-----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, BhHHFVM96IzBDcgNqgv3sAji4vsz2OY4yYd5lyeYyxTdZEpCc/yHIU2s+/C3z6r7 E9WABjvvYtmpHIKkL4t8iw== 0000950133-98-001046.txt : 19980331 0000950133-98-001046.hdr.sgml : 19980331 ACCESSION NUMBER: 0000950133-98-001046 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 19 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980327 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN MANAGEMENT SYSTEMS INC CENTRAL INDEX KEY: 0000310624 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING, DATA PROCESSING, ETC. [7370] IRS NUMBER: 540856778 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-09233 FILM NUMBER: 98577203 BUSINESS ADDRESS: STREET 1: 4050 LEGATO RD CITY: FAIRFAX STATE: VA ZIP: 22033 BUSINESS PHONE: 7032678000 10-K 1 FORM 10-K RE: AMERICAN MANAGEMENT SYSTEMS, INC. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- FORM 10-K X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ------ EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 1997 OR ______ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From:________________ To:______________ Commission File No.: 0-9233 AMERICAN MANAGEMENT SYSTEMS, INCORPORATED (Exact name of registrant as specified in its charter) State of Incorporation: Delaware I.R.S. Employer Identification No.: 54-0856778 4050 Legato Road Fairfax, Virginia 22033 (Address of principal executive office) Registrant's Telephone No., Including Area Code: (703) 267-8000 Securities Registered Pursuant to Section 12(b) of the Act: None Securities Registered Pursuant to Section 12(g) of the Act: Common Stock Par Value $0.01 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------- ------ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ____ The aggregate market value of voting stock held by non-affiliates of the Registrant as of March 20, 1998 was $1,111,526,473. As of March 20, 1998, 42,239,124 shares of common stock were outstanding. 2 DOCUMENTS INCORPORATED BY REFERENCE 1. Pursuant to Form 10-K General Instruction G(2), registrant hereby incorporates by reference those portions of the American Management Systems, Incorporated 1997 Financial Report necessary to respond to items 5, 6, 7, and 8 of this Form 10-K. 2. Pursuant to Form 10-K General Instruction G(3), registrant hereby incorporates by reference those portions of the American Management Systems, Incorporated definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 8, 1998 necessary to respond to items 10, 11, 12, and 13 of this Form 10-K. i 3 CONTENTS
Page ---- Part I Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . 4 Part II Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . 5 Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . 5 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . 5 Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . 5 Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . 5 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . 5 Part III Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . 6 Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . 6 Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . 6 Part IV Item 14. Exhibits, Financial Statements and Schedules, and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . 7
ii 4 PART I ITEM 1. BUSINESS OVERVIEW With 1997 revenues of $872 million, the business of American Management Systems, Incorporated and its wholly-owned subsidiaries ("AMS" or the "Company") is to partner with clients to achieve breakthrough performance through the intelligent use of information technology. AMS provides a full range of consulting services from strategic business analysis to the full implementation of solutions that produce genuine results on time and within budget. AMS measures success based on the results and business benefits achieved by its clients. AMS is a trusted business partner for many of the largest and most respected organizations in the markets in which it specializes. Each year, approximately 85-90% of the Company's revenue comes from clients it worked with in previous years. Organizations in AMS's target markets -- telecommunications firms; financial services institutions; state and local governments and education organizations; federal government agencies; and other corporate clients -- have a crucial need to exploit the potential benefits of information and systems integration technology. The Company helps clients fulfill this need by continuing to build a professional staff which is composed of experts in the necessary technical and functional disciplines; managers who can lead large, complex systems integration projects; and business and computer analysts who can devise creative solutions to complex problems. Another significant component of AMS's business is the development of proprietary software products, either with its own funds or on a cost-shared basis with other organizations. These products are principally licensed as elements of custom tailored systems, and, to a lesser extent, as stand-alone applications. The Company expended $50.6 million in 1997, $30.4 million in 1996, and $23.6 million in 1995 for research and development associated with proprietary software; of which $30.7 million in 1997, $26.0 million in 1996, and $19.4 million in 1995 was expensed in the accompanying financial statements. As a percentage of revenues, license and maintenance fee revenues were less than 10% during each of the last three years. In order to serve clients outside of the United States, AMS has expanded internationally by establishing eighteen subsidiaries or foreign branches. Exhibit 21 of this Form 10-K provides a complete listing of all active AMS subsidiaries (and branches), showing name, year organized or acquired, and place of incorporation. Revenues attributable to AMS's non-US clients were approximately $248.6 million in 1997, $278.3 million in 1996, and $178.2 million in 1995. Additional information on revenues, operating profits, and assets attributable to AMS's geographic areas of operation is provided in Note 12 of the consolidated financial statements appearing in Exhibit 13 of this Form 10-K. Founded in 1970, AMS services clients worldwide. AMS's approximately 7,100 full-time employees serve clients from corporate headquarters in Fairfax, Virginia and from 55 offices worldwide. 1 5 TELECOMMUNICATIONS FIRMS AMS markets systems consulting and integration services for order processing, customer care, billing, accounts receivable, and collections, both for local exchange and interexchange carriers and for cellular telephone companies. Most of the Company's work involves developing and implementing customized capabilities using AMS's application software products as a foundation. FINANCIAL SERVICES INSTITUTIONS AMS provides information technology consulting and systems integration services to money center banks, major regional banks, insurance companies, and other large financial services firms. The Company specializes in corporate and international banking, consumer credit management, customer value and global risk management, bank management information systems, and retirement plan systems. STATE AND LOCAL GOVERNMENTS AND EDUCATION AMS markets systems consulting and integration services and application software products to state, county, and municipal governments for financial management, tax and revenue management, human resources, social services, public safety and transportation functions, and environmental systems. The Company also markets services and application software products to universities and colleges. FEDERAL GOVERNMENT AGENCIES The Company's clients include civilian and defense agencies and aerospace companies. Assignments require knowledge of agency programs and management practices as well as expertise in computer systems integration. AMS's work for defense agencies often involves specialized expertise in engineering and logistics. OTHER CORPORATE CLIENTS The Company also solves information systems problems for the largest firms in other industries, including health care organizations and firms in the gas and electric utilities industry. AMS has systems integration and operations projects with several large organizations and intends to pursue more. AMS provides technical training and technical consulting services in software technology for large-scale business systems. PEOPLE People are AMS's most important asset and its success depends on its ability to attract and motivate especially well-qualified people. The Company's largest investment in recent years has been in recruiting, assimilating, and developing its people. AMS recruited and successfully assimilated approximately 2,100 new staff members in 1997, including 410 in Europe. About one-half of the new staff members came from the Company's college and university recruiting program. AMS recruits individuals for a career and hires a balanced mix of recent university graduates and experienced professionals who have demonstrated extraordinary technical, analytical, or management skills. A large number have advanced degrees in management, computer science, public policy, or engineering. 2 6 Individuals are assigned to one of the Company's market-oriented groups to develop expertise in the areas needed for solving its clients' problems. Performance, in terms of productivity, quality of work, and creativity in solving problems, determines an individual's advancement. This motivates staff members to increase their knowledge of AMS's clients' businesses and industries, to stay current with the technology most suited to AMS's clients, and to develop the consulting and managerial skills needed to produce results. COMPETITIVE FACTORS AMS's competition comes primarily from the management services units of large public accounting firms and consulting and systems integration firms. In addition, prospective clients may decide to perform projects with their in-house staff. AMS seeks to meet this competition by exploiting its industry-specific knowledge, its expertise with important business functions and with new technologies, its proprietary computer application products, and its experience in managing very large design and implementation projects. Although price is always a factor in clients' decisions, it is typically not the major factor. Other important factors are proven experience, the capabilities of the proposed computer application products, the quality of the proposed staff, and the proposed completion time for the project. MARKETING, CONTRACTS, AND SIGNIFICANT CUSTOMERS Marketing is performed principally by the senior staff (executive officers, vice presidents, senior principals, and principals) and by a relatively small number of full-time salespersons for each large market. In the U.S. Government markets, AMS replies selectively to requests for proposals, concentrating on those closely related to previous work done for the same or similar customers. Certain of the Company's software products and computer services are sold by a small group of full-time salespersons and, for those products and services, AMS advertises in trade publications and exhibits at industry conventions. For large systems integration projects, AMS typically contracts for one phase (design, development, and implementation) at a time. Many contracts may be canceled by the customer on short notice with appropriate compensation to the Company for actual work performed. Most contracts with federal government agencies allow for termination for the convenience of the government and for an annual audit. No contracts are subject to renegotiation at the client's option. AMS generally contracts either on the basis of reimbursement of costs plus a fixed fee, a fixed or ceiling price for each phase, unit rates for time and materials used, or services sold at unit prices. In most cases, AMS receives monthly or milestone progress payments. In 1997, the Company worked on projects directly for 93 U.S. Government clients, representing a total of $171.5 million, or 19.7%, of revenues. No other customer accounted for 10% or more of revenues in 1997. 3 7 ITEM 2. PROPERTIES Headquartered in Fairfax, Virginia, the Company's principal operations occupy approximately 941,000 square feet of office space under leases expiring through 2011. The Company also has other long-term lease commitments totaling approximately 581,500 square feet with varying expirations through 2014 at other locations throughout the United States. Additionally, the Company's international staff occupies approximately 258,700 square feet of office space outside of the U.S. at locations under leases expiring through 2003. With regard to its operating environment, the Company is provided with a mainframe processor environment at the IBM Dedicated Processor Center in Irving, Texas. In addition to the peripherals, power, and environmentals provided by the Dedicated Processor Center, the Company owns other mainframe peripheral equipment and microcomputers, and leases an IBM communications processor. The Company believes its facilities and equipment continue to be adequate for its business as currently conducted. ITEM 3. LEGAL PROCEEDINGS None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of security holders during the fourth quarter of 1997. 4 8 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS Market information for the Company's common stock contained in the Company's 1997 Financial Report is incorporated herein by reference in accordance with General Instruction G(2) of Form 10-K. ITEM 6. SELECTED FINANCIAL DATA Selected financial data contained in the Company's 1997 Financial Report is incorporated herein by reference in accordance with General Instruction G(2) of Form 10-K. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's discussion and analysis of financial condition and results of operations contained in the Company's 1997 Financial Report is incorporated herein by reference in accordance with General Instruction G(2) of Form 10-K. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS. Not applicable. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The consolidated financial statements of the Company, together with the report thereon of Price Waterhouse LLP, and the supplementary financial information, contained in the Company's 1997 Financial Report, are incorporated herein by reference in accordance with General Instruction G(2) of Form 10-K. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 5 9 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information relating to the directors and executive officers of the Company contained in the Company's definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 8, 1998, is incorporated herein by reference. The Company's definitive Proxy Statement will be filed within 120 days after the close of the Company's fiscal year in accordance with General Instruction G(3) of Form 10-K. ITEM 11. EXECUTIVE COMPENSATION Information relating to executive compensation contained in the Company's definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 8, 1998, is incorporated herein by reference. The Company's definitive Proxy Statement will be filed within 120 days after the close of the Company's fiscal year in accordance with General Instruction G(3) of Form 10-K. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information relating to the security ownership of certain beneficial owners and management contained in the Company's definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 8, 1998, is incorporated herein by reference. The Company's definitive Proxy Statement will be filed within 120 days after the close of the Company's fiscal year in accordance with General Instruction G(3) of Form 10-K. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information relating to certain relationships and related transactions contained under the headings "Principal Stockholders", "Compensation Committee Interlocks and Insider Participation" and "Certain Transactions" in the Company's definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 8, 1998, is incorporated herein by reference. The Company's definitive Proxy Statement will be filed within 120 days after the close of the Company's fiscal year in accordance with General Instruction G(3) of Form 10-K. 6 10 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES, AND REPORTS ON FORM 8-K (a) 1. FINANCIAL STATEMENTS The consolidated financial statements of American Management Systems, Incorporated and subsidiaries filed are as follows: Consolidated Statements of Operations for 1997-95 Consolidated Balance Sheets as of December 31, 1997 and 1996 Consolidated Statements of Cash Flows for 1997-95 Consolidated Statements of Changes in Stockholders' Equity for 1997-95 Notes to Consolidated Financial Statements Report of Independent Accountants 2. FINANCIAL STATEMENT SCHEDULE The financial statement schedule of American Management Systems, Incorporated and subsidiaries filed is as follows: Report of independent accountants on financial statement schedules Schedule II - Valuation and Qualifying Accounts for 1997-1995 All other schedules are omitted because they are not applicable, or the required information is shown in the financial statements or the notes thereto or in Management's Discussion and Analysis of Financial Condition and Results of Operations. Individual financial statements of the Company and each of its subsidiaries are omitted because the Company is primarily an operating company, and all subsidiaries included in the consolidated financial statements being filed, in the aggregate, do not have a minority equity interest in and/or indebtedness to any person other than the Company or its consolidated subsidiaries in amounts which together exceed five percent of the total assets as shown by the most recent year-end consolidated balance sheet. 7 11 3. EXHIBITS The exhibits to the Annual Report on Form 10-K of American Management Systems, Incorporated filed are as follows: 3. Articles of Incorporation and By-laws 3.1 Second Restated Certificate of Incorporation of the Company, (incorporated herein by reference to Exhibit 3 of the Company's 1995 Annual Report on Form 10-K). 3.2 By-Laws of the Company, as amended and restated February 27, 1998. 10. Material Contracts 10.1 1996 Amended Stock Option Plan F, (incorporated herein by reference to Exhibit A to the Company's definitive Proxy Statement filed on April 11, 1997). 10.2 Outside Directors Stock-for-Fees Plan (incorporated herein by reference to Exhibit C to the Company's definitive Proxy Statement filed on April 10, 1996). 10.3 1992 Amended and Restated Stock Option Plan E, as amended (incorporated herein by reference to Exhibit B to the Company's definitive Proxy Statement filed on April 17, 1995). 10.4 Executive Deferred Compensation Plan, as amended September 1, 1997. 10.5 Outside Director Deferred Compensation Plan, effective January 1, 1997. 10.6 Multi-Currency Revolving Credit Agreement dated as of January 9, 1998 among the Company, certain of the Company's subsidiaries, the Lenders named therein, and NationsBank N.A. as administrative agent and Wachovia Bank N.A., as documentation agent. 10.7 Agreement of Lease between Joshua Realty Corporation and the Company, dated August 10, 1992, as amended. 10.8 Office Lease Agreement between Hyatt Plaza Limited Partnership and the Company, dated August 12, 1993, as amended. 10.9 Lease Agreement between Fairfax Gilbane, L.P. and the Company, dated February 15, 1994, as amended. 10.10 Deed of Lease between Principal Mutual Life Insurance Company and the Company, dated December 1996. 8 12
23. Consent of Independent Accountants 27. Financial Data Schedules 27.1 Financial Data Schedule for the twelve months ended December 31, 1997. 27.2 Restated Financial Data Schedule for the twelve months ended December 31, 1996 27.3 Restated Financial Data Schedule for the twelve months ended December 31, 1995. 27.4 Restated Financial Data Schedule for the nine months ended September 30, 1997. 27.5 Restated Financial Data Schedule for the six months ended June 30, 1997. 27.6 Restated Financial Data Schedule for the three months ended March 31, 1997. 27.7 Restated Financial Data Schedule for the nine months ended September 30, 1996. 27.8 Restated Financial Data Schedule for the six months ended June 30, 1996. 27.9 Restated Financial Data Schedule for the three months ended March 31, 1996. (b) REPORTS ON FORM 8-K None
9 13 REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE To the Board of Directors of American Management Systems, Incorporated Our audits of the consolidated financial statements referred to in our report dated February 18, 1998 appearing on page 22 of the 1997 Financial Report of American Management Systems, Incorporated (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedule listed in Item 14(a) of this Form 10-K. In our opinion, this Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. PRICE WATERHOUSE LLP Washington, D.C. February 18, 1998 10 14 Schedule II VALUATION AND QUALIFYING ACCOUNTS (In millions)
1997 1996 1995 ----------------------------------------------------------------------------------------------------------- Allowance for Doubtful Accounts ------------------------------- Balance at Beginning of Period $ 18.9 $ 4.9 $ 3.3 Allowance Accruals 10.6 15.2 1.6 Charges Against Allowance (24.5) (1.2) - ------- ------ -------- Balance at End of Period $ 5.0 $ 18.9 $ 4.9 ======= ====== ======== Deferred Tax Asset Valuation Allowance -------------------------------------- Balance at Beginning of Period $ 0.4 $ 2.8 $ - Allowance Accruals 0.1 0.4 2.8 Charges Against Allowance - (2.8) - ------- ------ -------- Balance at End of Period $ 0.5 $ 0.4 $ 2.8 ======= ====== ======== Provision for Contract Loss --------------------------- Balance at Beginning of Period $ 18.5 $ - $ - Allowance Accruals - 18.5 - Charges Against Provision (18.5) - - ------- ------ -------- Balance at End of Period $ - $ 18.5 $ - ======= ====== ========
11 15 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 on the 27th of March, 1998. American Management Systems, Incorporated by s/Philip M. Giuntini -------------------------------- Philip M. Giuntini President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following officers and directors of the Registrant in the capacities and on the date indicated.
Signature Title Date --------- ------------- -------------- (i) Principal Executive Officer: s/Paul A. Brands Chairman and March 27, 1998 ------------------------------- Chief Executive Paul A. Brands Officer (ii) Principal Financial Officer: s/Frank A. Nicolai Secretary and March 27, 1998 ------------------------------- Treasurer Frank A. Nicolai (iii) Principal Accounting Officer: s/Nancy Yurek Controller March 27, 1998 ------------------------------- Nancy Yurek (iv) Directors: s/Daniel J. Altobello Director March 27, 1998 ------------------------------- Daniel J. Altobello
12 16
Signature Title Date --------- --------------- -------------- s/Paul A. Brands Director March 27, 1998 ------------------------------- Paul A. Brands s/James J. Forese Director March 27, 1998 ------------------------------ James J. Forese s/Philip M. Giuntini Director March 27, 1998 ------------------------------- Philip M. Giuntini s/Patrick W. Gross Director March 27, 1998 ------------------------------- Patrick W. Gross s/Dorothy Leonard Director March 27, 1998 ------------------------------- Dorothy Leonard s/W. Walker Lewis Director March 27, 1998 ------------------------------- W. Walker Lewis s/Frederic V. Malek Director March 27, 1998 ------------------------------- Frederic V. Malek s/Frank A. Nicolai Director March 27, 1998 ------------------------------- Frank A. Nicolai s/Alan G. Spoon Director March 27, 1998 ------------------------------- Alan G. Spoon
13 17 EXHIBIT INDEX
Exhibit Number Description ------- ----------- 3.1 Second Restated Certificate of Incorporation of the Company, * (incorporated herein by reference to Exhibit 3 of the Company's 1995 Annual Report on Form 10-K). 3.2 By-laws of the Company, as amended and restated February 27, 1998. 10.1 1996 Amended Stock Option Plan F, (incorporated herein by * reference to Exhibit A to the Company's definitive Proxy Statement filed on April 11, 1997). 10.2 Outside Directors Stock-for-Fees Plan (incorporated herein by * reference to Exhibit C to the Company's definitive Proxy Statement filed on April 10, 1996). 10.3 1992 Amended and Restated Stock Option Plan E, as amended * (incorporated herein by reference to Exhibit B to the Company's definitive Proxy Statement filed on April 17, 1995). 10.4 Executive Deferred Compensation Plan, as amended September 1, 1997. 10.5 Outside Director Deferred Compensation Plan, effective January 1, 1997. 10.6 Multi-Currency Revolving Credit Agreement dated as of January 9, 1998 among the Company, certain of the Company's Subsidiaries, the Lenders named therein, and NationsBank N.A. as administrative agent and Wachovia Bank N.A., as Documentation agent. 10.7 Agreement of Lease between Joshua Realty Corporation and the Company, dated August 10, 1992, as amended. 10.8 Office Lease Agreement between Hyatt Plaza Limited Partnership and the Company, dated August 12, 1993, as amended. 10.9 Lease Agreement between Fairfax Gilbane, L.P. and the Company, Dated February 15, 1994, as amended. 10.10 Deed of Lease between Principal Mutual Life Insurance Company and the Company, dated December 1996.
- ------------ *Previously filed. 14 18 \ EXHIBIT INDEX Exhibit Number Description ------- ----------- 23. Consent of Independent Accountants 27.1 Financial Data Schedule for the twelve months ended December 31, 1997. 27.2 Restated Financial Data Schedule for the twelve months ended December 31, 1996. 27.3 Restated Financial Data Schedule for the twelve months ended December 31, 1995. 27.4 Restated Financial Data Schedule for the nine months ended September 30, 1997. 27.5 Restated Financial Data Schedule for the six months ended June 30, 1997. 27.6 Restated Financial Data Schedule for the three months ended March 31, 1997. 27.7 Restated Financial Data Schedule for the nine months ended September 30, 1996. 27.8 Restated Financial Data Schedule for the six months ended June 30, 1996. 27.9 Restated Financial Data Schedule for the three months ended March 31, 1996. 15 19 Exhibit 13 Set forth following this page is the Company's 1997 Financial Report which is Exhibit 13 to the Company's Annual Report on Form 10-K as filed with the Securities and Exchange Commission. The 1997 Financial Report constitutes pages 17 to 51 of the Form 10-K. Accordingly, the page immediately preceding this page is numbered 15 and the page following Exhibit 13 is numbered 52. 16 20 Exhibit 13 AMERICAN MANAGEMENT SYSTEMS, INCORPORATED 1997 FINANCIAL REPORT CONTENTS - -------------------------------------------------------------------------------- Business of AMS 1 Financial Statements and Notes 3 Report of Independent Accountants 22 Management's Discussion and Analysis of Financial Condition and Results of Operations 23 Assumptions Underlying Certain Forward-Looking Statements and Factors That May Affect Future Results 30 Five-Year Financial Summary 32 Five-Year Revenues by Target Market 33 Selected Quarterly Financial Data and Information on AMS Stock 34 Other Information 35
21 BUSINESS OF AMS OVERVIEW With 1997 revenues of $872 million, the business of American Management Systems, Incorporated and its wholly-owned subsidiaries ("AMS" or the "Company") is to partner with clients to achieve breakthrough performance through the intelligent use of information technology. AMS provides a full range of consulting services from strategic business analysis to the full implementation of solutions that provide genuine results, on time and within budget. AMS measures success based on the results and business benefits achieved by its clients. AMS is a trusted business partner for many of the largest and most respected organizations in the markets in which it specializes. Each year, approximately 85-90% of the Company's business comes from clients it worked with in previous years. Organizations in AMS's target markets -- telecommunications firms; financial services institutions; state and local governments and education organizations; federal government agencies; and other corporate clients -- have a crucial need to exploit the potential benefits of information and systems integration technology. The Company helps clients fulfill this need by continuing to build a professional staff which is composed of experts in the necessary technical and functional disciplines; managers who can lead large, complex systems integration projects; and business and computer analysts who can devise creative solutions to complex problems. Another significant component of AMS's business is the development of proprietary software products, either with its own funds or on a cost-shared basis with other organizations. These products are principally licensed as elements of custom tailored systems and, to a lesser extent, as stand-alone applications. The Company expended $50.6 million in 1997, $30.4 million in 1996, and $23.6 million in 1995 for research and development associated with proprietary software; of which $30.7 million in 1997, $26.0 million in 1996, and $19.4 million in 1995 was expensed in the accompanying financial statements. As a percentage of revenues, license and maintenance fee revenues were less than 10% during each of the last three years. In order to serve clients outside of the United States, AMS has expanded internationally by establishing eighteen subsidiaries or foreign branches. Exhibit 21 of this Form 10-K provides a complete listing of all active AMS subsidiaries (and branches), showing name, year organized (acquired), and place of incorporation. Revenues attributable to AMS's non-US clients were approximately $248.6 million in 1997, $278.3 million in 1996, and $178.2 million in 1995. Additional information on revenues, operating profits, and assets attributable to AMS's geographic areas of operation is provided in Note 12 of the consolidated financial statements appearing elsewhere in this financial report. Founded in 1970, AMS services clients worldwide. AMS's approximately 7,100 full-time employees serve clients from corporate headquarters in Fairfax, Virginia and from 55 offices worldwide. 1 22 TELECOMMUNICATIONS FIRMS AMS markets systems consulting and integration services for order processing, customer care, billing, accounts receivable, and collections, both for local exchange and interexchange carriers and for cellular telephone companies. Most of the Company's work involves developing and implementing customized capabilities using AMS's application software products as a foundation. FINANCIAL SERVICES INSTITUTIONS AMS provides information technology consulting and systems integration services to money center banks, major regional banks, insurance companies, and other large financial services firms. The Company specializes in corporate and international banking, consumer credit management, customer value and global risk management, bank management information systems, and retirement plan systems. STATE AND LOCAL GOVERNMENTS AND EDUCATION AMS markets systems consulting and integration services, and application software products, to state, county, and municipal governments for financial management, tax and revenue management, human resources, social services, public safety and transportation functions, and environmental systems. The Company also markets services and application software products to universities and colleges. FEDERAL GOVERNMENT AGENCIES The Company's clients include civilian and defense agencies and aerospace companies. Assignments require knowledge of agency programs and management practices as well as expertise in computer systems integration. AMS's work for defense agencies often involves specialized expertise in engineering and logistics. OTHER CORPORATE CLIENTS The Company also solves information systems problems for the largest firms in other industries, including health care organizations and firms in the gas and electric utilities industry. AMS has systems integration and operations projects with several large organizations and intends to pursue more. AMS provides technical training and technical consulting services in software technology for large scale business systems. 2 23 FINANCIAL STATEMENTS AND NOTES American Management Systems, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31 (In millions except per share data) 1997 1996 1995 - --------------------------------------------------------------------------------------------------------------------- REVENUES $872.3 $812.2 $632.4 EXPENSES Client Project Expenses 502.3 525.9 348.6 Other Operating Expenses 266.2 210.4 192.3 Corporate Expenses 49.5 48.3 40.8 ------- ------- ------- 818.0 784.6 581.7 INCOME FROM OPERATIONS 54.3 27.6 50.7 OTHER (INCOME) EXPENSE Interest Expense 5.8 3.2 2.3 Other Income (2.9) (1.8) (1.4) ------- ------- ------- 2.9 1.4 0.9 INCOME BEFORE INCOME TAXES 51.4 26.2 49.8 INCOME TAXES 20.2 10.7 20.6 ------- ------- ------- NET INCOME $ 31.2 $ 15.5 $ 29.2 ======= ======= ======= WEIGHTED AVERAGE SHARES 41.4 40.7 39.7 ======= ======= ======= BASIC NET INCOME PER SHARE $ 0.75 $ 0.38 $ 0.73 ======= ======= ======= WEIGHTED AVERAGE SHARES AND EQUIVALENTS 42.3 41.9 40.7 ======= ======= ======= DILUTED NET INCOME PER SHARE $ 0.74 $ 0.37 $ 0.72 ======= ======= =======
- ---------------- See Accompanying Notes to Consolidated Financial Statements. 3 24 American Management Systems, Inc. CONSOLIDATED BALANCE SHEETS
December 31 (In millions except per share data) 1997 1996 - ---------------------------------------------------------------------------------------------------------------------- ASSETS - ---------------------------------------------------------------------------------------------------------------------- CURRENT ASSETS Cash and Cash Equivalents $ 49.6 $ 62.8 Accounts and Notes Receivable 240.9 247.7 Prepaid Expenses and Other Current Assets 8.4 13.3 ------ ------ 298.9 323.8 FIXED ASSETS Equipment 67.0 62.0 Furniture and Fixtures 22.4 18.4 Leasehold Improvements 13.9 10.7 ------ ------ 103.3 91.1 Accumulated Depreciation and Amortization (58.1) (43.1) ------ ------ 45.2 48.0 OTHER ASSETS Purchased and Developed Computer Software (Net of Accumulated Amortization of $63,400,000 and $50,500,000) 58.0 40.2 Intangibles (Net of Accumulated Amortization of $3,200,000 and $2,600,000) 6.0 6.3 Other Assets (Net of Accumulated Amortization of $815,000 and $15,700,000) 13.3 5.9 ------ ------ 77.3 52.4 ------ ------ TOTAL ASSETS $421.4 $424.2 ====== ======
- ---------------- See Accompanying Notes to Consolidated Financial Statements. 4 25 American Management Systems, Inc. CONSOLIDATED BALANCE SHEETS
December 31 (In millions except per share data) 1997 1996 - ---------------------------------------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY - ---------------------------------------------------------------------------------------------------------------------- CURRENT LIABILITIES Notes Payable and Capitalized Lease Obligations $ 7.5 $ 53.5 Accounts Payable 10.5 19.6 Accrued Incentive Compensation 24.7 36.1 Other Accrued Compensation and Related Items 32.2 32.3 Deferred Revenues 39.8 20.6 Other Accrued Liabilities 3.5 2.7 Provision for Contract Losses - 18.5 Income Taxes Payable 8.8 7.8 ------ ------ 127.0 191.1 Deferred Income Taxes 3.0 7.7 ------ ------ 130.0 198.8 NONCURRENT LIABILITIES Notes Payable and Capitalized Lease Obligations 27.9 13.7 Other Accrued Liabilities 9.5 1.4 Deferred Income Taxes 15.3 7.2 ------ ------ 52.7 22.3 ------ ------ TOTAL LIABILITIES 182.7 221.1 STOCKHOLDERS' EQUITY Preferred Stock ($0.10 Par Value; 4,000,000 Shares Authorized, None Issued or Outstanding) Common Stock ($0.01 Par Value; 100,000,000 Shares Authorized, 50,115,057 and 49,598,673 Issued and 41,544,299 and 40,939,209 Outstanding) 0.5 0.5 Capital in Excess of Par Value 84.1 75.0 Retained Earnings 188.5 157.3 Currency Translation Adjustment (8.0) (1.1) Common Stock in Treasury, at Cost (8,570,758 and 8,659,464 Shares) (26.4) (28.6) ------ ------ 238.7 203.1 ------ ------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $421.4 $424.2 ====== ======
- ---------------- See Accompanying Notes to Consolidated Financial Statements. 5 26 American Management Systems, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31 (In millions) 1997 1996 1995 - ----------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 31.2 $ 15.5 $ 29.2 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation 17.9 16.1 13.6 Amortization 16.8 23.2 16.6 Deferred Income Taxes 3.2 (9.8) 6.0 Provision for Doubtful Accounts 10.6 15.2 1.6 Provision for Contract Losses (18.5) 18.5 - Changes in Assets and Liabilities: Increase in Trade Receivables (3.7) (56.8) (66.5) Decrease (Increase) in Prepaid Expenses and Other Current Assets 4.8 (4.3) (2.3) Increase in Other Assets (8.2) (7.3) (9.1) (Decrease) Increase in Accrued Incentive Compensation (9.1) 11.2 14.1 (Decrease) Increase in Accounts Payable and Other Accrued Compensation and Liabilities (0.1) 19.0 8.7 Increase (Decrease) in Deferred Revenues 19.0 (5.7) 0.6 Increase in Income Taxes Payable 1.0 5.5 0.5 ------- ------- ------- Net Cash Provided by Operating Activities 64.9 40.3 13.0 ------- ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of Fixed Assets (15.9) (27.5) (22.5) Purchase of Computer Software (2.3) (5.6) (2.3) Investment in Software Products (31.6) (13.8) (13.7) Other Investments and Intangibles 0.4 0.5 0.4 Proceeds from Sale of Fixed Assets and Computer Software 0.9 0.7 0.5 ------- ------- ------- Net Cash Used in Investing Activities (48.5) (45.7) (37.6) ------- ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings 20.0 30.4 26.5 Payments on Borrowings (51.7) (6.7) (5.4) Proceeds from Common Stock Options Exercised 9.1 9.5 5.3 Payments to Acquire Treasury Stock (0.1) (0.5) (0.8) ------- ------- ------- Net Cash (Used) Provided by Financing Activities (22.7) 32.7 25.6 ------- ------- ------- (Decrease) Increase in Currency Translation Adjustment (6.9) (0.3) 0.6 ------- ------- ------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (13.2) 27.0 1.6 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 62.8 35.8 34.2 ------- ------- ------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 49.6 $ 62.8 $ 35.8 ======= ======= ======= NON-CASH OPERATING AND FINANCING ACTIVITIES: Treasury Stock Utilized to Satisfy Accrued Incentive Compensation Liability $ 2.3 $ 3.4 $ 2.9
- ---------------- See Accompanying Notes to Consolidated Financial Statements. 6 27 American Management Systems, Inc. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (In millions)
Common Stock Capital in Currency Total (Par Value Excess of Translation Retained Treasury Stockholders' $0.01) Par Value Adjustment Earnings Stock Equity - ---------------------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1994 $0.5 $60.2 $(1.4) $112.6 $(33.6) $138.3 Common Stock Options Exercised - 3.3 3.3 Tax Benefit Related to Exercise of Common Stock Options 1.9 1.9 Currency Translation Adjustment 0.7 0.7 Common Stock Repurchased (0.8) (0.8) Restricted Stock Awarded 2.9 2.9 1995 Net Income 29.2 29.2 ---- ----- ----- ------ ----- ----- Balance, December 31, 1995 0.5 65.4 (0.7) 141.8 (31.5) 175.5 Common Stock Options Exercised - 5.1 5.1 Tax Benefit Related to Exercise of Common Stock Options 4.5 4.5 Currency Translation Adjustment (0.4) (0.4) Common Stock Repurchased (0.5) (0.5) Restricted Stock Awarded 3.4 3.4 1996 Net Income 15.5 15.5 ---- ----- ----- ------ ----- ----- Balance at December 31, 1996 0.5 75.0 (1.1) 157.3 (28.6) 203.1 Common Stock Options Exercised - 4.1 4.1 Tax Benefit Related to Exercise of Common Stock Options 5.0 5.0 Currency Translation Adjustment (6.9) (6.9) Common Stock Repurchased (0.1) (0.1) Restricted Stock Awarded 2.3 2.3 1997 Net Income 31.2 31.2 ---- ----- ----- ------ ----- ----- Balance at December 31, 1997 $0.5 $84.1 $(8.0) $188.5 $(26.4) $238.7 ==== ===== ===== ====== ====== ======
- ---------------- See Accompanying Notes to Consolidated Financial Statements. 7 28 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 -- NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES The business of American Management Systems, Incorporated and its wholly-owned subsidiaries ("AMS" or the "Company") is to partner with clients to achieve breakthrough performance through the intelligent use of information technology. AMS is an international business and information technology consulting firm that provides a full range of services: business re-engineering, change management, systems integration, and systems development and implementation. AMS is headquartered in Fairfax, Virginia, with offices in 55 cities worldwide. The Company's primary target markets include telecommunications firms, financial services institutions, state and local governments and education, federal government agencies and other corporate clients. A. Revenue Recognition Revenues on fixed-price contracts are generally recorded using the percentage of completion method based on the relationship of costs incurred to the estimated total costs of the project. Revenues on cost reimbursable contracts and time and material contracts are recorded as labor and other expenses are incurred. Revenues from licenses of "off-the-shelf" software products, where the Company has insignificant remaining obligations, are recorded at the time of delivery, less a proportionate amount deferred to cover the costs required to complete the performance of the contract which is later recognized on a percentage of completion basis. In contracts where the Company has significant obligations to customize the software, all revenues are recognized on a percentage of completion basis. Revenues from software maintenance contracts are recognized ratably over the maintenance period. On benefit-funded contracts (contracts whereby the amounts due the Company are earned based on actual benefits derived by the client), the Company defers recognition of revenues until that point at which management can predict, with reasonable certainty, that the benefit stream will generate amounts sufficient to fund the contract. From that point forward revenues are recognized on a percentage of completion basis. When adjustments in contract value or estimated costs are determined, any changes from prior estimates are reflected in earnings in the current period. Any anticipated losses on contracts in progress are charged to earnings when identified. The costs associated with cost-plus government contracts are subject to audit by the U.S. Government. In the opinion of management, no significant adjustments or disallowances of costs are anticipated beyond those provided for in the financial statements. B. Software Development Costs The Company develops proprietary software products using its own funds, or on a cost-shared basis with other organizations, and records such activities as research and development. These software products are then licensed to customers, either as stand-alone applications, or as elements of custom-built systems. The Company accounts for software development costs in accordance with Statement of Financial Accounting Standards No. 86 -- "Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed". For projects funded by the Company, significant development costs incurred beyond the point of demonstrated technological feasibility are capitalized and, after the product is available for general release to customers, such costs are amortized on a straight-line basis 8 29 over a period of 3 to 5 years, or other such shorter period as might be required. For projects where the Company has a funding partner, the capital asset is reduced by the amount collected from the partner. The Company recorded $12.5 million of amortization in 1997, $9.3 million of amortization in 1996, and $9.5 million of amortization in 1995. Unamortized costs were $51.9 million and $32.7 million at December 31, 1997 and 1996, respectively. In 1997, the Company reduced the unamortized costs by $4 million representing collections from a funding partner. The Company evaluates the net realizable value of capitalized software using the estimated, undiscounted, net-cash flows of the underlying products. The Company expended $50.6 million in 1997, $30.4 million in 1996, and $23.6 million in 1995 for research and development associated with proprietary software; of which $30.7 million in 1997, $26.0 million in 1996, and $19.4 million in 1995 was expensed in the accompanying financial statements. The Company capitalizes costs incurred for the development or purchase of internal use software at the time when the evaluation and selection of performance requirements are completed and management authorizes funding of the project. Once the product is substantially complete, capitalized costs are amortized on a straight-line basis over the estimated useful life of the software. Purchased software licenses are to be accounted for as set forth in Note 1.C. C. Fixed Assets, Purchased Computer Software Licenses and Intangibles Fixed assets and purchased computer software licenses are recorded at cost. Furniture, fixtures, and equipment are depreciated over estimated useful lives ranging from 3 to 10 years. Leasehold improvements are amortized ratably over the lesser of the applicable lease term or the useful life of the improvement. For financial statement purposes, depreciation is computed using the straight-line method. Purchased software licenses are amortized over two to five years using the straight-line method. Intangibles are generally amortized over 5 to 15 years. D. Income Taxes Deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities, using enacted tax rates for the year in which the differences are expected to reverse. Deferred income taxes are provided for timing differences in recognizing certain income, expense, and credit items for financial reporting purposes and tax reporting purposes. Such deferred income taxes primarily relate to the methods of accounting for revenue, capitalized software development costs, restricted stock, and the timing of deductibility of certain reserves and accruals for income tax purposes. A valuation allowance is recorded if it is "more likely than not" that some portion or all of a deferred tax asset will not be realized. E. Earnings Per Share In February 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No. 128, "Earnings per Share". The Company adopted SFAS No. 128 in the year ended December 31, 1997 as required and restated earnings per share ("EPS") data for all prior periods to conform with SFAS No. 128. 9 30 SFAS No. 128 replaces the presentation of Primary EPS with a presentation of Basic EPS. SFAS No. 128 also requires dual presentation of basic and diluted EPS on the face of the statement of operations and requires a reconciliation of the numerator and denominator used in the basic and fully diluted EPS computations. Basic EPS excludes dilution and is computed by dividing net income by the weighted average of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. F. Cash and Cash Equivalents The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The carrying amount approximates fair value because of the short maturity of these instruments. G. Currency Translation For operations outside the United States that prepare financial statements in currencies other than the U.S. dollar, the Company translates income statement amounts at the average monthly exchange rates throughout the year. The Company translates assets and liabilities at exchange rates prevailing as of the Balance Sheet date. The resulting translation adjustments are shown as a separate component of Stockholders' Equity. H. Principles of Consolidation The consolidated financial statements include the accounts of American Management Systems, Incorporated and its wholly-owned subsidiaries. All significant intercompany transactions have been eliminated. I. 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 amounts reported in the financial statements and accompanying notes. Future actual results could be different due to these estimates. Significant estimates inherent in the preparation of the accompanying consolidated financial statements include: management's forecasts of contract costs and progress towards completion which are used to determine revenue recognition under the percentage-of-completion method, management's estimates of allowances for doubtful accounts, tax valuation allowances, and management's estimates of the net realizable value of purchased and developed computer software and intangible assets. J. Foreign Currency Hedging The Company enters into foreign exchange contracts as a hedge of intercompany balance sheet transactions. Market value gains and losses are recognized, and the resulting credit or debit offset foreign exchange gains or losses on those transactions. For 1997, the Company entered into two such short-term contracts with de minimis value. K. Reclassification Certain prior year information has been reclassified to conform with current year presentations. 10 31 L New Accounting Pronouncements In June 1997, the FASB issued SFAS No. 130 entitled "Reporting Comprehensive Income", which became effective January 1, 1998. SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components. All items that are required to be recognized under accounting standards as components of comprehensive income must be reported in a financial statement that is displayed with the same prominence as other financial statements. The Company's principal components of comprehensive income are net income and foreign currency translation adjustments. Given the uncertainty with foreign exchange rates, the Company can not estimate the impact of this pronouncement. This standard will become effective for the Company's 1998 quarterly reporting beginning in the first quarter of 1998. In June 1997, the FASB also issued SFAS No. 131 entitled "Disclosures about Segments of an Enterprise and Related Information" which will become effective for the Company's 1998 calendar year financial statements and will apply to quarterly reporting beginning in the first quarter of 1999. This Statement may change the way public companies, having segments, report information about their business in annual financial statements and may require them to report selected segment information in their quarterly reports issued to stockholders. It also requires entity-wide disclosures about the products and services an entity provides, the material countries in which it holds assets and reports revenues, and its major customers. The Company is currently evaluating the standard to determine the impact on its reporting and disclosure requirements. In October 1997, the American Institute of Certified Public Accountants (AICPA) issued Statement of Position 97-2, "Software Revenue Recognition" (SoP 97-2), which provides guidance in recognizing revenue on contracts with multiple elements including software licenses and services, and superseded the previous authoritative literature (SoP 91-1). The SoP is effective for the Company for transactions entered into after December 31, 1997. In February 1998, the AICPA proposed deferring, for one year, the implementation date for certain provisions of SoP 97-2. The Company does not currently believe that the application of SoP 97-2 will have a material impact on its historical practice with respect to the timing of revenue recognition in its consolidated financial statements, subject to the proposed one year deferral of certain provisions. The Company has not determined the effect of implementing SoP 97-2 if the provisions are not deferred when the one year proposed deferral expires. In March 1998, the AICPA issued Statement of Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use" (SoP 98-1). The SoP is effective for the Company's 1999 fiscal year and requires capitalization of costs related to developing or obtaining internal-use software. Adoption of the SoP is not expected to materially affect results of operations, as the Company is currently accounting for internal-use software generally in accordance with the provisions of this SoP. NOTE 2 -- SIGNIFICANT CUSTOMERS Total revenues from the U.S. Government, comprising 93 clients in 1997, 90 clients in 1996, and 72 clients in 1995, were approximately $171.5 million in 1997, $113.0 million in 1996, and $97.1 million in 1995. No other customer accounted for 10% or more of total revenues in 1997, 1996, or 1995. 11 32 NOTE 3 -- ACCOUNTS AND NOTES RECEIVABLE
December 31 (In millions) 1997 1996 - ---------------------------------------------------------------------------------------------------- Trade Accounts Receivable Amounts Billed $193.1 $205.7 Amounts Not Billed 45.3 48.2 Contract Retention 5.4 11.7 ------ ------ Total 243.8 265.6 Other Receivables 2.1 1.0 Allowance for Doubtful Accounts (5.0) (18.9) ------ ------ Total $240.9 $247.7 ====== ======
The Company enters into large, long-term contracts and, as a result, periodically maintains individually significant receivable balances with certain major clients. At December 31, 1997, the eight largest individual receivable balances totaled approximately $72 million. No other receivable exceeded $5 million. The Company expects to receive all funds due from these clients. Management believes that credit risk, with respect to the Company's receivables, is low due to the credit worthiness of its clients and the diversification of its client base across different industries and geographies. In addition, the Company is further diversified in that it enters into a range of different types of contracts, such as fixed price, cost plus, time and material, and benefits funded contracts. The Company may also, from time to time, work as a subcontractor on particular contracts. The Company performs ongoing evaluations of contract performance as well as an evaluation of the client's financial condition. NOTE 4 -- NOTES PAYABLE AND CAPITALIZED LEASE OBLIGATIONS On December 24, 1996, the Company entered into a syndicated $100 million Multi-Currency Revolving Credit ($80 million) and Term Loan ($20 million) Agreement with Wachovia Bank, NationsBank and Commerzbank. This Agreement replaced the two revolving credit agreements (the NationsBank Agreement and the Wachovia Agreement), totaling $70 million that the Company had immediately preceding the execution of the new credit facility, although outstanding borrowings under the NationsBank Agreement continued in force until they matured in January 1997. On January 6, 1997, a Term Loan of $20 million was funded. The Term Loan bears an interest rate of 6.94%, with monthly interest payments on the unpaid principal balance and quarterly principal payments commencing in April 1999. The Agreement described above contains certain covenants with which the Company must comply. These include (i) maintaining a total debt to total capitalization ratio of not greater than 0.5 to 1.0, (ii) maintaining a fixed charge cover ratio of not less than 2.5 to 1.0, (iii) restrictions on using net worth to acquire other companies or transferring assets to a subsidiary, and (iv) restrictions on declaring or paying cash dividends. At December 31, 1997, the Company was in compliance with all covenants under the Agreement. Effective January 9, 1998, the Company entered into a syndicated five-year $120 million Multi-Currency Revolving Credit with NationsBank and Wachovia Bank (the "1998 Agreement") as agents. This agreement replaces the $100 million Multi-Currency Revolving Credit Agreement with Wachovia Bank, NationsBank and Commerzbank; the Term Loan, which remains outstanding, is now governed by the 1998 Agreement. 12 33 The aggregate weighted average borrowings under all revolving credit agreements was approximately $41.3 million in 1997, and $29.2 million in 1996, at daily weighted average interest rates of approximately 6.6% in 1997 and 5.2% in 1996. The maximum borrowed under all agreements was $63.1 million in 1997 and $49.2 million in 1996. At December 31, 1997, the Company had $1.8 million outstanding under its revolving credit facility, and $33.6 million in term loans. The Company and most of its existing subsidiaries can borrow funds under the 1998 Agreement in any of the approved currencies subject to certain minimum amounts per borrowing. Interest on such borrowings will generally range from LIBOR plus 12.5 basis points to LIBOR plus 45 basis points depending on the ratio of total debt to earnings before interest, taxes, depreciation, and amortization. The Company must also pay a facility fee ranging from 12.5 basis points to 20 basis points of the total facility, based on the same performance measure. Based on such measures at December 31, 1997, interest payments during 1998 will be based on LIBOR plus 22.5 basis points and the facility fee will be 12.5 basis points. The 1998 Agreement, and the term loan, contains certain covenants with which the Company must comply. These include: (i) maintain at the end of each fiscal quarter for the four fiscal quarters ending on such date a fixed charge coverage ratio of not less than 2.25 to 1.0, as of December 31, 1997 and March 31, 1998, increasing to 2.5 to 1.0 for the quarter ending June 30, 1998 and thereafter, (ii) maintain total debt to EBITDA ratio of no more than 3.0 to 1.0, (iii) restrictions on using net worth to acquire other companies or transferring assets to a subsidiary, and (iv) restrictions on declaring or paying cash dividends in any one fiscal year in excess of twenty-five percent of its net income for such year. The following schedule summarizes the total outstanding notes and capitalized lease obligations. Differences between the face value and the fair value are considered immaterial.
December 31 (In millions) 1997 1996 - -------------------------------------------------------------------------------------------------------- Revolving Line-of-Credit $ 1.8 $46.8 Unsecured Notes With Interest at 5.25% - 6.94% Principal and Interest Payable Monthly Through January 2004 33.6 20.4 ----- ----- Total Notes Payable and Capitalized Lease Obligations $35.4 $67.2 ===== ===== Principal amounts are repayable as shown below: 1998 $ 7.5 1999 5.3 2000 5.2 2001 5.1 2002 and Beyond 12.3 ----- 35.4 Less Current Portion 7.5 ----- Long-Term Portion $27.9 =====
Interest paid by the Company totaled $5.8 million in 1997, $3.2 million in 1996, and $2.3 million in 1995. 13 34 NOTE 5 -- EQUITY SECURITIES At December 31, 1997, the Company had a stock option plan, 1992 Amended and Restated Stock Option Plan E, as amended (the "1992 Plan E"), under which the Company was authorized to issue up to 3,375,000 shares of common stock as incentive stock options ("ISOs") or nonqualified stock options ("NSOs"). The 1992 Plan E, which was approved by the shareholders in May 1992, replaced Stock Option Plan E ("Plan E"). On May 10, 1996, the shareholders approved a new stock option plan for the Company, Stock Option Plan F ("Plan F") under which an additional 3,800,000 shares of common stock may be issued as ISOs or NSOs. On February 21, 1997, the Board of Directors then adopted certain amendments to Plan F resulting in 1996 Amended Stock Option Plan F ("Amended Plan F") which was approved by the shareholders at the May 9, 1997 annual meeting. Under all plans, the exercise price of an ISO granted is not less than the fair market value of the common stock on the date of grant and for NSOs, the exercise price is either the fair market value of the common stock on the date of the grant or, when granted in connection with one-year performance periods under the Company's incentive compensation program, the exercise price may be determined by a formula selected by the Board or appropriate Board committee that is based on the fair market value of the common stock as of a date, or for a period, that is within three months of the date of grant. In cases where the average market value exceeds the exercise price on the date of grant, the differential is recorded as compensation expense. Under all plans, options expire up to eight years from the date of grant. Options granted are exercisable immediately, in monthly installments, or at a future date, as determined by the appropriate Board committee or as otherwise specified in the plan. At December 31, 1997, there were 152,633 shares available for the grant of future options under 1992 Plan E and 2,849,806 shares available under Amended Plan F. No options remain available for grant under any previous stock option plan. At its February 1998 meeting, the Board terminated 1992 Plan E. No grants had been made under this plan since 1996. The following table summarizes information with respect to stock options outstanding at December 31, 1997.
Options Exercisable Total Options Outstanding at 12/31/97 at 12/31/97 ----------------------------------------------- ----------------------------------- Weighted Average Remaining Weighted Weighted Contractual Average Average Range of Number Life Exercise Number Exercise Exercise Prices of Shares (Years) Price of Shares Price - --------------------------------------------------------------------------------------------------------------- $ 3.59 - $ 8.44 650,075 1.65 $ 7.51 550,265 $ 7.44 8.61 - 10.11 645,196 0.41 8.94 616,035 8.94 10.17 - 13.62 655,277 2.85 12.28 536,594 12.55 13.83 - 17.50 733,971 4.44 16.89 546,303 17.22 18.25 - 24.00 664,176 3.57 22.36 531,518 22.75 24.62 - 35.62 430,607 5.67 27.70 178,950 28.62 ----------- ----------- 3,779,302 2.98 $15.31 2,959,665 $14.52
The Company has chosen to continue to account for stock-based compensation using the method prescribed in APB Opinion No. 25, "Accounting for Stock Issued to Employees." In 1996, the Company adopted, for disclosure purposes only, Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based Compensation" (SFAS No. 123). 14 35 If the Company determined compensation cost for these plans in accordance with SFAS No. 123, the Company's pro-forma net income and earnings per share for fiscal year 1997 and 1996 would have been decreased to the pro-forma amounts indicated below:
December 31 (in millions, except per share data): 1997 1996 - ------------------------------------------------------------------------------------------------------------ Reported Net Income $31.2 $15.5 ===== ===== Pro-Forma Net Income $26.8 $13.1 ===== ===== Reported Basic Net Income per Share $0.75 $0.38 ===== ===== Pro-Forma Basic Net Income per Share $0.65 $0.32 ===== ===== Reported Diluted Net Income per Share $0.74 $0.37 ===== ===== Pro-Forma Diluted Net Income per Share $0.64 $0.31 ===== =====
The SFAS No. 123 method of accounting does not apply to options granted prior to January 1, 1995, and accordingly, the resulting pro-forma compensation cost may not be representative of that to be expected in future years. The Company has eight-year and five-year options. For disclosure purposes, the fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. Under the Black-Scholes model, the total value of the eight-year options granted in 1997 and 1996 was $2.2 million and $1.8 million, respectively, which would be amortized on a graded vesting schedule on a pro-forma basis over a seven-year period. The weighted-average fair value of the eight-year stock options granted in 1997 and 1996 was $10.56 and $12.36, respectively. The total value of the five-year stock options granted in 1997 and 1996 was $5.5 million and $5.0 million, respectively, which would be amortized ratably on a pro-forma basis over a five-year period (which varies between four months and five years). The weighted-average fair value of the five-year stock options granted in 1997 and 1996 was $7.28 and $8.06, respectively. Additionally, the following weighted-average assumptions were used for both the eight-year and five-year stock options granted in 1997 and 1996, respectively.
Eight Year Five Year --------------------- -------------------- December 31 1997 1996 1997 1996 - ---------------------------------------------------------------------------------------------------------------- Expected Volatility 39.96% 38.01% 39.65% 36.35% Risk-Free Interest Rate 5.60% 6.48% 6.29% 5.58% Expected Life 5 yrs 5 yrs 4 yrs 4 yrs Expected Dividend Yield 0% 0% 0% 0%
15 36 Additional information with respect to stock options awarded pursuant to such plans is summarized in the following schedule.
Number of Weighted Option Average Shares Exercise Price - ------------------------------------------------------------------------------------------------------------- Balance At December 31, 1994: 3,242,551 $ 7.51 Options Granted 737,752 13.53 Options Canceled 9,486 8.36 Options Exercised 566,235 5.86 Balance Outstanding at December 31, 1995 3,404,582 9.09 For the Year Ended December 31, 1996: Options Granted 769,451 23.84 Options Canceled 26,495 16.67 Options Exercised 730,782 7.16 Balance Outstanding at December 31, 1996 3,416,756 12.76 For the Year Ended December 31, 1997: Options Granted 964,335 20.77 Options Canceled 85,405 19.60 Options Exercised 516,384 7.94 Balance Outstanding at December 31, 1997 3,779,302 15.31
At its February 1995 meeting, the Board authorized the Company to expend up to $10 million to repurchase additional shares of its common stock, from time to time, for its stock-based benefit plans or for other corporate purposes. The Company repurchased 3,358, 24,600, and 60,000 shares of its common stock during 1997, 1996, and 1995, respectively, totaling $1.4 million. NOTE 6 - EARNINGS PER SHARE RECONCILIATION
Year Ended December 31 (In millions except per share data) 1997 1996 1995 - -------------------------------------------------------------------------------------------------------------- Basic Earnings per Share Computation ------------------------------------ Net Income (Numerator) $ 31.2 $15.5 $29.2 ------ ------ ------ Weighted Average Shares (Denominator) 41.4 40.7 39.7 ------ ------ ------ Basic Net Income per Share $ 0.75 $ 0.38 $ 0.73 ====== ====== ====== Diluted Earnings per Share Computation - -------------------------------------- Net Income (Numerator) $ 31.2 $15.5 $29.2 ------ ------ ------ Weighted Average Shares and Equivalents: Weighted Average Shares 41.4 40.7 39.7 Shares Issuable Upon Exercise of Stock Options 2.9 3.5 3.5 Less Shares Assumed to be Repurchased at Fair Market Value (2.0) (2.3) (2.5) ------ ------ ------ Total Weighted Average Shares and Equivalents (Denominator) 42.3 41.9 40.7 ------ ------ ------ Diluted Net Income per Share $ 0.74 $ 0.37 $ 0.72 ====== ====== ======
16 37 NOTE 7 -- INCOME TAXES
Year Ended December 31 (In millions) 1997 1996 1995 - -------------------------------------------------------------------------------------------------------------- Income before income taxes for the year ended December 31 was derived in the following jurisdictions: U.S. $ 25.7 $ 8.7 $ 42.6 Non-U.S. 25.7 17.5 7.2 ------- ------- ------- $ 51.4 $ 26.2 $ 49.8 ======= ======= ======= The provision for income taxes is comprised of the following: Current: U.S. $ 3.3 $ 10.4 $ 9.4 State 0.3 1.4 1.8 Non-U.S. 13.3 8.7 3.4 Deferred: U.S. 3.2 (4.3) 5.4 State 0.6 (0.5) 0.6 Non-U.S. (0.5) (5.0) - ------- ------- ------- Total Provision $ 20.2 $ 10.7 $ 20.6 ======= ======= ======= The differences between the U.S. federal statutory income tax as measured based on pre-tax income and the Company's effective rate are: U.S. federal statutory income tax rate 35.0% 35.0% 35.0% State income taxes, net of federal benefit 1.6% 1.9% 3.8% Change in valuation allowance 0.2% (9.1%) 2.5% Research tax credits (3.6%) (3.0%) (0.9%) Meals and entertainment 3.7% 5.7% 2.2% Goodwill and Other Non-deductibles 0.4% 1.6% - Benefit of Subsidiary Conversion (1.7%) - - Impact of Non-US jurisdictions 6.0% 4.3% (1.0%) Other (2.3)% 4.4% (0.2%) ------- ------- ------- E ffective Rate 39.3% 40.8% 41.4% ======= ======= =======
17 38
Year Ended December 31 (In millions) 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------- The tax effect of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31 are as follows: Deferred Tax Assets: Deferred Revenue $ 1.5 $ 2.4 $ 2.9 Restricted Stock 3.6 3.2 3.0 Accrued Leave Costs 3.4 2.9 2.2 Allowance for Doubtful Accounts 4.2 13.9 2.2 Loss and Credit Carryforwards 9.0 5.4 2.8 Other 5.0 (1.9) 2.0 ------- ------- ------- Subtotal 26.7 25.9 15.1 Valuation Allowance (0.5) (0.4) (2.8) ------- ------- ------- Total Deferred Tax Assets $ 26.2 $ 25.5 $ 12.3 ------- ------- ------- Deferred Tax Liabilities: Unbilled Receivables $ (20.4) $ (26.9) $ (20.4) Capitalized Software (21.0) (12.6) (10.0) Other (3.1) (0.9) (6.6) ------- ------- ------- Total Deferred Tax Liabilities (44.5) (40.4) (37.0) ------- ------- ------- Net Deferred Tax Liabilities $ (18.3) $ (14.9) $ (24.7) ======= ======= =======
The net changes in total valuation allowance for the years ending December 31, 1997 and 1996 were an increase of $0.1 million and a decrease of $2.4 million, respectively. Certain of the Company's foreign subsidiaries have net operating losses, the majority of such losses carry forward over an indefinite period. The Company has not provided U.S. federal income and foreign withholding taxes on $26.6 million of non-U.S. subsidiaries' undistributed earnings as of December 31, 1997, because such earnings are intended to be reinvested indefinitely or have already been taxed at rates in excess of the U.S. federal rate. If these earnings were distributed, foreign tax credits would become available under current law to reduce or eliminate the resulting U.S. Income tax liability. Where excess cash has accumulated in the Company's non-US subsidiaries and it is advantageous for tax or foreign exchange reasons, subsidiary earnings are remitted. The Company paid income taxes of approximately $14.9 million, $14.3 million, and $16.4 million, in 1997, 1996, and 1995, respectively. NOTE 8 - DEFERRED COMPENSATION PLAN The Company has deferred compensation plans which were implemented in late 1996, and permit eligible employees and directors to defer a specified portion of their compensation. The deferred compensation earns a specified rate of return. As of year end 1997 and 1996 the Company had accrued $10.4 million and $2.1 million, respectively, for its obligations under these plans. The Company expensed $0.6 million in 1997, related to the earnings by the deferred compensation plan participants. 18 39 To fund these plans, the Company purchases corporate-owned life insurance contracts. Proceeds from the insurance policies are payable to the Company upon the death of the insured. The cash surrender value of these policies, included in "Other Assets", was $9.6 million at December 31, 1997. There were no outstanding loans at December 31, 1997 on these policies. NOTE 9 -- EMPLOYEE PENSION PLAN The Company has a simplified employee pension plan, which became effective January 1, 1980. Contributions are based on the application of a percentage specified by the Company to the qualified gross wages of eligible employees. The Company makes annual contributions to the plan equal to the amount accrued for pension expense. Total expense of the plan was $9.8 million in 1997, $8.3 million in 1996, and $6.3 million in 1995. NOTE 10 -- COMMITMENTS AND CONTINGENCIES The Company occupies production facilities and office space (real property) and uses various pieces of equipment under operating lease agreements, expiring at various dates through the year 2014. The commitments under these agreements, as of December 31, 1997, are summarized in the table below. Payments under the real property leases are generally subject to escalation based upon increases in the Consumer Price Index, operating expenses, and property taxes. Gross Rentals and Maintenance Payments
(In millions) Real Property Equipment Total - ---------------------------------------------------------------------------------------------------------- 1998 $ 33.7 $10.3 $ 44.0 1999 35.3 6.6 41.9 2000 32.3 1.9 34.2 2001 29.7 0.2 29.9 2002 26.8 - 26.8 2003 through 2014 151.9 - 151.9 ------ ----- ------ Total $309.7 $19.0 $328.7 ====== ===== ======
Operating lease expense for 1997, 1996, and 1995 was approximately $46.5 million, $34.1 million, and $27.9 million, respectively. The Company has an extended leave program for titled employees that provides for compensated leave of eight weeks after seven years of service. The leave is not vested and can be taken only at the discretion of management. Because of the extended period over which the leave accumulates and the highly discretionary nature of the program, the amount of extended leave accumulated at any period end which will ultimately be taken is indeterminable. Consequently, the Company expenses such leave as it is taken. The Company has entered into a bank guarantee due upon request for performance under one of its contracts. At December 31, 1997 the Company had $6.3 million outstanding under such bank guarantee. 19 40 AMS performs, at any point in time, under a variety of contracts for many different clients. Situations can occasionally arise where factors may result in the renegotiation of existing contracts. Additionally, certain contracts may provide the client the right to suspend or terminate the contracts. To the extent any contracts may provide the client with such rights, the contracts generally provide for AMS to be compensated for work performed to date and may include provisions for payment of certain termination costs. However, business and other considerations may at times influence the ultimate outcome of contract renegotiations, suspension and/or cancellation. As of December 31, 1997, management is not aware of any major contract where there was a risk of suspension, termination or significant renegotiation which would materially impact the Company's financial position or results of operations other than those already provided for in the financial statements of the Company. NOTE 11 -- RELATED PARTY TRANSACTIONS The Company incurred legal fees and reimbursable expenses payable to Shaw, Pittman, Potts & Trowbridge, general counsel to the Company, totaling approximately $4.0 million, $2.7 million, and $2.5 million, in 1997, 1996, and 1995, respectively. A member of the firm of Shaw, Pittman, Potts & Trowbridge is the spouse of an executive officer of the Company who resigned in November 1997. NOTE 12 -- BUSINESS SEGMENT AND GEOGRAPHIC AREA INFORMATION AMS operates in one industry segment -- providing computer and information technology products and services to large clients in targeted vertical markets. However, AMS markets its services and products worldwide and its operations can be grouped into two main geographic areas according to the location of each AMS company. The two groupings consist of United States locations and non-US locations (primarily in Australia, Belgium, Canada, England, France, Germany, Mexico, Poland, Portugal, Spain, Sweden, Switzerland, and The Netherlands). Pertinent financial data, by geographic area, is summarized below.
Year Ended December 31 (In millions) 1997 1996 1995 - ---------------------------------------------------------------------------------------------------------- Revenues U.S. Companies $682.2 $645.2 $557.2 Non-US Companies 190.1 167.0 75.2 ------ ------ ------ Consolidated Total 872.3 812.2 632.4 ====== ====== ====== Income From Operations U.S. Companies 26.8 8.0 44.4 Non-US Companies 27.5 19.6 6.3 ------ ------ ------ Consolidated Total 54.3 27.6 50.7 ====== ====== ====== Identifiable Assets U.S. Companies 389.7 355.0 290.0 Non-US Companies 31.7 69.2 47.5 ------ ------ ------ Consolidated Total $421.4 $424.2 $337.5 ====== ====== ======
20 41 Revenues from AMS's U.S. Companies include export sales to non-US clients of $58.5 million in 1997, $111.3 million in 1996, and $103.0 million in 1995. As a result, the Company's total non-US client revenues were as follows:
Year Ended December 31 (In millions) 1997 1996 1995 - ----------------------------------------------------------------------------------------------------------- Exports By U.S. Companies $ 58.5 $111.3 $103.0 Non-US Companies 190.1 167.0 75.2 ------ ------ ------ Total Non-US Client Revenues $248.6 $278.3 $178.2 ====== ====== ====== Percent of Total Revenues 28.5% 34.3% 28.2% ====== ====== ======
21 42 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of American Management Systems, Incorporated In our opinion, the accompanying consolidated financial statements appearing on pages 3 to 21 of the 1997 Financial Report present fairly, in all material respects, the financial position of American Management Systems, Incorporated and its subsidiaries at December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. 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 of these statements in accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP Washington, D.C. February 18, 1998 22 43 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following table sets forth for the periods indicated the percentage of total revenues of major items in the Consolidated Statements of Operations and the percentage change in such items from period to period (see "Financial Statements and Notes"). The effect of inflation and price changes on the Company's revenues, income from operations, and expenses, is generally comparable to the general rate of inflation in the U.S. economy.
Period-to-Period Percentage of Total Revenues Change ---------------------------- ---------------- 1997 1996 vs. vs. 1997 1996 1995 1996 1995 - -------------------------------------------------------------------------------------------------------------- Revenues 100.0% 100.0% 100.0% 7.4 28.4% Expenses Client Project Expenses 57.6 64.8 55.1 (4.5) 50.9 Other Operating Expenses 30.5 25.9 30.4 26.5 9.4 Corporate Expenses 5.7 5.9 6.5 2.5 18.4 ------- ------- ------- 93.8 96.6 92.0 4.3 34.9 Income from Operations 6.2 3.4 8.0 96.7 (45.6) Other (Income) Expense 0.3 0.2 0.1 107.1 55.6 ------- ------- ------- Income Before Income Taxes 5.9 3.2 7.9 96.2 (47.4) Income Taxes 2.3 1.3 3.3 88.8 (48.1) ------- ------- ------- Net Income 3.6 1.9 4.6 101.3 (46.9) Weighted Average Shares 1.7 2.5 Basic Net Income per Share 97.4 (47.9) Weighted Average Shares and Equivalents 1.0 2.9 Diluted Net Income per Share 100.0 (48.6)
23 44 RESULTS OF OPERATIONS (continued) This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") contains certain forward-looking statements. In addition, the Company or its representatives from time to time may make, or may have made, certain forward-looking statements, orally or in writing, including, without limitation, any such statements made in this MD&A, press releases, or any such statements made, or to be made, in the MD&A contained in other filings with the Securities and Exchange Commission. The Company wishes to ensure that such forward-looking statements are accompanied by meaningful cautionary statements so as to ensure, to the fullest extent possible, the protections of the safe harbor established by the Private Securities Litigation Reform Act of 1995. Accordingly, such forward-looking statements made by, or on behalf of, the Company are qualified in their entirety by reference to, and are accompanied by, the discussion herein of important factors that could cause the Company's actual results to differ materially from those projected in such forward-looking documents. REVENUES Revenues increased 7% and 28% during 1997 and 1996 compared to the preceding year. Approximately 85-90% of each year's revenues come from clients for whom the Company performed services in prior years. Looking ahead to 1998, the Company expects continued growth, at higher rates of increase than were experienced in 1997. Business with non-US clients decreased 11% during 1997 to $249 million while it increased 56% in 1996 to $278 million. Business with non-US clients represents 28% and 34% of the Company's total revenues for 1997 and 1996, respectively. This was the first year (1997) since the Company began its international expansion in 1989 in which non-US revenues have declined on a comparative basis. These decreases were primarily due to two factors. The first factor is the termination of work with the non-US telecommunications client, Telecom Securicor Cellular Radio Limited ("Cellnet"), that had been the subject of prior statements by the Company dating back to the fourth quarter of 1996. The Company announced the termination of the Cellnet contract in a press release dated August 13, 1997. The second factor is the unexpected cancellation at the end of August 1997 by Swiss Telecom of the second phase of the Customer Care and Billing Systems project, after the successful completion of phase one of such project. The Company announced the cancellation of the Swiss Telecom contract in a press release dated September 4, 1997. If revenues from both such contracts were excluded from total revenues for 1997 and 1996, all other business with non-US clients increased 6% and 29%, during the twelve months of 1997 and 1996, respectively. For the year 1998, the Company expects non-US business, and European business in particular, to show little or no growth over 1997, owing principally to the impacts of the two clients discussed above. In the Telecommunications Firms market, a market which is characterized by large projects with relatively few clients, revenues decreased 16% compared to 1996 while there was an increase of 38% comparing 1996 to 1995. Non-US revenues decreased 20% and increased 65%, again compared to the 1996 and 1995 periods. These decreases are predominantly attributable to the termination of work on the Cellnet and Swiss Telecom contracts mentioned above, especially Cellnet. Excluding revenues from these two contracts, non-US revenues in this market from other contracts remained flat in 1997 and increased 30% in 1996. Revenues from all other telecommunications clients (both US and non-US, but excluding these two contracts) were approximately the same in 1997 when compared to 1996, and such revenues increased 17% between 1996 and 1995. For the year 1998, the Company expects revenues in this market to be approximately equal to Telecommunications Firms revenues for 1997. The lack of growth reflects several factors: the need to replace revenues from the Cellnet and Swiss Telecom contracts, Company initiated slowdown in business development in the fall of 1996 which market pipeline is just now increasing, reorganization of 24 45 management and market orientation in this market, and the need to upgrade software. The Company has begun development of its generation of customer care and billing software, known as "Tapestry", well underway through a significant contract with a European client. As that client is sharing part of the cost of the development, collections from that contract will not contribute to revenue growth in this market in 1998, but instead reduce capitalized software costs. A majority of the development effort is being capitalized. There remain risks in this market. Competition for experienced staff is especially intense in the telecommunications field, and staffing remains one of the Company's critical challenges for the Telecommunication Firms market. Additionally, the Company has entered various emerging markets. Contracts in emerging markets can pose higher delivery risks, however, than the Western European and U.S. markets in which the Company previously concentrated. In the Financial Services Institutions target market, 1997 revenues increased 17% over 1996, owing principally to build-ups in business with clients who started large projects in the second half of 1996 and several new projects in 1997. Revenues for this market, although strong generally, were somewhat lower than expectations due to differences with a European client on the scope of one project that led ultimately in the fourth quarter to termination of that contract. Business with non-US clients, primarily European, account for approximately 32% of the revenues in this market ($68 million). Comparing 1996 to 1995, business in this market had increased 23% owing to new business in late 1995. For 1998, the Company expects demand in the market to remain strong, but faces staffing constraints in this market as well. The Company anticipates revenue growth in this market to increase at rates somewhat above the Company's overall revenue growth. In the State and Local Governments and Education target market, revenues increased 22% in 1997 and 32% in 1996. The 1997 increase was fueled by several large contracts with state taxation departments looking to make substantial improvements in their ability to collect delinquent taxes and several new engagements for financial and revenue systems. On certain of the contracts with state taxation departments, the Company's fees are paid out of the benefits (increased collections) that the client achieves. On benefit-funded contracts (contracts whereby the amounts due the Company are earned based on actual benefits derived by the client), the Company defers recognition of revenues until that point at which management can predict, with reasonable certainty, that the benefit stream will generate amounts sufficient to fund the contract. From that point forward revenues are recognized on a percentage of completion basis. At the end of 1997, all such contracts had provided enough benefits to fund the work. In 1998, because the Company has begun several new large multi-year benefits-funded contracts, revenues from certain of those contracts are not likely to be recognized until later periods. The Company enjoys strong demand in this market. The Company has over $500 million in signed contracts in the State and Local Governments and Education market, to be performed over the next several years. Revenues in the State and Local Governments and Education market are expected to increase in 1998 at rates exceeding the increase in the Company's overall revenues. Revenues in the Federal Government Agencies target market increased 39% in 1997 and 22% in 1996. This increase was attributable to the award of a significant multi-year contract with the Department of Defense for its Standard Procurement System (SPS) which accounted for 40% of the 1997 growth in this market. In addition, there was increased business with existing clients and new business with both defense and civilian agencies. The Company expects revenues in this target market, for 1998, to increase at rates ahead of the overall growth rate of the Company, but not as high as the rates of increase in this market when comparing 1997 to 1996. These revenue increases will continue to be driven primarily by the SPS contract. Revenues from Other Corporate Clients decreased 11% in 1997 and increased 4% during 1996. For 1998, revenues from this market, which represents business in smaller vertical markets, are expected to increase at rates below the Company's overall growth in revenues owing to the expected increased work with health care and electric and gas utilities clients, being at least partially offset by decreases in various other projects. 25 46 EXPENSES Client project expenses and other operating expenses together increased 4% during 1997, which was slightly lower than the growth rate in revenues. Comparing 1996 to 1995, client project and other operating expenses increased 36%. Included in this increase for both 1997 and 1996 are the provisions and charges the Company recorded with respect to various client projects, totaling $7.2 million for 1997 and $31.1 million for 1996. The relevant clients included Cellnet, Swiss Telecom, a Financial Services Institutions client and in the fourth quarter of 1997 a receivable from a foreign government experiencing cash flow difficulties which had been owing for several years. In 1996, the Company recorded losses expected in 1997 related to the Cellnet project. These expenses were partially offset by significant reductions in performance-based incentive compensation accruals for the senior managers in the business units. Without these provisions and charges, client project and other operating expenses in 1996 would have increased by 31% over 1995, generally in line with the overall growth of the Company for 1996. Looking to 1998, the Company anticipates that growth in these expenses generally will be in line with the revenue growth. Corporate Expenses increased 2% and 18%, in 1997 and 1996, respectively. The 1997 and 1996 rates of increase were offset in part by sharply reduced performance-based incentive compensation accruals for the corporate officers and minimal profit-based compensation accruals under the Company's restricted stock program, both owing to the material impact of the Cellnet and Swiss Telecom contracts discussed earlier. In addition, the lower rate of growth in corporate expenses reflects the Company's focus on controlling expenses. For the year 1998, the Company expects these expenses to grow slightly above the Company's revenue growth. INCOME FROM OPERATIONS Income from operations increased 97% in 1997 and decreased 46% in 1996. These fluctuations were principally due to the charges associated with the non-US client projects discussed above. Absent these charges, income from operations would have increased 31% in 1996, comparable to the growth in revenues and in line with the Company's expectations. For 1997, as the Company was successful in controlling its overall growth rate, the Company's profit margins improved, but not at the level expected at the beginning of 1997, due primarily to the significant amount of management and staff resources that have been consumed in attempting to resolve the issues with the non-US client projects, delays in redeploying personnel from those projects, and attrition of personnel in that market higher than the Company's historical norms. For 1998, the Company will continue to manage growth and expects to improve on the profit margins. OTHER (INCOME) EXPENSE Interest expense increased 81% in 1997, compared to 1996, because of significant increases in short-term borrowing to finance accounts receivable, especially those of one of its foreign subsidiaries and the addition of the $20 million term loan signed in January 1997. It is expected that interest expense in 1998 will be significantly lower, compared to 1997, because of lower average outstanding borrowings. Other income increased 61% in 1997, compared to 1996, due primarily to additional income from landlord-initiated building moves, which the landlord payments exceeded the actual costs to move. 26 47 INCOME TAXES The Company's effective tax rate for 1997 was 39.3% compared to 40.8% in 1996. During the fourth quarter of 1997, the Company determined that it would be able to take advantage of a recent change in U.S. tax law that allowed certain U.S. tax benefits to accrue in cases where a U.S. company has foreign subsidiaries with accumulated losses in excess of the equity invested. The Company took advantage of this new law and was able to lower its 1997 tax rate, which benefit will not be recurring. The 1995 effective tax rate was 41.4%. The Company expects that its effective tax rate in 1998 will be generally consistent with its historical rates. FOREIGN CURRENCY EXCHANGE Approximately 28% of the Company's total revenues in 1997, 34% in 1996, and 28% in 1995, were derived from non-US clients. The Company's practice is to negotiate contracts in the same currency in which the predominant expenses are incurred, thereby mitigating the exposure to foreign currency exchange fluctuations. It is not possible to accomplish this in all cases, thus there is some risk that profits will be affected by foreign currency exchange fluctuations. However, the Company seeks to negotiate provisions in contracts with non-US clients that allow pricing adjustments related to currency fluctuations. In late 1997, the Company employed hedging of intercompany balance sheet transactions through derivative instruments (foreign currency swap contracts). For 1997, the Company entered into two such short-term contracts with de minimis value, which gave the Company access to additional sources of financing while limiting both the foreign exchange risk and exposure to floating interest rates. LIQUIDITY AND CAPITAL RESOURCES The Company provides for its operating cash requirements primarily through funds generated from operations, and secondarily from bank borrowings, which provide for cash and currency management with respect to the short term impact of certain cyclical uses such as annual payments of incentive compensation as well as financing to some degree accounts receivable. At December 31, 1997, the Company's cash and cash equivalents totaled $49.6 million, down from $62.8 million at the end of 1996. Cash provided from operating activities for 1997 was $64.9 million. Cash provided from operating activities increased due to significant improvements in the rate of collection of the Company's accounts receivable. Contributing to these improvements was the collection of most of the outstanding accounts receivable related to subcontract work with a prime contractor in the child support enforcement business. At December 31, 1997 receivables outstanding from that prime contractor are less than 5% of the overall accounts receivable balance. See Note 3 to the consolidated financial statements for further discussion on accounts receivable. The Company invested over $48.5 million in fixed assets and software purchases, and computer software development during 1997. Revolving line of credit borrowings during 1997 decreased by $45.0 million over year-end 1996, which borrowings consisted entirely of foreign currency borrowings by the Company's non-US subsidiaries, only $1.8 million of which remained outstanding at December 31, 1997. Additionally, the Company borrowed $20 million during the first quarter of 1997 under the term loan provisions of its $100 million syndicated debt facility then in effect. The aggregate weighted average short-term borrowings during 1997 was approximately $41.3 million, at an weighted average interest rate of 6.6%. During 1997, the Company made approximately $51.7 million in installment payments of principal on outstanding debt owed to banks; the Company also received proceeds of approximately $9.1 million during the period from the exercise of stock options and the tax benefits related thereto. 27 48 At December 31, 1997, the Company's debt-equity ratio, as measured by total liabilities divided by stockholders' equity was 0.77, down from 1.09 at December 31, 1996. On December 24, 1996, the Company entered into a syndicated $100 million Multi-Currency Revolving Credit ($80 million) and Term Loan ($20 million) Agreement with Wachovia Bank, NationsBank and Commerzbank. This Agreement replaced the two revolving credit agreements (the NationsBank Agreement and the Wachovia Agreement), totaling $70 million that the Company had immediately preceding the execution of the new credit facility, although outstanding borrowings under the NationsBank Agreement continued in force until they matured in January 1997. On January 6, 1997, a Term Loan of $20 million was funded. The Term Loan bears an interest rate of 6.94%, with monthly interest payments on the unpaid principal balance and quarterly principal payments commencing in April 1999. Effective January 9, 1998, the Company entered into a syndicated five-year $120 million Multi-Currency Revolving Credit with NationsBank and Wachovia Bank (the "1998 Agreement") as agents. This agreement replaces the $100 million Multi-Currency Revolving Credit Agreement with Wachovia Bank, NationsBank and Commerzbank; the Term Loan, which remains outstanding, is now governed by the 1998 Agreement. The Company's material unused source of liquidity at the end of 1997 consisted of approximately $78.2 million under the revolving credit and term debt facility then in effect. The Company believes that its liquidity needs can be met from the various sources described above. Companies in the business of providing information technology services, software products or custom-developed software, such as the Company, face "Year 2000 compliance" issues in at least two critical areas: internal systems and client systems. "Year 2000 compliance" means the ability of software and other processing capabilities to interpret and manipulate correctly all data that includes the year 2000 or dates thereafter. Failure of software and related capabilities used by the Company or, under certain circumstances, furnished to clients, to be Year 2000 compliant could have a material adverse impact on the Company. Accordingly, the Company is focusing at the most senior levels on these issues, with the Audit Committee of the Board of Directors, in conjunction with the Company's Chief Technology Officer and others, monitoring the Company's analyses and status with respect to Year 2000 issues. Early in 1997, the Company completed surveys of all of its major internal systems for Year 2000 compliance. The Company began remediation efforts for some systems in 1997, with others scheduled for upgrade or replacement in 1998. Assessment of smaller software components and systems, and interfaces with vendors, is continuing into 1998. The Company is coordinating centrally all of its efforts to achieve Year 2000 compliance of its internal systems by 1999. Total costs of achieving Year 2000 compliance in its internal systems, which costs will be expensed as they are incurred, are estimated to be approximately $3.0 million for 1998 and $2.5 million for 1999; the Company expensed $1.1 million for Year 2000 costs in 1997. With respect to its clients, the Company does not presently anticipate material costs or risks allocable specifically to Year 2000 compliance issues, but is continuing to assess the scope and status of such risks. Client engagements for specific Year 2000 remediation work have not been a strategic marketing focus for remediation work alone. In many of the Company's current engagements, Year 2000 replacement work is implicit, as the Company's clients are replacing systems for various business reasons but in the process are gaining a new Year 2000 compliant system. The Company does not anticipate any special risks or costs attributable to Year 2000 compliance issues in performing such contracts. With respect to contractual obligations to active clients (clients for whom the Company is still obligated to furnish products or services, such as maintenance), the Company similarly does not anticipate in the aggregate material costs or risks associated with Year 2000 compliance. Its contracts 28 49 with active clients generally are either for recent software that is Year 2000 compliant, or do not obligate the Company to furnish an updated release that is Year 2000 compliant. Early in 1997, the Company inventoried its active software products and status relative to Year 2000 compliance. It also has been communicating with active clients regarding Year 2000 compliance, and notifying them of the availability of updated Year 2000 compliant releases for certain older software known to the Company still to be used by that client. For example, AMS has made available to U.S. Federal Government clients since early 1997 an updated release of the Federal Financial System software that is Year 2000 compliant and many such clients are in the process of upgrading to that release. Given the special emphasis on Year 2000 compliance in the financial services sector, the Company's Finance Industry Group has notified both active and former clients of Year 2000 compliance releases of all current product offerings. The Company continues to assess the status of Year 2000 compliance of the Company-developed software in use by various clients. 29 50 ASSUMPTIONS UNDERLYING CERTAIN FORWARD-LOOKING STATEMENTS AND FACTORS THAT MAY AFFECT FUTURE RESULTS In the next couple of years, the Company expects growth in revenues to be somewhat lower than the Company's historical long-term rates. The more controlled and lower growth in revenues should enable the Company to improve its profit margins. These margins were reduced during the last several years owing to cancellations of two major projects and, related thereto, attrition rates higher than historical rates for the Company, heavy investment in building up staff capacity and infrastructure, and the stress of absorbing many new professional staff. The Company faces continuing risks in the area of project delivery and staffing. AMS has established a reputation in the marketplace of being a firm which delivers on time and in accordance with specifications regardless of the complexity of the application and the technology. The Company's customers often have a great deal at stake in being able to meet market and regulatory demands, and demand very ambitious delivery schedules. In order to meet its contractual commitments, AMS must continue to recruit, train, and assimilate successfully large numbers of entry-level and experienced employees annually, as well as to provide sufficient senior managerial experience on engagements, especially on large, complex projects. Moreover, this staff must be re-deployed on projects throughout North America, Europe, and other locations. The Company must also manage and seek to reduce rates of attrition, which the Company expects will continue to be somewhat higher than its historical norms in view of increased competition for its talent, although not as high as in 1997 when affected by the cancellation of two major projects within one month. There is also the risk of successfully managing large projects and the risk of a material impact on results because of the unanticipated delay, suspension, renegotiation or cancellation of a large project. As was the case in the past two years, any such development in a project could result in a drop in revenues or profits, the need to relocate staff, a potential dispute with a client regarding money owed, and a diminution of AMS's reputation. These risks are magnified in the largest projects and markets simply because of their size. The Company's business is characterized by large contracts producing high percentages of the Company's revenues. For example, 35% of the Company's total revenues in 1997 were derived from business with fifteen clients. The cancellation of phase two of the large Swiss Telecom project in the third quarter of 1997 after the Company's successful completion of phase one of the project, and the Company's subsequent reduction of net income for 1997 and redeployment of personnel as a result of such unexpected cancellation, together with a cancellation of a contract in the Financial Services Institutions market following management and institutional changes at the client, are recent examples of the risks inherent in the Company's business and the Company's efforts to manage such risks. Events such as unanticipated declines in revenues or profits could in turn result in immediate fluctuations in the trading price and volume of the Company's stock. Finally, there is the risk of revenues not being realized when expected, such as in certain contracts in the State and Local Governments and Education Market. On certain contracts, the Company's fees are paid out of the benefits (increased collections) that the client achieves. The Company typically defers recognition of such revenues until management can predict, with reasonable certainty, that the benefit stream will generate amounts sufficient to fund the contract. From that point forward revenues are recognized on a percentage of completion basis. 30 51 Certain other risks, including, but not limited to, the Company's increasing international scope of operations, are discussed elsewhere in this Form 10-K. The Company is also expanding in several emerging markets. Contracts being performed in such markets can have somewhat higher delivery risks. Because the Company operates in a rapidly changing and highly competitive market, additional risks not discussed in this Form 10-K may emerge from time to time. The Company cannot predict such risks or assess the impact, if any, such risks may have on its business. Consequently, the Company's various forward-looking statements, made, or to be made, should not be relied upon as a prediction of actual results. 31 52 FIVE-YEAR FINANCIAL SUMMARY
Year Ended December 31 (In millions except share and per share data) 1997 1996 1995 1994 1993 - --------------------------------------------------------------------------------------------------------------------------- OPERATING RESULTS - --------------------------------------------------------------------------------------------------------------------------- Revenues $ 872.3 $ 812.2 $ 632.4 $ 459.9 $ 364.0 Client Project Expenses 502 .3 525.9 348.6 246.9 189.3 Other Operating Expenses 266 .2 210.4 192.3 140.1 115.6 Corporate Expenses 49.5 48.3 40.8 32.6 28.4 -------- -------- -------- -------- -------- Total Operating Expense 818 .0 784.6 581.7 419.6 333.3 -------- -------- -------- -------- -------- Income From Operations 54.3 27.6 50.7 40.3 30.7 Other (Income) Expense 2 .9 1.4 0.9 0.8 - -------- -------- -------- -------- -------- Income Before Income Taxes 51.4 26.2 49.8 39.5 30.7 Income Taxes 20.2 10.7 20.6 16.1 12.9 -------- -------- -------- -------- -------- Net Income 31.2 15.5 29.2 23.4 17.8 Dividends and Accretion on Series B Preferred Stock - - - 0.3 0.8 -------- -------- -------- -------- -------- Net Income per Common Shareholders $ 31.2 $ 15.5 $ 29.2 $ 23.1 $ 17.0 ======== ======== ======== ======== ======== PER COMMON SHARE DATA - --------------------------------------------------------------------------------------------------------------------------- Basic Net Income per Common Share $ 0.75 $ 0.38 $ 0.73 $ 0.61 $ 0.47 Weighted Average Shares 41,361,967 40,656,760 39,736,747 38,126,715 35,844,296 Diluted Net Income per Common Share $ 0.74 $ 0.37 $ 0.72 $ 0.60 $ 0.46 Weighted Average Shares and Equivalents 42,304,018 41,925,353 40,707,633 38,731,422 36,663,440 Common Shares Outstanding at Year End 41,544,299 40,939,209 40,040,454 39,294,780 36,258,602 FINANCIAL POSITION - --------------------------------------------------------------------------------------------------------------------------- Total Assets $421.4 $424.2 $337.5 $252.2 $185.0 Fixed Assets, Net 45.2 48.0 37.1 28.7 21.3 Working Capital 168.9 125.0 115.6 89.4 67.3 Noncurrent Liabilities 52.7 22.3 26.8 21.3 19.6 Stockholders' Equity 238.7 203.1 175.5 138.3 99.0
32 53 FIVE-YEAR REVENUES BY TARGET MARKET
Year Ended December 31 (In millions) 1997 1996 1995 1994 1993 - ---------------------------------------------------------------------------------------------------------------------------- Revenues Telecommunication Firms $259.3 $310.1 $224.2 $128.6 $ 85.3 Financial Services Institutions 214.9 183.7 149.5 100.4 67.0 State and Local Governments and Education 171.4 140.7 106.9 92.3 76.7 Federal Government Agencies 189.2 135.7 111.5 104.4 104.8 Other Corporate Clients 37.5 42.0 40.3 34.3 30.2 ------ ------ ------ ------ ------ Total Revenues $872.3 $812.2 $632.4 $459.9 $364.0 ====== ====== ====== ====== ======
33 54 SELECTED QUARTERLY FINANCIAL DATA AND INFORMATION ON AMS STOCK (UNAUDITED) The following summary represents the results of operations for the two years in the period ended December 31, 1997. (In millions except per share data)
1st 2nd 3rd 4th Quarter Quarter Quarter Quarter Total - -------------------------------------------------------------------------------------------------------------------- 1997: - -------------------------------------------------------------------------------------------------------------------- Revenues $196.3 $220.9 $225.5 $229.6 $872.3 Income Before Income Taxes 9.7 13.3 8.5 19.9 51.4 Net Income 5.7 7.9 4.5 13.1 31.2 Basic Earnings per Share 0.14 0.19 0.11 0.31 0.75 Diluted Earnings per Share 0.14 0.18 0.11 0.31 0.74 1996: - -------------------------------------------------------------------------------------------------------------------- Revenues $181.4 $188.8 $217.5 $224.5 $812.2 Income Before Income Taxes 11.3 14.3 18.5 (17.9) 26.2 Net Income (Loss) 6.6 8.3 10.7 (10.1) 15.5 Basic Net Income per Share 0.16 0.21 0.26 (0.25) 0.38 Diluted Net Income per Share 0.16 0.20 0.25 (0.24) 0.37
The Company has never paid any cash dividends on its common stock and does not anticipate paying dividends in the foreseeable future. Its policy is to invest retained earnings in the operation and expansion of its business. Future dividend policy with respect to its common stock will be determined by the Board of Directors based upon the Company's earnings, financial condition, capital requirements, and other then-existing conditions. STOCK MARKET INFORMATION The common stock of American Management Systems, Inc., is traded in the NASDAQ over-the-counter market under the symbol AMSY. References to the stock prices are the high and low bid prices during the calendar quarters.
1997 1996 ----------------------------- ------------------------------- High Low High Low - --------------------------------------------------------------------------------------------------------------------------- 1st Quarter $25.750 $15.750 $26.625 $18.250 2nd Quarter 26.750 19.000 33.375 24.375 3rd Quarter 27.750 17.625 31.125 21.625 4th Quarter 24.375 18.250 37.125 20.375
The approximate number of shareholders of record of the Company's common stock as of March 20, 1998 was 524. 34 55 OTHER INFORMATION TRANSFER AGENT AND REGISTRAR Chemical Mellon Shareholder Services, L.L.C. Ridgefield Park, N.J. INDEPENDENT ACCOUNTANTS Price Waterhouse LLP Washington, D.C. COUNSEL Shaw, Pittman, Potts & Trowbridge Washington, D.C. STOCKHOLDER AND 10-K INFORMATION Financial inquiries should be directed to Frank A. Nicolai, Secretary of the Company, American Management Systems, Incorporated, 4050 Legato Road, Fairfax, Virginia 22033. Telephone (703) 267-8000. A complimentary copy of the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission will be provided upon written request. ANNUAL MEETING The annual shareholders meeting has been scheduled for May 8, 1998 in Fairfax, Virginia, for stockholders of record on March 20, 1998. 35 EX-3.2 2 BY-LAWS OF THE COMPANY AS AMENDED 1 EXHIBIT 3.2 AMERICAN MANAGEMENT SYSTEMS, INCORPORATED * * * * * BY-LAWS As amended and restated on February 27, 1998 * * * * * 2 AMERICAN MANAGEMENT SYSTEMS, INCORPORATED * * * * * BY-LAWS * * * * * ARTICLE I OFFICES Section 1. The registered office of the corporation shall be at 1209 Orange Street, in the City of Wilmington, County of New Castle, State of Delaware. The registered agent of the corporation at such address is The Corporation Trust Company. Section 2. The corporation may also have offices at such other places both within and without the State of Delaware as the board of directors may from time to time determine or the business of the corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. All meetings of the stockholders for the election of directors shall be held in the City of Fairfax, Commonwealth of Virginia, at such place as may be fixed from time to time by the board of directors, or at such other place either within or without the State of Delaware as shall be designated from time to time by the board of directors and stated in the notice of the meeting. Meetings of stockholders for any other purpose may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. The annual meeting of stockholders for the election of directors and the transaction of other business shall be held, in each year on the second Friday in May if not a legal holiday, and if a legal holiday, then on the next secular day following, at 10:00 a.m., or at any other date and time that shall be designated from time to time by the board of directors and stated in the notice of the meeting. Section 3. Written notice of the annual meeting stating the place, date and hour of the meeting shall be given to each stockholder entitled to vote at such meeting, either personally or by mail, not less than ten nor more than sixty days before the date of the meeting. If mailed, such notice shall be deemed to have been given when deposited in the United States mail, postage prepaid directed to the stockholder as it appears on the records of the corporation. Section 4. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the 3 stockholders entitled to vote at the meeting arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Section 5. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the certificate of incorporation, may be called by the chief executive officer and shall be called by the chief executive officer or secretary at the request in writing of a majority of the board of directors, or at the request in writing of stockholders owning a majority in amount of the entire capital stock of the corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. Section 6. Written notice of a special meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called, shall be given not less than ten nor more than sixty days before the date of the meeting, to each stockholder entitled to vote at such meeting. Section 7. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. Section 8. The holders of a majority of the stock issued and outstanding and entitled to vote thereat (or in the case of a class or series entitled to vote to the exclusion of any other class or series, a majority of such class or series), present in person or represented by proxy, shall constitute a quorum at all meetings of such stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders (including any class or series thereof), the holders of a majority of stock entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. 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. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 9. At all meetings of the stockholders for the election of directors a plurality of the votes cast shall be sufficient to elect. All other elections and questions shall, unless otherwise provided by the certificate of incorporation, these By-laws, the rules or regulations of any stock exchange applicable to the corporation, as otherwise provided by law or pursuant to any regulation applicable to the corporation, be decided by the affirmative vote of the holders of -2- 4 a majority in voting power of the shares of stock of the corporation which are present in person or by proxy and entitled to vote thereon. Section 10. Except as otherwise provided by or pursuant to the provisions of the certificate of incorporation, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of stock held by such stockholder which has voting power upon the matter in question. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or by delivering a proxy in accordance with applicable law bearing a later date to the secretary of the corporation. Voting at meetings of stockholders need not be by written ballot. Section 11. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors, and which record date: (i) in the case of determination of stockholders entitled to vote at any meeting of stockholders or adjournment thereof, shall, unless otherwise required by law, not be more than sixty nor less than ten days before the date of such meeting; and (ii) in the case of any other action, shall not be more than sixty days prior to such other action. If no record date is fixed: (i) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; and (ii) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting. Article IIB, Section 1 of these By-laws shall govern the record date to determine stockholders entitled to express consent to corporate actions in writing without a meeting. Section 12. Meetings of stockholders shall be presided over by the chairman of the board, if any, or in his absence by the vice chairman of the board, if any, or in his absence by the chief executive officer, or in his absence by the president, or in his absence by a vice president, or in the absence of the foregoing persons by a chairman designated by the board of directors, or in the absence of such designation by a chairman chosen at the meeting. The secretary shall act as secretary of the meeting, but in his absence the chairman of the meeting may appoint any person to act as secretary of the meeting. -3- 5 Section 13. The corporation shall in advance of any meeting of stockholders appoint one or more inspectors of election, who may be employees of the corporation, to act at the meeting and any adjournment thereof and to make a written report thereof. The corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. In the event that no inspector so appointed or designated is able to act at a meeting of stockholders, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath to execute faithfully the duties of inspector with strict impartiality and according to the best of his or her ability. The inspector or inspectors so appointed or designated shall (i) ascertain the number of shares of capital stock of the corporation outstanding and the voting power of each such share, (ii) count all votes and ballots, (iii) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors, and (iv) certify their determination of the number of shares of capital stock of the corporation represented at the meeting and such inspectors' count of all votes and ballots. Such certification and report shall specify such other information as may be required by law. In determining the validity and counting of proxies and ballots cast at any meeting of stockholders of the corporation, the inspectors may consider such information as is permitted by applicable law. No person who is a candidate for an office at an election may serve as an inspector at such election. Section 14. The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting by the person presiding over the meeting. The board of directors may adopt by resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the board of directors, the chairman of any meeting of stockholders shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the board of directors or prescribed by the chairman of the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations on attendance at or participation in the meeting to stockholders of record of the corporation, their duly authorized and constituted proxies or such other persons as the chairman of the meeting shall determine; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (v) limitations on the time allotted to questions or comments by participants. Unless and to the extent determined by the board of directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure. ARTICLE IIA NOTICE OF STOCKHOLDER BUSINESS AND NOMINATIONS Section 1. (A) Nominations of persons for election to the board of directors and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders only (a) pursuant to the corporation's notice of meeting (or any supplement thereto), -4- 6 (b) by or at the direction of the board of directors or (c) by any stockholder of the corporation who was a stockholder of record at the time of giving of notice provided for in this By-law, who is entitled to vote at the meeting and complies with the notice procedures set forth in this By-law. (B) For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (c) of paragraph (1)(A) of this By-law, the stockholder must have given timely notice thereof in writing to the secretary of the corporation and such other business must otherwise be a proper matter for stockholder action. To be timely, a stockholder's notice shall be delivered to the secretary at the principal executive offices of the corporation not later than the close of business on the sixtieth day nor earlier than the close of business on the ninetieth day prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is more than thirty days before or more than sixty days after such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the ninetieth day prior to such annual meeting and not later than the close of business on the later of the sixtieth day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made by the corporation. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a stockholder's notice as described above. Such stockholder's notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or re-election as a director all information relating to such person that is required to be disclosed in solicitations or proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and Rule 14a-11 thereunder (and such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (b) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made, and in the event that such business includes a proposal to amend the By-laws of the corporation, the language of the proposed amendment; and (c) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the corporation's books, and of such beneficial owner, (ii) the class and number of shares of the corporation which are owned beneficially and of record by such stockholder and such beneficial owner, (iii) a representation that the stockholder is a holder of record of stock of the corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business or nomination, and (iv) a representation whether the proponent intends or is part of a group which intends to solicit proxies from other stockholders in support of such proposal or nomination. (C) Notwithstanding anything in the second sentence of paragraph (1)(B) of this By-law to the contrary, in the event that the number of directors to be elected to the board of directors of the corporation is increased and there is no public announcement by the corporation naming all of the nominees for director or specifying the size of the increased board of directors at least seventy days prior to the first anniversary of the preceding year's annual -5- 7 meeting, a stockholder's notice required by this By-law shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the secretary at the principal executive offices of the corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the corporation. Section 2. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the corporation's notice of meeting. Nominations of persons for election to the board of directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the corporation's notice of meeting (a) by or at the direction of the board of directors or (b) provided that the board of directors has determined that directors shall be elected at such meeting, by any stockholder of the corporation who is a stockholder of record at the time of giving of notice provided for in this By-law, who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this By-law. In the event the corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the board of directors, any such stockholder may nominate a person or persons (as the case may be) for election to such position(s) as specified in the corporation's notice of meeting, if the stockholder's notice required by paragraph (1)(B) of this By-law shall be delivered to the secretary at the principal executive offices of the corporation not earlier than the close of business on the 90th day prior to such special meeting and not later than the close of business on the later of the 60th day prior to such special meeting, or the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the board of directors to be elected at such meeting. In no event shall the public announcement of an adjournment of a special meeting commence a new time period for the giving of a stockholder's notice as described above. Section 3. (A) Only such persons who are nominated in accordance with the procedures set forth in this By-law shall be eligible to serve as director and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this By-law. Except as otherwise provided by law, the chairman of the meeting shall have the power and duty to (i) determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this By-law and (ii) if any proposed nomination or business is not in compliance with this By-law, or if the stockholder solicits or is part of a group which solicits proxies in support of such stockholder's proposal without such stockholder having made the representation required by clause (c)(iv) of paragraph 1(B) of this By-law, to declare that such defective proposal or nomination shall be disregarded. (B) For purposes of this By-law, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act. (C) Notwithstanding the foregoing provisions of this By-law, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules -6- 8 and regulations thereunder with respect to the matters set forth in this By-law. Nothing in this By-law shall be deemed to affect any rights (i) of stockholders to request inclusion of proposals in the corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or (ii) of the holders of any series of Preferred Stock to elect directors under specified circumstances. ARTICLE IIB CONSENTS TO CORPORATE ACTION RECORD DATE Section 1. The record date for determining stockholders entitled to express consent to corporate action in writing without a meeting shall be as fixed by the board of directors or as otherwise established under this Section. Any person seeking to have the stockholders authorize or take corporate action by written consent without a meeting shall, by written notice addressed to the secretary and delivered to the corporation, request that a record date be fixed for such purpose. The board of directors may fix a record date for such purpose which shall be no more than ten days after the date upon which the resolution fixing the record date is adopted by the board of directors and shall not precede the date such resolution is adopted. If the board of directors fails within ten days after the corporation receives such notice to fix a record date for such purpose, the record date shall be the day on which the first written consent is delivered to the corporation in the manner described in Section 2 below unless prior action by the board of directors is required under the General Corporation Law of the State of Delaware, in which event the record date shall be at the close of business on the day on which the board of directors adopts the resolution taking such prior action. PROCEDURES Section 2. (A) Every written consent purporting to take or authorizing the taking of corporate action and/or related revocations (each such written consent and related revocation is referred to in this Article IIB as a "Consent") shall bear the date of signature of each stockholder who signs the Consent, and no Consent shall be effective to take the corporate action referred to therein unless, within sixty days of the earliest dated Consent delivered in the manner required by this Section 2, Consents signed by a sufficient number of stockholders to take such action are so delivered to the corporation. Prompt notice of the taking of the corporate action without a meeting by less than unanimous Consent shall be given to those stockholders who have not consented in writing, to the extent required by law. (B) A Consent shall be delivered to the corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery to the corporation's registered office shall be made by hand or by certified or registered mail, return receipt requested. (C) Consents shall be valid for a maximum of sixty days after the date of the earliest dated Consent delivered to the corporation in the manner provided in Section 228(c) -7- 9 of the General Corporation Law of the State of Delaware. Consents may be revoked by written notice (i) to the corporation, (ii) to the stockholder or stockholders soliciting consents or soliciting revocation in opposition to action by consent (the "Soliciting Stockholder"), or (iii) to a proxy solicitor or other agent designated by the corporation or the Soliciting Stockholders. (D) Within ten business days after receipt of the earliest dated Consent delivered to the corporation in the manner provided in Section 228(c) of the General Corporation Law of the State of Delaware or the determination by the board of directors of the corporation that the corporation should seek corporate action by written consent, as the case may be, the secretary of the corporation shall engage nationally recognized independent inspectors of elections for the purpose of performing a ministerial review of the validity of the Consents and revocations. The cost of retaining inspectors of election shall be borne by the corporation. For the purpose of permitting the inspectors to perform such review, no action by written consent without a meeting shall be effective until such date as the independent inspectors certify to the corporation that the consents delivered to the corporation in accordance with this Section 2 represent at least the minimum number of votes that would be necessary to take the corporate action. Nothing contained in this paragraph shall in any way be construed to suggest or imply that the board of directors or any stockholder shall not be entitled to contest the validity of any Consent or revocation thereof, whether before or after such certification by the independent inspectors, or to take any other action (including, without limitation, the commencement, prosecution or defense of any litigation with respect thereto, and the seeking of injunctive relief in such litigation). (E) Following appointment of the inspectors, Consents and revocations shall be delivered to the inspectors upon receipt by the corporation, the Soliciting Stockholder or their proxy solicitors or other designated agents. As soon as practicable following the earlier of (i) the receipt by the inspectors, a copy of which shall be delivered to the corporation, of any written demand by the Soliciting Stockholders of the corporation, or (ii) sixty days after the date of the earliest dated Consent delivered to the corporation in the manner provided in Section 228(c) of the General Corporation Law of the State of Delaware, the inspectors shall issue a preliminary report to the corporation and the Soliciting Stockholders stating the number of valid and unrevoked Consents received and whether, based on preliminary count, the requisite number of valid and unrevoked Consents has been obtained to authorize or take the action specified in the Consents. (F) Unless the corporation and the Soliciting Stockholders shall agree to a shorter or longer period, the corporation and the Soliciting Stockholders shall have 48 hours to review the Consents and revocations and to advise the inspectors and the opposing party in writing as to whether they intend to challenge the preliminary report of the inspectors. If no written notice of an intention to challenge the preliminary report is received within 48 hours after the inspectors' issuance of the preliminary report, the inspectors shall issue to the corporation and the Soliciting Stockholders their final report containing the information from the inspectors' determination with respect to whether the requisite number of valid and unrevoked Consents was obtained to authorize and take the action specified in the Consents. If the corporation or the Soliciting Stockholders issue written notice of an intention to challenge the inspectors' -8- 10 preliminary report within 48 hours after the issuance of that report, a challenge session shall be scheduled by the inspectors as promptly as practicable. Following completion of the challenge session, the inspectors shall as promptly as practicable issue their final report to the Soliciting Stockholders and the corporation, which report shall contain the information included in the preliminary report, plus any change in the vote total as a result of the challenge and a certification of whether the requisite number of valid and unrevoked Consents was obtained to authorize or take the action specified in the Consents. ARTICLE III DIRECTORS Section 1. The number of directors which shall constitute the whole board shall be not less than five nor more than fifteen. The number of directors may be altered by resolution adopted by a vote of a majority of the entire board of directors, or by such vote of the holders of any class or series of stock as may be specified in the certificate of incorporation. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 3 of this Article or otherwise specified in the certificate of incorporation and except that the first directors of the corporation were elected by the incorporators of the corporation, and each director elected shall hold office until his successor is elected and qualified. Directors need not be stockholders. Section 2. Any director may resign at any time upon written notice to the corporation. Section 3. Vacancies and newly created directorships resulting from any increase in the authorized number of directors, except as otherwise provided in the certificate of incorporation may be filled only by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify, or until their earlier resignation or removal. If there are no directors in office, then an election of directors may be held in the manner provided by statute. If, at the time of filling any vacancy or any newly created directorship, the directors then in office shall constitute less than a majority of the whole board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office. Section 4. The business of the corporation shall be managed by or under the direction of its board of directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the certificate or incorporation or by these By-laws directed or required to be exercised or done by the stockholders. -9- 11 MEETINGS OF THE BOARD OF DIRECTORS Section 5. The board of directors of the corporation may hold meetings, both regular and special, either within or without the State of Delaware. Section 6. The first meeting of each newly elected board of directors shall be held immediately after the annual meeting of stockholders and at the same place, and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present. In the event such meeting is not held at that time and place, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the board of directors, or as shall be specified in a written waiver signed by all of the directors. Section 7. Regular meetings of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by the board of directors. Section 8. Special meetings of the board of directors may be called by the chairman of the board of directors or the chief executive officer on three (3) days' notice to each director, either personally or by mail or by telegram, telecopier, telephone or other means of electronic transmission; special meetings shall be called by the chief executive officer or secretary in like manner and on like notice on the written request of a majority of the directors. Section 9. At all meetings of the board, a majority of the directors then in office or, if greater, one-third of the then-authorized total number of directors, shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation. If a quorum shall not be present at any meeting of the board of directors a majority of the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 10. Unless otherwise restricted by the certificate of incorporation or these By-laws, any action required or permitted to be taken at any meeting of the board of directors or of any committee thereof may be taken without a meeting, if all members of the board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the board or committee. COMMITTEES OF DIRECTORS Section 11. The board of directors may by resolution designate one or more committees, each committee to consist of one or more of the directors of the corporation. The board of directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Any such committee, to the extent provided in the resolution, shall have and may exercise the powers of -10- 12 the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; provided, however, that in the absence or disqualification of any member of such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of any such absent or disqualified member. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors. Section 12. Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required. AUDIT COMMITTEE Section 13. There shall exist a standing Audit Committee composed of not fewer than two directors of the corporation who are neither officers nor employees of the corporation. The members of the Audit Committee shall be designated by resolution passed by a majority of the whole board. The board may designate one or more qualifying directors as alternate members of the Audit Committee, who may replace any absent or disqualified members at any meeting of the committee. In the absence of any member of the Audit Committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a majority, may unanimously appoint another qualifying member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member not replaced by an alternate member designated by the whole board. Section 14. The Audit Committee shall meet on at least two occasions each fiscal year, as specified in Section 15 below, and on such other occasions as the members of the committee may deem appropriate and desirable. Section 15. The Audit Committee shall meet each year prior to the initiation of the annual audit and again following completion of the investigatory work of the corporation's independent auditors. At the former meeting, the committee shall review the proper scope of the audit to be performed by the corporation's independent auditors and the audit-related expenses to be incurred by the corporation. At the latter meeting, the committee shall: (i) review with the independent auditor its report or opinion, any recommendations it may have for improving internal accounting controls, management systems, or choice of accounting principles, and its perception of the adequacy of the corporation's financial and accounting personnel and the cooperation it received from them during the audit; and (ii) adopt a resolution recommending to the board of directors the accounting firm to be selected by the board as the independent auditor of the corporation. Moreover, the committee shall, at such times and under such circumstances as it may deem appropriate: (i) recommend that the board of directors discharge the firm acting as the corporation's independent auditor; (ii) review the engagement of the independent auditor, including the audit fees; (iii) review and approve the auditor's performance of non-audit services and the fees for such services; (iv) evaluate the independence of the independent auditor, taking into account the relationship of audit to non-audit fees and other pertinent matters; (v) review -11- 13 with the corporation's financial and accounting staff compliance with, and the need for any changes in, the corporation's policies and procedures with respect to internal accounting, auditing and financial controls; (vi) evaluate the degree of implementation of any adopted recommendations of the independent auditor; (vii) review any significant business transactions which are not a normal part of the corporation's business, any change in accounting practices and all significant adjustments in the corporation's financial statements; and (viii) perform such other functions, in keeping with the purposes and authorization of the committee, as the committee may deem necessary and appropriate to the accomplishment of its designated objectives. Section 16. The Audit Committee shall keep regular minutes of its meetings and shall report the same to the board of directors when required. Section 17. The Audit Committee, to the extent provided in this By-law, shall have and may exercise the powers of the board of directors in the management of the business and affairs of the corporation and may authorize the seal of the corporation to be affixed to all papers that may require it. Section 18. Each individual director of the corporation, as well as the board as a whole, shall continue to exercise due diligence to assure that the financial statements of the corporation fairly and accurately present the results of the operation and financial position of the corporation and that the corporation's financial operations are conducted in accordance with all applicable laws and regulations, the corporation's policies and the regular and accepted principles of accounting. The existence and functioning of the Audit Committee shall effect no derogation of this duty. COMPENSATION COMMITTEE Section 19. There shall exist a standing Compensation Committee composed of not fewer than three directors of the corporation who are neither officers nor employees of the corporation. The members of the Compensation Committee shall be designated by resolution passed by a majority of the whole board of directors. The board of directors may designate one or more qualifying directors as alternate members of the Compensation Committee, who may replace any absent or disqualified members at any meeting of the committee. In the absence of any member of the Compensation Committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a majority, may unanimously appoint another qualifying member of the board of directors to act at the meeting in the place of any such absent or disqualified member not replaced by an alternate member designated by the whole board. Section 20. The Compensation Committee shall meet at the request of the board of directors, and on such other occasions as the members of the committee may deem appropriate and desirable. The chief executive officer shall attend all meetings of the committee; provided, however, that the chief executive officer shall not participate in any decision concerning compensation which is subject to the provisions of Section 16 of the Securities Exchange Act of -12- 14 1934 (including decisions regarding eligibility for participation in plans, awards and any modifications thereto.) Section 21. The Compensation Committee shall (i) adopt resolutions recommending compensation policies and practices to the board of directors, (ii) make decisions regarding compensation plans and compensation for the chief executive officer and all other executive officers of the corporation, and make decisions regarding equity based compensation arrangements for and awards thereof to the controller, and (iii) approve any and all contracts or other transactions between the corporation and any of its directors or executive officers (to the extent that the approval of the board of directors is not required by law.) Section 22. The Compensation Committee shall keep regular minutes of its meetings and shall report the same to the board of directors when required. Section 23. The Compensation Committee, to the extent provided in this By-law, shall have and may exercise the powers of the board of directors in the management of the business and affairs of the corporation and may authorize the seal of the corporation to be affixed to all papers that may require it. COMPENSATION OF DIRECTORS Section 24. The directors may be paid their expenses, if any, of attendance at each meeting of the board of directors and may be paid a fixed sum for attendance at each meeting of the board of directors or a stated salary as director. No such payment shall preclude any directors from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. ARTICLE IV NOTICES Section 1. Whenever, under the provisions of the statutes or of the certificate of incorporation or of these By-laws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given in person or by telegram, telecopier, telephone or other means of electronic transmission. Section 2. Whenever any notice is required to be given under the provisions of the statutes or of the certificate of incorporation or of these By-laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. Attendance of a person at a meeting of stockholders, directors, or members of a committee of directors, shall constitute a waiver of notice of such meeting, except when the stockholder, director or committee member attends a meeting for the -13- 15 express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors or members of a committee of directors need be specified in any written waiver of notice unless so required by the certificate of incorporation or the By-laws. ARTICLE V OFFICERS Section 1. The officers of the corporation shall be chosen by the board of directors and shall be a chairman of the board, a president, a secretary and a treasurer. The board of directors may also choose one or more executive vice-presidents, one or more assistant secretaries and assistant treasurers, and other officers with such titles and duties as the board of directors shall designate. The board of directors shall designate one of the officers of the corporation as the chief executive officer, and such officer shall continue to act as chief executive officer until the board of directors designates another person as the chief executive officer. The board of directors also shall specify which officers shall have authority to perform the duties of the chief executive officer in his absence or in the event of his inability to act and, if there is more than one such officer, shall specify the order of priority in which such officers shall act on such authority. The list of such authorized officers and the specified order of priority shall remain in effect until changed by the board of directors. Any number of offices may be held by the same person except where the certificate of incorporation or these By-laws otherwise provide. Section 2. The board of directors at its first meeting after each annual meeting of stockholders shall choose a chairman of the board, a president, one or more executive vice-presidents, a secretary and a treasurer. Section 3. The board of directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board. Section 4. The salaries of all officers and agents of the corporation shall be fixed by or in the manner prescribed by the board of directors. Section 5. The officers of the corporation shall hold office until their successors are chosen and qualify. Any officer elected or appointed by the board of directors may be removed at any time by the affirmative vote of a majority of the directors then in office. Any officer may resign at any time upon written notice to the corporation. Any vacancy occurring in any office of the corporation shall be filled by or in the manner prescribed by the board of directors. THE CHAIRMAN OF THE BOARD Section 6. The chairman of the board shall preside at all meetings of the stockholders and the board of directors. -14- 16 THE CHIEF EXECUTIVE OFFICER Section 7. The chief executive officer of the corporation shall have general and active management of the business of the corporation and shall see that all orders and resolutions of the board of directors are carried into effect. Section 8. The chief executive officer shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required, or permitted by law to be otherwise signed and executed, and except where the signing and execution thereof shall be expressly delegated by the chief executive officer to some other officer or agent of the corporation. THE PRESIDENT, EXECUTIVE VICE PRESIDENTS AND OTHER DESIGNATED OFFICERS Section 9. In the absence of the chief executive officer or in the event of his inability to act, the officer specified by the board of directors (and in the event there is more than one such officer, in the order of priority specified by the board of directors) shall perform the duties of the chief executive officer, and when so acting, shall have all the powers of and be subject to all the restrictions upon the chief executive officer. The president (if he is not the chief executive officer), the executive vice-president(s), and any other officers designated as officers by the board of directors shall generally assist the chairman and chief executive officer and shall perform such other duties and have such other powers as the board of directors or the chief executive officer may from time to time prescribe. THE SECRETARY AND ASSISTANT SECRETARIES Section 10. The secretary shall attend all meetings of the board of directors and all meetings of the stockholders and record all the proceedings of the meetings of the corporation and of the board of directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors or the chief executive officer, under whose supervision he shall act. He shall have custody of the certificate books and such other books and records as the board of directors may direct. He shall have custody of the corporate seal of the corporation and he, or an assistant secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his signature or by the signature of such assistant secretary. The board of directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his signature. Section 11. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the board of directors (or if there be no such determination, then in the order of their election), shall, in the absence of the secretary or in the event of his inability to act, perform the duties and exercise the powers of the secretary and shall perform -15- 17 such other duties and have such other powers as the board of directors, the chief executive officer or the secretary may from time to time prescribe. THE TREASURER AND ASSISTANT TREASURER Section 12. The treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the board of directors and shall disburse the funds of the corporation as may be ordered by the board of directors, taking proper vouchers for such disbursements, and shall render to the chief executive officer and the board of directors, at its regular meetings, or when the board of directors so requires, an account of all his transactions as treasurer and of the financial condition of the corporation and shall perform such other duties and have such other powers as the board of directors or the chief executive officer may from time to time prescribe. Section 13. The assistant treasurer, or if there shall be more than one, the assistant treasurers in the order determined by the board of directors (or if there be no such determination, then in the order of their election), shall, in the absence of the treasurer or in the event of his inability or refusal to act, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other powers as the board of directors, the chief executive officer or the treasurer may from time to time prescribe. ARTICLES VI CERTIFICATES OF STOCK Section 1. Every holder of stock in the corporation shall be entitled to have a certificate, signed by, or in the name of the corporation by, the chairman of the board of directors or the president or an executive vice-president and the treasurer or an assistant treasurer, or the secretary or an assistant secretary of the corporation, certifying the number of shares owned by him in the corporation. Section 2. Where a certificate is countersigned (i) by a transfer agent other than the corporation or its employee, or, (ii) by a registrar other than the corporation or its employee, any other signature on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. LOST CERTIFICATES Section 3. The board of directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person -16- 18 claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the board of directors may, in its discretion, and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed. TRANSFERS OF STOCK Section 4. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed 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, cancel the old certificate and record the transaction upon its books. REGISTERED STOCKHOLDERS Section 5. The corporation shall be entitled to treat the record holder of any shares of the corporation as the owner thereof for all purposes, including all rights deriving from such shares, and shall not be bound to recognize any equitable or other claim to, or interest in, such shares or rights deriving from such shares, on the part of any other person, including, but without limiting the generality thereof, a purchaser, assignee or transferee of such shares or rights deriving from such shares, unless and until such purchaser, assignee, transferee or other person becomes the record holder of such shares, whether or not the corporation shall have either actual or constructive notice of the interest of such purchaser, assignee, transferee or other person. Any such purchaser, assignee, transferee or other person shall not be entitled to receive notice of the meetings of stockholders; to vote at such meetings; to examine a complete list of the stockholders entitled to vote at meetings; or to own, enjoy, and exercise any other property or rights deriving from such shares against the corporation, until such purchaser, assignee, transferee or other person has become the record holder of such shares. ARTICLE VII GENERAL PROVISIONS DIVIDENDS Section 1. Dividends upon the capital stock of the corporation, subject to the provisions of the certificate of incorporation, may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the certificate of incorporation. Section 2. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the board of directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for -17- 19 such other purpose as the board of directors shall think conducive to the interest of the corporation, and the board of directors may modify or abolish any such reserve in the manner in which it was created. CHECKS Section 3. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate. FISCAL YEAR Section 4. The fiscal year of the corporation begins on the 1st day of January and ends on the 31st day of December in each year. SEAL Section 5. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization and the words "Corporate Seal, Delaware." The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. ARTICLE VIII INDEMNIFICATION Section 1. The corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person (an "Indemnitee") who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "proceeding"), by reason of the fact that he, or a person for whom he is the legal representative, is or was a director or officer of the corporation, or, while a director or officer of the corporation, is or was serving at the written request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys' fees) reasonably incurred by such Indemnitee. Notwithstanding the preceding sentence, except as otherwise provided in Section 3 of this Article, the corporation shall be required to indemnify an Indemnitee in connection with a proceeding (or part thereof) commenced by such Indemnitee only if the commencement of such proceeding (or part thereof) by the Indemnitee was authorized by the board of directors. PREPAYMENT OF EXPENSES Section 2. The corporation shall pay the expenses (including attorneys' fees) incurred by an Indemnitee in defending any proceeding in advance of its final disposition, provided, however, that, to the extent required by law, such payment of the final disposition of the -18- 20 proceeding shall be made only upon receipt of an undertaking by the Indemnitee to repay all amounts advanced if it should be ultimately determined that the Indemnitee is not entitled to be indemnified under this Article VIII or otherwise. CLAIMS Section 3. If a claim for indemnification or advancement of expenses under this Article VIII is not paid in full within sixty (60) days after a written claim therefor by the Indemnitee has been received by the corporation, the Indemnitee may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action the corporation shall have the burden of proving that the Indemnitee is not entitled to the requested indemnification or advancement of expenses under applicable law. NONEXCLUSIVITY OF RIGHTS Section 4. The rights conferred on any Indemnitee by this Article VIII shall not be exclusive of any other rights which such Indemnitee may have or hereafter acquire under any statute, provision of the certificate of incorporation, these By-laws, agreement, vote of stockholders or disinterested directors or otherwise. OTHER SOURCES Section 5. The corporation's obligation, if any, to indemnify or to advance expenses to any Indemnitee who was or is serving at this request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, enterprise or nonprofit entity shall be reduced by any amount such Indemnitee may collect as indemnification or advancement of expenses from such other corporation, partnership, joint venture, trust, enterprise or non-profit enterprise. AMENDMENT OR REPEAL Section 6. Any repeal or modification of the foregoing provisions of this Article VIII shall not adversely affect any right or protection hereunder of any Indemnitee in respect of any act or occurring prior to the time of such repeal or modification. OTHER INDEMNIFICATION AND PREPAYMENT OF EXPENSES Section 7. This Article VIII shall not limit the right of the corporation, to the extent and in the manner permitted by law, to indemnify and to advance expenses to persons other than Indemnitees when and as authorized by appropriate corporate action. -19- 21 ARTICLE IX AMENDMENTS These By-laws may be altered or repealed at any regular meeting of the board of directors, or at any special meeting of the board of directors if notice of such alteration or repeal is contained in the notice of such special meeting, or by majority vote of the stock outstanding at the annual meeting of stockholders or at any special meeting of stockholders if notice of such alteration or repeal is contained in the notice of such special meeting. -20- EX-10.4 3 EXECUTIVE DEFERRED COMPENSATION PLAN 1 EXHIBIT 10.4 AMERICAN MANAGEMENT SYSTEMS, INC. EXECUTIVE DEFERRED COMPENSATION PLAN Effective September 1, 1996 (As Revised September 1, 1997) 2 TABLE OF CONTENTS
PAGE ---- ARTICLE I-- PURPOSE; EFFECTIVE DATE..........................................1 1.1 Purpose...............................................................1 1.2 Effective Date........................................................1 ARTICLE II-- DEFINITIONS.....................................................1 2.1 Account...............................................................1 2.2 Actuarial Equivalent..................................................1 2.3 Base Rate.............................................................1 2.4 Beneficiary...........................................................2 2.5 Board.................................................................2 2.6 Cause.................................................................2 2.7 Change in Control.....................................................3 2.8 Committee.............................................................3 2.9 Company...............................................................3 2.10 Compensation.........................................................3 2.11 Deferral Commitment..................................................4 2.12 Deferral Period......................................................4 2.13 Determination Date...................................................4 2.14 Disability...........................................................4 2.15 Discretionary Contribution...........................................4 2.16 Earnings.............................................................4 2.17 Employer.............................................................4 2.18 Entrance Fee.........................................................4 2.19 Entrance Fee Base....................................................5 2.20 Financial Hardship...................................................5 2.21 Financial Plan.......................................................5 2.22 401(k) Plan..........................................................5 2.23 Full-Time Participants...............................................5 2.24 Incentive Compensation...............................................5 2.25 Participant..........................................................6 2.26 Participation Agreement..............................................6 2.27 Plan.................................................................6 2.28 Premium Rate.........................................................6 2.29 Retirement...........................................................6 ARTICLE III-- PARTICIPATION AND DEFERRAL COMMITMENTS.........................6 3.1 Eligibility and Participation.........................................6
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PAGE ---- 3.2 Form of Deferral......................................................7 3.3 Limitations on Deferral Commitments...................................7 3.4 Commitment Limited by Termination.....................................7 3.5 Modification of Deferral Commitment...................................8 ARTICLE IV-- DEFERRED COMPENSATION ACCOUNT...................................8 4.1 Account...............................................................8 4.2 Timing of Credits; Withholding........................................8 4.3 SEP Makeup Contribution...............................................8 4.4 Discretionary Contributions...........................................8 4.5 Determination of Account..............................................8 4.6 Vesting of Account....................................................9 4.7 Statement of Account..................................................9 ARTICLE V-- PLAN BENEFITS....................................................9 5.1 Distributions Prior to Termination of Employment......................9 5.2 Termination of Employment............................................10 5.3 Termination for Cause................................................10 5.4 Retirement Benefit...................................................10 5.5 Disability Benefit...................................................11 5.6 Accelerated Distribution.............................................11 5.7 Withholding for Taxes................................................11 5.8 Valuation and Settlement.............................................11 5.9 Payment to Guardian..................................................11 5.10 Company Discretionary Distribution..................................12 ARTICLE VI-- BENEFICIARY DESIGNATION........................................12 6.1 Beneficiary Designation..............................................12 6.2 Changing Beneficiary.................................................12 6.3 Community Property...................................................12 6.4 No Beneficiary Designation...........................................13 ARTICLE VII-- ADMINISTRATION................................................13 7.1 Committee; Duties....................................................13 7.2 Agents...............................................................14 7.3 Binding Effect of Decisions..........................................14 7.4 Indemnity of Committee...............................................14
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PAGE ---- ARTICLE VIII-- CLAIMS PROCEDURE.............................................14 8.1 Claim................................................................14 8.2 Review of Claim......................................................14 8.3 Notice of Denial of Claim............................................15 8.4 Reconsideration of Denied Claim......................................15 8.5 Employer to Supply Information.......................................16 ARTICLE IX-- AMENDMENT AND TERMINATION OF PLAN..............................16 9.1 Amendment............................................................16 9.2 Employer's Right to Terminate........................................16 ARTICLE X-- MISCELLANEOUS...................................................17 10.1 Unfunded Plan.......................................................17 10.2 Company and Employer Obligations....................................17 10.3 Unsecured General Creditor..........................................17 10.4 Trust Fund..........................................................17 10.5 Nonassignability....................................................18 10.6 Not a Contract of Employment........................................18 10.7 Protective Provisions...............................................18 10.8 Governing Law.......................................................18 10.9 Validity............................................................18 10.10 Notice.............................................................18 10.11 Successors.........................................................19
-iii- 5 AMERICAN MANAGEMENT SYSTEMS, INC. EXECUTIVE DEFERRED COMPENSATION PLAN ARTICLE I -- PURPOSE; EFFECTIVE DATE 1.1 PURPOSE The purpose of this Executive Deferred Compensation Plan is to provide current tax planning opportunities as well as supplemental funds for retirement or death for selected employees of the Employer. It is intended that the Plan will aid in attracting and retaining employees of exceptional. ability by providing them with these benefits. 1.2 EFFECTIVE DATE The Plan is effective as of September 1, 1996 (as revised September 1, 1997). ARTICLE II -- DEFINITIONS For the purposes of this Plan, the following terms shall have the meanings indicated, unless the context clearly indicates otherwise: 2.1 ACCOUNT "Account" means the device used by the Employer to measure and determine the amount to be paid to a Participant under the Plan. 2.2 ACTUARIAL EQUIVALENT "Actuarial Equivalent" means equivalence in value between two or more forms and/or times of payment based on a determination by an actuary chosen by the Committee, using sound actuarial assumptions at the time of such determination. 2.3 BASE RATE "Base Rate" means the effective annual Yield of the average of the Moody's Average Corporate Bond Yield Index for the previous calendar month as published by Moody's Investor Services, Inc. (or any successor publisher thereto). or, if such index is no longer published, a substantially similar index selected by the Board. PAGE 1 - EXECUTIVE DEFERRED COMPENSATION PLAN 6 2.4 BENEFICIARY "Beneficiary" means the person, persons or entity entitled under Article VI to receive any Plan benefits payable after a Participant's death. 2.5 BOARD "Board" means the Board of Directors of the Company. 2.6 CAUSE "Cause" shall mean termination upon. (a) Your conviction or plea of guilty or nolo contenders to any felony or misdemeanor, except misdemeanors relating to traffic offenses; (b) The reasonable determination by the Company that you have engaged in an act of personal dishonesty in any way relating to or affecting the performance of your duties for the Company; (c) Your breach of fiduciary duty to the Company, its subsidiaries or affiliates; (d) Your willful continued failure to perform the duties assigned to you by the Company (other than failure to perform due to physical or mental disability); (e) Gross negligence in the performance of your duties, or (f) A breach of Company policy or of any written agreement between you and the Company. For purposes of this Section 2.6, no act, or failure to act. on your part shall be considered "willful" unless done, or omitted to be done, by you in bad faith and without reasonable belief that your action or emission was in, or not opposed to, the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Committee or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by you in good faith and in the best interests of the Company. It is also expressly understood that your attention to matters not directly related to the business of the Company shall not provide a basis for termination for Cause so long as the Company has approved your engagement in such activities. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to you a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership of the Committee at a meeting of the Committee called and held for this purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Committee). finding that, in the good faith opinion of the Committee you were guilty of the conduct set forth above in any of (a) through (f) of this Section 2.6 and specifying the particulars thereof in detail. PAGE 2 - EXECUTIVE DEFERRED COMPENSATION PLAN 7 2.7 CHANGE IN CONTROL A "Change in Control" means a Change in Control of a nature that would be required to be reported (assuming such event has not been "previously reported") in response to Item 1(a) of he current report on Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") or any successor thereto; provided that, without limitation, such a Change in Control shall be deemed to have occurred at such time as: (a) Any person is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of thirty percent (30%) or more of the combined voting power of the Company's Voting Securities; (b) During any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company, together with any new directors whose election, or nomination for election by the shareholders, was approved by a vote of at least two-thirds (2/3) of the directors then still in office who were either directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the Board of Directors of the Company; (c) The sale by the Company of more than fifty percent (50%) of the book value of its assets to a single purchaser or to a group of affiliated purchasers; or (d) The merger or consolidation of the Company in a transaction in which the shareholders of the Company receive less than fifty percent (50%) of the outstanding voting shares of the continuing corporation. Notwithstanding anything in the foregoing to the contrary, no Change in Control shall be deemed to have occurred by virtue of arty transaction which results in a Participant, or group of Participants, acquiring, directly or indirectly. twenty-five percent (25%) or more of the combined voting power of the Company's Voting Securities. 2.8 COMMITTEE "Committee" means the Administrative Committee appointed to administer the Plan pursuant to Article VII hereof. 2.9 COMPANY "Company" means American Management Systems, Inc., a Delaware corporation. 2.10 COMPENSATION "Compensation" means only base salary and Incentive Compensation payable to a Participant during the calendar year, before reduction for amounts deferred under this Plan or any other salary reduction program. PAGE 3 - EXECUTIVE DEFERRED COMPENSATION PLAN 8 2.11 DEFERRAL COMMITMENT "Deferral Commitment" means a commitment made by a Participant to defer Compensation pursuant to Article III. 2.12 DEFERRAL PERIOD "Deferral Period" means each calendar year. The initial Deferral Period, however, shall be from September 1, 1996, through December 31, 1996. 2.13 DETERMINATION DATE "Determination Date" means the last day of each calendar month. 2.14 DISABILITY "Disability" means a physical or mental condition that, in the opinion of the Committee, shall prevent the Participant from satisfactorily performing his usual duties for the Employer for a two (2) year period or longer. The Committee shall determine the existence of the Disability and may rely on advice from a medical examiner medical reports, and/or other evidence satisfactory to the Committee. 2.15 DISCRETIONARY CONTRIBUTION "Discretionary Contribution" means the Employer contribution credited to a Participant's Account under Section 4.4. 2.16 EARNINGS "Earnings" means the rate of growth credited to an account on each Determination Date in a calendar year, the rate shall be the Base Rate unless the Employer meets or exceeds its Financial Plan in a calendar year, in which case the rate shall be the Premium Rate for all Participants who are not Retired or not Disabled. 2.17 EMPLOYER "Employer" means the Company and any U.S. subsidiary or affiliate of the Company designated by the Board. 2.18 ENTRANCE FEE "Entrance Fee" means an amount equal to four percent (4%) of any deferral which is part of the Participant's First Deferral Commitment. In subsequent Deferral Periods the Entrance Fee shall equal four percent (4%) of the amount by which the deferral exceeds the Participant's Entrance Fee Base less prior deferrals made during the current Deferral Period. The Executive Committee of the Board of Directors may waive the four percent (4%) fee at its discretion if such waiver is deemed to be in the best Financial interest of the Company. PAGE 4 - EXECUTIVE DEFERRED COMPENSATION PLAN 9 2.19 ENTRANCE FEE BASE "Entrance Fee Base" means for a Deferral Period an amount equal to the Participant's first Deferral Commitment times the number of Deferral Periods the Participant has participated in the Plan (including the current Deferral Period), plus the portion of any subsequent Deferral Commitments subject to the Entrance Fee times the number of Deferral Periods including. and subsequent to, the payment of any such additional Entrance Fee, less total deferrals made prior to the current Deferral Period. 2.20 FINANCIAL HARDSHIP "Financial Hardship" means severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant or of a dependent (as defined in Section 152(a) of the Internal Revenue Code) of the Participant, loss of the Participant's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. The circumstances that will constitute an unforeseeable emergency will depend upon the facts of each case, but in any Case, payment may not be made to the extent that such hardship is or may be relieved: (a) Through reimbursement or compensation by insurance or otherwise; (b) By liquidation of the Participant's assets, to the extent the liquidation of such assets would not itself cause severe financial hardship; or (c) By cessation of deferrals under the Plan. 2.21 FINANCIAL PLAN "Financial Plan" means the plan approved by the Board of Directors in the beginning of each year and used for purposes of setting AMS-wide profit sharing goals. 2.22 401(k) PLAN "401(k) Plan" means the American Management Systems, Inc. 401(k) plan, as amended from time to time. 2.23 FULL-TIME PARTICIPANTS Participants who worked a minimum of 1,248 hours in the Financial Plan year on direct and/or indirect projects. 2.24 INCENTIVE COMPENSATION "Incentive Compensation" means the cash portion of the amounts payable to a participant as incentive awards under the Company's incentive compensation plans. PAGE 5 - EXECUTIVE DEFERRED COMPENSATION PLAN 10 2.25 PARTICIPANT "Participant" means any eligible individual who has elected to defer Compensation under this Plan. 2.26 PARTICIPATION AGREEMENT "Participation Agreement" means the agreement submitted by a Participant to the Committee prior to the beginning of a Deferral Period, with respect to a Deferral Commitment made for such Deferral Period. 2.27 PLAN "Plan" means this Executive Deferred Compensation Plan as amended from time to time. 2.28 PREMIUM RATE "Premium Rate" means the Base Rate plus three percent (3%) (300 basis points) for full-time. Participants and the Base Rate plus one and one-half percent (1.5%) (150 basis points) for all other Participants. Retired Participants shall not be eligible for the Premium Rate after the date of retirement. Terminated employees are not eligible for the premium rate for the year in which they terminate. 2.29 RETIREMENT "Retirement" means a termination of employment which. in the opinion of the Committee, based on the Participant's facts and circumstances, is a termination for retirement and not to pursue employment or self-employment. ARTICLE III -- PARTICIPATION AND DEFERRAL COMMITMENTS 3.1 ELIGIBILITY AND PARTICIPATION (a) ELIGIBILITY. Eligibility to participate in the Plan shall be limited to U.S. employees of Employer who are a Senior Consultant or above. The Executive Committee of the Board of Directors, in its Discretion may deem otherwise eligible employees to be ineligible to Participate if such participation is deemed by the Executive Committee not in the best financial interests of the Company. (b) PARTICIPATION. An eligible individual may elect to participate in the Plan with respect to any Deferral Period by submitting a Participation Agreement to the Committee by the. thirtieth (30th) day of September immediately preceding the beginning of the Deferral Period. PAGE 6 - EXECUTIVE DEFERRED COMPENSATION PLAN 11 3.2 FORM OF DEFERRAL A Participant may elect Deferral Commitments in the Participation Agreement as follows: (a) SALARY DEFERRAL COMMITMENT. A salary Deferral Commitment shall be related to the base salary payable by Employer to a Participant during the Deferral Period. The amount to be deferred shall be stated as a percentage amount. (b) INCENTIVE DEFERRAL COMMITMENT. An incentive Deferral Commitment shall be related to the Incentive Compensation payable by Employer to a Participant during tire Deferral Period. The amount to be deferred shall be stated either as a percentage or a dollar amount. (c) BONUS DEFERRAL COMMITMENT. Subject to the, discretion of the Executive Committee of the Board of Directors, a Participant may defer bonuses payable by the employer during the deferral period. The amount to be deferred shall be stated either as a percentage or as a dollar amount. No deferral shall be permitted that is in violation of law. e.g., wage garnishments, tax levies, or child support orders. 3.3 LIMITATIONS ON DEFERRAL COMMITMENTS The following limitations shall apply to Deferral Commitments: (a) MINIMUM. The minimum Salary Deferral Commitment amount shall be one thousand dollars ($1,000) for each month in the Deferral Period. There shall be no minimum deferral amount on an incentive Deferral Commitment. The minimum Deferral Commitment for a Participant who enters participation after the beginning of a Deferral Period shall be based on the number of months remaining in the Deferral Period. (b) MAXIMUM. The maximum deferral amount shall be fifty percent (50%) of base salary in a salary Deferral Commitment and ninety percent (90%) of Incentive Compensation in an incentive Deferral Commitment. (c) CHANGES IN MINIMUM OR MAXIMUM. The Committee may change the minimum or maximum deferral amounts from time to time by giving written notice to all Participants. No such chance may affect a Deferral Commitment made prior to the Committee's action. 3.4 COMMITMENT LIMITED BY TERMINATION If a Participant terminates employment with Employer prior to the end of the Deferral Period, the Deferral Period shall end at the date of termination. The minimum deferral for the Deferral Period shall be based on the number of months to the date of termination. PAGE 7 - EXECUTIVE DEFERRED COMPENSATION PLAN 12 3.5 MODIFICATION OF DEFERRAL COMMITMENT Except as provided in Section 5.1(b) below, Deferral Commitments shall be irrevocable. ARTICLE IV -- DEFERRED COMPENSATION ACCOUNT 4.1 ACCOUNT The amounts deferred by a Participant under the Plan any Employer contributions and Earnings shall be credited to the Participant's Account. Separate subaccounts may be maintained to reflect different forms of distribution and levels of vesting and forms of payment. The Account shall be a bookkeeping device utilized for the sole purpose of determining the benefits payable under the Plan and shall not constitute a separate fund of assets. 4.2 TIMING OF CREDITS; WITHHOLDING A Participant's deferred Compensation shall be credited to the Participant's Account at the time it would have been payable to the Participant. Any withholding of taxes or other amounts with respect to deferred Compensation or earnings that is required by state, federal or local law shall be withheld from the Participant's nondeferred Compensation to the maximum extent possible and any remaining amount shall reduce the amount credited to the Participant's Account. 4.3 SEP MAKEUP CONTRIBUTION If as a result of participation in this plan, a Participant's SEP contribution is reduced. the Company shall credit an amount equal to the foregone SEP contribution into the Participant's account on the date the SEP contribution is made. 4.4 DISCRETIONARY CONTRIBUTIONS Employer may make Discretionary Contributions to a Participant's Account. Discretionary Contributions shall be credited at such times and in such amounts as the Board in its sole discretion shall determine. 4.5 DETERMINATION OF ACCOUNT Each Participant's Account as of each Determination Date shall consist of the balance of the Account as of the immediately preceding Determination Date, adjusted as follows: (a) NEW DEFERRALS. The Account shall be increased by any deferred Compensation credited since such Determination Date. (b) ENTRANCE FEE. The Account shall be reduced by the Entrance Fee, if any, on deferred Compensation credited since such Determination Date. PAGE 8 - EXECUTIVE DEFERRED COMPENSATION PLAN 13 (c) EMPLOYER CONTRIBUTIONS. The Account shall be increased by any discretionary Employer contributions and SEP makeup contribution credited since such Determination Date. (d) DISTRIBUTIONS. The Account shall be reduced by any benefits distributed from the Account to the Participant since such Determination Date. (e) EARNINGS. The Account shall be increased by the Earnings on the average daily balance in the Account since such Determination Date. 4.6 VESTING OF ACCOUNT Each Participant shall be vested in the amounts credited to such Participant's Account and Earnings thereon as follows. (a) AMOUNTS DEFERRED. A Participant shall be one hundred percent (100%) vested at all times in the amount of Compensation elected to be deferred under this Plan and Earnings thereon. (b) DISCRETIONARY CONTRIBUTIONS. A Participant's Discretionary Contributions and Earnings thereon shall become vested as determined by the Board. (c) SEP MAKEUP CONTRIBUTIONS. A Participant shall be one hundred percent (100%) vested at all times in any SEP makeup contribution and earnings thereon. 4.7 STATEMENT OF ACCOUNT The Committee shall give to each Participant a Statement showing the balance in the Participant's Account on a semi-annual basis and at such times as may be determined by the Committee. ARTICLE V -- PLAN BENEFITS 5.1 DISTRIBUTIONS PRIOR TO TERMINATION OF EMPLOYMENT A Participant's Account may be distributed to the Participant prior to termination of employment as follows: (a) IN-SERVICE WITHDRAWALS. A Participant may elect in a Participation Agreement to withdraw all or any portion of the amount deferred by that Participation Agreement as of a date specified in the election. Such date shall not be sooner than five (5) years after the date the Deferral Period commences. The amount withdrawn shall not exceed the amount of' Compensation deferred plus Earnings on the deferral. Such election shall be made at the time the Deferral Commitment is made and can only be amended if such amendment is made at least two (2) calendar years before the calendar year in which the distribution was scheduled. PAGE 9 - EXECUTIVE DEFERRED COMPENSATION PLAN 14 (b) HARDSHIP WITHDRAWALS. Upon a finding that a Participant has suffered a Financial Hardship, the Committee may, in its sole discretion, (a) waive or modify the deferral commitment and/or (b) make distributions from the Participant's Account. The amount of such a withdrawal shall be limited to the amount reasonably necessary to meet the Participant's needs resulting from the Financial Hardship. If payment is made due to Financial Hardship under this Plan or the 401(k) Plan, the Participant's deferrals under this Plan shall cease the remainder of the current calendar year and for the following calendar year. Any resumption of the Participant's deferrals under the Plan after this period shall be made only at the election of the Participant in accordance with Article III herein. (c) FORM OF PAYMENT AND TIME. Any distribution pursuant to Section 5.1(a) or 5.1(b) shall be payable in a lump sum. The distribution shall be paid in the case of a partial withdrawal, as provided in the Participation Agreement, and in case of a Financial Hardship, within thirty (30) days after the determination of a Financial Hardship. 5.2 TERMINATION OF EMPLOYMENT Upon a Participant's termination of employment with Employer for any reason, other than Retirement or Disability, the Employer shall pay the Participant, in the case of death the Participant's Beneficiary, a lump-sum benefit equal to the balance (after recalculation if terminated for Cause) in the Participant's Account. Such payment will be paid within sixty (60) days of the termination. 5.3 TERMINATION FOR CAUSE If a Participant is terminated for Cause, the Participant's account shall be recalculated using only the Base Rate regardless of whether the Employer has met or exceeded its Financial Plan in the current year or past years. Any interest which exceeded the Base Rate and had been accrued to the Participant's Account shall be forfeited. The recalculated Account balance shall be paid in a lump sum. 5.4 RETIREMENT BENEFIT Retirement benefits shall be paid in the form elected by the Participant at the time of the deferral commitment. (a) Form of benefit payments shall be one (1) of the following: (i) Lump sum, (ii) Annual installments with a maximum of ten (10); or (iii) A portion in a lump sum and a portion in annual installments. (b) Benefits shall commence the last day of February in the calendar year following the date of retirement. PAGE 10 - EXECUTIVE DEFERRED COMPENSATION PLAN 15 (c) SMALL ACCOUNT(S). Notwithstanding Section 5.4(a), if a Participant's Account is under fifty thousand dollars ($50,000) on the valuation date, the benefit shall be paid by a lump sum. (d) CHANGE IN FORM AND COMMENCEMENT OF PAYMENT. A Participant may elect to file a modified election as to form and timing of payment. To be effective such modified election must be filed two (2) calendar years prior to the calendar year in which distributions would have occurred if the modification had not been made. 5.5 DISABILITY BENEFIT At the time of the deferral commitment, the Participant must elect, upon disability, to receive their benefit either in a lump sum or upon Retirement as elected under Section 5.4 above. 5.6 ACCELERATED DISTRIBUTION Notwithstanding any other provision of the Plan a Participant shall be entitled to receive, upon written request to the Committee, a lump-sum distribution equal to ninety percent (90%) of the vested Account balance as of the Determination Date immediately preceding the date on which the Committee receives the written request. The remaining balance shall be forfeited by the Participant. The amount payable under this section shall be paid in a lump sum within sixty-five (65) days following the receipt of the notice by the Committee from the Participant. Any Participant who elects to receive a benefit under this section shall not be eligible to participate in or defer into this Plan in the future. 5.7 WITHHOLDING FOR TAXES To the extent required by the law in effect at the time payments are made, the Employer shall withhold from the payments made hereunder any Taxes required to be withheld by the federal or any state or local government, including any amounts which the Employer determines is reasonably necessary to pay any generation-skipping transfer tax which is or may become due. A beneficiary, however, may elect not to have withholding of federal income tax pursuant to Section 3405(a)(2), of the Internal Revenue Code, or any successor provision thereto. 5.8 VALUATION AND SETTLEMENT The amount of a lump-sum payment and the initial amount of installments shall be based on the value of the Participant's Account on the valuation date. The valuation date shall be the date on which a lump sum is paid or the date on which installments commence. 5.9 PAYMENT TO GUARDIAN The Committee may direct payment to the duly appointed guardian, conservator. or other similar legal representative of a Participant or Beneficiary to whom payment is due. In the absence of such a legal representative. the Committee may, in it sole and absolute discretion make payment to a person having the care and custody of a minor, incompetent or person PAGE 11 - EXECUTIVE DEFERRED COMPENSATION PLAN 16 incapable of handling the disposition of property upon proof satisfactory to the Committee of incompetency, minority, or incapacity. Such distribution shall completely discharge the Committee from all liability with respect to such benefit. 5.10 COMPANY DISCRETIONARY DISTRIBUTION The Executive Committee of the Board of Directors may elect to distribute a Participant's account balance to the Participant if the Executive Committee deems it to be in the best financial interests of the Company. ARTICLE VI -- BENEFICIARY DESIGNATION 6.1 BENEFICIARY DESIGNATION Subject to Section 6.3, each Participant shall have the right, at any time, to designate one (1) or more persons or an entity as Beneficiary (both primary as well as secondary) to whom benefits under this Plan shall be paid in the event of Participant's death prior to complete distribution of the Participant's Account. Each Beneficiary designation shall be in a written form prescribed by the Committee and shall be effective only when filed with the Committee during the Participant's lifetime. 6.2 CHANGING BENEFICIARY Subject to Section 6.3, any Beneficiary designation may be changed by a Participant without the consent of the previously named Beneficiary by the filing of a new designation with the Committee. The filing of a new designation shall cancel all designations previously filed. 6.3 COMMUNITY PROPERTY If the Participant resides in a community property state, the following rules shall apply: (a) Designation by a married Participant of a Beneficiary other than the Participant's spouse shall not be effective unless the spouse executes a written consent that acknowledges the effect of the designation, or it is established the consent cannot be obtained because the spouse cannot be located. (b) A married participant's Beneficiary designation may be changed by a Participant with the consent of the Participant's spouse as provided for in Section 6.3(a) by the filing of a new designation with the Committee. (c) If the Participant's marital status changes after the Participant has designated a Beneficiary, the following shall apply: (i) If the Participant is married at the time of death but was unmarried when the designation was made, the designation shall be void unless the spouse has consented to it in the manner prescribed in Section 6.3(a) PAGE 12 - EXECUTIVE DEFERRED COMPENSATION PLAN 17 (ii) If the Participant is unmarried at the time of death but was married when the designation was made: a) The designation shall be void if the spouse was named as Beneficiary unless Participant had submitted a change of beneficiary listing the former spouse as the beneficiary. b) The designation shall remain valid if a nonspouse Beneficiary was named. (iii) If the Participant was married when the designation was made and is married to a different spouse at death, the designation shall be void unless the new spouse has consented to it in the manner prescribed above. 6.4 NO BENEFICIARY DESIGNATION If any Participant fails to designate a Beneficiary in the manner provided above, if the designation is void, or if the Beneficiary designated by a deceased Participant dies before the Participant or before complete distribution of the Participant's benefits, the Participant's Beneficiary shall be the person in the first of the following classes in which there is a survivor: (a) The Participant's spouse; (b) The Participant's children in equal shares, except that if any of the children predeceases the Participant but leaves issue surviving. then such issue shall take by right of representation the share the parent would have taken if living; (c) The Participant's estate. ARTICLE VII -- ADMINISTRATION 7.1 COMMITTEE; DUTIES This Plan shall be administered by the Administrative Committee. The Committee shall be appointed by the Executive Committee of the Board of Directors. The Committee shall have the authority to make, amend, interpret and enforce all appropriate rules and regulations for the administration of the Plan and decide or resolve any and all questions, including interpretations of the Plan, as may arise in such administration. A majority vote of the Committee members shall control any decision. Members of the Committee may be Participants under this Plan. 7.2 AGENTS The Committee may, from time to time, employ agents and delegate to them such administrative duties as it sees fit, and may from time to time consult with counsel who may be counsel to the Company. PAGE 13 - EXECUTIVE DEFERRED COMPENSATION PLAN 18 7.3 BINDING EFFECT OF DECISIONS The decision or action of the Committee with respect to any question arising out of or in connection with the administration, interpretation and application of the Plan and the rules and regulations promulgated hereunder shall be final, conclusive and binding upon all persons having any interest in the Plan. 7.4 INDEMNITY OF COMMITTEE The Company shall indemnify and hold harmless the members of the Committee against any and all claims, loss, damage, expense or liability arising from any action or failure to act with respect to this Plan on account of such person's service on the Committee, except in the cast of gross negligence or willful misconduct. ARTICLE VIII -- CLAIMS PROCEDURE 8.1 CLAIM The Committee shall establish rules and procedures to be followed by Participants and Beneficiaries in (a) filing claims for benefits, and (b) for furnishing and verifying proofs necessary to establish the right to benefits in accordance with the Plan, consistent with the remainder of this Article. Such rules and procedures shall require that claims and proofs be made in writing and directed to the Committee. 8.2 REVIEW OF CLAIM The Committee shall review all claims for benefits. Upon receipt by the Committee of such a claim, it shall determine all facts which are necessary to establish the right of the claimant to benefits under the provisions of the Plan and the amount thereof as herein provided within ninety (90) days of receipt of such claim. If prior to the expiration of the initial ninety (90) day period, the Committee determines additional time is needed to come to a determination on the claim, the Committee shall provide written notice to the Participant, Beneficiary or other claimant of the need for the extension, not to exceed a total of one hundred eighty (180) days from the date the application was received. 8.3 NOTICE OF DENIAL OF CLAIM In the event that any Participant, Beneficiary or other claimant claims to be entailed to a benefit under the Plan, and the Committee determine that such claim should be denied in whole or in part, the Committee shall, in writing, notify such claimant that the claim has been denied, in whole or in part, setting forth the specific reasons for such denial. Such notification shall be written in a manner reasonably expected to be understood by such claimant and shall refer to the specific sections of the Plan relied on, shall describe any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or PAGE 14 - EXECUTIVE DEFERRED COMPENSATION PLAN 19 information is necessary, and where appropriate, shall include an explanation of how the claimant can obtain reconsideration of such denial. 8.4 RECONSIDERATION OF DENIED CLAIM (a) Within sixty (60) days after receipt of the notice of the denial of a claim, such claimant or duly authorized representative may request, by mailing or delivery of such written notice to the Committee, a reconsideration by the Committee of the decision denying the claim. If the claimant or duty authorized representative fails to request such a reconsideration within such sixty (60) day period. it shall be conclusively determined for all purposes of this Plan that the denial of such claim by the Committee is correct. If such claimant or duly authorized representative requests a reconsideration within such sixty (60) day period, the claimant or duly authorized representative shall have thirty (30) days after filing a request for reconsideration to submit additional written material in support of the claim, review pertinent documents, and submit issues and comments in writing. (b) After such reconsideration request, the Committee shall determine within sixty (60) days of receipt of the claimant's request for reconsideration whether such denial of the claim was correct and shall notify such claimant in writing of its determination. The written notice of decision shall be in writing and shall include specific reasons for the decision, written in a manner calculated to be understood by the claimant, as well as specific reference to the pertinent Plan provisions on which the decision is based. In the event of special circumstances determined by the Committee, the time for the Committee to make a decision may be extended by an additional sixty (60) days upon written notice to the claimant prior to the commencement of the extension. If such determination is favorable to the claimant, it shall be binding and conclusive. If such determination is adverse to such claimant, it shall be binding and conclusive unless the claimant or his duly authorized representative notifies the Committee within ninety (90) days after the mailing or delivery to the claimant by the Committee of its determination that claimant intends to institute legal proceedings challenging the determination of the Committee and actually institutes such legal proceedings within one hundred eighty (180) days after such mailing or delivery. 8.5 EMPLOYER TO SUPPLY INFORMATION To enable the Committee to perform its functions, the Employer shall supply full and timely information to the Committee of all matters relating to the retirement, death or other cause for termination of employment of all Participants, and such other pertinent facts as the Committee may require. PAGE 15 - EXECUTIVE DEFERRED COMPENSATION PLAN 20 ARTICLE IX -- AMENDMENT AND TERMINATION OF PLAN 9.1 AMENDMENT The Board may at any time amend the Plan by written instrument, notice of which is given to all Participants and to Beneficiaries receiving installment payments, subject to the following; (a) PRESERVATION OF ACCOUNT BALANCE. No amendment shall reduce the amount accrued in any Account to the date such notice of the amendment is given. (b) CHANGES IN EARNINGS RATE. No amendment shall reduce the rate of earnings to be credited after the date of the amendment to the amount already accrued in any Account and any Deferred Compensation credited to the Account under Deferral Commitments already in effect on that date. 9.2 EMPLOYER'S RIGHT TO TERMINATE The Board may at any time partially or completely terminate the Plan if, in its judgment, the tax, accounting or other effects of the continuance of the Plan, or potential payments thereunder would not be in the best interests of Employer. (a) PARTIAL TERMINATION. The Board may partially terminate the Plan by instructing the Committee not to accept any additional Deferral Commitments. If such a partial termination occurs, the Plan shall continue to operate and be effective with regard to Deferral Commitments entered into prior to the effective date of such partial termination. (b) COMPLETE TERMINATION. The Board may completely terminate the Plan by instructing the Committee not to accept any additional Deferral Commitments, and by terminating all ongoing Deferral Commitments. If such a complete termination occurs, the Plan shall cease to operate and Employer shall pay out each Account. Payment shall be made in equal monthly installments over the following period, based on the Account balance:
