-----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, K6FtRbTPTLkzU52NznXEwp3Rqz/wxnAtm57cNLPMPTHKqBEQtVWT+j+oRG2SqBWp bZSLHehB3+N6anifX9nZ5A== 0000806637-97-000002.txt : 19970520 0000806637-97-000002.hdr.sgml : 19970520 ACCESSION NUMBER: 0000806637-97-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: ONCOR INC CENTRAL INDEX KEY: 0000806637 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 521310084 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16177 FILM NUMBER: 97608045 BUSINESS ADDRESS: STREET 1: 209 PERRY PKWY CITY: GAITHERSBURG STATE: MD ZIP: 20877 BUSINESS PHONE: 3019633500 MAIL ADDRESS: STREET 1: 209 PERRY PKWY CITY: GAITHERSBURG STATE: MD ZIP: 20877 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended March 31, 1997 Commission file number 0-16177 ONCOR, Inc. (Exact name of registrant as specified in its charter) Maryland 52-1310084 (State of Incorporation) (I.R.S Employer Identification No.) 209 Perry Parkway Gaithersburg, Maryland 20877 (Address of principal executive offices) (Zip code) (301) 963-3500 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO At April 30, 1997, there were 25,112,338 shares of Common Stock outstanding. PART I - FINANCIAL INFORMATION Item 1. Financial Statements. The unaudited consolidated balance sheet as of March 31, 1997, the audited consolidated balance sheet as of December 31, 1996, and the unaudited consolidated statements of operations and of cash flows for the three month periods ended March 31, 1997 and 1996, set forth below, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "Commission"). Certain information and note disclosures normally included in the annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations. Oncor, Inc. (the "Company") believes that the disclosures made are adequate to make the information presented not misleading. In the opinion of management of the Company, the accompanying consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair presentation of results for the periods presented. It is suggested that this financial information be read in conjunction with the Form 10-K, including "Item 1. Business - Additional Risk Factors," filed with the Commission for the year ended December 31, 1996. The results for the first three month period ended March 31, 1997, presented in the accompanying financial statements, are not necessarily indicative of the results for the entire year. In addition, the results for the three month period ended March 31, 1996 have been restated to give effect to the accounting treatment for the Company's convertible debentures. See Note 6 of the Notes to Financial Statements. ONCOR, INC. CONSOLIDATED BALANCE SHEETS
As of ------------------------------ Mar. 31, 1997 Dec. 31, 1996 Unaudited ------------------------------ ASSETS CURRENT ASSETS: Cash and cash equivalents $12,941,192 $13,058,657 Short-term investments, at market 2,808,149 388,504 Restricted cash 700,000 5,432,478 Accounts receivable, net of allowance for doubtful accounts of approxi- mately $417,000 and $372,000 2,050,436 2,401,639 Receivable from Officer/Director 302,542 294,039 Inventories 4,034,635 3,839,630 Other current assets 1,303,718 863,060 ------------ ------------ Total current assets 24,140,672 26,278,007 ------------ ------------ NON-CURRENT ASSETS: Property and equipment, net 4,735,539 5,044,270 Deposits and other non-current assets 441,108 216,035 Investment in and advances to affiliates 2,839,484 3,213,548 Intangible assets, net 6,083,136 6,918,278 ------------ ------------ Total non-current assets 14,099,267 15,392,131 ------------ ------------ Total assets $38,239,939 $41,670,138 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $2,785,658 $2,523,585 Accrued expenses and other current liabilities 980,676 1,656,900 Current portion of long-term debt 764,518 719,337 ------------ ------------- Total current liabilities 4,530,852 4,899,822 ------------ ------------- LONG-TERM DEBT 11,456,297 10,386,110 ------------ ------------- Total liabilities 15,987,149 15,285,932 ------------ ------------- COMMITMENTS AND CONTINGENCIES MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY 2,935,617 3,040,119 ------------ ------------- STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value, 1,000,000 shares authorized, no shares issued - - Common stock, $.01 par value, 50,000,000 shares authorized, 25,112,338 and 24,214,349 issued; 25,032,929 and 24,134,940 outstanding 251,123 242,143 Common stock warrants outstanding 781,250 781,250 Additional paid-in capital 130,251,411 125,327,438 Deferred compensation (573,214) (641,270) Unrealized gain on investments (2,204) (94) Cumulative translation adjustment (1,530,205) (508,172) Accumulated deficit (109,640,476) (101,636,696) Less - 79,409 shares of common stock held in treasury, at cost (220,512) (220,512) ------------ ------------- Total stockholders' equity 19,317,173 23,344,087 ------------ ------------- Total liabilities and stockholders' equity $38,239,939 $41,670,138 ============ ============= The accompanying notes are an integral part of these consolidated financial statements.
ONCOR, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For the Three Months Ended March 31, ------------------------------ 1997 1996 ------------------------------ GROSS REVENUES: Product sales $3,204,386 $3,923,372 Grants and contracts 122,750 272,025 ------------ ------------ Gross revenues 3,327,136 4,195,397 OPERATING EXPENSES: Direct cost of sales 1,930,049 2,413,115 Amortization of intangibles 307,119 344,379 Selling, general and administrative 3,241,100 3,458,816 Research and development 1,540,530 1,986,477 Clinical and regulatory 456,166 492,279 ------------ ------------ Total operating expenses 7,474,964 8,695,066 LOSS FROM OPERATIONS (4,147,828) (4,499,669) OTHER INCOME (EXPENSE): Investment income 193,845 178,964 Interest and other expenses, net (Note 6) (2,745,923) (660,695) Foreign exchange loss (4,787) (21,165) Equity in net loss of affiliates (1,299,087) (1,596,772) ------------ ------------ (3,855,952) (2,099,668) Net loss ($8,003,780) ($6,599,337) ============ ============ NET LOSS PER SHARE ($0.32) ($0.30) ============ ============ WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING 24,865,816 21,815,426 ============ ============ The accompanying notes are an integral part of these consolidated financial statements.
ONCOR, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the three months ended March 31, ------------------------------------ 1997 1996 ------------------------------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net loss ($8,003,780) ($6,599,337) Adjustments to reconcile net loss to net cash used in operating activities: Issuance of common stock for interest and imputed interest of convertible notes 2,175,000 569,842 Issuance of common stock in connection with research and development agreements 111,681 192,505 Depreciation and amortization 649,547 745,740 Expenses for non-employee stock options 107,118 - Equity in net loss of affiliate and other 1,319,670 1,596,775 Changes in operating assets and liabilities: Accounts receivable 235,403 803,411 Inventories (295,661) 268,213 Other current assets 29,129 (64,325) Deposits and other non-current assets (24,743) 12,787 Accounts payable (153,407) (379,526) Accrued expenses and other liabilities 384,941 (536,125) Deferred rent - (18,223) Net cash used in operating activities (3,465,102) (3,408,263) ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (114,303) (152,779) Purchases of investments (2,421,755) (2,590,110) ------------- ------------- Net cash used in investing activities (2,536,058) (2,742,889) ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Offering costs of private placement - (54,100) Exercise of stock options and warrants 19,950 199,950 Reduction in restricted funds 4,732,478 - Payment on notes for acquisitions - (603,444) Payment on bank loans (96,201) (328,601) Loan to unconsolidated affiliate (250,000) - Proceeds from borrowings and issuance of warrants 2,000,000 207,410 ------------- ------------- Net cash provided by (used in) financing activities 6,406,227 (578,785) ------------- ------------- ------------- ------------- EFFECT OF CHANGE IN EXCHANGE RATE ON CASH (522,532) (14,669) ------------- ------------- Net decrease in cash and cash equivalents (117,465) (6,744,606) CASH AND CASH EQUIVALENTS, beginning of the period 13,058,657 13,458,895 ------------- ------------- CASH AND CASH EQUIVALENTS, end of the period $12,941,192 $6,714,289 The accompanying notes are an integral part of these consolidated financial statements.
ONCOR, INC. NOTES TO FINANCIAL STATEMENTS AS OF MARCH 31, 1997 (Unaudited) 1. Cash Equivalents and Investments Cash equivalents and investments consist primarily of funds invested in money market instruments, commercial paper and U.S. government treasury bills. Investments with maturities between three months and one year are classified as short-term investments. Investments in securities with original maturities of three months or less are considered cash equivalents. Approximately $0.7 million in restricted cash is pledged as collateral for a loan of an officer and director for an indefinite period of time. Investments that are classified as available-for-sale securities are carried at fair market value. Unrealized holding gains and losses are excluded from earnings and reported as a net amount in a separate component of shareholders' equity until realized. 2. Intangible Assets The intangible assets comprise technology acquired, the estimated value of contractual positions, and the excess of the purchase price of an acquisition over the fair market value of the tangible assets acquired. The intangible assets are being amortized on a straight line method over periods of five to ten years, with a weighted average amortization period of eight years. 3. Net Loss Per Share Net loss per share is determined using the weighted-average number of shares of Common Stock outstanding during the periods presented. The effects of options and warrants have not been considered since the effects would be antidilutive. The Financial Accounting Standards Board has issued Statement No. 128, Earnings Per Share. Statement 128 requires dual presentation of basic and diluted earnings per share on the face of the income statement for all periods presented. Statement 128 is effective for fiscal years ending after December 15, 1997 and requires restatement of prior years' earnings per share. Since the effect of outstanding options is antidilutive, they have been excluded from the Company's computation of net loss per share. Accordingly, Statement 128 does not have an impact upon historical net loss per share as reported. 4. Investments in Debt Securities at March 31, 1997 The aggregate fair value of investments in debt securities as of March 31, 1997 is as follows: Government securities $U.S. denominated $1,131,077 Commercial paper 1,892,824 ---------- Total $3,023,901 5. Oncor Private Placement In January 1997, the Company completed a private placement of 6.0% five-year unsecured notes convertible into shares of Common Stock of the Company. The Company received total proceeds of approximately $2.0 million. Issuance costs were not significant. The notes are immediately convertible at the option of the holder and will be automatically converted upon maturity. The notes are convertible at prices which reduce from 100.0% to 80.0% of the market value of the Common Stock at the time of conversion over a period of 120 days. 6. Accounting for the Issuance of Convertible Debentures In December 1995, August 1996, December 1996 and January 1997, the Company issued convertible debentures in private placements in exchange for cash of $7.0 million, $5.0 million, $8.0 million and $2.0 million, respectively. In each such issuance, the holders of the debentures had "beneficial conversion" rights to convert the debentures into common shares of the Company at established discounts to the quoted trading price of the shares in a period immediately preceding the dates of conversions. The value of the fixed discount, ranging from 15%-20% of the respective issuance's face value of the Company's issuances, has been reflected in the interest expense in an aggregate amount of $2.2 million and $0.5 million in 1997 and 1996, respectively. Such additional fixed discount has been accreted for the period from date of issuance through the conversion dates of the respective issuances. The unaudited financial position and results of operations for the unaudited quarter ending March 31, 1996 has been restated to give effect to the accounting treatment announced in March 1997 by the staff of the Securities and Exchange Commission (SEC) at a meeting of the Emerging Issues Task Force relevant to certain of the Company's convertible debentures having "beneficial conversion" features. The first quarter of 1996 has been restated as follows: Originally Reported As Restated ------------ ------------- Interest and other expense, net $ (151,695) $ (660,695) Net loss (6,090,337) (6,599,337) Net loss per share (0.28) (0.30) 7. Related Party Transactions During the first quarter of 1997, the Company agreed to increase the guarantee of a loan for an officer and director from $700,000 to $960,000. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of the Company's results of operations and financial condition. The discussion should be read in conjunction with the audited consolidated financial statements of the Company and notes thereto, which were included in the Company's Annual Report on Form 10-K for fiscal year ended December 31, 1996. This Form 10-Q contains certain statements of a forward-looking nature relating to future events or the future financial performance of the Company. Readers are cautioned that such statements are only predictions and that actual events or results may differ materially. In evaluating such statements, readers should specifically consider the various factors identified in this Report which could cause actual results to differ materially from those indicated by such forward-looking statements, including the matters set forth in "Risk Factors." Results of Operations Consolidated products sales decreased 18% to $3.2 million in the three months ended March 31, 1997 compared to $3.9 million in the three months ended March 31, 1996. The sales decrease was attributable to the discontinuation of certain product lines and to the 11% change in exchange rates between the dollar and French franc. After adjusting for the elimination of the sales of discontinued products, sales of continuing products increased 5%. Contract and grant revenue decreased 55% to $0.1 million in the three months ended March 31, 1997 compared to $0.3 million in the three months ended March 31, 1996, due to the completion of certain research grants. Application for renewal of the research grants has been made, but there can be no assurance that such renewals will be granted. Gross profit as a percentage of product sales increased to 39.8% in the three months ended March 31, 1997 from 38.5% in the three months ended March 31, 1996. The increase, which was due to the discontinuation of sales of lower profit product lines, was partially offset by the costs for regulating the initial stages of the manufacture of a controlled diagnostic product. Amortization of intangible assets in the three months ended March 31, 1997 and the three months ended March 31, 1996 was due to the amortization of the portion of the purchase price of Appligene S.A. attributable to the value of intangible assets acquired, primarily for contracts, completed research projects, and the excess of the purchase price over the book value of the assets acquired. The intangible assets are being amortized on a straight line basis over periods ranging from two to ten years, with a weighted average period of approximately eight years. Selling, general and administrative expenses decreased 6% to $3.2 million in the three months ended March 31, 1997 from $3.5 million in the three months ended March 31, 1996. The beneficial effects of the discontinuation plan instituted in the second quarter of 1996, change in exchange rates and the postponement of certain marketing programs accounted for a decrease of $0.5 million, which decrease was partially offset by (i) legal and other expenses associated with certain intellectual property issues and (ii) the continuing development of a sales and marketing staff in Europe. An anticipated reduction in the aforementioned legal expenses and the implementation of the aforementioned marketing programs are expected to have largely offsetting effects on selling, general and administrative expenses throughout 1997. Research and development expenses decreased 22% to $1.5 million in the three months ended March 31, 1997 from $2.0 million in the three months ended March 31, 1996. This decrease is a result of initial payments made to The John Hopkins University under collaboration research agreements in the three months ended March 31, 1996, which payments were not repeated in the three months ended March 31, 1997, and to the effect of the above mentioned product discontinuation plan. Clinical and regulatory expense remained largely unchanged for the three months ended March 31, 1997 compared to the three months ended March 31, 1996. This expense is expected to continue at approximately this rate throughout 1997. Other net non-operating expenses increased by $1.8 million in the three months ended March 31, 1997 compared to the three months ended March 31, 1996. This increase resulted primarily from increased interest expense which has become substantially more significant through the issuance of convertible debentures in 1995, 1996 and 1997. In the three months ended March 31, 1997, interest and other expenses included a non-cash charge of $2.2 million compared to $0.5 million in the three months ended March 31, 1996. This charge represents the value of the beneficial conversion feature in the conversion formula associated with certain issuances of the convertible debenture by the Company. Such charges will continue at a lower rate through the second quarter of 1997. The net increase in interest and other expenses was partially offset by a decrease of $0.3 million in the