-----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, AvJzZQO9+0AI4u/xboRtlYUXxRpBR1FZ1SNwkxhIWfoI98JnuvVUvu6IaDvo8iyH p9pEPyT9tTHRVVEFKJGaEg== 0000950144-97-002841.txt : 19970326 0000950144-97-002841.hdr.sgml : 19970326 ACCESSION NUMBER: 0000950144-97-002841 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 20 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970325 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: QUINTILES TRANSNATIONAL CORP CENTRAL INDEX KEY: 0000919623 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH [8731] IRS NUMBER: 561714315 STATE OF INCORPORATION: NC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-23520 FILM NUMBER: 97562754 BUSINESS ADDRESS: STREET 1: 4709 CREEKSTONE DR STREET 2: STE 300 CITY: DURHAM STATE: NC ZIP: 27703-8411 BUSINESS PHONE: 9199412000 MAIL ADDRESS: STREET 1: 4709 CREEKSTONE DR STREET 2: STE 300 CITY: DURHAM STATE: NC ZIP: 27703-8411 10-K405 1 QUINTILES FORM 10-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1996 Commission file number 340-23520 QUINTILES TRANSNATIONAL CORP. (Exact name of registrant as specified in its charter) North Carolina 56-1714315 (State of incorporation) (I.R.S. Employer Identification Number) 4709 Creekstone Drive, Suite 300 Durham, North Carolina 27703-8411 (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code: (919) 941-2000 Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01 par value per share (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment of this Form 10-K. [ ] The aggregate market value of the registrant's Common Stock at March 12, 1997 (the most recent practicable date) held by those persons deemed by the registrant to be non-affiliates was approximately $1,531,423,095. As of March 12, 1997 (the most recent practicable date), there were 34,792,239 shares of the registrant's Common Stock, $.01 par value per share, outstanding. DOCUMENTS INCORPORATED BY REFERENCE Document Where Incorporated - -------- ------------------ 1. Annual Report to Shareholders for the year ended December 31, 1996 Part II 2. Proxy Statement for the Annual Meeting of Shareholders to be held April 30, 1997 Part III 2 QUINTILES TRANSNATIONAL CORP. Form 10-K Annual Report INDEX
Page ---- Part I....................................................................................3 Item 1. Business.......................................................................3 Item 2. Properties....................................................................16 Item 3. Legal Proceedings.............................................................17 Item 4. Submission Of Matters To A Vote Of Security Holders...........................17 Part II..................................................................................17 Item 5. Market For Registrant's Common Equity And Related Stockholder Matters.........18 Item 6. Selected Financial Data.......................................................18 Item 7. Management's Discussion And Analysis Of Financial Condition And Results Of Operations.................................................................18 Item 8. Financial Statements And Supplementary Data...................................18 Item 9. Changes In And Disagreements With Accountants On Accounting And Financial Disclosure..........................................................18 Part III.................................................................................18 Item 10. Directors And Executive Officers Of The Registrant...........................18 Item 11. Executive Compensation.......................................................18 Item 12. Security Ownership Of Certain Beneficial Owners And Management...............18 Item 13. Certain Relationships And Related Transactions...............................18 Part IV..................................................................................19 Item 14. Exhibits, Financial Statement Schedules, And Reports On Form 8-K.............19
2 3 PART I ITEM 1. BUSINESS GENERAL Quintiles Transnational Corp. (the "Company") is a leading provider of full-service contract research, sales and marketing services to the global pharmaceutical, biotechnology and medical device industries. Supported by its extensive information technology capabilities, the Company provides a broad range of fully-integrated contract services in order to accelerate the time from discovery to peak market acceptance of a new therapy by offering traditional contract research services as well as contract sales and marketing services. In addition, the Company also supports the developing information needs of the healthcare industry by providing health economics and healthcare policy consulting and disease and health information management services. Since its inception in 1982, the Company has continued to expand the scope of its services and its geographic presence to support the needs of its clients on a worldwide basis. The Company has implemented a number of strategic initiatives to broaden its array of services and create new opportunities for growth. In November 1996, the Company completed a share exchange for all of the outstanding shares of Innovex Limited ("Innovex"), an international contract services organization specializing in contract research, sales and marketing of new therapies for pharmaceutical companies. Innovex's contract sales and marketing and clinical research activities are concentrated on the perimarketing phase of product life, which the Company defines as the period from two years before to two years after regulatory approval. Innovex enables the Company to complement its clinical research focus on obtaining regulatory approval with services designed to assist clients in achieving market penetration of new therapies. Accordingly, with the addition of Innovex, the Company is now able to provide late stage clinical trials and product launch services to clients during a critical and costly stage of bringing a product to market. Also in November 1996, the Company acquired BRI International, Inc. ("BRI"), a leading international contract research firm specializing in medical device development and regulatory compliance consulting. The addition of BRI allows the Company to offer contract services to medical device developers, and consulting services relating to good manufacturing practices ("GMP"), good clinical practices ("GCP") and good laboratory practices ("GLP"). In May 1996, the Company acquired the operating assets of Lewin-VHI, Inc., a nationally-recognized healthcare consulting firm, and formed The Lewin Group, Inc. ("Lewin") as a new subsidiary of the Company. Combined with Benefit International, a firm specializing in pharmacoeconomic and quality of life evaluations that was acquired by the Company in May 1995, Lewin serves as the foundation for the Company's efforts to offer broad-based disease and health information management services. In February 1996, the Company acquired PMC Contract Research AB ("PMC"), a contract research organization ("CRO") located in Uppsala, Sweden which has extensive clinical trials management expertise as well as a Phase I clinical trial testing unit and an analytical laboratory. This acquisition enabled the Company to expand its ability to provide drug development services in Scandinavia and position itself for further growth in that important region for drug development. Also in 1996, in order to increase its capacity in clinical trial drug formulation, manufacturing, packaging and distribution, the Company began construction of a 171,000 square foot facility in Bathgate, Scotland. The Bathgate facility also will house a clinical data management center. To facilitate the integration of these acquisitions and to capitalize on the synergies each acquisition provides, the Company recently reorganized into three operating divisions which work 3 4 closely together to provide the Company's services on an integrated basis. The Contract Research Division covers services through Phase IIIa clinical trials, including study design, clinical data management and biostatistical analysis, laboratory services, formulation and packaging of clinical trial drugs, pre-clinical services, regulatory affairs and medical device consulting. The Innovex Division includes perimarketing clinical studies in Phases IIIb and IV, as well as the Company's pharmaceutical sales and marketing services. Finally, the Lewin-Benefit Division encompasses the Company's health economics and healthcare policy consulting and disease and health information management services. The divisions provide an organizational framework for the Company to cross-sell its services and enable it to offer both product development and sales and marketing services to clients. Accordingly, the Company believes its breadth of services strengthens its competitive position as it looks to become the provider of choice for pharmaceutical, biotechnology and medical device companies and the broader healthcare industry. INDUSTRY OVERVIEW The CRO industry provides independent product development services primarily for the pharmaceutical and biotechnology industries. Companies in these industries outsource product development services to CROs in order to manage the drug development process more efficiently and cost-effectively to maximize the benefits in time and profit of patent-protected products. CROs derive substantially all of their revenue from the research and development expenditures of pharmaceutical and biotechnology companies. The CRO industry has evolved from providing primarily pre-clinical services in the 1970s to a full-service industry, offering services during the pre-clinical, clinical and post-marketing phases of development for new therapies. In addition to managing clinical trials, CROs provide scientific evaluations and analyze the results according to good clinical and laboratory practices as required by the applicable regulatory authorities. CROs serving the medical device industry provide similar services designed to assist medical device developers in obtaining regulatory approval. The contract sales industry emerged in the 1980's, most notably in the U.K. where regulatory cost containment pressure, the Company believes, led pharmaceutical companies to search for a more cost-effective way to launch new products. As a result, in order to convert high fixed costs into variable costs, large pharmaceutical companies began to outsource their sales and marketing activities related to product launch. The Company believes that contract sales and marketing opportunities could emerge in the medical device and biotechnology industries, as well. The Company believes that there is a significant market opportunity