ACCOUNT BALANCE PAYOUT PERIOD ---------------------------------------------------------- Less than $50,000 Lump Sum $50,000 but less than $100,000 3 Years More than $100,000 5 Years ----------------------------------------------------------
Payments shall commence within sixty-five (65) days after the Board Terminates the Plan and earnings shall continue to be credited on the unpaid Account balance at the rate specified in Section 4.5(e). PAGE 16 - EXECUTIVE DEFERRED COMPENSATION PLAN 21 ARTICLE X -- MISCELLANEOUS 10.1 UNFUNDED PLAN This plan is an unfunded plan maintained primarily to provide deferred compensate benefits for a select group of management or highly-compensated employees' within the meaning of Sections 201, 301 and 401 of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and therefore is exempt from the provisions of Parts 2, 3 and 4 of Title I of ERISA. 10.2 COMPANY AND EMPLOYER OBLIGATIONS The obligation to make benefit payments to any Participant under the Plan shall be a joint and several liability of the Company and the Employer that employed the Participant. 10.3 UNSECURED GENERAL CREDITOR Participants and Beneficiaries shall be unsecured general creditors, with no secured or preferential right to any assets of Employer or any other party for payment of benefits under this Plan. Any life insurance policies annuity contracts or other property purchased by Employer in connection with this Plan shall remain its general, unpledged and Unrestricted assets. Employees obligation under the Plan shall be an unfunded and unsecured promise to pay money in the future. 10.4 TRUST FUND At its discretion, the Company may establish one or more trusts with such trustees as the Board may approve, for the purpose of providing for the payment of benefits owed under the Plan. Although such a trust shall be irrevocable, its assets shall be held for payment of all the Company's general creditors in the event of insolvency or bankruptcy. To the extent any benefits provided under the Plan are paid from any such trust, Employer shall have no further obligation to pay them. If not paid from the trust, such benefits shall remain the obligation of Employer. 10.5 NONASSIGNABILITY Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are, expressly declared to be unassignable and nontransferable. No part of the amounts payable shall, prior to actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant's or any other person's bankruptcy or insolvency. PAGE 17 - EXECUTIVE DEFERRED COMPENSATION PLAN 22 10.6 NOT A CONTRACT OF EMPLOYMENT This Plan shall not constitute a contract of employment between Employer and the Participant. Nothing in this Plan shall give a Participant the right to be retained in the service of Employer or to interfere with the right of Employer to discipline or discharge a Participant at any time. 10.7 PROTECTIVE PROVISIONS A Participant will cooperate with Employer by furnishing any and all information requested by Employer in order to facilitate the payment of benefits hereunder, and by taking such physical examinations as Employer may deem necessary and taking such other action as may be requested by Employer. 10.8 GOVERNING LAW The provisions of this Plan shall be construed and interpreted according to the laws of the Commonwealth of Virginia, except as preempted by federal law. 10.9 VALIDITY In case any provision of this Plan shall be held illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal and invalid provision had never been inserted herein. 10.10 NOTICE Any notice required or permitted under the Plan shall be sufficient if in writing and hand delivered or sent by registered or certified mail. Such notice shall be deemed as given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification. Mailed notice to the Committee shall be directed to the Company's address. Mailed notice to a Participant or Beneficiary shall be directed to the individual's last known address in Employer's records. PAGE 18 - EXECUTIVE DEFERRED COMPENSATION PLAN 23 10.11 SUCCESSORS The provisions of this Plan shall bind and inure to the benefit of Employer and its successors and assigns. The term successors as used herein shall include any corporate or other business entity which shall, whether by merger, consolidation, purchase or otherwise acquire all or substantially all of the business and assets of Employer, and successors of any such corporation or other business entity. AMERICAN MANAGEMENT SYSTEMS, INC. By: ----------------------------------------- Dated: ----------------------------------------- PAGE 19 - EXECUTIVE DEFERRED COMPENSATION PLAN EX-10.5 4 OUTSIDE DIRECTOR DEFERRED COMPENSATION PLAN 1 EXHIBIT 10.5 AMERICAN MANAGEMENT SYSTEMS, INC. OUTSIDE DIRECTOR DEFERRED COMPENSATION PLAN EFFECTIVE JANUARY 1, 1997 2 TABLE OF CONTENTS
Page ---- ARTICLE I - PURPOSE; EFFECTIVE DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1. Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2. Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE II - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2.1. Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2.2. Actuarial Equivalent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2.3. Base Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2.4. Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.5. Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.6. Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.7. Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.8. Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.9. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.10. Deferral Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.11. Deferral Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.12. Determination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.13. Disability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.14. Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.15. Entrance Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.16. Entrance Fee Base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.17. Financial Hardship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.18. Financial Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.19. Participant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.20. Participation Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.21. Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.22. Premium Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.23. Retirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 ARTICLE III - PARTICIPATION AND DEFERRAL COMMITMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 3.1. Eligibility and Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 3.2. Deferral Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 3.3. Limitations on Deferral Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 3.4. Modification of Deferral Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 ARTICLE IV - DEFERRED COMPENSATION ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 4.1. Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 4.2. Timing of Credits; Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 4.3. Determination of Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 4.4. Vesting of Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 4.5. Statement of Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(i) 3 ARTICLE V - PLAN BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 5.1. Distributions Prior to Termination of Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 5.2. Termination of Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 5.3. Retirement Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 5.4. Disability Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 5.5. Accelerated Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 5.6. Withholding for Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 5.7. Valuation and Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 5.8. Payment to Guardian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 5.9. Company Discretionary Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 ARTICLE VI - BENEFICIARY DESIGNATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 6.1. Beneficiary Designation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 6.2. Changing Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 6.3. Community Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 6.4. No Beneficiary Designation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 ARTICLE VII - ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 7.1. Committee; Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 7.2. Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 7.3. Binding Effect of Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 7.4. Indemnity of Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 ARTICLE VIII - CLAIMS PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 8.1. Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 8.2. Review of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 8.3. Notice of Denial of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 8.4. Reconsideration of Denied Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 8.5. Company to Supply Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 ARTICLE IX - AMENDMENT AND TERMINATION OF PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 9.1. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 9.2. Company's Right to Terminate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 ARTICLE X - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 10.1. Unfunded Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 10.2. Company Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 10.3. Unsecured General Creditor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 10.4. Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 10.5. Nonassignability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 10.6. Not a Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 10.7. Protective Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 10.8. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(ii) 4 10.9. Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 10.10. Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 10.11. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(iii) 5 AMERICAN MANAGEMENT SYSTEMS, INC. OUTSIDE DIRECTOR DEFERRED COMPENSATION PLAN ARTICLE I - PURPOSE; EFFECTIVE DATE 1.1. PURPOSE The Compensation Plan is to provide current tax planning opportunities as well as supplemental funds for retirement or death for outside directors of the Company. It is intended that the Plan will aid in attracting and retaining directors of exceptional ability by providing them with these benefits. 1.2. EFFECTIVE DATE The Plan is effective as January 1, 1997. ARTICLE II - DEFINITIONS For the purposes of this Plan. the following terms shall have the meanings indicated, unless the context clearly indicates otherwise: 2.1. ACCOUNT "Account" means the device used by the Company to measure and determine the amount. to be paid to a Participant under the Plan. 2.2. ACTUARIAL EQUIVALENT "Actuarial Equivalent" means equivalence in value- between two or more forms and/or times of payment based on a determination by an actuary chosen by the Committee, using sound actuarial assumptions at the time of such determination. 2.3. BASE RATE "Base Rate" means the effective annual yield of the average of the Moody's Average Corporate Bond Yield Index for the previous calendar month as published by Moody's Investor Services, Inc. (or any successor publisher thereto). or, if such index is no longer published, a substantially similar index selected by the Board. 2.4. BENEFICIARY "Beneficiary" means the person, persons or entity entitled under Article VI to receive any Plan benefits payable after a Participant's death. PAGE 1 - OUTSIDE DIRECTOR DEFERRED COMPENSATION PLAN 6 2.5. BOARD "Board" means the Board of Directors of the Company. 2.6. CHANGE IN CONTROL A "Change in Control" means a Change in Control of a nature that would be required to be reported (assuming such event has not been "previously reported") in response to item I (a) of the current report on Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") or any successor thereto-, provided that, without limitation, such a Change in Control shall be deemed to have occurred at such time as:. (a) Any person is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act). directly or indirectly, of thirty percent (30%) or more of the combined voting power of the Company's Voting Securities; (b) During any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company, together with any new directors whose election, or nomination for election by the shareholders, was approved by a vote of at least two-thirds (2/3) of the directors then still in office who were either director' at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the Board of Directors of the Company; (c) The sale by the Company of more than fifty percent (50%) of the book value of its assets to a single purchaser or to a group of affiliated purchasers; or (d) The merger or consolidation of the Company in a transaction in which the shareholders of the Company receive less than fifty percent (50%) of the outstanding voting shares of the continuing corporation. Notwithstanding anything in the foregoing to the contrary, no Change in Control shall be deemed to have occurred by virtue of any transaction which results in a Participant, or group of Participants. acquiring, directly or indirectly, twenty-five percent (25%) or more of the combined voting power of the Company's Voting Securities. 2.7. COMMITTEE "Committee" means the Administrative Committee appointed to administer the Plan pursuant to Article VII hereof. 2.8. COMPANY "Company" means American Management Systems, Inc., a Delaware corporation, or successor thereto. 2.9. COMPENSATION PAGE 2 - OUTSIDE DIRECTOR DEFERRED COMPENSATION PLAN 7 "Compensation" means all of the fees including retainer, meeting and committee meeting fees payable by the Company for services on the Board. 2.10. DEFERRAL COMMITMENT "Deferral Commitment" means a commitment made by a Participant to defer Compensation pursuant to Article III. 2.11. DEFERRAL PERIOD "Deferral Period" means each calendar year. The initial Deferral Period, however, shall be from January 1, 1997, through December 31, 1997. 2.12. DETERMINATION DATE "Determination Date" means the last day of each calendar month. 2.13. DISABILITY "Disability" means a physical or mental condition that, in the opinion of the Committee, shall prevent the Participant from satisfactorily performing his usual duties for the Company for a two (2) year period or longer. The Committee shall determine the existence of the Disability and may rely on advice from a medical examiner, medical reports, and/or other evidence satisfactory to the Committee. 2.14. EARNINGS "Earnings" means the rate of growth credited to an account on each Determination Date in a calendar year. The rate shall be the Base Rate unless the Company meets or exceeds its Financial Plan in a calendar year, in which case the rate shall be the Premium Rate for all Participants who are not Retired or not Disabled. 2.15. ENTRANCE FEE "Entrance Fee" means an amount equal to four percent (4%) of any deferral which is part of the Participant's first Deferral Commitment. In subsequent Deferral Periods the Entrance Fee shall equal four percent (4%) of the amount by which the deferral exceeds the Participant's Entrance Fee Base less prior deferrals made during the current Deferral Period. The Executive Committee of the Board of Directors may waive the four percent (4%) fee at its discretion if such waiver is deemed to be in the best financial interest of the Company. 2.16. ENTRANCE FEE BASE "Entrance Fee Base" means for a Deferral Period an amount equal to the Participant's first Deferral Commitment times the number of Deferral Periods the Participant has participated in the Plan (including the current Deferral Period), plus the portion of any subsequent Deferral Commitment subject to the Entrance Fee times the number of Deferral Periods including, and PAGE 3 - OUTSIDE DIRECTOR DEFERRED COMPENSATION PLAN 8 subsequent to, the payment of any such additional Entrance Fee, less total deferrals made prior to the current Deferral Period. 2.17. FINANCIAL HARDSHIP "'Financial Hardship" means severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant or of a dependent (as defined in Section 152(a) of the Internal Revenue Code) of the Participant, loss of the Participant's property due to casualty, or other similar extraordinary and unforseeable circumstances arising as a result of events beyond the control of the Participant. The circumstances that will constitute an unforseeable emergency will depend upon the facts of each case, but in any case, payment may not be made to the extent that such hardship is or may be relieved: (a) Through reimbursement or compensation by insurance or otherwise; (b) By liquidation of the Participant's assets, to the extent the liquidation of such assets would not itself cause severe financial hardship; or (c) By cessation of deferrals under the Plan. 2.18. FINANCIAL PLAN The plan approved by the Board of Directors in the beginning of each year and used for purposes of setting AMS-wide profit sharing goals. 2.19. PARTICIPANT "Participant" means any eligible individual who has elected to defer Compensation under this Plan. 2.20. PARTICIPATION AGREEMENT "Participation Agreement" means the agreement submitted by a Participant to the Committee prior to the beginning of a Deferral Period, with respect to a Deferral Commitment made for such Deferral Period. 2.21. PLAN "Plan" means this Outside Director Deferred Compensation Plan as amended from time to time. 2.22. PREMIUM RATE "Premium Rate" means the Base Rate plus three percent (3%) (300 basis points). Retired Participants shall not be eligible for the Premium Rate after the date of retirement. Terminated employees are not eligible for the premium rate for the year in which they terminate. PAGE 4 - OUTSIDE DIRECTOR DEFERRED COMPENSATION PLAN 9 2.23. RETIREMENT "Retirement" means a termination of service on the Board after the Participant attains age fifty-five (55). ARTICLE III - PARTICIPATION AND DEFERRAL COMMITMENTS 3.1. ELIGIBILITY AND PARTICIPATION ELIGIBILITY. Eligibility to Participate in the plan shall be limited to outside directors of the Company. PARTICIPATION. An eligible individual may elect to participate in the Plan with respect to any Deferral Period by submitting a Participation Agreement to the Committee by the fifteenth (15th) day of December the month immediately preceding the beginning of the Deferral Period. 3.2. DEFERRAL COMMITMENT FEE DEFERRAL COMMITMENT. A Fee Deferral Commitment shall be related to the fees payable by the Company to a Participant during the Deferral Period. The amount to be deferred shall be stated as a percentage amount. 3.3. LIMITATIONS ON DEFERRAL COMMITMENTS The following, limitations shall apply to Deferral Commitments: (a) MINIMUM. The minimum deferral amount shall be fifty percent (5096) of Board lees in the Deferral Period. The minimum Deferral Commitment for a Participant who enters participation after the beginning of a Deferral Period shall be based on the number of months remaining in the Deferral Period. (b) MAXIMUM. The maximum deferral amount shall be one hundred percent (100%) of Board fees. (c) CHANGES IN MINIMUM OR MAXIMUM. The Committee may change the minimum or maximum deferral amounts from time to time by giving written notice to all Participants. No such change may affect a Deferral Commitment made prior to the Committee's action. 3.4. MODIFICATION OF DEFERRAL COMMITMENT Except as provided in Section 5.1(b) below, Deferral Commitments shall be irrevocable. ARTICLE IV - DEFERRED COMPENSATION ACCOUNT 4.1. ACCOUNT PAGE 5 - OUTSIDE DIRECTOR DEFERRED COMPENSATION PLAN 10 The amounts deferred by a Participant under the Plan, any Company contributions and Earnings shall be credited to the Participant's Account. Separate subaccounts may be maintained to reflect different forms of distribution and levels of vesting and forms of payment. The Account shall be a bookkeeping device utilized for the sole purpose of determining the benefits payable under the Plan and shall not constitute a separate fund of assets. 4.2. TIMING OF CREDITS; WITHHOLDING A Participant's deferred Compensation shall be credited to the Participant's Account at the time it would have been payable to the Participant. Any withholding of taxes or other amounts with respect to deferred Compensation or earnings that is required by state, federal or local law shall be withheld from the Participant's nondeferred Compensation to the maximum extent possible and any remaining amount shall reduce the amount credited to the Participant's Account. 4.3. DETERMINATION OF ACCOUNT (a) Each Participant's Account as of each Determination Date shall consist of the balance of the Account as of the immediately preceding Determination Date, adjusted as follows: (b) NEW DEFERRALS. The Account shall be increased by any deferred Compensation credited since such Determination Date. (c) ENTRANCE FEE. The Account shall be reduced by the Entrance fee, if any, on deferred Compensation credited since such Determination Date. (d) DISTRIBUTIONS. The Account shall be reduced by any benefits distributed from the Account to the Participant since such Determination Date. (e) EARNINGS. The Account shall be increased by the Earnings on the average daily balance in the Account since such Determination Date. 4.4. VESTING OF ACCOUNT A Participant shall be one hundred percent (100%) vested at all times in the amount of Compensation elected to be deferred under this Plan and Earnings thereon. 4.5. STATEMENT OF ACCOUNT The Committee shall give to each Participant a statement showing the balance in the Participant's Account on a semi-annual basis and at such times as may be determined by the Committee. PAGE 6 - OUTSIDE DIRECTOR DEFERRED COMPENSATION PLAN 11 ARTICLE V - PLAN BENEFITS 5.1. DISTRIBUTIONS PRIOR TO TERMINATION OF SERVICE A Participant's Account may be distributed to the Participant prior to termination of service on the Board as follows: (a) IN-SERVICE WITHDRAWALS. A Participant may elect in a Participation Agreement to withdraw all or any portion of the amount deferred by that Participation Agreement as of a date specified in the election. Such date shall not be sooner than Five (5) years after the date the Deferral Period commences. The amount Withdrawn shall not exceed the amount of Compensation deferred plus Earnings on the deferral. Such election shall be made at the time the Deferral Commitment is made and can only be amended if such amendment is made at least two (2) calendar years before the calendar year in which the distribution was scheduled. (b) HARDSHIP WITHDRAWALS. Upon a finding that a Participant has sufferer a Financial Hardship, the Committee may, in its sole discretion, (a) waive or modify the deferral commitment and/or (b) make distributions from the Participant's Account. The amount of such withdrawal shall be limited to the amount reasonably necessary to meet the Participant's needs resulting from the Financial Hardship. If payment is made due to Financial Hardship under this Plan, the Participant's deferrals under this Plan shall cease the remainder of the current calendar year and for the following calendar year. Any resumption of the Participant's deferrals under the Plan after this period shall be made only at the election of the Participant in accordance with Article III herein. (c) FORM OF PAYMENT AND TIME. Any distribution pursuant to Section 5.1(a) or 5.l(b) shall be payable in a lump sum. The distribution shall be paid in the case of a partial withdrawal, as provided in the Participation Agreement, and in case of Financial Hardship, within thirty (30) days after the determination of a Financial Hardship. 5.2. TERMINATION OF SERVICE Upon a Participant's termination of service on the Board for any reason other than Retirement or Disability, the Company shall pay the Participant, or, in the case of death, the Participant's Beneficiary, a lump-sum, benefit equal to the balance in the Participant's Account. Such payment will be paid within sixty (60) days of the termination. 5.3. RETIREMENT BENEFIT Retirement benefits shall be paid in the form elected by the Participant at the time of the deferral commitment. (a) Form of benefit payments shall be one (1) of the following: (i) Lump sum; PAGE 7 - OUTSIDE DIRECTOR DEFERRED COMPENSATION PLAN 12 (ii) Annual installments with a maximum of ten (10); or (iii) A portion in a lump sum and a portion in annual installments. (b) Benefits shall commence the last day of February in the calendar year following the date of retirement. (c) Small Account(s). Notwithstanding Section 5.3(a), if a Participant's Account is under fiery thousand dollars ($50,000) on the valuation date, the benefit shall be paid in a lump sum. (d) Change in Form and Commencement of Payment. A Participant may elect to file modified election as to form and timing, of payment To be effective such modified election must be filed two (2) calendar years prior to the calendar year in which distributions would have occurred if the modification had not been made. 5.4. DISABILITY BENEFIT At the time of the deferral commitment, the Participant must elect, upon disability, to receive their benefit either in a lump sum or upon Retirement as elected under Section 5.3 above. 5.5. ACCELERATED DISTRIBUTION Notwithstanding any other provision of the Plan a Participant shall be entitled to receive, upon written request to the Committee, a lump-sum distribution equal to ninety percent (90%) of the vested Account balance as of the Determination Date immediately preceding the date on which the Committee receives the written request. The remaining balance shall be forfeited by the Participant. The amount payable under this section shall be paid in a lump sum within sixty-five (65) days following the receipt of the notice by the Committee from the Participant. Any Participant who elects to receive a benefit under this section shall not be eligible to participate in or defer into this Plan in the future. 5.6. WITHHOLDING FOR TAXES To the extent required by the law in effect at the time payments are reads, the Company shall withhold from the payments made hereunder any Taxes required to be withheld by the federal or ally state or local government, including any amounts which the Company determines is reasonably necessary to pay any generation skipping transfer tax which is or may become due A beneficiary, however, may elect not to have withholding of Federal income tax pursuant to Section 3405(a)(2) of the Internal Revenue Code, or any successor provision thereto. 5.7. VALUATION AND SETTLEMENT The amount of a lump-sum payment and the initial amount of installments shall be based on the value of the Participant's Account on the valuation date. The valuation date shall be the date on which a lump sum is paid or the date on which installments commence. PAGE 8 - OUTSIDE DIRECTOR DEFERRED COMPENSATION PLAN 13 5.8. PAYMENT TO GUARDIAN The Committee may direct payment to the duly appointed guardian, conservator, or other similar legal representative of a Participant or Beneficiary to whom payment is due In the absence of such a legal representative, the Committee may, in it sole and absolute discretion, make payment to a person having the care and custody of a minor, incompetent or person incapable of handling the disposition of property upon proof satisfactory to the Committee of incompetency, minority, or incapacity. Such distribution shall completely discharge the Committee from all liability with respect to such benefit. 5.9. COMPANY DISCRETIONARY DISTRIBUTION The Executive Committee of the Board of Directors may elect to distribute a Participant's account balance to the Participant if the Executive Committee deems it to be in the best financial interests of the Company. ARTICLE VI - BENEFICIARY DESIGNATION 6.1. BENEFICIARY DESIGNATION Subject to Section 6.3, each Participant shall have the right, at any time, to designate or[e or more persons or an entity as Beneficiary (both primary as well as secondary) to whom benefits under this Plan shall be paid in the event of Participant's death prior to complete distribution of the Participant's Account. Each Beneficiary designation shall be in a written form prescribed by the Committee and shall be effective only when fiend with the Committee during the Participant's lifetime. 6.2. CHANGING BENEFICIARY Subject to Section 6.3, any Beneficiary designation new be changed by a Participant without the consent of the previously named Beneficiary by the filing of a new designation with the Committee. The filing of a new designation shall cancel all designations previously filed. 6.3. COMMUNITY PROPERTY If the Participant resides in a community property state, the following rules shall apply (a) Designation by a roamed Participant of a Beneficiary other than the Participant's spouse shall not be effective unless the spouse executes a written consent that acknowledges the effect of the designation, or it is established the consent cannot be obtained because the spouse cannot be located. (b) A married Participant's Beneficiary designation may be changed by a Participant troth the consent of the Participant's spouse as provided For in Section 6.3(a) by the filing of a new designation with the Committee. PAGE 9 - OUTSIDE DIRECTOR DEFERRED COMPENSATION PLAN 14 (c) If the Participant's marital status changes after the Participant has designated a Beneficiary, the following, shall apply: (i) If the Participant is marked at the time of death but was unmarried when the designation was made, the designation shall be void unless the spouse has consented to it in the Planner prescribed in Section 6.3(a). (ii) If the Participant is unmarried at the time of death but was married when the designation was made: a) The designation shall be void if the spouse was named as Beneficiary unless Participant had submitted a change of beneficiary listing the former spouse as the beneficiary. b) The designation shall remain valid if a nonspouse Beneficiary was named. (iii) If the Participant divas married when the designation was made and is married to a different spouse at death, the designation shall be void unless the new spouse has consented to it in the manner prescribed above. 6.4. NO BENEFICIARY DESIGNATION If any Participant fails to designate a Beneficiary in the manner provided above, if the designation is void, or if the Beneficiary designated by a deceased Participant dies before the Participant or before complete distribution of the Participant's benefits. the Participant's Beneficiary shall be the person in the first of the following classes in which there is a survivor: (a) The Participant's spouse; (b) The Participant's children in equal shares, except that if any of the children predeceases the Participant but leaves issue surviving. then such issue shall take by right of representation the share the parent would have taken if living; (c) The Participant's estate. ARTICLE VII - ADMINISTRATION 7.1. COMMITTEE; DUTIES This Plan shall be administered by the Administrative Committee. The Committee shall be appointed by the Executive Committee of the Board of Directors. The Committee shall have the authority to make amend, interpret and enforce all appropriate rules and regulations for the administration of the Plan and decide or resolve any and all questions, including interpretations of PAGE 10 - OUTSIDE DIRECTOR DEFERRED COMPENSATION PLAN 15 the Plan, as may arise in such administration. A majority vote of the Committee members shall control any decision. Members of the Committee may be Participants under this Plan. 7.2. AGENTS The Committee may, from time to time, employ agents and delegate to them such administrative duties as it sees fit, and may from time to time consult with counsel who may be counsel to the Company. 7.3. BINDING EFFECT OF DECISIONS The decision or action of the Committee with respect to any question arising, out of or in connection lavish the administration, interpretation ant application of the Plan and the rules and regulations promulgated hereunder shall be final, conclusive and binding upon all persons having any interest in the Plan. 7.4. INDEMNITY OF COMMITTEE The Company shall indemnity and hold harmless the members of the Committee against my and all claims, loss. damage, expense or liability arising from any action or failure to act with respect to this Plan on account of such person's service on the Committee, except in the case of gross negligence or willful misconduct. ARTICLE VIII - CLAIMS PROCEDURE 8.1. CLAIM The Committee shall establish rules and procedures to be followed by Participants and Beneficiaries in (a) filing claims for benefits, and (b) for furnishing and verifying proofs necessary to establish the right to benefits in accordance with the Plan, consistent with the remainder of this Article. Such rules and procedures shall require that claims and proofs be made in writing and directed to the Committee. 8.2. REVIEW OF CLAIM The Committee shall review all claims for benefits. Upon receipt by the Committee of such a claim, it shall determine all facts which are necessary to establish the right of the claimant to benefits under the provisions of the Plan and the amount thereof as herein provided within ninety (90) dam of receipt of such claim. If prior to the expiration of the initial ninety (90) day period, the Committee determines additional time is needed to come to a determination on the claim, the Committee shall provide Driven notice to the Participant, Beneficiary or other claimant of the need for the extension, not to exceed a total of one hundred eighty (180) days from the date the application Divas received. 8.3. NOTICE OF DENIAL OF CLAIM PAGE 11 - OUTSIDE DIRECTOR DEFERRED COMPENSATION PLAN 16 In the event that any Participant, Beneficiary or other claimant claims to be entitled to a benefit under the Plan, and the Committee determines that such claim should be denied in whole or in part, the Committee shall, in writing, notify such claimant that the claim has been denied, in whole or in part, setting forth the specific reasons for such denial. Such notification shall be written in a manner reasonably expected to be understood by such-claimant and shall refer to the specific sections of the Plan relied on, shall describe any additional material or information necessary for the claimant to perfect the claim ant an explanation of why such material or information is necessary, and where appropriate, shall include an explanation of how the claimant can obtain reconsideration of such denial. 8.4. RECONSIDERATION OF DENIED CLAIM (a) Within sixty (60) days after receipt of the notice of the denial of a claim, such claimant or duly authorized representative may request, bar mailing or delivery of such written notice to the Committee, a reconsideration by the Committee of the decision denying the claim. If the claimant or duly authorized representative fails to request such a reconsideration within such sixty (60) day period, it shall be conclusively determined for all purposes of this Plan that the dental of such claim by the Committee is correct. If such claimant or duly authorized representative requests a reconsideration within such sixty (60) day period, the claimant or duly authorized representative shall have thirty (30) days after filing a request for reconsideration to submit additional written material in support of the claim, review pertinent documents, and submit issues and comments in writing. (b) After such reconsideration request, the Committee skill determine within sixty (60) days of receipt of the claimant's request for reconsideration whether such denial of the claim was correct and shall notify such claimant in writing of its determination. The written notice of decision shall be in writing and shall include specific reabsorbs for the decision, written in a manner calculated to be understood by the claimant, as well as specific references to the pertinent Plan provisions on which the decision is based. In the event of special circumstances determined by the Committee, the time for the Committee to make a decision may be extended by an additional sixty (60) days upon written notice to the claimant prior to the commencement of the extension. If such determination is favorable to the claimant, it shall be binding and conclusive. If such is adverse to such claimant, it shall be binding and conclusive unless the claimant or his duly authorized representative notifies the Committee within ninety (90) days after the mailing or delivery to the claimant by the Committee of its determination that claimant intends to institute legal proceedings challenging the determination of the Committee and actually institutes such legal proceedings within one hundred eighty (180) days after such mailing or delivery. 8.5. COMPANY TO SUPPLY INFORMATION To enable the Committee to perform its functions, the Company shall supply full and timely information to the Committee of all Platters relating to the retirement, death or other cause for termination of employment of all Participants, and such other pertinent facts as the Committee may require. PAGE 12 - OUTSIDE DIRECTOR DEFERRED COMPENSATION PLAN 17 ARTICLE IX - AMENDMENT AND TERMINATION OF PLAN 9.1. AMENDMENT The Board may at any time amend the Plan by written instrument, notice of which is given to all Participants and to Beneficiaries receiving installment payments, subject to the following: (a) PRESERVATION OF ACCOUNT BALANCE. No amendment shall reduce the amount accrued in any Account to the date such notice of the amendment is given. (b) CHANGES IN EARNINGS RATE. No amendment shall reduce the rate of earnings to be credited after the date or the amendment to the amount already accrued in any Account and any Deferred Compensation credited to the Account under Deferral Commitments already in effect on that date. 9.2. COMPANY'S RIGHT TO TERMINATE The Board may at any time partially or completely terminate the Plan if, in its judgment, the tax, accounting or other effects of the continuance of the Plan, or potential pavements thereunder would not be in the best interests of the Company. (a) PARTIAL TERMINATION. The Board may partially terminate the Plan by instructing the Committee not to accept any additional Deferral Commitments. If such a partial termination occurs, the Plan shall continue to operate and be effective with regard to Deferral Commitments entered into prior to the effective date of such partial termination. (b) COMPLETE TERMINATION. The Board may completely terminate the Plan by instructing the Committee not to accept any additional Deferral Commitments, and by terminating all ongoing Deferral Commitments. If such a complete termination occurs. the Plan shall cease to operate and the Company shall pay out each Account Payment shall be Inane in equal monthly installments over the following period, based on the Account balance:
ACCOUNT BALANCE PAYOUT PERIOD - -------------------------------------------------------------------------------- Less than $50,000 Lump Sum $50,000 but less than $100,000 3 Years More than $100,000 5 Years - --------------------------------------------------------------------------------
Payments shall commence within sixty-five (65) days after the Board terminates the Plan and earnings shall continue to be credited on the unpaid Account balance al the rate specified in Section 5.3(b). PAGE 13 - OUTSIDE DIRECTOR DEFERRED COMPENSATION PLAN 18 ARTICLE X - MISCELLANEOUS 10.1. UNFUNDED PLAN This plan is an unfunded plan maintainer primarily to provide deferred compensation benefits for outside directors of the Company and therefore is exempt from ERISA. 10.2. COMPANY OBLIGATIONS The obligation to make benefit payments to any Participant under the Plan shall be the liability of the Company. 10.3. UNSECURED GENERAL CREDITOR Participants and Beneficiaries shall toe unsecured general creditors, with no secured or preferential right to any assets of the Company or any other party for payment of benefits under this Plan. Any life insurance policies, annuity contracts or other property purchased by the Company in connection with this Plan shall remain its general, unpledged and unrestricted assets. The Company's obligation under the Plan shall be an unfunded and unsecured promise to pay money in the future. 10.4. TRUST FUND At its discretion, the Company may establish one or more trusts, with such trustees as the Board may approve, for the purpose of providing for the payment of benefits owed under the Plan. Although such a trust shall be irrevocable. its assets shall be held for payment of all the Company's general creditors in the event of insolvency or bankruptcy. To the extent any benefits provided under the Plan are paid from any such trust, the Company shall have no further obligation to pay them. It not paid from the trust such benefits shall remain the obligation of the Company. 10.5. NONASSIGNABILITY Neither a Participant nor any other person Shall have any right to commute, sell. assign, transfer pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are, expressly declared to be unassignable and nontransferable. No part of the amounts payable shall, prior to actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance oared by a Participant or any other person, nor be transferable by operation of law in the event of a Participant's or any other person's bankruptcy or insolvency. 10.6. NOT A CONTRACT This Plan shall not constitute an undertaking by the Company that the Participant shall continue to be a director of the Company for any period of time. PAGE 14 - OUTSIDE DIRECTOR DEFERRED COMPENSATION PLAN 19 10.7. PROTECTIVE PROVISIONS Participant will cooperate with the Company toy furnishing any and ail information requested in order to facilitate the payment of benefits hereunder, and by taking such physical examinations as the Company Ray deem necessary and taking such other action as may be requested. 10.8. GOVERNING LAW The provisions of this Plan shall be construed and interpreted according to the laws of the Commonwealth of Virginia, except as preempted by federal law. 10.9. VALIDITY In case any provision of this Plan shall be held illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal and invalid provision had never been inserted herein. 10.10. NOTICE Any notice required or permitted under the Plan shall be sufficient if in writing and hard delivered or sent by registered or certified mail. Such notice shall be decreed as given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification. Mailed notice to the Committee shall be directed to the Company's address. Mailed notice to a Participant or Beneficiary shall be directed to the individual's last known address in the Company's records. 10.11. SUCCESSORS The provisions of this Plan shall bind and inure to the benefit of The Company and its successors and assigns. The term successors as used herein shall include any corporate or other business entity which shall, whether by merger, consolidation, purchase or otherwise acquire all or substantially all of the business and assets of the Company, and successors of any such corporation or other business entity. AMERICAN MANAGEMENT SYSTEMS, INC. By: ------------------------------- Dated: ---------------------------- PAGE 15 - OUTSIDE DIRECTOR DEFERRED COMPENSATION PLAN EX-10.6 5 MULTI-CURRENCY REVOLVING AGREEMENT 1 EXHIBIT 10.6 $120,000,000 MULTI-CURRENCY REVOLVING CREDIT AGREEMENT DATED AS OF JANUARY 9, 1998 AMONG AMERICAN MANAGEMENT SYSTEMS, INCORPORATED, VARIOUS OTHER BORROWERS, THE LENDERS NAMED THEREIN, AND NATIONSBANK, N.A., AS ADMINISTRATIVE AGENT AND WACHOVIA BANK, N.A. AS DOCUMENTATION AGENT 2 TABLE OF CONTENTS
Title Page - ----- ---- ARTICLE 1 DEFINITIONS, TERMS AND REFERENCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 1.1 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 1.2 Accounting Terms; GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 1.3 Other Referential Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 1.4 Exhibits and Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 ARTICLE 2 REVOLVING CREDIT LOAN FACILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 2.1 Revolving Credit Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 2.2 Swingline Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 2.3 Procedure for Revolving Credit Loans and Swingline Loans . . . . . . . . . . . . . 17 Section 2.4 Continuation and Conversions . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 2.5 Interest Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 2.6 Competitive Bid Loans; Procedure for Competitive Bid Borrowings . . . . . . . . . 20 Section 2.7 Multicurrency Competitive Bid Loans; Procedure for Multicurrency Competitive Bid Borrowings . . . . . . . . . . . . . . . . . . . . . 23 Section 2.8 The Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Section 2.9 Repayment of Revolving Credit Loans, Swingline Loans and Competitive Bid Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Section 2.10 Interest Basis: Interest Payment Dates . . . . . . . . . . . . . . . . . . . . . . 28 Section 2.11 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 2.12 Termination or Reduction of Commitment . . . . . . . . . . . . . . . . . . . . . . 35 Section 2.13 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Section 2.14 Additional Borrowers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3 ARTICLE 3 GENERAL FUNDING AND PAYMENT PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Section 3.1 Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Section 3.2 Availabilility of Alternative Currency and Rate Options . . . . . . . . . . . . . 37 Section 3.3 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Section 3.4 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Section 3.5 Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Section 3.6 Funding Losses and Breakage Costs . . . . . . . . . . . . . . . . . . . . . . . . 40 Section 3.7 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Section 3.8 Highest Lawful Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Section 3.9 European Monetary Union . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 ARTICLE 4 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Section 4.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . 45 Section 4.2 Survival of Representations and Warranties, etc. . . . . . . . . . . . . . . . . 47 ARTICLE 5 COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Section 5.1 Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Section 5.2 Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Section 5.3 Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 ARTICLE 6 CONDITIONS OF LENDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Section 6.1 Conditions Precedent to the Initial Loan to Each Borrower . . . . . . . . . . . . 52 Section 6.2 Conditions Precedent to Each Loan or Letter of Credit . . . . . . . . . . . . . . 52 ARTICLE 7 EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Section 7.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 ARTICLE 8 REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
4 Section 8.1 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 ARTICLE 9 SET-OFFS AND SHARING OF PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Section 9.1 Right of Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Section 9.2 Sharing of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 ARTICLE 10 THE AGENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Section 10.1 Authorization and Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Section 10.2 Agent's Reliance, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Section 10.3 The Agents and their Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Section 10.4 Lender Credit Decision, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Section 10.5 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Section 10.6 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 ARTICLE 11 GUARANTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 Section 11.1 Obligations Guaranteed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 Section 11.2 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 Section 11.3 Lender's Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 Section 11.4 Guaranty Absolute and Unconditional . . . . . . . . . . . . . . . . . . . . . . . . . 61 Section 11.5 Further Representations and Warranties; Credit Investigation . . . . . . . . . . . . . 61 Section 11.6 Reinstatement of Guaranteed Obligations . . . . . . . . . . . . . . . . . . . . . . . 61 Section 11.7 Subrogation Rights; Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . 62 ARTICLE 12 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 Section 12.1 No Waiver; Cumulative Rights; Severability . . . . . . . . . . . . . . . . . . . . . . 62 Section 12.2 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 Section 12.3 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 Section 12.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
5 Section 12.5 Cost and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 Section 12.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Section 12.7 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Section 12.8 Time of the Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Section 12.9 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Section 12.10 Agents and Lenders Not Joint Venturers . . . . . . . . . . . . . . . . . . . . . . . 64 Section 12.11 Acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Section 12.12 Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 12.13 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 12.14 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 Section 12.15 Independence of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 Section 12.16 Revisions or Updates to Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . 68 Section 12.17 Submission to Jurisdiction; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . 68 Section 12.18 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 Section 12.19 Lender Not In Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 Section 12.20 Reproduction of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 Section 12.21 Mitigation Obligations; Substitution of Lenders . . . . . . . . . . . . . . . . . . . 71 Section 12.22 Several Obligations of Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 Section 12.23 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 Section 12.24 Margin Stock Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
6 EXHIBIT A Notice Of Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1 EXHIBIT B Notice of Continuation/Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1 EXHIBIT C Competitive Bid Borrowing Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1 EXHIBIT D Revolving Credit Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-1 EXHIBIT E Swingline Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-1 EXHIBIT F Competitive Bid Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1 EXHIBIT G Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . G-1 EXHIBIT H Closing Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . H-1 EXHIBIT I Closing Certificate (Other Borrowers) . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1 EXHIBIT J Opinion of Counsel to American Management Systems, Incorporated . . . . . . . . . . . . . . . J-1 EXHIBIT K Assignment and Acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . K-1 EXHIBIT L Administrative Questionnaire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . L-1 Schedule 2.11 List of Existing Letters of Credit issued by NationsBank, N.A. Attachment A Authorization Matrix
7 MULTI-CURRENCY REVOLVING CREDIT AGREEMENT THIS MULTI-CURRENCY REVOLVING CREDIT AGREEMENT, made, entered into and effective as of the 9th day of January, 1998, by and among each of the borrowers named herein on the signature pages hereof (individually, a "Borrower" and collectively, the "Borrowers"), American Management Systems, Incorporated, as guarantor (the "Guarantor"), each of the lenders named herein on the signature pages hereof (individually, a "Lender" and collectively, the "Lenders"), NationsBank, N.A., as administrative agent for the Lenders (in such capacity, the "Administrative Agent") and Wachovia Bank, N.A., documentation agent for the Lenders (in such capacity, the "Documentation Agent"). WITNESSETH: Each Borrower has requested that the Lenders make available to it loans and letters of credit denominated in various currencies under a revolving credit facility in an aggregate principal amount to all Borrowers at any time outstanding not to exceed ONE HUNDRED TWENTY MILLION U.S. DOLLARS ($120,000,000.00) or the equivalent U.S. dollar amount thereof in currencies other than U.S. Dollars. Each of the Lenders is willing to make such loans and letters of credit available to each Borrower under a revolving credit facility upon the terms and subject to the conditions of this Agreement. Accordingly, the Borrowers, the Lenders, the Guarantor, the Administrative Agent and the Documentation Agent agree as follows: ARTICLE 1 DEFINITIONS, TERMS AND REFERENCES SECTION 1.1 CERTAIN DEFINITIONS. In addition to other terms elsewhere defined herein, as used in this Agreement and in any Exhibits or Schedules hereto, the following terms shall have the following meanings, unless the context requires otherwise: "ADMINISTRATIVE QUESTIONNAIRE" means an Administrative Questionnaire in the form of Exhibit M. "ADMINISTRATIVE AGENT" has the meaning set forth on the first page hereof. "ADMINISTRATIVE AGENT'S ACCOUNT" means the account maintained by the Administrative Agent at NationsBank, N.A., #ABA: 053000196, Account No. 13662122506, for the purposes of this Agreement or such other account as may be specified by the Administrative Agent to the Borrowers and to the Lenders. "AFFILIATE" means, as to any Person, each other Person that directly or indirectly (through one or more intermediaries or otherwise) controls, is controlled by, or is under common control with, such Person. 8 "AGENT" means either the Administrative Agent or the Documentation Agent, and "Agents" means both of them. "AGENT'S FEES" means the fees payable to the Administrative Agent under the provisions of Section 2.13(c). "AGGREGATE COMMITMENTS" means the sum of the Commitments, as same may be reduced pursuant to Sections 2.12 and 12.13. "AGREEMENT" means this Multi-Currency Revolving Credit Agreement, as originally executed, and as amended, modified, supplemented, restated, renewed or extended from time to time. "AGREEMENT DATE" means the date first above written. "AMS" means American Management Systems, Incorporated. "APPLICABLE CURRENCY" means, as to any particular payment, Loan or Letter of Credit, the Approved Currency in which it is denominated or is payable. "APPLICABLE RATE" means, for any day, with respect to any Eurocurrency Rate Revolving Credit Loan or Swingline Loan, or with respect to the Facility Fees payable hereunder, or with respect to the Letter of Credit Fees payable hereunder, as the case may be, the applicable rate per annum, expressed as a percentage, equal to the number of basis points set forth below under the caption "Eurocurrency Rate Margin/Swingline Margin," "Facility Fee," or "LC Fee," as the case may be, based upon the ratio of Total Debt to EBITDA of AMS and its consolidated Subsidiaries:
- -------------------------------------------------------------------------------------------------- Total Debt : EBITDA Eurocurrency Rate Facility Fee LC Fee Margin/Swingline Margin (basis points (basis points (basis points per annum) per annum) per annum) - -------------------------------------------------------------------------------------------------- Less than or equal to 12.5 12.5 12.5 0.5 - -------------------------------------------------------------------------------------------------- Greater than 0.5 but 17.5 12.5 17.5 less than or equal to 1.0 - -------------------------------------------------------------------------------------------------- Greater than 1.0 but 22.5 12.5 22.5 less than or equal to 1.5 - -------------------------------------------------------------------------------------------------- Greater than 1.5 but 30.0 15.0 30.0 less than or equal to 2.0 - -------------------------------------------------------------------------------------------------- Greater than 2.0 but 37.5 17.5 37.5 less than or equal to 2.5 - -------------------------------------------------------------------------------------------------- Greater than 2.5 45.0 20.0 45.0 - --------------------------------------------------------------------------------------------------
9 For purposes of the foregoing, the Applicable Rate for any date shall be determined by reference to the ratio of Total Debt to EBITDA as of the last day of the fiscal quarter of AMS most recently ended as of such determination date (such calculation of EBITDA to be for the four fiscal quarters ending on such date), and any change in the Applicable Rate shall become effective five Business Days after the delivery to each Lender of the certificate with respect to the Financial Statements to be delivered pursuant to Section 5.1(a) for the fiscal quarter or fiscal year most recently ended, as the case may be, and shall apply to Loans and Letters of Credit outstanding on such delivery date or made on and after such delivery date. Notwithstanding the foregoing and except as provided in the following sentence, at any time during which AMS has failed to deliver to the Administrative Agent the certificate referred to above with respect to a fiscal quarter or fiscal year following the date that delivery of Financial Statements relating to such fiscal quarter or fiscal year are required to be delivered under Section 5.1(a), the ratio of Total Debt to EDITDA shall be deemed, solely for the purposes of calculating the Applicable Rate, to be greater than 2.5 until such time as AMS shall have delivered such certificate and Financial Statements to the Administrative Agent. Notwithstanding the foregoing, from the Closing Date to the earlier of (a) the date on which the certificate required by Section 5.1(a) with respect to the Financial Statements for the fiscal quarter ending March 31, 1998 is required to be delivered or (b) the date such certificate is actually delivered, the ratio of Total Debt to EBITDA shall be deemed, solely for purposes of calculating the Applicable Rate, to be greater than 1.0 but less than or equal to 1.5. "APPROVED CURRENCY" means U.S. Dollars, Australian Dollars, Belgian Francs, British Pounds, Canadian Dollars, Dutch Guilders, Finnish Markkas, French Francs, German Marks, Italian Lira, Japanese Yen, Spanish Pesetas, Swedish Kroner, Swiss Francs and any other currencies approved by the Lenders which are freely transferable and convertible into U.S. Dollars and in which dealings in deposits are carried out in the London interbank market. "ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance entered into by a Lender and an assignee, and accepted by the Administrative Agent, in the form of Exhibit K. "BANKRUPTCY CODE" means Title 11 of the United States Code entitled "Bankruptcy Code" as now or hereafter in effect, or any successor statute, including (unless the context otherwise requires) any rule or regulation promulgated thereunder in each case as in effect from time to time. References to Sections of the Bankruptcy Code shall be construed to also refer to any successor Sections. "BASE RATE" means, for any day, a simple interest rate per annum equal to the higher of (a) the Prime Rate for such day and (b) the sum of the Federal Funds Rate for such day plus .50%. "BASE RATE LOAN" means any Loan which bears interest at the time in question at the Base Rate. "BASE RATE REVOLVING CREDIT LOAN" means any Revolving Credit Loan which bears interest at the time in question at the Base Rate. 10 "BORROWER" means each of AMS, AMS Management Systems Deutschland GmbH, AMS Management Systems Europe S.A./N.V., AMS Management Systems U.K. Ltd., AMS Management Systems Canada Inc., AMSY Management Systems Netherlands, B.V., Nordic Business Management Systems AB, AMS Management Systems Australia Pty. Limited, AMS Management Systems Espana, S.A., AMS Management Systems (Switzerland) AG, AMS Management Systems Italia S.p.A., AMS Management Systems France, S.A., and, so long as the Guaranty is in full force and effect, each other Subsidiary of AMS, if any, designated by AMS pursuant to Section 2.14 hereof; and "BORROWERS" means all of the foregoing. "BUSINESS DAY" means any day other than a Saturday, Sunday or other day on which commercial banks in Charlotte or New York are authorized or required to close; and, if the applicable Business Day relates to any Eurocurrency Rate Loan, a day on which dealings are carried on in the London interbank market for deposits in the Applicable Currency; and, if the applicable Business Day relates to a day on which any amount is to be paid or made available, any day on which commercial banks and foreign exchange markets are open for business and are not required or authorized by law to close in New York, London and the principal financial center for the Applicable Currency. "CAPITALIZED LEASE OBLIGATIONS" means with respect to AMS and its Subsidiaries, taken on a consolidated basis, the amount determined in accordance with GAAP which represents the capitalized value of leases which appears on the liability side of a balance sheet as part of the Financial Statements. "CLOSING AND CLOSING DATE" means the first Business Day on which all of the conditions precedent set forth in Section 6.1 shall have been met. "CODE" means the Internal Revenue Code of 1986, as amended from time to time, and any successor statute, including (unless the context otherwise requires) any rules or regulations promulgated thereunder, in each case as in effect from time to time. Reference to Sections of the Code shall be construed to also refer to any successor Sections. "COMMITMENT" means each Lender's individual obligation to make Revolving Credit Loans and to acquire participations in Letters of Credit in a principal amount not to exceed the Equivalent U.S. Dollar Amount shown on the signature pages opposite its name, as such amount may be reduced from time to time pursuant to Sections 2.12 and 12.13. "COMMITMENT PERCENTAGE" means the percentage that the Commitment of each Lender bears to the Aggregate Commitments, which percentage is shown on the signature pages opposite the name of each Lender, as such percentages may be adjusted from time to time as provided in Section 12.13(a). "COMPETITIVE BID BORROWING REQUEST" means the borrowing request provided for in Section 2.6(a) and Section 2.7(a) in the form of Exhibit C hereto. "COMPETITIVE BID LOAN" means an USD Competitive Bid Loan or a Multicurrency Rate Competitive Bid Loan. 11 "COMPETITIVE BID NOTE" means the promissory note in substantially the form of Exhibit F hereto, executed and delivered by each Borrower, payable to the order of a Lender and evidencing the Competitive Bid Loans. "DEBT" of any Person means all obligations, contingent or otherwise which, in accordance with GAAP, should be classified upon such Person's balance sheet as liabilities or disclosed in footnotes thereto, but in any event including liabilities secured by any lien existing on property owned or acquired by such Person or a Subsidiary thereof (whether or not the liability secured thereby shall have been assumed) and obligations which have been or under GAAP should be capitalized for financial accounting purposes, and excluding operating leases. "DEBTOR RELIEF LAWS" means the Bankruptcy Code and all other applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, suspension of payments, or similar debtor relief Laws from time to time in effect affecting the rights of creditors generally. "DEFAULT CONDITION" means the occurrence of any event, condition, act or omission which, after satisfaction of any requirement for the giving of notice or the lapse of time, or the happening of any other condition, or any determination by the Required Lenders, or any combination of the foregoing, would, unless cured or waived, become an Event of Default. "DEFAULT RATE" means (a) with respect to any Base Rate Loan, a fluctuating interest rate per annum equal to the Prime Rate, plus two percent (2%) and (b) with respect to any Eurocurrency Rate Revolving Credit Loan. Swingline Loan or Competitive Bid Loan, the sum of two percent (2%) per annum plus the rate of interest in effect thereon at the time of the occurrence of an Event of Default until the end of the Interest Period applicable thereto, and thereafter, a fluctuating interest rate per annum equal to the Prime Rate plus two percent (2%). "DENOMINATION DATE" means, (i) with respect to the borrowing, continuation or conversion of a Loan denominated in U.S. Dollars, the date such Loan is made, converted or continued; (ii) with respect to the borrowing, conversion or continuation of a Eurocurrency Rate Revolving Credit Loan or a Swingline Loan denominated in an Approved Currency other than U.S. Dollars, the date that is two Business Days before the date such Loan is made, converted, or continued as a Eurocurrency Rate Revolving Credit Loan; (iii) with respect to the issuance of a Letter of Credit, the date such Letter of Credit is issued; (iv) with respect to a borrowing of a Competitive Bid Loan, the date such Loan is accepted by Borrower; and (v) for purposes of determining the applicability of the Usage Premium pursuant to Sections 2.10 and 2.13(b), each of the foregoing dates and, in addition, the date any repayment of principal of a Revolving Credit Loan, Swingline Loan or Unpaid Drawing occurs, the date any Letter of Credit expires or is terminated, the date the stated amount of any Letter of Credit is reduced, and the first day of January, April, July and October in each year. "DOCUMENTATION AGENT" has the meaning set forth on the first page hereof. "EBILTDA" means, for any period, with respect to AMS and its Subsidiaries, taken on a consolidated basis, earnings before interest, operating leases, taxes, depreciation and 12 amortization expenses, as set forth or reflected on the most recent consolidated Financial Statements of AMS and its consolidated Subsidiaries prepared in accordance with GAAP (except in the case of interim statements as to the absence of footnotes) and delivered to the Administrative Agent in accordance with Section 5.1(a). "EBITDA" means, for any period, with respect to AMS and its Subsidiaries, taken on a consolidated basis, earnings before interest, taxes, depreciation and amortization expenses, as set forth or reflected on the most recent consolidated Financial Statements of AMS and its consolidated Subsidiaries prepared in accordance with GAAP (except in the case of interim statements as to the absence of footnotes) and delivered to the Administrative Agent in accordance with Section 5.1(a). "EMPLOYEE PLAN" means an employee benefit plan or other plan covered by Title IV of ERISA and maintained in whole or in part for employees of AMS or any of its Subsidiaries, including any such plan of an ERISA Affiliate. "EQUIVALENT U.S. DOLLAR AMOUNT" means (i) with respect to an amount denominated in U.S. Dollars, the amount thereof, and (ii) with respect to an amount denominated in an Approved Currency other than U.S. Dollars, the amount of U.S. Dollars that may be purchased from such amount of Approved Currency at the Spot Exchange Rate at approximately 11:00 A.M., Charlotte, North Carolina time on any Business Day of determination. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statute, including (unless the context otherwise requires) any rules or regulations promulgated thereunder. "ERISA AFFILIATE" means any Person which is a member of the same "controlled group of corporations" as AMS or any Person under "common control" with AMS within the meaning of Section 414 of the Code. "EUROCURRENCY RATE" means, with respect to any Eurocurrency Rate Revolving Credit Loan for the Interest Period applicable thereto, a simple per annum interest rate determined pursuant to the following formula: Eurocurrency Rate = LIBOR ------------------------------------------ 1 - Eurocurrency Reserve Percentage The Eurocurrency Rate shall be adjusted automatically as of the effective date of any change in the Eurocurrency Reserve Percentage. "EUROCURRENCY RATE REVOLVING CREDIT LOAN" means any Revolving Credit Loan which bears interest at the time in question based on the Eurocurrency Rate. "EUROCURRENCY RESERVE PERCENTAGE" means, for any day, that percentage (expressed as a decimal) which is in effect from time to time, under Regulation D of the Board of Governors of the Federal Reserve System, as such regulation may be amended from time to time, or any 13 successor regulation, as the maximum reserve requirement (including, without limitation, any basic, supplemental, emergency, special, or marginal reserves) applicable to any member of the Federal Reserve System with respect to Eurocurrency liabilities as that term is defined in Regulation D, or against any other category of liabilities that includes deposits by reference to which the interest rate of Eurocurrency Rate Revolving Credit Loans is determined, whether or not any Lender has any such Eurocurrency liabilities subject to such reserve requirement at that time. Eurocurrency Rate Revolving Credit Loans shall be deemed to constitute Eurocurrency liabilities and, as such, shall be deemed subject to reserve requirements without benefits of credits for proration, exceptions or offsets that may be available from time to time to any Lender. "EXISTING CREDIT AGREEMENT" means the $100,000,000 Multi-Currency Revolving Credit and Term Loan Agreement dated as of December 24, 1996, as amended, among AMS, the Borrowers, the Lenders named therein, Wachovia Bank of Georgia, N.A., as Administrative Agent and NationsBank, N.A., as Documentation Agent. "EXISTING LETTER OF CREDIT" has the meaning set forth in Section 2.11(q) hereof. "EVENT OF DEFAULT" means any of the events or conditions described in Article 7 hereof. "FACILITY FEE" has the meaning set forth in Section 2.13(a) hereof. "FEDERAL FUNDS RATE" means, for any day, the simple interest rate per annum (rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day in the daily statistical release designated as the composite 3:30 P.M. Quotations for U.S. Government Securities, or any successor publication, under the caption Federal Funds Effective Rate, provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate quoted to the Administrative Agent on such day on such transactions as determined by the Administrative Agent. "FINANCIAL STATEMENTS" means, as may be applicable, balance sheets, statements of income, cash flow statements, and statements of changes in stockholders' equity (other than those required to be delivered pursuant to Section 5.1(b)). "GAAP" means generally accepted accounting principles in the United States of America, as in effect from time to time. "GOVERNMENTAL AUTHORITY" means any government or political subdivision or any agency, authority, bureau, central bank, commission, department or instrumentality of either, or any court, tribunal, grand jury or arbitrator, in each case whether foreign or domestic. "GUARANTY" means the guaranty of AMS contained in Article 11 hereof. 14 "GUARANTOR" means AMS. "HIGHEST LAWFUL RATE" means the maximum lawful rate of interest (or, if the context so requires, an amount calculated at such rate) which a Lender is allowed to contract for, charge, take, reserve or receive under applicable Law. "INTEREST AND LEASE CHARGES" means, for any period, the sum of the interest expenses and all payment obligations under all operating leases and rental agreements set forth or reflected on the most recent consolidated Financial Statements of AMS and its consolidated Subsidiaries prepared in accordance with GAAP (except in the case of interim statements as to the absence of footnotes) and delivered to the Administrative Agent in accordance with Section 5.1(a). "INTEREST PERIOD" means (a) in connection with any Eurocurrency Rate Revolving Credit Loan denominated in U.S. Dollars, the period beginning on the date such Loan is made or continued as or converted to a Eurocurrency Rate Revolving Credit Loan and ending one, two, three or six months thereafter, as Borrower may elect; (b) in connection with any Eurocurrency Rate Revolving Credit Loan denominated in an Approved Currency other than U.S. Dollars, the period beginning on the date such Loan is made or continued as or converted to a Eurocurrency Revolving Credit Rate Loan and ending one, two or three months thereafter, as Borrower may elect; (c) in connection with a Swingline Loan denominated in an Approved Currency other than U.S. Dollars, the period beginning on the date such Loan is made and ending seven days thereafter; and (d) as to any Competitive Bid Loan, each period specified by Borrower for such Competitive Bid Loan in the related Competitive Bid Borrowing Request delivered pursuant to Section 2.6(a)(i) or Section 2.7(a)(i) (but not more than 120 days). Notwithstanding the foregoing, (i) any applicable Interest Period which would otherwise end on a day which is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day; (ii) any applicable Interest Period which begins on a day for which there is no numerically corresponding day in the calendar month during which such Interest Period is to end shall (subject to clause (i) hereof) end on the last day of such calendar month; and (iii) no Interest Period shall extend beyond the Revolving Credit Termination Date. "LC SUBFACILITY" has the meaning set forth in Section 2.11(b) hereof. "LAW" means any law (including common law), constitution, statute, treaty, convention, regulation, rule, ordinance, order, injunction, writ, decree or award of any Governmental Authority. "LENDING OFFICE" means, as to each Lender, its office located at its address set forth on the signature pages hereof (or identified on the signature pages hereof as its Lending Office) for either Eurocurrency Revolving Credit Loans or Base Rate Loans or such other office as such Lender may hereafter designate as its Lending Office by notice to the Borrowers and the Administrative Agent. 15 "LETTER OF CREDIT" means any documentary letter of credit or any standby letter of credit issued by the Administrative Agent for the account of a Borrower pursuant to Section 2.11 hereof. "LETTER OF CREDIT FEE" has the meaning set forth in Section 2.13(b) hereof. "LETTER OF CREDIT PARTICIPANT" has the meaning set forth in Section 2.11(g) hereof. "LIBOR" means, with respect to any Eurocurrency Rate Revolving Credit Loan or Multicurrency Competitive Bid Loan for the Interest Period applicable thereto, the rate of interest per annum determined by the Administrative Agent to be the rate of interest per annum for deposits in the Applicable Currency for a period equal to the relevant Interest Period quoted on Telerate, page 3740 or 3750, as the case may be, at or about 11:00 A.M., London time, on the second Business Day before the commencement of such Interest Period. If no such quotations are available, LIBOR shall be determined by the Administrative Agent to be the arithmetic mean, rounded upward if necessary, to the nearest 1/100th of one percent of the respective rates of interest per annum notified to the Administrative Agent by the Reference Banks as the rate of interest (rounded upward to the nearest 1/100th of one percent) at which deposits in the Applicable Currency in which such Loan is denominated in an amount approximately equal to the aggregate amount of such Loan requested to be borrowed, and having a maturity equal to such Interest Period, are offered to major banks in the London interbank market at or about 11:00 A.M., London time, on the second Business Day before (and for value on) the commencement of such Interest Period, provided, however, that if the day on which quotations would ordinarily be given in the London interbank market for deposits in the Applicable Currency is not the second Business Day before the commencement of the Interest Period for value on the commencement of such Interest Period, then LIBOR will be determined at or about 11:00 A.M., London time, on the day on which quotations would normally be given for such Applicable Currency for value on the commencement of such Interest Period. "LIBOR BID MARGIN" is the rate per annum, expressed as a percentage, equal to the number of basis points to be added to or subtracted from the applicable LIBOR and set forth by a Lender in an offer to make a Multicurrency Competitive Bid Loan pursuant to Section 2.7(a)(ii). "LOAN" means a Revolving Credit Loan, a Swingline Loan or a Competitive Bid Loan. "LOAN DOCUMENTS" means this Agreement, a Revolving Credit Note, the Swingline Note or a Competitive Bid Note and any and all other documents, instruments, certificates and agreements executed and/or delivered by a Borrower, any of its Subsidiaries or any other Person in connection herewith or therewith or relating to the Loans, or any one, more, or all of the foregoing, as the context shall require, as amended, modified or supplemented from time to time. "MARGIN STOCK" means "margin stock" as defined in Regulation G, T, U or X of the Board of Governors of the Federal Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. "MATERIAL DEBT" has the meaning set forth in Section 7.1(e) hereof. 16 "MATERIALLY ADVERSE EFFECT" means (a) a material adverse effect on the business, operations or condition (financial or otherwise) of AMS and its Subsidiaries (taken as a whole), (b) a material adverse affect on the ability of AMS or any other Person to perform or comply with any of the terms or conditions of any Loan Document to which it is a party, or (c) a material adverse affect on the legality, validity, binding effect, enforceability or admissibility into evidence of any Loan Document or the ability of any Lender to enforce any rights or remedies under or in connection with any Loan Document. "MULTICURRENCY COMPETITIVE BID LOAN" means a Competitive Bid Loan denominated in an Approved Currency other than U.S. Dollars made pursuant to Section 2.7. "MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA or Section 414(f) of the Code. "NATIONSBANK" means NationsBank, N.A. "NET WORTH" means, with respect to AMS and its consolidated Subsidiaries, all amounts which, in conformity with GAAP, would be included in shareholders' equity on a consolidated balance sheet. "NOTE" means a Revolving Credit Note, the Swingline Note or a Competitive Bid Note; and "NOTES" means all such Notes. "NOTICE OF BORROWING" means a notice in substantially the form of Exhibit A hereto with respect to a proposed Revolving Credit Loan or a proposed Swingline Loan, or telephonic notice given pursuant to Section 2.3(c) herein. "NOTICE OF CONTINUATION/CONVERSION" means a notice in substantially the form of Exhibit B hereto with respect to a proposed continuation or conversion of a Revolving Credit Loan or telephonic notice pursuant to Section 2.4(c) hereof. "OBLIGATIONS" means (a) each Borrower's obligations in respect of the due and punctual payment of principal of and interest on the Loans when and as due whether at maturity, by acceleration or otherwise, and (b) all fees, expenses, indemnities, reimbursements and other obligations, monetary or otherwise, of the Borrowers under this Agreement or any other Loan Document. "PARTICIPANT" has the meaning set forth in Section 12.13(e) hereof. "PARTICIPATING LENDER" has the meaning set forth in Sections 2.6(a)(v) and 2.7(a)(v) hereof. "PBGC" means the Pension Benefit Guaranty Corporation, or any successor thereto. "PERSON" means and includes natural persons, corporations, limited partnerships, general partnerships, limited liability companies, limited liability partnerships, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, insurance 17 trusts or other organizations, whether or not legal entities, and governments and agencies and political subdivisions thereof. "PRIME RATE" means the per annum rate of interest established from time to time by the Administrative Agent at its principal office as its Prime Rate. Any change in the interest rate resulting from a change in the Prime Rate shall become effective as of 12:01 A.M., Charlotte, North Carolina time, of the Business Day on which each change in the Prime Rate is announced by the Administrative Agent. The Prime Rate is a reference used by the Administrative Agent in determining interest rates on certain loans and is not intended to be the lowest rate of interest charged on any extension of credit to any debtor. "PROHIBITED TRANSACTION" means any "prohibited transaction" within the meaning of Section 406 of ERISA or Section 4975 of the Code. "REFERENCE BANKS" means NationsBank, N.A. and Wachovia Bank, N.A. "REPORTABLE EVENT" has the meaning specified therefor in Title IV of ERISA. "REQUIRED LENDERS" means, at any time, Lenders having at least 50% of the Aggregate Commitments; and, if the Aggregate Commitments are no longer in effect, Lenders which are owed at least 50% of the aggregate outstanding principal amount of the Revolving Credit Loans, or, if there are no Swingline Loans or Revolving Credit Loans outstanding, but there are Letters of Credit outstanding, Letter of Credit Participants owning at least 50% of the participation interests in all outstanding Letters of Credit, or, if there are no Swingline Loans, Revolving Credit Loans or Letters of Credit outstanding, Lenders which are owed at least 50% of the aggregate amount of the Competitive Bid Loans outstanding. "REVOLVING CREDIT LOAN" means any loan made to any Borrower pursuant to Section 2.1 hereof, and "REVOLVING CREDIT LOANS" means all such loans. "REVOLVING CREDIT NOTE" means the promissory note substantially in the form of Exhibit D hereto, executed and delivered by each Borrower, payable to the order of a Lender and evidencing the Revolving Credit Loans. "REVOLVING CREDIT TERMINATION DATE" means the earlier to occur of (a) January 9, 2003, and any and all extensions or renewals thereof, and (b) the date on which the Aggregate Commitments shall be terminated pursuant to Section 2.12 or Section 8.1 hereof. "SPOT EXCHANGE RATE" means, on any Business Day with respect to any calculation of the Equivalent U.S. Dollar Amount of any Approved Currency other than U.S. Dollars, the spot rate at which U.S. Dollars are offered on such day by the Administrative Agent in the London foreign exchange market for such Approved Currency. "SUBSIDIARY" means, as to any Person, (a) any corporation of which fifty percent (50%) or more of the outstanding stock having ordinary voting power to elect a majority of its board of directors (or other governing body), regardless of the existence at the time of a right of the 18 holders of any class or classes (however designated) of securities of such corporation to exercise such voting power by reason of the happening of any contingency, or any partnership of which fifty percent (50%) or more of the outstanding general partnership interests is, at the time, owned by such Person, or by one or more Subsidiaries of such Person, or by such Person and one or more Subsidiaries of such Person. Unless otherwise qualified, all references to "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of Borrower or a Subsidiary or Subsidiaries of such Subsidiary or Subsidiaries. "SWINGLINE LOANS" means the Loans made pursuant to Section 2.2(a) hereof. "SWINGLINE NOTE" means the promissory note in substantially the form of Exhibit E hereto, executed and delivered by each Borrower, payable to the order of NationsBank and evidencing Swingline Loans. "TAXES" means all taxes, assessments, fees, levies, imposts, duties, deductions, withholdings, or other charges of any nature whatsoever from time to time or at any time imposed by any Law or Governmental Authority. "TOTAL DEBT" means, with respect to AMS and its Subsidiaries, taken on a consolidated basis, the sum of the amounts (without duplication) of (i) all indebtedness for borrowed money, (ii) all obligations evidenced by bonds, debentures, notes or similar instruments, (iii) all obligations to pay the deferred purchase price of property or services, exclusive of trade accounts and accounts payable, (iv) all Capitalized Lease Obligations and (v) all direct or indirect guaranties of any such obligations of third parties (other than the Obligations) and all standby letters of credit issued for the account of any of them. "TYPE OF LOAN" means, with respect to a Revolving Credit Loan, a Base Rate Revolving Credit Loan or a Eurocurrency Rate Revolving Credit Loan. "U.K. QUALIFYING LENDER" means a Lender which is either: (a) (i) a bank within the meaning of Section 840A of the United Kingdom Income and Corporation Taxes Act 1988; (ii) will be beneficially entitled to any interest to be paid to it on any advance to AMS Management Systems U.K. Limited ("AMS U.K.") under this Agreement; and (iii) is within the charge to United Kingdom corporation tax as respects such interest; provided, however, that, if Section 349 or Section 840A of the Income and Corporation Taxes Act 1988 is repealed, modified, extended or re-enacted, the Administrative Agent may at any time and from time to time (after consultation with AMS) amend this paragraph (a) in such manner as it may reasonably determine to put, so far as practicable, AMS U.K. and the Lenders in the same position as they would otherwise have been in; and provided, further, that an Assignee will not be a UK Qualifying Lender by reason of this paragraph (a) unless the assignor Lender was also a UK Qualifying Lender by reason of this paragraph (a); or (b) "resident" (as such term is defined in the appropriate double taxation treaty) in a country (the "Lender's" Treaty Country") with which the United Kingdom has a double taxation treaty generally giving residents of that country complete exemption from United 19 Kingdom Tax on interest (and which does not carry on business in the United Kingdom through a permanent establishment with which the indebtedness under this Agreement in respect of which the interest is paid is effectively connected) (a "U.K. Treaty Lender") and for this purpose "double taxation treaty" means any convention or agreement between the government of the United Kingdom and any other government for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains. "UNPAID DRAWING" has the meaning set forth in Section 2.11(e) hereof. "USD COMPETITIVE BID LOAN" means a Competitive Bid Loan denominated in U.S. Dollars made pursuant to Section 2.6. "U.S. DOLLARS" AND THE SIGN "$" means United States Dollars or such coin or currency of the United States of America as at the time of payment shall be legal funds for the payment of public and private debts in the United States of America. "USAGE PREMIUM" shall mean the rate per annum, expressed as a percentage, equal to 12.5 basis points which shall be added to the Applicable Rate in respect of Revolving Credit Loans and Letters of Credit as provided in Section 2.10 and 2.13. "WACHOVIA" means Wachovia Bank, N.A. SECTION 1.2 ACCOUNTING TERMS; GAAP. All terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time. SECTION 1.3 OTHER REFERENTIAL PROVISIONS. (a) All terms in this Agreement, the Exhibits and Schedules hereto shall have the same defined meanings when used in any other Loan Documents, unless the context shall require otherwise. (b) All personal pronouns used in this Agreement, whether used in the masculine, feminine or neuter gender, shall include all other genders; the singular shall include the plural, and the plural shall include the singular. (c) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provisions of this Agreement. (d) Titles of Articles and Sections in this Agreement are for convenience only, do not constitute part of this Agreement and neither limit nor amplify the provisions of this Agreement, and all references in this Agreement to Articles, Sections, Subsections, paragraphs, clauses, subclauses, Schedules or Exhibits shall refer to the corresponding Article, Section, Subsection, paragraph, clause, subclause, Schedule or Exhibit attached to this Agreement, unless specific reference is made to the articles, sections or other subdivisions or divisions of such Schedule or Exhibit to or in another document or instrument. 20 (e) Each definition of a document in this Agreement shall include such document as amended, modified, or supplemented from time to time in accordance with the terms of this Agreement. (f) Except where specifically restricted, reference to a party to a Loan Document includes that party and its successors and assigns permitted hereunder or under such Loan Document. (g) Unless otherwise specifically stated, whenever a time is referred to in this Agreement or in any other Loan Document, such time shall be the local time in Charlotte, North Carolina. SECTION 1.4 EXHIBITS AND SCHEDULES. All Exhibits and Schedules attached hereto are by reference made a part hereof. ARTICLE 2 REVOLVING CREDIT LOAN FACILITY SECTION 2.1 REVOLVING CREDIT LOANS. (a) Upon the terms and subject to the conditions of, and in reliance upon the representations and warranties made under, this Agreement, each Lender severally and not jointly agrees to make Revolving Credit Loans to each Borrower in an aggregate principal amount not to exceed its Commitment Percentage of (i) the Aggregate Commitments minus (ii) the sum of (x) the aggregate principal amount of all Loans (other than any Loans which are repaid with the proceeds of such Revolving Credit Loans) outstanding to all of the Borrowers, (y) the stated amounts of all Letters of Credit outstanding for the account of all Borrowers and (z) the amount of all Unpaid Drawings (other than any Unpaid Drawings which are repaid with the proceeds of Revolving Credit Loans), if any, then outstanding. The Revolving Credit Loans will be made from time to time on any Business Day during the period from the Closing Date to but excluding the Revolving Credit Termination Date, and, subject to the limits set forth herein, at such times and in such amounts as Borrower may request, which amounts may be borrowed, repaid and, to but excluding the Revolving Credit Termination Date, reborrowed. (b) The aggregate principal amount of each borrowing of Base Rate Revolving Credit Loans shall not be less than (i) $1,000,000 or (ii) an aggregate principal amount equal to the remaining balance of the available Aggregate Commitments, and if greater, shall be in integral multiples of $500,000, and the aggregate principal amount of each borrowing of Eurocurrency Rate Revolving Credit Loans shall not be less than the Equivalent U.S. Dollar Amount of $2,000,000, except that, in any event, the aggregate principal amount of each borrowing of Eurocurrency Rate Revolving Credit Loans denominated in Canadian Dollars or Australian Dollars shall not be less than the Equivalent U.S. Dollar Amount of $3,500,000. Revolving Credit Loans shall be made ratably by the Lenders in accordance with their respective Commitment Percentages, provided, however, that the failure of any Lender to make any Loan shall not relieve any other Lender of the obligation to lend hereunder. For purposes of 21 determining the amounts referred to in Sections 2.1(a) and (b) hereof, the Equivalent U.S. Dollar Amount of all Loans, Letters of Credit and Unpaid Drawings shall be determined as of the Denomination Date for each borrowing of a Revolving Credit Loan. (c) Each Revolving Credit Loan to any Borrower may be either a Base Rate Revolving Credit Loan denominated in U.S. Dollars or a Eurocurrency Rate Revolving Credit Loan denominated in an Approved Currency. No Borrower shall be entitled to any borrowing which, if made, would result in more than five Eurocurrency Rate Revolving Credit Loans outstanding to such Borrower at any one time or more than fifteen Eurocurrency Rate Revolving Credit Loans outstanding to all Borrowers at any one time. For purposes of the foregoing, Eurocurrency Rate Revolving Credit Loans having different Interest Periods, regardless of whether they commence on the same day, shall be considered separate Loans. (d) Upon receipt of a Notice of Borrowing of Revolving Credit Loans, the Administrative Agent shall promptly notify each Lender by telephone, telex, or telecopy of the contents thereof, the amount of such Lender's portion of such Loan and the Type of Loan. In the case of a Notice of Borrowing for a Base Rate Loan which is received by the Administrative Agent prior to 11:00 A.M., Charlotte, North Carolina time, the Administrative Agent shall provide such notice to each Lender not later than 12:00 NOON, Charlotte, North Carolina time. Subject to the satisfaction of all conditions precedent thereto as set forth herein, each Lender shall, not later than 2:00 P.M., Charlotte, North Carolina time, on the date specified in the Notice of Borrowing, deposit to the Administrative Agent's Account, in federal or other immediately available funds, such Lenders' ratable share of such Loan. Unless the Administrative Agent shall have received notice from a Lender prior to the date of any Loan that such Lender will not make available to the Administrative Agent such Lender's ratable portion of such Loan, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such Loan in accordance with this Section 2.1(d), and the Administrative Agent may, in reliance upon such assumption, make available to Borrower on such date a corresponding amount. If and to the extent such Lender shall not have made such ratable portion available to the Administrative Agent, such Lender and Borrower severally agree to repay to the Administrative Agent forthwith on demand (but without duplication) such corresponding amount together with interest thereon for each day from the date such amount is made available to Borrower until the date such amount is repaid to the Administrative Agent (i) with respect to Borrower, at the interest rate applicable at the time the Type of Loan is chosen, or (ii) with respect to the Lender, at the Federal Funds Rate. Such payment by Borrower, however, shall be without prejudice to the rights against such Lender. If such Lender shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Lender's ratable share of the Loan for purposes of this Agreement, which Loan shall be deemed to have been made by such Lender on the borrowing date applicable thereto, but without prejudice to Borrower's rights against such Lender. SECTION 2.2 SWINGLINE LOANS. (a) Upon the terms and subject to the conditions of, and in reliance upon the representations and warranties made under, this Agreement, NationsBank agrees to make a loan 22 or loans to any Borrower denominated in the Approved Currency which is the lawful currency of the nation under the laws of which a Borrower is organized (each a "Swingline Loan" and collectively, the "Swingline Loans") (except that Swingline Loans to American Management Systems Portugal - Consultoria E Desenvolvimento de Software Sociedade Unipessoal, LDA shall be denominated in U.S. Dollars and Swingline Loans to AMS Management Systems Poland Sp. Z O.O. shall be denominated in U.S. Dollars or German Marks), which Swingline Loan (i) may be repaid and reborrowed in accordance with the provisions hereof; (ii) in the case of a Swingline Loan denominated in an Approved Currency other than U.S. Dollars, shall not be less than the Equivalent U.S. Dollar Amount of $500,000, except that in any event the amount of any Swingline Loan denominated in Canadian Dollars or Australian Dollars shall not be less than the Equivalent U.S. Dollar Amount of $1,000,000; (iii) shall not exceed the Aggregate Commitments minus (A) the aggregate principal amount of all Loans (other than Loans which are repaid with the proceeds of such Swingline Loan) outstanding to all of the Borrowers, (B) the stated amounts of all Letters of Credit outstanding for the account of all Borrowers and (C) the amount of all Unpaid Drawings (other than Unpaid Drawings repaid with the proceeds of such Swingline Loan), if any, then outstanding; (iv) when aggregated with all other Swingline Loans outstanding after giving effect to the application of the proceeds thereof, shall not exceed the Equivalent U.S. Dollar Amount of $20,000,000 at any time; and (v) NationsBank will not make a Swingline Loan after it has received written notice from the Required Lenders that a Default Condition or Event of Default exists. For purposes of determining the aforementioned amounts, the Equivalent U.S. Dollar Amount of all Loans, Letters of Credit and Unpaid Drawings shall be determined as of the Denomination Date for each borrowing of a Swingline Loan. (b) On any Business Day, NationsBank may, in its sole discretion, give notice to the Administrative Agent, the Lenders (other than NationsBank) and AMS that its outstanding Swingline Loans denominated in U.S. Dollars shall be funded with a borrowing of Revolving Credit Loans (provided that each such notice shall be deemed to have been automatically given upon the occurrence of an Event of Default), and NationsBank shall, in any event, not later than the seventh Business Day after any borrowing of a Swingline Loan denominated in U.S. Dollars, fund such outstanding Swingline Loan with a borrowing of Revolving Credit Loans, in which case a borrowing of Revolving Credit Loans constituting Base Rate Loans shall be made on the immediately succeeding Business Day by all of the Lenders pro rata based upon each Lender's Commitment Percentage, and the proceeds thereof shall be applied directly to repay NationsBank for such outstanding Swingline Loans. (c) A Swingline Loan denominated in an Approved Currency other than U.S. Dollars shall be made for an Interest Period of seven days and shall be repaid in full on the last day of the Interest Period. Unless AMS notifies the Administrative Agent by 11:00 A.M., Charlotte, North Carolina time on the second Business Day prior to the last day of the Interest Period for such Swingline Loan that such Loan will be repaid in full or refunded with a borrowing of a Eurocurrency Rate Revolving Credit Loan at maturity, then, so long as there exists no Default Condition or Event of Default, and so long as such borrowing satisfies all of the conditions of Section 2.1(b), the Administrative Agent shall cause the borrowing of a Eurodollar Rate Revolving Credit Loan on the last day of the Interest Period by all Lenders pro rata based upon each Lender's Commitment Percentage, and the proceeds thereof shall be applied directly 23 to repay NationsBank for such outstanding Swingline Loan, which Loan shall be denominated in the same Approved Currency as such Swingline Loan and shall have an Interest Period of one month. If a Default Condition or Event of Default exists on the maturity date of such Swingline Loan, the Administrative Agent shall fund such outstanding Swingline Loan with a borrowing of a Base Rate Revolving Credit Loan by all of the Lenders pro rata based upon each Lender's Commitment Percentage, and the proceeds thereof shall be applied directly to repay NationsBank for such outstanding Swingline Loans. (d) Each Lender hereby irrevocably agrees to make Revolving Credit Loans for the purpose of refunding Swingline Loans in the amount and in the manner specified in subsections 2.3(b) and (c) and on the date specified in writing by the Administrative Agent notwithstanding (i) in the case of Base Rate Loans, that the amount of such borrowing may not comply with the minimum borrowing amounts otherwise required hereunder, (ii) whether any conditions specified in Section 6.2 are then satisfied, (iii) whether a Default Condition or Event of Default has occurred and is continuing, (iv) in the case of Base Rate Loans, the date of such borrowing and (v) any reduction in the Aggregate Commitments after any such Swingline Loans were made. In the event that any borrowing pursuant to this Section 2.2 cannot for any reason be made on the date otherwise required above (including, without limitation, as a result of the commencement of a proceeding under the Bankruptcy Code in respect of AMS), each Lender (other than NationsBank) hereby agrees that it shall forthwith purchase from NationsBank (without recourse or warranty) such assignment of the outstanding Swingline Loans as shall be necessary to cause the Lenders to share in such Swingline Loans ratably based upon their respective Commitment Percentages, provided that all interest payable on the Swingline Loans shall be for the account of NationsBank until the date the respective assignment is purchased and, to the extent attributable to the purchased assignment, shall be payable to the Lender purchasing same from and after such date of purchase. SECTION 2.3 PROCEDURE FOR REVOLVING CREDIT LOANS AND SWINGLINE LOANS. (a) Whenever a Borrower desires to borrow a Revolving Credit Loan hereunder, it shall deliver to the Administrative Agent an irrevocable Notice of Borrowing on or before (i) the proposed borrowing date with respect to a Base Rate Revolving Credit Loan, and (ii) at least three Business Days before the proposed borrowing date with respect to a Eurocurrency Rate Revolving Credit Loan, each such notice to be given prior to 11:00 A.M., Charlotte, North Carolina time, on the date specified. The Notice of Borrowing shall specify (i) the proposed borrowing date, (ii) the amount of the Revolving Credit Loan and the Applicable Currency, (iii) the Type of Loan and (iv) with respect to a Eurocurrency Rate Revolving Credit Loan, the initial Interest Period to be applicable thereto. Each Notice of Borrowing shall be signed by a representative of such Borrower duly designated to give such notice pursuant to appropriate corporate authority, and such Borrower shall notify the Administrative Agent in writing of the names of such representatives and shall provide the Administrative Agent with specimen signatures of such representatives in the form of an authorization matrix (attached, as supplemented or modified by AMS from time to time, as Attachment A). The Administrative Agent shall be entitled to rely conclusively on such representative's authority to request Revolving Credit Loans on behalf of Borrower until the Administrative Agent receives from 24 Borrower written notice to the contrary. The Administrative Agent shall have no duty to verify the authenticity of the signature appearing on any Notice of Borrowing, but the Administrative Agent shall have a duty to inspect any Notice of Borrowing for facial conformity to the authorization matrix. (b) Whenever a Borrower desires to borrow a Swingline Loan hereunder, it shall deliver to the Administrative Agent an irrevocable Notice of Borrowing (i) in the case of a Loan denominated in U.S. Dollars, not later than 12:00 NOON, Charlotte, North Carolina time, on the proposed borrowing date and (ii) in the case of a Loan to any Borrower denominated in an Approved Currency other than U.S. Dollars, not later than 11:00 A.M., Charlotte, North Carolina time on the third Business Day prior to the borrowing date. The Notice of Borrowing shall specify the date of such borrowing, the amount of the Swingline Loan and the Applicable Currency. (c) In lieu of delivering a Notice of Borrowing pursuant to Sections 2.3(a) and (b) hereof, Borrower may give the Administrative Agent telephonic notice by the required time of the proposed borrowing; provided that such notice shall be promptly confirmed in writing by delivery to the Administrative Agent of a Notice of Borrowing. The Administrative Agent shall be entitled to rely upon any telephonic notice referred to above which the Administrative Agent believes in good faith to have been given by a duly authorized representative of Borrower, or for otherwise acting in good faith under this Section 2.3. SECTION 2.4 CONTINUATION AND CONVERSIONS. (a) Subject to Sections 3.2 and 3.3 hereof, Borrower shall have the option, from time to time, to elect to convert or continue the Type of Loan as follows: (i) if such Revolving Credit Loan is a Base Rate Loan, Borrower may elect, as of any Business Day, to convert such Loan or a portion thereof to a Eurocurrency Rate Revolving Credit Loan denominated in U.S. Dollars; (ii) if such Revolving Credit Loan is a Eurocurrency Rate Revolving Credit Loan denominated in U.S. Dollars, Borrower may elect to change such Loan or a portion thereof to a Base Rate Loan, or may elect to continue such Loan or a portion thereof as a Eurocurrency Rate Revolving Credit Loan denominated in U.S. Dollars for an additional Interest Period, in each case beginning on the last day of the then current Interest Period applicable to such Loan; and (iii) if such Revolving Credit Loan is a Eurocurrency Rate Revolving Credit Loan denominated in an Approved Currency other than U.S. Dollars, Borrower may elect to continue such Loan or portion thereof as a Eurocurrency Rate Revolving Credit Loan denominated in the same currency for an additional Interest Period, in each case beginning on the last day of the then current Interest Period applicable to such Loan; 25 provided that (A) any election of a Eurocurrency Rate Revolving Credit Loan is subject to there being no Default Condition or Event of Default then in existence, (B) the Equivalent U.S. Dollar Amount of such Loan, when aggregated with all other Loans outstanding hereunder and the stated amounts of all Letters of Credit for the account of all Borrowers and the amount of all Unpaid Drawings, if any, then outstanding, would not exceed the Aggregate Commitments, and (C) the Equivalent U.S. Dollar Amount of the Loan or portion thereof converted to or continued as a Loan denominated in U.S. Dollars shall not be less than $1,000,000 and if greater, shall be in integral multiples of $500,000, and the Equivalent U.S. Dollar Amount of the Loan or portion thereof converted to or continued as a Loan denominated in an Approved Currency other than U.S. Dollars shall not be less than $2,000,000, except that, in any event, the Equivalent Dollar Amount of the Loan or portion thereof converted to or continued as a Loan denominated in Canadian Dollars or Australian Dollars shall not be less than $3,500,000. For purposes of determining the aforementioned amounts, the Equivalent U.S. Dollar Amount of all Loans, Letters of Credit and Unpaid Drawings shall be determined as of the Denomination Date for such conversion or continuation. (b) Each such continuation or conversion shall be effected by Borrower delivering to the Administrative Agent a Notice of Continuation/Conversion at least (i) one Business Day prior to a conversion of a Eurocurrency Rate Revolving Credit Loan denominated in U.S. Dollars to a Base Rate Loan and (ii) in all other cases, three Business Days prior to the date of the proposed continuation or conversion, each such notice to be given prior to 11:00 A.M. Charlotte, North Carolina time on the date specified. Each Notice of Continuation/Conversion shall be irrevocable and shall specify the Type of Loan to be continued or converted and the Interest Period to be applicable thereto. In the event no Notice of Continuation/Conversion is delivered by a Borrower with respect to any Eurocurrency Rate Revolving Credit Loan to such Borrower in conformity with this Section 2.4(b), then such Loan shall be continued as a Eurocurrency Rate Revolving Credit Loan with an Interest Period of one month. Notwithstanding the foregoing or the provisions of Section 2.5 hereof, if a Default Condition or Event of Default is in existence or would result from any proposed continuation of a Eurocurrency Rate Revolving Credit Loan, such Loan may not be continued as a Eurocurrency Rate Revolving Credit Loan but instead shall be automatically converted on the last day of such Interest Period into a Base Rate Revolving Credit Loan. (c) In lieu of delivery of a Notice of Continuation/Conversion, Borrower may give the Administrative Agent telephonic notice by the required time of the proposed continuation or conversion; provided that such notice shall be promptly confirmed in writing by delivery to the Administrative Agent of a Notice of Continuation/Conversion. The Administrative Agent shall be entitled to rely upon any telephonic notice referred to above which the Administrative Agent believes in good faith to have been given by a duly authorized representative of Borrower or for otherwise acting in good faith under this Section 2.4. SECTION 2.5 INTEREST PERIODS. At the time Borrower gives any Notice of Borrowing or Notice of Continuation/Conversion in respect of the making or continuation of a Eurocurrency Rate Revolving Credit Loan complying with the requirements of Sections 2.3 or 2.4 hereof, Borrower shall elect the Interest Period to be applicable to such Loan. If, upon the expiration of 26 any Interest Period for a Revolving Credit Loan, a Borrower has failed to elect a new Interest Period, then such Borrower shall be deemed to have given notice of election of an Interest Period of one month. SECTION 2.6 COMPETITIVE BID LOANS; PROCEDURE FOR COMPETITIVE BID BORROWINGS. (a) Subject to the terms and conditions of this Agreement, each Lender severally agrees that any Borrower may effect a borrowing of USD Competitive Bid Loans from time to time on any Business Day during the period from the Closing Date until the date occurring 30 days prior to the Revolving Credit Termination Date in the manner set forth below, provided, however, that the principal amount of such USD Competitive Bid Loans shall not exceed the Aggregate Commitments minus (x) the outstanding principal amount of all Loans (other than any Loans which are paid with the proceeds of such USD Competitive Bid Loans) outstanding to all of the Borrowers, (y) the stated amounts of all Letters of Credit outstanding for the account of all Borrowers and (z) the amount of all Unpaid Drawings (other than any Unpaid Drawings which are repaid with the proceeds of such USD Competitive Bid Loans), if any, then outstanding. For purposes of determining the aforementioned amounts, the Equivalent U.S. Dollar Amount of all Loans, Letters of Credit and Unpaid Drawings shall be determined as of the Denomination Date for each borrowing of USD Competitive Bid Loans. (i) Borrower may request a borrowing of USD Competitive Bid Loans by giving to the Administrative Agent, at least one Business Day prior to the date of the proposed borrowing, a notice, which notice may be in writing or by telecopy, telex or telegraph, or by telephone, if immediately confirmed in writing, substantially in the form attached hereto as Exhibit C (a "Competitive Bid Borrowing Request"). Each Competitive Bid Borrowing Request shall be given to the Administrative Agent prior to 10:00 A.M., Charlotte, North Carolina time. Each such Competitive Bid Borrowing Request shall specify the proposed date (which shall be a Business Day) and the aggregate amount of the proposed borrowing of USD Competitive Bid Loans, the proposed Interest Period for each USD Competitive Bid Loan to be made as part of such borrowing, the interest payment date or dates relating thereto, and such other terms to be applicable to such borrowing as Borrower may specify. No borrowing of USD Competitive Bid Loans shall be in an aggregate amount less than $3,000,000 or an integral multiple of $1,000,000 in excess thereof, or, if less, the unused amount of the Aggregate Commitments. No Interest Period shall extend after the Revolving Credit Termination Date. The Administrative Agent shall promptly notify (by telex or telecopy) each Lender of each Competitive Bid Borrowing Request received by it and the terms contained in such request. (ii) Each Lender shall, if, in its sole discretion, it elects so to do, irrevocably offer to make one or more USD Competitive Bid Loans to Borrower as part of such proposed borrowing at a rate or rates of interest specified by such Lender in its sole discretion, by notifying (by telephone or telecopy, and, in the case of telephone, immediately confirmed by telecopy) the Administrative Agent, 27 before 10:00 A.M., Charlotte, North Carolina time, on the proposed borrowing date of the minimum amount and maximum amount of each USD Competitive Bid Loan which such Lender would be willing to make as part of such proposed borrowing (which amounts may, subject to the proviso to the first sentence of this Section 2.6, exceed such Lender's Commitment), the rate or rates of interest therefor and such Lender's applicable Lending Office with respect to such Competitive Bid Loan. The Administrative Agent shall notify Borrower of all such offers before 10:30 A.M., Charlotte, North Carolina time, on the proposed borrowing date, provided that, if the Administrative Agent in its capacity as a Lender shall in its sole discretion elect to make any such offer, it shall notify Borrower of such offer before 9:30 A.M., Charlotte, North Carolina time on the proposed borrowing date. If any Lender other than the Administrative Agent shall fail to notify the Administrative Agent before 10:00 A.M., Charlotte, North Carolina time, and if the Administrative Agent in its capacity as a Lender shall fail to notify Borrower before 9:30 A.M., Charlotte, North Carolina time, on the proposed borrowing date, that it elects to make such an offer, such Lender shall be deemed to have elected not to make such an offer and such Lender shall not be obligated to, and shall not, make any USD Competitive Bid Loan as part of such borrowing. Any offer submitted after the time required above shall be disregarded by the Administrative Agent unless such offer is submitted to correct a manifest error in a prior offer. (iii) Borrower shall, before 11:00 A.M., Charlotte, North Carolina time, on the date of such proposed borrowing of USD Competitive Bid Loans, either (A) cancel such Competitive Bid Borrowing Request by notice to the Administrative Agent to that effect, or (B) in its sole discretion, irrevocably accept one or more of the offers made by any Lender or Lenders pursuant to Section 2.6(a)(ii), in ascending order of the rates offered therefor, by giving notice to the Administrative Agent of the amount of each USD Competitive Bid Loan (which amount shall be equal to or greater than the minimum amount, and equal to or less than the maximum amount, notified to Borrower by the Administrative Agent on behalf of such Lender for such Competitive Bid Loan pursuant to Section 2.6(a)(ii)) to be made by each Lender as part of such borrowing, and reject any remaining offers made by Lenders pursuant to Section 2.6(a)(ii), by giving the Administrative Agent notice to that effect, provided, however, that the aggregate amount of such offers accepted by Borrower shall be equal at least to $3,000,000. If offers for USD Competitive Bid Loans at the same interest rate are made by two or more Lenders for a greater aggregate minimum principal amount than the amount in respect of which offers for such Competitive Bid Loans are accepted by Borrower at such interest rate, the principal amount of USD Competitive Bid Loans accepted at such interest rate shall be allocated by 28 Borrower among such Lenders as nearly as possible in proportion to the respective minimum principal amounts offered by such Lenders. No such Lender shall be obligated to make such Competitive Bid Loan in a principal amount less than the minimum amount offered by such Lender without consenting to such lesser amount. If any Lender declines to make an USD Competitive Bid Loan at such lesser amount, Borrower shall be entitled in its sole discretion to determine which of such offers at the same interest rate it shall accept. (iv) If Borrower notifies the Administrative Agent that a Competitive Bid Borrowing Request is canceled pursuant to Section 2.6(a)(iii)(A), the Administrative Agent shall give prompt notice (by telex or telecopy) thereof to the Lenders and such borrowing shall not be made. (v) If Borrower accepts one or more of the offers made by any Lender or Lenders pursuant to Section 2.6(a)(iii)(B), the Administrative Agent shall, as promptly as practicable on the proposed borrowing date, notify (A) each Lender that has made an offer as described in Section 2.6(a)(ii), of the aggregate amount of such borrowing and whether any offer or offers made by such Lender pursuant to Section 2.6(a)(ii) have been accepted by Borrower and (B) each Lender that is to make an USD Competitive Bid Loan as part of such borrowing (a "Participating Lender" with respect to such borrowing), of the amount of each Loan to be made by such Lender as part of such borrowing, together with a specification of the interest rate and interest payment date or dates in respect of each such Competitive Bid Loan. Each such Participating Lender shall, not later than 12:00 NOON, Charlotte, North Carolina time, on the date specified in such Competitive Bid Borrowing Request deposit to the Administrative Agent's Account, in federal or other immediately available funds, such Lender's portion of such borrowing. Upon satisfaction of the applicable terms and conditions of this Agreement and after receipt by the Administrative Agent of such amount from each such Participating Lender, the Administrative Agent will make such amount available on such date to Borrower. Unless the Administrative Agent shall have received prior notice from a Participating Lender (by telephone or otherwise, such notice to be promptly confirmed by telex, telecopy or other writing) that such Participating Lender will not make available such Participating Lender's Competitive Bid Loan, the Administrative Agent may assume that such Participating Lender has made such Participating Lender's portion of such borrowing available to the Administrative Agent on such borrowing date in accordance with this Section 2.6(a)(v), and the Administrative Agent may, in reliance upon such assumption, make available to Borrower on such borrowing date a corresponding amount. If and to the extent such Participating Lender shall not have made such portion available to the Administrative Agent, such Participating Lender and Borrower severally agree to repay to the Administrative Agent forthwith on demand (but without duplication) such corresponding amount together with interest thereon for each day from the date such amount is made 29 available to Borrower until the date such amount is repaid to the Administrative Agent (x) with respect to Borrower, at a rate per annum equal to the rate of interest for such Competitive Bid Loan accepted by Borrower in its notice to the Administrative Agent delivered pursuant to Section 2.6(a)(iii)(B), or (y) with respect to the Participating Lender, at the Federal Funds Rate. If such Participating Lender shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Lender's Competitive Bid Loan as a part of such borrowing of Competitive Bid Loans for purposes of this Agreement, which Competitive Bid Loan shall be deemed to have been made by such Participating Lender on the borrowing date applicable thereto, but without prejudice to rights of Borrower against such Participating Lender. (b) The Administrative Agent will notify each Lender of the amount of any borrowing of USD Competitive Bid Loans and such Lender's new Commitment (after giving effect to all of the Competitive Bid Loans outstanding). After each such borrowing of USD Competitive Bid Loans, if requested by any Lender, the Administrative Agent shall within a reasonable time furnish to such Lender such information in respect of such Competitive Bid Loans as such Lender shall reasonably request. (c) Within the limits and on the conditions set forth in this Section 2.6, Borrower may from time to time borrow under this Section 2.6, repay pursuant to Section 2.6(d), and reborrow under this Section 2.6. (d) Borrower shall repay to the Administrative Agent for the account of each Participating Lender which has made an USD Competitive Bid Loan on the maturity date of such Competitive Bid Loan (such maturity date being that specified by the Company for repayment of such Competitive Bid Loan in the related Competitive Bid Borrowing Request delivered pursuant to Subsection 2.6(a)(i)) the then unpaid principal amount of such Competitive Bid Loan. SECTION 2.7 MULTICURRENCY COMPETITIVE BID LOANS; PROCEDURE FOR MULTICURRENCY COMPETITIVE BID BORROWINGS. (a) Subject to the terms and conditions of this Agreement, each Lender severally agrees that any Borrower may effect a borrowing of Multicurrency Competitive Bid Loans denominated in an Approved Currency other than U.S. Dollars from time to time on any Business Day during the period from the Closing Date until the date occurring 30 days prior to the Revolving Credit Termination Date in the manner set forth below, provided, however, that the principal amount of such Multicurrency Competitive Bid Loans shall not exceed the Aggregate Commitments minus (x) the outstanding principal amount of all Loans (other than any Loans which are repaid with the proceeds of such Multicurrency Competitive Bid Loans) outstanding to all of the Borrowers, (y) the stated amounts of all Letters of Credit outstanding for the account of all Borrowers and (z) the amount of all Unpaid Drawings (other than Unpaid Drawings which are repaid with the proceeds of such Multicurrency Competitive Bid Loans), if any, then outstanding. For purposes of determining the aforementioned amounts, the Equivalent 30 U.S. Dollar Amount of all Loans, Letters of Credit and Unpaid Drawings shall be determined as of the Denomination Date for each borrowing of Multicurrency Competitive Bid Loans. (i) Borrower may request a borrowing of Multicurrency Competitive Bid Loans by giving to the Administrative Agent, at least four Business Days prior to the date of the proposed borrowing, a notice, which notice may be in writing or by telecopy, telex or telegraph, or by telephone, if immediately confirmed in writing, substantially in the form attached hereto as Exhibit C (a "Competitive Bid Borrowing Request"). Each Competitive Bid Borrowing Request for a Multicurrency Competitive Bid Loan shall be given to the Administrative Agent prior to 10:00 A.M., Charlotte, North Carolina time. Each such Competitive Bid Borrowing Request for Multicurrency Competitive Bid Loans shall specify the proposed date (which shall be a Business Day), the aggregate amount of the proposed borrowing of Multicurrency Competitive Bid Loans and the Applicable Currency, the proposed Interest Period for each Multicurrency Competitive Bid Loan to be made as part of such borrowing (which shall not be more than 120 days), the interest payment date or dates relating thereto, and such other terms to be applicable to such borrowing as Borrower may specify. No borrowing of Multicurrency Competitive Bid Loans shall be in an aggregate amount less than the Equivalent U.S. Dollar amount of $3,000,000. No Interest Period shall extend after the Revolving Credit Termination Date. The Administrative Agent shall promptly notify (by telex or telecopy) each Lender of each Competitive Bid Borrowing Request received by it and the terms contained in such request. (ii) Each Lender shall, if, in its sole discretion, it elects so to do, irrevocably offer to make one or more Multicurrency Competitive Bid Loans to Borrower as part of such proposed borrowing at the "LIBOR Bid Margin" offered for each such Competitive Bid Loan (rounded to the nearest of 1/100th of one percent) to be added or subtracted from the applicable LIBOR for the Interest Period elected by Borrower, by notifying (by telephone or telecopy, and, in the case of telephone, immediately confirmed by telecopy) the Administrative Agent, before 10:00 A.M., Charlotte, North Carolina time, three Business Days prior to the proposed borrowing date of the minimum amount and maximum amount of each Multicurrency Competitive Bid Loan which such Lender would be willing to make as part of such proposed borrowing (which amounts may, subject to the proviso to the first sentence of this Section 2.7, exceed such Lender's Commitment), the rate or rates of interest therefor and such Lender's applicable Lending Office with respect to such Competitive Bid Loan. The Administrative Agent shall notify Borrower of all such offers before 10:30 A.M., Charlotte, North Carolina time, three Business Days prior to the proposed borrowing date, provided that, if the Administrative Agent in its capacity as a Lender shall in its sole discretion elect to make any such offer, it shall notify Borrower of such offer before 9:30 A.M., Charlotte, North Carolina time three Business Days prior to the proposed borrowing date. If any Lender other than the Administrative Agent shall 31 fail to notify the Administrative Agent before 10:00 A.M., Charlotte, North Carolina time, and if the Administrative Agent in its capacity as a Lender shall fail to notify Borrower before 9:30 A.M., Charlotte, North Carolina time, three Business Days prior to the proposed borrowing date, that it elects to make such an offer, such Lender shall be deemed to have elected not to make such an offer and such Lender shall not be obligated to, and shall not, make any Multicurrency Competitive Bid Loan as part of such borrowing. Any offer submitted after the time required above shall be disregarded by the Administrative Agent unless such offer is submitted to correct a manifest error in a prior offer. (iii) Borrower shall, before 11:00 A.M., Charlotte, North Carolina time, three Business Days prior to the date of such proposed borrowing of Multicurrency Competitive Bid Loans, either (A) cancel such Competitive Bid Borrowing Request by notice to the Administrative Agent to that effect, or (B) in its sole discretion, irrevocably accept one or more of the offers made by any Lender or Lenders pursuant to Section 2.7(a)(ii), in ascending order of the LIBOR Bid Margins offered therefor, by giving notice to the Administrative Agent of the amount of each Competitive Bid Loan (which amount shall be equal to or greater than the minimum amount, and equal to or less than the maximum amount, notified to Borrower by the Administrative Agent on behalf of such Lender for such Competitive Bid Loan pursuant to Section 2.7(a)(ii)) to be made by each Lender as part of such borrowing, and reject any remaining offers made by Lenders pursuant to Section 2.7(a)(ii), by giving the Administrative Agent notice to that effect, provided, however, that the aggregate amount of such offers accepted by Borrower shall be equal at least to the Equivalent U.S. Dollar Amount of $3,000,000. If offers for Multicurrency Competitive Bid Loans at the same LIBOR Bid Margin are made by two or more Lenders for a greater aggregate minimum principal amount than the amount in respect of which offers for Multicurrency Competitive Bid Loans are accepted by Borrower for the related Interest Period, the principal amount of Multicurrency Competitive Bid Loans accepted at such LIBOR Bid Margin shall be allocated by Borrower among such Lenders as nearly as possible in proportion to the respective minimum principal amounts offered by such Lenders. No such Lender shall be obligated to make such Competitive Bid Loan in a principal amount less than the minimum amount offered by such Lender without consenting to such lesser amount. If any Lender declines to make a Competitive Bid Loan at such lesser amount, Borrower shall be entitled in its sole discretion to determine which of such offers at the same interest rate it shall accept. 32 (iv) If Borrower notifies the Administrative Agent that a Competitive Bid Borrowing Request is canceled pursuant to Section 2.7(a)(iii)(A), the Administrative Agent shall give prompt notice (by telex or telecopy) thereof to the Lenders and such borrowing shall not be made. (v) If Borrower accepts one or more of the offers made by any Lender or Lenders pursuant to Section 2.7(a)(iii)(B), the Administrative Agent shall, as promptly as practicable notify (A) each Lender that has made an offer as described in Section 2.7(a)(ii), of the aggregate amount of such borrowing and whether any offer or offers made by such Lender pursuant to Section 2.7(a)(ii) have been accepted by Borrower and (B) each Lender that is to make a Multicurrency Competitive Bid Loan as part of such borrowing (a "Participating Lender" with respect to such borrowing), of the amount of each Loan to be made by such Lender as part of such borrowing, together with a specification of the LIBOR Bid Margin and interest payment date or dates in respect of each such Competitive Bid Loan. Each such Participating Lender shall, not later than 12:00 NOON, Charlotte, North Carolina time, on the date specified in such Competitive Bid Borrowing Request make available to the Administrative Agent, in immediately available and freely transferable funds, such Lender's portion of such borrowing in the Applicable Currency. Upon satisfaction of the applicable terms and conditions of this Agreement and after receipt by the Administrative Agent of such amount from each such Participating Lender, the Administrative Agent will make such amount available on such date to Borrower. Unless the Administrative Agent shall have received prior notice from a Participating Lender (by telephone or otherwise, such notice to be promptly confirmed by telex, telecopy or other writing) that such Participating Lender will not make available such Participating Lender's Competitive Bid Loan, the Administrative Agent may assume that such Participating Lender has made such Participating Lender's portion of such borrowing available to the Administrative Agent on such borrowing date in accordance with this Section 2.7(a)(v), and the Administrative Agent may, in reliance upon such assumption, make available to Borrower on such borrowing date a corresponding amount. If and to the extent such Participating Lender shall not have made such portion available to the Administrative Agent, such Participating Lender and Borrower severally agree to repay to the Administrative Agent forthwith on demand (but without duplication) such corresponding amount together with interest thereon for each day from the date such amount is made available to Borrower until the date such amount is repaid to the Administrative Agent (x) with respect to Borrower, at a rate per annum equal to LIBOR plus or minus the LIBOR Bid Margin for such Competitive Bid Loan accepted by Borrower in its notice to the Administrative Agent delivered pursuant to Section 2.7(a)(iii)(B), or (y) with respect to the Participating Lender, at the Federal Funds Rate. If such Participating Lender shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Lender's Multicurrency Competitive Bid Loan as a part of such borrowing of Multicurrency Competitive Bid Loans for purposes of this Agreement, which 33 Multicurrency Competitive Bid Loan shall be deemed to have been made by such Participating Lender on the borrowing date applicable thereto, but without prejudice to rights of Borrower against such Participating Lender. (b) The Administrative Agent will notify each Lender of the amount of any borrowing of Multicurrency Competitive Bid Loans and such Lender's new Commitment (after giving effect to all of the Competitive Bid Loans outstanding). After each such borrowing of Multicurrency Competitive Bid Loans, if requested by any Lender, the Administrative Agent shall within a reasonable time furnish to such Lender such information in respect of such Multicurrency Competitive Bid Loans as such Lender shall reasonably request. (c) Within the limits and on the conditions set forth in this Section 2.7, Borrower may from time to time borrow under this Section 2.7, repay pursuant to Section 2.7(d), and reborrow under this Section 2.7. (d) Borrower shall repay to the Administrative Agent for the account of each Participating Lender which has made a Multicurrency Competitive Bid Loan on the maturity date of such Competitive Bid Loan (such maturity date being that specified by the Borrower for repayment of such Competitive Bid Loan in the related Competitive Bid Borrowing Request delivered pursuant to Subsection 2.7(a)(i)) the then unpaid principal amount of such Multicurrency Competitive Bid Loan. SECTION 2.8 THE NOTES. The Revolving Credit Loans to each Borrower shall be evidenced by a single Revolving Credit Note dated the Closing Date made by each Borrower payable to the order of each Lender. The Swingline Loans to each Borrower shall be evidenced by a single Swingline Note dated the Closing Date made by each Borrower payable to the order of NationsBank. The Competitive Bid Loans to each Borrower shall be evidenced by a single Competitive Bid Note dated the Closing Date made by each Borrower payable to the order of each Lender. Each Lender is hereby authorized to record on a Note or on its internal records the amount and date of each Loan, and the date and amount of each repayment of a Loan; provided that the failure to make any such notation or any error therein shall not affect Borrower's obligation with respect to such Loan. Absent manifest error, the information so recorded by Lender shall be controlling as to the intent of the parties hereto. Each Lender will deliver a copy of all such information to Borrower upon the reasonable written request of Borrower. SECTION 2.9 REPAYMENT OF REVOLVING CREDIT LOANS, SWINGLINE LOANS AND COMPETITIVE BID LOANS. (a) The Commitment of each Lender shall terminate on the Revolving Credit Termination Date and the aggregate unpaid principal amount of all Revolving Credit Loans, Swingline Loans and Competitive Bid Loans, together with all accrued and unpaid interest thereon, and all amounts payable under this Agreement and any other Loan Document in respect of such Loans shall be paid by each Borrower to the Administrative Agent for the account of the Lenders on such date. (b) If, on any Business Day, the outstanding principal amount of all Loans, the stated amounts of all outstanding Letters of Credit for the account of all Borrowers and the 34 amount of all Unpaid Drawings, if any, then outstanding exceeds the Aggregate Commitments, each Borrower shall, on demand, repay the Equivalent U.S. Dollar Amount of Loans such that the outstanding principal amount of all Revolving Credit Loans, Swingline Loans, Competitive Bid Loans, and the stated amounts of all Letters of Credit for the account of all Borrowers and the amount of all Unpaid Drawings, if any, then outstanding is less than or equal to the amount of the Aggregate Commitments. For purposes of determining the aforementioned amounts, the Equivalent U.S. Dollar Amount of all Loans, Letters of Credit and Unpaid Drawings shall be determined as of such date of determination. SECTION 2.10 INTEREST BASIS: INTEREST PAYMENT DATES. (a) Each Borrower agrees to pay interest in respect of the unpaid principal amount of each Revolving Credit Loan, Swingline Loan and Competitive Bid Loan from the date of the relevant Loan until such Loan is paid in full and at maturity (whether by acceleration or otherwise) and thereafter on demand at the following rates per annum: (i) For each day that such Loan is a Base Rate Loan, the Base Rate applicable to such Loan for such day. (ii) For each day that such Loan is a Swingline Loan, a rate per annum equal to the sum of the rate quoted by NationsBank for such Loan for such day and accepted by AMS, plus the Applicable Rate. (iii) During such period that such Loan is a Eurocurrency Rate Revolving Credit Loan, the Eurocurrency Rate applicable to such Loan for the related Interest Period plus the Applicable Rate, plus, if applicable, the Usage Premium. (iv) During such period that such Loan is a Competitive Bid Loan, at a rate per annum accepted by Borrower in its notice to the Administrative Agent delivered pursuant to Section 2.6(a)(iii)(B) or Section 2.7(a)(iii)(B). Whenever the aggregate outstanding principal amount of Revolving Credit Loans and Swingline Loans plus the stated amount of all Letters of Credit outstanding (without reduction for Unpaid Drawings) exceeds fifty percent of the Aggregate Commitments, and for so long as such condition exists, the interest rate on any Eurocurrency Revolving Credit Loan shall be increased by the amount of the Usage Premium. For purposes of determining the aforementioned amounts, the Equivalent U.S. Dollar Amount of all Revolving Credit Loans, Swingline Loans and Letters of Credit shall be determined as of any Denomination Date. The Administrative Agent shall notify AMS promptly of its determination that the Usage Premium is applicable. Each invoice for interest payable hereunder shall indicate whether and for what period the Usage Premium was applicable in respect of any Loan. (b) Notwithstanding the foregoing, from and after the occurrence and during the continuance of an Event of Default, Borrower will pay interest at the Default Rate on the principal of the Revolving Credit Loans, the Swingline Loans, and the Competitive Bid Loans, 35 and on any other amounts payable by Borrower under this Agreement or the other Loan Documents (including interest to the extent permitted by law) that is not paid on the due date thereof. All interest provided for in this Section 2.10(b) shall be payable on demand. The payment or acceptance of the rate provided by this Section 2.10(b) shall not constitute a waiver of any Default Condition or Event of Default or an amendment to this Agreement, or otherwise prejudice or limit any rights or remedies of Lender. (c) Interest shall accrue from and including the date of any Revolving Credit Loan, Swingline Loan, or Competitive Bid Loan to but excluding the date of any repayment thereof and shall be payable (i) with respect to each Eurocurrency Rate Revolving Credit Loan or Competitive Bid Loan, on the last day of each Interest Period applicable to such Loan, and on any prepayment thereof (on the amount prepaid), provided that accrued interest shall be payable at least every three months if the applicable Interest Period exceeds three months, (ii) with respect to each Base Rate Loan or Swingline Loan, on the last day of each interval of one month, or three months, as selected by a Borrower, (iii) at maturity (whether by acceleration or otherwise), and (iv) after maturity (whether by acceleration or otherwise), on demand. All interest payable pursuant to the terms of this Agreement shall be computed on the basis of a year of three hundred sixty days for the actual number of days elapsed, except with respect to interest payable on any Loan, or any Unpaid Drawing in respect of Letters of Credit, denominated in British Pounds, in which case interest shall be computed on the basis of a year of three hundred sixty-five days for the actual number of days elapsed. SECTION 2.11 LETTERS OF CREDIT. (a) Subject to and upon the terms and conditions herein set forth, a Borrower may request that NationsBank issue, at any time and from time to time on or after the Closing Date and prior to the Revolving Credit Termination Date, for the account of Borrower and, subject to and upon the terms and conditions herein set forth, NationsBank agrees to issue from time to time, Letters of Credit denominated in U.S. Dollars, or in an Approved Currency other than U.S. Dollars, and in such form as may be approved by NationsBank. Notwithstanding the foregoing, NationsBank shall not be under any obligation to issue any Letter of Credit if, at the time of such issuance: (i) any order, judgment or decree of any Governmental Authority or arbitrator shall purport by its terms to enjoin or restrain NationsBank from issuing such Letter of Credit or any requirement of law applicable to NationsBank shall prohibit the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon NationsBank with respect to such Letter of Credit any restriction or reserve or capital requirement (for which NationsBank is not otherwise compensated) not in effect on the date hereof, or any unreimbursed loss, cost or expense which was not applicable, in effect or known to NationsBank as of the date hereof and which NationsBank in good faith deems material to it; or 36 (ii) NationsBank shall have received notice from the Required Lenders prior to the issuance of such Letter of Credit of the type described in the penultimate sentence of Section 2.11(d). (b) Notwithstanding the foregoing, (i) no Letter of Credit shall be issued the stated amount of which, when added to the stated amount of outstanding Letters of Credit (exclusive of Unpaid Drawings which are repaid on the date of, and prior to the issuance of, the respective Letter of Credit) at such time, would exceed either (A) the Equivalent U.S. Dollar Amount of $30,000,000 (the "LC Subfacility") or (B) when added to the aggregate principal amount of all Loans and Unpaid Drawings, if any, then outstanding, the Aggregate Commitments, (ii) no Letter of Credit shall be issued if any Default Condition or Event of Default is then in existence and (iii) no Letter of Credit shall have an expiration date occurring later than the Business Day next preceding the Revolving Credit Termination Date. For purposes of determining the aforementioned amounts, the Equivalent U.S. Dollar Amount of all Loans, Letters of Credit and Unpaid Drawings shall be determined as of the Denomination Date of such Letter of Credit. (c) Whenever it desires that a Letter of Credit be issued, Borrower shall give the Administrative Agent and NationsBank written notice thereof prior to 12:00 NOON, Charlotte, North Carolina time, at least two Business Days prior to the proposed date of issuance (which shall be a Business Day) (each a "Letter of Credit Request"), which Letter of Credit Request shall include NationsBank's customary application for a letter of credit containing information necessary to issue the Letter of Credit and any other documents that NationsBank customarily requires in connection therewith. If such application form or other document contains any terms and conditions, such terms and conditions shall have no force and effect, it being understood that the issuance and payment of Letters of Credit, and all other matters between NationsBank, the Administrative Agent, the Lenders and Borrower with respect to such Letter of Credit and the credit relationship of NationsBank, the Administrative Agent, the Lenders and Borrower shall be governed by this Agreement and applicable law. The Administrative Agent shall promptly notify each Lender of each Letter of Credit Request. (d) The making of each Letter of Credit Request shall be deemed to be a representation and warranty by Borrower that such Letter of Credit may be issued in accordance with, and will not violate the requirements of, Section 2.11(b). Unless NationsBank has received written notice from the Required Lenders before it issues a Letter of Credit that one or more of the conditions specified in Section 6.2 were not then satisfied, or that the issuance of such Letter of Credit would violate Section 2.11(b), then NationsBank may issue the requested Letter of Credit for the account of Borrower in accordance with NationsBank's usual and customary practices. NationsBank shall, promptly following the issuance of a Letter of Credit by it, give the Administrative Agent, each Lender and Borrower written notice of the issuance of such Letter of Credit. (e) Borrower hereby agrees to reimburse NationsBank, by making payment to NationsBank in immediately available funds, for any payment or disbursement made by NationsBank under any Letter of Credit issued by it (each such amount so paid or disbursed until 37 reimbursed, an "Unpaid Drawing") no later than one Business Day following the date of such payment or disbursement, with interest on the amount so paid or disbursed by NationsBank, to the extent not reimbursed prior to 1:00 P.M., Charlotte, North Carolina time, on the date of such payment or disbursement, from and including the date paid or disbursed to but not including the date NationsBank is reimbursed therefor at a rate per annum equal to the Base Rate as in effect from time to time (plus an additional 2% per annum if not reimbursed by the third Business Day after the date of such payment or disbursement), such interest also to be payable on demand. NationsBank shall provide Borrower prompt notice of any drawing made under any Letter of Credit prior to any payment or disbursement made by it on account of such drawing, although the failure of, or delay in, giving any such notice shall not release or diminish the obligations of Borrower under this Section 2.11(e) or under any other Section of this Agreement. (f) Borrower's obligation under Section 2.11(e) to reimburse NationsBank with respect to Unpaid Drawings (including, in each case, interest thereon) shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which Borrower may have or have had against any Lender, including, without limitation, any defense based upon the failure of any drawing under a Letter of Credit to conform to the terms of the Letter of Credit or any non-application or misapplication by the beneficiary of the proceeds of such drawing; provided, however, that Borrower shall not be obligated to reimburse the Administrative Agent for any wrongful payment made by the Administrative Agent under a Letter of Credit as a result of acts or omissions constituting gross negligence or willful misconduct on the part of NationsBank. (g) Immediately upon the issuance by NationsBank of any Letter of Credit, NationsBank shall be deemed to have sold and transferred to each other Lender, and each such Lender (each a "Letter of Credit Participant") shall be deemed irrevocably and unconditionally to have purchased and received from NationsBank, without recourse or warranty, an undivided interest and participation, to the extent of such Lender's Commitment Percentage, in such Letter of Credit, each substitute letter of credit, each drawing made thereunder and the obligations of Borrower under this Agreement with respect thereto and any security therefor or guaranty pertaining thereto. Upon any change in the Commitments or Commitment Percentages of the Lenders pursuant to Section 12.13, it is hereby agreed that, with respect to all outstanding Letters of Credit and Unpaid Drawings, there shall be an automatic adjustment to the participations pursuant to this Section 2.11(g) to reflect the new Commitment Percentages of the assigning and assignee Lender or of all Lenders, as the case may be. (h) In determining whether to pay under any Letter of Credit, NationsBank shall not have any obligation relative to the Letter of Credit Participants other than to determine that any documents required to be delivered under such Letter of Credit have been delivered and that they appear to comply on their face with the requirements of such Letter of Credit. Any action taken or omitted to be taken by NationsBank under or in connection with any Letter of Credit if taken or omitted in the absence of gross negligence or willful misconduct, shall not create for the Administrative Agent any resulting liability to the Letter of Credit Participants. 38 (i) In the event that NationsBank makes any payment under any Letter of Credit and Borrower shall not have reimbursed such amount in full to NationsBank pursuant to Section 2.11(e), NationsBank shall promptly notify the Administrative Agent, and the Administrative Agent shall notify each Letter of Credit Participant of such failure, and each Letter of Credit Participant shall promptly and unconditionally pay to the Administrative Agent for the account of NationsBank, the amount of such Letter of Credit Participant's Commitment Percentage of such executed payment in the Applicable Currency and in same day funds; provided, however, that no Letter of Credit Participant shall be obligated to pay to the Administrative Agent its Commitment Percentage of such unreimbursed amount for any wrongful payment made by NationsBank under a Letter of Credit as a result of acts or omissions constituting willful misconduct or gross negligence on the part of NationsBank. If the Administrative Agent so notifies any Letter of Credit Participant required to fund a payment under a Letter of Credit prior to 11:00 A.M., Charlotte, North Carolina time, on any Business Day, such Letter of Credit Participant shall make available to the Administrative Agent for the account of NationsBank such Letter of Credit Participant's Commitment Percentage of the amount of such payment on such Business Day in the Applicable Currency and in same day funds. If and to the extent such Letter of Credit Participant shall not have so made its Commitment Percentage of the amount of such payment available to the Administrative Agent for the account of NationsBank, such Letter of Credit Participant agrees to pay to the Administrative Agent for the account of NationsBank, forthwith on demand such amount, together with interest thereon, for each day from such date until the date such amount is paid to the Administrative Agent for the account of NationsBank at the Federal Funds Rate. The failure of any Letter of Credit Participant to make available to the Administrative Agent for the account of NationsBank its Commitment Percentage of any payment under any Letter of Credit shall not relieve any other Letter of Credit Participant of its obligation hereunder to make available to the Administrative Agent for the account of NationsBank its Commitment Percentage of any payment under any Letter of Credit on the date required, as specified above, but no Letter of Credit Participant shall be responsible for the failure of any other Letter of Credit Participant to make available to the Administrative Agent for the account of NationsBank such other Letter of Credit Participant's Commitment Percentage of any such payment. (j) Whenever NationsBank receives a payment of a reimbursement obligation as to which NationsBank has received any payments from the Letter of Credit Participants pursuant to clause (i) above, NationsBank shall promptly pay to each Letter of Credit Participant which has paid its Commitment Percentage thereof in the Applicable Currency and in same day funds, an amount equal to such Letter of Credit Participant's Commitment Percentage of the principal amount thereof and interest thereon accruing after the purchase of the respective participations. (k) Except as otherwise expressly stated herein, any Letter of Credit issued hereunder shall be subject to the Uniform Customs and Practices for Documentary Credits, 1993 Revision, International Chamber of Commerce Publication No. 500 ("Uniform Customs"). As to matters not governed by the Agreement or by the Uniform Customs, any Letter of Credit shall be construed in accordance with and governed by the Laws of the State of New York. 39 (l) Borrower assumes all the risk of the misuse of the Letter of Credit by the beneficiary thereof. NationsBank shall not be responsible for, and Borrower's obligation to NationsBank and the Lenders shall not be affected by: (i) any defect in a draft, payment request or other document unless such defect is readily apparent upon the face of the draft, payment request or other document; (ii) the correctness or legal effect of any document provided for in the Letter of Credit; (iii) the use which may be made of any Letter of Credit or for any acts or omissions of the user of any Letter of Credit; (iv) the validity, accuracy or genuineness of drafts, required statements or documents, even if such drafts, statements or documents should in fact prove to be in any or all respects invalid, inaccurate, fraudulent or forged; (v) errors, omissions, interruptions or delays in transmission or delivery of any message, by mail, cable, telegraph, telex or otherwise; or (vi) any consequences arising from causes beyond the control of NationsBank. (m) NationsBank may accept any written statement provided for in any Letter of Credit and any accompanying draft or payment request as conclusive of the matters covered by such statement, whether of fact or law, and any such statement shall be conclusive and binding between Borrower and NationsBank, whether or not actually true and correct as between other persons, and NationsBank shall not be required at any time or under any circumstances to determine any disputed question of fact or law. (n) If Borrower consents in writing to any overdrafts under any Letter of Credit or authorizes in writing payment under any Letter of Credit with irregular accompanying documents or authorizes or consents to any departure from the terms of such Letter of Credit, this Agreement shall be fully binding upon Borrower with respect to such overdrafts, irregularities or both and NationsBank's rights shall be, in every respect, the same as if this Agreement and such Letter of Credit expressly provided for such overdraft or irregularity or both. If at the request of Borrower there is any extension of time for presentation of any payment request or any document under a Letter of Credit, or in the event of any modification of the terms of such Letter of Credit or any transaction under such Letter of Credit, this Agreement shall be fully binding upon Borrower with regard to any action taken under such modified terms and to any payment request and documents presented within such extended time. (o) Any Letter of Credit can be canceled by the beneficiary thereof only after receipt by the Administrative Agent of such Letter of Credit, or upon such other conditions as the Administrative Agent may prescribe. In the event of any early cancellation there will be no 40 refund of Letter of Credit Fees. If any Letter of Credit is expressly designated as "transferable", and if such transfer is requested, Borrower agrees to pay NationsBank's customary fees for such transfer. (p) Unless a Letter of Credit expressly provides to the contrary in writing, Borrower agrees that NationsBank shall pay, after receipt of drafts, required statements or other documents otherwise in order which are signed or issued by the administrator, trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, liquidator, receiver or other such legal representative of the beneficiary of such Letter of Credit whose status as such has been established to the satisfaction of NationsBank (q) Schedule 2.11 hereto contains a description of all letters of credit issued by Wachovia pursuant to the Existing Credit Agreement which remain outstanding on the Closing Date. Each such letter of credit, including any extension thereof issued by Wachovia (each, an "Existing Letter of Credit") shall constitute a "Letter of Credit" for all purposes of this Agreement and each Lender (other than Wachovia) shall be deemed to have purchased a participation from Wachovia in each Existing Letter of Credit in accordance with Section 2.11 (g) on the Closing Date as if Wachovia were NationsBank. (r) If any Event of Default shall occur and be continuing, on the Business Day that Borrower receives notice from the Administrative Agent or the Required Lenders demanding the deposit of cash collateral pursuant to this paragraph, Borrower shall deposit in an account with the Administrative Agent, in the name of the Administrative Agent and for the benefit of the Lenders, the stated Equivalent U.S. Dollar Amount of all outstanding Letters of Credit as of such date plus any accrued and unpaid interest thereon; provided that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to Borrower described in Sections 7.1(f) or (g). Such deposit shall be held by the Administrative Agent as collateral for the payment and performance of the obligations of Borrower under this Agreement. The Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Investment of such deposits shall, to the extent reasonably practicable, be made at the direction of the Administrative Agent and at Borrower's risk and expense. Unless invested in accordance with the preceding sentence, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Monies in such account shall be applied by the Administrative Agent to reimburse NationsBank for drawings for which it has not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of Borrower for the undrawn Letters of Credit at such time or, if the maturity of the Loans has been accelerated (but subject to the consent of the Required Lenders), be applied to satisfy other obligations of Borrower under this Agreement. If Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not applied as aforesaid) shall be returned to Borrower within three Business Days after all Events of Default have been cured or waived. 41 SECTION 2.12 TERMINATION OR REDUCTION OF COMMITMENT. (a) AMS shall have the right, at any time and from time to time, upon at least thirty days' prior irrevocable, written notice to the Administrative Agent, to terminate or reduce permanently all or a portion of the Aggregate Commitments; provided that any such partial reduction shall be made in increments of not less than the Equivalent U.S. Dollar Amount of $5,000,000, unless the Revolving Credit Loans, Swingline Loans, Competitive Bid Loans and Unpaid Drawings are then paid in full and the Commitments terminated. As of the date of termination or reduction set forth in such notice, the Aggregate Commitments shall be permanently reduced to the amount stated in AMS' notice for all purposes herein, and each Borrower, subject to the provisions of Section 3.4 hereof, shall pay the amount necessary to reduce the aggregate outstanding principal amount of the Loans, the stated amount of all Letters of Credit, the amount of all Unpaid Drawings, if any, outstanding to not more than the amount of the Aggregate Commitments as so reduced, together with accrued interest on the amounts so prepaid. For purposes of this Section 2.12(a), each Borrower authorizes AMS to act in its behalf. (b) The amount of the Aggregate Commitments shall be automatically reduced to zero on the Revolving Credit Termination Date. (c) The Aggregate Commitments or any portion thereof terminated or reduced pursuant to this Section 2.12 may not be reinstated. SECTION 2.13 FEES. (a) AMS shall pay to the Administrative Agent for the account of the Lenders a facility fee ("Facility Fee") which shall accrue at a rate per annum equal to the Applicable Rate on the daily amount of the Aggregate Commitments (whether used or unused). The Facility Fee shall be payable in arrears on the first day of July, October, January and April during the term that the Aggregate Commitments are in effect. (b) Each Borrower for the account of which a Letter of Credit is issued hereunder shall pay to the Administrative Agent (i) for the account of each Lender, a fee (the "Letter of Credit Fee") in U.S. Dollars on the date of issuance of a Letter of Credit in an amount equal to the Applicable Rate per annum plus, if applicable, the Usage Premium, times the stated amount of such Letter of Credit and (ii) for the account of the Administrative Agent, a fronting fee (the "Fronting Fee") in U.S. Dollars on the date of issuance of a Letter of Credit in an amount equal to .125% per annum times the stated amount of such Letter of Credit; provided that the Administrative Agent shall rebate to such Borrower the ratable portion of such fees attributable to the period between the date such Letter of Credit is cancelled by mutual agreement of NationsBank and such Borrower (other than by reason of payment in full of such Letter of Credit) and the expiration date of such Letter of Credit. For purposes of this Section 2.13(b), the stated amount of a Letter of Credit denominated in an Alternative Currency shall be the Equivalent U.S. Dollar Amount thereof as of the Denomination Date. Upon receipt of notice from the Administrative Agent, each Lender shall pay to the Administrative Agent its Commitment Percentage of any amount subject to rebate hereunder. Whenever the aggregate 42 outstanding principal amount of Revolving Credit Loans and Swingline Loans plus the stated amount of all Letters of Credit outstanding (without reduction for Unpaid Drawings) exceeds fifty percent of the Aggregate Commitments, and for so long as such condition exists, the Usage Premium shall be added to the Applicable Rate to calculate any Letter of Credit Fee. For purposes of determining the aforementioned amounts, the Equivalent U.S. Dollar Amount of all Revolving Credit Loans, Swingline Loans and Letters of Credit shall be determined as of any Denomination Date. (c) AMS shall pay to the Administrative Agent additional fees as are due and payable hereafter (the "Agent's Fees") as set forth in a fee letter between the Administrative Agent and AMS. (d) All computations of fees hereunder shall be made on the basis of a year of three hundred sixty days for the actual number of days elapsed. SECTION 2.14 ADDITIONAL BORROWERS. So long as the Guaranty is in full force and effect, AMS may request in writing that any Subsidiary of AMS become a Borrower hereunder, and, if such request is approved in writing by all of the Lenders (which approval shall not be unreasonably withheld by any Lender), then, upon satisfaction of each condition precedent to any Loans or Letters of Credit to or for the account of such Borrower pursuant to Article 6, such Borrower shall become a party to this Agreement; it being understood that for this purpose, all of the Lenders, by their execution of this Agreement, have preapproved the addition of American Management Systems Portugal - Consultoria E Desenvolmimento de Software Sociedade Unipessoal, LDA and AMS Management Systems Poland Sp. Z O.O., if and when designated by AMS pursuant to this Section. ARTICLE 3 GENERAL FUNDING AND PAYMENT PROVISIONS SECTION 3.1 INCREASED COSTS. (a) If any change in any Law, or in the interpretation, administration or application thereof, shall: (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Eurocurrency Rate); or (ii) impose on any Lender or the London interbank market any other condition affecting this Agreement or Eurodollar Rate Revolving Credit Loans, Swingline Loans or Competitive Bid Loans, made by such Lender or any Letter of Credit or participation therein (other than an increase in the Taxes imposed on or with respect to any sum payable hereunder to or for the account of any Lender); 43 and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan, maintaining any Swingline Loan, maintaining any Competitive Bid Loan or to increase the cost to such Lender of participating in, issuing or maintaining any Letter of Credit or to reduce the amount of any sum received or receivable by such Lender hereunder in respect of such Loan or Letter of Credit by an amount deemed by such Lender to be material, then Borrower will pay to such Lender, as the case may be, such additional amount or amounts as will compensate such Lender, as the case may be, for such additional costs incurred or reduction suffered. (b) If any Lender determines that any change in any generally applicable Law regarding capital requirements, or in the interpretation, administration or application thereof prior to the date of this Agreement, has or would have the effect of reducing the rate of return on such Lender's capital or on the capital of such Lender's holding company, if any, as a consequence of this Agreement or the Loans made by, or participations in Letters of Credit held by, such lender, or the Letters of Credit issued by such lender, to a level below that which such Lender or such Lender's holding company could have achieved but for such change (taking into consideration such Lender's policies and the policies of such Lender's holding company with respect to capital adequacy) in each case by an amount deemed by such Lender to be material, then from time to time Borrower will pay to such Lender, as the case may be, such additional amount or amounts as will compensate such Lender or such Lender's holding company for the portion of any such reduction suffered. (c) A certificate of a Lender setting forth the amount or amounts (including the basis therefor and the calculation thereof) necessary to compensate such Lender or its holding company, as the case may be, as specified in clauses (a) or (b) of this Section 3.1, shall be delivered to Borrower as soon as practicable, but in any event, within 90 days after such Lender obtains actual knowledge thereof, and shall be presumptively correct absent manifest error, provided that such determination is made on a reasonable basis. Borrower shall pay such Lender, as the case may be, the amount shown as due on any such certificate within 10 days after receipt thereof. (d) Failure or delay on the part of any Lender to demand compensation pursuant to this Section 3.1 shall not constitute a waiver of such Lender's or such Issuing Bank's right to demand such compensation; provided that Borrower shall not be required to compensate a Lender pursuant to this Section 3.1 for any increased costs or reductions incurred more than 90 days prior to the date that such Lender delivers such certificate to Borrower; provided further that, if the change in Law giving rise to such increased costs or reductions is retroactive, then the 90 day period referred to above shall be extended to include the period of retroactive effect thereof. SECTION 3.2 AVAILABILITY OF APPROVED CURRENCY AND RATE OPTIONS. If, on or prior to the first day of any Interest Period for any Eurocurrency Rate Revolving Credit Loan or any Loan denominated in an Approved Currency other than U.S. Dollars, or prior to issuing any Letter of Credit denominated in an Approved Currency other than U.S. Dollars, the Administrative Agent shall have determined (which determination shall be final, conclusive and 44 binding upon all parties) or the Required Banks shall have advised the Administrative Agent, that: (a) deposits in the principal amounts of the Loans and in the Applicable Currency are not being offered in the relevant interbank or other market for such Interest Period; (b) with respect to any Applicable Currency, there shall have occurred any change in national or international financial, political or economic conditions (including the imposition of or any change in exchange controls) or currency exchange rates which would make it impracticable to make Loans or to issue Letters of Credit denominated in the Applicable Currency; (c) LIBOR will not adequately and fairly reflect any material costs of making, funding or maintaining the Loan; or (d) by reason of circumstances affecting the relevant interbank or other markets adequate and reasonable means do not exist for determining LIBOR; then the Administrative Agent shall promptly notify the Borrowers and the Lenders, whereupon, until the Administrative Agent notifies the Borrowers that the circumstances giving rise to such suspension no longer exist, the obligation of the Lenders to make Loans denominated in the affected Approved Currency, or to acquire participations in Letters of Credit denominated in the affected Approved Currency, or to make Loans with interest calculated on the basis of an affected Eurocurrency Rate, as the case may be, shall be suspended. If such notice is given, and until the Administrative Agent notifies the Borrowers that the circumstances giving rise to such suspension no longer exists or such notice has been withdrawn by such Lender, no Loan or Letter of Credit denominated in an Approved Currency so affected, or no Loan which bears interest calculated on the basis of a Eurodollar Rate so affected, as the case may be, shall be made or issued, and any such Loan outstanding shall, at the end of any applicable Interest Period therefor, be automatically converted into a Base Rate Loan, and if denominated in an Approved Currency so affected, shall be repaid in full or, at Borrower's option, converted to a Base Rate Loan in the Equivalent U.S. Dollar Amount of such Alternative Currency. SECTION 3.3 ILLEGALITY. Notwithstanding any other provisions herein contained, if, on any date, any Lender shall have determined (which determination shall be final, conclusive and binding upon all parties) that any Law, or any change therein or in the interpretation, administration or application thereof, or compliance by such Lender with any request or directive (whether or not having the force of law and whether or not failure to comply therewith would be unlawful) of any Governmental Authority shall make it unlawful or impossible for such Lender to make, maintain or fund any Eurocurrency Rate Revolving Credit Loan or any Loan denominated in an Approved Currency other than U.S. Dollars, such Lender shall promptly notify the Administrative Agent and the Administrative Agent shall forthwith notify the Borrowers, whereupon, the obligation of such Lender hereunder to make any such Loan or to issue a Letter of Credit denominated in an Approved Currency other than U.S. Dollars shall forthwith be suspended until such Lender notifies the Administrative Agent that the circumstances giving rise to such suspension no longer exists and any such Loan then 45 outstanding shall be automatically converted into a Base Rate Loan or, if such Loan is denominated in an Approved Currency so affected, shall be repaid in full or, at Borrower's option, converted to a Base Rate Loan in the Equivalent U.S. Dollar Amount of such Approved Currency; provided that if any such Law, or any change therein or in the interpretation or application thereof shall permit the continuance of a Loan through the last day of the applicable Interest Period, such Loan shall continue as such until the end of such Interest Period. SECTION 3.4 PAYMENTS. (a) Except as expressly provided in Sections 3.2 and 3.3, all payments of principal and interest hereunder shall be made in the Applicable Currency and in immediately available funds, and payments of all Facility Fees, Letter of Credit Fees, and all other sums shall be made in U.S. Dollars and in immediately available funds, and shall be made prior to 12:00 NOON, Charlotte, North Carolina time, on the date of payment to the principal office of the Administrative Agent or such other office as the Administrative Agent shall designate in writing. Payments received after 12:00 NOON, Charlotte, North Carolina time, shall be deemed to be payments made prior to 12:00 NOON, Charlotte, North Carolina time, on the next succeeding Business Day. Notwithstanding the foregoing, if the Administrative Agent is notified by 12:00 NOON, Charlotte, North Carolina time, of a Federal Reserve reference number for a wire transfer of such payment, such payment shall be effective if actually received by the Administrative Agent by 2:00 P.M., Charlotte, North Carolina time on such Business Day. Any payment which falls due on a day which is not a Business Day shall be rescheduled to the next succeeding Business Day, and interest and fees shall continue to accrue to such rescheduled Business Day unless, with respect to a Eurocurrency Rate Revolving Credit Loan, such Business Day falls in another calendar month, in which case the date for such payment shall be the next preceding Business Day. (b) Borrower agrees to pay principal, interest, fees and all other amounts due hereunder or under the Loan Documents without set-off, recoupment or counterclaim. If some but less than all amounts due from Borrower are received by a Lender, such Lender shall apply such amounts in the following order of priority: (i) to the payment of any fees then due and payable, (ii) to the payment of all other amounts not otherwise referred to in this Section 3.4 then due and payable hereunder or under the other Loan Documents (including, but not limited to, any costs and expenses incurred by such Lender as a result of a Default Condition or an Event of Default), (iii) to the payment of interest then due and payable on the Loans, and (iv) to the payment of principal then due and payable on the Loans. No application of payments will cure any Event of Default or prevent acceleration, or continued acceleration, of amounts payable under the Loan Documents or prevent the exercise, or continued exercise, of rights and remedies of any Lender hereunder, under any of the other Loan Documents or under applicable Law. SECTION 3.5 PREPAYMENTS. Subject to Section 3.6 hereof, Borrower shall have the right to prepay any Revolving Credit, Swingline Loan or Competitive Bid Loan in whole or in part from time to time on the following terms and conditions: (a) Borrower shall give Administrative Agent (i) notice 46 delivered on the date of prepayment of its intent to prepay a Base Rate Loan or a Swingline Loan denominated in U.S. Dollars, or (ii) at least three Business Days prior notice of its intent to prepay a Eurodollar Rate Revolving Credit Loan, a Swingline Loan denominated in an Approved Currency other than U.S. Dollars or a Competitive Bid Loan, each such notice to be given prior to 11:00 A.M., Charlotte, North Carolina time, on the date specified, in each case specifying the amount of such prepayment and the particular Loans to be prepaid, which notice shall be irrevocable and which notice of prepayment, having been given, the principal amount of the Loans specified in such notice shall become due and payable on the prepayment date specified therein; and (b) each partial prepayment of any Loan shall be in an aggregate principal amount at least equal to the Equivalent U.S. Dollar Amount of $1,000,000 and any partial prepayment of any Swingline Loan denominated in an Approved Currency other than U.S. Dollars shall be in an aggregate principal amount of $500,000; provided that no partial prepayment of a Eurocurrency Rate Revolving Credit Loan or Competitive Bid Loan shall reduce the outstanding amount thereof to an amount less than the Equivalent U.S. Dollar Amount of $1,000,000; and provided further that no partial prepayment of a Swingline Loan denominated in an Approved Currency other than U.S. Dollars shall reduce the outstanding amount thereof to an amount less than the Equivalent U.S. Dollar Amount of $500,000, except that in any event the amount of any Swingline Loan denominated in Canadian Dollars or Australian Dollars shall not be less than the Equivalent U.S. Dollar Amount of $1,000,000. SECTION 3.6 FUNDING LOSSES AND BREAKAGE COSTS. Within 15 days' notice of a demand for payment thereof, Borrower shall pay to the Administrative Agent for the account of any Lender such amount or amounts as may be sufficient in the reasonable opinion of such Lender to compensate such Lender for any losses or out-of-pocket expenses incurred by such Lender as a result of (a) any failure by Borrower to borrow any Eurodollar Rate Revolving Credit Loan, any Swingline Loan denominated in an Approved Currency other than U.S. Dollars or any Competitive Bid Loan after having given notice of its intention to borrow in accordance with Section 2.3(a), Section 2.6(a), or Section 2.7(a), as applicable (whether by reason of Borrower's election not to proceed or the non-fulfillment of any of the conditions set forth in this Agreement), (b) payment of all or any portion of any Eurodollar Rate Revolving Credit Loan, Swingline Loan or Competitive Bid Loan prior to the last day of the applicable Interest Period, (c) failure by Borrower to pay the principal amount of any Eurodollar Rate Revolving Credit Loan, Swingline Loan or Competitive Bid Loan when due (whether at the stated maturity, by reason of acceleration or otherwise), or (d) any failure by Borrower to fulfill, on or before the date specified for such Loan, the applicable conditions set forth in this Agreement. At the election of such Lender, and without limiting the generality of the foregoing, such loss or out-of-pocket expense may include an amount equal to the excess of (i) the interest that would have been received from Borrower on the amount re-employed during an Interest Period or the remaining portion of an Interest Period under this Agreement over (ii) the amount of interest which would have accrued on such amount if the Lender had placed such funds on deposit with a prime bank in the London interbank borrowing market from the date of such prepayment until the end of such Interest Period. Each Lender's determination of such loss or out-of-pocket expense, in the absence of manifest error, shall be conclusive; provided that such determination is made on a reasonable basis. 