equity in net losses of affiliates. The Company's proportionate share of net losses attributable to Codon decreased due to a significant decrease in the Company's ownership percentage. As a result of the factors discussed above, net loss increased to $8.0 million ($0.32 per share) in 1997 from $6.6 million ($0.30 per share) in 1996. Liquidity and Capital Resources The following table sets forth the most significant elements of the cash flows of the Company in the first quarter of 1997 (in millions): Cash and liquid investments at January 1, 1997 $18.9 Net cash loss from operations (3.6) Proceeds from issuance of debentures 2.0 Effects of foreign exchange rate adjustments, purchases of equipment and other (0.8) Cash and liquid investments at March 31, 1997 $16.5 The net cash used in operating activities is the result of the losses of the Company described in "Results of Operations" above. Approximately $6.3 million of the cash and liquid investments shown in the table set forth above is limited to fund operations of the Company's European subsidiary. Purchases of equipment resulted from the on-going replacement of office and laboratory equipment; the Company expects such purchases to continue at this rate. Any substantial leasehold improvements which may be required in manufacturing facilities are expected to be funded by the Company's primary landlord in accordance with the Company's current lease agreements. The Company has available for use in operations in North America, where most of its cash losses occur, (i) approximately $10.2 million dollars at March 1997 and (ii) an irrevocable commitment from a lending source in the amount of $3.0 million expiring March 31, 1998. The Company also holds marketable securities in affiliated companies with a present market value of approximately $21.6 million dollars, though substantial contractual, regulatory and market restrictions exist with respect to the rate at which these investments could be liquidated and significantly fluctuating market prices make the ultimate future selling prices unpredictable. With respect to North America, the Company believes that it has sufficient sources of cash to fund operations through the remainder of 1997 but believes that it will need to raise funds or liquidate assets shortly thereafter. The Company plans to raise needed additional financing through private equity placements and collaborative or other arrangements with corporate partners and others. There can be no assurance that the Company will be able to obtain additional financing when needed, if at all, or on terms acceptable to the Company. The Company currently has no commitments to receive additional financing. Any additional funding which it may raise in 1997 or 1998 likely will be dilutive to the interests of the current shareholders. Since December 1995, the principal source of funds for North American operations has been through the issuance of convertible debt securities. There are terms in certain of the agreements underlying these transactions which would make it more difficult to consummate similar such transactions in the future. There can be no assurance that the Company could access such funding or other funding sources in the future on commercially reasonable terms, if at all. With respect to Europe, the Company believes that its cash position of approximately $6.3 million is sufficient to fund operations beyond 1997. Risk Factors Risk Associated with the HER-2/neu Gene-Based Test System In November 1995, an FDA advisory panel (the "Panel") made a recommendation against final approval of the Company's Pre-Market Approval ("PMA") application for the use of its HER-2/neu gene-based test system for diagnostic purposes. No assurance can be given that the Panel will reconsider its position or that the FDA will overturn the recommendation of the Panel or that the Company will obtain FDA approval for its HER-2/neu gene-based test system. The failure to obtain FDA approval for its HER-2/neu gene-based test system on a timely basis, or at all, would have a material and adverse effect on the Company's business, financial condition and results of operations. In the event that the Company receives FDA approval for its HER-2/neu gene-based test system, there can be no assurance that the Company will be capable of manufacturing the test system in commercial quantities at reasonable costs or marketing the product successfully, that the test system will be accepted by the medical community, or that the market demand for the test system will be sufficient to allow profitable sales. No Assurance of Regulatory Approvals; Government Regulation The Company is currently pursuing FDA approval of certain existing products and expects to pursue FDA approval of certain additional products under development. There can be no assurance that the Company will receive regulatory approval for any of its products or, even if it does receive regulatory approval for a particular product, that the Company will ever recover its costs in connection with obtaining such approval. The timing of regulatory approvals is not within the control of the Company. The failure of the Company to receive requisite approval, or significant delays in obtaining such approval, could have a material and adverse effect on the business, financial condition and results of operations of the Company. Approval by the FDA requires lengthy, detailed and costly laboratory procedures, clinical testing procedures and application preparation and defense efforts to demonstrate a product's efficacy and safety before a product can be sold for diagnostic use. Even if such regulatory approval is obtained for a product, its manufacturer and its manufacturing facilities are subject to continual review and periodic inspections by the FDA and other regulatory agencies. The regulatory standards for manufacturing are applied stringently by the FDA. Discovery of previously unknown problems with a product, manufacturer or facility may result in restrictions on such product or manufacturer, including costly recalls or even withdrawal of the product from the market. Furthermore, approval may entail ongoing requirements for postmarketing studies. Failure to maintain requisite manufacturing standards or discovery of previously unknown problems could have a material and adverse effect on the Company's business, financial condition or results of operations. Patents and Proprietary Rights The Company's success will depend in large part on its, or its licensors', ability to obtain patents, defend its patents, maintain trade secrets and operate without infringing upon the proprietary rights of others, both in the United States and in foreign countries. The patent position of firms relying upon biotechnology is highly uncertain in general and involves complex legal and factual questions. To date there has emerged no consistent policy regarding the breadth of claims allowed in biotechnology patents or the degree of protection afforded under such patents. The Company relies on certain patents and pending United States and foreign patent applications relating to various aspects of its products. These patents and patent applications are either owned by the Company or rights under them are licensed to the Company. There can be no assurance that patents will issue as a result of any such pending applications or that, if issued, such patents will be sufficiently broad to afford protection against competitors with similar technology. In addition, there can be no assurance that any patents issued to the Company, or for which the Company has license rights, will not be challenged, invalidated or circumvented, or that the rights granted thereunder will provide competitive advantages to the Company. The commercial success of the Company will also depend upon avoiding the infringement of patents issued to competitors and upon maintaining the technology licenses upon which certain of the Company's current products are, or any future products under development might be, based. Litigation, which could result in substantial cost to the Company, may be necessary to enforce the Company's patent and license rights or to determine the scope and validity of others' proprietary rights. If competitors of the Company prepare and file patent applications in the United States that claim technology also claimed by the Company, the Company may have to participate in interference proceedings declared by the United States Patent and Trademark Office ("PTO") to determine the priority of invention, which could result in substantial cost to the Company, even if the outcome is favorable to the Company. An adverse outcome could subject the Company to significant liabilities to third parties and require the Company to license disputed rights from third parties or cease using the technology. A United States patent application is maintained under conditions of confidentiality while the application is pending in the PTO, so that the Company cannot determine the inventions being claimed in pending patent applications filed by its competitors in the PTO. Further, United States patents do not provide any remedies for infringement that occurred before the patent is granted. The University of California and its licensee, Vysis, Inc. ("Vysis"), filed suit against Oncor on September 5, 1995 for infringement of U.S. Patent No. 5,447,841 entitled Methods and Compositions for Chromosome Specific Staining which issued on that same date. The patent relates to a method of performing in situ hybridization using a blocking nucleic acid that is complementary to repetitive sequences. The Company has requested summary judgment of invalidity, non-infringement and unenforceability of the patent claims in suit. The University and Vysis have requested a summary judgment of infringement and validity. In January 1997, a summary judgment hearing was held but as of May 7, 1997, there had been no decision on the motions. A failure to successfully defend against or settle this suit may result in damages being assessed against the Company and an injunction against the sale of some of the Company's probes and genetic test kits. The Company has licensed rights to inventions disclosed in United States and foreign patent applications relating to methods and probes for detecting the presence of the Fragile X syndrome. The Company believes that its licensors are original inventors and are entitled to patent protection in the United States, but the Company is aware that certain third parties also have filed patent applications in the United States and abroad and claim to be entitled to patents related to this technology. The Company has initiated an interference proceeding with these third parties in the PTO to resolve which party is entitled to a United States patent, if any. The application licensed by the Company is senior in the interference. The Company has settled the interference with respect to one of the parties, and has reached a settlement agreement in principle with the other party. An unfavorable decision in such a proceeding could have an adverse effect on the Company. The Company currently has certain licenses from third parties and in the future may require additional licenses from other parties to develop, manufacture and market commercially viable products effectively. There can be no assurance that such licenses will be obtainable on commercially reasonable terms, if at all, that the patents underlying such licenses will be valid and enforceable or that the proprietary nature of the patented technology underlying such licenses will remain proprietary. The Company relies substantially on certain technologies that are not patentable or proprietary and are therefore available to the Company's competitors. The Company also relies on certain proprietary trade secrets and know-how that are not patentable. Although the Company has taken steps to protect its unpatented trade secrets and know-how, in part through the use of confidentiality agreements with its employees, consultants and certain of its contractors, there can be no assurance that these agreements will not be breached, that the Company would have adequate remedies for any breach, or that the Company's trade secrets will not otherwise become known or be independently developed or discovered by competitors. Uncertainties Relating to Product Development Most of the Company's products have not been approved by the FDA and may be sold only for research purposes. The Company has undertaken to seek FDA approval for certain of these products, and may in the future undertake to seek such approval for other products, and substantial additional investment, laboratory development, clinical testing and FDA approval will be required prior to the commercialization of such products for diagnostic purposes. There can be no assurance that the Company will be successful in developing such existing or future products, that such products will prove to be efficacious in clinical trials, that required regulatory approvals can be obtained for such products, that such products, if developed and approved, will be capable of being manufactured in commercial quantities at reasonable costs, will be marketed successfully or will be accepted by the medical diagnostic community, or that market demand for such products will be sufficient to allow profitable operations. International Sales and Foreign Exchange Risk The Company derived approximately $8.7 million or 57% of its total product revenues, from customers outside of the United States for the year ended December 31, 1996. The Company anticipates that a significant amount of its sales will take place in European countries and likely will be denominated in currencies other than the U.S. dollar. These sales may be adversely affected by changing economic conditions in foreign countries and by fluctuations in currency exchange rates. Any significant decline in the applicable rates of exchange could have a material adverse effect on the Company's business, financial condition and results of operations. Additional risks inherent in the Company's international business activities generally include unexpected changes in regulatory requirements, tariffs and other trade barriers, lack of acceptance of products in foreign markets, longer accounts receivable payment cycles, difficulties in managing international operations, potentially adverse tax consequences, restrictions on repatriation of earnings and the burdens of complying with a wide variety of foreign laws. There can be no assurance that such factors will not have a material adverse effect on the Company's future international revenues and, consequently, on the Company's business, financial condition and results of operations. Competition and Technological Change The diagnostic and biotechnology industries are subject to intense competition and rapid and significant technological change. Competitors of the Company in the United States and in foreign countries are numerous and include, among others, diagnostic, health care, pharmaceutical, biotechnology and chemical companies, academic institutions, government agencies and other public and private research organizations. Many of these competitors have substantially greater financial and technical resources and production and marketing capabilities than the Company. There can be no assurance that these competitors will not succeed in developing technologies and products that are more effective, easier to use or less expensive than those that have been or are being developed by the Company or that would render the Company's technology and products obsolete and noncompetitive. The Company also competes with various companies in acquiring technology from academic institutions, government agencies and research organizations. In addition, many of the Company's competitors have significantly greater experience than the Company in conducting clinical trials of new diagnostic products and in obtaining FDA and other regulatory approvals of products for use in health care. Accordingly, the Company's competitors may succeed in obtaining regulatory approval for products more rapidly than the Company. Investment in OncorMed and Codon The Company owns approximately 26% of the common stock of its publicly-traded affiliate, OncorMed, and 42% of the voting securities of its affiliate, Codon. The shares of common stock of both OncorMed and Codon held by the Company are not currently freely tradeable and no public market exists for the Common Stock of Codon. Therefore, there can be no assurance that the Company will be able to realize the economic benefit of its investment or predict the timing of such realization. The value of the Company's investment in OncorMed represents a significant portion of the total assets of the Company and such value fluctuates with the market price of OncorMed's common stock. Therefore, any event that has a material and adverse effect on the market price of the common stock of OncorMed will have a material and adverse effect on the value of the Company's investment in OncorMed. Although Stephen Turner, the Company's Chief Executive Officer, is a Director of OncorMed and the Company is a significant stockholder in OncorMed, the Company does not control the day-to-day operations and management of OncorMed and, therefore, has little direct control over its operations and financial results. Codon will require additional financing in the future. The Company does not currently intend to provide a significant portion of such financing although the Company may provide additional financing in the future. The failure of Codon to obtain any required financing on acceptable terms could have a material and adverse effect on the value of the Company's investment in Codon. Other Factors Other factors that may affect the Company's business, financial condition and results of operations, include the Company's limited manufacturing, marketing and distribution experience, the level and availability of government funding, the Company's ability to attract and retain key personnel, potential health care reform measures and the availability of third-party reimbursement, potential product liability claims, and environmental risks. Item 6. Exhibits and Reports on Form 8-K. a. The following exhibits are filed as part of this report on Form 10-Q. 27. Financial Data Schedule. 28. Leases. b. Reports on Form 8-K. None. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ONCOR, INC. (Registrant) Date: May 13, 1997 Stephen Turner, Chairman and Chief Executive Officer Date: May 13, 1997 Cecil Kost, President and Chief Operating Officer Date: May 13, 1997 John L. Coker, Vice President of Finance and Administration, Chief Financial Officer SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ONCOR, INC. (Registrant) Date: May 13, 1997 /s/ Stephen Turner Stephen Turner, Chairman and Chief Executive Officer Date: May 13, 1997 /s/ Cecil Kost Cecil Kost, President and Chief Operating Officer Date: May 13, 1997 /s/ John L. Coker John L. Coker, Vice President of Finance and Administration, Chief Financial Officer EX-27 2