for companies focusing on the perimarketing phase of a product life cycle. The perimarketing period is characterized by significant spending on large scale clinical trials and sales staff requirements necessary to gain commercial acceptance of products. The Company believes that organizations offering integrated product development and sales and marketing services during the perimarketing period will be able to further shorten the product development cycle and accelerate market penetration so that drug sponsors can maximize the duration of a drug's commercial life under patent protection, and therefore maximize related revenue and return on investment. Accordingly, the Company believes that such organizations will have a competitive advantage over companies that compete only in either the CRO or contract sales industries. TRENDS AFFECTING OUTSOURCING Worldwide spending on pharmaceutical products and medical devices is increasing due to a combination of factors, including aging populations and a growing number of pharmaceutical and medical device products that provide enhanced therapeutic benefits. At the same time, regulatory pressures and pricing constraints have intensified as governments and private healthcare payors seek to 4 5 manage the growth of total healthcare expenditures. These developments have led to intense competition in the pharmaceutical, biotechnology and medical device industries, where innovation, more focused research and development, rapid product introduction and cost-effectiveness have become key competitive factors. The Company believes that in response to these developments, pharmaceutical, biotechnology and medical device companies are increasingly outsourcing a variety of activities associated with product development and pharmaceutical sales and marketing to specialist third party service providers such as the Company. Although outsourcing has been prevalent for long periods of time in many industries, outsourcing to CROs and contract sales organizations is a relatively recent trend and one that is still evolving. Through such outsourcing, drug and medical device developers are attempting to reduce fixed costs and accelerate the time to market, commercial acceptance and market penetration of their products, with the aim of maximizing their return on investment. The Company believes that the following factors will contribute to the increased use of drug development and contract sales and marketing outsourcing and an expansion of the scope of services outsourced: (i) competitive pressures to contain costs and accelerate time to market; (ii) globalization of the marketplace; (iii) importance of sales and marketing activities; (iv) stringent regulation and the need for sophisticated information technology; (v) the growth in the biotechnology and genomics industries; and (vi) medical device industry growth. SERVICES The Company provides globally integrated contract research, sales and marketing services to the pharmaceutical, biotechnology and medical device industries. The Company also offers health economics and healthcare policy consulting and disease and health information management services. The Company provides its clients with a continuum of services that develops a laboratory discovery into a product sale. The Company is organized into three operating divisions that interface with the client at complementary points in the process. Within the divisional structure, there is considerable overlap in specific services and a free flow of communication to best meet each client's needs. Traditional CRO services range from pre-clinical testing to Phase IIIa clinical trials and are handled by the Contract Research Division. Once the product has reached Phase IIIb clinical trials and is therefore in the perimarketing period, client services generally are provided by the Innovex Division. These two divisions generate significant amounts of data that are processed and analyzed by a sophisticated information technology system. Information technology is at the core of the Company's operations because it enhances the quality of the Company's services and allows the free flow of information between the divisions that is key to maximizing the value delivered by the Company. In addition, the data can be used and further developed by the Lewin-Benefit Division, which handles disease and health information management. The Company's services are described in greater detail below. CONTRACT RESEARCH SERVICES Clinical Trial Services. The Company offers comprehensive clinical trials services which are the basis for obtaining regulatory approval for drugs and medical devices. The Company has specialized business units and extensive experience in the therapeutic areas of the central nervous system, cardiovascular, infectious and respiratory diseases as well as in the field of oncology. The Company also has significant clinical trials experience in the therapeutic areas of endocrinological, gastroenterological, genitourinary and musculoskeletal diseases. The Company is experienced in managing large trials involving several 5 6 thousand patients at several hundred sites and in multinational trials conducted simultaneously in the Americas, Europe, the Asia-Pacific region and South Africa. The Company provides its clients with one or more of the following core clinical trials services: Study Design. The Company uses its broad development expertise to serve its clients in the critical area of study design by assisting in the preparation of the study protocol and design of case report forms ("CRFs"). The protocol defines the medical issues to be examined, the number of patients required to produce statistically valid results, the period of time over which they must be tracked, the frequency and dosage of drug administration and the study procedures. The study's success often depends on the protocol's ability to predict correctly the requirements of the applicable regulatory authorities. Investigator Recruitment. During clinical trials, the drug is administered to patients by physicians, also referred to as investigators, at hospitals, clinics or other locations, also referred to as sites. The Company's ability to identify and recruit investigators with the appropriate expertise and an adequate base of patients who satisfy the requirements of the study protocol is critical to the success of the trial. The Company has access to several thousand investigators who have conducted clinical trials worldwide for the Company. Study Monitoring. The Company provides study monitoring services which include investigational site initiation, patient enrollment assistance and data collection and clarification. Site visits serve to assure the quality of the data which are gathered according to GCP and to meet the sponsors' and regulatory agencies' requirements as specified in the study protocol. Clinical Data Management and Biostatistical Services. The Company's clinical data management and biostatistical services were the original foundations of the Company, and the Company believes that they are two of the Company's primary competitive strengths. The Company has extensive experience in the United States and Europe in the creation of scientific databases for all phases of the drug development process, including the creation of customized databases to meet client-specific formats, integrated databases to support New Drug Application ("NDA") submissions and databases in accordance with the United States Food and Drug Administration ("FDA") and European specifications. The Company believes that its global database capabilities are a significant competitive advantage, particularly in large-scale multi-jurisdictional trials involving thousands of patients at hundreds of sites. For example, during 1996 the Company managed the NDA submission process for six large-scale programs. The largest program included approximately 3,000 patients located throughout the United States, Europe and Japan. Phase I Services. The Company has Phase I units located in London, England, Uppsala, Sweden, Freiburg, Germany and Lenexa, Kansas. The services offered by these units include dose ranging, bioavailability/bioequivalence studies, pharmacokinetic/pharmacodynamic modeling, first administration to humans, multiple dose tolerance, dose effect relationship and metabolism studies. Because its Phase I units focus primarily on studies for new, innovative products, rather than generics, the Company believes there is greater opportunity for winning contracts for larger, later stage studies of such innovative products. In addition to the Company's core clinical trials management services, the Company provides its clients with the following specialized services: Centralized Clinical Trial Laboratory. In addition to providing comprehensive safety and efficacy testing for clinical trials, the Company's centralized clinical trial laboratory provides site-specific study materials, customized lab report design and specimen archival and management on behalf 6 7 of a study sponsor. The centralized laboratory offers a 48-hour turnaround time for laboratory results and is capable of providing direct electronic integration of laboratory data into safety and efficacy reports for NDA submissions. Formulation, Manufacturing and Packaging Services. The Company offers services in the design and development of pharmaceutical dose forms as well as the manufacture of study drug and placebos and the appropriate packaging of these for double blinded studies. These services can expedite the drug development process because clinical trials are often postponed by delays in the manufacture of study drug materials. The Company is expanding its capacity for delivering these services through the construction of a new 171,000 square foot facility at Bathgate, Scotland which the Company believes will be one of the largest specialist clinical trial supplies units in the world. The Company anticipates construction will be completed in late 1997. The facility also will house a clinical data management center. Pre-Clinical Services. The Company's pre-clinical unit in Edinburgh, Scotland is part of a drug development facility acquired by the Company in 1995 from Syntex Pharmaceuticals Limited. This unit, combined with the Company's pre-clinical facility in Ledbury, England, provides clients with a wide array of pre-clinical and toxicology services. These services are designed to produce the data required to identify, quantify, and evaluate the risks to humans resulting from the manufacture or use of pharmaceutical and biotechnology products, including developmental and reproductive toxicology, genetic toxicology, neurotoxicology, carcinogenicity