47 SECTION 3.7 TAXES. (a) Any and all payments by a Borrower hereunder shall be made, in accordance with Section 3.4, free and clear of and without deduction for any and all present or future Taxes, excluding (i) Taxes imposed on the income of a Lender and franchise taxes imposed on a Lender by the jurisdiction under the laws of which such Lender is organized, (ii) Taxes imposed by reason of the Lender having some connection with the jurisdiction imposing the Taxes other than the mere holding and payment in respect of the Notes, (iii) Taxes imposed by reason of the Lender failing, after reasonable request by the Borrower, to establish its entitlement to any tax treaty benefits for which such payment is eligible with respect to such Taxes, including without limitation any failure by a Lender to obtain a certification from the tax authority of the country in which it is organized of its status as a resident of that country, or (iv) Taxes which would not have been imposed but for the failure by the Lender, after reasonable request by the Borrower, timely to comply with certification, information or other reporting requirements concerning its nationality, residence or identity, if such compliance is required by statute or by regulation of the jurisdiction imposing the Taxes as a precondition of relief or exemption from the requirement to make such deduction or withholding (all such excluded Taxes being hereinafter referred to, collectively or individually, as "Excluded Taxes"). If a Borrower shall be required by law to deduct any Taxes (other than Excluded Taxes) from or in respect of any sum payable hereunder to or for the account of any Lender, (x) the sum payable shall be increased by the amount necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.7) such Lender shall receive an amount equal to the sum it would have received had no such deductions been made, (y) Borrower shall make such deductions and (z) Borrower shall pay the full amount deducted to the relevant taxing authority or other Governmental Authority in accordance with applicable law. (b) In addition, Borrower agrees to pay any present or future stamp or documentary Taxes or any other excise or property Taxes which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any other Loan Document (hereinafter referred to as "Other Taxes"). (c) Each Borrower will indemnify each Lender for the full amount of Taxes (other than Excluded Taxes) and Other Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Subsection 3.7) paid by such Lender, as the case may be, and any liability (including penalties, interest and reasonable out-of-pocket expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted by the relevant taxing authority or other Governmental Authority. Such indemnification shall be made within 30 days after the date any Lender makes written demand therefor, which demand may be made after such Lender determines to challenge or contest such assertion of Taxes or Other Taxes. After Borrower makes full payment to the Lender with respect to such indemnification for Taxes or Other Taxes asserted, if such Lender or Borrower reasonably believes in its sole discretion that reasonable grounds exist to challenge or contest the Taxes or Other Taxes imposed, then such Lender shall so contest or challenge in good faith the Taxes or Other Taxes asserted, which contest or challenge shall be at the sole expense of Borrower. If a Lender shall become aware that it is entitled to receive a refund in respect of 48 Taxes or Other Taxes, it shall promptly notify Borrower of the availability of such refund and shall, within 30 days after receipt of a request by Borrower, apply for such refund at Borrower's reasonable out-of-pocket expense. If any Lender receives a refund of any Taxes or Other Taxes for which such Lender has received payment from a Borrower hereunder, it shall promptly notify such Borrower of such refund and shall promptly upon receipt repay such refund to such Borrower, net of all out-of-pocket expenses of such Lender and without interest; provided that Borrower, upon the request of such Lender, agrees to return such refund (plus penalties, interest or other charges) to such Lender in the event such Lender is required to repay such refund. (d) Within thirty days after the date of any payment of Taxes or Other Taxes withheld by a Borrower in respect of any payment to any Lender, such Borrower will furnish to the Administrative Agent, at its address referred to in Subsection 12.6, the original or a certified copy of a receipt evidencing payment thereof, or, if it is not the practice of the relevant taxing authority to provide a receipt, other evidence of the payment of such Taxes or Other Taxes. (e) Without prejudice to the survival of any other agreement contained herein, the agreements and obligations contained in this Section 3.7 shall survive the payment in full of the principal of and interest on all Loans made hereunder. (f) Each Lender that is organized under the laws of any jurisdiction other than the United States or any state thereof agrees that: (i) it shall, no later than the Closing Date (or, in the case of a Lender which becomes a party hereto after the Closing Date, the date upon which such Lender becomes a party hereto) deliver to the Administrative Agent and to the Borrowers through the Administrative Agent (A) two accurate, complete and duly executed originals of IRS Form 4224 or any successor thereto ("Form 4224") or (B) two accurate, complete and duly executed originals of IRS Form 1001 or any successor thereto ("Form 1001"), as appropriate, and, in the case of either (A) or (B), two accurate, complete and duly executed originals of IRS Form W-8 or any successor thereto ("Form W-8") or IRS Form W-9 or any successor thereto ("Form W-9"), whichever is applicable. (ii) it shall, before or promptly after the occurrence of any event requiring a change in or renewal of the most recent Form 4224, Form 1001, Form W-8 or Form W-9 previously delivered by such Lender (including the passing of time and in any event (A) in the case of Form 4224, before the payment of any interest in each succeeding taxable year of such Lender after the Closing Date during which interest may be paid under this Agreement and (B) in the case of Form 1001, before the payment of any interest in each third succeeding calendar year after the Closing Date during which interest may be paid under this Agreement), deliver to the Administrative Agent and through the Administrative Agent to the Borrowers two accurate, complete and duly executed originals of Form 4224, Form 1001, Form W-8 or Form W-9 in replacement of the forms previously delivered by such Lender; (iii) each Form 1001 or Form 4224 delivered by a Lender pursuant to this section 3.7(f) shall certify, unless unable to do so by virtue of a change of law 49 occurring after the date such Lender becomes a party hereto, that the Lender is entitled to receive payments under this Agreement without deduction or withholding of U.S. federal income taxes; and (iv) It shall promptly notify AMS at any time that it determines that it is no longer in a position to provide any previously delivered form or certificate to a Borrower. (g) Each Lender that is incorporated or organized under the laws of the United States or a state or other political subdivision thereof shall, no later than the Closing Date (or, in the case of a Lender which becomes a party hereto after the Closing Date, the date upon which such Lender becomes a party hereto) deliver to the Administrative Agent and to the Borrowers through the Administrative Agent two accurate, complete and duly executed originals of Form W-9 or applicable successor form, which forms shall certify that such Lender is entitled to an exemption from U.S. backup withholding. (h) Each Lender: (i) represents and warrants that it is a U.K. Qualifying Lender on the date that it becomes a Lender under this Agreement and that such warranty will be deemed to be repeated by such Lender on the due date for payment of any amount by AMS U.K. under this Agreement (except that a Lender shall not be liable for any breach of this representation and warranty resulting from a change in law occurring after the Closing Date or, if later, the date on which such Lender becomes a party to this Agreement); (ii) agrees that, if it is a U.K. Treaty Lender, it shall (A) no later than the Closing Date (or in the case of a Lender which becomes a party hereto after the Closing Date, the date upon which such Lender becomes a party hereto) deliver to the Administrative Agent and to the Borrowers through the Administrative Agent a copy of an accurate, complete and duly executed claim form for relief from United Kingdom withholding tax applicable to such Lender's jurisdiction of residence, the original of which shall have been submitted by the Lender to the relevant taxing authority of the Lender's Treaty Country (a "U.K. Certificate"), which the Administrative Agent shall promptly deliver to AMS, (B) promptly complete and submit any other Inland Revenue form or forms applicable to such Lender's jurisdiction of residence, together with all necessary certifications as are required to claim exemption from Taxes in the United Kingdom for payments made hereunder, and (C) do all things reasonably requested by AMS U.K., the Inland Revenue or the taxing authority of such Lender's jurisdiction of residence to expedite confirmation from the Inland Revenue of such exemption and with a view to ensuring that such exemption is maintained in full force and effect. Each Treaty Lender further agrees to deliver, and submit to Inland Revenue, a new U.K. Certificate in the event of the occurrence of any event requiring a change in or renewal of any U.K. Certificate. 50 (i) A Borrower shall not be required to pay any additional amounts to any Lender in respect of withholding tax pursuant to Section 3.7(a) above, and shall not be required to indemnify any Lender pursuant to Section 3.7(c), if the obligation to pay such additional amounts or the obligation to indemnify such Lender would not have arisen but for a failure by such Lender to comply with the provisions of, or a breach by such Lender of any representation or warranty made in, any of Sections 3.7(f), (g), or (h), unless such failure results from (i) a change in applicable law, regulation or official interpretation thereof or (ii) an amendment, modification or revocation of any applicable tax treaty or a change in official position regarding the application or interpretation thereof, in each case after the later of the Closing Date or the date such Lender becomes a party to this Agreement. SECTION 3.8 HIGHEST LAWFUL RATE. In no event shall the amount of interest due or payable hereunder exceed the Highest Lawful Rate, and in the event any such excess is paid by a Borrower or received by a Lender, then such excess sum shall be deemed to be inadvertently paid or received and shall be credited as a payment of principal, unless a Borrower shall notify a Lender in writing that Borrower elects to have such excess returned to it forthwith. It is the express intent hereof that any Borrower not pay and a Lender not receive, directly or indirectly, in any manner whatsoever, interest in excess of that which may be lawfully paid by any Borrower under applicable Law. Each Borrower and each Lender hereby agree that (a) the only charge imposed by Lender upon Borrower for the use, detention or forbearance of money in connection with the Agreement shall be the interest expressed in Section 2.10 and Section 2.11(e) and in a Revolving Credit Note, Swingline Note, or a Competitive Bid Loan Note, as the case may be, and (b) all other charges imposed by a Lender on a Borrower in connection with the Loans, including, without limitation, any Facility Fees, Letter of Credit Fees, the Administrative Agent's Fees, default and any late charges, and charges for Taxes and reserve requirements, are and shall be deemed made to compensate such Lender for administrative and other services and costs performed and incurred, and to be performed and incurred, by such Lender in connection with the Loans, and shall under no circumstances be deemed to be charges for the use, detention or forbearance of money. All charges referred to herein shall be fully earned when due and non-refundable when paid. SECTION 3.9 EUROPEAN MONETARY UNION. (a) If, as a result of the implementation of European monetary union, (i) any Approved Currency ceases to be lawful currency of the nation issuing the same and is replaced by a European single currency or (ii) any Approved Currency and a European single currency are at the same time recognized by the central bank or comparable authority of the nation issuing such currency as lawful currency of such nation and the Administrative Agent or the Lenders shall so request in a notice delivered to the Borrower, then any amount payable hereunder by the Lenders to any Borrower, or by any Borrower to the Lenders, in such currency shall instead be payable in the European single currency and the amount so payable shall be determined by translating the amount payable in such Approved Currency to such European single currency at the exchange rate recognized by the European Central Bank for the purpose of implementing European monetary union. 51 (b) The Borrowers and Lenders agree, at the time of or at any time following the implementation of European monetary union, to enter into an agreement amending this Agreement in such manner as to reflect the implementation of such monetary union to place the parties hereto in the position they would have been in had such monetary union not been implemented. ARTICLE 4 REPRESENTATIONS AND WARRANTIES SECTION 4.1 REPRESENTATIONS AND WARRANTIES. On the date hereof, each Borrower represents and warrants to the Agents and each Lender as follows: (a) Existence. Each of the Borrower and its Subsidiaries is a corporation or partnership duly organized, validly existing and in good standing under the Laws of the nation in which it is organized and any political subdivision thereof, and is duly qualified to do business and in good standing in each other nation and any political subdivision thereof where the nature or extent of its business activities requires such qualification, except where the failure to be so qualified and in good standing could not reasonably be expected to have a Materially Adverse Effect. (b) Power and Authority. Each of the Borrower and its Subsidiaries has all requisite power and authority to own or lease its properties, conduct its business as now conducted and to execute, deliver and perform the Loan Documents to which it is a party. (c) Authorization and Enforceability. The execution, delivery and performance of the Loan Documents to which it is a party have been duly authorized by all necessary corporate or partnership action of each of the Borrower and its Subsidiaries and require no consent of any Person which has not been obtained, and the Loan Documents constitute valid and binding obligations of each of the Borrower and its Subsidiaries party thereto, enforceable in accordance with their terms, except as such enforceability may be limited by Debtor Relief Laws and by general principles of equity. (d) No Violation. The execution, delivery and performance of the Loan Documents do not and will not violate any Borrower's or any of its Subsidiaries' charter, bylaws, partnership agreement or other organizational documents, any Laws applicable to such Borrower or any of its Subsidiaries or any agreement to which such Borrower or any of its Subsidiaries is a party or by which such Borrower or any of its Subsidiaries is bound, except for violations of Laws or agreements which could not reasonably be expected to have a Materially Adverse Effect. (e) Financial Statements. The Financial Statements of AMS most recently delivered to Lender have been prepared in accordance with GAAP and fairly present the consolidated financial condition and results of operations of AMS and its consolidated Subsidiaries as of the date thereof and for the period covered thereby, and no material adverse 52 change has occurred in such financial condition since the date of the Financial Statements most recently delivered to Lender prior to the date this representation is made or deemed made. (f) Litigation. Except as disclosed in the Financial Statements (or the notes thereto) or other writings heretofore delivered to Lender, there is no litigation pending or, to the knowledge of any Borrower, threatened against such Borrower or any of its Subsidiaries which could reasonably be expected to have a Materially Adverse Effect. (g) General. All Financial Statements, reports and other written information heretofore delivered by any Borrower to Lender, when taken as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (h) Investment Company. Neither AMS nor any of its Subsidiaries is an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (i) Margin Stock. No Borrower is engaged principally, or as one of its important activities, in the business of purchasing or carrying any Margin Stock, and no part of the proceeds of any Loans will be used for any purpose which violates, or which is inconsistent with the provisions of Regulation U or Regulation X. (j) Borrower Subsidiaries. Each Borrower is a Subsidiary of AMS. (k) ERISA. AMS and each ERISA Affiliate and each of their respective Employee Plans are in substantial compliance with ERISA and the Code, and neither AMS nor any of its ERISA Affiliates has incurred any "accumulated funding deficiency" with respect to any such Plan within the meaning of Subsection 302(a) of ERISA or Section 412 of the Code. AMS and each of its ERISA Affiliates are in substantial compliance with all requirements of ERISA Sections 601 through 608 and Code Section 4980B. Neither AMS nor any of its ERISA Affiliates has incurred any material liability to PBGC in connection with any such Employee Plan. The assets of each such Employee Plan which is subject to Title IV of ERISA are sufficient to provide the benefits under such Employee Plan, payment of which the PBGC would guarantee if such Employee Plan were terminated, and such assets are also sufficient to provide all other "benefit liabilities" (as defined in ERISA Section 4001(a)(16)) due under the Employee Plan upon termination. No Reportable Event has occurred and is continuing with respect to any such Employee Plan. No such Employee Plan or trust created thereunder, or AMS or any ERISA Affiliate, has engaged in a Prohibited Transaction which would subject such Employee Plan or any other Employee Plan of AMS or any of its ERISA Affiliates, any trust created thereunder, AMS or any ERISA Affiliate, or any party dealing with any such Employee Plan or any such trust to the tax or penalty on "prohibited transactions" imposed by Section 502 of ERISA or Section 4975 of the Code. Neither AMS nor any of its ERISA Affiliates is a participant in or is obligated to make any payment to a Multiemployer Plan. (l) Taxes. AMS and each of its Subsidiaries has timely filed or caused to be timely filed all tax returns and reports required to be filed by any of them in any jurisdiction, and all taxes upon AMS and its Subsidiaries and upon their respective properties, assets, income and 53 franchises which are due and payable have been paid when due and payable, except to the extent that such failure to file or pay shall not have a Materially Adverse Effect. The charges, accruals and reserves on the books of AMS and its consolidated Subsidiaries with respect to taxes are, in the reasonable opinion of AMS, adequate under GAAP. No examination or audit of any U.S. federal income tax return of AMS by the Internal Revenue Service is in progress as of the date of this Agreement. SECTION 4.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. All statements contained in any certificate, Financial Statement, legal opinion or other instrument delivered by or on behalf of Borrower pursuant to or in connection with this Agreement or any of the Loan Documents (including but not limited to any such representation or warranty made in or in connection with any amendment thereto) shall constitute representations and warranties made under this Agreement. All representations and warranties made under Section 4.1 (except for the last sentence of Section 4.1(l)) of this Agreement shall be deemed to be made at and as of the date hereof and at and as of the date of the making of each Loan and the issuance of each Letter of Credit. All representations and warranties made under this Agreement shall survive, and not be waived by, the execution and delivery of this Agreement and any other Loan Document, any investigation or inquiry by Lender, or by making any Loan or issuing any Letter of Credit under this Agreement. ARTICLE 5 COVENANTS SECTION 5.1 AFFIRMATIVE COVENANTS. Each Borrower covenants and agrees that so long as it may borrow hereunder or any amount due under any of the Loan Documents shall remain outstanding or unpaid, or any Lender shall have any Commitment hereunder: (a) Financial Statements, etc. AMS will deliver to the Administrative Agent and each Lender (i) within five days of its delivery of Financial Statements to the U.S. Securities and Exchange Commission, but not later than ninety-five days after the last day of each of its fiscal years, consolidated Financial Statements showing the financial condition and results of operations of AMS and its consolidated Subsidiaries as of the last day of, and for, such fiscal year, which Financial Statements shall be prepared in accordance with GAAP and be accompanied by the unqualified audit report (as to the consolidated portions thereof) of Price Waterhouse LLP or other firm of independent certified public accountants reasonably acceptable to the Required Lenders; (ii) within five days of its delivery of Financial Statements to the U.S. Securities and Exchange Commission, but not later than fifty days after the last day of each of its fiscal quarters, consolidated Financial Statements showing the financial condition and results of operations of AMS and its consolidated Subsidiaries as of the last day of such fiscal quarter and for such fiscal quarter and portion of the fiscal year ending on the last day of such fiscal quarter, which Financial Statements shall be prepared in accordance with GAAP; and (iii) within thirty days after request therefor, such other information regarding the financial condition or business operations of AMS and each of its Subsidiaries as any Lender may reasonably request (it being understood that the reasonableness of any request shall take into consideration the availability of resources of AMS to respond thereto), provided, that the Administrative Agent and each Lender 54 shall agree to observe (x) such reasonable restrictions which AMS may impose on information which it deems to be confidential and which is labeled as such, and (y) restrictions which are imposed on AMS by third parties with respect to the confidential information of such third parties; provided further, that AMS may satisfy its obligations under clauses (i) and (ii) of this paragraph by delivery of its Forms 10-K and 10-Q filed with the U.S. Securities and Exchange Commission for such periods and as of such dates. The Financial Statements delivered under clauses (i) and (ii) above shall be accompanied by a certificate of a responsible officer (including, but not limited to, the Controller, Deputy Controller, Director of Treasury and the Corporate Manager of Accounting) of AMS in substantially the form of Exhibit G hereto: (x) certifying as to whether, to the best knowledge of such officer, a Default Condition has occurred and is continuing and, if a Default Condition has occurred and is continuing, specifying the details thereof and any action taken or proposed to be taken with respect thereto, and (y) setting forth reasonably detailed calculations demonstrating compliance with Sections 5.2(a) and 5.2(b). (b) Management Reports. Within five days after such reports are prepared, but in no event more than 90 days after the end of each fiscal quarter, AMS will deliver to the Administrative Agent balance sheets, statements of cash flow and statements of revenue and expenses with respect to each Borrower in the form of the management reports prepared from time to time by AMS for the purpose of reporting to senior management of AMS (whether or not prepared in accordance with GAAP); provided that any change in the format of such reports shall not result in any reduction in the financial information so reported and provided further that, if any Borrower or AMS ceases to prepare such reports for the purpose of reporting to senior management of AMS, such reports shall nevertheless continue to be delivered to the Administrative Agent no less frequently than quarterly. The Administrative Agent shall provide copies of the foregoing reports to any Lender upon request. (c) Notices. Borrower will deliver to the Administrative Agent and each Lender, promptly after an officer of Borrower obtains knowledge thereof, notice of any examination or audit of any U.S. federal income tax return of AMS by the Internal Revenue Service, notice of the occurrence of any Default Condition or Event of Default, or the institution or threat of any litigation against Borrower or any of its Subsidiaries which could reasonably be expected to have a Materially Adverse Effect, and of any other material adverse change in the financial condition or business operations of the Borrower and its Subsidiaries, taken as a whole. (d) Books and Records. AMS will keep its financial books and records and those of its consolidated Subsidiaries in accordance with GAAP and permit the Administrative Agent or any Lender to inspect and to discuss with its officers, directors and accountants such books and records and its properties and business operations during reasonable business hours. (e) Obligations, etc. Borrower will timely pay and perform, and cause each of its Subsidiaries to timely pay and perform, all of its material Taxes and other obligations, except to the extent being contested by appropriate proceedings; maintain, and cause each of its Subsidiaries to maintain insurance (including self insurance) in such amounts, with such deductibles, and against such risks as is customary for similarly situated businesses; observe and 55 comply with, and cause each of its Subsidiaries to observe and comply with, all material applicable Laws (including environmental Laws) and all material agreements to which it is a party or by which it is bound. (f) ERISA. AMS will maintain each of its employee benefit plans in compliance in all material respects with all applicable requirements of ERISA and of the Code and with all applicable rulings and regulations issued under the provisions of ERISA and of the Code. SECTION 5.2 FINANCIAL COVENANTS. AMS covenants and agrees that so long as any Borrower may borrow hereunder or any amount due under any of the Loan Documents shall remain outstanding or unpaid, or any Lender shall have any Commitment hereunder, AMS and its consolidated Subsidiaries will: (a) Total Debt to EBITDA. Maintain as of the end of each fiscal quarter, for the four fiscal quarters ending on such date, a ratio of Total Debt to EBITDA of not greater than 3.0 to 1.0. (b) Fixed Charge Coverage Ratio. Maintain as of the end of each fiscal quarter, for the four fiscal quarters ending on such date, a ratio of EBILTDA to Interest and Lease Charges of not less than (i) 2.25 to 1.0 as of December 31, 1997 and March 31, 1998 and (ii) 2.5 to 1.0 as of June 30, 1998 and as of the last day of each fiscal quarter thereafter. SECTION 5.3 NEGATIVE COVENANTS. AMS covenants and agrees that so long as it may borrow hereunder, or any amount due under any of the Loan Documents shall remain outstanding or unpaid, or any Lender shall have any Commitment hereunder, AMS and its consolidated Subsidiaries will not: (a) Changes in Corporate Assets or Structure. (i) Liquidate, dissolve, reorganize or merge or consolidate with any other company, firm or association, provided that AMS may liquidate or dissolve non-useful Subsidiaries or may merge Subsidiaries with each other or with AMS, or (ii) acquire another business or non-business entity, provided that AMS may acquire one or more business or non-business entities so long as the aggregate amount of cash disbursed by AMS in connection with all such acquisitions does not exceed, in any fiscal year of AMS, fifty percent of its Net Worth for such fiscal year, or (iii) form any new Subsidiaries, provided that AMS may form wholly-owned Subsidiaries to which AMS transfers cash, accounts and notes receivable, inventory, and other assets of AMS or a Subsidiary of AMS, so long as the aggregate amount and fair market value of such transferred assets for all such wholly-owned Subsidiaries does not exceed, in any fiscal year of AMS, twenty-five percent of its Net Worth for such fiscal year; provided further, that no such permitted acquisition or formation, or any transfer of assets in connection therewith, shall violate Section 5.2(a) or Section 5.2(b). (b) Change in Business. Make, or permit any of its Subsidiaries to make, any material change in the nature of its business as carried on at the date hereof, including any such change by reason of acquisition. 56 (c) Distributions. Declare or pay any cash dividends to its shareholders on its common stock in aggregate amounts in any one fiscal year in excess of twenty-five percent of its net income for such fiscal year, provided, that the foregoing limitations shall not apply with respect to the declaration or payments of dividends by any Subsidiary to AMS or to any other Subsidiary of AMS. (d) Mortgages and Pledges. Create, incur, assume, or suffer to exist any mortgage, pledge, lien, charge or other encumbrance of any kind upon, or any security interest in, any of its property or assets, whether now owned or hereafter acquired, or permit any Subsidiary so to do, except (i) liens existing at the date of this Agreement and securing Debt outstanding on the date of this Agreement; (ii) liens securing Debt owing by any Subsidiary to AMS or to another Subsidiary; (iii) liens on assets of any entity existing at the time such entity becomes a Subsidiary and not created in contemplation of such event; (iv) liens on assets existing at the time of acquisition thereof and not created in contemplation of such event; provided that such lien shall not extend to any other property of AMS or a Subsidiary; (v) liens to secure Debt incurred or guaranteed by AMS or a Subsidiary to finance the purchase price of land, buildings or equipment, or improvements to or construction of land, buildings or equipment, which Debt is incurred or guaranteed prior to, at the time of, or within 180 days after such acquisition (or in the case of real property, completion of such improvement or construction or commencement of full operation of such property, whichever is later); provided that such lien shall extend only to the asset to be acquired or improved with such financing; (vi) liens on any assets of a corporation existing at the time such corporation is merged into or consolidated with AMS or a Subsidiary and not created in contemplation of such event; provided that such lien shall not extend to any other property of AMS or a Subsidiary; (vii) liens on any assets in favor of the United States of America or any State thereof, or in favor of any other country, or political subdivision thereof, and created to secure payments pursuant to any contract or statute of any Debt incurred or guaranteed by AMS or any Subsidiary to finance the purchase price (or, in the case of real property, the cost of construction) of the assets subject to any such lien (including, but not limited to, liens incurred in connection with pollution control, industrial revenue or similar financings); 57 (viii) any extension, renewal or replacement (or successive extensions, renewals or replacements) in whole or in part, of any lien referred to in the foregoing paragraphs (i) to (vii), inclusive, or the refinancing or refunding of any Debt secured thereby; provided that (A) such Debt is not secured by any additional assets and (B) the amount of such Debt secured by any such lien is not increased; (ix) liens for property taxes and assessments or governmental charges or levies and liens securing claims or demands of mechanics, suppliers, carriers, landlords and other like Persons; (x) liens incurred or deposits made in the ordinary course of business in connection with worker's compensation, unemployment insurance, social security and other like laws, or to secure the performance of letters of credit, bids, sales contracts, leases, statutory obligations, surety, appeal and performance bonds and other similar obligations, in each case not incurred in connection with the borrowing of money, the obtaining of advances or the payment of the deferred purchase price of property; (xi) attachment, judgment and other similar liens arising in connection with court proceedings, provided that execution and other enforcement of such liens are effectively stayed and all claims which the liens secure are being actively contested in good faith and by appropriate proceedings; (xii) liens arising in the ordinary course of the business or incidental to the conduct of such business or the ownership of the assets of AMS or any Subsidiary which liens arise out of transactions involving the sale or purchase of goods or services and which do not, in the opinion of AMS, materially impair the use of such assets in the operations of the business of AMS or such Subsidiary; (xiii) liens other than those described in clauses (i) through (xii) above provided the sum of the aggregate principal amount secured thereby at any time outstanding does not exceed the Equivalent U.S. Dollar Amount of $10,000,000; and (xiv) liens on any Margin Stock the value of which exceeds 33% of the value of all assets subject to this Section 5.3(d) other than Margin Stock. Minor reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions and other minor title exceptions are not considered liens for purposes of this Section 5.3(d). 58 ARTICLE 6 CONDITIONS OF LENDING SECTION 6.1 CONDITIONS PRECEDENT TO THE INITIAL LOAN TO EACH BORROWER. The obligation of the Lenders to make the initial Loan to a Borrower shall be subject to the conditions precedent that the Administrative Agent and each Lender shall have received, on or before the Closing Date, all of the following, each dated the Closing Date and in form and substance satisfactory to the Administrative Agent and legal counsel for the Administrative Agent: (a) a closing certificate substantially the same in form and substance as Exhibit I completed on behalf of each Borrower and Exhibit H completed on behalf of the Guarantor; (b) a certified copy of a resolution of the board of directors of AMS authorizing the execution, delivery and performance of this Agreement, and all transactions and documents contemplated hereby and thereby; (c) an opinion of counsel to AMS, as Borrower and Guarantor, substantially the same in form and substance as Exhibit J hereto; (d) the commitment of each of the lenders named therein to make, continue or convert loans under the Existing Credit Agreement shall have been or shall concurrently be terminated and any amounts outstanding or owed thereunder in respect of principal or interest as Base Rate Loans shall have been or shall concurrently be paid in full or funded as Base Rate Loans hereunder. Any Eurocurrency Rate Revolving Credit Loans outstanding under the Existing Credit Agreement on the Closing Date shall remain outstanding until the last day of the Interest Period applicable thereto, subject to the terms of such agreement, and shall reduce availability under the Aggregate Commitments until the last day of the Interest Period applicable to such loan, whereupon such loan will be refinanced as a Revolving Credit Loan hereunder. SECTION 6.2 CONDITIONS PRECEDENT TO EACH LOAN OR LETTER OF CREDIT. The obligation of a Lender to make any Loan to a Borrower including, but not limited to, the initial Revolving Credit Loan , a Swingline Loan, and a Competitive Bid Loan, or to issue any Letter of Credit for the account of any Borrower, is subject to the satisfaction of the following conditions: (a) with respect to any Revolving Credit Loan, receipt by such Lender of a Revolving Credit Note in the form of Exhibit D hereto, executed and delivered by each Borrower; (b) with respect to any Swingline Loan, the receipt by the Administrative Agent of the Swingline Note in the form of Exhibit E hereto, executed and delivered by each Borrower; (c) with respect to any Revolving Credit Loan or Swingline Loan, receipt by the Administrative Agent of the Notice of Borrowing as required by Section 2.3 hereof; 59 (d) with respect to any Competitive Bid Loan, receipt by such Lender of a Competitive Bid Note in the form of Exhibit F hereto, executed and delivered by each Borrower; (e) with respect to any Competitive Bid Loan, receipt by the Administrative Agent of a Competitive Bid Borrowing Request as required by Section 2.6(a)(i) or Section 2.7(a)(i) hereof; (f) the fact that the representations and warranties of any Borrower contained in this Agreement and in any other Loan Document or certificate delivered to the Administrative Agent and each Lender hereunder shall be true, complete and accurate on and as of the date of such Loan or Letter of Credit to or for the account of such Borrower as though made on and as of such date; (g) the fact that, immediately thereafter, no event shall have occurred and be continuing, or shall result from such Loan, which constitutes a Default Condition or an Event of Default; (h) the fact that since the date of the most recent audited Financial Statements there has occurred no event which could reasonably be expected to have a Materially Adverse Effect; (i) the incumbency of persons authorized by Borrower to sign documents shall be as stated in the certificate of incumbency delivered as part of the closing certificate or as subsequently modified and reflected in a certificate of incumbency delivered to the Administrative Agent . The Administrative Agent may, without waiving this condition, consider it fulfilled and a representation by Borrower to such effect made, if no written notice to the contrary, dated the date of such Loan, is received by the Administrative Agent from Borrower prior to the making of such Loan; (j) no order, judgment or decree of any court, arbitrator or Governmental Authority shall purport to enjoin or restrain any Lender from making a Loan; (k) receipt by a Lender of such supplemental certificates, opinions and documents as any Lender may reasonably request; and (l) there has occurred no default or event of default under any agreement evidencing or securing any Material Debt of such Borrower. Each Notice of Borrowing, Competitive Bid Borrowing Request, Notice of Continuation/Conversion and Letter of Credit Request pursuant to Sections 2.3, 2.4, 2.6, 2.7 and 2.11 hereof shall be deemed to be a representation and warranty by Borrower on the date of such Notice as to the facts specified in clauses (f), (g) and (h) of this Section 6.2. 60 ARTICLE 7 EVENTS OF DEFAULT SECTION 7.1 EVENTS OF DEFAULT. The occurrence of any one or more of the following events or conditions shall constitute an Event of Default hereunder, whatever the reason for such event and whether it shall be voluntary or involuntary or within or without the control of a Borrower, any of its Subsidiaries or any Guarantor, or be effected by operation of or pursuant to any Law: (a) NONPAYMENT. Any Borrower shall fail to pay when due any payment or prepayment of principal of, or interest due on, any Loan or Unpaid Drawing, or any other amount due hereunder or thereunder, and such failure shall continue for five days. (b) MISREPRESENTATIONS. Any Borrower or the Guarantor shall make (or be deemed to have made) any representation or warranty in any of the Loan Documents or in any certificate or statement furnished at any time hereunder or in connection with any of the Loan Documents which proves to have been incorrect, untrue or misleading in any material respect when made (or deemed made) or furnished. (c) COVENANTS. There shall occur any failure to observe or perform any term, covenant or agreement contained in the Loan Documents (other than those covered by Section 7.1(a) above and Section 5.1(a) with respect to the failure to deliver an unqualified audit report) and such failure continues for a period of thirty (30) days after notice from the Administrative Agent. (d) UNQUALIFIED AUDIT REPORT. AMS shall deliver a qualified audit report and the Administrative Agent shall have notified AMS in writing within 30 days of the delivery thereof of the occurrence of an Event of Default arising therefrom. (e) OTHER DEBTS. (i) Any Borrower, any of its Subsidiaries or the Guarantor shall fail to make any payment when due on any Debt (other than Debt incurred under this Agreement) for borrowed money in an amount in excess of the Equivalent U.S. Dollar Amount of $1,000,000 ("Material Debt") which a Borrower, any of its Subsidiaries, or the Guarantor is obligated to pay as borrower, guarantor or in any other capacity or (ii) any default or event of default (other than a payment default) shall occur under any agreement evidencing or securing any Material Debt, and, if such Material Debt is Debt of a Subsidiary of AMS, the holder of such Material Debt has accelerated the payment of such Material Debt. (f) VOLUNTARY BANKRUPTCY. Any Borrower or the Guarantor shall file a voluntary petition in bankruptcy or a voluntary petition or answer seeking liquidation, reorganization, arrangement, readjustment of its debts, or for any other relief under any Debtor Relief Law; any Borrower or the Guarantor shall enter into any agreement indicating its consent to, approval of, or acquiescence in, any such petition or proceeding; any Borrower or the Guarantor shall apply for or permit the appointment by consent or acquiescence of a receiver, custodian or trustee of Borrower or the Guarantor, for all or a substantial part of its property; any 61 Borrower or the Guarantor shall make an assignment for the benefit of creditors; any Borrower or the Guarantor shall be unable or shall fail to pay its debts generally as such debts become due; or any Borrower or the Guarantor shall admit, in writing, its inability or failure to pay its debts generally as such debts become due; or any Borrower or the Guarantor shall take any action to authorize, or in furtherance of, any of the foregoing. (g) INVOLUNTARY BANKRUPTCY. There shall have been filed against any Borrower or the Guarantor an involuntary petition in bankruptcy or seeking liquidation, reorganization, arrangement, readjustment of its debts or for any other relief under any Debtor Relief Law and such petition is not dismissed within sixty days thereafter; or any Borrower or the Guarantor shall suffer or permit the involuntary appointment of a receiver, custodian or trustee of Borrower or the Guarantor, for all or any substantial part of its property; or any Borrower or the Guarantor shall suffer or permit the issuance of a warrant of attachment, execution or similar process against all or any substantial part of its property. (h) JUDGMENTS. Any final judgment or judgments for the payment of money in excess of the Equivalent U.S. Dollar Amount of $20,000,000 which is or are not adequately insured or indemnified against shall be rendered against AMS or any Subsidiary and the same shall remain undischarged for a period of more than thirty days during which execution shall not be effectively stayed. (i) GUARANTY DEFAULTS. The Guarantor shall fail in any material respect to perform or observe any term, covenant or agreement in the Guaranty; or the Guaranty shall for any reason be partially (including with respect to future advances) or wholly revoked or invalidated, or otherwise cease to be in full force and effect, or the Guarantor or any other Person shall contest in any manner the validity or enforceability thereof or deny that it has any further liability or obligation thereunder. ARTICLE 8 REMEDIES SECTION 8.1 REMEDIES. If an Event of Default shall have occurred and shall be continuing: (a) TERMINATION OF COMMITMENT; ACCELERATION (i) With the exception of an Event of Default specified in Sections 7.1(f) or (g) hereof, the Administrative Agent may, with the consent of the Required Lenders, and the Administrative Agent shall, if requested to do so by the Required Lenders, do any one or more of the following: (1) terminate the Commitment with respect to each Borrower and the Aggregate Commitments with respect to all of the Borrowers: and (2) declare the principal of and interest on the Loans and all other amounts owed under the Loan Documents, and all other Obligations, to be forthwith due and payable, whereupon all such amounts shall immediately become absolute and due and payable, without presentment, demand, notice of intent to accelerate, notice of acceleration, protest, notice of 62 nonpayment or notice of any kind, all of which are hereby expressly waived by each Borrower, anything in any other Loan Document or in any other document to the contrary notwithstanding; (ii) Upon the occurrence and continuance of an Event of Default specified in Sections 7.1(f) and (g) hereof, the principal of and interest on the Loans, all other amounts owed under any Loan Document, and all other Obligations shall thereupon and concurrently therewith become absolute and due and payable, and the Commitment with respect to each Borrower and the Aggregate Commitments with respect to all Borrowers shall forthwith terminate, all without any action by the Administrative Agent or any Lender, and without presentment, demand, notice of intent to accelerate, notice of acceleration, protest, notice of nonpayment or notice of any kind, all of which are hereby expressly waived by each Borrower, anything in any Loan Document or in any other document to the contrary notwithstanding; (b) OTHER REMEDIES. Unless and except to the extent expressly provided for to the contrary herein, the rights of the Administrative Agent and any Lender specified herein shall be in addition to, and not in limitation of, the Administrative Agent's or such Lender's rights under any statute or rule of law or equity, or under any other provision of any of the Loan Documents, or under the provisions of any other document, instrument or other writing executed by Borrower or any third party in favor of the Administrative Agent or Lender, all of which may be exercised successively or concurrently. ARTICLE 9 SET-OFFS AND SHARING OF PAYMENTS SECTION 9.1 RIGHT OF SET-OFF. In addition to any rights now or hereafter granted under applicable Law or otherwise, and not by way of limitation of any such rights, upon the occurrence of an Event of Default, each Lender is authorized at any time and from time to time, without presentment, demand, protest or other notice of any kind (all of which rights being hereby expressly waived), to set-off and to appropriate and apply any and all deposits (general or special) and any other indebtedness at any time held or owing by such Lender (including, without limitation branches, agencies or Affiliates of such Lender wherever located) to or for the credit or the account of Borrower against obligations and liabilities of Borrower to such Lender hereunder, under the Notes, the other Loan Documents or otherwise, irrespective of whether such Lender shall have made any demand hereunder and although such obligations, liabilities or claims, or any of them, may be contingent or unmatured, and any such set-off shall be deemed to have been made immediately upon the occurrence of an Event of Default even though such charge is made or entered on the books of such Lender subsequent thereto. Borrower hereby agrees that any Person purchasing a participation in the Loans, the Letters of Credit, and Commitments hereunder pursuant to Section 2.11(g), Section 9.2 or Section 12.13(e) may exercise all rights of set-off with respect to its participation interest as fully as if such person were a Lender hereunder. SECTION 9.2 SHARING OF PAYMENTS. If any Lender, by exercising any right of set-off or counterclaim or otherwise, obtains payment of a proportion of the aggregate amount of principal, 63 interest or the fees owing with respect to the Revolving Credit Loans and participations in Letter of Credit reimbursement obligations which is greater than the proportion received by any other Lender in respect of the principal, interest, or fees owing with respect to such Loans and participations in Letter of Credit reimbursement obligations then owed and due to such other Lender, then the Lender receiving such proportionately greater payment shall simultaneously purchase participations in the Revolving Credit Loans and participations in the Letter of Credit reimbursement obligations owed to such other Lenders so that the aggregate unpaid principal amount of such Loans and participations in Letter of Credit reimbursement obligations owed to each Lender shall be shared pro rata; provided that nothing in this Section shall impair the right of any Lender to exercise any right of setoff or counterclaim it may have and to apply the amount subject to such exercise to the payment of any indebtedness of a Borrower other than the Revolving Credit Loans and Letter of Credit reimbursement obligations. In the event that a Lender purchases a participation from any other Lender under the provision of this Section 9.2(a) and is subsequently required to return all or any part of such set-off or payment to a Borrower or to a trustee for a Borrower, the Lender from which it has purchased a participation shall repurchase such participation to the extent of its share of such returned amount. ARTICLE 10 THE AGENTS SECTION 10.1 AUTHORIZATION AND ACTION. Each Lender hereby appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto. The Administrative Agent will furnish to each Lender a copy of any certificate or notice furnished to the Administrative Agent by a Borrower indicating the existence of a Default or an Event of Default. The Administrative Agent may in its discretion give any Borrower notice of any Default of which it has knowledge and, if requested to do so by the Required Lenders, the Administrative Agent shall give any Borrower notice of such Default. As to any matters not expressly provided for by this Agreement (including, without limitation, enforcement or collection of the Notes), the Administrative Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders, and such instructions shall be binding upon all Lenders and all holders of Notes; provided, however, that the Administrative Agent shall not be required to take any action which exposes the Administrative Agent to personal liability or which is contrary to applicable law. Each Lender hereby authorizes the Administrative Agent to take delivery of the Notes and other documents from time to time executed and delivered hereunder by any Borrower and accepts the benefit of, and agrees to be bound by the terms of, this Agreement. SECTION 10.2 AGENT'S RELIANCE, ETC. Neither the Administrative Agent, the Documentation Agent, nor any director, officer, agent or employee of either shall be liable to any Lender for any action taken or omitted to be taken by it or them under or in connection with this Agreement, except for its or their own gross negligence or willful misconduct. Without limiting the generality of the foregoing, the Administrative Agent: may treat the payee of any Note as the 64 holder thereof until the Administrative Agent receives written notice of the assignment or transfer thereof signed by such payee and in form satisfactory to the Administrative Agent; and may consult with legal counsel (including counsel for any Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts. Without limiting the generality of the foregoing, neither Agent: makes any warranty or representation to any Lender; shall be responsible to any Lender for any statements, warranties or representations made in or in connection with this Agreement; shall have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement on the part of any Borrower or to inspect the property (including the books and records) of any Borrower; shall be responsible to any Lender for the due execution, legality, validity, or enforceability, of this Agreement, any other instrument or document furnished pursuant hereto (but the Agents shall obtain executed copies of documents held for the benefit of the Lenders where manually executed copies have not been furnished to each Lender); and shall incur any liability under or in respect of any provision of this Agreement by acting upon any notice, consent, certificate or other instrument or writing (which may be by telegram, telecopy, cable or telex) believed by it to be genuine and signed or sent by the proper party or parties. SECTION 10.3 THE AGENTS AND THEIR AFFILIATES. With respect to its Commitment, the Loans made by it and Notes issued to it, an Agent shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not an agent; for purposes of uniform terminology only, each Agent shall be referred to as a "Lender" hereunder when acting in its lending capacity, and the term "Lender" or "Lenders" shall, unless otherwise expressly indicated, include each Agent in its individual capacity. Each Agent and its Affiliates may lend money to, act as trustee under the indentures of, and generally engage in any kind of business with, any Borrower, any of its Subsidiaries and any Person who may do business with or own securities of any Borrower or any of its Subsidiaries, all as if such Agent were not an agent and without any duty to account therefor to the Lenders. Each Agent or its Affiliates may accept deposits of any Borrower and its Subsidiaries. SECTION 10.4 LENDER CREDIT DECISION, ETC. Each Lender acknowledges that it has, independently and without reliance upon either Agent, any other Lender or special counsel to the Agents, and based on the financial statements of each Borrower, its review of this Agreement, the legal opinions required to be delivered to it hereunder, the advice of its own counsel and such other documents and information as it has deemed appropriate, made its own credit and legal analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon either Agent, any other Lender or special counsel to the Agents, and based on such review, advice, documents and information as it shall deem appropriate at the time, continue to make its own decisions in taking or not taking action under this Agreement. SECTION 10.5 INDEMNIFICATION. The Lenders agree to indemnify each Agent (to the extent not reimbursed by a Borrower) ratably according to the respective Commitment Percentages, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever 65 which may be imposed on, incurred by, or asserted against such Agent in any way relating to or arising out of this Agreement, the Loans, the Letters of Credit or any action taken or omitted by such Agent under this Agreement, provided, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Agent's gross negligence or willful misconduct. Without limiting the generality of the foregoing, each Lender agrees to reimburse an Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including counsel fees) incurred by such Agent in connection with the preparation, execution, administration, or enforcement of, or legal advice in respect of rights or responsibilities under, this Agreement, to the extent that such Agent is not reimbursed for such expenses by a Borrower. Notwithstanding anything to the contrary contained herein, no termination of the Commitment of any Lender shall relieve it of any obligation to indemnify an Agent (to the extent set forth above) for any of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature asserted against such Agent for any event or matter occurring, or any condition existing, or any action taken or omitted by such Agent, under this Agreement at a time prior to the termination of the Commitment of such Lender, and for purposes of determining the ratable obligations of the Lenders to indemnify an Agent, the Commitment Percentages in effect at the time that such matter or event occurred or condition existed or action was taken or failed to be taken by such Agent shall govern. SECTION 10.6 SUCCESSOR AGENT. Subject to the appointment and acceptance of a successor Administrative Agent, the Administrative Agent may resign at any time as Administrative Agent under this Agreement by giving written notice thereof to the Lenders and each Borrower and may be removed as Administrative Agent under this Agreement at any time with or without cause by the Required Lenders. Upon any such resignation or removal, AMS shall have the right to appoint a successor Administrative Agent, subject, however, to the approval of the Required Lenders, which approval, however, shall not be unreasonably withheld. If no successor Administrative Agent shall have been so appointed by AMS and shall have accepted such appointment, within thirty days after the retiring Administrative Agent's giving of notice of resignation or the Required Lenders' removal of the retiring Administrative Agent, then the retiring Administrative Agent may, on behalf of AMS and subject, however, to the approval of the Required Lenders, which approval, however, shall not be unreasonably withheld, appoint a successor Administrative Agent, which shall be a financial institution organized under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to, and become vested with, all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Section 10 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. 66 ARTICLE 11 GUARANTY SECTION 11.1 OBLIGATIONS GUARANTEED. To induce the Lenders to make the Loans and to issue the Letters of Credit hereunder, AMS (in its capacity as a guarantor hereunder, the "Guarantor") irrevocably and unconditionally guarantees to each Lender the payment when due, whether by acceleration or otherwise, of any and all Obligations of any Borrower to each Lender. The guaranty given hereby is a guaranty of payment, not a guaranty of collection. Upon the failure of any Borrower to pay any Obligations when and as the same shall become due, whether at maturity, by acceleration, prepayment or otherwise, Guarantor promises to and will, upon written demand by any Lender, forthwith pay, or cause to be paid, to such Lender in cash an amount equal to the sum of (a) the unpaid principal amount of such Obligations then due, (b) accrued and unpaid interest on such Obligations and (c) all other monetary Obligations then due. AMS shall have no liability under this Guaranty except upon the occurrence and continuation of an Event of Default described in Article 7 (including nonpayment of any amounts upon acceleration of the Obligations pursuant Article 8) with respect to any subsidiary Borrower. SECTION 11.2 WAIVERS. To the fullest extent permitted by law, Guarantor expressly waives (a) notice of acceptance of this Guaranty by a Lender and notice of or consent to the creation or incurrence of any Obligations to which it may apply; (b) presentment, demand for payment, protest and notice of dishonor with respect to any Note, (c) any right to assert against any Lender any defense (legal or equitable), counterclaim, setoff, or cross claim which the Guarantor may now or hereafter have against any Lender or any Borrower, but such waiver shall not prevent the Guarantor from asserting against a Lender in a separate action any claim, action, cause of action, or demand that the Guarantor might have, whether or not arising out of this Guaranty; and (d) the benefits of any provision of law requiring that a Lender exhaust any right or remedy, or take any action, against any Borrower or any other Person or any property. SECTION 11.3 LENDER'S RIGHTS. Any Lender may at any time and from time to time without notice to or the consent of the Guarantor and without impairing, releasing, discharging or otherwise affecting the obligations of the Guarantor in whole or in part, and without the endorsement or execution by the Guarantor of any additional consent, waiver or guaranty: (a) change the manner, place or terms of payment, and change or extend the time of payment of or renew or alter or accelerate, any Obligations, modify or amend any of the provisions of the Loan Documents, or exchange, compromise or surrender any security therefor; (b) loan additional monies or extend additional credit to any Borrower, with or without security; (c) sell, release, surrender, realize upon or otherwise deal with in any manner and in any order any property at any time pledged or mortgaged to secure the Obligations and any offset against such obligations; (d) exercise or refrain from exercising any rights against any Borrower or others (including the Guarantor and any other guarantor of the Obligations), or against any property; (e) settle or compromise any Obligations or any security therefor and subordinate the payment of all or any part thereof to the payment of any indebtedness (whether or not due) of any Borrower to creditors of any Borrower other than Lender; and (f) apply any sums from any sources to any Obligations without regard to any Obligations remaining unpaid. 67 SECTION 11.4 GUARANTY ABSOLUTE AND UNCONDITIONAL. No invalidity, irregularity or unenforceability of all or any part of the Obligations or of any security therefor shall affect, impair, release, discharge or be a defense to this Guaranty, and this Guaranty is an absolute obligation of the Guarantor. Neither the Guarantor's obligations under this Guaranty nor any remedy for the enforcement thereof shall be impaired, modified, changed, released or discharged in any manner whatsoever by (a) an impairment, modification, change, release, discharge or limitation of the liability of any Borrower or by reason of any Borrower's bankruptcy or insolvency; (b) any determination that any disposition of collateral securing the Obligations is commercially unreasonable; or (c) any other act or omission of a Lender which changes the scope of the Guarantor's risk, except, as to such Lender only, acts or omissions of such Lender in bad faith. SECTION 11.5 FURTHER REPRESENTATIONS AND WARRANTIES; CREDIT INVESTIGATION. The Guarantor represents and warrants to each Agent and each Lender that: (a) the Guarantor has adequate means to obtain from each Borrower, on a continuing basis, information concerning Borrower and Borrower's financial condition and affairs; (b) the Guarantor is not relying on any Agent or any Lender, its employees, agents or other representatives, to provide such information, now or in the future; (c) the Guarantor is executing this Guaranty freely and deliberately, and understands the obligations and financial risk undertaken by providing this Guaranty; (d) the Guarantor has relied solely on the Guarantor's own independent investigation, appraisal and analysis of each Borrower and each Borrower's financial condition and affairs in deciding to provide this Guaranty; and (e) the Guarantor has not depended or relied on any Agent or any Lender, its employees, agents or representatives, for any information whatsoever concerning any Borrower or any Borrower's financial condition and affairs or other matters material to the Guarantor's decision to provide this Guaranty or for any counseling, guidance, or special consideration or any promise therefor with respect to such decision. The Guarantor agrees that no Agent or any Lender has any duty or responsibility whatsoever, now or in the future, to provide to Guarantor any information concerning any Borrower or any Borrower's financial condition and affairs and that, if the Guarantor receives any such information from an Agent or a Lender, its employees, agents or other representatives, the Guarantor will independently verify the information and will not rely on any Agent or Lender, its employees, agents or other representatives, with respect to such information. SECTION 11.6 REINSTATEMENT OF GUARANTEED OBLIGATIONS. If claim is ever made upon any Lender for repayment or recovery of any amount or amounts received by any Lender in payment or on account of any of the Obligations and any Lender repays all or part of said amount by reason of any judgment, decree or order of any Governmental Authority having jurisdiction over such Lender or any of its property, then the Guarantor agrees that any such judgment, decree, or order shall be binding upon the Guarantor, notwithstanding any revocation hereof or the cancellation of any Loan Document, and the Guarantor shall be and remain liable to such Lender hereunder for the amount so repaid or recovered to the same extent as if such amount had never originally been received by such Lender. Further, any acknowledgment, new promise, payment of principal or interest, or otherwise, whether by a Borrower or others (including the Guarantor), with respect to any of the Obligations shall, if the statute of limitations in favor of the Guarantor against a Lender shall have commenced to run, toll the running of such statute of 68 limitations and, if the period of such statute of limitations shall have expired, prevent the operation of such statute of limitations. SECTION 11.7 SUBROGATION RIGHTS; SUBORDINATION. Until all of the Obligations shall have been paid in full, (i) the Guarantor shall not exercise any rights arising out of any payment by the Guarantor to a Lender of any of the Obligations pursuant to this Guaranty including, but not limited to, any right of subrogation, indemnity, reimbursement, contribution, exoneration, payment or any other claim, cause of action, right or remedy against the Borrower, whether such claim arises at law, in equity or out of any written or oral agreement between the Guarantor and Borrower or otherwise, and (ii) any indebtedness of any Borrower to the Guarantor is hereby subordinated to the Obligations. ARTICLE 12 MISCELLANEOUS SECTION 12.1 NO WAIVER; CUMULATIVE RIGHTS; SEVERABILITY. No failure or delay by any Lender in exercising any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right. The rights of the Lenders or any of them hereunder shall be cumulative and not exclusive of each other or of any other right now or hereafter provided at Law or in equity. A determination that any provision of any Loan Document is unenforceable or invalid shall not affect the enforceability or validity of any other provision of a Loan Document. SECTION 12.2 GOVERNING LAW. This Agreement and the other Loan Documents, and the rights and obligations of the parties hereunder and thereunder, shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York. SECTION 12.3 SURVIVAL. The terms and provisions of this Agreement shall continue in full force and effect, notwithstanding the payment of any Loan, until all of the Obligations to each Lender have been paid in full and each Lender has terminated this Agreement in writing. The obligations of each Borrower in Sections 3.1, 3.6, 3.7, 12.5 and 12.23 hereof shall survive the termination of this Agreement and repayment of the Loans and other amounts due under the Loan Documents. SECTION 12.4 COUNTERPARTS. This Agreement may be executed by one or more of the parties hereto in any number of separate counterparts, each of which when fully executed shall be an original, and all of said counterparts taken together shall be deemed to constitute one and the same agreement. SECTION 12.5 COST AND EXPENSES. The Borrowers and the Guarantor (a) will pay all reasonable out-of-pocket expenses by the Administrative Agent in connection with the preparation of this Agreement and the Notes (whether or not the transactions hereby contemplated shall be consummated), the making of the Loans or the issuance of the Letters of Credit hereunder, any amendment to or modification or waiver of any of the terms hereof, including the reasonable fees and disbursements of counsel for the Administrative Agent, and (b) will pay all out-of-pocket expenses incurred by the Administrative Agent and each Lender in the 69 enforcement of its respective rights in connection with this Agreement or with the Loans made or the Notes issued hereunder, including but not limited to, the reasonable fees and disbursements of counsel for the Administrative Agent and for each of the Lenders. SECTION 12.6 NOTICES. Unless otherwise provided herein, all notices, requests, demands and other communications provided for hereunder to or upon the respective parties hereto to be effective shall be in writing (including bank wire, facsimile, telex or similar teletransmission or writing), and shall be deemed to have been given or made (i) if given by facsimile, when such facsimile is transmitted to the facsimile number specified below, or (ii) if given by mail, other than during a general discontinuance of postal service due to strike, lockout or otherwise, upon the earlier of receipt or the third Business Day after being deposited in the mail, registered or certified mail, with first class postage prepaid, addressed as set forth below, or (iii) if given by any other means (including, without limitation in the case of overnight courier) when delivered, provided, that any notice, request, demand or other communication to or upon the Administrative Agent under Article 2 hereof shall not be effective until received by the Administrative Agent addressed as follows or to such other address as may be designated hereafter in writing by the respective parties hereto: To: American Management Systems, Incorporated 4000 Legato Road Centerpointe II - 4th Floor Fairfax, Virginia 22033-4003 Attention: Treasurer Facsimile: (703) 267-5436 To: each other Borrower, from time to time party to this Agreement [Name of Borrower] c/o American Management Systems, Incorporated 4000 Legato Road Centerpointe II - 4th Floor Fairfax, Virginia 22033-4003 Attention: Treasurer Facsimile: (703) 267-5436 Administrative Agent: NationsBank, N.A. 101 North Tryon Street 15th Floor NC1-001-15-12 Charlotte, NC 28225 Attn: Ret Taylor - Agency Services Facsimile: (704) 388-9436 A Borrower or the Administrative Agent may change its address for notice purposes by notice to the other party in the manner provided herein. Any notice, request or other 70 communication hereunder to a Borrower (other than AMS) shall be deemed given to and effective against its Subsidiaries. SECTION 12.7 AMENDMENTS AND WAIVERS. No amendment of any provision of this Agreement or the Notes shall be effective unless it is in writing and signed by the Borrowers and the Required Lenders and, if the rights and duties of the Administrative Agent are affected thereby, the Administrative Agent, and no waiver of any provision of this Agreement or the Notes, nor consent to any departure by any Borrower therefrom, shall be effective unless it is in writing and signed by the Required Lenders and, if the rights and duties of the Administrative Agent are affected thereby, by the Administrative Agent, except that with respect to amendments or waivers relating to (a) any increase in the amount of the Commitments, (b) any reduction in the amount of, or postponement of the due date of, any payment or any extension of the Revolving Credit Termination Date, (c) any changes in interest or fees (including any change in the basis for the calculation of the Applicable Rate), other than the Agent's Fees, due hereunder, (d) any change in Section 2.9(a) or change in Article 9 in a manner that would alter the pro rata sharing of payments required thereby, (e) any change in Article 11, or (f) any change in this Section 12.7 or the definition of "Required Lenders" or "Required Lenders", no such amendment or waiver shall be effective unless it is in writing and signed by each of the Lenders. In any event, any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it is given. SECTION 12.8 TIME OF THE ESSENCE. Time is of the essence of this Agreement and the other Loan Documents, including, without limitation, in the interpreting and performance hereof and thereof. SECTION 12.9 INTERPRETATION. Should any provision of this Agreement or any of the other Loan Documents require judicial interpretation, the parties hereto agree that the court interpreting or construing the same shall not apply a presumption that the terms hereof shall be more strictly construed against one party by reason of the rule of construction that a document is to be more strictly construed against the party who itself or through its agents prepared the same, it being agreed that the Borrowers, the Guarantor, the Agents and the Lenders and their respective agents participated in the preparation hereof. SECTION 12.10 AGENTS AND LENDERS NOT JOINT VENTURERS. Neither this Agreement nor any agreements, instruments, documents or transactions contemplated hereby (including the Loan Documents) shall in any respect be interpreted, deemed or construed as making any Lender a partner or joint venturer with a Borrower or the Guarantor or as creating any similar relationship or entity, or as creating any fiduciary relationship between a Borrower or the Guarantor and any Agent or Lender, and each Borrower and the Guarantor agrees that it will not make any contrary assertion, contention, claim or counterclaim in any action, suit or other legal proceeding involving any Agent or Lender and any Borrower. SECTION 12.11 ACCEPTANCE. This Agreement, together with the other Loan Documents, shall not become effective unless and until delivered to the Administrative Agent at its principal office and accepted in writing by each Lender thereafter at such office as evidenced by its 71 execution hereof (notice of which delivery and acceptance are hereby waived by each Borrower and the Guarantor). SECTION 12.12 RECITALS. All recitals contained herein are hereby incorporated by reference into this Agreement and made part hereof. SECTION 12.13 SUCCESSORS AND ASSIGNS: Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of each Borrower, each Agent and each Lender that are contained in this Agreement shall bind and inure to the benefit of its respective successors and assigns. (a) Each Lender may assign to one or more assignees all or a constant, and not a varying, percentage of its interests, rights and obligations under this Agreement (including all or a constant, and not a varying, percentage of its Commitment and the Loans at the time owing to it and the Notes held by it); provided, however, that (i) except in the cases of an assignment to (A) a Lender or an Affiliate of such Lender under circumstances in which such Lender does not reasonably anticipate that such assignment would result in increased cost to a Borrower and (B) to any assignee at any time after the occurrence of a Default Condition or an Event of Default, AMS and the Administrative Agent must give their prior written consent to such assignment (which consent shall not be unreasonably withheld), (ii) the amount of the Commitment of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than the Equivalent U.S. Dollar Amount of $5,000,000 and the amount of the Commitment of such Lender remaining after such assignment shall not be less than the Equivalent U.S. Dollar Amount of $5,000,000 or shall be zero, (iii) the parties to each such assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with the Note or Notes subject to such assignment and a processing and recordation fee of $3,500 and (iv) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire. Upon acceptance and recording pursuant to Section 12.13(e), from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least five Business Days after the execution thereof, (A) the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement and (B) the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto (but shall continue to be entitled to the benefits of Sections 3.1, 3.7, 12.10 and 12.23, as well as to any fees accrued for its account hereunder and not yet paid)). (b) By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the assignee thereunder shall be deemed to confirm to and agree with each other and the other parties hereto as follows: (i) such assigning Lender warrants that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse 72 claim and that its Commitment, and the outstanding balances of its Loans, in each case without giving effect to assignments thereof which have not become effective, are as set forth in such Assignment and Acceptance, (ii) except as set forth in (i) above, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto or the financial condition of any Borrower or the performance or observance by any Borrower of any of its obligations under this Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto; (iii) such assignee represents and warrants that it is legally authorized to enter into such Assignment and Acceptance; (iv) such assignee confirms that it has received a copy of this Agreement, together with copies of the most recent Financial Statements delivered pursuant to Section 5.1(a) and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (v) such assignee will independently and without reliance upon any Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (vi) such assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this Agreement are required to be performed by it as a Lender. (c) The Administrative Agent shall maintain at one of its offices in Charlotte, North Carolina a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive in the absence of manifest error and the Borrowers, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrowers and any Lender, at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee together with the Note or Notes subject to such assignment, an Administrative Questionnaire completed in respect of the assignee (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) above and, if required, the written consent of AMS and the Administrative Agent to such assignment, the Administrative Agent shall (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Lenders. Within five Business Days after receipt of notice, each of the Borrowers, at its own expense, shall execute and deliver to the Administrative Agent, in exchange for the surrendered Note or Notes, a new Note or Notes to the order of such assignee in an amount equal to the applicable Commitment assumed by it pursuant to such Assignment and Acceptance and, 73 if such assigning Lender has retained a Commitment, a new Note to the order of such assigning Lender in a principal amount equal to the applicable Commitment retained by it. Such new Note or Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Note or Notes; such new Notes shall be dated the date of the surrendered Notes which they replace and shall otherwise be in substantially the form of Exhibits D, E and F hereto, as appropriate. Canceled Notes shall be returned to the appropriate Borrower. (e) Each Lender may without the consent of the Borrowers or the Administrative Agent sell participations to one or more banks or other entities (each a "Participant") in all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it and the Notes held by it); provided, however, that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the Participant shall be entitled to the benefit of the cost protection provisions contained in Sections 3.1 and 3.7 to the same extent as if they were Lenders but not in excess of those cost protections to which the Lender from which it purchased its participation would be entitled to under any of such Sections and (iv) the Borrowers, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement, and such Lender shall retain the sole right to enforce the obligations of a Borrower relating to the Loans and to approve any amendment, modification or waiver of any provision of this Agreement (other than amendments, modifications or waivers decreasing any fees payable hereunder, increasing the Commitment of such Lender or decreasing the amount of principal of or the rate at which interest is payable on the Loans, or extending any scheduled principal payment date or date fixed for the payment of interest on the Loans). (f) Any Lender or Participant may, in connection with an assignment or participation or proposed assignment or participation pursuant to this Subsection 12.13, disclose to the assignee or Participant or proposed assignee or Participant any information relating to a Borrower furnished to such Lender by or on behalf of any Borrower; provided that, prior to any such disclosure of information designated by a Borrower as confidential, each such assignee or Participant or proposed assignee or Participant shall execute an agreement whereby such assignee or Participant shall agree to preserve the confidentiality of such confidential information (subject to those restrictions set forth in Section 5.1(a) hereof). (g) Any Lender may at any time assign all or any portion of its rights under this Agreement and the Notes issued to it to a Federal Reserve Bank, provided, that no such assignment shall release a Lender from any of its obligations hereunder. (h) No Borrower shall assign or delegate any of its respective rights and duties hereunder without the prior written consent of the Administrative Agent and each of the Lenders, subject to the execution by such assignee and delivery to the Agents and the Lenders of such reasonable documentation as any Lender may request. 74 (i) If, pursuant to this Subsection 12.13, any interest in this Agreement or any Commitment, Loan or Note is transferred to any transferee, Lender or Participant which is organized under the laws of any jurisdiction other than the United States or any state thereof, the transferor Lender shall cause such transferee, concurrently with and as a condition to the effectiveness of such transfer, for the benefit of the transferor Lender and the Borrowers, to (A) make such representations and warranties, (B) deliver such certificates and forms, and (C) agree to comply with all other such requirements, in each case as are applicable to the transferee under Section 3.7 on the date that it becomes a Lender and thereafter or, if the transferee is a Participant, that would be applicable to the transferee if the transferee were a Lender. A Borrower shall not be required to pay any additional amounts to any Lender or Participant in respect of withholding tax, or indemnify the Lender or Participant in respect of withholding tax pursuant to Section 12.13(e)(ii), if the obligation to pay such additional amounts or the obligation to indemnify would not have arisen but for a failure by a Participant to comply with the foregoing. SECTION 12.14 ENTIRE AGREEMENT. THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND ANY OTHER DOCUMENTS TOGETHER WITH THE EXHIBITS AND SCHEDULES ATTACHED HERETO AND THERETO EXECUTED IN CONNECTION HEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR OR CONTEMPORANEOUS, ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. Each Borrower and the Guarantor acknowledges and agrees that the execution of this Agreement and the other Loan Documents by Borrower and the Guarantor was not based upon any facts or materials provided by any Agent or Lender, nor was Borrower or the Guarantor induced to execute this Agreement or any other Loan Document by any representation, statement or analysis made by any Agent or Lender. SECTION 12.15 INDEPENDENCE OF COVENANTS. Each covenant of Borrower herein is independent of each other covenant so made. The fact that the operation of any such covenant permits a particular action to be taken or condition to exist does not mean that such action or condition is not prohibited, restricted or conditioned by the operation of the provisions of any other covenant herein. SECTION 12.16 REVISIONS OR UPDATES TO SCHEDULES. A Borrower may, from time to time, revise or update the information and disclosures set forth on the Schedules attached hereto by delivering to the Administrative Agent and each Lender, revised Schedule(s). Each Lender may, in its sole discretion, accept or reject such revised Schedule(s). From any time after the date of the Required Lender's written acceptance of such revised Schedule(s), the representations, warranties and covenants contained herein shall be deemed modified with respect to the additional or revised information or disclosures set forth on such revised Schedule(s); provided, however, that the Required Lender's written acceptance of revised Schedule(s) pursuant to this Section 12.16 shall not be deemed to constitute a waiver of any Default Condition or Event of Default that is in existence prior to such written acceptance. SECTION 12.17 SUBMISSION TO JURISDICTION; WAIVER. EACH BORROWER AND THE GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY: 75 (a) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING DIRECTLY OR INDIRECTLY TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF; (b) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS, AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT FORUM AND AGREES NOT TO PLEAD OR CLAIM THE SAME; (c) WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND AGREES THAT ALL SUCH SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO BORROWER AT ITS ADDRESS SET FORTH IN SECTION 12.6 HEREOF OR AT SUCH OTHER ADDRESS OF WHICH THE ADMINISTRATIVE AGENT SHALL HAVE BEEN NOTIFIED PURSUANT THERETO AND THAT SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT OR THREE (3) BUSINESS DAYS AFTER THE SAME SHALL HAVE BEEN POSTED TO BORROWER'S ADDRESS AS SET FORTH IN SECTION 12.6 HEREOF; (d) HEREBY IRREVOCABLY AND UNCONDITIONALLY APPOINTS AMS AS ITS AGENT TO RECEIVE ON ITS BEHALF AND ON BEHALF OF ITS PROPERTY SERVICE OF PROCESS HEREUNDER AND THAT SUCH PROCESS MAY BE SERVED ON ANY BORROWER IN CARE OF AMS PURSUANT TO SECTION 12.17(c) HEREOF; (e) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT OR OTHERWISE AFFECT THE RIGHT OF LENDER TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER, THE GUARANTOR OR THE PROPERTY OF EITHER IN THE COURTS OF OTHER JURISDICTIONS. (f) If for the purpose of obtaining judgment in any court it is necessary to convert a sum due hereunder in an Approved Currency other than U.S. Dollars into U.S. Dollars, agrees that the rate of exchange used shall be the spot rate at which in accordance with normal banking procedures the Approved Currency could be purchased in New York City with U.S. Dollars by the person obtaining such judgment on the Business Day preceding that on which final judgment is given; 76 (g) Agrees, to the fullest extent that they may effectively do so under applicable law, that the obligations of each to make payments in an Approved Currency of the principal of and interest on the Loans and any other amounts due hereunder to a Lender as provided herein (i) shall not be discharged or satisfied by any tender, or any recovery pursuant to any judgment, in any currency other than the relevant Approved Currency, (ii) shall be enforceable as an alternative or additional cause of action for the purpose of recovering in the Approved Currency the amount, if any, by which such actual receipt shall fall short of the full amount of the Approved Currency so expressed to be payable and (iii) shall not be affected by an unrelated judgment being obtained for any other sum due under this Agreement; SECTION 12.18 WAIVER OF JURY TRIAL. EACH BORROWER, THE GUARANTOR, THE ADMINISTRATIVE AGENT AND EACH LENDER HEREBY INTENTIONALLY AND VOLUNTARILY WAIVE ANY RIGHT WHICH ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN CONNECTION WITH ANY MATTER DIRECTLY OR INDIRECTLY RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. SECTION 12.19 LENDER NOT IN CONTROL. None of the covenants or other provisions contained in the Loan Documents shall or shall be deemed to give any Lender the rights or power to exercise control over the affairs and/or management of a Borrower, any of its Subsidiaries or the Guarantor, the power of any Lender being limited to the right to exercise the remedies provided in the Loan Documents; provided, however, that if any Lender becomes the owner of any stock or other equity interest in any Person, whether through foreclosure or otherwise, such Lender shall be entitled (subject to requirements of law) to exercise such legal rights as it may have by being owner of such stock or other equity interest in such Person. SECTION 12.20 REPRODUCTION OF DOCUMENTS. This Agreement and all other Loan Documents, including (a) consents, waivers, amendments and modifications, which may subsequently be executed, (b) documents received by Lender on the Closing Date, and (c) financial statements, certificates and other information previously or subsequently furnished to any Lender may be reproduced by such Lender, any Borrower or the Guarantor by any photographic, photostatic, microfilm, microcard, miniature photographic or similar process. Borrower, Guarantor and Lender agree and stipulate that any such reproduction shall, to the extent permitted by applicable Law, be admissible in evidence as the original itself in any judicial or administrative proceeding whether or not the original is in existence (and whether or not the reproduction was made by Lender in the regular course of business) and that any enlargement, facsimile or further reproductions of the reproduction shall likewise be admissible in evidence; provided, that if the original is in existence and shall be reasonably available, the original shall be used in evidence, and not a reproduction. 77 SECTION 12.21 MITIGATION OBLIGATIONS; SUBSTITUTION OF LENDERS. (a) If any Lender requests compensation under Section 3.1, or if a Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.7, or if any Lender is affected by the circumstances contemplated by Section 3.3, then such Lender shall use reasonable efforts to designate a different Lending Office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or Affiliates, if, in the reasonable judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 3.1 or 3.7, as the case may be, in the future or (ii) result in the Lender not being affected by the circumstances contemplated by Section 3.3 and (iii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment. Without limiting the generality of the foregoing, each Lender shall use all reasonable efforts to mitigate the effect upon Borrower of any increased capital requirement and shall assess any cost related to such increased capital on a nondiscriminatory basis among Borrower and other borrowers of such Lender to which such cost applies and such Lender shall not be entitled to be compensated for any increased capital requirement unless it is, as a result of such law, regulation, guideline or request, such Lender's policy generally to seek to exercise such rights, where available, against other borrowers of such Lender. (b) If any Lender requests additional compensation under the provisions of Sections 3.1 or an increase in additional compensation under the provisions of Section 3.7 due to a change in the rate of collection or withholding of Taxes, or shall notify the Administrative Agent or a Borrower pursuant to Section 3.3 that it is unlawful or impossible for such Lender to make, maintain or fund a Eurodollar Rate Revolving Credit Loan, any Borrower may upon the payment of the amount to which such Lender is entitled terminate the Commitment of such Lender and shall, with the approval of the Administrative Agent, which approval shall not be unreasonably withheld, substitute for such Lender another lender or lenders. Any lender which becomes a "Lender" pursuant to the provisions of this Subsection 12.21 shall become a party to this Agreement by executing such instruments or agreements as may be satisfactory to the Administrative Agent and AMS, including an Assignment and Acceptance pursuant to Section 12.13, and each Borrower shall execute and deliver to such Lender a Revolving Credit Note dated as of the date such lender becomes a Lender. SECTION 12.22 SEVERAL OBLIGATIONS OF LENDERS. The obligation of each Lender to make the Loans provided for herein is several, and no Lender shall be liable in the event that any other Lender fails to make any Loan it has agreed to make hereunder. SECTION 12.23 INDEMNIFICATION. From and at all times after the date of this Agreement, and in addition to all of the other rights and remedies of the Agents and the Lenders against the Borrowers and the Guarantor, each Borrower and the Guarantor agrees to hold each Agent and each of the Lenders harmless from, and to indemnify each Agent and each of the Lenders against, all losses, damages, costs and expenses (including, but not limited to, reasonable 78 attorneys' fees, costs and expenses) incurred by an Agent or any of the Lenders from and after the date hereof, whether direct, indirect or consequential, as a result of or arising from or relating to the use of the proceeds of the Loans by a Borrower; provided, however, that the foregoing indemnification shall not protect an Agent or any Lender from loss, damage, cost or expense directly attributable to the willful misconduct or gross negligence of such Person. All of the foregoing losses, damages, costs and expenses of an Agent or any Lender shall be payable by the Company upon demand by such Agent or such Lender. SECTION 12.24 MARGIN STOCK COLLATERAL. Each of the Lenders represents to the Agents and to each of the other Lenders that it in good faith is not, directly or indirectly (by negative pledge or otherwise) relying upon any Margin Stock as collateral in the extension or maintenance of the credit provided for in this Agreement. [Rest of Page Intentionally Left Blank] 79 IN WITNESS WHEREOF, each Borrower, the Guarantor, the Administrative Agent, the Documentation Agent and each Lender have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. AMERICAN MANAGEMENT SYSTEMS, INCORPORATED, as Borrower and Guarantor BY: /s/ FRANK A. NICOLAI ------------------------------------------ NAME: Frank A. Nicolai ---------------------------------------- TITLE: Director --------------------------------------- AMS MANAGEMENT SYSTEMS DEUTSCHLAND GmBH, as Borrower BY: /s/ FRANK A. NICOLAI ------------------------------------------ NAME: Frank A. Nicolai ---------------------------------------- TITLE: Director --------------------------------------- AMS MANAGEMENT SYSTEMS EUROPE S.A./N.V., as Borrower BY: /s/ FRANK A. NICOLAI ------------------------------------------ NAME: Frank A. Nicolai ---------------------------------------- TITLE: Director --------------------------------------- 80 AMS MANAGEMENT SYSTEMS U.K. LTD., as Borrower BY: /s/ FRANK A. NICOLAI ------------------------------------------ NAME: Frank A. Nicolai ---------------------------------------- TITLE: Director --------------------------------------- AMS MANAGEMENT SYSTEMS CANADA INC., as Borrower BY: /s/ FRANK A. NICOLAI ------------------------------------------ NAME: Frank A. Nicolai ---------------------------------------- TITLE: Director --------------------------------------- AMSY MANAGEMENT SYSTEMS NETHERLANDS, B.V., as Borrower BY: /s/ FRANK A. NICOLAI ------------------------------------------ NAME: Frank A. Nicolai ---------------------------------------- TITLE: Director --------------------------------------- 81 NORDIC BUSINESS MANAGEMENT SYSTEMS AB, as Borrower BY: /s/ FRANK A. NICOLAI ---------------------------------------------- NAME: Frank A. Nicolai -------------------------------------------- TITLE: Director ------------------------------------------- AMS MANAGEMENT SYSTEMS AUSTRALIA PTY. LIMITED, as Borrower BY: /s/ FRANK A. NICOLAI ---------------------------------------------- NAME: Frank A. Nicolai -------------------------------------------- TITLE: Director ------------------------------------------- AMS MANAGEMENT SYSTEMS (SWITZERLAND) AG, as Borrower BY: /s/ FRANK A. NICOLAI ---------------------------------------------- NAME: Frank A. Nicolai -------------------------------------------- TITLE: Authorized Signatory ------------------------------------------- 82 AMS MANAGEMENT SYSTEMS ITALIA S.p.A., as Borrower BY: /s/ FRANK A. NICOLAI ---------------------------------------------- NAME: Frank A. Nicolai -------------------------------------------- TITLE: Director ------------------------------------------- AMS MANAGEMENT SYSTEMS FRANCE S.A., as Borrower BY: /s/ FRANK A. NICOLAI ---------------------------------------------- NAME: Frank A. Nicolai -------------------------------------------- TITLE: Director ------------------------------------------- AMS MANAGEMENT SYSTEMS ESPANA, S.A., as Borrower BY: /s/ FRANK A. NICOLAI ---------------------------------------------- NAME: Frank A. Nicolai -------------------------------------------- TITLE: Director ------------------------------------------- 83 COMMONWEALTH OF VIRGINIA City/County of Fairfax The foregoing instrument was acknowledged before me in my jurisdiction aforesaid this 9th day January, 1998 by Frank A. Nicolai, who is Director of AMS Management Systems Espana, S.A., for and on behalf of the corporation. /s/ Merritt Zafren -------------------------------------- Notary Public My commission expires: 9/30/2000 ----------- I was commissioned a notary public as Merritt Mantiply. 84 Amount of Commitment Commitment Percentage - ---------- ---------- $40,000,000 33.333% NATIONSBANK, N.A. Lending Office for Base Rate Loans: By: /s/ MARTY V. MITCHELL ----------------------------- Its: Vice President ---------------------------- 101 North Tryon Street 15th Floor NC1-001-15-12 Charlotte, NC 28225 ATTN: Ret Taylor - Agency Services Lending Office for Eurocurrency Loans: Address for Notices: NationsBank, N.A., London 101 North Tryon Street Sort Code 40 51 15 15th Floor SWIFT Address: NABKGB2X NC1-001-15-12 ATTN: Timothy Martin Charlotte, NC 28225 ATTN: Ret Taylor-Agency Services 85 Amount of Commitment Commitment Percentage - ---------- ---------- $35,000,000 29.167% WACHOVIA BANK, N.A. Lending Office for Base Rate Loans: By: /s/ Charles A. Johnson ------------------------ Its: Senior Vice President ----------------------- 100 North Main Street MC NC 37202 Winston-Salem, NC 27150 ATTN: Ann Parrish Lending Office for Eurocurrency Rate Loans: Address for Notices: 100 North Main Street 100 North Main Street MC NC 37202 MC NC 37202 Winston-Salem, NC 27150 Winston-Salem, NC 27150 ATTN: Ann Parrish ATTN: Ann Parrish 86
Amount of Commitment Commitment Percentage - ---------- ---------- $15,000,000 12.5% BANK OF TOKYO - MITSUBISHI TRUST COMPANY
Lending Office for Base Rate Loans: By: /s/ Catherine Moeser ----------------------- Its: Vice President ---------------------- Bank of Tokyo-Mitsubishi Trust Company 1251 Avenue of the Americas New York, New York 10020-1104 Fax No.: (201) 413-8225 Lending Office for Eurocurrency Rate Loans: Address for Notices: Bank of Tokyo-Mitsubishi Trust Company Bank of Tokyo-Mitsubishi Trust 1251 Avenue of the Americas Company New York, New York 10020-1104 1251 Avenue of the Americas Fax No.: (201) 413-8225 New York, New York 10020-1104 Fax No.: (201) 413-8225 87 Amount of Commitment Commitment Percentage - ---------- ---------- $15,000,000 12.5% COMERICA BANK Lending Office for Base Rate Loans: By: /s/ Tamara J. Gurne ----------------------- Its: Vice President ---------------------- 500 Woodward Avenue Detroit, Michigan 48226 Mail Code 3230 Lending Office for Eurocurrency Rate Loans: Address for Notices: 500 Woodward Avenue 500 Woodward Avenue Detroit, Michigan 48226 Detroit, Michigan 48226 Mail Code 3280 Mail Code 3280 Attn: Diana Pascoe Fax: (313) 222-3330 88 Amount of Commitment Commitment Percentage - ---------- ---------- $15,000,000 12.5% KREDIETBANK, N.V. Lending Office for Base Rate Loans: By: /s/ ROBERT SNAUFFER ---------------------- Its: Robert Snauffer --------------------- Vice President Grand Cayman Branch c/o New York Branch By: /s/ PATRICK J. OWENS 125 West 55th Street --------------------- New York, New York 10019 Its: PATRICK J. OWENS -------------------- Vice President Lending Office for Eurocurrency Rate Loans: Address for Notices: Grand Cayman Branch 125 West 55th Street c/o New York Branch New York, New York 10019 125 West 55th Street Attn: Loan Administration New York, New York 10019 Fax (212) 956-5581 Lending Office for British Pound Loans: Kredietbank N.V., London Branch Bank account details for 7th Floor, Exchange House Revolving Advance in GBP: Primrose Street, London EC2A 2HQ Bank Name: Royal Bank of Scotland Tel. No. 0171 638-5812 5-10 Great Tower Street Fax No. 0171 256-4846 London Telec: 8951024/5 Acct. Name: Kredietbank N.V., London For Credit Matters: Acct. No.: 12201433 Attn: Lisa Taylor Chaps Sort Code: 16-54-87 Tel. No. 0171 256-4807 Fax. No. 0171 256-4846 For Administration Matters: Attn: Mr. Terry Rogers Tel. No. 0171 256-4827 Fax. No. 0171-256-4846
89 NATIONSBANK, N.A., as Administrative Agent By: /s/ MARTY V. MITCHELL ------------------------------------- Its: Vice President ------------------------------------ Address for Notices: 101 North Tryon Street 15th Floor NC1-001-15-12 Charlotte, NC 20225 ATTN: Ret Taylor, Agency Services
90 WACHOVIA BANK, N.A. as Documentation Agent By: /s/ CHARLES A. JOHNSON ------------------------------------- Its: Senior Vice President ------------------------------------ Address for Notices: 100 North Main Street MC NC 37202 Winston-Salem, NC 27150 ATTN: Ann Parrish 91 EXHIBIT A NOTICE OF BORROWING TO: NationsBank, N.A., as Administrative Agent ------------------------------------------ ------------------------------------------ Attention: ------------------------------- Irrevocable notice is hereby given pursuant to the Multi-Currency Revolving Credit Agreement dated as of January, 1998, by and among American Management Systems, Incorporated, various of its Subsidiaries, the Lenders named therein, NationsBank, N.A., as Administrative Agent and Wachovia Bank, N.A., as Documentation Agent (the "Loan Agreement"), of Borrower's desire to effect the [Revolving Credit Loan] [Swingline Loan] specified herein. Capitalized terms used herein that are defined in the Loan Agreement shall have the meanings therein defined. 1. The Business Day of the proposed borrowing is _____________, ______. 2. The aggregate amount of the proposed borrowing is [$_______________.] [ ]. 3. The proposed borrowing is to be a [Swingline Loan] [Base Rate Loan] [Eurocurrency Rate Loan], provided, that any Revolving Credit Loan denominated in an Approved Currency other than U.S. Dollars shall be a Eurocurrency Rate Loan. 4. The initial Interest Period for a Eurocurrency Rate Loan shall be [one], [two], [three], [six] months, provided, that a Revolving Credit Loan denominated in an Approved Currency other than U.S. Dollars may not have a six-month Interest Period. 92 The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the proposed borrowing, before and after giving effect thereto and to the application of the proceeds therefrom: (a) The applicable representations and warranties of the undersigned contained in Article 4 of the Loan Agreement are true and correct in all material respects as though made on and as of such date. (b) No Default Condition or Event of Default exists or shall result from such proposed borrowing. (c) After giving effect to the proposed borrowing the aggregate outstanding principal balance of the Loans shall not exceed the Aggregate Commitments. (d) No event has occurred since the date of the most recent audited Financial Statements which could reasonably be expected to have a Materially Adverse Effect. Dated: [NAME OF BORROWER] --------------------------- By: -------------------------- Name: ------------------------ Title: ----------------------- 93 EXHIBIT B NOTICE OF CONTINUATION/CONVERSION TO: NationsBank, N.A., as Administrative Agent ------------------------------------------ ------------------------------------------ Attention: ------------------------------- Irrevocable notice is hereby given pursuant to the Multi-Currency Revolving Credit Agreement dated as of January, 1998, by and among American Management Systems, Incorporated, various of its Subsidiaries, the Lenders named therein, NationsBank, N.A., as Administrative Agent and Wachovia Bank, N.A., as Documentation Agent (the "Loan Agreement"), of Borrower's desire to effect the Continuation/Conversion of a Loan thereunder. Capitalized terms used herein that are defined in the Loan Agreement shall have the meanings therein defined. 1. The Business Day of the proposed Continuation/Conversion is: _______________, _____. 2. The Type and Amount of the Loan to be continued/converted is: ____________________. 3. The Type of Loan into which the existing Loan is to be continued/converted is: _______________. 4. The Interest Period (if applicable) is: ____________________. The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the proposed Continuation/Conversion, before and after giving effect thereto and to the application of the proceeds therefrom: 94 (a) The applicable representations and warranties of the undersigned contained in Article 4 of the Loan Agreement are true and correct in all material respects as though made on and as of such date. (b) No Default Condition or Event of Default exists or shall result from such Loan as continued or converted. (c) After giving effect to the proposed Continuation/Conversion the aggregate outstanding principal balance of the Loans shall not exceed the Aggregate Commitments. (d) No event has occurred since the date of the most recent audited Financial Statements which could reasonably be expected to have a Materially Adverse Effect. Dated: [NAME OF BORROWER] --------------------------- By: ---------------------------- Name: -------------------------- Title: ------------------------- 95 EXHIBIT C COMPETITIVE BID BORROWING REQUEST TO: NationsBank, N.A., as Administrative Agent ------------------------------------------ ------------------------------------------ Attention: -------------------------------- Notice is hereby given pursuant to Section 2.6(a) or 2.7(a) of the Multi-Currency Revolving Credit, dated as of January, 1998, by and among American Management Systems, Incorporated, various of its Subsidiaries, the Lenders named therein, NationsBank, N.A., as Administrative Agent and Wachovia Bank, N.A., as Documentation Agent (the "Loan Agreement"), of Borrower's desire to effect a [USD] [Multicurrency] Competitive Bid Loan. Capitalized terms used herein that are defined in the Loan Agreement shall have the meanings therein defined. Borrower encloses payment of the fee payable with respect to this Competitive Bid Borrowing Request and sets forth below the terms of the Competitive Bid Loan requested. 1. The Business Day of the proposed borrowing is _______________, _____. 2. The amount of the proposed borrowing is _______________ [Dollars] [Alternative Currency] 3. The proposed borrowing shall consist of Competitive Bid Loans having an Interest Period of _______________. 4. The LIBOR Bid Margin requested is _______%. 96 The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the proposed borrowing, before and after giving effect thereto and to the application of the proceeds therefrom: (a) The applicable representations and warranties of the undersigned contained in Article 4 of the Loan Agreement are true and correct in all material respects as though made on and as of such date. (b) No Default Condition or Event of Default exists or shall result from such proposed borrowing. (c) After giving effect to the proposed borrowing the aggregate outstanding principal balance of the Loans shall not exceed the Aggregate Commitments. (d) No event has occurred since the date of the most recent audited Financial Statements which could reasonably be expected to have a Material Adverse Effect. Dated: [NAME OF BORROWER] --------------------------- By: ----------------------------------------------- Name: --------------------------------------------- Title: --------------------------------------------
97 EXHIBIT D REVOLVING CREDIT NOTE $___________ January, 1998 FOR VALUE RECEIVED, the undersigned, ______________________, ("Borrower"), hereby promises to pay to the order of _______________, (hereinafter, together with any holder hereof, referred to as "Lender"), on _______________, 2003, at the office of the Administrative Agent (as defined below), in the Applicable Currency in which any Revolving Credit Loan is denominated, and in immediately available funds, the principal sum equal to the Equivalent U.S. Dollar Amount of _____________________________________ U.S. DOLLARS ($___________), or the aggregate unpaid principal amount outstanding of all Revolving Credit Loans made by Lender to Borrower pursuant to the Loan Agreement (as defined below), whichever is less, and, prior to maturity, to pay interest on said principal sum, or the outstanding balance thereof, whichever is less, in like money and funds, at said office on the date or dates and at the rate or rates provided for in the Loan Agreement. Interest on any overdue principal of and, to the extent permitted by law, overdue interest on the principal amount hereof shall bear interest at the Default Rate, as provided for in the Loan Agreement. Lender has been authorized by Borrower to record on the schedule attached to this Note the amount and date of each Revolving Credit Loan made by Lender, and the date and amount of each payment of principal thereof received by Lender, provided that the failure by Lender to make any such endorsement or any error therein shall not affect the obligations of Borrower hereunder. 98 This Note is the Revolving Credit Note referred to in and entitled to the benefit of that certain Multi-Currency Revolving Credit Agreement dated January __, 1998, by and among Borrower, American Management Systems, Incorporated, various of its Subsidiaries, Lender, the other Lenders named therein, NationsBank, N.A., as Administrative Agent and Wachovia Bank, N.A., as Documentation Agent, as from time to time amended, modified, supplemented, renewed, or extended (the "Loan Agreement"). Capitalized terms used herein that are defined in the Loan Agreement shall have the meanings therein defined. Upon the occurrence of an Event of Default the principal hereof and accrued interest hereon may become, or may be declared to be, forthwith due and payable in the manner, upon the conditions, and with the effect provided in the Loan Agreement. Time is of the essence of this Note. In addition and not in limitation of the foregoing, Borrower agrees to pay all reasonable costs and expenses incurred in the collection of this Note, including reasonable attorney's fees if this Note is collected by or through an attorney at law, or in bankruptcy, receivership, or other court proceeding. Reference is made to Section 3.5 of the Loan Agreement for provisions relating to the prepayment hereof. Borrower hereby waives presentment, demand, notice of dishonor, protest, and all other notices whatever. This Note shall be governed by and construed in accordance with the laws of the State of New York. 99 Executed under the hand of Borrower by its officer or agent duly authorized on the date first above written. [BORROWER] By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- 100 SCHEDULE TO REVOLVING CREDIT NOTE
Date of Revolving Principal Applicable Amount & Credit Loan Currency Amount Type of Loan Interest Period Date Repaid ----------- --------------- ------------ --------------- ----------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
101 EXHIBIT E SWINGLINE NOTE $20,000,000 January, 1998 FOR VALUE RECEIVED, the undersigned, ___________________________ ________________ ("Borrower"), hereby promises to pay to the order of NationsBank, N.A. (hereinafter, together with any holder hereof, referred to as "Lender"), on the dates specified in the Loan Agreement (as defined below) and on _______________, 2003, at the office of Lender, in [Borrower's domestic currency], and in immediately available funds, the principal sum equal to the Equivalent U.S. Dollar Amount of TWENTY MILLION AND 00/100 U.S. DOLLARS ($20,000,000), or the aggregate unpaid principal amount outstanding of all Swingline Loans made by Lender to Borrower pursuant to the Loan Agreement, whichever is less, and, prior to maturity, to pay interest on said principal sum, or the outstanding balance thereof, whichever is less, in like money and funds, at said office on the date or dates and at the rate or rates provided for in the Loan Agreement. Interest on any overdue principal of and, to the extent permitted by law, overdue interest on the principal amount hereof shall bear interest at the Default Rate, as provided for in the Loan Agreement. Lender has been authorized by Borrower to record on the schedule attached to this Note the amount and date of each Swingline Loan made by Lender, and the date and amount of each payment of principal thereof received by Lender, provided, that the failure by Lender to make any such endorsement or any error therein shall not affect the obligations of Borrower hereunder. 102 This Note is the Swingline Note referred to in and entitled to the benefit of that certain Multi-Currency Revolving Credit Agreement dated January __, 1998, by and among Borrower, American Management Systems, Incorporated, various of its Subsidiaries, Lender, the other Lenders named therein, NationsBank, N.A., as Administrative Agent and Wachovia Bank, N.A., as Documentation Agent, as from time to time amended, modified, supplemented, renewed or extended (the "Loan Agreement"). Capitalized terms used herein that are defined in the Loan Agreement shall have the meanings therein defined. Upon the occurrence of an Event of Default the principal hereof and accrued interest hereon may become, or may be declared to be, forthwith due and payable in the manner, upon the conditions and with the effect provided in the Loan Agreement. Time is of the essence of this Note. In addition and not in limitation of the foregoing, Borrower agrees to pay all reasonable costs and expenses incurred in the collection of this Note, including reasonable attorney's fees if this Note is collected by or through an attorney at law, or in bankruptcy, receivership, or other court proceeding. Reference is made to Section 3.5 of the Loan Agreement for provisions relating to the prepayment hereof. Borrower hereby waives presentment, demand, notice of dishonor, protest, and all other notices whatever. This Note shall be governed by and construed in accordance with the laws of the State of New York. 103 Executed under the hand of Borrower by its officer or agent duly authorized on the date first above written. ------------------------------------------- [BORROWER] By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ 104 SCHEDULE TO SWINGLINE NOTE
Date of Principal Applicable Amount & Swingline Loan Currency Amount Interest Rate Date Repaid -------------- -------------------- ------------- ----------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
105 EXHIBIT F COMPETITIVE BID NOTE $120,000,000 January, 1998 FOR VALUE RECEIVED, the undersigned, ____________________ ("Borrower"), promises to pay to the order of ____________________ (hereinafter, together with any holder hereof, referred to as "Lender"), on the dates specified in the Loan Agreement (as defined below) and on _______________, 2003, at the office of the Administrative Agent (as defined below), in the Applicable Currency in which any Competitive Bid loan is denominated, and in immediately available funds, the principal sum equal to the Equivalent U.S. Dollar Amount of ONE HUNDRED AND TWENTY MILLION AND 00/100 U.S. DOLLARS ($120,000,000), or the aggregate unpaid principal amount outstanding of all Competitive Bid Loans made by Lender to Borrower pursuant to the Loan Agreement (as defined below), whichever is less, and prior to maturity, to pay interest on said principal sum, or the outstanding balance thereof, whichever is less, in like money and funds, at the said office on the date or dates and at the rate or rates provided for in the Loan Agreement. Interest on any overdue principal of and, to the extent permitted by law, overdue interest on the principal amount hereof shall bear interest at the Default Rate, as provided for in the Loan Agreement. Lender has been authorized by Borrower to record on the schedule attached to this Note the amount and date of each Competitive Bid Loan made by Lender, and the date and amount of each payment of principal thereof received by Lender, provided that the failure by Lender to make any such endorsement or any error therein shall not affect the obligations of Borrower hereunder. 106 This Note is the Competitive Bid Note referred to in and entitled to the benefit of that certain Multi-Currency Revolving Credit Agreement dated January __, 1998, by and among Borrower, American Management Systems, Incorporated, various of its Subsidiaries, Lender, the other Lenders named therein, NationsBank, N.A., as Administrative Agent and Wachovia Bank, N.A., as Documentation Agent, as from time to time amended, modified, supplemented, renewed, or extended (the "Loan Agreement"). Capitalized terms used herein that are defined in the Loan Agreement shall have the meanings therein defined. Upon the occurrence of an Event of Default the principal hereof and accrued interest hereon may become, or may be declared to be, forthwith due and payable in the manner, upon the conditions and with the effect provided in the Loan Agreement. Time is of the essence of this Note. In addition and not in limitation of the foregoing, Borrower agrees to pay all reasonable costs and expenses incurred in the collection of the Note, including reasonable attorney's fees, if this Note is collected by or through an attorney at law, or in bankruptcy, receivership, or other court proceeding. Reference is made to Section 3.5 of the Loan Agreement for provisions relating to the prepayment hereof. Borrower hereby waives presentment, demand, notice of dishonor, protest, and all other notices whatever. This Note shall be governed by and construed in accordance with the laws of the State of New York. 107 Executed under the hand of the Borrower, by its officer or agent duly authorized on the date first above written. [BORROWER] By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- 108 SCHEDULE TO COMPETITIVE BID NOTE
Date of Principal Applicable Competitive Currency Amount Amount and Bid Loan Interest Rate of Loan Maturity Date Date Repaid -------- ------------- ------- ------------- ----------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
109 EXHIBIT G _______________ ___, 1998 [Lender Address] Dear ____________: Pursuant to Section 5.1(a) of the Multi-Currency Revolving Credit Agreement dated January __, 1998 (the "Loan Agreement") among American Management Systems, Incorporated ("AMS"), various of its Subsidiaries, the Lenders named therein, NationsBank Bank, N.A., as Administrative Agent and Wachovia Bank, N.A., as Documentation Agent, the following are submitted for AMS and its consolidated Subsidiaries for the [Fiscal Quarter] [Fiscal Year] ended _______________, 19___. Consolidated Financial Statements for [Fiscal Quarter] [Fiscal year] ended _______________, 19___. I hereby certify that the foregoing Financial Statements of the Borrower are complete and correct in all material respects and present fairly, in accordance with GAAP, on a consolidated basis, the statements of cash flow and the financial condition of AMS and its consolidated Subsidiaries, and the results of their operations and changes in stockholders' equity for the reporting period. [No change in GAAP or in the application of GAAP to the preparation of the Financial Statements has occurred since the date of the audited Financial Statements dated as of _______________, 19___.] [Since the date of the audited Financial Statements dated as of _______________, 19___, there have occurred the following changes in GAAP or in the application of GAAP to the preparation of the Financial Statements: ________________________________ ________________________________________________________________________________ ______________________. The effect of such change is as follows:_______________ ______________________________________________________________________________.] The following Default Condition or Event of Default exists on the date hereof: [None] [or] [Describe any such Default Condition or Event of Default] The Borrower proposes to take the following steps with respect to any such Default Condition or Event of Default: 110 I further certify that no Default Condition or Event of Default has occurred as defined in Article 8 of the Loan Agreement except as specified in Exhibit 1 hereto. The following calculations are provided demonstrating compliance with Section 5.2(a) and Section 5.2(b) of the Loan Agreement. Section 5.2(a) - Total Debt to EBITDA 3.0 to 1.0 Actual at _______________,19___ (1) Total Debt $ --------------------------------- (2) EBITDA $ --------------------------------- (3) Ratio of (1) to (2) ____ to ____ Section 5.2(b) - Fixed Charge Coverage Ratio [2.25 to 1.0 as of 12/31/97 and 3/31/98] Actual at _______________, 19___ [2.5 to 1.0 as of 6/30/98 and thereafter] (1) EBILTDA $ --------------------------------- (2) Interest and Lease Charges $ --------------------------------- (3) Ratio of (1) to (2) ____ to ____
All capitalized terms used herein but not defined herein shall have the meanings set forth for those terms in the Loan Agreement. Yours truly, AMERICAN MANAGEMENT SYSTEMS, INC. By: ----------------------------------------------- Name: --------------------------------------------- Title: --------------------------------------------
111 EXHIBIT H CLOSING CERTIFICATE The undersigned, as ____________________ of American Management Systems, Incorporated (the "Borrower" and "Guarantor"), in connection with that certain Multi-Currency Revolving Credit Agreement (the "Loan Agreement") of even date herewith by and among Borrower and Guarantor, the Lenders named therein (each a "Lender"), NationsBank, N.A., as Administrative Agent and Wachovia Bank, N.A., as Documentation Agent, hereby certifies to the Lenders that: 1. Attached hereto as Exhibit A is a true, correct, and complete copy of resolutions of the Board of Directors of Borrower and Guarantor duly adopted as of the ____ day of __________, 1997, such corporate action having been duly taken in accordance with the provisions of applicable law, the Articles of Incorporation and the By-Laws of Borrower and Guarantor, and being now in full force and effect, without any modifications in any respect. The resolutions attached as Exhibit A authorize Borrower and Guarantor and the officers designated therein to execute and deliver, and to do all things necessary or appropriate for the payment and performance of all Borrower's and Guarantor's obligations under the Loan Agreement, the Revolving Credit Note, the Swingline Note, the Competitive Bid Note, and the other Loan Documents to which Borrower and Guarantor is party. Each of the Loan Documents to which Borrower and Guarantor is a party has been duly executed and delivered by Borrower and Guarantor. 112 2. Each of the representations and warranties of Borrower and Guarantor contained in the Loan Agreement and the other Loan Documents is accurate and complete in all respects as of the date of this Certificate. 3. The following persons have been duly elected to the offices set forth beside their names, have been duly qualified, and as of the date of the execution of the Loan Agreement were, and on the date hereof are, officers or other representatives of Borrower and Guarantor, holding, in the case of officers, the offices set forth opposite their respective names below, and the signatures set forth opposite their respective names are their respective genuine signatures: Name Title Signature ---- ----- --------- -------------------------- -------------------------- -------------------------- -------------------------- -------------------------- --------------------------
This Certificate is made and delivered for the benefit of Lenders, and Lenders are entitled to rely on the warranties, representations and facts set forth herein in making the Revolving Credit Loans, Swingline Loans, and Competitive Bid Loans described in and pursuant to the Loan Agreement. Capitalized terms used herein and not otherwise defined are used as defined in the Loan Agreement. 113 IN WITNESS WHEREOF, the undersigned has signed this Certificate and affixed hereto the seal of Borrower and Guarantor, as of the ____ day of __________, 1998. AMERICAN MANAGEMENT SYSTEMS, INCORPORATED By: (Seal) ------------------------------ Name: ---------------------------- Title: --------------------------- ---------------------------------- Attest [CORPORATE SEAL] 114 EXHIBIT I CLOSING CERTIFICATE The undersigned, who is the _______________ of ____________________, a corporation (the "Borrower"), in connection with that certain Multi-Currency Revolving Credit Agreement (the "Loan Agreement") of even date herewith by and among American Management Systems, Inc. ("AMS"), Borrower, various other Subsidiaries of AMS, the Lenders named therein, NationsBank, N.A., as Administrative Agent and Wachovia Bank, N.A., as Documentation Agent, hereby certifies to Lender that: 1. Attached hereto as Exhibit A is a true, correct and complete copy of resolutions of the Board of Directors of Borrower duly adopted as of the ____ day of ___________, 1997, such corporate action having been duly taken in accordance with the provisions of applicable law, the Articles of Incorporation and the By-Laws of Borrower, and being now in full force and effect, without any modifications in any respect. The resolutions attached as Exhibit A authorize Borrower and the officers designated therein to execute and deliver, and to do all things necessary or appropriate for the payment and performance of all the Borrower's obligations under, the Loan Agreement, the Revolving Credit Note, the Swingline Note, the Competitive Bid Note and the other Loan Documents to which the Borrower is party. Each of the Loan Documents to which Borrower is a party has been duly executed and delivered by Borrower. 2. Each of the representations and warranties of Borrower contained in the Loan Agreement and the other Loan Documents is accurate and complete in all respects as of the date of this Certificate. 115 3. The following persons have been duly elected to the offices set forth beside their names, have been duly qualified, and as of the date of the execution of the Loan Agreement were, and on the date hereof are, officers or other representatives of Borrower holding, in the case of officers, the offices set forth opposite their respective names below, and the signatures set forth opposite their respective names are their respective genuine signatures: Name Title Signature ---- ----- --------- -------------------------- -------------------------- -------------------------- -------------------------- -------------------------- --------------------------
This Certificate is made and delivered for the benefit of Lender and Lender is entitled to rely on the warranties, representations and facts set forth herein in making the Revolving Credit Loans, Swingline Loans, and Competitive Bid Loans, described in and pursuant to the Loan Agreement. Capitalized terms used herein and not otherwise defined are used as defined in the Loan Agreement. 116 IN WITNESS WHEREOF, the undersigned has signed this Certificate and affixed hereto the seal of Borrower, as of the ____ day of __________, 1998. [NAME OF BORROWER] By: (Seal) -------------------------- Name: ------------------------ Title: ----------------------- ------------------------------ Attest [CORPORATE SEAL] 117 EXHIBIT J NationsBank, N.A., as Administrative Agent for the Lenders - ----------------------------- - ----------------------------- Attention: Syndicate Services Re: Multi-Currency Revolving Credit Agreement (the "Loan Agreement") dated as of January ____, 1998 by and among NationsBank, N.A., as Administrative Agent, Wachovia Bank, N.A., as Documentation Agent, the Lenders named therein and American Management Systems, Incorporated; AMS Management Systems Deutschland GmbH, AMS Management Systems Europe S.A./N.V., AMS Management Systems U.K. Ltd., AMS Management Systems Canada Inc., AMSY Management Systems Netherlands, B.V., Nordic Business Management Systems AB, AMS Management Systems Australia Pty. Limited, AMS Management Systems Espana, S.A., AMS Management Systems (Switzerland) AG, AMS Management Systems Italia S.p.A. and AMS Management Systems France, S.A. (each a "Borrower," collectively, the "Borrowers") Ladies and Gentlemen: We have acted as counsel to American Management Systems, Incorporated ("AMS"), as a Borrower and as Guarantor, in connection with the Loan Agreement. As counsel, we have examined executed copies of the following fully executed documents, each dated as of the date hereof (collectively, the "Loan Documents"): 1. the Loan Agreement, 2. the Revolving Credit Note of AMS (the "Revolving Credit Note"), 3. the Swingline Note of AMS, and 4. the Competitive Bid Note of AMS. In connection with our opinion, we have examined a certificate (the "Closing Certificate"), dated the date hereof, from the corporate secretary of AMS. We have also examined the following: (i) the Second Amended and Restated Certificate of Incorporation of AMS, as certified to us by the Closing Certificate, (ii) the Bylaws of AMS in effect on the date hereof, as certified to us by the Closing Certificate; (iii) copies of the resolutions of the Board of Directors of AMS and the unanimous written consent of the Executive Committee of the Board of Directors of AMS authorizing the execution, delivery and performance of each of the Loan Documents, as certified to us by the Closing Certificate, and (iv) the good standing certificates for AMS, dated December ____, 1997, provided and certified by the Secretary of State of the 118 State of Delaware and the State Corporation Commission of the Commonwealth of Virginia, respectively. Our examination did not include any review of the files, documents or internal records of any Borrower. Unless facts material to the opinions expressed herein are specifically stated to have been independently established or verified by us, we have relied as to such facts solely upon the representations made by AMS in the Closing Certificate and in the Loan Documents, and upon the certificates of public officials referred to above. The opinions expressed in this letter concern only the effect of the Delaware General Corporation Law and the laws (excluding the principles of conflict of laws) of the State of New York. We assume no obligation to supplement this letter if any of the applicable laws or facts changes in any manner. Capitalized terms used herein and not otherwise defined herein have the respective meanings assigned to them in the Loan Agreement. Based upon and subject to the foregoing and to the qualifications stated herein, we are of the opinion that: I. AMS is a corporation validly existing under the laws of the State of Delaware and in good standing under the laws of the State of Delaware and the Commonwealth of Virginia. AMS has the corporate power and authority to execute, deliver and perform the Loan Documents. II. All requisite corporate action on the part of AMS, to authorize the execution and delivery of the Loan Documents has been taken. The Loan Documents have been duly executed and delivered by AMS. Each of the Loan Documents constitutes a legal, valid and binding obligation enforceable against AMS as a Borrower in accordance with its terms. III. The Guaranty has been duly executed and delivered by Guarantor, and the Guaranty constitutes the legal, valid and binding obligation of Guarantor, enforceable against Guarantor in accordance with its terms. IV. No authorization, consent, approval, license, exemption of or filing or registration with any Virginia or New York court or any Virginia or New York governmental department, commission, board, bureau, agency or other instrumentality and no corporate filing by AMS or consent by the shareholders of AMS under Delaware General Corporation Law (collectively, the "Consents") is or will be necessary for the valid execution, delivery or performance by AMS of the Loan Agreement, the Guaranty and each of the other Loan Documents, or for the payment to Lenders of any sums due under such documents, except for Consents previously obtained. The opinions set forth in this letter are subject to the following additional qualifications: 119 A. Our opinions herein as to the qualifications and good standing of AMS are solely based upon the good standing certificates issued by the applicable state regulatory authority, and are rendered as of the date of the applicable certificate. B. Our opinions are subject to the effects of applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, fraudulent transfer and other laws or equitable principles relating to or affecting the rights of debtors, creditors or other obligees generally. C. Our opinions are subject to the effects of the exercise of judicial discretion and applicable principles of equity, whether such principles are applied by a court of equity or a court of law, including, without limitation, such principles relating to the availability of specific performance and other equitable remedies. D. Enforceability may be limited to the extent that remedies are sought with respect to a breach that a court concludes is not material or does not adversely affect the Lenders. E. Notwithstanding language in the Loan Documents that may imply otherwise, a court of equity could enjoin a Lender from enforcing its remedies under the Loan Documents by reason of any unconscionable or inequitable conduct by the Lender, or if there are equitable defenses, defenses arising from the Lender's failure to act in accordance with the terms and conditions of the Loan Documents, defenses arising as a consequence of the passage of time, defenses arising as a result of the Lender's failure to act reasonably or in good faith in attempting to exercise its remedies, or any other similar defenses. F. The provisions regarding the remedies available to a Lender on default as set forth in the Loan Documents are subject to certain procedural and other requirements which, with regard to several of the remedies, are not reflected in the Loan Documents. These requirements affect and may restrict rights and remedies stated in the Loan Documents to be available to the Lender. G. We express no opinion on the enforceability of any provisions of the Loan Documents that entitle a Lender, as a matter of right, after the occurrence of a default, to cause the appointment of a receiver or to exercise powers of attorney granted to it. H. We express no opinion on the enforceability of any provisions of the Loan Documents: (i) imposing increased interest rates and/or late payment charges upon delinquency in payment or upon the occurrence of a default, to the extent such provisions may be deemed to constitute penalties, or (ii) under which AMS as a Borrower or as Guarantor may be obligated to pay legal and other professional fees incurred by a Lender or the cost of collection following a default, to the extent a court could conclude such fees are unreasonable, are inequitable or constitute a penalty. 120 I. We express no opinion on the enforceability of any provisions of the Loan Documents under which AMS as Borrower or Guarantor waives any rights afforded under any statute or constitutional provision or by which any of the parties waives any rights afforded under applicable law after a default, including, without limitation, any waiver of the right to a jury trial or of the right to receive consequential and punitive damages, or any provisions of the Loan Documents under which any applicable statutes of limitations are tolled or waived. J. We express no opinion on the enforceability of any provisions of the Loan Documents that provide that the provisions of any of the Loan Documents are severable, to the extent that any material provisions thereof is found to be unenforceable. K. We express no opinion on the enforceability of the prepayment provisions, including any yield maintenance premium, contained in the Loan Documents. L. Our opinion is as of the date hereof and is based upon and limited to laws and regulations as in effect on the date of this letter. We assume no obligation to update the opinions set forth herein. M. Except to the extent expressly set forth above, (i) in rendering the opinions set forth herein, we have relied upon the assumptions set forth in Section 4 of the Third-Party Legal Opinion Report, including the Legal Opinion Accord, of the Section of Business Law of the American Bar Association, dated 1991 (the "Accord"), (ii) this opinion does not address the legal issues set forth in Section 19 of the Accord, and (iii) this opinion is subject to the General Qualifications as defined in Section 11 of the Accord. The opinions expressed in this letter are solely for the use of the Lenders. These opinions may not be relied on by or distributed to any other persons without our express prior written approval. The opinions expressed in this letter are limited to the matters set forth in this letter, and no other opinions may be inferred beyond the matters expressly stated. Very truly yours, SHAW, PITTMAN, POTTS & TROWBRIDGE 121 EXHIBIT K ASSIGNMENT AND ACCEPTANCE Reference is made to the Multi-Currency Revolving Credit Agreement dated as of January __, 1998, by and among American Management Systems, Incorporated, various of its Subsidiaries, the Lenders named therein, NationsBank, N.A., as Administrative Agent and Wachovia Bank, N.A., as Documentation Agent, as from time to time amended, modified, supplemented, renewed, or extended (the "Loan Agreement"). Any term used herein that is defined in the Loan Agreement shall have the same meaning when used herein. 1. The Assignor hereby sells and assigns, without recourse, to the Assignee, and the Assignee hereby purchases and assumes, without recourse, from the Assignor, effective as of the Effective Date set forth below, the interests set forth below (the "Assigned Interest") in the Assignor's rights and obligations under the Loan Agreement, including, without limitation, the interests set forth below in the Commitment of the Assignor on the Effective Date and the Loans owing to the Assignor which are outstanding on the Effective Date, together with unpaid interest accrued on the assigned Loans to the Effective Date and the amount, if any, set forth on the reverse hereof of the Fees accrued to the Effective Date for the account of the Assignor. Each of the Assignor and the Assignee hereby makes and agrees to be bound by all the representations, warranties and agreements set forth in Section 12.13(b) of the Loan Agreement, a copy of which has been received by each such party. From and after the Effective Date (i) the Assignee shall be a party to and be bound by the provisions of the Loan Agreement and, to the extent of the interests assigned by this Assignment and Acceptance, have the rights and obligations of a Bank thereunder and under the Loan Documents and (ii) the Assignor shall, to 122 the extent of the interests assigned by this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Loan Agreement. 2. This Assignment and Acceptance is being delivered to the Administrative Agent together with (i) the Notes evidencing the Loans included in the Assigned Interest, (ii) if the Assignee is organized under the laws of a jurisdiction outside the United States, the forms specified in Section 12.13(b) of the Loan Agreement, duly completed and executed by such Assignee, (iii) if the Assignee is not already a Lender under the Loan Agreement, an Administrative Questionnaire in the form of Exhibit L to the Loan Agreement, and (iv) a processing and recordation fee of $3,500.00. 3. This Assignment and Acceptance shall be governed by and construed in accordance with the laws of the State of New York without reference to its conflicts of laws principles or provisions. 123 Date of Assignment: ------------------------------------------- Legal Name of Assignor: ------------------------------------------- Legal Name of Assignee: ------------------------------------------- Assignee's Address for Notices: ------------------------------------------- Effective Date of Assignment (may not be fewer than 5 Business Days after the Date of Assignment): -------------------------------------------
Percentage Assigned of Facility and Commitment Thereunder (set forth, to at least 8 decimals, as a percentage of the Facility and the aggregate Facility Principal Amount Assigned Commitments of all Lenders) - -------- ------------------------- ---------------------------------- - ----------------- ---------------------------------- ---------------------------------- Commitment: $_______________ (_____%) Assigned: ------------------------------------------- Loans: ------------------------------------------- Fees Assigned (if any): -------------------------------------------
124 The terms set forth above are hereby agreed to: Accepted: , as Assignor NATIONSBANK, N.A., - ---------------------------------- as Administrative Agent By: By: ----------------------------------------------- ------------------------------------------------ Name: Name: --------------------------------------------- --------------------------------------------- Title: Title: -------------------------------------------- -------------------------------------------- , as Assignee [NAME OF BORROWER] - ---------------------------------- By: By: ----------------------------------------------- ----------------------------------------------- Name: Name: --------------------------------------------- --------------------------------------------- Title: Title: -------------------------------------------- --------------------------------------------
125 EXHIBIT L ADMINISTRATIVE QUESTIONNAIRE ____________________ (Company) $120,000,000 Multi-Currency Revolving Credit Agreement Please provide the following administrative details with respect to your participation in the Multi-Currency Revolving Credit and Term Loan Agreement (the "Loan Agreement"): 1. Identification. The full name (indicating punctuation and upper and lower case letters), address, contact, and telephone, telex, and fax numbers of your institution as they are to appear in documentation. 2. Payment instructions. The name, address and account numbers, together with any necessary reference, of your (correspondent) banks for payment of fees, interest and principal under the Loan Agreement. Unless individual details are provided, it will be assumed that all such items are to be paid to the same account. 3. Notice. The name, address, and telephone, telex, and fax numbers of the Person to whom notices should be sent upon receipt from the borrower. Please direct your responses regarding administration details to the attention of _______________ at NationsBank, N.A., ________________. 126 SCHEDULE 2.11 The following is a description of the existing Letters of Credit issued by Wachovia pursuant to the Existing Credit Agreement: (1) LC No. 968-090225, issued 9/12/97 in favor of The Traveler's Indemnity Co., stated amount $200,000 U.S. Dollars. 127 ATTACHMENT A AUTHORIZATION MATRIX EX-10.7 6 AGREEMENT OF LEASE WITH JOSHUA REALTY CORP. 1 EXHIBIT 10.7 AGREEMENT OF LEASE BETWEEN JOSHUA REALTY CORPORATION AND AMERICAN MANAGEMENT SYSTEMS, INC. 2 AGREEMENT OF LEASE CENTERPOINTE I AND II FAIRFAX, VIRGINIA TABLE OF CONTENTS 1. Reference Data and Definitions............................................1 2. Demise of Premises........................................................4 3. Term......................................................................4 4. Possession................................................................5 5. Use of the Premises.......................................................6 6. Base Rent.................................................................6 7. Additional Rent...........................................................7 8. Late Charge; Interest....................................................14 9. Services.................................................................14 10. Repairs and Condition of Premises.......................................19 11. Compliance with Law.....................................................19 12. Estoppel Certificate....................................................20 13. Rules and Regulations...................................................21 14. Assignment and Subletting...............................................21 15. Alterations.............................................................24 16. Mechanics' and Other Liens..............................................25 17. Landlord's Right to Enter...............................................26 18. Certain Rights Reserved by Landlord.....................................26 19. Landlord's Liability; Rights............................................28 20. Unilateral Amendment....................................................29 21. Insurance...............................................................29 22. Fire or Other Casualty..................................................30 23. Waiver of Claims; Indemnification.......................................32 24. Condemnation............................................................33 25. Holding Over............................................................33 26. Covenant of Quiet Enjoyment.............................................34 27. Relocation of Tenant. Intentionally Omitted............................34 28. Condition of Premises...................................................34 29. No Third Party Beneficiaries............................................34 30. Transfer of Landlord's Interest.........................................35 31. Default; Landlord's Remedies............................................35 32. Remedies Cumulative.....................................................38 33. Expenses of Enforcement.................................................38 34. Nonwaiver...............................................................38 35. Subordination...........................................................38 36. Paramount Lease.........................................................39 37. Legal Proceedings. .....................................................40 38. Interpretation..........................................................40 39. Severability............................................................40 3 40. Notices.................................................................40 41. No Representation by Landlord...........................................41 42. Whole Agreement.........................................................41 43. Security Deposit. Intentionally Omitted................................41 44. Real Estate Broker......................................................41 45. Inability to Perform....................................................41 46. Corporate Entities......................................................42 47. Recordation.............................................................42 48. Time....................................................................42 49. Applicable Law..........................................................42 50. Defined Terms...........................................................42 51. Delivery for Examination................................................44 52. Environmental Matters...................................................44 53. Tenant's Remedies.......................................................46 54. Extension Option........................................................47 55. Signage.................................................................49 56. Storage Space...........................................................49 57. Food Service In Centerpointe II Building................................50 58. Non-Disturbance.........................................................50 59. Exercise Room...........................................................51 60. Parking.................................................................51 61. Right of First Offer....................................................51 62. Expansion Space.........................................................53 63. Measurement of Premises. Intentionally Omitted..........................54 64. Tenant's Affiliation Representation.....................................54 65. Arbitration.............................................................54 Exhibit A-1. Plan of Centerpointe I Premises Exhibit A-2. Plan of Centerpointe II Premises Exhibit B. Landlord's Base Building Modifications Exhibit C Tenant Design and Construction Process Exhibit D Concession Fund Voucher Form Exhibit F Rules and Regulations Exhibit G HVAC Standards Exhibit H Legal Description of the Property Exhibit I Index of Defined Term Exhibit J. Form of Lease Memorandum 4 AGREEMENT OF LEASE CENTERPOINTE I AND II FAIRFAX, VIRGINIA This Lease is made this 10th day of August, 1992, between JOSHUA REALTY CORPORATION, a Delaware corporation, (general partner and sole remaining partner of Faircenter Limited Partnership, a Delaware limited partnership)(hereinafter referred to as "Landlord"), and AMERICAN MANAGEMENT SYSTEMS, INC., a Delaware corporation, (hereinafter referred to as "Tenant"). 1. REFERENCE DATA AND DEFINITIONS: ANY REFERENCE IN THIS LEASE TO THE FOLLOWING SUBJECTS SHALL INCORPORATE THEREIN THE DATA STATED FOR THE SUBJECTS IN THIS ARTICLE 1. 1.1. DEMISED PREMISES (a) SPACE DESCRIPTION - CENTERPOINTE I: Approximately 203,630 rentable square feet on eleven (11) floors of the building ("Centerpointe I Building") located at 4050 Legato Road, Fairfax, Virginia and commonly known as Centerpointe I (the "Centerpointe I Premises") as shown on Exhibit "A-l" attached hereto. (b) SPACE DESCRIPTION - CENTERPOINTE II: Approximately 38,384 rentable square feet of space on the third (3rd) and fourth (4th) floors of the building ("Centerpointe II Building") located at 4000 Legato Road, Fairfax, Virginia and commonly known as Centerpointe II (the "Centerpointe II Premises") as shown on Exhibit "A-2" attached hereto. (c) RENTABLE AREA OF THE DEMISED PROMISES: The Centerpointe I Premises and the Centerpointe II Premises are herein together defined as the "Premises" and the Centerpointe I Building and the Centerpointe II Building are herein together defined as the "Buildings". The exact square footage of the Premises has been measured in accordance with the Washington, D.C. Association of Realtor's Standard Method of Measurement (January 1, 1989). This figure shall be used for all purposes under this Lease, including, but not limited to, determination of Base Rent and Additional Rent. 1.2. Base Rent: Thirteen Dollars and Seventy Cents ($13.70) per rentable square foot, net of Electricity Costs (as defined in Article 7.1.3), and subject to adjustment as described in Article 6.3 below. 5 1.3.1. BASE YEAR OPERATING EXPENSES shall mean the Operating Expenses (as defined in Article 7 below) incurred by Landlord during the calendar year 1993, as adjusted pursuant to Article 7.4.4 below. 1.3.2. BASE YEAR REAL ESTATE TAXES shall mean the Real Estate Taxes (as defined in Article 7 below) incurred by Landlord during calendar year 1993 (as the same may be adjusted pursuant to Article 7.1.1(e) below). 1.4. RENT COMMENCEMENT SCHEDULE: Tenant shall commence Base Rent payments for the Premises in accordance with the schedule below. Rent Commencement Date RSF ----------------- --- (a) December 1, 1992 70,451 (b) May 1, 1993 38,336 (c) August 1, 1993 38,336 (d) November 1, 1993 38,384 (e) May 1, 1994 56,507 The space described in Article 1.4(a) above is herein defined as the "Initial Space" and the space described in Article 1.4(b)-1.4(e) is herein defined as the "Subsequent Space". The dates in Articles 1.4(b)-1.4(e) under the column "Rent Commencement Date" are each herein defined as a "Scheduled Rent Commencement Date". 1.5. CONCESSION FUND: $28.50 per rentable square foot. 1.6. SECURITY DEPOSIT: None 1.7. STANDARD BUILDING OPERATING DAYS AND HOURS: (a) Centerpointe I Building: 8:00 A.M. to 7:00 P.M. Monday - Friday 8:00 A.M. to 1:00 P.M. Saturday (b) Centerpointe II Building: 8:00 A.M. to 6:00 P.M. Monday - Friday 8:00 A.M. to 1:00 P.M. Saturday 2 6 1.8. PERMITTED USE: General office use, and uses incidental thereto (including, without limitation, the conduct of computer operations and the use and operation of all equipment related thereto). 1.9 (a) ADDRESS FOR NOTICES TO TENANT: American Management Systems, Inc. 1525 Wilson Boulevard Suite 130 Arlington, Virginia 22209 Attn: Mr. Thomas W. Huba with copies of notices at all times to: Shaw, Pittman, Potts & Trowbridge 2300 N Street N.W. Washington, D.C. 20037 Attn: Craig A. deRidder, Esquire (b) ADDRESS FOR NOTICES TO LANDLORD PRIOR TO LEASE COMMENCEMENT DATE: Joshua Realty Corporation c/o LPC Commercial Services, Inc. 4050 Legato Road Fairfax, Virginia 22030 Attn: Mr. Michael Taylor Address from and after Lease Commencement Date: c/o LPC Commercial Services, Inc. 4000 Legato Road Suite 950 Fairfax, Virginia 22030 Attn: Mr. Michael Taylor with copies of notices at all times to: Lincoln Property Company 1530 Wilson Boulevard, Suite 200 Arlington, Virginia 22209 Attention: Mr. John B. Grissim 3 7 and General Electric Investment Corporation 3003 Summer Street Stamford, Connecticut 06904-7900 Attention: Mr. Steven D. Burton and Wolf, Block, Schorr and Solis-Cohen 12th Floor Packard Building 15th and Chestnut Streets Philadelphia, PA 19102 Attention: Alvin H. Dorsky, Esquire 2. Demise of Premises. Landlord hereby leases to Tenant, and Tenant hereby hires and takes from Landlord, the premises identified as the "Premises", for the Term (defined below) and subject to the covenants, terms, provisions and conditions of this Lease, together with the right to use, in common with others, of all common and public areas in the Buildings including (without limitation) elevators, stairways, lobbies and corridors in the Buildings necessary for access to the Premises (provided, however, that subject to Landlord's right to entry hereunder, use of the common areas of the Centerpointe I Building shall be consistent with that afforded to a single tenant building during the time that Tenant is leasing one hundred percent (100%) of the rentable area of the Centerpointe I Building). 3. Term. 3.1. The term (the "Term") shall commence on the date of this Lease (the "Lease Commencement Date") and shall end, without the necessity of notice from either party to the other, on November 30, 2007 ("Termination Date"). 3.2. The Term shall commence as to each segment of the Subsequent Space on the earlier of (i) the date which is four (4) months prior to the respective Scheduled Rent Commencement Date for such segment of the Subsequent Space or (ii) the date that Tenant or anyone claiming under or through Tenant first occupies such segment of the Subsequent Space (each such date which is the earlier of (i) or (ii) above is herein defined as a "Subsequent Lease Commencement Date"). 3.2.1. Tenant's obligation to pay Rent (defined in Article 1.2) for the Initial Space shall commence on December 1, 1992 ("Rent Commencement Date"). All other obligations of Tenant pertaining to the initial Space under this Lease shall commence on the Lease Commencement Date. 4 8 3.2.2. Tenant's obligation to pay Rent for any segment of the Subsequent Space shall commence on the Scheduled Rent Commencement Date for such segment of the Subsequent Space (each such date is herein defined as a "Subsequent Rent Commencement Date"). If Tenant occupies any segment of Subsequent Space for the Permitted Use prior to the Subsequent Rent Commencement Date for that segment of Subsequent Space, then Tenant shall pay to Landlord an amount equal to Five Dollars ($5.00) per rentable square foot per annum, in equal monthly installments in advance, as Additional Rent hereunder for each such segment of Subsequent Space from and after the date that Tenant occupies and uses that segment of Subsequent Space for the Permitted Use until the Subsequent Rent Commencement Date for that segment of Subsequent Space. All other obligations of Tenant pertaining to each segment of the Subsequent Space under this Lease shall commence on the respective Subsequent Lease Commencement Date. 3.3. The First Lease Year shall be the period commencing on the Rent Commencement Date and continuing through December 31, 1993. Each Lease Year after the First Lease Year shall be a consecutive twelve (12) month period commencing on the first day of the calendar month immediately following the preceding Lease Year, except that the Last Lease Year shall be the period from the first day of Tenant's partial Lease Year occurring at the end of the Term until the Termination Date. 4. Possession. 4.1. In addition, to the extent required by law, Landlord will comply with the requirements of the Americans With Disabilities Act of 1990 ("ADA") requirements applicable to the "Core Elements" of the Buildings (including those which may arise because of the performance of the Tenant Work) and Tenant shall comply with all other ADA requirements respecting the Premises, including those requirements arising from Tenant Work. The "Core Elements" of the Buildings are defined as the roof, the ground floor lobby or lobbies, entryways, the garage, surface parking areas, paths of travel to and from the Buildings, loading docks and loading zones, elevators and elevator call buttons, stairways, risers and other penetrations, restrooms and drinking fountains not installed by Tenant in connection with the Tenant Work, or otherwise, and the base-building mechanical, electrical, HVAC and plumbing systems (excluding any changes thereto or extensions thereof performed as part of the Tenant Work or any later Tenant alteration). 4.2. "Tenant Work" as used in this Lease shall mean the provision of the materials, components, labor and services encompassed within the work described in the Tenant Design and Construction Process (as defined in Exhibit "C"). Landlord shall provide a concession fund equal to Twenty-Eight Dollars and Fifty Cents ($28.50) per rentable square foot ("Concession Fund"). The Concession Fund may be utilized to pay the cost of construction, demolition, construction documentation and associated permits and fees, architectural and engineering fees, moving expenses and other reasonable move-related expenses, signage, Tenant's legal fees incurred in negotiations of this Lease, remaining lease liability coverage and holdover penalties and furniture and equipment. The Concession Fund shall be applied to the items described above in such amounts as Tenant may determine, and disbursed by Landlord from time to time to Tenant, so long as Tenant is not in default (which term for purposes of this Article 4.2 5 9 shall not be deemed to be a circumstance entitled to the benefit of notice and cure periods provided under Article 31 below) under this Lease, pursuant to the Concession Fund Voucher Form attached hereto as Exhibit "D". Tenant covenants that Tenant shall utilize a minimum of fifty percent (50%) of the Concession Fund for direct hard cost improvements to the Premises. For purposes hereof, the term "hard costs" shall mean all costs incurred by Tenant in the design, engineering and construction of leasehold improvements in the Premises, including all contractor and materialman charges. in no event shall Landlord have any obligation to pay for costs relating to Tenant Work or for any of the other items for which the Concession Fund may be utilized in an amount that exceeds the Concession Fund. A reconciliation to establish that the requisite portion of the Concession Fund has been expended for hard costs of improvements to the Premises shall be submitted to Landlord by Tenant within sixty (60) days after the completion of the Tenant Work. So long as Tenant has expended the requisite portion of the Concession Fund on hard costs and Tenant is not in default (which term for purposes of this Article 4.2 shall not be deemed to be a circumstance entitled to the benefit of notice and cure periods provided under Article 31 below) under this Lease, the portion of the Concession Fund not disbursed to Tenant by the date of reconciliation referred to above shall be credited against the Monthly Installments of Base Rent payable hereunder as follows: (i) an amount up to $5.00 per rentable square foot shall be credited against the next installments) of Base Rent payable hereunder and (ii) any amount in excess of $5.00 per rentable square foot shall, after the credit described in the immediately preceding clause has been exhausted, be credited in twelve equal installments against the next twelve Monthly Installments of Base Rent. 4.3. Landlord and Tenant recognize and agree that floors 1, 7, 8 and 10 of the Centerpointe I Building constitute the Initial Space, that the County of Fairfax ("County") has vacated the Initial Space and that Landlord has made the Initial Space available to Tenant for Tenant Work on the date hereof. Except for the 4th floor of the Centerpointe II Building, which shall be used by the County for storage until February 28, 1993, Landlord shall make the Subsequent Space available for possession by Tenant no later than December 31, 1992. If for any reason Landlord is unable to so deliver the Subsequent Space, Landlord agrees to pay to Tenant, as Tenant's sole remedy for Landlord's inability to deliver the Subsequent Space as aforesaid (as reimbursement for the actual holdover penalty that Tenant will incur under its present lease for premises located at 1525 Wilson Boulevard, Arlington, Virginia) (the "Wilson Boulevard Lease"), an amount up to $75,000 per month, to be pro rated on a per them basis if permitted under the Wilson Boulevard Lease (the "Holdover Payment") and to the extent that such failure to deliver any segment of the Subsequent Space causes Tenant to have less than 120 days to complete the Tenant Work for any segment of the Subsequent Space, the Subsequent Rent Commencement Date for such segment(s) of the Subsequent Space shall be extended by the number of days needed to provide Tenant with 120 days to complete the Tenant Work. 5. Use of the Premises. Tenant shall not use or occupy, or permit or suffer to be used or occupied, the Premises or any part thereof, other than for the Permitted Use (set forth in Article 1.8), and except for any retail uses that may be permitted on the first floor of the Centerpointe I Building pursuant to Article 14.1.2 below. 6. Base Rent. 6 10 6.1.1. Covenant to Pay. Tenant covenants that it shall, without any demand therefor and without set off or deduction whatsoever (except as may be expressly permitted pursuant to Article 53.2 below), pay to Landlord at Landlord's Address (set forth in Article 1.9) or to such other person and at such other place as Landlord may from time to time designate in writing, in lawful money of the United States of America, rent at the annual rate of the Base Rent. Base Rent shall be payable monthly in installments (each a "Monthly Installment of Base Rent"), in advance on or before the first day of each and every calendar month during the Term from and after the Rent Commencement Date, as to the Initial Space, and from and after the applicable Subsequent Rent Commencement Date, as to each applicable segment of the respective Subsequent Space. 6.1.2. Advance Deposit of Base Rent. At the time of execution of this Lease Tenant shall pay to Landlord an amount equal to the first Monthly Installment of Base Rent for the Initial Space, to be applied by Landlord on the Rent Commencement Date. 6.2. Partial Month. If the Rent Commencement Date or a Subsequent Rent Commencement Date is other than the first day of a month, Rent (defined in Article 50.12), including, without limitation, Base Rent, due from such date until the first day of the following month shall be prorated and shall be payable on the Rent Commencement Date or the Subsequent Rent Commencement Date, as applicable. 6.3. Escalation of Base Rent. Commencing on May 1, 1994 ("Escalation Date"), and on the first day of each May during the Term thereafter (each a "Subsequent Escalation Date") (each such period from and after the Escalation Date to the date which is one day prior to the next Subsequent Escalation Date being herein defined as an "Escalation Period"), Base Rent per rentable square foot shall be increased for each Escalation Period by an amount equal to Two and Twenty-Five One Hundredths percent (2.25%) multiplied by the difference between (i) Base Rent per rentable square foot, at the rate effective on the day before the applicable Subsequent Escalation Date and (ii) the sum of the Base Year Operating Expenses and the Base Year Real Estate Taxes per rentable square foot. In addition to the foregoing escalation of Base Rent, the Base Rent then in effect shall be increased by One Dollar ($1.00) per rentable square foot at the beginning of the sixth (6th) Lease Year and by Two Dollars ($2.00) per rentable square foot at the beginning of the eleventh (11th) Lease Year. By way of illustration of the foregoing formula, if the sum of Base Year Operating Expenses and Base Year Real Estate Taxes per rentable square foot is Five Dollars ($5.00), then on the Escalation Date Base Rent per rentable square foot will increase to $13.90 per rentable square foot from and after the Escalation Date until the next Subsequent Escalation Date. 6.4. Independent Covenant; Survival. Tenant's covenant to pay the Base Rent is independent of any other covenant, agreement, term or condition of this Lease (subject to Article 53.2 below). Without limitation on other obligations of Tenant which shall survive the expiration of the Term, the obligation of Tenant to pay Base Rent shall survive the expiration of the Term. 7. Additional Rent. 7 11 7.1. Covenant to Pay. In addition to paying Base Rent, Tenant covenants that it shall without (except as may be otherwise expressly provided herein) any demand therefor and without set-off or deduction whatsoever (subject to Article 53.2 below), pay to Landlord at Landlord's Address or to such other person and at such other place as Landlord may from time to time designate in writing, in lawful money of the United States of America, within thirty (30) days of a statement of the amount due therefor (except as provided in Article 7.5 with respect to estimated payments of Additional Rent and except that if a different period for payment is specifically set forth, said different period shall control) the following in this Article 7 (collectively, "Additional Rent"): 7.1.1. Real Estate Taxes. "Net Real Estate Taxes", as defined below. (a) Tenant's Centerpointe I Proportionate Share (as defined in Article 50.16 below) of Real Estate Taxes (as defined in Article 50.11) for the Centerpointe I Building in excess of Tenant's Centerpointe I Proportionate Share of Base Year Real Estate Taxes for the Centerpointe I Building ("Centerpointe I Net Real Estate Taxes"). (b) Tenant's Centerpointe II Proportionate Share (as defined in Article 50.16) of Real Estate Taxes for the Centerpointe II Building in excess of Tenant's Centerpointe II Proportionate Share of Base Year Real Estate Taxes for the Centerpointe II Building ("Centerpointe II Net Real Estate Taxes"). (c) Tenant's Centerpointe I Net Real Estate Taxes and Tenant's Centerpointe II Net Real Estate Taxes are herein defined as "Net Real Estate Taxes". (d) Upon the written request of Tenant, during any year of the Term of this Lease, Landlord shall deliver a copy of the real property tax assessment for the Buildings for that year and shall inform Tenant whether or not Landlord intends to institute an appeal ("Tax Appeal") of the real property tax assessment for either or ' both of the Buildings. If, notwithstanding Landlord's intention not to appeal the real property tax assessment in a particular year, Tenant in its reasonable judgment determines that a Tax Appeal should be filed, then Tenant shall deliver written notice of such determination to Landlord no later than the earlier of (i) thirty (30) days following Landlord's delivery of Landlord's notice of its decision not to file a Tax Appeal, or (ii) thirty (30) days prior to the deadline for filing the Tax Appeal. In such event, Landlord, with counsel designated by Landlord, shall file and prosecute a Tax Appeal with the same diligence as if Landlord had itself made the determination to undertake such Tax Appeal, and Tenant may participate and consult with Landlord in such proceedings. The cost and expense of any Tax Appeal shall be an Annual Operating Cost, as defined in Article 7.4.1 below. In the event Landlord receives a rebate or refund of any Real Estate Taxes with respect to which Tenant has contributed its Proportionate Share hereunder, Landlord shall deliver to Tenant its Proportionate Share of the rebate or refund, up to an amount which is equal to the sum of the Net Real Estate Taxes which may have been paid by Tenant in that year, within thirty (30) days after the receipt thereof by Landlord. (e) For the Lease Year commencing January 1, 1996 the parties shall adjust Base Year Real Estate Taxes if the average of the assessments for the Buildings (as opposed 8 12 to changes in the tax rate or the percentage of the assessment upon which the rate is based) for calendar years 1993, 1994 and 1995 ("Three Year Average Assessment") deviates from the 1993 Base Year assessment ("Base Year Assessment") by more than 5%. If the Three Year Average Assessment is not 5% higher or 5% lower than the Base Year Assessment, Base Year Real Estate Taxes shall continue to be 1993 calendar year Real Estate Taxes by the tax rate effective in calendar year 1993. There shall be no readjustment of Tenant's Proportionate Share of Real Estate Taxes for Lease Years 1993, 1994 or 1995. If Base Year Real Estate Taxes are adjusted pursuant to this Article 7.1.1(e), the escalations to Base Rent made pursuant to Article 6.3 shall be recalculated on the basis of the adjusted Base Year Real Estate Taxes, and any underpayment or overpayment of the Base Rent made prior to the adjustment of Base Year Real Estate Taxes on the basis of the 1993 Base Year Real Estate Taxes during any Escalation Period shall be paid by Tenant to Landlord, or by Landlord to Tenant, within thirty (30) days of such recalculation. 7.1.2. Lease Taxes. All Lease Taxes (defined in Article 50.7), unless Tenant shall be prohibited by law from paying the same, in which event Landlord shall be entitled, at its election, to terminate this Lease by written notice to Tenant, and Landlord and Tenant shall enter into a new lease which will provide Landlord with economic benefits of an economic value as closely as is equitably possible to the economic benefits that Landlord would have enjoyed had Tenant been lawfully permitted to pay such Lease Taxes. 7.1.3. Tenant Electricity. From and after the date on which Tenant commences the conduct of its business therein for the Permitted Use, as to the Initial Space, and as to any Subsequent Space, Tenant shall pay to Landlord as Additional Rent, within thirty (30) days after receipt from Landlord of each statement of the amount due, Landlord's actual cost in each period chosen by Landlord, of supplying such quantity of electricity ("Tenant Electricity") as is consumed by Tenant in the Premises ("Tenant Electricity Costs"). Tenant Electricity shall include the electricity supplied to the common areas of the interior portion (excluding the garage) of the Centerpointe I Building (including, without limitation, the cost for taxes, fuel adjustment charges, transfer charges and other like charges regularly passed on to the consumer by the public utility furnishing electricity to the Buildings). Tenant Electricity Costs shall be determined by Landlord (i) on the basis of a submeter installed by Landlord, at Landlord's expense on the first floor of the Centerpointe I Building and (ii) on the basis of a separate submeter for the third, fourth and, if and when leased by Tenant pursuant to the first offer rights described in Article 61 and the expansion rights described in Article 62, on any other full floors of the Centerpointe II Building, all such meters to be installed by Landlord at Landlord's expense. For any floor less than a full floor in the Centerpointe II Building, Tenant Electricity Costs applicable to such floor shall be determined by deeming Tenant's obligation to be equal to that fractional share of Tenant Electricity Costs, the numerator of which is the Rentable Area of the Premises on that floor and the denominator of which is the Rentable Area of all leased premises on such floor of the Centerpointe II Building which share a common electrical submeter and which were occupied during the period in question, with equitable adjustments being made for occupancy during only portions of such period. The calculation of the billing in said statement shall be determined by Landlord in good faith, using reasonable accounting principles, it being understood that Landlord shall not derive any profit from the supplying of electricity. Landlord shall pass on to Tenant the benefit of any bulk or 9 13 discount rates for electricity that Landlord is able to obtain for the Buildings and Landlord agrees to use its best efforts to obtain such reduced rates. 7.1.4. Other Sums. All other sums payable under this Lease for any purpose, whether or not they are expressly designated as "Additional Rent" or rent or would otherwise be considered rent, are herein payable as "Additional Rent". 