5 3-MOS DEC-31-1997 MAR-31-1997 12941195 0 2468145 (417709) 4034635 24140672 10818160 (6082621) 38239939 4530852 0 0 0 251123 19066050 38239939 3204386 3327136 1930049 7474964 (3855952) 0 2756187 (8003780) 0 (8003780) 0 0 0 (8003780) (0.32) (0.32)
EX-28 3 FIRST AMENDMENT TO THE LEASE BETWEEN SAUL HOLDINGS LIMITED PARTNERSHIP AND ONCOR, INC. 200 PERRY PARKWAY This FIRST AMENDMENT TO LEASE is made and entered into this 4th day of November 1996 by and between SAUL HOLDINGS LIMITED PARTNERSHIP (hereinafter referred to as "Landlord"), and ONCOR, INC. a Maryland Corporation (hereinafter referred to as "Tenant"). WHEREAS, Landlord and Oncor, Inc. have entered into that certain Lease dated December 2, 1994 (the "Lease") for approximately 19,581 square feet in 200 Perry Parkway, Avenel Business Park, Gaithersburg, Maryland 20877; and WHEREAS, the parties hereto desire to enter into this First Amendment to Lease for the purposes hereinafter set out. NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. Article 2 of the Lease captioned "Term" is hereby modified to extend the term of the Lease for sixty eight (68) months, commencing on July 1, 1998 and expiring on March 31, 2004. 2. (a) Article 3 of the Lease captioned "Rent" is hereby modified as of February 1, 1997 to change the annual Initial Base Rent payable under the Lease from and after the February 1, 1997 to Two Hundred Forty-Four Thousand Seven Hundred Sixty-Two and 50/100 Dollars ($244,762.50) payable in equal monthly installments of Twenty Thousand Three Hundred Ninety-Six and 88/100 Dollars ($20,396.88). (b) Commencing on February 1, 1998 and on the first day of every Lease Year (as hereinafter defined) thereafter during the term hereof, the Initial Base Rent (without deduction for rent abatement, if any) shall be increased to an amount equal to one hundred three percent (103%) of the amount of the Initial Base Rent which was in effect during the Lease Year immediately preceding the Lease Year for which the adjustment is being made, payable by Tenant in equal monthly installments in accordance with Article 3 of the Lease. (c) For the purpose of calculating the adjustment to the Initial Base Rent under this First Amendment to Lease, the "Lease Year" shall be defined to mean a period of twelve (12) calendar months and the first Lease Year shall commence on February 1, 1997 and each succeeding Lease Year shall commence on the anniversary date of the beginning of the first Lease Year. 3. Article 5 of the Lease captioned "Annual Operating Costs" is hereby Modified to change the Tenant's estimated monthly payment of Annual Operating Costs to $6,053.79 per month. 4. Special Stipulation 47 of the Lease is hereby deleted in its entirety effective February 1, 1997. Special Stipulation 52 is hereby deleted in its entirety. 5. Landlord will provide Tenant with a construction allowance ("Construction Allowance") equal to the lesser of (a) the actual amount expended by Tenant in remodeling and renovating the Demised Premises or (b) $127,276.50 as an allowance toward construction of Tenant Improvements in the Demised Premises. Upon request to the Landlord, the Tenant Improvements performed in space leased by the Tenant at 205,207 and 209 Perry Parkway in Avenel Business Park shall qualify for the Construction Allowance. The Construction Allowance shall be payable after February 1, 1998 within thirty (30) days after request of Tenant and completion of all of the requirements specified below. Tenant Improvements shall include architectural/engineering fees, permit and inspection fees, and construction costs for alterations to or additional improvements of the partitions, doors, ceilings, finishes, mechanical equipment, electrical system, sprinkler system or other such permanent improvements to the Demised Premises. Prior to commencement of Tenant Improvements, Tenant shall submit plans and specifications for the Tenant Improvements for the Landlord's review and approval, in accordance with Articles 8 and 9 of the Lease. The Tenant Improvements shall be performed in accordance with the following requirements: A. The Tenant shall provide lien waivers and copies of paid invoices from all contractors, subcontractors and suppliers of materials for all Tenant Improvements. Such invoices shall total or exceed the amount the Construction Allowance requested. B. Tenant shall provide its own contractors to perform all of the Tenant Improvements except that Tenant shall utilize the Landlord's roofing contractor for all roofing work or work involving penetrations of the roof membranae. C. The contractors, subcontractors or laborers employed in connection with such work shall comply with any applicable law and reasonable uniform work rules and regulations established by Landlord from time to time for all tenant improvements. D. Tenant, or its contractors and their subcontractors, shall provide such insurance, bonding, or indemnification as Landlord may reasonably require for its protection from negligence or malfeasance on the part of such contractors and subcontractors. E. In Landlord's reasonable judgement such work of the contractor or subcontractors will not result in delays, stoppages or other action or the threat thereof which may interfere with or delay the completion of other work in the Building. F. Landlord shall have the fight to inspect the Tenant's work on a regular basis. G. Tenant shall be responsible for obtaining any permits, certificates, or approvals from any state, federal or local government necessary to enable Tenant to occupy the Demised Premiss and construct the Tenant Improvements. All costs incurred in connection with obtaining such permits, certificates, or approvals shall be the sole responsibility of Tenant. H. As provided for in section 9 of the Lease, Tenant shall save Landlord harmless from and against all expenses, liens, claims or damages to either property or person which may or might arises by reason of making the Tenant Improvements. I. If after complying with the terms of this Paragraph 5, the Construction Allowance is not paid in accordance with the terms of this Paragraph 5, then Tenant shall be entitled, notwithstanding anything in the Lease to the contrary to offset the rent by an amount equal to the Construction Allowance. 6. A. Prior to February 1, 1997, and within ninety (90) days after the expiration or earlier termination of the Lease, Landlord may engage its environmental consultant, Environmental Management Group or another environmental consultant satisfactory to Landlord to perform a Phase I environmental assessment of the Demised Premises and any surrounding areas of the Property designated by Landlord or the Environmental Consultant. The cost of the above described Phase I assessments shall be paid by Landlord unless the assessment indicates that Tenant is not in substantial compliance with the applicable statues, ordinances, and regulations governing Tenant's use, storage, and disposal of chemicals and hazardous materials in which event Tenant shall reimburse Landlord as additional rent for the cost of the assessment. Tenant shall defend, indemnify, and hold Landlord and Landlord's agents, officers, directors, employees, and contractors harmless against and from any and all injuries, costs, expenses, liabilities, losses, damages, injunctions, suits, actions, fines, penalties, and demands of any kind or nature (including reasonable attorney fees) occasioned by or arising out of or relating to any environmental pollution, damage, condition or problem, including without limitation, the presence of any hazardous substances, asbestos or other toxic waste as defined in any federal, state, or municipal governmental or quasi-governmental laws, rules, regulations, or ordinances in effect on the Lease Date that are existing in the Demised Premises and caused by the acts, omissions or negligence of Tenant, its agents, or employees and not caused by Landlord's acts or omissions. B. Landlord shall have the right, at its sole cost and not as an operating expense, on one (1) occasion during each Lease Year to have Landlord's environmental consultant inspect the Tenant's records and procedures regarding the Tenant's storage, use, and disposal of chemicals and hazardous materials within the Demised Premises. In the event that the Landlord's environmental consultant finds that the Tenant is not in substantial compliance with any applicable law, regulation, or codes regarding the storage, use, or disposal of chemicals or hazardous materials, such non compliance shall constitute a non-monetary default under Article 16 of the Lease. D. Tenant shall have the right to construct an exterior structure (Outdoor Storage Structure) in a location and of a size and material reasonably approved by Landlord within which Tenant will store chemicals and materials which are subject to this Paragraph 6. The Construction Allowance may be used for this purpose. The Outdoor Storage Structure shall be deemed to be a part of the Demised Premises for purposes of Articles 8, 9, 12, 13, 17, 18, 20, 21, and 23 of this Lease and Tenant shall include the Outdoor Storage Structure within the coverage of all insurance policies required to be maintained by Tenant under this Lease. 7. Tenant shall have the option to renew the term of the Lease for one (l) additional period of five (5) years (the "Option Term") following the expiration of the initial lease term provided for in paragraph 1 of this First Amendment, provided that the Lease is in full force and effect, the Tenant shall be in possession and occupying the Demised Premises, and Tenant shall not be in default in the performance or observance of any of the terms, conditions, provisions and/or covenants of the Lease. All such rights of a renewal shall be exercised by delivery to Landlord of written notice of Tenant's intention to renew the term at least nine (9) months but not more than fifteen (15) months prior to the expiration of the then applicable term of the lease. The Option Term shall be on the same terms, covenants and conditions as the original lease except Initial Base Rent for the Option Term shall be 100% of the then Prevailing Market Rent of comparable space within the Gaithersburg market area, including current operating costs and concessions, which rent shall be established as follows: (a) Within fifteen (15) business days after receipt of Tenant's notice exercising its option to extend the term of this Lease, Landlord shall notify Tenant of Landlord's estimate of Prevailing Market Rent. If Tenant disagrees with Landlord's estimate of Prevailing Market Rent, Tenant shall notify Landlord that it has elected to submit the determination of Prevailing Market Rent to Arbitration, in which event the provisions of subparagraph (b) of this Article shall govern the selection of arbitrators and the establishment of the Prevailing Market Rent payable for the year of the then applicable Option Term; provided, however, that if Tenant does not elect to submit the determination of Prevailing Market Rent to Arbitration during such fifteen (15) day period, then the Landlord's estimate of Prevailing Market Rent shall be deemed to be agreed to by Tenant, and shall be the Initial Base Rent payable by Tenant to Landlord during the first year of the then applicable Option Term. (b) (i) Definition: As used herein, the term "Prevailing Market Rent" means the most probable rent (as determined pursuant to the appraisal procedure hereinafter set forth) at which the Demised Premises (and any Additional Premises) would be leased in a comparable and open market, under all conditions requisite to a fair Lease, the Landlord and Tenant each acting prudently, knowledgeable, and assuming the rent is not affected by undue stimulus. Implicit in this definition is the consummation of the Lease beginning on the commencement date of the Option Term under conditions whereby: 1. Landlord and Tenant are typically motivated (i.e., neither party is compelled to enter into a lease and both parties are willing to enter into a lease). 2. Both parties are well informed or well advised, and each acting in what it considers its own best interest. 3. A reasonable time is allowed for exposure in the open market. 4. The Prevailing Market Rent shall be computed as an amount equal to the then prevailing market rental rate of the Demised Premises, as if vacant with building standard improvements, and taking into account the annual adjustments of Initial Base Rent, Tenant's obligation to pay Tenant's pro-rata share of Annual Operating Expenses and all existing market factors. 5. All of the terms, covenants and conditions of the Lease (except terms respecting the amount of Initial Base Rent) remain in effect throughout the applicable Option Term. (ii) In the event of a dispute as to determination of Prevailing Market Rent referred to in this Article, or a dispute of any of the provisions of this Lease, such dispute shall be in accordance with the following: (a) If Landlord and Tenant fail to agree upon the Prevailing Market Rent as referred to in this Article, within the time periods provided for herein, then Landlord and Tenant each shall give notice to the other setting both the name and address of a licensed real estate broker or appraiser (hereinafter "appraiser") who shall be a M.A.I. Real Estate professional with substantial experience in commercial real estate appraisal designated by it to make the determinations hereafter required. Each appraiser shall be instructed to calculate the Prevailing Market Rent as provided in each of the foregoing sections which is the subject of the dispute and is in accordance with the criteria referenced therein. If either party shall fail to give notice of such designations within ten (10) days after failing to agree between themselves, then the appraisal made by the appraiser so designated shall be the Appraisal Prevailing Market Rent. If two appraisers have been designated, such two appraisers shall consult with each other and, within thirty (30) days thereafter, issue their determinations of Appraisal Prevailing Market Rent in writing, and give notice thereof to each other and to Landlord and Tenant. If such two appraisers shall concur as to the determination of the prevailing Market Rent and submit their decision in writing to Landlord and Tenant, such concurrence shall be final and binding upon Landlord and Tenant. If the two determinations of Prevailing Market Rent shall be within five percent (5%) (measured from the higher appraisal) of each other, the Prevailing Market Rent shall be deemed to be the average of the two appraisers' determinations. If such two appraisers' determinations shall not so concur or coincide, then such two appraisers shall immediately (i) designate a third appraiser, (ii) prepare detailed written appraisals, and (iii) submit copies of such appraisal to Landlord, Tenant and such third arbitrator. If the two appraisers shall fail to agree upon the designation of such third appraiser within eight (8) days of the date on which the last determination was rendered, then either party may apply to the American Arbitration Association or any successor thereto having jurisdiction, for the designation of such appraiser. All arbitrators shall be licensed real estate appraisers who shall have had at least fifteen (15) years continuous experience in the business of appraising or real estate in the Montgomery County area. The third appraiser shall conduct such hearings and investigations as he may deem appropriate and shall, within twenty (20) days after the date of designation of the third appraiser, choose the determination of the two appraisers originally selected by the parties which is the nearest to the determination such third appraiser would have made acting alone and applying the standards set forth therefor in this Lease, and that choice by the third appraiser shall be binding upon Landlord and Tenant. Each party shall pay its own counsel fees and expenses, if any, in connection with any arbitration under this Article, including the expenses and fees of any appraiser selected by it in accordance with the provisions of this Article, and the parties shall share equally all other expenses and fees of any such arbitration, including the expenses of the third appraiser. The determination rendered in accordance with the provisions of this Article shall be final and binding in fixing the Prevailing Market Rent. Notwithstanding the foregoing, in no event shall the Basic Rent for the First Lease Year of the Option Term be less than the then Initial Base Rent of the last Lease Year of the initial lease term of this First Amendment escalated by three percent. 8. Landlord will use reasonable efforts to obtain a non-disturbance agreement for Tenant's benefit from the holder of the mortgage lien on the Property (the "Lender"). The non-disturbance agreement shall be on the Lender's approved form, and Tenant shall pay to Landlord, as additional rent, all fees, costs and expenses charged to Landlord by the Lender in connection with the Lender's review of this Lease including, without limitation, the Lender's legal fees. This Lease shall not be subordinate to any future mortgage, deed of trust or other lien on the Property unless the party secured by any such instrument enters into a non-disturbance agreement with Tenant on a form acceptable to such future Lender. 