testing, pharmacology, analytical chemistry, pathology, metabolism and pharmacokinetics. Regulatory Affairs Services. The Company provides comprehensive medical and regulatory services for its pharmaceutical and biotechnology clients. The Company's medical services include medical oversight of studies, review and interpretation of adverse experiences, medical writing of reports and study protocols and strategic planning of drug development programs. Regulatory services for product registration include regulatory strategy design, document preparation, consultation, and liaison with various regulatory agencies. The Company's regulatory affairs professionals help to define the steps necessary to obtain registration in the most expeditious manner. The Company is able to provide such services in numerous countries to meet its clients' needs to launch products in multiple countries simultaneously. Medical Device Services. With its acquisition of BRI in November 1996, the Company believes it obtained a leading international contract research firm specializing in medical devices and regulatory consulting. The Company's service offerings include: review of global strategies for device development and introduction; identifying regulatory requirements in targeted markets; clinical study design and planning; data management; statistical analysis of report preparations; global clinical trial management and monitoring capabilities; consultation on quality control and quality assurance issues; regulatory filings; compliance with United States, European and European Union regulations relating to medical devices; long-range planning for multinational product launches; compliance with legislative requirements for market access; post-marketing requirements; managing relationships with national governments and regulatory authorities; European pricing strategies; and European personnel and recruitment services. PERIMARKETING SERVICES (INNOVEX) 7 8 The Company provides services to the pharmaceutical industry with a strategic focus on the commercial launch of new drugs. These services include contract sales, marketing and Phases IIIb and IV clinical trials. The Company believes that there is significant potential for future growth in the market for such contract services. The Company is well-positioned to benefit from this opportunity by cross-selling its sales and marketing outsourcing capabilities to its contract research clients. Similarly, the Company believes that its existing and new sales and marketing relationships will benefit its future contract research opportunities. Sales and Marketing Services. The Company offers a flexible range of contract sales services which are delivered through dedicated and syndicated sales teams. Dedicated sales teams are comprised of sales representatives recruited by the Company in accordance with client specifications to conduct sales efforts for a particular client. Dedicated sales teams can be managed by the Company or can report directly to the client, depending on client preference. In certain circumstances, the Company can transfer an entire dedicated sales team to the client for an additional placement fee. Syndicated sales teams promote a number of drugs for different clients and are generally managed directly by the Company. The Company's contract sales teams form a highly skilled network of professionals that afford clients substantial flexibility in selecting the extent and cost of promoting products as well as their level of involvement in managing the sales effort. The Company believes that speed of recruitment, quality of training and management of sales representatives, supported by advanced information technology, are key to providing clients with a sales force tailored to meet their geographic and scheduling needs. The Company's ability to assemble a sales team quickly is a product of combining the talents of experienced personnel for screening and interviewing candidates with the use of information technology, such as scanning and resume tracking systems, to expedite recruitment. In the United States, the Company maintains an electronic database of 54,000 resumes and has recruited as many as 125 sales representatives per week. In addition, the Company has established relationships with specialist healthcare recruitment agencies in Europe, particularly the U.K., and the United States to assist in its recruiting efforts. A client-specific national sales force can be recruited by the Company in as few as eight weeks, whereas the Company believes pharmaceutical companies often take six to nine months to build an internal sales force. Sound hiring procedures, such as the Company's candidate assessment program, background screenings and drug testing programs, supplemented by the Company's internal training and development programs, help to ensure the quality of recruited personnel. Once the sales teams are assembled, the Company uses its electronic territory management system ("ETMS") to enhance the speed, effectiveness and accountability to clients of its contract sales activities. This system is currently being used in the United States and is being implemented in the U.K. The Company intends to further expand the use of ETMS in the U.K. and internationally in 1997. The Company also provides a range of specialized marketing services specifically for pharmaceutical companies aimed at influencing the decisions of patients and physicians and accelerating the acceptance of drugs into treatment guidelines and formularies. Such services are typically purchased by the marketing departments of pharmaceutical companies, however, marketing of new products often receives substantial attention from senior executives, creating an opportunity for the Company to interact with the strategists of the pharmaceutical industry. The Company believes that its commercial orientation, clinical and promotional expertise and international experience enable it to tailor programs to specific client needs in a wide range of geographic markets and therapeutic areas. The market for outsourced contract sales and marketing services in the pharmaceutical industry has been predominantly national in nature and is most highly developed in the U.K. where the Company 8 9 estimates that one out of every four pharmaceutical sales representatives is a contract sales representative. In 1996, the Company derived $76.7 million of its net revenue from the contract sales and marketing services of its U.K. operations. The Company believes that contract sales and marketing generally is more developed in the U.K. because regulatory cost containment pressures occurred much earlier there than in other markets. Although there is a much lower level of market penetration for outsourced sales and marketing services in most other countries, the market has been growing, particularly in the United States and Germany, where increased cost containment pressures have emerged. Net revenue from the Company's contract sales and marketing services in the United States and Germany for 1996 was $55.4 million and $14.4 million, respectively. The Company also currently offers contract sales and marketing services in The Netherlands, Sweden and Spain and is seeking to develop such services in other parts of the world. Contract Research Services. The Innovex Division also provides contract research services, primarily for Phase IIIb and Phase IV clinical trials during the perimarketing period. The Company believes that the focus by the Innovex Division on Phase IIIb and Phase IV trials complements the Company's sales and marketing activities and enables the Company to integrate marketing considerations with the design of late stage clinical research protocols. The Company believes this coordination between clinical investigators and marketing professionals enables it to add value during the sales and marketing of a product. HEALTH ECONOMICS AND DISEASE INFORMATION MANAGEMENT SERVICES (LEWIN-BENEFIT) The Company offers a wide range of health economics and disease management information services to private and public sector clients to develop solutions in the public policy, managed care and medical technology arenas of healthcare. The Company's capabilities encompass health economics and healthcare policy research and consulting and disease and health information management services. The Company serves clients throughout the healthcare industry, including federal and state government agencies, associations, hospitals, physician groups, managed care organizations, industry suppliers, pharmaceutical companies and insurers. Healthcare Policy Research and Consulting. The Company's healthcare policy research and healthcare consulting services are designed to assist clients in evaluating healthcare programs and policies and developing strategies for doing business in the highly regulated healthcare environment. The Company has over 100 consultants, including clinicians, economists, marketing professionals and former high-level government executives with experience in the private sector, providing interdisciplinary skills and expert capabilities in corporate strategic planning and management, program and policy development, financial and cost-effectiveness analysis, evaluation design, microsimulation modeling and data analysis across five general practice areas: public health and finance policy, healthcare organizations, economic analysis, managed care and medical technology. The Company has access to more than 76 healthcare-related databases and has developed the expertise to analyze such complex data to respond to its clients' information needs. These services represent the core competencies of Lewin, a nationally-recognized healthcare consulting firm acquired by the Company in 1996. The Company believes that it can leverage Lewin's reputation, expertise and access to providers and policymakers to cross-sell its other health economics and information management services beyond its current market. Health Economics Consulting and Disease Information Management Services. 