7.2. Independent Covenant: Survival. Tenant's covenant to pay the Additional Rent is independent of any other covenant, agreement, term or condition of this Lease (subject to Article 53.2 below). Without limitation on other obligations of Tenant which shall survive the expiration of the Term, the obligation of Tenant to pay Additional Rent shall survive the expiration of the Term. 7.3. Partial Year. If the Rent Commencement Date is not the first day of a calendar year or if the expiration date of the Term is not the last day of a calendar year, the amount computed as Additional Rent with respect to such partial calendar year under this Article 7 shall be prorated in proportion to the portion of such calendar year falling within the Term. 7.4. Operating Costs. Tenant shall also pay as "Additional Rent", "Net Annual Operating Costs", as defined below. (a) Tenant's Centerpointe I Proportionate Share of Annual Operating Costs for the Centerpointe I Building in excess of Tenant's Centerpointe I Proportionate Share of Base Year Operating Costs for the Centerpointe I Building ("Centerpointe I Net Annual Operating Costs"); (b) Tenant's Centerpointe II Proportionate Share of Annual Operating Costs for the Centerpointe II Building in excess of Tenant's Centerpointe II Proportionate Share of Base Year Operating Costs for the Centerpointe II Building ("Centerpointe II Net Annual Operating Costs"); (c) Tenant's Centerpointe I Net Annual operating Costs and Tenant's Centerpointe II Net Annual Operating Costs are together defined as "Net Annual Operating Costs". 7.4.1. The term "Annual Operating Costs" shall mean the direct actual costs to Landlord, determined consistently on a cash, accrual or modified accrual basis, at Landlord's option, of operating and maintaining the Property during each calendar year of the Term. Consistent with the operation of a first class office building in the Northern Virginia area, Landlord agrees to use its reasonable efforts to minimize Annual Operating Costs to the same extent as if the entire burden thereof were an unreimbursable obligation of Landlord. Such 'costs shall include, by way of example rather than of limitation, (A) charges for, and taxes on, the furnishing to the Property of water and sewer service, electric energy to common areas (other than interior common areas of the Centerpointe I Building, the payment of which is governed by Article 7.1.3 above) and, if the building systems should be converted to receive the same, steam or fuel and other utility services; (B) costs of elevator service, maintenance of the Property, janitorial service and trash removal; (C) 10 14 charges for governmental permits; (D) wages, salaries and benefits of employees of Landlord, or of any management company, who are directly involved in management of the Property (which costs shall be equitably allocated among the buildings serviced by such employee), and management fees, overhead and expenses; (E) premiums for hazard, rent, liability, worker's compensation and other insurance; (F) costs arising under service contracts; (G) legal, auditing and other professional and consulting fees; (H) repairs, replacements and improvements which are in Landlord's reasonable judgment necessary to cause the Buildings to comply with changes in existing law arising from and after the date hereof or those which reduce or are expected or intended to result in a net reduction (taking into account the cost of such improvement) in Annual Operating Costs, in which case the cost thereof shall be included in Annual Operating Costs as set forth in Article 7.4.3 below; (I) taxes, including the Fairfax County BPOL gross receipts and gross expenditures taxes (other than Real Estate Taxes and state and federal income taxes and any other income, profit, franchise, capital stock, excise, estate, gift, succession, transfer or recordation tax or levy); (J) charges, if any, for the Buildings' share of the costs of (i) any common means of vehicular access and loading facilities and (ii) common facilities which the Buildings may share with others, (K) the cost of all other items which under standard accounting practices constitute operating or maintenance costs which are reasonably allocable to the Property or any portion thereof. 11 15 7.4.2. The term "Annual Operating Costs" shall not include: (A) depreciation; (B) principal and interest on encumbrances; (C) ground rents; (D) costs actually reimbursed through insurance proceeds to repair or replace damage by fire or insured other casualty; (E) compensation and benefits of executive officers of Landlord (or its managing agent above the level of building manager; (F) Electricity Costs)(defined in 1,101--Article 7.1.4); (G) commissions payable to leasing brokers and advertising costs and other marketing expenses associated with procuring new tenants; (H) expenditures for capital improvements except those referred to in Section 7.4.1(H); (I) costs actually reimbursed by condemnation awards or under contractor warranties; (J) costs of preparing tenant space for other tenants; (K) legal fees relating to preparation of tenant leases, financing of the Buildings and violations by the Landlord or any tenant under tenant leases; (L) fees or charges paid to any Affiliate of Landlord to the extent such fees or charges exceed the fees or charges that would have been incurred to an independent entity in an arm's length transaction; (M) cost of utilities and services furnished to retail tenants who pay directly for such utilities and services under their leases; (N) costs of original artwork; (0) costs of furnishing any additional or special service to any tenant, if such service is not also available to Tenant at no charge; (P) costs of upgrading the common areas of the Buildings beyond the level of maintenance, repair, modification and replacement necessary to preserve the first class standard of quality prevailing in such areas on the date of this Lease; (Q) the cost of any fine for Landlord's failure to comply with any laws for which this Lease imposes the obligation on Landlord to comply, (R) the wages and benefits of any personnel employed to manage the garage; (S) the cost of any personnel, materials or services shared by the Buildings and any other buildings owned or operated by Landlord, to the extent reasonably allocable to such other buildings; (T) annual increases in rent for the space occupied by the management office in a Building in excess of annual increases in the Consumer Price Index (CPI-W), DC-MD-VA; and (U) phase outs of chlorofluorocarbon refrigerants which do, not result in a net decrease in Annual Operating-Costs. 7.4.3. If there shall be purchased any item of capital equipment or made any capital expenditure required by changes in existing law or designed to result in net savings or reductions in Annual Operating Costs (including any phase outs of chlorofluorocarbon refrigerants which result in a net decrease in Annual Operating Costs) incurred or expected to be incurred or in Electricity Costs applicable to the Buildings generally, then the costs for same shall be included in Annual Operating Costs for the calendar year in which the costs are incurred and subsequent calendar years, on a straight line basis, to the extent that such items are amortized over their useful life, as determined pursuant to Generally Accepted Accounting Principles, with an interest factor equal to the Landlord's actual cost of funds. If there shall be leased any capital equipment to meet requirements of the law or designed to result in savings or reductions in Annual Operating Costs, or in Electricity Costs applicable to the Buildings generally, then the rental and other costs paid for such leasing shall be included in Annual Operating Costs for the calendar years in which they were incurred, but only to the extent that the amortized cost of such items could have been included hereunder had they been purchased. 7.4.4. In determining Annual Operating Costs for any year, including Base Year Operating Expenses, if for thirty (30) or more consecutive days less than 100% of the Rentable Area of the Centerpointe I Building or the Centerpointe II Building shall have been occupied by tenants, or if any tenant is separately obtaining janitorial services or any other services being 12 16 furnished by Landlord hereunder, then Annual Operating Costs shall be deemed for such year to be an amount equal to the like expenses that would normally be expected to be incurred had such occupancy of the Centerpointe I Building and the Centerpointe II Building been at least 100% throughout such year, and had Landlord been furnishing all customary services to tenants, as reasonably determined by Landlord. In making the adjustment called for under this Article 7.4.4, Landlord shall not adjust any element of Annual Operating Costs which would not vary with the occupancy rate of the Buildings. This Article 7.4.4 shall not be applied in a manner which would enable Landlord to recover from the tenants in either Building any amount in excess of the costs actually incurred by Landlord that are attributable to the occupied premises in such Building. 7.4.5. If, at any time during the Term of this Lease Tenant shall vacate all or any portion of the Premises (and such portion of the Premises shall not be occupied by any assignees or sublessees of Tenant), then, to the extent that Landlord is able to suspend janitorial services for such portion of the Premises vacated by Tenant and receive a reduction of the amounts owing under Landlord's janitorial contract, Landlord shall credit against Tenant's Base Rent obligation under this Lease the amount by which Landlord is able to reduce its janitorial costs with respect to the vacant space (but not by more than the janitorial costs incurred with respect to such space in the Base Year). 7.5. Payment of Estimated Additional Rent. Anything contained in this Lease to the contrary notwithstanding, Landlord shall be entitled, at its discretion, to make reasonable estimates, prior to April 30 of each calendar year, of the amounts of Additional Rent to become due for Net Annual operating Costs and Net Real Estate Taxes for any full or partial calendar year under this Article, and to require Tenant to pay, (i) in the case of Net Annual Operating Costs, such estimated amounts in equal monthly installments on the first day of each month during each calendar year, and (ii) in the case of Net Real Estate Taxes, such estimated amounts in equal monthly installments on the first day of each month during a 12-month period ending not more than 60 days before the last day in each calendar year when any annual Real Estate Tax may be paid without interest or penalty; provided, however, that whenever an estimate of Additional Rent shall be revised as aforesaid, Landlord shall have the right to increase the monthly installments to be paid thereafter for that category so that such installments, when added to the installments which Tenant was theretofore required to pay for the same category, shall equal the increased estimate. Landlord's estimate of Annual Operating Costs for the upcoming calendar year shall not exceed the Annual Operating Costs incurred during the preceding calendar year by more than ten percent (10%). After the end of each calendar year (for Net Annual Operating Costs) or the end of the applicable 12-month period (for Net Real Estate Taxes), Landlord shall cause the actual amount of such Additional Rent to be computed and statements thereof to be sent to Tenant; and Tenant shall, within 30 days after any statement is sent to Tenant, pay to Landlord the amount of any deficiency shown therein. If such statement shall show that Tenant has made an overpayment, Tenant shall receive a credit to the extent of such overpayment, which credit shall be made against the installment of Base Rent next falling due hereunder, or refunded to Tenant if occurring at the end of the Term, and Landlord's obligation to fund such a refund shall survive the expiration of the Term of this Lease. 13 17 7.6. Disputes. Unless Tenant, within 180 days after Landlord shall deliver to Tenant Landlord's computation of Base Year Operating Expenses and Base Year Real Estate Taxes, or any other statement of Additional Rent, shall give notice to Landlord that Tenant disputes said statement, specifying in detail the basis for such dispute, each statement furnished to Tenant by Landlord under any provision of this Article shall be conclusively binding upon Landlord and Tenant as to the particular Additional Rent due from Tenant for the period represented thereby. Pending resolution of any dispute, Tenant shall pay the Additional Rent in accordance with the statements furnished by Landlord. Notwithstanding the foregoing, if Tenant in any year shall timely elect to cause an audit to be performed of Landlord's statement, and the audit reveals, in Tenant's reasonable judgment, that a component of the Annual Operating Costs may have been incorrectly charged in the past, Tenant shall have the right to review Landlord's books as to that item only, for the three calendar years prior to the year in which the audit is performed and any discrepancies shall be adjusted, and any reimbursement of the cost of the audit, shall occur as provided below (except that the standard of a 5% discrepancy giving rise to an obligation on the part of Landlord to reimburse Tenant's audit costs shall relate to the components of Operating Costs that Tenant was entitled to audit for such prior years, rather than to Operating Costs in the aggregate). Landlord agrees, upon prior written request, to make Landlord's books and records which are relevant to any operating statement available at Landlord's or its agent's offices during normal business hours for inspection by Tenant and by a "Big Six" accounting firm (or other national or regional accounting firm to be approved by Landlord, which approval shall not be unreasonably withheld or delayed) representing Tenant at Tenant's sole expense (unless Tenant's inspection or audit discloses a discrepancy of more than five percent (5%) in the Annual Operating Costs, 'in which event the audit or inspection shall be at Landlord's expense), provided that any disputed amounts shall have been paid by Tenant to Landlord. Any discrepancy disclosed by the inspection or audit by Tenant's "Big Six" accounting firm (or other national or regional accounting firm approved by Landlord as aforesaid) shall be corrected by payment of any shortfall to Landlord by Tenant within thirty (30) days after the discrepancy is revealed, or by a credit against the next payment(s) of Base Rent or Additional Rent hereunder. 8. Late Charge; Interest. If any payment or any part thereof to be made by Tenant to Landlord pursuant to the terms of this Lease shall become overdue for a period in excess of five (5) calendar days, a "Late Charge" of $.03 for each dollar so overdue shall be paid by Tenant for the purpose of defraying the expense incident to handling such delinquent payment, together with interest from the date when such payment or such part thereof was due, at the Lease Interest Rate (defined in Article 50.6). The foregoing "Late Charge" (but not interest at the Lease Interest Rate) shall not be payable, however, for the first two (2) infractions during any twelve (12) month period. Nothing herein shall be construed as waiving any rights of Landlord arising out of any default of Tenant, by reason of Landlord's imposing or accepting any such Late Charge or interest; the right to collect the Late Charge and interest is separate and apart from any rights relating to remedies of Landlord after default by Tenant including, without limitation, the rights of Landlord pursuant to Article 31 of this Lease. 9. Services. 14 18 9.1. Landlord agrees that when Tenant occupies the Initial Space and the Subsequent Space for the Permitted Use, it shall provide or cause to be provided the following: 9.1.1. HVAC. In accordance with standards appropriate for a first-class office building attached hereto as Exhibit "G", furnish heat, ventilation and air-conditioning to the Premises during ordinary Business Hours (defined in Article 50.8) by a "Variable Air Volume System", subject to the following: (A) Heating and/or air-conditioning supplied to Tenant during times other than Ordinary Business Hours ("HVAC Off-Hours") required by Tenant shall be supplied on a floor-by-floor basis upon reasonable prior notice, and shall be paid for by Tenant as Additional Rent within 30 days after Tenant's receipt of each bill therefor, at the "HVAC Off-Hours Rate" (defined in Article 50.4); (B) Landlord shall not be responsible for the failure of the heating or air-conditioning system to meet the aforesaid standards if such failure results from occupancy of the Premises by more than an average of one person for each 100 square feet of usable space or if Tenant uses equipment and the combined electrical load of Tenant's equipment exceeds 4.0 watts, 120 volts per square foot of floor area in any one room or area; (C) In addition, if the Premises are used in a manner exceeding the aforementioned occupancy or electric load criteria, Tenant shall pay to Landlord as Additional Rent, within 30 days after Tenant's receipt of each bill therefor, Landlord's costs of supplying heating or air conditioning resulting from such excess, at such rates as Landlord shall establish therefor; (D) If, due to the use of the Premises in a manner exceeding the aforementioned occupancy or electrical load criteria or if Tenant has requested and installed a supplemental HVAC system, or due to the arrangement of partitioning or the distribution system within the Premises, impairment of normal operation of the heating or air-conditioning in the Premises results, necessitating changes in the heating or air-conditioning distribution system within the Premises, such changes may be made by Landlord upon request by Tenant, subject to the provisions of Article 9.2 of this Article 9; Tenant shall pay to Landlord as Additional Rent the cost of any such change within 30 days after Tenant's receipt of a bill therefor; (E) Tenant agrees at all times to cooperate fully with Landlord and to abide by all necessary regulations and requirements which Landlord may prescribe for the proper functioning and protection of the heating and/or air-conditioning system; (F) The foregoing heating and air-conditioning services shall be subject to any statute, ordinance, rule, regulation or resolution for energy conservation which may be promulgated by any governmental agency or organization and which Landlord shall, in Landlord's reasonable opinion, be by law required to abide by. 9.1.2. Elevators. Provide passenger elevator service to the Premises during ordinary Business Hours, with two elevators in each Building subject to call at all other times. Provide freight elevator service to the Premises subject to reasonable scheduling by Landlord. 9.1.3. Access. Furnish to Tenant's employees and agents access to the Premises (including the fire stairs for transportation between floors of the Premises, subject to any code requirements) and garage at all times, subject to compliance with such reasonable security measures as shall be from time to time in effect for the Buildings. In addition, Tenant shall have such access to the roof of the Buildings as will be necessary for Tenant to construct and maintain the alterations as described in Article 15.2 below. Tenant may use (i) the kitchen exhaust shaft in the Centerpointe I Building for data and telecommunications wiring, unless Landlord elects to 15 19 terminate such right in order to increase the fresh air capacity in the Centerpointe I Building, and (ii) the existing auxiliary cooling towers on the roof of the Centerpointe I Building. 9.1.4. Janitorial. Provide to the Premises janitorial service in accordance with the schedule annexed hereto as Exhibit "E". Any and all additional or specialized janitorial service desired by Tenant shall be contracted for by Tenant directly and the cost and payment thereof shall be the sole responsibility of Tenant. 9.1.5. Water. Provide hot and cold water, and lavatory and toilet fixtures at the Buildings' core, and water fountains, on each floor. 9.1.6. Public Areas. Keep and maintain the public areas of the Buildings clean and in good working order, and the sidewalks adjoining the Buildings clean and in good repair and substantially free from accumulations of snow and ice. 9.1.7. Repairs. Make all structural repairs to the Buildings, all repairs which may be needed to the mechanical, HVAC, electrical and plumbing systems in and servicing the Premises, and all repairs to exterior or atrium windows and glass (including caulking and weather-stripping) and all repairs to the common and public areas and facilities of the Buildings and the Property (including those portions of the Centerpointe I Building that would be common or public areas if such Building was a multi-tenant Building). 9.1.8. Electricity. Furnish electric energy as required by Tenant for general light and power use in the Premises, in addition to the electric energy required by Tenant for distribution of the Buildings' heating, ventilation and air-conditioning systems to the Premises, all subject to the following: (a) With respect to light fixtures standard in the Buildings, Landlord shall furnish and install all replacement fluorescent tubes, starters, lamps and ballasts required in the Premises, with the expense thereof to be included in Annual Operating Costs. (b) Tenant's use of electric energy in the Premises shall not at any time exceed the capacity of any of the electrical conductors and equipment in or serving the Premises. In the event that Tenant shall require electric energy for use in the Premises (exclusive of such electric energy as is required for distribution of the heating, ventilating and air-conditioning systems to the Premises) in excess of 4.0 watts per square foot as hereinabove provided, and if, in Landlord's reasonable judgment, Landlord's facilities are inadequate for such additional requirements and if electric energy for such additional requirements is available to Landlord, Landlord, upon written request and at the cost and expense of Tenant, will furnish and install such additional wires, risers, conduits, feeders, switchboards and circuit panels as reasonably may be required to supply such additional requirements of Tenant, provided (x) that the same shall be permitted by applicable laws and insurance regulations, (y) that, in Landlord's reasonable judgment, the same are necessary and will not cause damage or injury to the Buildings or the Premises or cause or create a dangerous or hazardous condition or entail excessive or unreasonable alterations or repairs or interfere with or disturb other tenants or occupants and (z) that Tenant, at Tenant's expense, shall, concurrently with the making of such written request, execute and deliver 16 20 to Landlord Tenant's written undertaking, in form and substance reasonably satisfactory to Landlord, obligating Tenant to fully and promptly pay the entire cost and expense of so furnishing and installing any such additional wires, risers, conduits, feeders, switchboards, and/or circuit panels, subject to Article 9.2 of this Article 9. 9.2. Tenant shall not install any equipment of any kind whatsoever which might necessitate any changes, replacements or additions to any of the heating, ventilating, air-conditioning, electric, sanitary, elevator or other systems serving the Premises or any other portion of the Buildings, or to any of the services required of Landlord under this Lease, without the prior written consent of Landlord, which shall not be unreasonably withheld so long as there is no adverse impact on any other tenant of a Building and there is no other adverse impact on the structural integrity of the Buildings, and in the event such consent is granted, such replacements, changes or additions shall be paid for by Tenant at Tenant's sole and exclusive expense. At the expiration or earlier termination of the Term, Tenant shall pay Landlord's cost of restoring such systems to their condition prior to such replacements, changes or additions if at the time that Landlord granted its consent to the replacements, changes or additions, Landlord conditioned its consent to their removal at the end of the Term or earlier termination of this Lease. Landlord agrees not to unreasonably require the removal of systems that are customarily installed in office buildings. 9.3. In case of accident, strikes, inability to obtain supplies, breakdowns, repairs, renewals or improvements to the Buildings or replacement of machinery therein, or for other cause deemed sufficient by Landlord in its good faith judgment, the operation of the elevators or other machinery or apparatus may be changed or suspended. As to heat, ventilation, air-conditioning, cleaning, electricity, elevator, access, janitorial, water, repairs and any other services provided to the Premises or Buildings, Landlord shall not be responsible or liable in any way for any failure, defect in supply or character of, interruption or inadequacy in the quantity or quality of the same where caused by war, civil commotion, governmental restrictions or regulations, strikes, labor disturbances, inability to obtain adequate supplies or materials, casualties, repairs, replacements, or act or omission or requirement of the public utility serving the Buildings, or any other cause beyond Landlord's reasonable control whether similar or dissimilar to the foregoing. Notwithstanding the foregoing, if any interruption of utilities or services shall continue for more than five (5) consecutive business days and shall render any portion of the Premises unusable for the normal conduct of Tenant's business, and if Tenant in fact ceases to use and occupy such portion of the Premises for the normal conduct of its business because of its inability due to the interruption (other than, e.g., entry to retrieve files and other materials), then all Rent payable hereunder with respect to such portion of the Premises shall be abated retroactively to the first (1st) day of such interruption and continuing until full use of such portion of the Premises is restored to Tenant. 9.4. Any service which Landlord is required to furnish hereunder may, at Landlord's option, be furnished from time to time in whole or in part by employees of Landlord, by Landlord's managing agent or by others. 17 21 9.5. Tenant understands that persons selected by Landlord to provide services which Tenant is entitled to (or elects to) receive may be allowed by Landlord to perform these or other services at the Centerpointe II Building for other tenants at the direct cost and expense of tenants. Tenant acknowledges that such persons are independent contractors and not agents or instrumentalities of Landlord and that such arrangements as Tenant may enter into with such persons are independent of this Lease. Landlord's engagement of any such independent contractors shall not diminish or impair Landlord's obligation to provide the services and the level of services required by this Lease. 9.6. Landlord and Tenant acknowledge that janitorial services for the Buildings shall initially be furnished by Red Coat, Inc. Landlord shall not employ any other cleaning contractor for the Centerpointe I Building without Tenant's prior written approval, which shall not be unreasonably withheld, conditioned or delayed. In the event Tenant determines that the janitorial services being furnished by Landlord pursuant to Article 9.1.4 above are unsatisfactory, in Tenant's reasonable judgment, Tenant shall deliver written notice to Landlord specifying in detail the manner in which the services are deemed deficient. If the deficiencies are not, in Tenant's reasonable judgment, substantially corrected during the next succeeding sixty (60) days, then Tenant may deliver a further notice to Landlord advising Landlord of such fact and Landlord shall either terminate the contract for janitorial services to the Buildings or submit the matter to arbitration in accordance with Article 65 below. If the arbitrator decides in favor of Tenant, Landlord shall terminate the contract for janitorial services to the Buildings. Promptly thereafter, Landlord shall enter into a new contract for janitorial services to the Buildings with a contractor approved by Tenant, such approval not to be unreasonably withheld, conditioned or delayed. If the arbitrator decides in favor of Landlord, Tenant shall be barred from sending the notice permitted by this Article 9.6 for a one year period following such determination. 9.7. Landlord and Tenant acknowledge that the Buildings shall initially be managed by LPC Commercial Services, Inc. Landlord agrees that the term of any management agreement for the Buildings shall not exceed two (2) years, shall be terminable with cause upon sixty (60) days' prior written notice and that the fee payable to any manager under each contract shall be at the then-prevailing market rate for first class buildings comparable to the Buildings in the Northern Virginia area. In the event Tenant determines that the manager of the Buildings is not operating the Buildings in a first class manner, in Tenant's reasonable judgment, then Tenant may deliver written notice to Landlord specifying in detail the manner in which the operation of the Buildings is deemed deficient. If the deficiencies are not, in Tenant's reasonable judgment, substantially corrected during the next succeeding sixty (60) days, then Tenant may deliver a further notice to Landlord advising Landlord of such fact and Landlord shall either terminate the contract for management services to the Buildings or submit the matter to arbitration in accordance with Article 65 below. If the arbitrator decides in favor of Tenant, Landlord shall terminate the management contract for the Buildings. Promptly thereafter, Landlord shall enter into a new contract for management services to the Buildings with a managing agent approved by Tenant, such approval not to be unreasonably withheld, conditioned or delayed. If the arbitrator decides in favor of Landlord, Tenant shall be barred from sending the notice permitted by this Article 9.7 for a one year period following such determination. 18 22 9.8. In the event Tenant at any time after the Base Year requests with specificity that Landlord adjust (either to increase or to decrease) the level of services being furnished to the Centerpointe I Building, Landlord agrees to confer with Tenant about such request and to make any adjustment requested by Tenant that does not impair Landlord's operation and maintenance of the Centerpointe I Building or adversely affect Base Year Operating Expenses. Landlord agrees to consult with Tenant at Tenant's request from time to time about the services being furnished hereunder to the Centerpointe I Building, and not to adopt or materially modify an annual operating budget for the Centerpointe I Building without first reviewing said budget with Tenant. 10. Repairs and Condition of Premises. Tenant covenants that at the expiration or other termination of this Lease, Tenant shall leave the Premises, and during the Term will keep the same, in good order and condition, ordinary wear and tear, damage by fire or other casualty alone excepted; and for that purpose and except as stated, Tenant will make all necessary repairs and replacements that are not the responsibility of Landlord under this Lease. Tenant shall also at all times (subject to Article 9.1.4 hereof) remove all dirt, rubbish, waste and refuse from the Premises and at the termination of the Term will also have had removed all of Tenant's property therefrom, to the end that Landlord may again have and repossess the entire Premises in good order and condition. In the event that any repair is required by reason of such removal or any negligence or abuse of Tenant or its agents or employees, Landlord may, after providing Tenant with notice (except in cases of emergency) of Landlord's intent to make such repair and Tenant's failure to make such repair within five (5) days of receipt of such notice, make such repair and Tenant shall, upon demand pay to Landlord as Additional Rent the cost actually and reasonably incurred by Landlord thereof, together with interest thereon at the Lease Interest Rate. 11. Compliance with Law. Tenant agrees to comply promptly with all laws, ordinances, regulations and other requirements whatsoever, including without limitation environmental laws, of any and all Federal, State, or local authorities or of the Board of Fire Underwriters or any insurance organizations, associations or companies, with respect to the Premises and any property owned or leased by Tenant and located within the Premises, subject, however, to Landlord's obligations under Article 9 above, this Article 11 and Article 52 below. Landlord and Tenant each agree that neither shall knowingly do or commit, or suffer to be done or committed anywhere in the Buildings, any act or thing contrary to any of the laws, ordinances, regulations and requirements hereinabove referred to in this Article. Tenant shall give Landlord prompt written notice of any accident in the Premises and of any breakage, defect or failure in any of the systems or equipment servicing the Premises. Landlord shall be responsible for any required compliance with legal requirements relating to the condition of the base Buildings (not relating to tenants' individual uses of their premises or any tenant work associated with their premises). If a condition exists such that if Tenant were to complete the Tenant Work as provided herein Tenant would be unable to obtain the required certificate of occupancy (or nonresidential use permit, if applicable) so that Tenant would be unable to lawfully occupy the Premises for the Permitted Use because of any violation of a legal requirement relating to the condition of the base Buildings as aforesaid, Tenant shall notify Landlord in writing of such violation. Landlord shall use its best efforts to cure the defect and shall have ninety (90) days to satisfy such legal requirement or to obtain the certificate of occupancy (or non-residential use permit, if applicable) on behalf of Tenant. There shall be an equitable abatement of Rent for portions of the Premises 19 23 which Tenant would not lawfully be able to occupy equal to the length of the period that Tenant is actually delayed in occupying that space. If Landlord has not satisfied the legal requirement or otherwise obtained the certificate of occupancy (or non-residential use permit, if applicable) for Tenant within such ninety (90) days, Tenant shall have the right to terminate this Lease which shall be Tenant's sole remedy under this Article 11. 12. Estoppel Certificate. 12.1. Tenant shall from time to time, within fifteen (15) days after Landlord's request or that of any mortgagee of Landlord, execute and deliver to Landlord a written instrument certifying (i) that this Lease is in full force and effect and has not been modified, supplemented or amended (or, if there have been modifications, supplements or amendments, that it is in full force and effect as modified, supplemented or amended, and stating such modifications, supplements and amendments); (ii) the dates to which Base Rent and Additional Rent and any other charges arising hereunder have been paid; (iii) the amount of any prepaid rents or credits due Tenant, if any; (iv) if applicable, that Tenant has accepted possession and has entered into occupancy of the Premises, and certifying the Lease Commencement Date, each Subsequent Lease Commencement Date, the Expansion Space Lease Commencement Date (as defined in Article 62 below), the Rent Commencement Date, each Subsequent Rent Commencement Date, the Expansion Space Rent Commencement Date (as defined in Article 62 below) and the Termination Date; (v) whether or not, to the best knowledge of the Tenant, all conditions under the Lease to be performed by Landlord prior thereto have been satisfied and whether or not Landlord is then in default in the performance of any covenant, agreement or condition contained in this Lease and specifying each, if any, unsatisfied condition and each, if any, default of which the signer may have knowledge; and (vi) any other fact or condition reasonably requested. Any certification delivered pursuant to the provisions of this Article shall be intended to be relied upon by Landlord or any of its partners and any mortgagee or prospective mortgagee or purchaser of the Property or of any interest therein. 12.2. The failure of Tenant to execute, acknowledge and deliver to Landlord a written instrument in accordance with the provisions of this Article 12 within the fifteen (15) day period above provided shall constitute an acknowledgment by Tenant, which may be relied upon by any mortgagee or prospective mortgagee or any purchaser of either or both of the Buildings or of any interest therein, that this Lease has not been modified, supplemented or amended except as set forth in Landlord's request, and is in full force and effect (or in full force and effect as so modified, supplemented or amended), that the Base Rent, Additional Rent and any other charges arising hereunder have not been paid beyond the respective due dates immediately preceding the date of such request, that Tenant has no right of set-off or other defense to this Lease and of the truth of such other facts and conditions as shall have been requested to be certified, and shall constitute, as to any person entitled to rely as aforesaid, a waiver of any defaults which may exist prior to the date of such request. Notwithstanding the foregoing, Tenant's failure to furnish such written instrument within five (5) days after Landlord's second written request therefor, shall constitute a default under this Lease. 20 24 12.3. Landlord agrees, upon not less than fifteen (15) days after receipt of Tenant's written request, to execute and deliver a written instrument to Tenant containing the statements and certifications set forth in Article 12.1, with appropriate changes reflecting the identity of the parties with respect to clause (v) of Article 12.1. Such statement of Landlord shall not be binding on a Senior Holder with respect to those matters set forth in Article 58 below and may be relied upon by Tenant and any assignee or subtenant of Tenant. 12.4. The failure of Landlord to execute and deliver to Tenant a written instrument in accordance with the provisions of Article 12.3 within the fifteen (15) day period above provided shall constitute an acknowledgment by Landlord, which may be relied upon by any prospective assignee or subtenant of Tenant, that the Lease has not been modified, supplemented or amended except as set forth in Tenant's request, and is in full force and effect (or in full force and effect as so modified, supplemented or amended), that the Base Rent, Additional Rent and any other charges arising hereunder have been paid through the respective due dates immediately preceding the date of such request, and of the truth of such other facts and conditions as shall have been requested and certified, and shall constitute, as to any person entitled to rely as aforesaid, a waiver of any defaults which may exist prior to the date of such request. The provisions of this Article 12.4 shall not be binding upon any Senior Holder with respect to those matters set forth in Article 58 below. 13. Rules and Regulations. Tenant agrees to observe the rules and regulations for the Buildings attached hereto as Exhibit "F" and made a part hereof and such additional reasonable rules and regulations and any modifications thereto made from time to time by Landlord, which, in Landlord's reasonable judgment, may be desirable for the use, entry, operation and management of the Premises, the Property or the Buildings, each of which rules and regulations and any additions and modifications thereto shall be deemed a part of this Lease with the same effect as though written herein. Tenant covenants that all such rules and regulations shall be faithfully observed and complied with by Tenant, and to cause Tenant's agents, employees and invitees and all those visiting the Premises or claiming under Tenant. Landlord agrees not to apply the rules and regulations in a discriminatory manner as between tenants of the Buildings. 14. Assignment and Subletting. 14.1.1. So long as Tenant is not in default under this Lease, upon ten (10) days prior written notice to Landlord, Tenant shall have the right at any time without Landlord's consent to sublet or otherwise permit the occupancy of all or a portion of the Premises, or to assign this Lease to any company or entity which is an Affiliate of Tenant or to any company or entity which is wholly-owned by Tenant or to any company or entity which shall acquire all of the stock or substantially all of the assets of Tenant. Any sublessee or assignee permitted pursuant to this Article 14.1.1 without Landlord's prior consent shall be bound by all restrictions on transfer under this Article 14 generally. 14.1.2. Tenant shall not mortgage, pledge or encumber this Lease, collaterally or otherwise. Except as provided in Section 14.1.1 above, Tenant shall not assign this Lease, or sublet or underlet the Premises or any part thereof, or permit any other person or entity to occupy 21 25 the Premises or any part thereof, without on each occasion first obtaining the written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed by Landlord. Without limiting the foregoing, Tenant acknowledges that it shall be reasonable for Landlord to withhold its consent if such subtenant's or assignee's business is not suitable for a first-class office building or would otherwise inhibit Landlord's marketing efforts or detract from the value of the Buildings. Further, Landlord shall not unreasonably withhold or delay its consent to a proposed sublease or subleases of portions of the first floor of the Centerpointe I Building for retail uses which would constitute an amenity to Tenant's employees, provided, however, any proposed retail sublease must not conflict with the terms of any of the then-existing leases for the Buildings, must be for an amount of space and type of use that complies with all laws, including but not limited to zoning proffers for the Property, the proposed use must be suitable for a first-class office building, and must not otherwise inhibit Landlord's marketing efforts or detract from the value of the Buildings and must otherwise be in form and substance reasonably satisfactory to Landlord. In the event that Landlord should withhold its consent to a sublease or assignment and Tenant should contest the reasonableness of Landlord's action, the parties shall submit the matter to arbitration pursuant to Article 65 below. 14.2. Except for subleases and assignments permitted pursuant to Section 14.1.1, at least 20 days prior to any proposed subletting or assignment, Tenant shall submit to Landlord a statement seeking Landlord's consent and containing the name and address of the proposed subtenant or assignee, the terms of the proposed sublease or assignment and such financial and other information available to Tenant with respect to the proposed subtenant or assignee as Landlord may reasonably request. Landlord shall indicate its consent or non-consent within 14 days of its receipt of Tenant's submission. If Landlord has not responded to Tenant within such 14 day period, Tenant shall deliver a second notice to Landlord advising Landlord of the proposed assignment or sublease and Landlord's failure to respond to the second notice within 4 days of receipt thereof shall be deemed to be consent to the proposed sublease or assignment. Should Landlord agree to an assignment or sublease, Tenant will pay to Landlord on demand a sum equal to all of Landlord's reasonable costs, including reasonable attorneys' fees, incurred in connection with such assignment or transfer. Landlord shall furnish written reasons for any non-consent. 14.3. Tenant shall have 120 days from its receipt of Landlord's consent as described in Article 14.2 of this Article 14 to enter into the proposed sublease or assignment substantially in accordance with the terms and with the identified subtenant or assignee described in Tenant's statement to Landlord, and in accordance with such other terms required by this Lease, and Tenant shall submit a fully executed sublease or assignment to Landlord. 14.4. A subletting shall not convey to any subtenant the right to exercise or receive any lease renewal option rights or space option rights of the Premises, special privileges or extra services granted to Tenant by this Lease, or addendum or amendment thereto or letter of agreement. Any sale, assignment, mortgage or transfer of this Lease or sublease of the Premises which does not comply with the provisions of this Article 14 shall be void. 14.5. Except for subleases or assignments permitted by Article 14.1.1, in the event that Tenant at any time desires to sublease or assign all or part of its interest in the Premises 22 26 or the Lease or any portion thereof which, when aggregated with all other portions of the Premises then subject to subleases collectively comprises greater than thirty-six percent (36%) of the Premises ("Proposed Recapture Space"), then Tenant shall deliver a notice to Landlord ("Recapture Notice") advising Landlord of such fact and specifying in good faith the date as of which Tenant desires the assignment or sublease to take effect (the "Proposed Transfer Date"). Tenant may deliver the Recapture Notice prior to identifying a prospective assignee of this Lease or sublessee of the Proposed Recapture Space. Landlord shall have the right in its absolute discretion to terminate this Lease as to the Proposed Recapture Space. Landlord may exercise such right to terminate by giving written notice to Tenant within twenty-one (21) days after receipt of the Recapture Notice. If the Proposed Recapture Space does not constitute the entire Premises and Landlord elects to terminate this Lease with ' respect to the Proposed Recapture Space, then (a) Tenant shall tender the Proposed Recapture Space to Landlord on the Proposed Transfer Date as if such specified date had been originally set forth in this Lease as the expiration date of the Term with respect to the Proposed Recapture Space, and (b) as to all portions of the Premises other than the Proposed Recapture space, this Lease shall remain in full force and effect except that the Rent shall be reduced pro rata. Landlord and Tenant shall promptly enter into an amendment to this Lease setting forth the new Rentable Area of the Premises and the consequent reduction in Base Rent and Additional Rent. In the event Landlord does not exercise its right to terminate this Lease with respect thereto, Tenant shall be entitled to seek an acceptable assignee or subtenant for the Proposed Recapture Space, subject to Landlord's consent pursuant to Article 14.2 above. 14.6. An assignment within the meaning of this Lease is intended to comprehend not only the voluntary action of Tenant, but also any involuntary action to include without limitation any levy or sale on execution or other legal process against the leasehold, and every assignment of the leasehold for the benefit of creditors, and the filing or any petition or order described in Article 31.1.3 below. 14.7. No subletting or assignment with or without Landlord's consent shall in any way relieve or release Tenant from liability for the performance of all terms, covenants and conditions of this Lease. Furthermore, no assignment will be valid unless the assignee shall execute and deliver to Landlord an assumption of liability agreement in form reasonably satisfactory to Landlord, including an assumption by the assignee of all of the obligations of Tenant and the assignee's ratification of and agreement to be bound by all the provisions of this Lease; and no subletting will be valid unless the subtenant first enters into a written agreement that subordinates such sublease to this Lease and confirms that no provision of such sublease is inconsistent with the terms and conditions of this Lease. Any successors and assigns of the Tenant named as Tenant on page I of this Lease shall have the same obligations and liabilities as it would have possessed had it originally executed this Lease as the Tenant; any rights, privileges or powers under this Lease shall inure to the benefit of any such successor or assignee of Tenant, immediate or remote, only if the assignment to such assignee or successor has been approved in writing by Landlord or, under the terms of this Lease, is an assignment for which no approval is required, and such successor or assignee shall have executed and delivered to Landlord the written documents required by Landlord referred to hereinbefore, and each and every person hereinabove named as the Tenant shall be bound jointly and severally by the terms, covenants and agreements contained herein. 23 27 14.8. Although the Permitted Use shall in all events be limited to that set forth in Article 1.8, for the purpose of protecting any mortgagee or other investor in the Property from having made certain unfavorable or unlawful investments, it is agreed that Tenant shall not enter into any assignment, sublease, license, concession or other agreement for use, occupancy or utilization of the whole or any part of the Premises with or without Landlord's consent, which provides for rental or other payment for such use, occupancy or utilization based, in whole or in part, on the net income or net profits derived by any person or entity from the space leased, used, occupied or utilized (other than an amount based on a fixed percentage or percentages of gross receipts or sales), and any such purported assignment, sublease, license, concession or other agreement shall be absolutely void and ineffective as a conveyance or creation of any right or interest in the possession, use, occupancy or utilization of any part of the Premises. 15. Alterations. 15.1. Except for Tenant Work which shall be governed by the Tenant Design and Construction Process set forth on Exhibit "C", Tenant covenants to make no alteration, addition or improvement to the Premises without first submitting a detailed description thereof to Landlord and obtaining Landlord's written approval thereof, which shall not be unreasonably withheld, conditioned or delayed, except that Landlord's written approval shall not be required for painting, wall coverings, carpeting or decorations or for minor, nonstructural improvements, additions or alterations valued at less than $35,000 in each instance at the time thereof and not adversely affecting the structural, mechanical, electrical or plumbing systems, or any components thereof, of the Buildings. Landlord agrees that Tenant may, at Tenant's sole expense and subject to Landlord's prior approval (which approval will not be unreasonably withheld, conditioned or delayed) as to size, equipment specifications, architectural screening and engineering requirements, and subject to all local, county and state rules, codes, ordinances and statutes, install and maintain: (i) additional cooling towers or electrical generators on the roof of the Centerpointe I Building, provided that space availability and structural capacity permit such installation, and (ii) add air-cooled refrigeration equipment within the garage level of the Centerpointe I Building or in close proximity to the Centerpointe I Building and (iii) proprietary equipment or antennae, HVAC units, communications and data transmission networks on the roof of the Buildings so long as Tenant does not interfere with rights of other tenants on the roof of the Centerpointe II Building. 15.2. Provided that the proposed alteration, addition or improvement does not in Landlord's reasonable judgment involve any modification to the Buildings' exterior or any material modification to mechanical, electrical or plumbing systems or components, or impairs the integrity of the Buildings' structures, such approval shall not be unreasonably withheld or delayed, but may be conditioned upon compliance with reasonable requirements of Landlord, including, without limitation, the filing of mechanics' lien waivers by Tenant's contractors or the posting of a bond to protect against mechanics liens, and the submission of written evidence of adequate insurance coverage naming Landlord as an additional insured thereunder. 15.3. Landlord may withhold its approval in its absolute and sole discretion with respect to each such alteration, addition or improvement which Landlord reasonably determines involves any modification to the Buildings' exterior or impairs the integrity of the Buildings' structures, or involves any 24 28 material modification to the Buildings' electrical, mechanical or plumbing systems or any components thereof. 15.4. Tenant shall not permit any financing statement or statements to be filed with respect to any of the foregoing alterations, additions or improvements. All alterations, additions or improvements made by Tenant and all fixtures attached to the Premises (other than Tenant's trade and business fixtures and equipment) shall remain at the Premises at the expiration or sooner termination of this Lease and, upon their installation in the Premises (unless such alterations, additions or improvements are composed of or contain a Hazardous Substance), shall become the property of Landlord except that any or all of the foregoing which may be designated by Landlord for removal in a notice given at the time Landlord approves the original installation thereof in the Premises shall be removed at the cost of Tenant before such expiration or sooner termination and in such event, Tenant shall repair all damage to the Premises caused by the installation or removal thereof, however, Tenant shall in no event be required to remove customary items of office construction and finishing, such as partitions, doors, light fixtures, carpeting and the like. Notwithstanding anything in the foregoing to the contrary, Tenant shall in all events have the right (but not the obligation) to remove any raised computer flooring or supplementary HVAC installed in or about the Premises by or on behalf of Tenant so long as Tenant restores the Premises following such removal. 15.5. All such alterations, additions or improvements shall be performed at Tenant's cost by one or more contractors approved by Landlord (in its reasonable discretion), and shall be made in accordance with the standards, procedures and requirements set forth in Exhibit "C" to the extent that any such standards, procedures and requirements reasonably applies to the proposed alterations, additions or improvements. 15.6. Except as otherwise expressly provided herein, Tenant shall not place, or cause or allow to be placed, any sign, advertising matter, lettering, stand, booth, showcase or other article or matter outside of the Premises, without the prior written consent of Landlord which may be withheld in its sole discretion. 16. Mechanics' and Other Liens. 16.1. Tenant covenants that it shall not (and has no authority to) create or allow any encumbrance against the Premises, the Property or the Buildings, or any part of any thereof or Landlord's interest therein. 16.2. Tenant covenants that it shall not suffer or permit to be created, or to remain, any lien or claim thereof (arising out of any work done or services, material, equipment or supplies furnished for or at the request of Tenant or by or for any contractor or subcontractor of Tenant) which is or may become a lien upon the Premises, the Property or the Buildings, or any part of any thereof or the income therefrom or any fixture, equipment or similar property therein. 16.3. If any lien or claim shall be filed, Tenant shall within 15 days after Tenant receives notice of the filing thereof, cause the same to be discharged of record by payment, deposit, bond or otherwise. If Tenant shall fail to cause such lien or claim to be discharged and removed from record (by bonding or otherwise) within that period, then, without obligation to investigate the validity thereof and in addition to any other right or remedy Landlord may have, Landlord may, but shall not be obligated to, contest the lien or claim or discharge it by posting a 25 29 bond, if that method is reasonably practicable, or, if posting a bond is not reasonably practicable, by payment, deposit or otherwise. Any amounts so paid by Landlord and all reasonable costs and reasonable expenses, including reasonable attorneys' fees, incurred by Landlord in connection therewith, together with interest at the Lease Interest Rate from the respective dates of Landlord's making of the payment or incurring of the cost or expense, shall constitute Additional Rent payable by Tenant under this Lease and shall be paid by Tenant to Landlord promptly on demand. 16.4. Notwithstanding anything contained herein to the contrary, nothing contained in or contemplated by this Lease shall be deemed or construed in any way to constitute the consent or request on the part of Landlord for the performance of any work or services or the furnishing of any materials for which any lien could be filed against the Premises or the Buildings or the Property or any part of any thereof, nor as giving Tenant any right, power, or authority (beyond those set forth in this Lease) to contract for or permit the performance of any work or services or the furnishing of any materials for which any lien could be filed against the Premises, the Buildings, or the Property or any part of any thereof. 17. Landlord's Right to Enter. Landlord has the right, and Tenant will permit Landlord, its agents, employees and any other persons authorized by Landlord in writing, to enter the Premises at any time in case of an emergency; to enter the Premises at any reasonable time after reasonable prior notice if Landlord shall so elect for making alterations, improvements or repairs to the Buildings or for any purpose in connection with the operation or maintenance or financing of the Buildings and, if Tenant abandons the Premises, then at any time to re-enter and renovate the Premises; in any event, no such entry or renovation shall be considered as a deprivation of Tenant's use of the Premises or shall give rise to any abatement of Rent and Landlord shall use its best efforts to avoid any material interference with Tenant's use and enjoyment of the Premises and whenever reasonably possible cause such entry to occur during hours other than Standard Operating Hours. In addition, to the extent that Tenant gives Landlord prior written notice thereof, Landlord shall comply with Tenant's reasonable security requirements and any security restrictions imposed by Tenant's governmental or private-sector clients that may apply to any portion(s) of the Premises. 18. Certain Rights Reserved by Landlord. Landlord waives no rights, except those that may be specifically and expressly waived pursuant to the terms of this Lease, and explicitly retains all other rights, including, without limitation, the following rights, each of which Landlord may exercise without liability to Tenant for damage or injury to property, person or business on account of the exercise thereof, and the exercise of any such rights shall not be deemed to constitute an eviction or disturbance of Tenant's use or possession of the Premises (provided that Landlord shall use its best efforts to avoid any material interference with Tenant's use and enjoyment of the Premises) and shall not give rise to any claim for set-off or abatement of Rent or any other claim: 18.1. To install, affix and maintain any and all signs which comport with the character of a first class building on the exterior and on the interior of the Centerpointe II Building or on the exterior or interior of the Centerpointe I Building if Tenant is no longer the largest tenant of the Centerpointe I Building. 26 30 18.2. To decorate or to make repairs, alterations, additions, or improvements, whether structural or otherwise, in and about the Buildings, or any part thereof, and for such purposes to enter upon the Premises (in accordance with the terms of Article 17 above), and during the continuance of any of such work, to temporarily close doors, entry ways, public space and corridors in the Buildings and to interrupt or temporarily suspend services or use of facilities, all without affecting any of Tenant's obligations hereunder, so long as the Premises are reasonably accessible and usable. 18.3. To furnish door keys for the entry door(s) in the Premises at the commencement of the Lease and to retain at all times, and to use in appropriate instances, keys to all doors within and into the Premises (except as provided below). Tenant agrees to change no locks, and not to affix locks on doors without the prior written consent of the Landlord, which consent Landlord will not unreasonably withhold or delay so long as Tenant gives to Landlord duplicate keys for any changed locks (subject to any security requirements for Tenant's clients, which may prohibit delivery of duplicate keys for portions of the Premises). Upon the expiration of the Term or Tenant's right to possession, Tenant shall return all keys to Landlord and shall disclose to Landlord the combination of any safes, cabinets or vaults left in the Premises. Tenant shall have the right to install an access-control system for the Premises (including interior areas within the Premises), which may be separate from Landlord's access-control system for the Buildings or may be an extension of Landlord's system (at Tenant's expense) to cover the Premises so long as such system does not interfere with the other access control systems for the Buildings and does not limit Landlord's access to the Premises as permitted under Article 17 above. If Tenant extends Landlord's access-control system for the Buildings to cover the Premises, Landlord shall not thereafter replace the Buildings' access-control system or change it in a way that impairs the functioning of Tenant's system without Tenant's prior written approval which approval shall not be unreasonably withheld or delayed. 18.4. To approve all window coverings used in the Buildings. 18.5. To approve the weight, size and location of safes, vaults and other heavy equipment and articles in and about the Premises and the Buildings so as not to exceed the legal load per square foot designated by the structural engineers for the Buildings, and to require all such items and furniture and similar items to be moved into or out of the Buildings and Premises only at such times and in such manner as Landlord shall reasonably direct in writing. Tenant shall not install or operate machinery or any mechanical devices of a nature not directly related to Tenant's ordinary use, as limited by the Permitted Use, of the Premises without the prior written consent of Landlord. Movements of Tenant's property into or out of the Buildings or Premises and within the Buildings are entirely at the risk and responsibility of Tenant. 18.6. To regulate (pursuant to reasonable rules and regulations) delivery of supplies and the usage of the loading docks, receiving areas and freight elevators. 18.7. To enter the Premises in accordance with Article 17, and in the last year of the Term, to show the Premises to prospective tenants at reasonable times after reasonable prior 27 31 notice to Tenant and, if abandoned, to show the Premises at any time and to prepare the Premises for re-occupancy. 18.8. To erect, use and maintain pipes, ducts, wiring and conduits, and appurtenances thereto, in and through the Premises at reasonable locations. 18.9. To enter the Premises in accordance with Article 17 at any reasonable time to inspect the Premises and to make repairs or alterations as Landlord deems necessary, with due diligence and minimum disturbance. 18.10. To grant to any person or to reserve unto itself the right to conduct any business or render any service in the Buildings. 19. Landlord's Liability; Rights. 19.1. It is expressly understood and agreed by Tenant that none of Landlord's covenants, undertakings or agreements are made or intended as personal covenants, undertakings or agreements by Landlord or its partners, shareholders or trustees, or any of their respective partners, shareholders or trustees, and any liability for damage or breach or nonperformance by Landlord (that is not covered by Landlord's liability insurance, which shall not in any way abrogate the waivers set forth in Article 21.4) shall be collectible only out of Landlord's interest in the Buildings and the rents, the net proceeds of sale arising therefrom, and insurance and condemnation proceeds actually collected by Landlord, and no personal liability is assumed by, nor at any time may be asserted against, Landlord or its partners, shareholders or trustees or any of its or their partners, shareholders, trustees, officers, agents, employees, legal representatives, successors or assigns, if any, all such liability, if any, being expressly waived and released by Tenant. 19.2. The Landlord named on page 1 of this Lease and any subsequent owners of such Landlord's interest in the Buildings, as well as their respective heirs, personal representatives, successors and assigns shall each have the same rights, remedies, powers, authorities and privileges, and obligations and liabilities, as it would have had had it originally signed this Lease as Landlord, but any such person, whether or not named herein, shall have no liability hereunder for acts occurring after it ceases to hold such interest, provided all such liability arising from and after such date is assumed in a written agreement between Landlord and such successor owner. 20. Unilateral Amendment. Landlord shall have the right at any time, and from time to time, during the Term of this Lease, to unilaterally amend the provisions of this Lease if Landlord is advised by its counsel that all or any portion of the monies paid by Tenant to Landlord hereunder are, or may be deemed to be, unrelated business income within the meaning of the United States Internal Revenue Code or regulations issued thereunder, and Tenant agrees that it will execute all documents or instruments necessary to effect such amendment or amendments, provided that no such amendment shall result in Tenant having to pay a larger sum of money on account of its occupancy of the Premises under the terms of this Lease as so amended, and provided further that no such amendment or amendments shall result in Tenant receiving under the 28 32 provisions of this Lease less services that it is entitled to receive, nor services of a lesser quality nor otherwise materially and adversely affect the rights of Tenant under this Lease. 21. Insurance. 21.1. Avoidance of Acts Which Increase Insurance Risk. Landlord and Tenant each covenant that it will not do or commit, or suffer or permit to be done or committed, any act or thing as a result of which any policy of insurance of any kind on or in connection with the Buildings or the Property or any part thereof shall become void or suspended, or the insurance risk on the Buildings or the Property or any part thereof shall (in the opinion of any insurer or proposed insurer) be rendered more hazardous. Tenant shall pay as Additional Rent, within 30 days after being billed therefor, the amount of any increase of premiums for such insurance resulting from any breach of this covenant. 21.2. Tenant's Insurance Coverage. Tenant covenants that it shall maintain throughout the Term, at Tenant's expense, policies of (i) commercial general public liability insurance having initial limits of not less than $5,000,000 per occurrence and annual aggregate combined single limit for bodily injury and property damage, with a severability of interest endorsement, and with increases in such limits as may from time to time be commercially common for tenants of first-class office buildings in the Northern Virginia area, and (ii) all-risk or fire and extended coverage insurance upon Tenant's personal property and leasehold improvements in the Premises for the full replacement value of such personal property and leasehold improvements. Such policies shall name Landlord (and, if available, Landlord's mortgagees from time to time) as an additional insured party and shall provide that the policies shall not be cancelable without at least 30 days' prior written notice to Landlord and shall be issued by insurers licensed to do business in Virginia and having a Best's rating of A-XII or higher. Tenant shall furnish Landlord with certificates of insurance to evidence the existence of such coverage. 21.3. Landlord's Insurance Coverage. Landlord shall maintain throughout the Term "all-risk" insurance upon the Buildings. Landlord's property insurance shall include replacement cost coverage and an agreed amount endorsement, and shall provide for a commercially reasonable "deductible" for first class office buildings in the Northern Virginia area. Landlord shall also carry (or cause to be carried) commercial general liability insurance covering Landlord and its managing agent having limits of not less than $5,000,000 annual aggregate combined single limit for bodily injury and property damage and with increases in such limits equal to any increases from time to time in Tenant's limits pursuant to Article 21.2 above. Landlord's liability policy shall name Tenant as an additional insured party. All of Landlord's policies shall be issued by insurers licensed to do business in Virginia and having a Best's rating of A-XII or higher. Landlord shall furnish Tenant with certificates of insurance to evidence the existence of such coverage. The cost of the premiums for such insurance and of any endorsements thereto shall, for purposes of Article 7 hereof, be part of the Annual Operating Costs. 21.4. Waiver of Subrogation. Notwithstanding anything in this Lease to the contrary, each party hereto hereby releases the other party, its agents and employees, to the extent 29 33 the releasing party is, or is required hereunder to be, insured under its insurance policies, from any and all liability for any loss or damage which may be inflicted upon the property of such party, notwithstanding that such loss or damage shall have arisen out of the negligent or other tortious act or omission of the other party, its agents or employees. Each party hereto shall cause a clause to be included in each and every policy of property insurance of the party to the effect that such release shall not affect the right of the insured to recover thereunder, if such clause is available. If such a waiver of subrogation cannot be obtained, the party undertaking to carry the insurance shall notify the other party of such fact, and the other party shall have a period of 30 days thereafter to place such insurance in companies which are reasonably satisfactory to the notifying party and will issue such insurance with waiver of subrogation. 22. Fire or Other Casualty. 22.1. Casualty to Centerpointe II Premises. If the Centerpointe II Premises (including machinery or equipment used in the operation of the Centerpointe II Premises) shall be damaged by fire or other casualty which casualty renders all or a material portion of the Centerpointe II Premises untenantable, and Landlord elects not to rebuild or restore the Centerpointe II Premises for any reason, but rather to cease operating the Centerpointe II Building and to terminate the leases of the tenants therein, the Lease will terminate as to the Centerpointe II Premises only (with an equitable abatement of Rent as of the date of the casualty), but Tenant shall have no right to terminate the Lease for the balance of the Premises in the Centerpointe I Building provided, however, that (i) American Management Systems, Inc., or (ii) any assignee of its entire interest in this Lease, or (iii) any sublessee of 90% or more of the Premises for substantially all of the Term, or (iv) any sublessee whose sublease term was due to expire less than 36 months following the date of casualty and there shall be remaining at least 72 months in the Term (any party in clauses (i) - (iv) above is herein a "Substitute Space Tenant") shall have the right to lease "Substitute Space" (as hereinafter defined) for the balance of the Term and Landlord shall have the obligation to pay to such Substitute Space Tenant the "Substitute Space Differential" (as hereinafter defined) for the balance of the Term. For purposes of this Article 22.1, the term "Substitute Space" shall mean office building rental space in the Fair Oaks area of Fairfax County or otherwise within a one and one-half driving mile radius of the Centerpointe II Building, or to the South at the intersection of Waples Mill and Random Hills Road, and of sufficient square footage to accommodate the rentable square footage occupied by the Substitute Space Tenant in the Centerpointe II Building in blocks of a full floor or more and otherwise be reasonably equivalent in quality, features and on-site amenities (except that parking may be surface lot only) to the Centerpointe II Premises. For purposes of this Article 22.1, the term "Substitute Space Differential" shall mean the then present value of the difference between: (i) the ' then base monthly rental and additional monthly rental payable for the Substitute Space by the Substitute Space Tenant (plus reasonable moving costs and the cost to build out the Substitute Space in a manner that is equivalent to the Centerpointe II Premises) for the remainder of the Term (but not any unexercised renewal terms), and (ii) the Base Rent and Additional Rent payable under this Lease for the remainder of the Term (but not any unexercised renewal terms). Any disputes between Landlord and Tenant regarding the determination of Substitute Space or Substitute Space Differential shall be determined by arbitration in accordance with Article 65 of this Lease. If Tenant reasonably determines that no Substitute Space is then obtainable (the reasonableness of 30 34 which determination Landlord may challenge by arbitration pursuant to Article 65 below) then, notwithstanding anything in the foregoing to the contrary, Tenant shall have the right to terminate this Lease with respect to both the Centerpointe I Premises and the Centerpointe II Premises. 22.2. Casualty To Centerpointe I Building: Restoration: Landlord's Right to Terminate 22.2.1. Except as provided in this Article 22.2, if the Centerpointe I Building (including machinery or equipment used in the operation of the Centerpointe I Building) shall be damaged by fire or other casualty, then if permitted by Landlord's mortgagees, and only to the extent that there are available insurance proceeds, Landlord shall be obligated to repair and restore the same with reasonable promptness, subject to reasonable delays for insurance adjustments and to delays caused by matters beyond Landlord's reasonable control; provided, however, that Landlord shall have no duty to repair or restore any personal property, or any alterations, additions, improvements or decorations not originally installed pursuant to the Tenant Work and paid for with the Concession Fund. 22.2.2. However, if (a) the damage by fire or other casualty renders all or a substantial part of the Centerpointe I Building untenantable and occurs at a time such that following the date that the restoration and repair work is reasonably anticipated to be completed less than 24 months of the Term will remain; or (b) such fire or other casualty renders fifty percent (50%) or more of the Rentable Area of the Centerpointe I Building untenantable and Landlord elects to cease operating the Centerpointe I Building; then in any such event, Landlord shall have the right to terminate this Lease (with equitable prorations of Rent being made for Tenant's possession of any tenantable portions of the Premises subsequent to the date of such damage and prior to the effective date of such termination) upon giving written notice to Tenant at any time within 90 days after the date of such damage 22.2.3. If pursuant to Article 22.2.2(a) hereof, Landlord elects not to repair or restore, Tenant may nullify such election pursuant to such subsection if Tenant, within 30 days after the date of receipt of Landlord's notice of election to terminate, exercises any available option to extend the Term of this Lease for a Renewal Period such that more than 24 months of the Term will remain after the date the restoration or repair work is reasonably anticipated to be complete. 22.2.4. Landlord shall have no liability to Tenant for, and Tenant shall not be entitled to terminate this Lease by virtue of, any delays in completion of repairs and restoration. Rent, however, shall equitably abate as to those portions of the Premises as are, from time to time, untenantable as a result of such damage. 22.3 Tenant's Right to Terminate For Centerpointe I Building Casualty. In the event there shall occur any fire or other casualty to the Centerpointe I Building after the Lease Commencement Date, Tenant shall have the right to terminate this Lease in accordance with this Article 22.3. If the damage by fire or other casualty renders all or a substantial part of the Centerpointe I Building untenantable and occurs at a time such that following the date that the restoration and repair work is reasonably anticipated to be completed, less than 24 months of the Term will remain, Tenant shall have the right to terminate this Lease. In all other casualty situations, if substantial 31 35 completion of the restoration of the Centerpointe I Building does not occur, or in Landlord's reasonable judgment will not occur, within 365 days after the fire or other casualty (which 365-day period shall be extended for up to an additional year to the extent of any delay caused by strikes, lockouts, acts of god, acts of war or other occurrences beyond Landlord's control), Landlord shall so notify Tenant in writing, which notice shall include Landlord's reasonable estimate of the date of substantial completion of the restoration. Tenant, by giving written notice of termination within 15 business days after its receipt of Landlord's notice, shall have the right to terminate this Lease effective as of such date not later than 45 business days after Tenant's receipt of Landlord's notice, as Tenant may specify in such notice. In the event of such termination, neither party shall be liable to the other for any liability relating to the period after termination. If Tenant does not terminate this Lease as aforesaid, and the substantial completion of the restoration does not occur by the estimated date of substantial completion contained in the aforesaid notice, Landlord shall provide within 10 business days after a determination is made that substantial completion will not occur by the estimated date a second notice estimating the extended date of substantial completion, and Tenant shall again have the right, exercisable only by written notice given within 15 business days after the receipt of Landlord's notice, to terminate this Lease within the 45-day time period set forth above in this Article 22.3. In each instance in which Tenant elects not to exercise its right to terminate as provided in this Article 22.3, such right to terminate, following the same procedure and schedule, shall again arise if substantial completion has not occurred by the estimated date of substantial completion set forth in the notice upon which Tenant's previous election not to terminate was based. 23. Waiver of Claims; Indemnification. 23.1. Neither Landlord nor any partner, shareholder or trustee in Landlord shall be held responsible for, and each is hereby expressly relieved from, any and all liability by reason of any injury, loss, or damage to any person or property in or about Tenant's Control Area (as defined in Article 52 below) due to any cause whatever, or arising from Tenant's use of the roof, garage and other facilities in Landlord's Control Area permitted pursuant to Articles 9.1.3 and 15.1, except for liability arising from the acts within the Tenant's Control Area of Landlord's cleaning personnel or Landlord's building engineers, and whether the loss, injury or damage be to the person or property of Tenant or any other person, unless due to the gross negligence of Landlord, its servants or employees. Tenant further agrees to indemnify, defend and save Landlord and each partner, shareholder or trustee in Landlord harmless from and against all claims by any employee or invitee of Tenant made on account of such injury, loss or damage (unless due to the gross negligence of Landlord, its servants and employees), including but not limited to reasonable attorneys' fees and other legal expenses. 23.2. Neither Tenant nor any partner, shareholder or trustee in Tenant shall be held responsible for, and each is hereby expressly relieved from, any and all liability by reason of any injury, loss or damage to any person or property in or about Landlord's Control Area (as defined in Article 52 below), due to any cause whatsoever, or arising from the acts within Tenant's Control Area of Landlord's cleaning personnel or Landlord's building engineers, except for liability arising from Tenant's use of the roof, garage and other facilities in Landlord's Control Area permitted pursuant to Articles 9.1.3 and 15.1, and whether the loss, any injury or damage be 32 36 to the person or property of Landlord, or any other person, unless due to the gross negligence of Tenant, its servants or employees. Landlord further agrees to indemnify, defend and save Tenant harmless from and against all claims by any person made on account of such injury, loss or damage (unless due to the gross negligence of Tenant, its servants or employees), including but not limited to reasonable attorneys' fees and other legal expenses. 24. Condemnation. 24.1. If the whole or a substantial part of the Centerpointe I Building is taken or condemned for a public or quasi-public use under any statute or by right of eminent domain by any competent authority or sold in lieu of such taking or condemnation, such that in the opinion of Landlord the Centerpointe I Building is not economically operable as before without substantial alteration or reconstruction, this Lease shall automatically terminate on the date that the right to possession shall vest in the condemning authority (the "Taking Date"), with Rent being adjusted to said Taking Date, and Tenant shall have no claim against Landlord for the value of any unexpired term of this Lease. Tenant shall have no claim against Landlord and no claim or right to any portion of any amount that may be awarded as damages or paid as a result of any taking, condemnation or purchase in lieu thereof, except for moving expenses, if any, which may be separately awarded to tenants under Virginia or federal law to the extent that such award does not reduce the amount to be awarded or paid to Landlord; all other rights of Tenant to any award are hereby assigned by Tenant to Landlord. If the whole or a substantial part of the Centerpointe II Premises is taken or condemned for a public or quasi-public use under any statute or by right of eminent domain by any competent authority or sold in lieu of such taking or condemnation, such occurrence shall be treated as though a casualty had occurred to the Centerpointe II Premises and Landlord had elected not to rebuild or restore the Centerpointe II Premises, as described in Article 22.1 above. 24.2. If any part of the Premises is so taken or condemned, this Lease shall automatically terminate as to the portion of the Premises so taken or condemned, as of the Taking Date, and this Lease shall continue in full force as to the remainder of the Premises, with Rent abating only to the extent of the Premises so taken or condemned. 24.3. In the event of any temporary eminent domain taking of the Premises or any part thereof for temporary use, this Lease shall not be affected in any manner, the Term shall not be reduced, and the Tenant shall continue to pay in full the Base Rent, Additional Rent and all other sums of money and charges in this Lease reserved and provided to be paid by Tenant. Tenant shall be entitled to receive for itself such portion of any eminent domain award made for such temporary use with respect to the period of the taking which is within the Term; provided that if such temporary taking shall remain in full force at the expiration or earlier termination of this Lease, the award shall be apportioned between Landlord and Tenant in proportion to the respective portions of the period of temporary taking which falls within the Term and which falls outside the Term. 25. Holding Over. 33 37 25.1. If Tenant or any person claiming through Tenant shall continue to occupy the Premises after the expiration or earlier termination of the Term or any renewal thereof without Landlord's written consent, then Landlord shall be entitled to recover from Tenant compensation for such use and occupancy at a rate per month equal to (i) 150% of the annual Base Rent plus (ii) 1/12 of the annual Additional Rent which would have been payable had this Lease been renewed for a period of 12 full calendar months following such expiration or earlier termination, on the terms and conditions in effect immediately prior thereto. Neither Landlord's demand nor Landlord's receipt of the aforesaid compensation for use and occupancy shall be deemed to provide Tenant with any right to any use, occupancy or possession of the Premises for any period beyond which such compensation has been demanded and paid. 25.2. The provisions of this Article 25 shall not be deemed to limit or constitute a waiver of any other rights of remedies of Landlord provided herein or at law. 26. Covenant of Quiet Enjoyment. Landlord covenants that Tenant, on paying the Rent and all other charges or payments herein reserved and on keeping, observing and performing all the other terms, covenants, conditions, provisions and agreements herein contained on the part of Tenant to be kept, observed and performed, shall, during the Term, peaceably and quietly have, hold and enjoy the Premises subject to the terms, covenants, conditions, provisions and agreements hereof. 27. Relocation of Tenant. Intentionally Omitted. 28. Condition of Premises. The taking of possession of each segment of the Premises by Tenant shall be conclusive evidence, as against Tenant, that each such segment of the Premises was in good and satisfactory condition at the time such possession was so taken, subject to (i) completion of any Base Building Modifications set forth on Exhibit "B" that have not been completed by the date of delivery of any segment of the Premises, (ii) latent defects, provided that Tenant so notifies Landlord within one (1) year-of the Lease Commencement Date, as to the Initial Space, and within one (1) year of the applicable Subsequent Lease Commencement Date, as to Subsequent Space, or (iii) defects other than latent defects identified by Tenant in a notice given to Landlord within thirty (30) days of the Lease Commencement Date, as to the Initial Space, and within thirty (30) days of any applicable Subsequent Lease Commencement Date, as to Subsequent Space. 29. No Third Party Beneficiaries. Notwithstanding anything to the contrary contained herein, no provision of this Lease is intended to benefit any party other than the signatories hereto and their permitted heirs, personal representatives, successors and assigns, and no provision of this Lease shall be enforceable by any other party. 30. Transfer of Landlord's Interest. In the event of any sale or other conveyance or transfer of Landlord's interest in a Building or the Buildings, the transferor shall be and hereby is entirely free and relieved of all covenants and obligations of Landlord hereunder prior to the date of transfer as to the Building or Buildings transferred, provided that the transferee at any such sale or conveyance or transfer (subject to the limitation of Landlord's liability in Article 19 of this Lease) shall have assumed and agreed in a written agreement with Landlord to carry out any and 34 38 all covenants and obligations of Landlord hereunder arising or continuing from and after the date of transfer. 31. Default; Landlord's Remedies. 31.1. Defaults. If any of the following shall occur, such occurrence shall constitute a default (which term, unless expressly noted otherwise in this Lease, shall refer only to the circumstance that exists after the giving of any notice and the expiration of any cure period provided for herein) hereunder: 31.1.1. Tenant does not pay in full when due any installment of Rent or any other charge or payment whether or not herein included as Rent, and such failure continues for ten (10) days after written notice from Landlord specifying such failure, provided, however, that Landlord shall not be required to give, and Tenant shall not be entitled to the benefit of, any such notice or grace period more than two (2) times in any twelve (12) month period for late payments of Monthly Installments of Base Rent and Additional Rent, 31.1.2. Tenant violates or fails to perform or otherwise breaks any covenant, agreement or condition herein contained or any other obligation of Tenant to Landlord, and such violation or failure continues for thirty (30) days after written notice from Landlord specifying such violation or failure (or such longer period, as may be necessary if such violation or failure cannot reasonably be cured within said thirty (30) day period but Tenant is diligently and in good faith pursuing such cure and such violation or failure is reasonably capable of a cure i as determined in Landlord's reasonable judgment), 31.1.3. Tenant becomes the subject of commencement of an involuntary case under the federal bankruptcy law as now or hereafter constituted, or there is filed a petition against Tenant seeking reorganization, arrangement, adjustment or composition of or in respect of Tenant under the federal bankruptcy law as now or hereafter constituted, or under any other applicable federal or state bankruptcy, insolvency, reorganization or other similar law, or seeking the appointment of a receiver, liquidator or assignee, custodian, trustee, sequestrator (or similar official) of Tenant or any substantial part of its property, or seeking the winding-up or liquidation of its affairs and such involuntary case or petition is not dismissed within 90 days after the filing thereof, or if Tenant commences a voluntary case or institutes proceedings to be adjudicated a bankrupt or insolvent, or consents to the institution of bankruptcy or insolvency proceedings against it, under the Federal bankruptcy laws as now or hereafter constituted, or any other applicable Federal or state bankruptcy or insolvency or other similar law, or consents to the appointment of or taking possession by a receiver or liquidator or assignee, trustee, custodian, sequestrator (or other similar official) of Tenant or of any substantial part of its property, or makes any assignment for the benefit of creditors or admits in writing its inability to pay its debts generally as they become due or fails to generally pay its debts as they become due or if Tenant or its stockholders or Board of Directors or any committee thereof takes any corporate action in furtherance of any of the foregoing, then 35 39 31.2. Remedies. In the event of any such default set forth in Article 31.1 above, and, at the sole option of Landlord, Landlord may pursue any one or more of the following remedies: 31.2.1. Tenant's right of possession shall thereupon cease and terminate, and to the extent permitted by law Landlord shall be entitled to the possession of the Premises and to reenter the same without demand of rent or demand of possession of said Premises and may forthwith proceed to recover possession of the Premises by process of law, any notice to quit being hereby expressly waived by Tenant. In the event of such re-entry by process of law, Tenant nevertheless agrees to remain answerable for any and all damage, deficiency or loss of Rent which Landlord may sustain by such re-entry, including reasonable attorney's fees and court costs. If, under the provisions hereof, seven (7) days summons or other applicable summary process shall be served, and a compromise or settlement therefor shall be made, such action shall not be constituted as a waiver of any breach of any covenant, condition or agreement herein contained. No waiver of any breach of any covenant, condition or agreement, herein contained, on one or more occasions shall operate as a waiver of the covenant, condition or agreement itself, or of any subsequent breach thereof. No provision of this Lease shall be deemed to have been waived by Landlord unless such waiver shall be in writing signed by Landlord. 31.2.2. Should this Lease be terminated before the expiration of the Term of this Lease by reason of Tenant's default, the Premises may be relet by Landlord for such rent and upon such terms as are reasonable under the circumstances. If the full Rent reserved under this Lease (and any of the costs, expenses or damages indicated below) shall not be realized by Landlord, Tenant shall be liable for all damages sustained by Landlord, including, without limitation, deficiency in Rent, reasonable attorneys' fees, other reasonable collection costs, reasonable brokerage fees, and reasonable expenses of placing the Premises in first-class rentable condition. Landlord, in putting the Premises in good order or preparing the same for re-rental, may, at Landlord's option, make such alterations, repairs, or replacements in the Premises as Landlord, in Landlord's sole judgment, considers advisable and necessary for the purpose of reletting the Premises, and the making of such alterations, repairs, or replacements shall not operate or be construed to release Tenant from liability hereunder as aforesaid. Landlord shall in no event be liable in any way whatsoever for failure to relet the Premises, or in the event that the Premises are relet, for failure to collect the rent thereof under such reletting. In no event shall Tenant be entitled to receive any excess, if any, of such net rent collected over the sums payable by Tenant to Landlord hereunder. 31.2.3. Any damage or loss of Rent sustained by Landlord may be recovered by Landlord, at Landlord's option, at the time of the reletting, or in separate actions, from time to time, as said damage shall have been ascertained by successive relettings, or, at Landlord's option, may be deferred until the expiration of the Term of this Lease (in which event Tenant hereby agrees that the cause of action shall not be deemed to have accrued until the date of expiration of said Term). The provisions contained in this Article 31.2.3 shall be in addition to and shall not prevent the enforcement of any claim Landlord may have against Tenant for anticipatory breach of the unexpired Term of this Lease. All rights and remedies of Landlord under this Lease shall be 36 40 cumulative and shall not be exclusive of any other rights and remedies provided to Landlord under applicable law. 31.2.4. If under the provisions hereof Landlord shall institute proceedings and a compromise or settlement thereof shall be made, the same shall not constitute a waiver of any covenant, rule or regulation herein contained nor of any of Landlord's rights hereunder. No waiver by Landlord of any breach of any covenant, condition, agreement, rule or regulation itself, or of any subsequent breach thereof. 31.2.5. If, prior to the Rent Commencement Date, Tenant notifies Landlord of or otherwise unequivocally demonstrates an intention to repudiate this Lease, Landlord may, at its option, consider such anticipatory repudiation a breach of this Lease. In such event, in addition to Landlord's other remedies hereunder, Landlord may retain all Rent paid upon execution of the Lease and the security deposit, if any, to be applied to damages of Landlord incurred as a result of such repudiation, including without limitation reasonable attorneys' fees, brokerage fees, costs of reletting, loss of Rent, etc. and Landlord shall be entitled to recover all or any portion of the Concession Fund theretofore disbursed to Tenant hereunder (which, when collected, shall be credited against Tenant's other liabilities hereunder), and Tenant shall indemnify, defend and hold Landlord harmless from and against the claims of any contractors or materialmen performing the Tenant Work. 31.2.6. If the Premises shall be deserted or vacated by Tenant for thirty (30) consecutive days or more without notice to Landlord, and Tenant shall have failed to make the current Rent payment, the Premises may be deemed abandoned. Landlord may consider Tenant in default under this Lease and may pursue all remedies available to it under this Lease or at law, including the following: (a) If Tenant abandons the Premises as defined above, Landlord may, at its option, enter into the Premises without being liable for any prosecution therefor or for damages by reason thereof. In addition to any other remedy, Landlord, as agent of Tenant, may relet the whole or any part of the Premises for the whole or any part of the then unexpired Lease Term. For the purposes of such reletting, Landlord may make any alterations or modifications of the Premises considered desirable in its sole judgment. (b) If Tenant abandons the Premises as defined above, any property that Tenant leaves on the Premises shall be deemed to have been abandoned and may either be retained by Landlord as the property of Landlord or may be disposed of at public or private sale in accordance with applicable law as Landlord sees fit. The proceeds of any public or private sale of Tenant's property, or the then current fair market value of any property retained by Landlord, shall be applied by Landlord against (i) the expenses of Landlord for removal, storage or sale of the property; (ii) the arrears of Rent or future Rent payable under this Lease; and (iii) any other damages to which Landlord may be entitled hereunder. (c) If Tenant abandons the Premises, as defined above, Landlord may, upon presentation of evidence of a claim valid upon its face of ownership or of a security interest 37 41 in any of Tenant's property abandoned in the Premises, turn over such property to the claimant with no liability to Tenant. 31.2.7. Landlord may (but shall not be obligated to do so), in addition to any other rights it may have in law or equity, following the delivery of notices prescribed by Article 31.1 above, cure such default on behalf of Tenant, and Tenant shall reimburse Landlord upon demand for all reasonable costs incurred by Landlord in curing such default, including, without limitation, reasonable attorneys' fees and other legal expenses, together with interest thereon at the Lease Interest Rate, which costs and interest thereon shall be deemed Additional Rent hereunder. 32. Remedies Cumulative. All remedies available to Landlord hereunder and at law and in equity shall be cumulative and concurrent. No termination of this Lease nor taking or recovering possession of the Premises shall deprive Landlord of any remedies or actions against Tenant for Rent, for charges or for damages for the breach of any covenant, agreement or condition herein contained, nor shall the bringing of any such action for Rent, charges or breach of covenant, agreement or condition, nor the resort to any other remedy or right for the recovery of Rent, charges or damages for such breach be construed as a waiver or release of the right to insist upon the forfeiture and to obtain possession. No reentering or taking possession of the Premises, or making of repairs, alterations or improvements thereto, or reletting thereof, shall be construed as an election on the part of Landlord to terminate this Lease unless written notice of such election be given by Landlord to Tenant. The failure of Landlord to insist upon strict and/or prompt performance of the terms, agreements, covenants and conditions of this Lease or any of them, and/or the acceptance of such performance thereafter shall not constitute or be construed as a waiver of Landlord's right to thereafter enforce the same strictly according to the terms thereof in the event of a continuing or subsequent default. 33. Expenses of Enforcement. Each party shall pay upon demand all of the other party's costs, charges and expenses, including the reasonable fees and out-of-pocket expenses of counsel, agents and others, incurred in any litigation, negotiation or transaction in which the defaulting party causes the other without the other's fault, to become involved or concerned. 34. Nonwaiver. No waiver of any provision of this Lease shall be implied by any failure of either party to enforce any remedy allowed for the violation of such provision, even if such violation is continued or repeated, and no express waiver shall affect any provision other than the one(s) specified in such waiver and only for the time and in the manner specifically stated. No receipt of monies by Landlord from Tenant after the termination of this Lease shall in any way alter the length of the Term or of Tenant's right of possession hereunder or after the giving of any notice shall reinstate, continue or extend the Term or affect any notice given to Tenant prior to the receipt of such moneys, it being agreed that after the service of notice or the commencement of a suit or after final judgment for possession of the Premises, Landlord may receive and collect any Rent due, and the payment of said Rent shall not waive or affect said notice, suit or judgment. 35. Subordination. 35.1. Subject to the satisfaction of the conditions of Article 58 below, this Lease shall be subject and subordinate at all times to the lien of any mortgage, deed of trust and/or other encumbrance heretofore or hereafter placed by Landlord upon the Premises or the Property and of 38 42 all renewals, modifications, consolidations, replacements and extensions thereof (all of which are hereinafter referred to collectively as a "Mortgage"), all automatically and without the necessity of any further action on the part of Tenant to effectuate such subordination. Tenant shall, at the request of any person who may acquire Landlord's estate by foreclosure (or transfer in lieu of foreclosure), attorn to such person, and shall execute, acknowledge and deliver, upon demand by Landlord or any mortgage holder or its assignee, but in no event later than fifteen (15) days after such demand, such further reasonable instruments evidencing such subordination, and such further reasonable instruments evidencing such attornment obligation, as shall be desired by such Mortgage holder or its assignee. 35.2. Anything contained in the foregoing provisions of this Article 35 to the contrary notwithstanding, any such holder may at any time subordinate, in whole or in part, its Mortgage to the operation and effect of this Lease, without the necessity of obtaining Tenant's consent thereto, by giving notice of the same in writing to Tenant, and thereupon this Lease shall be deemed to be prior to such Mortgage without regard to their respective dates of execution, delivery and/or recordation, and in that event, such holder shall have the same rights with respect to this Lease as though this Lease were executed, delivered and recorded prior to the execution and delivery of such Mortgage. 35.3. No person acquiring Landlord's estate by foreclosure or transfer in lieu of foreclosure shall have any personal liability hereunder or any liability whatsoever for the acts of the Landlord prior to any such transfer or any liability for any deposits made by Tenant hereunder unless such deposits have been transferred to such party; provided, however, that such party shall have the liability to perform all of the Landlord's duties and obligations arising or continuing thereafter, if any, that have not been performed as of the date of transfer. 36. Paramount Lease. Subject to the satisfaction of the terms of Article 58 below, if Landlord is or becomes lessee of a Building or the Buildings or the land upon which they stand, then Tenant agrees that Tenant's possession shall be that of a subtenant and subordinate to the interest of Landlord's lessor, its heirs, personal representatives, successors and assigns (such lessor and other persons being hereinafter collectively referred to as the "Overlessor") without the necessity of any further action on the part of Tenant to effectuate such subordination (provided that such change in status does not affect any of Tenant's rights or Landlord's obligations under this Lease), but notwithstanding the foregoing, if Landlord's tenancy shall terminate either by expiration, forfeiture or otherwise, then, if Overlessor shall so request, Tenant shall attorn to Overlessor and recognize Overlessor as Tenant's landlord upon the terms and conditions of this Lease for the balance of the Term hereof and any extensions or renewals hereof. Tenant shall execute, acknowledge and deliver, upon demand by Landlord or any Overlessor, such further customary and reasonable instruments evidencing such subordination of Tenant's right, title and interest under this Lease to the interests of Overlessor, and such further customary and reasonable instruments of attornment, as shall be desired by such Overlessor. Landlord represents and warrants that the Property is not currently subject to any ground lease or Overlease. 37. Legal Proceedings. It is mutually agreed by and between Landlord and Tenant that (a) they hereby waive trial by jury in any action, proceeding or counter-claim brought by either of 39 43 the parties hereto against the other on any matter whatsoever arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant, Tenant's use or occupancy of the Premises or claim of injury or damage, and (b) in any action against Landlord by Tenant, or against Tenant by Landlord, the reasonable legal fees of the prevailing party will be paid by the other party to the action. The parties hereto consent to the jurisdiction of the courts of the Commonwealth of Virginia and of the United States District Court of Virginia in connection with any action, suit or proceeding arising out of or relating to this Lease, and agree that venue shall lie only in said courts. 38. Interpretation. 38.1. Gender; Plural Terms; Persons. The masculine (or neuter) pronoun and the singular number shall include the masculine, feminine and neuter genders and the singular and plural numbers. A reference to person shall mean a natural person, a trustee, a corporation, a partnership and any other form of legal entity. All references in the singular or plural number shall be deemed to have been made, respectively, in the plural or singular number as well, as the context may require. 38.2. Exhibits. Each and every document or other writing which is referred to herein as being attached hereto or is otherwise designated herein as an exhibit hereto is hereby made a part hereof. 38.2.1. Captions. The captions of Articles, sections, subsections and the Table of Contents are for convenience only; they are not intended to indicate all of the subject matter in the text and they shall not be deemed to limit, construe, affect or alter the meaning of any provisions of this Lease and are not to be used in interpreting this Lease or for any other purpose in the event of any controversy. 39. Severability. If any provision contained in this Lease shall, to any extent, be invalid or unenforceable, the remainder of this Lease (and the application of such provision to persons or circumstances, if any, other than those in respect of which it is invalid or unenforceable) shall not be affected thereby, and each and every other provision of this Lease shall be valid and enforceable to the fullest extent permitted by law. 40. Notices. All notices required to be given by Landlord to Tenant shall be sufficiently given by overnight courier service delivery against written receipt or signed proof of delivery, or mailing the same by registered or certified mail, return receipt requested, to Tenant's Address or to such other person or persons and address or addresses as Tenant may from time to time designate in writing and deliver to Landlord in accordance with this Article. Notices given by Tenant to Landlord shall be sufficiently given by registered or certified mail, return receipt requested, overnight express delivery service or by courier service delivery against written receipt or signed proof of delivery, to Landlord at Landlord's Address or to such other person and address as Landlord may from time to time designate in writing and deliver to Tenant in accordance with this Article. Notices may be given on behalf of either party by its counsel. 40 44 41. No Representation by Landlord. Landlord and Landlord's agents have made no representation, agreements, conditions, warranties, understandings, or promises, either oral or written, other than as herein set forth, with respect to the Lease, Buildings, Property, or Premises, or otherwise. 42. Whole Agreement. This Lease, the exhibits, and any riders attached hereto and forming a part hereof set forth all of the promises, agreements, conditions, warranties, representations and understandings between Landlord and Tenant relative to the Premises and this leasehold. No alteration, amendment, modification, waiver, understanding or addition to this Lease shall be binding upon Landlord or Tenant unless reduced to writing and signed by Landlord and Tenant or by a duly authorized agent of Landlord or Tenant empowered by a written authority signed by Landlord and/or Tenant (as the case may be). 43. Security Deposit. Intentionally Omitted. 44. Real Estate Broker. Landlord and Tenant each represent and warrant to the other that it has dealt with no broker, agent or other intermediary in connection with this Lease other than Julien J. Studley, Inc. and Cushman & Wakefield of Virginia, and that insofar as it knows, no other broker, agent or other intermediary negotiated this Lease or introduced Tenant to Landlord or brought the Buildings to Tenant's attention for the lease of space therein. Tenant recognizes Cushman & Wakefield of Virginia as its broker of record for the Term of this Lease and authorizes Joshua Realty Corporation to pay the commissions to Cushman & Wakefield of Virginia during the Term of this Lease pursuant to an agreement of even date herewith and Landlord agrees that Joshua Realty Corporation, as Landlord, shall be responsible for any commissions payable to Julien J. Studley, Inc., with respect to this Lease, pursuant to a separate agreement of even date herewith. Each party agrees to indemnify, defend and hold the other and its partners, employees, agents, their officers and partners, harmless from and against any claims made by any broker, agent or other intermediary other than Julien J. Studley, Inc. and Cushman & Wakefield of Virginia, with respect to a claim for broker's commission or fee or similar compensation brought by any person in connection with this Lease, provided that the indemnified party has not in fact retained such broker, agent or other intermediary. 45. Inability to Perform. If Landlord or Tenant is delayed or prevented from performing any of its obligations under this Lease by reason of strike, labor troubles, or any cause whatsoever beyond its control, the period of such delay or prevention shall be deemed added to the time herein provided for the performance of any such obligation. 46. Corporate Entities. If Tenant is a corporation, each person executing this Lease on behalf of Tenant hereby covenants and warrants that: Tenant is a duly formed corporation qualified to do business in the state in which the Premises is located; all Tenant's franchise and corporate taxes have been paid to date; and such persons are duly authorized by such corporation to execute and deliver this Lease on behalf of the corporation. Each person executing this Lease on behalf of Landlord hereby covenants and warrants that: Landlord is a duly formed corporation qualified to do business in the state in which the Premises is located; all Landlord's franchise and 41 45 corporate taxes have been paid to date; and such persons are duly authorized by such corporation to execute and deliver this Lease on behalf of the corporation. 47. Recordation. At the time of execution of this Agreement, Landlord and Tenant shall execute and acknowledge, in recordable form, for notice and recording purposes only, a Memorandum of this Agreement, it being expressly agreed that such Memorandum shall not supersede, add to or change this Lease. The form of Memorandum is attached hereto as Exhibit "J" and Tenant may cause the Memorandum to be recorded in the appropriate office for recording in Fairfax County at Tenant's sole expense. Tenant covenants to execute and deliver a termination of Memorandum upon the termination of this Lease, and Tenant hereby appoints Landlord its attorney-in-fact to file any instrument to remove or discharge from record any such Memorandum. 48. Time. Time is of the essence of this Lease and all of its provisions. 49. Applicable Law. This Lease shall in all respects be governed by the laws of the Commonwealth of Virginia. 50. Defined Terms. As used in this Lease, the following terms have the meaning as set forth below, respectively: 50.1. Affiliate. Any corporation which is controlled by, controlling, or under common control with Tenant. As used herein the term "control" shall mean possession of the power, directly or indirectly, to vote more than fifty percent (50%) of the voting securities having the ordinary power for the election of directors. 50.2. Buildings: The physical structures located at 4050 Legato Road and 4000 Legato Road, Fairfax, Virginia. 50.3. Holidays: The following holidays: 50.3.1. For the Centerpointe I Building New Year's Day Martin Luther King Jr. Day (in even-numbered years) Washington's (President) Birthday Memorial Day Independence Day Labor Day Columbus Day (in odd-numbered years) Thanksgiving Day Day After Thanksgiving Christmas Day 50.3.2. For the Centerpointe II Building: New Year's Day Martin Luther King Jr. Day Washington's (President) Birthday 42 46 Memorial Day Independence Day Labor Day Columbus Day Veterans Day Thanksgiving Day Christmas Day 50.4. HVAC Off-Hours Rate: For the Centerpointe I Building, a rate which shall include only Landlord's actual labor costs and the reasonable cost for additional wear and tear of Landlord's equipment. For the Centerpointe II Building, a charge per floor equal to $45.00 per hour, and $54.00 per hour on Holidays (with a flat rate of $25.00 per hour payable for each additional floor), with a two (2) hour minimum, subject to adjustment in accordance with any increases in Landlord's actual labor costs and the reasonable cost of additional wear and tear of Landlord's equipment. 50.5. Landlord: The Landlord named on page 1 of this Lease and any subsequent owner of such Landlord's interest in the Buildings, as well as their respective heirs, personal representatives, successors and assigns, all subject to the provisions of Article 19. 50.6. Lease Interest Rate: The lesser of (A) the Prime Rate in effect from time to time plus 3%, or, (B) the maximum amount or rate that Landlord lawfully may charge Tenant in such circumstances, if such a maximum exists. 50.7. Lease Taxes: Any tax, assessment, levy or other charge (other than any income tax or the Fairfax County BPOL gross receipts or gross expenditure taxes) by any federal, state or local law now or hereafter imposed directly or indirectly upon Landlord with respect to this Lease or the value thereof, or upon the Tenant's use or occupancy of the Premises, or upon the Base Rent, Additional Rent or any other sums payable under this Lease or upon this transaction. 50.8. Ordinary Business Hours: Monday through Friday, inclusive, from 8:00 a.m. to 7:00 p.m., in the Centerpointe I Building, and from 8:00 a.m. to 6:00 p.m., in the Centerpointe II Building, and Saturdays from 8:00 a.m. to 1:00 p.m. in both Buildings, with Holidays excepted. 50.9. Prime Rate: The reference rate of interest as published in the Money Rates section of the Wall Street Journal from time to time, or if such reference rate is discontinued, such comparable rate as Landlord reasonably designates by written notice to Tenant. 50.10. Property: The Buildings and the land owned by Landlord upon which they stand, as more particularly described on Exhibit "HI' attached hereto. 50.11. Real Estate Taxes: All real estate taxes and assessments, general or special, ordinary or extraordinary, foreseen or unforeseen (other than Lease Taxes) assessed or imposed upon the Buildings and/or the Property. If, due to a future change in the method of taxation, any franchise, income, profit or other tax, however designated, shall be levied or imposed in substitution, in whole or in part, for (or in lieu of) any tax or increase in any tax which would otherwise be included within the 43 47 definition of Real Estate Taxes, then such other tax shall be deemed to be included within Real Estate Taxes as defined herein. Any special assessments which may be paid in installments shall be paid over the maximum number of installments permitted without the imposition of any penalty. Except as provided in the immediately-preceding sentence, Real Estate Taxes shall not include any income, profit, franchise, capital stock, excise, estate, gift, succession, transfer or recordation tax or levy. 50.12. Rent: Additional Rent and Base Rent, collectively. 50.13. Rentable Area of the Buildings: Deemed to be 203,630 square feet for each of the Centerpointe I Building and the Centerpointe II Building. 50.14. Rentable Area of the Premises: As set forth in Article 1.1 hereof. 50.15. Tenant: Each and every person hereinabove named as Tenant on page 1 of this Lease and such persons' respective heirs, personal representatives, successors and assigns, subject to the provisions of Article 14.7. 50.16. Tenant's Proportionate Share: 50.16.1. As to the Centerpointe I Building, Tenant's Proportionate Share shall be 100% ("Tenant's Centerpointe I Proportionate Share"). 50.16.2. As to the Centerpointe II Building, Tenant's Proportionate Share shall be 18.85% ("Tenant's Centerpointe II Proportionate Share"), which is derived by dividing the Rentable Area of the Centerpointe II Premises by 203,630, which is the Rentable Area of the Centerpointe II Building. 51. Delivery for Examination. DELIVERY OF THE LEASE TO TENANT SHALL NOT BIND LANDLORD IN ANY MANNER, AND NO LEASE OR OBLIGATIONS OF LANDLORD OR TENANT SHALL ARISE UNTIL THIS INSTRUMENT IS SIGNED BY BOTH LANDLORD AND TENANT AND DELIVERY IS MADE TO EACH. 52. Environmental Matters. 52.1. Compliance with Law. For purposes of this Article 52, Landlord and Tenant shall each be referred to as the "Responsible Party" with regard to their respective "Control Areas". Tenant's "Control Area" shall be the Centerpointe I Building (but does not include the Core Elements of the Centerpointe I Building), and the portion of the Premises in the Centerpointe II Building, (but does not include the Core Elements within the Centerpointe II Building that fall within the Centerpointe II Premises) while Landlord's "Control Area" shall be the Property, exclusive of (i) the Centerpointe I Building (but including the "Core Elements" of the Centerpointe I Building), and (ii) the portion of the Premises in the Centerpointe II Building (but including the Core Elements within the Centerpointe II Building that fall within the Premises). Each Responsible Party shall conduct, and cause to be conducted, all operations and activity at its Control Area in compliance with, and shall in all other respects applicable to such Control Area comply with, all applicable present and future federal, state, municipal and other governmental statutes, ordinances, regulations, orders, directives and other requirements, and all present and 44 48 future requirements of common law, concerning the environment (hereinafter collectively called "Environmental Statutes") including, without limitation, (i) those relating to the generation, use, handling, treatment, storage, transportation, release, emission, disposal, remediation or presence of any material, substance, liquid, effluent or product, including, without limitation, hazardous substances, hazardous waste or hazardous materials, (ii) those concerning conditions at, below or above the surface of the ground and (iii) those concerning conditions in, at or outside buildings. In addition, Landlord's compliance obligation shall extend to matters existing at the Property (including Tenant's Control Area) prior to the date hereof. 52.2. Permits. Each Responsible Party, in a timely manner, with respect to its Control Area, shall obtain and maintain in full force and effect all permits, licenses and approvals, and shall make and file all notifications and registrations as required by Environmental Statutes, and shall at all times comply with the terms and conditions of any such permits, licenses, approvals, notifications and registrations. 52.3. Documents. Each Responsible Party shall provide to the other party copies of the following, forthwith after each shall have been submitted, prepared or received by the Responsible Party or any occupant of its Control Area: (i) all applications and associated materials submitted to any governmental agency relating to any Environmental Statute; (ii) all notifications, registrations, reports and other documents, and supporting information, prepared, submitted or maintained in connection with any Environmental Statute; (iii) all permits, licenses, approvals, and amendments or modifications thereof, obtained under any Environmental Statute; and (iv) any correspondence, notice of violation, summons, order, complaint, or other document received by such Responsible Party or any occupant of its Control Area pertaining to compliance with or liability under any Environmental Statute. 52.4. Operations. Neither Responsible Party shall cause or suffer or permit to occur in, on or under its Control Area any generation, use, manufacturing, refining, transportation, emission, release, treatment, storage, disposal, presence or handling of hazardous substances, hazardous wastes or hazardous materials (as such terms are now or hereafter defined under any Environmental Statute) or any other material, substance, liquid, effluent or product now or hereafter regulated by any Environmental Statute (all of the foregoing herein collectively called "Hazardous Substances"), except that construction materials (other than asbestos or polychlorinated biphenyls), office equipment, fuel and similar products (if contained in vehicles) and cleaning solutions, and other maintenance materials that are or contain Hazardous Substances may be used, generated, handled or stored in the Control Area, provided such is incident to and reasonably necessary for the operation of, maintenance of or conduct of business in the Control Area and is in compliance with all Environmental Statutes and all other applicable governmental requirements. Should any release of any Hazardous Substance occur at a Control Area, the Responsible Party shall immediately contain, remove and dispose of, from the Control Area such Hazardous Substances, and any material that was contaminated by the release and to remedy and mitigate all threats to human health or the environment relating to such release. When conducting any such measures the Responsible Party shall comply with all Environmental Statutes. 45 49 52.5. Indemnification. Each Responsible Party hereby agrees to indemnify and to hold harmless the other party hereto of, from and against any and all expense, loss or liability suffered by the other party hereto by reason of the Responsible Party's breach of any of the provisions of this Article, including, but not limited to, (i) any and all expenses that the indemnified party may incur in complying with any Environmental Statutes, (ii) any and all costs that the indemnified party may incur in studying, assessing, containing removing, remedying, mitigating, or otherwise responding to, the unlawful release of any Hazardous Substance or waste at or from the other party's Control Area, (iii) any and all costs for which the indemnified party may be liable to any governmental agency for studying, assessing, containing, removing, remedying, mitigating, or otherwise responding to, the unlawful release of a Hazardous Substance or waste at or from the other party's Control Area, (iv) any and all fines or penalties assessed, or threatened to be assessed, upon the indemnified party by reason of a failure of the indemnifying party to comply with any obligations, covenants or conditions set forth in this Article, and (v) any and all legal fees and costs incurred by the indemnified party in connection with any of the foregoing. 52.6. General Compliance. The provisions of this Article 52 shall not be construed as limiting in any respect the covenants and obligations of either party hereunder. All covenants, obligations and liabilities of Landlord and Tenant under this Article 52 shall survive the expiration or other termination of this Lease. 53. Tenant's Remedies. 53.1. If Landlord shall be in default in the performance of any of its duties or obligations hereunder for fifteen (15) consecutive days after written notice from Tenant (unless such default is not susceptible of cure within fifteen (15) days in which event Landlord shall have failed to commence curing such default within such fifteen (15) day period and diligently prosecuted such cure until completion), and as a result thereof all or a substantial portion of any floor is rendered untenantable, inaccessible, incapable of use, or Tenant's use or enjoyment thereof is materially and adversely affected, in addition to any other rights Tenant may have in law or equity, Tenant may but shall not be obligated to cure such default on behalf of Landlord. Landlord shall reimburse Tenant upon demand for all reasonable out-of-pocket costs incurred by Tenant in curing such default, including, without limitation, reasonable attorneys' fees and other legal expenses, together with interest thereon at the Lease Interest Rate. Notwithstanding the foregoing, Tenant shall not have any right in exercising its remedies under the preceding sentence to make any repairs or modifications to areas outside the Premises or to Building systems except those within and solely affecting the Premises or those required to maintain direct access to the Premises or provide services directly to the Premises (in any case in a manner which does not materially adversely affect the Buildings or other tenants in the Centerpointe II Building), or to provide any services for the benefit of any occupants of the Buildings other than Tenant, or to retain any contractors or subcontractors to perform such services which are not responsible contractors and subcontractors. Tenant shall give written notice to Landlord prior to retaining any such contractors or subcontractors of the identity of such contractors and subcontractors. 46 50 53.2. If the cure provided for under Article 53.1 above involves a payment by Tenant for Landlord's account, then Tenant may set off the amount of such payment (and the interest provided for in Article 53.1 above) against any Rent payable by Tenant hereunder except for payments of Base Rent, unless (a) Landlord's default is a failure to pay any portion of the Concession Fund when the same is due, in which event Tenant shall have a right of set off as against Base Rent and Additional Rent in the amount of any portion of the Concession Fund that was not paid when due, together with interest at the Lease Interest Rate from the due date until the date of set off, or (b) the set off right arises in the last year of the Term or in the last year of any Renewal Period, in which event Tenant shall have a right of set off against Base Rent and Additional Rent. Notwithstanding anything else herein to the contrary, however, in the event Landlord disputes that its has the obligation to reimburse Tenant as aforesaid, Tenant shall not have any right of set off against the amount thereof against Rent until such time that a court of competent jurisdiction has entered a judgment which provides that Landlord was in fact obligated to make such payment or Landlord is determined to have had such obligation pursuant to the arbitration provisions set forth in Article 65 of this Lease. The survival of Tenant's set off rights, if any, in the event of a foreclosure or other enforcement of a mortgage, deed of trust or ground lease shall be governed by Article 58 below. 54. Extension Option. 54.1. So long as Tenant is not in default under this Lease, Tenant shall have an option to extend the Term of this Lease for two (2) additional periods of five (5) years each (each a "Renewal Period"). The option for each such additional 5-year Renewal Period term may be exercised by Tenant only by written notice (the "Extension Exercise Notice") given to Landlord not later than the date which is at least fifteen (15) months prior to the expiration of the Term, in the case of the first 5-year option, and at least fifteen (15) months prior to the expiration of the first Renewal Period (each an "Option Exercise Date"), in the case of the second Renewal Period. In the event that Tenant exercises the option to extend the Term in accordance with the provisions hereof, the Term shall be extended accordingly. Tenant's extension option for the first Renewal Period shall be for a minimum of fifty percent (50%) of the Rentable Area of the Centerpointe I Building in a contiguous block of space and shall be for no less than one-half of any particular floor. Tenant's extension option for the second Renewal Period shall be for one hundred percent (100%) of the space for which Tenant exercised the extension option during the first Renewal Period. Upon the commencement of each Renewal Period, Landlord shall grant to Tenant a reasonable refurbishment allowance in such amount as may be mutually agreed to by Landlord and Tenant, which amount shall be agreed to in conjunction with, and as a component of, the determination of "Market Rental Value", as described below. Except as stated below in this Article, all of the terms and conditions of this Lease in effect immediately prior to the respective Renewal Period shall equally pertain in all respects to the respective Renewal Period. All references in this Lease to the Term of this Lease shall be construed to include the applicable Renewal Period, unless the context clearly indicates that another meaning is intended. Tenant shall not have the right to exercise the extension option for the second Renewal Period unless Tenant had previously exercised the extension option for the first Renewal Period. 47 51 54.2. Annual Base Rent during the first Renewal Period shall be the greater of (i) ninety percent (90%) of the Market Rental Value of the Premises (as defined and determined below) for that period or (ii) the then-current rate of Base Rent, net of Base Year Operating Expenses and Base Year Real Estate Taxes; provided, however, that if the then-current Base Rent, net of Base Year Operating Expenses and Base Year Real Estate Taxes is greater than 100% of Market Rental Value, the annual Base Rent shall be 100% of Market Rental Value. Annual Base Rent for the second Renewal Period shall be one hundred percent (100%) of the Market Rental Value of the Premises. The determination of Market Rental Value shall account for the fact that Base Year operating Expenses and Base Year Real Estate Taxes for each Renewal Period shall be the Operating Expenses and Real Estate Taxes incurred by Landlord during the calendar year in which the applicable Renewal Period commences. 54.3. "Market Rental Value" of the Premises for the Renewal Periods shall be determined by Landlord and Tenant not later than thirty (30) days after Landlord's receipt of the respective Extension Exercise Notice ("Negotiation Period"). if Landlord and Tenant cannot agree as to Market Rental Value of the Premises prior to the end of the Negotiation Period, then Tenant may deliver written notice to Landlord within ten (10) days after the expiration of the Negotiation Period rescinding Tenant's Extension Exercise Notice, in which event this Lease shall expire upon the last day of the then-current Term. If Tenant does not deliver such rescission notice within ten (10) days after the expiration of the Negotiation Period, then Market Rental Value shall be determined as follows: 54.3.1. Landlord and Tenant shall each, within fifteen (15) days after the expiration of the Negotiation Period, select a broker, each of whom shall be a Virginia-licensed real estate broker with at least ten (10) years experience in the Fairfax/Fair Oaks office market, who shall determine the Market Value Rental. The brokers shall be instructed to submit their written determinations of the Market Rental Value of the Premises to Landlord and Tenant within thirty (30) days after their appointment. In the event that higher of the two determinations exceeds the lower of the two determinations by less than five percent (5%), the Market Rental Value shall be the average of such determinations. If the higher of the two determinations exceeds the lower of the two determinations by five percent (5%) or more, the brokers shall, within ten (10) days, appoint a third broker with similar qualifications to make such determination of the Market Rental Value in accordance with the foregoing limitations. In the event that the two brokers cannot agree as to the selection of the third broker, either party may request that the President of the Washington Area Commercial Brokers Council appoint the third broker. The third broker shall be instructed to complete the appraisal procedure and to submit a written determination of the Market Rental Value to Landlord and Tenant within thirty (30) days after such broker's appointment. The rental rate that shall be binding upon Landlord and Tenant as the Market Rental Value shall be the mean of the two closest determinations; provided, however, that (i) if any determination is agreed upon by any two of the brokers, then Market Rental Value shall equal such agreed-upon determination, and (ii) if any determination is equidistant from the other two determinations, then Market Rental Value shall equal such middle determination. Landlord and Tenant shall each bear the costs of their respective brokers. The expenses of the third broker shall be borne one-half (1/2) by Landlord and one-half (1/2) by Tenant. 48 52 54.3.2. For purposes of this Article, the term "Market Rental Value" means the fair market rental rate per square foot of the Rentable Area of the Premises that would be agreed upon between a landlord and a tenant of similar creditworthiness entering into a new lease in comparable buildings (with structured or below-grade parking amenities) of comparable age as the Buildings, assuming the following: (A) the landlord and tenant are typically motivated; (B) the landlord and tenant are well informed and well advised and each is acting in what it considers its own best interests; (C) in the event the Premises have been destroyed or damaged by fire or other casualty, they have been fully restored; (D) the Premises are to be let with vacant possession and subject to the provisions of this Lease for a term commensurate with the respective Renewal Period. Market Rental Value shall take into account market rents then being charged for leases of comparable square footage and comparable space in other similar office buildings in comparable locations, rent escalation provisions then prevailing, rental abatements, build-out allowances and other concessions then customarily granted, any savings in brokerage commissions by Landlord, and other terms customarily agreed to in market leases entered into at such times. 55. Signage. Tenant shall have the right to install two illuminated signs on the top of the Centerpointe I Building identifying Tenant's corporate name or logo. The signs must be of design, material, size, color, location and construction methods acceptable and approved by Landlord prior to installation, which approval shall not be unreasonably withheld, delayed or conditioned. In addition, the signs shall be built and installed in accordance with all applicable local county and state codes. Subject to the signage rights of existing tenants (including how those prior rights impact on the total allowable signage for the Property), Tenant shall have the right to install a monument sign at the approach to the Centerpointe I Building so long as such sign complies with all applicable local, county and state codes, and is of a design, character and at a location reasonably satisfactory to Landlord. The signs shall be provided and installed by Tenant as part of the Concession Fund and the signs shall be removed and the Buildings restored to their original condition at Tenant's expense at the end of the Term. So long as Tenant occupies more Rentable Area in the Buildings than any other tenant, Landlord shall grant no further signage rights to other tenants. At such time as (i) the rights of Quality Systems, Inc. expire in and to the Centerpointe II Building, and (ii) in the event Tenant is leasing at least twenty-five percent (25%) of the Rentable Area of the Centerpointe II Building, and (iii) there is no contiguous space leased to a single tenant or contiguous empty space in the Centerpointe II Building containing a Rentable Area which is greater than the Rentable Area leased by Tenant in the Centerpointe II Building, then Tenant shall have the right to install one illuminated sign on the top of the Centerpointe II Building identifying Tenant's corporate name or logo. Such sign shall be subject to the same requirements as are set forth above with respect to the signs on the Centerpointe I Building. 56. Storage Space. Tenant shall have the right, at its sole cost and expense, to convert up to approximately 3,000 square feet of Tenant's garage parking area (described in Article 60 below) to a storage area provided that such conversion is in accordance with law and is in a location and design acceptable to Landlord, which approval shall not be unreasonably withheld, delayed or conditioned. Any 49 53 parking converted to storage shall directly reduce Tenant's parking allocation, as described in Article 60. All storage improvements shall be removed and the garage restored to its original condition at Tenant's expense, at the end of the Term. 57. Food Service In Centerpointe II Building. Landlord agrees that so long as Tenant does not operate its own cafeteria in either of the Buildings, Landlord shall not lease the portion of the first floor of the Centerpointe II Building which is presently leased to Centerpointe Cafe for use other than as a deli-type food service operation comparable to that offered by Centerpointe Cafe. Tenant acknowledges that Landlord shall have the right to change the location of the food service operation to any other portion of the first floor of the Centerpointe II Building (provided that such new space shall provide for seating for at least 85 patrons), in which event the negative covenant described in the first sentence of this Article shall apply only to such space and that Landlord is free to change the identity of the tenant of such food service operation from time to time during the Term of this Lease. 58. Non-Disturbance. As to each Overlessor, deed of trust trustee, mortgagee or holder of any other interest to which this Lease shall hereafter become subordinate pursuant to Article 35 or Article 36 (each a "Senior Holder"), such subordination is subject to the express condition that so long as Tenant is not in default in its obligations hereunder beyond applicable grace periods, (a) Tenant will not be made a party in any action or proceeding by such Senior Holder to recover possession of the Property and/or the Premises, or to any trustee's or sheriff's sale of the Property or to foreclose any mortgage, (b) Tenant's possession shall not be disturbed by such Senior Holder, and (c) this Lease shall not be cancelled or terminated by such Senior Holder and shall continue in full force and effect upon such foreclosure or recovery of possession as a direct lease between Tenant and the person or entity acquiring the interest of Landlord, or between Tenant and the Overlessor, as the case may be, upon all the terms, covenants, conditions and agreements set forth in this Lease, provided in each case that, unless the Senior Holder is the General Electric Pension Trust, the trustees or any subsidiary thereof, neither such Senior Holder nor any person or entity acquiring title to the Buildings as a result of foreclosure or trustee's sale nor any successor or assign of either of the foregoing shall be (i) bound by or liable for any payment of Rent which may have been made more than thirty (30) days before the due date of such installment, (ii) subject to any defense or offset which Tenant may have to the payment of Rent or other performance under this Lease, unless a Senior Holder that institutes a foreclosure or other conveyance of title to a Building or Buildings has been notified of Tenant's claim of a set off right, and, if the set off rights are determined pursuant to a court action or arbitration, has been given the opportunity to appear in, an action in which Tenant is awarded a set off right pursuant to Article 53.2 above, in which event Tenant's right of set off shall be limited as against such Senior Holder or any party acquiring such title to 75% of any Monthly Installments of Additional Rent payable thereunder from time to time from and after the date on which such Senior Holder or other party acquires title to a Building or Buildings, (iii) bound by any amendment or modification to this Lease made without the consent of such Senior Holder, (iv) liable for any monies owing by Landlord or on deposit with Landlord to the credit of Tenant, which such Senior Holder shall not have received, except as aforesaid, or (v) bound by or liable for any act or omission of any prior Landlord, and Tenant shall not have any right to set off (except as provided in clause (ii) above) or assert against such Senior Holder or other person or entity any claim or damages arising therefrom. The provisions of this 50 54 Article 58 shall be self-operative and no further instrument of subordination or attornment shall be required to be provided by any Senior Holder or by Tenant. Tenant agrees, however, whenever requested to do so upon reasonable notice, to execute such instruments confirmatory of the provisions of this Article 58 as Landlord or any Senior Holder requesting the same may reasonably require. 59. Exercise Room. Landlord shall provide an allowance of $35,000 for Tenant's purchase of exercise equipment for use in the fitness center which Tenant intends to construct in the Centerpointe I Building. The foregoing equipment allowance shall be in addition to the Concession Fund. The fitness center shall otherwise be constructed by Tenant at Tenant's sole cost and expense. 60. Parking. Tenant shall have the right to park up to 3.6 automobiles per 1,000 rentable square feet of the Premises free of charge to Tenant throughout the Term (including any renewal terms), subject to readjustment pursuant to Article 56 above. Tenant's total parking allotment shall initially be eight hundred seventy-one (871) spaces (which spaces shall be unassigned for the portion of the garage beneath the Centerpointe II Building), comprised of seven hundred fourteen (714) spaces in the garage and one hundred fifty-seven (157) spaces on the surface lot. Landlord shall designate within the garage that portion of the garage for use by tenants of each of the respective Buildings. Tenant's garage parking shall include the entire portion of the garage designated by Landlord for the use of the Centerpointe I Building (which portion shall be below the Centerpointe I Building) provided that Tenant's usage shall not restrict access and use of the parking areas for the Centerpointe II Building. 61. Right of First Offer. 61.1. At any time that there remains at least four (4) years in the Term, including during any exercised Renewal Periods, (provided, however, that the rights set forth in this Article 61 during a Renewal Period shall only be applicable if Tenant is occupying eighty percent (80%) or more of the Rentable Area of the Centerpointe I Building), and provided Tenant is not in default of any of the terms and conditions in this Lease, Tenant shall have the rights of first offer set forth in this Article with respect to any space in the Centerpointe II Building that becomes available following (or in anticipation of) the vacation of such space by any tenant, provided that the space is not as of the date of this Lease under any previous options or rights of first offer or first negotiations to any other tenant (or its assignee or sublessee) of the Centerpointe II Building (the "First Offer Space"). First Offer Space shall not include any space which was not previously leased to and occupied by another tenant. Gin the event that Landlord shall propose to actively market or lease any First Offer Space to prospective tenants' then Landlord shall first give written notice (the "Offer Notice") to Tenant notifying Tenant of such intention and designating the First Offer Space which Landlord intends to so market or lease and specifying in good faith the Base Rent, Additional Rent, escalations, tenant concessions and other terms and the date on which Landlord would require Tenant or the prospective tenant to occupy such First offer Space (each such date shall herein be defined as a "Scheduled Commencement Date") Upon the giving of an Offer Notice by Landlord, Tenant shall thereupon have an option (a "Right of First Offer"), exercisable by notice (an "Acceptance Notice") given to Landlord not later than ten (10) business 51 55 days after the receipt of the Offer Notice, to lease the designated First Offer Space on the terms and conditions specified below in this Article. If the First Offer Space shall be for a term which is not coterminus with the Term of this Lease, Landlord's Offer Notice shall also include the terms and conditions upon which Landlord would lease the First Offer Space for a term that is coterminus with the Term, and Tenant shall elect in its Acceptance Notice whether Tenant shall lease the First Offer Space for a coterminus term upon such terms and conditions or for the term that Landlord had otherwise been marketing for the First Offer Space. In the event Tenant does not exercise its option as aforesaid for any First Offer Space as to which Tenant receives an Offer Notice from Landlord, then Landlord shall have the right to enter into a lease with respect to such designated First Offer Space (on terms substantially similar to, and at a net effective base rental which is no less than 95% of, the terms of the Offer Notice) with another tenant during the period which is twelve (12) months after the date of Landlord's Offer Notice. If Landlord enters into a lease with another tenant for First Offer Space as aforesaid, at the end of the term of any such lease, Tenant's rights of first offer shall be reinstated for the remainder of the Term of this Lease as to such space, subject to the terms and conditions herein stated. 61.2. In the event that Tenant shall exercise its Right of First offer with respect to any First Offer Space, all of the terms and conditions of this Lease applicable to the Premises generally, shall apply to such First Offer Space, except that Base Rent, Additional Rent, renewal options, escalations, tenant concessions and other economic terms and any other terms set forth in the Offer Notice shall control if inconsistent with this Lease (or if not addressed in this Lease), and except as otherwise set forth below in this Article. Landlord and Tenant shall execute a lease addendum within twenty (20) days after the date of the Acceptance Notice to memorialize the terms of the Offer Notice. First Offer Space shall be delivered to Tenant in its then "as-is" condition and state or repair, unless otherwise specified in the Offer Notice. 61.3. The Scheduled Commencement Date for First Offer Space as to which Tenant shall have given an Acceptance Notice ("Accepted First Offer Space") and the dates upon which Rent shall become due shall be specified by Landlord in the Offer Notice. If Landlord shall fail to deliver timely possession of such Accepted First Offer Space for any reason beyond Landlord's control, Landlord shall not be subject to any liability to Tenant, provided, however, that Landlord shall use reasonable efforts to evict any holdover tenant and the date upon which Rent shall be payable shall be equitably adjusted. 61.4. The Term of this Lease shall commence as to each Accepted First Offer Space on such date, which for purposes of this Article shall be a "Subsequent Lease Commencement Date" for such Accepted First Offer Space, as shall be the date (the "Availability Date") Landlord makes such Accepted First Offer Space available for the commencement of Tenant Work. On the Subsequent Lease Commencement Date for such Accepted First Offer Space, such First Offer Space shall become part of the Premises. This Lease shall terminate as to Accepted First Offer Space upon the expiration of the Term, if the term for such First Offer Space is co-terminus with the Term, or on the date otherwise specified in the Offer Notice and elected by Tenant in the Acceptance Notice. 52 56 61.5. From and after the Subsequent Rent Commencement Date for Accepted First Offer Space, the "Tenant's Centerpointe II Proportionate Share" shall be increased by the percentage which is derived by dividing the rentable square footage of such Accepted First offer Space by 203,630. 62. Expansion Space. 62.1. So long as Tenant is not in default under the terms of this Lease, Tenant shall have the option to lease the approximately 9,062 rentable square feet of the sixth (6th) floor and the approximately 9,469 rentable square feet of the tenth (10th) floor in the Centerpointe II Building which are not presently leased to other tenants ("Expansion Space"), provided that Tenant exercises its option to lease either or both partial floors by written notice delivered to Landlord ("Expansion Notice") on or before March 31, 1993, which notice shall advise Landlord of the date that Tenant shall occupy the Expansion Space, which date shall be no later than March 1, 1994. Landlord shall make available the Expansion Space to Tenant for Tenant Work within five (5) days after Landlord's receipt of the Expansion Notice. 62.2. If Tenant delivers to Landlord its Expansion Notice at any time on or before March 31, 1993, all of the terms and conditions of this Lease applicable to the Premises shall apply to such Expansion Space, except as set forth below in this Article. Expansion Space shall be delivered to Tenant in its then "as-is" condition and state of repair, but the Concession Fund shall be increased pro rata based on the square footage of the Expansion Space. 62.3. The Term of this Lease shall commence as to such Expansion Space on such date, which for purposes of this Lease shall be the "Expansion Space Lease Commencement Date," as shall be the date Tenant or anyone claiming under or through Tenant enters such Expansion Space to commence actual construction of the Tenant Work. 62.4. Tenant's obligation to pay Rent for the Expansion Space shall commence on March 1, 1994 ("Expansion Space Rent Commencement Date"). If Tenant occupies the Expansion Space for the Permitted Use prior to the Expansion Space Rent Commencement Date, Tenant shall pay to Landlord for the period between the date of such occupancy and the Expansion Space Rent Commencement Date, an amount equal to Five Dollars ($5.00) per rentable square foot per annum, in equal monthly installments, in advance, as Additional Rent hereunder. All other obligations of Tenant pertaining to the Expansion Space under this Lease shall commence on the Expansion Space Lease Commencement Date. 62.5. Unless Tenant exercises its option to lease both of the partial floors that comprise the Expansion Space, as provided in Article 62.1 above, Landlord agrees, (i) as to one of the two partial floors, to be selected by Landlord, if neither partial floor is so leased by Tenant, or (ii) as to the remaining partial floor, if one of the partial floors is so leased by Tenant (the applicable floor in item (i) or (ii) above is herein defined as "Five Year Space"), that Landlord will not enter into any lease for the Five Year Space for a term that exceeds five (5) years, and following the expiration of the term of such lease for the Five Year Space, Tenant shall have the option to lease the Five Year Space, to be exercised by the delivery of a notice to Landlord within thirty (30) days after Landlord provides Tenant with written notice as to the availability of the Five 53 57 Year Space, provided that the Base Rent payable with respect to the Five Year Space shall be at the "Market Rental Value," as defined in, and determined under, Article 54.3 above. Any renewal rights granted to a tenant of the Five Year Space shall be subordinate to Tenant's option as aforesaid. 62.6. After the Expansion Space Rent Commencement Date with respect to the Expansion Space, Tenant's Centerpointe II Proportionate Share shall be increased by an amount equal to the percentage derived by dividing the rentable square footage of the Expansion Space by 203,630. 63. Measurement of Premises. Intentionally Omitted 64. Tenant's Affiliation Representation. Tenant represents and warrants that (i) it does not directly or indirectly control the General Electric Company and is not directly or indirectly controlled by or under common control with the General Electric Company; (ii) neither the Tenant nor any principal of the Tenant is an officer, director or employee of the General Electric Company or any subsidiary of any affiliated company of the General Electric Company; and (iii) it is not a partnership in which the General Electric Company or any subsidiary of any affiliated company of the General Electric Company is a ten percent (10%) or more (directly or indirectly, in capital or profits) partner. 65. Arbitration (a) If any controversy shall arise between the parties with respect to the matters stated in this Lease to be resolved by arbitration and that dispute shall not be resolved by the parties within ten (10) days after either of the parties shall notify the other of its desire to arbitrate the dispute, then the dispute shall be settled by arbitration, as hereinafter provided, and judgment upon the award shall be entered in any court having jurisdiction. The arbitrators shall have no power to change any provisions of this Lease in any respect, and the jurisdiction of the arbitrators is expressly limited accordingly. Neither party shall interrupt the progress of its respective area of performance under this Lease pending the determination in the arbitration proceeding. (b) The party desiring such arbitration shall give written notice to that effect to the other party and shall in such notice appoint a disinterested person in the Northern Virginia area of recognized competence and experience in the field which is the subject matter of the dispute as one of the arbitrators. Within fifteen (15) days thereafter, the other party shall, by written notice to the original party, appoint a second disinterested person in the Northern Virginia area of recognized competence and having at least ten (10) years experience in such field as an arbitrator. The arbitrators thus appointed shall appoint a third disinterested person in the Northern Virginia area of recognized competence in such field, and such three arbitrators shall, as promptly as possible, determine such matter, provided, however, that (i) if the second arbitrator shall not have been appointed as aforesaid, the first arbitrator shall proceed on ten (10) days notice to the parties to determine such matter; and (ii) if the two arbitrators appointed by the parties shall be unable to agree, within fifteen (15) days after the appointment of the second arbitrator, upon the appoint of a third arbitrator, they shall give written notice of such failure to agree to the parties, 54 58 and, if the parties fail to agree upon the selection of such third arbitrator within fifteen (15) days after the arbitrators appointed by the parties give notice as aforesaid, then within ten (10) days thereafter either of the parties upon written notice to the other party hereto may request such appointment by the American Arbitration Association (or any organization successor thereto), or in its absence, refusal, failure or inability to act, may apply for such appointment to a Court of competent jurisdiction. (c) The arbitration shall be conducted in accordance with the rules of the American Arbitration Association (or its successor) and the decision of a majority of the arbitrators (or sole arbitrator, as the case may be) shall be binding, final and conclusive on the parties and judgment thereon may be entered in any court having jurisdiction thereof. Landlord and Tenant shall be entitled to present evidence and arguments to the arbitrators. If a majority of the arbitrators (or sole arbitrator, as the case may be) believe that expert advice would materially assist them in the resolution of the matter in dispute, they may retain one or more qualified persons, including, but not limited to, legal counsel, architects or engineers, to provide such expert advice. The fees of the arbitrators and the expenses incident to the proceedings shall be borne equally between Landlord and Tenant. The fees of respective counsel engaged by the parties, and the fees of expert witnesses and other witnesses called by the parties, shall be paid by the party which loses in the proceedings The arbitrators shall give written notice to the parties stating their determination, and shall furnish a copy of such determination signed by them to each party. IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties hereto have executed this Agreement of Lease on the date first set forth herein. Landlord: JOSHUA REALTY CORPORATION, a Delaware corporation By: /s/ Steven D. Burton ------------------------ Steven D. Burton, Vice President Tenant: AMERICAN MANAGEMENT SYSTEMS, INC, a Delaware corporation By: /s/ Frank A. Nicolai (Seal) ----------------------- [THE FOLLOWING PAGES OF THE ORIGINAL DOCUMENT INCLUDED AS EXHIBITS A-1 AND A-2 FLOOR PLANS OF THE PREMISES.] 55 59 EXHIBIT "B" Landlord's Base Building Modifications The following items are to be the sole responsibility of the Landlord. The items will be completed in accordance with the dates indicated below: 1. Landlord will provide electrical sub-meters for first floor tenant space in the Centerpointe I Building by December 1, 1992 and the third and the fourth floors in the Centerpointe II Building by August 1, 1993. 2. The base Building core shells were constructed in accordance with 1984 BOCA Codes at which time the building met all applicable codes. Landlord will make any modifications allowable per code to bring the Building up to the 1990 BOCA Code by December 1, 1992. 3. Landlord will provide roll-down doors at garage entry/exits with card readers for security purposes by December 1, 1992. 4. By December 1, 1992, Landlord will provide an awning over the loading dock area from the exterior Building doors to compactor area for the Centerpointe I Building. Additionally, by December 1, 1992 a ramp will be constructed in place of the stairs adjacent to the dock for the Centerpointe I Building. The final design, material, color and location shall be subject to all County codes, as well as Tenant's review. 5. Landlord will reimburse Tenant for the costs incurred in connection with the removal of all existing data/telecommunications wiring from previous tenants. Such reimbursement shall be in addition to the Concession Fund. 6. Landlord will diligently pursue alternatives to provide easier walking access to Fair Oaks Mall. Landlord's total cost for design, engineering and construction shall not exceed $25,000. Any in-house costs associated with the approval process shall be at the Landlord's expense. 7. Landlord has negotiated with the County for the right of Tenant to occupy, on a rent-free basis, a maximum of 2,000 square feet in the Centerpointe I Building in a location reasonably acceptable to the County, for use as a construction management office. Tenant agrees to indemnify, defend and hold Landlord harmless from and against any loss arising from Tenant's use of such space. 8. Landlord will provide Tenant with transformers to accommodate 4 watts per square foot demand load at 120 volts for tenant power on a floor by floor basis on the respective Lease Commencement Date and Subsequent Lease Commencement Date for each floor. B-1 60 9. Based on a maximum occupancy of one hundred ten (110) people on a typical full office floor, the Landlord will provide 2,200 cubic feet per minute (CFM) of outside air per floor. The actual available outside air volume, per floor, will be confirmed by an AABC or NEBB certified air balance report. All costs associated with providing certified air balance report shall be borne by Landlord. Should the actual available outside air volume on a typical office floor be less than 1,980 CFM of outside air, the Landlord, at its expense, will increase outside air volume to a minimum 2,200 CFM, per floor, by May 1, 1993. 10. Landlord will provide the necessary improvements to reduce the average noise levels in office areas not to exceed NC-35 and areas within 101 of machine rooms not to exceed NC-40. Tenant will assist Landlord by attempting to locate non-office uses around mechanical rooms on the respective Lease Commencement Date and Subsequent Lease Commencement Date for each floor. 11. Landlord shall prepare a plan with respect to ADA requirements for the Buildings by December 15, 1992, which Tenant shall have the right to review (but not approve), it being acknowledged that Landlord shall in its sole judgment determine what modifications to the Core Elements may be necessary to comply with ADA. B-2 61 EXHIBIT "C" Tenant Design and Construction Process Tenant shall construct the Tenant Work in a good and workmanlike manner and in compliance with all laws and all requirements of insurance underwriters rating or insuring the Buildings, the Premises and/or the Property, and in accordance with the following requirements: 1. DESIGN. A. The plans, specifications and drawings for the Tenant Work (the "Tenant Plans") shall be prepared by Tenant's architect and engineers, who shall be licensed and registered in the Commonwealth of Virginia, shall be sufficient for governmental approval and construction thereof, and comply with the plans and specifications for the Buildings and with all applicable laws, ordinances, rules, regulations and other requirements of all governmental and quasi-governmental authorities having jurisdiction thereof and all insurance requirements. B. The Tenant Plans for the Initial Space shall be delivered to Landlord promptly following the date hereof for Landlord's approval, and, for Subsequent Space, no later than the same time such Plans are submitted to Tenant's General Contractor (as defined in Paragraph 2 below) for pricing of Tenant Work on such Subsequent Space. Landlord shall not unreasonably withhold, condition or delay its approval of the Tenant Plans or any revisions thereto (the Tenant Plans as approved by Landlord are hereinafter referred to as the "Final Plans") and within five (5) business days of receipt of the Tenant Plans, Landlord will notify Tenant in writing ("Landlord's Plan Notice") whether the Tenant Plans have been approved or disapproved, and if disapproved, Landlord's Plan Notice shall explain in reasonable detail the deficiencies that resulted in the disapproval. Following receipt of Landlord's Plan Notice, Tenant shall submit to Landlord revisions of the Tenant Plans which correct the deficiencies. If Landlord shall disapprove the revisions of the Tenant Plans, Landlord's Revised Plan Notice shall explain in reasonable detail the deficiencies which resulted in the disapproval. Following receipt of Landlord's Revised Plan Notice, Tenant shall submit to Landlord further revisions to the Tenant Plans which correct the deficiencies. The procedures and time periods relating to submitting and resubmitting and approving or disapproving revisions to the Tenant Plans shall apply to any subsequent revisions to the Tenant Plans. C. Tenant shall have the right to make changes from time to time to the Final Plans (herein called the "Revisions"). All Revisions which affect structural, or materially affect electrical, plumbing or mechanical components of the Buildings shall be subject to Landlord's prior written approval, which approval shall not be unreasonably withheld, conditioned or delayed. No approval of Tenant Plans and/or Final Plans shall in any way be deemed to be an agreement by Landlord that the Tenant Plans, the Final Plans and/or the Tenant Work comply with any laws, ordinances, rules, regulations or requirements of any governmental authority having jurisdiction thereof or any insurance requirements. C-1 62 2. COSTS. Tenant shall enter into a construction contract ("General Contract Agreement") for the performance of the Tenant Work with Davis Construction Company (such firm being hereinafter referred to as the "General Contractor"). Tenant shall have the right to change the General Contractor subject to Landlord's prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed. Landlord shall have the right to review the mechanical, electrical and plumbing subcontractors that will perform any of the Tenant Work, as well as any subcontractors that will perform any structural work. Prior to entering into the General Contract Agreement, Tenant shall submit the same to Landlord for its approval, which approval shall not be unreasonably withheld, conditioned or delayed. The General Contractor Agreement shall not be modified, amended or terminated without obtaining the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed. The General Contract Agreement and each subcontract shall provide for a ten percent (10%) retainage until the Tenant Work shall be substantially completed in accordance with the Final Plans. Provided that Landlord disburses the Concession Fund in accordance with the terms of Exhibit "D", Tenant shall pay, when due, all amounts owing to the General Contractor or any other person in connection with the construction and/or performance of the Tenant Work. Tenant and the General Contractor shall be solely responsible for the transportation, safekeeping and storage of materials and equipment used in the performance of the Tenant Work, for the removal of waste and debris resulting therefrom to the Buildings' dumpsters and for any proven damage caused by them during the course of the Tenant Work to the Buildings or the Property. Tenant shall not permit any financing statements or statements to be filed with respect to any of the foregoing alterations, additions or improvements by Tenant. 3. COMPLETION. A. Tenant shall be solely responsible for the construction of the Tenant Work. Tenant and its contractors shall work in harmony and shall not interfere with Landlord, Landlord's contractors, any other tenants of the Buildings or such tenants' contractors. B. All Tenant Work shall be done in accordance with, and subject to all of the terms and conditions provided in this Exhibit "C". In connection therewith, Tenant and/or its contractors shall provide to Landlord, and shall maintain at all times during the performance of Tenant Work, Insurance as described in the Insurance Addendum attached hereto as Schedule "C-1". Certificates for such insurance shall be furnished to Landlord before Tenant or its contractors commence to perform Tenant's Work. Landlord shall not be liable in any way for any injury, loss or damage that may occur to any of Tenant's, or Tenant's contractor's decorations, fixtures, installations, supplies, materials, or equipment unless any such injury, loss or change is due to Landlord's gross negligence or willful misconduct and is not covered by insurance which Tenant is required to carry pursuant to this Exhibit "C"; any such entry upon the Premises by Tenant and/or its contractors being at their sole risk. C. Prior to the final payment under the General Contract Agreement for the Initial Space, or any segment of the Subsequent Space, Tenant shall deliver to Landlord a copy of C-2 63 the final certificate of occupancy (or a non-residential use permit, if such a permit is issued in lieu of a certificate of occupancy) for the Initial Space or the relative segment of the Subsequent Space, together with certificates of substantial completion by Tenant's architect, Tenant's engineers and by the General Contractor, all of which shall certify to Landlord that the Tenant Work has been completed substantially in accordance with the Final Plans and any changes thereto made in accordance with the terms of this Lease. Prior to the final payment under the General Contract Agreement, Tenant shall deliver to Landlord a reproducible sepia of the "as built" plans and specifications for the fully completed Tenant Work prepared and certified by Tenant's architect or the General Contractor. Without limiting the foregoing, Tenant shall be responsible for obtaining a certificate of occupancy (or a non-residential use permit, if such a permit is issued in lieu of a certificate of occupancy) for the Premises or such other certificate or approval as shall be required in order for Tenant to legally occupy the Premises and shall promptly deliver a copy thereof to Landlord. 4. TENANT'S REPRESENTATIVES. Tenant hereby constitutes and appoints Dale Moser, Tom Huba and Mike Mitchell (AMS) and Mike Solomon and Gary Helminski (Cushman & Wakefield) its representatives (individually a "Tenant Representative" and collectively the "Tenant Representatives") to deal with Landlord in connection with the Tenant Work. Any notices and/or approvals given to or by any one of the said Representatives shall be binding upon Tenant and Landlord shall be entitled to rely on notices or approvals delivered by any one of such Representatives. Tenant may change the designation of the Tenant Representatives by notice in writing to Landlord. 5. DISBURSEMENT PROVISIONS. Tenant shall, from time to time during the course of construction of the Tenant Work and following the completion of the construction by Tenant of the Tenant Work, but not more frequently than once per month, submit to Landlord an Application for Payment in the form attached hereto as Exhibit "D" which shall set forth the amount of all costs and expenses which have been incurred by Tenant to the date of such statement for Tenant Work (excluding amounts previously reimbursed to Tenant by Landlord pursuant to previous statements) and for which Tenant is entitled to reimbursement from the Concession Fund as more particularly set forth in Article 4.2 of the Lease to which this Exhibit "C" is attached. Each Application for Payment shall be accompanied by supporting waivers of liens from the General Contractor and from each subcontractor to which payments will be made from advances made pursuant to the Application for Payment. Provided that the Concession Fund has not been exhausted and there is no default (which default shall not require the delivery of any notice or the expiration of any cure periods for the purpose of relieving Landlord from any obligation to advance any portion of the Concession Fund in the face of such default, although Tenant shall otherwise be entitled to applicable notice and cure periods as a condition precedent to Landlord exercising its remedies under the Lease) under the Lease, Landlord will cause the approved amount to be paid to Tenant on the fifth (5th) business day after Landlord's receipt thereof; provided further that all other conditions set forth in this Exhibit "C" shall have been satisfied. C-3 64 6. TENANT SUBMISSIONS. A. Prior to the commencement of construction in the Initial Space, and prior to the commencement of construction in any segment of the Subsequent Space, Tenant shall submit to Landlord a copy of the building permit or permits required for the construction of the Tenant Work as to such space. B. Prior to the final payment under the General Contract Agreement, Tenant shall deliver to Landlord final lien waivers from the General Contractor, Tenant's architect and engineers (to the extent they are entitled to file mechanic's liens with respect to their services) and all subcontractors, materialmen and suppliers. Tenant shall use its best efforts to secure lien waivers as aforesaid. If Tenant cannot secure any such lien waiver(s) Tenant agrees to post a bond to clear any such lien if filed of record. 7. OWNERSHIP OF IMPROVEMENTS. Landlord and Tenant hereby agree and acknowledge that, notwithstanding the fact that Tenant may be contracting for the design and construction of the Tenant Work, immediately upon its installation in the Premises, all Tenant Work (including, without limitation, all general office construction items, all mechanical, plumbing and HVAC equipment, all voice or data communications wiring, and all raised computer access flooring) shall be and remain the property of Landlord, and shall not thereafter (except as otherwise provided in the Lease) be subject to removal by Tenant or in any other manner be deemed the property of Tenant. 8. TENANT'S RIGHTS. In its performance of the Tenant Work, Tenant shall have the right to take such actions and utilize such facilities as are customarily and reasonably taken and utilized in the construction of comparable space, subject to such customary and reasonable restrictions as Landlord may adopt in the prudent management of the Buildings. Tenant shall not be charged for the use of utilities, elevators, loading docks, and similar Building facilities in the construction of the Tenant Work. No fees of any manner shall be charged by Landlord for its review of plans and drawings or any supervision or inspection of the Tenant Work. Landlord shall cause any of its contractors working in the Buildings to work in harmony with Tenant and the General Contractor, and Landlord shall not knowingly permit any other contractors to interfere with the performance of the Tenant Work. C-4 65 Insurance Addendum Page 1 EXHIBIT "C-1" INSURANCE ADDENDUM This Insurance Addendum is a part of the Agreement between Owner and Contractor dated ____ July 1992. Notwithstanding anything to the contrary in the Agreement to which this Addendum is attached, or in any other agreement between Contractor, Owner and/or Architect, Landlord or their respective subcontractors, agents, employees or representatives, the parties hereto agree as follows: All general liability and umbrella liability insurance coverage required herein or in any other agreement between the parties shall be written on an "Occurrence Basis". Contractor shall at all times during the period in which this Contract is in force, provide, maintain and require all subcontractors to provide and maintain the following types of insurance protecting the interest of Landlord and Owner and Contractor with limits not less than those as set forth below: WORKER'S COMPENSATION INSURANCE (WC) to cover statutory limits of the Worker's Compensation Law of the State of Virginia, with Coverage B Employer's Liability coverage in limits not less than $500,000 COMMERCIAL GENERAL LIABILITY (GGL) insurance for hazards of (i) Premises Operations, (ii) Elevators and Escalators, (iii) Independent Contractors, (iv) Coverage for explosion, collapse, and underground (X, C, U), (v) Products and Completed Operations coverage, (vi) Contractual Liability on a "Blanket" basis designating all written and oral contracts related to the work, (vii) Personal Injury Liability for groups of offenses A, B, and C (with exclusions pertaining to liability assumed by the insured under contract, and to personal injury sustained by any person as a result of an offense directly or indirectly related to the employment of each person by the named insured deleted), and (viii) Incidental Medical Malpractice coverage. Such Commercial General Liability Insurance must be endorsed with a Broad Form Property Damage Endorsement (including Complete Operations). The Contractual Liability coverage must be endorsed so that all exclusions relating to explosion, collapse and underground hazards are deleted. The CGL insurance shall have primary coverage limits not less than following: 66 Insurance Addendum Page 2 BODILY INJURY LIABILITY/PROPERTY DAMAGE LIABILITY - $1,000,000 each occurrence, combined single limit. PERSONAL INJURY LIABILITY - $1,000,000 each person; AUTOMOBILE LIABILITY INSURANCE (Auto) covering all owned, leased, non-owned and hired automobiles used in connection with the Work with coverage limits not less than the following: BODILY INJURY LIABILITY/PROPERTY DAMAGE LIABILITY - $1,000,000 each person and each occurrence, combined single limit. COMPREHENSIVE CATASTROPHE LIABILITY INSURANCE (Umbrella) indemnifying for ultimate net loss sustained by reason of any liability whether imposed by law, assumed under contract, or otherwise incurred arising out of: BODILY INJURY, including personal injury, because of bodily injury, including death at any time resulting therefrom, sustained by any person or persons. PROPERTY DAMAGE, for losses due to damages to or destruction of tangible property, including loss of use of such property resulting therefrom. The Umbrella insurance shall set forth coverage limits with respect to each occurrence, except for the products hazard coverage which shall contain aggregate limits for each annual period. With regard to Contractor, the Umbrella insurance shall have coverage limits not less than FIVE MILLION DOLLARS AND 00/100 ($5,000,000) for each occurrence and in the aggregate as applicable in excess of the amount set forth in subparagraphs (WC), (CGL) & (AUTO) above. For each subcontractor employed in conjunction with the Work, the Umbrella insurance shall have coverage limits not less than TWO MILLION DOLLARS AND 00/100 ($2,000,000) for each occurrence and in the aggregate as applicable in excess of the amount set forth in subparagraphs (WC), (CGL) & (AUTO) above. In the event that Contractor or any subcontractors have or obtain insurance coverage in amounts in excess of those listed above, such additional insurance coverage shall also insure to the benefit of the Landlord and Owner. Contractor shall be liable to Landlord and Owner for the actions of Contractor, its subcontractors and their respective agents, servants and employees for any losses suffered by Landlord and Owner which would otherwise have been covered by any insurance required hereunder in the event Contractor fails to obtain any such addendum. (Any subcontractor working directly for Owner shall be deemed a General Contractor for purposes of this addendum and shall comply with all obligations herein required of Contractor). 67 Insurance Addendum Page 3 Before commencing the Work, Contractor and all subcontractors shall furnish certificates of insurance satisfactory to Landlord and Owner from each insurance carrier indicating that the above-required insurance is in force, the amount of the carrier's liability thereunder, and further providing that the insurance will not be canceled, changed or non-renewed until the expiration of at least thirty (30) days after written notice of such cancellation or change has been mailed to and received by Landlord and Owner. Contractor shall deliver copies of all policies from Contractor and Subcontractors if requested by Landlord and Owner. All insurance described herein shall be written in a company or companies satisfactory to Landlord and Owner. If Contractor or any subcontractor fails to procure and maintain the above-described insurance, or any portion thereof, Landlord and Owner shall have the right, but not the obligation to procure and maintain the required insurance for and in the name of such party and such party shall pay the cost thereof and shall furnish all information necessary to acquire and maintain such insurance. Neither Contractor nor subcontractors shall violate or knowingly permit any violation of any condition or terms of the policies of insurance described herein. All CGL, Auto and Umbrella Policies shall designate Landlord and Owner as additional insured with Certificates of Insurance provided as evidence. Any other insurance maintained by Landlord and, Owner shall be in excess of all contractors and all tiers of subcontractor's insurance required herein and shall not contribute with it. CONTRACTOR(S) shall require all policies of insurance that are in any way related to the work and that are secured and maintained by Contractor and all tiers of subcontractors to included clauses providing that each underwriter shall waive all of its rights of recovery, under subrogation or otherwise against Landlord and Owner, and shall be so designated on said certificate. CONTRACTOR SHALL MAINTAIN ALL BUILDER'S RISK INSURANCE COVERAGE FOR DESIGNATED WORK IN THE AMOUNT OF THE CONTRACT, AND SHALL NAME THE LANDLORD AND OWNER AS ADDITIONAL NAMED INSURED. ANY DEDUCTIBLE ENCOUNTERED IN THE SUBMISSION OF A CLAIM SHALL BE BORNE SOLELY BY THE CONTRACTOR. Landlord and Owner shall not be responsible for obtaining or maintaining in force insurance on construction equipment, tools or personal effects, owned by or rented to or in the care, custody and control of Contractor or any subcontractors, nor shall Landlord and Owner be responsible for such equipment, tools or personal effects. All insurance required hereunder shall be maintained continuously until final completion as certified by Architect and until accepted or approved by Landlord and Owner. All insurance shall provide for Owner to take occupancy of the Work or any part thereof during the term of said insurance. All policies issued shall specify as additional insured LPC Commercial Services, Inc., Joshua Realty Corporation and American Management Systems, Inc. 68 EXHIBIT "D" Concession Fund Voucher Form _______________, as Tenant Representative for American Management Systems, Inc. ("Tenant") hereby certifies to Joshua Realty Corporation ("Landlord") as follows: 1. The sum of $__________________ (the "Draw Request") is requested for disbursement from the Concession Fund and such sum has been properly expended for items permitted under Article 4.2 of the Lease. Attached hereto as Schedule "D-1" is a list of the items for which payment is hereby requested and the portion of the Draw Request attributable to each such item. 2. That the Tenant Work for which the Draw Request is being made has been performed in accordance with Exhibit "C" to the Lease. 3. Attached hereto as Schedule "D-2" are the lien waivers from all contractors that will be paid by Tenant, or the General Contractor, from the Draw Request. 4. Attached hereto as Schedule "D-3" is the General Contractor's certification that the Tenant Work for which application for payment is being made has been completed. ---------------------------------- Tenant Representative for American Management Systems, Inc. D-1 69 EXHIBIT "E" CLEANING, MAINTENANCE, SPECIFICATIONS, STAFFING AND FREQUENCY SERVICES ELEVATORS (NIGHTLY SERVICES) 1. Vacuum carpet in all passenger elevators nightly. Spot clean carpet, as necessary. 2. Carpet to be shampooed as necessary, but no less than once per month. 3. Elevator carpets to be clean on a nightly basis. 4. Clean lobby elevator saddles, doors and frames, nightly. Polish with approved Polish, as required. 5. Clean elevator frames and doors (both sides) of all fingerprints and smudges. 6. Dust and remove all marks on ceiling and light fixtures in cab as necessary, but no less than once per week. 7. Remove all unauthorized marks and writing from insides of elevator cabs nightly, using manufacturer's approved method. 8. Clean all interior cab wall surfaces and wash as required, but no less than once per week. 9. Report all mechanical deficiencies or damage to owners representatives on sight. 10. Remove all gum and foreign matter on sight. 11. Clean all elevator saddles as required, but no less than once per week. 12. Elevator contractor to clean pits on a monthly basis; the only person allowed in the pit is the elevator contractor. 13. Wet mop and remove all stains from freight elevator flooring. GENERAL OFFICES (INCLUDES ALL BASEMENT AREAS) (NIGHTLY SERVICES) 1. All flooring swept nightly. E-1 70 2. All carpeted areas and rugs carpet-swept nightly and vacuum-cleaned weekly. 3. Wastepaper baskets, ashtrays, receptacles, etc. emptied and cleaned nightly and damp dusted when necessary, but no less than once per week. 4. Cigarette urns, cleaned nightly and sand or water replaced when necessary, but no less than once per week. 5. All furniture, fixture and window sills dusted and wiped cleaned nightly. 6. All glass furniture tops cleaned nightly. 7. All baseboards, chair rails and trim dusted weekly. 8. All water fountains washed clean nightly. 9. Slop sink rooms cleaned nightly. 10. Fill toilet tissue and towel dispensers as required. 11. Service sanitary napkin dispensers. Sanitary napkins and products furnished by contractor. Dispensers shall be maintained by contractor. 12. Collect coins from sanitary napkin dispensers and turn proceeds over to duly authorized representative of contractors. 13. Report all mechanical deficiencies, i.e. dripping faucets, burnt out lights, etc. to the Building Manager. LAVATORIES (PUBLIC) 1. All flooring swept and washed nightly. 2. All mirrors, powder shelves, bright work, etc. including flushometers, piping and toilet seat hinges washed and polished nightly. 3. All basins, bowls, urinals and toilet seats (both sides) washed nightly. 4. All partitions, tile walls, dispensers and receptacles dusted nightly. 5. Paper towels and sanitary disposal receptacles emptied and cleaned nightly. 6. Paper towels, soap dispensers and toilet paper replenished daily or more frequently as required. E-2 71 HIGH DUSTING - OFFICE AREAS Do all high dusting approximately once a month, including, but not limited to, the following: 1. Dust all pictures, frames, charts, graphs and panel wall hangings not reached in nightly cleaning. 2. Dust all vertical surfaces such as walls, partitions, ventilating louvers and other surfaces not reached in nightly cleaning. 3. Dust all lighting fixtures (exterior only). 4. Dust all venetian blinds and window frames approximately once every two months. PERIODIC CLEANING - OFFICE AREA 1. Wipe clean all interior metal as necessary, but no less than once per month. 2. Dust all door louvers and other ventilating louvers within reach weekly. 3. Remove finger marks from metal partition and other surfaces when necessary, but no less than once per week. PERIODIC CLEANING - LAVATORIES (PUBLIC) 1. Machine-scrub flooring when necessary, but no less than once per month. 2. Wash all partitions, tile walls and enamel surfaces monthly with proper disinfectant when necessary, but no less than once per month. 3. Dust exterior of lighting fixtures monthly. 4. High dust monthly. PUBLIC AREAS (NIGHTLY SERVICES) 1. All public stairwells to be swept and dusted weekly. 2. All public stairwells to be washed as necessary, but no less than once per month. 3. Maintain all bright metal. E-3 72 BUILDING SERVICE AREAS (NIGHTLY SERVICES) 1. Keep locker rooms in neat and orderly condition at all times. Wash lockers once per month. Wash and wax floor weekly. 2. Remove all gum and foreign matter from sidewalks on sight. 3. Lay down and remove runners as necessary. 4. Remove and clean all spillages. 5. Wash walls in main floor freight lobby, as required, but no less than once per month. Scrub floor nightly. 6. Storerooms, electric and telephone closets are to be kept free from debris and material. Floors are to be swept weekly. Reports of any stored extraneous material or equipment are to be made to the Building Manager immediately. 7. Slop sinks, locker areas, etc. to be thoroughly cleaned. 8. Contractors equipment to be stored in a central location supplied by Landlord. 9. Lights shall be extinguished as areas are cleaned. 10. Contractor's employees to work behind closed doors at all times. The cleaning supervisor shall inspect all spaces to insure compliance. LOBBY (NIGHTLY) 1. Sweep and remove gum. 2. Sweep travertine/marble floor nightly (Sunday through Friday). 3. Remove all hand marks on doors, walls, stairwell doors, directories and urns. 4. Dust all mullions, frames, and ledges with treated cloths. 5. Wash travertine/marble walls quarterly. 6. Damp wipe interior black wall surfaces floor to ceiling as required, but no less than once per week. 7. Damp and dry wipe interior of all revolving door drums as required, but no less than once per week. E-4 73 DAY PORTER SERVICES Services to be provided by one (1) Day Porter under Building Manager's direction and supervision. Duties are as follows: 1. Police sidewalks. 2. Police main lobby as required, but no less than three times daily. 3. Dust and clean out lobby grill work. 4. Police public areas of multi-tenant floors twice daily. 5. Damp wipe lobby directories. 6. Keep entrance door glass clean. 7. Police men's lavatories on multi-tenant floors as required, but no less than twice daily. 8. Police and vacuum elevator cabs as required, but no less than twice daily. 9. Dust tops of revolving door housing. 10. Lay down and remove foul weather mats as necessary. 11. Snow/Ice removal to avoid any accumulation. 12. Police main lobby on a continual basis. EXTERMINATION 1. All services are to be performed by an approved operator licensed by Board of Health and certificate of such shall be on file with the Building Manager. 2. Public spaces, slop sink, freight areas, Electric and Telephone closets, and mechanical spaces throughout the building shall be kept under pest control treatment at least once per month or as required. 3. All emergency treatments to the above shall be at the expense of the contractor. SECURITY The Contractor shall provide security from 5 PM to 8 PM Monday through Friday using porter security personnel. The porter security person shall be available at all times to let people in and out. E-5 74 Friday midnight until Saturday midnight - Security Guard S Service. Contractor shall provide security services 52 weeks per year including all holidays. E-6 75 EXHIBIT "F" RULES AND REGULATIONS 1. Tenant shall not obstruct or interfere with the rights of other tenants of the Centerpointe II Building, or of persons having business in the Centerpointe II Building, or in any way injure or annoy such tenants or persons. Tenant will not conduct any activity within the Premises which will create excessive noise anywhere in the Buildings. 2. Canvassing, soliciting and peddling in the Buildings are prohibited, and Tenant shall cooperate to prevent such activities. 3. Tenant shall not bring or keep within the Buildings any animal, bicycle, motorcycle, or other type of vehicle except as required by law. 4. All office equipment and any other device of any electrical or mechanical nature shall be placed by Tenant in the Premises in settings approved by Landlord, so as to absorb or prevent any vibration, noise or annoyance. Tenant shall not construct, maintain, use or operate within the Premises or elsewhere in the Buildings or outside of the Buildings any equipment or machinery which produces music, sound or noise, which is audible beyond the Premises. Tenant shall not cause improper noises, vibrations or odors within the Buildings. 5. Tenant shall not deposit any trash, refuse, cigarettes or other substances of any kind within or out of the Buildings except in the refuse containers provided therefor. No material shall be placed in the trash boxes or receptacles if such material is of such nature that it may not be disposed of in the ordinary and customary manner of removing and disposing of office buildings' trash and garbage without being in violation of any law or ordinance governing such disposal. Tenant shall be charged the cost of removal for any items left by Tenant that cannot be so removed. All garbage and refuse disposal shall be made only through entryways and elevators provided for such purposes and at such times as Landlord shall designate. Tenant shall not introduce into the Buildings any substance which might add an undue burden to the cleaning or maintenance of the Premises or the Buildings. Tenant shall exercise its best efforts to keep the sidewalks, entrances, passages, courts, lobby areas, garages or parking areas, elevators, escalators, stairways, vestibules, public corridors and halls in and about the Buildings (hereinafter "Common Areas") clean and free from rubbish. Tenant shall not cause any unnecessary labor by reason of Tenant's carelessness or indifference in the preservation of good order and cleanliness. 6. The Common Areas and roof of the Buildings are not for the use of the general public, and Landlord shall in all cases retain the right to control or prevent access thereto by all persons whose presence, in the judgment of Landlord, shall be prejudicial to the safety, character, reputation or interests of the Buildings and their tenants. Except as otherwise provided in the Lease, Tenant shall not enter or install equipment in the mechanical rooms, air conditioning rooms, electrical closets, janitorial closets or similar areas or go upon the roof of the Buildings F-1 76 without the prior written consent of Landlord. Except as otherwise provided in the Lease, Tenant shall not install any radio or television antenna, loudspeaker or other device on the roof or exterior walls of the Buildings. 7. Without limitation upon any of the provisions of the Lease, Tenant shall not mark, paint, drill into, cut, string wires within, or in any way deface any part of the Buildings, without the prior written consent of Landlord, and as Landlord may direct. Upon removal of any wall decorations or installations or floor coverings by Tenant, any damage to the walls or floors shall be repaired by Tenant at Tenant's sole cost and expense. Tenant shall not lay linoleum or similar floor coverings so that the same shall come into direct contact with the floor of the Premises and, if linoleum or similar floor covering is to be used, an interlining of builder's deadening felt shall be first affixed to the floor, by a paste or other materials soluble in water. The use of cement or other similar adhesive material is expressly prohibited. Floor distribution boxes for electric and telephone wires must remain accessible at all times. 8. Tenant shall not install or permit the installation of any awnings, shades, mylar films or sunfilters on windows. Tenant shall cooperate with Landlord in obtaining maximum effectiveness of the cooling system of the Buildings by closing drapes and other window coverings when the sun's rays fall upon windows of the Premises. Tenant shall not obstruct, alter or in any way impair the efficient operation of Landlord's heating, ventilating, air conditioning, electrical, fire, safety or lighting systems, nor shall Tenant tamper with or change the setting of any thermostat or temperature control valves in the Buildings. 9. Tenant shall not use the washrooms, restrooms and plumbing fixtures of the Buildings, and appurtenances thereto, for any other purpose than the purpose for which they were constructed, and Tenant shall not deposit any sweepings, rubbish, rags or other improper substances therein. Tenant shall not waste water by interfering or tampering with the faucets or otherwise. If Tenant or Tenant's servants, employees, agents, contractors, jobbers, licensees, invitees, guests or visitors cause any damage to such washrooms, restrooms, plumbing fixtures or appurtenances, such damage shall be repaired at Tenant's expense, and Landlord shall not be responsible therefor. 10. Subject to applicable fire or other safety regulations, all doors opening onto Common Areas and all doors upon the perimeter of the Premises shall be kept closed and, during non-business hours, locked, except when in use for ingress or egress. 11. Employees of Landlord shall not receive or carry messages for or to Tenant or any other person, nor contract with nor render free or paid services to Tenant or Tenant's servants, employees, contractors, jobbers, agents, invitees, licensees, guests or visitors. In the event that any of Landlord's employees perform any such services, such employees shall be deemed to be the agents of Tenant regardless of whether or how payment is arranged for such services. 12. Tenant shall, upon the termination of its tenancy, provide Landlord with the combinations to all combination locks on safes, safe cabinets and vaults and deliver to Landlord all keys to the Buildings, the Premises and all interior doors, cabinets and other key-controlled mechanisms therein, whether or not such keys were furnished to Tenant by Landlord. In the F-2 77 event of the loss of any key furnished to Tenant by Landlord, Tenant shall pay to Landlord the cost of replacing the same or of changing the lock or locks opened by such lost key if Landlord shall deem it necessary to make such a change. The word "key" as used herein shall refer to keys, keycards and all such means of obtaining access through restricted access systems. 13. For purposes hereof, the terms "Landlord", "Tenant", "Buildings" and "Premises" are defined as those terms are defined in the Lease to which these Rules and Regulations are attached. The term "Buildings" shall include the Premises, and any obligations of Tenant hereunder with regard to the Buildings shall apply with equal force to the Premises and to other parts of the Buildings. 14. These Rules and Regulations are in addition to, and shall not be construed to in any way modify or amend, in whole or in part, the agreements, covenants, conditions and provisions of any lease of premises in the Buildings. The terms of the Lease shall supersede any provisions of these Rules and Regulations which may be inconsistent with the terms of the Lease. F-3 78 EXHIBIT "G" HVAC System Design Criteria