9. Except as modified hereby, the Lease shall remain in full force and effect in accordance with its terms, and is hereby ratified, confirmed and approved in all respects. WITNESS the following signatures and seals. ATTEST: LANDLORD:SAUL HOLDINGS LIMITED PARTNERSHIP By: SAUL CENTERS, INC., ITS GENERAL PARTNER [SIG] By:/s/ PHILIP D. CARACI - --------------------------- ------------------------------------ (SEAL) Secretary Philip D. Caraci, President ATTEST: TENANT: ONCOR, INC. [SIG] By: - --------------------------- ------------------------------------ (SEAL) Secretary EXHIBIT A RG 0101 AMPICILLIN RG 0102 AMMONIUM ACETATE RG 0103 ACETIC ACID RG 0104 AGAROSE SEAKEM LE RG 0105 ANTIFOAM A DCA ANTIFOAM RG 0106 AMMONIUM PERSULFATE RG 0107 ACRYLAMIDE RG 0108 3AMINOPROPYLTRIEIHOXY- SILANE RG 0109 ACETIC ANHYDRIDE RG 0110 AGAROSE NUSIEVE RG 0111 ALKALINE PHOPHATASE RG 0112 AMMONIUM CHLORIDE RG 0113 AMMONIUM SULFATE RG 0114 AGAROSE HISPANAGAR RG 0116 AGAR STRIPS-TOTAL COUNT (GK-4) RG 0120 ANTIBODY MOUSE IgG ANTI- DIGOXYGENIN RG 0125 ANTI-DIGOXIGENIN PEROXYDASE 150u/ml RG 0130 ALUMINUM SUL. HYDRATED RG 0135 ANTIBODY-FITC ANTIDIG RG 0136 ANTIBODY FITC ANTIPHOX RG 0140 ANTIBODY-FITC ANTI RABBIT RG 0145 ANTIBODY TEXAS RED ANTI- AVIDIN RG 0150 ANTIBODY-RABBIT ANTI- SHEEP RG 0155 ANTIBODY-RHODAMINE ANTI- RABBIT RG 0160 ALCONOX DETERGENT RG 0200 BACTO-AGAR RG 0201 TRYPTONE(BACTO) RG 0202 YEAST EXTRACT (BACTO) RG 0203 B-MERCAPTOETHANOL RG 0204 BROMOPHENOL BLUE RG 0205 BORIC ACID GRANULAR RG 0206 BISACRYLAMIDE RG 0207 5BROMO4CHLORO3INDOLYLP- HOSPHATE RG 0208 BCR-PROBE RG 0209 BENZAMIDINE RG 0220 BLUE BUFFER SOLUTION RG 0300 CASEIN,VITAMIN FREE RG 0301 CHLOROFORM RG 0302 CALCIUM CHLORIDE RG 0303 CARNATION NONFAT DRY MILK RG 0304 CASEIN FROM BOVINE MILK RG 0305 CASEIN HAMMERSTEIN RG 0306 INACTIVE RG 0307 CADAVERIN RG 0308 CHAPS RG 0309 HUMAN COZ-1 DNA RG 0311 MDA-MB468 CELL PELLET RG 0315 CENTRICON MINI CONTRACT RG 0400 DAB STOCK SOLUTION RG 0401 DAPI RG 0402 DEXTRAN SULFATE RG 0403 DITHIOTHREITOL (DTT) RG 0404 NUCLEOTIDE-dCTPALPHA 32p RG 0405 NUCLEOTIDE-dATP RG 0406 NUCLEOTIDE-dTTP RG 0407 NUCLEOTIDE-dGTP RG 0408 ENZYME-DNAse I RG 0409 ENZYME-DNA POLYMERASE I (10 U/ul) RG 0410 DISUCCINIMIDYL SUBERATE (DSS) RG 0411 DIETHNYLPYROCARBONATE RG 0412 DIMETHYLFORMAMIDE(DMF) RG 0413 NUCLEOTIDE-dCTP RG 0414 NUCLEOTIDE-dUTP BIOTIN RG 0415 OBEA BIO-14-DCTP RG 0417 NUCLEOTIDE-dUTP DIG RG 0418 DIGOXIGENIN-14-dCTP NUCLEOTIDE RG 0419 DIGOXIGENIN-11-UTP RG 0420 NUCLEOTIDE-dNTP SET RG 0421 DEIONIZED WATER RG 0422 NUCLEOTIDE:BODIPY-TR- dCTP RG 0425 2,4-DINITROBENZENESULFON IC ACID, SODIUM SALT RG 0426 DIETHUNOLAMINE RG 0501 EDTA RG 0502 ETHANOL RG 0503 ETHIDIUM BROMIDE RG 0504 ETHER RG 0505 E.coli tRNA RG 0506 EGTA RG 0520 EOSIN Y RG 0601 FORMAMIDE RG 0602 FICOLL RG 0603 FITC AVIDIN RG 0604 FORMALDEHYDE RG 0605 FORMALIN SOLUTION NEUTRAL BUFFERED RG 0701 GLYCEROL RG 0702 GLUCOSE RG 0703 GLYCINE RG 0704 GIEMSA STAIN RG 0705 GLACINE RG 0706 ANTIBODY-GOAT ANTI- AVIDIN RG 0707 GOAT SERUM RG 0708 GUANIDINE THIOCYANATE RG 0800 HB101 COMPETENT CELLS RG 0801 HYDROCHLORIC ACID RG 0802 HEMATALL RG 0803 HYDROXYAPATITE RG 0804 HEPES RG 0805 HIPURE GELATIN RG 0806 HEMTOXYLIN RG 0810 HORSERADISH PEROXIDE COMPLEX RG 0820 HYDROGEN PEROXIDE RG 0901 ISOAMYL ALCOHOL RG 0905 ISOPROPYL ALCOHOL RG 1102 KODAK FIXER LIQUID RG 1103 KODAK DEKTOL DEVELOPER RG 1210 LYSOZYME RG 1215 STABILZYME RG 1220 LB/AMPICILLIN PLATES RG 1230 LIQUINOX RG 1235 LpH GERMICIDAL DETERGENT RG 1236 LITHIUM CHLORIDE RG 1300 MAGNESIUM ACETATE RG 1301 MAGNESIUM CHLORIDE HEXAHYDRATE RG 1302 INACTIVE RG 1303 METHANOL RG 1304 MINERAL OIL RG 1305 1.OM MgCl RG 1310 MOPS SODIUM SALT RG 1315 MOUNTING MEDIA RG 1320 ENZYME-MSP I(100U/ul) RG 1402 NACS 20 RG 1403 NACS 37 RG 1404 NITRO BLUE TETRAZOLIUM RG 1405 NONIDET P-40 RG 1420 NHS LC BIOTIN RG 1480 NUCLEAR FAST RED RG 1501 NUCLEOTIDE OLIGODEOY- NUCLEOTIDE MIXTURE RG 1502 TS OLIGONUCLEOTIDE RG 1503 ACX OLIGONUCLEOTIDE RG 1504 UZ OLIGONUCLEOTIDE RG 1505 TSUZ OLIGONUCLEOTIDE RG 1506 TSR8 OLICG1ONUCLEOTIDE RG 1601 POTASSIUM PHOSPHATE DIBASIC RG 1602 POTASSIUM PHOSPHATE MONOBASIC RG 1603 POTASSIUM ACETATE RG 1604 POTASSIUM CHLORIDE RG 1605 POLYVINYL PYROLLIDINE RG 1606 POTASSIUM HYDROXIDE RG 1607 PEG 8000 RG 1608 PHENOL (LIQUID) RG 1609 P-PHENYLENE DIAMINE DI- HYDROCHLORIDE RG 1610 PARAFORMALDEHYDE RG 1611 PEPTONE WATER RG 1612 PERMOUNT RG 1613 PROTEASE SUBSTRATE GEL TABLET RG 1615 PROPIDIUM IODIDE RG 1616 PROPYLPARASEPT RG 1617 PHENOL CRYSTALS RG 1618 PHENOL, CHLORROFORM ISOAMYL ALCOHOL RG 1619 P11 FIBROUS CATION EX- CHANGER RG 1620 POLYETHYLENE GLYCOL RG 1640 PNPP TABLETS RG 1801 RABBIT SERUM NORMAL RG 1805 RHODAMINE ANTI DIG RG 1823 RED BUFFER SOLUTION pH4 RG 1829 REX-70 200-400 MESH SODIUM/BIO RG 1843 RODAC PLT-TSA AGAR LECITHI & P80 RG 1901 SODIUM CHLORIDE RG 1902 SODIUM HYDROXIDE PELLETS RG 1903 SODIUM DODECYL SULFATE RG 1904 SODIUM PHOSPHATE DIABASIC-ANHYDROUS RG 1906 SODIUM CITRATE RG 1907 SODIUM ACETATE RG 1908 SARCOSYL(N-LAUROYLSAR- COSINE) RG 1909 SPERMIDINE RG 1910 SEPHADEX G-50 RG 1911 SALMON SPERM DNA RG 1912 SEPHADEX G-25 RG 1913 SODIUM PHOSPHATE- DIBASIC RG 1914 SODIUM PHOSPHATE MONO- BASIC-MONOHYDRATE RG 1915 SODIUM AZIDE RG 1916 SODIUM BICARBONATE RG 1917 SODIUM CARBONATE RG 1918 SODIUM DIATRIZOATE RG 1919 SODIUM PHOSPHATE BUFFER POWDER RG 1920 STERILE WATER RG 1921 STREPTAVIDIN STOCK RG 1922 SUCROSE RG 1923 SODIUM BISULFITE RG 1930 STAIN BUFFER PELLET RG 1940 SEPHAROSE CL-4B RG 2001 TRIS BASE RG 2003 TRIS HYDROCHLORIDE RG 2004 TRITON X-100 RG 2005 TEMED RG 2006 TRIETHANOLAMINE RG 2007 TRIS ACETATE RG 2008 INACTIVE RG 2009 INACTIVE RG 2010 TWEEN 20 RG 2011 tris-cl (ph8.3) RG 2012 TRIS-CL (PH7.6) RG 2030 THYMOL RG 2040 ENZYME Taq 1 POLYMEARSE 5U/ul RG 2101 UREA RG 2205 VESPHENE/1 STROKE GERMIC DETER RG 2250 WRIGHT STAIN RG 2401 XYLENE CYANOL RG 2505 YELLOW BUFFER SOLUTION pH7 RG 2610 ZINC CLORIDE RG 2702 BLEACH RG 2703 DIALYSIS MEMBRANE-3/4 IN RG 2704 CONDUCT CAL SOLUTION 1000umhos/cm RG 2705 CONDUCT CAL SOLUTION 10000umhos/cm RG 2706 CONDUCT CAL SOLUTION 100000umhos/cm RG 2707 PONCEAU SS RG 2708 PONCEAU S RG 2709 ACID FUCHSIN RG 2711 COOMAISE BRILLIANT BLUE R250 RG 2712 METHYL GREEN RG 2713 METHYL VIOLET 2B RG 2714 METHYL BLUE RG 2715 ORANGE G RG 2716 METHYL ORANGE RG 2717 NAPHTHOL BLUE BLACK RG 2718 NILE BLUE A RG 2719 MOLT 4 CELLS RG 2720 SB CELLS RG 2721 PLACENTA FEMALE (SHADY GROVE) RG 2722 PLACENTA MALE (SHADY GROVE) RG 2724 COBALT CHLORIDE HEXA- HYDRATE RG 2725 CACODYLIC ACID RG 2726 ENZYME-DEOXYNUCLEOTIDE TERM. TRANSFERASE 25u/ul RG 2727 KANAMYCIN MONOSULFATE RG 2728 CARBOXYMETHLATED BSA RG 2729 ANTIBODY-PCNA RG 2730 ANTIBODY NM23 RG 2731 S35 dUTP RG 2732 ANTI-DIGOXIGENIN ALK-PHOSPHATASE RG 2734 L-GLUTAMINE RG 2735 RPMI-1640 MEDIUM WITH HEPES RG 2736 PHYTOHAEMAGGLUTININ RG 2737 DEIONIZED DISTILLED WATER RG 2738 PENICILLIN-STREPTOMYCIN SOLUTION RG 2739 COLCEMID (KAYROMAX) RG 2740 FETAL BOVINE SERUM RG 2741 ACETONE RG 2742 XYLENES RG 2743 BIOTINYLATED ANTI-SHEEP Ab RG 2744 THIMERSOL RG 2745 HRP ANTI-DIGOXYGENIN RG 2746 HER-2/NEU ANTIBODY RG 2750 ACETIC ACID, GLACIAL RG 2751 AMMONIUM HYDROXIDE SON RG 2752 AMMONIUM OXALATE RG 2753 BARIUM CHLORIDE DIHYDRATE RG 2754 CALCIUM HYDROXIDE RG 2755 HYDROGEN SULFIDE RG 2756 NITRIC ACID 1.0 N RG 2757 NESSLER'S REAGENT RG 2758 POTASSIUM CHLORIDE RG 2759 SILVER NITRARE 1.0 N RG 2760 SULFURIC ACID 36N RG 2761 HIGHLY PURIFIED WATER RG 2762 SODIUM CHLORIDE RG 2763 POTASSIUM PERMANGANATE 1 ON RG 2764 ALUI ENZYME RG 2765 RANDOM HEXANUCLEOTIDE FRAGMETS pd(N)6 RG 2766 HISTOCHOICE TISSUE FIXATIVE 100ml RG 2767 HISTOCHOICE TISSUE FIXATIVE 500ml RG 2768 HISTOCHOICE TISSUE FIXATIVE 4 LITER RG 2769 HISTOCHOICE TISSUE FIXATIVE 3ml RG 2770 HISTOCHOICE TISSUE FIXATIVE 7ml RG 2771 HISTOCHOICE TISSUE FIXATIVE 15ml RG 2772 ANTI-HUMAN FAS, CLONE CH-11, 50ug RG 2773 ANTI-HUMAN FAS, UB2 100ug RG 2774 ANTI-HUMAN FAS, UB2-FITC LABELED, 50 TESTS RG 2775 SODIUM SULFITE PHOTO- GRAPHIC GRADE RG 2776 FITC-11-dUTP RG 2777 SYNERGEL RG 2778 CATRIMOX-14 RG 2779 ICE INHIBITOR RG 2780 ICE SUBSTRATE RG 2781 GRANZYME B SUBSTRATE RG 2782 GRANZYME B SUBSTRATE INHIBITOR RG 2783 ICE OVERLAY MEMBRANE RG 2784 GRANZYME B ENZYME OVER- LAY MEMBRANE RG 2785 AGAROSE DI LE RG 2786 AGAROSE DS LE RG 2787 AGAROSE LM2 RG 2788 MOPS FREE ACID RG 2789 ANTI-EGER ANTIBODY RG 2790 ANTI-FLUORESCEIN AP FAB FRAGMENTS RG 2791 PRE-PACKED PD10 COLUMN RG 2792 EGFR PEPTIDE RG 2793 FAE-dCTP RG 2794 EGFR ANTIBODY RG 2795 ISO ENZYME muGST RG 2796 GST ALPHA ISOENZYME RG 2797 EGFR ISOENZYME RG 2798 GST mu ANTIBODY RG 2799 GST ALPHA ANTIBODY RG 2801 LAMBDA HIND III DNA RG 2802 PHI X 174-HAE III DNA RG 2803 REACT BUFFER SET RG 2804 ENZYME Sst I RG 2805 ENZYME Pst I 50U/ul RG 2806 LAMBDA DNA RG 2807 PBR322-DNA RG 2808 PROTEINASE K RG 2809 ENZYME-Pst I 10U/ul RG 2810 ENZYME-BamH I 50U/ul RG 2811 ENZYME-HINC II (10 U/ul) RG 2812 ENZYME-AVA I RG 2813 ENZYME SAU3A RG 2814 BSA (ACETYLATED) SOLUTION RG 2816 ENZYME DDE I RG 2817 HERRING TESTES DNA RG 2818 RNASE A RG 2819 RNASET T RG 2820 ENZYME ECOR I 50U/ul RG 2821 ENZYME KLENOW FRAGMENT RG 2823 123 bp DNA LADDER RG 2824 ENZYME ECOR V RG 2825 ENZYME CLA I RG 2826 ENZYME AAT II RG 2827 ENZYME BGL I RG 2828 ENZYME AVA II RG 2829 ENZYME BAMH I 100U/ul RG 2830 ENZYME HIND III 50U/ul RG 2831 BSA POWDER RG 2832 ANTIBODY-GstPI RG 2833 ENZYME HINC II RG 2834 ENZYME HIND III 100U/ul RG 2836 ENZYME DRA I RG 2837 ENZYME ECOR I 100U/ul RG 2838 ENZYME BGL II RG 2839 BAMH I 200U/ul RG 2840 ENZYME HIND III 200U/ul RG 2841 ECOR I 200U/ul RG 2842 ENZYME PVU II RG 2843 ENZYME NDE I RG 2844 ENZYME SAC II 2009U/ul RG 2845 ENZYME HPA I RG 2846 ENZYME HINF I RG 2847 dTTP NUCLEOTIDE RG 2848 dGTP NUCLEOTIDE RG 2849 dCTP NUCLEOTIDE RG 2850 dATP POWDER RG 2851 ENZYME HIND III 8-12 U/ul (LTI) RG 2852 ENZYME ECORI 8-12 U/ul (LTI) RG 2853 HIND III 10 U/ul (APPLIGENE) RG 2854 ECO RI 10 U/ul (APPLIGENE) RG 2855 ENZYME KPN I RG 2856 BAMH I 10 U/ul (APPLIGENE) RG 2857 ENZYME BAMH I 8-12 U/ul (LTI) RG 2858 SAC I 10 U/ul (APPLIGENE) RG 2859 SAC I 8-12 U/ul(PROMEGA) RG 2860 BGL I 10 U/ul(APPLIGENE) RG 2861 DRA I 10 U/ul(APPLIGENE) RG 2862 PVU II 10 U/ul(APPLIGENE) RG 2863 ENZYME NCO I RG 2865 SST I 50-100 U/ul (LTI) RG 2866 DRA I 50 U/ul (LTI) RG 2867 BUFFER SET (APPLIGENE) RG 2868 BSA, FRACTION V HEAT SHOCK RG 2870 TAKARA LA PCR RG 2871 TAKARA PCR AMPLIFICATION RG 2872 TAKARA TAQ POLYMARASE RG 2873 TAKARA TAQ POLYMARASE RG 2874 TAKARA LA PCR KIT VER 2 RG 2875 TAKARA LA PCR CLONING RG 2876 TAKARA LA PCR MUTAGENSIS RG 2877 TAKARA CDNA SYNTHESIS KIT RG 2878 TAKARA PCR MYEOPLASMA DETECTION RG 2879 TAKARA RNA PCR KIT VER 2 RG 2880 DNA QUANTITATION STAND- ARDS RG 2882 ENZYME ECORI 50U/ul RG 2883 ENZYME HIND III 50U/ul RG 2884 ENZYME BAMHI 50U/ul RG 2885 ENZYME PVU I RG 2886 ENZYME DRAI 50U/ul RG 2891 ENZYME SAL I RG 2892 ENZYME SAU96 I RG 2893 ENZYME SCA I RG 2894 Enzyme Sph I RG 2896 ENZYME SCA II RG 2897 ENZYME Taq I RG 2898 ENZYME XHO 1 RG 2900 ENZYME XBA I RG 2901 ANTI-FLUORESCEIN RG 2902 ANTI-MOUSE FLUORESCEIN CONJUGATE RG 2903 TRYPSIN INHIBITOR (SOYBEAN) RG 2904 RABBIT ANTI-DNP ANTIBODY RG 2905 OVALBUMIN RG 2906 TRIFLOR ACETIC ACID RG 2907 CARBONIC ANHYDRASE II RG 2908 PHOSPHORYLASE B RG 2909 GOAT ANTI-RABBIT IgG HRP ANTIBODY RG 2910 1.4-DINITROPHENYLHY- DRAZINE RG 2911 BOVINE SERUM ALBUMIN RG 2912 POTASSIUM CARBONATE RG 2913 TRIETHANOLAMINE - CRYSTALLINE RG 2914 PLACENTA MALE (INTERGEN) RG 2915 PLACENTA FEMALE (INTERGEN) RG 2916 PHENYLOXAZOLINE-DCTP RG 2917 BOVINE THROMBIN RG 2918 BOVINE PLASMA RG 2930 ENVIROCIDE THIRD AMENDMENT TO THE LEASE BETWEEN SAUL HOLDINGS LIMITED PARTNERSHIP AND ONCOR, INC. 209 PERRY PARKWAY This THIRD AMENDMENT TO LEASE is made and entered into this 15th day of October, 1996 by and between SAUL HOLDINGS LIMITED PARTNERSHIP (hereinafter referred to as "Landlord"), successor in interest to Avenel Associates Limited Partnership, and ONCOR, INC. a Maryland Corporation (hereinafter referred to as "Tenant"), WHEREAS, Landlord and Oncor, Inc., have entered into that certain Lease dated March 22, 1990 as amended by an Amendment to Lease dated February 25, 1991 and the Second Amendment to Lease dated June 21, 1991 (the "Lease") for approximately 25,941 square feet in 209 Perry Parkway, Avenel Business Park, Gaithersburg, Maryland 20877; and WHEREAS, the parties hereto desire to enter into this Third Amendment to Lease for the purposes hereinafter set out. NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. Article 2 of the Lease captioned "Term" is hereby modified to extend the term of the Lease for eighty-four (84) months, commencing on April 1, 1997 and expiring on March 31, 2004. 2. (a) Article 3 of the Lease captioned "Rent" is hereby modified as of February 1, 1997 to change the annual Initial Base Rent payable under the Lease from and after February 1, 1997 to Three Hundred Twenty-Four Thousand Two Hundred Sixty-Two and 50/100 Dollars ($324,262.50) payable in equal monthly installments of Twenty-Seven Thousand Twenty One and 88/100 Dollars ($27,021.88). (b) Commencing on February 1, 1998 and on the first day of every Lease Year (as hereinafter defined) thereafter during the term hereof, the Initial Base Rent (without deduction for rent abatement, if any) shall be increased to an amount equal to one hundred three percent (103%) of the amount of the Initial Base Rent which was in effect during the Lease Year immediately preceding the Lease Year for which the adjustment is being made, payable by Tenant in equal monthly installments in accordance with Article 3 of the Lease. (c) For the purpose of calculating the adjustment to the Initial Base Rent under this Third Amendment to Lease, the "Lease Year" shall be defined to mean a period of twelve (12) calendar months and the first Lease Year shall commence on February 1, 1997 and each succeeding Lease Year shall commence on the anniversary date of the beginning of the first Lease Year. 3. Special Stipulation 48 of the Lease is hereby deleted in its entirety effective February 1, 1997. Special Stipulations 47, 49, and 53 are hereby deleted in their entirety. 4. The Landlord will permit the Tenant to install, at its sole cost and expense, an illuminated monument sign ("Monument Sign") at the entrance to 207/209 Perry Parkway. Landlord shall approve the exact location, size, content, and design of the Monument Sign, such approval not to be unreasonably withheld. This work will be performed in accordance with the stipulations for alterations specified in Article 9 of the Lease and applicable codes and ordinances. Given the Monument Sign's prominence at an entrance to Avenel Business Park, the Tenant shall maintain and repair (including the prompt replacement of bulbs) the Monument Sign in first-class condition throughout the Lease term. The Monument Sign shall be deemed to be a part of the Premises for purposes of Articles 8, 9, 12, 13, 17, 18, 20, 21, and 23 of this Lease and Tenant shall include the Monument Sign within the coverage of all insurance policies required to be maintained by Tenant under this Lease. 5. Landlord will provide Tenant with a construction allowance ("Construction Allowance") equal to the lesser of (a) the actual amount expended by Tenant in remodeling and renovating the Premises or (b) $168,616.50 as an allowance toward construction of Tenant Improvements in the Demised Premises. Upon request to the Landlord, the Tenant Improvements performed in space leased by the Tenant at 200, 205, and 207 Perry Parkway in Avenel Business Park or the costs of the Monument Sign shall qualify for the Construction Allowance. The Construction Allowance shall be payable after February 1, 1997 within thirty (30) days after request of Tenant and completion of all of the requirements specified below. Tenant Improvements shall include architectural/engineering fees, permit and inspection fees, and construction costs for alterations to or additional improvements of the partitions, doors, ceilings, finishes, mechanical equipment, electrical system, sprinkler system or other such permanent improvements to the Demised Premises. Prior to commencement of Tenant Improvements, Tenant shall submit plans and specifications for the Tenant Improvements for the Landlord's review and approval, in accordance with Articles 8 and 9 of the Lease. The Tenant Improvements shall be performed in accordance with the following requirements: A. The Tenant shall provide lien waivers and copies of paid invoices from all contractors, subcontractors and suppliers of materials for all Tenant Improvements. Such invoices shall total or exceed the amount the Construction Allowance requested. B. Tenant shall provide its own contractors to perform all of the Tenant Improvements except that Tenant shall utilize the Landlord's roofing contractor for all roofing work or work involving penetrations of the roof membrane. C. The contractors, subcontractors or laborers employed in connection with such work shall comply with any applicable law and reasonable uniform work rules and regulations established by Landlord from time to time for all tenant improvements. D. Tenant, or its contractors and their subcontractors, shall provide such insurance, bonding, or indemnification as Landlord may reasonably require for its protection from negligence or malfeasance on the part of such contractors and subcontractors. E. In Landlord's reasonable judgement such work of contractor or subcontractors will not result in delays, stoppages or other action or the threat thereof which may interfere with or delay the completion of other work in the Building. F. Landlord shall have the right to inspect the Tenant's work on a regular basis. G. Tenant shall be responsible for obtaining any permits, certificates, or approvals from any state, federal or local government necessary to enable Tenant to occupy the Demised Premiss and construct the Tenant Improvements. All costs incurred in connection with obtaining such permits, certificates, or approvals shall be the sole responsibility of Tenant. H. As provided for in section 9 of the Lease, Tenant shall save Landlord harmless from and against all expenses, liens, claims or damages to either property or person which may or might arises by reason of making the Tenant Improvements. I. If after complying with the terms of this Paragraph 5, the Construction Allowance is not paid in accordance with the terms of this Paragraph 5, then Tenant shall be entitled, notwithstanding anything in the Lease to the contrary to offset against the rent an amount equal to the Construction Allowance. 