9 10 The Company's health economics consulting and disease information management services focus on applying healthcare outcomes analysis to the economic valuation of drugs and the treatment of diseases using data generated from its clinical trials services. These services enable regulators, health-care providers and third parties to assess the pricing and cost-effectiveness of new medical therapies. The Company believes that such economic valuation of therapies will play an important role in the future determination of drug pricing. Additionally, France, Germany, the U.K., Canada and Australia require cost-benefit analyses in regulatory submissions, and the Company believes that other countries may adopt similar requirements in the future. The Company believes that it will benefit from cross-selling these services to its pharmaceutical and biotechnology clients which are subject to pressures from managed care providers and regulators to demonstrate the cost-effectiveness of new products. Platform for Future Growth. The Company is positioning itself to serve as a health information interface between the users of healthcare services and the developers of healthcare treatments by developing health information management services designed to evaluate alternative healthcare solutions and provide third parties with the tools to select among them. While hospitals and healthcare provider organizations are placing intense pressure on the prices of products and services, the public is highly concerned about the resulting quality of care. The Company believes that purchasers of healthcare services, such as individuals and employers, as well as public interest groups and governments, are becoming increasingly interested in the value of care, as a function of its cost and level of quality, and accordingly, are seeking ways to measure and weigh the value of various healthcare alternatives. INFORMATION TECHNOLOGY All of the Company's services are enhanced by the Company's ongoing investment in information technology. The Company believes that it was a pioneer in the CRO industry in building a comprehensive global information technology network for gathering, managing and analyzing clinical trials data. The Company's information technology systems consist of a wide area network linking approximately 50 local area networks and interconnecting over 6,000 microcomputers worldwide. The Company continues to improve and expand this network, supported by the development of data management software to further streamline the drug development process. The Company's network enables the exchange of information among the Company's offices on a worldwide basis, facilitating concurrent multinational clinical trials and regulatory submissions. In addition, through the Company's innovative systems, clients are able to gain direct access to key data with respect to their products in testing, such as adverse events, CRFs and clinical laboratory testing results on a current basis. Clients using the Company's sales and marketing services can access information related to sales calls and provide feedback about the performance of the Company's sales representatives. The Company's sales and marketing services are further supported by its ETMS for planning, targeting, reporting, analysis and communications of sales and marketing activities, allowing the Company to centralize management of sales activities across a broad geographic area. The Company currently uses this system in the United States and is implementing it in the U.K. The Company intends to further expand the use of ETMS in the U.K. and internationally in 1997. Additionally, the Company utilizes an enhanced system for screening and tracking resumes as the cornerstone of its efforts to rapidly recruit qualified sales representatives. Some of the Company's internally developed systems which facilitate its drug development services, sales and marketing services and overall business management are described below: INNTRAX(R) Computerized clinical trial administrative management system. QTONE(TM) Touchtone and voice response patient information system. 10 11 QCANDA(TM) System for electronic submission and review of NDA data. QSTAR(TM) Imaging technology process which eliminates time and minimizes errors in data management by electronically routing and tracking optically scanned CRFs. QLIMS(TM) A laboratory data management system which provides protocol-specific validity checks. QNET(TM) System which allows electronic monitoring of laboratory test data. QNOW(TM) Client contact management and investigator database. IBDIS Client news-tracking system. The Company's information technology systems are supported by approximately 170 employees worldwide who are committed to the ongoing development of technology solutions to support the Company's services on a worldwide basis. CLIENTS AND MARKETING The Company coordinates its business development efforts across its service offerings through a central business development function. The Company believes that it is best able to capitalize on the synergies arising from its broad array of fully-integrated contract services by cross-selling its services at a centralized level. In addition, the Company believes that this structure allows the Company to serve its clients more effectively, while permitting the divisions to focus on the services provided. The Company's business development function directs the activities of business development personnel in each of the Company's United States locations as well as the Company's locations in the U.K., Belgium, Canada, France, Germany, Ireland, Italy, Japan, The Netherlands, Argentina, Denmark, Australia, Spain, Sweden and Singapore. Most of the Company's business development personnel have technical or scientific backgrounds and many are physicians, pharmacologists, statisticians or regulatory affairs professionals. The Company coordinates its worldwide marketing efforts through a computerized system integrated into each of the Company's offices that is actively marketing services. The Company provides its clinical research, sales and marketing services on a global basis to the pharmaceutical, biotechnology and medical device industries. In addition, the Company provides health economics and healthcare policy consulting and disease and health information management services to the United States healthcare industry and governments. For the year ended December 31, 1996, approximately 43.8% of the Company's net revenue was attributed to operations in the Americas, 53.8% to European operations and 2.4% to Asia-Pacific operations. The Company has provided services during 1996 to 49 of the 50 largest pharmaceutical companies in the world, as ranked by 1995 healthcare revenue, and to the 11 largest biotechnology companies in the world, as ranked by market capitalization in December, 1996. In 1996, the Company represented over 300 clients, including some of the largest American, European and Japanese pharmaceutical companies. In 1996, Novartis AG accounted for 11.9% of the Company's consolidated net revenue. The Company has in the past derived, and may in the future derive, a significant portion of its net revenue from a relatively limited number of major projects or clients. As pharmaceutical companies continue to outsource large projects and studies to fewer full-service global providers, the concentration of business could increase. The Company is likely to experience such concentration in 1997 and in future years. The loss of any such client could materially and adversely affect the Company. COMPETITION 11 12 The market for the Company's contract research services is highly competitive, and the Company competes against traditional CROs, the in-house research and development departments of pharmaceutical companies, as well as universities and teaching hospitals. Within the CRO industry, there are several hundred small, limited-service providers, several medium-sized firms, and only a few full-service companies with global capabilities. The Company believes that it is the only company offering full-service contract research services with annualized net revenue exceeding $500 million. Consolidation in the CRO industry will likely result in greater competition among the larger contract research providers for clients and acquisition candidates. The Company's primary contract research competitors include Covance Pharmaceutical Product Development, Inc., PAREXEL International Corp. and ClinTrials Research, Inc. In sales and marketing services, the Company competes against the in-house sales and marketing departments of pharmaceutical companies and small local contract sales organizations in each country in which it operates. The Company also competes against consulting firms offering healthcare consulting services, including boutique firms specializing in the healthcare industry and the healthcare departments of large firms. Competitive factors for contract research services include previous experience, medical and scientific experience in specific therapeutic areas, the quality of contract research, the ability to organize and manage large-scale trials on a global basis, the ability to manage large and complex medical databases, the ability to provide statistical and regulatory services, the ability to recruit investigators, the ability to integrate information technology with systems to improve the efficiency of contract research, an international presence with strategically located facilities, financial viability, and price. The primary competitive factors affecting contract sales and marketing services are the ability to quickly assemble, train and manage large qualified sales forces to handle broad scale launches of new drugs and price. Competitive factors affecting healthcare consulting services include experience, reputation, access to data, ability to analyze data and price. The Company believes that it competes favorably in these areas. In addition, the Company believes that the synergies arising from integrating contract research services with contract sales and marketing services, supported by global operations and information technology, differentiate the Company from its competitors. EMPLOYEES The Company has approximately 7,375 employees, comprised of approximately 3,325 in the Americas, 3,925 in Europe and Africa and 125 in the Asia-Pacific region, and over 50 offices in 20 countries. CONTRACT REVENUE Most of the Company's contracts are fixed price, with some variable components, and range in duration from a few months to several years. Generally, a portion of the contract fee is paid at the time the project is initiated with performance-based installments payable over the contract duration. Most contracts are terminable upon 15-90 days' notice by the client, and typically provide for termination or winding down fees. Also, some client contracts call for the client to reimburse the Company at cost for certain items such as investigator payments and travel. These reimbursed costs are deducted from professional fee income in calculating net revenue. The Company recognizes net revenue from its contracts on a percentage-of-completion or per diem basis as work is performed. Consistent with prior years' practice, the Company considers net revenue its primary