SUMMER WINTER Outside Temperature Outside Temperature Dry Bulb 95 degrees F Dry Bulb O degrees F Wet Bulb 78 degrees F Inside Temperature Inside Temperature Dry Bulb 75 degrees F Dry Bulb 70 degrees F % Relative Humidity 50% % Relative Humidity 20%
G-1 79 EXHIBIT H Legal Description of the Property PARCEL A: BEGINNING at a point on the Southwesterly R/W line of Legato Road (Route #656) said point being N 14 deg. 30' 12" W 72.49 feet from a point marking the Northeasterly corner of the Fairfax Assembly of Good Church; thence departing from the Road and running through the property of Faircenter Limited Partnership the following courses: with a curve to the right whose radius is 26.00 feet (and whose chord is S 65 deg. 28' 14" W, 11.22 feet) an arc distance of 11.31 feet; S 77 deg, 55' 48" W 200.47 feet; with a curve to the right whose radius is 659.96 feet (and whose chord is S 86 deg. 10' 48" W, 189.40 feet) an arc distance of 190.05 feet and N 08 deg. 21' 54" E 564.80 feet to a point on the aforementioned Southwesterly R/W line of Legato Road; thence with the Southwesterly line of Legato Road S 59 deg. 03' 43" E 129 feet and with a curve to the right whose radius is 344.62 feet (and whose chord is S 56 deg. 04' 19" E 35.95 feet) an arc distance of 35.97 feet to a point; thence departing from the Road and running through the property of Faircenter Limited Partnership with a curve to the left whose radius is 55.00 feet (and whose chord is S 48 deg. 51' 01" E 50.86 feet) an arc distance of 52.87 feet to a point on the Southwesterly R/W line of Legato Road; thence with the Southwesterly R/W line of Legato Road the following courses: with a curve to the right whose radius is 344.62 feet (and whose chord is S 40 deg. 30' 20" E 49.45 feet) an arc distance of 49.49 feet; S 24 deg. 09' 12" E 84.71 feet; S 16 deg. 09' 12" E 147.80 feet; S 11 deg. 30' 12" E 100.00 feet and S 14 deg. 30' 12" E 25.71 feet to the point of beginning, containing 144,883 square feet of land, more or less. H-1 80 EXHIBIT H BEGINNING at a point marking the intersection of the Southeasterly R/W line of West Ox Road (Route #608) and the Southwesterly R/W line of Legato Road (Route #656) ; thence with the Southwesterly R/W line of Legato Road S 59# 03' 43" E, 39.90 feet to a point; thence departing from the Road and running through the property of Faircenter Limited Partnership S 08# 21' 54" W, 564.80 feet to a point on the Northerly line of relocated Legato Road; thence with the said line of relocated Legato Road the following courses: with a curve to the right whose radius is 659.96 feet (and whose chord is N 78# 05' 37" W, 171.74 feet) and arc distance of 172.22 feet; with a curve to the right whose radius is 420.00 feet (and whose chord is N 62# 58' 47" W, 111.65 feet) an arc distance of 111.98 feet; with a curve to the right whose radius is 4500.00 feet (and whose chord is N 55# 04' 04" W, 43.00 feet) an arc distance of 43.00 feet; N 47# 02' 47" W, 92.84 feet and with a curve to the right whose radius is 41.00 feet (and whose chord is N 03# 10' 33" E, 63.02 feet) an arc distance of 71.88 feet to a point on the aforementioned R/W line of West Ox Road; thence with the said R/W line of West Ox Road N 53# 23' 54" E, 361.12 feet and with a curve to the left whose radius is 582.96 feet (and whose chord is N 44# 35' 50" E, 178.39 feet) an arc distance of 179.09 feet to the point of beginning, containing 140,326 square feet of land. TOGETHER WITH all rights appurtenant to the property described above arising under a Declaration of Easements, Covenants and Related Agreements, made by Faircenter Limited Partnership, a Delaware limited partnership, dated as of February 2, 1989, and recorded February 15, 1989 in the Clerk's Office of the Circuit Court of Fairfax County, Virginia in Deed Book 7265, at page 1813. H-2 81 EXHIBIT "I" INDEX OF DEFINED TERMS
TERM ARTICLES IN WHICH DEFINED - ------------------------- ------------------------- Acceptance Notice 61 Accepted First Offer Space 61.3 ADA 4.1 Additional Rent 7.1.4 Affiliate 50.1 Annual Base Rent 54.1 Annual Operating Costs 7.4.1 Availability Date 61.4 Base Building Modifications Exhibit "B" Base Rent 1.2,6 Base Year Assessment 7.1.1(e) Base Year Real Estate Taxes 1.3.2 Base Year Operating Expenses 1.3.1,54.2 Buildings 1.1(c), 50.2 Centerpointe I Building 1.1(a) Centerpointe II Building 1.1(b) Centerpointe I Net Annual Operating Costs 7.4(a) Centerpointe II Net Annual Operating Costs 7.4(b) Centerpointe I Net Real Estate Taxes 7.1.1(a) Centerpointe II Net Real Estate Taxes 7.1.1(b) Centerpointe I Premises 1.1(a)
I-1 82
TERM ARTICLES IN WHICH DEFINED - ------------------------- ------------------------- Centerpointe II Premises 1.1(b) Concession Fund 1.5, 4.2 Concession Fund Voucher Form 4.2, Exhibit I'D" Control Areas 52.1 County 4.3 Core Elements 4.1 Environmental Statutes 52.1 Escalation Date 6.3 Escalation Period 6.3 Expansion Notice 62.1 Expansion Space 62.1 Expansion Space Lease Commencement Date 62.3 Expansion Space Rent Commencement Date 62.4 Extension Exercise Notice 54.1 First Lease Year 3.3 First Offer Space 61 Five Year Space 62.5 Hard Costs 4.2 Hazardous Substances 52.4 Holdover Payment 4.3 Holidays 50.3 HVAC Off-Hours 9.1.1 HVAC Off-Hours Rate 50.4 Initial Space 1.4
I-2 83
TERM ARTICLES IN WHICH DEFINED - ------------------------- ------------------------- Landlord Introductory Paragraph (page 1); 50.5 Landlord's Address 1.9(b) Landlord's Control Area 52.1 Last Lease Year 3.3 Late Charge 8 Lease Commencement Date 3.1 Lease Interest Rate 50.6 Lease Taxes 7.1.2,50.7 Lease Year 3.3 Market Rental Value 54.3,54.3.2 Monthly Installment of Base Rent 6.1.1 Mortgage 35.1 Negotiation Period 54.3 Net Annual Operating Costs 7.4(c) Net Real Estate Taxes 7.1.1(c) Occupancy Schedule 1.4 Offer Notice 61 Operating Expenses 54.2 Option Exercise Date 54.1 Ordinary Business Hours 50.8 Overlessor 36 Permitted Use 1.8 Premises 1.1(c)
I-3 84
TERM ARTICLES IN WHICH DEFINED - ------------------------- ------------------------- Prime Rate 50.9 Property 50.10 Proposed Recapture Space 14.5 Proposed Transfer Date 14.5 Real Estate Taxes 7.1.1,50.11 Recapture Notice 14.5 Renewal Period 54.1 Rent 50.12 Rent Commencement Date 3.2.1 Rentable Area of the Buildings 50.13 Rentable Area of the Premises 1.1(c), 50.14 Responsible Party 52.1 Right of First Offer 61 Scheduled Commencement Date 61 Scheduled Rent Commencement Date 1.4 Security Deposit 1.6 Senior Holder 58 Subsequent Escalation Date 6.3 Subsequent Lease Commencement Date 3.2,61.4 Subsequent Rent Commencement Date 3.2.2 Subsequent Space 1.4 Substitute Space 22.1 Substitute Space Differential 22.1 Substitute Space Tenant 22.1
I-4 85
TERM ARTICLES IN WHICH DEFINED - ------------------------- ------------------------- Taking Date 24.1 Tax Appeal 7.1.1(d) Tenant Introductory Paragraph (page 1); 50.15 Tenant Design and Construction Process Exhibit 'IC" Tenant Electricity 7.1.3 Tenant Electricity Costs 7.1.3 Tenant Work 4.2 Tenant's Address 1.9(a) Tenant's Centerpointe I Proportionate Share 7.1.1(a), 50.16.1 Tenant's Centerpointe II Proportionate Share 7.1.1(b), 50.16.2 Tenant's Control Area 52.1 Tenant's Proportionate Share 50.16 Term 3.1 Termination Date 3.1 Three Year Average Assessment 7.1.1(e) Wilson Boulevard Lease 4.3
I-5 86 EXHIBIT J MEMORANDUM OF LEASE THIS MEMORANDUM OF LEASE is made as of this ________ day of August, 1992, by and between JOSHUA REALTY CORPORATION, a Delaware corporation ("Landlord"), and AMERICAN MANAGEMENT SYSTEMS, INC., a Delaware corporation ('Tenant"), with respect to the following recitals: A. Landlord is the owner of the land and improvements located in Fairfax County, Virginia at 4050 and 4000 Legato Road, as more fully described in Exhibit A attached hereto. B. Pursuant to a lease of even date herewith (the "Lease'), Landlord has leased to Tenant all of the rentable area of the building situated at 4050 Legato Road and approximately 38,384 square feet of rentable area in the building situated at 4000 Legato Road. The Lease grants Tenant certain expansion rights in the building situated at 4000 Legato Road. C. Landlord and Tenant desire to provide record notice of the Lease. NOW THEREFORE, in consideration of the premises and other good and adequate consideration, receipt of which is acknowledged, Landlord and Tenant agree and acknowledge as follows: 1. Landlord and Tenant have entered into the Lease. 2. The initial term of the Lease is for fifteen (15) years commencing on the date hereof. The Lease grants Tenant the option to extend the term of the Lease for two (2) five-year renewal periods. 3. This Memorandum of Lease describes certain provisions contained in the Lease. Reference is hereby made to the Lease for the complete statement of all terms and conditions contained therein. 4. In no event shall this Memorandum of Lease be used to interpret or construe the terms of the Lease, the sole purpose of this Memorandum of Lease being to provide recordable notice of the Lease. J-1 87 IN WITNESS WHEREOF, Landlord and Tenant have caused this Memorandum of Lease to be executed and delivered as of the date and year first above written. ATTEST: Landlord: JOSHUA REALTY CORPORATION, a Delaware corporation By: - ------------------------------- -------------------------------- (Corporate Seal) Steven D. Burton, Vice President Tenant: AMERICAN MANAGEMENT SYSTEMS, INC., a Delaware corporation By: - ------------------------------- -------------------------------- (Corporate Seal) Title: ----------------------------- Title: J-2 88 FIRST AMENDMENT TO AGREEMENT OF LEASE BETWEEN JOSHUA REALTY CORPORATION AND AMERICAN MANAGEMENT SYSTEMS, INC. This First Amendment to Agreement of Lease is made this 24th day of May, 1993, between JOSHUA REALTY CORPORATION, a Delaware corporation (general partner and sole remaining partner of Faircenter Limited Partnership, a Delaware limited partnership) (hereinafter referred to as "Landlord"), and AMERICAN MANAGEMENT SYSTEMS, INC., a Delaware corporation (hereinafter referred to as "Tenant"). B A C K G R O U N D: A. Landlord and Tenant entered into a certain Agreement of Lease dated August 10, 1992 (the "Lease"). Capitalized terms used in this First Amendment and not defined shall have the meanings ascribed to them under the Lease. B. Tenant has exercised Tenant's option to lease the Expansion Space pursuant to Paragraph 62 of the Lease. C. Landlord and Tenant desire that Tenant lease from Landlord approximately 2,893 square feet on the eighth floor of the Centerpointe II Building and Landlord and Tenant agree to amend the Lease by adding Paragraph 66 to the Lease as hereinafter provided: 66. Eighth Floor Space. 66.1 Landlord hereby leases, to Tenant, and Tenant hereby hires and takes from Landlord, approximately 2,893 square feet on the eighth floor of the Centerpointe II Building which shall herein be defined as the "Eighth Floor Space". Landlord shall make available the Eighth Floor Space to Tenant for Tenant Work upon the full execution of this First Amendment. All of the terms and condition of the Lease applicable to the Premises shall apply to such Eighth Floor Space, except as set forth below in this Article. The Eighth Floor Space shall be delivered to Tenant in its then "as-is" condition and state of repair. 66.2 For purposes of the Eighth Floor Space, the Concession Fund shall equal Eighteen Dollars ($18.00) per rentable square foot. All other provisions in the Lease governing the Concession Fund shall apply to the Eighth Floor Space. 66.3 The Term of the Lease shall commence as to the Eighth Floor Space on May 1, 1993 ("Eighth Floor Space Lease Commencement Date"). 66.4 Tenant's obligation to pay Rent for the Eighth Floor Space shall commence on March 1, 1994 ("Eighth Floor Space Rent Commencement Date"). During the period between the Eighth Floor Space Lease Commencement Date and the Eighth Floor Space Rent Commencement Date, Tenant shall pay to Landlord an amount equal to Five Dollars ($5.00) per rentable square foot per annum, in equal monthly installments, in advance, as Additional Rent hereunder. 89 All other obligations of Tenant pertaining to the Eighth Floor Space under the Lease shall commence on the Eighth Floor Space Lease Commencement Date. 66.5 After the Eighth Floor Space Rent Commencement Date, Tenant's Centerpointe II Proportionate Share shall be increased by an amount equal to the percentage derived by dividing the rentable square footage of the Eighth Floor Space by 203,630. 66.6 Except as modified by this First Amendment, the Lease shall otherwise remain in full force and effect. IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties hereto have executed this First Amendment to Lease on the date first set forth herein. LANDLORD: JOSHUA REALTY CORPORATION, a Delaware corporation By: /s/ Steven D. Burton -------------------------------- Steven D. Burton, Vice President TENANT: AMERICAN MANAGEMENT SYSTEMS, INC., a Delaware corporation By: /s/ Frank A. Nicolai -------------------------------- Title: -------------------------------- 90 - ----------------------- - ----------------------- I, the undersigned Notary Public in and for the above-named jurisdiction, hereby certify that Steven D. Burton, who executed the foregoing memorandum of Lease dated August __, 1992 in his capacity as Vice President of Joshua Realty Corporation, personally appeared before me in my aforesaid jurisdiction and acknowledged the same as his free act and deed and the act and deed of said corporation. ---------------------------------- Notary Public [SEAL] My commission expires: ---------------------------------- - ----------------------- - ----------------------- I, the undersigned Notary Public in and for the above-named jurisdiction, hereby certify that _________________, who executed the foregoing Memorandum of Lease dated August __, 1992 in his capacity as [Vice] President of American Management Systems, Inc., personally appeared before me in my aforesaid jurisdiction and acknowledged the same as his free act and deed and the act and deed of said corporation. ---------------------------------- Notary Public [SEAL] My commission expires: ---------------------------------- 91 SECOND AMENDMENT TO AGREEMENT OF LEASE BETWEEN JOSHUA REALTY CORPORATION AND AMERICAN MANAGEMENT SYSTEMS, INC. This Second Amendment to Agreement of Lease is made this 18th day of March, 1994, between JOSHUA REALTY CORPORATION, a Delaware corporation (general partner and sole remaining partner of Faircenter Limited Partnership, a Delaware limited partnership) (hereinafter referred to as "Landlord"), and AMERICAN MANAGEMENT SYSTEMS, INC., a Delaware corporation (hereinafter referred to as "Tenant"). B A C K G R 0 U N D: A. Landlord and Tenant entered into a certain Agreement of Lease dated August 10, 1992, as amended by a First Amendment to Agreement of Lease dated May 24, 1993 (together the "Lease"). Capitalized terms used in this Second Amendment and not defined shall have the meanings ascribed to them under the Lease. B. Landlord and Tenant desire to amend and restate Article 6.3 of the Lease to modify the basis upon which the escalation of Base Rent may occur during the Term of the Lease. NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant amend the Lease by amending and restating Article 6.3 as hereinafter provided: "6.3 Escalation of Base Rent. 6.3.1 Commencing on May 1, 1994 ("Escalation Date"), and on the first day of May during the Term thereafter (each a "Subsequent Escalation Date") (each such period from and after the Escalation Date to the date which is one day prior to the next Subsequent Escalation Date being herein defined as an "Escalation Period"), subject to Article 6.3.2 below, Base Rent per rentable square foot shall be increased for each Escalation Period by an amount equal to Three and Eight Hundred Twenty-five one thousandths percent (3.825%) (the "Escalation Percentage") multiplied by the difference between (i) Base Rent per rentable square foot, at the rate effective on the day before the applicable Subsequent Escalation Date and (ii) the sum of the Base Year Operating Expenses and Base Year Real Estate Taxes 92 per rentable square foot. By way of illustration of the foregoing formula, if the sum of the Base Year Operating Expenses and Base Year Real Estate Taxes per rentable square foot is Four Dollars and Forty-five cents ($4.45), then on the Escalation Date Base Rent per rentable square foot will increase to $14.05 per rentable square foot from and after the Escalation Date until the next Subsequent Escalation Date. 6.3.2 The selection of an Escalation Percentage of Three and Eight Hundred Twenty-five one thousandths percent (3.825%) assumes that the sum of the Base Year Operating Expenses and the Base Year Real Estate Taxes will equal Four Dollars and Forty-five cents ($4.45). The Escalation Percentage will be adjusted if the actual sum of Base Year Operating Expenses and Base Year Real Estate Taxes is not four Dollars and Forty-five Cents ($4.45) to that percentage which will produce a series of Base Rent cash flows, the net present value of which shall equal the net present value of Base Rent over the primary term of the Lease, as defined in the Lease prior to this Second Amendment, using a discount rate in both net present value calculations equal to eight percent (8%). The Escalation Percentage will also be readjusted if, pursuant to Article 7.1.1(e) of the Lease, the Base Year Real Estate Taxes are subsequently adjusted. Schedule A attached to this Second Amendment illustrates the manner in which the Escalation Percentage may be adjusted in the event that the actual sum of Base Year operating Expenses and Base Year Real Estate Taxes is not Four Dollars and Forty-five Cents ($4.45)." IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties hereto have executed this Second Amendment to Lease on the date first set forth herein. Except as amended hereby, the Lease remains in full force and effect. LANDLORD: JOSHUA REALTY CORPORATION, a Delaware corporation By: /s/ Steven D. Burton ---------------------- Steven D. Burton, Vice President [SIGNATURES CONTINUED ON NEXT PAGE] 93 [SIGNATURES CONTINUED FROM PREVIOUS PAGE] TENANT: AMERICAN MANAGEMENT SYSTEMS, INC., a Delaware corporation By: /s/ Frank A. Nicolai ------------------------------ Title: Executive Vice President -------------------------- 94 Schedule A
INITIAL ESCALATION 260,000 square feet Base Year Taxes & Expenses $4.45 Per Square Foot $9.25 Rate of escalation 3.825% Interest Rate 8.0 YEARS NPV 1 2 3 4 5 6 ---------------------------------------------------------------------------------------------------------- Current Lease 25,715,912 2,405,000 2,459,113 2,514,443 2,571,017 2,618,885 2,948,015 Proposed Terms 25,715,912 2,405,000 2,496,982 2,592,483 2,691,635 2,794,580 2,901,463 - --------------------------------------------------------------------------------------------------------------------------
INITIAL ESCALATION Base Year Taxes & Expenses $4.45 Per Square Foot $9.25 Rate of escalation 3.825% Interest Rate 8.0 YEARS 7 8 9 10 11 12 ---------------------------------------------------------------------------------------------------------- Current Lease 3,014,345 3,082,168 3,151,517 3,222,426 3,814,30 3,900,766 Proposed Terms 3,012,433 3,127,647 3,247,268 3,371,464 3,500,410 3,634,287 - ---------------------------------------------------------------------------------------------------------------------------
INITIAL ESCALATION Base Year Taxes & Expenses $4.45 Per Square Foot $9.25 Rate of escalation 3.825% Interest Rate 8.0 YEARS 13 14 15 ---------------------------------------------------------------------------------------------------------- Current Lease 3,988,534 4,078,276 4,170,037 Proposed Terms 3,773,285 3,917,600 4,067,433 - --------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------- Example #1 Base Year Taxes & Expenses $4.60 Per Square Foot $9.10 Rate of escalation 3.849% Interest Rate 8.0 YEARS NPV 1 2 3 4 5 6 ---------------------------------------------------------------------------------------------------------- Current Lease 25,336,182 2,366,000 2,419,235 2,473,668 2,529,325 2,586,235 2,904,425 Proposed Terms 25,336,182 2,366,000 2,457,08 2,551,641 2,649,854 2,751,847 2,857,766 - --------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------- Example #1 Base Year Taxes & Expenses $4.60 Per Square Foot $9.10 Rate of escalation 3.849% Interest Rate 8.0 YEARS 7 8 9 10 11 12 ---------------------------------------------------------------------------------------------------------- Current Lease 2,969,775 3,036,595 3,104,918 3,174,779 3,766,212 3,850,951 Proposed Terms 2,967,762 3,081,991 3,200,618 3,323,810 3,451,744 3,584,602 - --------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------- Example #1 Base Year Taxes & Expenses $4.60 Per Square Foot $9.10 Rate of escalation 3.849% Interest Rate 8.0 YEARS 13 14 15 ---------------------------------------------------------------------------------------------------------- Current Lease 3,937,598 4,026,194 4,116,783 Proposed Terms 3,722,574 3,885,856 4,014,653 - --------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------- Example #2 Base Year Taxes & Expenses $4.75 Per Square Foot $8.95 Rate of escalation 3.880% Interest Rate 8.0 YEARS NPV 1 2 3 4 5 6 ---------------------------------------------------------------------------------------------------------- Current Lease 24,956,453 2,327,000 2,379,358 2,432,893 2,487,633 2,543,605 2,860,836 Proposed Terms 24,965,453 2,327,000 2,417,291 2,511,085 2,608,519 2,709,733 2,814,874 - --------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------- Example #2 Base Year Taxes & Expenses $4.75 Per Square Foot $8.95 Rate of escalation 3.880% Interest Rate 8.0 YEARS 7 8 9 10 11 12 ---------------------------------------------------------------------------------------------------------- Current Lease 2,925,205 2,991,022 3,058,320 3,127,132 3,717,493 3,801,136 Proposed Terms 2,924,095 3,037,554 3,155,415 3,277,849 3,405,035 3,537,155 - --------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------- Example #2 Base Year Taxes & Expenses $4.75 Per Square Foot $8.95 Rate of escalation 3.880% Interest Rate 8.0 YEARS 13 14 15 ---------------------------------------------------------------------------------------------------------- Current Lease 3,886,662 3,974,112 4,063,529 Proposed Terms 3,674,401 3,816,973 3,965,077 - --------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------- Example #3 Base Year Taxes & Expenses $4.30 Per Square Foot $9.40 Rate of escalation 3.801% Interest Rate 8.0 YEARS NPV 1 2 3 4 5 6 ---------------------------------------------------------------------------------------------------------- Current Lease 26,095,641 2,444,000 2,498,990 2,555,217 2,612,710 2,671,496 2,991,604 Proposed Terms 26,095,641 2,444,000 2,536,896 2,633,323 2,733,414 2,837,311 2,945,156 - --------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------- Example #3 Base Year Taxes & Expenses $4.30 Per Square Foot $9.40 Rate of escalation 3.801% Interest Rate 8.0 YEARS 7 8 9 10 11 12 ---------------------------------------------------------------------------------------------------------- Current Lease 3,058,915 3,127,741 3,198,115 3,270,073 3,863,649 3,950,581 Proposed Terms 3,057,101 3,173,300 3,293,917 3,419,117 3,549,077 3,683,977 - --------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------- Example #3 Base Year Taxes & Expenses $4.30 Per Square Foot $9.40 Rate of escalation 3.801% Interest Rate 8.0 YEARS NPV 13 14 15 ---------------------------------------------------------------------------------------------------------- Current Lease 26,095,641 4,039,470 4,130,358 4,223,291 Proposed Terms 26,095,641 3,824,004 3,969,353 4,120,227 - --------------------------------------------------------------------------------------------------------------------------
95 THIRD AMENDMENT TO AGREEMENT OF LEASE BETWEEN JOSHUA REALTY CORPORATION AND AMERICAN MANAGEMENT SYSTEMS, INC. This Third Amendment to Agreement of Lease is made this 5th day of June, 1995, between JOSHUA REALTY CORPORATION, a Delaware corporation (general partner and sole remaining partner of Faircenter Limited Partnership, a Delaware limited partnership) (hereinafter referred to as "Landlord"), and AMERICAN MANAGEMENT SYSTEMS, INC., a Delaware corporation (hereinafter referred to as "Tenant"). BACKGROUND A. Landlord and Tenant entered into a certain Agreement of Lease dated August 10, 1992, as amended by a First Amendment to Agreement of Lease dated May 24, 1993 and by a Second Amendment to Agreement of Lease dated March 18, 1994 (as amended, the "Lease"). Capitalized terms used in this Third Amendment and not deemed shall have the meanings ascribed to them under the Lease. B. Landlord and Tenant desire that Tenant lease from Landlord approximately 4,393 rentable square feet on the fifth floor of the Centerpointe II Building and Landlord and Tenant agree to amend the Lease by adding Paragraph 67 to the Lease as hereinafter provided: 67. Fifth Floor Space. 67.1 Landlord hereby leases to Tenant, and Tenant hereby hires and takes from Landlord, approximately 4,393 rentable square feet on the fifth floor of the Centerpointe II Building more fully described on the floor plan annexed to this Third Amendment as Exhibit A, which shall herein be deemed as the "Fifth Floor Space." Landlord shall make available the Fifth Floor Space to Tenant for Tenant Work on June 1, 1995. All of the terms and conditions of the Lessee applicable to the Premises shall apply to such Fifth Floor Space, except as set forth below in this Article. 67.2.1 The Fifth Floor Space will be delivered to Tenant in its "as is", "as built" condition and state of repair. Any mixtures not removed by the prior tenant shall be left in place and not removed by Landlord. Tenant shall perform the Fifth Floor Tenant's Work (which term shall mean the provision of materials, components, labor and services encompassed within the work described on Exhibit B to this Third Amendment) (i) at Tenant's sole cost, except as provided in Paragraph 96 67,2.2, and (ii) in accordance with the Tenant Design and Construction Process set forth on Exhibit "C" to the Lease and otherwise in accordance with all relevant provisions of the Lease. To the extent required by law, Landlord will comply with the requirements of the ADA applicable to the Core Elements of Centerpointe H which may arise because of the performance of the Fifth Floor Tenant's Work and Tenant shall comply with all other ADA requirements respecting the Fifth Floor Space, including those requirements arising from the Fifth Floor Tenant's Work. 67.2.2 For purposes of the Fifth Floor Space, the Concession Fund shall equal Seven Dollars ($7.00) per rentable square foot. All other provisions in the Lease governing the Concession Fund shall apply to the Fifth Floor Space. 67.3 The Term of the Lease shall commence as to the Fifth Floor Space on June 1, 1995 ("Fifth Floor Space Lease Commencement Date"). The Term of the Lease as to the Fifth Floor Space shall expire on the date which is four (4) years and seven (7) months after the Fifth Floor Space Rent Commencement Date. 67.4 Base Rent payable for the Fifth Floor Space shall be fifteen dollars and sixty cents ($15.60) per rentable square foot, net of Electricity Costs, and subject to adjustment as described in article 6.4. Base Rent for the Fifth Floor Space shall be payable as provided in Section 6.1.1. Tenant's obligation to pay Rent for the Fifth Floor Space shall commence_on the earlier of (i) July 15, 1994 or (ii) substantial completion of the Fifth Floor Tenant's Work ("Fifth Floor Space Rent Commencement Date"). All other obligations of Tenant pertaining to the Fifth Floor Space under the Lease shall commence on the Fifth Floor Space Rent Commencement Date. If the Fifth Floor Space Rent Commencement Date is other than the First day of a month, Base Rent for the Fifth Floor Space due from the Fifth Floor Space Rent Commencement Date until the first day of the following month shall be prorated and payable on the Fifth Floor Space Rent Commencement Date. 67.5 After the Fifth Floor Space Rent Commencement Date, Tenant's Centerpointe II Proportionate Share shall be increase by an amount equal to the 97 percentage derived by dividing the rentable square footage of the Fifth Floor Space by 204,481. Therefore, after the Fifth Floor Space Rent , Tenant's Centerpointe H Proportionate Share shall equal 31.40%. 67.6 Except as modified by this Third Amendment, the Lease shall otherwise remain in full force and effect. IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties hereto have executed this Third Amendment to Lease on the date on the date first set forth herein. LANDLORD: JOSHUA REALTY CORPORATION, a Delaware Corporation By: /s/ Gerald Karr ----------------------- Name: Gerald Karr Title: Vice President TENANT: AMERICAN MANAGEMENT SYSTEMS, INC., a Delaware Corporation By: /s/ Frank A. Nicolai ----------------------- Name: Frank A. Nicolai Title: EVP [THE FOLLOWING PAGES INCLUDED AS EXHIBITS A AND B FLOOR PLANS OF THE PREMISES.] 98 FOURTH AMENDMENT TO AGREEMENT OF LEASE BETWEEN JOSHUA REALTY CORPORATION AND AMERICAN MANAGEMENT SYSTEMS, INC. This Fourth Amendment to Agreement of Lease is made this 18th day of July, 1995, between JOSHUA REALTY CORPORATION, a Delaware corporation (general partner and sole remaining partner of Faircenter Limited Partnership, a Delaware limited partnership) (hereinafter referred to as "Landlord"), and AMERICAN MANAGEMENT SYSTEMS, INC., a Delaware corporation (hereinafter referred to as "Tenant"). BACKGROUND A. Landlord and Tenant entered into a certain Agreement of Lease dated August 10, 1992, as amended by a First Amendment to Agreement of Lease dated May 24, 1993, by a Second Amendment to Agreement of Lease dated March 18, 1994 and by a Third Amendment to Agreement of Lease Dated June 5, 1995 (as amended, the "Lease"). Capitalized terms used in this Fourth Amendment and not defined shall have the meanings ascribed to them under the Lease. B. Landlord and Tenant desire that Tenant lease from Landlord approximately 1,697 rentable square feet on the ninth floor of the Centerpointe II Building known as suite 940 and Landlord and Tenant agree to amend the Lease by adding Paragraph 68 to the Lease as hereinafter provided: 68. Ninth Floor Space. 68.1 Landlord hereby leases to Tenant, and Tenant hereby hires and takes from Landlord, approximately 1,697 rentable square feet on the ninth floor of the Centerpointe II Building more fully described on the floor plan annexed to this Fourth Amendment as Exhibit A, which shall herein be deemed as the "Suite 940." Landlord shall make available Suite 940 to Tenant for Tenant Work on July 1, 1995. All of the terms and conditions of the Lease applicable to the Premises shall apply to Suite 940, except as set forth below in this Article. 68.2.1 Suite 940 will be delivered to Tenant in its "as is "as built" condition and state of repair. Any mixtures not removed by the prior tenant shall be left in place and not removed by Landlord. Tenant shall perform Suite 940 Tenant's Work (which term shall mean the provision of materials, components, labor and services encompassed within the work described on Exhibit B to this Fourth Amendment) (i) at Tenant's sole 99 cost, except as provided in Paragraph 68.2.2, and (H) in accordance with the Tenant Design and Construction Process set forth on Exhibit "C" to the Lease and otherwise in accordance with all relevant provisions of the Lease. To the extent required by law, Landlord will comply with the requirements of the ADA applicable to the Core Elements of Centerpointe 11 which may arise because of the performance of Suite 940 Tenant's Work and Tenant shall comply with all other ADA requirements respecting Suite 940, including those requirements arising from Suite 940 Tenant's Work. 68.2.2 For purposes of Suite 940, the Concession Fund shall equal Seven Dollars ($7.00) per rentable square foot. All other provisions in the Lease governing the Concession Fund shall apply to Suite 940. 68.3 The Term of the Lease shall commence as to Suite 940 on July 1, 1995 ("Suite 940 Lease Commencement Date"). The Term of Lease as to Suite 940 shall expire on the date which is four (4) years after the Suite 940 Rent Commencement Date. 68.4 Base Rent payable for Suite 940 shall be fifteen dollars and sixty cents ($15.60) per rentable square foot, net of Electricity Costs, and subject to adjustment as described in article 6.4. Base Rent for Suite 940 shall be payable as provided in Section 6.1.1. Tenant's obligation to pay Rent for Suite 940 shall commence on the earlier of (i) August 1, 1995 or 00 substantial completion of Suite 940 Tenant's Work ("Suite 940 Rent Commencement Date"). All other obligations of Tenant pertaining to Suite 940 under the Lease shall commence on the date of this Fourth Amendment. If the Suite 940 Rent Commencement Date is other than the first day of a month, Base Rent for Suite 940 due from the Suite 940 Rent Commencement Date until the first day of the following month shall be prorated and payable on the Suite 940 Rent Commencement Date. 68.5 After the Suite 940 Rent Commencement Date, Tenant's Centerpointe H Proportionate Share shall be increase by an amount equal to the percentage derived by dividing the rentable square footage of Suite 940 by 204,481. Therefore, after the Suite 100 940 Rent Commencement, Tenant's Centerpointe H Proportionate Share shall equal 32.23%. 68.6 Except as modified by this Fourth Amendment, the Lease shall otherwise remain in full force and effect. IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties hereto have executed this Fourth Amendment to Lease on the date on the date first set forth herein. LANDLORD: JOSHUA Realty CORPORATION, a Delaware corporation By: /s/ Dan Coughlan ------------------------ Name: Dan Coughlan Title: V.P. TENANT: AMERICAN MANAGEMENT SYSTEMS, INC., a Delaware Corporation By: /s/ Frank A. Nicolai ------------------------ Name: Frank A. Nicolai Title: EVP, Secretary & Treasurer 101 FIFTH AMENDMENT TO AGREEMENT OF LEASE BETWEEN JOSHUA REALTY CORPORATION AND AMERICAN MANAGEMENT SYSTEMS, INC. This Fifth Amendment to Agreement of Lease is made this 27th day of December, 1995, between JOSHUA REALTY CORPORATION, a Delaware corporation (general partner and sole remaining partner of Faircenter Limited Partnership, a Delaware limited partnership) (hereinafter referred to as "Landlord"), and AMERICAN MANAGEMENT SYSTEMS, INC., a Delaware corporation (hereinafter referred to as "Tenant"). BACKGROUND A. Landlord and Tenant entered into a certain Agreement of Lease dated August 10, 1992, as amended by a First Amendment to Agreement of Lease dated May 24, 1993, by a Second Amendment to Agreement of Lease dated March 18, 1994, by a Third Amendment to Agreement of Lease Dated June 5, 1995 and by a Fourth Amendment to Agreement of Lease Dated June 18, 1995 (as amended, the "Lease"). Capitalized terms used in this Fifth Amendment and not defined shall have the meanings ascribed to them under the Lease. B. Landlord and Tenant desire that Tenant lease from Landlord approximately 3,687 rentable square feet on the ninth floor of the Centerpointe II Building known as suite 960 and Landlord and Tenant agree to amend the Lease by adding Paragraph 69 to the Lease as hereinafter provided: 69. Ninth Floor Space. 69.1 Landlord hereby leases to Tenant, and Tenant hereby hires and takes from Landlord, approximately 3,687 rentable square feet on the ninth floor of the Centerpointe II Building more fully described on the floor plan annexed to this Fifth Amendment as Exhibit A, which shall herein be deemed as the "Suite 960." Landlord shall make available Suite 960 to Tenant for Tenant Work on January 1, 1996. All of the terms and conditions of the Lease applicable to the Premises shall apply to Suite 960, except as set forth below in this Article. 69.2.1 Suite 960 will be delivered to Tenant in its "as is", "as built" condition and state of repair. Any fixtures not removed by the prior tenant shall be left in place and not removed by Landlord. Tenant shall perform Suite 960's 102 Tenant's Work (which term shall mean the provision of materials, components, labor and services encompassed within the work described on Exhibit B to this Fifth Amendment) (i) at Tenant's sole cost, except as provided in Paragraph 69.2.2, and (ii) in accordance with the Tenant Design and Construction Process set forth on Exhibit "C" to the Lease and otherwise in accordance with all relevant provisions of the Lease. To the extent required by law, Landlord will comply with the requirements of the ADA applicable to the Core Elements of Centerpointe II which may arise because of the performance of Suite 960 Tenant's Work and Tenant shall comply with all other ADA requirements respecting Suite 960, including those requirements arising from Suite 960 Tenant's Work. 69.2.2 For purposes of Suite 960, the Concession Fund shall equal Zero Dollars ($0.00) per rentable square foot. 69.3 The Term of the Lease shall commence as to Suite 960 on January 1, 1996 ("Suite 960 Lease Commencement Date"). The Term of Lease as to Suite 960 shall expire on the date which is two (2) years after the Suite 960 Rent Commencement Date. 69.4 Base Rent payable for Suite 960 shall be twenty-two dollars and thirty, cents ($22.30) per rentable square foot, net of Electricity Costs, and subject to adjustment as described in article 6.4. Base Rent for Suite 960 shall be payable as provided in Section 6.1.1. Tenant's obligation to pay Rent for Suite 960 shall commence on the earlier of (i) February 15, 1995 or (ii) substantial completion of Suite 960 Tenant's Work ("Suite 960 Rent Commencement Date"). All other obligations of Tenant pertaining to Suite 960 under the Lease shall commence on the date of this Fourth Amendment. If the Suite 960 Rent Commencement Date is other than the first day of a month, Base Rent for Suite 960 due from the Suite 960 Rent Commencement Date until the first day of the following month shall be prorated and payable on the Suite 960 Rent Commencement Date. 69.5 After Suite 960 Rent Commencement Date, Tenant's Centerpointe II Proportionate Share shall be increase by an amount equal to the percentage derived by dividing the rentable square footage of 103 Suite 960 by 204,481. Therefore, after the Suite 960 Rent Commencement, Tenant's Centerpointe II Proportionate Share shall equal 32.25%. 69.6 If the Term of the Lease as to Suite 960 has not commenced by April 1, 1996, either party, by written notice to the other given at any time thereafter, but in all events prior to the Suite 960 Commencement Date, may terminate this Fifth Amendment, in which event neither party shall have any further rights or obligations under this Fifth Amendment. 69.7 Except as modified by this Fifth Amendment, the Lease shall otherwise remain in full force and effect. 69.8 Notwithstanding anything contained in this Fifth Amendment, if Landlord is unable to make Suite 960 available to tenant by January 1, 1996 as a result of a hold over of the existing tenant of Suite 960, then: (i) the Suite 960 Lease Commencement Date shall not be January 1, 1996 but shall be such later date as Landlord shall advise Tenant in writing following the vacation of Suite 960 by the current tenant, (ii) the validity of this Fifth Amendment and the obligations of Tenant under the Fifth Amendment shall not be affected by such failure to deliver possession of Suite 960, except that the Suite 960 Rent Commencement Date shall instead be the earlier of (A) forty-five days after the Suite 960 Lease Commencement Date or (B) substantial completion of the Suite 960 Tenant's Work, and (iii) Tenant shall have no claim against Landlord arising out of Landlord's failure or inability to deliver possession of Suite 960 on the date originally fixed therefor. 104 IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties hereto have executed this Fifth Amendment to Lease on the date on the date first set forth herein. LANDLORD: JOSHUA REALTY CORPORATION, a Delaware corporation By: /s/ Dan Coughlan ---------------------------------- Name: Dan Coughlan Title: TENANT: AMERICAN MANAGEMENT SYSTEMS, INC., a Delaware Corporation By: /s/ Frank A. Nicolai ---------------------------------- Name: Frank A. Nicolai Title: EVP, Secretary & Treasurer 105 SIXTH AMENDMENT TO AGREEMENT OF LEASE BETWEEN JOSHUA REALTY CORPORATION AND AMERICAN MANAGEMENT SYSTEMS, INC. This Sixth Amendment to Agreement of Lease is made this _____ day of ________, 1996, between JOSHUA REALTY CORPORATION, a Delaware corporation (general partner and sole remaining partner of Faircenter Limited Partnership, a Delaware limited partnership) (hereinafter referred to as "Landlord"), and AMERICAN MANAGEMENT SYSTEMS, INC., a Delaware corporation (hereinafter referred to as "Tenant"). B A C K G R 0 U N D: A. Landlord and Tenant entered into a certain Agreement of Lease dated August 10, 1992, as amended by a First Amendment to Agreement of Lease dated May 24, 1993, by a Second Amendment to Agreement of Lease dated March 18, 1994, by a Third Amendment to Agreement of Lease dated June 5, 1995, by a Fourth Amendment to Agreement of Lease dated June 18, 1995 and by a Fifth Amendment to Agreement of Lease dated December 27, 1995 (as amended, the "Lease"). Capitalized terms used in this Sixth Amendment and not defined shall have the meanings ascribed to them under the Lease. B. Landlord and Tenant desire that Tenant lease from Landlord approximately 28,359 additional rentable square feet on the tenth and eleventh floors of the Centerpointe II Building and Landlord and Tenant agree to amend the Lease by adding Article 70 to the Lease as hereinafter provided: 70. Tenth/Eleventh Floor Space. 70.1 Landlord hereby leases to Tenant, and Tenant hereby hires and takes from Landlord, approximately 28,359 rentable square feet on the tenth and eleventh floors of the Centerpointe II Building, as more fully described on the floor plan annexed to this Amendment as Exhibit A, which shall herein be defined as the "Tenth/Eleventh Floor Space." All of the terms and conditions of the Lease applicable to the Premises shall apply to such Tenth/Eleventh Floor Space, except as set forth below in this Article. 70.2.1 The Tenth/Eleventh Floor Space will be delivered to Tenant in its "as is", "as built" condition and state of repair. Any fixtures not removed by the prior tenant shall be left in place 106 and not removed by Landlord. Tenant shall perform all work necessary to install any tenant improvements or otherwise necessary to prepare the Tenth/Eleventh Floor Space (i) at Tenant's sole cost, except as provided in Paragraph 70.2.2, and (ii) in accordance with the Tenant Design and Construction Process set forth on Exhibit 'IC" to the Lease and otherwise in accordance with all relevant provisions of the Lease. To the extent required by law, Landlord will comply with the requirements of the ADA applicable to the Core Elements of Centerpointe II which may arise because of the performance of the Tenth/Eleventh Floor Tenant's Work and Tenant shall comply with all other ADA requirements respecting the Tenth/Eleventh Floor Space, including those requirements arising from the Tenth/Eleventh Floor Tenant's Work. 70.2.2 For purposes of the Tenth/Eleventh Floor Space, the Concession Fund shall equal Ten Dollars ($10.00) per rentable square foot. All other provisions in the Lease governing the Concession Fund shall apply to-the Tenth/Eleventh Floor Space. 70.3 The Term of the Lease shall commence as to the Tenth/Eleventh Floor Space on March 15, 1997 ("Tenth/Eleventh Floor Space Lease Commencement Date"); provided, that if Landlord is unable to deliver the Tenth/Eleventh Floor Space to Tenant by March 15, 1997 for any reason whatever, including without limitation by reason of the holding over of any tenant, then the Tenth/Eleventh Floor Space Lease Commencement Date shall be delayed until such time as Landlord delivers such space to Tenant and Landlord will have no liability to Tenant in any event for any such delay. The Term of the Lease as to the Tenth/Eleventh Floor Space shall expire on the Termination Date. Notwithstanding anything contained in this Amendment, if for any reason Landlord has not delivered the Tenth/Eleventh Floor Space to Tenant by July 1, 1997, then upon written notice from Tenant to Landlord given at any time after July 1, 1997 and prior to the date Landlord delivers the Tenth/Eleventh Floor Space to Tenant, as its sole and exclusive remedy, Tenant may terminate this Sixth Amendment, whereupon this Amendment shall be null and void and neither party 107 shall have any further rights or obligations under this Sixth Amendment. 70.4 Base Rent payable for the Tenth/Eleventh Floor Space shall be Twenty-One and 50/100 Dollars ($21.50) per rentable square foot, inclusive of Electricity Costs, and subject to adjustment as described in Article 6.3. Base Rent for the Tenth/Eleventh Floor Space shall be payable as provided in Section 6.1.1. Tenant's obligation to pay Rent for the Tenth/Eleventh Floor Space and all other obligations of Tenant pertaining to the Tenth/Eleventh Floor Space under the Lease shall commence on the Tenth/Eleventh Floor Space Lease Commencement Date. If the Tenth/Eleventh Floor Space Lease Commencement Date is other than the first day of a month, Base Rent for the Tenth/Eleventh Floor Space due from the Tenth/Eleventh Floor Space Lease Commencement Date until the first day of the following month shall be prorated and payable on the Tenth/Eleventh Floor Lease Commencement Date. 70.5 After the Tenth/Eleventh Floor Space Lease Commencement Date, Tenant's Centerpointe II Proportionate Share shall be increased by an amount equal to the percentage derived by dividing the rentable square footage of the Tenth/Eleventh Floor Space by 204,481. Therefore, after the Tenth/Eleventh Floor Space Lease Commencement Date, Tenant's Centerpointe II Proportionate Share shall equal 47.9%. 70.6 Except as modified by this Sixth Amendment, the Lease shall otherwise remain in full force and effect. 108 IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties hereto have executed this Sixth Amendment to Lease on the date first set forth herein. LANDLORD: JOSHUA REALTY CORPORATION, a Delaware corporation By: ----------------------------- Name: Title: TENANT: AMERICAN MANAGEMENT SYSTEMS, INC., a Delaware corporation By: /s/ Frank A. Nicolai ----------------------------- Name: Frank A. Nicolai Title: EVP, Sec. & Treasurer [THE FOLLOWING PAGES INCLUDED AS EXHIBITS A AND B, FLOOR PLANS OF THE PREMISES.] 109 SEVENTH AMENDMENT TO AGREEMENT OF LEASE BETWEEN JOSHUA REALTY CORPORATION AND AMERICAN MANAGEMENT SYSTEMS, INC. This Seventh Amendment to Agreement of Lease is made as of this 22nd day of July, 1996, between JOSHUA REALTY CORPORATION, a Delaware corporation (general partner and sole remaining partner of Faircenter Limited Partnership, a Delaware limited partnership) (hereinafter referred to as "Landlord"), and AMERICAN MANAGEMENT SYSTEMS, INC., a Delaware corporation (hereinafter referred to as "Tenant"). B A C K G R O U N D: A. Landlord and Tenant entered into a certain Agreement of Lease dated August 10, 1992, as amended by a First Amendment to Agreement of Lease dated May 24, 1993, by a Second Amendment to Agreement of Lease dated March 18, 1994, by a Third Amendment to Agreement of Lease dated June 5, 1995, by a Fourth Amendment to Agreement of Lease dated June 18, 1995, by a Fifth Amendment to Agreement of Lease dated December 27, 1995 and by a Sixth Amendment to Agreement of Lease (undated) (as amended, the "Lease"). Capitalized terms used in this Seventh Amendment and not defined shall have the meanings ascribed to them under the Lease. B. Landlord and Tenant desire that Tenant lease from Landlord approximately 1,829 additional rentable square feet on the first floor of the Centerpointe II Building and Landlord and Tenant agree to amend the Lease by adding Article 71 to the Lease as hereinafter provided: 71. First Floor Space. 71.1 Landlord hereby leases to Tenant, and Tenant hereby hires and takes from Landlord, approximately 1,829 rentable square feet on the first floor of the Centerpointe II Building, as more fully described on the floor plan annexed to this Amendment as Exhibit Al which shall herein be defined as the "First Floor Space." All of the terms and conditions of the Lease applicable to the Premises shall apply to such First Floor Space, except as set forth below in this Article. 71.2.1 The First Floor Space will be delivered to Tenant in its "as is" , "as built" condition and state of repair. Any fixtures not removed by the prior tenant shall be left in place and not removed by 110 Landlord. Tenant shall perform all work (the "First Floor Tenant's Work") necessary to install any tenant improvements or otherwise necessary to prepare the First Floor Space (i) at Tenant's sole cost and (ii) in accordance with the Tenant Design and Construction Process set forth on Exhibit 'IC" to the Lease and otherwise in accordance with all relevant provisions of the Lease. To the extent required by law, Landlord will comply with the requirements of the ADA applicable to the Core Elements of Centerpointe II which may arise because of the performance of the First Floor Tenant's Work and Tenant shall comply with all other ADA requirements respecting the First Floor Space, including those requirements arising from the First Floor Tenant's Work. 71.2.2 For purposes of the First Floor Space, there shall be no Concession Fund. 71.3 The Term of the Lease shall commence as to the First Floor Space on July 22, 1996 ("First Floor Space Lease Commencement Date"). The Term of the Lease as to the First Floor Space shall expire on December 31, 2000. 71.4 Base Rent payable for the First Floor Space shall be Nineteen Dollars ($19.00) per rentable square foot, inclusive of Electricity Costs, and subject to adjustment as described in Article 6.3. Base Rent for the First Floor Space shall be payable as provided in Section 6.1.1. Tenant's obligation to pay Rent for the First Floor Space shall commence on August 1, 1996. 71.5 After the First Floor Space Lease Commencement Date, Tenant's Centerpointe II Proportionate Share shall be increased by an amount equal to the percentage derived by dividing the rentable square footage of the First Floor Space by 204,481. Therefore, after the First Floor Space Lease Commencement Date, Tenant's Centerpointe II Proportionate Share shall equal 48.79%. 71.6 Except as modified by this Seventh Amendment, the Lease shall otherwise remain in full force and effect. 111 IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties hereto have executed this Seventh Amendment to Lease as of the date first set forth herein. LANDLORD: JOSHUA REALTY CORPORATION, a Delaware corporation By: /s/ Dan Coughlan ------------------------------ Name: Daniel Coughlan Title: TENANT: AMERICAN MANAGEMENT SYSTEMS, INC., a Delaware corporation By: /s/ Frank A. Nicolai ------------------------------ Name: Frank A. Nicolai Title: Executive Vice President [THE FOLLOWING PAGE INCLUDED AS EXHIBIT A FLOOR PLAN OF THE PREMISES.] 112 EIGHTH AMENDMENT TO AGREEMENT OF LEASE BETWEEN JOSHUA REALTY CORPORATION AND AMERICAN MANAGEMENT SYSTEMS, INC. This Eighth Amendment to Agreement of Lease is made as of this 12th day of February, 1997 between JOSHUA REALTY CORPORATION, a Delaware corporation (general partner and sole remaining partner of Faircenter Limited Partnership, a Delaware limited partnership) (hereinafter referred to as "Landlord"), AMERICAN MANAGEMENT SYSTEMS, INC., a Delaware corporation (hereinafter referred to as "Tenant"), and QUALITY SYSTEMS, INC., a Virginia corporation ("QSI"). B A C K G R O U N D: A. Landlord and Tenant entered into a certain Agreement of Lease dated August 10, 1992, as amended by a First Amendment to Agreement of Lease dated May 24, 1993, by a Second Amendment to Agreement of Lease dated March 18, 1994, by a Third Amendment to Agreement of Lease dated June 5, 1995, by a Fourth Amendment to Agreement of Lease dated June 18, 1995, by a Fifth Amendment to Agreement of Lease dated December 27, 1995, by a Sixth Amendment to Agreement of Lease (undated) and by a Seventh Amendment to Agreement of Lease dated July 22, 1996 (as amended, the "Lease"). Capitalized terms used in this Eighth Amendment and not defined shall have the meanings ascribed to them under the Lease. B. Pursuant to the Sixth Amendment to Agreement of Lease dated (undated) (the "Sixth Amendment"), Landlord and Tenant agreed that Tenant lease from Landlord approximately 28,359 additional rentable square feet on the tenth and eleventh floors of Centerpointe II Building, which space is currently occupied by QSI and defined in the Sixth Amendment, Section 70.1 as the "Tenth/Eleventh Floor Space." C. Pursuant to the Sixth Amendment, the Term of the Lease for the Tenth/Eleventh Floor Space was to commence March 15, 1997, which date is the day following the expiration of the lease between Landlord and QSI dated December 21, 1989 (the "QSI Lease"). D. Pursuant to a Termination Agreement of even date herewith between Landlord and QSI, Landlord and QSI have agreed to terminate the QSI Lease early, on February 17, 1997. E. Landlord and Tenant desire that Tenant lease from Landlord the Tenth/Eleventh Floor Space on February 18, 1997, which date is approximately one (1) month earlier than the 113 Tenth/Eleventh Floor Lease Commencement Date set forth in Section 70.3 of the Sixth Amendment. NOW, THEREFORE, for good and valuable consideration, including the mutual promises, covenants and agreements herein contained, the parties hereto mutually covenant and agree that the Lease is hereby amended as follows: 1. Term. The dated "March 15, 1997" set forth in the second and fifth lines of Section 70.3 of the Sixth Amendment is hereby deleted in both instances, and substituted in each instance in lieu thereof is the date "February 18, 1997." 2. Base Rent. Notwithstanding anything to the contrary set forth in Section 70.4 of the Sixth Amendment, Base Rent during any portion of the Term of the Lease for the Tenth/Eleventh Floor Space prior to March 15, 1997 shall equal Seventeen and 50/100 Dollars ($17.50) per rentable square foot of the Tenth/Eleventh Floor Space per annum, inclusive of Electricity Costs, and not subject to adjustment as described in Section 6.3 of the Lease. Commencing March 15, 1997, Base Rent for the Tenth/Eleventh Floor Space shall be payable in accordance with Section 70.4 of the Sixth Amendment. 3. Effect. Except as modified by this Eighth Amendment, the Lease shall otherwise remain in full force and effect. 114 IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties hereto have executed this Eighth Amendment to Lease as of the date first set forth herein. LANDLORD: JOSHUA REALTY CORPORATION, a Delaware corporation By: /s/ Dan Coughlan ----------------------------- Name: Daniel P. Coughlan Title: TENANT: AMERICAN MANAGEMENT SYSTEMS, INC., a Delaware corporation By: /s/ Frank A. Nicolai ----------------------------- Name: Frank A. Nicolai Title: QSI: QUALITY SYSTEMS, INC., a Virginia corporation By: /s/ Dan O'Neill ----------------------------- Name: Dan O'Neill Title: VP, Finance & Admin. 115 NINTH AMENDMENT TO AGREEMENT OF LEASE BETWEEN JOSHUA REALTY CORPORATION AND AMERICAN MANAGEMENT SYSTEMS, INC. This Ninth Amendment to Agreement of Lease is made as of this 4th day of March, 1997 between JOSHUA REALTY CORPORATION, a Delaware corporation (general partner and sole remaining partner of Faircenter Limited Partnership, a Delaware limited partnership) (hereinafter referred to as "Landlord") and AMERICAN MANAGEMENT SYSTEMS, INC., a Delaware corporation (hereinafter referred to as "Tenant"). B A C K G R O U N D: A. Landlord and Tenant entered into a certain Agreement of Lease dated August 10, 1992, as amended by a First Amendment to Agreement of Lease dated May 24, 1993, by a Second Amendment to Agreement of Lease dated March 18, 1994, by a Third Amendment to Agreement of Lease dated June 5, 1995, by a Fourth Amendment to Agreement of Lease dated June 18, 1995, by a Fifth Amendment to Agreement of Lease dated December 27, 1995, by a Sixth Amendment to Agreement of Lease (undated) and by a Seventh Amendment to Agreement of Lease dated July 22, 1996 and by an Eighth Amendment to Agreement of Lease dated as of February 12, 1997 (as amended, the "Lease"). Capitalized terms used in this Ninth Amendment and not defined shall have the meanings ascribed to them under the Lease. B. Landlord and Tenant desire that Tenant lease from Landlord, Suite 900, containing approximately 5,664 additional rentable square feet on the ninth floor of the Counterpointe II Building and Landlord and Tenant agree to amend the Lease by adding Article 72 to the Lease as hereinafter provided: 72. Suite 900 Space. 72.1 Landlord hereby leases to Tenant, and Tenant hereby hires and takes from Landlord, approximately 5,664 rentable square feet on the ninth floor of the Centerpointe II Building, as more fully described on the floor plan annexed to this Amendment as Exhibit A, which shall herein be defined as the "Suite 900 Space." All of the terms and conditions of the Lease applicable to the Premises shall apply to such Suite 900 Space, except as set forth below in this Article. 72.2.1 The Ninth Floor Space will be delivered to Tenant in its "as is", "as built" condition and state of 116 repair. Any fixtures not removed by the prior tenant shall be left in place and not removed by Landlord. Tenant shall perform all work (the "Suite 900 Tenant's Word") necessary to prepare the Suite 900 Space (i) at Tenant's sole cost and (ii) in accordance with the Tenant Design and Construction Process set forth on Exhibit "C" to the Lease and otherwise in accordance with all relevant provisions of the Lease. To the extent required by law, Landlord will comply with the requirements of the ADA applicable to the Core Elements of Centerpointe II which may arise because of the performance of the Suite 900 Tenant's Work and Tenant shall comply with all other ADA requirements respecting the Suite 900 Space, including those requirements arising from the Suite 900 Tenant's Work. 72.2.2 For purposes of the Suite 900 Space, there shall be no Concession Fund. 72.3 The term of the Lease shall commence as to the Suite 900 Space on May 10, 1997 ("Suite 900 Space Lease Commencement Date"). The Term of the Lease as to the Suite 900 Space shall expire on May 31, 2002. 72.4 Base Rent payable for the Suite 900 Space shall be Nineteen and 50/100 Dollars ($19.50) per rentable square foot, inclusive of Electricity Costs, and subject to adjustment as described in Article 6.3. Base Rent for the Suite 900 Space shall be payable as provided in Section 6.1.1. Tenant's obligation to pay Rent for the Suite 900 Space shall commence on May 10, 1997. 72.5 After the Suite 900 Space Lease Commencement Date, Tenant's Centerpointe II Proportionate Share shall be increased by an amount equal to the percentage derived by dividing the rentable square footage of the Suite 900 Space by 204,481. Therefore, after the Suite 900 Space Lease Commencement Date, Tenant's Counterpointe II Proportionate Share shall equal 51.56%. 72.6 Except as modified by this Ninth Amendment, the Lease shall otherwise remain in full force and effect. 117 IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties hereto have executed this Ninth Amendment to Lease as of the date first set forth herein. LANDLORD: JOSHUA REALTY CORPORATION, a Delaware corporation By: /s/ Dan Coughlan ------------------------------- Name: Title: TENANT: AMERICAN MANAGEMENT SYSTEMS, INC., a Delaware corporation By: /s/ Frank A. Nicolai ------------------------------- Name: Frank A. Nicolai Title: Executive Vice President [THE FOLLOWING PAGE INCLUDED AS AN EXHIBIT A FLOOR PLAN OF THE PREMISES.] 118 TERMINATION AGREEMENT This TERMINATION AGREEMENT (this "Agreement"), made this 11th day of February, 1997 between JOSHUA REALTY CORPORATION, a Delaware corporation (general partner and sole remaining partner of Faircenter Limited Partnership, a Delaware limited partnership) (the "Landlord"), and QUALITY SYSTEMS, INC., a Virginia corporation (the "Tenant"), and VITRO CORPORATION, a Delaware corporation (the "Guarantor"). W I T N E S S E T H: WHEREAS, by an Office Building Lease dated December 2, 1989, by and between Landlord and Tenant (the "Lease"), Landlord leased to Tenant and Tenant leased from Landlord all of that real property, situate and lying in Fairfax, Virginia, which is described therein (the "Premises") (Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Lease.); and WHEREAS, as of the date hereof, the Term of the Lease has not expired or otherwise terminated, and the Lease remains in full force and effect; and WHEREAS, Landlord and Tenant desire to terminate the Lease, upon the terms and subject to the conditions which are hereinafter set forth. NOW, THEREFORE, FOR AND IN CONSIDERATION of the mutual entry into this Agreement by the parties hereto, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows: Section 1. Termination of Lease. 1.1. Notwithstanding anything contained in the provisions of the Lease to the contrary, the Term shall end at 11:59 o'clock p.m. on February 17, 1997 (the "Termination Date"). Tenant shall have no right to occupy or use the Premises thereafter, and shall thereupon immediately surrender possession of the Premises to Landlord in accordance with the provisions of Section 6.10 of the Lease. 1.2. Termination of the Lease shall not alter or impair any and all liability of Tenant or Guarantor accruing under the provisions of the Lease at or before such termination of the Lease (including, by way of example rather than of limitation, any 119 liability for Base Annual Rent or Additional Rent accruing at or before such termination). Section 2. Consideration. 2.1 Consideration. In consideration of the granting by Landlord of the early termination of the Lease, Tenant shall pay to Landlord, simultaneously with the execution of this Agreement, the amount of Twenty-Three Thousand Eight Hundred Sixty-Nine and 32/100 Dollars ($23,869.32). 2.2 Attorney's Fees. Upon presentation of an invoice from Landlord, Tenant agrees to reimburse Landlord for Landlord's attorney's fees not to exceed $720.00 incurred in connection with both the termination of this Lease and the Eighth Amendment to Lease Agreement between Landlord and American Management Systems, Inc. of even date herewith. Section 3. Mutual release. Provided that each party hereto performs its obligations under the provisions of this Agreement and except as is otherwise provided in subsection 1.2 hereof, each party hereto hereby releases the other party from any and all obligations which the released party may have to the other under the provisions of the Lease (including, by way of example rather than of limitation, any and all such obligations which Tenant or Guarantor may have for the payment of Rent to the Landlord which would have been due beyond the Termination Date had this Lease not been terminated). *not to exceed $720.00 120 IN WITNESS WHEREOF, each party hereto has caused this Agreement to be and ensealed on its behalf by its duly authorized representatives, the day and year first above written. ATTEST/WITNESS: JOSHUA REALTY CORPORATION, a Delaware corporation /s/ Raymond L. Owens By: /s/ Dan Coughlan - --------------------------- ------------------------------- Name: Daniel P. Coughland Title: ATTEST/WITNESS: QUALITY SYSTEMS, INC., a Virginia corporation /s/ [SIG] By: /s/ Dean O'Neill - --------------------------- ------------------------------- Name: Dean O'Neill Title: VP Finance & Admin. ATTEST/WITNESS: VITRO CORPORATION /s/ [SIG] By: /s/ Arthur Rossi - --------------------------- ------------------------------- Name: Arthur Rossi Title: Senior Vice President EX-10.8 7 OFFICE LEASE AGREEMENT 1 EXHIBIT 10.8
TABLE OF CONTENTS ARTICLE 1 BASIC LEASE INFORMATION AND CERTAIN DEFINITIONS....................1 ARTICLE 2 DEMISE; RENEWAL TERM AND TERM......................................3 Section 2.01. Demise...................................................3 Section 2.02. Renewal Terms............................................3 Section 2.03. Definition of Term.......................................4 ARTICLE 3 DELIVERY OF THE PREMISES TO TENANT; RENTABLE AREA..................4 Section 3.01. Delivery of the Premises to Tenant.......................4 Section 3.02. Completion of the Premises...............................5 Section 3.03. Rentable Area............................................5 Section 3.04. Allowances Granted to Tenant.............................6 ARTICLE 4 ACCEPTANCE OF THE PREMISES AND BUILDING BY TENANT..................6 ARTICLE 5 BASE RENT..........................................................6 Section 5.01. Base Rent - Initial Term.................................6 Section 5.02. Base Rent - Renewal Term.................................7 Section 5.03. Temporary Rent...........................................8 Section 5.04. Payment..................................................8 Section 5.05. Acceptance of Rent.......................................9 Section 5.06. Survival of Rent Obligation..............................9 Section 5.07. Default Interest.........................................9 ARTICLE 6 ADDITIONAL RENT....................................................9 Section 6.01. Operating Expenses.......................................9 Section 6.02. Real Estate Taxes.......................................15 Section 6.03. Parking.................................................17 Section 6.04. Additional Rent Defined.................................17 Section 6.05. Rent Defined............................................17 ARTICLE 7 SERVICES BY LANDLORD..............................................17 Section 7.01. Services Generally......................................17 Section 7.02. Interruption in Services................................17 ARTICLE 8 UTILITIES.........................................................18 Section 8.01. Computerized Energy Management System...................18 Section 8.02. Water, Heating, Ventilating and Air Conditioning........19 Section 8.03. Electricity.............................................19 Section 8.04. Tenant's Security Regulations...........................20 Section 8.05. Building Security System................................20 ARTICLE 9 USE...............................................................20
i 2 ARTICLE 10 COMPLIANCE WITH LAWS.............................................20 ARTICLE 11 OBSERVANCE OF BUILDING'S RULES AND REGULATIONS; HAZARDOUS MATERIALS .......................................................21 Section 11.01. Rules and Regulations..................................21 Section 11.02. Hazardous Materials....................................22 ARTICLE 12 ALTERATIONS......................................................23 Section 12.01. Approval of Landlord...................................23 Section 12.02. Ownership of Improvements to Premises..................24 ARTICLE 13 LIENS............................................................24 ARTICLE 14 REPAIRS..........................................................25 Section 14.01. Tenant's Obligations...................................25 Section 14.02. Landlord's Obligations.................................25 ARTICLE 15 INSURANCE........................................................26 Section 15.01. Tenant's Insurance.....................................26 Section 15.02. Insurance Rating.......................................27 Section 15.03. Waiver of Subrogation..................................27 Section 15.04. Landlord Insurance.....................................27 Section 15.05. Self Insurance and Blanket Insurance...................28 ARTICLE 16 DAMAGE BY FIRE OR OTHER CASUALTY.................................28 Section 16.01. Termination Rights Due to Damage or Destruction to the Premises...............................................28 Section 16.02. Damage to the Building.................................29 Section 16.03. Partial Damage.........................................29 Section 16.04. Damage During Last Year of Term........................29 Section 16.05. No Landlord Liability..................................30 Section 16.06. Apportionment of Rent..................................30 ARTICLE 17 CONDEMNATION.....................................................30 Section 17.01. Entire Building........................................30 Section 17.02. Partial Takings Affecting the Premises.................30 Section 17.03. Termination of Lease...................................31 Section 17.04. Landlord's Right to Award..............................31 ARTICLE 18 ASSIGNMENT AND SUBLETTING........................................31 Section 18.01. Permitting Subletting of the Premises..................31 Section 18.02. Rights of Tenant.......................................32 Section 18.03. Required Provision in Sublease.........................33 Section 18.04. Excess Rent............................................33 Section 18.05. Rights of Landlord.....................................33 Section 18.06. Permitted Occupants....................................34
ii 3 ARTICLE 19 INDEMNIFICATION..................................................34 ARTICLE 20 SURRENDER OF THE PREMISES........................................35 Section 20.01. Condition of Premises..................................35 Section 20.02. Tenant Holdover........................................35 ARTICLE 21 ESTOPPEL CERTIFICATES............................................35 ARTICLE 22 SUBORDINATION AND ATTORNMENT.....................................36 Section 22.01. Existing Financings....................................36 Section 22.02. Future Financings......................................36 Section 22.03. Attornment.............................................37 ARTICLE 23 QUIET ENJOYMENT..................................................37 ARTICLE 24 SIGNS AND FURNISHINGS............................................37 Section 24.01. Signs and Advertisements...............................37 Section 24.02. Building Signage.......................................38 Section 24.03. Furnishings............................................38 Section 24.04. Satellite Dish.........................................39 ARTICLE 25 DEFAULTS AND REMEDIES............................................39 Section 25.01. Events of Default......................................39 Section 25.02. Remedies...............................................40 Section 25.03. Remedies Cumulative....................................41 Section 25.04. No Acceptance or Surrender.............................41 Section 25.05. Customs and Practices..................................41 Section 25.06. Payment of Tenant's Obligations by Landlord............41 Section 25.07. Default by Landlord....................................42 ARTICLE 26 SECURITY DEPOSIT.................................................43 ARTICLE 27 INTENTIONALLY OMITTED............................................43 ARTICLE 28 ATTORNEY'S FEES AND LEGAL EXPENSES...............................43 ARTICLE 29 NOTICES..........................................................43 ARTICLE 30 RIGHT OF FIRST REFUSAL...........................................44 ARTICLE 31 MISCELLANEOUS....................................................45 Section 31.01. No Partnership.........................................45 Section 31.03. Severability...........................................46 Section 31.04. Trial by Jury..........................................46 Section 31.05. Force Majeure..........................................46 Section 31.06. Captions...............................................46
iii 4 Section 31.07. Benefit and Burden.....................................46 Section 31.08. No Representations by Landlord.........................46 Section 31.09. Entire Agreement.......................................46
iv 5 OFFICE LEASE AGREEMENT THIS OFFICE LEASE AGREEMENT is made and entered into this 12th day of August, 1993, by and between HYATT PLAZA LIMITED PARTNERSHIP, a Virginia limited partnership ("Landlord") and AMERICAN MANAGEMENT SYSTEMS, INC., a Delaware corporation ("Tenant"), upon all terms set forth in this Lease and in all Exhibits hereto, to each and all of which terms Landlord and Tenant hereby mutually agrees, and in consideration of One Dollar and other valuable considerations, the receipt and sufficiency of which are hereby acknowledged, and of the rents, agreements and benefits flowing between the parties hereto, as follows: ARTICLE 1 BASIC LEASE INFORMATION AND CERTAIN DEFINITIONS Section 1.01. Each reference to this Lease to information and definitions contained in Article 1 and each use of the terms capitalized and defined in this Section 1.01 shall be deemed to refer to, and shall have the following meanings: A. Building: Hyatt Plaza 12701 Fair Lakes Circle Fairfax, Virginia 22033 B. Phase I Space: Refers to approximately 51,262 square feet of Rentable Area (defined in Section 3.03 of the Lease) located on the seventh (7th) and eighth (8th) floors of the Building, as more fully described and shown on Exhibit "A" - Part 1. C. Phase II Space: Refers to approximately 32,974 square feet of Rentable Area located on the ninth (9th) and tenth (10th) floors of the Building, as more fully described and shown on Exhibit "A" - Part 2. D. Phase I Rent Commencement Date: March 1, 1994, subject, however, to the provisions of Section 3.01(c) hereof. E. Phase I Rent: Refers to an amount equal to the product obtained by multiplying $17.37 by the number of square feet of Rentable Area in the Phase I Space. F. Phase II Rent Commencement Date: March 1, 1995, subject, however, to the provisions of Section 3.01(d) hereof. G. Phase II Rent: Refers to an amount equal to the product obtained by multiplying $17.80 by the number of square feet of Rentable Area in the Phase II Space. H. Initial Term: Ten (10) years. I. Commencement Date: March 1, 1994. 6 J. Expiration Date: February 29, 2004. K. Rentable Area of the Building: 252,395 square feet. L. Base Rent: Refers to the following: (i) From the Phase I Rent Commencement Date to the Phase II Commencement Date the Phase I Rent, any Temporary Rent (defined in Section 5.03) and any Additional Space Rent (defined in Article 30 hereof). (ii) From the Phase II Rent Commencement Date to the expiration of the Term an amount equal to the sum of (1) the Phase I Rent; (2) the Phase II Rent; and (3) any Additional Space Rent. M. Base Year: Refers to the following: (i) During the Initial Term: 1994. (ii) During any Renewal Term: The base year or amount established as part of the Market Rent (as defined in Section 5.02 hereof). N. Base Operating Expenses: The Operating Expenses (defined in Section 6.01(b)) incurred by Landlord during the Base Year. O. Base Real Estate Taxes: The Real Estate Taxes (defined in Section 6.02(c)) assessed upon the Building during the Base Year. P. Tenant's Proportionate Share: The result obtained by multiplying 100% by a fraction, the numerator being the Rentable Area of the Premises and the denominator being the Rentable Area of the Building, provided that prior to the Phase II Rent Commencement Date the numerator shall be the Rentable Area of the Phase I Space only. Q. Landlord's Address for Notices: c/o Hazel/Peterson Companies 12500 Fair Lakes Circle Suite 400 Fairfax, Virginia 22033 Attention: Asset Manager -2- 7 R. Tenant's Address for Notices: 4050 Legato Road Fairfax, Virginia 22030 Attention: Thomas W. Huba S. Lease: Collectively refers to this Office Lease Agreement together with the following Exhibits which are attached hereto and incorporated herein by this reference.
Exhibits "A" Floor Plans "B" Leasehold Improvements "C" Modified Method "D" Cleaning Specifications "E" HVAC Specifications "F" Barrier Removal Program "G" Rules and Regulations "H" Form Subordination Agreement
T. Broker: Cushman & Wakefield of Virginia and Grubb & Ellis U. Premises: Refers to the Rentable Area demised to Tenant by this Lease. V. Fair Lakes: A mixed-use development in Fairfax County, Virginia. ARTICLE 2 DEMISE; RENEWAL TERM AND TERM Section 2.01. Demise. Landlord leases to Tenant, and Tenant leases from Landlord, the Premises located in the Building for the Term (defined in Section 2.03) and subject to the provisions hereof. The Initial Term of this Lease shall be for the period specified in Section 1.01 and shall begin at midnight on the Commencement Date and shall, unless this Lease is sooner terminated in accordance with the provisions of this Lease, end at midnight on the Expiration Date, provided, however, that if for any reason the Expiration Date shall be a day other than the final day of a calendar month then, the Term of this Lease shall be extended so that it will expire on the last day of the calendar month in which the Expiration Date takes place. Section 2.02. Renewal Terms. Tenant shall have the right to renew and extend the Term of this Lease for two (2) Renewal Terms (herein so called) of five (5) years each upon and subject to the following terms and conditions: (a) Tenant may exercise its right to a Renewal Term by giving written notice thereof to Landlord no later than thirty (30) days after its receipt of the Market Rent Notice (as defined in Section 5.02 hereof) for the Renewal Term in question. The Renewal Term shall commence immediately upon the expiration of the Initial Term (as extended if Tenant had previously exer- -3- 8 cised its right to the first Renewal Term) and upon such exercise the "Expiration Date" of the Term shall automatically become the last day of the current Renewal Term. (b) The exercise by Tenant of its right to a Renewal Term must be made, if at all, by written notice executed by Tenant and delivered to Landlord on or before the date set forth hereinabove. Once Tenant has exercised its option to a Renewal Term, the exercise may be revoked as more particularly described in Section 5.02(b) hereof. Tenant shall not have the right to a Renewal Term if Tenant is in Default (as defined in Section 25.01 hereof) under this Lease, either at the time Tenant gives notice of its election, or immediately prior to the commencement of a Renewal Term. If Tenant does not exercise its right to a Renewal Term in a timely manner, then Tenant's rights with respect thereto shall expire and be of no force or effect. Section 2.03. Definition of Term. As used in this Lease the word "Term" collectively refers to the Initial Term, Renewal Term, if any, and, any Temporary Occupancy Period (hereinafter defined). ARTICLE 3 DELIVERY OF THE PREMISES TO TENANT; RENTABLE AREA Section 3.01. Delivery of the Premises to Tenant. (a) Landlord shall deliver the Phase I Space and Phase II Space to Tenant in its "as is" and "where as" condition with only the improvements identified on Schedule 1 of Exhibit "B" hereto (the "Existing Improvements") on or before December 5, 1993. For every day beyond December 5, 1993 that Landlord has not delivered the Premises, the Rent Commencement Date for Phase I and Phase II will be extended by one (1) day. The provisions of Exhibit "B" hereto shall govern the construction and installation of all Leasehold Improvements (as defined in Exhibit "B"). (b) It is acknowledged and agreed that Tenant (and its agents, contractors and employees) may enter upon the Premises commencing after the date it is delivered to Tenant pursuant to subparagraph (a) hereof to perform the construction work required by this Lease to be performed by Tenant. Any entry prior to the Commencement Date shall be subject to all of the terms and conditions of this Lease, however, Tenant's obligations to pay Rent hereunder shall commence on the Phase I Rent Commencement Date with respect to the Phase I Space and on the Phase II Rent Commencement Date with respect to the Phase II Space. (c) The Phase I Rent Commencement Date shall occur on the earlier of (i) March 1, 1994 or (ii) the date on which Tenant occupies any portion of the Phase I Space for the operation of its normal business, provided, however, that if Tenant occupies only a portion of the Phase I Space prior to March 1, 1994, then the Rent payable with respect to the Phase I Space for the period from Tenant's occupancy for its normal business operations until March 1, 1994 shall be prorated so that Tenant shall pay Rent only with respect to the portion of the Phase I Space Tenant is occupying for its normal business operations, provided further, however, that Tenant shall commence paying Rent with respect to all of the Phase I Space on March 1, 1994 whether or not Tenant has occupied all of the Phase I Space. The period from Tenant's occupancy of any por- -4- 9 tion of the Phase I Space for its normal business operations until March 1, 1994 is hereinafter referred to as the "Temporary Occupancy Period". The Tenant's occupancy of any Phase I Space during the Temporary Occupancy Period will be subject to the terms and conditions of this Lease and Tenant will be obligated to pay Temporary Rent with respect to such space computed in accordance with Section 5.03 hereof. (d) The Phase II Rent Commencement date shall occur on the earlier of (i) March 1, 1995 or (ii) the date on which Tenant occupies any portion of the Phase II Space for the operation of its normal business, provided, however, that if Tenant occupies only a portion of the Phase II Space prior to March 1, 1995, then the Rent payable with respect to the Phase II Space for the period from Tenant's occupancy for its normal business operations until March 1, 1995 shall be prorated so that Tenant shall pay Rent only with respect to that portion of the Phase II Space Tenant is occupying for its normal business operations, provided, further, however, that Tenant shall commence paying Rent with respect to all of the Phase II Space on March 1, 1995 whether or not Tenant has occupied all of the Phase II Space. The period from Tenant's occupancy of any portion of the Phase II Space for its normal business operations until March 1, 1995 is hereinafter referred to as the "Temporary Occupancy Period". Tenant's occupancy of any Phase II Space during the Temporary Occupancy Period will be subject to the terms and conditions of this Lease and Tenant will be obligated to pay Temporary Rent computed in accordance with Section 5.03 hereof. (e) Tenant shall indemnify Landlord and hold Landlord harmless from and against any and all claims, damages, losses, liabilities, costs and expenses (including without limitation attorneys' fees and court costs) which Landlord may incur as a result of Tenant's entry on the Premises and construction of the Leasehold Improvements to the Premises. Section 3.02. Completion of the Premises. Upon completion of a phase of the Premises, Tenant will supply Landlord with (i) a certificate from the Tenant's Architect (defined in Exhibit "B"), that, in its professional judgment, the Leasehold Improvements to be constructed in the phase have been substantially completed, and (2) copies of the non-residential use permit for the phase. Section 3.03. Rentable Area. The term "Rentable Area" as used herein means all the floor area in the Building and/or in the Premises and has been calculated using a modified version of the standard method of measurements of the Washington D.C. Association of Realtors (formerly the Washington Board of Realtors) a copy of which is attached hereto as Exhibit "C" (the "Modified Method"). The Rentable Area of each phase of the Premises is approximately stated in Section 1.01 and shall be specifically calculated by Landlord's architect using the Modified Method as Approved Plans (defined in Exhibit "B") for a phase are completed. Upon such determination: (i) Landlord's architect will send written certification of such determination to Landlord and Tenant showing the method of calculation; (ii) such calculations shall be subject to confirmation by Tenant's Architect and (iii) once the Rentable Area is agreed upon the Rentable Area of the Premises and Base Rent specified in Section 1.01 shall be appropriately adjusted, if necessary, to reflect the agreed upon number of square feet of Rentable Area of the Premises. The Rentable Area of the Building and the Premises shall be adjusted, if necessary, by -5- 10 Landlord's architect using the Modified Method in the event of any future expansion or modification of the Premises. If the number of square feet of the Rentable Area of the Premises changes, then Tenant's Proportionate Share shall be adjusted effective as of the date of any such change. Section 3.04. Allowances Granted to Tenant. Landlord grants to Tenant an allowance (the "Tenant's Allowance") equal to $10.00 per square foot of Rentable Area in the original Premises. The Tenant Allowance will be disbursed pursuant to the provisions of Exhibit "B". Any undisbursed or unused portion of the Tenant Allowance may be used by Tenant to apply towards moving expenses or Rent accruing hereunder at such time as all of the fees, costs and expenses associated with work which Tenant is required to pay under this Lease have been paid in full. ARTICLE 4 ACCEPTANCE OF THE PREMISES AND BUILDING BY TENANT Taking possession of a phase of the Premises by Tenant shall be conclusive evidence that Tenant: (i) accepts such phase as suitable for the purposes for which they are leased; (ii) waives any defects in the phase of the Premises. Except as specifically set forth in this Lease, and except for negligence or willful misconduct of Landlord, its agents, employees, licensees or servants, Landlord shall not be liable to Tenant or any of its agents, employees, licensees, servants, or invitees for any injury or damage to person or property due to (i) the condition or design of or any defect in the Premises or its mechanical, plumbing and electrical systems and equipment which may exist or occur, or (ii) any work performed by Tenant, its agents, employees, licensees, servants, and invitees, and Tenant expressly assumes all risks for injury or damage to person or property, either proximate or remote, resulting from the condition of the Premises. ARTICLE 5 BASE RENT Section 5.01. Base Rent - Initial Term. Commencing on the Rent Commencement Date and continuing thereafter during the Initial Term of this Lease Tenant shall pay to Landlord monthly, in lawful money of the United States, without demand or offset (other than specifically permitted herein); Base Rent as specified in Section 1.01 hereof. The Base Rent shall be paid in equal monthly installments, each payable in advance, on or before the first day of each calendar month during the Term. The monthly installment of Base Rent for any partial calendar month of the Term shall be appropriately prorated. (References to Base Rent in this Lease collectively refer to the Initial Term - Base Rent and the Renewal Term - Base Rent determined in accordance with Section 5.02 hereof). Section 5.02. Base Rent - Renewal Term. In the event Tenant has exercised an option for a Renewal Term of this Lease, then Tenant shall pay to Landlord, during a Renewal Term, a Base Rent equal to ninety-five percent (95%) of the then market rate being charged and/or granted to a tenant seeking a five (5) year lease for a space of a size comparable to the Rentable Area of the Premises, in a full service, first class office building located in the Fairfax Center -6- 11 area in buildings that are similar in age, quality of construction and management of the Building (the "Market Rent"), multiplied by the number of square feet of Rentable Area in the Premises. In determining Market Rent, Landlord and Tenant shall also establish a new base (whether a year or an amount) reflective of the market which will be used to determine the Base Operating Expenses and Base Real Estate Taxes for the Renewal Term. All determinations of Market Rent shall (i) reflect market conditions expected to exist as of the date Base Rent based on Market Rent is to commence (including base rents and escalations, rental abatements, construction allowances and other tenant concessions, operating expense and tax passthrough provisions, and other terms expected to be agreed to in market leases entered into at such time); (ii) reflect the fact that Landlord is providing Tenant parking free of charge pursuant to Section 6.03 hereof; and (iii) reflect any rent premiums that buildings in Fair Lakes may receive. In determining the Market Rent, Landlord and Tenant shall employ the following method and timetable to establish the Market Rent. (a) Not later than fourteen (14) months prior to the expiration date of the Initial Term (or the first Renewal Term if Tenant had previously exercised its option for a Renewal Term), Landlord shall deliver to Tenant written notice (the "Market Rent Notice") of its proposed Market Rent for the Premises during the applicable Renewal Term based on Landlord's determination of the Market Rent. If Tenant (within the time period permitted by and in the manner required by Section 2.02(a) hereof) elects to exercise its right to a Renewal Term, Tenant shall also notify Landlord of Tenant's election to either accept or reject the proposed Market Rent, set forth in the most recent Market Rent Notice. Should Tenant accept the Market Rent proposed by Landlord in the most recent Market Rent Notice, then such Market Rent will be used during the applicable Renewal Term; (b) Should Tenant reject the Market Rent set forth in the most recent Market Rent Notice, Landlord and Tenant for _ period of thirty (30) days will attempt to negotiate _ Market Rent. Should the parties reach an agreement, then the agreed upon Market Rent shall be used during the applicable Renewal Term. Should the parties fail to reach an agreement within such period, then, Tenant, by written notice to Landlord given within ten (10) days after the expiration of the foregoing thirty (30) day period, shall have the option to either U) rescind its election for the Renewal Term, in which case, this Lease shall terminate on the Expiration Date, or (ii) elect to use the appraiser method described in subparagraph (c) hereof. An election by Tenant will be irrevocable. A failure to notify Landlord within the ten (10) day period will be deemed to be Tenant's election to rescind its election for the Renewal Term. (c) In the event Tenant elects pursuant to subparagraph (b)(ii) to invoke the appraiser method, Tenant in its notice to Landlord will select a broker who has at least ten (10) years experience leasing commercial office space in Fairfax County, Virginia (a "Broker"), to determine a Market Rent. (i) Within ten (10) days after its receipt of the Tenant's notice, Landlord shall engage a Broker and shall notify the Tenant thereof. In the event Landlord does not engage a Broker and provide Tenant notice as required above, -7- 12 then the Tenant's Broker shall select a Market Rent which shall be deemed the Market Rent used during the applicable Renewal Term. (ii) Within five (5) days after the selection by Landlord of a Broker, the two (2) Brokers shall (a) each render their own determination of the Market Rent and (b) choose a third Broker and notify Landlord and Tenant of said choice. Each party shall bear the cost of its appointed Broker and shall share equally the cost of the third Broker. In the event that said two (2) Brokers cannot agree on the choice of a third Broker and they notify the parties thereof, then the President of the Fairfax County Board of Realtors shall choose a third Broker. (iii) Within fifteen (15) days after the selection of the third Broker, the third Broker shall, by written notice, notify Landlord and Tenant of its determination of Market Rent. The Market Rent for purposes of this section shall equal the average of the two closest determinations; provided, however, that (a) if any one determination is agreed upon by any two of the Brokers, then the Market Rent shall be such determination, and (b) if any one determination is equidistant from the other two determinations, then the Market Rent shall be such middle determination. Section 5.03. Temporary Rent. During any Temporary Occupancy Period, Tenant shall be obligated to pay to Landlord an adjusted rent (the "Temporary Rent") for the Rentable Area occupied by Tenant computed in accordance with this Section. For any Phase I Space occupied by Tenant during a Temporary Occupancy Period, then Temporary Rent will be an amount equal to $7.00 per square foot of Rentable Area occupied by Tenant. For any Phase II Space occupied by Tenant during a Temporary Occupancy Period, the Temporary Rent will be $11.87 per square foot of Rentable Area occupied by Tenant. The Temporary Rent shall be paid in the same manner as Base Rent. Section 5.04. Payment. All Rent (as hereinafter defined) shall be paid to Landlord by Tenant when due at Landlord's Address for Notices as specified in Section 1.01, or such other place as Landlord may from time to time designate in writing. Tenant shall only be required to pay Rent to one entity or person. In the event more than one entity or person shall constitute Landlord hereunder, they shall appoint by written notice to Tenant a single entity or person, (who may be one of the entities or persons constituting Landlord), as (i) the designated recipient of Rent; and (ii) the representative to whom Tenant should direct all notices to Landlord and upon whose actions the Tenant may rely. Tenant shall be entitled to pay Rent and rely upon the last named single recipient until a new single recipient is named by written notice to Tenant. Section 5.05. Acceptance of Rent. If Landlord shall direct Tenant to pay Rent to a lockbox or other depository whereby checks issued in payment of Rent is initially cashed or deposited by a person or entity other than Landlord (albeit on Landlord's authority), then, for any and all purposes under this Lease: (i) Landlord shall not be deemed to have accepted such payment -8- 13 until ten (10) days after the date on which Landlord shall have actually received such funds, and (ii) Landlord shall be deemed to have accepted such payment if (and only if) within said ten (10) day period, Landlord shall not have refunded (or attempted to refund) such payment to Tenant. Nothing contained in the immediately preceding sentence shall be construed to place Tenant in default of Tenant's obligation to pay Rent if and for so long as Tenant shall timely pay the Rent required pursuant to this Lease in the manner designated by Landlord. Section 5.06. Survival of Rent Obligation. The obligation of Tenant with respect to the payment of past due Rent shall survive the termination of this Lease. Section 5.07. Default Interest. In the event any installment of Rent due hereunder is not paid within five (5) calendar days after it is due, then such delinquent installment of Rent or any component thereof shall bear interest from the date originally due until paid, at the Default Rate (hereinafter defined in Section 25.06 hereof). Notwithstanding the foregoing, Landlord agrees to waive imposition of such interest with respect to the first late payment in any calendar year. ARTICLE 6 ADDITIONAL RENT Section 6.01. Operating Expenses. (a) Commencing on (i) January 1, 1995 with respect to the Phase I Space and (ii) the Phase II Rent Commencement Date with respect to the Phase II Space, and thereafter, throughout the Term, Tenant shall pay on a monthly basis, without demand, as Additional Rent for the Premises, Tenant's Proportionate Share of the amount by which Operating Expenses (as defined in Section 6.01(b) hereof) exceed the Base Operating Expenses. Such payments shall be made as follows: (i) Commencing on January 1, 1995 and on the first day of January of each year during the remainder of the Term or as soon thereafter as is practicable, Landlord shall furnish Tenant with Landlord's reasonable estimate of the Operating Expenses for the year. On the first day of each month during such year, Tenant shall pay 1/12th of Tenant's Proportionate Share of the difference between the estimated Operating Expenses for such year and the Base Operating Expenses. If for any reason Landlord has not provided Tenant with Landlord's Operating Expenses estimate on or before the first day of January of any year during the Term (or by the Commencement Date, as the case may be), then, until the first day of the calendar month following the month in which Tenant is given Landlord's estimate of Operating Expenses, Tenant shall continue to pay Landlord on the first day of each calendar month the monthly sum payable by Tenant under this Section 6.01 for the month of December of the preceding year. (ii) On March 1, 1996 and thereafter on the first day of March of each year during the remainder of the Term, or as soon thereafter as reasonably practical, Landlord shall furnish to Tenant a statement of the actual Operating Expenses for the preceding year. Such statement shall provide Tenant with reasonable details regard- -9- 14 ing the various components of Operating Expenses. Within thirty (30) days after the delivery of that statement, Tenant shall either (i) notify Landlord, in writing, the Tenant objects to a component of the Operating Expenses on the grounds that it is not permitted by Section 6.01 hereof or (ii) pay to Landlord a lump sum payment equal to the amount, if any, by which Tenant's Proportionate Share of the actual Operating Expenses exceeds the amount, if any, which Tenant has paid toward the estimated operating Expenses pursuant to Section 6.01(a)(i) above or the undisputed amount thereof. Should Tenant dispute an Operating Expenses statement, (i) Tenant and Landlord shall in good faith attempt to resolve such dispute and (ii) in the event Landlord is unable to demonstrate by invoices or other supporting information the inclusion of an item or expenses as an Operating Expense, Landlord will not be permitted to charge or include such item. Within thirty (30) days after resolution of the dispute, Tenant will make a lump sum payment equal to the amount agreed upon by Landlord and Tenant. if Tenant's Proportionate Share of the actual operating Expenses is less than the amount Tenant has paid toward the estimated Operating Expenses pursuant to Section 6.01(a)(1) above, Landlord shall either (i) apply such amount to the next accruing installments of Rent due hereunder or (ii) if such excess arises after the Expiration Date, refund such amount to Tenant provided no Default by Tenant exists under Sections 25.01(a) and (b) hereof. The effect of this Section 6.01(a)(ii) is that Tenant will pay during each year during the Term Tenant's Proportionate Share of the actual operating Expense in excess of the Base Operating Expenses. (iii) If the Term ends on a date other than the last day of December, the actual Operating Expenses for the year in which the Expiration Date occurs shall be prorated so that Tenant shall pay that portion of Tenant's Proportionate Share of Operating Expenses for such year represented by a fraction, the numerator of which shall be the number of days during such fractional year falling within the Term, and the denominator of which is 365 (or 366, in the case of a leap year). The provisions of this Section 6.01 shall survive the Expiration Date or any sooner termination provided for in this Lease. (iv) Tenant shall have the right, during business hours and upon reasonable prior notice, one time during each calendar year to inspect Landlord's books and records relating to Operating Expenses, and/or to have such books and records audited at Tenant's expense by a certified public accountant mutually designated by Landlord and Tenant, except that any audit that discloses a discrepancy of more than three percent (3%) in the annual Operating Expenses and/or Real Estate Taxes shall be at Landlord's expense. Any discrepancy shall be promptly corrected by a payment of any shortfall to Landlord by Tenant within thirty (30) days after the applicable audit, or by a credit against the next payment(s) of rent hereunder, as may be applicable. In the event Tenant does not contest a statement of Operating Expenses within three hundred sixty-five (365) days after it is rendered, such statement shall become binding and conclusive; provided, however, that if a timely audit of Operating Expenses for a particular year reveals an error resulting -10- 15 in any overcharge with regard to particular expenses in such year, Tenant shall thereupon have the right to reexamine Landlord's books and records with respect to the immediately preceding two (2) calendar years for the sole purpose of determining whether the same error resulting in an overcharge with respect to the same expenses in such immediately preceding two (2) calendar years, and if so Tenant shall be entitled to a refund of such overcharged amount. (b) As used in this Lease, "Operating Expenses" means all expenses, costs, and disbursements of every kind which Landlord incurs, pays or becomes obligated to pay in connection with the ownership, operation, repair, and maintenance of the Building, which costs shall include all expenditures by Landlord to maintain all facilities in operation at the beginning of the Term and such additional facilities installed in subsequent years as Landlord may consider necessary or beneficial for the operation of the Building. All Operating Expenses shall be determined according to generally accepted accounting principles (which shall be consistently applied) and shall include, but are not limited to, the following: (i) Wages, salaries, and fees of all personnel or entities (exclusive of Landlord's executive personnel) engaged in the operation, repair, maintenance, or security of the Building, including taxes, insurance, and benefits relating thereto (in the event the personnel service more than one building, expenses related to such person will be pro-rated to the Building on the basis of the amount of time the personnel spent servicing the Building); (ii) All supplies and materials used in the operation, repair, security, and maintenance of the Building. (iii) Cost of all maintenance and service agreements for the Building and the equipment therein, including, without limitation, alarm service, water treatment services, janitorial services, security systems service, window cleaning, service on electrical and mechanical components, trash removal, elevator maintenance, extermination service, plumbing service, grounds keeping, and landscaping; (iv) Cost of all insurance relating to the Building for which Landlord is responsible hereunder (exclusive, however, of payments made by tenants of the Building pursuant to provisions in their lease similar to Section 15.02 hereof), or which Landlord considers reasonably necessary for the operation of the Building, including, without limitation, the cost of property, casualty and liability insurance applicable to the Building and Landlord's personal property used in connection therewith, and the cost of business interruption or rental insurance in such amounts as will reimburse Landlord for all losses of earnings and other income attributable to such perils as are commonly insured against by prudent landlords or required by Landlord's lender; (v) Cost of repairs and maintenance (excluding repairs and maintenance paid by proceeds of insurance or by Tenant or other third parties or paid under guaranties, warranties or service contracts more particularly described in subparagraph (iii) -11- 16 hereof, and alterations attributable solely to tenants of the Building other than Tenant) of the Building; (vi) All utility costs of the Building (exclusive, however, of such special utility services as are provided for in Article 8 hereof, the costs of which special utility services shall be payable as therein provided), including, without limitation, water, power, fuel, heating, lighting, air-conditioning, and ventilating; (vii) Amortization of the cost of installation of capital investment items which are installed primarily to reduce operating costs for the general benefit of the Building's tenants or to enhance the efficient operation of Building or which may be required in the future by any governmental authority, but which shall not include capital investment items required or generated by any specific tenant use. All such costs, including interest costs, shall be amortized over the reasonable life of the capital investment items, with reasonable life and amortization schedule being determined by Landlord according to generally accepted accounting principles, but in no event to extend beyond the reasonable life of the Building; (viii) Landlord's central accounting costs, annual audits (except those costs and audits incurred for Landlord's sole benefit), and legal fees relating to the operation of the Building, but excluding legal fees relating to specific tenants; (ix) A management fee to the manager of the Building, which fee shall not exceed the normal and customary management fees charged for managing comparable buildings in Fairfax County, Virginia. (x) The Building's pro-rata share of office rent or rental value for any central Building management office located in another building located within Fair Lakes, provided that such rent or rental value shall not increase by more than two percent (2%) in any calendar year; (xi) The Fair Lakes League Assessment, provided, however, that such assessment shall be included in Operating Expenses only if and to the extent that the item or service to which the assessment relates would be properly includible in Operating Expenses pursuant to this Section 6.01(b) if such item or service was provided or performed directly by Landlord; and (xii) Costs to implement and maintain any controls on access to the Building parking lot which Landlord deems necessary pursuant to Section 6.03 hereof. (c) Notwithstanding any other provision of this Lease, operating Expenses (as defined in Section 6.01(b) above) shall not include; and Landlord shall be solely liable for, the following expenses: (i) Costs of a capital nature (other than those permitted by Section 6.01(b)(7) above), including but not limited to, capital improvements, capital repairs; capital equip- -12- 17 ment and capital tools, all in accordance with generally accepted accounting principles; (ii) Repairs or other work occasioned by insured casualty or by the exercise of eminent domain, to the extent Landlord is reimbursed by insurance maintained by Landlord or by Tenant or another tenant of the Building or by the condemning authority; (iii) Leasing commissions, attorneys' fees, costs and disbursements and other expenses incurred in connection with negotiations or disputes with present or prospective tenants or other occupants of the Building; (iv) Costs incurred in improving, decorating, building-out, painting or redecorating space for other tenants of the Building; (v) Expenses in connection with services or other benefits of a type which are not provided Tenant but which are provided to another tenant of the Building; (vi) Costs incurred due to violation by Landlord or any other tenant of the Building of the terms and conditions of any lease of space in the Building; (vii) Interest or debt or amortization payments on any mortgage or mortgages; (viii) Payments of rent by Landlord to any ground lessor; (ix) Landlord's general overhead not related to the operation of the Building (but without limiting Landlord's right to seek reimbursement as provided in Sections 6.01(b)(i), (viii), (ix) and (x) above); (x) Advertising and promotional expenditures with respect to the Building; (xi) Any costs, fines or penalties incurred due to either (i) violations by Landlord of any governmental rule or authority or (ii) late payments by Landlord under any service, contract, lien or encumbrance applicable to the Building; (xii) Wages, salaries or other compensation paid to any executive employees above the grade of building manager; (xiii) Rentals and other related expenses incurred in leasing air-conditioning systems, elevators or other equipment ordinarily considered to be of capital nature; (xiv) Any cost or expense whatsoever arising from or related to any clean-up of any Hazardous Materials (as defined in Section 11.02(d)), or any governmental penalty of fines associated therewith, excepting, however, any such cost or expense resulting from the negligent or intentional acts of Tenant; -13- 18 (xv) The cost of excessive use of Building utilities (such as HVAC or electricity) by other tenants of the Building, and/or utility service by other tenants outside normal Building hours, and/or utility service paid by tenants directly to utility companies based on separate metering; (xvi) Any other cost or expense which would not be considered an operating expense under generally accepted accounting principles consistently applied; (xvii) Costs incurred in connection with the sale, financing, refinancing, mortgaging or change of ownership of the Building or the Project, including without limitation, brokerage commissions, attorneys' and accountants' fees, closing costs, title insurance premiums, transfer taxes and interest charges; (xviii) Any and all loss, claim, damage, award or other amount paid or payable by Landlord (including all attorneys, fees, court costs and other costs incurred in connection therewith) as a result or arising out of any act of negligence, breach of contract or willful misconduct by the Landlord or its agents, employees or contractors to the extent not covered by insurance; (xix) Bad debt losses, rent losses or reserves for such losses; (xx) Non-cash items, such as deductions for depreciation and amortization of the Building and the Building equipment; (xxi) Costs incurred in operating concessions such as (but not limited to) newspaper or cigarette stands; (xxii) Any cost representing an amount paid for services or materials to a person, firm or entity related to Landlord or any general partner of Landlord to the extent such amount exceeds the amount that would be paid for such services or materials at the then existing market rates to an unrelated person, firm or corporation; and (xxiii) Any capital costs associated with phasing out chlorofluorocarbon refrigerants. (d) If the average occupancy rate for the Building during any calendar year (including the Base Year), is less than one hundred percent (100%), or if any tenant is separately paying for utility or janitorial services furnished to its premises which normally would be included in Operating Expenses (as opposed to janitorial or utility services addressed in Section 6.01(c)(5) and (15) and/or special utility services as are provided in Article 8 hereof), then Operating Expenses for such calendar year shall be deemed to include all additional expenses, as reasonably estimated by Landlord, which would have been incurred during such calendar year if such average occupancy rate had been one hundred percent (100%) and if Landlord paid for utility and janitorial services furnished to such premises. -14- 19 Section 6.02. Real Estate Taxes. (a) Commencing on (i) January 1, 1995 with respect to the Phase I Space and (ii) the Phase II Rent Commencement Date with respect to the Phase II Space, and continuing thereafter throughout the Term, Tenant shall pay on a monthly basis, without demand, as Additional Rent for the Premises, Tenant's Proportionate Share of the amount by which Real Estate Taxes (as defined in Section 6.02(c) hereof) exceed the Base Real Estate Taxes. Such payments shall be made as follows: (i) Prior to January 1, 1995 and on the first day of January of each year during the remainder of the Term, or as soon thereafter as practicable, Landlord shall furnish Tenant with Landlord's reasonable estimate of the Real Estate Taxes for the forthcoming year. On the first day of each month during such year, Tenant shall pay 1/12th of Tenant's Proportionate Share of the difference, if any, between the estimated Real Estate Taxes for such year and the Base Real Estate Taxes. if for any reason Landlord has not provided Tenant with Landlord's estimate of Real Estate Taxes on or before the first day of January of any year during the Term, then until the first day of the calendar month following the month in which Tenant is given Landlord's estimate of Real Estate Taxes, Tenant shall continue to pay to Landlord on the first day each calendar month the monthly sum payable by Tenant under this Section 6.02 for the month of December of the preceding year. (ii) Commencing on March 1, 1996 and thereafter on the first day of March of each year during the remainder of the Term, or as soon thereafter as reasonably practical, Landlord shall furnish to Tenant a statement of the actual Real Estate Taxes for the preceding year. Within thirty (30) days after the delivery of that statement, a lump sum payment will be made by Tenant equal to the amount, if any, by which Tenant's Proportionate Share of the actual Real Estate Taxes exceeds the amount, if any, which Tenant has paid toward the estimated Real Estate Taxes pursuant to Section 6.02(a)(i) above. If Tenant's Proportionate Share of such items is less than the amount Tenant has paid toward the estimated Real Estate Taxes pursuant to Section 6.02(a)(i) above, Landlord shall apply such amount to the next accruing installments of Rent due hereunder. The foregoing notwithstanding, Landlord shall have the right from time to time during any year, but not more frequently then twice during any calendar year, to notify Tenant in writing of any change in Landlord's estimate of Real Estate Taxes for the then current year, in which event Tenant's Proportionate Share of Real Estate Taxes, as previously estimated, shall be adjusted to reflect the amount shown in such notice and shall be effective, and due from Tenant, on the first day of each month following Landlord's giving of such notice. The effect of this Section 6.02(a) is that Tenant will pay during each year during the Term Tenant's Proportionate Share of the actual Real Estate Taxes in excess of the Base Real Estate Taxes. (b) If the Term ends on a date other than the last day of December, the actual Real Estate Taxes for the year in which the Expiration Date occurs shall be prorated so that Tenant -15- 20 shall pay that portion of Tenant's Proportionate Share of Real Estate Taxes for such year represented by a fraction, the numerator of which shall be the number of days during such fractional year falling within the Term, and the denominator of which is 365 (or 366, in the case of a leap year). The provisions of this Section 6.02 shall survive the Expiration Date or any sooner termination provided for in this Lease. (c) As used in this Lease, the term "Real Estate Taxes" shall include the following: (i) All real estate taxes, including general and special assessments, if any, which are imposed upon Landlord or assessed against the Building or the land upon which the Building is situated; (ii) Any other present or future taxes or governmental charges that are imposed upon Landlord, or assessed against the Building or the land upon which the Building is situated, including, but not limited to, any tax levied on or measured by the rents payable by tenants of the Building which is in the nature of, or in substitution for, real estate taxes. Any inheritance, estate, gift, franchise, corporation, income, or net profits tax which may be assessed against Landlord and/or the Building shall be excluded. (d) Notwithstanding anything to the contrary contained in this Section 6.02 during the Term of this tease, Landlord agrees to appeal and/or seek other appropriate remedies in the event that Landlord determines, in its reasonable discretion, that the Real Estate Taxes for the Building or land upon which it is situated are excessive when compared to assessments or levies imposed or levied upon other buildings of a similar size, age, condition and occupancy level located in Fair Lakes. Should Landlord succeed in any challenge to the assessment or levy, any reduction of the Real Estate Taxes, for periods occurring during the Term, shall be passed on to the tenants in the Building by way of a credit against or a reduction in the current year's Real Estate Taxes used to determine Tenant's Proportionate Share of the same. Upon receiving a notice of reassessment with respect to the Building and/or the land upon which it is situated from Fairfax County, Landlord will furnish Tenant with a copy thereof. Landlord shall make a determination whether or not to challenge or appeal such reassessment based on Landlord's reasonable judgment of which course is in the best interest of the Building. Landlord shall inform Tenant of such determination, and shall make available appropriate personnel to discuss with Tenant the reasons underlying such determination. In the event Landlord initially determines not to challenge or appeal such reassessment, Landlord agrees to consider in good faith any desire expressed by Tenant that such reassessment be challenged or appealed; however, the final determination shall be made by Landlord as provided above. Section 6.03. Parking. During the Term, Tenant and its employees, invitees, and guests shall have the right to use, in common, with the other tenants of the Building, free of charge, the parking areas of the Building, all on an unassigned and unreserved basis. Landlord reserves the right to promulgate reasonable rules and regulations of general application for the use of all parking spaces. At all times during the Term, Tenant shall be entitled to use 3.2 parking spaces in the Building's parking lot for each 1,000 square feet of Rentable Area in the Premises. In the -16- 21 event excessive use of the parking lot by other tenants or visitors to the Building results in a repeated unavailability of spaces for Tenant's use in the foregoing ratio, Landlord shall implement such controls on access to and use of the parking lot by other tenants and visitors as Landlord may deem necessary in its reasonable discretion to prevent such excessive use. Section 6.04. Additional Rent Defined. The term "Additional Rent" shall include, but not be limited to (i) the fees, if any, under Section 5.07; (ii) Tenant's Proportionate Share of Operating Expenses as calculated under Section 6.01; (iii) Tenant's Proportionate Share of Real Estate Taxes as calculated under Section 6.02; and (iv) all other costs and expenses which Tenant assumes, agrees or is required to pay to Landlord pursuant to this Lease. In the event of nonpayment of Additional Rent, Landlord shall have all the rights and remedies herein provided for in case of nonpayment of Rent. Section 6.05. Rent Defined. The term "Rent" shall include Base Rent and Additional Rent. ARTICLE 7 SERVICES BY LANDLORD Section 7.01. Services Generally. While Tenant or its Permitted Occupants (defined in Section 18.06 of this Lease) are occupying the Premises, Landlord shall furnish the Premises with: (i) passenger elevator service in common with other tenants for access to and from the Premises, provided that Landlord may reasonably limit the number of elevators to be operated at night after normal business hours and on Saturdays, Sundays, and holidays so long as at least one elevator is in service at all times and that Landlord may remove elevators from service for maintenance; (ii) janitorial cleaning services Monday through Friday (except "Holidays", which for purposes of the Lease are defined as being New Year's Day, Lee Jackson King Day, Washington's Birthday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Friday after Thanksgiving Day and Christmas Day) consistent with the cleaning specifications attached hereto as Exhibit "D"; (iii) replacement, as necessary, of all fluorescent lamps and ballasts in the Existing Improvements light fixtures within the Premises; and (iv) the utility services provided for in Article 8 below. If Tenant requires services which are not specified herein Tenant may, in writing, request Landlord to provide such services. Should Landlord elect to provide such additional services to Tenant, Tenant will pay to Landlord, upon demand, as Additional Rent, Landlord's reasonable charges for providing such additional services. Section 7.02. Interruption in Services. Failure to furnish, or any stoppage of, the services provided for in this Article 7 and in Article 8 below resulting from any cause will not make Landlord liable in any respect for damages to any person, property, or business, nor be construed as an eviction of Tenant, nor entitle Tenant to any damages because of malfunctions or any interruptions in service. Notwithstanding the foregoing, if such malfunction or interruption in service is due solely to the negligent act or willful omission of Landlord or its agents, employees, contractors or representatives, and such malfunction or interruption in service (i) continues for two (2) consecutive business days and (ii) makes it reasonably impossible for Tenant to continue to occupy, operate and/or use the Premises (or portion thereof), and (iii) requires Tenant to discon- -17- 22 tinue its occupancy, operations and/or use of the Premises (or portion thereof), then, and only in such cases, Tenant shall be entitled to an abatement of the Rent accruing from the time of the disruption, for the portion of the Permission which Tenant has discontinued its use, operations and/or occupancy. The abatement shall be for the period commencing on the date of the malfunction or interruption of services, and continuing until the date such service is corrected or restored. Notwithstanding the foregoing, if the service has not been corrected and restored and Tenant recommences its use, operations and/or occupancy of a portion of the Premises in which its use, operations and/or occupancy were discontinued because of the interruption in service, then, Tenant's right to abate Rent applicable to the portion of the Premises reoccupied shall terminate. In addition to the foregoing, if such malfunction or interruption in service is caused by anything other than the negligence or willful acts or omissions of Tenant, and such malfunction or interruption continues for five (5) consecutive business days then Tenant shall be entitled to an abatement of Rent with respect to any portion of the Premises that is rendered unusable by Tenant as described above and which is not occupied by Tenant, for the period commencing on the date of the malfunction or interruption of services and continuing until earlier of the date such service is corrected or restored and the date Tenant reoccupies the vacated space, provided that in the event of an abatement of Rent Tenant shall be obligated to assign and deliver to Landlord all proceeds it receives as a result of (i) any business interruption insurance maintained by Tenant with respect to the Premises or (ii) any other insurance maintained by Tenant for which Tenant receives a reimbursement as a result of the malfunction or interruption of services. If any such malfunction or interruption in service (not caused by the negligence or willful acts or omissions of Tenant) continues for sixty (60) consecutive days, then Tenant shall have the right to terminate this Lease by written notice to Landlord given prior to the date such service is corrected or restored. ARTICLE 8 UTILITIES Section 8.01. Computerized Energy Management System. The Building has been designed with a Computerized Energy Management System (the "CEMS") which controls the heating, ventilating and air conditioning system (the "HVAC") and electrical system for the Premises, Tenant will designate to Landlord authorized representatives of the Tenant who will be given, through the CEMS, direct control of the HVAC and lighting system for use after normal Building hours. Section 8.02. Water, Heating, Ventilating and Air Conditioning. (a) While Tenant or its subtenants or assigns permitted by this Lease are occupying the Premises under this Lease, Landlord shall furnish Tenant with the following utilities in the manner and to the extent customarily provided in office buildings in the Northern Virginia area: (1) potable water at those points of supply provided periodically for normal lavatory use by tenants in the Building; (2) heating, ventilating, and air-conditioning in season on business days from 7:00 a.m. to 6:00 p.m., and on Saturdays from 8:00 a.m. to 1:00 p.m. (except Holidays) consistent with the HVAC specifications attached hereto as Exhibit "E"; and (3) electric lighting -18- 23 for public areas and special service areas of the Building. If Tenant requires air-conditioning or heating outside the hours and days specified above, the additional service may be requested by use of the CEMS and Tenant will pay for such services based on measurement from the CEMS at the actual cost incurred by Landlord therefor. The after-hours cost, as of the Commencement Date of this Lease, shall be $40.00 per hour per floor which is subject thereafter to change as actual costs increase. (b) Except as set forth in Article 7 hereof, Landlord shall not be liable for its failure to maintain comfortable atmospheric conditions in all or any portion of the Premises due to heat generated by any equipment or machinery installed by Tenant (with or without Landlord's consent) that exceeds generally accepted engineering design practices for normal modern office purposes. If Tenant desires additional cooling to offset excessive heat generated by such equipment or machinery, Landlord will have the right to require Tenant to install supplemental air conditioning units in the Premises, and the full cost thereof, including the cost of installation of unit(s) and meter(s), operation, use, and maintenance will be paid by Tenant. Section 8.03. Electricity. (a) While Tenant or its subtenants or assigns permitted by this Lease are occupying the Premises, Landlord will furnish sufficient power for lighting and for typewriters, word processors, calculating machines, copying machines, personal computers and other modern office equipment. Tenant will not install or operate in the Premises any heavy duty electrical equipment or machinery without first obtaining prior written consent of Landlord, which consent shall not be unreasonably withheld or delayed. Landlord may require, as a condition of its consent, for the installation of such equipment or machinery, payment by Tenant as additional rent for excess consumption of electricity that may be occasioned by the operation of said equipment or machinery. Landlord may make periodic inspections of the Premises at reasonable times to determine that Tenant's electrically operated equipment and machinery complies with the provisions of this Article 8. (b) If the measurements from the CEMS reveals Tenant's use of electricity in the Premises exceeds a reasonable level of consumption for a modern business office, then Tenant agrees to pay Landlord (or the utility company if direct service is provided by such company) promptly upon demand therefor, for all such excessive electric consumption and demand as shown by the CEMS at the rates charged for such service by the local public utility company. For Tenant's information, provisions similar to this subparagraph are and will be contained in all leases for the Building. Section 8.04. Tenant's Security Regulations. It is acknowledged that Tenant's use of the Premises may require security systems in addition to those provided pursuant to Section 8.05. Tenant shall have the right, at its sole cost and expense, to install in the Premises additional locks or other security access systems. Upon the Expiration Date, Tenant shall remove such additional locks and security systems and restore the affected portions of the Premises as required by this Lease. -19- 24 Landlord agrees that, notwithstanding anything to the contrary contained in this Lease, except in emergency situations, Landlord's access to the Premises will be upon reasonable prior notice to Tenant and subject to Tenant's rules and regulations related to security. Landlord and Tenant agree to cooperate with each other so as to establish a mutually acceptable system so as to permit Landlord to provide janitorial and other services to the Premises in a manner consistent with Tenant's security concerns. Section 8.05. Building Security System. The Building has been constructed with a card access computerized security system which limits access to the Building after normal Building hours. Tenant will designate in writing to Landlord those employees of the Tenant who will be given access to the Building after hours. Landlord will have no liability to Tenant in the event of any loss or damage to the Premises resulting from the entry by Tenant's employees into the Premises and/or Building after normal Building hours. ARTICLE 9 USE The Premises shall be used solely for general office purposes and for no other purpose. Tenant agrees to use and maintain the Premises in a clean, careful, safe, lawful, and proper manner. ARTICLE 10 COMPLIANCE WITH LAWS (a) Except as set forth in subparagraph (b) of this Article or otherwise to the contrary contained in this Lease, Tenant shall, at its sole expense, promptly and faithfully (i) comply with all present and future laws, ordinance, orders, rules, regulations, and requirements of every governmental authority having jurisdiction over the Premises (including, but not limiting the generality of the foregoing Americans with Disabilities Act 42 USC Section 12101 et seq. (the "ADA")) to the extent applicable to the Premises or Tenant's particular use of the Premises; (ii) comply with any direction made pursuant to law by any public officers which requires abatement of any nuisance or imposes upon Landlord or Tenant any duty or obligation arising from Tenant's occupancy or use of the Premises or from conditions which have been created by or at the insistence of Tenant, (iii) comply with the requirements of the local board of fire underwriters, or any body exercising similar functions with respect to the construction, care and safety, maintenance and operation of the Premises to the extent applicable to the Premises or Tenant's use of the Premises; and (iv) indemnify Landlord and hold Landlord harmless from any loss, cost, claim, or expense which Landlord may incur or suffer by reason of Tenant's failure to comply with its obligations under clauses (ii), or (iii) above, so long as such failure is not due to (i) the acts or omission or negligence of Landlord or its employees, agents, contractors, servants and licensees or (ii) a default by Landlord hereunder. (b) Except as set forth in subparagraph (a) of this Article or otherwise assumed by Tenant pursuant to this Lease, Landlord shall promptly and faithfully (i) comply with all present and future laws, ordinances, orders, rules, regulations and requirements of every governmental -20- 25 authority having jurisdiction over the Building (including, but not limiting the generality of the foregoing, the items maintained by Landlord pursuant to Section 14.02 hereof); (ii) comply with any direction made pursuant to law by and public officers which require abatement of any nuisance which imposes upon Landlord or Tenant any duty or obligation arising from Landlord's operation or maintenance of the Building or from conditions which have been created by or at the insistence of Landlord; (iii) comply with the requirements of the local board of fire underwriters, or any body exercising similar functions with respect to the construction, care and safety, maintenance and operation for the Building; and (iv) indemnify Tenant and hold Tenant harmless from any loss, cost, claim, or expense which Tenant may incur or suffer by reason of Landlord's failure to comply with its obligations under clauses (i), (ii), or (iii) above, so long as such failure is not due to (i) the acts or omissions or negligence of Tenant or its employees, agents, contractors, servants and licensees; or (ii) a Default by Tenant hereunder. (c) Landlord represents that as of the date hereof and as of the Commencement Date, the Building complies with all applicable laws, ordinances, orders, rules and regulations and requirements of every governmental authority having jurisdiction over the Building, except as it pertains to the ADA. Landlord, as of the date of this Lease, is currently implementing a program to remove barriers in the common areas of the Building as required by the ADA and shall complete the same at its sole cost and expense. A copy of Landlord's barrier removal program is attached as Exhibit "F". (d) If either party receives notice of any such direction or of violation of any such law, order, ordinance, or regulation, the party receiving such notice shall promptly notify the other thereof. ARTICLE 11 OBSERVANCE OF BUILDING'S RULES AND REGULATIONS; HAZARDOUS MATERIALS Section 11.01. Rules and Regulations. Tenant and its servants, employees, agents, visitors, and licensees shall observe faithfully and comply strictly with the Rules and Regulations attached to this Lease as Exhibit "G". Landlord shall at all times have the right to make reasonable changes in and additions to such Rules and Regulations; provided such changes in existing or new rules and regulations do not materially interfere with the lawful conduct of Tenant's business in the Premises. Any failure by Landlord to enforce any of the Rules and Regulations now or hereafter in effect, either against Tenant or any other tenant in the Building, shall not constitute a waiver of any such Rules and Regulations. Landlord shall not be liable to Tenant for the failure or refusal by any other tenant, guest, invitee, visitor, or occupant of the Building to comply with any of the Rules and Regulations. Landlord shall, however, enforce the Rules and Regulations in a nondiscriminatory manner in what Landlord reasonably determines, in its reasonable discretion, to be in the best interests of the Building and its tenants. If there is any inconsistency between this Lease and the Rules and Regulations set forth in Exhibit "G" hereto, this Lease shall govern. -21- 26 Section 11.02. Hazardous Materials. (a) Except for those materials that are necessary in the normal course of Tenant's business activities associated with the use of the Premises permitted by this Lease, Tenant, its agents, employees, contractors or invites shall not (i) cause or permit any Hazardous Materials (hereinafter defined) to be brought upon, stored, used or disposed on, in or about the Premises and/or the Building, or (ii) permit the release, discharge, spill or emission of any substance considered to be a Hazardous Material from the Premises. (b) Any Hazardous Materials permitted by subparagraph (a), all containers therefor, and all materials that have been contaminated by Hazardous Materials shall be used, kept, stored and disposed of by Tenant in a manner that shall in all respects comply with all applicable federal, state and local laws, ordinances, regulations and standards. (c) Tenant hereby agrees that it is and shall be fully responsible for all costs, expenses, damages or liabilities (including, but not limited to those incurred by Landlord and/or its mortgagee) which may occur from the use, storage, disposal, release, spill, discharge or emissions of Hazardous Materials by Tenant whether or not the same may be permitted by this Lease. Tenant shall defend, indemnify and hold harmless Landlord, its mortgagee and its agents from and against any claims, demands, administrative orders, judicial orders, penalties, fines, liabilities, settlements, damages, costs or expenses (including, without limitation, reasonable attorney and consultant fees, court costs and litigation expenses) of whatever kind or nature, known or unknown, contingent or otherwise, arising out of or in any way related to the use, storage, disposal, release, discharge, spill or emission of any Hazardous Material by Tenant, its agents, employees, contractors or invites. The provisions of this Section shall be in addition to any other obligations and liabilities Tenant may have to Landlord at law or in equity and shall survive the transactions contemplated herein or any termination of this Lease. (d) As used in this Lease, the term "Hazardous Materials" shall include, without limitation: (i) Those substances included within the definitions of "hazardous substances", "hazardous materials," toxic substances," or "solid waste" in the Comprehensive Environmental Response Compensation and Liability Act of 1980 (42 U.S.C. Section 9601 et seq.), as amended by Superfund Amendments and Reauthorization Act of 1986, the Resource Conservation and Recovery Act of 1976, and the Hazardous Materials Transportation Act, and in the regulations promulgated pursuant to said laws, all as amended; (ii) Those substances listed in the United States Department of Transportation Table (49 CFR 172.101 and amendments thereto) or by the Environmental Protection Agency (of any successor agency) as hazardous substances (40 CFR Part 302 and amendments thereto); (iii) Any material, waste or substance which is (A) petroleum, (B) asbestos, (C) polychorinated biphenyls, (D) designated as a "hazardous substance" pursuant to Sec- -22- 27 tion 311 of the Clean Water Act, 33 U.S.C. Section 1251 et seq. (33 U.S.C. Section 1321) or listed pursuant to Section of the Clean Water Act (33 U.S.CD. Section 1317); (E) flammable explosives; or (F) radioactive materials; (iv) Those substances regulated pursuant to or identified in the Virginia Pesticide Law; Air Pollution Control Board; Virginia Waste Management Act; Environmental Health Service; Transportation of Hazardous Radioactive Materials; Virginia Hazardous Materials Emergency Response Program; State Water Control Law; The Groundwater Act of 1973; and Miscellaneous Offenses; and in the regulations promulgated pursuant to said laws, all as amended; and (v) Such other substances, materials and wastes which are or become regulated as hazardous or toxic under applicable local, state or federal law, or the United States government, or which are classified as hazardous or toxic under federal, state, or local laws or regulations. (e) Landlord represents and warrants that as of the date of this Lease it has not received any notice that there are Hazardous Materials in the Building; or that the Building violates any applicable law pertaining to Hazardous Materials. ARTICLE 12 ALTERATIONS Section 12.01. Approval of Landlord. After the initial Leasehold Improvements are completed, Tenant shall not, at any time during the Term, without Landlord's prior written consent, make any Alterations (hereinafter defined) to the Premises. Should Tenant desire any Alterations, Tenant agrees to submit all plans and specifications for same to Landlord for Landlord's written approval, before beginning such work and Landlord's approval shall not be unreasonably withheld, conditioned or delayed. Provided Tenant has supplied Landlord with information and plans for the Alterations which reasonably details the nature and scope of the same, Landlord's failure to respond to Tenant's request for approval within ten (10) business days after receipt of the information, plans and request for approval, shall be deemed to be Landlord's approval of the same. Landlord shall not be considered as unreasonably withholding its approval by refusing to consent to any Alterations which alter the exterior appearance of the Building, or the public lobbies, corridors, or common areas thereof; which will or are likely to cause any weakening of any part of the structure of the Premises or Building or which may cause damage or disruption to any Building system and such damage or disruption is not repaired as part of the Alterations. Upon Tenant's receipt of Landlord's written approval, Tenant may proceed with the construction of the approved Alterations, but only so long as they are in substantial compliance with the plans any specifications approved by Landlord and provisions of this Article 12. Additionally, the construction of any alterations, (regardless of whether or not Landlord's prior approval of the work is required by this Lease) the alterations themselves, or any maintenance thereof shall comply with all building, safety, fire, plumbing, electrical and other codes and governmental and insurance requirements, and shall not require an amount of water, electricity, gas, heat, ventilation, or air-conditioning which exceeds reasonable level of consumption for a mod- -23- 28 ern business office unless prior written arrangements reasonably satisfactory to Landlord are made with respect thereto. All alterations shall be made at Tenant's expense, either by Tenant's contractors which have been approved in advance by Landlord or, at Tenant's option, by Landlord's contractors on terms reasonably satisfactory to Tenant. In the event Landlord actually constructs the alterations or is retained by Tenant to supervise or manage the construction by contractors selected by Tenant and approved by Landlord, then Tenant shall pay to Landlord a fee equal to ten percent (10k) of the actual costs of such work, such fee to cover Landlord's overhead related to the work, including, but not limited to, Landlord's review of the plans and specifications, coordination of the work, consultation with professionals regarding the work, and general administration allocable to the work. The foregoing fee will not be charged in circumstances where Landlord has merely approved the Alterations. All such construction shall be completed promptly and in a good and workmanlike manner and shall be performed in compliance with Article 13 hereof. As used in this Lease, the term Alterations refers to work performed after the completion of the initial Leasehold Improvements which would reasonably be considered major construction, renovations or changes to the Premises, having a material impact on the appearance of the Premises to other portions of the Building, or would otherwise have a material impact (structural, mechanical, operational or otherwise) upon the Building, and/or the total cost of the construction renovations or changes is more than $75,000.00. Alterations do not include, by way of example, the hanging of pictures, the movement of furniture and flexible space walls or partitions, or the painting of the interior of the Premises. Prior to commencing any alterations, Tenant will coordinate with Landlord so as to schedule the movement of men, material and equipment through the Building's common areas in a manner which does not unreasonably interrupt the normal Building operations and the use and enjoyment of the Building by other tenants therein. Section 12.02. Ownership of Improvements to Premises. All Existing Improvements and improvements to the Premises constructed by Tenant and paid for by Tenant from funds supplied by Landlord either in the form of allowances or credits shall be and remain the Landlord's property, and shall not be removed from the Premises. Tenant shall have the right, upon expiration of the Term, to remove, at Tenant's expense, all alterations to the Premises (other than the Existing Improvements and the improvements or alterations paid by allowances granted by Landlord); specialized trade fixtures or other systems or items installed by Tenant pursuant to Article 12 hereof, and; movable trade fixtures. Tenant agrees to remove, at Tenant's expense all of its furnishings, furniture and movable personal property by the Expiration Date. Tenant will promptly restore any damage to the Premises or Building caused by its removal of its property. ARTICLE 13 LIENS Tenant shall promptly pay when due the entire cost of any work done on the Premises by Tenant, its agents, employees, or independent contractors. Tenant shall keep the Premises and the Building free from any liens arising from any work performed, materials furnished, or obligations incurred by or at the request of Tenant, its agents, employees or independent contractors. if any lien is filed against the Premises, the Building or Tenant's leasehold interest therein, which -24- 29 arises out of any purported act or agreement of Tenant, Tenant shall discharge same within thirty (30) days after its filing by either paying off the same or depositing with a title company acceptable to Landlord (in its reasonable discretion) such bond or other undertaking sufficient to stay any action to foreclose the lien. If Tenant fails to discharge such lien or post a bond securing the payment and discharge of the lien within such period, then, in addition to any other right or remedy of Landlord, Landlord may, at its election, discharge the lien by paying the amount claimed to be due, or by depositing with a court or a title company, or by bonding, the amount claimed to be due. Tenant shall pay on demand, as Additional Rent, any amount paid by Landlord for the discharge or satisfaction of any such lien, and all attorney's fees and other costs and expenses of Landlord reasonably incurred in defending any such action or in obtaining the discharge of such lien, together with all necessary disbursements in connection therewith. In the event Tenant posts a bond to secure payment of a lien, such action does not relieve Tenant of its obligation to discharge the lien prior to its foreclosure. Further, Landlord reserves the right to draw upon any bond posted by Tenant to pay any lien if Landlord, in its reasonable discretion, determines it is necessary to discharge the same. ARTICLE 14 REPAIRS Section 14.01. Tenant's Obligations. Tenant shall keep the Premises and every part thereof in good condition and repair at all times during the Term and at Tenant's sole cost and expense, normal wear and tear excepted. At the end of the Term, Tenant shall surrender to Landlord the Premises and all alterations, additions, and improvements thereto in the same condition as when received, subject to the provisions of Section 12.02 and Article 20 hereof. Landlord shall give Tenant five (8) business days notice to commence to make repairs. If Tenant fails to commence to make such repairs within such time period, Landlord, at its option, may make such repairs, and Tenant shall pay Landlord on demand Landlord's actual costs in making such repairs plus a fee of ten percent (10W) to cover Landlord's overhead, all to constitute Additional Rent. Landlord has no obligation and has made no promise to alter, remodel, improve, repair, decorate, or paint the Premises or any part thereof, except as specifically set forth in this Lease. No representations respecting the condition of the Premises or the Building have been made by Landlord to Tenant except as specifically herein set forth. Section 14.02. Landlord's Obligations. Subject to the other provisions of this Lease imposing obligations in this respect upon Tenant, and subject to the provisions of Articles 16 and 17 hereof, Landlord shall, at its sole cost and expense (but, subject, where applicable, to inclusion as part of the Operating Expenses), repair, replace, and maintain: (i) All common areas of the Building, including without limitation, the sidewalks, driveways, service areas and parking areas; (ii) The exterior and structure of the Building and the Premises, including without limitation, the roof (including flashings and water tightness of the Building), walls (including caulking), floors and foundations and the landscaping for the Building; -25- 30 (iii) The Building systems, including without limitation, heating, ventilating, air conditioning and sprinkler systems; and (iv) The Building water, sewerage, gas, electrical, life safety systems, plumbing systems and other lines, pipes and conduits within the Building and the Premises. ARTICLE 15 INSURANCE Section 15.01. Tenant's Insurance. Tenant, at its sole expense, shall obtain and keep in force the, following insurance: (a) Comprehensive public liability insurance coverage on an "occurrence basis" against claims for personal injury, including, without limitation, bodily injury, death, and broad form property damage, in limits not less than $5,000,000 inclusive. All such insurance policies shall name Tenant as the named insured thereunder and shall name Landlord and Landlord's mortgagees as additional insureds thereunder, all as their respective interests may appear. (b) Worker's Compensation and Employer's Liability insurance, with a waiver of subrogation endorsement, in form and amount satisfactory to Landlord. (c) All Risk Insurance insuring all personal property of Tenant (its agents, employees, contractors, subtenants and permittees) located in the Premises, including furniture, equipment fittings, installations, supplies and any other personal property and Alterations ("Tenant's Property"), in an amount equal to the full replacement value, it being understood that no lack or inadequacy of insurance by Tenant shall in any event make Landlord subject to any claim by virtue of any theft or loss or damage to any uninsured or inadequately insured property; and (d) During the course of construction of work, should any work be performed by Tenant pursuant to Exhibit "B" or for any alterations by Tenant until completion thereof: Builder's Risk Insurance on an "all risk" basis (including collapse) on a completed value (nonreporting) form for full replacement value covering all work incorporated in the Building and all materials and equipment in or about the Premises. All policies shall be issued by companies having a Best's rating of at least A:XII and shall be in amounts and in form satisfactory from time to time to Landlord and Landlord's mortgagees. All policies shall contain an endorsement or agreement by the insurer that, as to Landlord's interest, any loss shall be payable in accordance with the terms of such policy notwithstanding any act or negligence of Tenant which might otherwise result in forfeiture of said insurance. Tenant will deliver certificates of insurance evidencing each policy to Landlord as soon as practicable after the placing of the required insurance, but not later than ten (10) days prior to the date Tenant takes possession of all or any part of the Premises. All policies shall contain an undertaking by the insurers to notify Landlord and Landlord's mortgagees in writing, by Registered or Certified U.S. Mail, return receipt requested, not less than thirty (30) days before any material change., reduction in the scope or limits of coverage, cancellation, or other termination thereof. -26- 31 Landlord reserves the right, not more often than once every year, to periodically review the insurance coverages required by this Section 15.01 and to revise such requirements to reflect insurance industry practices or require other forms or amounts of insurance as may be reasonably required to reflect changes in insurance industry practices. Section 15.02. Insurance Rating. Tenant will not keep, use, sell, or offer for sale in, or upon, the Premises any article which may be prohibited by any insurance policy periodically in force covering the building and the Leasehold Improvements. If Tenant's occupancy or business in, or on, the Premises, whether or not Landlord has consented to the same, results in any increase in premiums for the insurance periodically carried by Landlord with respect to the Building or the Leasehold Improvements, Tenant shall pay any such increase in premiums as Additional Rent within ten (10) days after being billed therefor by Landlord. If any of Landlord's insurance policies shall be canceled or cancellation shall be threatened or the coverage thereunder reduced or threatened to be reduced in any way because of the use of the Premises or any part thereof by Tenant or any assignee or sub-tenant of Tenant or by anyone Tenant permits on the Premises and, if Tenant fails to remedy the condition giving rise to such cancellation, threatened cancellation, reduction of coverage, or threatened reduction of coverage within 48 hours after notice thereof, Landlord may enter upon the Premises and attempt to remedy such condition, and Tenant shall promptly pay the cost thereof to Landlord as Additional Rent. Landlord shall not be liable for any damage or injury caused to any property of Tenant or of others located on the Premises resulting from such entry. If Landlord is unable or elects not to remedy such condition, then Landlord shall have all of the remedies provided for in this Lease in the event of a Default by Tenant. Notwithstanding the foregoing provisions of this Section, if Tenant fails to remedy as aforesaid, Tenant shall be in Default of its obligations hereunder and Landlord shall have no obligation to remedy such Default. Section 15.03. Waiver of Subrogation. All policies covering real or personal property which either party obtains affecting the Premises shall include a clause or endorsement denying the insurer any rights of subrogation against the other party to the extent rights have been waived by the insured before the occurrence of injury or loss, if same are obtainable. Landlord and Tenant waive any rights of recovery against the other for injury or loss due to hazards covered by policies of insurance containing such a waiver or subrogation clause or endorsement to the extent of the injury or loss covered thereby. Section 15.04. Landlord Insurance. Landlord, as part of the Operating Expenses, shall obtain and keep in force the following insurance: (a) Comprehensive public liability insurance coverage on an "occurrence basis" against claims in or about the Building (other than the Premises) for personal injury, including without limitation, bodily injury, death and broad form property damage, in limits not less than $5,000,000 inclusive; (b) Workmen's Compensation and Employer's Liability Insurance; -27- 32 (c) All Risk Insurance insuring the Landlord's interest in the Building, all Leasehold Improvements in the Premises constructed by Tenant using funds supplied by Landlord (specifically excluding, Tenant's personal property and all improvements in the Premises erected by Tenant using its own funds which under Virginia law are considered fixtures (the "Fixtures")) in a form satisfactory to Landlord and in an amount equal to the full replacement value of the Landlord's insurable interest in the Building; and (d) Any other form or forms of insurance as Landlord, or Landlord's mortgagees may reasonably require from time to time in form, in amounts, and for insurance risks against which a prudent Landlord of a comparable size and in a comparable business would protect itself. Section 15.05. Self Insurance and Blanket Insurance. Landlord and Tenant shall have the right to satisfy its obligations under this Article through the use of self-insurance and blanket insurance programs so long as the coverages, and limits otherwise satisfy this Article. Tenant's rights under this Section 15.04 are personal to the Tenant named herein and its Parent or Affiliates (as hereinafter defined). ARTICLE 16 DAMAGE BY FIRE OR OTHER CASUALTY Section 16.01. Termination Rights Due to Damage or Destruction to the Premises. (a) Landlord and Tenant shall each immediately notify the other of any damage to the Building which affects the Premises. (b) If all or any portion of the Premises are damaged and destroyed (such area being hereinafter referred to as the "Damaged Area"), Landlord shall cause Landlord's architect for the Building (the "Building Architect"), to inspect the Premises. Within thirty (30) days after the damage and destruction, the Building Architect shall complete its inspection and notify Landlord and Tenant, in writing, of its findings (the "Damage Report"). (c) Should the Building Architect, in the exercise of its reasonable objective opinion, determine in the Damage Report that the Damaged Area can be rebuilt but either (i) the reconstruction can not be completed and the Damaged Area made fit for Tenant's purposes within one hundred (100) days after the damage or destruction, or (ii) when rebuilt, the Damaged Area cannot be reasonably occupied or used for the continued operation of the Tenant's business, then, in either case, Tenant shall have the right, at its sole option, to terminate this Lease as it pertains to the Damaged Area. In such case, Tenant may exercise its right to terminate this Lease by giving written notice to Landlord, within sixty (60) days after receipt of the Damage Report. (d) Should the Damage Report reveal that the provisions of subparagraph (c) of this Section do not apply and the Damaged Area can be rebuilt and made fit for Tenant's continued use, but the proceeds of the insurance which Tenant is required to maintain under Section 15.01(c) that was intended to cover the Tenant's Property, are insufficient to repair or restore the damage or destruction, then Landlord and Tenant will each have a right to terminate this Lease as it pertains to the Damaged Area. In such case, Landlord or Tenant may exercise their respective -28- 33 right to terminate as to the Damaged Area, by giving notice to the other, within sixty (60) days after receipt of the Damage Report. Section 16.02. Damage to the Building. (a) If the Building or any portion thereof (excluding the Premises) is damaged or destroyed by any cause whatsoever, to the extent that in Landlord's reasonable judgment, it would not be economically feasible to repair or restore such damage or destruction, Landlord may, at its option, terminate this Lease by giving Tenant notice of such termination within sixty (60) days after such damage or destruction. (b) Provided the provisions of subparagraph (a) are not applicable the Building Architect will notify Landlord and Tenant, if, in the Building Architect's reasonable objective judgment, the damage or destruction to the Building I cannot be repaired or restored within three hundred sixty (360) days after such damage or destruction. Landlord or Tenant shall have the right, at the option of either party, to terminate this Lease. In such case, Landlord or Tenant may exercise their respective right to terminate this Lease by giving written notice to the other, within sixty (60) days after receipt of the Building Architect's notification and thereupon the provisions of Section 16.06 hereof shall apply. (c) If any portion of the Building (excluding the Premises) is damaged or destroyed by any cause whatsoever to the extent that the Building Architect determines that such damage makes it reasonably impossible for Tenant to continue to use or occupy the Premises, then either Landlord or Tenant shall have the right, at the option of either party, to terminate this Lease as to the portion of the Premises affected by such damage or destruction by giving the other, within sixty (60) days after such damage or destruction, written notice of termination, and thereupon Rent and any other payments for which Tenant is liable under this Lease for the portion of the Premises affected shall be apportioned and paid to the date of such damage, and Tenant shall immediately vacate the affected portion of the Premises; provided, however, that those provisions of this Lease which are designated to cover matters of termination and the period thereafter shall survive the termination hereof. Section 16.03. Partial Damage. In the event of partial destruction or damage to the Building or the Premises which does not result in a complete termination of this Lease pursuant to Sections 16.01 and 16.02 hereof, this Lease shall not terminate and Rent shall be abated in proportion to the area of the Premises which, in the Building's Architect's reasonable objective opinion, cannot be used or occupied by Tenant as a result of such casualty. Landlord shall in such event, within a reasonable time after the date of such destruction or damage, restore the Premises to as near the same condition as existed prior to such partial damage or destruction, provided that Tenant shall be responsible for restoring its personal property. Upon such reconstruction, the Rentable Area of the Premises will be recomputed and Tenant's Proportionate Share adjusted accordingly. Section 16.04. Damage During Last Year of Term. If the Building or the Premises or any substantial portion thereof is destroyed by fire or other causes at any time during the last year of the Term, then either Landlord or Tenant shall have the right, at the option of either party, to -29- 34 terminate this Lease by giving written notice to the other within sixty (60) days after the date of such destruction, and Tenant shall immediately vacate the Premises and, upon Tenant's vacation of the Premises, this Lease shall terminate. Section 16.05. No Landlord Liability. Landlord shall have no responsibility to restore the Tenant's personal property, except as specifically provided in Sections 16.01(d) and 16.03. Landlord shall have no liability to Tenant for inconvenience, loss of business, or annoyance arising from any repair of any portion of the Premises or the Building. If Landlord is required by this Lease or by any lender or lessor of Landlord to repair or if Landlord undertakes to repair, Tenant shall pay to Landlord that amount of Tenant's insurance proceeds which insures such damage as a contribution towards such repair, and Landlord shall use reasonable efforts to have such repairs made promptly and in a manner which will not unnecessarily interfere with Tenant's use and occupancy. Notwithstanding the foregoing, if such repairs continue for two (2) consecutive days and make it reasonably impossible for Tenant to continue to occupy, operate and/or use the Premises, Tenant shall be entitled an abatement of Rent payable at the time of such disruption for the portion of the Premises affected by the repairs for the period commencing on the date of the interruption caused by the repairs, and continuing until the earlier of (i) the date such repair is completed, or (ii) the date such disruption ceases. However, should Tenant recommence its use, occupancy and/or operations in any part of the Premises which was affected by the repairs, notwithstanding the fact that the repairs may not have been completed, Tenant's right to abate Rent for the reoccupied portion of the Premises will terminate. Section 16.06. Apportionment of Rent. In the event of termination of this Lease pursuant to Section 16.01, then all Rent shall be apportioned and paid to the date on which possession is relinquished or the date of such damage, whichever last occurs, and Tenant shall immediately vacate the Premises according to such notice of termination and upon such vacation, the Lease will terminate as to the portion of the Premises affected thereby. ARTICLE 17 CONDEMNATION Section 17.01. Entire Building. In the event that the whole or substantially the whole of the Building and/or the Premises are taken or condemned for any public purpose, this Lease and the leasehold estate created hereby shall cease and terminate as of the date of such taking. Section 17.02. Partial Takings Affecting the Premises. (a) In the event that either (i) a portion, but less than substantially the whole, of the Premises should be taken or condemned for any public purpose, and the remainder of the Premises cannot be reasonably used for the continued operation of Tenant's business or (ii) a portion, but not all, of the Building is taken and such taking makes it reasonably impossible for Tenant to continue to occupy, operate and/or use the Premises, then in either event, either party may terminate this Lease by written notice to the other given within thirty (30) days of such taking and then this Lease shall be terminated as of the date of such taking. -30- 35 (b) For all circumstances not addressed in Sections 17.01 and 17.02(a), in the event of a partial taking of the Premises, this Lease shall be terminated as of the date of such taking as to the portion of the Premises so taken or affected by such taking, and, this Lease shall remain in full force and effect as to the remainder of the Premises. In such event, the Rent will be diminished by an amount representing the part of such amounts properly applicable to the portion of the Premises so taken. Further, in such event Tenant's Proportionate Share shall be recomputed based upon the remaining Rentable Area in the Premises and in the Building. Section 17.03. Termination of Lease. In the event of the termination of this Lease pursuant to the provisions of this Article 17, this Lease and the Term and the estate hereby granted shall expire as of the date of such termination in the same manner and with the same effect as if that were the date set for the normal expiration of the Term of this Lease, and the Rent shall be apportioned as of such date. Section 17.04. Landlord's Right to Award. All awards, damages, and other compensation paid by the condemning authority on account of such taking or condemnation (or sale under threat of such a taking) shall belong to Landlord, and Tenant hereby assigns to Landlord all rights to such awards, damages and compensation. Tenant agrees not to make any claim against Landlord or the condemning authority for any portion of such award or compensation attributable to damages to the Premises, the value of the unexpired term of this Lease, the loss of profits or goodwill, Leasehold Improvements paid by Tenant by the use of the Tenant Allowance or severance damages. Nothing contained herein, however, shall prevent Tenant from pursuing a separate claim against the condemning authority for the value of Leasehold Improvements paid by Tenant from funds other than the Tenant Allowance, Alterations paid by Tenant, furnishings, equipment, and trade fixtures installed in the Premises at Tenant's expense and for relocation expenses. ARTICLE 18 ASSIGNMENT AND SUBLETTING Section 18.01. Permitting Subletting of the Premises. (a) Tenant shall have the right to sublet the Premises without the prior consent of Landlord so long as (i) the sublease has provisions which satisfy Section 18.03 hereof; (ii) the entity, organization or individual to which the space is sublet satisfies the requirements of Section 18.02(b)(ii) and (iii) hereof; and (iii) the total Rentable Area of the Premises occupied by Tenant or its Permitted Occupants is not less than 50% of the Rentable Area demised by this Lease. (b) In the event of a sublease, Tenant shall submit to Landlord evidence that the provisions of Section 18.01(a) have been satisfied. Should the sublease result in a violation of the -31- 36 provisions of Section 18.01(a) then such sublease shall be subject to the provisions of Section 18.02 hereof. (c) Notwithstanding the foregoing or the provisions of Section 18.02 hereof, the Premises or any part thereof shall not be publicly advertised in newspapers or other mass media for subletting at a rental rate less than the rental rate being sought by Landlord for space in the Building (provided that Landlord shall, within ten (10) days after Tenant so requests, have informed Tenant of the rental rate being sought by Landlord for such space), and all advertisements (in newspapers or other mass media) of the Premises or any portion thereof for subletting shall not include the name of the Building (without Landlord's prior written consent which will not be unreasonably withheld). The foregoing, however, shall not be deemed to prohibit Tenant from negotiating or consummating a sublease at a lower rental rate. Section 18.02. Rights of Tenant. (a) Except as permitted by Sections 18.01(a) and 18.06 hereof, Tenant may not sell, assign, transfer, or hypothecate this Lease or any interest herein (either voluntarily or by operation of law, and including, if Tenant is a corporation or partnership, the sale or transfer of a controlling interest in Tenant), or sublet the Premises or any part hereof without the prior written consent of Landlord, which shall not be unreasonably withheld, conditioned or delayed. If Tenant should desire to assign this Lease or sublet the Premises (or any part thereof), Tenant shall give Landlord written notice at least fifteen (15) days in advance of the date on which Tenant desires to make such assignment or sublease. Landlord shall then have a period of ten (10) days following receipt of such notice within which to notify Tenant in writing that landlord elects: (i) to permit Tenant to assign or sublet such space, subject, however, to the subsequent written approval by Landlord of the instrument of assignment or sublease as to form and substance; or (ii) to refuse, in Landlord's reasonable discretion, to consent to Tenant's assignment or subleasing of such space and to continue this Lease in full force and effect as to the entire Premises. If Landlord