6. A. Tenant represents that the list attached hereto as Exhibit A is a complete and accurate list of chemicals and hazardous materials, including approximate quantities, to be used and stored in or about the Demised Premises. The amounts of chemicals and hazardous materials will be limited to quantities necessary for the Tenant's day-to-day operations. Landlord is relying on the list in Exhibit F in not requiring Gradual Pollution and/or Contamination Liability Insurance. If Tenant's operations change and additional chemicals materially more hazardous and/or quantities significantly larger than those stipulated in Exhibit F are required for Tenant's operation, Tenant shall notify Landlord within five business days and Landlord reserves that right to require Tenant to obtain and maintain Gradual Pollution and/or Contamination Liability Insurance if in Landlord's reasonable opinion such change in the nature or quantity of materials being stored materially increases the risk of contamination. The Tenant will, upon written request by the Landlord, provide the Landlord with an updated list of chemicals and hazardous materials with quantities located within the Demised Premises. B. Prior to February 1, 1997, and within ninety (90) days after the expiration or earlier termination of the Lease, Landlord may engage its environmental consultant, Environmental Management Group or another environmental consultant satisfactory to Landlord to perform a Phase I environmental assessment of the Premises and any surrounding areas of the Property designated by Landlord or the Environmental Consultant. The cost of the above described Phase I assessments shall be paid by Landlord unless the assessment indicates that Tenant is not in substantial compliance with the applicable statues, ordinances, and regulations governing Tenant's use, storage, and disposal of chemicals and hazardous materials in which event Tenant shall reimburse Landlord as additional rent for the cost of the assessment. Tenant shall defend, indemnify, and hold Landlord and Landlord's agents, officers, directors, employees, and contractors harmless against and from any and all injuries, costs, expenses, liabilities, losses, damages, injunctions, suits, actions, fines, penalties, and demands of any kind or nature (including reasonable attorney fees) occasioned by or arising out of or relating to any environmental pollution, damage, condition or problem, including without limitation, the presence of any hazardous substances, asbestos or other toxic waste as defined in any federal, state, or municipal governmental or quasi-governmental laws, rules, regulations, or ordinances in effect on the Lease Date that are existing in the Demised Premises and caused by the acts, omissions or negligence of Tenant, its agents, or employees and not caused by Landlord's acts or omissions. C. Landlord shall have the right, at its sole cost and not as an operating expense, on one (1) occasion during each Lease Year to have Landlord's environmental consultant inspect the Tenant's records and procedures regarding the Tenant's storage, use, and disposal of chemicals and hazardous materials within the Demised Premises. In the event that the Landlord's environmental consultant finds that the Tenant is not in substantial compliance with any applicable law, regulation, or codes regarding the storage, use, or disposal of chemicals or hazardous materials, such non compliance shall constitute a non-monetary default under Article 16 of the Lease. D. Tenant shall have the right to construct an exterior structure (Outdoor Storage Structure) in a location and of a size and material reasonably approved by Landlord within which Tenant will store chemicals and materials which are subject to this Paragraph 6. The Construction Allowance may be used for this purpose. The Outdoor Storage Structure shall be installed, maintained, repaired and removed by Tenant, at Tenant's sole cost and expense, and shall be deemed to be a part of the Demised Premises for all purposes of the Lease including, without limitation, Articles 8, 9, 12, 13, 17, 18, 20, 21, and 23 of this Lease and Tenant shall include the Outdoor Storage Structure within the coverage of all insurance policies required to be maintained by Tenant under this Lease; provided, however, that Landlord shall not have any repair or maintenance obligations of any kind with respect to the Outdoor Storage Structure. 7. Provided (i) Tenant is not then in default (beyond any applicable cure period) in any of its obligations under this Lease, and (ii) Landlord desires to lease the Option Space (hereinafter defined) to any party other than the party then occupying the Option Space, Landlord agrees that, during the initial term of the Lease, as extended by this Third Amendment to Lease, provided for in paragraph 1, Tenant shall have the right of first offer to enter into a lease of certain other premises in the Building, consisting of the area of approximately 16,241 square feet of leasable area contiguous to the Premises designated on Exhibit A as "Option Space" (the "Option Space") in accordance with the terms and conditions set forth in this paragraph 7, as follows: (a) After receipt of a written proposal to lease the Option Space from a prospective tenant (Prospective Tenant) or its agent and prior to entering into a lease with that Prospective Tenant for the Option Space, Landlord shall send to Tenant an offer notice of the availability of such space (the "OFFER NOTICE"). (b) Within ten (10) business days after Tenant's receipt of the Offer Notice, Tenant shall notify Landlord that Tenant either (i) agrees to lease the Option Space, or (ii) does not desire to lease the Option Space and the Landlord shall have the right to lease the Option Space to the Prospective Tenant. A failure by Tenant to timely elect the option described in clauses (i) or (ii) above shall be deemed a to be a waiver by Tenant of any further right to lease the Option Space under this paragraph 7. If Tenant elects the option described in clause (ii) above, the Tenant shall have additional first rights of offer provided that the Option Space is not leased to the Prospective Tenant or the Option Space becomes available during the initial term of the Lease as extended by this Third Amendment to Lease and subject to the initial or renewal occupancy by the Prospective Tenant. (c) If Tenant exercises its option to lease the Option Space under this paragraph 7, then Tenant shall execute a lease amendment embodying the terms set forth in the Offer Notice, within ten (10) business days after Landlord submits any such lease amendment to Tenant which shall provide that the following terms and conditions shall apply to the Option Space: (i) The Demised Premises shall be modified effective as of the date falling 40 days after the date of the Offer Notice (the "Option Effective Date") to increase the size of the Demised Premises by approximately 16,241 rentable square feet size. (ii) As of the Option Effective Date, the initial Base Rent for the Option Space shall be the Initial Base Rent per square foot set forth below for the year in which Tenant exercises its option under this paragraph 7 and such Initial Base Rent shall be increased on the first day of each succeeding Lease Year to the amounts set forth below. OPTION EXERCISE DATE RENT PER SQUARE FOOT Before February 1, 1997 $12.50 Before February 1, 1998 $13.00 Before February 1, 1999 $13.50 Before February 1, 2000 $14.00 Before February 1, 2001 $14.50 Before-February 1, 2002 $15.00 Before February 1, 2003 $15.50 Before February 1, 2004 $16.00 (iii) The Annual Operating Costs shall be modified as of the Option Effective Date to increase Tenant's Pro-Rata Share of Annual Operating Cost to reflect the increased size of the Demised Premises. (iv) Tenant agrees to accept the Option Space "as is" in its then existing condition and Landlord shall have no construction obligations with respect thereto. However, the Landlord will provide Tenant with a construction allowance ("Option Space Construction Allowance") equal to the lesser of (a) the actual amount expended by Tenant in remodeling and renovating the Option Space or (b) an amount equal to $1,256.74 multiplied by the number of full months remaining on the initial term of the Lease as extended by this Third Lease Amendment from the Option Effective Date. The Option Space Construction Allowance shall be used for the construction of Tenant Improvements in the Option Space. The Construction Allowance shall be payable after February 1, 1997 within thirty (30) days after request of Tenant and completion of all of the requirements specified below. Tenant Improvements shall include architectural/engineering fees, permit and inspection fees, and construction costs for alterations to or additional improvements of the partitions, doors, ceilings, finishes, mechanical equipment, electrical system, sprinkler system or other such permanent improvements to the Option Space. Prior to commencement of Tenant Improvements, Tenant shall submit plans and specifications for the Tenant Improvements for the Landlord's review and approval, in accordance with Articles 8 and 9 of the Lease. The provisions, requirements and conditions of subparagraphs (5)(a) through (5)(i) above will apply to the Option Space Construction Allowance. (d) Landlord may, at its option, in lieu of a narrative description of the terms to be described in the Offer Notice, submit to Tenant a lease amendment document setting forth the terms of the proposed lease amendment, for the Option Space in which event Tenant's exercise of its option to lease the Option Space shall be made by Tenant's execution of such lease amendment document and its return to Landlord within the applicable time periods set forth in paragraph (b) or (c) of this paragraph 7. If Landlord does not submit a lease amendment document to Tenant at the time the Offer Notice is given, and Tenant exercises its option to lease the Option Space under such terms, then Tenant shall execute a lease amendment embodying the terms set forth in the Offer Notice within ten (10) days after Landlord submits any such lease amendment to Tenant, as provided in paragraph (c) above. (e) Tenant shall have no further right to lease the Option Space under this paragraph 7 after Landlord enters into a lease of the Option Space with the Prospective Tenant in accordance with this paragraph 7 unless the Option Space is vacated by the Prospective Tenant during the initial term of the Lease as extended by this Third Lease Amendment. (f) Tenant's right to lease the Option Space shall be conditioned upon Tenant's full and complete compliance with all of the terms and conditions of the Lease prior to the date of any Offer Notice, and Tenant's option to lease the Option Space shall terminate when the initial term of the Lease as extended by this Third Amendment expires or terminates. (g) Time shall be of the essence with respect to Tenant's right of first offer under this paragraph 7. 8. Tenant shall have the option to renew the term of the Lease for one (1) additional period of five (5) years (the "Option Term") following the expiration of the initial lease term provided for in paragraph 1 of this Third Amendment, provided that the Lease is in full force and effect, the Tenant shall be in possession and occupying the Demised Premises, and Tenant shall not be in default in the performance or observance of any of the terms, conditions, provisions and/or covenants of the Lease. All such rights of a renewal shall be exercised by delivery to Landlord of written notice of Tenant's intention to renew the term at least nine (9) months but not more than fifteen (15) months prior to the expiration of the then applicable term of the lease. The Option Term shall be on the same terms, covenants and conditions as the original lease except Initial Base Rent for the Option Term shall be 100% of the then Prevailing Market Rent of comparable space within the Gaithersburg market area, including current operating costs and concessions, which rent shall be established as follows: (a) Within fifteen (15) business days after receipt of Tenant's notice exercising its option to extend the term of this Lease, Landlord shall notify Tenant of Landlord's estimate of Prevailing Market Rent. If Tenant disagrees with Landlord's estimate of Prevailing Market Rent, Tenant shall notify Landlord that it has elected to submit the determination of Prevailing Market Rent to Arbitration, in which event the provisions of subparagraph (b) of this Article shall govern the selection of arbitrators and the establishment of the Prevailing Market Rent payable for the year of the then applicable Option Term; provided, however, that if Tenant does not elect to submit the determination of Prevailing Market Rent to Arbitration during such fifteen (15) day period, then the Landlord's estimate of Prevailing Market Rent shall be deemed to be agreed to by Tenant, and shall be the Initial Base Rent payable by Tenant to Landlord during the first year of the then applicable Option Term. (b) (i) Definition: As used herein, the term "Prevailing Market Rent" means the most probable rent (as determined pursuant to the appraisal procedure hereinafter set forth) at which the Demised Premises (and any Additional Premises) would be leased in a comparable and open market, under all conditions requisite to a fair Lease, the Landlord and Tenant each acting prudently, knowledgeable, and assuming the rent is not affected by undue stimulus. Implicit in this definition is the consummation of the Lease beginning on the commencement date of the Option Term under conditions whereby: 1. Landlord and Tenant are typically motivated (i.e., neither party is compelled to enter into a lease and both parties are willing to enter into a lease). 2. Both parties are well informed or well advised, and each acting in what it considers its own best interest. 3. A reasonable time is allowed for exposure in the open market. 4. The Prevailing Market Rent shall be computed as an amount equal to the then prevailing market rental rate of the Demised Premises, as if vacant with building standard improvements, and taking into account the annual adjustments of Initial Base Rent, Tenant's obligation to pay Tenant's pro-rata share of Annual Operating Expenses and all existing market factors. 5. All of the terms, covenants and conditions of the Lease (except terms respecting the amount of Initial Base Rent) remain in effect throughout the applicable Option Term. (ii) In the event of a dispute as to determination of Prevailing Market Rent referred to in this Article, or a dispute of any of the provisions of this Lease, such dispute shall be in accordance with the following: (a) If Landlord and Tenant fail to agree upon the Prevailing Market Rent as referred to in this Article, within the time periods provided for herein, then Landlord and Tenant each shall give notice to the other setting both the name and address of a licensed real estate broker or appraiser (hereinafter "appraiser") who shall be a M.A.I. Real Estate professional with substantial experience in commercial real estate appraisal designated by it to make the determinations hereafter required. Each appraiser shall be instructed to calculate the Prevailing Market Rent as provided in each of the foregoing sections which is the subject of the dispute and is in accordance with the criteria referenced therein. If either party shall fail to give notice of such designations within ten (10) days after failing to agree between themselves, then the appraisal made by the appraiser so designated shall be the Appraisal Prevailing Market Rent. If two appraisers have been designated, such two appraisers shall consult with each other and, within thirty (30) days thereafter, issue their determinations of Appraisal Prevailing Market Rent in writing, and give notice thereof to each other and to Landlord and Tenant. If such two appraisers shall concur as to the determination of the prevailing Market Rent and submit their decision in writing to Landlord and Tenant, such concurrence shall be final and binding upon Landlord and Tenant. If the two determinations of Prevailing Market Rent shall be within five percent (5%) (measured from the higher appraisal) of each other, the Prevailing Market Rent shall be deemed to be the average of the two appraisers' determinations. If such two appraisers' determinations shall not so concur or coincide, then such two appraisers shall immediately (i) designate a third appraiser, (ii) prepare detailed written appraisals, and (iii) submit copies of such appraisal to Landlord, Tenant and such third arbitrator. If the two appraisers shall fail to agree upon the designation of such third appraiser within eight (8) days of the date on which the last determination was rendered, then either party may apply to the American Arbitration Association or any successor thereto having jurisdiction, for the designation of such appraiser. All arbitrators shall be licensed real estate appraisers who shall have had at least fifteen (15) years continuous experience in the business of appraising or real estate in the Montgomery County area. The third appraiser shall conduct such hearings and investigations as he may deem appropriate and shall, within twenty (20) days after the date of designation of the third appraiser, choose the determination of the two appraisers originally selected by the parties which is the nearest to the determination such third appraiser would have made acting alone and applying the standards set forth therefor in this Lease, and that choice by the third appraiser shall be binding upon Landlord and Tenant. Each party shall pay its own counsel fees and expenses, if any, in connection with any arbitration under this Article, including the expenses and fees of any appraiser selected by it in accordance with the provisions of this Article, and the parties shall share equally all other expenses and fees of any such arbitration, including the expenses of the third appraiser. The determination rendered in accordance with the provisions of this Article shall be final and binding in fixing the Prevailing Market Rent. Notwithstanding the foregoing, in no event shall the Basic Rent for the First Lease Year of the Option Term be less than the then Initial Base Rent of the last Lease Year of the initial lease term of the Lease, as extended by this Third Amendment escalated by three percent. 