measure of revenue growth. BACKLOG The Company believes that backlog is not a consistent indicator of future results because backlog can be affected by a number of factors, including the variable size and duration of projects, 12 13 many of which are performed over several years. Additionally, projects may be terminated by the client or delayed by regulatory authorities for many reasons, including unexpected test results. Moreover, the scope of a project can change during the course of a study. The Company reports backlog based on anticipated net revenue from uncompleted projects which have been authorized by the client, through a written contract or otherwise. Once work begins on a project, net revenue is recognized over the duration of the project. Using this method of reporting backlog, at December 31, 1996, backlog was approximately $708 million, as compared to approximately $415 million at December 31, 1995. POTENTIAL LIABILITY In connection with its provision of contract research services, the Company contracts with physicians to serve as investigators in conducting clinical trials to test new drugs on human volunteers. Such testing creates risk of liability for personal injury to or death of volunteers, particularly to volunteers with life-threatening illnesses, resulting from adverse reactions to the drugs administered. Although the Company does not believe it is legally accountable for the medical care rendered by third party investigators, it is possible that the Company could be held liable for the claims and expenses arising from any professional malpractice of the investigators with whom it contracts or in the event of personal injury to or death of persons participating in clinical trials. The Company also could be held liable for errors or omissions in connection with the services it performs. In addition, as a result of its Phase I clinical trials facilities, the Company could be liable for the general risks associated with a Phase I facility including, but not limited to, adverse events resulting from the administration of drugs to clinical trial participants or the professional malpractice of Phase I medical care providers. The Company believes that its risks are reduced by contractual indemnification provisions with clients and investigators, insurance maintained by clients and investigators and by the Company, various regulatory requirements, including the use of institutional review boards and the procurement of each volunteer's informed consent to participate in the study. The contractual indemnifications generally do not protect the Company against certain of its own actions such as negligence. The contractual arrangements are subject to negotiation with clients and the terms and scope of such indemnification vary from client to client and from trial to trial. The financial performance of these indemnities is not secured. Therefore, the Company bears the risk that the indemnifying party may not have the financial ability to fulfill its indemnification obligations. The Company maintains professional liability insurance that covers worldwide territories in which the Company currently does business and includes drug safety issues as well as data processing errors and omissions. The Company could be materially and adversely affected if it were required to pay damages or bear the costs of defending any claim outside the scope of or in excess of a contractual indemnification provision or beyond the level of insurance coverage or in the event that an indemnifying party does not fulfill its indemnification obligations. GOVERNMENT REGULATION The preclinical, laboratory and clinical trial supply services performed by the Company are subject to various regulatory requirements designed to ensure the quality and integrity of the data or products of these services. The industry standard for conducting preclinical and laboratory testing is embodied in the GLP regulations. The requirements for facilities engaging in clinical trial supplies preparation, labeling and distribution are set forth in the GMP regulations. GLP and GMP regulations have been mandated by the FDA and the Department of Health in the United Kingdom, and adopted by similar regulatory authorities in other countries. GLP and GMP stipulate requirements for facilities, equipment, supplies and personnel engaged in the conduct of studies to which these regulations apply. The regulations require that written, standardized procedures are followed during the conduct of studies and for the recording, reporting and retention of study data and records. To help assure compliance, the Company has established Quality Assurance programs at its preclinical, laboratory and clinical trial supply facilities which monitor ongoing compliance with GLP and GMP regulations by auditing study data and conducting regular inspections of study procedures. 13 14 The industry standard for the conduct of clinical research and development studies is embodied in GCP regulations and guidelines. The FDA and many other regulatory authorities require that study results and data be submitted to such authorities to be based on studies conducted in accordance with GCP provisions. These provisions include (i) complying with specific regulations governing the selection of qualified investigators; (ii) obtaining specific written commitments from the investigators; (iii) verifying that patient informed consent is obtained; (iv) instructing investigators to maintain records and reports; (v) verifying drug or device accountability; and (vi) permitting appropriate governmental authorities access to data for their review. Records for clinical studies must be maintained for specified periods for inspection by the FDA during audits. Non-compliance with GCP requirements can result in the disqualification of data collected during the clinical trial. The Company's standard operating procedures related to clinical studies are written in accordance with regulations and guidelines appropriate to the region where they will be used, thus ensuring compliance with GCP. Within Europe, all work is carried out in accordance with the European Community Note For Guidance "Good Clinical Practice for Trials on Medicinal Products in the European Community." In addition, FDA regulations and guidelines serve as a basis for the Company's North American standard operating procedures. The Company's offices in the Asia-Pacific region have developed standard operating procedures in accordance with their local requirements and in harmony with the Company's North American and European operations. From a transnational perspective, the Company has implemented common standard operating procedures across regions to assure consistency whenever it is feasible to do so. The Company's sales and marketing services are subject to detailed and comprehensive regulation in each geographic market in which it operates. Such regulation relates, among other things, to the qualifications of sales representatives and the use of healthcare professionals in sales functions. In the U.K., the Company complies with the ABPI Code of Practice for the Pharmaceutical Industry, which prescribes, among other things, an examination that must be passed by sales representatives within two years of their taking up employment, and which prevents the employment of healthcare professionals as sales representatives. Similar guidelines are in effect in other countries where the Company offers sales and marketing services. The Company's U.S. laboratories are subject to licensing and regulation under federal, state and local laws relating to hazard communication and employee right-to-know regulations, the handling and disposal of medical specimens and hazardous waste and radioactive materials, as well as the safety and health of laboratory employees. All of the Company's laboratories are operated in material compliance with applicable federal and state laws and regulations relating to the storage and disposal of all laboratory specimens including the regulations of the Environmental Protection Agency, the Nuclear Regulatory Commission, the Department of Transportation, the National Fire Protection Agency and the Resource Conservation and Recovery Act. The use of controlled substances in testing for drugs of abuse is regulated by the United States Drug Enforcement Administration (the "DEA"). All of the Company's laboratories using controlled substances for testing purposes are licensed by the DEA. The regulations of the United States Department of Transportation, the Public Health Service and the Postal Service apply to the surface and air transportation of laboratory specimens. The Company's laboratories also comply with International Air Transport Association regulations, which govern international shipments of laboratory specimens. Furthermore, when the materials are sent to a foreign country, the transportation of such materials becomes subject to the laws, rules and regulations of such foreign country. 14 15 In addition to its comprehensive regulation of safety in the workplace, the United States Occupational Safety and Health Administration has established extensive requirements relating to workplace safety for healthcare employers, whose workers may be exposed to blood-borne pathogens such as HIV and the hepatitis B virus. These regulations, among other things, require work practice controls, protective clothing and equipment, training, medical follow-up, vaccinations and other measures designed to minimize exposure to chemicals, and transmission of blood-borne and airborne pathogens. Furthermore, relevant employees of the Company receive initial and periodic training to ensure compliance with applicable hazardous materials regulations and health and safety guidelines. Although the Company believes that it is currently in compliance in all material respects with such federal, state and local laws, failure to comply could subject the Company to denial of the right to conduct business, fines, criminal penalties and other enforcement actions. EXECUTIVE OFFICERS OF THE REGISTRANT The following table provides information on the executive officers of the Company. There are no family relationships between any of the executive officers or directors of the Company.
Name Age Position with the Company - ---- --- ------------------------- Dennis B. Gillings, Ph.D. 52 Chairman of the Board of Directors and Chief Executive Officer Barrie S. Haigh 58 Vice Chairman of the Board of Directors and Chief Customer Officer Santo J. Costa 51 President, Chief Operating Officer and Director Rachel R. Selisker 41 Chief Financial Officer, Executive Vice President Finance, Treasurer and Director Gregory D. Porter 40 Executive Vice President, Chief Administrative and Legal Officer and Secretary Ludo J. Reynders, Ph.D. 43 Chief Executive Officer, CRO Division, and Director David F. White 53 Chief Executive Officer, Innovex Division Lawrence S. Lewin 58 Chief Executive Officer, Lewin-Benefit Division, and Director