should fail to notify Tenant in writing of such election within such ten (10) day period, Landlord shall be deemed to have elected option (i) above. Except as may be otherwise expressly set forth to the contrary in Landlord's consent to the assignment, no assignment by Tenant shall relieve Tenant of Tenant's obligations under this Lease. Any attempted assignment or sublease by Tenant which is not permitted by Section 18.01 and 18.06 hereof and is in violation of the terms and provisions of this Section shall be void. (b) Landlord's consent under this Section 18.02(a) to an assignment or sublease will not be withheld provided all of the following conditions have been satisfied: (i) if a sublease, the sublease has provisions which satisfy Section 18.03 hereof; -32- 37 (ii) if an assignment, (a) the assignee shall agree, in a written agreement satisfactory to Landlord, to assume and abide by all of the terms and provisions of this Lease (but without liability to matters arising prior to the date of the assignment); and (b) the assignee has submitted a current financial statement reasonably acceptable to Landlord, showing a net worth and working capital in amounts reasonably determined by Landlord to be sufficient to assure the future performance by such assignee of Tenant's obligations hereunder; and (iii) the entity, organization, or individual to which such space is proposed to be sublet or to which the Lease is proposed to be assigned is not of a type that would be an undesirable tenant in a first-class office complex in Fair Lakes, or of a type that because of its controversial or unsavory nature, might bring undue notoriety or disruption to the Building. Section 18.03. Required Provision in Sublease. A sublease of portions of the Premises, must include (or shall be deemed to include) provisions stating that it is subject and subordinate to this Lease and to the matters to which this Lease is or shall be subordinate, and that in the event of the termination of this Lease, or the re-entry or dispossession of Tenant by Landlord under this Lease, the sublease shall also terminate and the subtenant shall peacefully vacate the premises sublet. Section 18.04. Excess Rent. In the event that (i) the total Rentable Area of the Premises occupied by Tenant or its Permitted Occupants is less than 50% of the Rentable Area of the Premises; and (ii) if the rent agreed upon between Tenant and its proposed subtenant under any proposed sublease of the Premises (or any part thereof) is greater than the Rent that Tenant must pay Landlord hereunder for that portion of the Premises that is subject to such proposed sublease and at the time of the transaction Tenant is not in Default hereunder, then one-half of such excess rent (after deducting therefrom the reasonable costs involved in the transaction, which costs include, without limitation, brokerage commissions, marketing costs, construction expenses, tenant concessions, and legal fees) shall be considered Additional Rent owed by Tenant to Landlord, and shall be paid by Tenant to Landlord in the same manner that Tenant pays Rent under this Lease. Notwithstanding the foregoing, if at the time of the assignment or sublease Tenant is in Default hereunder, then until such Default has been cured by Tenant (i) all such excess rent arising prior to the cure shall be considered Additional Rent owed by Tenant to Landlord and shall be paid by Tenant to Landlord in the same manner that Tenant pays Rent under this Lease, and (ii) all costs associated with the transaction shall be borne by Tenant and will not be deducted in determining the excess rent payable to Landlord hereunder. Section 18.05. Rights of Landlord. Landlord may sell, transfer, assign, and convey, all or any part of the Building and/or the Land and any and all of its rights under this Lease, and in the event Landlord assigns its rights under this Lease, Landlord shall be released from any further obligations hereunder which arise after the date of the transfer, and Tenant agrees to look solely to Landlord's successor in interest for performance of such obligations. -33- 38 Section 18.06. Permitted Occupants. Notwithstanding the provisions of Section 18.01 hereof, Tenant shall have the right, without the prior written consent of Landlord to assign its entire interest in this Lease to an Affiliate (hereinafter defined) so long as (i) the Affiliate delivers to Landlord, concurrently with such assignment, a written notice of the assignment and an assumption agreement whereby the Affiliate assumes and agrees to perform, observe and abide by the terms, conditions, obligations and provisions of this Lease applicable to Tenant and (ii) the entity remains an Affiliate. Further, Tenant shall also have the right, without the prior written consent of Landlord, to sublet all or any portion of the Premises to an Affiliate so long as (i) such sublease is expressly subject to the terms of this Lease so that a termination of this Lease shall result in the termination of the sublease and (ii) the entity remains an Affiliate. No assignment or subletting by Tenant shall relieve Tenant of Tenant's obligations under this Lease. As used herein, the term Affiliate shall mean and collectively refer to (i) a parent corporation (the "Parent") of the Tenant which owns and controls not less than fifty-one percent (51%) of the voting stock of the Tenant and is able to elect (by ownership of stock or by proxy) the board of directors and the officers of Tenant, or (ii) a corporation in which either the Tenant or its Parent owns and controls not less than fifty-one percent (51%) of the voting stock of the corporation and is able to elect (by ownership of stock or proxy) the board of directors and the officers of the corporation, or (iii) an Affiliate of the Parent, and/or (iv) a successor or surviving corporation in the event of a merger, takeover or other form of corporation acquisition of the Tenant. In addition to the foregoing, Tenant shall also have the right, without the prior consent of Landlord, to sublet portions of the Premises to any entity, organization or individual who is either a contractor or subcontractor of Tenant or its Affiliate or with whom the Tenant or its Affiliates are a contractor or subcontractor so long as (i) the terms of the sublease satisfy the provisions of Section 18.03 hereof and (ii) the total Rentable Area occupied by such subtenants (or subtenants permitted by Section 18.01 hereof) does not exceed an aggregate of 50% of the Rentable Area of the Premises. A transfer permitted under this Section 18.06 will be excluded from the provisions of Section 18.04 hereof. Entities permitted by this Section 18.06 are collectively referred to as "Permitted Occupants". ARTICLE 19 INDEMNIFICATION The Tenant shall indemnify the Landlord and hold the Landlord harmless from and against all loss or liability for or on account of any injury (including death) or damage received or sustained by any person or persons (including the Landlord and any employee, agent or invitee of any of them) to the extent that such loss or liability is (i) caused by reason or any negligent act or omission on the part of the Tenant or any employee, representative, or business visitor of the Tenant and (ii) not covered by insurance maintained by Landlord pursuant to this Lease. The Landlord shall indemnify the Tenant and hold the Tenant harmless from and against all loss or liability for or on account of any injury (including death) or damage received or sustained by any person or persons (including any employee, agent or invitee of the Tenant) to the extent that such loss or liability is (i) caused by reason of any negligent act or omission on the part of Landlord or any employee, representative or business visitor of Landlord and (ii) not covered by insurance maintained by Tenant pursuant to this Lease. -34- 39 If either Landlord or Tenant (the "Indemnitee") is made a party to any litigation commenced against the Indemnitee which falls within the scope of the foregoing indemnities, then the other party (the "Indemnitor") shall pay all costs and expenses, including reasonable attorneys, fees and court costs, incurred by or imposed upon Indemnitee because of any such litigation, and the amount of such costs and expenses, including reasonable attorneys' fees and court costs, shall be a demand obligation owing by Indemnitor to Indemnitee. ARTICLE 20 SURRENDER OF THE PREMISES Section 20.01. Condition of Premises. Upon expiration of the Term or other termination of this Lease for any cause whatsoever, Tenant shall peacefully vacate the Premises in as good order and condition as the same were at the beginning of the Term or may thereafter have been improved by Landlord or Tenant, except for reasonable use and wear thereof, and damage to the Premises or the Leasehold Improvements by fire or other casualty or condemnation. Section 20.02. Tenant Holdover. In the event that Tenant shall not immediately surrender the Premises on the Expiration Date of the Term, Tenant shall become a month-to-month Tenant subject to all of the terms, conditions, covenants and agreements of this Lease; however, during the first ninety (90) days of the holdover Rent will be 125% of the Rent paid during the last month of the Term; thereafter it will be 150%. However, if Landlord has notified Tenant that it has relet all or any portion of the Premises and Tenant fails to vacate the Premises within thirty (30) days after the date of Landlord's notice, then Tenant shall reimburse Landlord for the costs and damages incurred by Landlord for failing to deliver the space but in no event will it be greater than 150% of the Rent. Tenant shall give to Landlord at least thirty (30) days' written notice of any intention to quit the Premises, and Tenant shall be entitled to thirty (30) days' written notice to quit the Premises, unless Tenant is in Default hereunder, in which event Tenant shall not be entitled to any notice to quit, the usual thirty (30) days written notice being hereby expressly waived. Notwithstanding the foregoing provisions of this Section, in the event that Tenant shall hold over after the expiration of the Term, then at any time prior to Landlord's acceptance of Rent from Tenant as a monthly tenant hereunder, Landlord, at its option, may forthwith re-enter and take possession of the Premises without process, or by any legal process in force in the Commonwealth of Virginia. Tenant shall be liable to Landlord for all damage which Landlord suffers because of any holding over by Tenant, and Tenant shall indemnify Landlord against all claims made against Landlord resulting from Landlord's delay in delivering possession of the Premises to any other tenant or prospective tenant. ARTICLE 21 ESTOPPEL CERTIFICATES Landlord and Tenant each agree that, upon request of a party (the "Requesting Party"), the other (the "Responding Party") will execute and return, within fifteen (15) calendar days after the Requesting Party's request, any certificate that the Requesting Party may request from time to time, stating that this Lease is unmodified and in full force and effect, or in full force and effect as modified, and stating the modification. The certificate also shall state, if true, (i) that all -35- 40 work has been completed, and the work and the Premises are accepted as satisfactory except for items listed on a punchlist, if any, attached to such certificate; (ii) the amount of Base Rent and Additional Rent and the dates on which Rent commenced to accrue and to which the Rent has been paid in advance, and the amount of any security deposit or prepaid Rent; (iii) that, to the best of the Responding Party's knowledge, Tenant is in full and complete possession of the Premises and doing business; (iv) that there is no present default on the part of the Requesting Party, or attach a memorandum stating any such instance of default; (v) that the Responding Party has not advanced any amounts to or on behalf of the Requesting Party which have not been reimbursed; (vi) that, to the best of Responding Party's knowledge, the Responding Party has no rights to setoff and no defense or counterclaim against enforcement of its obligations under the Lease, including the payment of Rent; (vii) that there are no actions, whether voluntary or otherwise, pending against the Responding Party under the bankruptcy laws of the United States or any state thereof; and (viii) any other fact pertaining to this Lease which the Requesting Party may reasonably request. Failure to deliver the certificate within the fifteen (15) calendar days shall be conclusive upon the Responding Party for the benefit of the Requesting Party and its successor that this Lease is in full force and effect and has not been modified except as may be represented by the party requesting the certificate. ARTICLE 22 SUBORDINATION AND ATTORNMENT Section 22.01. Existing Financings. (a) This Lease is subject and subordinate to any deeds of trust or other security instruments which, as of the date of this Lease, cover the Building, the underlying land, or any interest of Landlord therein, and to any advances made on the security thereof, and to any increases, renewals, modifications, consolidations and extensions of any of such deeds of trust or security instruments (the "Existing Indebtedness"). This provision is declared by Landlord and Tenant to be self-operative and no further instrument shall be required to effect such subordination of this Lease. Upon demand, however, Tenant shall execute, acknowledge, and deliver to Landlord any further instruments and certificates evidencing such subordination as Landlord, or the holder of the Existing Indebtedness may reasonably require. (b) Landlord agrees to obtain from the holder of the Existing Indebtedness a Subordination, Non-Disturbance and Attornment Agreement, in form attached hereto as Exhibit "H" (and by this reference incorporated herein), which provides that, in the event of a foreclosure or a transfer in lieu thereof, Tenant will not be disturbed in its possession and this Lease shall, notwithstanding the foreclosure or transfer in lieu thereof, continue in full force and effect upon and subject to all terms, covenants, conditions, and obligations of this Lease so long as (i) no Default has occurred on the part of Tenant under this Lease and (ii) Tenant attorns to the purchaser or transferree as landlord under this Lease. Section 22.02. Future Financings. During the Term of this Lease, Landlord reserves the right to encumber its interest in this Lease, the Building and/or the underlying land, by new or additional deeds of trust or other security instruments and to refinance the Existing Indebtedness -36- 41 (the "New Financing"). Tenant agrees to subordinate this Lease to any New Financing so long as the holder of the New Financing executes and delivers to Tenant a Subordination, Non-Disturbance and Attornment Agreement which contains the provision set forth in Section 22.01(b) hereof and is otherwise a commercially reasonable instrument. Section 22.03. Attornment. Provided the holder of the Existing Indebtedness and New Financing has delivered to Tenant a Subordination, Non-Disturbance and Attornment Agreement which satisfies the provisions of Section 22.01(b) hereof, Tenant shall attorn to the purchaser upon a sale or to the grantee under any deed in lieu of foreclosure and shall recognize such purchaser or grantee as Landlord under this Lease without any change in the terms or other provisions of this Lease. In such agreement, Tenant will waive the right, if any, to elect to terminate this Lease or to surrender possession of the Premises in the event of foreclosure of any deed of trust or security instrument (or any transfer in lieu thereof). ARTICLE 23 QUIET ENJOYMENT Provided there is no Event of Default by Tenant of its obligations under this Lease, Tenant shall, during the Term, peaceably and quietly enjoy the Premises without disturbance from Landlord or any other persons acting by, through, or under Landlord; subject, however, to (i) the terms of this Lease; (ii) the Existing Indebtedness and New Financings (which satisfy the provisions of Section 22.02 hereof) ordinances, restrictive covenants, leases, easements, and other agreements or encumbrances now or hereafter affecting the Building or the land on which the Building is situated; (iii) the right of Landlord to construct on its property any additional buildings or other improvements now or hereafter permitted by the governmental authorities having jurisdiction over Landlord's property; and (iv) the right of Landlord to relocate parking spaces for the Building, conduct renovations for the Building or make alterations to the Building so long as Landlord's exercise of the rights reserved under subparagraphs (iii) and (iv) does not substantially interfere with Tenant's use of the Premises. This covenant and all other covenants of Landlord in this Lease shall be binding upon Landlord and its successors only with respect to breaches occurring during its and their respective ownership of Landlord's interest hereunder. ARTICLE 24 SIGNS AND FURNISHINGS Section 24.01. Signs and Advertisements. No sign, advertisement, or notice referring to Tenant shall be inscribed, painted, affixed, or otherwise displayed on any part of the exterior of the Premises or the exterior or the interior of the Building (if visible to the exterior of the Premises), except those permitted by Section 24.02 or those installed by Landlord on the directories and the entrance door to the Premises and such other areas, if any, as Landlord may determine. Tenant may also install, without the prior consent of Landlord, locational and directional signage and suite or room numbers within the Premises so long as the same is not visible to the exterior of the Premises. If Tenant exhibits or installs any sign, advertisement or notice, without the prior consent of Landlord, Landlord shall have the right to remove the same at Tenant's expense. -37- 42 Landlord shall have the right to prohibit any advertisement of or by Tenant which in its opinion tends to impair the reputation of the Building or its desirability as a high-quality office building and, upon written notice from Landlord, Tenant shall immediately refrain from and discontinue any such advertisement. Landlord reserves the right to affix, install, and display signs, advertisements, and notices on any part of the exterior or interior of the Building, however, Landlord's right to install exterior signage for any other tenant in the Building is subject to the provisions of Section 24.02 hereof. Landlord shall not, however, have the right to affix upon the exterior of the Building "for lease" or similar signs advertising the availability of space for lease in the Building, however, Landlord may utilize monument signage similar to those in existence for the Building on the date of this Lease. Section 24.02. Building Signage. (a) Notwithstanding the provisions of Section 24.01 hereof, Tenant shall have the right, subject to the provisions of this Section 24.02, to install, at its sole cost one building identification sign showing the Tenant's corporate logo. The sign will be located on the roofline of the western (or I-66) side of the Building. The exact location, size, design, appearance, and finish of the sign shall be subject to the approval of all applicable governmental authorities, the Architectural Review Board of Fair Lakes (established by the Fair Lakes League to which the Building is subject) and Landlord. Landlord shall use its best efforts to promptly obtain the approval of the Architectural Review Board of Fair Lakes. (b) Landlord covenants and agrees that, during the Term, no more than two (2) building identification signs (including the sign erected by Tenant pursuant to Section 24.02(a)) may be erected upon the exterior of the Building without the prior consent of Tenant which consent shall not be unreasonably withheld. Notwithstanding the foregoing, upon the vacation of AETNA Life and Casualty, as a tenant in the Building, Landlord reserves the right to replace the Building rooftop sign for AETNA with a sign of a tenant occupying not less than two floors of the Building or 45,000 square feet of Rentable Area (the "Other Tenant"), however, (i) the sign of the other Tenant will be removed if Tenant and its Permitted Occupants occupy 50% or more of the Rentable Area in the Building or five (5) full floors of the Building, and (ii) Tenant shall have the only sign along the rooftop of the Building for so long as it and its Permitted Occupants occupy more than 50% of the Rentable Area in the Building or five (5) full floors of the Building. Landlord specifically reserves the right, during foregoing period, to install signage on the exterior of the first floor of the Building. Section 24.03. Furnishings. The Building is designed with a floor load design capacity of 100 pounds per square foot of live load. In no event shall Tenant place on any part of the floor of the Premises a load exceeding the foregoing floor load per square foot and which is allowed by law. Any and all damage or injury to the Premises or the Building caused by Tenant moving heavy equipment or fixtures or the same being in or upon the Premises by Tenant, shall be repaired by and at the sole cost of Tenant. All furniture, equipment, and other bulky matter of any description shall be delivered to the Premises only through the designated service entrance of the Building and the designated service elevator during normal business hours or as otherwise directed or scheduled by Landlord. All moving of furniture, equipment and other materials shall -38- 43 be under the supervision of Landlord, who shall not, however, be responsible for any damage to or charges for moving the same. Tenant agrees to remove promptly from the sidewalks adjacent to the Building any of Tenant's furniture, equipment, or other material there delivered or deposited. Section 24.04. Satellite Dish. (a) Tenant shall have the right, subject to the provisions of this Section 24.04, to install, at its sole cost and expense, upon the roof of the Building a satellite dish antenna. The location of the antenna shall be mutually agreed upon by Landlord and Tenant prior to the Commencement Date. The size, design, and appearance of the antenna shall be subject to the approval of all applicable governmental authorities, the Architectural Review Board of Fair Lakes and Landlord. (b) In the event that Tenant constructs the antenna then, such construction shall be subject to all of the provisions of this Lease, including, but not limited to Article 12 and 13 hereof. Tenant further agrees that the provisions of Article 19 hereof shall apply to Tenant's use of the roof for the installation and operation of the antenna. Tenant shall maintain the antenna and the portion of the roof upon which it is situated in a good, clean and proper condition and will, at the end of the Term, remove the antenna and restore the portion of the roof affected thereby as required by Article 12 and 20 hereof. ARTICLE 25 DEFAULTS AND REMEDIES Section 25.01. Events of Default. The occurrence of any one or more of the following events shall constitute a Default or an Event of Default under this Lease: (a) if Tenant fails to pay any Base Rent, Temporary Rent and/or Additional Space Rent hereunder as and when the same becomes due and such failure shall continue for more than fifteen (15) days after Landlord gives Tenant notice that such payment is past due; (b) if Tenant fails to pay any installment of Additional Rent hereunder within thirty (30) days after Landlord gives notice that such payment is due; (c) if Tenant fails to take possession of either (i) the Phase I Space on the Phase I Rent Commencement Date or promptly thereafter or (ii) the Phase II Space on the Phase II Rent Commencement Date or promptly thereafter; (d) if Tenant permits to be done anything which creates a lien upon the Premises and fails to discharge, or bond such lien or post such security with Landlord as is required by Article 13; (e) if Tenant violates the provisions of Article 18 by attempting to make an unpermitted assignment or sublease; (f) if Tenant fails to maintain in force all policies of insurance required by this Lease and any such failure shall continue for more than ten (10) days after Landlord gives Tenant notice of such failure; (g) if any petition is filed by or against Tenant under any present or future section or chapter of the Bankruptcy Code, or under any similar law or statute of the United States or any state thereof (which, in the case of an involuntary proceeding, is not permanently discharged, dismissed, stayed or vacated, as the case may be, within ninety (90) days of commencement), or if any order for relief shall be entered against Tenant in any such proceedings; (h) if Tenant becomes insolvent or makes a transfer in fraud of creditors or makes an assignment for the benefit of creditors; (i) if a receiver, custodian, or trus- -39- 44 tee is appointed for the Premises or for all or substantially all of the assets of Tenant, which appointment is not vacated within ninety (90) days following the date of such appointment; or (j) if Tenant fails to perform or observe any other term of this Lease and such failure shall continue for more than thirty (30) days after Landlord gives Tenant notice of such failure, or, if such failure cannot be corrected within such thirty (30) day period, if Tenant does not commence to correct such default within said thirty (30) day period and thereafter diligently prosecute the correction of same to completion within a reasonable time and in any event prior to the time a failure to complete such correction could cause Landlord to be subject to prosecution for violation of any law, rule, ordinance or regulation or causes, or could cause a default under any deed of trust, mortgage, underlying lease, Tenant lease or other agreement applicable to the Project and/or Building. Section 25.02. Remedies. Upon the occurrence of any Event of Default, Landlord shall have the right, at Landlord's option, to terminate this Lease. With or without terminating this Lease, Landlord may re-enter and take possession of the Premises and the provisions of this Section 25.02 shall operate as a notice to quit, any other notice to quit or of Landlord's intention to reenter the Premises being hereby expressly waived. If necessary, Landlord may proceed to recover possession of the Premises under and by virtue of the laws of the Commonwealth of Virginia or by such other proceedings, including re-entry and possession, as may be applicable. If Landlord elects to terminate this Lease, everything contained in this Lease on the part of Landlord to be done and performed shall cease without prejudice; subject however, to the right of Landlord to recover from Tenant all rent and other sums accrued up to the time of termination or recovery of possession by Landlord, whichever is later. Whether or not this Lease is terminated by reason of Tenant's Default, Landlord may, but shall not be obligated to, relet the Premises for such rent and upon such terms as are not unreasonable under the circumstances and, if the entire Rent provided in this Lease plus the costs, expense, and damages hereafter described shall not be realized by Landlord, Tenant shall be liable for all damages sustained by Landlord, including, without limitation, attorney's fees and expenses reasonably incurred, brokerage fees, and the expense of placing the Premises in first-class rentable condition. Landlord shall in no way be responsible or liable for any failure to collect any rent due and/or accrued from such reletting, to the end and intent that Landlord may elect to hold Tenant liable for the Rent which Tenant shall have been obligated to pay throughout the remainder of the Term. Landlord shall, however, use reasonable efforts to relet the Premises and mitigate its damages. Any damages or loss of rent sustained by Landlord may be recovered by Landlord, at Landlord's option, at the time of the reletting or in separate actions, from time to time, as said damage shall have been made more easily ascertainable by successive relettings, or, at Landlord's option, may be deferred until the expiration of the Term, in which event Tenant hereby agrees that the cause of action shall not be deemed to have accrued until the date of Expiration of the Term. In the event such damages or loss of rent are recovered at the time of the reletting and the judgment rendered in Landlord's favor requires the Tenant to pay for future losses suffered by the Landlord, Tenant shall be liable for an amount equal to the present value (as of the date of the judgment for Landlord) of the Rent which would have been paid by Tenant for the remaining balance of the Term, but for Tenant's Default, less the present value (as of the date of the judgment for Landlord) of the revenue stream Landlord reasonably expects to receive over the remainder of the Term as a result of the reletting of the Premises. For purposes of the foregoing sentence, present value shall be determined by -40- 45 discounting at a rate equal to one and one-half percentage points above the discount rate then in effect at the Federal Reserve Bank nearest to the Building. There shall be no discounting for present value for any judgment which covers losses incurred by Landlord prior to the reletting or portions of the award applicable to sums accruing prior to the date of the judgment. The provisions contained in this Section 25.02 shall be in addition to, and shall not prevent the enforcement of, any claim Landlord may have against Tenant for anticipatory breach of this Lease. Section 25.03. Remedies Cumulative. All rights and remedies of Landlord set forth herein are in addition to all other rights and remedies available to Landlord at law or in equity. All rights and remedies available to Landlord hereunder or at law or in equity are expressly declared to be cumulative. The exercise by Landlord of any such right or remedy shall not prevent the concurrent or subsequent exercise of any such right or remedy. No delay in the enforcement or exercise of any right or remedy granted Landlord or Tenant under this Lease shall constitute a waiver of any Default by the defaulting party hereunder or of any rights or remedies in connection therewith available hereunder to the non-defaulting party. No party shall be deemed to have waived any Default by the other hereunder unless such waiver is set forth in a written instrument signed by the party against the waiver is asserted. Any waiver in writing shall be limited to its terms and shall not be construed as a waiver of any covenant, condition, or agreement set forth in this Lease except as to the specific circumstances described in such written waiver. Section 25.04. No Acceptance or Surrender. No act or thing done by Landlord or its agents during the Term shall constitute an acceptance of an attempted surrender of the Premises, and no agreement to accept a surrender of the Premises shall be valid unless made in writing and signed by Landlord. No re-entry or taking possession of the Premises by Landlord shall constitute an election by Landlord to terminate this Lease, unless a written notice of such intention is given to Tenant. Notwithstanding any such reletting or re-entry or taking possession, Landlord may at any time thereafter terminate this Lease for a previous Default. Landlord's acceptance of Rent following an Event of Default hereunder shall not be construed as a waiver of such Event of Default unless the payment cures such Event of Default. Section 25.05. Customs and Practices. No custom or practice which may develop between the parties in the administration of the terms of this Lease shall be construed to waive or lessen a party's right to insist upon strict performance of the terms of this Lease. Section 25.06. Payment of Tenant's Obligations by Landlord. In the Event of Default, Landlord may, but shall not be required to, make such payment or do such act required to be performed by Tenant. If Tenant fails to act and Landlord makes such payment or does such act, all costs and expenses incurred by Landlord, plus interest thereon at the rate per annum which is two percent (2%) higher than the "prime rate" published in the Money Rates section of the Wall Street Journal (the "Default Rate"), from the date paid by Landlord to the date of payment thereof by Tenant, shall be immediately paid by Tenant to Landlord; provided, however, that nothing contained therein shall be construed as permitting Landlord to charge or receive interest in excess of the maximum legal rate then allowed by law. The taking of such action by Landlord shall not be considered as a cure of such Default by Tenant or to prevent Landlord from pursuing any remedy it is otherwise entitled to in connection with such Default. -41- 46 Section 25.07. Default by Landlord. Should Landlord breach any of its warranties or representations herein set forth or fail to perform any of its covenants herein contained, Tenant shall notify Landlord of such default or breach and Landlord shall have a period of 30 days after receipt of written notice to remedy such breach or default, except in an emergency or life threatening situation, in which case Landlord shall have a reasonable period to cure such situation. If such breach or default cannot be cured within such period, Landlord shall have such additional period that shall be reasonably necessary to remedy such breach or default provided that Landlord is diligently and continuously pursuing such remedy and provided further that Tenant is not materially damaged or prejudiced. Should Landlord fail to cure such breach or default, Tenant shall have available to it the following remedies, as its sole and exclusive remedies, Tenant specifically waiving any other remedy it may have at law or at equity: (a) Terminate this Lease in the event of a material default which renders it reasonably impracticable to occupy the Premises; (b) Bring suit against Landlord for specific performance; (c) Pursue any other rights and remedies specifically granted to Tenant hereunder; or (d) For so long as Tenant or its Permitted Occupants are occupying not less than 40% of the Rentable Area of the Building, if such breach or default is under the provisions of Sections 7.01, 7.04 and 14.02 hereof or Articles 8, 16 or 17 hereof, then Tenant shall have the right to cure such breach or default only to the extent that it affects the Premises. In the event that Tenant elects to exercise its rights under subparagraph (d), then the following provisions shall apply: (i) Tenant shall diligently and continuously pursue such cure until the default or breach is corrected; (ii) Tenant shall perform such cure in a manner which, to the extent reasonably practicable, minimizes interference or disruption to the other tenants of the Building; (iii) All such work shall be performed using firstclass materials, in a good and workmanlike manner consistent with all applicable governmental requirements; (iv) Should Tenant be required to expend funds in its cure of the Landlord's breach of default, then all costs and expenses incurred by Tenant shall be due and payable by Landlord within fifteen (15) days of a receipt of written demand from Tenant for such payment accompanied by a reasonably detailed statement of expenditures together with invoices shall bear interest at the Default Rate, from the date paid by Tenant to the date of payment thereof by Landlord. In the event that such sum (and interest accruing thereon) is not paid within sixty (60) days after receipt of written demand from Tenant, then Tenant may deduct such amount (and interest accrued thereon) against the installments of Rent until paid in full. Tenant agrees to give written notice of any default by Landlord under this Lease to any lender of Landlord secured by the Premises upon request thereof by such lender and a reasonable -42- 47 time within which to cure such default prior to Tenant taking any action to remedy such default or cancel the Lease. ARTICLE 26 SECURITY DEPOSIT (a) In the event Tenant desires to assign its interest in the Lease and be relieved of continuing liability hereunder, Landlord may require, as a condition to its consent to any such assignment, that the assignee posts a security deposit (the "Security Deposit") equal to one (1) month Rent due under the Lease at the time of the Assignment. (b) The Security Deposit shall be security for the performance by Tenant of all of Tenant's obligations, covenants, conditions, and agreements under this Lease. Within thirty (30) days after the expiration of the Term, and provided Tenant has vacated the Premises and is not in Default hereunder, Landlord shall return the Security Deposit to Tenant, less such portion thereof as Landlord shall have appropriated to satisfy any Default by Tenant hereunder. In the event of any default by Tenant hereunder, Landlord shall have the right, but shall not be obligated to use, apply or retain all or any portion of the Security Deposit for (i) the payment of any Rent to which Tenant is in Default, (ii) the payment of any amount which Landlord may spend or become obligated to spend by reason of Tenant's Default, or (iii) the payment of any amount Landlord may spend or become obligated to spend or for compensation of Landlord for any losses incurred by reason of Tenant's Default, including, but not limited to, any damage or deficiency arising in connection with the reletting of the Premises. If any portion of the Security Deposit is so used or applied, within three (3) business days after written notice to Tenant of such use or application, Tenant shall deposit with Landlord an amount sufficient to restore the Security Deposit to its original amount, and Tenant's failure to do so shall constitute a Default under this Lease. ARTICLE 27 INTENTIONALLY OMITTED ARTICLE 28 ATTORNEY'S FEES AND LEGAL EXPENSES In any action or proceeding brought by either party against the other under this Lease, the prevailing party shall be entitled to recover from the other party reasonable attorneys' fees, and other reasonable legal expenses and court costs incurred by such party in such action or proceeding as the court may find to be reasonable. ARTICLE 29 NOTICES Any notice or document required to be delivered hereunder shall be in writing and shall be given or made or communicated by United States registered or certified mail or by any overnight or express mail service which provides receipts to indicate delivery, addressed to the parties hereto at the respective addresses as specified in the Basic Lease Information, or at such other addresses they have subsequently specified by written notice. -43- 48 All notices shall be effective upon being deposited in the manner prescribed above, however, the time period in which a response to such notice must be given shall commence to run from the date of receipt by the addressee thereof as shown on the return receipt of the notice. Rejection or other refusal to accept or the inability to deliver because of changed address of which no notice was given, shall be deemed to be receipt of the notice as of the date of such rejection, refusal or inability to deliver. ARTICLE 30 RIGHT OF FIRST REFUSAL Provided Tenant is not in Default under this Lease at the applicable time, Tenant, during the Refusal Period (hereinafter defined), shall, in the manner described by and in compliance with the terms and provision of this Article 30 have a right of first refusal to expand the Premises to include all or any portion of the Additional Space (hereinafter defined). (a) If at any time during the Refusal Period Landlord shall either (i) receive a bonafide offer from a third party to lease all or a portion of the Additional Space, which Landlord is prepared to accept, or (ii) prepares a proposal pertaining to all or a portion of the Additional Space which Landlord is prepared to offer as a lease proposal to a third party, then in either such event, landlord shall send a written notice (the "Offer Notice") to Tenant of such proposal. The Offer Notice shall set forth in reasonable detail the size or portion of the Additional Space subject to the Offer Notice, and shall contain (or be deemed to contain) an offer to Tenant to lease the portion of the Additional Space subject to the Offer Notice for the remaining Term of this Lease on the same terms and conditions set forth in the Offer Notice. (Except that the concessions offered to the third party pursuant to the proposal forming the basis of the Offer Notice shall be appropriately prorated if the remaining Term of this Lease is shorter than the term contemplated by the proposal forming the basis of the Offer Notice.) Tenant may elect to accept the Offer Notice, by giving written notice to Landlord of its election not less than ten (10) days after receipt by Tenant of the Offer Notice. (b) In the event Tenant responds within the ten (10) day period and elects to accept the proposal set forth in the Offer Notice, then this Lease shall automatically be amended to include within the Premises the portion of the Additional Space subject to the Offer Notice. The rent payable for the Additional Space subject to the Offer Notice (the "Additional Space Rent") will be as set forth in the Office Notice and Tenant will be entitled to all rental concessions set forth in the Offer Notice prorated as set forth in subparagraph (a) hereof. Tenant will take the space subject to the Offer Notice in its "as is" and "where as" condition, however, Landlord will (i) perform in the Additional Space all work required by the Offer Notice; (ii) grant to Tenant any construction allowances that may be set forth in the Offer Notice prorated as set forth in subparagraph (a) hereof; and (iii) deliver such space upon Substantial Completion of all improvements thereto. The provisions of this subparagraph shall be self-enforcing without the need for any further act by Landlord or Tenant. (c) Should Tenant either fail to respond within the ten (10) days, or elects not to accept the Offer Notice, then the Landlord shall be free to execute a lease (the "Space Lease") for -44- 49 the portion of the Additional Space subject to the Offer Notice on terms not materially different than those set forth in the Offer Notice and thereupon such space shall be automatically excluded from the Additional Space and the rights of Tenant set forth in this Article, as they pertain to the portion of the Additional Space which is subject to the Offer Notice, shall automatically terminate and be of no further force or effect. The provisions of this subparagraph shall be self-enforcing without the need for any further act by Landlord or Tenant. (d) Notwithstanding the foregoing provisions of subparagraph (c) hereof, should Tenant either fail to respond within ten (10) days, or elects not to accept the Offer Notice, then the portion of the Additional Space subject to the Offer Notice shall again become a part of the Additional Space subject to the provisions of this Article upon either (i) the expiration or termination of the Space Lease or (ii) six (6) months after the date of an Offer Notice if Landlord is unable, within such period of time, to execute a Space Lease for the space subject to the Offer Notice. (e) An election by Tenant under this Article shall be irrevocable. (f) As used herein, the term "Refusal Period" shall mean and refer to the period commencing on the Commencement Date and expiring upon the earlier of (i) the date on which Tenant's rights under this Article with respect to the Additional Space are terminated pursuant to subparagraphs (b) and (c) hereof or (ii) the commencement of the last year of the Term of this Lease (as it may be extended by the Renewal Terms). (g) As used herein, the term "Additional Space" shall mean and refer to all of the Rentable Area of the Building excluding the Premises. (h) The rights granted Tenant hereunder are subject to the rights granted to others pursuant to leases in effect in the Building as of the date hereof. ARTICLE 31 MISCELLANEOUS Section 31.01. No Partnership. Nothing contained in this Lease shall be construed as creating a partnership or joint venture of or between Landlord and Tenant, or to create any other relationship between the parties hereto other than that of Landlord and Tenant. Section 31.02. Brokers. Landlord recognizes the Broker as the Broker under this Lease and shall pay the Broker a commission pursuant to a separate agreement between the Landlord and Broker. Landlord and Tenant each represent and warrant to the other that, except as provided above, neither of them has employed or dealt with any broker, agent or finder in carrying on the negotiations relating to this Lease. In the event of a breach by a party of their foregoing representation and warranty (the "Defaulting Party"), the Defaulting Party shall indemnify and hold the other party harmless from and against any claim or claims, damages or expenses (including any claims for brokerage or other commissions asserted by broker, agent or finder fees) which may arise as a result of such breach. -45- 50 Section 31.03. Severability. Every agreement contained in this Lease is, and shall be construed as, a separate and independent agreement. If any term of this Lease or the application thereof to any person or circumstances shall be invalid and unenforceable, the remainder of this Lease, or the application of such term to persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected. Section 31.04. Trial by Jury. Landlord and Tenant each hereby waive trial by jury in any action, proceeding or counterclaim brought by either of them against the other in connection with any matter arising out of or in any way connected with this Lease, the relationship of landlord and tenant hereunder, Tenant's use or occupancy of the Premises, or any claim of injury or damage. Section 31.05. Force Majeure. Whenever a period of time is herein prescribed for action to be taken by a party, the party shall not be liable or responsible for, and there shall be excluded from the computation for any such period of time, any delays due to strikes, riots, acts of God, shortages of labor or materials, war, governmental laws, regulations, or restrictions, or any other cause of any kind whatsoever which is beyond the reasonable control the party. However, the failure or inability to obtain or have funds required for a performance of a parties, obligation shall not be a basis of force majeure. Force Majeure shall not be applicable to Tenant's obligation to pay Rent hereunder as and when it is due and payable. Section 31.06. Captions. The article and section headings contained in this Lease are for convenience only and shall not enlarge or limit the scope or meaning of the provisions hereof. Words of any gender used in this Lease shall include any other gender, and words in the singular number shall be held to include the plural, unless the context otherwise requires. Section 31.07. Benefit and Burden. If there be more than one Tenant, the obligations hereunder imposed upon Tenant shall be joint and several, and all agreements and covenants herein contained shall be binding upon their respective heirs, personal representatives, successors, and, to the extent permitted under this Lease, assigns of the parties hereto. If there be more than one Landlord, the obligations hereunder imposed upon Landlord shall be joint and several, and all agreements and covenants herein contained shall be binding upon respective heirs, personal representatives, successors, and assigns. Section 31.08. No Representations by Landlord. Neither Landlord nor Landlord's agents or brokers have made any representations or promises with respect to the Premises or the Building except as herein expressly set forth and all reliance with respect to any representations or promises is based solely on those contained herein. No rights, easements, or licenses are acquired by Tenant under this Lease by implication or otherwise except as expressly set forth in this Lease. Section 31.09. Entire Agreement. This Lease sets forth the entire agreement between the parties and cancels all prior negotiations, arrangements, brochures, agreements, and understandings, if any, between Landlord and Tenant regarding the subject matter of this Lease. No amendment or modification of this Lease shall be binding or valid unless expressed in a writing executed by both parties hereto. -46- 51 Section 31.10. No Offer. The submission of this Lease to Tenant shall not be construed as an offer, nor shall Tenant have any rights with respect thereto unless Landlord executes a copy of this Lease and delivers the same to Tenant. Section 31.11. Authority. If Tenant signs as a corporation, each of the persons executing this Lease on behalf of Tenant represents and warrants that Tenant is a duly organized and existing corporation, that Tenant has been and is qualified to do business in the Commonwealth of Virginia, that the corporation has full right and authority to enter into this Lease, and that all persons signing on behalf of the corporation were authorized to do so by appropriate corporate actions. If Tenant signs as a partnership, trust, or other legal entity, each of the persons executing this Lease on behalf of Tenant represents and warrants that Tenant has complied with all applicable laws, rules, and governmental regulations relative to its right to do business in the Commonwealth of Virginia, that such entity has the full right and authority to enter into this Lease, and that all persons signing on behalf of the Tenant were authorized to do so by any and all necessary or appropriate partnership, trust, or other actions. If Landlord signs as a corporation, each of the persons executing this Lease on behalf of Landlord represents and warrants that Landlord is a duly organized and existing corporation, that Landlord has been and is qualified to do business in the Commonwealth of Virginia, that the corporation has full right and authority to enter into this Lease, and that all persons signing on behalf of the corporation were authorized to do so by appropriate corporate actions. If Landlord signs as a partnership, trust, or other legal entity, each of the persons executing this Lease on behalf of Landlord represents and warrants that Landlord has complied with all applicable laws, rules, and governmental regulations relative to its right to do business in the Commonwealth of Virginia, that such entity has the full right and authority to enter into this Lease, and that all persons signing on behalf of the Landlord were authorized to do so by any and all necessary or appropriate partnership, trust, or other actions. Section 31.12. Changes Requested by Lender. If, in connection with obtaining financing for the Building, any lender shall request reasonable modifications in this Lease as a condition for such financing, Tenant will not unreasonably withhold, delay, or defer its consent thereto, provided that such modifications do not increase the obligations of Tenant hereunder or diminish Tenant's rights hereunder or materially adversely affect either the leasehold interest hereby created or Tenant's use and enjoyment of the Premises. Section 31.13. Governing Law and Construction. This Lease shall be governed by and construed under the laws of the Commonwealth of Virginia. Printed parts of this Lease shall be as binding on a parties hereto as other parts hereof. Parts of this Lease which are written or typewritten shall have no greater force or effect than, and shall not control, parts which are printed, but all parts shall be given equal effect. Tenant declares that Tenant has read and understands all parts of this Lease, including all printed parts thereof. Should any provision of this Lease require judicial interpretation, it is agreed that the court interpreting or considering same shall not apply the presumption that the terms hereof shall be more strictly construed against a party by reason of the rule or conclusion that a document should be construed more strictly against the party who itself or through its agent prepared the same, it being agreed that all parties -47- 52 hereto have participated in the preparation of this Lease and that legal counsel was consulted by each party hereto before the execution of this Lease. Section 31.14. Exhibits. The Exhibits referred to in the Basic Lease Information are by this reference incorporated fully herein. The term "this Lease" shall be considered to include all such Exhibits. Section 31.15. Landlord's Liability. Anything contained in this Lease to the contrary notwithstanding, Tenant agrees that Tenant shall look solely to the estate and property of Landlord in the Building and the land upon which is situated for the collection of any judgment or other judicial process requiring the payment of money by Landlord for any default or breach by Landlord under this Lease, subject, however, to the prior rights of any mortgagee or lessor of the Building and land upon which the Building is situated. No other assets of Landlord or any partners, shareholders, or other principals of Landlord shall be subject to levy, execution or other judicial process for the satisfaction of Tenant's claim. Section 31.16. Use of Name of Building. Tenant shall not, without prior written consent of Landlord, use the name of the Building for any purpose other than as the address of the business to be conducted by Tenant on the Premises, and Tenant shall not-do or permit the doing of anything in connection with Tenant's business or advertising which in the reasonable judgment of Landlord may reflect unfavorably on Landlord or the Building or confuse or mislead the public as to any apparent connection or relationship between Tenant and Landlord, the Building or the land upon which it is situated. Section 31.17. Time of Essence. Time is of the essence in this Lease for the Landlord and Tenant. EXECUTED as of the date first written above. LANDLORD: HYATT PLAZA LIMITED PARTNERSHIP a Virginia limited partnership By: Fair Lakes Hyatt Limited Partnership, a Virginia limited partnership, its general partner By: Fair Lakes of Virginia, Inc. a Virginia corporation By: [SIG] ----------- Its: ------------------------------------- TENANT: -48- 53 AMERICAN MANAGEMENT SYSTEMS, INC. a Delaware corporation By: /s/ Frank A. Nicolai ------------------------------------- Its: Exec. VP, Secretary & Treasurer ------------------------------------- [THE FOLLOWING PAGES INCLUDE AS EXHIBIT A FLOOR PLANS OF THE PREMISES.] -49- 54 EXHIBIT "B" TO LEASE DATED AUGUST 12, 1993 BETWEEN HYATT PLAZA LIMITED PARTNERSHIP A VIRGINIA LIMITED PARTNERSHIP, (LANDLORD) AND AMERICAN MANAGEMENT SYSTEMS, INC. A CORPORATION, (TENANT) LEASEHOLD IMPROVEMENTS This Exhibit "B" is attached to and made a part of that certain Office Lease Agreement dated August 12, 1993 (the "Lease"), between HYATT PLAZA LIMITED PARTNERSHIP ("Landlord"), and AMERICAN MANAGEMENT SYSTEMS, INC. ("Tenant"). The terms used in this Exhibit that are defined in the Lease shall have the same meanings as provided in the Lease. The purpose of this Exhibit "B" is to set forth the relative rights and obligations of Landlord and Tenant with respect to the construction and installation of the initial tenant improvements in the Premises. A. DEFINITIONS 1. "Existing Improvements" means all improvements existing in the Premises that are more particularly shown on Exhibit B Schedule 1 attached hereto and incorporated herein. 2. "Contractor" means the person or firm from time to time selected by Tenant (pursuant to Paragraph D(3) hereof) to install the Leasehold Improvements in the Premises. 3. "Leasehold Improvements" shall mean the aggregate of improvements to the Premises required by the Approved Plan. 4. "Tenant's Architect" shall mean the architect or space planner designated by Tenant and approved by Landlord to prepare the plans and specifications for the Leasehold Improvements. 5. "Approved Plan" shall mean the plan for Leasehold Improvements approved by Landlord and Tenant pursuant to Paragraph D.4. hereof. B. GENERAL PROVISIONS 1. Unless otherwise agreed to in writing by Landlord and Tenant, all work involved in the design and construction of the Leasehold Improvements shall be carried out by Tenant, Tenant's Architect and Tenant's Contractor. Each party shall cooperate with the other to promote the B-1 55 efficient and expeditious completion of such work so that occupancy of each phase of the Premises may occur when required by Section 3.01 of the Lease. 2. As of the date of execution of this Lease, the Premises are improved with the Existing Improvements. All costs associated with the design and construction of the Premises pursuant to an Approved Plan (including any demolition to the Existing Improvements) shall be borne by Tenant. As more particularly set forth in the Lease, Landlord has granted to Tenant a Tenant Allowance. The Tenant Allowance will be made available to Tenant in monthly installments. Tenant shall, on a monthly basis, submit to Landlord a statement setting forth the expenditures made by Tenant during the preceding month with respect to the Leasehold Improvements. The statement shall be accompanied by lien waivers from persons paid during the previous month and invoices or receipts evidencing the amount Tenant has requested Landlord to disburse from the Tenant Allowance. In such monthly statement, Tenant shall designate which payments it desires the Landlord to make directly to the billing party. Provided there is no Event of Default, Landlord shall, within ten (10) days after its receipt of Tenant's monthly statement, disburse the amount requested. Should the cost of the Leasehold Improvements exceed the Tenant Allowance, then such excess shall be paid by Tenant. C. DESIGN 1. Tenant may draw from the Tenant Allowance the cost of all design services (including all necessary architectural, mechanical and electrical drawings) required for the Approved Plan. 2. The design, construction, and installation of the Leasehold Improvements shall conform to the requirements of applicable building, plumbing, and electrical codes and the requirements of any authority having jurisdiction over, or with respect to, such work. 3. All architectural, mechanical, and electrical plans and specifications for the Leasehold Improvements must be approved by Landlord. Any changes in the Approved Plans must also be approved by Landlord. Tenant shall not be permitted to modify the Building in any way, including but not limited to the structural, mechanical, and electrical systems, except as approved by Landlord on the Approved Plan. No alterations by Tenant to the Leasehold Improvements shall be allowed at any time except as provided in the Lease. D. PROCEDURES FOR COMPLETION OF LEASEHOLD IMPROVEMENTS The following procedures shall be followed in completing the Leasehold Improvements. 1. Prior to commencing construction of any Phase, Tenant shall prepare and submit to Landlord (for its information) a construction schedule. 2. Tenant's Architect shall complete working drawings and specifications and submit the same to Tenant and Landlord approval. Within five (5) business days after their receipt of such working drawings and specifi- B-2 56 cations, each party shall notify the Tenant's Architect and the other party in writing as to whether it approves or disapproves such working drawings and specifications. Should the working drawings and specifications (or parts thereof) be disapproved by either party, the party, in its notice of disapproval, shall specify, in reasonable detail, the reasons for its disapproval. The Tenant's Architect will revise the material and resubmit the same to Landlord and Tenant for their review and approval. Within five (5) days after their receipt of the revised material, each party shall notify the other and the Tenant's Architect in writing as to whether it approves or disapproves of the revised material. The foregoing process will be repeated (within the time periods permitted) until such time as both Landlord and Tenant have approved the working drawings and specifications. Upon approval of the working drawings and specifications, they will be deemed to be the "Approved Plan" for the phase in question. 3. Tenant shall select the general contractor (the "Contractor") who will perform the Leasehold Improvements. Tenant's selection of the Contractor shall be subject to Landlord's written approval, which approval shall not be unreasonably withheld, conditioned or delayed. E. RIGHT AND OBLIGATIONS OF LANDLORD 1. Landlord is permitted to make periodic inspections of the Premises during construction provided that such inspections are made during reasonable business hours. Tenant shall not be liable for any damage or injury sustained by Landlord, or any of Landlord's agents, representatives or employees arising from Landlord's entry upon the Premises during the construction of the Leasehold Improvements. 2. Whenever this Exhibit requires an act by Tenant or a plan, contract or other construction related document related to the Leasehold Improvements (the "Construction Document"), to be approved by Landlord, such approval shall not be unreasonably withheld, conditioned or delayed. The failure of Landlord to notify Tenant within the time period specified (or if no period is specified within five (5) business days after Tenant's request for Landlord's approval), shall constitute Landlord's approval of the Construction Document in question. Whenever Landlord withholds its approval, Landlord shall provide Tenant with an explanation of why the approval is being withheld and/or what corrective actions must be taken so that Landlord may approve the Construction Document in question. Each party agrees to use good faith efforts to resolve any conflict or disagreement. F. TENANT'S RIGHTS In its performance of the Leasehold Improvements, Tenant shall have the right to take such actions and utilize such facilities as are customarily and reasonably taken and utilized in the construction of comparable space, subject to such customary and reasonable restrictions as Landlord may adopt in the prudent management of the Building. Tenant shall not be charged for the use of utilities, elevators, loading docks, and similar Building facilities in the construction of the Leasehold Improvements. No fees of any manner shall be charged by Landlord for its review of plans and drawings or any supervision or inspection of the Leasehold Improvements. Landlord shall cause any of its contractors working in the Building to work in harmony with Tenant and the Contractor, and Landlord shall not knowingly permit any other contractors to interfere with the performance of the Leasehold Improvements. B-3 57 [THE DOCUMENT INCLUDES AS EXHIBIT C A SQUARE FOOT CHART SHOWING VARIOUS MEASURES OF USABLE SPACE ON EACH FLOOR.] B-4 58 EXHIBIT "D" TO LEASE DATED August 12, 1993 BETWEEN HYATT PLAZA LIMITED PARTNERSHIP (Landlord) and AMERICAN MANAGEMENT SYSTEMS, INC. (Tenant) CLEANING SPECIFICATIONS SPECIFICATIONS AREAS: The entire premises, including all office space, entrance lobby(ies), basement areas, loading platforms), receiving areas, landings/steps, public halls, stairways, lavatories, passageways and elevator cabs. PART A - DAILY SERVICES 1. Toilet Rooms Rest rooms are to receive complete cleaning and sanitation each night according to the specifications listed below: a. Commodes and Urinals: Commodes shall be washed inside and outside including under the lips of each bowl. All seats shall be washed. This work shall be performed using an approved disinfectant cleanser. All bright metal shall be cleaned and, dry polished. Deodorant blocks shall not be used in the urinals. b. Washbasins: Washbasins shall be washed inside and outside using an approved disinfectant cleanser. All bright metal fixture units and plumbing shall be dry polished. c. Stall Partitions: All stall partitions shall be damp cleaned using an approved disinfectant cleanser. Special attention shall be given to urinal partitions. d. Entrance Doors: All entrance doors, including stops, jambs, and frames shall be cleaned. e. Mirrors and Lights: All mirrors and lights immediately above mirrors shall be cleaned. Burned out lights shall be reported to the maintenance department. f. Couches and Chairs: Lather or vinyl couches and chairs shall be damp cleaned. All vanity chairs, stools and other furniture shall be treated in a like manner. D-1 59 g. Sanitary Napkin Disposal Containers: All sanitary napkin containers shall be emptied, damp cleaned with an approved disinfectant cleanser and provided with a new paper bag liner daily. h. Installation of Supplies: All supplies such as toilet tissue, paper towels, liquid hand soap and bar soap is to be replenished. Insure that proper liquid soap is used in dispensers to avoid malfunction (dilute with water if necessary to prevent clogging). Periodically, clean operating mechanisms and replace liquid soap supply in each dispenser to insure proper operation. i. Mosaic Floors: - Pick up loose paper and trash - Sweep all floors - Wet mop floors, using an approved disinfectant cleanser j. Walls: Wash/clean walls around soap dispensers, towel containers, and light switches as required to maintain clean/bright appearance. k. Traps and Floor Drains: Shall be maintained free from odor at all times. Periodically, water shall be poured down through these traps/floor drains to insure vapor seal. NOTE: No harsh or abrasive cleaner shall be used without consulting the Property Manager. 2. Room Cleaning Executive Offices - Private Offices - Semi-Private Offices - Reception Areas - Conference Rooms - General Offices The areas stated above are to receive complete general cleaning daily according to the specifications listed below. a. Wastepaper and Trash Containers: All trash containers shall be emptied and returned to original locations. Plastic liners shall be used in trash containers and changed as necessary for appearance and sanitation. Trash containers shall be periodically washed, for appearance and sanitation. All trash collected shall be deposited in exterior bulk trash containers provided by the Property Manager. Doors on these containers shall be kept closed when not in use. Any spills occurring during emptying of trash shall be cleaned up immediately (inside or outside), and related stains shall be washed/shampooed as required. b. Entrances to Executive Offices and Entrances to of Office Areas on Various Floors: All glass doors, plate glass side panels and mirrors, including metal frames, stops, jambs shall be cleaned as necessary. c. Ash Trays: All ash trays shall be emptied. Ash trays shall then be wiped clean with a damp cloth to remove stains and odors. D-2 60 d. Desks and Chairs: Wood desks shall be thoroughly dusted with a treated dust cloth and oiled/waxed as required. Metal desks shall be damp wiped as necessary to remove spots and stains, including front and side vertical surfaces. All glass desk tops will be damp cleaned. Papers on desks shall not be disturbed. All chairs shall be dusted or vacuumed from top to bottom, as required. e. File and Storage Cabinets: All file and storage cabinets shall be thoroughly dusted with a treated dust cloth. Cabinets lined in a row shall be dusted along the horizontal and vertical surface of each cabinet. Spill stains shall be damp cleaned when required. f. Tables and Lamps: Tables shall be treated in a like manner as desks. Lamps shall be dusted thoroughly, using a treated dust cloth. When dusting lamp shades, be certain that cloth is not laden with dust. Cloth lamp shades shall be vacuumed with a soft brush type tool. g. Hand Dust/Clean the following using a treated dust cloth: - Window Sills - Pictures and Frames - Counters - Radiator and Fan Coil Unit enclosures (damp clean as required) - Ledges and Shelves under six feet - Doors, Jambs and Stops (particularly along top/horizontal surface) - Pushplates and Kickplates - Coat rack and trees - Telephones, all types including office and telephones in booths - Panel boxes, Fire extinguishers and cabinets, and fire hose cabinets/enclosures h. Vinyl (Resilient) Tile Floors: All resilient tile floors shall be dusted with a treated dust mop. All spillage will be removed, including damp mop cleaning when required. (Spray buff floor, using a commercial floor polishing machine, synthetic fiber pad and an approved acrylic polymer finish as required to maintain gloss). i. Carpets: All carpets shall be thoroughly vacuumed. Special attention will be paid to all spills, spots and adherents for removal. Spot clean carpeting as required. j. Glass Partitions: All glass partitions will be washed to remove fingermarks and smudges. 3. Other Cleanable Areas Main Entrance Lobby - Elevators - Corridors - Snack Bars Stairways, Landings, Loading Platforms, and Receiving Rooms The areas listed above are to receive complete daily cleaning as prescribed in paragraphs A I and 2 above and specialty cleaning according to the specifications listed below. D-3 61 a. Main Entrance Lobby: All hard surface floors shall be thoroughly cleaned and non-slip floor finish applied as necessary. (Spray buff floor, using a commercial floor polishing machine, synthetic fiber pad and an approved acrylic polymer finish as required to maintain gloss). All entrance door glass shall be cleaned. Area mats shall be removed and thoroughly cleaned and returned to their original location. Carpet areas shall be vacuumed and spot cleaned as necessary. b. Elevators: Interior walls and ceilings shall be dusted with a treated dust cloth and spot cleaned as required. All carpets shall be vacuumed and stains removed when possible. Telephone boxes shall be checked and cleaned of any trash/ashes, etc. c. Corridors/Snack Bars: (1) Carpeted areas shall be vacuumed and all stains removed when possible. Resilient flooring shall be swept and damp mopped to remove spillage. (Spray buff floor, using a commercial floor polishing machine, synthetic fiber pad and an approved acrylic polymer finish as required to maintain gloss). (2) All refuse, trash and garbage from snack bars and vending machine areas shall be collected and removed from the building. Cans used for collection of food remnants shall be periodically washed inside and out. d. Water Fountains: To insure a clean, health condition at the water fountains, the dispensing area shall be washed, cleaned and polished. e. Stairways: Stair landings and steps shall be swept or vacuumed. Hand railing, ledges, grilles, fire apparatus and doors shall be dusted. Spills shall be wiped up daily. Spray buff resilient flooring as required to maintain gloss. f. Outside Entrances: Landings and steps shall be swept. Both sides of entrance glass shall be cleaned. Kick plates and push bars shall be cleaned and polished. g. Loading Platforms/Receiving Rooms: Loading dock areas, platforms and receiving rooms shall be swept daily and damp mopped as required. PART B - WEEKLY SERVICES 1. Toilet Rooms Damp clean and dry polish tile walls. 2. Room Cleaning a. Vertical Surfaces: (1) Wood wall paneling in Executive Offices shall be dusted using a treated dust cloth. D-4 62 (2) Dust vertical surfaces of cabinets, files, etc. (3) All woodwork, doors, walls (including stairwells (,shall be spot cleaned to remove smudges/spills etc. b. Other (1) Air conditioning return air grills shall be cleaned (vacuumed if necessary). (2) Vacuum all upholstered furniture and clean any leather furniture with a treated cloth. 3. Other Cleanable Areas Stairways and Landings: All stairways and landings shall be damp mopped weekly. Dust light fixtures and exposed pipes in stairwells. PART C - MONTHLY SERVICES 1. Toilet Rooms Dust all high areas and vacuum exhaust grills. 2. Rooms Cleaning a. Vertical surfaces and under surfaces (knee wells, chair rungs, table legs, etc.,) shall be thoroughly dusted and all glass in doors, partitions, pictures, and bookcases shall be damp-wiped. Dust walls and horizontal surfaces over six feet high. b. Venetian Blinds: Venetian blinds will be dusted in place with a treated dust cloth or venetian blind tool. 3. Other Cleanable Areas Elevators: Carpet shall be lifted where appropriate, and flooring swept and damp mopped. D-5 63 EXHIBIT "E" TO LEASE DATED August 12, 1993 BETWEEN HYATT PLAZA LIMITED PARTNERSHIP (Landlord) and AMERICAN MANAGEMENT SYSTEMS, INC. (Tenant) HVAC SPECIFICATIONS The Building HVAC system consists of floor-by-floor variable air volume air handling units. The typical floor unit provides nominal cooling capacity of approximately 78 tons. The air handling units are served by two cooling towers with a total nominal tonnage of 1,120. There is a spare capacity in the condenser water system of approximately 300 tons to more than handle any supplemental cooling that may be required within the building for special areas, such as computer rooms or training labs. The air is distributed throughout each floor through VAV boxes with maximum perimeter zones of 1,600 CFM and maximum interior zones of 1,800 CFM. Heat is provided through electric reheat coils in the VAV boxes, which is supplemented in certain areas by baseboard heat as well. The Building is controlled by the EMS which is designed to turn equipment off and on in the most energy and cost efficient manner. The system also provides for after hours usage by each tenant through an access code that can be implemented via a touch tone phone. Subject to any limitations imposed by governmental authorities having jurisdiction thereover, the HVAC equipment shall maintain an indoor temperature of 76 degrees FDB in the summer, so long as the Washington National Airport outdoor temperature is below 93 degrees FDB and 76 degrees FWB, and of 70 degrees FDB in the winter, so long as the Washington National Airport outdoor temperature is above 14 degrees FDB. The Building system also contains toilet exhaust, general exhaust, smoke exhaust and elevator and stairwell pressurization systems to meet local fire codes. E-1 64 EXHIBIT "F" TO LEASE DATED August 12, 1993 BETWEEN HYATT PLAZA LIMITED PARTNERSHIP (Landlord) and AMERICAN MANAGEMENT SYSTEMS, INC. (Tenant) BARRIER REMOVAL PROGRAM
- ------------------------------------------------------------------------------- PLANNED ELEMENT BARRIER LOCATION CORRECTIONS - ------------------------------------------------------------------------------- 2.0 Insufficient amount and/or Parking Lot At next planned lot style of accessible parking resurfacing/restriping spaces - ------------------------------------------------------------------------------- 3.0 Curb ramp needs detectable East Footnote 1 warnings Entrance - ------------------------------------------------------------------------------- 4.0 Inaccessible entrance needs West Footnote 1 directional signage Entrance - ------------------------------------------------------------------------------- 8.0 Floor buttons need braille All Cabs Footnote 1 designations - ------------------------------------------------------------------------------- 10.0 Door closers do not meet ADA Rest Rooms, In process during requirements for maximum Corridor 1993 opening force Doors - ------------------------------------------------------------------------------- 12.3 Urinals mounted above All Rest Footnote 1 maximum height (24" vs. 17") Rooms - ------------------------------------------------------------------------------- 15.0 No AV devices in rest rooms All Rest Footnote 1 Rooms - -------------------------------------------------------------------------------
F-1 65
- ---------------------------------------------------------------------------- PLANNED ELEMENT BARRIER LOCATION CORRECTIONS - ---------------------------------------------------------------------------- 17.0 Public telephone needs First Floor At next scheduled volume controls and signage Corridor replacement of per ADA standard wall finishes in this area ---------------------------------------------------------------- Public telephone mounted First Floor At next scheduled above maximum allowable Corridor replacement of height wall finishes in this area - ----------------------------------------------------------------------------
Footnote 1: All items with this footnote are being remedied gradually, taking into consideration priority of barrier as well operational and budget considerations. It is the intent to have all these barriers eliminated by not later than 1995. F-2 66 EXHIBIT "G" TO LEASE DATED August 12, 1993 BETWEEN HYATT PLAZA LIMITED PARTNERSHIP (Landlord) and AMERICAN MANAGEMENT SYSTEMS, INC. (Tenant) RULES AND REGULATIONS This Exhibit "G" is attached to and made a part of that Office Lease Agreement dated August 12, 1993 (the "Lease"), between HYATT PLAZA LIMITED PARTNERSHIP ("Landlord"), and AMERICAN MANAGEMENT SYSTEMS, INC. ("Tenant"). Unless the context otherwise requires the terms used in this Exhibit that are defined in the Lease shall have the same meanings as provided in the Lease. The following rules and regulations have been formulated for the safety and well-being of all tenants of the Building and to ensure compliance with governmental and other requirements. Any continuing violation of these rules and regulations by Tenant shall constitute a Default by Tenant under the Lease. Landlord may, upon request of any Tenant, waive compliance by such Tenant with any of the following rules and regulations, provided (i) no waiver shall be effective unless signed by Landlord; (ii) any such waiver shall not relieve such Tenant from the obligation to comply with such rule or regulation in the future unless otherwise agreed to by Landlord; (iii) no waiver granted to any Tenant shall relieve any other tenant from the obligation of complying with these rules and regulations, unless such other tenant has received a similar written waiver from Landlord; and (iv) any such waiver by Landlord shall not relieve Tenant from any liability to Landlord for any loss or damage occasioned as a result of Tenant's failure to comply with any rule or regulation. 1. Sidewalks, plaza areas, entrances, courts, elevators, stairways, corridors and all other public areas of the Building shall not be obstructed or encumbered by any tenant or used for any purpose other than ingress and egress to and from the premises of such tenant. 2. No awnings or other projections shall be attached to the outside wall or windows of the Building. No curtains, blinds, shades, or screens (other than those furnished as part of the G-1 67 Leasehold Improvements or approved by Landlord as part of an Alteration) shall be attached to or hung in, or used in connection with, any window or door of the premises of any tenant. 3. Except as otherwise permitted by Sections 24.01, 24.02 and 24.04 of the Lease, no showcases or other articles shall be put in front of or affixed to any part of the exterior of the Building, nor placed in the corridor, or other public areas of the Building. 4. Plumbing fixtures and appliances shall be used only for the purposes for which they were constructed, and no sweepings, rubbish, rags, or other substances (including, without limitation, coffee grounds) shall be thrown therein. The cost of repairing any stoppage or damage resulting from misuse of such fixtures by a tenant or such tenant's servants, employees, agents, visitors, or licensees, shall be paid by such tenant. 5. No tenant shall bring or keep, or permit to be brought or kept, any inflammable, combustible, or explosive fluid, materials, chemical, or substance in or about its premises; however, substances used in modern offices may be brought into and stored (in reasonable quantities) in the Premises. 6. Except for paintings or other typical wall hangings, no tenant shall mark, paint, drill into, or in any way deface, any part of the Building or its premises. No boring, cutting, or stringing of wires shall be permitted unless approved as part of an Approved Plan. 7. No cooking shall be done or permitted in the Building by any tenant, except for that which is consistent with an employee kitchen within the premises. No tenant shall cause or permit any unusual or objectionable odors to emanate from its premises. 8. Neither the whole nor any part of the premises of any tenant shall be used for manufacturing, for the storage of. merchandise, or for the sale or exchange of merchandise, goods, or property of any kind. 9. Tenants shall not construct, maintain, use, or operate within their respective premises any electrical device, wiring, or apparatus in connection with a loud-speaker system or other sound system, except as reasonably required as part of a communication system approved prior to the installation thereof by Landlord. No such loud-speaker system shall be constructed, maintained, used or operated outside of the premises. 10. No tenant shall make, or permit to be made, any unseemly or disturbing noises or disturb or interfere with other tenants or occupants of the Building or neighboring buildings whether by the use of any musical instrument, radio, television, or other audio device, whistling, singing, or in any other way. Nothing shall be thrown out of any doors, windows, or any passageways. 11. Except as permitted by the Lease, no additional locks or bolts of any kind shall be placed upon any of the doors or windows by and tenant, nor shall any changes be made in any existing locks or the locking mechanisms therein, without landlord's approval. The doors leading to the corridors or main halls shall be kept closed during business hours except as they may G-2 68 be used for ingress or egress. Each tenant shall, upon the termination of its tenancy, restore to Landlord all keys of offices and storage and toilet rooms either furnished to, or otherwise procured by, such tenant. In the event of the loss of any keys so furnished, such tenant shall pay to Landlord the replacement cost thereof. 12. The normal hours of operation of the Building shall be 7:00 a.m. to 6 p.m. Monday through Friday, and 8 a.m. to 1 p.m. on Saturdays, customary legal holidays excluded. 13. No tenant shall use or occupy or permit any portion of its premises to be used or occupied as an employment bureau or for the storage, manufacture, or sale of liquor, narcotics, or drugs. Tenants may, however, have small quantities of liquor or beer used for entertaining purposes. No tenant shall engage or pay any employees in the Building, except those actually working for such tenant in the Building, nor advertise for laborers giving an address at the Building. 14. Landlord reserves the right to exclude from the Building at all times any person who is not known or does not properly identify himself to the Building management or watchman on duty, Landlord may at its option, require all persons admitted to or leaving the Building between the hours of 6 p.m. and 7:00 a.m., Monday through Friday, and at any hour on Saturdays, Sundays, and legal holidays, to register. Each Tenant shall be responsible for all persons for whom it authorizes entry into the Building, and shall be liable to Landlord for all acts or omissions of such persons. 15. Each tenant, before closing and leaving its premises at any time, shall lock all entrance doors and turn off all lights and electrical appliances. 16. No premises shall be used, or permitted to be used, for lodging or sleeping or for any immoral or illegal purpose. 17. Landlord's employees shall not perform, and shall not be requested by any tenant to perform, any work outside of their regular duties, unless under specific instructions from the office of Landlord. The requirements of tenants will be attended to only upon application to Landlord, and any such special requirements shall be billed to tenants (and paid when the next installment of rent is due) in accordance with the schedule of charges maintained by Landlord from time to time or at such charge as is agreed upon in advance by Landlord and such tenant. 18. Canvassing, soliciting, and peddling in the Building are prohibited, and each tenant shall cooperate in seeking their prevention. 19. Except for trained animals assisting persons with disabilities, no animals of any kind shall be brought into or kept about the Building by any tenant. 20. No vending machines for commercial or public use shall be permitted to be placed or installed in any part of the Building by any Tenant. Tenant may have vending machines in kitchen or other non-public areas of the Premises and/or employee kitchen areas so long as (i) such machines are not available for use by the general public; (ii) Landlord has approved such G-3 69 machines and (iii) the machines are not visible to the exterior of the Premises or the Building. Landlord reserves the right to place or install vending machines in any of the public areas of the Building. 21. No plumbing or electrical fixtures shall be installed by any Tenant without the written consent of Landlord. 22. Bicycles, motorcycles, or any other type of vehicle shall not be brought into the lobby or elevators of the Building or into the premises of any tenant. 23. Landlord has the right to evacuate the Building in event of emergency or catastrophe. 24. Landlord reserves the right to rescind any of these Rules and Regulations and make such other and further rules and regulations as in the judgment of Landlord shall from time to time be needed for the safety, protection, care, and cleanliness of the Building, the operation thereof, the preservation of good order therein, and the protection and comfort of its tenants, their agents, employees, and invitees, which Rules and Regulation when made and notice thereof given to a Tenant shall be binding upon him in like manner as if originally herein prescribed. G-4 70 EXHIBIT "H" TO LEASE DATED August 12, 1993 BETWEEN HYATT PLAZA LIMITED PARTNERSHIP (Landlord) and AMERICAN MANAGEMENT SYSTEMS, INC. (Tenant) SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT THIS AGREEMENT is dated the _____ day of _____________, 19__, and is made between THE AETNA CASUALTY AND SURETY COMPANY or one or more of its affiliates or designees ("Mortgagee"), and _________________________________ ________ ("Tenant"). RECITALS: (a) Tenant has entered into a certain lease ("Lease") dated _________________ with _______________________________________ as lessor ("Landlord"), covering certain premises known as ____________________________ _____________ and located in ________________________________________________ ___ (the "Demised Premises"); and (b) Mortgagee has agreed to make a mortgage loan in the amount of ___________________________________ Dollars ($________) (the "Mortgage") to the Landlord, secured by the Demised Premises, and the parties desire to set forth their agreement herein. NOW, THEREFORE, in consideration of the Demised Premises and of the sum of ONE DOLLAR ($1.00) by each party in hand paid to the other, the receipt of which is hereby acknowledged, the parties hereby agree as follows: 1. Said Lease is and shall be subject and subordinate to the Mortgage insofar as it affects the real property of which the Demised Premises for a part, and to all renewals, modifications, consolidations, replacements and extensions thereof, to the full extent of amounts secured thereby and interest thereon. 2. Tenant agrees that it will attorn to and recognize any purchaser at a foreclosure sale under the Mortgage, any transferee who acquires the Demised Premises by deed in lieu of foreclosure, and the successors and assigns of such purchaser(s), as its landlord for the unexpired H-1 71 balance (and any extensions, if exercised) of the term of said Lease upon the same terms and conditions set forth in said Lease. 3. If it becomes necessary to foreclose the Mortgage, Mortgagee will not terminate said lease nor join Tenant in summary or foreclosure proceedings so long as Tenant is not in default under any of the terms, covenants, or conditions of said Lease. 4. If Mortgagee succeeds to the interest of Landlord under the Lease, Mortgagee shall not be: a. liable for any act or omission of any prior landlord (including Landlord); or b. liable for the return of any security deposit; or c. subject to any offsets or defenses which Tenant might have against any prior landlord (including Landlord); or d. bound by any rent or additional rent which Tenant might have paid for more than the current month to any prior landlord (including Landlord); or e. bound by any amendment or modification of the Lease made without its consent. 5. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their successors and assigns. 6. Tenant agrees to give Mortgagee, by registered mail, a copy of any notice of default served upon the Landlord, provided that prior to such notice Tenant has been notified in writing (by way of Notice of Assignment of Rents and Leases, or otherwise), of the address of such Mortgagee. Tenant further agrees that if Landlord shall have failed to cure such default within the time provided for in this Lease, then the Mortgagee shall have an additional sixty (60) days within which to cure such default or if such default cannot be cured within that time, then such additional time as may be necessary to cure such default shall be granted if within such sixty (60) days Mortgagee has commenced and is diligently pursuing the remedies necessary to cure such default (including, but not limited to, commencement of foreclosure proceedings, if necessary to effect such cure), in which event the Lease shall not be terminated while such remedies are being so diligently pursued. H-2 72 IN WITNESS WHEREOF, the parties hereto have executed these presents as of the day and year first above written. Mortgagee: - --------------------------------- ----------------------------- Date By: ------------------------------------ Its: Address: c/o AEtna Realty Investors, Inc. 242 Trumbull Hartford, CT 06156 Tenant: - --------------------------------- ----------------------------- Date By: ------------------------------------ Its: H-3 73 FIRST AMENDMENT TO OFFICE LEASE AGREEMENT THIS FIRST AMENDMENT TO OFFICE LEASE AGREEMENT (the "First Amendment") is made and entered into this day ___ of _________, 1994 (the "Effective Date"), by and between HYATT PLAZA LIMITED PARTNERSHIP, a Virginia limited partnership ("Landlord"), and AMERICAN MANAGEMENT SYSTEMS, INC., a Delaware corporation ("Tenant"), with reference to the following: RECITALS: A. Pursuant to an Office Lease Agreement dated August 12, 1993, by and between Landlord and Tenant (the "Lease"), Landlord has leased to Tenant certain premises located at 12701 Fair Lakes Circle, Fairfax, Virginia, as more particularly described therein. All capitalized terms used herein, unless specifically defined, shall have the same meaning and definition as used in the Lease. B. Landlord and Tenant have agreed to amend the certain terms and provisions of the Lease as hereinafter set forth. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Landlord and Tenant agree as follows: 1. Under Tenant's Right of First Refusal option, Landlord and Tenant have agreed to expand the Premises to include an additional 7,926 square feet of Rentable Area located on the ninth (9th) floor of the Building (the "Additional Space"), as more particularly shown on Exhibit "A" attached hereto and made a part hereof by this reference. Base Rent for the Additional Space ("Additional Space Base Rent") shall be at the rate of $16.50 per square foot of Rentable Area, or the sum of $130,779.00 per year ($10,898.25 per month), adjusted as hereinafter set forth. Tenant shall lease the Additional Space in its "as is" and "where as" condition, and Landlord shall have no obligation to make any improvements as a condition of Tenant's acceptance thereof. Tenant's lease of the Additional Space shall commence on May 1, 1995 (the "Additional Space Commencement Date") and shall terminate on April 30, 2000 (the "Additional Space Expiration 74 Date"). Provided, however, that Tenant shall have the right to commence renovation of the Additional Space prior to the Additional Space Commencement Date with Landlord's prior written approval. Any entry upon the Additional Space prior to the Additional Space Commencement Date shall be subject to all of the terms and conditions of the Lease, as amended; however, Tenant's obligations to pay Additional Space Rent hereunder shall commence on the Additional Space Commencement Date. Tenant's renovation of the Additional Space shall be at Tenant's sole expense, and in accordance with the terms and provisions of Exhibit "B" to the Lease. On or before the Additional Space Expiration Date, Tenant shall surrender possession of the Premises to Landlord in accordance with the terms of the Lease. 2. Commencing on January 1, 1996 and thereafter throughout the Additional SpaceTerm (as hereinafter defined) Tenant shall pay on a monthly basis, without demand, as Additional Rent for the Additional Space, Tenant's Proportionate Share of the amount by which Operating Expenses exceed the Base Operating Expenses. The Base Year with respect to the Additional Space shall be 1995. 3. (a) As used in the following paragraphs, the following terms shall be deemed to refer to, and shall have the following meanings: (1) Consumer Price Index or CPI: The Consumer Price Index for All Urban Consumers (CPI-U) for Washington,D.C.-Md.-Va. All Items(1982-84=100),published by the Bureau of Labor Statistics, United States Department of Labor. (2) Base CPI: The most recently published Consumer Price Index as of the last day of the month immediately preceding the Additional Space Commencement Date. (3) CPI Adjustment Factor: Thirty percent (30%). (b) During the Additional Space Term, the Additional Space Base Rent shall be adjusted, pursuant to the terms of this Paragraph 2, on the first day of January of each calendar year after the Additional Space Commencement Date and on the first day of January annually thereafter during the term of this First Amendment. The dates described in this Paragraph 2 for computing the adjustment of Additional Space Base Rent are hereinafter sometimes referred to 75 collectively as "Rental Adjustment Dates" and singularly as a "Rental Adjustment Date". All adjustments to Additional Space Base Rent required by this Paragraph 2 shall be made as follows: (1)The Base CPI shall be subtracted from the CPI for the month immediately preceding a Rental Adjustment Date to determine the changes in the CPI for such period. (2)The number computed in (1) above shall be divided by the Base CPI to yield a percentage of increase in the CPI. (3)The percentage of increase computed in (2) above shall be multiplied by the CPI Adjustment Factor. (4)The Additional Space Base Rent (which amount shall remain constant for purposes of this calculation) shall be multiplied by the percentage computed in (3) above. (5)The number computed in (4) above shall be added to the Additional Space Base Rent set forth in (4) immediately above and the resulting sum will be adjusted rent (hereinafter the "Additional Space Adjusted Rent") to be paid by the Tenant to Landlord, in advance, without demand, in equal monthly installments, on the first day of each calendar month until the next Rental Adjustment Date. (c) In no event shall any adjustment made pursuant to this Paragraph 2 ever result in an increase in the Adjusted Rent by more than three percent (3%) of the Adjusted Rent in effect immediately prior to the applicable Rental Adjustment Date, nor shall any adjustment made pursuant to this Paragraph 2 ever result in a decrease in the Additional Space Adjusted Rent below the Additional Space Rent payable and in effect for the preceding calendar year. In the event of an adjustment which would otherwise cause a decrease in the Additional Space Adjusted Rent, the Rent payable hereunder in effect for the preceding year shall continue in effect until the next Rental Adjustment Date. Adjustments to Rent shall be effective on the first day of January each year. (d) If (i) a significant change is made in the number or nature (or both) of items used in determining the CPI, or (ii) the CPI shall be discontinued for any reason, the Bureau of Labor Statistics shall be requested to furnish a new index comparable to the CPI, together with 76 information which will make possible the conversion to the new index in computing the adjustment to Base Rent hereunder. If for any reason the Bureau of Labor Statistics does not furnish such an index and such information, Landlord and Tenant shall instead accept and use such other index or comparable statistics on the cost of living in the Washington, D.C. -Md. -Va. metropolitan area, that is computed and published by an agency of the United States or a responsible financial periodical of recognized authority. (e) Landlord shall provide Tenant with written notice of each adjustment pursuant to this Paragraph 2, which notice shall provide the basis upon which such adjustment has been calculated; provided, however, that if for any reason Landlord does not notify Tenant of the amount of such adjustment until after any Rental Adjustment Date, Tenant shall continue to pay the Additional Space Base Rent or Adjusted Rent, as the case may be, payable prior to the Rental Adjustment Date, and Tenant, within five (5) days following Landlord's delivery of written notice of such adjustment, shall pay to Landlord in a lump sum the amount of any increase in the Additional Space Base Rent resulting from such adjustment for all months in the existing calendar year prior to and including the month in which such notice of adjustment is received and during the remainder of such year Tenant shall pay to Landlord the Additional Space Adjusted Rent as set forth in such notice. 4. Tenant shall have the right to renew and extend the Additional Space Term (the "Additional Space Term") with respect to the Additional Space for one (1) Renewal Term (herein so called) upon and subject to the following terms and conditions: (a)Tenant may extend the Additional Space Term for one (1) Renewal Term of four (4) years (such Renewal Term commencing on May 1, 2000 and expiring concurrent with the Lease Term on February 29, 2004) by Tenant's giving written notice thereof to Landlord no later than twelve (12) months prior to the expiration of the original Additional Space Term. If Tenant does not exercise its rights to a Renewal Term in a timely manner, Tenant's failure shall conclusively be deemed a waiver of its rights to a Renewal Term. 77 (b) The exercise by Tenant of its rights to a Renewal Term must be made, if at all, by written notice executed by Tenant and delivered to Landlord on or before the date set forth above. Once Tenant shall exercise its rights to a Renewal Tenn, Tenant may not thereafter revoke such exercise. Tenant shall not have the right to exercise a Renewal Tenn if Tenant is in Default under the Lease, as amended, either at the time Tenant gives notice of its election or immediately prior to the commencement of the Renewal Term. (c) Tenant shall take the Additional Space "as is" for the Renewal Term and Landlord shall have no obligation to make any improvements or alterations to the Additional Space. (d) Base Rent per square foot of Rentable Area of the Additional Space for the first year of the Renewal Term shall be the current Base Rent, as adjusted, in effect on May 1, 2000. In no event shall the Additional Space Base Rent for the first year of the Additional Space Renewal Tenn be less than the Additional Space Base Rent in effect immediately prior to the expiration of the original Additional Space Term. (e) Subject to subparagraph (e) above, the leasing of the Additional Space for the Renewal Term shall be upon the same terms and conditions as are applicable for the original Additional Space Term, and shall be upon and subject to all of the provisions of the Lease, including, without limitations the obligation of Tenant to pay Tenant's Additional Rent under the Lease. 5. From and after the Additional Space Commencement Date until the Additional Space Expiration Date, the following terms used in the Lease shall have the following ascribed meanings: (a) Premises: Refers to the Rentable Area demised to Tenant by the Lease (set forth therein) and to the Additional Space demised to Tenant by this First Amendment, as more fully described and shown on the floor plan(s) attached as Exhibit "A" hereto. (b) Additional space: 7,926 square feet of Rentable Area located on the ninth (9th) floor of the Building, subject to adjustment pursuant to Paragraph 2 of this Amendment. 78 (c) Additional Space Base Rent: $130,779.00 per year ($10,898.25 per month), based on $16.50 per square foot of Rentable Area of the Premises, as adjusted. (d) Additional Space Base Year. 1995. (e) Tenant's Proportionate Share as to Additional Space: 3.14% subject to adjustment pursuant to Paragraph 2 of this First Amendment. 6. Except as expressly modified by this First Amendment, the Lease remains unchanged and in full force and effect. {Signatures appear on next page} IN WITNESS WHEREOF, Landlord and Tenant have executed this First Amendment as of the day and year first above written. LANDLORD: --------- HYATT PLAZA LIMITED PARTNERSHIP, a Virginia limited partnership By: Fair Lakes Hyatt Limited Partnership, a Virginia general partnership, its general partner By: Fair Lakes of Virginia, Inc., a Virginia corporation By: -------------------------------- Name: --------------------------- Its: ---------------------------- TENANT: ------- AMERICAN MANAGEMENT SYSTEMS, INC., a Delaware corporation By: -------------------------------- Name: --------------------------- Its: ---------------------------- 79 [THE FOLLOWING PAGE INCLUDES AS EXHIBIT A A FLOOR PLAN OF THE ADDITIONAL SPACE] 80 SECOND AMENDMENT TO OFFICE LEASE AGREEMENT THIS SECOND AMENDMENT TO OFFICE LEASE AGREEMENT (the "Second Amendment") is made and entered into this 1st day of November, 1994 (the "Effective Date"), by and between HYATT PLAZA LIMITED PARTNERSHIP, a Virginia limited partnership ("Landlord"), and AMERICAN MANAGEMENT SYSTEMS, INC., a Delaware corporation ("Tenant"), with reference to the following: RECITALS: A. Pursuant to an Office Lease Agreement dated August 12, 1993, by and between Landlord and Tenant, as amended by that certain First Amendment to Office Lease Agreement dated August 31, 1994 (collectively, the "Lease"), Landlord has leased to Tenant certain premises located at 12701 Fair Lakes Circle, Fairfax, Virginia, as more particularly described therein. All capitalized terms used herein, unless specifically defined, shall have the same meaning and definition as used in the Lease. B. Landlord and Tenant have agreed to amend the certain terms and provisions of the Lease as hereinafter set forth. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Landlord and Tenant agree as follows: 1. Under Tenant's Right of First Refusal option, Landlord and Tenant have agreed to expand the Premises to include an additional 5,175 square feet of Rentable Area located on the tenth (10th) floor of the Building (the "Additional Space"), as more particularly shown on Exhibit "A" attached hereto and made a part hereof by this reference. Base Rent for the Additional Space ("Additional Space Base Rent") shall be at the rate of $16.50 per square foot of Rentable Area, or the sum of $85,387.50 per year ($7,115.63 per month), adjusted as hereinafter set forth. Tenant shall lease the Additional Space in its "as is" and "where as" condition, and Landlord shall have no obligation to make any improvements as a condition of Tenant's acceptance thereof. Tenant's lease of the Additional Space shall commence on April 1, 1995 (the "Additional Space 81 Commencement Date") and shall terminate on March 30, 2000 (the "Additional Space Expiration Date"). Provided, however, that Tenant shall have the right to commence renovation of the Additional Space prior to the Additional Space Commencement Date with Landlord's prior written approval. Any entry upon the Additional Space prior to the Additional Space Commencement Date shall be subject to all of the terms and conditions of the Lease, as amended; however, Tenant's obligations to pay Additional Space Rent hereunder shall commence on the Additional Space Commencement Date. Tenant's renovation of the Additional Space shall be at Tenant's sole expense, and in accordance with the terms and provisions of Exhibit "B" to the Lease. On or before the Additional Space Expiration Date, Tenant shall surrender possession of the Premises to Landlord in accordance with the terms of the Lease. 2. Commencing on January 1, 1996 and thereafter throughout the Additional Space Term (as hereinafter defined) Tenant shall pay on a monthly basis, without demand, as Additional Rent for the Additional Space, Tenant's Proportionate Share of the amount by which Operating Expenses exceed the Base Operating Expenses. The Base Year with respect to the Additional Space shall be 1995. 3. (a) As used in the following paragraphs, the following terms shall be deemed to refer to, and shall have the following meanings: (1) Consumer Price Index or CPI: The Consumer Price Index for All Urban Consumers(CPI-U)for Washington,D.C.-Md.-Va. All Items(1982-84=100), published by the Bureau of Labor Statistics, United States Department of Labor. (2) Base CPI: The most recently published Consumer Price Index as of the last day of the month immediately preceding the Additional Space Commencement Date. (3) CPI Adjustment Factor: Thirty percent (30%). (b) During the Additional Space Term, the Additional Space Base Rent shall be adjusted, pursuant to the terms of this Paragraph 2, on the first day of January of each calendar year after the Additional Space Commencement Date and on the first day of January annually 82 thereafter during the term of this Second Amendment. The dates described in this Paragraph 2 for computing the adjustment of Additional Space Base Rent are hereinafter sometimes referred to collectively as "Rental Adjustment Dates" and singularly as a "Rental Adjustment Date". All adjustments to Additional Space Base Rent required by this Paragraph 2 shall be made as follows: (1) The Base CPI shall be subtracted from the CPI for the month immediately preceding a Rental Adjustment Date to determine the changes in the CPI for such period. (2) The number computed in (1) above shall be divided by the Base CPI to yield a percentage of increase in the CPI. (3) The percentage of increase computed in (2) above shall be multiplied by the CPI Adjustment Factor. (4) The Additional Space Base Rent (which amount shall remain constant for purposes of this calculation) shall be multiplied by the percentage computed in (3) above. (5) The number computed in (4) above shall be added to the Additional Space Base Rent set forth in (4) immediately above and the resulting sum will be the adjusted rent (hereinafter the "Additional Space Adjusted Rent") to be paid by the Tenant to Landlord, in advance, without demand, in equal monthly installments, on the first day of each calendar month until the next Rental Adjustment Date. (c) In no event shall any adjustment made pursuant to this Paragraph 2 ever result in an increase in the Adjusted Rent by more than three percent (3%) of the Adjusted Rent in effect immediately prior to the applicable Rental Adjustment Date, nor shall any adjustment made pursuant to this Paragraph 2 ever result in a decrease in the Additional Space Adjusted Rent below the Additional Space Rent payable and in effect for the preceding calendar year. In the event of an adjustment which would otherwise cause a decrease in the Additional Space Adjusted Rent, the Rent payable hereunder in effect for the preceding year shall continue in effect until the next 3 83 Rental Adjustment Date. Adjustments to Rent shall be effective on the first day of January each year. (d) If (i) a significant change is made in the number or nature (or both) of items used in determining the CPI, or (ii) the CPI shall be discontinued for any reason, the Bureau of Labor Statistics shall be requested to furnish a new index comparable to the CPI, together with information which will make possible the conversion to the new index in computing the adjustment to Base Rent hereunder. If for any reason the Bureau of Labor Statistics does not furnish such an index and such information, Landlord and Tenant shall instead accept and use such other index or comparable statistics on the cost of living in the Washington, D.C.-Md.-Va. metropolitan area, that is computed and published by an agency of the United States or a responsible financial periodical of recognized authority. (e) Landlord shall provide Tenant with written notice of each adjustment pursuant to this Paragraph 2, which notice shall provide the basis upon which such adjustment has been calculated; provided, however, that if for any reason Landlord does not notify Tenant of the amount of such adjustment until after any Rental Adjustment Date, Tenant shall continue to pay the Additional Space Base Rent or Adjusted Rent, as the case may be, payable prior to the Rental Adjustment Date, and Tenant, within five (5) days following Landlord's delivery of written notice of such adjustment, shall pay to Landlord in a lump sum the amount of any increase in the Additional Space Base Rent resulting from such adjustment for all months in the existing calendar year prior to and including the month in which such notice of adjustment is received and during the remainder of such year Tenant shall pay to Landlord the Additional Space Adjusted Rent as set forth in such notice. 4. Tenant shall have the right to renew and extend the Additional Space Term (the "Additional Space Term") with respect to the Additional Space for one (1) Renewal Term (herein so called) upon and subject to the following terms and conditions: (a) Tenant may extend the Additional Space Term for one (1) Renewal Term of four (4) years (such Renewal Term commencing on April 1, 2000 and expiring concurrent with the 84 Lease Term on February 29, 2004) by Tenant's giving written notice thereof to Landlord no later than twelve (12) months prior to the expiration of the original Additional Space Term. If Tenant does not exercise its rights to a Renewal Term in a timely manner, Tenant's failure shall conclusively be deemed a waiver of its rights to a Renewal Term. (b) The exercise by Tenant of its rights to a Renewal Term must be made, if at all, by written notice executed by Tenant and delivered to Landlord on or before the date set forth above. Once Tenant shall exercise its rights to a Renewal Term, Tenant may not thereafter revoke such exercise. Tenant shall not have the right to exercise a Renewal Term if Tenant is in Default under the Lease, as amended, either at the time Tenant gives notice of its election or immediately prior to the commencement of the Renewal Term. (c) Tenant shall take the Additional Space "as is" for the Renewal Term and Landlord shall have no obligation to make any improvements or alterations to the Additional Space. (d) Base Rent per square foot of Rentable Area of the Additional Space for the first year of the Renewal Term shall be the current Base Rent, as adjusted, in effect on April 1, 2000. In no event shall the Additional Space Base Rent for the first year of the Additional Space Renewal Term be less than the Additional Space Base Rent in effect immediately prior to the expiration of the original Additional Space Term. (e) Subject to subparagraph (e) above, the leasing of the Additional Space for the Renewal Term shall be upon the same terms and conditions as are applicable for the original Additional Space Term, and shall be upon and subject to all of the provisions of the Lease, including, without limitation, the obligation of Tenant to pay Tenant's Additional Rent under the Lease. 5. From and after the Additional Space Commencement Date until the Additional Space Expiration Date, the following terms used in the Lease shall have the following ascribed meanings: 5 85 (a) Premises: Refers to the Rentable Area demised to Tenant by the Lease (set forth therein) and to the Additional Space demised to Tenant by the First Amendment and the Additional Space demised to Tenant by this Second Amendment, as more fully described and shown on the floor plan(s) attached as Exhibit "A" hereto. (b) Additional Space: 5,175 square, feet of Rentable Area located on the tenth (10th) floor of the Building, subject to adjustment pursuant to Paragraph 2 of this Amendment. (c) Additional Space Base Rent: $85,387.50 per year ($7,115.65 per month), based on $16.50 per square foot of Rentable Area of the Additional Space as adjusted. (d) Additional Space Base Year. 1995. (e) Tenant's Proportionate Share as to Additional Space: 2.05% subject to adjustment pursuant to Paragraph 2 of this Second Amendment. 6. Except as expressly modified by this Second Amendment, the Lease remains unchanged and in full force and effect. 86 IN WITNESS WHEREOF, Landlord and Tenant have executed this Second Amendment as of the day and year first above written. LANDLORD: --------- HYATT PLAZA LIMITED PARTNERSHIP, a Virginia limited partnership By: Fair Lakes Hyatt Limited Partnership, a Virginia general partnership, its general partner By: Fair Lakes of Virginia, Inc., a Virginia corporation By: [SIG] -------------------------------- Name: ----------------------------- Its: ------------------------------ TENANT: ------- AMERICAN MANAGEMENT SYSTEMS, INC., a Delaware corporation By: /s/ Frank A. Nicolai -------------------------------- Name: Frank A. Nicolai ----------------------------- Its: Executive Vice President, ------------------------------ Secretary and Treasurer ------------------------------ 7 87 THIRD AMENDMENT TO OFFICE LEASE AGREEMENT THIS THIRD AMENDMENT TO OFFICE LEASE AGREEMENT (this "Third Amendment") is made and entered into this 2nd day of October 1995 (the "Effective Date"), by and between HYATT PLAZA LIMITED PARTNERSHIP, a Virginia limited partnership ("Landlord"), and AMERICAN MANAGEMENT SYSTEMS, INC., a Delaware corporation ("Tenant"), with reference to the following: RECITALS: A. Pursuant to an Office Lease Agreement dated August 12, 1993, by and between Landlord and Tenant, as amended by that certain (i) First Amendment to Office Lease Agreement dated August 31, 1994 and (ii) Second Amendment Office Lease Agreement dated November 1, 1994 (collectively, the "Lease"), Landlord has leased to Tenant certain premises located at 12701 Fair Lakes Circle, Fairfax, Virginia, as more particularly described therein. All capitalized terms used herein, unless specifically defined, shall have the same meaning and definition as used in the Lease. B. Landlord and Tenant have agreed to amend the certain terms and provisions of the Lease as hereinafter set forth. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Landlord and Tenant agree as follows: 1. Under Tenant's Right of First Refusal option, Landlord and Tenant have agreed to expand the Premises to include an additional 5,327 square feet of Rentable Area located on the third (3rd) floor of the Building (the "Third Amendment Space"), commonly known as Suite 320, as 88 more particularly shown on Exhibit "A" attached hereto and made a part hereof by this reference. Base Rent for the Third Amendment Space ("Third Amendment Space Base Rent") shall be at the rate of $17.00 per square foot of Rentable Area, or the sum of $90,559.00 per year ($7,546.58 per month), adjusted as hereinafter set forth. Tenant shall lease the Third Amendment Space in its "as is" and "where as" condition, and Landlord shall have no obligation to make any improvements as a condition of Tenant's acceptance thereof. Notwithstanding, Landlord agrees to provide Tenant with a Renovation Allowance of up to $5.00 per rentable square foot in the Third Amendment Space. Landlord shall reimburse Tenant for approved improvements to the Third Amendment Space within thirty (30) days after receipt of invoices from Tenant. Tenant's lease of Third Amendment Space shall commence January 1, 1996 (the "Third Amendment Space Commencement Date") and shall terminate on December 31, 2000 (the "Third Amendment Space Expiration Date") (the "Third Amendment Space Initial Term"). Provided, however, that Tenant shall have the right to commence renovation of the Third Amendment Space prior to the Third Amendment Space Commencement Date and after October 1, 1995 with Landlord's prior written approval. Any entry upon the Third Amendment Space prior to the Third Amendment Space Commencement Date shall be subject to all of the terms and conditions of the Lease, as amended; however, Tenant's obligations to pay Third Amendment Space Base Rent and Third Amendment Space Additional Rent (as hereinafter defined) shall commence on the Third Amendment Space Commencement Date. Tenant's renovation of the Third Amendment Space shall be at Tenant's sole expense, and in accordance with the terms and provisions of Exhibit "B" to the Lease. On or before the Third Amendment Space Expiration Date, Tenant shall surrender possession of the Premises to Landlord in accordance with the terms of the Lease. 2. Commencing on January 1, 1997 and thereafter throughout the Third Amendment Space Initial Term Tenant shall pay on a monthly basis, without demand, as Additional Rent for the Third Amendment Space, 2.11% of the amount by which Operating Expenses exceed the Adjusted Base Operating Expenses. Adjusted Base Operating Expenses shall, for purposes of this Amendment, refer to the Operating Expenses incurred during the 1996 calendar 2 89 year. Such payments shall be made in accordance with Section 6.01 of the Lease. 3. (a) As used in the following paragraphs, the following terms shall be deemed to refer to, and shall have the following meanings: (1) Consumer Price Index or CPI: The Consumer Price Index for All Urban Consumers (CPI-U) for Washington, D.C.-Md.-Va. All Items (1982-84=100), published by the Bureau of Labor Statistics, United States Department of Labor. (2) Base CPI: The most recently published Consumer Price Index as of the last day of the month immediately preceding the Third Amendment Space Commencement Date. (3) CPI Adjustment Factor: Thirty percent (30%). (b) During the Third Amendment Space Initial Term, the Third Amendment Space Base Rent shall be adjusted, pursuant to the terms of this Paragraph 3, on the first day of January of each calendar year after the Third Amendment Space Commencement Date and on the first day of January annually thereafter during the term of this Third Amendment. The dates described in this Paragraph 3 for computing the adjustment of Third Amendment Space Base Rent are hereinafter sometimes referred to collectively as "Rental Adjustment Dates" and singularly as a "Rental Adjustment Date". All adjustments to Third Amendment Space Base Rent required by this Paragraph 3 shall be made as follows: 3 90 (1) The Base CPI shall be subtracted from the CPI for the month immediately preceding a Rental Adjustment Date to determine the changes in the CPI for such period. (2) The number computed in (1) above shall be divided by the Base CPI to yield a percentage of increase in the CPI. (3) The percentage of increase computed in (2) above shall be multiplied by the CPI Adjustment Factor. (4) The Third Amendment Space Base Rent (which amount shall remain constant for purposes of this calculation) shall be multiplied by the percentage computed in (3) above. (5) The number computed in (4) above shall be added to the Third Amendment Space Base Rent set forth in (4) immediately above and the resulting sum will be the adjusted rent (hereinafter the "Third Amendment Space Adjusted Rent") to be paid by Tenant to Landlord, in advance, without demand, in equal monthly installments, on the first day of each calendar month until the next Rental Adjustment Date. (c) In no event shall any adjustment made pursuant to this Paragraph 3 ever result in an increase in the Third Amendment Space Adjusted Rent by more than three percent (3%) of the Third Amendment Space Adjusted Rent in effect immediately prior to the applicable Rental 4 91 Adjustment Date, nor shall any adjustment made pursuant to this Paragraph 3 ever result in a decrease in the Third Amendment Space Adjusted Rent below the Third Amendment Space Base Rent and Third Amendment Space Additional Rent payable and in effect for the preceding calendar year. In the event of an adjustment which would otherwise cause a decrease in the Third Amendment Space Adjusted Rent, the Rent payable hereunder in effect for the preceding year shall continue in effect until the next Rental Adjustment Date. Adjustments to Rent shall be effective on the first day of January each year. (d) If (i) a significant change is made in the number or nature (or both) of items used in determining the CPI, or (ii) the CPI shall be discontinued for any reason, the Bureau of Labor Statistics shall be requested to furnish a new index comparable to the CPI, together with information which will make possible the conversion to the new index in computing the adjustment to Base Rent hereunder. If for any reason the Bureau of Labor Statistics does not furnish such an index and such information, Landlord and Tenant shall instead accept and use such other index or comparable statistics on the cost of living in the Washington, D.C. -Md. -Va. metropolitan area, that is computed and published by an agency of the United States or a responsible financial periodical of recognized authority. (e) Landlord shall provide Tenant with written notice of each adjustment pursuant to this Paragraph 2, which notice shall provide the basis upon which such adjustment has been calculated; provided, however, that if for any reason Landlord does not notify Tenant of the amount of such adjustment until after any Rental Adjustment Date, Tenant shall continue 5 92 to pay the Third Amendment Space Base Rent or Adjusted Rent, as the case may be, payable prior to the Rental Adjustment Date, and Tenant, within five (5) days following Landlord's delivery of written notice of such adjustment, shall pay to Landlord in a lump sum the amount of any increase in the Third Amendment Space Base Rent resulting from such adjustment for all months in the existing calendar year prior to and including the month in which such notice of adjustment is received and during the remainder of such year Tenant shall pay to Landlord the Third Amendment Space Adjusted Rent as set forth in such notice. 4. Tenant shall have the right to renew and extend the Third Amendment Space Initial Term (the "Third Amendment Space Renewal Term") with respect to the Third Amendment Space for one (1) Renewal Term (herein so called) upon and subject to the following terms and conditions: (a) Tenant may extend the Third Amendment Space Initial Term for one (1) Renewal Term of five (5) years (such Renewal Term commencing on January 1, 2001 and expiring on December 31, 2005 by Tenant's giving written notice thereof to Landlord no later, than twelve (12) months prior to the expiration of the Third Amendment Space Initial Term. If Tenant does not exercise its rights to a Renewal Term in a timely manner, Tenant's failure shall conclusively be deemed a waiver of its rights to a Renewal Term. (b) The exercise by Tenant of its rights to a Renewal Term must be made, if at all, by written notice executed by Tenant and delivered to Landlord on or before the date set forth above. Once Tenant shall exercise its rights to a Renewal Term, Tenant may not thereafter 6 93 revoke such exercise. Tenant shall not have the right to exercise a Renewal Term if Tenant is in Default under the Lease, as amended, either at the time Tenant gives notice of its election or immediately prior to the commencement of the Renewal Term. (c) Tenant shall take the Third Amendment Space "as is" for the Renewal Term and Landlord shall have no obligation to make any improvements or alterations to the Third Amendment Space. (d) Base Rent per square foot of Rentable Area of the Third Amendment Space for the first year of the Renewal Term shall be the current Third Amendment Space Base Rent, as adjusted, in effect on January 1, 2001. In no event shall the Third Amendment Space Base Rent for the first year of the Third Amendment Space Renewal Term be less than the Third Amendment Space Base Rent, as adjusted, in effect immediately prior to the expiration of the Third Amendment Space Initial Term. (e) Subject to subparagraph (d) above, the leasing of the Third Amendment Space for the Renewal Term shall be upon the same terms and conditions as are applicable for the Third Amendment Space Initial Term, and shall be upon and subject to all of the provisions of the Lease, including, without limitation, the obligation of Tenant to pay Tenant's Third Amendment Space Additional Rent under the Lease. 5. From and after the Third Amendment Space Commencement Date until the Third 7 94 Amendment Space Expiration Date, the following terms used in the Lease shall have the following ascribed meanings: (a) Premises: Refers to the Rentable Area demised to Tenant by the Lease (set forth therein) and to the space demised to Tenant by the First Amendment, Second Amendment and the Third Amendment Space demised to Tenant by this Third Amendment, as more fully described and shown on the floor plan(s) attached as Exhibit "A" hereto. (b) Third Amendment Space: 5,327 square feet of Rentable Area located on the third (3rd floor of the Building, subject to adjustment pursuant to Paragraph 2 of this Third Amendment. (c) Third Amendment Space Renewal Term: Refers to the Third Amendment Space Renewal Term, if exercised by Tenant pursuant to the terms and conditions of this Third Amendment. 6. Except as expressly modified by this Third Amendment, the Lease remains unchanged and in full force and effect. [Signatures to appear on next page.] 8 95 IN WITNESS WHEREOF, Landlord and Tenant have executed this Third Amendment as of the day and year first above written. LANDLORD: --------- HYATT PLAZA LIMITED PARTNERSHIP, a Virginia limited partnership By: Fair Lakes Hyatt Limited Partnership, a Virginia general partnership, its general partner By: Fair Lakes of Virginia, Inc., a Virginia corporation By: /s/ Milton V. Peterson ------------------------------- Name: Milton V. Peterson ------------------------------ Its: President ------------------------------ TENANT: ------- AMERICAN MANAGEMENT SYSTEMS, INC., a Delaware corporation By: /s/ Frank A. Nicolai ----------------------------------- Name: Frank A. Nicolai -------------------------------- Its: Executive Vice President ------------------------------- Secretary & Treasurer ------------------------------- 9 96 EXHIBIT A THIRD AMENDMENT SPACE FLOOR PLAN [INCLUDES FLOOR PLAN OF PREMISES] 10 97 FOURTH AMENDMENT TO OFFICE LEASE AGREEMENT THIS FOURTH AMENDMENT TO OFFICE LEASE AGREEMENT (this "Fourth Amendment") is made and entered into as of the 12th day of August, 1996 (the "Effective Date"), by and between HYATT PLAZA LIMITED PARTNERSHIP, a Virginia limited partnership ("Landlord"), and AMERICAN MANAGEMENT SYSTEMS, INC., a Delaware corporation ("Tenant"), with reference to the following: RECITALS: A. Pursuant to an Office Lease Agreement dated August 12, 1993, by and between Landlord and Tenant, as amended by that certain (i) First Amendment to Office Lease Agreement dated August 31, 1994, (ii) Second Amendment to Office Lease Agreement dated November 1, 1994 and (iii) Third Amendment to Office Lease Agreement dated October 2, 1995 (collectively, the "Lease"), Landlord has leased to Tenant certain premises located at 12701 Fair Lakes Circle, Fairfax, Virginia, as more particularly described therein. All capitalized terms used herein, unless specifically defined, shall have the same meaning and definition as used in the Lease. B. Landlord and Tenant have agreed to amend the certain terms and provisions of the Lease as hereinafter set forth. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Landlord and Tenant agree as follows: 1. Landlord and Tenant have agreed to expand the Premises to include an additional 851 square feet of Rentable Area located on the third (3rd) floor of the Building (the "Fourth Amendment Space"), commonly known as Suite 365, as more particularly shown on Exhibit "A" attached hereto and made a part hereof by this reference. Base Rent for the Fourth Amendment Space ("Fourth Amendment Space Base Rent") shall be as set forth below: (i) From August 12, 1996 to August 31, 1997, $18.75 per square foot of Rentable Area, or the sum of $15,956.25 per year ($1,329.69 per month), and (ii) From September 1, 1997 to August 31, 1998, $19.22 per square foot of Rentable Area, or the sum of $16,356.22 per year ($1,363.02 per month). 2. Tenant shall lease the Fourth Amendment Space in its "as is" and "where is" condition, and Landlord shall have no obligation to make any improvements as a condition of Tenant's acceptance thereof. Tenant's lease of Fourth Amendment Space shall commence August 12, 1996 (the "Fourth Amendment Space Commencement Date") and shall terminate August 31, 1998 (the "Fourth Amendment Space Expiration Date") (the "Fourth Amendment Space Initial 98 Term"). On or before the Fourth Amendment Space Expiration Date, Tenant shall surrender possession of the Premises to Landlord in accordance with the terms of the Lease. 3. Commencing on January 1, 1997 and thereafter throughout the Fourth Amendment Space Initial Term, Tenant shall pay on a monthly basis, without demand, as Additional Rent for the Fourth Amendment Space, .34% of the amount by which Operating Expenses exceed the Adjusted Base Operating Expenses. Adjusted Base Operating Expenses shall, for purposes of this Amendment, refer to the Operating Expenses incurred during the 1996 calendar year. Such payments shall be made in accordance with Section 6.01 of the Lease and Paragraph 3 of the Third Amendment to the Lease. 4. Tenant shall have the right to renew and extend the Fourth Amendment Space Initial Term (the "Fourth Amendment Space Renewal Term") with respect to the Fourth Amendment Space for one (1) Renewal Term (herein so called) upon and subject to the following terms and conditions: (a) Tenant may extend the Fourth Amendment Space Initial Term for one (1) Renewal Term of three (3) years, such Renewal Term commencing on September 1, 1998 and expiring on August 31, 2001, by Tenant's giving written notice thereof to Landlord no later than six (6) months prior to the expiration of the Fourth Amendment Space Initial Term. If Tenant does not exercise its rights to a Renewal Term in a timely manner, Tenant's failure shall conclusively be deemed a waiver of its rights to a Renewal Term. (b) The exercise by Tenant of its rights to a Renewal Term must be made, if at all, by written notice executed by Tenant and delivered to Landlord on or before the date set forth above. Once Tenant shall exercise its rights to a Renewal Term, Tenant may not thereafter revoke such exercise. Tenant shall not have the right to exercise a Renewal Term if Tenant is in Default under the Lease, as amended, either at the time Tenant gives notice of its election or immediately prior to the commencement of the Renewal Term. (c) Tenant shall take the Fourth Amendment Space "as is" for the Renewal Term and Landlord shall have no obligation to make any improvements or alterations to the Fourth Amendment Space. (d) Base Rent per square foot of Rentable Area of the Fourth Amendment Space for the first year of the Renewal Term shall be the market rate for Fair Lakes as reasonably determined by Landlord for comparable size space, and for Leases with comparable terms, conditions and concessions. Such Base Rate shall be adjusted on September 1 of each subsequent year of the Renewal Term by multiplying the Base Rent in effect on August 31 by 2.5% and adding the product to the Base Rent then in effect. The Adjusted Base Rent shall be in effect until the next adjustment date. (e) Subject to subparagraph (d) above, the leasing of the Fourth Amendment Space for the Renewal Term shall be upon the same terms and conditions as are applicable for the Fourth Amendment Space Initial Term, and shall be upon and subject to all of the provisions of 2 99 the Lease, including, without limitation, the obligation of Tenant to pay Tenant's Fourth Amendment Space Additional Rent under the Lease. 5. From and after the Fourth Amendment Space Commencement Date until the Fourth Amendment Space Expiration Date, the following terms used in the Lease shall have the following ascribed meanings: (a) Premises: Refers to the Rentable Area demised to Tenant by the Lease (set forth therein) and to the space demised to Tenant by the First Amendment, Second Amendment, Third Amendment and Fourth Amendment Space, demised to Tenant by this Fourth Amendment. (b) Fourth Amendment Space: 851 square feet of Rentable Area located on the third (3rd floor of the Building, subject to adjustment pursuant to Paragraph 2 of this Fourth Amendment. (c) Fourth Amendment Space Renewal Term: Refers to the Fourth Amendment Space Renewal Term, if exercised by Tenant pursuant to the terms and conditions of this Fourth Amendment. (d) Rentable Area of the Premises: Original Lease Space 84,236 square feet First Amendment Space 7,926 square feet Second Amendment Space 5,175 square feet Third Amendment Space 5,327 square feet Fourth Amendment Space 851 square feet ------- Total------------------------------------ 103,515 square feet
(e) Tenant's Proportionate Share as to the Fourth Amendment Space: .34% Except as expressly modified by this Fourth Amendment, the Lease remains unchanged and in full force and effect. 3 100 IN WITNESS WHEREOF, Landlord and Tenant have executed this Fourth Amendment as of the day and year first above written. LANDLORD: --------- HYATT PLAZA LIMITED PARTNERSHIP, a Virginia limited partnership By: Fair Lakes Hyatt Limited Partnership, a Virginia general partnership, its general partner By: Fair Lakes of Virginia, Inc., a Virginia corporation its general partner By: ----------------------------------- Name: ---------------------------------- Its: ----------------------------------- TENANT: ------- AMERICAN MANAGEMENT SYSTEMS, INC., a Delaware corporation By: ------------------------------------ Name: ---------------------------------- Its: ----------------------------------- 4 101 EXHIBIT A FOURTH AMENDMENT SPACE FLOOR PLAN [INCLUDES FLOOR PLANS OF THE PREMISES] 5 102 FIFTH AMENDMENT TO OFFICE LEASE AGREEMENT THIS FIFTH AMENDMENT TO OFFICE LEASE AGREEMENT (this "Fifth Amendment") is made and entered into as of the 30th day of September, 1996 (the "Effective Date"), by and between HYATT PLAZA LIMITED PARTNERSHIP, a Virginia limited partnership ("Landlord"), and AMERICAN MANAGEMENT SYSTEMS, INC., a Delaware corporation ("Tenant"), with reference to the following: RECITALS: A. Pursuant to an Office Lease Agreement dated August 12, 1993, by and between Landlord and Tenant, as amended by that certain (i) First Amendment to Office Lease Agreement dated August 31, 1994, (ii) Second Amendment to Office Lease Agreement dated November 1, 1994, (iii) Third Amendment to Office Lease Agreement dated October 2, 1995 and (iv) Fourth Amendment to Office Lease Agreement dated August 12, 1996 (collectively, the "Lease"), Landlord has leased to Tenant certain premises located at 12701 Fair Lakes Circle, Fairfax, Virginia, 22033, as more particularly described therein. All capitalized terms used herein, unless specifically defined, shall have the same meaning and definition as used in the Lease. B. Landlord and Tenant have agreed to amend the certain terms and provisions of the Lease as hereinafter set forth. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Landlord and Tenant agree as follows: 103 1. As an exercise of Tenant's Right of First Refusal Option, Landlord and Tenant have agreed to expand the Premises to include an additional 3,350 square feet of Rentable Area located on the first (1st) floor of the Building (the "Fifth Amendment Space"), commonly known as Suite 160, as more particularly shown on Exhibit "A" attached hereto and made a part hereof by this reference. Base Rent for the Fifth Amendment Space ("Fifth Amendment Space Base Rent") shall be as set forth below: (i) From October 1, 1996 to September 30, 1997, $21.00 per square foot of Rentable Area, or the sum of $70,350.00 per year ($5,862.50 per month), and (ii) From October 1, 1997 to September 30, 1998, $21.63 per square foot of Rentable Area, or the sum of $72,460.50 per year ($6,038.38 per month). 2. Tenant shall lease the Fifth Amendment Space in its "as is" and "where is" condition, and Landlord shall have no obligation to make any improvements as a condition of Tenant's acceptance thereof. Tenant's lease of Fifth Amendment Space shall commence October 1, 1996 (the "Fifth Amendment Space Commencement Date") and shall terminate September 30, 1998 (the "Fifth Amendment Space Expiration Date") (the "Fifth Amendment Space Initial Term"). On or before the Fifth Amendment Space Expiration Date, Tenant shall surrender possession of the Premises to Landlord in accordance with the terms of the Lease. 3. Commencing on January 1, 1998 and thereafter throughout the Fifth Amendment Space Initial Term, Tenant shall pay on a monthly basis, without demand, as Additional Rent for the Fifth Amendment Space, 1.33% of the amount by which Operating Expenses exceed the Adjusted Base Operating Expenses. Adjusted Base Operating Expenses shall, for purposes of 2 104 this Amendment, refer to the Operating Expenses incurred during the 1997 calendar year. Such payments shall be made in accordance with Sections 6.01 and 6.02 of the Lease. 4. Tenant shall have the right to renew and extend the Fifth Amendment Space Initial Term (the "Fifth Amendment Space Renewal Term") with respect to the Fifth Amendment Space for one (1) Renewal Term (herein so called) upon and subject to the following terms and conditions: (a) Tenant may extend the Fifth Amendment Space Initial Term for one (1) Renewal Term of three (3) years, such Renewal Term commenting on October 1, 1998 and expiring on September 30, 2001, by Tenant's giving written notice thereof to Landlord on or before April 1, 1998. If Tenant does not exercise its rights to a Renewal Term in a timely manner, Tenant's failure shall conclusively be deemed a waiver of its rights to a Renewal Term. (b) The exercise by Tenant of its rights to a Renewal Term must be made, if at all, by written notice executed by Tenant and delivered to Landlord on or before the date set forth above. Once Tenant shall exercise its rights to a Renewal Term, Tenant may not thereafter revoke such exercise. Tenant shall not have the right to exercise a Renewal Term if Tenant is in Default under the Lease, as amended, either at the time Tenant gives notice of its election or immediately prior to the commencement of the Renewal Term. (c) Tenant shall take the Fifth Amendment Space "as is" for the Renewal Term and Landlord shall have no obligation to make any improvements or alterations to the Fifth Amendment Space. 3 105 (d) Base Rent per square foot of Rentable Area of the Fifth Amendment Space for the first year of the Renewal Term shall be at the rate of $22.28 per square feet for the Fifth Amendment Space. Such Base Rate shall be adjusted on October 1 of each subsequent year of the Renewal Term by multiplying the Base Rent in effect on September 30 by 3.0% and adding the product to the Base Rent then in effect. The Adjusted Base Rent shall be in effect until the next adjustment date. (e) Subject to subparagraph (d) above, the leasing of the Fifth Amendment Space for the Renewal Term shall be upon the same terms and conditions as are applicable for the Fifth Amendment Space Initial Term, and shall be upon and subject to all of the provisions of the Lease, including, without limitation, the obligation of Tenant to pay Tenant's Fifth Amendment Space Additional Rent under the Lease. 5. From and after the Fifth Amendment Space Commencement Date until the Fifth Amendment Space Expiration Date, the following terms used in the Lease shall have the following ascribed meanings: (a) Premises: Refers to the Rentable Area demised to Tenant by the Lease (set forth therein) and to the space demised to Tenant by the First Amendment, Second Amendment, Third Amendment, Fourth Amendment and Fifth Amendment Space, demised to Tenant by this Fifth Amendment. (b) Fifth Amendment Space: 3,350 square feet of Rentable Area located on the first (1st) floor of the Building. 4 106 (c) Fifth Amendment Space Renewal Term: Refers to the Fifth Amendment Space Renewal Term, if exercised by Tenant pursuant to the terms and conditions of this Fifth Amendment. (d) Rentable Area of the Premises: Original Lease Space 84,236 square feet First Amendment Space 7,926 square feet Second Amendment Space 5,175 square feet Third Amendment Space 5,327 square feet Fourth Amendment Space 851 square feet Fifth Amendment Space 3,350 square feet ------- Total ---------------------------------- 106,865 square feet
(e) Tenant's Proportionate Share: Original Premises 33.37% First Amendment Space 3.14% Second Amendment Space 2.05% Third Amendment Space 2.11% Fourth Amendment Space .34% Fifth Amendment Space 1.33% ------ Total........................................ 42.34%
(f) Base Year: Original Premises 1994 First Amendment Space 1995 Second Amendment Space 1995 Third Amendment Space 1996 Fourth Amendment Space 1996 Fifth Amendment Space 1997
6. Except as expressly modified by this Fifth Amendment, the Lease remains unchanged and in full force and effect. [Signatures appear on following page] 5 107 IN WITNESS WHEREOF, Landlord and Tenant have executed this Fifth Amendment as of the day and year first above written. LANDLORD: -------- HYATT PLAZA LIMITED PARTNERSHIP, a Virginia limited partnership By: Fair Lakes Hyatt Limited Partnership, a Virginia general partnership, its general partner By: Fair Lakes of Virginia, Inc., a Virginia corporation its general partner By: [SIG] ----------------------------------- Name: ----------------------------------- Its: ----------------------------------- TENANT: ------ AMERICAN MANAGEMENT SYSTEMS, INC., a Delaware corporation By: /s/ Frank A. Nicolai ----------------------------------- Name: ----------------------------------- Its: ----------------------------------- [FOLLOWED BY FLOOR PLANS ATTACHED AS EXHIBIT A] 6 108 FIFTH AMENDMENT TO OFFICE LEASE AGREEMENT THIS FIFTH AMENDMENT TO OFFICE LEASE AGREEMENT (the "Fifth Amendment") is made and entered into this 30th day of November, 1996, but effective for all purposes on the Assignment Date (hereinafter defined) by and among HYATT PLAZA LIMITED PARTNERSHIP, a Virginia limited partnership, and AMERICAN MANAGEMENT SYSTEMS, INC., a Delaware corporation (hereinafter sometimes referred to as "Assignee" and/or "Tenant") with reference to the following: RECITALS: A. Pursuant to the terms of that certain Office Lease Agreement dated May 21, 1990, as amended by First Amendment dated July 12, 1990, Second Amendment dated July 27, 1990, Third Amendment dated April 18, 1991 and Fourth Amendment dated September 22, 1994 (collectively hereinafter referred to as the "Lease"), Landlord leased to Trident Data Systems, Inc., a California corporation ("Original Tenant") that certain premises (the "Premises") more particularly described therein. All capitalized terms used in this Fifth Amendment which are not defined herein, shall have the same meaning and definition as used in the Lease. B. Pursuant to that certain Assignment of Office Lease Agreement dated __________, 1996 (the "Assignment") by and between Original Tenant and Assignee, Original Tenant, with Landlord's consent, has assigned to Assignee all of its right, title and interest in and to the Lease (as defined in the Assignment). The Assignment contains certain provisions which permit the Original Tenant and the Assignee to terminate the Assignment should certain events occur. The date that all of the rights of Assignee and the Original Tenant to terminate the Assignment cease and the assignment of the Lease to the Assignee becomes effective is hereinafter referred to as the "Assignment Date." C. The parties have agreed to amend certain terms and provisions of the Lease, as of the Assignment Date. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. From and after the Assignment Date, any and all references in the Lease to the term Tenant shall mean and refer to the Assignee. 2. As of the Assignment Date, Tenant exercises its right of renewal set forth in Rider No. 4 of the Lease. As a result of the foregoing exercise, the Term of the Lease has been extended for an additional six (6) years, two (2) months (the "Extension Term"), commencing on January 1, 1998 (the "Extension Commencement Date") and expiring on February 29, 2004 (the "Expiration Date"). The Base Rent for the Extension Term shall be $413,462.60 per year ($34,455.22 per month), based upon $20.60 times 20,071, the number of square feet of Rentable Area in the Premises. The Base Rent for the Extension Term shall be increased by 3% annually on each 109 January 1st throughout the Extension Term, with the first increase occurring on January 1, 1999. During the Extension Term, the Base Operating Expenses Amount and the Base Real Estate Taxes Amount shall be equal to Tenant's proportionate share of the actual Operating Expenses and Base Real Estate Taxes incurred by Landlord with respect to the Building during calendar year 1998. 3. Landlord and Tenant agree that Tenant shall lease the Premises in its "as is" and "where is" condition during the Extension Term and Landlord shall not be obligated to make any improvements whatsoever to the Premises as a condition of Tenant's extension of the Lease, nor shall Landlord be obligated to provide Tenant any allowances. 4. As of the Assignment Date, Article 12 - Alterations shall be deleted in its entirety, and replaced with the following: "After the initial Leasehold Improvements are completed, Tenant shall not, at any time during the Term, without Landlord's prior written consent, make any Alterations (hereinafter defined) to the Premises. Should Tenant desire any Alterations, Tenant agrees to submit all plans and specifications for same to Landlord for Landlord's written approval, before beginning such work and Landlord's approval shall not be unreasonably withheld, conditioned or delayed. Provided Tenant has supplied Landlord with information and plans for the Alterations which reasonably details the nature and scope of the same, Landlord's failure to respond to Tenant's request for approval within ten (10) business days after receipt of the information, plans and request for approval, shall be deemed to be Landlord's approval of the same. Landlord shall not be considered as unreasonably withholding its approval by refusing to consent to any Alterations which alter the exterior appearance of the Building, or the public lobbies, corridors, or common areas thereof, which will or are likely to cause any weakening of any part of the structure of the Premises or Building or which may cause damage or disruption to any Building system and such damage or disruption is not repaired as part of the Alterations. Upon Tenant's receipt of Landlord's written approval, Tenant may proceed with the construction of the approved Alterations, but only so long as they are in substantial compliance with the plans and specifications approved by Landlord and provisions of this Article 12. Additionally, the construction of any alterations (regardless of whether or not Landlord's prior approval of the work is required by this Lease), the alterations themselves, or any maintenance thereof shall comply with all building, safety, fire, plumbing, electrical and other codes and governmental and insurance requirements, and shall not require an amount of water, electricity, gas, heat, ventilation, or air-conditioning which exceeds reasonable level of consumption for a modem business office unless prior written arrangements reasonably satisfactory to Landlord are made with respect thereto. All alterations shall be made at Tenant's expense, either by Tenant's contractors which have been approved in advance by Landlord or at Tenant's option, by Landlord's contractors on terms reasonably satisfactory to Tenant. In the event Landlord actually constructs the alterations or is retained by Tenant to supervise or manage the construction by contractors selected by Tenant and approved by Landlord, then Tenant shall pay to Landlord a fee equal to ten percent (10%) of the actual costs of such work, such fee to cover Landlord's overhead related to the work, including, but not limited to, Landlord's review of the plans and specifications, coordination of the 2 110 work, consultation with professionals regarding the work, and general administration allocable to the work. The foregoing fee will not be charged in circumstances where Landlord has merely approved the Alterations. All such construction shall be completed promptly and in a good and workmanlike manner and shall be performed in compliance with the lien provisions set forth in Article 13 of the Lease. As used in the Lease, the term Alterations refers to work performed after the completion of the initial Leasehold Improvements which would reasonably be considered major construction, renovations or changes to the Premises, having a material impact on the appearance of the Premises or to other portions of the Building, or would otherwise have a material impact (structural, mechanical, operational or otherwise) upon the Building, and/or the total cost of the construction, renovations or changes is more than $75,000.00. Alterations do not include, by way of example, by hanging of pictures, the movement of furniture and flexible space walls or partitions, or the painting of the interior of the Premises. Prior to commencing any alterations, Tenant will coordinate with Landlord so as to schedule the movement of men, material and equipment through the Building's common areas in a manner which does not unreasonably interrupt the normal Building operations and the use and enjoyment of the Building by other tenants therein. All existing Improvements and improvements to the Premises constructed by Tenant and paid for by Tenant from funds supplied by Landlord either in the form of allowances or credits shall be and remain the Landlord's property, and shall not be removed from the Premises. Tenant shall have the right, upon expiration of the Term, to remove, at Tenant's expense, all alterations to the Premises (other than the Existing Improvements and the improvements or alterations paid by allowances granted by Landlord); specialized trade fixtures or other systems or items installed by Tenant pursuant to Article 12 of the Lease, and; moveable trade fixtures. Tenant agrees to remove, at Tenant's expense, all of its furnishings, furniture and movable personal property by the Expiration Date. Tenant will promptly restore any damage to the Premises or Building caused by its removal of its property." 3 111 5. From and after the Extension Commencement Date, the following terms as defined in the Lease shall have the following meanings: (a) Term: Thirteen (13) years, five (5) months and seventeen (17) days. (b) Expiration Date: February 29, 2004. (c) Base Rent:$413,462.60 per year ($34,455.22 per month), which amount is based upon $20.60 per square foot of Rentable Area in the Premises, effective as of the Extension Commencement Date, as adjusted pursuant to Section 5.02 of the Lease, as modified herein. (d) Adjustment Factor: 3.0% (e) Tenant's Proportionate Share:8.05% 6. From and after the Assignment Date, Section 5.02 of the Lease shall be deleted and the following inserted in lieu thereof. "(a) During the Term of this Lease, the Base Rent shall be adjusted on January 1, 1999 and the first day of January thereafter pursuant to this Section. The dates described in this Section for computing the adjustment in Base Rent are hereinafter sometimes referred to collectively as "Rental Adjustment Dates" and singularly as a "Rental Adjustment Date". All adjustment to Base Rent required by this Section 5.02 shall be made as hereinafter described: (1) On the first Rental Adjustment Date, the Base Rent shall be multiplied by the Adjustment Factor and the amount computed shall be added to the Base Rent as of the first Rental Adjustment Date and the resulting sum shall be the adjusted Base Rent (hereinafter the "Adjusted Rent") to be paid by the Tenant to Landlord, in advance, without demand, in equal monthly installments, on the first day of each calendar month until the next Rental Adjustment Date. (2) On the second Rental Adjustment Date and on every Rental Adjustment Date throughout the term of this Lease, the Adjusted Rent payable in the year immediately preceding the Rental Adjustment Date in question shall be multiplied by the Adjustment Factor and the amount computed shall be added to the Adjusted Rent for the year immediately preceding the Rental Adjustment Date and the resulting sum shall be the Adjusted Rent for that rental year to be paid by the Tenant to Landlord, in advance, without demand, in equal monthly installments, on the first day of each calendar month until the next Rental Adjustment Date. (b) Landlord shall provide Tenant with written notice of each adjustment pursuant to Section 3.02(b), which notice shall provide the basis upon which such adjustment has been calculated; provided, however, that if for any reason Landlord 4 112 does not notify Tenant of the amount of such adjustment until after any Rental Adjustment Date, Tenant shall continue to pay the Base Rent or Adjusted Rent, as the case may be, payable prior to the Rental Adjustment Date, and Tenant, within five (5) days following Landlord's delivery of written notice of such adjustment shall pay to Landlord in a lump sum the amount of any increase in the Base Rent resulting from such adjustment for all months in the existing calendar year prior to and including the month 'in which such notice of adjustment is received and during the remainder of such year Tenant shall pay to Landlord the Adjusted Rent as set forth in such notice." 7. Section 1.01.6 and all references to Base Net Rent shall be deleted. 8. This Fifth Amendment shall be effective only upon the Assignment Date. Should, for any reason, either the Original Tenant or the Assignee terminate the Assignment, then this Fifth Amendment shall be null and void and the Original Tenant shall continue to occupy the Premises pursuant to the terms of the Lease, unmodified, and in full force and effect. 5 113 IN WITNESS WHEREOF, Landlord and Tenant have executed this Fifth Amendment as of the day and year first above written. LANDLORD: --------- HYATT PLAZA LIMITED PARTNERSHIP, a Virginia limited partnership By: Fair Lakes Hyatt Limited Partnership, a Virginia general partnership, its general partner By: Fair Lakes of Virginia, Inc., a Virginia corporation its general partner By: /s/ Milton V. Peterson -------------------------------- Name: Milton V. Peterson ----------------------------- Its: President ----------------------------- ASSIGNEE/TENANT: ---------------- AMERICAN MANAGEMENT SYSTEMS, INC., a Delaware corporation, successor-in-interest to Trident Data Systems, Inc., a California corporation By: /s/ Frank Nicolai -------------------------------- Name: ------------------------------ Its: -------------------------------- 6 114 ASSIGNMENT OF LEASE THIS ASSIGNMENT OF LEASE (the "Assignment") is made and entered into this 30th day of September, 1996 by and between Trident Data Systems, Inc. (the "Assignor") and American Management Systems, Inc. (the "Assignee"), with reference to the following: RECITALS: A. Pursuant to a Lease Agreement, dated May 17, 1990 as amended by the First Amendment dated July 12, 1990, the Second Amendment dated July 27, 1990, the Third Amendment dated April 18, 1991 and the Fourth Amendment dated September 22, 1994 (collectively the "Lease") by and between Assignor and Hyatt Plaza Limited Partnership (the "Landlord"), Assignor leased certain premises totaling 20,071 rentable square feet more particularly described therein. B. Assignor desires to assign unto the Assignee all of the Assignor's rights, title and interest under the Lease. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Effective as of February 1, 1997 (the "Effective Date") Assignor assigns all of its rights and obligations under the Lease and Assignee accepts such assignment of Page 1 of 4 115 all the Assignor's rights and obligations thereunder. In the event the Premises are not made available to the Assignee by the Effective Date, the Assignor shall pay the Assignee a penalty of $1,219.87 for each day the Premises are not available beyond the Effective Date. In addition, if the Premises are not made available to the Assignee by March 1, 1997, the Assignee shall have the option to cancel the Assignment. 2. From and after the Effective Date, Assignee will perform all of the provisions to be performed under the Lease by Assignor and Landlord shall be entitled to all the rights, benefits and rentals accruing thereunder. 3. The Assignor shall pay the Assignee $80,000 in two equal installments of $40,000 payable on January 1, 1997 and March 1, 1997. In addition, the Assignor shall pay a brokerage commission to Cushman & Wakefield equal to $12,142.96 as the Assignee's broker representative. The amounts due from Assignor to Assignee under this paragraph 3 are solely the obligation of the Assignor and shall under no circumstances have any effect upon the Lease or this Assignment. 4. The Assignor represents and warrants that the monthly base rent for the Premises will be $36,596.12 per month through December 31, 1997. In addition, the Assignor currently pays $1,610.24 per month in estimated real estate tax and operating expense passthroughs which is subject to adjustment based upon actual costs pursuant to Article 6 of the Lease. Page 2 of 4 116 5. This Assignment is contingent on Pacific Mutual Life Insurance Company countersigning a lease with Trident Data Systems, Inc. for office space at 10455 White Granite Drive, Oakton, Virginia. In the event the Assignor has not satisfied the contingency within ten (10) days of the date hereof, then the Assignor shall have the option to rescind this Assignment at any time within twenty (20) days thereafter. 6. Assignor, Assignee and Landlord acknowledge and agree that the Assignee shall have no rights to the security deposit under the Lease and that the security deposit will be returned to the Assignor by Landlord in accordance with the terms of a separate agreement. WITNESS the following signatures and seals of Assignor and Assignee made as of the date first above written. ASSIGNOR: -------- TRIDENT DATA SYSTEMS, INC. By: /s/ David A. Muckley --------------------------------- Name: David A. Muckley -------------------------------- Its: President & CEO ------------------------------ ASSIGNEE: -------- AMERICAN MANAGEMENT SYSTEMS, INC. By: /s/ Frank A. Nicolai --------------------------------- Name: -------------------------------- Its: --------------------------------- Page 3 of 4 117 The undersigned, the Landlord of the above referenced Lease, hereby executes this Assignment solely to evidence its consent to the assignment by the Assignor to the Assignee. The undersigned reserves its rights under the Lease to consent and approve any future assignment of the Lease. The consent by Landlord shall not be deemed a release of the Assignor of the Tenant's obligations under the Lease accruing prior to the Effective Date of this Assignment. Upon the Assignor surrendering possession by the Effective Date, the Assignor and Landlord shall have no further obligations to each other under the Lease except for the following provisions which expressly state that such provisions shall survive termination of the Lease: Articles 5.04, 6.01 and 6.02. LANDLORD: -------- By: Fair Lakes Hyatt Limited Partnership*, its g.p. By: Fair Lakes of Virginia, Inc.**, its gen. partner By: /s/ Milton V. Peterson --------------------------------- Name: Milton V. Peterson Its: President * a Virginia limited partnership ** a Virginia corporation By: ----------------------------- Name: ---------------------------- Its: ----------------------------- By: ------------------------------ Name: ----------------------------- Its: ------------------------------ Page 4 of 4 EX-10.9 8 LEASE AGREEMENT WITH FAIRFAX GILBANE, L.P. 1 EXHIBIT 10.9 LEASE AGREEMENT BY AND BETWEEN FAIRFAX GILBANE, L.P. AND AMERICAN MANAGEMENT SYSTEMS, INC. 2 TABLE OF CONTENTS ARTICLE 1 DEFINITIONS........................................................1 ARTICLE 2 PREMISES...........................................................1 ARTICLE 3 TERM...............................................................2 ARTICLE 4 BASE RENT..........................................................5 ARTICLE 5 OPERATING CHARGES AND REAL ESTATE TAXES............................6 ARTICLE 6 USE OF PREMISES...................................................10 ARTICLE 7 ASSIGNMENT AND SUBLETTING.........................................11 ARTICLE 8 MAINTENANCE AND REPAIRS...........................................12 ARTICLE 9 ALTERATIONS.......................................................13 ARTICLE 10 SIGNS............................................................14 ARTICLE 11 TENANT'S INSTALLATIONS...........................................14 ARTICLE 12 SECURITY DEPOSIT [INTENTIONALLY OMITTED].........................15 ARTICLE 13 INSPECTION.......................................................15 ARTICLE 14 INSURANCE........................................................15 ARTICLE 15 SERVICES AND UTILITIES...........................................16 ARTICLE 16 LIABILITY........................................................18 ARTICLE 17 RULES............................................................20 ARTICLE 18 DAMAGE OR DESTRUCTION............................................20 ARTICLE 19 CONDEMNATION.....................................................21 ARTICLE 20 DEFAULT..........................................................22 ARTICLE 21 BANKRUPTCY.......................................................24 ARTICLE 22 SUBORDINATION....................................................24 ARTICLE 23 HOLDING OVER.....................................................25 ARTICLE 24 COVENANTS OF LANDLORD............................................26 ARTICLE 25 PARKING..........................................................27 ARTICLE 26 GENERAL PROVISIONS...............................................27 ARTICLE 27 EXPANSION........................................................30 3 EXHIBIT A -- Legal Description of the Land EXHIBIT B -- Work Agreement EXHIBIT C -- Rules EXHIBIT D -- Certificate Affirming the Lease Commencement Date EXHIBIT E -- HVAC Specifications EXHIBIT F -- Cleaning Specifications EXHIBIT G -- Nondisturbance Agreement 4 LEASE AGREEMENT THIS LEASE AGREEMENT (this "Lease") is dated as of the 15th day of February, 1994, by and between FAIRFAX GILBANE, L.P., a Virginia limited partnership ("Landlord"), and AMERICAN MANAGEMENT SYSTEMS, INC., a Delaware corporation ("Tenant"). ARTICLE 1 DEFINITIONS 1.1. (a) Building: a ten (10) story office building containing approximately 253,000 square feet of rentable office area (subject to final measurement pursuant to Section 26.18 below) to be constructed on the land (the "Land") situated in Fair Lakes Park, Fairfax County, Virginia, more fully described in Exhibit A attached hereto. (b) Premises: the entire rentable area of the Building. (c) Parking Rights: the right to use all 463 parking spaces in the parking structure and all 313 parking spaces in the surface lot(s) to be constructed in conjunction with the Building. (d) Lease Term: one hundred eighty two (182) months. (e) Base Rent: Four Million Eighty-Five Thousand Nine Hundred Fifty Dollars ($4,085,950) for the first Lease Year, which amount is subject to adjustment as provided in Section 4.2 hereof. (f) Rent Commencement Date: the later of (i) the date that is forty-nine (49) days after the Lease Commencement Date (as determined pursuant to Section 3.2 hereof) or (ii) February 16, 1996. (g) Broker: Cushman & Wakefield of Virginia. (h) Tenant Address for Notices: 4000 Legato Road, Fairfax, Virginia 22030, Attn: Mr. Thomas W. Huba, with a copy to Shaw, Pittman, Potts & Trowbridge, 2300 N Street, N.W., Washington, D.C. 20037, Attn: Craig A. deRidder, Esq. ARTICLE 2 PREMISES 2.1. (a) Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, the Premises, for the term and upon the conditions and covenants set forth herein. (b) Throughout the Lease Term, Tenant shall be entitled to use the core area stairwells in the Building as a means of interfloor access. -1- 5 (c) Throughout the Lease Term, Tenant shall have the exclusive right to install and maintain such satellite dishes, microwave antennas and other communications equipment upon the roof of the Building as Tenant may desire, subject to compliance with any applicable legal requirements or restrictions and subject to Landlord's prior written approval (which shall not be unreasonably withheld, conditioned or delayed) of any such installation that is not customary for a first-class office building. Tenant shall not install any such dishes, antennas or equipment that would impair the structural integrity of the Building or invalidate the roof warranty for the Building, and Tenant shall hold Landlord harmless against any breach by Tenant of such restriction. Upon the expiration or termination of this Lease, Tenant shall remove such dishes, antennas and equipment from the roof and restore any damage to the Building caused by such removal. ARTICLE 3 TERM 3.1. The Lease Term shall commence on the Lease Commencement Date specified in Section 3.2 and shall continue for the period set forth in Section 1.1(d). If the Lease Commencement Date is not the first day of a month, then the Lease Term shall be the period set forth in Section 1.1(d) plus the partial month in which the Lease Commencement Date occurs. The Lease Term shall also include any renewal or extension of the term of this Lease. 3.2. The Lease Commencement Date shall be the earlier of (a) the date on which Tenant commences the conduct of its business in the Building or (b) December 29, 1995 (subject to adjustment as provided in Exhibit B hereto). Installation of Tenant's furniture, equipment and other personalty in the Premises shall not constitute the conduct of business for purposes hereof. Promptly after the Lease Commencement Date is ascertained, Landlord and Tenant shall execute a certificate substantially in the form of Exhibit D hereto confirming the Lease Commencement Date. In the event the Lease Commencement Date has not occurred on or before December 29, 1995 (it being acknowledged that the Lease Commencement Date shall not be extended by reason of any delay that is deemed a "Tenant Delay" pursuant to Exhibit B), then Landlord shall reimburse Tenant for any damages incurred by Tenant as a direct result of such delay, including (without limitation) any holdover rental payments and increased moving costs; provided, however, that Landlord shall not be liable for such damages to the extent that the delay results from causes commonly considered to be "acts of God" (including, e.g., fire or casualty not caused by the acts or omissions of Landlord or its agents, employees or contractors, and severe weather conditions that are not reasonably to be anticipated; but excluding, e.g., labor problems, permitting delays, and materials shortages). 3.3. "Lease Year" shall mean a period of twelve (12) consecutive months commencing on the Rent Commencement Date, and each successive twelve (12) month period thereafter; provided, however, that if the Rent Commencement Date is not the first day of a month, then the first Lease Year shall commence on the Rent Commencement Date and shall continue for the balance of the month in which the Rent Commencement Date occurs and for a period of twelve (12) months thereafter. -2- 6 3.4. (a) Landlord hereby grants to Tenant the right, exercisable at Tenant's option, to renew the term of this Lease for two (2) successive renewal terms of five (5) years each. If exercised, and if the conditions applicable thereto have been satisfied, the first such renewal term (the "First Renewal Term") shall commence following the end of the initial Lease Term and the second such renewal term (the "Second Renewal Term") shall commence following the end of the First Renewal Term. The rights of renewal herein granted to Tenant shall be subject to, and shall be exercised in accordance with, the following conditions: (1) Tenant shall exercise its right of renewal with respect to each Renewal Term by giving Landlord written notice thereof not later than eighteen (18) months prior to the expiration date of the Lease Term (as theretofore extended). (2) In the event the renewal option notice is not given timely, Tenant's right of renewal with respect to the Renewal Term shall lapse and be of no further force or effect. (3) The renewal option may be exercised only with respect to either (i) the entire Premises, or (ii) a portion of the Premises consisting of at least 100,000 contiguous rentable square feet and comprising only full floors. (4) In the event there exists an Event of Default under this Lease on the date the renewal option notice is sent (provided Landlord gives Tenant written notice, within fifteen (15) days after its receipt of Tenant's renewal option notice, that Landlord is invoking the provisions of this clause (4)), or on the date the Renewal Term is to commence, then, at Landlord's option, the Renewal Term shall not commence and the Lease Term shall expire at the date the Lease Term would have expired without such renewal. (b) During any Renewal Term, all the terms, conditions, covenants and agreements set forth in this Lease, including but not limited to the full pass-through of Operating Charges, shall continue to apply and be binding upon Landlord and Tenant, except that: (1) the Base Rent shall be adjusted at the beginning of each Renewal Term to equal ninety-five percent (95%) of Market Rent (as hereinafter defined); and (2) in no event shall Tenant have the right to renew the Lease Term beyond the expiration of the Second Renewal Term provided for in Section 3.4(a) or in the event this Lease is terminated as provided in the other provisions of this Lease. Furthermore, in the event Tenant renews the term of this Lease with respect to only a portion of the Premises pursuant to clause (a)(3)(ii) above, then (i) Tenant's right to use the parking structure and surface lots on the Land shall be correspondingly reduced pro rata based upon the ratio that the total rentable square footage being leased by Tenant during such Renewal Term bears to the total rentable square footage of the Building; (ii) Tenant's rights pursuant to Section 2.1(c) shall be nonexclusive if Tenant leases less than five (5) full floors; (iii) Article 5 shall be modified to provide that Tenant shall pay only its pro rata share of Operating Charges and Real Estate Taxes, and that Operating Charges shall be "grossed up" to reflect the costs associated with a 100% occupied building; (iv) Tenant's rights pursuant to Section 5.4 shall be void if Tenant leases less than five (5) full floors; (v) Tenant's rights pursuant to Section 10.1 shall be nonexclusive if Tenant leases less than five (5) full floors; (vi) Tenant shall be entitled to its pro rata share of listings on the Building's directory; (vii) the charge for after-hours HVAC -3- 7 service pursuant to Section 15.1 shall be increased to include electricity, water and maintenance costs associated with such after-hours service (which shall no longer be included in Operating Charges); (viii) Tenant shall not have the right to designate Building holidays if Tenant leases less than five (5) full floors; (ix) Tenant shall not have the right to approve, or require the replacement of, the cleaning contractor or management agent if Tenant leases less than five (5) full floors; and (x) Tenant's rights pursuant to Sections 24.3 and 24.4 shall lapse if Tenant leases less than five (5) full floors. (c) "Market Rent" shall be the fair market amount of Base Rent determined as follows: (1) The parties shall have thirty (30) days after the date of Tenant's renewal notice in which to agree on such Market Rent. If, during such negotiation period, the parties are unable to agree on such Market Rent, then Tenant shall have the option, exercisable by written notice delivered to Landlord within seven (7) days after expiration of the aforementioned thirty (30) day period, to rescind its election to extend the term of this Lease for such Renewal Term. If Tenant does not timely exercise such right of rescission, then Landlord and Tenant shall each designate an independent, licensed real estate broker within seven (7) days from the expiration of the aforementioned seven (7) day period, who shall have more than five (5) years' experience as a real estate broker specializing in commercial leasing and who shall be familiar with the commercial real estate market in which the Building is located. Said brokers shall each determine the Market Rent within fifteen (15) days. If the lower of the two determinations is not less than ninety percent (90%) of the higher of the two determinations, then the Market Rent shall be the average of the two determinations. If the lower of the two determinations is less than ninety percent (90%) of the higher of the two determinations, then the two brokers shall render separate written reports of their determinations and within fifteen (15) days thereafter the two brokers shall appoint a third broker with like qualifications. Such third broker shall be furnished the written reports of the first two brokers. Within fifteen (15) days after the appointment of the third (3rd) broker, the third broker shall appraise the Market Rent. The Market Rent for purposes of this Section 3.4 shall equal the average of the two closest determinations; provided, however, that (a) if any one determination is agreed upon by any two of the brokers, then the Market Rent shall be such determination, and (b) if any one determination is equidistant from the other two determinations, then the Market Rent shall be such middle determination. Landlord and Tenant shall each bear the cost of its broker and shall share equally the cost of the third broker. Tenant shall have the option, exercisable by written notice delivered to Landlord within ten (10) days after the final determination of Market Rent hereunder, to rescind its election to extend the term of this Lease for the Renewal Term in question. (2) Among the factors to be considered in determining Market Rent shall be the rental rates for similar terms then being quoted or obtained for similar space in single-tenant, multi-story, first-class office buildings in the Market Area (as herein defined). All determinations shall reflect market conditions expected to exist as of the date Base Rent based on Market Rent is to commence (including base rents and escalations, rental abatements, construction allowances, other tenant concessions, and other terms expected to be agreed to in -4- 8 market leases entered into at such time). For purposes of this Lease, the term "Market Area" shall mean the Fairfax Center submarket of Fairfax County, Virginia. ARTICLE 4 BASE RENT 4.1. During each Lease Year of the Lease Term, Tenant shall pay the Base Rent specified in Section 1.1. On the first day of the second Lease Year and on the first day of every Lease Year thereafter during the Lease Term (including the second and any succeeding Lease Year within any Renewal Term), the Base Rent in effect shall be adjusted as provided in Section 4.2. The Base Rent shall be due and payable in equal monthly installments, without notice, demand, setoff or deduction (except as otherwise expressly provided in this Lease), in advance on the first day of each month during each Lease Year. If the Rent Commencement Date is not the first day of a month, then the Base Rent from the Rent Commencement Date until the first day of the following month shall be prorated on a per diem basis, and Tenant shall pay such prorated installment of the Base Rent on the Rent Commencement Date. 4.2. (a) Commencing on the first (1st) day of the second (2nd) Lease Year and on the first day of every Lease Year thereafter, the Base Rent shall be adjusted to reflect increases in the cost of living in the following manner: (1) The Revised Consumer Price Index for Urban Wage Earners and Clerical Workers, 1982-84 Base Year, All Items, Washington, D.C.-MD-VA Metropolitan Area (CPI-W) as published by the Bureau of Labor Statistics of the United States Department of Labor (herein referred to as the "Index"), which is published for the bimonthly period that includes the month immediately preceding the Lease Year for which such adjustment is being made (herein referred to as the "Adjustment Index"), shall be compared with the Index published for the period twelve (12) months prior thereto (herein referred to as the "Beginning Index"). If the Adjustment Index has changed from the Beginning Index, the percentage change between the Beginning Index and the Adjustment Index shall be determined. There shall be added to such percentage change three and one-half (3 1/2) percentage points, and the resulting sum shall be referred to herein as the "Escalation Factor." For example, if the Adjustment Index is two percent (2%) higher than the Beginning Index in any particular year, then the Escalation Factor for such year shall equal five and one-half percent (5.5%), and if the Adjustment Index is one percent (1%) lower than the Beginning Index in any particular year, then the Escalation Factor for such year shall equal two and one-half percent (2.5%). (2) The Escalation Factor determined in Step (1) above shall be multiplied by the Base Rent in effect during the immediately-preceding Lease Year to arrive at the amount of the increase in the Base Rent for such newly-commencing Lease Year. In no event, however, shall the amount of such increase be greater than two and 033/1000 percent (2.033%) of the Base Rent in effect during the immediately-preceding Lease Year. (3) The amount determined in Step (2) above (subject to the limitation set forth in the last sentence of Step (2)) shall be added to the Base Rent in effect during the -5- 9 immediately-preceding Lease Year to arrive at the Base Rent payable for such newly-commencing Lease Year. (b) In no event shall the Base Rent payable during any Lease Year be less than the Base Rent payable during the immediately preceding Lease Year. (c) If the Index is changed so that a base year other than 1982-84 is used, the Index used herein shall be converted in accordance with the conversion factor published by the Bureau of Labor Statistics of the United States Department of Labor. If the Index is discontinued or otherwise revised during the Lease Term, such other government index or computation with which it is replaced shall be used in order to obtain substantially the same result as would be obtained if the Index had not been discontinued or revised. (d) Promptly after the adjustment in the Base Rent is determined for each Lease Year, Landlord shall submit to Tenant a statement setting forth the amount of such adjustment and the computations by which it was determined. Since the actual increase in the Base Rent may not be determined until after the start of a new Lease Year, until the actual increase in the Base Rent is determined, Tenant shall make monthly payments of Base Rent in an amount equal to the monthly installments of Base Rent payable during the immediately preceding Lease Year. Promptly after receipt of a statement from Landlord setting forth the actual increase in the monthly installments of Base Rent for such Lease Year, the difference between the monthly payments paid by Tenant and the actual amount of Base Rent determined to be owing for such months shall be determined. If the actual amount determined to be owing is greater than Tenant's payments, the deficiency shall be paid by Tenant together with the next monthly installment of Base Rent due at least fifteen (15) days after the amount of the deficiency is determined. 