8. Landlord will use reasonable efforts to obtain a non-disturbance agreement for Tenant's benefit from the holder of the mortgage lien on the Property (the "Lender"). The nondisturbance agreement shall be on the Lender's approved form, and Tenant shall pay to Landlord, as additional rent, all fees, costs and expenses charged to Landlord by the Lender in connection with the Lender's review of this Lease including, without limitation, the Lender's legal fees. This Lease shall not be subordinate to any future mortgage, deed of trust or other lien on the Property unless the party secured by any such instrument enters into a non-disturbance agreement with Tenant on a form acceptable to such future Lender. 9. Except as modified hereby, the Lease shall remain in full force and effect in accordance with its terms, and is hereby ratified, confirmed and approved in all respects. WITNESS the following signatures and seals. ATTEST: LANDLORD: SAUL HOLDINGS LIMITED PARTNERSHIP By: SAUL CENTERS, INC., ITS GENERAL PARTNER ATTEST: [SIG] By: /s/ PHILIP D. CARACI - ---------------------- ----------------------------------- (SEAL) Secretary Philip D. Caraci, President ATTEST: TENANT: ONCOR, INC. [SIG] By: [SIG] - ---------------------- ----------------------------------- (SEAL) Secretary THIRD AMENDMENT TO THE LEASE BETWEEN SAUL HOLDINGS LIMITED PARTNERSHIP AND ONCOR, INC. 207 PERRY PARKWAY This THIRD AMENDMENT TO LEASE is made and entered into this 15th day of October, 1996 by and between SAUL HOLDINGS LIMITED PARTNERSHIP (hereinafter referred to as "Landlord"), successor in interest to Avenel Associates Limited Partnership, and ONCOR, INC. a Maryland Corporation (hereinafter referred to as "Tenant"), WHEREAS, Landlord and Oncor, Inc., predecessor to Tenant, have entered into that certain Lease dated June 28, 1991 as amended by the First Amendment to Lease dated October 4, 1993 and the Second Amendment to Lease dated December 2, 1994 (the "Lease") for approximately 14,950 square feet in 207 Perry Parkway, Avenel Business Park, Gaithersburg, Maryland 20877; and WHEREAS, the parties hereto desire to enter into this Third Amendment to Lease for the purposes hereinafter set out. NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. Article 2 of the Lease captioned "Term" is hereby modified to extend the term of the Lease for eighty-four (84) months, commencing on April 1, 1997 and expiring on March 31, 2004. 2. (a) Article 3 of the Lease captioned "Rent" is hereby modified as of February 1, 1997 to change the annual Initial Base Rent payable under the Lease from and after February 1, 1997 to One Hundred Eighty-Six Thousand Eight Hundred Seventy-Five Dollars ($186,875.00) payable in equal monthly installments of Fifteen Thousand Five Hundred Seventy Two and 92/100 Dollars ($15,572.92). (b) Commencing on February 1, 1998 and on the first day of every Lease Year (as hereinafter defined) thereafter during the term hereof, the Initial Base Rent (without deduction for rent abatement, if any) shall be increased to an amount equal to one hundred three percent (103%) of the amount of the Initial Base Rent which was in effect during the Lease Year immediately preceding the Lease Year for which the adjustment is being made, payable by Tenant in equal monthly installments in accordance with Article 3 of the Lease. (c) For the purpose of calculating the adjustment to the Initial Base Rent under this Third Amendment to Lease, the "Lease Year" shall be defined to mean a period of twelve (12) calendar months and the first Lease Year shall commence on February 1, 1997 and each succeeding Lease Year shall commence on the anniversary date of the beginning of the first Lease Year. 3. Special Stipulation 48 of the Lease is hereby deleted in its entirety effective February 1, 1997. Special Stipulations 47, 51, and 53 are hereby deleted in their entirety. 4. Landlord will provide Tenant with a construction allowance ("Construction Allowance") equal to the lesser of (a) the actual amount expended by Tenant in remodeling and renovating the Demised Premises or (b) $124,839.00 as an allowance toward construction of Tenant Improvements in the Demised Premises. Upon request to the Landlord, the Tenant Improvements performed in space leased by the Tenant at 200, 205 and 209 Perry Parkway in Avenel Business Park shall qualify for the Construction Allowance. The Construction Allowance shall be payable after February 1, 1997 within thirty (30) days after request of Tenant and completion of all of the requirements specified below. Tenant Improvements shall include architectural/engineering fees, permit and inspection fees, and construction costs for alterations to or additional improvements of the partitions, doors, ceilings, finishes, mechanical equipment, electrical system, sprinkler system or other such permanent improvements to the Demised Premises. Prior to commencement of Tenant Improvements, Tenant shall submit plans and specifications for the Tenant Improvements for the Landlord's review and approval, in accordance with Articles 8 and 9 of the Lease. The Tenant Improvements shall be performed in accordance with the following requirements: A. The Tenant shall provide lien waivers and copies of paid invoices from all contractors, subcontractors and suppliers of materials for all Tenant Improvements. Such invoices shall total or exceed the amount the Construction Allowance requested. B. Tenant shall provide its own contractors to perform all of the Tenant Improvements except that Tenant shall utilize the Landlord's roofing contractor for all roofing work or work involving penetrations of the roof membranae. C. The contractors, subcontractors or laborers employed in connection with such work shall comply with any applicable law and reasonable uniform work rules and regulations established by Landlord from time to time for all tenant improvements. D. Tenant, or its contractors and their subcontractors, shall provide such insurance, bonding, or indemnification as Landlord may reasonably require for its protection from negligence or malfeasance on the part of such contractors and subcontractors. E. In Landlord's reasonable judgement such work of the contractors or subcontractors will not result in delays, stoppages or other action or the threat thereof which may interfere with or delay the completion of other work in the Building. F. Landlord shall have the right to inspect the Tenant's work on a regular basis. G. Tenant shall be responsible for obtaining any permits, certificates, or approvals from any state, federal or local government necessary to enable Tenant to occupy the Demised Premiss and construct the Tenant Improvements. All costs incurred in connection with obtaining such permits, certificates, or approvals shall be the sole responsibility of Tenant. H. As provided for in section 9 of the Lease, Tenant shall save Landlord harmless from and against all expenses, liens, claims or damages to either property or person which may or might arises by reason of making the Tenant Improvements. I. If after complying with the terms of this Paragraph 4, the Construction Allowance is not paid in accordance with the terms of this Paragraph 4, then Tenant shall be entitled, notwithstanding anything in the Lease to the contrary to offset the rent by an amount equal to the Construction Allowance. 5. A. Tenant represents that the list attached hereto as Exhibit A is a complete and accurate list of chemicals and hazardous materials, including approximate quantities, to be used and stored in or about the Demised Premises. The amounts of chemicals and hazardous materials will be limited to quantities necessary for the Tenant's day-to-day operations. Landlord is relying on the list in Exhibit F in not requiring Gradual Pollution and/or Contamination Liability Insurance. If Tenant's operations change and additional chemicals materially more hazardous and/or quantities significantly larger than those stipulated in Exhibit F are required for Tenant's operation, Tenant shall notify Landlord within five business days and Landlord reserves that right to require Tenant to obtain and maintain Gradual Pollution and/or Contamination Liability Insurance if in Landlord's reasonable opinion such change in the nature or quantity of materials being stored materially increases the risk of contamination. The Tenant will, upon written request by the Landlord, provide the Landlord with an updated list of chemicals and hazardous materials with quantities located within the Demised B. Prior to February 1, 1997, and within ninety (90) days after the expiration or earlier termination of the Lease, Landlord may engage its environmental consultant, Environmental Management Group or another environmental consultant satisfactory to Landlord to perform a Phase I environmental assessment of the Demised Premises and any surrounding areas of the Property designated by Landlord or the Environmental Consultant. The cost of the above described Phase I assessments shall be paid by Landlord unless the assessment indicates that Tenant is not in substantial compliance with the applicable statues, ordinances, and regulations governing Tenant's use, storage, and disposal of chemicals and hazardous materials in which event Tenant shall reimburse Landlord as additional rent for the cost of the assessment. Tenant shall defend, indemnify, and hold Landlord and Landlord's agents, officers, directors, employees, and contractors harmless against and from any and all injuries, costs, expenses, liabilities, losses, damages, injunctions, suits, actions, fines, penalties, and demands of any kind or nature (including reasonable attorney fees) occasioned by or arising out of or relating to any environmental pollution, damage, condition or problem, including without limitation, the presence of any hazardous substances, asbestos or other toxic waste as defined in any federal, state, or municipal governmental or quasi-governmental laws, rules, regulations, or ordinances in effect on the Lease Date that are existing in the Demised Premises and caused by the acts, omissions or negligence of Tenant, its agents, or employees and not caused by Landlord's acts or omissions. C. Landlord shall have the right, at its sole cost and not as an operating expense, on one (1) occasion during each Lease Year to have Landlord's environmental consultant inspect the Tenant's records and procedures regarding the Tenant's storage, use, and disposal of chemicals and hazardous materials within the Demised Premises. In the event that the Landlord's environmental consultant finds that the Tenant is not in substantial compliance with any applicable law, regulation, or codes regarding the storage, use, or disposal of chemicals or hazardous materials, such non compliance shall constitute a non-monetary default under Article 16 of the Lease. 6. Tenant shall have the option to renew the term of the Lease for one (1) additional period of five (5) years (the "Option Term") following the expiration of the initial lease term provided for in paragraph 1 of this Third Amendment, provided that the Lease is in full force and effect, the Tenant shall be in possession and occupying the Demised Premises, and Tenant shall not be in default in the performance or observance of any of the terms, conditions, provisions and/or covenants of the Lease. All such rights of a renewal shall be exercised by delivery to Landlord of written notice of Tenant's intention to renew the term at least nine (9) months but not more than fifteen (15) months prior to the expiration of the then applicable term of the lease. The Option Term shall be on the same terms, covenants and conditions as the original lease except Initial Base Rent for the Option Term shall be 100% of the then Prevailing Market Rent of comparable space within the Gaithersburg market area, including current operating costs and concessions, which rent shall be established as follows: (a) Within fifteen (15) business days after receipt of Tenant's notice exercising its option to extend the term of this Lease, Landlord shall notify Tenant of Landlord's estimate of Prevailing Market Rent. If Tenant disagrees with Landlord's estimate of Prevailing Market Rent, Tenant shall notify Landlord that it has elected to submit the determination of Prevailing Market Rent to Arbitration, in which event the provisions of subparagraph (b) of this Article shall govern the selection of arbitrators and the establishment of the Prevailing Market Rent payable for the year of the then applicable Option Term; provided, however, that if Tenant does not elect to submit the determination of Prevailing Market Rent to Arbitration during such fifteen (15) day period, then the Landlord's estimate of Prevailing Market Rent shall be deemed to be agreed to by Tenant, and shall be the Initial Base Rent payable by Tenant to Landlord during the first year of the then applicable Option Term. (b) (i) Definition: As used herein, the term "Prevailing Market Rent" means the most probable rent (as determined pursuant to the appraisal procedure hereinafter set forth) at which the Demised Premises (and any Additional Premises) would be leased in a comparable and open market, under all conditions requisite to a fair Lease, the Landlord and Tenant each acting prudently, knowledgeable, and assuming the rent is not affected by undue stimulus. Implicit in this definition is the consummation of the Lease beginning on the commencement date of the Option Term under conditions whereby: 1. Landlord and Tenant are typically motivated (i.e., neither party is compelled to enter into a lease and both parties are willing to enter into a lease). 2. Both parties are well informed or well advised, and each acting in what it considers its own best interest. 3. A reasonable time is allowed for exposure in the open market. 4. The Prevailing Market Rent shall be computed as an amount equal to the then prevailing market rental rate of the Demised Premises, as if vacant with building standard improvements, and taking into account the annual adjustments of Initial Base Rent, Tenant's obligation to pay Tenant's pro-rata share of Annual Operating Expenses and all existing market factors. 5. All of the terms, covenants and conditions of the Lease (except terms respecting the amount of Initial Base Rent) remain in effect throughout the applicable Option Term. (ii) In the event of a dispute as to determination of Prevailing Market Rent referred to in this Article, or a dispute of any of the provisions of this Lease, such dispute shall be in accordance with the following: (a) If Landlord and Tenant fail to agree upon the Prevailing Market Rent as referred to in this Article, within the time periods provided for herein, then Landlord and Tenant each shall give notice to the other setting both the name and address of a licensed real estate broker or appraiser (hereinafter "appraiser") who shall be a M.A.I. Real Estate professional with substantial experience in commercial real estate appraisal designated by it to make the determinations hereafter required. Each appraiser shall be instructed to calculate the Prevailing Market Rent as provided in each of the foregoing sections which is the subject of the dispute and is in accordance with the criteria referenced therein. If either party shall fail to give notice of such designations within ten (10) days after failing to agree between themselves, then the appraisal made by the appraiser so designated shall be the Appraisal Prevailing Market Rent. If two appraisers have been designated, such two appraisers shall consult with each other and, within thirty (30) days thereafter, issue their determinations of Appraisal Prevailing Market Rent in writing, and give notice thereof to each other and to Landlord and Tenant. If such two appraisers shall concur as to the determination of the prevailing Market Rent and submit their decision in writing to Landlord and Tenant, such concurrence shall be final and binding upon Landlord and Tenant. If the two determinations of Prevailing Market Rent shall be within five percent (5%) (measured from the higher appraisal) of each other, the Prevailing Market Rent shall be deemed to be the average of the two appraisers' determinations. If such two appraisers' determinations shall not so concur or coincide, then such two appraisers shall immediately (i) designate a third appraiser, (ii) prepare detailed written appraisals, and (iii) submit copies of such appraisal to Landlord, Tenant and such third arbitrator. If the two appraisers shall fail to agree upon the designation of such third appraiser within eight (8) days of the date on which the last determination was rendered, then either party may apply to the American Arbitration Association or any successor thereto having jurisdiction, for the designation of such appraiser. All arbitrators shall be licensed real estate appraisers who shall have had at least fifteen (15) years continuous experience in the business of appraising real estate in the Montgomery County area. The third appraiser shall conduct such hearings and investigations as he may deem appropriate and shall, within twenty (20) days after the date of designation of the third appraiser, choose the determination of the two appraisers originally selected by the parties which is the nearest to the determination such third appraiser would have made acting alone and applying the standards set forth therefor in this Lease, and that choice by the third appraiser shall be binding upon Landlord and Tenant. Each party shall pay its own counsel fees and expenses, if any, in connection with any arbitration under this Article, including the expenses and fees of any appraiser selected by it in accordance with the provisions of this Article, and the parties shall share equally all other expenses and fees of any such arbitration, including the expenses of the third appraiser. The determination rendered in accordance with the provisions of this Article shall be final and binding in fixing the Prevailing Market Rent. Notwithstanding the foregoing, in no event shall the Basic Rent for the First Lease Year of the Option Term be less than the then Initial Base Rent of the last Lease Year of the initial lease term of this Third Amendment escalated by three percent. 