Dennis B. Gillings, Ph.D. founded the Company in 1982 and has served as Chief Executive Officer and Chairman of the Board of Directors since its inception. From 1972-1988, Dr. Gillings served as a professor in the Department of Biostatistics at the University of North Carolina at Chapel Hill. During his tenure as a professor, he was active in statistical consulting for the pharmaceutical industry. Dr. Gillings currently serves on the Board of Directors of the University of North Carolina School of Public Health Foundation. Dr. Gillings has been published widely in scientific and medical journals. Dr. Gillings received a Diploma in Mathematical Statistics from the University of Cambridge and a Ph.D. in Mathematics from the University of Exeter. Barrie S. Haigh became Vice Chairman of the Board of Directors and Chief Customer Officer in January 1997. Mr. Haigh founded Innovex in 1979 and served as its Chairman until November 1996 when Innovex merged with the Company. From 1979 until August 1994, Mr. Haigh served as Chief Executive Officer and Chairman of the Board of Innovex. Previously, Mr. Haigh held management positions with Syntex, Merck Sharp and Dohme. Mr. Haigh is a member of the Board of Management of the Association of the British Pharmaceutical Industry and a Fellow of the Royal Pharmaceutical Society of Great Britain for distinction in the profession of Pharmacy. Mr. Haigh received a degree in pharmacy from Bradford University. Santo J. Costa became President and Chief Operating Officer of the Company on April 1, 1994 and has been a director since April 1994. From July 1, 1993 to March 31, 1994, Mr. Costa directed the affairs of his own consulting firm, Santo J. Costa & Associates, which focused on pharmaceutical and 15 16 biotechnology companies. Prior to June 30, 1993, Mr. Costa served seven years at Glaxo, Inc., a pharmaceutical company, as Senior Vice President Administration and General Counsel and a member of the Board of Directors. Mr. Costa serves as a director of NPS Pharmaceuticals. Mr. Costa received his law degree from St. John's University. Rachel R. Selisker, a certified public accountant, serves as Chief Financial Officer, Executive Vice President Finance and Treasurer for the Company and has been the Company's principal financial officer since 1987. Ms. Selisker has served as a director of the Company since November 1995. From 1981-1987, Ms. Selisker was with the accounting firm of Oppenheim, Appel, Dixon & Co. in Raleigh, North Carolina. Gregory D. Porter has served as Executive Vice President, Chief Administrative and Legal Officer, General Counsel and Secretary since January 1997. Mr. Porter joined the Company in September 1994 as Vice President, General Counsel and Secretary. From 1982 to September 1994, Mr. Porter was in the private practice of law. From 1981 to 1982, Mr. Porter clerked with the Honorable William Matthew Byrne of the U.S. District Court for the Central District of California. Mr. Porter received his law degree from the University of North Carolina at Chapel Hill. Ludo J. Reynders, Ph.D. serves as Chief Executive Officer of the Company's CRO Division. He has managed European clinical operations since joining the Company in 1988. Dr. Reynders has served as a director of the Company since January 1, 1995. Prior to joining the Company, Dr. Reynders managed the biostatistics and data management department of the Bristol-Myers Co. Pharmaceutical Research and Development Division, located in Brussels, Belgium. Dr. Reynders received an M.S. and Ph.D. in Applied Sciences from the University of Louvain, Louvain, Belgium. David F. White serves as the Chief Executive Officer of the Company's Innovex Division. Mr. White joined Innovex as Chief Executive Officer in September 1994 from ICI plc. At ICI, he had a broad career principally in the pharmaceutical business. After successive appointments as Managing Director of Stuart Pharmaceuticals from June 1984 to October 1985 and General Manager, ICI Pharmaceuticals (U.K.) from November 1985 to December 1988, he was promoted to lead the global plastics and acrylics businesses. Lawrence S. Lewin serves as the Chief Executive Officer of the Company's Lewin-Benefit Division and has served as the Chief Executive Officer of The Lewin Group, Inc., a subsidiary of the Company, since May 1996. Mr. Lewin has been a director of the Company since June 1996. Between November 1992 and May 1996, Mr. Lewin served as the Chairman and Chief Executive Officer of Lewin-VHI, Inc., a healthcare consulting firm specializing in performing economic analyses, product profiles, and strategic development for healthcare reform and medical reimbursement and the establishment of medical guidelines. Mr. Lewin serves as a director of Apache Medical Systems, Inc. and as a member of the advisory boards of the Hambrecht & Quist Healthcare Investors Fund and the Hambrecht & Quist Life Sciences Fund. Mr. Lewin received an M.B.A. from Harvard Business School. ITEM 2. PROPERTIES The Company has over 50 offices located in 20 countries. The Company's executive headquarters and one of its operating units are located adjacent to Research Triangle Park, North Carolina. The Company also leases facilities in Mountain View, California; San Diego, California; San Francisco California; Smyrna, Georgia; Lenexa, Kansas; Bethesda, Maryland; Gaithersburg, Maryland; Rockville, Maryland; Cambridge, Massachusetts; Cranford, New Jersey; Parsippany, New Jersey; Yardley, Pennsylvania; Arlington, Virginia; Fairfax, Virginia; Buenos Aires, Argentina; Melbourne, Australia; North Sydney, Australia; Vienna, Austria; Antwerp, Belgium; Brussels, Belgium; Louvain-La- 16 17 Neuve, Belgium; Mechelin, Belgium; Montreal, Canada; Copenhagen, Denmark; Adelaide, England; Battle, England; Esher, England; Ledbury, England; London, England; Bracknell, England; Marlow, England; Staines, England; Espon, Finland; Paris, France; Gennevilliers, France; Neuilly sur seine, France; Strasbourg, France; Freiburg, Germany; Neu-Isenberg, Germany (Frankfurt); Mannheim, Germany; Weil am Rhein, Germany; Dublin, Ireland; Milan, Italy; Tokyo, Japan; Osaka, Japan; Hoofddorp, The Netherlands; Leiden, The Netherlands; Schiedam, The Netherlands; Auckland, New Zealand; Pretoria, South Africa; Edinburgh, Scotland; Madrid, Spain; Barcelona, Spain; Uppsala, Sweden; China, Hong Kong and Singapore. In addition, the Company owns a facility in Ledbury, England and Lenexa, Kansas. Quintiles believes that its facilities are adequate for the Company's operations and suitable additional space will be available when needed. ITEM 3. LEGAL PROCEEDINGS No material legal proceedings are pending to which Quintiles, its subsidiaries or any of their properties are subject. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On November 26, 1996, a Special Meeting of the Shareholders of the Company, at which a quorum was present, was held to approve (1) the issuance by the Company of 9,214,239 shares (plus an additional 786,226 shares subject to options) of the Company's Common Stock to the shareholders of Innovex; and (2) an amendment to the Company's Amended and Restated Articles of Incorporation to increase the number of authorized shares of the Company's Common Stock from 50,000,000 to 200,000,000. The number of votes cast for, against or withheld, as well as the number of abstentions and broker non-votes as to each matter referenced above were as follows: Votes Against Broker Votes For or Withheld Abstentions Non-Votes --------- ------------- ----------- --------- Proposal 1 13,779,082 11,167 37,268 0 Proposal 2 9,551,296 4,239,287 36,934 0 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Information relating to the market for the Company's Common Stock is incorporated by reference from page 47 and page 50, "Security Information", of the Company's 1996 Annual Report to Shareholders included as Exhibit 13 to this report. RECENT SALES OF UNREGISTERED SECURITIES In November 1996, in connection with the share exchange with Innovex, the Company issued an aggregate of 8,920,588 shares of Common Stock, which were not registered under the Securities Act of 1933, as amended, to certain shareholders of Innovex in exchange for their shares of Innovex. The issuance of such shares was made pursuant to Section 4(2) of the Securities Act of 1933, as amended, as a transaction not involving any public offering and in reliance upon Regulation D under Section 4(2). The Company previously reported on a Current Report on Form 8-K, dated November 22, 1996, the 17 18 issuance in the share exchange with Innovex of 293,651 shares of Common Stock in compliance with Regulation S under the Securities Act of 1933, as amended. ITEM 6. SELECTED FINANCIAL DATA This information is incorporated by reference from page 20, "Selected Consolidated Financial Data", of the Company's 1996 Annual Report to Shareholders included as Exhibit 13 to this report. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This information is incorporated by reference from pages 22-28, "Management's Discussion and Analysis of Financial Condition and Results of Operations", of the Company's 1996 Annual Report to Shareholders included as Exhibit 13 to this report. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements and supplementary financial information are incorporated by reference from pages 29-48 of the Company's 1996 Annual Report to Shareholders included as Exhibit 13 to this report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information on the Company's directors is incorporated by reference from the Company's definitive proxy statement to be filed with respect to the Annual Meeting of Shareholders to be held April 30, 1997. Information on the Company's executive officers is included under the caption "Executive Officers of the Registrant" on page 15 of this report. ITEM 11. EXECUTIVE COMPENSATION This information is incorporated by reference from the Company's definitive proxy statement to be filed with respect to the Annual Meeting of Shareholders to be held April 30, 1997. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT This information is incorporated by reference from the Company's definitive proxy statement to be filed with respect to the Annual Meeting of Shareholders to be held April 30, 1997. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS This information is incorporated by reference from the Company's definitive proxy statement to be filed with respect to the Annual Meeting of Shareholders to be held April 30, 1997. 18 19 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a)(1) Financial Statements. The following financial statements and supplementary data included in the 1996 Annual Report to Shareholders, filed as Exhibit 13 to this report, are incorporated by reference in Item 8 of this report.