4.3. All sums payable by Tenant under this Lease shall be paid to Landlord in legal tender of the United States by wire transfer (which Tenant agrees to utilize for regular monthly installments of Base Rent and additional rent, provided Landlord has furnished Tenant with accurate wiring instructions) or by check (subject to collection), at the address to which notices to Landlord are to be given or to such other party or such other address as Landlord may designate in writing. Landlord's acceptance of rent after it shall have become due and payable shall not excuse a delay upon any subsequent occasion or constitute a waiver of any of Landlord's rights. ARTICLE 5 OPERATING CHARGES AND REAL ESTATE TAXES 5.1. (a) Tenant shall pay as additional rent all Operating Charges (as defined in Section 5.1(b)) incurred during each calendar year falling entirely or partly within the Lease Term. (b) Operating Charges shall mean all costs and expenses reasonably incurred by Landlord in the maintenance and operation of the Building, the Land and the parking -6- 10 facilities, determined in accordance with generally accepted accounting practices prevailing in the real estate industry, including all of the following: (1) electricity, gas, water, sewer and other utility charges of every type and nature; (2) premiums and other charges for insurance (including, but not limited to, property insurance, rent loss insurance (for a rent interruption period of up to 18 months) and liability insurance); (3) market-rate management fees incurred in the management of the Building; (4) all costs incurred in connection with service and maintenance contracts; (5) maintenance and repair expenses and supplies; (6) amortization (calculated over the useful life of the improvement, with interest at Landlord's cost of funds or (if the improvement is not financed) at the prime rate reported in The Wall Street Journal) for capital expenditures made by Landlord for the purpose of complying with legal requirements instituted after the Lease Commencement Date, or that are reasonably expected to result in a net decrease in Operating Charges and are approved in advance by Tenant; (7) salaries, wages, benefits and other expenses of Building personnel (except as excluded below); (8) legal fees (except as excluded below), administrative expenses, and accounting fees and expenses (except as excluded below); (9) costs of any service not provided to the Building on the Lease Commencement Date but thereafter provided by Landlord in the prudent management of the Building and approved in advance by Tenant; (10) charges for concierge, security, janitorial, char and cleaning services and supplies furnished to the Building; (11) amortization (calculated over the useful life of the improvement, with interest at Landlord's cost of funds or (if the improvement is not financed) at the prime rate reported in The Wall Street Journal) for capital expenditures made by Landlord in performing Landlord's obligations under Section 8.2 hereof by repairing or replacing any item or system (including, without limitation, repaving access lanes and parking areas) upon the expiration of the customary useful life thereof (but not any cost of upgrading the Building generally or correcting defects in initial construction); (12) assessments or other amounts payable to any association or associations now or hereafter established to administer, oversee or enforce common covenants affecting the Fair Lakes development zone in which the Building is located, or to operate, maintain, or repair common or public areas or facilities of such Fair Lakes development zone; and (13) any other expense reasonably incurred by Landlord in maintaining, repairing or operating the Building, the Land and the parking facilities. Operating Charges shall not include (A) interest and amortization of mortgages or any other encumbrances or debt; (B) ground rent; (C) depreciation of the Building, any equipment, or any other improvements (except as permitted pursuant to clauses (6) and (11) above); (D) any capital expenditures other than those permitted pursuant to clauses (6) and (11) above; (E) income, excess profits or franchise taxes imposed upon or measured by the net income of Landlord from the operation of the Building; (F) legal fees and all other costs and expenses incurred in disputes with any lenders or ground lessors, or in connection with the sale or financing of all or any part of the Building or Landlord's interest therein; (G) salaries, wages, fringe benefits or other compensation paid or provided to executives of Landlord or any personnel above the level of building manager; (H) the cost of any goods or services purchased from an individual or entity which is a parent, subsidiary or affiliate which controls, is controlled by, or is under common control with, Landlord to the extent such cost exceeds the cost that would be incurred in an arm's-length transaction with an unrelated party; (I) any cost which is reimbursed by the proceeds of insurance, condemnation award, refund, credit or warranty; (J) legal and other costs (including the prepayment of any indebtedness) incurred in connection with any mortgaging, financing, refinancing, or sale of the Building or entering into or modifying any ground lease; (K) original construction costs for the -7- 11 Building; (L) payments for equipment rented under long-term leases which would constitute capital expenditures if such equipment were purchased (except as permitted pursuant to clause (6) above); (M) any costs, fines or penalties incurred as a result of a violation by Landlord of any legal requirements; (N) interest or penalties arising by reason of Landlord's failure to pay any Operating Charges when due; (O) reserves for replacements or repairs; (P) costs of correcting defects in the initial construction of the Building; (Q) costs of reconstruction or repair pursuant to Article 18 hereof, except to the extent of any commercially reasonable deductible under Landlord's insurance policies, or pursuant to Article 19 hereof; (R) accounting fees not incurred in connection with the operation and management of the Building or the preparation of any statements required under this Lease; (S) any costs associated with phasing out chlorofluorocarbon refrigerants; and (T) the cost of any personnel, materials or services shared by the Building and any other buildings owned or operated by Landlord, to the extent reasonably allocable to such other buildings. 5.2. (a) Tenant shall make estimated monthly payments to Landlord on account of the amount of Operating Charges that are reasonably expected to be incurred during each calendar year. Upon the commencement of the Lease Term, and thereafter at the beginning of each calendar year, Landlord will submit a statement to Tenant setting forth Landlord's reasonable estimate of such amount. Tenant shall pay to Landlord on the first day of each month following receipt of such statement, until Tenant's receipt of the succeeding annual statement, an amount equal to one-twelfth (1/12) of such share. (b) Within approximately one hundred twenty (120) days after the end of each calendar year, Landlord shall submit a statement containing reasonable detail and certified as true, accurate and complete by Landlord showing (1) the amount of Operating Charges actually incurred during the preceding calendar year, and (2) the aggregate amount of Tenant's estimated payments during such year. If such statement indicates that the aggregate amount of such estimated payments exceeds Tenant's actual liability, then Tenant shall deduct the net overpayment from its next monthly rental payment, except that, following the expiration or other termination of the Lease Term, Landlord shall refund such excess to Tenant upon delivery of such statement. Landlord's obligation to pay such refund shall survive the expiration or other termination of this Lease. If such statement indicates that Tenant's actual liability exceeds the aggregate amount of such estimated payments, then Tenant shall pay the amount of such excess with the next monthly rental payment due at least fifteen (15) days after the delivery of Landlord's reconciliation statement. (c) Tenant shall have the right, exercisable upon at least fifteen (15) days' prior written notice to Landlord, to inspect or audit Landlord's books and records with respect to Operating Charges. Such inspection or audit shall take place during normal business hours at a location in the Washington, D.C. metropolitan area. If it is established that Landlord overstated Tenant's obligation for Operating Charges in any calendar year, Landlord shall promptly refund such excess, and if Tenant's obligation for Operating Charges shall have been overstated by more than three percent (3%) for any calendar year, Landlord shall reimburse Tenant for the reasonable costs paid or incurred by Tenant to third parties for such inspection or audit. Tenant's right to audit Landlord's books and records for any calendar year shall expire on December 31 of -8- 12 the third year following such calendar year and Landlord shall not be required to maintain any books and records with respect to Operating Charges for longer than three (3) years after the end of each such calendar year. If Tenant shall dispute any item or items included by Landlord in determining Operating Charges, Tenant shall nevertheless pay to Landlord in full the amount claimed by Landlord and shall not offset or withhold any payment while its dispute is pending. If such dispute is not amicably settled between Landlord and Tenant within thirty (30) days after such notice, either party may refer such disputed item or items to a reputable firm of independent certified public accountants mutually selected by Landlord and Tenant for decision, and the decision of such firm shall be conclusive and binding upon Landlord and Tenant. The expenses involved in such determination shall be borne by the party against whom a decision is rendered by such accountants; provided that if more than one item is disputed and the decision shall be against each party in respect to any item or number of items disputed, then the expenses shall be apportioned according to the monetary value of the items decided against each party. 5.3. (a) Tenant shall pay as additional rent all Real Estate Taxes (as defined in Section 5.3(b)) incurred during each calendar year falling entirely or partly within the Lease Term. (b) Real Estate Taxes shall mean (1) all real estate taxes, including general and special assessments, if any, which are imposed upon Landlord or assessed against the Building and/or the Land (including the parking structure and all other improvements on the Land) to the extent attributable to the Lease Term, (2) any other present or future taxes or governmental charges that are imposed upon Landlord or assessed against the Building and/or the Land which are in the nature of or in substitution for real estate taxes, including any tax levied on or measured by the rents payable by tenants of the Building, and (3) reasonable expenses (including reasonable attorneys' and appraisers' fees) incurred in reviewing, protesting or seeking a reduction of Real Estate Taxes. If Tenant shall have paid an amount of additional rent because of the inclusion of contested Real Estate Taxes in Operating Charges and Landlord thereafter receives a refund of such Real Estate Taxes, Landlord shall pay promptly to Tenant such refund (including any interest received from the taxing authority), reduced by the costs of obtaining such refund. Landlord's obligation to refund to Tenant any refund of Real Estate Taxes shall survive the expiration or termination of this Lease. (c) Upon receipt of each real estate tax bill with respect to the Building and the Land from Fairfax County, Landlord shall deliver a copy of such bill to Tenant. Tenant shall pay all Real Estate Taxes it is required to pay pursuant to this Section 5.3 to Landlord no later than ten (10) business days before the date on which Landlord is required to pay such Real Estate Taxes to Fairfax County in order to avoid the imposition of penalties or interest. Notwithstanding the foregoing, in the event there occurs a default by Tenant under this Lease that directly results in a default by Landlord under the mortgage or deed of trust encumbering the Building, and if as a result of such default the holder of said mortgage or deed of trust exercises its right to require Landlord thereafter to make a monthly escrow deposit on account of Real Estate Taxes, then Tenant shall, after receiving written notice of the lender's election and the amount of the required monthly escrow deposit on account of Real Estate Taxes, deposit such sum with Landlord on a monthly basis together with the regular monthly installment of Base -9- 13 Rent and estimated Operating Charges (subject, however, to Tenant's right to receive any sums returned to Landlord by reason of an overpayment of Real Estate Taxes). 5.4. Upon receiving a notice of reassessment with respect to the Building and/or the Land from the County of Fairfax, Landlord will furnish Tenant with a copy thereof. Landlord shall make an initial determination whether or not to challenge or appeal such reassessment based on Landlord's reasonable judgment of which course is in the best interest of the Building. Landlord shall inform Tenant of such determination, and shall make available appropriate personnel to discuss with Tenant the reasons underlying such determination. In the event Landlord determines not to challenge or appeal such reassessment, Tenant shall have the right to challenge or appeal such assessment in Landlord's name but at Tenant's expense, and Landlord shall cooperate in such challenge or appeal (including executing such forms as may be necessary to institute and prosecute such action). During the pendency of such challenge or appeal, Tenant shall pay all of the contested taxes as required pursuant to this Article 5, unless (and then only to the extent) the prosecution of such challenge or appeal stays collection of the contested taxes. 5.5. If the Lease Term expires on a day other than the last day of a calendar year, then Tenant's liability for Operating Charges and Real Estate Taxes incurred during such calendar year shall be apportioned by multiplying the amount of Tenant's liability therefor 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. Tenant's obligation to pay Operating Charges and Real Estate Taxes hereunder, and Landlord's obligation to refund any overpayment thereof, shall survive the expiration or termination of this Lease. ARTICLE 6 USE OF PREMISES 6.1. Tenant shall use the Premises solely for general and executive office purposes and for no other use or purpose. Provided Tenant complies with any legal and insurance requirements relating thereto, "general and executive office purposes" shall be deemed to include the uses which are incidental or ancillary to such general and executive office use, including the following uses: (i) one or more cafeterias, dining rooms and warming pantries (each of which may include facilities for the refrigeration, preparation, cooking and service of food), provided that Tenant shall install all grease traps and other similar items reasonably deemed necessary, (ii) the sale, by vending machines, of items commonly sold in office vending machines, including soft drinks, food, candy and cigarettes; (iii) facilities for photographic reproductions and offsets, laser and other types of printing; (iv) data processing and word processing services; (v) telephone, telecopier and other business communications systems; (vi) storage of files, papers, microfilm and other storage media; (vii) video display, screening and media rooms; (viii) conference rooms; (ix) classrooms for training and presentations; (x) executive placement and travel agency services; (xi) a medical or nurse's office; (xii) a messenger service; (xiii) a day care facility for use exclusively by Tenant's employees, (xiv) an exercise facility, and (xv) shower and locker room facilities. Portions of the Premises situated on the ground floor of the Building may be used by Tenant (or subleased by Tenant to others to be used) for retail purposes, including (without limitation) food service operations. Tenant shall not generate, use, store, or dispose of -10- 14 any materials posing a health or environmental hazard in or about the Building, except that Tenant may use and store within the Premises reasonable quantities of materials customarily found in general and executive offices, provided such materials are used, stored and disposed of in a manner that complies with all applicable environmental laws. Landlord shall bear the cost of removing from the Building and the Land any hazardous materials that were not introduced by Tenant or Tenant's agents, employees or contractors and that are hereafter required to be removed to avoid a health or environmental hazard. Tenant shall comply with and conform to all present and future laws, ordinances, regulations and orders of all applicable governmental or quasi-governmental authorities having jurisdiction over the Premises, including those concerning the use, occupancy and condition of the Premises and all machinery, equipment and furnishings therein, except that Landlord shall comply with all such requirements with respect to the Building's structural components and systems, including those within the Premises, except to the extent structural alterations or improvements are the direct result of any required change to the Premises for which Tenant is responsible. In the event any act or omission by Tenant or Tenant's agents, employees or contractors results in a violation of law for which Landlord is fined or otherwise penalized, Tenant shall pay or reimburse Landlord for any such fine or penalty. The party performing the Tenant Work pursuant to Exhibit B shall obtain the initial nonresidential use permit for the Premises. Any amended or substitute nonresidential use permit necessitated by Tenant's particular use of the Premises or any Alterations made by Tenant in the Premises shall be obtained by Tenant at Tenant's sole expense. Tenant acknowledges that the Land and the Building, and its use thereof, are subject to the Declaration of Covenants, Conditions and Restrictions of the Fair Lakes League (the "Fair Lakes CCRs"), which has been recorded in the land records of Fairfax County, Virginia. Landlord warrants that the current zoning classification applicable to the Land permits occupancy for general and executive office purposes, and that no other covenants or restrictions (including the Fair Lakes CCRs) affecting the Land will prevent or interfere with such use. ARTICLE 7 ASSIGNMENT AND SUBLETTING 7.1. Tenant shall not assign this Lease or any of Tenant's rights or obligations hereunder, or sublet the Premises or any part thereof, without Landlord's prior written consent. Landlord's consent shall not be unreasonably withheld, conditioned or delayed, provided the proposed assignee or subtenant will use the Premises only for the purposes and in the manner permitted under this Lease. Landlord shall respond to a request for its approval of a proposed assignment or sublease within ten (10) business days following its receipt of a written request for such approval from Tenant, and Landlord's failure to respond within such ten (10) business day period shall be deemed to constitute Landlord's approval of the assignment or sublease. Landlord shall furnish Tenant with detailed written reasons for Landlord's refusal to approve any assignment or sublease. No assignment or transfer of this Lease may be effected by operation of law or otherwise without Landlord's prior written consent. Landlord's acceptance or collection of rent from -11- 15 any assignee, subtenant or occupant shall not be construed as a consent to or acceptance of such assignee, subtenant or occupant as a tenant. Neither shall Landlord's consent to any assignment, subletting or occupancy, or Landlord's acceptance or collection of rent from any assignee, subtenant or occupant, be construed as relieving Tenant or any assignee, subtenant or occupant from the obligation of obtaining Landlord's prior written consent to any subsequent assignment, subletting or occupancy. Notwithstanding any assignment of Tenant's interest in this Lease, the original Tenant hereunder shall remain liable for all obligations of Tenant arising under this Lease. Tenant agrees to furnish Landlord, upon request, with such financial information concerning any proposed assignee or subtenant as Tenant may have in its possession; however, because the original Tenant remains liable for the obligations of Tenant under this Lease, Landlord agrees that the financial condition of the proposed assignee or subtenant will not be a reasonable basis for Landlord to withhold approval of such proposed assignee or subtenant. Tenant agrees that, in the event the bulk of the original Tenant's assets are hereafter conveyed to any parent, subsidiary or affiliate of the original Tenant, then, upon any assignment of this Lease occurring after such conveyance, the obligations of Tenant under this Lease shall be guaranteed by the parent, subsidiary or affiliate to which such assets were conveyed. All restrictions and nonmonetary obligations imposed pursuant to this Lease on Tenant shall be deemed to extend to any subtenant, assignee or occupant of Tenant, and Tenant shall cause such persons to comply with all such restrictions and obligations. Any assignee shall expressly assume in writing all obligations of Tenant arising under this Lease after such assignment is effective. 7.2. Notwithstanding any other provision of this Article 7, Tenant shall have the right to assign this Lease or to sublet all or any portion of the Premises, in either case without the consent of Landlord, to any entity that is owned by or under common ownership with Tenant, or to any division or subentity of Tenant, or to any entity or user that is partially owned by Tenant and in the management and operations of which Tenant is an active participant. No such assignment or subletting shall relieve the original Tenant from liability for the performance of all of the obligations of the tenant under this Lease. ARTICLE 8 MAINTENANCE AND REPAIRS 8.1. Tenant shall keep and maintain the Premises and all fixtures and equipment located therein in clean, safe and sanitary condition, shall take good care thereof and make all repairs and replacements thereto, and shall suffer no waste or injury thereto, provided that Landlord shall be solely responsible for maintaining and repairing the Building's structural components and systems, including those within the Premises (unless repair is necessitated by any negligent or wrongful act or omission of Tenant or its agents or employees or contractors). At the expiration or earlier termination of the Lease Term, subject to Section 9.3 below, Tenant shall surrender the Premises in the same order and condition in which they were on the Lease Commencement Date, ordinary wear and tear and damage by casualty or condemnation excepted. Except as otherwise provided in Article 18, all injury, breakage and damage to the Premises and to any other part of the Building or the Land caused by any act or omission of Tenant or of any agent or employee or contractor of Tenant shall be repaired by and at Tenant's expense, except that Landlord shall have the right at Landlord's option to make any such repair if it involves the Building's structural components or systems and to charge Tenant for all reasonable costs and expenses incurred in connection therewith. The liability of Tenant for such -12- 16 costs and expenses shall be reduced by the amount of any insurance proceeds received by Landlord on account of such injury, breakage or damage. Landlord shall provide and install replacement tubes for standard fluorescent light fixtures; all other bulbs and tubes for the Premises shall be provided and installed by Landlord at Tenant's expense. 8.2. Landlord shall keep and maintain in good order and repair the base-building structure and systems, including the roof, exterior walls, elevators, electrical, plumbing and HVAC systems, and the ground floor lobby and other core areas and base-building facilities of the Building (including the parking structure and surface parking areas). ARTICLE 9 ALTERATIONS 9.1. The original improvement of the Premises shall be accomplished in accordance with Exhibit B. Landlord is under no obligation to make any structural or other alterations, additions or improvements (collectively "Alterations") in or to the Premises except as set forth in Exhibit B or otherwise expressly provided in this Lease. 9.2. Except as provided below, Tenant shall not make or permit anyone for whom Tenant is responsible to make any Alterations in or to the Premises or the Building without Landlord's prior written consent. If a proposed Alteration does not affect the structure of the Building or modify the base-building mechanical, electrical or plumbing systems, then, if the cost thereof is less than $50,000 (and provided such cost, in the aggregate with the cost of other Alterations made without Landlord's consent during the preceding twelve (12) month period, does not exceed $150,000), Landlord's consent thereto shall not be required. If an Alteration will affect the structure of the Building or modify the base-building mechanical, electrical or plumbing systems or if the cost thereof is $50,000 or more (or would, in the aggregate with the cost of other Alterations made without Landlord's consent during the preceding twelve (12) month period, exceed $150,000), Landlord's consent thereto shall not be unreasonably withheld, conditioned or delayed. Any Alteration made by Tenant shall be made: (a) in a good and workmanlike manner by an experienced, reputable contractor; and (b) in accordance with all applicable legal requirements and requirements of any insurance company insuring the Building. If any mechanic's or materialman's lien is filed in connection with any Alteration, then such lien shall be discharged by Tenant at Tenant's expense within thirty (30) days after Tenant receives notice thereof by the payment thereof or the filing of a bond. If Tenant shall fail to discharge any such mechanic's or materialman's lien, Landlord may, at its option, discharge such lien and treat the cost thereof (including reasonable attorneys' fees incurred in connection therewith) as additional rent payable with the next monthly installment of Base Rent falling due at least fifteen (15) days following Landlord's submission of a bill to Tenant. If Landlord gives its consent to the making of any Alteration, then such consent shall not be deemed to constitute Landlord's consent to subject its interest in the Premises, the Building or the Land to any mechanic's or materialman's lien which may be filed in connection therewith. 9.3. Upon the expiration or sooner termination of the Lease Term, Tenant may, at its election, either remove or leave in place any Alterations, fixtures, telephone or computer wiring, -13- 17 auxiliary HVAC equipment, raised computer flooring, kitchen equipment, built-in furnishings, and other special installations or equipment installed in the Premises by Landlord (excluding Landlord's Work, as described in Exhibit B) or Tenant. In the event Tenant elects to leave any such items in place, then (i) if any of such items, at the time of their initial installation, violated (or were installed in a manner that caused them to violate) any code requirements in force at the time of such initial installation, Tenant shall correct such violation upon Tenant's vacating of the Premises, and (ii) if any of such items render any base-building system nonoperational or render any portion of the Premises unusable or inaccessible (e.g., an automatic locking system), Tenant shall correct such condition upon Tenant's vacating of the Premises (and if such condition can be corrected only by the removal of the item in question, then Tenant shall not have the option of leaving such item in place). In the event Tenant elects to remove any items, Tenant shall repair any structural damage to the Premises or any breach of applicable laws or codes caused by such removal, but shall not be required to restore any nonstructural elements such as partitions, carpets, ceiling tiles, and the like. Landlord shall have the right to repair at Tenant's expense all structural damage and injury to the Premises or the Building caused by such removal or to require Tenant to do the same. Tenant shall also have the right to remove, prior to the expiration or earlier termination of the Lease Term, all movable furniture, furnishings and equipment installed in the Premises. If any such furniture, furnishing or equipment is not removed by Tenant within fifteen (15) days following the expiration or earlier termination of the Lease Term, then the same shall become Landlord's property and shall be surrendered with the Premises as a part thereof; provided, however, that Landlord shall have the right to remove from the Premises at Tenant's expense such furniture, furnishing or equipment, and Tenant shall reimburse Landlord for the cost of such removal within thirty (30) days after receipt of written demand therefor. ARTICLE 10 SIGNS 10.1. Tenant may install and maintain upon the exterior of the Building such signage identifying Tenant as Tenant may elect, subject to compliance with all applicable legal requirements and restrictions and compliance with any other covenants or restrictions binding upon the Land. Upon the expiration or termination of this Lease, Tenant shall remove its exterior signage and repair any damage to the Building caused by such removal. Landlord shall not install any signage upon the Building unless approved by Tenant in Tenant's sole discretion. 10.2. Tenant shall have the right to designate all entries on the Building's directory. Tenant may install such signs in the interior of the Premises as Tenant may elect. ARTICLE 11 TENANT'S INSTALLATIONS 11.1. Safes and other heavy equipment and fixtures shall be installed in such manner as engineered by Tenant's engineer and reasonably approved by Landlord in order to distribute their weight adequately. Any and all damage or injury to the Premises or the Building caused by moving the property of Tenant into or out of the Premises, or due to the same being in or upon the Premises, shall be repaired at the sole cost of Tenant. -14- 18 ARTICLE 12 SECURITY DEPOSIT [Intentionally omitted] ARTICLE 13 INSPECTION 13.1. Tenant shall permit Landlord and its designees to enter the Premises, without charge therefor and without diminution of the rent payable by Tenant, to inspect the Premises, to make such alterations and repairs as may be necessary, or to exhibit the Premises to prospective tenants during the last three hundred sixty-five (365) days of the Lease Term. Notwithstanding the foregoing, in the event a portion of the Premises greater than one-half floor is rendered untenantable by any such activity for more than two (2) consecutive days, and provided (i) Tenant gives Landlord notice of such untenantability and (ii) Tenant does not in fact use or occupy such area, then a proportionate amount of Base Rent and additional rent shall be abated until the entirety of such portion of the Premises is again tenantable. In connection with any such entry, (i) Landlord shall minimize the disruption to Tenant's use of the Premises, and (ii) Landlord shall comply with Tenant's reasonable security requirements applicable to discrete areas that are devoted to particularly confidential or sensitive matters. Except in an emergency, Landlord shall give Tenant reasonable prior notice (which need not be in writing) of any entry into the Premises pursuant to this Section. ARTICLE 14 INSURANCE 14.1. Tenant shall not conduct or permit any activity or place any item in or about the Building which may invalidate any insurance on the Building. 14.2. Throughout the Lease Term, Landlord shall insure the Building and the permanent leasehold improvements therein and the parking facilities and any other improvements on the Land against loss due to fire and other casualties included in broad form property insurance policies, with an agreed amount endorsement and replacement cost coverage, exclusive of excavations, footings and foundations. Throughout the Lease Term, Landlord shall also carry commercial general liability insurance in the minimum amount of five million dollars ($5,000,000) for injury to persons and damage to property, combined single limit. Landlord's commercial general liability policy shall name Tenant as an additional insured. If requested by Tenant, certificates of insurance shall be delivered by Landlord to Tenant on or before the Lease Commencement Date and at least annually thereafter. 14.3. Throughout the Lease Term, Tenant shall insure, for their full insurable value, the contents of the Premises, including furnishings, fixtures and equipment used or installed in the Premises by or on behalf of Tenant, and the other personal property of Tenant in the Premises, against loss due to fire and other casualties included in broad form property insurance policies, -15- 19 with an agreed amount endorsement and replacement cost coverage. Throughout the Lease Term, Tenant shall obtain and maintain commercial general liability insurance in a company or companies licensed to do business in the Commonwealth of Virginia and having an A.M. Best's rating of A:X or better. Such insurance shall be in the minimum amount of five million dollars ($5,000,000) for injury to persons and damage to property, combined single limit, shall be for a minimum term of one (1) year, and may be carried as excess coverage. Tenant's commercial general liability policy shall name Landlord as an additional insured, and if requested by the holder of any mortgage or deed of trust against the Building, the commercial general liability policy shall also name such holder as an additional insured. If requested by Landlord, certificates of insurance shall be delivered by Tenant to Landlord on or before the Lease Commencement Date and at least annually thereafter. Each such policy shall contain an endorsement prohibiting cancellation or reduction of coverage without first giving Landlord and the holder of any mortgage or deed of trust on the Building at least thirty (30) days' prior written notice of such proposed action. All insurance carried by Tenant hereunder shall be primary and not contributing with any insurance carried by Landlord. 14.4. Tenant hereby waives and releases Landlord from any and all liabilities, claims and losses on account of damage to Tenant's property for which Landlord is or may be held liable to the extent Tenant either is required to maintain insurance pursuant to this Article 14 or actually receives insurance proceeds on account thereof. Landlord hereby waives and releases Tenant from any and all liabilities, claims and losses on account of damage to the Building for which Tenant is or may be held liable to the extent Landlord either is required to maintain insurance pursuant to this Article 14 or actually receives insurance proceeds on account thereof. Each party hereto shall secure waiver of subrogation endorsements from their respective insurance carriers. The foregoing waivers shall not apply to the extent of deductibles not in excess of $10,000 under each party's property insurance policy. ARTICLE 15 SERVICES AND UTILITIES 15.1. Continually through the Lease Term, Landlord will furnish to the Premises air-conditioning and heating during the seasons in which they are required in accordance with the standards set forth in Exhibit E attached hereto. Continually through the Lease Term, Landlord will provide: electricity; water; elevator service; exterior and interior window-cleaning service; and janitorial service after 6:00 p.m. on Monday through Friday only (excluding holidays) in accordance with the standards set forth in Exhibit F hereto. Upon Tenant's request, Landlord agrees to amend Exhibit F from time to time to incorporate services which are commensurate with services furnished in other first-class office buildings in the Market Area (as defined in Section 3.4(c)(2) above). The hours of operation of the Building will be 8:00 a.m. to 7:00 p.m. on Monday through Friday (except holidays) and 9:00 a.m. to 2:00 p.m. on Saturday (except holidays) and such additional hours, if any, as Landlord from time to time determines. The Building's HVAC system shall be designed so that Tenant will be able to obtain HVAC service on a zone-by-zone basis, without prior arrangement, at any time beyond the aforesaid normal hours of operation. Tenant shall pay for such after-hours service a charge reasonably established by Landlord from time to time to compensate Landlord for the actual incremental wear on the -16- 20 Building's HVAC system resulting from such after-hours usage (it being understood that all electricity, water and maintenance costs relating to both scheduled and after-hours HVAC service are being included in the Operating Charges of the Building). During the first two (2) Lease Years, such charge for after-hours HVAC service shall not exceed $7.85 per hour of after-hours use per zone (there being two (2) zones per floor). As used in this Section 15.1, the term "holidays" shall mean New Year's Day, Presidents Day, Martin Luther King Jr.'s Birthday (in even-numbered years only), Memorial Day, Independence Day, Labor Day, Columbus Day (in odd-numbered years only), Thanksgiving Day, the day after Thanksgiving, and Christmas, as such list of holidays may be modified by Tenant from time to time. Landlord agrees to provide an access control system for the Building that will control all points of ingress and egress to the Building after hours, and that will afford Tenant access to the Premises twenty-four (24) hours per day every day of the year. At least two (2) elevators in the Building shall be in service at all times. 15.2. The parties agree to comply with all mandatory energy or water conservation controls and requirements applicable to office buildings that are imposed or instituted by the Federal or state governments, including without limitation, controls on the permitted range of temperature settings in office buildings and requirements necessitating curtailment of the volume of energy or water consumption or the hours of operation of the Building. Any terms or conditions of this Lease that conflict or interfere with compliance with such controls or requirements shall be suspended for the duration of such controls or requirements. It is further agreed that compliance with such controls or requirements shall not be considered an eviction, actual or constructive, of the Tenant from the Premises and shall not entitle Tenant to terminate this Lease or to an abatement of any rent payable hereunder. 15.3. If any interruption of utilities or services shall continue for more than two (2) consecutive days and shall render any portion of the Premises unusable for the normal conduct of Tenant's business, and provided (i) Tenant gives Landlord notice of such unusable condition and (ii) Tenant does not in fact use or occupy such portion of the Premises, then all Base Rent and additional rent payable hereunder with respect to such portion of the Premises shall be abated retroactively to the first (1st) day of such interruption and such abatement shall continue until full use of such portion of the Premises is restored to Tenant. 15.4. Throughout the Lease Term, the Building shall be managed and operated in a manner commensurate with the standards obtaining in other first-class buildings in the Market Area (as defined in Section 3.4(c)(2) above). 15.5. Landlord shall not employ any cleaning contractor for the Building without Tenant's prior written approval, which shall not be unreasonably withheld, conditioned or delayed. In the event Tenant determines that the janitorial services being furnished by Landlord are unsatisfactory, in Tenant's reasonable judgment, Tenant shall deliver written notice to Landlord specifying in detail the manner in which the services are deemed deficient. If the deficiencies are not, in Tenant's reasonable judgment, substantially corrected during the next succeeding sixty (60) days, then Tenant may deliver a further notice to Landlord advising Landlord of such fact and Landlord shall terminate the contract for janitorial services to the -17- 21 Building. Promptly thereafter, Landlord shall enter into a new contract for janitorial services to the Building with a contractor approved by Tenant, such approval not to be unreasonably withheld, conditioned or delayed. 15.6. It is acknowledged and agreed that the initial management agent for the Building will be Gilbane Properties, Inc. ("GPI"). Landlord shall not employ any other management agent for the Building without Tenant's prior written approval, which shall not be unreasonably withheld, conditioned or delayed. In the event Tenant determines that the manager of the Building (whether GPI or any other manager) is not operating the Building in a first class manner, in Tenant's reasonable judgment, then Tenant may deliver written notice to Landlord specifying in detail the manner in which the operation of the Building is deemed deficient. If the deficiencies are not, in Tenant's reasonable judgment, substantially corrected during the next succeeding sixty (60) days, then Tenant may deliver a further notice to Landlord advising Landlord of such fact and Landlord shall terminate the contract for management services to the Building. Promptly thereafter, Landlord shall enter into a new contract for management services to the Building with a managing agent approved by Tenant, such approval not to be unreasonably withheld, conditioned or delayed. 15.7. Landlord shall not adopt or materially modify an annual operating budget for the Building without first reviewing said budget with Tenant. Landlord agrees to consult with Tenant at Tenant's request from time to time about the services being furnished hereunder to the Building. In the event Tenant at any time requests with specificity that Landlord adjust (either to increase or to decrease) the level of services being furnished to the Building, Landlord agrees to confer with Tenant about such request and to make any adjustment requested by Tenant that does not materially impair the overall operation and maintenance of the Building and does not prohibit Landlord from carrying out sound maintenance practices in keeping with Class A industry standards for comparable properties. 15.8. Tenant shall have the right to participate in any discussions or communications between Landlord and the local electric power company concerning the designation of an electricity rate schedule for the Building, and Landlord agrees to give Tenant reasonable prior notice of any planned meeting between Landlord and power company representatives to discuss such issue. Landlord shall not designate, elect, or approve an electricity rate schedule for the Building without Tenant's prior approval, which approval shall not be unreasonably withheld, conditioned or delayed, but may be granted or withheld based on the anticipated financial impact upon Tenant. ARTICLE 16 LIABILITY 16.1. Subject to the provisions of Section 14.4 hereof, Tenant shall indemnify and hold Landlord, its employees and agents harmless from and against all costs, damages, claims, liabilities and expenses (including attorneys' fees) suffered by or claimed against Landlord, directly or indirectly, based on or arising out of (a) Tenant's use and occupancy of the Premises or the parking structure or other improvements upon the Land, or the business conducted by -18- 22 Tenant therein, (b) any negligent act or omission of Tenant or its employees or agents or contractor, (c) any breach of Tenant's obligations under this Lease, or (d) any entry by Tenant upon the Land prior to the Lease Commencement Date. Subject to the provisions of Section 14.4 hereof, Landlord hereby agrees to indemnify and hold Tenant harmless from and against all costs, damages, claims, liabilities and expenses (including attorneys' fees) suffered by or claimed against Tenant, directly or indirectly, based on, arising out of or resulting from (i) Landlord's maintenance and operation of the Building or the parking structure or other improvements upon the Land, (ii) any negligent act or omission of Landlord or its employees or agents or contractor, or (iii) any breach or default by Landlord in the observance or performance of its covenants and obligations under this Lease. The foregoing indemnifications shall not extend to any costs, expenses, claims, damages or liabilities arising solely out of the negligence or willful misconduct of the indemnitee, its agents, employees, contractors or invitees. 16.2. If any landlord hereunder transfers the Building or such landlord's interest therein in accordance with the provisions of Section 24.3 below, then the transferor landlord shall not be liable for any obligation or liability based on or arising out of any event or condition occurring after the date of such transfer. Within fifteen (15) days after the transferee's request, Tenant shall attorn to such transferee and execute, acknowledge and deliver any reasonable document submitted to Tenant confirming such attornment, provided such transferee has assumed all of the obligations of Landlord thereafter arising hereunder. 16.3. Except as expressly provided in this Lease, Tenant shall not have the right to offset or deduct the amount allegedly owed to Tenant pursuant to any claim against Landlord from any rent or other sum payable to Landlord. Tenant's sole remedy for recovering upon such claim shall be to institute an independent action against Landlord. 16.4. If Tenant is awarded a money judgment against Landlord, then recourse for satisfaction of such judgment shall be limited to execution against Landlord's estate and interest in the Building and the Land and sales proceeds generated thereby. No other asset of Landlord shall be available to satisfy, or be subject to, such judgment, nor shall any natural person be held to have personal liability for satisfaction of any claim or judgment against Landlord. 16.5. If Landlord shall be in default in the performance of any of its duties or obligations hereunder, Tenant may deliver written notice of such default to Landlord and to any Mortgagee of whose identity and address Tenant has previously been notified in writing. If such default continues for fifteen (15) consecutive days following the date of such notice (unless such default is not susceptible of cure within fifteen (15) days, in which event this provision shall apply only if Landlord shall not commence to cure such default within said fifteen (15) day period or shall not thereafter diligently pursue such cure to completion), then, in addition to any other rights Tenant may have in law or equity, Tenant may (but shall not be obligated to) cure such default on behalf of Landlord. Landlord shall reimburse Tenant upon demand for all reasonable out-of-pocket costs incurred by Tenant in curing such default, including, without limitation, reasonable attorneys' fees and other legal expenses, together with interest thereon at the Default Rate (as defined in Section 20.4 below). If Landlord fails thus to reimburse Tenant within fifteen (15) days following Landlord's receipt of a reasonably detailed invoice for the -19- 23 costs incurred by Tenant, then Tenant may offset the reimbursable amount (including interest, as described above) against any Base Rent or additional rent thereafter falling due. To the extent any sum thus reimbursed to Tenant by Landlord (either directly or by virtue of a rent offset) represents an amount that would have been included in the Operating Charges of the Building if paid by Landlord to perform the obligation in question, Landlord shall be entitled to include in Operating Charges the sum reimbursed to Tenant (but not any interest thereon or any reimbursed legal expenses or other associated costs not incurred as a direct cost of performing the obligation in question). ARTICLE 17 RULES 17.1. Tenant shall at all times abide by and observe the rules set forth in Exhibit C. Tenant shall also abide by and observe any other rule that Landlord may reasonably promulgate from time to time for the operation and maintenance of the Building, provided that notice thereof is given and such rule is not inconsistent with the provisions of this Lease. ARTICLE 18 DAMAGE OR DESTRUCTION 18.1. If the Premises or the Building is totally or partially damaged or destroyed, thereby rendering the Premises totally or partially inaccessible or unusable, then Landlord shall diligently repair and restore the Premises and the Building to substantially the same condition they were in prior to such damage or destruction; provided, however, that if in Landlord's good faith reasonable judgment such repair and restoration cannot be completed within the lesser of (a) fifteen (15) months after the occurrence of such damage or destruction or (b) twelve (12) months after settlement with any insurance company involved, then Landlord shall promptly notify Tenant of such determination. For a period of thirty (30) days after receipt of such determination, Tenant shall have the right to terminate this Lease by providing written notice to Landlord. If Tenant does not elect to terminate this Lease within such thirty (30) day period, Landlord shall proceed to repair and restore the Premises and the Building. In the event Landlord has not completed its repairs and restoration by the later of (i) the date by which it had been projected that Landlord's work would be completed, or (ii) the earlier of (a) the date that is fifteen (15) months after the date of the casualty, or (b) the date that is twelve (12) months after settlement with any insurance company involved, then Tenant shall have the right, at any time thereafter before the restoration has been completed, to terminate this Lease by delivering written notice of termination to Landlord; provided, however, that, if Landlord has diligently pursued restoration and Tenant is then able (practically and lawfully) to occupy at least seventy-five percent (75%) of the rentable area of the Premises for the normal conduct of Tenant's business, then Tenant shall not have the right to terminate this Lease unless Landlord fails to complete all of its repairs and restoration within an additional ninety (90) days, and during such extended restoration period Tenant shall pay Base Rent and additional rent only for the portion of the Premises that is usable for the normal conduct of Tenant's business. -20- 24 18.2. If this Lease is terminated pursuant to Section 18.1 above, then all rent shall be apportioned (based on the portion of the Premises which is usable after such damage or destruction) and paid to the date of termination. If this Lease is not terminated as a result of such damage or destruction, then until such repair and restoration of the Premises are substantially complete, Tenant shall be required to pay the Base Rent and additional rent only for the portion of the Premises that is usable for the normal conduct of Tenant's business (as determined in Tenant's reasonable judgment) and accessible while such repair and restoration are being made. Landlord shall bear the expenses of repairing and restoring the Premises and the Building; provided, however, that Landlord shall not be required to repair or restore any Alteration previously made by Tenant or any of Tenant's trade fixtures, furnishings, equipment or personal property. 18.3. Notwithstanding anything herein to the contrary, Landlord shall not be obligated to restore the Premises or the Building and shall have the right to terminate this Lease if zoning or other applicable laws or regulations do not permit such repair and restoration. 18.4. Notwithstanding anything in this Article 18 to the contrary, in the event of any fire or casualty occurring during the last twenty-four (24) months within the Lease Term, if (a) the damage caused by such fire or casualty will take more than one hundred twenty (120) days to repair and restore and (b) upon the substantial completion of such repair and restoration less than eighteen (18) months will remain in the Lease Term, then Landlord and Tenant shall each have the right to terminate this Lease by written notice delivered to the other within thirty (30) days after the terminating party is made aware that the circumstances described in the foregoing clauses (a) and (b) exist; provided, however, that if, within said thirty (30) day period, Tenant exercises any then-available option of Tenant to renew the term of this Lease, then neither party shall have the right to terminate this Lease and Landlord shall proceed to restore the Premises and the Building as described above. ARTICLE 19 CONDEMNATION 19.1. If one-third or more of the Premises or occupancy thereof shall be permanently taken or condemned by any governmental or quasi-governmental authority for any public or quasi-public use or purpose or sold under threat of such a taking or condemnation (collectively, "condemned"), then this Lease shall terminate on the date title thereto vests in such authority and rent shall be apportioned as of such date. If less than one-third of the Premises or occupancy thereof is condemned, then Landlord shall be obligated, at Landlord's expense, to erect such walls as may be necessary to enclose the part of the Premises not condemned and restore the remainder of the Premises to an architectural unit as nearly like the condition of the Premises prior to such taking as is practicable under the circumstances; provided, however, that Landlord shall not be required to expend for such restoration more than an amount equal to the condemnation proceeds actually awarded to Landlord as a result of any such taking. This Lease shall continue in full force and effect as to the part of the Premises not condemned, except that as of the date title vests in such authority Tenant shall not be required to pay the Base Rent and additional rent with respect to the part of the Premises condemned. -21- 25 19.2. Except as provided hereinbelow, all awards, damages and other compensation paid by such authority on account of such condemnation shall belong to Landlord, and Tenant assigns to Landlord all rights to such awards, damages and compensation. Tenant shall not make any claim against Landlord or the authority for any portion of such award, damages or compensation attributable to damage to the Premises, value of the unexpired portion of the Lease Term, loss of profits or goodwill, or severance damages, but Tenant shall be entitled to a portion of the award, damages or compensation equal to the unamortized cost of any permanent leasehold improvements installed in the Premises at Tenant's expense (i.e., not paid for by application of the Tenant Work Credit described in Exhibit B hereto). In addition, nothing contained herein shall prevent Tenant from pursuing a separate claim against the authority for the value of furnishings, trade fixtures, equipment, and other movable fixtures or improvements installed in the Premises at Tenant's expense and for relocation expenses, provided that such claim shall in no way diminish the award, damages or compensation payable to or recoverable by Landlord in connection with such condemnation. ARTICLE 20 DEFAULT 20.1. Each of the following shall constitute an Event of Default: (a) Tenant's failure to make any payment of the Base Rent, additional rent or other sum on or before such payment's due date, if such failure continues for five (5) business days after Tenant receives written notice that such payment was not made when due; (b) Tenant's violation or failure to perform or observe any other covenant or condition contained in this Lease within thirty (30) days after written notice thereof from Landlord, provided that, if such violation or failure is not capable of being cured within such thirty (30) day period for reasons including those set forth in Section 26.21 hereof, there shall exist no Event of Default provided Tenant commences to cure such violation or failure within said thirty (30) day period and diligently pursues such cure to completion; or (c) an Event of Bankruptcy as specified in Article 21 with respect to Tenant. 20.2. If there shall be an Event of Default, including an Event of Default prior to the Lease Commencement Date, then Landlord shall have the right, at its sole option, to terminate this Lease. In addition, with or without terminating this Lease, Landlord may re-enter, terminate Tenant's right of possession and take possession of the Premises. The provisions of this Article shall operate as a notice to quit, any other notice to quit or of Landlord's intention to re-enter the Premises being hereby expressly waived. If necessary, Landlord may proceed to recover possession of the Premises under and by virtue of the laws of the Commonwealth of Virginia, or by such other lawful proceedings, including re-entry and possession, as may be applicable. If Landlord elects to terminate this Lease and/or elects to terminate Tenant's right of possession, then everything contained in this Lease to be done and performed by Landlord shall cease, without prejudice, however, to Landlord's right to recover from Tenant all rent and other sums accrued through the later of termination or Landlord's recovery of possession. Whether or not this Lease and/or Tenant's right of possession is terminated, Landlord may relet the Premises or any part thereof for such rent and upon such terms and conditions (which may include concessions or free rent and alterations of the Premises) as Landlord may determine, but Landlord shall not be liable for Landlord's failure to relet the Premises. Landlord agrees to use -22- 26 reasonable efforts to relet the Premises and mitigate its damages. Whether or not this Lease is terminated, Tenant nevertheless shall remain liable for any Base Rent, additional rent or damages which may be due or sustained prior to such default, all costs, fees and expenses (including, without limitation, reasonable attorneys' fees, brokerage fees and expenses incurred in placing the Premises in rentable condition) incurred by Landlord in pursuit of its remedies and in renting the Premises to others from time to time. Tenant shall also be liable for the Base Rent and additional rent which would have become due during the remainder of the Lease Term, less the amount of rental, if any, which Landlord receives during such period from others to whom the Premises may be rented, which damages shall be computed and payable in monthly installments, in advance, on the first day of each calendar month following Tenant's default and continuing until the date on which the Lease Term would have expired but for Tenant's default. Separate suits may be brought to collect any such damages for any month(s), and such suits shall not in any manner prejudice Landlord's right to collect any such damages for any subsequent month(s). Landlord shall not have any right to accelerate the rental due hereunder. Tenant waives any right of redemption, re-entry or restoration of the operation of this Lease under any present or future law, including any such right which Tenant would otherwise have if Tenant shall be dispossessed for any cause. 20.3. Except as expressly provided in this Lease, Landlord's and Tenant's rights and remedies set forth in this Lease are cumulative and in addition to Landlord's and Tenant's other rights and remedies at law or in equity, including those available as a result of any anticipatory breach of this Lease. Landlord's or Tenant's exercise of any such right or remedy shall not prevent the concurrent or subsequent exercise of any other right or remedy. Landlord's or Tenant's delay or failure to exercise or enforce any of its rights or remedies or the other party's obligations shall not constitute a waiver of any such rights, remedies or obligations. Neither Landlord nor Tenant shall be deemed to have waived any default unless such waiver expressly is set forth in an instrument signed by Landlord or Tenant, respectively. If Landlord or Tenant waives in writing any default, then such waiver shall not be construed as a waiver of any covenant or condition set forth in this Lease except as to the specific circumstances described in such written waiver. Neither Tenant's payment of a lesser amount than the sum due hereunder nor Tenant's endorsement or statement on any check or letter accompanying such payment shall be deemed an accord and satisfaction, and Landlord may accept the same without prejudice to Landlord's right to recover the balance of such sum or to pursue any other remedy available to Landlord. Landlord's re-entry and acceptance of keys shall not be considered an acceptance of a surrender of this Lease. 20.4. If Tenant fails to make any payment of the Base Rent, additional rent or any other sum payable to Landlord within five (5) days after the date such payment is due and payable, then Tenant shall pay a late charge equal to three percent (3%) of the amount of such payment. In addition, such payment and such late fee shall bear interest at a rate per annum (the "Default Rate") that is two (2) percentage points higher than the Prime Rate published from time to time in the Money Rates section of The Wall Street Journal, from the date such payment was due to the date of payment thereof. Notwithstanding the foregoing, Landlord agrees to waive imposition of such late charge and interest on up to two (2) occasions in any twelve (12) month -23- 27 period provided the overdue payment is made within five (5) business days after Landlord gives Tenant written notice that the payment was not made when due. 20.5. Landlord hereby waives all statutory or other lien rights Landlord might otherwise have against any or all of Tenant's property situated at the Premises. The foregoing waiver shall not apply to any judgment lien that Landlord may obtain upon winning a final, nonappealable judgment in any suit brought by Landlord against Tenant. ARTICLE 21 BANKRUPTCY 21.1. The following shall be Events of Bankruptcy under this Lease: (a) Tenant's becoming insolvent, as that term is defined in Title 11 of the United States Code (the "Bankruptcy Code"), or under the insolvency laws of any state (the "Insolvency Laws"); (b) appointment of a receiver or custodian for any substantial portion of the property of Tenant, or the institution of a foreclosure or attachment action upon any substantial portion of the property of Tenant; (c) filing of a voluntary petition by Tenant under the provisions of the Bankruptcy Code or Insolvency Laws; (d) filing of an involuntary petition against Tenant as the subject debtor under the Bankruptcy Code or Insolvency Laws, which either (i) is not dismissed within ninety (90) days of filing, or (ii) results in the issuance of an order for relief against the debtor which is not successfully appealed or stayed within ninety (90) days; or (e) Tenant's making or consenting to an assignment for the benefit of creditors or a composition of creditors. 21.2. Upon occurrence of an Event of Bankruptcy, Landlord shall have all rights and remedies available pursuant to Article 20; provided, however, that while a case in which Tenant is the subject debtor under the Bankruptcy Code is pending, Landlord shall not exercise its rights and remedies pursuant to Article 20 so long as the Bankruptcy Code prohibits the exercise of such rights and remedies. ARTICLE 22 SUBORDINATION 22.1. This Lease is subject and subordinate to the lien, provisions, operation and effect of any first mortgage or first deed of trust which currently encumbers the Land (or which will encumber the Land upon Landlord's acquisition of title thereto). Landlord shall obtain on Tenant's behalf a nondisturbance agreement substantially in the form attached hereto as Exhibit G from the holder of the Mortgage currently encumbering the Land (or which will encumber the Land upon Landlord's acquisition of title thereto). Provided the applicable mortgagee enters into a subordination and nondisturbance agreement with Tenant substantially in the form of Exhibit G attached hereto or otherwise in a form reasonably acceptable to Tenant, this Lease shall also be subject and subordinate to the lien, provisions, operation and effect of all mortgages, deeds of trust, ground leases or other security instruments (collectively, "Mortgages") which may hereafter encumber the Building or the Land, to all funds and indebtedness intended to be secured thereby, and to all renewals, extensions, modifications, or recastings thereof; however, this Lease shall not be subordinated to any Mortgage if the holder thereof fails to enter into such -24- 28 a nondisturbance agreement with Tenant. The holder of any Mortgage to which this Lease is subordinate shall have the right at any time to declare this Lease to be superior to the lien, provisions, operation and effect of such Mortgage, and Tenant shall execute, acknowledge and deliver all reasonable documents required by such holder in confirmation thereof. 22.2. Provided such purchaser assumes all of the obligations of Landlord under this Lease (subject to the limitations set forth in the next sentence), Tenant shall attorn to the purchaser of the Building at any foreclosure sale and shall recognize such purchaser as the landlord under this Lease. Upon such attornment, and after such purchaser succeeds to Landlord's interest, such purchaser shall perform in accordance with the terms of this Lease all obligations of Landlord arising after the date such purchaser acquires title to the Building; provided, however, that such purchaser shall not be (a) bound by any payment of the Base Rent or additional rent more than one (1) month in advance, except any such payments required by the terms of this Lease, (b) bound by any amendment of this Lease made without the consent of the holder of each Mortgage existing as of the date of such amendment, if such consent was required by the terms of such Mortgage and Tenant had been given notice of such requirement, or (c) liable for damages for any breach, act or omission of any prior landlord. Any rights of Tenant pursuant to the provisions of this Lease shall survive any foreclosure and attornment. Tenant shall promptly execute, acknowledge and deliver any reasonable document submitted to Tenant confirming such attornment. 22.3. After Tenant receives notice from any person, firm or other entity that it holds a Mortgage on the Building or the Land, a copy of every default notice delivered by Tenant to Landlord shall be given to such holder, provided that Tenant shall have been furnished with the name and address of such holder. Any such holder shall have thirty (30) days after its receipt of notice from Tenant of a default by Landlord under this Lease to cure such default before Tenant may seek to terminate this Lease. Nothing contained in this Section 22.3 shall be construed to prevent Tenant from exercising its right to receive a rent abatement or offset in those circumstances expressly set forth in this Lease. ARTICLE 23 HOLDING OVER 23.1. If Tenant does not immediately surrender the Premises upon the expiration or earlier termination of the Lease Term, then Tenant shall become a tenant by the month and the Base Rent shall be (i) for the first ninety (90) days of the holdover period, equal to the Base Rent that would have been payable pursuant to the provisions of this Lease if the Lease Term had continued during such holdover period, and (ii) following the first ninety (90) days of the holdover period, equal to 125% of the Base Rent that would have been payable pursuant to the provisions of this Lease if the Lease Term had continued during such holdover period. Additional rent and other sums payable under this Lease shall continue to be payable pursuant to the applicable provisions of this Lease. Such rent shall be computed on a monthly basis and shall be payable on the first day of such holdover period and the first day of each calendar month thereafter during such holdover period until the Premises have been vacated. Following the first ninety (90) days of the holdover period, Landlord may elect no longer to recognize Tenant as a -25- 29 tenant by the month, may refuse to accept the aforesaid holdover rental, and may instead exercise Landlord's other rights and remedies, including Landlord's right to evict Tenant and to recover damages. ARTICLE 24 COVENANTS OF LANDLORD 24.1. Landlord covenants that it is the fee simple owner of the Land (or will be the fee simple owner of the Land prior to the date on which construction of the Building is to commence), that it will be the fee simple owner of the Building, that it has the right to enter into this Lease, and that, subject to the provisions of this Lease, Tenant shall during the Lease Term peaceably and quietly occupy and enjoy the full possession of the Premises without hindrance by Landlord or any party claiming through or under Landlord. 24.2. Wherever, under the terms of this Lease, Landlord's consent or approval is required to any act or thing, such consent or approval shall not be unreasonably withheld, delayed or conditioned. The failure to recite this standard in any provision of this Lease concerning Landlord's consent or approval rights shall not be deemed to imply that any other standard is intended or is applicable. 24.3. It is acknowledged that Landlord's identity, reputation and relationship with Tenant are a material inducement to Tenant to enter into this Lease. Accordingly, Landlord agrees that it will not sell, transfer or convey the Building or its interest in this Lease (other than an assignment as security for financing of the Building) without Tenant's prior written consent. Tenant agrees that it will not unreasonably withhold its consent to such a sale, transfer or conveyance provided the transferee (i) is of good reputation and character, (ii) has substantial experience in the ownership and management of sizable, first-class, headquarters-quality office buildings in major urban metropolitan areas, and (iii) expressly assumes in writing all of the obligations of Landlord under this Lease (whether arising prior to or following such conveyance). 24.4. After the initial construction financing for the Building (including conversion of any such construction financing into a permanent loan facility), Landlord shall not at any time encumber the Building and/or the Land with any Mortgage(s) securing debt obligations in excess of ninety percent (90%) of the appraised value of the Building and the Land at the time the Mortgage(s) is (are) granted. Landlord shall not undertake any financing secured by a Mortgage encumbering the Building or the Land without Tenant's prior written approval, which approval shall not be unreasonably withheld, conditioned or delayed, it being agreed and acknowledged that it shall be reasonable for Tenant to withhold such approval if (but only if) Tenant reasonably determines that the existence of such financing is reasonably likely to effect a material change in the relationship between Landlord and Tenant hereunder or a material impairment of Landlord's maintenance, repair or operation of the Building. -26- 30 ARTICLE 25 PARKING 25.1. During the Lease Term, Tenant shall have, at no additional charge, the Parking Rights. ARTICLE 26 GENERAL PROVISIONS 26.1. Tenant acknowledges that neither Landlord nor any broker, agent or employee of Landlord has made any representations or promises with respect to the Premises or the Building except as herein expressly set forth, and no right, privilege, easement or license is being acquired by Tenant except as herein expressly set forth. 26.2. Nothing contained in this Lease shall be construed as creating a partnership or joint venture between Landlord and Tenant or to create any other relationship other than that of landlord and tenant. 26.3. Landlord and Tenant each warrant to the other that in connection with this Lease neither has employed or dealt with any broker, agent or finder, other than the Broker. Landlord acknowledges that it shall pay any commission or fee due to the Broker, pursuant to a separate written agreement. Landlord and Tenant each shall indemnify and hold the other harmless from and against any claim for brokerage or other commissions asserted by any broker, agent or finder employed by the indemnifying party or with whom the indemnifying party has dealt, other than the Broker. 26.4. At any time and from time to time (but not more than twice in any Lease Year) upon not less than twenty (20) days' prior written notice, Tenant shall execute, acknowledge and deliver to Landlord and/or any other person or entity designated by Landlord, an estoppel certificate: (a) certifying that this Lease is unmodified and in full force and effect (or if there have been modifications, that this Lease is in full force and effect as modified and stating the modifications); (b) stating the dates to which the rent and any other charges have been paid; (c) stating whether or not, to the best knowledge of Tenant, Landlord is in default in the performance of any obligation of Landlord contained in this Lease, and if so, specifying the nature of such default; (d) stating the address to which notices are to be sent; (e) confirming that this Lease is subject and subordinate to every Mortgage encumbering the Building or the Land, provided the holder thereof has delivered to Tenant an acceptable nondisturbance agreement; and (f) certifying to such other matters as Landlord may reasonably request. Any such statement may be relied upon by any owner of the Building or the Land, any prospective purchaser of the Building or the Land, or any holder or prospective holder of a Mortgage. Upon request, Landlord agrees to execute and deliver to Tenant a comparable certificate. 26.5. Landlord and Tenant waive trial by jury in any action, proceeding, claim or counterclaim brought in connection with any matter arising out of or in any way connected with this Lease, the landlord-tenant relationship, Tenant's use or occupancy of the Premises or any -27- 31 claim of injury or damage. Tenant consents to service of process and any pleading relating to any such action at the Premises. Landlord and Tenant waive any objection to the venue of any action filed in any court situated in the jurisdiction in which the Building is located and waive any right under the doctrine of forum non conveniens or otherwise, to transfer any such action filed in any such court to any other court. 26.6. If either party to this Lease brings an action to enforce the terms hereof or declare rights hereunder, the prevailing party in any such action shall be entitled to recover its reasonable professional fees of appraisers, accountants and investigators, and reasonable attorneys' fees and costs from the losing party. 26.7. All notices or other required communications hereunder shall be in writing and shall be deemed duly given when delivered in person (with receipt therefor) or by facsimile (with electronic confirmation of transmittal), or one (1) business day after being sent by Express Mail or overnight courier service (provided a receipt will be obtained), or three (3) business days after being sent by certified or registered mail, return receipt requested, postage prepaid, to the following addresses: (i) if to Landlord, at 7 Jackson Walkway, Providence, RI 02940, Attn: Michael E. Culbert; (ii) if to Tenant, at the Tenant Address for Notices. Landlord's facsimile number is 401/456-5996. Tenant's facsimile number is 703/908-8123. Either party may change its address or facsimile number for the giving of notices by notice given in accordance with this Section. 26.8. Each provision of this Lease shall be valid and enforceable to the fullest extent permitted by law. If any provision of this Lease or the application thereof to any person or circumstance shall to any extent be invalid or unenforceable, then such provision shall be deemed to be replaced by the valid and enforceable provision most substantively similar to such invalid or unenforceable provision, and the remainder of this Lease and the application of such provision to persons or circumstances other than those as to which it is invalid or unenforceable shall not be affected thereby. 26.9. Feminine, masculine or neuter pronouns shall be substituted for those of another form, and the plural or singular shall be substituted for the other number, in any place in which the context may require such substitution. 26.10. The provisions of this Lease shall be binding upon and inure to the benefit of the parties and each of their respective representatives, successors and assigns, subject to the provisions herein restricting assignment or subletting. 26.11. This Lease contains the entire agreement of the parties hereto and supersedes all prior agreements, negotiations, letters of intent, proposals, representations, warranties, understandings and discussions between the parties hereto. Any representation, inducement, warranty, understanding or agreement that is not contained in this Lease shall be of no force or effect. This Lease may be modified or changed in any manner only by an instrument duly signed by both parties. -28- 32 26.12. This Lease shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia. 26.13. Article and section headings are used for convenience and shall not be considered when construing this Lease. 26.14. The submission of an unsigned copy of this document or a document signed by only one party shall not constitute an offer or option to lease the Premises. This Lease shall become effective and binding only upon execution and delivery by both Landlord and Tenant. 26.15. Time is of the essence of each provision of this Lease. 26.16. This Lease may be executed in multiple counterparts, each of which shall be deemed an original and all of which together constitute one and the same document. 26.17. Upon the request of either party, the parties agree to execute, in recordable form, a short-form memorandum of this Lease, provided that such memorandum shall not contain any of the specific rental terms set forth herein. Such memorandum may be recorded in the land records of Fairfax County, Virginia, and the party desiring such recordation shall pay all recordation costs and taxes. 26.18. Rentable area for the Building shall mean all space measured from the inside face of the exterior glass line of the Building. Rentable area for the Premises shall be measured from the inside face of the exterior glass line of the Building (a) without deduction for any mechanical rooms, vestibules, elevator shafts, stairwells or other penetrations, but excluding from rentable area any central mechanical plant(s), rooftop penthouse(s), elevator machine room(s) and balconies, and (b) if the Building has more than one tenant, plus a pro rata share of all common areas on the first floor of the Building. The rental figures set forth in this Lease shall be appropriately adjusted once the final measurement of the Building has been mutually agreed upon by Landlord and Tenant, such measurement to be performed within thirty (30) days following Landlord's completion of the base-building structure (excluding completion of the lobby or other interior work being performed by Landlord). 26.19. Except as otherwise provided in this Lease, any additional rent or other sum owed by Tenant to Landlord, and any cost, expense, damage or liability incurred by Landlord for which Tenant is liable, shall be considered additional rent payable pursuant to this Lease and paid by Tenant no later than thirty (30) days after the date Landlord notifies Tenant of the amount thereof. 26.20. Landlord's and Tenant's monetary and indemnification liabilities existing as of the expiration or earlier termination of the Lease Term shall survive such expiration or earlier termination. 26.21. If Landlord or Tenant is in any way delayed or prevented from performing any of its obligations under this Lease due to fire, act of God, governmental act or failure to act, strike, labor dispute, inability to procure materials or any other cause beyond Landlord's or Tenant's -29- 33 reasonable control (whether similar or dissimilar to the foregoing events) (excluding, however, unavailability of funds), then the time for performance of such obligation shall be excused for the period of such delay or prevention and extended for a period equal to the period of such delay or prevention. 26.22. Each of the persons executing and delivering this Lease on Landlord's and Tenant's behalf warrants that such person is duly authorized to so act. 26.23. For purposes of applicable law, this instrument shall constitute a deed of lease executed under seal. This Lease includes and incorporates all Exhibits attached hereto. ARTICLE 27 EXPANSION 27.1. It is acknowledged that Landlord has the option, through the fifth (5th) anniversary of the date Tenant commences occupancy of the Premises, to acquire from H/P Companies, L.C. (or an affiliate thereof) ("H/P") the right to perform additional development on the Land. Landlord shall not exercise its option to acquire such development rights except in accordance with the terms of this Article 27. Landlord shall not modify the terms of its option agreement with H/P without Tenant's prior written approval. 27.2. Upon Tenant's written request, Landlord shall either (i) assign its development rights option to Tenant, at no charge to Tenant, or (ii) exercise its option to acquire the development rights to the extent designated by Tenant, and, simultaneously with its acquisition of such development rights, assign such rights to Tenant for consideration equal to the consideration paid by Landlord to H/P. IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the day and year first above written. -30- 34 WITNESS: LANDLORD: FAIRFAX GILBANE, L.P., a Virginia limited partnership By: Gilbane Properties, Inc. General Partner /s/ Ron By:/s/ Robert V. Gilbane - ------------------------------- ----------------------------------- Title: President -------------------------------- WITNESS: TENANT: AMERICAN MANAGEMENT SYSTEMS, INC., a Delaware corporation /s/ Ethan J. Friedman By:/s/ Paul A. Brands - ------------------------------- ----------------------------------------- Title: CEO -------------------------------------- [FOLLOWING AS EXHIBIT A ARE TWO AERIAL SKETCHES OUTLINING THE PROPOSED EXPANSION.] -31- 35 EXHIBIT B WORK AGREEMENT This Exhibit is attached to and made a part of that certain Lease Agreement dated as of the 15th day of February, 1994 (the "Lease"), by and between FAIRFAX GILBANE, L.P. ("Landlord") and AMERICAN MANAGEMENT SYSTEMS, INC. ("Tenant"). (a) Tenant's Authorized Representative. Tenant designates Dale Moser and Thomas W. Huba of American Management Systems, Inc. and Mike Solomon of Cushman & Wakefield (each, a "Tenant's Authorized Representative"), any of whom alone may act, as the persons authorized to approve in writing all plans, drawings, specifications, change orders, charges and approvals pursuant to this Exhibit. (b) Landlord's Work. Landlord shall construct the base-building elements of the Building (the "Base Building Work"), the sitework on the Land, and the parking structure and surface parking areas on the Land, all in accordance with the Design Specifications attached hereto as Schedule I (collectively, "Landlord's Work"). All of Landlord's Work shall be performed in a good and workmanlike manner, in accordance with plans and specifications ("Landlord's Plans") mutually approved by Landlord and Tenant. Tenant's approval of Landlord's Plans shall not be unreasonably withheld, conditioned or delayed, and Tenant shall not be entitled to condition its approval of Landlord's Plans upon the inclusion therein of any design specifications that are inconsistent with the Design Specifications attached hereto as Schedule I (including requiring a higher performance standard than any performance standard expressly set forth in Schedule I). Tenant shall respond to any request for approval of Landlord's Plans, or any portion or progress set thereof, or any modifications thereto, as promptly as reasonably possible and in any event within ten (10) business days in the case of the original complete set of Landlord's Plans and any structural modifications thereto and within two (2) business days in the case of any nonstructural modifications to Landlord's Plans, and Tenant's failure to respond within such time periods shall be referred to herein and in the Lease as a "Tenant Delay." In the event Tenant disapproves Landlord's Plans or any portion thereof or any modifications thereto, Tenant's notice of disapproval shall specify in detail the reasonable basis for such disapproval. Landlord shall promptly make such revisions to Landlord's Plans as may be necessary to address Tenant's reasonable objections, and shall resubmit Landlord's Plans to Tenant for Tenant's approval. Tenant shall review such revised plans as promptly as reasonably possible and notify Landlord whether Tenant approves or reasonably disapproves Landlord's Plans as modified. This process shall be repeated, if necessary, until Tenant's reasonable objections to Landlord's Plans have been addressed and Tenant has approved Landlord's Plans. After approval of Landlord's Plans, Tenant shall have the right to initiate changes to Landlord's Plans or Landlord's Work, subject to (i) Landlord's approval of any such proposed change, which approval shall not be unreasonably withheld, conditioned or delayed, and (ii) Landlord's and Tenant's mutual agreement concerning (and execution of a change order or other written confirmation of) (A) any net increase in design or construction costs resulting from such change, all of which increased costs shall be borne solely by Tenant, and (B) any delay such change will cause in the completion of Landlord's Work or the achievement of any milestone date(s), which B-1 36 delay shall not extend the Lease Commencement Date or the commencement of Tenant's rental obligations under the Lease (but shall appropriately extend any affected milestone date(s)) and shall be deemed a "Tenant Delay" for purposes hereof and of the Lease. Landlord shall be responsible for causing Landlord's Work to comply with all applicable legal requirements, including (without limitation) requirements of building codes, environmental laws and the Americans with Disabilities Act, and Landlord shall indemnify Tenant and hold it harmless with respect to any loss, cost, damage or liability resulting from Landlord's breach of this obligation (which indemnification shall survive the expiration or termination of the Lease). In constructing the Base Building Work, Landlord shall perform and install all work and materials designated "Base Building" in Schedule II attached hereto. In performing the Base Building Work, Landlord shall use best efforts to achieve the milestone dates set forth in Schedule III attached hereto. In the event Landlord fails to achieve any of said milestone dates, except to the extent such failure is caused by any Tenant Delay, the December 29, 1995 date set forth in Section 3.2 of the Lease shall be extended by one (1) day for each day of delay in achieving the milestone date; provided, however, that such extension shall not occur if (and then only to the extent) Landlord and Tenant mutually agree and acknowledge in writing that the completion of the Tenant Work (as defined below) was not delayed by reason of the delay in achieving Landlord's milestone date. Tenant agrees to use good faith reasonable efforts to counter the effect of any delay by Landlord in achieving any milestone date; however, Tenant shall not be obligated to expend any additional amounts in such efforts (e.g., by employing overtime labor) unless Landlord agrees in advance to bear any incremental cost associated with such efforts (whether or not such efforts are ultimately successful). (c) Tenant's Plans. All improvements to the Premises in excess of the Base Building Work (including those items designated "Tenant Work" in Schedule II) shall be performed by Tenant at Tenant's expense and shall be collectively referred to herein as the "Tenant Work." Tenant's plans and working drawings for the Tenant Work ("Tenant's Plans") shall be prepared by architects and engineers employed and paid by Tenant (subject to application of the Tenant Work Credit (as hereinbelow defined) toward such costs). Tenant's Plans shall comply with all rules and regulations and other requirements of any governmental authorities having or asserting jurisdiction over the Premises or the Building. Landlord's approval of Tenant's Plans shall not be construed or deemed to be a representation or warranty by Landlord that Tenant's Plans comply with the rules and regulations of any governmental authorities having or asserting jurisdiction over the Premises or the Building; however, Landlord shall notify Tenant of any failure in such compliance of which Landlord is aware. Tenant's Plans, and any changes or modifications thereof requested by Tenant, shall be subject to Landlord's approval, which approval shall not be unreasonably withheld, conditioned or delayed. Landlord shall respond to any request for approval of Tenant's Plans, or any portion or progress set thereof, or any modifications thereto, as promptly as reasonably possible and in any event within ten (10) business days in the case of the original complete set of Tenant's Plans and any structural modifications thereto and within two (2) business days in the case of any nonstructural modifications to Tenant's Plans. In the event Landlord disapproves Tenant's Plans or any portion thereof or any modifications thereto, Landlord's notice of disapproval shall specify in detail the reasonable basis for such disapproval. Tenant shall promptly make such revisions to Tenant's Plans as may be necessary to address Landlord's reasonable objections, and shall resubmit Tenant's Plans to Landlord for Landlord's B-2 37 approval. Landlord shall review such revised plans as promptly as reasonably possible and notify Tenant whether Landlord approves or reasonably disapproves Tenant's Plans as modified. This process shall be repeated, if necessary, until Landlord's reasonable objections to Tenant's Plans have been addressed and Landlord has approved Tenant's Plans. Tenant shall be responsible for coordination of Tenant's Plans with the plans for the Base Building Work; however, Landlord shall be responsible for any incremental cost or delay resulting from any divergence (beyond standard, acceptable industry tolerance) between the plans for the Base Building Work and the as-built condition of the Base Building Work, unless Landlord has notified Tenant of such divergence and has appropriately modified the plans for the Base Building Work before Tenant designs the portion of Tenant's Work that is affected by such change in the Base Building Work. (d) Tenant's Contractor. Tenant shall cause the Tenant Work to be performed by a contractor designated and employed by Tenant, subject to the following terms and conditions: (i) Tenant's Contractor must be approved by Landlord, whose approval shall not be unreasonably withheld, delayed or conditioned. Tenant shall be entitled to employ non-union contractors and subcontractors with respect to all trades. (ii) Tenant's Contractor shall maintain worker's compensation and builder's risk insurance, in amounts and with companies reasonably satisfactory to Landlord, or, in the case of workers' compensation coverage, in amounts statutorily required. (iii) In its performance of the Tenant Work, Tenant shall have the right to take such actions and utilize such facilities as are customarily and reasonably taken and utilized in the construction of comparable space. Landlord shall cause any of its contractors working in the Building to work in harmony with Tenant and Tenant's Contractor, and Landlord shall not knowingly permit any other contractors to interfere with the performance of the Tenant Work. Tenant's Contractor shall be given reasonable access to the site, the loading docks, the elevators, and any hoist(s) put in place by Landlord; provided, however, that all such access to the loading docks, elevators and hoist(s) shall be scheduled through Landlord. Tenant shall not be charged for the use of elevators, loading docks, and similar facilities in the construction of the Tenant Work. Landlord shall specify an hourly charge for the use of any hoist(s) put in place by Landlord to cover Landlord's actual costs associated with the use of such hoist(s), and Tenant shall pay for any use of such hoist(s) by Tenant or Tenant's Contractor at such hourly rate promptly upon being billed therefor. During any period that Landlord's contractor and Tenant's Contractor are both performing material work in the Building, Landlord and Tenant agree to share equally the cost of any electricity consumed in the Building. During any period that only Landlord's contractor or only Tenant's Contractor is performing material work in the Building, the party employing such contractor shall pay the entire cost of any electricity consumed in the Building. (iv) No charges, fees or markups shall be collected by Landlord with respect to the Tenant Work performed by Tenant's Contractor. B-3 38 (v) Following completion of the Tenant Work by Tenant's Contractor, provided Landlord has disbursed the Tenant Work Credit in the manner required pursuant hereto, Tenant shall obtain and deliver to Landlord an unconditional lien waiver and an indemnification against subcontractor liens with respect to the Premises and the Building from Tenant's Contractor and all major subcontractors. Should any mechanic's or materialman's lien be filed against the Premises or the Building with respect to any Tenant Work being performed by Tenant's Contractor or its subcontractors, Tenant shall promptly bond or pay off such lien. (vi) Tenant's contract with Tenant's Contractor shall provide for a retainage of 10% with respect to the first fifty percent (50%) of the Tenant Work and 0% for the final fifty percent (50%) of the Tenant Work, such that, upon substantial completion of the Tenant Work, a 5% retainage balance will remain, which retainage balance shall be disbursed to Tenant's Contractor upon delivery of the final lien waiver described in clause (v) above. (vii) The Tenant Work Credit described in Paragraph (f) below shall be disbursed to Tenant, no more than once every thirty (30) days, based on the percentage of the Tenant Work that has been completed (as reasonably determined by Landlord's architect and Tenant's architect) (but subject to Paragraph (e) below). In connection with a request for the disbursement of any portion of the Tenant Work Credit for "hard" or "soft" costs or other permitted applications of the Tenant Work Credit, Tenant shall submit an AIA G702 requisition form, and in connection therewith (or as part thereof) Tenant shall furnish to Landlord (i) a certificate signed by Tenant's Authorized Representative stating that the work for which payment is sought has been completed in accordance with Tenant's Plans and in a manner satisfactory to Tenant, (ii) copies of lien waivers in a form reasonably satisfactory to Landlord and its lender executed by the contractor performing the work for which payment is being sought (which lien waivers may be conditioned on payment for the current month), and (iii) if requested by Landlord, copies of invoices for all work for which Tenant is seeking payment. In the event Landlord fails to make a disbursement of the Tenant Work Credit within twenty (20) days after the date Tenant submits a requisition and the supporting materials described above, such payment shall bear interest at the Default Rate (as defined in Section 20.4 of the Lease) from the date payment is required to be made hereunder through the date such payment is actually made by Landlord. In addition, if Landlord's improper failure to make such disbursement results in a work stoppage by Tenant's Contractor, then the December 29, 1995 date set forth in Section 3.2 of the Lease shall be extended by one day for each day of such work stoppage. (viii) Subject to the provisions of this Exhibit B, Tenant shall be solely responsible for the progress of construction of the Tenant Work, and for the quality and fitness thereof (except in cases where the Tenant Work is reliant on the proper performance of the Base Building Work to function properly). Without limiting the generality of the foregoing, Tenant shall be solely responsible for the filing of Tenant's Plans with appropriate governmental authorities and the obtaining of all necessary permits. Copies of all permits shall be promptly furnished by Tenant to Landlord. Tenant shall also be responsible for obtaining the nonresidential use permit for the Premises, and shall deliver the original thereof to Landlord. Landlord shall cooperate with Tenant in Tenant's efforts to obtain permits and a nonresidential B-4 39 use permit, and shall promptly execute any reasonable document relating thereto, at no cost to Landlord. (ix) Tenant shall indemnify and hold Landlord harmless from any and all loss, liability, damage, claim, cause of action or expense, including reasonable attorneys' fees, directly arising out of the Tenant Work, including, but not limited to, any mechanics or construction liens arising as a result thereof, any repair, alteration or replacement required as a result of the Tenant Work, including alterations, repairs and replacements to the base building or any other part of the Landlord's Work attributable to the Tenant Work or any damage caused to Landlord's Work during construction of the Tenant Work and/or subsequent operation of the facilities and systems incorporated into the Tenant Work and any failure of the Tenant Work to comply with any applicable governmental laws, ordinances, rules and regulations. (e) Tenant's Budget. Prior to commencement of the Tenant Work, Tenant shall provide to Landlord, in form reasonably satisfactory to Landlord's construction lender ("Lender"), a budget detailing the total cost of completing the Tenant Work. Tenant acknowledges that, to the extent the total cost of completing the Tenant Work exceeds the Tenant Work Credit (as described in Paragraph (f) below), Lender may require that Tenant show that the amount of such excess cost has been expended by Tenant, and a corresponding portion of the Tenant Work completed, before Lender shall be required to advance funds in reimbursement for the Tenant Work and that, accordingly, Landlord's obligation to pay the Tenant Work Credit to Tenant shall likewise be so conditioned. If, prior to completion of the Tenant Work, Lender determines that the then remaining balance of the Tenant Work Credit not yet paid to Tenant is not sufficient to complete the Tenant Work, Lender may again require that the amount of such excess cost be expended by Tenant, and a corresponding portion of the Tenant Work be completed, before any further sums are disbursed by Lender or otherwise required of Landlord hereunder to pay for the costs of completing the Tenant Work. In the event Tenant is required pursuant to this Paragraph (e) to expend any of its own funds toward completion of the Tenant Work, and if later savings are achieved in the cost of the Tenant Work such that the total cost of the Tenant Work is less than the amount of the Tenant Work Credit, then an amount equal to the sums expended by Tenant pursuant to this Paragraph (e) shall be disbursed to Tenant by Landlord in cash out of the balance of the Tenant Work Credit remaining upon completion of the Tenant Work, until such balance of the Tenant Work Credit is exhausted. (f) Tenant Work Credit. Landlord hereby grants Tenant a credit to be applied toward the cost of the Tenant Work in the amount of $8,505,860 (the "Tenant Work Credit"). The Tenant Work Credit shall be increased or decreased pro rata at such time as the final measurement of the Building is agreed upon pursuant to Section 26.18 of the Lease. In the event the Tenant Work Credit exceeds the cost of designing and constructing the Tenant Work as set forth in the executed architect's agreement, project management agreement with Tenant's project manager, and construction contract, any excess portion of the Tenant Work Credit may be applied toward the cost of furniture, fixtures and equipment (including telecommunications and computer equipment and cabling) installed by Tenant in the Premises or any other expenses incurred by Tenant in relocating to the Premises (including moving expenses and legal fees incurred in connection with this Lease). Such costs shall be reimbursed as incurred, upon B-5 40 presentation of receipts or invoices evidencing that the cost in question has been incurred. In the event the Tenant Work Credit is still not exhausted upon payment of such costs, the remainder thereof shall be disbursed to Tenant within thirty (30) days following the Rent Commencement Date. (g) Ownership of Improvements. Landlord and Tenant hereby agree and acknowledge that, notwithstanding the fact that Tenant may be contracting for the design and construction of the Tenant Work, immediately upon its installation in the Premises, all Tenant Work (including, without limitation, all general office construction items, all mechanical, plumbing and HVAC equipment, all voice or data communications wiring, and all raised computer access flooring) shall be and remain the property of Landlord, and shall not thereafter (except as otherwise provided in the Lease) be subject to removal by Tenant or in any other manner be deemed the property of Tenant, but Tenant waives any claim against Landlord for any failure in condition, including (but not limited to) latent defects, in any of the Tenant Work. B-6 41 SCHEDULE I AMERICAN MANAGEMENT SYSTEMS DESIGN SPECIFICATIONS I. GENERAL II. SITEWORK III. ARCHITECTURAL IV. STRUCTURAL V. MECHANICAL VI. MONITORING SYSTEM VII. PLUMBING VIII. FIRE PROTECTION IX. ELECTRICAL X. VERTICAL TRANSPORTATION MARCH 3, 1993 REVISED NOVEMBER 17, 1993 REVISED DECEMBER 29, 1993 REVISED JANUARY 24, 1994 REVISED FEBRUARY 3, 1994 FINAL ** REVISED FEBRUARY 9, 1994 ** FINAL 42 AMERICAN MANAGEMENT SYSTEMS DESIGN SPECIFICATIONS This section outlines the design specifications which have been developed for American Management System's (AMS's) requirement. These specifications are not intended to be restrictive but rather provide guidelines as to minimum standards and a basis for comparison. We are encouraging creative and cost effective solutions and would be pleased to entertain alternatives. I. GENERAL A. Project Description The project is conceived as a development containing first class office space. Projected space requirements indicate a need for a building or site that could accommodate a minimum of 250,000 square feet. Special facility requirements which have been identified include: - Food Service - Fitness Center - Sundry Retail B. Codes/Standards/Requirements All design and construction shall be in accordance with all applicable local, state, federal codes and standards, OSHA provisions and AMS requirements. In the event of a conflict between the applicable codes or standards the more stringent shall prevail. II. SITEWORK A. Site Plan and Survey A preliminary survey of the site, shall be performed. Information determined from the survey should be reported as part of the proposal response including: 1. Land area of proposed site. 2. Current zoning designation. 3. Physical description of the property including topography, special features and surrounding development. 2 43 4. Property restrictions which would limit or affect development. Typical items would be zoning issues such as set-backs and easements and physical restrictions such as flood plains or wet land limits. 5. Utilities serving the proposed property shall be identified. B. Geotechnical A preliminary geotechnical report, shall be submitted as part of this proposal response. Significant areas of unsuitable soil, rock or ground water should be identified. C. Environmental Proposals shall confirm that potential sites are free from contamination from previous or current presence of any hazardous or toxic materials. D. Site Utilities 1. All required utilities shall be extended underground to the building with adequate capabilities to meet the initial and expansion requirements. 2. Telephone connection from central telephone office to be fiber optic with one separate independent redundant route from central telephone office. Required telephone service will be identified and coordinated by the Tenant. All distribution beyond the main Telephone Room will be by Tenant. Base building will provide main Telephone Room and access via conduit. 3. Site storm drainage and roof drains shall be piped underground and discharged into the municipal storm drainage system. Sheet draining of parking lot to catch basins and/or swales in non-paved areas may be incorporated prior to run-off entering underground piping system. 4. Storm water retention/management ponds shall not be permitted on site. E. Landscaping Should be consistent with surrounding area and include full automatic lawn irrigation system coverage. Provide walkways around the building as required by traffic flow and/or local regulation. Walks shall be constructed of monolithic concrete or stone or masonry paving on concrete, whichever is economically and aesthetically suitable. 3 44 F. Roads and Driveways The proposal shall include a vehicle traffic flow diagram and description indicating entrances and exits of the site with appropriate control devices, either existing or to be installed, such as traffic signals, stop signs, etc. as required by the agency having local jurisdiction. Paving sections shall conform to regulatory standards. Curbs shall be provided along all roadways and parking areas and shall be constructed of reinforced concrete with appropriate profiles. If possible, loading, delivery and service areas should be segregated from parking areas. G. Parking Parking shall be provided as follows: 776 parking spaces will be provided, 463 in the garage and 313 surface spaces in accordance with the site plan (attached). The following criteria shall apply: a. Placement 1. The garage shall be placed contiguous to the building complex, either below grade or adjacent to the office in accordance with the attached site plan. 2. Should this placement prove impractical, the garage shall be placed so that the walking distance between its main pedestrian exit, at ground level, and the nearest building entrance does not exceed 300 feet. b. Structure 1. The assumed floor live load shall be as required by code. 2. All floor slabs shall be sealed to prohibit the intrusion of corrosive agents. 3. Reinforcing steel shall be epoxy coated where appropriate. 4. The floor to clear height (underside of structure) shall be a minimum of 8'- 0". 5. The interior columns shall be placed no less than 3 ft. inboard from the aisles. 4 45 6. The interior columns falling within parking spaces shall have impact protective wraps up to a minimum height of 3.0 ft. c. Aisles and Ramps 1. The minimum number of entrance and exit aisles shall be 1 per 500 car stalls. 2. The garage and lot shall be able to discharge its total capacity in 30 minutes. 3. Aisle and ramp widths/slopes: All access aisles, ramps and radi shall conform to recognized standards and local codes in terms of width and allowable slopes. d. Parking Stalls 1. Stalls for regular (full size), compact and handicapped usage shall be sized in accordance to local codes. 2. Should the proposal response contain a parking structure which utilizes 'stacked', 'tandem' or 'buddy' stalls the extent of these spaces shall be defined as percentage of the total number of spaces provided. 3. Visitor and service parking areas should be provided as appropriate. e. Pedestrian Circulation 1. Provide elevators for the garage in accordance with good elevator engineering practice. 2. Stairs and exit to exterior walk at grade level shall be smoke and fire proof as required by law. f. Mechanical 1. Below grade levels shall use mechanical ventilation, with a CO (carbon monoxide) monitoring and alarm system. g. Lighting 1. Minimum lighting intensity shall be: 20 foot candles at elevators and stairwells. 5 46 30 foot candles at entrances. 10 foot candles at ramps. 5 foot candles elsewhere. 2. Fixtures shall be low glare with shatterproof lens or protective cages. h. Fire Protection 1. Fire extinguishing equipment shall be provided at every garage level, or sprinklers as per code. i. Access, Security, Stacking Security in a headquarters complex is accomplished by architectural, electronic, mechanical and physical planning. Security should appear to the general public to be sophisticated, but it should function so as to minimize inconvenience to occupants. A major portion of the security program can be achieved by establishing a traffic pattern to guide the occupants and visitors through a funnel of surveillance, thus allowing the ability to be challenged by the building security team. At the service loading deck, the dock gate is to be closed and locked unless a security guard is posted. All doors leading into the building from the loading dock should be kept locked except the entrance door to the freight elevator. The security guard is to maintain control of the area. Security cameras should be provided to guard parking lot areas. III. ARCHITECTURAL (BASE BUILDING) A. Building Concept The exterior building appearance in both design and finish shall be responsive to surrounding topography and compatible with existing the architecture in the immediate area. B. Bay Size The architect shall recommend bay sizes which will be structurally economical, and shall establish suitable building modules to accommodate a flexible and economical interior layout for partitioning ceiling and lighting, etc. Typical bays shall be 42.5'x 25.0' and 25.0'x 25.0'. 6 47 C. Building Modules The building(s) should be modular in design. the basic architectural and structural modules should be established upon a regular, integrated dimension which will coordinate with office sizes, columns, windows, lighting, ceiling grid, partition layout, etc. Modules of 4'- 0", 4'- 6" and 5'- 0" will be considered. D. Exterior Wall System Performance Criteria: a. Wind Loads: Minimum as required by code or higher as recommended by structural engineer. b. Thermal Values: Overall 'U' value = 0.36 or as required by code. 1. Walls/Spandrels: Minimum to be selected by architect. 2. Glass: Doubled insulated. c. Fire Protection - 1-1/2 hour rated smoke stop at floor structure or as required by law. d. Water Penetration: No uncontrolled leakage inboard of system. e. Air infiltration: 0.06 cfm/sq. ft./min. E. Roofing Roofing materials shall comply with all applicable codes. Roofing System Criteria a. Preferred system shall be a single ply EPDM membrane with compatible associated materials and accessories such as: metal & flexible flashing, primers, rigid insulation, adhesive, ballast, hatches, and walkway pavers. A built up roofing system will be considered if it is a minimum of 4 - ply system will equal performance capabilities. b. Warranty: Shall be for a period of 15 years from the system manufacturer. c. Membrane: Minimum thickness 0.045 inch. d. Insulation: Extruded rigid closed cell polystyrene board in appropriate thickness as required by membrane manufacturer. e. Ballast: Shall not be less than 15 pounds per square foot and comply with ASTM C33, Gradation No. 4 with no fines less than 1/2 inch. 7 48 f. Pavers: Provide precast concrete pavers 2'-0" x 2'-0" x 2" to all mechanical equipment from roof access areas. F. Public Areas The design and selection of finish materials for public areas should be appropriate for a headquarters office building. Durability and ease of maintenance should be considered in the selection of finishes. Main Lobby Lobby floors should consist, for the most part, of hard stone, properly honed and sealed, that will allow for simple dry and wet maintenance during the normal office hours. The Lobby Control Station should be located in a position which does not block the natural traffic flow but offers excellent visual contact with the main lobby entry doors and the elevator system. Such positioning results in minimizing manpower during normal and/or after business hours. Corridors Floor layouts should be designed to minimize the corridors required around the core for access to elevators, service facilities, toilets and stairways. Toilets Toilet areas should be functionally designed with fixtures and stalls located in a manner to provide easy ingress and egress. Installation is to comply with code and handicapped accessibility requirements of maintenance and operating expense. Wet Walls Where wet fixtures (water closets, urinals and lavatories) are installed, specify glazed ceramic tile (with a cove base). Other Walls Glazed ceramic tile with cove base is preferable but a serviceable vinyl wall covering is acceptable. Countertop Lavatories Continuous surfaces are preferred. Natural stone, plastic laminate or Corian are acceptable surfaces. 8 49 Powder Room In women's toilets, if space permits, a separate powder room with powder shelf and mirror for make-up is desirable. Partitions All partitions should be ceiling hung. Finish shall be factory finished baked enamel. Toilets should be wall mounted. G. Floor Configuration General - Floor sizes of 20,000 to 25,000 sq. ft. are acceptable. Larger size floors of up to 35,000 sq. ft. can be considered. The configuration should be rectangular and the interior relatively column free to provide for efficient layouts. The maximum depth from any interior space to the glass should be 45'0" for typical office space. Center cores are desired; larger floor plates may require more than one core. Specifically, the column line to column line foot print of the building will be 110.0' x 235.0' in a ten (10) story facility. The floor to floor height shall be: Floor 1, 14.75', Floors 2-10, 12.75'. H. Ceiling Height Clear ceiling heights shall be: 1. General Office areas: 8'-6" minimum 2. Offices: 8'-6" 3. Reception lobby: as required 4. Mechanical: As required 5. Cafeteria: 10'-0" Where practical, higher ceilings may be considered for large open areas, but these heights shall not set floor heights or increase the building heights. 9 50 I. Loading Loading - Receiving. Two full (semi, tractor) trailer truck bays will be required, plus one for a trash compactor. Loading zone is to be provided in accordance with the attached first floor plan and site plan. The loading dock area should consist of two truck berths, approximately forty-five feet (45') in length. Dock facilities should not interfere with pedestrian traffic, building entrances or on site vehicle traffic or parking. Dock leveling devices should be provided to aid in truck loading or unloading. Door seals with overhead rolling doors are acceptable. IV. STRUCTURAL (BASE BUILDING) A. General Selection of a framing system should be made from a number of alternate solutions carried though schematic design to a point where a proper choice will be made with respect to: - architectural expression and facade development; - accommodation of a flexible and efficient mechanical system; - provision for electrical distribution; - consideration for future changes in floor loadings and penetrations such as private communicating stairs; - building module and conformance with other building elements, i.e., core, HVAC, lighting, ceiling system, etc. B. Foundations Foundations shall be designed and constructed with proper consideration given to soil, rock and groundwater conditions. Foundation design shall be adequate to prevent detrimental settlement. All concrete shall have a minimum 28 compressive strength of 3,000 psi. Slab on grade floors shall be moisture proofed with a polyethylene vapor barrier. C. Structural System The structural or framing system shall be of reinforced concrete or steel as determined by structural and economic analysis. No consideration will be given to a structural system of post-tensioned concrete. The system is to be designed and constructed in compliance with applicable codes and standards. 10 51 D. Design Loads - Floors Structural floor systems shall be designed with the minimum live loads, including partitions: Dock areas 150-200 psf All other areas 100 psf 11 52 V. MECHANICAL A. HVAC 1. General a. This section establishes the design criteria for all mechanical work to be executed in the proposed facility and supplements local, state and national codes and laws applicable to work being undertaken. b. In case of conflict between any codes, standards or this RFP requirements, the more stringent provision shall prevail. 2. The mechanical design for heating, ventilating, air conditioning and piping systems must consider the following: a. The mechanical systems should be designed to optimize operating economies, not only first cost considerations. b. Life safety including smoke purge capabilities. c. Operating reliability and simplicity. d. Ease of maintenance. e. Flexibility in total system for simple adjustments to increased load requirements by twenty-five (25%) percent. This excess capacity (25%) shall be provided in the cooling tower, risers and risers only if a central plant chiller system is selected. 25% additional capacity will be required in chiller also. f. Flexibility of operation as related to varying occupancy conditions. g. System design allowing for a simple and economic modifications as may be required by partial or total changes in building use. 3. Equipment Selection Criteria a. Field proven for operational reliability. b. Low overall operating cost as related to fuel, labor, maintenance and repair. c. Reasonable initial cost. d. Automatic operation. 4. Testing and Balancing 12 53 a. All base building equipment and controls shall be thoroughly tested in accordance with manufacturers' recommendations and established standards and a report submitted to the Tenant for review and comment. Prior to test, notify the Tenant of all testing dates so that a Tenant representative can witness tests if deemed necessary. b. Air and water balance for base building equipment shall be done by a certified member of the Associated Air Balance Council (A.A.B.C.) or National Environmental Balancing Bureau (N.E.B.E.) who shall be a direct subcontractor to the developer. B. HVAC System Design 1. Design Parameters The HVAC design shall address the following factors: a. Building and HVAC design shall provide for energy conservation. b. The entire HVAC and building envelope design shall conform to current ASHRAE Standard or local energy codes, the more stringent shall prevail. c. All occupied areas shall be air-conditioned. d. HVAC shall be provided on a year-round basis. e. Temperature control shall be automatic and shall maintain temperature set point at +/- 2 degrees F.D.B. f. A complete system should provide heating and cooling with sufficient temperature control zones for maximum flexibility and comfort for perimeter spaces, office and production areas. Control zones should be located at reasonable periodic intervals in order to minimize the costs of making future tenant changes. g. A standard distribution pattern of air to accommodate general conditions of office areas to offset internal loads should also be provided. The office areas system shall be a variable air volume configuration with a minimum of one (1) internal zone per 800 usable square feet for purposes of base building tenant work delineation, the perimeter fan power VAV box zone shall be from the exterior wall inward twelve (12') feet. h. Internal air quantities for office areas should range between 0.9 and 1.5 CFM per square foot, distributed through air troffer type 13 54 lighting fixtures or conventional diffusers with one (1) air outlet per 100 SF as the basic standard. Air should be returned through air troffer fixtures into the ceiling, using the ceiling cavity as a return air plenum. i. Outside air shall be provided at 0.20 CFM per usable square foot or 20 CFM per person whichever is greater. C. HVAC Design Conditions 1. Design Conditions The heating, ventilating and air conditioning systems will be designed and selected to produce the indoor conditions noted below when the outdoor conditions are as stated: a. Indoor Conditions Summer 75 degrees F. db +/- 2 degrees 50 +/- RH 10% Winter 70 degrees F. db +/- 2 degrees 35 +/- RH 15% b. Outdoor conditions: Summer 91 degrees F. db 74 degrees F. wb Winter 14 degrees F. db D. HVAC Design Load Criteria 1. Base building block load. a. Heat gain and losses: as per design conditions, lighting requirements of 2 watts per rentable square foot and power requirements to 4 watts per rentable square foot. b. Occupancy load: one (1) person per 135 carpetable square feet for typical office areas. E. HVAC System Criteria a. The building air-handling systems shall be arranged for automatic modulation during partial occupancy during off hours and have the optional capability of 100% outside air to provide free cooling when outside conditions are suitable. System shall include means for relieving, automatically and positively via return fans, up to 900% of the outside air taken into the building. Control shall be 14 55 based on the enthalpy of air-side economy. This system shall also be designed for smoke purging of floors. b. Fans are to be AMCA rated. c. Main supply air fans & air shafts shall be sized for 115% for building design air requirements with matching motor and drive and selected near the center of their range. d. Variable air volume control of the air handling systems shall be accomplished by using electronic flow economizers AC with motor speed controls. e. High efficiency motors shall be used on all equipment. f. The air handling unit casing shall be properly insulated, free of air leaks, and have adequate access doors as per the appropriate SMACNA Manual. 1. Air Distribution a. Standards All duct systems shall be designed and installed in accordance with provisions found in the latest editions of the ASHRAE HANDBOOKS and SMACNA Standards. b. Requirements 1. All supply and return air ducts shall be properly insulated. 2. Ducting material shall be galvanized sheet metal. The connection to each air outline device may be of the insulated flexible duct, not to exceed ten (10) feet. 3. Transfer air grilles shall be sized not to exceed 300 FPM over net area. 4. For filtration, use high efficiency disposable air filters with rated efficiency of 25% per NVBS (atmospheric). 2. Heating System a. Requirements 1. In general, heating load should be based on transmission losses, ventilation load, and combustion (if required). 15 56 3. Refrigeration System a. Selection of refrigeration machinery and pumps shall be based on a total building load plus twenty-five (25%) percent. (25% excess capacity in cooling tower risers and pumps only.) b. If building has a central plant, it shall be served by a minimum of three refrigeration circuits (compressors, condensers, pumps, etc.) The refrigeration plant design shall include energy conservation measures. Refrigeration equipment rated at 150 tons or larger shall be centrifugal with efficiency not less than 0.60 KW/ton. Water cooled DX Systems are an acceptable alternative. c. Cooling towers shall be non-combustible type sized for 125% of loads. d. Towers shall be equipped with two (2) speed fans, separate cells minimum automatic chemical treatment, automatic bleed-off control and Ph control. 4. Pumps and Piping a. Provide one stand-by-pump that can be used through proper valving and piping for either chilled water or condenser water system. b. All chilled water condensate piping shall be covered with water barrier insulation. c. All pumping circuits should be manifolded to provide maximum flexibility with respect to operation of any refrigeration machine with any tower cell, chilled and condenser water pump. d. Pumps with variable speed control are preferred but staged control is acceptable. e. Separate condenser water distribution system will be provided within the core area with valved and capped connections at every floor. F. Provisions for Supplemental Air Conditioning System Condenser water should be available on a 24 hour a day, 365 days per year basis to accommodate increased power loads from future growth. 16 57 G. Acoustics Noise criteria: offices: NC-35 Noise criteria: offices adjacent to or below fan rooms, toilets, retail areas: NC-40. VI. MONITORING SYSTEM A direct digital control Building Monitoring System (BMS) is required as described below. The following functions should flow through the control points of the BMS by taking each system individually and addressing the control points or monitoring that each system should incorporate: HVAC Control Demand Limiting Life Safety Interface Lighting Control Security Control Vertical Transportation Control Energy Management Control It is important that the BMS system design be capable, expandable and with a proven track record of performance. A remote monitor should be located at a security desk location to be determined. a. HVAC Control Start and stop most equipment within the project. All controllable systems should have remote reset capabilities. Space temperatures should be read at a minimum of one per air handler zone. The air-handlers should be controlled with not less than temperatures, stop-start, filter alarms, dampers and vibration indicators. The fans should be designed so that they can also become part of any load-shedding and energy conservation programs. This can be accomplished by using variable vortex dampers, variable pitch centrifugal fans or variable frequency drives on the motors. b. Lighting The building standard lighting system should be controlled in as many zones as possible or practical. Energy conservation measures shall be incorporated into the design. The system should be controlled on the basis that the lighting can be reduced to 50% at any given time and primarily during the cleaning operation. All other 17 58 controllable light circuits should be coded to allow shut-off of the lighting systems in unoccupied areas. c. Life Safety (Separate System) Life safety control measures which must be considered within the Building Management System's comprehensive plan include: - Remote control monitoring of fire and jockey pump and smoke evacuation systems; - Status reporting of standpipe systems controls and pressures; - Public address system on both a general and specific location basis and communication to specified zones; - All life safety points in hard copy in both the engineer's station and the security office. VII. PLUMBING 1. General a. This section establishes the design criteria for all plumbing work to be executed in the proposed facility and supplements local, state and national codes and laws applicable to the work being undertaken. b. In case of conflict between any codes, standards or this RFP requirements, the more stringent provision shall prevail. 2. Systems a. Domestic water supply system. b. Sanitary fixtures. c. Sanitary drainage and vent system. d. Storm drainage and vent system. e. Gas system. 3. Plumbing a. Domestic Water Supply System: 18 59 1. Metered domestic service will be extended from street mains. Water will be distributed through mains, risers, and branches to plumbing fixtures and equipment. 2. The domestic hot water system shall be of the recirculating type, except where the water heaters are adjacent to the area being served. 3. Special areas requiring higher hot water temperature (cafeteria) shall be provided with booster heater. 4. Domestic water systems to be distributed in one (1) core location and two (2) wet columns per floor. Provide valved and capped outlets at each riser at each floor. b. Sanitary Fixtures 1. All fixtures are to be wall hung. 2. All fixtures are to be of the water saver type. 3. All toilet rooms shall be accessible to and usable by the physically disabled, as required by local code and the Americans With Disabilities Act (ADA). 4. In janitor closets, provide deep basin sink capable of accepting condensate and condenser water drains from supplemented A/C units without overflowing. 5. Electric water coolers shall be semi-recessed stainless steel. c. Sanitary Drainage System 1. Provide a complete sanitary drainage system for the fixtures, floor drains, etc. The system shall be complete with risers and valves and connection to site sewer. 2. Floor drains will be run by gravity to oil and sediment interceptors and then pumped into gravity sewers. 3. All drainage from cafeteria to be provided with grease interceptors. 4. Provide lift stations as required. d. Storm Drainage 19 60 1. Provide a complete system with roof drains and leaders and connect to the site drainage system. Controlled flow roof drainage will be provided, if required. VIII. FIRE PROTECTION 1. General a. This section establishes the design criteria for the fire protection work to be executed at the proposed facility and supplements local, state and national codes and laws applicable to the work being undertaken. b. In case for conflict between any codes, standards of this RFP requirements, the more stringent provision shall prevail. c. Provide automatic wet pipe sprinkler system with standpipes and risers except for electric and telephone equipment rooms or as required by code. System will be hydraulically calculated. An automatic dry pipe sprinkler system win be provided as required. d. Provide portable fire extinguishers based on code requirements and N`FPA Standards. e. Sprinkler heads in all base building areas, will be concealed type with flat ceiling plate. Sprinkler heads in all other areas will be chrome pendant. f. Each sprinkler system shall have a water flow alarm, tamper switches and zone valves connected to a central annunciator panel. Even if this panel is monitored at all times, signal should also report to the local fire department or to a fire reporting service. g. Emergency Power All life safety and fire protection systems shall provide with emergency power, as required by authorities having jurisdiction over this project. h. Sprinkler system design shall be based on 1 head per 90 RSF IX. ELECTRICAL A. General 1. This document establishes electrical design criteria for the proposed facility and shall be used to supplement local, state and national codes and laws which are applicable to the work being undertaken, and those laws dealing with environmental protection, occupational safety and health. In case for conflict, the more stringent requirement shall govern. 20 61 2. Standards for Materials All materials shall be new and shall conform to the applicable standard or standards where such have been established for particular material in question. Publications and standards or the organizations listed below are applicable to materials specified herein: a. Underwriters Laboratories, Inc. (UL). b. National Electrical Manufacturers Associations (NEMA). 3. Scope of Work a. Furnish all material, labor, transportation, tools, equipment and supervision to completely install and leave ready for operation, complete electrical systems and in accordance with this RFP. b. The work shall include but not necessarily be limited to the following general items: 1. Main switchboards, panel boards, distribution boards, transformers, bus duct, feeders and other equipment for the complete power distribution system to the electrical closets on each floor. 2. Wiring, branch circuiting, conduit systems and devices for the complete system for public areas. 3. Complete lighting system for public areas. 4. Power wiring and connection for all mechanical equipment furnished under other sections. 5. Emergency power distribution system. 6. Fire alarm system. 7. Lightning protection system B. Electrical Service 1. The incoming service shall have utility company transformers as required. 2. The base building electrical system should be capable of being expanded by 25%. 3. Switchboards - 480 volt: 21 62 a. Switchboards shall be sectional NEMA Type II, totally free standing, indoor, dead front, low voltage switchboard in accordance with the latest applicable standards of NEMA and UL. Rating shall be 277/480 volts, 3 phase, 4 wire service. b. The main bus shall be of such size, quality and spacing to ensure that temperature rise does not exceed NEMA Standards under fully loaded conditions. c. Main bus shall be structured and braced for a short circuit capacity. d. Provide a copper ground bus secured to each vertical section of the switchboard extending the full length of the board. e. Feeder or main devices rated 800 amps or less shall be quick-make, quick-break fusible switches with current limiting uses for 200,000 amps RMS. Feeder or main devices rated more than amps shall be insulated case systems circuit breaker with solid state tripping. f. Ground fault protection shall be furnished on all over current protection devices rated 1,000 amps or more where used as main disconnect. g. Provide lightning protection in service entrance section. h. Provide voltmeter and ammeter with three position switches for monitoring incoming service. C. Distribution 1. The bus ducts should be capable of providing nine (9) watts per square foot with seven (7) watts available on the floor. Lighting power should be based on two (2) watts per square foot. Power should be based upon five (5) watts per square foot. 2. Mechanical equipment loads should not be served from the same bus duct that services the tenant spaces. 3. In addition, the building should be provided with an emergency distribution system which will supply power to all essential life safety building loads, telephone service and security. 4. All main distribution panels to be provided with surge protection. 5. Provide transformers and distribution panels for 120/208 volt power distribution and one height voltage panel. 22 63 6. All conductors shall be of copper and shall meet the ASTM specifications for conductivity. 7. Provide two (2) electric closets per floor. D. Emergency Power System 1. Provide and install a pad mounted diesel generator set in waterproof enclosure and storage fuel tank sized for minimum 1 day, eight (8) hours, continuous operation at full load. Generator shall be rated for 277/480 volt service. Designed for harmonic non-linear loads. 2. Generator shall serve an emergency distribution panel through a mechanically held, open transition, electrically operated automatic transfer switches. 3. The emergency distribution system shall serve fire pump, fire jockey pump, smoke exhaust fans, elevators, fire alarm system, stairwell, egress, exit lighting. 4. System shall include a remote generator status panel with start-stop controls and load transfer controls tied to the BMS system. E. Lightning Protection Provide and install a complete lightning protection system in compliance with NFPA no. 79 system shall be installed for a UL Master Label A. F. Lighting 1. Furnish and install all lighting fixtures required per public area. 2. Types of lighting for various areas shall be as follows: a. Entry and Elevator Lobby Areas: Specialty lighting (pendants, sconces etc.) as selected by base building architect along with recessed ceiling fixtures. b. Toilets: Fluorescent strip fixture in a recessed coves. G. Telephone Utility Room 1. Provide four (4) 4" incoming conduits stubbed 6" AFF in building main telephone service equipment room. 2. Provide No. 16 galvanized iron "pull-wire" or nylon zip string in each telephone conduit opening. 23 64 3. Provide equipment backboards. Provide two (2) 4'X8' 3/4" fireproof plywood secured to wall. 4. Provide one #4 copper ground wire for each backboard tied back to main switch gear ground with impedance. H. Fire Alarm System 1. Provide a complete stand alone fire alarm system to comply with NFPA 72A Standard Building Code, NFPA 101, and all ordinances having jurisdiction over this project. 2. Fire alarm system shall be multiplexed type and shall include, but shall not be limited to the following: a. Manual pull stations. b. Voice alarm speakers with flashing lights and speakers. c. Smoke detectors in all mechanical equipment rooms, electrical rooms, telephone rooms and lobbies. d. Smoke detectors in supply and return ducts or each air handler system in outside air intake fans. e. Provide amplifier capacity for all speakers installed in base building at their two watt tap. Provide additional capacity for future tenant speakers. Provide redundant amplifiers. f. Provide dual channel audio. g. Fireman's telephone jack at each entrance and each lobby. Telephone circuits shall be horizontally zoned, one per telephone. h. Monitoring of all sprinkler system alarm valves, flow switches, tamper switches, etc. i. Monitoring of fire pump per NFPA 20. j. Relays for fan shut down to start the smoke exhaust. k. Provide control panel with H.O.S. switches and indicated lights for all fans a HVAC units for the project in fire command center. 1. 24-hour battery back-up. 24 65 m. The central control panel is to be located in the security area and wired to U.11 system. I. Lighting Control Equipment 1. Exterior Lighting Control System Exterior lighting shall be operated through magnetic contractors controlled by the BMS. 2. Interior Lighting Control System Entry lobby, elevator lobbies and public corridor lighting shall be operated by magnetic contractors controlled by the BMS. X. VERTICAL TRANSPORTATION A. Life Safety 1. All elevators shall have fireman's recall key position or be recalled to the firemen's floor. 2. Traction elevators shall be arranged so that power can be selectively applied to one elevator in any group at only one time. Hydraulic elevators shall have provisions for mechanically lowering the cab and opening the doors. 3. Smoke detectors shall be installed in the elevator lobbies to signal the elevators their designated floor and should also have automatic elevator recall. 4. Every elevator cab shall be provided with a two way emergency communications system provided with emergency power. B. Access Requirements All passenger elevators shall be designed to be accessible to the physically disabled in accordance with the local codes and the Americans with Disabilities Act (ADA). C. Passenger Elevators Passenger elevators shall meet these criteria: 1. Interval (wait) 30 seconds. 25 66 2. Handling capacity (percent of building population handled in a 5 minute period): 15%-17%. 3. The following minimum inside dimensions for elevator cabs should be used: Cab Width: 6'-10" Cab Depth: 4-9" Cab Height: 8'.6" or 9'-0" Door Width 4'-0" (center opening) Door Height: 7'-0" or 9'-0" 4. The minimum load capacities for passenger elevator cabs shall be 3,500 lbs. 5. Building shall have five (5) passenger elevators. D. Freight Elevators 1. Provide minimum of one (1) freight elevator per building. 2. Close proximity to truck dock. 3. Capable of carrying 48" x 48" pallets by truck. 4. Minimum capacity: 5,000 lbs. 5. Minimum 10' ceiling with removable clearance. 6. Doors to open to a width of at least 5 feet. 26 67 SCHEDULE II February 3, 1994 AMERICAN MANAGEMENT SYSTEMS Base Building - Tenant Work Delineation
- ---------------------------------------------------------------------------------------- BASE TENANT DESCRIPTION BUILDING WORK -------- ---- - ---------------------------------------------------------------------------------------- ARCHITECTURAL ------------- - ---------------------------------------------------------------------------------------- Sealed concrete floor in tenant area X - ---------------------------------------------------------------------------------------- Sealed concrete floors in Mech./Elec.Tel./Jan. X - ---------------------------------------------------------------------------------------- Gypsum board partitions (taped & spackled) - ---------------------------------------------------------------------------------------- - Permiter X - ---------------------------------------------------------------------------------------- - Columns X - ---------------------------------------------------------------------------------------- - Core X - ---------------------------------------------------------------------------------------- Toilet rooms ( all finishes) X - ---------------------------------------------------------------------------------------- MEP rooms (all finishes) X - ---------------------------------------------------------------------------------------- Exit stairs (all finishes) X - ---------------------------------------------------------------------------------------- Janitor closets (all finishes) X - ---------------------------------------------------------------------------------------- Freight elevator lobby (all finishes) X - ---------------------------------------------------------------------------------------- Main lobby (all finishes) X - ---------------------------------------------------------------------------------------- Security/Concierge desk X - ---------------------------------------------------------------------------------------- Typical elevator lobby finishes, Floors 2-10 X (Note 1) X - ---------------------------------------------------------------------------------------- Painting/Wallcovering X - ---------------------------------------------------------------------------------------- Ceiling system - ----------------------------------------------------------------------------------------
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- ---------------------------------------------------------------------------------------- BASE TENANT DESCRIPTION BUILDING WORK -------- ---- - ---------------------------------------------------------------------------------------- - Toilet rooms X - ---------------------------------------------------------------------------------------- - Tenant area X - ---------------------------------------------------------------------------------------- - MEP rooms N/A - ---------------------------------------------------------------------------------------- - Janitors closets N/A - ---------------------------------------------------------------------------------------- - Typical elevator lobby X - ---------------------------------------------------------------------------------------- Floor Covering w/base - ---------------------------------------------------------------------------------------- - Tenant area X - ---------------------------------------------------------------------------------------- - Elevator lobbies X - ---------------------------------------------------------------------------------------- Exercise Room - ---------------------------------------------------------------------------------------- - Finishes X - ---------------------------------------------------------------------------------------- - Equipment X - ---------------------------------------------------------------------------------------- Shower/Locker Room - ---------------------------------------------------------------------------------------- - Finishes X - ---------------------------------------------------------------------------------------- Cafeteria - ---------------------------------------------------------------------------------------- - Kitchen/Servery Equipment X - ---------------------------------------------------------------------------------------- - Dining Area Finishes X - ---------------------------------------------------------------------------------------- Window treatment X - ---------------------------------------------------------------------------------------- Millwork X - ---------------------------------------------------------------------------------------- Doors & Hardware - ---------------------------------------------------------------------------------------- - Core X - ---------------------------------------------------------------------------------------- - Tenant area X - ---------------------------------------------------------------------------------------- FF&E X - ----------------------------------------------------------------------------------------
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- ---------------------------------------------------------------------------------------- BASE TENANT DESCRIPTION BUILDING WORK -------- ---- - ---------------------------------------------------------------------------------------- Mullion adapters X - ---------------------------------------------------------------------------------------- ADA Code Requirements - ---------------------------------------------------------------------------------------- - Parking Garage X - ---------------------------------------------------------------------------------------- - Site X - ---------------------------------------------------------------------------------------- - Building Entries X - ---------------------------------------------------------------------------------------- - Main Lobby X - ---------------------------------------------------------------------------------------- - Elevators X - ---------------------------------------------------------------------------------------- - Exit Stairs X - ---------------------------------------------------------------------------------------- - Toilet Rooms X - ---------------------------------------------------------------------------------------- - Tenant Area X - ---------------------------------------------------------------------------------------- Exterior Signage - ---------------------------------------------------------------------------------------- - Directional Site Signage X - ---------------------------------------------------------------------------------------- - Building Mounted & Illuminated Signage X - ---------------------------------------------------------------------------------------- Interior Signage - ---------------------------------------------------------------------------------------- - Building Directories X - ---------------------------------------------------------------------------------------- - Core Areas X - ---------------------------------------------------------------------------------------- - Tenant Areas X - ---------------------------------------------------------------------------------------- STRUCTURAL - ---------------------------------------------------------------------------------------- Loading Capacity (per code/specifications) X - ---------------------------------------------------------------------------------------- Spray-on fireproofing, if required X - ---------------------------------------------------------------------------------------- Additional loading capacity X - ---------------------------------------------------------------------------------------- ELECTRICAL - ----------------------------------------------------------------------------------------
29 70
- ---------------------------------------------------------------------------------------- BASE TENANT DESCRIPTION BUILDING WORK -------- ---- - ---------------------------------------------------------------------------------------- Incoming Service X - ---------------------------------------------------------------------------------------- Switchgear X - ---------------------------------------------------------------------------------------- Bus duct riser (capacity per specifications) X - ---------------------------------------------------------------------------------------- Distribution to closets - ---------------------------------------------------------------------------------------- - Low Voltage (168 circuits) per floor X - ---------------------------------------------------------------------------------------- - High Voltage (42 circuits) per floor X - ---------------------------------------------------------------------------------------- - Transformers X - ---------------------------------------------------------------------------------------- Emergency lighting - ---------------------------------------------------------------------------------------- - Core area X - ---------------------------------------------------------------------------------------- - Tenant area X - ---------------------------------------------------------------------------------------- Light fixtures - ---------------------------------------------------------------------------------------- - Core area X - ---------------------------------------------------------------------------------------- - Tenant area X - ---------------------------------------------------------------------------------------- - Typical elevator lobbies X - ---------------------------------------------------------------------------------------- - Main lobby X - ---------------------------------------------------------------------------------------- Convenience Outlets - ---------------------------------------------------------------------------------------- - Core area X - ---------------------------------------------------------------------------------------- - Tenant area X - ---------------------------------------------------------------------------------------- Surge Protection - ---------------------------------------------------------------------------------------- - Main switchgear X - ---------------------------------------------------------------------------------------- - Floor panels X - ---------------------------------------------------------------------------------------- Strobe lighting - ----------------------------------------------------------------------------------------
30 71
- ---------------------------------------------------------------------------------------- BASE TENANT DESCRIPTION BUILDING WORK -------- ---- - ---------------------------------------------------------------------------------------- - Core areas X - ---------------------------------------------------------------------------------------- - Tenant areas X - ---------------------------------------------------------------------------------------- - Panel contracts (for both areas) X - ---------------------------------------------------------------------------------------- Telephone/Data core drills in closets X - ---------------------------------------------------------------------------------------- Voice/Data distribution - ---------------------------------------------------------------------------------------- - Incoming Service X - ---------------------------------------------------------------------------------------- - Vertical Backbone X - ---------------------------------------------------------------------------------------- - Horizontal Distribution X - ---------------------------------------------------------------------------------------- - Grounding System X - ---------------------------------------------------------------------------------------- - Outlets X - ---------------------------------------------------------------------------------------- Telephone Switch X - ---------------------------------------------------------------------------------------- UPS System N/A N/A - ---------------------------------------------------------------------------------------- Automatic Transfer Switch N/A N/A - ---------------------------------------------------------------------------------------- Battery Back-Up N/A N/A - ---------------------------------------------------------------------------------------- MECHANICAL - ---------------------------------------------------------------------------------------- Air Handling Units (2 per floor) X - ---------------------------------------------------------------------------------------- - Supply/return trunk ducts to run X 2'-0" past X core wall; includes all fire and smoke dampers (including controls, motors, interfaces) - ---------------------------------------------------------------------------------------- Permiter fan powered VAV boxes X - ---------------------------------------------------------------------------------------- - Hot water coils X - ---------------------------------------------------------------------------------------- - Thermostats X - ---------------------------------------------------------------------------------------- - 100% operational X - ----------------------------------------------------------------------------------------
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- ---------------------------------------------------------------------------------------- BASE TENANT DESCRIPTION BUILDING WORK -------- ---- - ---------------------------------------------------------------------------------------- HVAC - ---------------------------------------------------------------------------------------- - Shower/Locker Room X - ---------------------------------------------------------------------------------------- - Exercise Room X - ---------------------------------------------------------------------------------------- - Cafeteria X - ---------------------------------------------------------------------------------------- Exhaust/Ventilation - ---------------------------------------------------------------------------------------- - MEP rooms X - ---------------------------------------------------------------------------------------- - Toilet rooms X - ---------------------------------------------------------------------------------------- - Elevator shafts X - ---------------------------------------------------------------------------------------- - Stairs X - ---------------------------------------------------------------------------------------- - Cafeteria (provide shaft at core) X - ---------------------------------------------------------------------------------------- - Dishwashing (provide shaft at core) X - ---------------------------------------------------------------------------------------- - Exercise (provide shaft at core) X - ---------------------------------------------------------------------------------------- - Shower/Locker Room (provide shaft at core) X - ---------------------------------------------------------------------------------------- Medium, pressure trunk duct X - ---------------------------------------------------------------------------------------- Low pressure trunk duct X - ---------------------------------------------------------------------------------------- Duct runouts X - ---------------------------------------------------------------------------------------- Diffusers X - ---------------------------------------------------------------------------------------- Interior VAV boxes X - ---------------------------------------------------------------------------------------- - Thermostats X - ---------------------------------------------------------------------------------------- Supplemental A/C Units - ---------------------------------------------------------------------------------------- - Extra System Capacity X - ---------------------------------------------------------------------------------------- - Units (power, piping, controls) X - ----------------------------------------------------------------------------------------
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- ---------------------------------------------------------------------------------------- BASE TENANT DESCRIPTION BUILDING WORK -------- ---- - ---------------------------------------------------------------------------------------- FIRE PROTECTION - ---------------------------------------------------------------------------------------- Standpipes X - ---------------------------------------------------------------------------------------- Distribution to main loop X - ---------------------------------------------------------------------------------------- - Valved connections X - ---------------------------------------------------------------------------------------- - Flow & tamper switches X - ---------------------------------------------------------------------------------------- Branches, drops and heads (per code) - ---------------------------------------------------------------------------------------- - Core X - ---------------------------------------------------------------------------------------- - Tenant area (code minimum) X - ---------------------------------------------------------------------------------------- - Additional heads per tenant plan X - ---------------------------------------------------------------------------------------- - Main lobby (flush heads) X - ---------------------------------------------------------------------------------------- Life safety system (strobes) - ---------------------------------------------------------------------------------------- - Core X - ---------------------------------------------------------------------------------------- - Tenant Area X - ---------------------------------------------------------------------------------------- Extinguisher Cabinets/Extinguishers - ---------------------------------------------------------------------------------------- - Core X - ---------------------------------------------------------------------------------------- - Tenant area X - ---------------------------------------------------------------------------------------- Local Fire Alarm X - ---------------------------------------------------------------------------------------- - For tenant tie-in; every other floor X - ---------------------------------------------------------------------------------------- Fire phones (per code) - ---------------------------------------------------------------------------------------- - Fire control room X - ---------------------------------------------------------------------------------------- - Elevators X - ---------------------------------------------------------------------------------------- - Stairways X - ----------------------------------------------------------------------------------------
33 74
- ---------------------------------------------------------------------------------------- BASE TENANT DESCRIPTION BUILDING WORK -------- ---- - ---------------------------------------------------------------------------------------- Annunciator Panels (per code/specifications) X - ---------------------------------------------------------------------------------------- PLUMBING - ---------------------------------------------------------------------------------------- Wet Columns (2 per floor) X - ---------------------------------------------------------------------------------------- Core fixtures X - ---------------------------------------------------------------------------------------- Electric water coolers X - ---------------------------------------------------------------------------------------- Janitors sink X - ---------------------------------------------------------------------------------------- Pantries (typical floor) X - ---------------------------------------------------------------------------------------- Shower rooms (4 per sex-rough-in) X - ---------------------------------------------------------------------------------------- Cafeteria (rough in) X - ---------------------------------------------------------------------------------------- SECURITY - ---------------------------------------------------------------------------------------- Garage control gages (Note 2) X - ---------------------------------------------------------------------------------------- Loading dock doors X - ---------------------------------------------------------------------------------------- Card readers (including power & conduit) - ---------------------------------------------------------------------------------------- - Garage gates X - ---------------------------------------------------------------------------------------- - Building entries X - ---------------------------------------------------------------------------------------- - Elevators X - ---------------------------------------------------------------------------------------- Typical floors X - ---------------------------------------------------------------------------------------- CCTV X - ----------------------------------------------------------------------------------------
Note 1: Typical floor elevator door and frame finishes, elevator sill height, fire strobes, pull station and detectors to be coordinated with AMS and interior architect. Note 2: Coordinate requirements with AMS and security system vendor. The preceding delineation is meant to outline the scope of work between base building and tenant improvements for the purpose of identifying a tenant work allowance. It is not meant to 34 75 delete, supersede, modify or cancel any code requirements or the information contained in the Design Specifications. 35 76 SCHEDULE III February 7, 1994 American Management Systems Build-to-Suit Key Base Building Milestone Dates - - Building Watertight (Bldg. One) July 15, 1995 Includes all roofing (main roof, balconies, penthouses), roof drains & overflows, all window systems (curtain wall, storefronts, ribbon punched), all exterior skin assemblies (precast, stone, etc.), flashing, expansion joints, caulking and entrances. - - Core Complete - Floors 2, 3 and 4 July 15,1995 - - Core Complete - Floors 5, 6 and 7 August 15, 1995 - - Core Complete - Floors 8, 9, 10 and 1 October 15, 1995 - - Core Complete - First Floor Lobby Complete December 15,1995 Includes all restrooms (fixtures, vanities, mirrors, partitions, tile, paint, lighting, accessories, doors, frames, hardware), elevator lobby (doors, frames, call buttons & hall lanterns), janitors closets (slop sinks, drains), mechanical rooms (DX units or equivalent), duct stub-outs, dampers, controls, risers), electric room (buss duct, panels, transformers), telephone closets (core drills, plywood), gypsum board enclosures (core, stairs perimeter wall & interior columns), fire stairs, standpipes, life safety system. - - Final Base Building System Approvals/Inspections(Substantial Completion) December 15,1995 All base building inspections, tests, permits, approvals for building, garage and site. - - Power July 15, 1995 Power (temporary or permanent) available for tenant contractor use. - - Elevators/Hoist July 15, 1995 Vertical transportation available for tenant contractor for material delivery. 36 77 - - Dumpsters July 15, 1995 Provide space for tenant dumpsters with convenient access. - - HVAC October 15, 1995 Provide base building system airflow. 37 78 EXHIBIT C RULES This Exhibit is attached to and made a part of that certain Lease Agreement dated as of the 15th day of February, 1994 (the "Lease"), by and between FAIRFAX GILBANE, L.P. ("Landlord"), and AMERICAN MANAGEMENT SYSTEMS, INC. ("Tenant"). 1. Tenant shall not use the water and wash closets and other plumbing fixtures for any purpose other than those for which they were constructed, and Tenant shall not place any debris, rubbish, rag or other substance therein. 2. Tenant shall not use the Premises for lodging or sleeping or for any immoral or illegal purpose. 3. Tenant shall not request Landlord's employees to perform any work or do anything outside of such employees' regular duties without Landlord's prior written consent. Tenant's special requirements will be attended to only upon application to Landlord, and any such special requirements shall be billed to Tenant in accordance with the schedule of charges maintained by Landlord from time to time or as is agreed upon in writing in advance by Landlord and Tenant. Tenant shall not employ any of Landlord's employees for any purpose whatsoever without Landlord's prior written consent. 4. There shall not be used in any space, or in the public halls of the Building, either by any tenant or by jobbers or others in the delivery or receipt of merchandise, any hand trucks, except those equipped with rubber tires and side guards. Tenant shall be responsible for any loss or damage resulting from any deliveries made by or for Tenant. 5. Tenant shall comply with any requirements relating to the segregation of glass, paper, metal or other materials in Tenant's refuse implemented pursuant to the terms of any recycling law now or hereafter in force, provided that this rule shall not affect Landlord's obligation to provide janitorial services under the Lease. 6. In the event of any conflict or inconsistency between any of the foregoing rules and the terms of the Lease, the terms of the Lease shall govern. C-1 79 EXHIBIT D CERTIFICATE AFFIRMING THE LEASE COMMENCEMENT DATE This Certificate is being provided pursuant to Section 3.2 of that certain lease agreement dated February 15, 1994 (the "Lease"), between FAIRFAX GILBANE, L.P. ("Landlord") and AMERICAN MANAGEMENT SYSTEMS, INC. ("Tenant"). The parties to the Lease desire to confirm the following: 1. The Lease Commencement Date is ____________, 199___. 2. The initial term of the Lease shall expire on ____________ __, ___. 3. The rentable area of the Premises is ____________rentable square feet. WITNESS LANDLORD: FAIRFAX GILBANE, L.P., a Virginia limited partnership By: Gilbane Properties, Inc. General Partner By: ----------------------- ------------------------- Title: ------------------------- WITNESS: TENANT: AMERICAN MANAGEMENT SYSTEMS, INC., a Delaware corporation By: ----------------------- ------------------------- Title: ------------------------- D-1 80 Exhibit E HVAC Specifications Heating, Ventilation, and Air Conditioning System Operation Standards 1. The following operation standards are based upon population not to exceed one (1) person per 13 5 carpetable square foot area and maximum electric lighting (two [2] watts per rentable square foot), and power requirements (four [4] watts per rentable square foot) of six [6] watts per rentable square foot area. 2. A system in operation during regular business hours on all business days (as defined further by the Lease) capable of maintaining temperatures within the building of: - 70 degrees F. (+/-2 degrees F.) with 35% RH (Relative Humidity) (+/-15%) during the heating season with outdoor temperatures ranges from 14 degrees F db to 55 degrees F or changeover point. - 75 degrees F. (+/-2 degrees F.) with 50% RH (Relative Humidity) (+/-10%) during the cooling season with outdoor temperatures ranges from 91 degrees F. db to 74 degrees F. E-1 81 EXHIBIT F LANDLORD'S SERVICES AND CLEANING SPECIFICATIONS A. GENERAL 1. All nighttime cleaning work will be performed between 6:00 pm, and 12:00 Midnight, Monday through Friday, excluding holidays (per section 15.1 of the lease), unless otherwise necessary for stripping, waxing, etc. 2 (1) Full time Day Porter and (1) part time Day Porter will provide services during the hours of 7:30 am, and 4:00 pm. The Day Porter will be supervised and directed by the Building Manager. 3. All waste shall be compacted and its removal will be coordinated through the Landlord. B. DAILY OPERATIONS 1. Day Porter Services a. Police Sidewalks. b. Police main lobby as required, but no less than three times daily. c. Damp wipe lobby directories. d. Keep entrance door glass clean. e. Police lavatories including shower/locker facilities on each floor no less than twice daily. f. Police and vacuum elevator cabs as required, but no less than twice daily. g. Lay down and remove foul weather mats as necessary. h. Snow/Ice removal to avoid any accumulation. i. Replace lights in the office space as necessary. j. Police parking garage. 2. Tenant Areas (nightly) a. Empty and clean all waste receptacles, wash receptacles as necessary, and provide liners. F-1 82 b. Spot vacuum or sweep all rugs and carpeted areas. c. All tile flooring dust mopped. d. All glass furniture tops cleaned. e. All water fountains washed clean. f. Report all mechanical deficiencies, i.e. dripping faucets, burnt out lights, etc., to the Building Manager. g. Spot clean carpets as required. 3 Lavatories (nightly) a. Sweep and wash floors with disinfectant. b. Wash both sides of toilet seats with disinfectant. c. Wash all mirrors, basins, bowls, urinals. d. Spot clean toilet partitions. e. Empty and disinfect sanitary napkin disposal receptacles. f. Refill toilet tissue, towel, soap and sanitary napkin dispensers. g. Slop sink rooms cleaned. h. All mirrors, powder shelves, bright work, lockers, etc., including flushometers, piping and toilet seat hinges washed and polished. i. Clean all showers, shower doors/curtains. j. Empty and clean all waste receptacles. 4. Public Areas (nightly) a. Vacuum elevator carpets and wipe down doors and walls. b. Clean water coolers. c. Wipe down entrance doors and clean glass (interior and exterior). d. Clean Main Lobby stone flooring. e. Dust, clean and polish all Main Lobby millwork. F-2 83 f. Vacuum floor in exercise area and wipe down equipment. 5. Elevators, including Parking Garage Elevator (nightly) a. Vacuum carpet in all passenger elevators. Spot clean carpet, as necessary. b. Clean lobby elevator saddles, doors, and frames. Polish with approved polish, as required. c. Clean elevator frames and doors of all fingerprints and smudges. d. Dust and remove all marks on ceiling and light fixtures in cab. e. Remove all unauthorized marks and writing from insides of elevator cabs, using manufacturer's approved method. f. Remove all gum and foreign matter on sight. C. WEEKLY OPERATIONS 1. Tenant Areas, Lavatories, Public Areas. a. Hand dust and wipe clean all horizontal surfaces with treated cloths to include furniture, window sills, door ledges, chair rails, baseboards, convector tops, etc., within normal reach. b. Remove finger marks from private entrance doors, light switches, and doorways. c. Sweep all stairways (including Parking Garage). d. Thorough vacuuming of all rugs and carpeted areas. 2. Elevators a. Dust and remove all marks on ceiling and light fixtures in cab b. Shampoo carpets. D. MONTHLY OPERATIONS 1. Tenant and Public Areas a. Thoroughly vacuum seat cushions on chairs, sofas, etc. b. Vacuum and dust grillwork. c. All carpets in high traffic areas shampooed monthly. F-3 84 2. Lavatories a. Wash down interior walls and toilet partitions. E. BI-YEARLY, WEATHER PERMITTING 1. Entire Building a. Clean inside of all windows. b. Clean outside of all windows. F. YEARLY 1. Tenant and Public Areas a. Strip and wax all resilient tile floor areas. G. AS REQUIRED 1. Plowing, landscaping services, and exterior maintenance. F-4 85 EXHIBIT G RECORDING REQUESTED BY - ------------------------------ WHEN RECORDED MAIL TO The Northwestern Mutual Life Ins. Co. 720 East Wisconsin Ave. - Rm N1BWC Milwaukee, WI 53202 Attn: ------------------------- SPACE ABOVE THIS LINE FOR RECORDER'S USE - -------------------------------------------------------------------------------- ACKNOWLEDGMENT, SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT Loan No. - -------------------------------------------------------------------------------- THIS AGREEMENT is entered into as _, 19_, between ____ ("Tenant"), _________ ("Borrower"), and THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY, a Wisconsin corporation, 720 East Wisconsin Avenue, Milwaukee, WI 53202 ("Lender"). RECITALS A. Tenant is the lessee of successor to the lessee and Borrower is the lessor or successor to the lessor of a certain lease dated ______, 19__ (the "Lease"). B. Lender has made, or will make, to borrower a mortgage loan to be secured by a Mortgage, Deed to Secure A Debt or Deed of Trust and Security Agreement from Borrower to Lender (the "Mortgage") on the fee title and/or leasehold Interest in the real estate, wherein the premises covered by the Lease are located, as described in Exhibit A attached hereto. C. Borrower and Lender have executed, or will execute, an Absolute Assignment of Leases and Rents (the "Assignment") pursuant to which the Lease is assigned to Lender. D. Lender has required the execution of this Agreement by Borrower and Tenant as a condition to Lender making the requested mortgage loan or consenting to the Lease. G-1 86 E. Tenant acknowledges as its consideration for entering into this Agreement that Tenant will benefit by entering into an agreement with Lender concerning their relationship in the event of foreclosure of the Mortgage by Lender. AGREEMENT NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in order to induce Lender to make the requested mortgage loan or consent to the Lease, Tenant, Borrower, and Lender hereby agree and covenant as follows: 1. Borrower hereby acknowledges, confirms and agrees that the Lease has been, or will be, assigned to Lender pursuant to the Assignment, and Lender acknowledges that the Assignment contains a license back to Borrower permitting Borrower to collect all rents, income and other sums payable under the Lease. 2. Upon revocation, pursuant to the Assignment, of the license back, Borrower acknowledges that all rents, income and other sums payable under the Lease shall be paid to Lender. 3. Tenant and Borrower agree for the benefit of Lender that: (a) Tenant shall not pay and Borrower shall not accept, any rent or additional rent more than one month in advance; (b) Tenant and Borrower will not enter into any agreement for the cancellation, surrender, amendment or modification of the Lease without Lender's prior written consent. Tenant will not terminate the Lease because of a default thereunder by Borrower unless Tenant shall have first given Lender notice and a reasonable opportunity to cure such default. 4. Tenant and Lender hereby agrees that the Lease is and shall at all times be subject and subordinate in all respects to the Mortgage and to all renewals, modifications and extensions thereof, subject to the terms and conditions hereafter set forth in this Agreement. 5. Borrower, Tenant and Lender agree that unless Lender shall otherwise consent in writing, the fee title to, or any leasehold interest in, the real estate and the leasehold estate created by the Lease shall not merge but shall remain separate and distinct, notwithstanding the union of said estates either in the Borrower or the Tenant or any third party by purchase, assignment or otherwise. 6. If the interests of Borrower in the real estate are acquired by Lender by foreclosure, deed in lieu of foreclosure or any other method: (a) If Tenant shall not then be in default in the payment of rent or other sums due under the Lease beyond any applicable cure set forth in the Lease or be otherwise in material default under the Lease beyond any applicable cure set forth in the G-2 87 Lease, Lender agrees that the Lease and the rights to Tenant thereunder shall continue in full force and effect and shall not be terminated or disturbed except in accordance with the terms of the Lease or this Agreement; (b) Tenant agrees to attorn to Lender as its lessor; Tenant shall be bound under all of the terms, covenants and conditions of the Lease for the balance of the term thereof remaining, including any renewal options which are exercised in accordance with the terms of the Lease; (c) The interests so acquired shall not merge with any other interests of Lender in the real estate if such merger would result in the termination of the Lease; (d) If, notwithstanding any other provisions of this Agreement, the acquisition by Lender of the interests of Borrower in the real estate results, in whole or part, in the termination of the Lease, there shall be deemed to have been created a lease between Lender and Tenant on the same terms and conditions as the Lease for the remainder of the term of the Lease, with renewal options, if any. The provisions of this paragraph shall be effective and self-operative immediately upon Lender succeeding to the interests of Borrower without the execution of any other instrument. 7. If the Interests of Borrower in the real estate are acquired by Lender by foreclosure, deed in lieu of foreclosure or any other method, Lender shall be bound to Tenant under all of the terms, covenants and conditions of the Lease, and Tenant shall, from and after Lender's acquisition of the Interests of Borrower In the real estate, have the same remedies against Lender for the breach of the Lease that Tenant would have had under the Lease against Borrower if Lender had not succeeded to the interests of Borrower; provided however, that Lender shall not be: (a) liable for any act or omission of any landlord Including Borrower) prior to the date of Lender's acquisition of the interests of Borrower In the real estate; or (b) subject to any offsets or defenses which Tenant might have against any landlord (including Borrower) prior to the date of Lender's acquisition of the interests of Borrower in the real estate, except with respect to any right of offset which Tenant may have pursuant to Section 16.5 of the Lease as a result of any default by any prior landlord with respect to which default Tenant shall have delivered written notice to Lender as provided in such Section 16.5. (c) liable for the return of any security deposit under the Lease unless such security deposit shall have been actually deposited with Lender; or (d) liable to Tenant (i) under any indemnification provisions set forth in the lease or (ii) for any damages Tenant may suffer as a result of any representation set forth in the Lease, the breach of any warranty set forth in the Lease, or any act of, or failure to act by any party other than Lender and its agents, officers and employees. 8. This Agreement may not be modified orally or in any other manner except by an agreement in writing signed by the parties hereto or their respective successors in interest. This G-3 88 Agreement shall inure to the benefit of and be binding upon the parties hereto, their respective heirs, successors and assigns. Upon recorded satisfaction of the Mortgage this Agreement shall become null and void and be of no further effect. IN WITNESS WHEREOF, the parties herewith have executed this Agreement as of the day and year first above written. TENANT: ------------------------------- By ------------------------------- Attest ---------------------------- Secretary BORROWER: ------------------------------- By ------------------------------- Attest ---------------------------- Secretary LENDER: THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY, a Wisconsin corporation By ------------------------------- Attest ---------------------------- Secretary G-4 89 Fairfax Gilbane, L.P. c/o Gilbane Properties, Inc. 7 Jackson Walkway Providence, Rhode Island 02940 Gentlemen: Re: Lease Agreement by and between Fairfax Gilbane, L.P., as Landlord, and American Management Systems, Inc. American Management Systems, Inc. ("Tenant") and Fairfax Gilbane, L.P., a Rhode Island Limited Partnership ("Landlord") have on this date entered into the above referenced Lease Agreement for an office building to be constructed by the Landlord and leased to the Tenant situated in Fair Lakes Park, Fairfax County, Virginia. The purpose of this letter is to confirm that the obligations of the Landlord under the Lease Agreement are expressly contingent upon satisfaction of the following contingencies: 1. On or before March 15, 1994, Landlord obtaining an environmental audit report for the Land ( as defined in the Lease Agreement) prepared by Law Engineering or such other environmental engineer as may be acceptable to the Tenant and to the Landlord's lender, Northwestern Mutual Life Insurance Company ("NML"), confirming that the Land is free of environmental contamination and in compliance with all applicable environmental laws and regulations, in form and content satisfactory to Tenant and NML; 2. On or before April 8, 1994, Landlord obtaining acceptance from NML of an Application for Mortgage Loan for Fairfax Gilbane, L.P., dated and signed as of the date hereof and submitted to NML for approval whereby there shall be no material change from the terms of said Application; 3. On or before May 15, 1994, Landlord obtaining any and all necessary or required governmental approvals for the FDPA and site plan for development of the Land and construction of the building as contemplated under the Lease Agreement; and 4. On or before March 7, 1994, Landlord obtaining a report from a qualified soils engineer confirming that the subsoil conditions of the Land are capable of supporting the contemplated construction of a 10-story office building as designed in the FDPA. Landlord agrees to use its good faith efforts to make such inquiries, retain such consultants, make such applications and perform such acts as may be reasonably necessary or appropriate to enable Landlord to satisfy the above stated contingencies. 90 If Landlord notifies Tenant in writing within ten (10) days after the end of the respective required time periods set forth above, that Landlord has not satisfied and/or waived each respective contingency, the Lease Agreement shall be deemed to be null and void and of no further force or effect and Tenant shall pay to Landlord, within thirty (30) days after the date of written demand from Landlord, all out of pocket expenses incurred by Landlord to the date of termination of the Lease Agreement hereunder in the design and development of the Land and all improvements thereon (provided that Tenant's liability hereunder shall not exceed $125,000.00 (or such higher amount as Landlord and Tenant may hereafter agree to ). If Landlord does not so timely notify Tenant, Landlord shall be deemed to have waived the respective contingencies. Dated this 15th day of February, 1994. AMERICAN MANAGEMENT SYSTEMS, INC. By: /s/ Paul A. Brands ------------------------------- ACKNOWLEDGED AND AGREED TO this 15th day of February, 1994. Fairfax Gilbane, L.P. By: Gilbane Properties, Inc., General Partner By: /s/ Robert V. Gilbane --------------------------------- EX-10.10 9 DEED OF LEASE 1 EXHIBIT 10.10 DEED OF LEASE by and between PRINCIPAL MUTUAL LIFE INSURANCE COMPANY ("Landlord") and AMERICAN MANAGEMENT SYSTEMS, INC. ("Tenant") 2 TABLE OF CONTENTS
Section Page 1. Demise......................................................................................... 2. Term........................................................................................... 3. Rent........................................................................................... 4. Permitted Use.................................................................................. 5. Expenses; Services ............................................................................ 6. Additional Rent................................................................................ 7. Sorting and Separation of Refuse and Trash..................................................... 8. Hazardous Substances........................................................................... 9. Insurance...................................................................................... 10. Damage or Restoration.......................................................................... 11. Indemnification................................................................................ 12. Assignment and Subletting...................................................................... 13. Care of Premises............................................................................... 14. Alteration by Tenant........................................................................... 15. Condemnation................................................................................... 16. Subordination.................................................................................. 17. Access to Premises............................................................................. 18. Rules and Regulations.......................................................................... 19. Covenants of Right to Lease.................................................................... 20. Mechanic's Liens............................................................................... 21. Expiration of Lease and Surrender of Possession................................................ 22. Default-Remedies............................................................................... 23. Re-Entry by Landlord........................................................................... 24. Additional Rights to Landlord.................................................................. 25. Successors, Assigns and Liability.............................................................. 26. Notices........................................................................................ 27. Mortgagee's Approval........................................................................... 28. Estoppel Certificates.......................................................................... 29. Default Rate of Interest....................................................................... 30. Exculpatory Provisions......................................................................... 31. Mortgage Protection............................................................................ 32. Reciprocal Covenant on Notification of ADA Violations.......................................... 33. Laws that Govern............................................................................... 34. Financial Statements........................................................................... 35. Parking........................................................................................ 36. Signage........................................................................................ 37. Recordation.................................................................................... 38. Force Majeure.................................................................................. 39. Intentionally Omitted.......................................................................... 40. Brokers........................................................................................ 41. Effectiveness.................................................................................. 42. Lease/Deed of Lease............................................................................ 43. Miscellaneous.................................................................................. 44. Roof Top Rights................................................................................ 45. Early Termination Fee..........................................................................