7. Landlord will use reasonable efforts to obtain a non-disturbance agreement for Tenant's benefit from the holder of the mortgage lien on the Property (the "Lender"). The non-disturbance agreement shall be on the Lender's approved form, and Tenant shall pay to Landlord, as additional rent, all fees, costs and expenses charged to Landlord by the Lender in connection with the Lender's review of this Lease including, without limitation, the Lender's legal fees. This Lease shall not be subordinate to any future mortgage, deed of trust or other lien on the Property unless the party secured by any such instrument enters into a non-disturbance agreement with Tenant on a form acceptable to such future Lender. 8. Except as modified hereby, the Lease shall remain in full force and effect in accordance with its terms, and is hereby ratified, confirmed and approved in all respects. WITNESS the following signatures and seals. ATTEST: LANDLORD:SAUL HOLDINGS LIMITED PARTNERSHIP By: SAUL CENTERS, INC., ITS GENERAL PARTNER [SIG] By:/s/ PHILIP D. CARACI - --------------------------- ------------------------------------ (SEAL) Secretary Philip D. Caraci, President ATTEST: TENANT: ONCOR, INC. [SIG] By: [SIG] - --------------------------- ------------------------------------ (SEAL) Secretary FIRST AMENDMENT TO THE LEASE BETWEEN SAUL HOLDINGS LIMITED PARTNERSHIP AND ONCOR, INC. 200 PERRY PARKWAY This FIRST AMENDMENT TO LEASE is made and entered into this 15th day of October, 1996 by and between SAUL HOLDINGS LIMITED PARTNERSHIP (hereinafter referred to as "Landlord") and ONCOR, INC. a Maryland Corporation (hereinafter referred to as "Tenant"), WHEREAS, Landlord and Tenant have entered into that certain Lease dated December 14, 1995 (the "Lease") for approximately 4,256 square feet in 205 Perry Parkway, Avenel Business Park, Gaithersburg, Maryland 20877; and WHEREAS, the parties hereto desire to enter into this First Amendment to Lease for the purposes hereinafter set out. NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. Article 2 of the Lease captioned "Term" is hereby modified to extend the term of the Lease for sixty-four (64) months, commencing on December 1. 1998 and expiring on March 31, 2004. 2. (a) Article 3 of the Lease captioned "Rent" is hereby modified as of February 1, 1997 to change the annual Initial Base Rent payable under the Lease from and after February 1, 1997 to Fifty Three Thousand Two Hundred Dollars ($53,200) payable in equal monthly installments of Four Thousand Four Hundred Thirty Three and 34/100 Dollars ($4,433.33). (b) Commencing on February 1, 1998 and on the first day of every Lease Year (as hereinafter defined) thereafter during the term hereof, the Initial Base Rent (without deduction for rent abatement, if any) shall be increased to an amount equal to one hundred three percent (103%) of the amount of the Initial Base Rent which was in effect during the Lease Year immediately preceding the Lease Year for which the adjustment is being made, payable by Tenant in equal monthly installments in accordance with Article 3 of the Lease. (c) For the purpose of calculating the adjustment to the Initial Base Rent under this First Amendment to Lease, the "Lease Year" shall be defined to mean a period of twelve (12) calendar months and the first Lease Year shall commence on February 1, 1997 and each succeeding Lease Year shall commence on the anniversary date of the beginning of the first Lease Year. 3. Special Stipulation 47 is hereby deleted in its entirety effective February 1, 1997. 4. A. Tenant represents that the list attached hereto as Exhibit A is a complete and accurate list of chemicals and hazardous materials, including approximate quantities, to be used and stored in or about the Demised Premises. The amounts of chemicals and hazardous materials will be limited to quantities necessary for the Tenant's day-to-day operations. Landlord is relying on the list in Exhibit F in not requiring Gradual Pollution and/or Contamination Liability Insurance. If Tenant's operations change and additional chemicals and/or quantities significantly larger than those stipulated in Exhibit F are required for Tenant's operation, Tenant shall immediately notify Landlord and Landlord reserves that right to require Tenant to obtain and maintain Gradual Pollution and/or Contamination Liability Insurance. The Tenant will, upon written request by the Landlord, provide the Landlord with an updated list of chemicals and hazardous materials with quantities located within the Demised Premises. B. Prior to February 1, 1997, and within ninety (90) days after the expiration or earlier termination of the Lease, Landlord may engage its environmental consultant, Environmental Management Group or another environmental consultant satisfactory to Landlord to perform a Phase I environmental assessment of the Demised Premises and any surrounding areas of the Property designated by Landlord or the Environmental Consultant. The cost of the above described Phase I assessments shall be paid by Landlord unless the assessment indicates that Tenant is not in substantial compliance with the applicable statues, ordinances, and regulations governing Tenant's use, storage, and disposal of chemicals and hazardous materials in which event Tenant shall reimburse Landlord as additional rent for the cost of the assessment. Tenant shall defend, indemnify, and hold Landlord and Landlord's agents, officers, directors, employees, and contractors harmless against and from any and all injuries, costs, expenses, liabilities, losses, damages, injunctions, suits, actions, fines, penalties, and demands of any kind or nature (including reasonable attorney fees) occasioned by or arising out of or relating to any environmental pollution, damage, condition or problem, including without limitation, the presence of any hazardous substances, asbestos or other toxic waste as defined in any federal, state, or municipal governmental or quasi-governmental laws, rules, regulations, or ordinances in effect on the Lease Date that are existing in the Demised Premises and caused by the acts, omissions or negligence of Tenant, its agents, or employees and not caused by Landlord's acts or omissions. C. Landlord shall have the right, at its sole cost and not as an operating expenses, on one (1) occasion during each Lease Year to have Landlord's environmental consultant inspect the Tenant's records and procedures regarding the Tenant's storage, use, and disposal of chemicals and hazardous materials within the Demised Premises. In the event that the Landlord's environmental consultant finds that the Tenant is not in substantial compliance with any applicable law, regulation, or codes regarding the storage, use, or disposal of chemicals or hazardous materials, such non compliance shall constitute a non-monetary default under Article 16 of the Lease. 5. Tenant shall have the option to renew the term of the Lease for one (1) additional period of five (5) years (the "Option Term") following the expiration of the initial lease term provided for in paragraph 1 of this First Amendment, provided that the Lease is in full force and effect, the Tenant shall be in possession and occupying the Demised Premises, and Tenant shall not be in default in the performance or observance of any of the terms, conditions, provisions and/or covenants of the Lease. All such rights of a renewal shall be exercised by delivery to Landlord of written notice of Tenant's intention to renew the term at least nine (9) months but not more than fifteen (15) months prior to the expiration of the then applicable term of the lease. The Option Term shall be on the same terms, covenants and conditions as the original lease except Initial Base Rent for the Option Term shall be 100% of the then Prevailing Market Rent of comparable space within the Gaithersburg market area, including current operating costs and concessions, which rent shall be established as follows: (a) Within fifteen (15) business days after receipt of Tenant's notice exercising its option to extend the term of this Lease, Landlord shall notify Tenant of Landlord's estimate of Prevailing Market Rent. If Tenant disagrees with Landlord's estimate of Prevailing Market Rent, Tenant shall notify Landlord that it has elected to submit the determination of Prevailing Market Rent to Arbitration, in which event the provisions of subparagraph (b) of this Article shall govern the selection of arbitrators and the establishment of the Prevailing Market Rent payable for the year of the then applicable Option Term; provided, however, that if Tenant does not elect to submit the determination of Prevailing Market Rent to Arbitration during such fifteen (15) day period, then the Landlord's estimate of Prevailing Market Rent shall be deemed to be agreed to by Tenant, and shall be the Initial Base Rent payable by Tenant to Landlord during the first year of the then applicable Option Term. (b) (i) Definition: As used herein, the term "Prevailing Market Rent" means the most probable rent (as determined pursuant to the appraisal procedure hereinafter set forth) at which the Demised Premises (and any Additional Premises) would be leased in a comparable and open market, under all conditions requisite to a fair Lease, the Landlord and Tenant each acting prudently, knowledgeable, and assuming the rent is not affected by undue stimulus. Implicit in this definition is the consummation of the Lease beginning on the commencement date of the Option Term under conditions whereby: 1. Landlord and Tenant are typically motivated (i.e., neither party is compelled to enter into a lease and both parties are willing to enter into a lease). 2. Both parties are well informed or well advised, and each acting in what it considers its own best interest. 3. A reasonable time is allowed for exposure in the open market. 4. The Prevailing Market Rent shall be computed as an amount equal to the then prevailing market rental rate of the Demised Premises, as if vacant with building standard improvements, and taking into account the annual adjustments of Initial Base Rent, Tenant's obligation to pay Tenant's pro-rata share of Annual Operating Expenses and all existing market factors. 5. All of the terms, covenants and conditions of the Lease (except terms respecting the amount of Initial Base Rent) remain in effect throughout the applicable Option Term. (ii) In the event of a dispute as to determination of Prevailing Market Rent referred to in this Article, or a dispute of any of the provisions of this Lease, such dispute shall be in accordance with the following: (a) If Landlord and Tenant fail to agree upon the Prevailing Market Rent as referred to in this Article, within the time periods provided for herein, then Landlord and Tenant each shall give notice to the other setting both the name and address of a licensed real estate broker or appraiser (hereinafter "appraiser") who shall be a M.A.I. Real Estate professional with substantial experience in commercial real estate appraisal designated by it to make the determinations hereafter required. Each appraiser shall be instructed to calculate the Prevailing Market Rent as provided in each of the foregoing sections which is the subject of the dispute and is in accordance with the criteria referenced therein. If either party shall fail to give notice of such designations within ten (10) days after failing to agree between themselves, then the appraisal made by the appraiser so designated shall be the Appraisal Prevailing Market Rent. If two appraisers have been designated, such two appraisers shall consult with each other and, within thirty (30) days thereafter, issue their determinations of Appraisal Prevailing Market Rent in writing, and give notice thereof to each other and to Landlord and Tenant. If such two appraisers shall concur as to the determination of the prevailing Market Rent and submit their decision in writing to Landlord and Tenant, such concurrence shall be final and binding upon Landlord and Tenant. If the two determinations of Prevailing Market Rent shall be within five percent (5%) (measured from the higher appraisal) of each other, the Prevailing Market Rent shall be deemed to be the average of the two appraisers' determinations. If such two appraisers' determinations shall not so concur or coincide, then such two appraisers shall immediately (i) designate a third appraiser, (ii) prepare detailed written appraisals, and (iii) submit copies of such appraisal to Landlord, Tenant and such third arbitrator. If the two appraisers shall fail to agree upon the designation of such third appraiser within eight (8) days of the date on which the last determination was rendered, then either party may apply to the American Arbitration Association or any successor thereto having jurisdiction, for the designation of such appraiser. All arbitrators shall be licensed real estate appraisers who shall have had at least fifteen (15) years continuous experience in the business of appraising real estate in the Montgomery County area. The third appraiser shall conduct such hearings and investigations as he may deem appropriate and shall, within twenty (20) days after the date of designation of the third appraiser, choose the determination of the two appraisers originally selected by the parties which is the nearest to the determination such third appraiser would have made acting alone and applying the standards set forth therefor in this Lease, and that choice by the third appraiser shall be binding upon Landlord and Tenant. Each party shall pay its own counsel fees and expenses, if any, in connection with any arbitration under this Article, including the expenses and fees of any appraiser selected by it in accordance with the provisions of this Article, and the parties shall share equally all other expenses and fees of any such arbitration, including the expenses of the third appraiser. The determination rendered in accordance with the provisions of this Article shall be final and binding in fixing the Prevailing Market Rent. Notwithstanding the foregoing, in no event shall the Basic Rent for the First Lease Year of the Option Term be less than the then Initial Base Rent of the last Lease Year of the initial lease term of this First Amendment escalated by three percent. 6. Landlord will use reasonable efforts to obtain a non-disturbance agreement for Tenant's benefit from the holder of the mortgage lien on the Property (the "Lender"). The non-disturbance agreement shall be on the Lender's approved form, and Tenant shall pay to Landlord, as additional rent, all fees, costs and expenses charged to Landlord by the Lender in connection with the Lender's review of this Lease including, without limitation, the Lender's legal fees. This Lease shall not be subordinate to any future mortgage, deed of trust or other lien on the Property unless the party secured by any such instrument enters into a non-disturbance agreement with Tenant on a form acceptable to such future Lender. 7. Except as modified hereby, the Lease shall remain in full force and effect in accordance with its terms, and is hereby ratified, confirmed and approved in all respects. WITNESS the following signatures and seals. ATTEST: LANDLORD:SAUL HOLDINGS LIMITED PARTNERSHIP By: SAUL CENTERS, INC., ITS GENERAL PARTNER [SIG] By:/s/ PHILIP D. CARACI - --------------------------- ------------------------------------ (SEAL) Secretary Philip D. Caraci, President ATTEST: TENANT: ONCOR, INC. [SIG] By: [SIG] - --------------------------- ------------------------------------ (SEAL) Secretary FOURTH AMENDMENT TO THE LEASE BETWEEN SAUL HOLDINGS LIMITED PARTNERSHIP AND ONCOR, INC. 209 PERRY PARKWAY This FOURTH AMENDMENT TO LEASE is made and entered into this ______ day of _________, 1997, by and between SAUL HOLDINGS LIMITED PARTNERSHIP (hereinafter referred to as "Landlord"), successor in interest to Avenel Associates Limited Partnership, and ONCOR, INC., a Maryland Corporation (hereinafter referred to as "Tenant"). WHEREAS, Landlord's predecessor and Tenant entered into that certain Lease dated March 22, 1990, as amended by an Amendment to Lease dated February 25, 1991, a Second Amendment to Lease dated June 21, 1991, and a Third Amendment to Lease dated October 15, 1996 (the "Lease"), for approximately 25,941 square feet in 209 Perry Parkway, Avenel Business Park, Gaithersburg, Maryland 20877 ("Demised Premises"); and WHEREAS, the parties hereto desire to enter into this Fourth Amendment to Lease for the purposes hereinafter set out: NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. All terms used herein and defined in the Lease shall have the same meaning as in the Lease unless otherwise defined herein. 2. Commencing on the Effective Date (as hereinafter defined), and subject to the following sentence herein, the square footage of the Demised Premises shall be increased by approximately 6,236 square feet of space, shown cross-hatched in red on the site plan attached hereto as Exhibit A ("Additional Space"), for a total square footage of approximately 32,177. Within ten (10) days of Landlord's receipt of Tenant's final plans and specifications for the improvements to the Additional Space, as approved by Landlord, Landlord's architect shall measure the space and Landlord shall notify Tenant in writing of the actual square footage of the Additional Space. All Rent and additional charges payable under the Lease, and as modified herein, shall be adjusted accordingly. Upon the Effective Date, the Demised Premises, as that term is defined and used in the Lease shall be deemed to include the Additional Space. 3. Commencing May 1, 1997, Tenant's Base Rent shall be increased by an additional $13.00 per square foot of additional Space, and Article 3 of the Lease captioned Rent is hereby modified to change the Annual Base Rent payable under the Lease to Four Hundred Five Thousand Three Hundred Thirty-two and 04/100 Dollars ($405,332.04), payable in equal monthly installments of Thirty-three Thousand Seven Hundred Seventy-seven and 67/100 Dollars ($33,777.67). The increase in the Base Rent payable to Landlord herein is subject to further modification upon verification of the square footage of the Additional Space as provided in Paragraph 1 hereof. 