Annual Report to Financial Statements Form 10-K Page Shareholders Page -------------------- -------------- ----------------- Consolidated Statements of Income for the years ended 17 29 December 31, 1996, 1995 and 1994 Consolidated Balance Sheets as of December 31, 1996 17 30-31 and 1995 Consolidated Statements of Cash Flows for the years 17 32-33 ended December 31, 1996, 1995 and 1994 Consolidated Statements of Shareholders' Equity for the 17 34 years ended December 31, 1996, 1995 and 1994 Report of Independent Auditors 17 48
(a)(2) Financial Statement Schedules. All applicable financial statement schedules required under Regulation S-X have been included in the Notes to the Consolidated Financial Statements. (a)(3) Exhibits. The exhibits required by Item 601 of Regulation S-K are listed below.
Exhibit Description - ------- ----------- 3.01(1) Amended and Restated Articles of Incorporation, as amended 3.02(2) Amended and Restated Bylaws 4.01(3) Indenture, dated as of May 17, 1996, between the Company and Marine Midland Bank, as Trustee, with respect to the Company's 4.25% Convertible Subordinated Notes due May 31, 2000 4.02 Amended and Restated Articles of Incorporation, as amended (see Exhibit 3.01) 4.03 Amended and Restated Bylaws (see Exhibit 3.02) 4.04(4) Specimen certificate for Common Stock, $0.01 par value per share 4.05(1) Form of the Company's 4.25% Convertible Subordinated Notes in Unrestricted Global Form
19 20 4.06(1) Form of the Company's 4.25% Convertible Subordinated Notes in Certificated Form. 4.07(3) Registration Rights Agreement, dated as of May 17, 1996, by and among the Company, Goldman Sachs International and Smith Barney, Inc. 10.01(4) Agreement for the Development of Standardized Nomenclature, dated March 22, 1993, by and between the Company and the United States Food and Drug Administration 10.02(4) Stock Purchase Agreement, dated June 7, 1991, by and among Thompson Clive Investments plc, Midland Bank Trust Company Limited, as Trustee of the Thompson Clive Growth Companies Fund, Midland Bank Trust Corporation (Jersey) Limited, as Trustee of Thompson Clive Ventures, Midland Bank Trust Corporation (Jersey) Limited, as Trustee of Thompson Clive Ventures L.P., and the Company 10.03(4) Stock Purchase Agreement, dated October 29, 1992, by and among Thompson Clive Investments plc, Midland Bank Trust Company Limited, as Trustee of the Thompson Clive Growth Companies Fund, Midland Bank Trust Corporation (Jersey) Limited, as Trustee of Thompson Clive Ventures, Midland Bank Trust Corporation (Jersey) Limited, as Trustee of Thompson Clive Ventures L.P., and the Company 10.04(4) Stock Purchase Agreement, dated July 28, 1993, by and between Thompson Clive Investments plc and the Company 10.05(4)(5) Employment Agreement, dated February 22, 1994, by and between Dr. Dennis B. Gillings and the Company 10.06(4)(5)(6) Employment Agreement, dated February 22, 1994, by and between Santo J. Costa and the Company, as amended on November 4, 1994 10.07(5)(6) Employment Agreement, dated January 1, 1995, by and between Rachel R. Selisker and the Company 10.08(4)(5) Employment Agreement, dated January 15, 1988, by and between Dr. Ludo Reynders and Quintiles (UK) Limited 10.09(5) Employment Agreement, dated November 29, 1996, by and between Barrie S. Haigh and the Company 10.10(5) Deed of Non-Competition, dated as of November 29, 1996, between Barrie S. Haigh and the Company 10.11(5) Employment Agreement, dated May 13, 1996, by and between Lawrence S. Lewin and The Lewin Group, Inc. (a wholly-owned subsidiary of the Company) 10.12(5) Service Agreement, dated March 31, 1993, between Innovex Holdings Limited and Paul Knott
20 21 10.13(5) Deed of Non-Competition, dated November 29, 1996, between Paul Knott and the Company 10.14(5) Service Agreement, dated September 2, 1994, between Innovex Holdings Limited and David F. White 10.15(5) Deed of Non-Competition, dated November 29, 1996, between David F. White and the Company 10.16(2)(5) Employment letter agreement, dated May 31, 1994, by and between Gregory D. Porter and the Company 10.17(4)(5) Non-Qualified Employee Incentive Stock Option Plan 10.18(4)(5) Equity Compensation Plan 10.19(5)(6) Amended and Restated Employee Stock Ownership Plan and Trust 10.20(4)(5) Quintiles (UK) Limited Approved Profit Sharing Scheme 10.21(4)(5) Quintiles Ireland Limited Approved Profit Sharing Scheme 10.22(4)(5) Quintiles (UK) Limited Executive Share Option Scheme 10.23(2)(5) Quintiles Group Executive Share Option Scheme 10.24(5)(7) Quintiles Employee Stock Purchase Plan 10.25(5)(7) Quintiles/BRI Nonqualified Stock Option Plan 10.26(5)(7) Innovex Limited 1996 Unapproved Executive Share Option Scheme 10.27(5)(8) Quintiles/Lewin Stock Option Plan 10.28(6) Loan Agreement, dated August 31, 1994, between the Company and Branch Banking & Trust Company, as amended August 31, 1996 and February 28, 1997 (amendments filed herewith) 10.29(6) Form of Guaranty Agreement, dated August 31, 1994, by and between Branch Banking & Trust Company and each of Quintiles Pacific, Inc., Quintiles, Inc., Quintiles Laboratories Limited and International Clinical Research Corporation 10.30(4) Lease, dated January 20, 1992, by and between Durham Park, operating as a Joint Venture, Imperial Center, and Quintiles, Inc. as amended on April 6, 1992, April 16, 1992, May 12, 1992, May 13, 1992, March 10, 1993, and September 1, 1993 10.31(2)(6) Lease dated September 8, 1994, by and between Petula Associates Ltd. and Quintiles, Inc., as amended on September 30, 1994, January 10, 1995, April 12, 1995 and August 11, 1995
21 22 10.32(4) Lease Agreement, dated December 9, 1992, by and between South Bay/Copley Joint Venture and the Company, as amended March 3, 1993 10.33(6) Lease, effective January 1, 1995, by and between The Norwich Union Life Insurance Society, Earlsfort Centre and Quintiles Ireland Limited and guaranteed by Quintiles, Inc. 10.34(4) Leases, dated December 1, 1993, by and between The Norwich Union Life Insurance Society, Quintiles (UK) Limited, and the Company (as surety) 10.35(2) Lease, dated August 31, 1995, by and between California Public Employees' Retirement System and International Clinical Research Corp., as amended October 25, 1995 10.36 Lease, dated November 6, 1996, by and between Seagate Technology, Inc. and Innovex 10.37 Lease, dated December 20, 1996, by and between The Norwich Union Life Insurance Society and Quintiles (U.K.) Limited 10.38 Lease, dated August 14, 1996, by and between PRUBETA-3 and Innovex, Inc. 10.39 Lease, dated November 30, 1995, by and between Lenexa Industrial Park, Inc. and Innovex, Inc. 10.40 Sublease, dated January 18, 1996, by and between Legent Corporation and Innovex, Inc. 10.41(9) Agreement for the Provision of Research Services and Lease of Business Assets dated as of March 3, 1995, between Syntex Pharmaceuticals Limited, Quintiles Scotland Limited, Quintiles (UK) Limited, and Roche Products Limited 10.42(2)(5) Consulting Agreement dated as of March 15, 1995 between the Company and A.M. Pappas & Associates, L.L.C. 10.43(10) Share Exchange Agreement dated as of May 2, 1995 by and between Quintiles Transnational Corp., Quintiles Holding S.A., ACTA, Eric Jacques Souetre, Pierre Souetre, Jean Claude Souetre, Christophe Celerier, Paul Boilait, Caroline Boilait, Debessa BV, Marc Riviere 10.44(10) Employment and Consulting Agreement dated as of May 2, 1995 between Quintiles Inc. and Eric Jacques Souetre 10.45(10) Stock Option Agreement dated as of May 2, 1995 between Quintiles Transnational Corp. and Eric Jacques Souetre 10.46(10) Covenant to Assist Buyer and Covenant Not to Compete with Buyer dated as of May 2, 1995 between Quintiles Transnational Corp. or it assignee, Quintiles Holding S.A., and Eric Jacques Souetre
22 23 10.47(11) Share Purchase Agreement dated as of September 19, 1995 by and among Quintiles Holdings Limited, TSI Corporation (the sole shareholder of G.D.R.U. Limited) and Genzyme Transgenics Corporation 10.48(12) Merger Agreement, dated as of September 16, 1996, by and among the Company, BRI Acquisition Corp. and BRI 10.49(13) Share Exchange Agreement, dated as of October 4, 1996, among Innovex, the Company and the shareholders of Innovex 10.50(14) Registration Rights Agreement, dated as of November 29, 1996, by and among the Company and the shareholders of Innovex 10.51(15) Supplemental agreement to Registration Rights Agreement by and among the Company and Certain Shareholders Party Thereto, dated as of February 11, 1997 10.52(16) Asset Purchase Agreement, dated as of April 16, 1996, among The Lewin Group, Inc., the Company, Lewin-VHI, Inc., Value Health, Inc., Lawrence S. Lewin and Robert J. Rubin 10.53 Underwriting Agreement, dated March 6, 1997, by and between the Company and Goldman, Sachs & Co., Morgan Stanley & Co. Incorporated, Smith Barney Inc. and William Blair & Company, L.L.C., as representatives of the several Underwriters named in Schedule 1 thereto 10.54 Underwriting Agreement (International Version), dated March 6, 1997, by and between the Company and Goldman Sachs International, Morgan Stanley & Co. International Limited, Smith Barney Inc. and William Blair & Company, L.L.C., as representatives of the several Underwriters named in Schedule 1 thereto 13 Portions of the Annual Report to Shareholders for fiscal year ended December 31, 1996, which are incorporated herein by reference. 21 Subsidiaries of the Company 23 Consent of Ernst & Young LLP 99.01 Risk Factors relating to the Company