3 EXHIBITS EXHIBIT A - Legal Description of the Land EXHIBIT A-1 - Premises (First Floor Rentable Area) EXHIBIT A-2 - Premises (Second Floor Rentable Area) EXHIBIT A-3 - Premises (Third Floor Rentable Area) EXHIBIT A-4 - Premises (Fourth Floor Rentable Area) EXHIBIT A-5 - Premises (Fifth Floor Rentable Area) EXHIBIT A-6 - Premises (Sixth Floor Rentable Area) EXHIBIT A-7 - Premises (Seventh Floor Rentable Area) EXHIBIT A-8 - Premises (Eighth Floor Rentable Area) EXHIBIT A-9 - Premises (Ninth Floor Rentable Area) EXHIBIT A-10 - Premises (Tenth Floor Rentable Area) EXHIBIT A-11 - Premises (Eleventh Floor Rentable Area) EXHIBIT A-12 - Premises (Twelfth Floor Rentable Area) EXHIBIT A-13 - Premises (Lower Level Rentable Area) EXHIBIT A-14 - Premises Rentable Areas EXHIBIT B - Work Agreement EXHIBIT B-1 - Landlord's Work EXHIBIT B-2 - Landlord's ADA and BOCA Work EXHIBIT B-3 - Landlord's Base Building Improvements EXHIBIT C - Declaration of Lease Commencement EXHIBIT D - Rules and Regulations EXHIBIT E - Roof-Top Rights EXHIBIT F - HVAC Specifications EXHIBIT G - Janitorial Specifications EXHIBIT H - Ancillary Use Restrictions EXHIBIT I - Termination Payment Schedule 4 DEED OF LEASE THIS DEED OF LEASE ("Lease") is made by and between PRINCIPAL MUTUAL LIFE INSURANCE COMPANY, an Iowa corporation, whose address for the purpose of this Lease shall be 711 High Street, Des Moines, Iowa 50392-1370, Attn: CRE Equities/Mid-Atlantic Team, hereinafter referred to as "Landlord", and AMERICAN MANAGEMENT SYSTEMS, INC., a Delaware corporation, whose address for the purpose of this Lease shall be 4050 Legato Road, Fairfax, Virginia 22030, Attn: Mr. Thomas W. Huba, hereinafter referred to as "Tenant". IT IS AGREED AS FOLLOWS: 1. DEMISE. Upon and subject to the terms hereof, Landlord does hereby lease to Tenant and Tenant does hereby lease from Landlord the premises (the "Premises") consisting of all of the rentable area of the building (the "Building") commonly known as the One Fair Oaks Office Building and located on that certain parcel of real property in Fairfax County, Virginia known as 4114 Legato Road, Fairfax, Virginia and more particularly described on the attached Exhibit A (the "Land", the Land and the Building herein collectively referred to as the "Property"), which Premises the Landlord and Tenant agree contains approximately two hundred fourteen thousand two hundred fourteen (214,214) square feet of rentable area. For purposes of this Lease, (i) the portion of the Premises consisting of the entire rentable areas of the second (2nd), seventh (7th), eighth (8th), ninth (9th), tenth (10th), eleventh (11th) and twelfth (12th) floors of the Property, which the Landlord and Tenant agree contains approximately one hundred nineteen thousand four hundred seventy-nine (119,479) square feet of rentable area, is referred to as the "Phase I Premises", and (ii) the portion of the Premises consisting of the entire rentable areas of the lower level, the first (1st), third (3rd), fourth (4th), fifth (5th) and sixth (6th) floors of the Property, which the Landlord and Tenant agree contains approximately ninety-four thousand seven hundred thirty-five (94,735) square feet of rentable area, is referred to as the "Phase II Premises"; provided that, Tenant shall have the right, to be exercised by written notice delivered to Landlord not later than December 15, 1996, to alter the floors designated as the Phase I Premises and the Phase II Premises, so long as (i) the Phase I Premises shall consist of not less than one hundred eighteen thousand two hundred eighty-five (118,285) square feet, and (ii) the Phase I Premises and the Phase II Premises shall comprise the entire rentable area of the Building. Landlord and Tenant hereby acknowledge and agree to the designation of rentable area for each floor of the Building, as set forth on the attached Exhibits A-1, A-2, A-3, A-4, A-5, A-6, A-7, A-8, A-9, A-10, A-11, A-12 and A-13, respectively, and the rentable square footages set forth on the attached Exhibit A-14. The Premises does not include the roof or exterior surfaces of the walls of the Premises or the Property, or any improvements or areas outside of such walls. 2. TERM. (A) Initial Term. Subject to the terms hereof, the term of this Lease (the "Lease Term") shall be for a period (the "Initial Term") of thirteen (13) years, commencing on the first (1st) day of January, 1997 (the "Commencement Date") and ending at 11:59 p.m. on the thirty-first (31st) day of December, 2009 (the "Expiration Date"). If Landlord fails to tender possession of the Premises to the Tenant on or before the Commencement Date stated in the preceding sentence, Landlord shall not be liable for any damage caused by any such delay in the Commencement Date or failure to tender possession of the Premises, nor shall this Lease be void or voidable; provided that, to the extent such failure in tendering possession is not caused by or reasonably attributable to Tenant or Tenant's agents, contractors, subtenants, assignees, employees, officers, directors, shareholders, partners, licensees and/or others for whose actions Tenant is responsible or over whose actions Tenant can reasonably be expected to exercise control (collectively, "Tenant's Agents"), the Commencement Date shall be extended to that date on which Landlord tenders possession of the 1 5 Premises to Tenant, and the Expiration Date shall be extended by an equal amount so that the Initial Term remains thirteen (13) years. Notwithstanding anything herein to the contrary, Tenant shall have the right to terminate this Lease (and shall have no further liability hereunder) if Landlord fails to tender possession of the Premises to Tenant on or before January 31, 1997 (such date to be subject to a day-for-day extension for each day of delay in tendering possession which is caused by or reasonably attributable to Tenant or Tenant's Agents). Tenant expressly acknowledges and agrees that (i) Landlord shall be entitled to tender possession of the Premises subject to the continued occupancy by the existing tenant of the Premises, Collins International Service Company ("Collins") and Collins shall be deemed to be a permitted subtenant of Tenant, and (ii) no such continued occupancy by Collins of any portion of the Premises after December 31, 1996 shall constitute a failure by Landlord to tender possession of the Premises, so long as (i) Landlord shall have elected to treat such continued occupancy as a direct sublease between Tenant and Collins, and (ii) Collins shall have agreed in writing to execute and deliver to Tenant such form of sublease with respect to Collins' continued occupancy of the Premises as Tenant may reasonably request (Tenant hereby acknowledging that Collins shall in no event be required to execute and deliver any such sublease which provides (on a per rentable square foot basis) for a higher base rent than the Base Rent under the Lease Agreement dated March 5, 1993, between Landlord and Collins (the "Collins Lease")). Such sublease shall contain Collins' agreement that (i) Collins shall not be permitted to control access to any portion of the Building by means of previously-existing security systems or practices, and (ii) Collins shall have no right to object to any construction activities taking place in or around the Building. At the request of Landlord, Tenant hereby agrees to execute a declaration in the form attached hereto as Exhibit C (the "Declaration") as incorporated herein by reference. Tenant's failure to execute the Declaration shall not affect the Commencement Date or the Lease Term, as same are determined by the terms of this Lease. (B) Extension Period. (i) Provided Tenant is not in default beyond the expiration of any applicable notice and cure period at the time of the exercise of the applicable Extension Option or thereafter (through and including the commencement date of the applicable Extension Period as herein defined), and provided that this Lease shall not theretofore have been terminated, Tenant shall have two (2) options (the "Extension Options") to extend the Expiration Date of the Lease Term, each for a period of five (5) consecutive years (individually, the "First Extension Period" and the "Second Extension Period", and collectively the "Extension Periods"), the First Extension Period commencing on the thirteenth (13th) anniversary of the Commencement Date and ending on the day preceding the eighteenth (18th) anniversary of the Commencement Date, and the Second Extension Period commencing on the eighteenth (18th) anniversary of the Commencement Date and ending on the day preceding the twenty-third (23rd) anniversary of the Commencement Date, subject to adjustment pursuant to the terms hereof. The Extension Periods shall be upon the same terms and conditions contained herein except that (A) the Rent payable in the Extension Periods shall be adjusted to equal one hundred percent (100%) of the then-prevailing fair market rental rate for the Premises (the "New Rental Rate"), and shall thereafter be subject to adjustment as provided in Section 3(B) hereof, (B) Tenant shall have the right to adjust the size of the Premises in accordance with Section 2(B)(ix) hereof, (C) Tenant shall have no option to extend the Expiration Date of the Lease Term beyond the last day of the Second Extension Period, and (D) Tenant shall have no right to exercise the Extension Option for the Second Extension Period unless Tenant has properly exercised the Extension Option for the First Extension Period. (ii) Tenant may exercise an Extension Option only by delivering binding written notice (the "Extension Option Notice") to Landlord of Tenant's election to exercise such Extension Option not later than twelve (12) months prior to the commencement of the applicable Extension Period. Landlord and Tenant agree to negotiate in good faith for a period of thirty (30) days to attempt to reach agreement on the New Rental Rate, promptly following delivery of Tenant's Extension Option Notice. In the event the parties are unable to agree on such New Rental Rate 2 6 within said thirty (30) day period, then Tenant's Extension Option Notice shall be deemed null and void, unless within ten (10) business days after the expiration of such thirty (30) day period Tenant agrees, by means of giving the Landlord written notice thereof (which notice shall name the Tenant's selected broker), to submit the determination of the fair market rental rate for the Premises to arbitration by brokers as set forth below. In the event Tenant shall agree to submit such determination to arbitration in the manner aforesaid, Landlord shall, within ten (10) business days after receipt of Tenant's written notice to submit such determination to arbitration, designate the broker appointed by it. (iii) Each broker shall render a separate written report, within thirty (30) days after appointment of Landlord's broker, of such broker's estimate of the then-prevailing fair market rental rate for the Premises as of the commencement of such Extension Period. If the values contained in the written reports differ by five percent (5%) or less of the greater of such values, the New Rental Rate shall be one hundred percent (100%) of the arithmetic average of such values. If the values contained in the written reports differ to a greater extent than set forth above, the brokers shall, within five (5) days after rendering their reports, promptly jointly appoint a third broker. If the two brokers so designated shall fail to agree upon the selection of a third broker within ten (10) days after the expiration of such 30-day period, then either party, upon written notice to the other, may request such appointment by the American Arbitration Association (or any organization successor thereto). The parties shall cooperate to expedite such appointment. Within twenty (20) days of his appointment, the third broker shall render a written report of his opinion of the value of the then-prevailing fair market rental rate for the Premises as of the commencement of the applicable Extension Period. One hundred percent (100%) of the arithmetic average of the values in the three (3) evaluation reports shall then be the New Rental Rate for the Extension Period; provided, however, that if the lowest or highest of the three (3) evaluations, or both, varies by more than ten (10%) from the middle evaluation, such evaluation or evaluations so varying shall be disregarded in computing said average. (iv) In the event the New Rental Rate has not been determined on or before the commencement of an Extension Period, the Rent payable by Tenant until such determination shall be deemed equal to the Rent payable by Tenant pursuant to Section 3(A) immediately prior to the commencement of such Extension Period (as the same may be adjusted hereunder); provided, however, within fifteen (15) days of such determination, Tenant shall pay Landlord the excess of (i) the initial monthly installments of monthly Rent calculated for such Extension Period, above (ii) the monthly installments of Rent actually paid by the Tenant, in respect of each month commencing on or after the commencement of such Extension Period but prior to such determination, or Landlord shall credit Tenant for any excess rent paid by Tenant if the rental rate has declined, and Tenant shall thereafter pay Rent for the Extension Period at the New Rental Rate (as the same may be increased in accordance with the terms hereof). (v) All valuations of the fair market rental rate of the Premises shall be in writing and shall be expressed in terms of an annual rent. Each broker's determination shall be based on all relevant factors affecting fair market rental rate, including, but not limited to, other terms of this Lease (excluding tenant concessions and/or construction allowances, but including the provision of free parking and the roof and signage rights granted hereunder), the fact that the determination is for a renewal, and the fact that the determination is for a renewal as of a future date. Each broker shall use as a basis for comparison the base and additional rent, abatements, construction allowances and other tenant concessions for lease renewals entered into for comparable space in the Fair Oaks/Fair Lakes submarket of Fairfax County, Virginia, within the period which commences twelve (12) months prior to the date of such determination, which leases shall commence at approximately the same time as the applicable Extension Period. (vi) Each broker appointed hereunder shall be a licensed commercial real estate broker in the Commonwealth of Virginia, and shall be qualified by experience and ability to appraise the fair market rental for the Premises. The party appointing each broker shall be obligated, promptly after receipt of the valuation report prepared by the broker appointed by such party, to deliver a copy of 3 7 such valuation report to the other party in the manner provided elsewhere in this Lease for the delivery of notices. If a third broker is appointed, the third broker shall be directed, at the time of his appointment, to deliver copies of his valuation report, promptly upon its completion, to Landlord and Tenant in the manner provided elsewhere in this Lease for the delivery of notices. The fees and other costs of each of the first two brokers shall be borne by the party appointing each such broker, with the fees and other costs of the third broker being shared equally by Landlord and Tenant; provided that, each broker shall (i) acknowledge that such broker's participation in the determination of the New Rental Rate shall not entitle such broker to a brokerage commission for the applicable Extension Period, and (ii) waive any lien rights it may have or claim against the Property in respect of the fees to be paid in connection with the determination of the New Rental Rate. (vii) It is understood that the New Rental Rate shall be the initial Rent for the applicable Extension Period (such Rent being subject thereafter to then-current market escalations and adjustments as determined pursuant to Section 3(B)), and that Tenant shall continue to pay all Additional Rent reserved under the Lease. (viii) Tenant's failure to timely deliver Tenant's Extension Option Notice with regard to an Extension Option shall render such Extension Option null and void, and of no further force or effect. (ix) Tenant shall have the right to delete from the Premises one (1) or more full floors of the Building, for either the Second Extension Period or the First and Second Extension Periods, subject to the following terms and conditions: (1) Tenant shall notify Landlord of its election to decrease the Premises within the Tenant's Extension Option Notice for the applicable Extension Period, and shall designate in such notice the number of floors which Tenant desires to delete from the Premises; (2) Tenant may not decrease the size of the Premises in either the First or Second Extension Period to less than one hundred sixty thousand six hundred sixty-one (160,661) rentable square feet; (3) Landlord shall designate the floors to be surrendered by Tenant pursuant to this Section 2(B)(ix) (the "Early Surrender Space"); provided that, the Early Surrender Space designated by Landlord shall result in the remaining Premises constituting a single contiguous space; (4) Landlord shall have no obligation to restore, nor shall Tenant have any right to regain, possession of any portion of the Early Surrender Space; (5) Tenant shall surrender possession of the Early Surrender Space not later than the last day of the Initial Term or First Extension Period, as the case may be, free and clear of all tenancies and occupancies, broom-clean and otherwise in accordance with all terms and conditions of this Lease applicable to the surrender of the Premises, as if such day were the Expiration Date (Tenant hereby acknowledging that such terms and conditions shall be independently applied to the Early Surrender Space); (6) Upon the surrender of the Early Surrender Space, the Rent and the Tenant's Proportionate Share (as herein defined) shall be recalculated to reflect the deletion of the Early Surrender Space; and (7) From and after the designation of the Early Surrender Space, Tenant shall have no right, power or authority to (i) assign any of the Tenant's interest in the Lease with respect to any portion of the Early Surrender Space, or to enter into any sublease or to permit any occupancy of all or any portion of the Early Surrender Space by any person or entity not 4 8 then in possession of all or a portion of the Early Surrender Space (other than the Tenant's employees), or (ii) to make or perform, or cause to be made or performed, any alteration, addition, improvement or modification in or to such Early Surrender Space. The Tenant further acknowledges and agrees that, notwithstanding anything contained in this Lease to the contrary, from and after the date of such designation, the Landlord shall have no obligation to rebuild or undertake major repairs of such Early Surrender Space in the event of any condemnation, fire or other casualty. 3. RENT. (A) Base Rent. Tenant shall pay for the use and occupancy of the Premises a base rental ("Rent") equal to the sum of the Phase I Rent and the Phase II Rent. The "Phase I Rent" shall mean the product of (i) the rentable area of the Phase I Premises multiplied by (ii) Fourteen Dollars ($14.00) per rentable square foot per year, payable in equal monthly installments. The "Phase II Rent" shall mean the product of (i) the rentable area of the Phase II Premises, multiplied by (ii) Fourteen Dollars ($14.00) per rentable square foot per year, payable in equal monthly installments. Rent shall be paid on the first day of each month in advance without demand, notice, deduction, offset, or counterclaim (except as may be otherwise expressly provided herein) during the Lease Term; provided that, (i) Phase I Rent shall commence to accrue on that date (the "Phase I Rent Commencement Date") which is the later of April 1, 1997 or the date which is the ninetieth (90th) day following the Commencement Date, and (ii) Phase II Rent shall commence to accrue on January 1, 1998 (the "Phase II Rent Commencement Date"). Rent for any period during the Lease Term which is less than one month shall be prorated on a daily basis, based on the monthly installment, and shall be payable in advance. Rent shall be payable in lawful money of the United States to Landlord at the address stated herein or to such other persons or at such other places as Landlord may designate in writing. If Tenant occupies the Premises prior to the Commencement Date, such occupancy shall be subject to all provisions hereof and shall not advance the last day of the Lease Term. Tenant and Tenant's Agents may enter upon the Premises at any time after Landlord tenders possession thereof to complete the Building Fit-Out (as defined in Exhibit B and including, but not limited to, the installation of telephone equipment and communications wiring and cabling, the placement of furniture and equipment and other work in preparation for occupancy), without advancing the Phase I or Phase II Rent Commencement Dates or otherwise triggering any obligation to pay Rent pursuant to this Section 3(A) or Additional Rent pursuant to Section 6(A). (B) Rent Schedule. Effective January 1, 1998, the Rent payable pursuant to Section 3(A) shall be increased to equal Three Million Five Hundred Four Thousand Five Hundred Forty-One Dollars ($3,504,541.00) per annum. On each anniversary of the Phase I Rent Commencement Date occurring after January 1, 1998 and prior to the end of the Initial Term (each an "Adjustment Date"), the Rent set forth in the preceding sentence shall be increased to reflect increases in the cost of living in accordance with the following procedure: (1) The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), U.S. City Average, All Items (1982-84=100) (herein referred to as the "Index"), as published by the U.S. Department of Labor, Bureau of Labor Statistics, which is published for the bimonthly reporting period ending most recently prior to the Adjustment Date (herein referred to as the "Adjustment Index"), shall be compared with the Index published for the same reporting period twelve (12) months prior thereto (herein referred to as the "Beginning Index"). If the Adjustment Index has changed from the Beginning Index, the percentage change between the Beginning Index and the Adjustment Index shall be determined. There shall be added to such percentage change 5 9 five (5) percentage points, and the resulting sum shall be referred to herein as the "Escalation Factor". For example, if the Adjustment Index is two percent (2%) higher than the Beginning Index, then the Escalation Factor for such adjustment shall equal seven percent (7%), and if the Adjustment Index is one percent (1%) lower than the Beginning Index, then the Escalation Factor for such adjustment shall equal four percent (4%). (2) The Escalation Factor determined in Section 3(B)(1) shall be multiplied by the Rent in effect immediately prior to such Adjustment Date (as such rent may have been escalated pursuant to the terms hereof) to arrive at the amount (the "Escalation Amount") of the increase in the Rent pursuant to this Section 3(B) for the period commencing with such Adjustment Date and ending on the day preceding the next Adjustment Date (each an "Adjustment Year"). In no event, however, shall any Escalation Amount for any Adjustment Year exceed two and six/tenths percent (2.6%) of the Rent in effect immediately prior to such Adjustment Date. (3) The Escalation Amount determined in Section 3(B)(2) shall, subject to the limitation set forth in the last sentence thereof, be added to the Rent in effect immediately prior to such Adjustment Date to arrive at the Rent payable for such newly commencing Adjustment Year. (4) In no event shall the Rent payable during any Adjustment Year be less than the Rent in effect immediately prior to the commencement of such Adjustment Year. (5) If the Index is changed so that a base year other than 1982-84 is used, the Index used herein shall be converted in accordance with the conversion factor published by the U.S. Department of Labor, Bureau of Labor Statistics. If the Index is discontinued or otherwise revised during the Lease Term, such other government index or computation with which the Index is replaced shall be used in order to obtain substantially the same result as would be obtained if the Index had not been discontinued or revised. (6) Promptly after the adjustment of the Rent is determined for each Adjustment Year, Landlord shall submit to Tenant a statement setting forth the Escalation Amount for such Adjustment Year and the computations by which it was determined. Since the actual increase in the Rent may not be determined until after the start of a new Adjustment Year, until the actual Escalation Amount is determined the Tenant shall continue to make monthly payments of Rent in the amount in effect immediately prior to the Adjustment Date. In such event, Landlord's statement shall, in addition to the actual Escalation Amount for such Adjustment Year and the computations by which it was determined, set forth the difference between the monthly Rent payments theretofore paid by Tenant for such Adjustment Year and the actual amount of Rent determined to be owing for the period for which such Rent has been paid (inclusive of the Escalation Amount). If the actual amount determined to be owing is greater than Tenant's payments for the same period, the deficiency shall be paid by Tenant together with the next monthly installment of Rent due at least fifteen (15) days after the amount of the deficiency is determined (but in all events not later than forty-five (45) days after the amount of such deficiency is determined). The Rent payable for the First and Second Extension Periods shall escalate on each anniversary of the Phase I Rent Commencement Date occurring during such Extension Periods in accordance with the then-current market escalation formula (such current market escalation formula to be determined by the brokers establishing the New Rental Rate, in accordance with the procedure set forth in Section 2(B) (except that the determination of the third broker, if any, shall be controlling as to the constituent components of such current market escalation formula, if the 6 10 brokers appointed by the parties shall fail to agree on such components), at the time the New Rental Rate is determined). (C) Place of Payment. Rent, Additional Rent and other sums owed by Tenant shall be paid to Landlord at the offices of Landlord's property manager at 1115 30th Street, N.W., Washington, D.C. 20007, or at such place as Landlord may designate from time to time in writing. (D) Late Charge. Tenant hereby acknowledges that late payment by Tenant of Rent, Additional Rent or other sums due hereunder will cause Landlord to incur costs not contemplated by this Lease. Therefore, if any installment of Rent, Additional Rent or any other sum due from Tenant shall not be received by Landlord when such amount is due, Tenant shall pay to Landlord a late charge of four percent (4%) of such overdue amount. Additionally, Tenant shall pay to Landlord the Default Rate (as set forth in Section 29) on all sums in default. Acceptance of such late charge and/or the Default Rate by Landlord shall in no event constitute a waiver of Tenant's default with respect to such overdue amount, or prevent Landlord from exercising any other right or remedy available to Landlord. Landlord agrees to waive the imposition of such late charge and interest on one (1) occasion in any twelve (12) month period provided that no such late charge waiver has been granted or exercised in the preceding twelve (12) months, and the overdue payment is paid within five (5) business days after notice from Landlord that the payment was not paid when due. (E) Receipt. The Phase I Rent for the first month of the Lease Term will be paid by Tenant on the Commencement Date. (F) Intentionally Omitted. 4. PERMITTED USE. Tenant covenants that the Premises will be used solely for general and executive office purposes in accordance with the terms hereof (the "Permitted Use") and for no other purpose whatsoever. "General and executive office purposes" shall be deemed to be limited to general office use (which shall be deemed to include (a) laser and other types of printing customarily employed in first-class business offices; (b) data processing and word processing services; (c) telephone, telecopier and other business communications systems; (d) storage of files, papers, microfilm and other storage media as customarily performed in first-class business offices; (e) video display, screening and media rooms; (f) conference rooms; (g) classrooms for training and presentations; (h) executive placement and travel agency services; and (i) a messenger service), and the following incidental and ancillary uses (each an "Ancillary Use" and collectively, "Ancillary Uses"): (i) one or more cafeterias, dining rooms and warming pantries (each of which may include facilities for the refrigeration, preparation, cooking and service of food); (ii) the sale, by vending machines, of items commonly sold in office vending machines, including soft drinks, food, candy and cigarettes; (iii) an exercise facility; (iv) shower and locker room facilities; and (v) in portions of the Premises situated on the ground floor and/or lower level of the Building, food service operations and other retail uses approved by Landlord (such consent not to be unreasonably withheld or delayed, but such consent may be made subject to Tenant's agreement to such reasonable conditions and restrictions as Landlord may require (including, but not limited to, those set forth on the attached Exhibit H) . All such Ancillary Uses shall be subject to the terms of this Lease and the applicable terms of the attached Exhibit H. Nothing herein contained shall be deemed to grant Tenant the exclusive right to engage in such Ancillary Uses at any time when Tenant leases less than all of the Building and Tenant acknowledges that it has received no written or oral inducements from Landlord or any of Landlord's 7 11 representatives that Tenant will be granted any such exclusive rights. Tenant shall not use, store or dispose of any materials posing a health or environmental hazard in or about the Building or the Property; provided that, the foregoing shall not be deemed to prohibit the storage and use of normal and reasonable quantities (not for resale) of ordinary and customary office and cleaning supplies utilized in first-class offices (collectively, "Permitted Materials"). All such storage and use covered by the preceding sentence shall be made in accordance with all applicable Federal, state and local laws, ordinances, rules and regulations, as the same may be amended from time to time (Tenant hereby expressly agreeing to obtain all required permits and pay any and all fees and provide any testing required by any governmental agency in connection therewith), and shall be subject to the following further conditions: (i) in all events Tenant shall, upon the expiration or sooner termination of this Lease, promptly remove all hazardous, toxic, radioactive and/or carcinogenic substances, pollutants, contaminants and/or materials (including, but not limited to, any storage tanks or containers for the same) brought into or upon the Property (including , but not limited to, the Premises) by Tenant or any of Tenant's Agents or any third party for or on behalf of Tenant or any of Tenant's Agents; and (ii) notwithstanding any provision hereof to the contrary, in the event that any applicable Federal, state or local law, ordinance, order, rule, regulation or other restriction shall, at any time during the Term of this Lease or any renewal or extension hereof, (a) require that Tenant discontinue the use or storage, or otherwise restrict or regulate the use, of any hazardous, toxic, radioactive and/or carcinogenic substances, pollutants, contaminants and/or materials (including, but not limited to, any storage tanks or containers for the same) brought upon the Property (including, but not limited to, the Premises) by or on behalf of Tenant or Tenant's Agents, or (b) shall require that Landlord or Tenant or any of Tenant's Agents remediate, clean-up or abate the effects of past use, storage or disposal of substances brought into or upon the Property (including, but not limited to, the Premises) by Tenant or any of Tenant's Agents or any third party for or on behalf of Tenant or any of Tenant's Agents, Tenant shall, at Tenant's sole expense, (1) where required, immediately remove such substances (to the extent brought into or upon the Property (including, but not limited to, the Premises) by Tenant or any of Tenant's Agents or any third party for or on behalf of Tenant or any of Tenant's Agents) from the Property (including, but not limited to, the Premises); (2) promptly comply with all applicable laws, ordinances, order, rules, regulations and restrictions; and (3) promptly remediate, clean-up and abate the effects of past use, storage and/or disposal by Tenant or any of Tenant's Agents by any third party on behalf of Tenant or any of Tenant's Agents as required by applicable laws, ordinances, orders, rules, regulations and restrictions. (iii) Tenant shall defend, indemnify and hold Landlord and the Property harmless from and against any claims, costs, damage, expense and liability which may be asserted against Landlord and/or the Property on account of such storage, use, disposal, remediation, clean-up and/or abatement by Tenant or any of Tenant's Agents or by any third party on behalf of Tenant or any of Tenant's Agents. Landlord shall bear the cost of removing from the Property any hazardous materials that were not introduced by Tenant or any of Tenant's Agents and that are hereafter reasonably required to be removed to avoid a health or environmental hazard. Tenant further covenants that the Premises will not be used or occupied for any unlawful purposes. Tenant agrees to and shall use the Premises solely for the purpose of conducting the Permitted Use and for no other business or purpose. Tenant shall not commit or allow to be committed any waste upon the Premises, or any public or private nuisance, or, at any time when Tenant leases less than the entire Building, any other act or thing which disturbs the quiet enjoyment of any other tenant in the Property. 5. EXPENSES; SERVICES. 8 12 (A) Taxes. Landlord shall pay all taxes applicable to the Property which are payable during the Lease Term. As used herein, the term "taxes" shall mean real estate taxes, assessments (whether general or special), sewer rents, rates and charges, transit and other special taxing district taxes, taxes based upon the receipt of Rent or other payments hereunder which are in substitution for, or in addition to, real estates taxes, and any other federal, state or local governmental charge, general, special, ordinary or extraordinary (but not including income or franchise taxes, inheritance, estate or gift taxes, net profit taxes or any other taxes imposed upon or measured by Landlord's net income or profits), which may now or hereafter be levied, assessed or imposed against the Property or Premises (collectively, "Taxes"). Additionally, Landlord shall have no obligation to protest Taxes, but if Landlord does protest Taxes, the reasonable cost of such protest shall also be deemed Taxes. In the event that Landlord elects not to protest Taxes, Tenant shall have the right to challenge or appeal such assessment in Landlord's name but at Tenant's sole expense, and Landlord shall cooperate in such challenge or appeal (including executing such forms as may be reasonably necessary to institute and prosecute such action); provided that, (i) Tenant shall have no right to challenge or appeal any Tax assessment during the last two (2) years of the Lease Term, and (ii) in the event Tenant then leases less than all of the Building, Tenant shall pay one hundred percent (100%) of any increase in Taxes resulting from any challenge or appeal of Taxes filed by Tenant. (B) Insurance. Landlord shall provide insurance for the Property as set forth in Section 9(A) ("Insurance"). So long as Principal Mutual Life Insurance Company ("PMLIC") or another entity owned or controlled by PMLIC or under common control with PMLIC, in whole or part, is the Landlord hereunder, Landlord shall have the right to self-insure (in which event, Operating Expenses shall include the reasonable costs which would have been incurred if Landlord had obtained the insurance set forth in Section 9(A) from a third party, subject to the limitation set forth in Section 5(G)). (C) Services. (1) Subject to the terms hereof, continually through the Lease Term, Landlord will furnish to the Premises heating, air-conditioning and ventilation during the seasons in which they are required, in accordance with the standards set forth in Exhibit F attached hereto. Continually through the Lease Term, Landlord will provide: electricity; water; elevator service; exterior and interior window-cleaning service; and, in accordance with the standards set forth in Exhibit G attached hereto, janitorial service after 6:00 p.m. on Monday through Friday only (excluding holidays). Upon Tenant's request, Landlord agrees to amend Exhibit G from time to time to incorporate services which are commensurate with services furnished in other first-class office buildings in the Fair Oaks/Fair Lakes submarket of Fairfax County, Virginia. The hours of operation of the Building will be 8:00 a.m. to 7:00 p.m. on Monday through Friday (except holidays) and 9:00 a.m. to 2:00 p.m. on Saturday (except holidays) and such additional hours, if any, as Landlord and Tenant from time to time determine; provided that, at any time Tenant does not lease the entire Building, Tenant's consent shall not be required for any expansion of the hours of operation of the Building which is consistent with the hours of operation for other first-class office buildings in the Fair Oaks/Fair Lakes submarket of Fairfax County, Virginia. Tenant shall pay for after-hours HVAC service a reasonable charge reasonably established by Landlord from time to time to compensate Landlord for the reasonably estimated incremental wear on the Building's HVAC system resulting from such after-hours usage (it being understood that all personnel, electricity, water and maintenance costs relating to both scheduled and after-hours HVAC service are being included in the Operating Expenses of the Building); provided that, for any period in which Tenant does not lease the entire Building, such charge shall also include the 9 13 reasonable cost of personnel, electricity, water and maintenance charges incurred as a result of such after-hours HVAC service (and such cost shall be excluded from Operating Expenses of the Building). Additionally, at such times as Tenant does not lease the entire Building, Landlord shall also have the right to require a separate meter be installed to meter Tenant's utility usage within the Premises, with the cost of such meter to be borne by Landlord. In such event, Tenant shall pay for such utility usage in a timely manner to either Landlord or directly to the utility if required by Landlord, and there shall be an equitable adjustment of Operating Expenses to reflect such separate metering. As used in this Section, the term "holidays" shall mean New Year's Day, Presidents Day, Martin Luther King Jr.'s Birthday (in even-numbered years only), Memorial Day, Independence Day, Labor Day, Columbus Day (in odd-numbered years only), Thanksgiving Day, the day after Thanksgiving, and Christmas, as such list of holidays may be modified by Tenant from time to time; provided that, at such time as Tenant leases less than all of the Building, Tenant shall have no further right to modify such list of holidays, and Landlord shall have the right to modify such list of holidays to conform to the building holidays generally recognized by first-class buildings in the Fair Oaks/Fair Lakes submarket of Fairfax County, Virginia. Subject to the terms hereof, at least two (2) elevators in the Building shall be in service at all times. (2) In the event of (i) any interruption of essential utilities or services due to Landlord's gross negligence or willful misconduct or a failure of the base Building HVAC System to meet the HVAC specifications set forth on Exhibit F, which interruption or failure continues for more than two (2) consecutive business days, or (ii) any interruption of essential utilities or services not due to Landlord's gross negligence or willful misconduct which continues for more than five (5) consecutive business days, then, provided such interruption or failure shall render a material portion of the Premises untenantable, all Rent and Additional Rent payable hereunder with respect to such portion of the Premises shall thereafter be abated until such portion of the Premises is tenantable. Landlord shall proceed with due diligence to remedy any such interruption as promptly as reasonably feasible. (3) Throughout the Lease Term, the Building shall be managed and operated in a manner commensurate with the standards prevailing for other first-class office buildings of comparable age, equipment and facilities in the Fair Oaks/Fair Lakes sub-market of Fairfax County, Virginia (such standard being referred to herein as "first-class"). (4) Landlord shall not employ any cleaning contractor for the Building without Tenant's prior written approval (Tenant hereby agreeing not to unreasonably withhold, condition or delay such consent). In the event Tenant determines that the janitorial services being furnished by Landlord are unsatisfactory, in Tenant's reasonable judgment, Tenant shall deliver written notice to Landlord specifying the manner in which the services are deemed by Tenant to be deficient. If the deficiencies are not, in Tenant's reasonable judgment, substantially corrected during the next succeeding thirty (30) days after delivery of such deficiency notice, then Tenant may deliver a further notice to Landlord advising Landlord of such fact and Landlord shall terminate the contract for janitorial services to the Building. Promptly thereafter, Landlord shall enter into a new contract for janitorial services to the Building with a contractor approved by Tenant (Tenant hereby agreeing not to unreasonably withhold, condition or delay such approval). (5) It is acknowledged that the initial management agent for the Building will be Trammell Crow Real Estate Services, Inc. ("TC"). Landlord shall not employ any other management agent for the Building who is not, in Landlord's reasonable discretion, a first-class property management agent. In the event Tenant determines that the manager of the Building (whether TC or any other manager) is not operating the Building in a first class manner, in Tenant's reasonable judgment, then Tenant may deliver written notice to Landlord specifying the manner in which the operation of the Building is deemed deficient. Landlord agrees to consider, in good faith, any bona fide complaint Tenant may have with regard to the managing agent of the Property and, to the extent Landlord in its reasonable business judgment agrees with Tenant's complaint, Landlord 10 14 shall institute reasonable measures to cure such complaint. (6) Landlord shall not adopt or materially modify an annual operating budget for the Building without first reviewing said budget with Tenant. Landlord agrees to consult with Tenant at Tenant's request from time to time about the services being furnished hereunder to the Building. In the event Tenant at any time requests that Landlord adjust (either to increase or to decrease) the level of services being furnished to the Property, Landlord agrees to confer with Tenant about such request and to make any reasonable adjustment requested by Tenant that (i) does not materially impair the overall operation of the Building, (ii) does not prohibit Landlord from carrying out sound maintenance practices in keeping with industry standards for comparable properties, and (iii) does not otherwise adversely affect the Building or Property or the value thereof; provided that, (x) Tenant shall have no right to decrease the level of services to be provided to the portions of the Property excluding the Premises if Tenant is then leasing less than all of the Building, and (y) if Tenant is leasing less than all of the Building, Tenant shall pay all costs and expenses associated with any increase in services (whether by addition of new services or increase in the level of existing services, any capital improvement costs associated therewith being amortized over the shorter of the useful life of such capital improvement(s) or the period constituting the remainder of the Lease Term for which Tenant is obligated, with interest thereon at the Prime Rate immediately prior to such costs being incurred), if and then only to the extent, Landlord reasonably determines (and so informs Tenant prior to implementing the new or increased level of service) that the level of services requested by Tenant exceeds the level of services commonly provided in other first-class office buildings in the Fair Oaks/Fair Lakes submarket of Fairfax County, Virginia. (7) Tenant shall have the right to participate in any discussions or communications between Landlord and the local electric power company concerning the designation of an electricity rate schedule for the Building, and Landlord agrees to use reasonable efforts to provide Tenant reasonable prior notice of any planned meeting between Landlord and power company representatives to discuss such issue. (D) Utilities. Except for utilities for which Tenant contracts directly, Landlord shall pay all utility bills incurred for water, gas, electricity, fuel, light, heat and power. Except as otherwise set forth in Section 5(C)(2), Landlord shall not be liable for any failure to furnish, or for any loss, injury or damage caused by or resulting from any variation, interruption or failure of utilities or services. (E) Compliance with Laws. (1) Tenant, at Tenant's sole expense, shall comply with all laws, rules, orders, ordinances, directions, regulations and requirements of federal, state, county, and municipal authorities now in force or which may hereafter be in force, which shall impose any duty upon Landlord or Tenant with respect to Tenant's particular use, occupancy or alteration of the Premises (as distinct from office use generally). Without limiting the foregoing, and notwithstanding anything herein contained to the contrary, Tenant shall be solely responsible for obtaining and maintaining all necessary governmental and quasi-governmental approvals, consents, licenses and permits (Tenant hereby agreeing to provide copies thereof to Landlord upon receipt) for all Ancillary Uses, and conducting such Ancillary Uses in full compliance with all applicable laws, codes and regulations at all times (including, but not limited to, the requirements of any board of fire underwriters or other similar body now or hereafter constituted, and health and safety codes). (2) Landlord agrees to comply with all laws, rules, orders, ordinances, directions, regulations and requirements of federal, state, county, and municipal authorities now in force or which may hereafter be in force and applicable to the Property, excluding, however, any such law, rule, order, ordinance, direction, regulation or requirement which shall impose any duty 11 15 upon Landlord or Tenant with respect to Tenant's particular use, occupancy or alteration of the Premises (as distinct from office use generally); provided that, (i) Landlord shall be entitled to utilize any "grandfathering" or other exclusion or exception from compliance which may be lawfully available, (ii) Landlord shall have no obligation to cause any area of or equipment in the Premises (or portion of either), which Tenant intends to alter, modify, improve, demolish or remove as part of the Building Fit-Out, to comply with such laws, rules, orders, ordinances, directions, regulations or requirements, and (iii) Tenant shall be solely responsible for compliance with all laws, rules, orders, ordinances, directions, regulations and requirements pertaining to the Ancillary Uses. Except to the extent incurred in connection with the performance of the Landlord's Work or incurred in order to cure a violation of law which is required to be corrected prior to the Commencement Date, all costs, expenses and fees (including, but not limited to, reasonable attorneys' and consultants' fees) incurred in connection with the performance of Landlord's obligations pursuant to this Section 5(E)(2) shall be included in Operating Expenses. (F) Condition of Premises. Notwithstanding anything to the contrary contained herein, Tenant shall keep, maintain and preserve the Premises in a first class condition at all times except for ordinary wear and tear, and except for damage or destruction due to casualty or condemnation which Landlord is required to repair; provided that, this sentence shall not be deemed to require or authorize Tenant to perform any repairs or alterations which are Landlord's obligation hereunder. Except as otherwise set forth herein, Landlord agrees to maintain and repair the Building in accordance with Section 13 hereof. (G) Operating Expenses Defined. Operating Expenses shall mean all costs and expenses incurred by Landlord in connection with the maintenance, repair, management and operation of the Property (including, but not limited to, the provision of the services required to be provided by Landlord hereunder), determined in accordance with sound accounting principles prevailing in the insurance and real estate industries, consistently applied, including, but not limited to, the following: (a) electricity, gas, water, sewer and other utility charges; (b) commercially reasonably premiums and other charges for insurance (including, but not limited to, premiums for loss of rents insurance); (c) management fees incurred in the management of the Property (not to exceed the fair market value of the goods and services provided in exchange therefor, and, during the first (1st) three (3) years of the Initial Term, not to exceed two percent (2%) of gross aggregate Rent and Additional Rent due hereunder); (d) costs incurred in connection with service and maintenance contracts; (e) maintenance and repair expenses (including, but not limited to, landscaping and repairs and maintenance to the Property); (f) amortization (calculated over the useful life of the improvement, with interest at the Prime Rate immediately prior to Landlord incurring such capital expenditures) for capital expenditures made by Landlord that are (i) required in order to comply with changes in laws (exclusive of capital improvements to be performed by Landlord pursuant to Exhibits B-2 and/or B-3), or (ii) reasonably expected to result in a net decrease in Operating Expenses; (g) salaries, wages, benefits and other expenses of Building personnel (except as excluded below); (h) legal fees (except as excluded below), administrative expenses and accounting fees (except as excluded below); (i) costs of any service not provided to the Property on the Commencement Date but thereafter provided by Landlord in the prudent management of the Property; (j) charges for janitorial, char and cleaning services and supplies furnished to the Property; and (k) any other expense reasonably incurred by Landlord in maintaining, repairing, managing or operating the Property. Operating Expenses shall not include (a) interest and amortization of mortgages or any other encumbrances or debt; (b) ground rent; (c) depreciation of the Property, any equipment (other than personal property utilized in the operation, maintenance, management or repair of the Property), or any other improvements; (d) any capital expenditures (other than those permitted above); (e) legal fees and 12 16 all other costs and expenses incurred in disputes with any lenders or ground lessors, or in connection with the sale or financing of all or any part of the Property or Landlord's interest therein; (f) salaries, wages, fringe benefits or other compensation paid or provided to executives of Landlord or any personnel above the level of building manager (except to the extent of their direct involvement in the management of the Building, Landlord and Tenant hereby confirming their intent that Operating Expenses shall exclude all salaries, wages and fringe benefits or other compensation paid to executives or other personnel to the extent attributable to the performance of duties above the level of building manager); (g) the cost of any goods or services purchased from an individual or entity which is a parent, subsidiary or affiliate which controls, is controlled by, or is under common control with, Landlord to the extent such cost exceeds the cost that would be incurred in an arm's-length transaction with an unrelated party; (h) any cost to the extent reimbursed by the proceeds of insurance, condemnation award, refund, credit or warranty; (i) legal and other costs (including the prepayment of any indebtedness) incurred in connection with any mortgaging, financing, refinancing, or sale of the Property or entering into or modifying any ground lease; (j) original construction costs for the Property; (k) payments for equipment rented under long-term leases which would constitute capital expenditures if such equipment were purchased (except to the extent the same would constitute a capital expenditure permitted to be included in Operating Expenses pursuant to this Section 5); (l) any fines or penalties incurred as a result of a violation by Landlord of any legal requirements or any of its obligations and duties hereunder (except to the extent caused by Tenant or any of Tenant's Agents); (m) interest or penalties arising by reason of Landlord's failure to pay any Operating Expenses when due (except to the extent caused by Tenant or any of Tenant's Agents); (n) reserves for replacements or repairs; (o) accounting fees not incurred in connection with the operation and management of the Property or the preparation of any statements required under this Lease; (p) the cost of any personnel, materials or services shared by the Building and any other buildings owned or operated by Landlord, to the extent reasonably allocable to such other buildings; (q) any cost, expense or fee incurred for any item included in Operating Expenses (other than insurance premiums, utility charges, and goods and services specifically purchased at Tenant's request), to the extent such cost, expense or fee exceeds the range of fair market value for the goods or services in question; and (r) at any time that Tenant is not leasing the entire Building, the cost of any service to the extent furnished without charge to any other tenant of the Building to a materially greater extent than is furnished to the Premises. (H) Tenant's Audit Right. (1) In the event Tenant desires to review or audit any annual statement of actual Operating Expenses and/or Taxes, Tenant shall notify Landlord in writing within one hundred eighty (180) days of receiving such statement (failing which, such statement shall be deemed conclusive). Not earlier than twenty (20) days, nor later than one hundred twenty (120) days after such notice is delivered to Landlord, Tenant shall have the right to inspect and review, or to cause an independent, certified public accountant employed by Tenant to inspect and audit Landlord's books and records relating to the calendar year to which the statement relates, at the Washington, D.C. metropolitan area office of Landlord's managing agent during regular business hours. In the event Tenant elects to employ a certified public accountant for purposes of conducting such inspection and review, such certified public account shall have at least five (5) years experience as a certified public accountant; provided that, no such certified public accountant shall be compensated on a contingency fee basis. (2) Tenant shall provide Landlord not less than twenty (20) days notice of the date on which Tenant or Tenant's accountant desires to examine Landlord's books and records during regular business hours. Prior to the performance of such examination, Tenant and, if applicable, Tenant's certified public accountant each shall execute a reasonable form of non-disclosure agreement providing that the information disclosed in connection with such examination be kept confidential. Tenant shall cause the results of such examination to be communicated in writing to Landlord. 13 17 (3) If Landlord does not agree with the examination results submitted by Tenant, Landlord's accountant and Tenant (or, if applicable, Tenant's certified public accountant) shall endeavor to resolve any differences. If such parties are unable to resolve all differences within sixty (60) days, Landlord and Tenant shall select an independent, certified public accountant who satisfies the criteria set forth above (but failing agreement, either party may request such appointment be made by the American Arbitration Association or any recognized successor thereto) to resolve the same. Such jointly selected accountant, after executing a reasonable form of non-disclosure agreement, shall make an independent audit of the unresolved issue(s), the results of which shall be binding on Landlord and Tenant. (4) If such independent audit shows that the amounts paid by Tenant to Landlord on account of Operating Expenses and/or Taxes exceeded the amounts to which Landlord was entitled hereunder, Landlord shall promptly credit the amount of such excess against Tenant's next due Rent payment. If such audit shows that the amounts paid by Tenant to Landlord on account of Operating Expenses and/or Taxes were less than the amounts to which Landlord was entitled hereunder, Tenant shall pay to Landlord the amount of such shortfall within thirty (30) days of the date Tenant is notified of the error. Except as otherwise expressly provided below, all costs and expenses of Tenant's audit (including, without limitation, reasonable copying charges) shall be paid by Tenant. In addition, Tenant shall be responsible for the costs incurred in connection with the third accountant (including, without limitation, reasonable copying charges) unless such audit discloses that the amounts paid by Tenant to Landlord for the year in question exceeded the amounts to which Landlord was entitled by more than three percent (3%), in which event Landlord shall promptly reimburse Tenant for the reasonable costs and expenses incurred in connection with Tenant's audit and such third accountant. Landlord shall pay any accountant employed by it to act as Landlord's accountant. 6. ADDITIONAL RENT. (A) It is understood that the Rent set forth in Section 3(A) (as adjusted pursuant to Section 3(B)) was negotiated with the agreement that Tenant will pay, in addition to the Rent specified in Section 3(A) (as adjusted pursuant to Section 3(B)), Tenant's Proportionate Share (as herein defined) of all Taxes and Operating Expenses pertaining to the Property from and after the Phase II Rent Commencement Date. As used herein, the term "Tenant's Proportionate Share" shall mean the ratio of the total rentable square footage of Premises (as the same may be decreased pursuant to Section 2(B)(ix)) to the total rentable square footage of the Building (as such amounts are calculated pursuant to the attached Exhibit A-14) (the parties hereby acknowledging that, until an adjustment to the rentable area of the Premises pursuant to Section 2(B)(ix), Tenant's Proportionate Share shall mean one hundred percent (100%)). On or before January 1st of each calendar year commencing during the Lease Term or as soon as practicable thereafter, Landlord shall furnish to Tenant a reasonable estimate of the Taxes and Operating Expenses for the calendar year in question. The estimate, and each annual statement of Taxes and Operating Expenses, shall include a line item expense for each category of Operating Expenses and Taxes. Tenant shall pay to Landlord the Tenant's Proportionate Share of the estimate of such Taxes and Operating Expenses in equal monthly installments at the same time and place as Rent is to be paid. Landlord will furnish a statement of the actual Taxes and Operating Expenses for each year during the Lease Term no later than April 1st of the following year. In the event that Landlord is, for any reason, unable to furnish the statement of the actual Taxes and Operating Expenses within the time specified above, Landlord will furnish such statement as soon thereafter as practicable (but no later than May 1st of each year) and such statement shall have the same force and effect as if delivered within the time specified above. Tenant will pay to Landlord any excess of the Tenant's Proportionate Share of the total amount of Taxes and Operating Expenses for each year above the estimated payments made by Tenant with respect thereto, as shown by such statement, within thirty (30) days of receipt of such statement. Landlord shall refund to Tenant any excess (as shown by such statement) of the estimated 14 18 payments by Tenant above the Tenant's Proportionate Share of the total Taxes and Operating Expenses within thirty (30) days of the date of the statement; provided that, Landlord's obligation to refund any such excess shall be suspended for the duration of any default by Tenant hereunder. Landlord will keep books and records showing the Taxes and Operating Expenses in accordance with sound accounting principles prevailing in the real estate and insurance industries, consistently applied. (B) For the period commencing on the Phase I Rent Commencement Date, or any earlier date (the "Phase I Early Operation Date") on which Tenant commences to operate its business in the Premises, or subleases or otherwise utilizes all or a portion of the Phase I Premises for purposes other than the Building Fit-Out, and ending on December 31st of the calendar year in which the Phase I Rent Commencement Date shall occur, Tenant shall pay to Landlord the product (the "1997 Phase I Tax and Operating Expense Payment") of (i) the rentable area of the Phase I Premises, multiplied by (ii) Six and fifty/one hundredths Dollars ($6.50) per annum (pro-rated on a daily basis according to the number of days in such calendar year which are included in the Lease Term), in equal monthly installments; provided that, in the event the Phase I Early Operation Date shall occur prior to the Phase I Rent Commencement Date, the 1997 Phase I Tax and Operating Expense Payment allocable to the period commencing on such Phase I Early Operation Date and ending on the day preceding the Phase I Rent Commencement Date shall be calculated (subject to daily pro-ration as aforesaid, if applicable) by multiplying (i) the sum of the entire rentable area of each floor of the Phase I Premises on which Tenant has commenced to operate its business, or has subleased or otherwise utilized all or a portion of the floor for purposes other than the Building Fit-Out (whether or not such entire floor is so utilized), by (ii) Six and fifty/one hundredths Dollars ($6.50). Landlord and Tenant hereby acknowledge that the foregoing amounts are based on the parties' agreed estimate that the Taxes and Operating Expenses for said calendar year will be approximately Six and fifty/one hundred Dollars ($6.50) per rentable square foot. (C) In the event Tenant shall, prior to January 1, 1998, commence to operate its business in the Phase II Premises or shall sublease or otherwise utilize all or a portion of the Phase II Premises for purposes other than the Building Fit-Out ("Early Use"), Tenant shall, in addition to the 1997 Phase I Tax and Operating Expense Payment, pay to Landlord, with respect to the period commencing on the first (1st) day of such Early Use and ending on December 31, 1997, the product (the "1997 Phase II Tax and Operating Expense Payment") equal (subject to daily pro-ration as aforesaid, if applicable) to (i) the sum of the entire rentable area of each floor of the Phase II Premises on which Tenant has commenced such Early Use (whether or not such entire floor is being utilized for such Early Use), multiplied by (ii) Six and fifty/one hundredths Dollars ($6.50) per annum. Landlord and Tenant hereby acknowledge that the foregoing amount is based on the parties' agreed estimate that the Taxes and Operating Expenses for said calendar year will be approximately Six and fifty/one hundred Dollars ($6.50) per rentable square foot. (D) Actual Taxes and Operating Expenses for calendar year 1997 shall be reconciled against estimated payment(s) pursuant to the foregoing Section 6(B) and/or 6(C) in accordance with the procedure set forth in Section 6(A). (E) In addition to the foregoing, Tenant shall reimburse Landlord upon demand for all reasonable costs, expenses and fees incurred by or on behalf of Landlord as a result of the Building Fit-Out during any period commencing after the Phase I Rent Commencement Date (including, but not limited to, any increase in Building utility costs). (F) Any and all payments (other than Rent) required to be made by Tenant pursuant to this Lease shall be deemed additional Rent ("Additional Rent"). Landlord shall have the same rights and remedies for said payments as for Rent. 15 19 (G) In the event that, at any time when Tenant is leasing less than the entire Building, Landlord furnishes any utility or service which is included in Operating Expenses to less than ninety-five percent (95%) of the rentable area of the Property because (i) the average occupancy of the Property for the year in question was not equal to or greater than ninety-five percent (95%), (ii) such utility or service is not required by or provided to one or more of the tenants of the Property, or (iii) any tenant occupant is itself obtaining or providing any such utility or services, then Operating Expenses for such year shall be adjusted to include all additional costs, expenses and disbursements that Landlord reasonably determines would have been incurred if Landlord had provided such utilities and services to all rentable areas of the Property. The intent of this section is to ensure that the reimbursement of Operating Expenses is fairly and equitably allocated among the tenants receiving the utilities and services in question. 7. SORTING AND SEPARATION OF REFUSE AND TRASH. (A) Tenant covenants and agrees, at Tenant's sole cost and expense, to comply with all applicable present and future laws, orders and regulations of all state, federal, municipal and local governments, departments, commissions and boards regarding the collection, sorting, separation and recycling of waste products, garbage, refuse and trash. Without limiting the generality of the foregoing, Tenant shall prepare and submit for Landlord's approval (not to be unreasonably withheld, conditioned or delayed) a recycling plan for the Building which complies with applicable law, and Tenant shall comply with the approved recycling plan. Neither Landlord's review of the Tenant's recycling plan nor any coordination therewith by Landlord shall constitute a warranty by Landlord regarding the compliance of such recycling plan with applicable laws, regulations, codes or governmental or quasi-governmental requirements, nor shall Landlord have any liability with regard to such recycling plan. Tenant shall sort and separate waste products, garbage, refuge and trash into such categories as provided by law. Each separately sorted category of waste products, garbage, refuse and trash shall be placed in separate receptacles provided by Tenant and reasonably approved by the Landlord. Such separate receptacles may, at Landlord's option, be removed from the Premises in accordance with a collection schedule prescribed by law or by Landlord. (B) Landlord reserves the right to refuse to collect or accept from Tenant any waste products, garbage, refuse or trash that is not separated and sorted as required by law, and to require Tenant to arrange for such collection at Tenant's sole cost and expense, utilizing a contractor satisfactory to Landlord. Tenant shall pay all costs, expenses, fines, penalties or damages that may be imposed on Landlord or Tenant by reason of Tenant's failure to comply with the provisions of this Section 7. Tenant, at Tenant's sole cost and expense, shall indemnify, defend and hold Landlord harmless (including reasonable legal fees and expenses) from and against any actions, claims and suits arising from such noncompliance, utilizing counsel reasonably satisfactory to Landlord. 8. HAZARDOUS SUBSTANCES. (A) The term "Hazardous Substances" shall mean pollutants, contaminants, toxic or hazardous wastes, chemicals or materials, or any other substances, the use, storage, manufacture, disposal and/or the removal of which is required or the use of which is restricted, prohibited or penalized by any "Environmental Law", which term shall mean any federal, state or local law, regulation, order, ordinance or other statute of a governmental or quasi-governmental authority relating to pollution or protection of the environment. Tenant hereby agrees that: (A) no activity will be conducted by Tenant or any of Tenant's Agents on the Property or Premises that will produce, utilize or otherwise involve the manufacture, use, storage or disposal of any Hazardous Substances, except for those Permitted Materials permitted pursuant to Section 4 hereof; (B) no portion of the Property or the Premises will be used by Tenant or any of Tenant's Agents as a landfill or a dump; (C) neither Tenant nor any of Tenant's Agents will install any underground tanks of any type; (D) neither Tenant nor any of Tenant's Agents will cause or authorize any 16 20 surface or subsurface conditions to exist or come into existence that constitute, or with the passage of time may constitute a public or private nuisance; and (E) neither Tenant nor any of Tenant's Agents will cause or authorize any Hazardous Substances to be brought onto the Property or Premises, except for the Permitted Materials described above, and if so brought or found located thereon, the same shall be immediately removed, with proper disposal, and all required cleanup procedures shall be diligently undertaken by Tenant pursuant to all Environmental Laws. Landlord or Landlord's representatives shall have the right (after reasonable advance notice except in the event of an emergency (in which event no notice shall be required)), but not the obligation, to enter the Premises for the purpose of inspecting the storage, use and disposal of Permitted Materials to verify compliance with all Environmental Laws. Should it be determined, in Landlord's reasonable opinion, that Permitted Materials are being improperly stored, used, or disposed of, then Tenant shall immediately take such corrective action as is reasonably requested by Landlord. Should Tenant fail to commence to take such corrective action within 24 hours, Landlord shall have the right (but not the obligation) to perform such work and Tenant shall promptly reimburse Landlord for any and all reasonable costs associated with said work. If at any time during or after the Lease Term, the Property is found to be contaminated or subject to such surface or subsurface conditions then, to the extent caused by the acts or omissions of Tenant or any of Tenant's Agents or any third party on behalf of Tenant or any of Tenant's Agents, Tenant shall diligently institute proper and thorough cleanup procedures at Tenant's sole cost. Tenant agrees to indemnify, defend and hold harmless Landlord, its lenders, any managing agents and leasing agents of the Property, and their respective agents, partners, officers, directors and employees, from all claims, demands, actions, liabilities, reasonable costs, reasonable expenses, penalties (whether civil or criminal), damages (actual or punitive) and obligations of any nature to the extent arising from or as a result of any violation of this Section 8(A). The foregoing indemnification and the responsibilities of Tenant shall survive the termination or expiration of this Lease. (B) Except with regard to the use, storage and disposal of Hazardous Substances utilized in the ordinary course of the maintenance, repair and/or operation of the Property ("Landlord's Permitted Substances"), Landlord agrees that it will be fully responsible for all costs, expenses, damages or liabilities which may occur from the use, storage, disposal, release, spill or discharge of Hazardous Substances by Landlord or its agents, representatives, employees or contractors and it shall indemnify, defend and hold harmless Tenant and its agents, partners, officers, directors, employees and contractors from all claims, demands, actions, liabilities, reasonable costs, reasonable expenses, penalties (whether civil or criminal), damages (actual or punitive) and obligations of any nature to the extent arising from or as a result of any violation of this Section 8(B). The foregoing indemnification and the responsibilities of Landlord shall survive the termination or expiration of this Lease. (C) During and after the Lease Term, Tenant and Landlord shall each promptly provide the other with copies of all summons, citations, directives, information inquiries or requests, notices of potential responsibility, notices of violation or deficiency, orders or decrees, claims, complaints, investigations, judgments, letters, notices of environmental liens, and other communications, issued or threatened in writing, from the United States Environmental Protection Agency, Occupational Safety and Health Administration, the Commonwealth of Virginia Department of Environmental Quality, or other federal, state or local agency or authority, or any other entity or individual, whether public or private, concerning (i) any Hazardous Substance regarding the Property or the Premises; (ii) the imposition of any environmental lien on the Property or the Premises; or (iii) any alleged violation of or responsibility under any Environmental Law. 9. INSURANCE. (A) INSURANCE BY LANDLORD. Subject to the terms hereof, Landlord shall, during the Lease Term, procure and keep in force the following insurance, the cost of which (including, but not limited to, all premiums and deductibles for loss of rents coverage and all other premiums and 17 21 reasonable deductibles) will be deemed Operating Expenses payable by Tenant pursuant to Section 5 and Section 6: (1) Property insurance insuring the Property and improvements and loss of rents insurance for perils covered by the causes of loss - special form (all risk) and in addition coverage for flood, earthquake and boiler and machinery (if applicable). Such coverage (except for flood and earthquake) shall be written on a replacement cost basis equal to ninety percent (90%) of the full insurable replacement value of the foregoing and shall not cover Tenant's equipment, trade fixtures, inventory, fixtures, alterations or personal property located on or in the Premises. (2) Commercial general liability insurance against any and all claims for bodily injury and property damage occurring in or about the Property or the land. Such insurance shall have the combined single limit of not less than One Million Dollars ($1,000,000) per occurrence per location with a Two Million Dollars ($2,000,000) aggregate limit. (3) Such other insurance as Landlord deems necessary and prudent, or as required by Landlord's beneficiaries or mortgagees of any deed of trust or mortgage encumbering the Property. (B) INSURANCE BY TENANT. Tenant shall, during the Lease Term, procure and keep in force the following insurance: (1) Commercial general liability insurance, naming Landlord and Landlord's managing agent for the Property as additional insureds against any and all claims for bodily injury and property damage occurring in, or about the Property arising out of Tenant's use and occupancy of the Property. Such insurance shall have a combined single limit of not less than Two Million Dollars ($2,000,000) per occurrence with Two Million Dollars ($2,000,000) aggregate limit and excess umbrella liability insurance in the amount of Ten Million Dollars ($10,000,000). Such liability insurance shall be primary and not contributing to any insurance available to Landlord and Landlord's insurance shall be in excess thereto. In no event shall the limits of such insurance be considered as limiting the liability of Tenant under this lease. (2) Personal property insurance insuring all equipment, trade fixtures, inventory, fixtures and personal property located on or in the Premises for perils covered by the cause of loss - special form (all risk) and in addition, coverage for flood, earthquake and boiler and machinery (if applicable). Such insurance shall be written on a replacement cost basis in an amount equal to one hundred percent (100%) of the full replacement value of the aggregate of the foregoing. (3) Workers' compensation insurance in accordance with statutory law and employers' liability insurance with a limit of not less than $100,000 per accident, $500,000 for a disease policy limit, and $100,000 for disease limit for each employee. (4) Such other insurance as Landlord deems necessary and prudent, or as required by Landlord's beneficiaries or mortgagees of any deed of trust or mortgage encumbering the Property, and customarily maintained by comparable tenants engaged in comparable uses. The policies required to be maintained by Tenant shall be issued by companies rated AX or better (or equivalent, from time to time) in the most current issue of Best's Insurance Reports (or any recognized successor thereto), and licensed to do business in the state in which the Property is located and domiciled in the USA. Deductible amounts under Tenant's insurance policies shall not exceed Twenty-Five Thousand Dollars ($25,000.00). Certificates of insurance (certified copies of the policies may be required) shall be delivered to Landlord prior to the Commencement Date and annually thereafter at least thirty (30) days prior to the expiration date 18 22 of the old policy. Tenant shall have the right to provide insurance coverage which it is obligated to carry pursuant to the terms hereof in a blanket policy, provided such blanket policy expressly affords coverage to the Property, the Premises, and to Landlord as required by this Lease. Each policy of insurance shall provide notification to Landlord at least thirty (30) days prior to any cancellation or modification to reduce the insurance coverage. Tenant hereby agrees to pay to Landlord as liquidated damages an amount equal to Two Hundred Fifty Dollars ($250.00) per day for each day on which Tenant fails to deliver to Landlord a current certificate(s) evidencing that the insurance required pursuant to this Section is being maintained, after not less than forty-eight (48) hours notice from Landlord that it has not been provided a current certificate of insurance. In the event Tenant does not purchase the insurance required by this Lease or keep the same in full force and effect, Landlord may (but shall not be obligated to) purchase the required insurance and pay the premium. The Tenant shall repay to Landlord promptly upon demand as Additional Rent, the amount so paid. In addition, Landlord may recover from Tenant and Tenant agrees to pay, as Additional Rent, any and all reasonable expenses (including, but not limited to, reasonable attorneys' fee) and damages which Landlord may sustain by reason of the failure of Tenant to obtain and maintain such insurance. (C) SUBROGATION. Landlord and Tenant mutually waive their respective rights of recovery against each other for any loss of, or damage to, their respective property, to the extent that such loss or damage is (or is required hereby to be) insured against by an insurance policy at the time of such loss or damage or, with respect to Landlord, is self-insured. Each party shall obtain any special endorsements (if required by its insurance policy) whereby the insurer waives its rights of subrogation against the other party. This clause shall not apply in those cases where waiver of subrogation would cause either parties' insurance to be voided or otherwise made uncollectible. 10. DAMAGE OR DESTRUCTION. If the Premises shall be (i) materially damaged or destroyed during the last year of the Lease Term (inclusive of any Extension Period for which an Extension Option was exercised prior to such damage or destruction), or (ii) damaged or destroyed to such extent that the damage or destruction cannot be repaired within a period of three hundred sixty-five (365) days of the date of such damage or destruction, either Landlord or Tenant may terminate this Lease by written notice delivered to the other within sixty (60) days of the date of such damage or destruction (and in such event this Lease shall terminate as of date of such damage or destruction as if such date were the Expiration Date hereof). In addition, Landlord, at its sole option, shall have the right to cancel and terminate this Lease, by written notice delivered to Tenant not later than sixty (60) days after the date of damage or destruction, in the event the Premises is damaged or destroyed during the last five (5) years of the Lease Term (inclusive of any Extension Period for which an Extension Option was exercised prior to such damage or destruction) and Tenant shall fail to execute and deliver to Landlord upon request an extension of the Lease Term equal to the amount of time by which the remaining Lease Term (exclusive of any Extension Period for which the applicable Extension Option was not exercised prior to such damage or destruction, and further excluding the estimated time to rebuild or restore the Premises) is less than five (5) years, upon the same terms and conditions set forth herein except that the Rent for the period of such extension shall equal the then-escalated Rent in effect immediately prior to the expiration of the Lease Term, subject to escalation in the same manner in effect immediately prior to the expiration of the Lease Term. If this Lease is not terminated, then Landlord shall repair and restore the Premises (exclusive of Tenant's equipment, trade fixtures, inventory, fixtures and personal property) with all reasonable speed to substantially the same condition as immediately prior to such damage or destruction, and the Rent or a just and proportionate part thereof, according to Tenant's ability to utilize the Premises in its damaged condition, shall be abated until the Premises shall have been repaired and restored by Landlord. 11. INDEMNIFICATION. 19 23 Tenant shall defend, and hereby does indemnify and hold Landlord harmless from and against any and all claims, costs, damages, expenses, fees, liabilities, losses or suits arising from or out of, or in connection with (i) injury or death to any person in, on or about the Premises, (ii) damage to or loss of use of any property arising out of any occurrence in, on or about the Premises, (iii) the use, condition, occupational safety or occupancy of the Property or Premises, to the extent attributable to the gross negligence or willful misconduct of Tenant or any of Tenant's Agents, and/or (iv) any default by Tenant in the performance of its obligations under this Lease (including, but not limited to Exhibit H); provided that, Tenant shall have no obligation to defend, indemnify or hold Landlord harmless with regard to any matter to the extent caused by the negligence or willful misconduct of Landlord or its agents or employees. Such indemnifications shall, among other things, include and apply to reasonable attorneys' fees, investigation costs, and other costs actually incurred by or on behalf of Landlord. The provisions of this Section 11 shall survive the expiration or termination of this Lease with respect to any matter, circumstance or event which occurred or relates to any period ending prior to such expiration or termination. Except as otherwise expressly set forth herein to the contrary, this Lease is made on the express conditions that, to the fullest extent permitted by applicable law, Landlord shall not be liable for, or suffer loss by reason of, injury to person or property, from whatever cause, in any way connected with the condition, use, occupational safety or occupancy of the Premises, specifically including, without limitation, any liability for injury to the person or property of Tenant or Tenant's Agents. Landlord shall indemnify, defend and hold harmless Tenant from and against all costs, damages, injury, claims, liabilities, expenses (including reasonable attorneys' fees), losses and court costs arising from or as a result of any breach of Landlord's duties or obligations hereunder or of any gross negligence or willful misconduct of Landlord or its agents, representatives employees or contractors acting within the scope of their employment or engagement. 12. ASSIGNMENT AND SUBLETTING. (A) Tenant shall not assign this Lease, or sublet all or any portion of the Premises, or permit the use or occupancy of the Premises by any party other than Tenant, without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed. Tenant shall not encumber, mortgage, pledge, license, hypothecate or otherwise transfer the Premises or this Lease (except as set forth in the preceding sentence) without the prior written consent of Landlord, which may be granted or withheld in Landlord's sole discretion. (B) Tenant must request Landlord's consent to an assignment or sublease in writing at least twenty (20) days prior to the commencement date of the proposed sublease or assignment, which request must include (a) the name and address of the proposed assignee or subtenant, (b) the nature and character of the business of the proposed assignee or subtenant, (c) financial information (including financial statements, if available) of the proposed assignee or subtenant, and (d) a copy of the proposed sublet or assignment agreement, which must be in substance and form reasonably acceptable to Landlord. Tenant shall also provide any additional information Landlord reasonably requests regarding such proposed assignment or subletting. Within seven (7) business days after Landlord receives Tenant's request (with all required information included), Landlord shall notify Tenant if it wishes to deny its consent to such proposed assignment or subletting. In the event Landlord shall fail to respond to Tenant within such period of time, Tenant may deliver to Landlord a second (2nd) request for such consent, which notice shall specifically state that the failure by Landlord to respond within five (5) business days shall be deemed Landlord's election to grant its consent thereto, and in the absence of a response to such second (2nd) notice, Landlord shall be deemed to have granted its consent thereto. (C) Each sublease and/or assignment is also subject to all of the following terms and conditions: (1) If Landlord approves an assignment or sublease as herein provided, Tenant shall pay to Landlord as Additional Rent fifty percent (50%) of the amount, if any, by which the rent, any additional rent and any other sums paid by the assignee or subtenant to Tenant under 20 24 such assignment or sublease (after deducting therefrom the reasonable out-of-pocket costs incurred by Tenant in the subject transaction, including, but not limited to, brokerage commissions, hard and soft construction expenses, tenant concessions (exclusive of non-cash concessions, such as free rent), and reasonable legal fees) exceeds the total of the Rent plus any Additional Rent payable by Tenant hereunder which is allocable to the portion of the Premises which is the subject of such assignment or sublease. The foregoing payments shall be made on not less than a monthly basis by Tenant. The foregoing provisions of this Section 12(C)(1) shall be inapplicable to any subletting of the Phase II Premises prior to January 1, 1998, but shall apply to any continuation thereof beyond January 1, 1998. (2) No consent to any assignment or sublease shall constitute a further waiver of the provisions of this section, and all subsequent assignments or subleases may be made only upon the terms and conditions of this Section 12 and with the prior written consent of Landlord in accordance herewith. In no event shall any consent by Landlord be construed to permit reassignment or resubletting by a permitted assignee or sublessee. (3) No sublease or assignment by Tenant shall relieve Tenant of any liability hereunder. (4) Any assignment or sublease without Landlord's prior written consent shall be void, and shall, at the option of the Landlord, constitute an Event of Default under this Lease. (5) No assignment or sublease shall be granted for any term which extends beyond the Lease Term, as it may have been theretofore renewed hereunder, unless the portion of the term which extends beyond the Lease Term shall be subject to Tenant's exercise of the applicable Extension Option(s). (6) Tenant shall reimburse Landlord upon demand for all reasonable costs, expenses and fees incurred by or on behalf of Landlord in connection with any proposed assignment or sublease by Tenant (including, but not limited to, Landlord's reasonable attorneys fees and out-of-pocket expenses incurred in connection with Landlord's review of such sublease or assignment (if any)). (D) The following events shall constitute an "Assignment" which is subject to the terms of this section and for which Landlord's prior written consent is required: (i) if Tenant is a corporation and any part or all of Tenant's shares of stock, or the shares of stock or other ownership interests of any corporation or other entity owning shares of Tenant's stock, shall in any one or more instances be issued, or transferred by sale, assignment, conveyance, operation of law (including, but not limited to, transfer as a result of or in conjunction with any merger, reorganization or recapitalization) or other disposition, or otherwise changed, so as to result in less than fifty-one (51%) of such shares, or other ownership interests, or less than fifty-one percent (51%) of any class of such shares or other ownership interests, being owned by the present (i.e., as of the date hereof) owners thereof; (ii) if Tenant is a partnership and any general partnership interest(s), or the stock or other ownership interests of any corporation or other entity owning any such general partnership interests(s), in the partnership shall in any one or more instances be issued, or transferred by sale, assignment, conveyance, operation of law (including, but not limited to, transfer as a result of or in conjunction with any merger, reorganization or recapitalization) or other disposition, or otherwise changed, so as to result in less than fifty-one percent (51%) of such general partnership interests(s), stock (or any class of such stock) or other ownership interests being owned by the present (i.e., as of the date hereof) owners thereof; (iii) if Tenant is a limited liability company or any other type of entity, and any interest(s) of any member or other equity owner, or the ownership interests of any entity owning any membership interest(s) or other equity interest in the Tenant, shall in any one or more instances be issued, or transferred by sale, assignment, conveyance, operation of law (including, but not limited to, transfer as a result of or in conjunction with any merger, reorganization or recapitalization) or other disposition, or otherwise changed, so as to result in less than fifty-one 21 25 percent (51%) of such membership interests or other such equity and/or ownership interests being owned by the present (i.e., as of the date hereof) owners thereof; or (iv) if effective control of the corporation, partnership, limited liability company or other form of Tenant shall be taken from those exercising such control as of the date hereof; provided that, this Section 12(D) shall not be deemed to apply to any corporation the shares of which are traded on a nationally-recognized exchange and which is required to make public disclosures regarding ownership and financial condition. (E) Notwithstanding any other provision of this Lease to the contrary, American Management Systems, Inc. ("AMS") shall have the right to (1) assign this Lease or to sublet all or any portion of the Premises, in either case without the consent of Landlord, to any affiliate that is wholly-owned by or under common ownership with AMS (as part of a single group of interlocking companies), or to any wholly-owned and controlled division or sub-entity of AMS, or (2) sublease up to one (1) full floor of the Premises to any entity or user that is partially-owned by AMS and in which AMS is an active participant in management and operations, all subject to the following conditions: (a) the proposed assignee or sublessee (the "Transferee") and its business shall be of a type and quality suitable for a first-class office building, (b) the proposed Transferee shall not be a governmental or quasi-governmental authority, a foreign government or international agency or other organization entitled to sovereign or other immunity, (c) neither the proposed assignment or subtenancy, nor the proposed assignee or subtenant, will impose an additional, material burden upon Landlord in its operation of the Property which exceeds the additional burden which Landlord would reasonably suffer if the Building were multi-tenanted, (d) AMS shall notify Landlord not less than ten (10) days in advance of the effective date of such assignment or sublease of AMS' intent to enter into such assignment or sublease (failing which, Landlord shall be entitled (as Landlord's sole remedy for AMS' failure to deliver such notice), and AMS shall pay to Landlord as liquidated damages, the sum of Five Hundred Dollars ($500.00) for each failure to so notify Landlord), (e) such Transferee is lawfully qualified to occupy the Premises, (f) there will be no use of the Premises in violation of the terms hereof, (g) with respect to an assignment, such Transferee shall expressly assume all of the obligations of the Tenant hereunder on a form acceptable to Landlord, and (h) no such assignment or subletting shall relieve AMS of any agreement, covenant, duty, liability or obligation hereunder. (F) Tenant hereby assigns to the Landlord absolutely the rent due from each assignee and subtenant and Tenant hereby authorizes each such assignee and subtenant to pay said rent directly to Landlord for credit, as and when collected by the Landlord (and net of the Landlord's reasonable collection costs), against the Rent and Additional Rent payable hereunder; provided that, for all periods in which no Event of Default shall be in existence hereunder, Landlord shall permit Tenant to continue to collect the rent from such assignees and subtenants. 13. CARE OF PREMISES. (A) Except as otherwise expressly set forth herein to the contrary, Tenant covenants and agrees that during the Lease Term it will keep the Premises and every part thereof in first-class order, condition and repair except for ordinary wear and tear and casualty and condemnation damage which Landlord is required to repair, and that it will in all respects and at all times duly comply with all applicable laws, and all covenants, conditions and restrictions applicable to the Property. (B) Subject to ordinary wear and tear and subject to Tenant's obligation to pay Operating Expenses pursuant to Sections 5 and 6, Landlord shall keep the Property and the Building in a first-class condition, and shall replace, repair and maintain as and when necessary in Landlord's reasonable business judgment: (A) the roof, exterior and core walls, floor slabs and other structural components of the Building; (B) all systems required for the elevator, plumbing, electrical, HVAC, mechanical and other services of Landlord required hereunder; (C) all exterior areas of the Building; (D) all common areas of the Property; and (E) all exterior improvements and areas of the Property (including, but not limited to, driveways, parking areas and facilities, curbs, sidewalks, lighting, landscaping and fencing). In furtherance of the foregoing, Landlord shall 22 26 agree to maintain in stock one (1) compressor and one (1) fan motor for the base Building HVAC System (as herein defined). Landlord further agrees to utilize prudent management practices in determining when an item is at the end of its useful operating life and should be replaced rather than repaired. 14. ALTERATION BY TENANT. (A) Tenant is hereby given the right, at its sole cost and expense, at any time during the Lease Term, to make non-structural or cosmetic alterations or improvements to the interior of the Premises which Tenant deems necessary or desirable for its purposes; provided, however, that no addition, alteration, improvement or modification which (i) is not considered normal office build-out for office tenants of all sizes, (ii) affects the structure or systems of the Building or any other tenant of the Building (if any), (iii) requires a permit or other governmental or quasi-governmental approval, consent or license, or (iv) costs in excess of Ten Thousand Dollars ($10,000.00), shall be made without the prior written approval of Landlord (which written approval shall not be unreasonably withheld, conditioned or delayed, except with regard to work covered by clause (ii) which will or is likely to materially and adversely affect any other occupant of the Property). Landlord's approval of any plans, specifications or work drawings shall create no responsibility or liability on the part of the Landlord for their completeness, design sufficiency or compliance with any laws, rules and regulations of governmental agencies or authorities. (B) All work by or for Tenant herein permitted shall be done and completed by the Tenant in a good and workmanlike manner and in compliance with all requirements of law and of governmental rules and regulations (including, but not limited to, the Americans with Disabilities Act). Tenant agrees to indemnify the Landlord against all mechanics' or other liens arising out of any of such work, and also against any and all claims for damages or injury which may occur during the course of any such work. Tenant shall notify Landlord in writing not less than ten (10) days in advance of all work to be performed in or on the Property by or on behalf of Tenant or any of Tenant's Agents, for which Landlord's consent is required. For the further security of Landlord, Tenant covenants and agrees to give actual notice of the first (1st) two (2) sentences of Section 20 in advance to each project manager, contractor and subcontractor with whom Tenant contracts directly for the performance of any addition, alteration, improvement or modification in or to the Premises; provided that, Landlord hereby acknowledges that Tenant's failure to give the notice specified in this sentence shall not constitute an Event of Default hereunder (whether or not notice of such failure is delivered by Landlord to Tenant). (C) Upon written notice to Tenant (not later than thirty (30) days after expiration of the Lease Term), Landlord may require that Tenant remove, after the expiration or sooner termination of the Lease Term and at Tenant's sole cost and expense, any and/or all alterations, improvements or additions to the Premises, and restore the Premises to their prior condition; provided that, Landlord shall have no right to require the removal of (i) any additions, alterations or improvements that are customarily considered normal office improvements for office tenants of all sizes (including, but not limited to, wiring or cabling which is customarily considered part of normal office improvements for first-class office tenants of all sizes), or (ii) any alterations, improvements or additions to the Premises to which Landlord has consented, unless at the time such consent was granted Landlord reserved the right to require such removal. Tenant shall also repair any damage to the Premises caused by the installation or removal of Tenant's trade fixtures, furnishings and equipment, or any alterations or other improvements made to the Premises by Tenant. 15. CONDEMNATION. (A) If the Premises shall be wholly taken by exercise of right of eminent domain, then this Lease shall terminate from the day the possession of the whole of the Premises shall be required under the exercise of such power of eminent domain. 23 27 (B) If a part of the Premises shall be condemned, then the Rent payable hereunder shall be reduced in the proportion that the remaining area of the Premises bears to the original area of the Premises. (C) Any award for the taking of all or part of the Premises (including, but not limited to, the Tenant's leasehold interest) under the power of eminent domain or any payment made under threat of the exercise of such power shall be the property of the Landlord. Tenant reserves such separate rights as it may have against the condemning authority to claim damages for loss of its trade fixtures and the cost of removal and relocation expense, provided such Tenant rights do not, in any way, diminish the award to which Landlord would otherwise be entitled or reduce the amounts payable to Landlord pursuant to this subsection. 16. SUBORDINATION. This Lease is and shall at all times be and remain subject and subordinate to the lien of any future mortgage (and to any and all advances made thereunder) upon the Property or Premises, unless Landlord requires this Lease to be superior to any such mortgage. Tenant shall execute and return to Landlord any and all documentation reasonably required by Landlord to evidence the subordination (or superiority) of this Lease to any such mortgage. Tenant hereby agrees to pay to Landlord as liquidated damages an amount equal to Two Hundred Fifty Dollars ($250.00) per day for each day on which Tenant fails to return any such documentation requested pursuant to the preceding sentence, after not less than forty-eight (48) hours notice from Landlord that Tenant has failed to return any such documentation within ten (10) days after Landlord's written request therefor. In the event of subordination of this Lease, Landlord will obtain a written non-disturbance agreement in form reasonably satisfactory to Tenant and such lender, providing, without limitation, that (A) in the event of a foreclosure or other action taken under the mortgage by the holder thereof, this Lease and the rights of Tenant hereunder shall not be disturbed but shall continue in full force and effect so long as there shall not be an Event of Default in existence hereunder, and (B) such holder will agree that in the event it shall be in possession of the Premises, that so long as Tenant shall observe and perform all of the obligations of Tenant to be performed pursuant to this Lease, such Mortgagee will perform all obligations of Landlord required to be performed under this Lease. So long as such non-disturbance agreement was delivered to Tenant, in the event any proceedings are brought for foreclosure, or in the event of the exercise of the power of sale under any mortgage made by the Landlord covering the Premises, Tenant shall attorn to the purchaser at any such foreclosure, or to the grantee of a deed in lieu of foreclosure, and recognize such purchaser or grantee as the Landlord under this Lease. Tenant hereby agrees that no mortgagee or its successor shall be (i) bound by any payment of Rent or Additional Rent for more than one (1) month in advance, (ii) bound by any amendment or modification of this Lease made without the consent of Landlord's mortgagee or its successor, (iii) liable for damages for any breach, act or omission of any prior landlord, (iv) bound to effect or pay for any construction for Tenant's occupancy, or (v) subject to any claim of offset or defenses that Tenant may have against any prior landlord. The word "mortgage" as used herein includes mortgages, deeds of trust and any sale-leaseback transactions, or other similar instruments, and modifications, extensions, renewals, and replacements thereof, and any and all advances thereunder. 17. ACCESS TO PREMISES Landlord and its authorized agents shall, upon reasonable prior verbal or written notice (except in the event of an emergency, in which event no notice shall be required), have free access to the Premises at any and all reasonable times to inspect the same, to make any repair or alteration to the Premises, to place and maintain a "For Rent" sign thereon at any time within twelve (12) months prior to expiration of the Lease Term and/or termination of this Lease and to exhibit and show the Premises to prospective tenants during such time period, and for other reasonable purposes pertaining to the rights of the Landlord hereunder. 24 28 18. RULES AND REGULATIONS. Tenant agrees to comply with all existing rules and regulations of the Building, and all future rules and regulations reasonably promulgated by Landlord concerning the Property and the Premises and made known to Tenant in writing. The existing rules and regulations are set forth in Exhibit D attached hereto and made a part hereof by reference. Landlord shall have no liability for any failure by any other person or entity to honor or observe the terms of said rules and regulations. 19. COVENANTS OF RIGHT TO LEASE. Landlord covenants that it is the fee simple owner of the Property and has good and sufficient right to enter into this Lease and that Landlord alone has the right to lease the Premises for the Lease Term. Landlord further covenants that upon Tenant performing the terms and obligations of Tenant under this Lease, Tenant shall be entitled to peaceably and quietly possess the Premises throughout the Lease Term and any renewal or extension thereof, subject to the terms of this Lease. 20. MECHANICS LIENS. Neither Tenant nor anyone claiming by, through, or under Tenant or this Lease, shall have the right to file or place any mechanics lien or other lien of any kind or character whatsoever upon the Property or Premises or upon any improvement thereon, or upon the leasehold interest of Tenant therein. Notice is hereby given that no contractor, subcontractor, or anyone else who may furnish any material, service or labor for any Property improvements, alteration, repairs or any part thereof, shall at any time be or become entitled to any lien thereon. Tenant shall cause any such lien imposed to be released of record by payment or posting of the proper bond acceptable to Landlord within ten (10) business days after the earlier of Tenant acquiring knowledge of such lien or written request by Landlord. If Tenant fails to remove any lien within said ten (10) business day period, then Landlord may (but shall not be obligated to) do so at Tenant's expense, and Tenant shall reimburse Landlord upon demand for such amount, including, but not limited to, reasonable attorneys fees and costs, as Additional Rent. 21. EXPIRATION OF LEASE AND SURRENDER OF POSSESSION. (A) Holding Over. Tenant will, at the expiration or termination of this Lease by lapse of time or otherwise, yield up immediate possession of the Premises to Landlord, free of all tenancies and occupancies and otherwise in the condition required under this Lease. If Tenant retains possession of the Premises or any part thereof after such expiration or termination, then Landlord may, at its option, serve written notice upon Tenant that such holding over constitutes either of (i) creation of a month-to-month tenancy, upon the terms and conditions set forth in this Lease, or (ii) creation of a tenancy at sufferance, in any case upon the terms and conditions set forth in this Lease; provided, however, that the monthly Rent (or daily Rent under (ii)) shall, in addition to all other sums which are to be paid by Tenant hereunder, whether or not as Additional Rent, be equal to the greater of (x) the fair market rent for the Premises, or (y) one hundred fifty percent (150%) of the sum of Rent plus Additional Rent owed monthly to Landlord under this Lease immediately prior to such expiration or termination (prorated in the case of (ii) on the basis of a 365 day year for each day Tenant remains in possession); provided that, with respect to the first (1st) ninety (90) days of any such holdover, the amount calculated under the foregoing clause (y) shall be based on one hundred twenty-five percent (125%), rather than one hundred fifty percent (150%). If no such notice is served, then a tenancy at sufferance shall be deemed to be created at the Rent in the preceding sentence. Tenant shall also pay to Landlord as Additional Rent all damages sustained by Landlord resulting from retention of possession by Tenant, including, but not limited to, all brokerage commissions and reasonable legal fees incurred in connection with any lease for all or a part of the Premises to a replacement tenant which is canceled or terminated as a result of such holdover, plus a reasonable vacancy allowance equal to the period reasonably estimated by Landlord to be necessary to identify another replacement tenant, negotiate a lease with such replacement tenant, and build-out the Premises (or such portion thereof as shall be leased) for such replacement tenant; 25 29 provided that, except to the extent expressly enumerated in the foregoing provisions of this sentence, Tenant shall not be liable for any indirect, consequential or punitive damages as a consequence of any holdover. The provisions of this section shall not constitute a waiver by Landlord of any right of re-entry as herein set forth; nor shall receipt of any Rent or any other act in apparent affirmance of the tenancy operate as a waiver of Landlord's right to terminate this Lease for a breach of any of the terms, covenants, or obligations herein on Tenant's part to be performed. (B) Subject to Landlord's right to require their removal in writing as hereinabove provided, all alterations, additions and improvements which may be made in, on or to the Premises shall become the property of Landlord upon their installation in the Premises and shall remain upon and be surrendered with the Premises. Subject to Section 14, upon the expiration of this Lease, by lapse of time or otherwise, Tenant shall surrender the Premises, together with any and all alterations, improvements or additions erected in, on or to the Property or Premises by Tenant (excluding Tenant's personalty), ordinary wear and tear and casualty and condemnation damage which Landlord is required to repair excepted. (C) Tenant may install adequate equipment, fixtures, wiring, cabling and machinery for the operation of its business and, upon the expiration or termination of this Lease by lapse of time or otherwise, Tenant shall remove such equipment, fixtures, wiring and cabling (subject to the limitation set forth in Section 14(C)), and machinery installed by it at Tenant's sole cost. Upon removal of such equipment, fixtures, wiring and cabling (subject to the limitation set forth in Section 14(C)), and machinery, Tenant shall repair any damage to the Property or Premises caused by such removal or installation at Tenant's sole cost. 22. DEFAULT-REMEDIES. (A) The occurrence of one or more of the following events shall constitute a material default and breach of this Lease by Tenant ("Event of Default"): (1) Failure by Tenant to make payment of any Rent, Additional Rent, or any other payment required to be made by Tenant hereunder, as and when due, and such a failure shall continue for a period of more than ten (10) days after written notice of such failure to Tenant; provided that, (i) Landlord shall not be required to deliver more than two (2) such notices in any period of twelve (12) consecutive months , and (ii) following delivery of the second (2nd) such notice, any subsequent failure by Tenant, within twelve (12) months of the first (1st) such notice, to make any payment when and as due shall be deemed an Event of Default; (2) The making by Tenant (or any guarantor) of any general assignment or arrangement for the benefit of creditors; (3) The filing by Tenant (or any guarantor) of a petition in bankruptcy or for any other relief under Title 11 of the United States Code ("Bankruptcy Code"), or the insolvency laws of any state, or any other applicable statute ("Insolvency Laws"); (4) The levying of an attachment, execution of other judicial seizure upon the Tenant's property in or interest under this Lease, which is not satisfied or released or the enforcement thereof superseded by an appropriate proceeding within sixty (60) days thereafter; (5) The filing of an involuntary petition in bankruptcy or for reorganization or arrangement under the Bankruptcy Code or Insolvency Laws against Tenant (or any guarantor) and such involuntary petition is not withdrawn, dismissed, or discharged within sixty (60) days from the filing thereof, 26 30 (6) The appointment of a receiver or trustee to take possession of the property of Tenant (or any guarantor) or of Tenant's (or any guarantor's) business or assets and the order or decree appointing such receiver or trustee shall have remained in force undischarged for sixty (60) days after the entry of such order or decree; (7) The vacating or abandonment of the Premises; provided that, vacating the Premises shall not be deemed an Event of Default if (i) Tenant shall notify Landlord in writing (or Landlord's building manager shall otherwise acquire actual knowledge) of Tenant's intent to vacate not less than sixty (60) days in advance, (ii) Tenant shall obtain and provide to Landlord prior to vacating all necessary endorsements required to ensure that Tenant's insurance with respect to the Premises shall remain in full force and effect notwithstanding such vacancy, and (iii) Tenant shall take all commercially reasonable steps to secure the Premises against unauthorized entry during the period of such vacancy; (8) The failure by Tenant to furnish to Landlord any statement required herein within fifteen (15) days (or such shorter period as may be expressly set forth herein with respect to such delivery) after its due date, which failure shall continue for more than two (2) business days after Landlord delivers written notice of such failure to deliver such statement within the required time period; (9) The failure by Tenant to maintain, or provide to Landlord evidence that Tenant continues to maintain, any insurance required herein, which failure shall continue for more than two (2) business days after Landlord delivers written notice of Tenant's failure to deliver evidence of continued insurance at least thirty (30) days prior to the expiration of the then-current policy period; (10) An assignment, subletting, pledge, mortgage, or other transfer of this Lease or the Premises by Tenant, or any transfer of any interest in the Tenant, in violation of Section 12 of this Lease; or (11) The failure by Tenant to perform or observe any other term, covenant, agreement or condition to be performed or kept by the Tenant under the terms, conditions, or provisions of this Lease, which failure shall continue for more than fifteen (15) days after written notice thereof from Landlord (or such longer time as may be reasonably required to cure such failure through the exercise of due diligence, provided that (i) such failure is not a willful repudiation of the Lease authorized by Tenant's Board of Directors, (ii) such failure is susceptible of cure, (iii) such failure does not relate to the existence of a Hazardous Substance on the Premises in violation of Section 8 hereof, (iv) such failure does not subject Landlord to prosecution or substantial civil or criminal fine or penalty, and (v) Tenant promptly commences to cure such failure within the aforesaid fifteen (15) day period and thereafter diligently pursues the cure of such failure to completion). (B) If an Event of Default shall have occurred, Landlord shall have (in addition to all other rights and remedies provided at law or in equity or otherwise provided by this Lease) the right, at the option of the Landlord, then or at any time thereafter while such Event of Default shall continue, to elect any one or more of the following: (1) To continue this Lease in full force and effect (so long as Landlord does not terminate this Lease), and Landlord shall have the right to collect Rent, Additional Rent and other charges when due for the remainder of the Lease Term; and/or (2) To cure such default or defaults, upon ten (10) days' notice of Landlord's intention to cure (but without notice in the event of an emergency), at Tenant's expense and without prejudice to any other remedies which Landlord might otherwise have; and any reasonable payment made or reasonable expenses incurred by Landlord in curing such default, 27 31 with interest thereon at the Default Rate (as herein defined), shall be Additional Rent to be paid by Tenant with the next installment of Rent falling due thereafter; and/or (3) To either (a) declare this Lease terminated and the Lease Term ended, or (b) elect to continue this Lease in full force and effect (but with the right at any time thereafter to declare this Lease terminated and the Lease Term ended), and in either such event to re-enter the Premises, with or without notice, and dispossess Tenant and anyone claiming through or under Tenant by summary proceedings or otherwise, and remove their effects, and take complete possession of the Premises. In such re-entry, Landlord may, with or without process of law, remove all persons from the Premises, and Tenant hereby covenants in such event, for itself and all others occupying the Premises under Tenant, to peacefully yield up and surrender the Premises to Landlord. If Landlord elects to terminate this Lease and/or elects to terminate Tenant's right of possession, every obligation of Landlord contained in this Lease shall cease without prejudice to Tenant's liability for all Rent, Additional Rent, and other sums owed by Tenant herein. In the event Landlord declares this Lease terminated and the Lease Term ended (pursuant to Section 22(B)(3)(a) above), the Landlord shall be entitled to recover from Tenant the Rent, Additional Rent, and all other sums due and owing by Tenant to the date of termination, plus the reasonable costs of curing all Tenant's defaults existing at or prior to the date of termination, plus the reasonable costs of recovering possession of the Premises, plus the reasonable costs of reletting the Premises (including, but not limited to repairs to the Premises, reasonable costs to prepare and refinish the Premises for reletting, leasing commissions, rental concessions, and reasonable legal fees and costs), plus other actual damages suffered or incurred by Landlord due to all Events of Default (including, without limitation, late fees or other charges incurred by Landlord under any mortgage, but excluding any indirect, consequential or punitive damages arising from an Event of Default other than those expressly enumerated in this sentence), plus the excess, if any, of the Tenant's Rent and Additional Rent for the balance of the Lease Term above the rent (if any) collected by Landlord during the remainder of the scheduled Lease Term, net of Landlord's costs to collect the same. Landlord agrees to exercise reasonable efforts to relet the Premises in the event this Lease is terminated, but Landlord shall have no obligation to give any preference to leasing the Premises over leasing any other space Landlord may have available. Should Landlord elect to continue this Lease (pursuant to Section 22(B)(3)(b) above), Landlord shall be entitled to recover from Tenant the Rent, Additional Rent and all other sums due and owing by Tenant up to the date of dispossession, plus the reasonable costs of curing all Events of Default existing at or prior to the date of dispossession, plus the Rent, Additional Rent and all other sums owed by Tenant on a continuing basis as said amounts accrue to the end of the Lease Term, less the rental which Landlord receives during such period, if any, with respect to the Premises, plus the cost of recovering possession of the Premises, plus the costs of reletting (including, but not limited to, repairs to the Premises, costs to prepare and refinish the Premises for reletting, leasing commissions, rental concessions, and reasonable legal fees and costs). Any suit brought by Landlord to enforce collection of such deficiency for any one month shall not prejudice Landlord's right to enforce the collection of any deficiency for any subsequent month in subsequent separate actions, or Landlord may defer initiating any such suit until after the expiration of the Lease Term (in which event such deferral shall not be construed as a waiver of Landlord's rights as set forth herein and Landlord's cause of action shall be deemed not to have accrued until the expiration of the Lease Term), and it being further understood that if Landlord elects to bring suits from time to time prior to reletting the Premises, Landlord shall be entitled to its full damages through the date of the award of damages without regard to any rent, additional rent or other sums that are or may be projected to be received by Landlord upon a subsequent reletting of the Premises. In the event that Landlord relets the Premises together with other premises or for a term extending beyond the scheduled expiration of the Lease Term, it is understood that Tenant will not be entitled to apply against Landlord's damages any rent, additional rent or other sums generated or projected to be generated by either such other premises or the period extending beyond the scheduled expiration of 28 32 the Lease Term. Landlord shall use commercially reasonable efforts to relet and rent the Premises with or without advertising for the remainder of the Lease Term, or for such longer or shorter period as Landlord shall deem advisable. In lieu of the amounts recoverable by Landlord pursuant to the two immediately preceding paragraphs, but in addition to other remedies and amounts otherwise recoverable by Landlord in this Lease, Landlord may, in its sole election, (i) terminate this Lease, (ii) collect all Rent, Additional Rent, and other sums due and owing by Tenant up to the date of termination, and (iii) collect, as liquidated damages, an amount equal to (a) the present value (as of the date of termination) of the Rent and Additional Rent which would have been paid by Tenant for the remaining balance of the Lease Term (if this Lease were not terminated), minus (b) the present value (as of the date of termination) of the net revenue stream (e.g., after deducting reasonable allowances for periods of vacancy and anticipated legal fees, brokerage commissions, tenant improvement allowances and other concessions required to relet the Premises) Landlord reasonably expects to receive over the remainder of the Lease Term (if this Lease were not terminated) as a result of the reletting of the Premises. For purposes of determining present value under the foregoing clause (iii), the indicated amounts shall be discounted to present value using an interest rate equal to five percent (5.0%) per annum. In no event shall Landlord be liable for, nor shall Tenant's obligations hereunder be diminished by reason of, any failure by Landlord to relet all or any portion of the Premises or to collect any rent due upon such reletting, nor shall Tenant be entitled to share in, or to any off-set against its liability under the foregoing clause (iii), any proceeds from any reletting of the Premises. Tenant further acknowledges and agrees that no election by Landlord to seek liquidated damages pursuant to this paragraph shall relieve Tenant of any liability for damages for any failure by Tenant to surrender the Premises to Landlord in accordance with the terms hereof. (C) TENANT, ON ITS OWN BEHALF AND ON BEHALF OF ALL PERSONS CLAIMING THROUGH OR UNDER TENANT, INCLUDING ALL CREDITORS, DOES HEREBY SPECIFICALLY WAIVE AND SURRENDER ANY AND ALL RIGHTS AND PRIVILEGES, SO FAR AS IS PERMITTED BY LAW, WHICH TENANT AND ALL SUCH PERSONS MIGHT OTHERWISE HAVE UNDER ANY PRESENT OR FUTURE LAW (1) TO THE SERVICE OF ANY NOTICE TO QUIT OR OF LANDLORD'S INTENTION TO RE-ENTER OR TO INSTITUTE LEGAL PROCEEDINGS, WHICH NOTICE MAY OTHERWISE BE REQUIRED TO BE GIVEN, (2) TO REDEEM THE PREMISES, (3) TO RE-ENTER OR REPOSSESS THE PREMISES, (4) TO RESTORE THE OPERATION OF THIS LEASE, WITH RESPECT TO ANY DISPOSSESSION OF TENANT BY JUDGMENT OR WARRANT OF ANY COURT OR JUDGE, OR ANY RE-ENTRY BY LANDLORD, OR ANY EXPIRATION OR TERMINATION OF THIS LEASE, WHETHER SUCH DISPOSSESSION, RE-ENTRY, EXPIRATION OR TERMINATION SHALL BE BY OPERATION OF LAW OR PURSUANT TO THE PROVISIONS OF THIS LEASE, OR (5) WHICH EXEMPTS PROPERTY FROM LIABILITY FOR DEBT OR FOR DISTRESS FOR RENT. TENANT HEREBY CONSENTS TO THE EXERCISE OF PERSONAL JURISDICTION OVER IT BY ANY FEDERAL OR LOCAL COURT IN THE JURISDICTION IN WHICH THE PREMISES IS LOCATED. 23. RE-ENTRY BY LANDLORD No re-entry by Landlord or any action brought by Landlord to remove Tenant from the Premises shall operate to terminate this Lease unless Landlord shall have given written notice of termination to Tenant, in which event Tenant's liability shall be as above provided. No right or remedy granted to Landlord herein is intended to be exclusive of any other right or remedy, and each and every right and remedy herein provided shall be cumulative and in addition to any other right or remedy hereunder or now or hereafter existing in law or equity or by statute. In the event of termination of this Lease, Tenant waives any and all rights to redeem the Premises given by any statute now or hereafter enacted. 29 33 24. ADDITIONAL RIGHTS TO LANDLORD. (A) In addition to any and all other remedies, Landlord may restrain any threatened breach of any covenant, condition or agreement herein contained, but the mention herein of any particular remedy or right shall not preclude the Landlord from any other remedy or right it may have either at law or equity, or by virtue of some other provision of this Lease; nor shall the consent to one act, which would otherwise be a violation hereof, nor the waiver of redress for one violation of a covenant, promise, agreement, undertaking or condition, constitute Landlord's consent to, or waiver of redress for, any subsequent act in violation hereof. (B) Receipt by Landlord of Rent or other payments from the Tenant shall not be deemed to operate as a waiver of any rights of the Landlord to enforce payment of any Rent, Additional Rent, or other payments previously due or which may thereafter become due, or of any rights of the Landlord to terminate this Lease or to exercise any remedy or right which otherwise might be available to the Landlord. The right of Landlord to declare a forfeiture for each and every breach of this Lease is a continuing one for the life of this Lease; provided that Landlord shall have no right to declare a forfeiture of this Lease with regard to any one instance of an Event of Default after such Event of Default is cured. 25. SUCCESSORS, ASSIGNS AND LIABILITY. The terms, covenants, conditions and agreements herein contained and as the same may from time to time hereafter be supplemented, modified or amended, shall apply to, bind, and inure to the benefit of the parties hereto and their legal representatives, successors and assigns, respectively, subject to Section 12 hereof. In the event either party now or hereafter shall consist of more than one person, firm or corporation, then and in such event all such persons, firms and/or corporations shall be jointly and severally liable as parties hereunder. 26. NOTICES. All notices and demands required to be given to either party hereunder shall be in writing and shall be sent by certified United States mail, postage prepaid, return receipt requested, or by personal delivery, or by a nationally recognized overnight delivery service, delivery prepaid, addressed to the party to whom directed at the address set forth below or at such other address as may be from time to time designated in writing by the party changing such address. All such notices and demands shall be deemed to have been received on the date of delivery or the date of refusal of delivery (or inability to deliver to the last known address) as evidenced in writing.
Landlord Tenant -------- ------ Principal Mutual Life Insurance Company American Management Systems, Inc. 711 High Street 4050 Legato Road Des Moines, IA 50392-1370, Fairfax, VA 22030 Attn: CRE Equities/Mid-Atlantic Team Attn: Mr. Thomas W. Huba With a copy to: With a copy of any default notices (which shall not be required for Trammell Crow Real Estate Services, Inc. an effective notice) to: 1115 30th Street, N.W. Washington, D.C. 20007 Shaw, Pittman, Potts & Trowbridge Attn: Property Manager/One Fair Oaks 2300 N Street, N.W. Washington, D.C. 20037 Attn: Craig A. de Ridder, Esq.
30 34 27. MORTGAGEE'S APPROVAL. Tenant hereby agrees that, if Landlord's mortgagee shall require modifications of the terms and provisions of this Lease, Tenant shall not unreasonably withhold, condition or delay its execution and delivery of the agreements required to effect such Lease modification (it being understood that any such reasonable modification(s) shall be executed and delivered within thirty (30) days after Landlord's request therefor). In no event, however, shall Tenant be required to agree to modify any provision of this Lease relating to the amount of Rent, Additional Rent or other charges reserved herein, the size and/or general location of the Premises, or the Lease Term, nor shall any such modification diminish Landlord's obligations or Tenant's rights hereunder. 28. ESTOPPEL CERTIFICATES. Within twenty (20) days after delivery of a written request from the other party hereto (the "Requesting Party"), the party receiving such request (the "Receiving Party") agrees to execute, acknowledge and deliver to the Requesting Party (or, if Landlord is the Requesting Party, any proposed mortgagee or purchaser) a statement in writing, in form reasonably satisfactory to the Requesting Party, certifying whether this Lease is in full force and effect and, if it is in full force and effect, what modifications (if any) have been made to this Lease to the date of the certification, whether or not any defaults or offsets exist with respect to this Lease and, if there are, what they are claimed to be, and setting forth the date(s) to which Rent or other charges have been paid in advance, if any. The failure of Tenant to execute, acknowledge, and deliver to Landlord a statement as above shall constitute an acknowledgment by Tenant that this Lease is unmodified and in full force and effect and that the Rent and other charges have been duly and fully paid to and including the respective due dates immediately preceding the date of Landlord's notice to Tenant and shall constitute as to any person, a waiver of any defaults which may exist prior to such notice. 29. DEFAULT RATE OF INTEREST. All amounts owed by Tenant to Landlord pursuant to any provision of this Lease shall bear interest from the date due until paid at three percent (3%) per annum above the Prime Rate reported immediately prior to the due date for such amount(s), unless a lesser rate shall then be the maximum rate permissible by law, in which event said lesser rate shall be charged ("Default Rate"). 30. EXCULPATORY PROVISIONS. (A) It is expressly understood and agreed by and between the parties hereto, anything herein to the contrary notwithstanding, that each and all of the representations, warranties, covenants, undertakings, indemnities and agreements herein made on the part of Landlord, while in form purporting to be the representations, warranties, covenants, undertakings, indemnities and agreements of Landlord, are nevertheless each and every one of them made and intended, not as personal representations, warranties, covenants, undertakings, indemnities and agreements by Landlord or for the purpose or with the intention of binding Landlord personally, but are made and intended for the purpose only of subjecting Landlord's interest in the Property to the terms of this Lease and for no other purpose whatsoever, and in case of default hereunder by Landlord, Tenant shall look solely to the interests of Landlord in the Property; provided that, subject to the rights of Landlord's mortgagee(s) (if any), (i) in the event of a sale of the Building, Tenant's recourse against the assets of the selling Landlord to satisfy any claim by Tenant which has been identified in writing to the selling Landlord with particularity by Tenant prior to such sale shall be deemed to extend to the Landlord's net proceeds from the sale of the Building, and (ii) in the event of a condemnation or casualty, Tenant's recourse against the assets of the Landlord to satisfy any claim by Tenant which has been identified in writing to Landlord with particularity by Tenant prior to such casualty or condemnation shall be deemed to extend to Landlord's net proceeds of the insurance settlement or condemnation award, as applicable, to the extent that such net proceeds exceed the cost of repairs and restoration incurred by or on behalf of Landlord with respect to such casualty or condemnation. Landlord shall not have any personal 31 35 liability to pay any indebtedness accruing hereunder or to perform any covenant, either express or implied, herein contained. All such personal liability of Landlord, if any, is expressly waived and released by Tenant and by all persons claiming by, through or under Tenant. Nothing herein contained shall be deemed to constitute a waiver of any right Tenant may have to seek injunctive relief (other than for the payment of money) with regard to any default by Landlord hereunder which is not cured within fifteen (15) days (or such longer period as is reasonably required to cure such default through the exercise of due diligence) after written notice from Tenant specifying such default with particularity. (B) Except with regard to repairs (which shall be governed by the provisions of the following Section 30(C)), Tenant may, following a default by Landlord which is not cured within fifteen (15) days after delivery of written notice from Tenant specifying the nature of such default in detail (or such longer time as may be reasonably required to cure such failure through the exercise of due diligence, provided that (i) such failure is not a willful repudiation of the Lease authorized by Landlord's Board of Directors, (ii) such failure is susceptible of cure, (iii) such failure does not relate to the existence of a Hazardous Substance on the Premises in violation of Section 8 hereof, (iv) such failure does not subject Tenant to prosecution or substantial civil or criminal fine or penalty, and (v) Landlord promptly commences to cure such failure within the aforesaid fifteen (15) day period and thereafter diligently pursues the cure of such failure to completion), make any payment or perform any act required of Landlord, whereupon all reasonable costs and expenses reasonably incurred by Tenant, plus interest at the Default Rate from the date incurred until payment in full by Landlord, shall be promptly reimbursed by Landlord (or, in the event Tenant shall obtain a final, unappealable judgment therefor which shall not be satisfied for more than thirty (30) days after such judgment shall become final and unappealable, offset by Tenant against future Rent due hereunder). (C) In the event that at any time during the Term the Tenant determines that repairs which are the responsibility of Landlord as provided herein are required, Tenant shall promptly so notify Landlord and Landlord's managing agent for the Property. In the event that Tenant reasonably determines that the existing situation constitutes an emergency which either threatens imminent injury to persons or material damage to property or materially impairs Tenant's then-current use of the Premises or a material portion thereof, Tenant may give such notice by any means including, without limitation, by telephone. If initial notice is given by telephone (hereinafter "Initial Notice"), such notice must be followed immediately with written notice to Landlord and Landlord's managing agent for the Property (hereinafter "Written Notice"). If Tenant so notifies Landlord and Landlord's managing agent of an emergency situation, Landlord or Landlord's managing agent shall use reasonable efforts to respond within three (3) hours of receipt of the Initial Notice. Tenant shall have the right to immediately eliminate the threat of imminent personal injury or property damage, but Tenant shall not make any repairs except for those necessary to eliminate the threat of imminent personal injury or property damage. If the situation of which Tenant notifies Landlord and Landlord's managing agent is not an emergency, or if the threat of imminent personal injury or property damage is eliminated as aforesaid, Landlord shall thereafter use reasonable means to commence such repairs within ten (10) business days of receipt of Tenant's Written Notice. If Landlord fails to commence the repair within ten (10) business days after receipt of Written Notice from Tenant, Tenant shall have the right, but not the obligation, to commence such repairs. In doing so, Tenant may hire repairman, purchase materials, and generally perform any other act which would be reasonably required of Landlord in making such repair. If the repairs are deemed to be necessary, as well as the responsibility of the Landlord, all reasonable costs incurred by Tenant in effectuating such repairs shall be promptly reimbursed by Landlord after Tenant has submitted to Landlord reasonable documentation evidencing the costs of repair, together with interest at the Default Rate from the date incurred until payment in full by Landlord (failing which, in the event Tenant shall obtain a final, unappealable judgment therefor which shall remain unpaid for thirty (30) days after such judgment shall become final and unappealable, such sums may be offset by Tenant against future Rent due hereunder). 32 36 (D) Tenant hereby acknowledges and agrees that nothing contained in the foregoing Sections 30(B) and 30(C) shall grant Tenant any right to, and Tenant shall not, perform (or cause to be performed) any addition, alteration, improvement, maintenance, modification, repair or other act which will or is likely to adversely affect any other occupant of the Property. (E) Notwithstanding anything herein contained to the contrary, in no event shall either party hereto be obligated to the other to pay or reimburse such party for any indirect, consequential or punitive damages; provided that, this Section 30(E) shall not be deemed to relieve Tenant of any liability with regard to indirect or consequential damages expressly enumerated in Section 21(A) or Section 22(B) hereof. 31. MORTGAGE PROTECTION. Tenant agrees to give any holder of any first mortgage or first trust deed in the nature of a mortgage (both hereinafter referred to as a "First Mortgage") against the Property, or any interest therein, by registered or certified mail, a copy of any notice or claim of default served upon Landlord by Tenant, provided that prior to such notice, Tenant has been notified in writing of the address of such First Mortgage holder. Tenant further agrees that if Landlord shall have failed to cure any such default within twenty (20) days after such notice to Landlord (or if such default cannot be cured or corrected within that time, then such additional time as may be necessary if Landlord has commenced within such twenty (20) days and is diligently pursuing the remedies or steps necessary to cure or correct such default), then the holder of the First Mortgage shall have an additional twenty (20) days within which to cure or correct such default (or if such default cannot be cured or corrected within that time, then such additional time as may be necessary if such holder of the First Mortgage has commenced with such twenty (20) days and is diligently pursuing the remedies or steps necessary to cure or correct such default, including the time necessary to obtain possession if possession is necessary to cure or correct such default). 32. RECIPROCAL COVENANT ON NOTIFICATION OF ADA VIOLATIONS. Within ten (10) days after receipt, Landlord and Tenant shall advise the other party in writing, and provide the other with copies of (as applicable), any notices alleging violation of the ADA relating to any portion of the Property or the Premises; any claims made or threatened in writing regarding noncompliance with the ADA and relating to any portion of the Property or the Premises; or any governmental or regulatory actions or investigations instituted or threatened regarding noncompliance with the ADA and relating to any portion of the Property or the Premises. Nothing in this Section 32 shall be deemed to alter the allocation of responsibility for ADA compliance set forth elsewhere in this Lease. 33. LAWS THAT GOVERN. The terms and conditions of this Lease shall be governed by the laws of the Commonwealth of Virginia, without regard to the conflict of laws principles thereof. 34. FINANCIAL STATEMENTS. Within ten (10) business days of Landlord's request, Tenant shall deliver to Landlord the current financial statements of Tenant, and financial statements for the two (2) years prior to the current year. The financial statements shall include a balance sheet, profit and loss statement, and statement of cash flows for each year, accompanied by an opinion from a certified public accountant certifying that the financial statements are prepared in accordance with generally accepted accounting principles consistently applied. Tenant hereby agrees to pay to Landlord as liquidated damages an amount equal to Two Hundred Fifty Dollars ($250.00) per day for each day on which Tenant fails to deliver such financial statements to Landlord, after not less than forty-eight (48) hours notice from Landlord that Tenant has failed to deliver to Landlord such financial statements within ten (10) business days after Landlord's written request therefor. Notwithstanding the foregoing, the provisions of this Section 34 shall not be 33 37 deemed to apply to Tenant, so long as the stock of Tenant is publicly traded on a nationally-recognized stock exchange and Tenant makes public disclosures regarding its ownership and financial condition. 35. PARKING. Tenant shall have the right to utilize Tenant's Proportionate Share of all parking, parking structures and facilities on the Property at no charge to Tenant during the Lease Term, subject to such reasonable terms and conditions as may be established in writing by Landlord from time to time. Tenant agrees to cooperate with Landlord and other tenants in use of the parking facilities during such periods as Tenant shall lease less than all of the entire Building. Landlord reserves the right during such periods as Tenant shall lease less than the entire Building, in its reasonable discretion, to allocate and assign parking spaces among Tenant and other tenants, so long as Tenant shall be entitled to utilize not less than Tenant's Proportionate Share thereof. Landlord further reserves the right to reconfigure the parking area and modify the existing ingress and egress from the parking area as Landlord shall reasonably deem appropriate. 36. SIGNAGE. Tenant shall have the exclusive right, at Tenant's sole cost and expense (including, but not limited to, all costs of design, construction and installation), to install one or more signs (which may, at Tenant's election, be illuminated) on the Building, subject to (i) the issuance of all necessary consents, licenses and approvals from Fairfax County, and (ii) Landlord's prior written consent (which consent shall not be unreasonably withheld, conditioned or delayed); provided that, nothing herein contained shall be deemed to prohibit Landlord from granting another occupant of the Building the right to have monument signage or Building directory listings. All signs erected by Tenant pursuant to the provisions hereof shall be erected at Tenant's own risk and expense (including final electrical connections and time clock), shall be in accordance with applicable law, and shall only contain the Tenant's name and/or corporate logo. Tenant shall maintain said signs in a good state of repair and save the Landlord harmless from any loss, cost or damage as a result of the construction, installation, maintenance, existence or removal of the same, and Tenant shall repair any damage which may have been caused by the construction, installation, operation, existence, maintenance or removal of such signs. Upon vacating the Premises, Tenant shall remove all such signs and repair all damage caused by the installation, operation and/or removal thereof, at the Tenant's sole expense. No third party shall have any signage rights whatsoever to the Property at any time Tenant is leasing the entire Building. 37. RECORDATION. Tenant shall not record this Lease among or in any public records. 38. FORCE MAJEURE. This Lease and the obligations of the parties hereunder shall not be affected or impaired because the Landlord or Tenant (as applicable) is unable to fulfill any of its obligations hereunder or is delayed in doing so, to the extent such inability or delay is caused by reason of war, civil unrest, strike, labor troubles, unusually inclement weather, governmental delays, inability to procure services or materials despite reasonable efforts, third party delays, acts of God, or any other cause(s) beyond the reasonable control of the Landlord or Tenant (as applicable) (which causes are referred to collectively herein as "Force Majeure"). The time specified for the performance of an obligation of Landlord or Tenant (as applicable) in this Lease shall be extended one day for each day of delay suffered by Landlord or Tenant (as applicable) in the performance of such obligation as a result of any Force Majeure cause. Notwithstanding the foregoing, this Section 38 shall have no application to, nor shall the time for the performance of Landlord's or Tenant's obligations hereunder be extended with respect to, any obligation for the payment of money or the surrender of the Premises upon the expiration of the Lease Term. 34 38 39. INTENTIONALLY OMITTED. 40. BROKERS. Landlord and Tenant each represents and warrants to the other that neither it nor its officers or agents nor anyone acting on its behalf has dealt with any real estate broker other than TRAMMELL CROW COMPANY and CUSHMAN & WAKEFIELD in the negotiating or making of this Lease, and Landlord and Tenant each agrees to indemnify and hold the other (and its agents, employees, partners, directors, shareholders and independent contractors) harmless from all liabilities, costs, demands, judgments, settlements, claims and losses, including reasonable attorneys fees and costs, incurred in conjunction with any such claim or claims of any other broker or brokers with whom the indemnifying party has dealt. Landlord shall be solely responsible for all payments and commissions due to the above-named real estate brokers pursuant to a separate agreement or agreements. 41. EFFECTIVENESS. This Lease shall not be effective and binding unless and until (i) this Lease is fully-executed and delivered by each of the parties hereto, (ii) Landlord and Collins International Service Company ("Collins") and, as guarantor, Rockwell International Corporation, shall execute and deliver a First Lease Amendment to the Collins Lease in form acceptable to Landlord (the "Collins Amendment"), (iii) the First Amendment is formally approved by the Investment Committee of Landlord, and (iv) Collins has approved and has executed the lease on new premises to which it is moving. In the event any of the aforesaid conditions has not been met on or before December 11, 1996, either party may, without liability or obligation to the other, terminate this Lease upon written notice to the other, in which event this Lease shall be null and void as if this Lease were never executed. Landlord and Tenant each expressly acknowledges and agrees that neither party shall have any liability to the other for the failure of any of the conditions set forth in the preceding sentence for any reason whatsoever. 42. LEASE/DEED OF LEASE. To the extent required under applicable law to make this Lease legally effective, this Lease shall constitute a deed of lease executed under seal. 43. MISCELLANEOUS. (A) In the event that Tenant desires to store or maintain the type or character of goods or materials in the Premises which cause an increase in insurance premiums, Tenant shall first obtain the written consent of Landlord and Tenant shall reimburse Landlord for any increase in premiums caused thereby. (B) Unless the context clearly denotes the contrary, the words "Rent" and "Additional Rent" as used in this Lease not only includes cash rental for the Premises, but also all other payments and obligations to pay assumed by the Tenant, whether such obligations to pay run to the Landlord or to other parties. (C) In any litigation between the parties arising out of this Lease, or in connection with any consultations with counsel and other actions taken or notices delivered in relation to a default by any party to this Lease, the non-prevailing party shall pay to the prevailing party all reasonable expenses and costs including reasonable attorneys' fees incurred by the prevailing party in connection with the default and/or litigation, as the case may be (including, but not limited to, fees and costs in preparation for and at trial, and on appeal, if applicable) ("Legal Costs"). The Legal Costs shall be payable on demand, and, if the prevailing party is Landlord, the Legal Costs shall be deemed Additional Rent, subject to all of Landlord's rights and remedies provided herein. 35 39 (D) IT IS MUTUALLY AGREED BY AND BETWEEN LANDLORD AND TENANT THAT THE RESPECTIVE PARTIES HERETO SHALL, AND THEY HEREBY DO, WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER ON ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S USE OF OR OCCUPANCY OF THE PREMISES OR ANY CLAIM OF INJURY OR DAMAGE AND ANY EMERGENCY STATUTORY OR ANY OTHER STATUTORY REMEDY. IF LANDLORD COMMENCES ANY SUMMARY PROCEEDING FOR NONPAYMENT OF RENT OR ADDITIONAL RENT, TENANT WILL NOT INTERPOSE ANY NON-COMPULSORY COUNTERCLAIM OF WHATEVER NATURE OR DESCRIPTION IN ANY SUCH PROCEEDING. (E) If any term or provision of this Lease is declared invalid or unenforceable, the remainder of this Lease shall not be affected by such determination and shall continue to be valid and enforceable. (F) The parties executing this Lease warrant that this agreement is being executed with full corporate authority and that the officers whose signatures appear hereon are duly authorized and empowered to make and execute this Lease in the name of the corporation by appropriate and legal resolution of its Board of Directors. (G) This Lease contains the entire agreement between the parties hereto. No representations, inducements, promises or agreements, oral or otherwise, between the parties not embodied herein shall be of any force or effect, and all reliance by Tenant with respect to any representations, inducements, promises or agreements is based solely on those contained in this Lease. Any modification to this Lease must be in writing and duly executed by the parties hereto. 44. ROOF-TOP RIGHTS. In addition to Tenant's other rights hereunder, but subject to Landlord's requirements for operation of the Building, Tenant shall have the exclusive right (or, if Tenant is not leasing the entire Building, the non-exclusive right) at no charge to access and utilize the roof of the Building for purposes of installing, operating, maintaining and repairing radio, microwave and satellite transmission and reception equipment and HVAC equipment. Such rights shall be subject to the terms and conditions of this Lease and to all of the terms and conditions set forth on the attached Exhibit E. No third party shall have any roof-top rights whatsoever at any time when Tenant leases the entire Building. 45. EARLY TERMINATION FEE. Notwithstanding anything herein contained, but in consideration of the terms and conditions hereby granted in favor of Tenant, in the event this Lease shall expire or be terminated for any reason whatsoever (whether due to fire, casualty, condemnation, default by Landlord or Tenant or any other reason or cause, and regardless of whether due to the fault of Landlord or Tenant or arising without fault on the part of either) prior to the day preceding the thirteenth (13th) anniversary of the Commencement Date, Tenant agrees to pay to Landlord the sum (the "Termination Payment") equal to the Termination Payment set forth on the attached Exhibit I which corresponds to the month of the Initial Term in which such expiration or termination shall occur. By way of example of the foregoing, but not in limitation thereof, in the event the Lease were terminated for any reason in the seventieth (70th) month of the Initial Term, Tenant would pay to Landlord a Termination Payment in the sum of $704,844.22. The Termination Payment shall be paid by Tenant to Landlord not less than sixty (60) days following the expiration or sooner termination of this Lease. [signatures appear on following page] 36 40 IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease under seal on this _____ day of December, 1996. LANDLORD: PRINCIPAL MUTUAL LIFE INSURANCE COMPANY, an Iowa corporation By: (Seal) -------------------------------- Title: ---------------------------- Attest: By: (Seal) -------------------------------- Title: ---------------------------- TENANT: AMERICAN MANAGEMENT SYSTEMS, INC., a Delaware corporation By: (Seal) -------------------------------- Title: ---------------------------- Attest: By: (Seal) -------------------------------- Title: ---------------------------- 37 41 EXHIBIT A LEGAL DESCRIPTION OF THE LAND [TO BE ATTACHED PRIOR TO EXECUTION] 42 EXHIBIT A-1 PREMISES (FIRST FLOOR RENTABLE AREA) 43 EXHIBIT A-2 PREMISES (SECOND FLOOR RENTABLE AREA) 44 EXHIBIT A-3 PREMISES (THIRD FLOOR RENTABLE AREA) 45 EXHIBIT A-4 PREMISES (FOURTH FLOOR RENTABLE AREA) 46 EXHIBIT A-5 PREMISES (FIFTH FLOOR RENTABLE AREA) 47 EXHIBIT A-6 PREMISES (SIXTH FLOOR RENTABLE AREA) 48 EXHIBIT A-7 PREMISES (SEVENTH FLOOR RENTABLE AREA) 49 EXHIBIT A-8 PREMISES (EIGHTH FLOOR RENTABLE AREA) 50 EXHIBIT A-9 PREMISES (NINTH FLOOR RENTABLE AREA) 51 EXHIBIT A-10 PREMISES (TENTH FLOOR RENTABLE AREA) 52 EXHIBIT A-11 PREMISES (ELEVENTH FLOOR RENTABLE AREA) 53 EXHIBIT A-12 PREMISES (TWELFTH FLOOR RENTABLE AREA) 54 EXHIBIT A-13 PREMISES (LOWER LEVEL RENTABLE AREA) 55 EXHIBIT A - 14 PREMISES RENTABLE AREAS
FLOOR RENTABLE SQUARE FEET ----- -------------------- First Floor 11,495 Second Floor 14,624 Third Floor 16,648 Fourth Floor 17,586 Fifth Floor 17,586 Sixth Floor 17,586 Seventh Floor 17,586 Eighth Floor 17,586 Ninth Floor 17,586 Tenth Floor 17,586 Eleventh Floor 17,633 Twelfth Floor 16,878 Lower Level 13,834
56 EXHIBIT B WORK AGREEMENT A. Subject to the terms hereof, Landlord shall be responsible, at its cost and expense, for ensuring that the Landlord's Work referenced on the attached Exhibit B-1 is substantially completed in the Building prior to the Landlord's General Work Deadline (as herein defined); provided that, Landlord shall be responsible, at its cost and expense, for ensuring that the Landlords' Critical HVAC Work and (provided that Tenant shall advise Landlord, not later than December 13, 1996, of the number of ADA strobes to be installed by Tenant on each floor of the Premises) Landlord's Critical Fire/Life Safety Work are substantially completed in the Building on or before the Critical Path Deadline (as herein defined). Subject only to the foregoing, Tenant shall be solely responsible for compliance of the Premises with all applicable requirements under the Americans with Disabilities Act and the regulations and Accessibility Guidelines for Buildings and Facilities promulgated pursuant thereto (collectively, the "ADA"), including, but not limited to, ADA compliance with regard to the Building Fit-Out (as defined below) and any subsequent changes to the Premises made by or on behalf of Tenant. B. Tenant shall cause the work (the "Building Fit-Out") defined and described in the Approved Plans (as hereinafter defined) to be performed by a general contractor (the "General Contractor") reasonably approved by Landlord (and it shall not be unreasonable for Landlord to deny its approval to any general contractor which: (i) lacks demonstrable experience in commercial construction, (ii) is not bonded or not bondable; (iii) is not fully licensed under all applicable laws; (iv) is not enjoying good labor relations as of the date Landlord's approval is sought; or (v) lacks the ability to perform, consistently, quality workmanship (as reasonably evidenced by Landlord)). Landlord hereby approves Davis Construction to act as the General Contractor. C. Promptly after execution of this Lease, Tenant will cause to be prepared and shall submit to Landlord for Landlord's approval (which shall not be unreasonably withheld, conditioned or delayed) construction drawings for the proposed Building Fit-Out. Such construction drawings shall be prepared by an architect ("Tenant's Architect") licensed in the Commonwealth of Virginia, selected by Tenant and approved by Landlord (which approval shall not be unreasonably withheld). Landlord hereby approves Greenwell-Goetz Architects to act as Tenant's Architect. Tenant shall, after receipt of Landlord's approval, submit such construction drawings for permitting with Fairfax County, Virginia. Within ten (10) business days after Tenant's submission of construction drawings to Landlord, Landlord will indicate to Tenant in writing whether it approves such drawings, or if not, specifying what aspects of such drawings are not approved. If Landlord fails to notify Tenant of any objections within the required time period, Landlord will be deemed to have approved Tenant's submission. Grounds for disapproval by Landlord shall include, but not be limited to, the failure of such drawings to adhere to applicable laws, codes or ADA requirements, or to integrate appropriately with base Building structural, electrical, mechanical, plumbing, and/or heating, ventilation and air conditioning ("HVAC") systems (hereinafter "Systems"), and the inclusion of work which may invalidate any existing warranty. If Landlord disapproves any part of the drawings submitted by Tenant, Landlord and Tenant will meet promptly to discuss the objectionable items and will use commercially reasonable efforts to resolve all objections promptly. Once approved by Landlord, the final construction drawings, as revised to reflect the resolution of all objections, shall constitute the "Approved Plans" for all purposes of this Lease. Neither Landlord's review of the proposed construction drawings or the Approved Plans, nor any review or oversight of the Building Fit-Out by Landlord's construction manager, shall constitute a warranty by Landlord regarding the fitness of the Premises or the Approved Plans for the Permitted Use of the Premises by Tenant, the proper integration of the Building Fit-Out with the Systems, nor of the compliance of the Approved Plans with applicable codes or governmental or quasi-governmental requirements, nor shall Landlord have any liability with regard to such approval, review or oversight but, subject to the foregoing, Landlord agrees to use reasonable efforts to notify Tenant of any failure to comply with applicable laws of which Landlord acquires actual knowledge. 57 D. Tenant shall promptly cause the General Contractor to commence and diligently prosecute to completion the Building Fit-Out upon receiving the necessary permits from Fairfax County, Virginia. Subject to the terms hereof, Tenant will pay the full cost associated with the preparation of the Approved Plans and the construction of the Building Fit-Out. The Building Fit-Out shall be completed by Tenant substantially in accordance with the Approved Plans (and any Approved Change Orders, as defined below). Tenant shall be solely responsible for all matters necessary to commence, perform and complete the Building Fit-Out, including, but not limited to, filing plans and other required documentation with the proper governmental authorities, securing all necessary permits for the performance of any and all work required to be performed under the Approved Plans (all of which will be deemed part of the Building Fit-Out), and filing for and obtaining all approvals and permits necessary for Tenant to occupy the Premises (including, but not limited to, all final inspections for issuance of Tenant's final non-residential use permit, or its equivalent). E. Tenant shall have the right, at its sole expense, to make changes to the Approved Plans provided the same are approved by Landlord, which approval shall not be unreasonably withheld, conditioned or delayed. No such Landlord approval shall be required for any change having a cost of less than Ten Thousand Dollars($10,000.00), provided such change neither requires a permit, permit modification or other governmental or quasi-governmental approval, consent or license, nor affects the structure or systems of or serving the Building. Tenant assumes full responsibility for all additional costs and delays in completion of the Building Fit-Out due to any such change orders. Any change order approved by Landlord and Tenant pursuant to the foregoing provision is referred to herein as an "Approved Change Order". F. Tenant agrees that the Building Fit-Out will be performed in a good and workmanlike manner. The General Contractor and any contractors of Landlord shall keep all construction areas reasonably clean and free of trash and debris, and shall police the activities of its contractors, subcontractors and their respective employees with regard to keeping the Building and Property clean. G. The General Contractor(s) and any contractors of Landlord shall be adequately insured, and shall carry worker's compensation, liability and other insurance (including, but not limited to, Builder's Risk Insurance) naming Landlord or Tenant (as applicable) as an additional insured and loss payee (as to Builder's Risk coverage) in amounts and in form and substance reasonably satisfactory to Landlord. Tenant shall provide Landlord and Landlord shall provide Tenant with evidence that the requisite insurance has been obtained prior to the commencement of any work by any contractor acting on behalf of such party. Tenant's construction contract shall indemnify Tenant and Landlord from damages, losses and expenses associated with the acts and omissions of the General Contractor, its agents, employees, contractors and subcontractors. H. Landlord and Tenant shall each provide to the other copies of all applications for permits, copies of all governmental inspection reports and/or certificates, and any and all notices or violations communicated to them or their respective contractors by applicable governmental authorities, promptly upon receipt and/or submission thereof, as the case may be. Each party agrees to comply (and to cause its contractor(s) to comply) with all applicable federal, state and local laws, regulations and ordinances in the performance of the Landlord Work or the Building Fit-Out (as applicable), and to promptly cause to be rectified any violations of such laws caused by the acts or omission of the applicable party or its contractor(s), or their respective employees, agents, contractors and/or subcontractors, and each shall be responsible for any non-compliance by them or their respective contractor(s), or their respective employees, agents, contractors and/or subcontractors. I. The performance of Tenant's Work and Landlord's Work shall be lien free. Except as specifically set forth herein, Tenant shall be responsible for the payment of, and shall pay when due, all hard and soft costs (collectively referred to herein as the "Costs") associated with the design, permitting and construction of the Building Fit-Out (such as, but not limited to, design 58 and engineering costs, permitting costs, inspection fees, demolition costs, and costs incurred to procure labor and materials, and any other costs associated with modifications needed to be made to the "as-is" condition of the existing improvements within the Building to the extent the same are not specifically required to be performed at Landlord's expense as part of the Landlord's Work). Tenant shall pay all Costs on a timely basis so as to avoid the assertion of any statutory and/or common law lien against the Premises, the Land or the Building, in whole or part. Landlord shall not be entitled to any fee or mark-up with respect to the Building Fit-Out performed by Tenant and its contractors (but this sentence shall not be deemed to prohibit Landlord from recovering any sums to which Landlord is entitled pursuant to Section 6(E) hereof). J. In consideration of Tenant's fulfillment of all of its obligations under this Exhibit B, Landlord agrees to provide Tenant with the following allowances (collectively, the "Allowances"): 1. An allowance (the "Construction Allowance") equal to Six Million Four Hundred Twenty-Six Thousand Four Hundred Twenty Dollars ($6,426,420.00) ($30.00 per square foot of rentable area in the Premises). Tenant agrees that the Construction Allowance shall be applied solely to pay Costs of design and construction of the Building Fit-Out pursuant to the Approved Plans (including, but not limited to, all hard and soft costs associated with the Build-Out, including space planning, interior design, construction drawings for both the permit and bid set, permits, and mechanical, electrical and plumbing drawings); provided that, upon completion of the Building Fit-Out and payment of all costs, expenses and fees associated therewith, Landlord agrees to allow Tenant to utilize the unpaid portion of the Construction Allowance, up to a maximum of One Million Seventy-One Thousand Seventy Dollars ($1,071,070.00), for data wiring, cabling expenses, relocation costs and other move-related expenses, subject to the terms hereof; and 2. An allowance (the "Capital Improvement Allowance") equal to Two Hundred Thousand Dollars ($200,000.00). Tenant agrees that the Capital Improvement Allowance shall be applied solely to pay Costs of design and construction of elevator lobby renovations and other improvements to the common areas of the Building mutually agreed by Landlord and Tenant (the "Common Area Renovations"). The Common Area Renovations shall be included as a part of the Building Fit-Out on all of the terms and conditions applicable to the Building Fit-Out. 3. The Allowances shall be payable by Landlord to Tenant on a percentage of completion basis, with draws to be payable not more than once per month commencing at any time after the Phase I Commencement Date, within fifteen (15) business days after (1) the applicable percentage of construction of the Premises has been substantially completed, (and subject to not less than a ten percent (10%) holdback requirement on the first (1st) fifty percent (50%) of the Building Fit-Out, which holdback amount shall not be payable prior to final completion of the Building Fit-Out and the tender of all required deliveries by the General Contractor to Tenant and Landlord under the terms of the general construction contract) and (2) Tenant has provided Landlord with a written payment request for the applicable portion of the Allowance, accompanied by all of the following items: a. A certificate from Tenant's Architect to Landlord certifying that the Building Fit-Out (or the applicable percentage thereof) has been substantially completed in accordance with the Approved Plans, and that the sums being requested by Tenant to be paid out of the Allowance in such payment request have been expended by Tenant for actual costs of the construction of Tenant's Work; b. A true and correct copy of the final non-residential use permit (or its equivalent) issued to Tenant by the applicable governmental authority (final payment only); c. A copy of as-built plans and specifications for the Building Fit-Out incorporating all Approved Change Orders (if any) (final payment only); and 59 d. A duly executed interim release of liens (for interim payments) and a duly executed final release of liens (for the final payment) executed (for all payments) by Tenant's General Contractor and (for the final payment only) by any and all subcontractors and/or materialmen supplying labor and/or materials in connection with the Building Fit-Out, in form and substance reasonably satisfactory to Landlord, acknowledging (as to the final payment) payment of in full for all labor and/or materials associated with the Building Fit-Out, and (as to interim payments) acknowledging partial payment of the applicable percentage of the Allowance plus any other sums otherwise disbursed by Landlord and/or Tenant to the General Contractor, as of the date of, and including, such draw request, and fully and forever waiving any and all statutory and/or common law liens which might otherwise be asserted by them against the Property in connection with the performance of the Building Fit-Out (except, as to interim payments only, such waiver may be limited by its terms to the disbursed amounts); provided that, with respect to any subcontractor and/or materialman supplying labor and/or materials in connection with the Building Fit-Out, who refuses to execute and deliver a duly executed final release of liens, Landlord shall be entitled to deduct from the final payment the full amount of the contract price for such subcontractor or materialman (net of any amounts for which partial lien releases have previously been obtained from such contractor or materialman with respect to the Building Fit-Out) and hold the same as additional retainage until such time as (i) such subcontractor or materialman shall have executed and delivered to Landlord such final release of liens, or (ii) the applicable period within which such subcontractor or materialman may assert a lien against the Property shall have expired, and Landlord shall disburse the remainder of the final payment to Tenant. Landlord shall not be obligated to pay the Allowance (or any portion thereof) to Tenant unless (and not until fifteen (15) business days after) Landlord has received a payment request with all required attachments properly supplied, and such payment shall be (until the final payment) net of the holdback requirement set forth above, and shall be utilized to reimburse Tenant for (or, with respect to any work for which a mechanics lien might be asserted against the Property, and with respect to which work Tenant has not delivered evidence of prior payment, to pay directly to the General Contractor) the actual Costs of performing the Building Fit-Out or such other costs for which such Allowance may be used in accordance with the terms hereof. At Landlord's option, disbursements with respect to any work for which a mechanics lien might be asserted against the Property, and with respect to which Tenant has not delivered evidence of prior payment, may be made directly to the General Contractor, or jointly to the Tenant and the General Contractor. K. Tenant acknowledges that Landlord is delivering the Premises and Building in "as-is" condition, except for the performance of the Landlord's Work and as may otherwise be expressly set forth herein. Tenant shall be solely responsible for ensuring that the design and construction of the Building Fit-Out is in compliance with ADA and with all other applicable laws, building codes, ordinances and regulations applicable to the construction of the Premises. Tenant shall also be solely responsible for compliance of its operations and employment practices with all applicable laws, including but not limited to the ADA. L. Landlord and Tenant acknowledge and agree that timely, concurrent completion of the Building Fit-Out and the Landlord's Work will require reasonable cooperation during the plan preparation, permitting and construction process. Accordingly, Landlord and Tenant agree to use commercially reasonable efforts and due diligence to cooperate with each other, to accommodate each other's interests as the construction process progresses, and otherwise to expedite the resolution of any disputes, problems or unforeseen circumstances. Upon delivery of the final construction drawings to Landlord for the Building Fit-Out, Tenant shall also deliver to Landlord a construction schedule for the performance of the Building Fit-Out, which construction schedule shall provide for a reasonable phasing of the Landlord's Work with the Building Fit-Out, and for reasonable periods of time for completion of each portion of the Landlord's Work. Such construction schedule shall be subject to Landlord's review, comment 60 and approval, and revision by Tenant, in accordance with the applicable provisions of Section (C) of this Exhibit B. Landlord and Tenant each agree to negotiate with regard to such construction schedule in good faith. After commencing the Building Fit-Out, the Tenant shall not modify such construction schedule in any respect which will alter the agreed phasing of the Landlord's Work with the Building Fit-Out or the agreed-upon times for the performance of the Landlord's Work. In the event of any delay claimed to have been occasioned by the other party (the "delaying party"), the injured party shall deliver written notice of the claim of delay within two (2) business days after the occurrence thereof, and the delaying party shall have two (2) business days to cure the cause of such delay. Failure to provide such notice shall be deemed conclusive evidence that no such delay has occurred. M. Without limiting the generality or applicability of the other provisions governing the Building Fit-Out under this Exhibit B, or of any other applicable provision of this Lease, Tenant agrees that the following provisions shall apply to the performance of Building Fit-Out: 1. In conducting any portion of the Building Fit-Out which involves construction work upon the exterior portions of the Building, Tenant agrees that it shall, at Tenant's sole expense, restore all areas of the Building's exterior, including, without limitation, all adjacent planting areas, sidewalks and parking areas affected by the execution of the Building Fit-Out, to their condition immediately prior to commencement of such portion of the Building Fit-Out. 2. Tenant shall protect and restore all work areas of the Building (including without limitation any portions of the common areas of the Building) required for access to the Premises as part of the Tenant's Work, or otherwise utilized or affected in performing the Building Fit-Out, including, but not limited to, the Building HVAC System, Building roof, common corridor floors, walls, and ceilings, second floor penetrations and chase wall penetrations. Tenant shall further ensure that all floor penetrations are properly fire-stopped, in accordance with applicable building and fire codes and prudent construction practices. Tenant's construction schedule shall be updated promptly by Tenant to reflect any material changes therein, and Tenant shall promptly notify Landlord of any such change in Tenant's construction schedule. Tenant shall notify Landlord at the time Tenant commences any portion of the Building Fit-Out involving the exterior of the Building, the Building roof, the common corridors, and all floor to floor penetrations (which notification shall be deemed given as to all such matters reviewed at a regularly scheduled meeting with the General Contractor if Landlord's representative is in attendance. All Building Fit-Out shall be subject to the inspection and approval of Landlord. In regard to the foregoing right of inspection and approval, Tenant and its contractor shall permit such construction manager and/or representatives reasonable and timely notice of all meetings with the General Contractor, and access to all affected areas of the Premises and Building necessary for Landlord to conduct inspections and/or supervision. Tenant shall also deliver to Landlord's managing agent copies of all documents and document revisions issued or received by Tenant pertaining to the payment, scope, plans, permits, changes or schedule of, to or for the Building Fit-Out sent by Tenant, Tenant's architect, the General Contractor or any governmental agency which regulates the Building Fit-Out in whole or part (collectively, the "Key Parties") to another of the Key Parties. 3. Tenant and the General Contractor shall provide copies of warranties for the Building Fit-Out and the materials and equipment which are incorporated into the Building and Premises in connection therewith, as well as provide to Landlord copies of all operating and maintenance manuals for all equipment and materials incorporated into the Building and/or Premises as part of the Building Fit-Out. Tenant shall either assign to Landlord, or enforce on Landlord's behalf, all such warranties to the extent repairs and/or maintenance on warranted items which are otherwise Landlord's responsibility under this Lease would be covered by such warranties. Without limitation, all aspects of the Building Fit-Out in each of the Phase I Premises and the Phase II Premises shall be warranted to be free from defects in design and workmanship for a period of not less than one (1) year from substantial completion of construction in such phase (i.e., the Phase I Premises or the Phase II Premises, as the case may be). 61 N. In the event that Tenant is unable to occupy or use the Premises for its intended purpose on or before the Phase I Rent Commencement Date (with regard to the Phase I Premises) or the Phase II Rent Commencement Date (with regard to the Phase II Premises) due to the failure to complete the Building Fit-Out or other matters for which Tenant is responsible, Rent shall, nonetheless, commence on the Phase I Rent Commencement Date and Phase II Rent Commencement Date, respectively. Notwithstanding the foregoing: (1) To the extent substantial completion of the Building Fit-Out is delayed due to the wrongful acts or omissions of Landlord or its agents, employees, representatives or contractors in violation of the terms hereof which are not cured within twenty-four (24) hours after notice thereof from Tenant to Landlord, or any failure to substantially complete any of Landlord's Work by the applicable deadline set forth in paragraph N(2) with respect to the incomplete item(s) of Landlord's Work (without regard to any extension available pursuant to paragraph N(2) for delays occasioned by Force Majeure events or circumstances) (collectively, "Landlord's Wrongful Acts"), and, as a result of such delay, Tenant is unable to lawfully occupy the Premises and in fact does not commence operation of its business in the Premises on or before April 11, 1997 or such later date on which the Building Fit-Out would have been substantially completed and the Premises capable of lawful occupancy by Tenant, but for Landlord's Wrongful Acts (as the same may be extended as aforesaid, the "Target Completion Date"), the Phase I Rent Commencement Date shall be extended one (1) day for each day after the Target Completion Date on which the Building Fit-Out is not substantially completed due to Landlord's Wrongful Acts (but in no event beyond the date on which Tenant is able to lawfully occupy any portion of the Premises or in fact commences operation of its (or allows any sublessee, licensee or other person or entity to commence operation of their) business in any portion of the Premises). Notwithstanding the foregoing provisions of this paragraph N(1), in the event of any failure, which is not due to Force Majeure events or circumstances, by Landlord to substantially complete any of Landlord's Work by the applicable deadline set forth in paragraph N(2) with respect to the incomplete item(s) of Landlord's Work, the Phase I Rent Commencement Date shall be extended one (1) day for each day after the Target Completion Date on which such Landlord's Work is not substantially completed, regardless of whether Tenant is or lawfully may occupy the Premises; (2) In the event that (i) any portion of the Landlord's Critical Fire/Life Safety Work or the Landlord's Critical HVAC Work is not substantially completed in the Building on or before March 7, 1997 (the "Critical Path Deadline"), or (ii) any other portion of the Landlord's Work is not substantially completed in the Building on or before April 11, 1997 (the "Landlord's General Work Deadline"), each of the Critical Path Deadline and the Landlord's General Work Deadline being subject to a day-for-day extension for each day of delay in the substantial completion of the Landlord's Work which is reasonably attributable to Force Majeure events or circumstances or to the wrongful acts or omissions of Tenant or Tenant's Agents in violation of the terms hereof which are not cured within twenty-four (24) hours after notice thereof from Landlord to Tenant, then in order to compensate Tenant for costs and expenses that will likely be incurred by Tenant on account of such delay, Landlord shall be obligated to pay Tenant as liquidated damages the amount of Four Thousand Five Hundred Eighty-Two and seventy-five/one hundredths Dollars ($4,582.75) per day for each day after the Critical Path Deadline or the Landlord's General Work Deadline, as applicable (or such later date on which Tenant would have been able to lawfully occupy any portion of the Premises or in fact commence operation of its business in any portion of the Premises, but for the delay in the 62 substantial completion of the Landlord's Work), on which Tenant is unable to lawfully occupy the Premises and in fact does not commence operation of its (or allows any sublessee, licensee or other person or entity to commence operation of their) business in the Premises, together with any reasonable increased cost of the Building Fit-Out proximately resulting from such delay; (3) To the extent Tenant is unable to obtain a non-residential use permit due to the failure of the base Building structure, systems or core facilities or any of the Landlord's Work to comply with any applicable legal requirements, then any delay in the issuance of such non-residential permit beyond the date on which Tenant would have been able to obtain such non-residential use permit, but for such failure, shall be treated pursuant to paragraph (N)(1) as a delay in the substantial completion of the Building Fit-Out caused by Landlord's Wrongful Acts; (4) In the event the Phase I Rent Commencement Date shall be extended as a consequence of the failure by Landlord to substantially complete any portion of the Landlord's Work due to a Force Majeure event or circumstance, the Expiration Date shall also be extended by a like amount; and (5) Tenant acknowledges and agrees that: (i) nothing herein contained shall be deemed to extend the Phase I Rent Commencement Date by more than one (1) day for any one (1) day of delay for which Landlord is responsible pursuant to paragraph N(1), notwithstanding that more than one (1) provision of said paragraph N(1) may apply to such one (1) day of delay; (ii) nothing herein contained shall be deemed to obligate Landlord to pay Tenant more than one (1) days' liquidated damages pursuant to paragraph N(2) for any one (1) day of delay in Tenant's ability to lawfully occupy the Premises, notwithstanding that more than one (1) failure to meet the Critical Path Deadline or the Landlord's General Work Deadline has contributed to such day of delay; (iii) nothing herein contained shall be deemed to extend the Phase I Rent Commencement Date, or to obligate Landlord to pay Tenant liquidated damages, with respect to any delay in Tenant's ability to lawfully occupy the Premises or obtain a non-residential use permit therefor that does not extend beyond April 11, 1997; and (iv) the remedies set forth in this paragraph N shall be Tenant's exclusive monetary remedies against Landlord in respect of any delay in the substantial completion of the Landlord's Work or the Building Fit-Out, and any delay in Tenant's ability to lawfully occupy the Premises or obtain a non-residential use permit therefor, and Tenant further waives any right of rescission with respect to any such delays. O. Landlord and Tenant shall, and shall each cause its respective contractor(s) to, work in harmony with the other party hereto and its contractor(s), and neither party shall, or shall knowingly permit its contractor(s) to, interfere with the performance of the other party's work hereunder (i.e., the Building Fit-Out or the Landlord's Work, as applicable). Each party's contractor(s) shall be permitted reasonable access to the site, the loading docks, the elevators, any construction lift or trash chute, and any other existing Building facilities which are reasonably and customarily required in the performance of their respective work (without damage thereto). Tenant shall not be charged for the use of elevators, loading docks, and similar facilities in the construction of the Building Fit-Out. P. On or about January 1, 1997, or any earlier date after the existing tenant of the Building vacates the Building to which Landlord and Tenant agree, Landlord and Tenant shall cause their respective designated agents to conduct a joint inspection of the Building HVAC System to determine the condition thereof and to jointly prepare a report regarding the condition of said Building HVAC System and a list of reasonable steps to be taken by Tenant to safeguard the Building HVAC System against damage thereto (including, but not limited to, physical damage 63 to equipment, decreased operating efficiency due to abnormal levels of dust or particulates, or improper balancing) arising from or out of, or in connection with, the Building Fit-Out (such list to include, but shall not necessarily be limited to, Tenant's obligation to replace Building HVAC System filters not less than once each ten (10) days). Promptly following the substantial completion of any portion of the Landlord's Work affecting the Building HVAC System, prior to the completion of the Building Fit-Out, Landlord and Tenant shall cause their respective designated agents to mutually update such report and list (each agreeing to act reasonably) to reflect any change to the Building HVAC System or the condition thereof as a result of the completion of such portion of the Landlord's Work. Each party agrees to act in good faith in the preparation of such report and list (and any supplement(s) thereto). Tenant agrees to comply (and to cause its General Contractor, contractors and subcontractors to comply) with the mutually agreed steps identified to safeguard the Building HVAC System against such damage. Notwithstanding anything contained in this Lease to the contrary, (i) Tenant shall be solely liable for, and shall be responsible for the correction of, any damage to the Building HVAC System occasioned by the Building Fit-Out, and (ii) to the extent reasonably attributable to any such damage, Landlord shall not be liable for or obligated to grant (nor shall Tenant be entitled to) any abatement of rent or liquidated damages pursuant to paragraph N of this Exhibit B with regard to (a) any failure to complete the Landlord's Work, (b) delay in the substantial completion of the Building Fit-Out, or (c) failure of the Building HVAC System to comply with any applicable legal requirements. 64 EXHIBIT B-1 LANDLORD'S WORK 1. Landlord shall, at its sole cost and expense, cause the work set forth on the attached Exhibits B-2 and B-3 (collectively, the "Landlord's Work") to be substantially completed in the Building in a good and workmanlike manner. All of the Landlord's Work shall be performed utilizing Building standard materials; provided that, Landlord shall have the right to make reasonable and comparable substitutions. No allowance or credit shall be granted in connection with any unused materials or any portion of the Landlord's Work which is waived by Tenant. Except as expressly set forth in the Lease to the contrary (including, but not limited to, Exhibits B-2 and B-3, and this Exhibit B-1), Tenant acknowledges and agrees that (i) Tenant will accept possession of the Premises in its "as is" condition as of January 1, 1997, and (ii) Landlord shall have no obligation to alter, improve or modify the Premises. 2. To the extent that any delay in the performance of the Landlord's Work is occasioned by the acts or omissions of Tenant or any of Tenant's Agents and such delay shall result in any increase in the cost of the performance of any portion of the Landlord's Work, Tenant shall reimburse Landlord upon demand for such increased cost(s). Tenant shall bear all costs of design and construction of all improvements and alterations in excess of the Landlord's Work. No such delay in the performance of the Landlord's Work occasioned by Tenant or any of Tenant's Agents (nor any delay in the performance of the Landlord's Work which does not result in a delay in the substantial completion of the Building Fit-Out) shall defer or extend the Phase I Rent Commencement Date or the Phase II Rent Commencement Date. 3. Landlord and Tenant shall examine the Landlord's Work upon substantial completion thereof, and shall prepare a list of mutually-agreed punch-list work. Preparation of such list shall be conclusive evidence that the Landlord's Work has been completed in accordance with the terms hereof, subject to the cure of the identified "punch-list" items of the Landlord's Work, and further subject to the cure of latent defects in the Landlord's Work identified by Tenant in writing within one hundred eighty (180) days of the preparation of said punch-list. Landlord shall exercise reasonable efforts to complete all punch-list items of Landlord's Work within thirty (30) days after preparation of said punch-list. 65 EXHIBIT B-2 LANDLORD'S ADA and BOCA WORK Subject to the terms of Exhibit B-1, Landlord agrees to perform the following work in compliance with the Americans With Disabilities Act ("ADA") and the 1993 BOCA Code: 1. Landlord shall, at its own expense and not as an Operating Expense, cause the base Building HVAC System (i.e., exclusive of any additions thereto made by or for Tenant or any prior tenant of the Building) to comply with all laws, orders, ordinances and regulations of Federal and local authorities, and with directions of public rules, requirement and regulations of the Board of Fire Underwriters, pertaining to fresh air and/or heating and cooling capacity (including, with respect to fresh air requirements, ASHRAE Standard 62-1989, and, with respect to heating and cooling capacity, 1993 BOCA code), which are applicable to the Premises as of the date hereof. Without limiting the foregoing, Landlord shall: (a) ensure that the existing base Building HVAC System, (including variable air volume ("VAV") boxes) is restored to fully-operational condition (the "Landlord's Critical HVAC Work"); (b) ensure that the existing base Building HVAC System is capable of providing not less than two thousand two hundred sixty (2,260) cubic feet per minute (cfm) of outdoor air per floor of the Building; (c) install such additional equipment or modify existing equipment as is reasonably required in order to provide an additional ten (10) tons of capacity to the existing cooling tower; (d) install a ninety-eight (98) ton outside air roof-top unit; (e) outside air system, including roof-top unit, shall be provided with automated controls so that they operate in conjunction with the occupied load of the HVAC system and are locked-out during the morning warm-up and cool-down periods; and (f) ensure that, subject to the qualifications and limitations set forth in Exhibit F, the existing base Building HVAC System meets the specifications set forth on the attached Exhibit F, and is capable, subject to the qualifications and limitations set forth in said Exhibit F, of providing conditioned air at a ratio of not less than one (1) ton of air conditioning per three hundred twenty-five (325) usable square feet in the Building. 2. With respect to the areas (the "common areas") comprising the main lobby, elevators and elevator lobbies, fire stairwells and rest rooms (including water fountains adjacent thereto) within the Building, and all areas of the Property outside the Building, Landlord shall cause the following items of work ("Landlord's ADA Work") to be performed in compliance with the ADA as enforced by Fairfax County, Virginia: (a) Provide directional signage identifying location of handicapped parking spaces and the path to handicapped entrances to the Building, at both front and rear lobby locations; (b) Provide two (2) handicap accessible van spaces on the Property; (c) Reconfigure four foot (4') ramp at curb adjacent to main Building entrance, to remove existing two inch (2") lips; (d) Replace knob type hardware with ADA lever sets on the second (2nd) floor common areas, where necessary; (e) Provide ADA-compliant signage indicating location of public rest rooms (if any) on each floor of the Building; 66 (f) Reset elevator door "open wait" time from fourteen (14) seconds to twenty (20) seconds; (g) Provide (i) a readable Emergency Call symbol, non-voice call options, pull loop call box (replace pincher pull), and twenty-eight inch (28") cord length, for elevator call boxes. (h) Install ADA-compliant signage on restrooms and fire stairwells; (i) Reset pull pressure on door closers in common areas, and on mechanical closet doors; (j) Provide paddle-type faucet handles on rest room sinks, and cover exposed hot pipes and drains in rest rooms; (k) Replace marble thresholds to rest rooms with ADA-compliant beveled thresholds; (l) Reset rest room flush valves to require five (5) pounds maximum force; (m) Replace drinking fountains with ADA-compliant "high-low" units; and (n) Provide ADA-compliant fire alarm system for all core and common areas of the Building, which system shall have the capability to be expanded to accommodate ADA strobes throughout the Premises (the work set forth in this paragraph 2(n) being referred to as the "Landlord's Critical Fire/Life Safety Work"). Notwithstanding the foregoing, Landlord hereby reserves the right to add, delete, modify or replace all or any portion of the Landlord's ADA Work provided that Landlord complies with the requirements of ADA as enforced by Fairfax County, Virginia. 3. The foregoing is not intended, and shall not be construed, to impose on Landlord any obligation to or liability for assuring that the Building Fit-Out is in compliance with any applicable law, rule, regulation or standard as set forth above, all of which are the sole and absolute responsibility of Tenant, or to rectify or remedy any such violation caused by the Building Fit-Out or any other acts, omissions, use or occupancy of Tenant. Tenant further acknowledges and agrees that, (i) Tenant shall be solely responsible for installation and/or modification of any distribution ductwork or other equipment required to distribute HVAC service throughout any floor of the Premises, and for any balancing or rebalancing of the HVAC System occasioned by the Building Fit-Out, and (ii) Landlord shall have no obligation to perform any of Landlord's ADA Work in, for or to any addition, alteration or improvement in the Premises, or to any area of the Premises (or portion of either), which Tenant intends to demolish or remove as part of the Building Fit-Out. 67 EXHIBIT B-3 LANDLORD'S BASE BUILDING IMPROVEMENTS 1. Remove existing turnstiles and security desks located in first (1st) floor lobby; 2. Repair and/or replace as necessary (with stain-grade wood veneer doors) fire stair doors damaged by previous tenant's security equipment; and 3. Remove all security equipment installed by previous tenant (exclusive of cabling) from all rentable areas and common areas. 68 EXHIBIT C DECLARATION OF LEASE COMMENCEMENT THIS DECLARATION is attached to and made a part of that certain Deed of Lease dated the ____ day of December, 1996, ("Lease") by and between PRINCIPAL MUTUAL LIFE INSURANCE COMPANY, an Iowa corporation ("Landlord", and AMERICAN MANAGEMENT SYSTEMS, INC., a _____________________ corporation ("Tenant"). Landlord and Tenant are parties to the Lease. All capitalized terms used herein shall have the same meaning as was ascribed to such terms in the Lease, unless otherwise indicated. Landlord and Tenant do hereby declare that (a) the Commencement Date is hereby established to be _________, ____; and (b) the Lease Term shall expire on ____________, ______ unless the Lease is earlier terminated as may be provided therein. The Lease is in full force and effect as of the date hereof, and Landlord has fulfilled all of its obligations under the Lease required to be fulfilled by Landlord on or prior to such date. IN WITNESS WHEREOF Landlord and Tenant have executed this Declaration under seal on this ____ day of _____________________, 1997. LANDLORD: PRINCIPAL MUTUAL LIFE INSURANCE COMPANY, an Iowa corporation By: (Seal) -------------------------------- Title: ---------------------------- TENANT: AMERICAN MANAGEMENT SYSTEMS, INC., a Delaware corporation By: (Seal) -------------------------------- Title: ---------------------------- 69 EXHIBIT D RULES AND REGULATIONS 1. The sidewalks, halls, passages, courts, exits, vestibules, entrances, public areas, elevators, escalators and stairways of the Property shall not be obstructed by Tenant or used for any purpose other than ingress to and egress from their respective Premises. The halls, passages, exits, entrances, elevators, escalators and stairways are not for the general public, and Landlord shall, in all cases, retain the right, but not the obligation, 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 Property, provided that nothing herein contained shall be construed to prevent such access to persons with whom any Tenant normally deals in the ordinary course of its business, unless such persons are engaged in illegal activities. Neither Tenant, nor any of Tenant's Agents, shall enter or install equipment in mechanical rooms, air conditioning rooms, electrical closets, janitorial closets or similar areas without the prior written consent of Landlord (which consent shall not be unreasonably withheld, conditioned or delayed). 2. The Premises shall not be used for the storage of merchandise held for sale to the general public or for lodging. Except as may otherwise be expressly set forth in the Lease to which this Exhibit D is attached (if at all), no cooking shall be done or permitted by any Tenant on the Premises except that the use by Tenant of Underwriter's Laboratory-approved equipment for brewing coffee, tea, hot chocolate and similar beverages, and the use by Tenant of underwriter's laboratory approved microwave ovens for reheating food for on-premises consumption by Tenant's employees, shall be permitted provided that such use is in accordance with all applicable federal and State and county laws, codes, ordinances, rules and regulations. 3. Tenant shall not employ any person or entity to provide services to the Premises (whether janitorial service, towel service, water service or other service), unless otherwise agreed to by Landlord in writing (such agreement not to be unreasonably withheld). Tenant shall not cause any unnecessary labor by reason of such Tenant's carelessness or indifference in the preservation of good order and cleanliness. Except as otherwise expressly set forth in the Lease, Landlord shall not be responsible to Tenant for any loss of property on the Premises, however occurring, or for any damage done to the effects of Tenant by the cleaning service or any other employee or any other person. 4. Tenant shall not alter any lock or install a new or additional lock or bolts on any door of its Premises unless Tenant shall also provide Landlord with keys (or other means of access) for each such lock. Tenant, upon the termination of its tenancy, shall deliver to Landlord all keys which are in Tenant's possession to doors, safes, vaults and other locks in the Premises and the Building. 5. Landlord shall have the right to prescribe the weight, size and position of all equipment, materials, furniture or other property brought into the Property to the extent necessary to protect the Property. Heavy objects, if considered necessary by Landlord, shall stand on wood strips of such thickness as is necessary to properly distribute the weight. Landlord will not be responsible for loss of or damage to any such property from any cause and all damage done to the Property by moving or maintaining such property shall be repaired at the expense of Tenant. Business machines and other equipment shall be placed and maintained by Tenant at Tenant's expense in setting sufficient, in Landlord's reasonable judgment, to absorb and prevent unreasonable vibration. 6. Subject to any contrary provisions of Section 8 of the Lease, neither Tenant nor any of Tenant's Agents shall use or keep in the Premises or the Property any kerosene, gasoline or flammable or combustible fluid or material other than limited quantities thereof reasonably necessary for the operation or maintenance of office equipment, or, without Landlord's prior written approval, use any method of heating or air conditioning other than that supplied by Landlord. Neither Tenant nor any of Tenant's Agents shall use or keep or permit to be used or kept any hazardous or toxic materials or any foul or 70 noxious gas or substance in the Premises or permit or suffer the Premises to be occupied or used in a manner offensive or objectionable to Landlord in Landlord's reasonable discretion 7. Intentionally Omitted. 8. Landlord reserves the right to exclude from the Property, between the hours of 6:00 p.m. and 7:00 a.m. and at all hours on Saturdays, Sundays, and legal holidays all persons who do not present a pass to the Building signed by Tenant or other evidence of authorization to enter reasonably designated by Tenant. Tenant shall be responsible for all persons for whom it authorizes entry to the Building and shall be liable to Landlord for all acts of such persons. Landlord shall, in no case, be liable for damages for any error with regard to the admission to or exclusion from the Property of any person. In the case of invasion, mob, riot, public excitement or other circumstances rendering such action advisable in Landlord's opinion Landlord reserves the right to prevent access to the Property during the continuance of the same by such action as Landlord may deem appropriate including closing doors. 9. In the event Tenant no longer leases the entire Building, no curtains, draperies, blinds, shutters, shades, screens or other coverings, hangings or decorations shall be attached to, hung or placed in, or used in connection with any window of the Building without the prior written consent of Landlord (such consent not to be unreasonably withheld, conditioned or delayed). No files, cabinets, boxes, containers or similar items shall be placed in, against or adjacent to any window of the Building so as to create an unsightly condition visible from the outside of the Building. No bottles, parcels or other articles may be placed in the halls or in any other part of the Property, nor shall any article be thrown out of the doors or windows of the Premises. 10. Tenant shall ensure that the doors of its Premises are closed and locked, that all water faucets, water apparatus and utilities are shut off before Tenant or Tenant's employees leave the Premises, so as to prevent waste or damage. 11. The lavatory rooms, toilets, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed, 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 Tenant. The Premises shall not be used for manufacturing of any kind, or any business or activity other than that specifically permitted pursuant to the Lease to which this Exhibit D is attached. 12. No air conditioning units or other projections shall be attached to the outside walls or window sills of the Building or otherwise project from the Building, without the prior written consent of Landlord. Tenant shall not install or permit the installation of any awnings, shades, mylar films or sun-filters on windows. Tenant shall cooperate with Landlord in obtaining maximum effectiveness of the cooling system of the Building by closing drapes and other window coverings when the sun's rays fall upon windows of the Premises. Tenant shall not obstruct, alter or in any way impair the efficient operation of Landlord's heating, ventilation, air conditioning, electrical, fire, safety or light systems, nor shall Tenant tamper with or change the setting of any thermostat or temperature control valves in the Building. Tenant shall cooperate with energy conservation by limiting use of lights to areas occupied during non-business hours. 13. There shall not be used in any space or public halls of the Building, either by any Tenant or any others, any hand trucks except those equipped with rubber tires and side guards or such other material handling equipment as Landlord may approve. 14. No material shall be placed in the trash boxes or receptacles if such material is of such nature that it may not be disposed of in the ordinary and customary manner of removing and disposing of trash and garbage in the jurisdiction where the Property is located without being in violation of any law or ordinance governing such disposal. 15. Intentionally Omitted. 71 16. No cutting or boring for wires shall be allowed without Landlord's consent (such consent not to be unreasonably withheld). 17. Tenant shall not lay linoleum, tile, carpet or floor covering so that it is affixed to the floor of the Premises by the use of cement or other similar adhesive material. Electric and telephone floor distribution boxes must remain accessible at all times. 18. The requirements of Tenant will be attended to only upon written request to the Landlord's managing agent at the Washington, D.C. metropolitan area office of said managing agent. Employees of Landlord shall not perform any work or do anything outside of their regular duties unless under special instructions from Landlord. 19. These rules and regulations are in addition to the terms, covenants, agreements and conditions of the Lease to which they are attached, but in the event of a conflict between the express terms of the Lease to which this Exhibit D is attached (exclusive of these rules and regulations), and the terms of these rules and regulations, such other terms of the Lease shall control. 20. Landlord reserves the right to make such other rules and regulations as Landlord, in Landlord's reasonable discretion, may deem necessary from time to time. 21. Landlord shall not be responsible to Tenant or to any other person for the non-observance or violation of these rules and regulations by any person. Tenant shall be deemed to have read these rules and to have agreed to abide by them as a condition to its occupancy of the space leased. 72 EXHIBIT E ROOF-TOP RIGHTS 1. License. Subject to the terms hereof, Landlord hereby grants to Tenant an exclusive license (the "License") to enter onto and utilize the roof of the Building (the "License Area"), solely for the use permitted pursuant to paragraph 3 hereof; provided that, such license is subject to Landlord's right to enter (and to permit its contractor(s) to enter) onto the roof and perform additions, alterations, improvements, maintenance, modification and repairs in connection with the operation of the Building. 2. Term. The License granted hereby shall commence upon January 1, 1997, and shall, subject to the terms hereof, continue in full force and effect until the expiration or sooner termination of the lease (the "Lease") to which this Exhibit E is attached (the "License Term"), as such lease may be renewed. Notwithstanding anything herein contained to the contrary, (i) Landlord may revoke this License at any time during the continuance of any default or breach of the terms of this License or the Lease which remains uncured beyond the applicable notice and cure period (if any), and (ii) in the event Tenant shall at any time lease less than all of the Building, this License shall be deemed a non-exclusive license and Landlord shall have the right to grant to other tenants of the Building the right to use reasonable quantities of space upon the roof provided that such use does not interfere with Tenant's ability to utilize its Equipment. Upon the expiration or sooner termination of the License, Tenant shall have no right, title or interest with respect to the License Area. 3. Permitted Use: Subject to (i) Tenant's receipt of all applicable governmental approvals and permits (the same to be obtained by the Tenant and a copy thereof provided to Landlord, all at the Tenant's sole expense), (ii) Landlord's structural and roofing requirements (consistent with the structural limitations of the Building as reasonably determined by the Landlord's structural engineer), and (iii) the provisions of paragraph 4 hereof, Landlord agrees to permit Tenant to utilize, for the purposes provided herein, suitable space on the roof for installation and operation of radio, microwave and satellite transmission and reception equipment and HVAC equipment (collectively referred to as the "Equipment"), subject to all of the terms of this License. Use of the Equipment shall be solely for the convenience of Tenant in the normal conduct of Tenant's business. In no event shall the Equipment be used for a commercial purpose separate from Tenant's normal business as an independent means of producing income separate from the Tenant's normal business. Without limiting the preceding sentence, Tenant shall have no right to assign or sublease any rights to utilize the License Area other than as part of an assignment of the entire Lease. 4. Landlord's Prior Approval: (a) The nature, type, weight and location of the Equipment and plans and specifications for the installation thereof shall be subject to the Landlord's prior written approval (which approval shall not be unreasonably withheld, conditioned or delayed, provided Tenant is not proposing to exceed the load bearing capacity of the affected portion(s) of the roof or proposing any penetration of the roof membrane or other alteration, addition, improvement or modification which will void any existing roof warranty). (b) Tenant agrees not to install or modify any of the Equipment in any manner which will or may interfere with the operation of any existing equipment installed on the roof from time to time by any other person or entity. Tenant shall take all steps necessary to ensure that the installation and operation of the Equipment does not adversely affect the operation of the Building or its basic systems. If the operation of any portion of the Equipment causes any such adverse effect, Tenant, at its sole expense, shall immediately take all steps necessary to eliminate such adverse effect(s). If such adverse effect(s) cannot be eliminated by Tenant, Tenant shall, upon Landlord's request and at Tenant's sole expense, remove the Equipment in accordance with the terms hereof. (c) After initial installation of the Equipment, Landlord may require Tenant to relocate the Equipment, on reasonable Notice to Tenant; provided, however, that no relocation shall be required to a 73 location which will not permit the Equipment to function properly or which would not allow for necessary transmission paths. Landlord shall bear the cost of any relocation of the Tenant's Equipment required by Landlord, other than any relocation(s) required in order to effect additions, alterations, improvements, maintenance, modifications repairs or replacements to the roof or other portions of the Building or the equipment serving the same or any of the components of any of the foregoing (collectively, "Roof Alterations") (in which event Landlord and Tenant shall each bear one-half (1/2) of the reasonable cost of such relocation). To the extent the installation, operation or relocation of the Tenant's Equipment shall increase the cost of any such Roof Alterations, Tenant shall reimburse Landlord upon demand for the amount of such increase. In no event shall Landlord be liable for any loss, damage or injury to Tenant's business occasioned by any required relocation of Tenant's Equipment. 5. Installation of Equipment: (a) The Equipment shall be installed by a properly licensed and insured contractor reasonably approved by Landlord, at Tenant's sole expense, in compliance with all applicable codes, law and regulations. Neither the aggregate live or dead load associated with the Equipment (inclusive of all mounting structures) shall exceed the load bearing capacity of the roof. (b) No penetration of the roof surface of the Building will be allowed except upon the prior written consent of the Landlord and the written agreement of the entity (or, if more than one (1), all entities) providing a warranty on the roof of the Building, that such penetration will not invalidate, in whole or part, the warranty(ies) provided by such entity(ies). The Equipment shall, to the extent required by applicable law, be shielded from public view in a manner acceptable to the Landlord. In no event shall Tenant permit the Equipment to be visible from surrounding locations on the ground. 6. Assignment: Except as expressly permitted hereby, Tenant shall not assign or otherwise transfer this License Agreement, or any of Tenant's rights hereunder, nor permit the use or occupancy of the License Area by any person or entity other than Tenant. Notwithstanding the foregoing, Tenant shall have the right to assign its rights under this License to any assignee of all of Tenant's right, title and interest in and to the Lease. 7. Condition and Suitability of the Property: Landlord makes no representations or warranties regarding the suitability or condition of the roof for installation or operation of the Equipment, and Landlord shall have no liability to Tenant on account thereof. The installation and operation of the Equipment on the roof by Tenant shall be at the Tenant's sole risk. 8. Repairs and Maintenance: Tenant shall repair and maintain the Equipment throughout the Term in compliance with all applicable codes, laws and regulations. Tenant and/or its contractor shall bear all expenses in connection with the installation, operation, maintenance and repair of the Equipment and the removal thereof. Tenant acknowledges and agrees that all risk of loss or damage to the Equipment, from any cause whatsoever, shall be borne solely by Tenant, and Tenant undertakes to indemnify and hold Landlord harmless therefrom. 9. Compliance with Laws. (a) Tenant shall, at the Tenant's expense, comply with all governmental laws, regulations or requirements and obtain and maintain in full force and effect throughout the Term all permits and other governmental approvals as may be required in connection with the Equipment. Prior to installation of the Equipment, Tenant shall provide Landlord with evidence that all such necessary permits and approvals have been obtained. In addition, Tenant agrees that Tenant shall, at Tenant's sole expense, comply with all other laws, statutes, ordinances, and governmental rules, regulations and requirements now in force or which may hereafter be in force, and with the requirements of any board of fire underwriters or other similar body now or hereafter constituted, relating to or affecting the Tenant's Equipment, access to the roof, and/or the activities of Tenant or Tenant's Agents in, on or upon the roof. 74 (b) Tenant acknowledges that, depending on the location, nature and size of the Equipment, review by local planning or zoning authorities may be required. In the event any review by or proceeding before local planning or zoning authorities is required in order to obtain approval for installation of the Equipment, the Landlord agrees to cooperate in connection therewith, provided that the same is at no cost, expense or risk to the Landlord. Upon installation of the Equipment, the Tenant shall provide the Landlord with such evidence as the Landlord may reasonably require of compliance with laws, including (where applicable) regulations of the Federal Communications Commission and Federal Aviation Administration. 10. Access to the License Area: Tenant and its contractors shall have reasonable access during normal working hours (and, in the event of an emergency, after normal working hours) to the License Area to facilitate the installation, operation and maintenance of the Equipment and the removal thereof. Access to and activities in, on or upon the roof by Tenant and/or Tenant's Agents shall be subject to such reasonable rules and regulations as Landlord may promulgate in connection with such access and/or activities. 11. Termination of License: In the event (i) Tenant fails for more than fifteen (15) days after written notice to comply with, fulfill or observe any of the covenants, conditions, or obligations made by or imposed on the Tenant pursuant to the terms of this License or, with respect to the Equipment or the Licensed Area (or such longer time as may be reasonably required to cure such failure through the exercise of due diligence, provided that (i) such failure is not a willful repudiation of the License authorized by Tenant's Board of Directors, (ii) such failure is susceptible of cure, (iii) such failure does not relate to the existence of a Hazardous Substance on the roof in violation of Section 8 of the Lease, (iv) such failure does not subject Landlord to prosecution or substantial civil or criminal fine or penalty, and (v) Tenant promptly commences to cure such failure within the aforesaid fifteen (15) day period and thereafter diligently pursues the cure of such failure to completion) (each of the foregoing being herein referred to as an "Roof-Top Breach"), or (ii) removal of the Equipment shall be required by any governmental authority, this License may, without demand or notice, be terminated by the Landlord without payment of penalty or compensation to Tenant, and Tenant shall promptly (immediately, if so required by a governmental authority) remove the Equipment from the Building at the Tenant's expense; provided that, Tenant shall not be required to remove its Equipment from the roof pursuant to clause (ii) of this Section 11 so long as (x) Tenant promptly, diligently and in good faith contests the removal requirement by the applicable governmental authority, and (y) Tenant indemnifies and holds Landlord and the Property harmless from and against any and all costs, claims, damages, expenses, fees, liabilities, losses or suits incurred by or on behalf of, or asserted against, Landlord and/or the Property as a result of the continued existence of Tenant's Equipment on the roof or such contest; and provided further that, in the event that a final, unappealable decision in any such contest shall require the removal of Tenant's Equipment, Tenant shall promptly comply with such decision. In all events, Tenant shall at its sole cost and expense remove the Equipment and all screening therefor upon the expiration or sooner termination of the License and restore the area affected by the installation, operation and/or removal of the Equipment and/or such screening to its original condition existing immediately prior to the installation of the Equipment and/or such screening. 12. Indemnity: To the fullest extent permitted by applicable law, Tenant hereby agrees to indemnify and hold Landlord and Landlord's agents, contractors and employees (collectively, the "Indemnitees") harmless from and against any and all costs, damages, claims, expenses, fees, suits, awards and liabilities incurred or suffered by or claimed against any Indemnitee (including, but not limited to, court costs and reasonable attorneys fees), directly or indirectly, based on, arising out of or resulting from (i) Tenant's use of the License Area, (ii) any act or omission by Tenant or Tenant's Agents within the License Area, or (iii) any breach or default by Tenant in the performance or observance of its covenants or obligations under this License Agreement. Without limiting the foregoing, Tenant shall be responsible for, and shall defend, indemnify and hold Landlord harmless from and against, any damage caused to the roof structure by the installation, operation, maintenance, repair and/or removal of the Equipment, and any injury or 75 death, or loss or damage to any of the Equipment or involving any such equipment of any other Tenant or tenant. 13. Insurance: In furtherance of Tenant's indemnity of Landlord as contained in the preceding paragraph 12, Tenant hereby agrees to maintain, in full force and effect throughout the License Term, policies of liability and property damage insurance as described in the Lease (or endorsements to all policies maintained in accordance with said Lease, extending coverage to the License Area and including the Equipment as additional personal property to be insured) with respect to personal injury, death or property damage arising out of or in connection with Equipment, Tenant's right of access to the roof pursuant to this License, and any activities conducted in, on or upon the roof by the Tenant or the Tenant's Agents. In addition, Tenant shall require the contractor engaged for installation of the Equipment to provide to Landlord a certificate of insurance evidencing (i) a minimum combined single limit general liability coverage of Two Million Dollars ($2,000,000.00), with Landlord named as an additional insured, and (ii) the statutorily required workmen's compensation insurance coverage. 76 EXHIBIT F HVAC SPECIFICATIONS Landlord agrees that the air conditioning system in the Premises shall be capable of providing (subject to the requirements of federal, state and local governmental authorities) temperatures of not more than 75 degrees Fahrenheit dry bulb and a relative humidity not in excess of fifty percent (50%) with outside conditions of 95 degrees Fahrenheit dry bulb and 78 degrees Fahrenheit wet bulb, except as otherwise provided in this Lease. Landlord agrees that the heating system in the Premises will be capable of providing (subject to the requirements of federal, state and local governmental authorities) temperatures of not less than 70 degrees Fahrenheit whenever the outdoor dry bulb temperature is lower than 65 degrees Fahrenheit, with indoor relative humidity at such level as not to permit the formation of condensation on the windows. Landlord shall not be responsible if the normal operation of the Building HVAC System shall fail to provide conditioned air at reasonable temperatures, pressures or degrees of humidity or in reasonable volumes or velocities in any portions of the Premises which (i) shall have an electrical load in excess of four (4) watts per rentable square foot of the Premises for all purposes (including lighting and power) or which shall have a human occupancy factor in excess of one person for each one hundred fifty (150) rentable square feet of the Premises, or (ii) because of rearrangement of partitioning or other Alterations made by or on behalf of Tenant or any person claiming by, through or under Tenant. 77 EXHIBIT G JANITORIAL SPECIFICATIONS Landlord will furnish janitor service and cleaning services as set forth below for the Premises, exclusive of stock rooms, xerox rooms, kitchens and cafeterias (except as noted): I. DAILY 1. Collect trash. (Private kitchens included) 2. Empty ash trays; damp wipe clean. 3. Dust furniture, desks, machines, phones, file cabinets, window ledges, etc. (papers shall not be required to be disturbed.) 4. Vacuum carpets, sweep resilient tile and wood floors in corridors and lobbies. (Private kitchens included.) 5. Wash water fountains. 6. Lavatories: (a) Clean and disinfect all toilet bowls, urinals, and wash basins. (b) Clean mirrors. (c) Resupply all dispensers and toilet paper. (d) Damp wipe and disinfect all ledges, toilet stalls, and doors. (e) Damp mop and disinfect all floors. (f) Empty and clean sanitary napkin disposal containers. (g) Collect trash. 7. Turn off lights and check all doors on completion of work. II. WEEKLY 1. Spot clean carpet stains. 2. Spot clean walls, doors, partitions. 3. Sweep all stair areas. 4. Dust wood wall paneling. 78 III. MONTHLY 1. Scrub and recondition resilient tile floors. 2. Wash all interior glass partitions on both sides. 3. Dust venetian blinds. 4. Dust picture frames, charts, etc. IV. SEMI-ANNUALLY Dust all horizontal and vertical surfaces not reached in nightly cleaning (pipes, light fixtures, door frames, wall hangings, etc.). V. ANNUALLY Strip and refinish all resilient floor areas using buffable, non-slip floor finish. VI. AS NECESSARY 1. Clean venetian blinds. 2. Spot clean light switches, doors and walls. 3. Washing light fixtures, including light reflectors, globes, diffusers and trim. 4. Wash walls in corridors, lobbies, and washrooms. 5. Spot clean all baseboards. 6. Wash windows, inside and outside, as required by Landlord. 7. Vacuum carpets in individual offices. VII. EXTRAS - CHARGED TO THE TENANT 1. Daily buffing of hardwood floors in executive office areas. 2. Cleaning of kitchens, canteen, or coffee station areas, including washing sink, washing ledge, cleaning cabinets and/or appliances. 3. Dusting and sweeping of storage areas, closets, telephone exchange areas. 4. Cleaning of shower stalls, or other similar non-standard equipment in rest-rooms. Should Tenant install any Alterations or specialty items which will increase in any way the rate being charged by the cleaning contractor for the Premises, Tenant shall be liable for such increases and shall reimburse Landlord upon demand for any additional cost. All of the above services are to be performed during those hours (after-business hours) as established between Landlord and Landlord's cleaning contractor. Any special cleaning requests are to be in writing and delivered to the management office by 3 p.m. The foregoing specifications are subject to change from time to time in Landlord's reasonable discretion. 79 EXHIBIT H ANCILLARY USE RESTRICTIONS 1. Ancillary Uses: Each of the Ancillary Uses set forth in the Lease are subject to the applicable provisions of this Exhibit H. 2. General Conditions: (a) In no event shall any Ancillary Use (other than any food service operation on the first (1st) floor of the Building) be used for a commercial purpose separate from Tenant's normal business as an independent means of producing income separate from the Tenant's normal business. Without limiting the preceding sentence, Tenant shall have no right to assign or sublease any rights to engage in any of the Ancillary Uses on any floor above the ground level of the Building, other than by the assignment of the entire Lease. In no event shall any such Ancillary Uses be open to, or made available to, the general public. (b) The nature, type, weight, location and method of installation of all equipment utilized in the Ancillary Uses or required in connection with the Ancillary Uses (collectively, "Ancillary Use Equipment") shall be subject to the Landlord's prior written approval (which approval shall not be unreasonably withheld, conditioned or delayed, provided Tenant is not proposing to exceed the load bearing capacity of the affected portion(s) of the Premises or the electrical capacity of the circuits to be so utilized, and further provided that such Ancillary Use Equipment is installed in such manner as will not materially interfere with the operation of the Building as a multi-tenant building in the future. All Ancillary Use Equipment installed in the Premises shall be Underwriters' Laboratory approved. Tenant agrees not to install or modify any Ancillary Use Equipment in any manner which will or may interfere with the operation of any existing equipment installed in or on the Property. Tenant shall take all steps necessary to ensure that the installation and operation of the Ancillary Use Equipment does not adversely affect the operation of the Building or its basic systems. If the operation of any portion of the Ancillary Use Equipment causes any such adverse effect, Tenant, at its sole expense, shall immediately take all steps necessary to eliminate such adverse effect(s). If such adverse effect(s) cannot be eliminated by Tenant, Tenant shall, upon Landlord's request and at Tenant's sole expense, remove the Ancillary Use Equipment in accordance with the terms hereof. Tenant shall be solely responsible for the maintenance, repair and replacement of the Ancillary Use Equipment, and Tenant agrees to maintain all Ancillary Use Equipment in good working order and in compliance with all applicable laws at all times. (c) Landlord makes no representations or warranties regarding the suitability or condition of the Premises for installation of the Ancillary Use Equipment or operation of the Ancillary Uses, and Landlord shall have no liability to Tenant on account thereof. The installation of the Ancillary Use Equipment and operation of the Ancillary Uses by Tenant shall be at the Tenant's sole risk. (d) Tenant shall be solely responsible for, and shall promptly pay when due, all costs, expenses and fees arising from or out of, or in connection with, the installation or operation of any Ancillary Use or any Ancillary Use Equipment. It is the intent of the parties hereto that Tenant shall pay all costs and expenses relating to the Ancillary Uses, and that any amount or obligation relating to the Ancillary Uses which is not expressly declared to be that of Landlord shall be deemed to be any obligation of Tenant to be performed by Tenant at Tenant's sole expense. Without limiting the foregoing, Tenant shall be solely responsible for all cleaning, security, utilities and increased insurance premiums arising from or out of, or in connection with, the Ancillary Uses or the Ancillary Use Equipment. (e) Tenant shall be responsible at its sole expense for providing and installing all furniture, trade fixtures and equipment desired by the Tenant or otherwise required in connection with any Ancillary Use. Without limiting the foregoing, Tenant shall be solely responsible for the installation, operating, maintenance, repair, replacement and removal of any and all HVAC and fire suppression 80 equipment in excess of the equipment being furnished by Landlord pursuant to Exhibit B (including, but not limited to, additional sprinkler heads or runs, fire suppression equipment, venting and exhaust ductwork and equipment) required by this Lease or applicable law, or desired by Tenant, in connection with any Ancillary Use. Tenant expressly acknowledges and agrees that Landlord shall have no, and is hereby relieved of, liability for any failure or inadequacy of the base Building HVAC or fire suppression System to the extent such failure or inadequacy is attributable to any Ancillary Use or any Ancillary Use Equipment. (f) The Tenant, at its sole cost and expense, shall be responsible for maintaining all areas of the Premises utilized for Ancillary Uses, and all Ancillary Use Equipment, in a clean, safe and sanitary condition, and in compliance with all applicable laws, ordinances, regulations, rules and other restrictions imposed by any governmental or quasi-governmental agency or authority, at all times. Without limiting the foregoing sentence, the Tenant shall be required to regularly maintain and promptly repair when necessary all Ancillary Use Equipment. (g) The provisions set forth in this Exhibit "H" are in addition to all other provisions of the Lease imposing a covenant, duty, obligation or restriction upon the Tenant. Without limiting the foregoing, nothing in this Exhibit "H" shall be deemed to authorize the storage or use of any Hazardous Substance on the Premises other than Permitted Materials. 3. Food Service Operations. In addition to the foregoing: (a) In no event shall Tenant sell, or suffer or permit any other person or entity to sell from the Premises any alcoholic beverages for either on-Premises or off-Premises consumption. (b) All garbage and refuse shall be removed from any food service operation within the Premises prior to the close of business each day. Tenant shall keep all garbage, refuse and trash from food service operations in pest-safe closed containers, with appropriate odor-eliminators, until removal. All garbage and refuse removal shall be made through the loading dock of the Building without use of the lobby area or common corridors of the Building, and, during such times as Tenant leases less than the entire Building, no removal will be made between the hours of 7:00 a.m. - 9:30 a.m. and 4 p.m. to 7 p.m. (c) Tenant shall at its expense have all areas utilized for food service operations, and all adjacent areas of the Premises, regularly treated (not less than once each thirty (30) days throughout the Lease Term) by a licensed and reputable pest control contractor or exterminator for rats, mice, insects and other pests and vermin. The Tenant's schedule for such treatment and the contractor providing the treatment shall be reasonably acceptable to the Landlord. (d) Tenant shall, at Tenant's sole expense: (i) install, maintain and clean, on a regular schedule (but not less often than once each thirty (30) days throughout the Lease Term), and replace as necessary, all exhaust ductwork and such grease traps as shall be required by the Landlord to prevent the accumulation of grease or other waste in the plumbing or venting facilities servicing food service operation areas of the Premises; (ii) prevent any obnoxious or objectionable odors (as reasonably determined by the Landlord) from emanating from the Premises, either from food preparation or garbage or otherwise, and install, maintain and clean, on a regular schedule, and replace as necessary, vents and exhausts or other suitable devices to prevent the same, as reasonably required by the Landlord or any legal authorities having jurisdiction thereof, including, but not limited to, the installation and/or replacement of filters and other devices designed to control odors; 81 (iii) observe any reasonable rules or regulations promulgated by the Landlord at any time and from time to time relating to delivery vehicles and the delivery of food, beverages or merchandise and the storage and removal of trash and garbage; and not permit any deliveries to be made between the hours of 7:00 a.m. - 9:30 a.m. and 4:00 p.m. - 7:00 p.m.; (iv) not dispose of any foreign substances in the plumbing facilities other than through utilization of appropriate garbage disposal units; and (v) carry products liability insurance with respect to any food service operation of not less than One Million Dollars ($1,000,000.00). (e) Tenant expressly acknowledges and agrees that Landlord shall have no liability for, and Tenant hereby expressly relieves Landlord of all liability for, damages caused by spoilage of food. 4. Printing. In addition to the foregoing, Tenant shall in no event engage, or suffer or permit any other person or entity to engage in the preparation of photographic reproductions or blueprints in the Premises. 5. Exercise Facilities; Locker Rooms; Showers. In addition to the foregoing: (a) In the event the Tenant contracts with, employs or otherwise retains an operator for any exercise facility, locker room or shower in the Premises (each an "Exercise Facility"), Tenant shall (i) require the operator to be properly licensed, (ii) require that such operator expressly covenant to observe all of the applicable terms and conditions of this Exhibit "H", and (iii) enforce the applicable terms of this Exhibit "H" against such operator. (b) No Exercise Facility shall be used to render medical care to any person except for medical assistance rendered to an employee or partner of Tenant or other user of the Exercise Facility in the event of an emergency. Use of the Exercise Facility shall be subject to such reasonable rules and regulations and such security measures which Landlord and/or Tenant may promulgate from time to time. (c) Tenant shall (i) ensure that adequate soundproofing (as reasonably determined by the Landlord) is installed in the Exercise Facility so that no sounds inside the Exercise Facility may be heard outside the Exercise Facility; (ii) ensure that no objectionable odors emanate from the Exercise Facility; and (iii) install all security measures necessary to deny unauthorized access to the Exercise Facility. Landlord shall have no obligation to install, maintain or operate in the Exercise Facility any devices and equipment to ensure the safety and well-being of the users of the Exercise Facility. (d) Tenant shall post signage in the Exercise Facility setting forth the rules and regulations governing the use of the same. 6. Ancillary Use Breach; Cessation; Removal. (a) Upon the occurrence of an Event of Default with regard to any Ancillary Use or Ancillary Use Equipment (an "Ancillary Use Breach"), Landlord shall, in addition to (and without limitation of) its other remedies at law, in equity and under this Lease, have the right to require Tenant to cease the Ancillary Use in the course of which such Ancillary Use Breach has arisen until such Ancillary Use Breach shall be cured. In the event cessation of any Ancillary Use and/or removal of any Ancillary Use Equipment shall be required by any governmental authority, Tenant shall, without demand or notice, promptly (immediately, if so required by a governmental authority) cease such Ancillary Use and, if applicable, remove the Ancillary Use Equipment from the Property at Tenant's expense; provided that, Tenant shall not be required to cease any Ancillary Use or remove any Ancillary Use Equipment from the Property pursuant to the foregoing provision of this sentence, so long as (x) Tenant promptly, diligently and in good faith contests the cessation and/or removal requirement (as the case may be) by the applicable governmental authority, and (y) Tenant indemnifies and holds Landlord and the Property 82 harmless from and against any and all costs, claims, damages, expenses, fees, liabilities, losses or suits incurred by or on behalf of, or asserted against, Landlord and/or the Property as a result of the continued operation of such Ancillary Use and/or continue existence of Ancillary Use Equipment on the Property or such contest; and provided further that, in the event that a final, unappealable decision in any such contest shall require the cessation of such Ancillary Use and/or removal of Tenant's Equipment, Tenant shall promptly comply with such decision. (b) Upon written notice to Tenant (not later than thirty (30) days after expiration of the Lease Term), Landlord may require that Tenant remove, after the expiration or sooner termination of the Lease Term and at Tenant's sole cost and expense, any and/or all Ancillary Use Equipment installed by or on behalf of Tenant in the Premises, and restore the Premises to their prior condition; provided that, Landlord shall have no right to require the removal of (i) any Ancillary Use Equipment that is customarily considered normal office improvements for office tenants of all sizes (including, but not limited to, wiring or cabling which is customarily considered part of normal office improvements for first-class office tenants of all sizes), or (ii) any Ancillary Use Equipment installed in the Premises to which Landlord has consented, unless at the time such consent was granted Landlord reserved the right to require such removal. Tenant shall also repair any damage to the Premises caused by the installation or removal of any Ancillary Use Equipment installed in the Premises by or on behalf of Tenant. EX-23 10 CONSENT OF INDEPENDENT ACCOUNTANTS 1 Exhibit 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the registration statements on Form S-8 (Nos. 33-47661, 33-68426, 333-00563, 33-01557, and 333-08371) of American Management Systems, Incorporated of our report dated February 18, 1998, appearing on page 22, of the 1997 Financial Report which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedule, which appears on page 10 of this Form 10-K. PRICE WATERHOUSE LLP Washington, D.C. March 27, 1998 53 EX-27.1 11 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER 31, 1997 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR DEC-31-1997 DEC-31-1997 49,600 0 240,900 5,000 0 298,900 103,300 (58,100) 421,400 130,000 0 0 0 500 238,700 421,400 872,300 872,300 502,300 818,000 2,900 10,600 5,800 51,400 20,200 31,200 0 0 0 31,200 0.75 0.74
EX-27.2 12 RESTATED FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER 31, 1996 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR DEC-31-1996 DEC-31-1996 62,800 0 247,700 18,900 0 323,800 91,100 (43,100) 424,200 198,800 0 0 0 500 203,100 424,200 812,200 812,200 525,900 784,600 1,400 15,200 3,200 26,200 10,700 15,500 0 0 0 15,500 0.38 0.37 NOTE: Primary Earnings Per Share represents Basic Earnings Per Share as required per SFAS No. 128.
EX-27.3 13 RESTATED FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER 31, 1995 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR DEC-31-1995 DEC-31-1995 35,800 0 206,100 (4,900) 0 250,800 73,000 (35,900) 337,500 135,200 0 0 0 500 175,000 337,500 632,400 632,400 348,600 581,700 900 1,600 2,300 49,800 20,600 29,200 0 0 0 29,200 0.73 0.72 NOTE: Primary Earnings Per Share represents Basic Earnings Per Share as required per SFAS No. 128.
EX-27.4 14 RESTATED FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE SEPTEMBER 30, 1997 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS SEP-30-1997 SEP-30-1997 52,500 0 250,600 5,800 0 312,800 100,700 (54,800) 432,100 165,000 0 0 0 500 222,200 432,100 642,600 642,600 375,200 608,000 3,100 3,500 4,800 31,500 13,400 18,100 0 0 0 18,100 0.44 0.43 NOTE: Primary Earnings Per Share represents Basic Earnings Per Share as required per SFAS No. 128.
EX-27.5 15 RESTATED FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE 30, 1997 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS JUN-30-1997 JUN-30-1997 38,200 0 257,200 8,000 0 304,200 98,300 (51,100) 419,400 156,500 0 0 0 500 216,900 419,400 417,200 417,200 242,800 392,500 1,600 2,600 3,000 23,100 9,500 13,600 0 0 0 13,600 0.33 0.32 NOTE: Primary Earnings Per Share represents Basic Earnings Per Share as required per SFAS No. 128.
EX-27.6 16 RESTATED FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH 31, 1997 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS MAR-31-1997 MAR-31-1997 30,500 0 250,400 19,700 0 294,300 94,300 (46,900) 395,000 137,500 0 0 0 500 210,500 395,000 196,300 196,300 113,400 186,300 300 800 1,300 9,700 4,000 5,700 0 0 0 5,700 0.14 0.14 NOTE: Primary Earnings Per Share represents Basic Earnings Per Share as required per SFAS No. 128.
EX-27.7 17 RESTATED FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE SEPTEMBER 30, 1996 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS SEP-30-1996 SEP-30-1996 26,200 0 272,700 6,700 0 340,700 82,300 40,100 404,300 173,900 0 0 0 500 208,500 404,300 587,700 587,700 354,900 186,900 1,700 1,800 2,400 44,200 18,600 25,600 0 0 0 25,600 0.63 0.61 NOTE: Primary Earnings Per Share represents Basic Earnings Per Share as required per SFAS No. 128.
EX-27.8 18 RESTATED FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE 30, 1996 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS JUN-30-1996 JUN-30-1996 13,200 0 260,600 5,900 0 285,300 76,300 36,400 375,200 154,400 0 0 0 500 197,400 375,200 370,200 370,200 224,900 118,800 800 1,000 1,400 25,700 10,800 14,900 0 0 0 14,900 0.37 0.36 NOTE: Primary Earnings Per Share represents Basic Earnings Per Share as required per SFAS No. 128.
EX-27.9 19 RESTATED FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH 31, 1996 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS MAR-31-1996 MAR-31-1996 23,200 0 225,900 5,400 0 259,600 70,800 33,100 343,900 134,000 0 0 0 500 184,700 343,900 181,400 181,400 109,500 169,900 200 500 700 11,300 4,700 6,600 0 0 0 6,600 0.16 0.16 NOTE: Primary Earnings Per Share represents Basic Earnings Per Share as required per SFAS No. 128.
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