4. Tenant is accepting the Additional Space in "as is" condition. Tenant agrees that it has inspected the Additional Space and that no representations have been made by Landlord as to the condition thereof except as are expressly set forth in this Amendment. 5. (a) Landlord will provide Tenant with a construction allowance ("Construction Allowance") in an amount equal to the lesser of (i) the actual amount expended by Tenant for the Tenant Improvements (as hereinafter defined) to the Additional Space; or (ii) Eight and 50/100 Dollars ($8.50) per square foot of Additional Space as an allowance toward construction of Tenant Improvements. The Construction Allowance shall be utilized by Tenant for architectural/engineering fees, permit and inspection fees and construction costs for alterations to or additional improvements of the partitions, doors, ceilings, fixtures, mechanical equipment, electrical system, sprinkler system or other such permanent improvements to the Additional Space ("Tenant Improvements") and shall be payable within thirty (30) days after Landlord's receipt of written request of Tenant and Tenant's full compliance with all of the requirements specified below. Within thirty (30) days of the Effective Date, Tenant shall submit plans and specifications for the Tenant Improvements to the Additional Space for Landlord's review and approval, in accordance with Articles 8 and 9 of the Lease. Tenant shall observe and perform all of Tenant's obligations under the Lease, as amended herein, from and after the date the Additional Space is delivered to Tenant in the same manner as though the Additional Space were deemed to be the Demised Premises as of the delivery date. Landlord shall have no liability whatsoever for loss or damage to Tenant Improvements or fixtures, equipment or other property of Tenant or Tenant's contractors. It is expressly understood that Tenant shall, to the fullest extent possible, perform or cause to be performed the Tenant Improvements without causing any interference whatsoever with the activities and business of adjoining tenants and the use of the common areas by tenants and their customers, agents, invitees and licensees. The Tenant Improvements shall be performed in accordance with the following requirements: A. The Tenant shall provide lien waivers and copies of paid invoices from all contractors, subcontractors and suppliers of materials for all Tenant Improvements. Such invoices shall total or exceed the amount of the Construction Allowance requested. B. Tenant shall provide its own contractors to perform all the Tenant Improvements except that Tenant shall utilize the Landlord's roofing contractor for all roofing work or work involving penetrations of the roof membrane. C. The contractors, subcontractors or laborers employed in connection with such work shall comply with any applicable law and reasonable uniform work rules and regulations established by Landlord from time to time for all tenant improvements. D. Tenant, or its contractors and their subcontractors, shall provide such insurance, bonding, or indemnification as Landlord may reasonably require for its protection from negligence or malfeasance on the part of such contractors and subcontractors. E. In Landlord's reasonable judgment, such work of contractors or subcontractors will not result in delays, stoppages or other action or the threat thereof which may interfere with or delay the completion of other work in the Building. F. Landlord shall have the right to inspect the Tenant's work on a regular basis. G. Tenant shall be responsible for obtaining any permits, certificates, or approvals from any state, federal or local government necessary to enable Tenant to occupy the Additional Space and construct the Tenant Improvements. All costs incurred in connection with obtaining such permits, certificates or approvals shall be the sole responsibility of Tenant. H. As provided in Article 9 of the Lease, Tenant shall save Landlord harmless from and against all expenses, liens, claims or damages to either property or person which may or might arise by reason of making the Tenant Improvements. (b) Tenant shall use good faith efforts to complete the Tenant Improvements on or before May 31, 1997. 6. Provided Tenant is not in default of the terms and conditions of the Lease either on the date of the Option Notice (as hereinafter defined) or on the Option Effective Date (as hereinafter defined), then Tenant shall have the right, with written notice to Landlord given no later than June 30, 1997 ("Option Notice"), to lease additional space containing approximately 10,005 square feet as shown cross hatched in blue on Exhibit A ("Option Space"). (a) If Tenant exercises its option to lease the Option Space in accordance with the provisions of this paragraph 6, then Tenant shall execute and deliver to Landlord a lease amendment within ten (10) business days after Landlord submits the same to Tenant, which shall include the following terms and conditions: (i) Effective forty (40) days after the date of the Option Notice ("Option Effective Date"), the square footage of the Demised Premises shall be deemed increased by the square footage of the Option Space. (ii) As of the Option Effective Date, Tenant's Annual Base Rent shall be increased by $13.00 per square foot of Option Space. (iii) Tenant is accepting the Option Space in "as is" condition. Tenant agrees that it has inspected the Option Space and that no representations have been made by Landlord as to the condition thereof except as are expressly set forth in this Amendment. (iv) Landlord will provide Tenant with a construction allowance ("Construction Allowance") in an amount equal to the lesser of (a) the actual amount expended by Tenant for the Tenant Improvements (as hereinafter defined) to the Option Space; or (b) Eight and 50/100 Dollars ($8.50) per square foot of Option Space as an allowance toward construction of Tenant Improvements. The Construction Allowance shall be utilized by Tenant for architectural/engineering fees, permit and inspection fees and construction costs for alterations to or additional improvements of the partitions, doors, ceilings, fixtures, mechanical equipment, electrical system, sprinkler system or other such permanent improvements to the Option Space ("Tenant Improvements") and shall be payable within thirty (30) days after Landlord's receipt of written request of Tenant and Tenant's full compliance with all of the requirements specified in Paragraph 5(a)A-H. Prior to commencement of the Tenant Improvements to the Option Space, Tenant shall submit plans and specifications for the Tenant Improvements to the Option Space for Landlord's review and approval, in accordance with Articles 8 and 9 of the Lease. Tenant shall observe and perform all of Tenant's obligations under the Lease, as amended herein, from and after the date the Option Space is delivered to Tenant in the same manner as though the Option Space were deemed to be the Demised Premises as of the delivery date. Landlord shall have no liability whatsoever for loss or damage to Tenant Improvements or fixtures, equipment or other property of Tenant or Tenant's contractors. It is expressly understood that Tenant shall, to the fullest extent possible, perform or cause to be performed the Tenant Improvements without causing any interference whatsoever with the activities and business of adjoining tenants and the use of the common areas by tenants and their customers, agents, invitees and licensees. The Tenant Improvements shall be performed in accordance with the requirements set forth in Paragraph 5(a)A-H. (b) Provided (i) Tenant is not then in default (beyond any applicable cureperiod) in any of its obligations under this Lease, and (ii) Landlord desiresto lease the Option Space (hereinafter defined) to any party, Landlord agrees that, during the initial term of the Lease, Tenant shall have the right of first offer to enter into a lease of the Option Space (the "Option Space") in accordance with the terms and conditions set forth in this paragraph (b), as follows: (i) After receipt of a written proposal to lease the Option Space from a prospective tenant or its agent ("Prospective Tenant") and prior to entering into a lease with that Prospective Tenant for the Option Space, Landlord shall send to Tenant an offer notice of the availability of such space (the "OFFER NOTICE"). (ii) Within ten (10) business days after Tenant's receipt of the Offer Notice, Tenant shall notify Landlord that Tenant either (1) agrees to lease the Option Space, or (2) does not desire to lease the Option Space and the Landlord shall have the right to lease the Option Space to the Prospective Tenant. A failure by Tenant to timely elect the option described in clauses (1) or (2) above shall be deemed a to be a waiver by Tenant of any further right to lease the Option Space under this paragraph. If Tenant elects the option described in clause (2) above, the Tenant shall have additional first rights of offer provided that the Option Space is not leased to the Prospective Tenant or the Option Space becomes available during the initial term of the Lease and subject to the initial or renewal occupancy by the Prospective Tenant. (iii) If Tenant exercises its option to lease the Option Space under this paragraph, then Tenant shall execute a lease amendment embodying the terms set forth in the Offer Notice, within ten (10) business days after Landlord submits any such lease amendment to Tenant which shall provide that the following terms and conditions shall apply to the Option Space: (a) The Premises shall be modified effective as of the date falling 40 days after the date of the Offer Notice (the "Option Effective Date") to increase the size of the Demised Premises by approximately 10,005 rentable square feet size. (b) As of the Option Effective Date, the initial Base Rent for the Option Space shall be the Initial Base Rent per square foot set forth below for the year in which Tenant exercises its option under this paragraph and such Initial Base Rent shall be increased on the first day of each succeeding Lease Year to the amounts set forth below. OPTION EXERCISE DATE RENT PER SQUARE FOOT Before February 1, 1998 $13.00 Before February 1, 1999 $13.50 Before February 1, 2000 $14.00 Before February 1, 2001 $14.50 Before February 1, 2002 $15.00 Before February 1, 2003 $15.50 Before February 1, 2004 $16.00 (c) The Annual Operating Costs shall be modified as of the Option Effective Date to increase Tenant's Pro-Rata Share of Annual Operating Cost to reflect the increased size of the Demised Premises. (d) Tenant agrees to accept the Option Space "as is" in its then existing condition and Landlord shall have no construction obligations with respect thereto. However, the Landlord will provide Tenant with a construction allowance ("Option Space Construction Allowance") equal to the lesser of (a) the actual amount expended by Tenant in remodeling and renovating the Option Space or (b) an amount equal to $774.19 multiplied by the number of full months remaining on the initial term of the Lease from the Option Effective Date. The Option Space Construction Allowance shall be used for the construction of Tenant Improvements in the Option Space. The Construction Allowance shall be payable within thirty (30) days after request of Tenant and completion of all of the requirements specified below. Tenant Improvements shall include architectural/engineering fees, permit and inspection fees, and construction costs for alterations to or additional improvements of the partitions, doors, ceilings, finishes, mechanical equipment, electrical system, sprinkler system or other such permanent improvements to the Option Space. Prior to commencement of Tenant Improvements, Tenant shall submit plans and specifications for the Tenant Improvements for the Landlord's review and approval, in accordance with Articles 8 and 9 of the Lease. The provisions, requirements and conditions of subparagraphs (5)(a)A-H above will apply to the Option Space Construction Allowance. (iv) Landlord may, at its option, in lieu of a narrative description of the terms to be described in the Offer Notice, submit to Tenant a lease amendment document setting forth the terms of the proposed lease amendment for the Option Space in which event Tenant's exercise of its option to lease the Option Space shall be made by Tenant's execution of such lease amendment document and its return to Landlord within the applicable time periods set forth above. If Landlord does not submit a lease amendment document to Tenant at the time the Offer Notice is given, and Tenant exercises its option to lease the Option Space under such terms, then Tenant shall execute a lease amendment embodying terms set forth in the Offer Notice within ten (10) days after Landlord submits any such lease amendment to Tenant, as provided above. (v) Tenant shall have no further right to lease the Option space under this paragraph after Landlord enters into a lease of the Option Space with the Prospective Tenant in accordance with this paragraph unless the Option Space is vacated by the Prospective Tenant during the initial term of the Lease. (vi) Tenant's right to lease the Option Space shall be conditioned upon Tenant's full and complete compliance with all of the terms and conditions of the Lease prior to the date of any Offer Notice, and Tenant's option to lease the Option Space shall terminate when the initial term of the Lease expires or terminates. (c) Time shall be of the essence with respect to Tenant's right to lease the Option Space and with respect to Tenant's fight of first offer under this Paragraph 6. 7. Tenant's proportionate share of all taxes and assessments, insurance and operating costs shall be adjusted in accordance with the provisions of this Amendment. 8. Article 7 of the Third Amendment to Lease is hereby deleted in its entirety. 9. The Effective Date is the date of this Amendment. 10. Except as modified hereby, the Lease shall remain in full force and effect in accordance with its terms, and is hereby ratified, confirmed and approved in all respects. 11. Any agreements, obligation or liability, made, entered into or incurred by or on behalf of Landlord binds only its property and no shareholder, trustee, officer, employee, director, partner or agent of the Landlord assumes or shall be held to any liability therefor. 12. The provisions of this Amendment shall be binding upon the parties hereto, their successors, and to the extent permitted under the Lease, their assigns. 13. The submission of this Amendment for examination does not constitute an agreement, an option or an offer, and this Amendment becomes effective only upon execution and delivery thereof by Landlord. Captions and headings, if any, are for convenience and reference only and shall not in any way define, limit or describe the scope or content of any provision of this Amendment. Whenever in this Amendment (i) any printed portion, or any part thereof, has been stricken out, or (ii) any portion of the Lease (as the same may have been previously amended) or any part thereof, has been modified or stricken out, then, in either of such events, whether or not any replacement provision has been added, this Amendment and the Lease shall hereafter be read and construed as if from the text of the material so stricken out which would be inconsistent in any way with the construction or interpretation which would be appropriate if such material had never been contained herein or in the Lease. WITNESS the following signatures and seals. ATTEST: LANDLORD: SAUL HOLDINGS LIMITED PARTNERSHIP BY: SAUL CENTERS, INC., ITS GENERAL PARTNER By: - ---------------------- ----------------------------- (SEAL) Secretary Philip D. Caraci, President ATTEST: TENANT: ONCOR, INC. By: [sig] - ---------------------- ----------------------------- (SEAL) Secretary Name: ---------------------------- Title: ---------------------------- SECRETARY'S CERTIFICATE I, JOHN COKER, Secretary of Oncor, Inc., a Maryland corporation, do hereby certify (i) that the foregoing and annexed Lease was executed and delivered pursuant to, and in strict conformity with the provisions of resolutions of the Board of Directors of said Corporation validly adopted at a regularly called meeting of said Board of Directors, and that a quorum was present at said meeting (or validly adopted by unanimous written consent of said Board of Directors in lieu of a meeting), in conformity with the laws of the state of incorporation of said Corporation; and (ii) that the following is a true, correct and complete reproduction of such resolutions: RESOLVED: That CECIL KOST, President and JOHN COKER, Vice President of the Corporation, shall be and is hereby authorized and empowered, for and on behalf of the Corporation, to execute, acknowledge and deliver the foregoing and annexed Fourth Amendment to Lease between Saul Holdings Limited Partnership, as Landlord, and Oncor, Inc., as Tenant, for those certain Premises located in the Building at 209 Perry Parkway, Avenel Business Park, Gaithersburg, Maryland, at an annual Base Rental of approximately Four Hundred Five Thousand Three Hundred Thirty-two and 04/100 Dollars ($405,332.04), as well as any and all related documents, in order to expeditiously provide for the leasing of such Premises, and in so doing, to make any and all related changes therein or modifications thereof as he, in his sole discretion, acting for and on behalf of the Corporation, shall deem necessary or advisable, and all of the officers of the Corporation are hereby authorized, directed and empowered to do any and all acts or things as shall be necessary or advisable in order to effectuate the foregoing resolution. [sig] - ----------------------------------------- Printed Name: , Secretary --------------------------------- Date -------------------------------------------- (Corporate Seal) -----END PRIVACY-ENHANCED MESSAGE-----