- ---------- (1) Exhibit to the Company's Registration Statement on Form S-3 as filed with the Securities and Exchange Commission (Registration No. 333-19009) effective February 21, 1997 and incorporated herein by reference. (2) Exhibit to the Company's Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 25, 1996, as amended on May 16, 1996, and incorporated herein by reference. (3) Exhibit to the Company's Quarterly Report on Form 10-Q as filed with the Securities and Exchange Commission on August 15, 1996 and incorporated herein by reference. 23 24 (4) Exhibit to the Company's Registration Statement on Form S-1 as filed with the Securities and Exchange Commission (Registration No. 33-75766) effective April 20, 1994 and incorporated herein by reference. (5) Executive compensation plans and arrangements. (6) Exhibit to the Company's Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 30, 1995 and incorporated herein by reference. (7) Exhibit to the Company's Registration Statement on Form S-8 as filed with the Securities and Exchange Commission (Registration No. 333-16553) effective November 21, 1996 and incorporated herein by reference. (8) Exhibit to the Company's Registration Statement on Form S-8 as filed with the Securities and Exchange Commission (Registration No. 333-03603) effective May 13, 1996 and incorporated herein by reference. (9) Exhibit to the Company's Current Report on Form 8-K as filed with the Securities and Exchange Commission on March 20, 1995 and incorporated herein by reference. (10) Exhibit to the Company's Current Report on Form 8-K as filed with the Securities and Exchange Commission on May 9, 1995 and incorporated herein by reference. (11) Exhibit to the Company's Current Report on Form 8-K as filed with the Securities and Exchange Commission on September 19, 1995 and incorporated herein by reference. (12) Exhibit to the Company's Registration Statement on Form S-4 as filed with the Securities and Exchange Commission (Registration No. 333-12573) effective October 15, 1996 and incorporated herein by reference. (13) Exhibit to the Company's Current Report on Form 8-K as filed with the Securities and Exchange Commission on October 11, 1996 and incorporated herein by reference. (14) Exhibit to the Company's Current Report on Form 8-K as filed with the Securities and Exchange Commission on December 6, 1996 and incorporated herein by reference. (15) Exhibit to the Company's Current Report on Form 8-K as filed with the Securities and Exchange Commission on March 5, 1997 and incorporated herein by reference. (16) Exhibit to the Company's Current Report on Form 8-K as filed with the Securities and Exchange Commission on April 23, 1996 and incorporated herein by reference. (b) Reports on Form 8-K. The Company filed one report on Form 8-K, dated October 6, 1996, and one report on Form 8-K, dated November 22, 1996, during the three months ended December 31, 1996. The report on Form 8-K, dated October 6, 1996, reported the signing of a definitive share exchange agreement with Innovex Limited, an international contract pharmaceutical organization based in Marlow, United Kingdom and the shareholders of Innovex. The Company also filed the Financial Statements of the Innovex Companies, which comprise a combination of Innovex PLC and Innovex Holdings Limited and its subsidiaries, as of March 31, 1995 and 1996 and Report of Independent Auditors. The Company also filed the Unaudited ProForma 24 25 Combined Condensed Financial Information for the Registrant for the years ended December 31, 1995, 1994 and 1993 and the six months ended June 30, 1996 and 1995 reflecting the acquisitions of BRI and Innovex. The report on Form 8-K, dated November 22, 1996, reported the consummation of both the acquisition of BRI and the combination with Innovex. No financial statements were included with such report. No other reports on Form 8-K were filed during the quarter ended December 31, 1996. On January 16, 1997, the Company filed a report on Form 8-K/A, dated January 16, 1997, which included Unaudited Interim Condensed Financial Statements of Innovex and BRI and Unaudited ProForma Combined Condensed Financial Statements of the Company, Innovex and BRI. On February 7, 1997, the Company filed a report on Form 8-K, dated February 7, 1997, reporting certain information regarding certain effects of governmental regulation of its business and filing the Consolidated Financial Statements of the Company for the fiscal year ended December 31, 1996. On March 5, 1997, the Company filed a report on Form 8-K with respect to a supplemental agreement to the Registration Rights Agreement filed as Exhibit 10.51 to this report. No other reports on Form 8-K have been filed since that date. FORWARD-LOOKING STATEMENTS Information set forth in this Annual Report on Form 10-K contains various "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which statements represent the Company's judgment concerning the future and are subject to risks and uncertainties that could cause the Company's actual operating results and financial position to differ materially. Such forward looking statements can be identified by the use of forward looking terminology such as "may", "will", "expect", "anticipate", "estimate", "believe", or "continue", or the negative thereof or other various thereof or comparable terminology. The Company cautions that any such forward looking statements are further qualified by important factors that could cause the Company's actual operating results to differ materially from those in the forward looking statements, including without limitation, the Company's dependence on certain industries and clients, the management of its growth, the risks associated with acquisitions, risks relating to contract sales services, competition within the industry, the loss or delay of large contracts, dependence on personnel and government regulation and the other Risk Factors described in Exhibit 99.01 attached to this report. 25 26 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in Durham, North Carolina, on the 25th day of March, 1997. QUINTILES TRANSNATIONAL CORP. By: /s/ Dennis B. Gillings ----------------------------------------- Dennis B. Gillings Chairman of the Board of Directors and Chief Executive Officer 26 27 SIGNATURES AND POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Dennis B. Gillings and Rachel R. Selisker and each of them, each with full power to act without the other, his true and lawful attorneys-in-fact and agents, with full powers of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments to this report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.
Signature Title Date - --------- ----- ---- /s/ Dennis B. Gillings, Ph.D. Chairman of the Board of Directors and Chief Executive March 25, 1997 - ----------------------------- Officer Dennis B. Gillings, Ph.D. /s/ Rachel R. Selisker Chief Financial Officer, Executive Vice President Finance, March 25, 1997 - ----------------------------- Treasurer and Director Rachel R. Selisker /s/ Robert C. Bishop, Ph.D. Director March 21, 1997 - ----------------------------- Robert C. Bishop, Ph.D. /s/ Vaughn D. Bryson Director March 25, 1997 - ----------------------------- Vaughn D. Bryson /s/ Santo J. Costa President, Chief Operating Officer and Director March 25, 1997 - ----------------------------- Santo J. Costa /s/ Chester W. Douglass, Ph.D. Director March 25, 1997 - ----------------------------- Chester W. Douglass, Ph.D. /s/ John G. Fryer, Ph.D. Director March 23, 1997 - ----------------------------- John G. Fryer, Ph.D. /s/ Barrie S. Haigh Vice Chairman of the Board of Directors and Chief March 25, 1997 - ----------------------------- Barrie S. Haigh Customer Officer /s/ Paul Knott, Ph.D. Senior Vice President, International Strategic Development, March 25, 1997 - ----------------------------- and Director Paul Knott, Ph.D. /s/ Lawrence S. Lewin Chief Executive Officer, Lewin-Benefit Division, and March 25, 1997 - ----------------------------- Lawrence S. Lewin Director /s/ Arthur M. Pappas Director March 21, 1997 - ----------------------------- Arthur M. Pappas Chief Executive Officer, CRO Division, and Director March , 1997 - ----------------------------- Ludo J. Reynders, Ph.D. /s/ Eric J. Souetre President, Benefit International SNC, and Director March 25, 1997 - ----------------------------- Eric J. Souetre /s/ Richard H. Thompson Director March 25, 1997 - ----------------------------- Richard H. Thompson
27 28 EXHIBIT INDEX
Exhibit Description Page - ------- ----------- ---- 3.01(1) Amended and Restated Articles of Incorporation, as amended 3.02(2) Amended and Restated Bylaws 4.01(3) Indenture, dated as of May 17, 1996, between the Company and Marine Midland Bank, as Trustee, with respect to the Company's 4.25% Convertible Subordinated Notes due May 31, 2000 4.02 Amended and Restated Articles of Incorporation, as amended (see Exhibit 3.01) 4.03 Amended and Restated Bylaws (see Exhibit 3.02) 4.04(4) Specimen certificate for Common Stock, $0.01 par value per share 4.05(1) Form of the Company's 4.25% Convertible Subordinated Notes in Unrestricted Global Form 4.06(1) Form of the Company's 4.25% Convertible Subordinated Notes in Certificated Form. 4.07(3) Registration Rights Agreement, dated as of May 17, 1996, by and among the Company, Goldman Sachs International and Smith Barney, Inc. 10.01(4) Agreement for the Development of Standardized Nomenclature, dated March 22, 1993, by and between the Company and the United States Food and Drug Administration 10.02(4) Stock Purchase Agreement, dated June 7, 1991, by and among Thompson Clive Investments plc, Midland Bank Trust Company Limited, as Trustee of the Thompson Clive Growth Companies Fund, Midland Bank Trust Corporation (Jersey) Limited, as Trustee of Thompson Clive Ventures, Midland Bank Trust Corporation (Jersey) Limited, as Trustee of Thompson Clive Ventures L.P., and the Company 10.03(4) Stock Purchase Agreement, dated October 29, 1992, by and among Thompson Clive Investments plc, Midland Bank Trust Company Limited, as Trustee of the Thompson Clive Growth Companies Fund, Midland Bank Trust Corporation (Jersey) Limited, as Trustee of Thompson Clive Ventures, Midland Bank Trust Corporation (Jersey) Limited, as Trustee of Thompson Clive Ventures L.P., and the Company
28 29 10.04(4) Stock Purchase Agreement, dated July 28, 1993, by and between Thompson Clive Investments plc and the Company 10.05(4)(5) Employment Agreement, dated February 22, 1994, by and between Dr. Dennis B. Gillings and the Company 10.06(4)(5)(6) Employment Agreement, dated February 22, 1994, by and between Santo J. Costa and the Company, as amended on November 4, 1994 10.07(5)(6) Employment Agreement, dated January 1, 1995, by and between Rachel R. Selisker and the Company 10.08(4)(5) Employment Agreement, dated January 15, 1988, by and between Dr. Ludo Reynders and Quintiles (UK) Limited 10.09(5) Employment Agreement, dated November 29, 1996, by and between Barrie S. Haigh and the Company 10.10(5) Deed of Non-Competition, dated as of November 29, 1996, between Barrie S. Haigh and the Company 10.11(5) Employment Agreement, dated May 13, 1996, by and between Lawrence S. Lewin and The Lewin Group, Inc. (a wholly-owned subsidiary of the Company) 10.12(5) Service Agreement, dated March 31, 1993, between Innovex Holdings Limited and Paul Knott 10.13(5) Deed of Non-Competition, dated November 29, 1996, between Paul Knott and the Company 10.14(5) Service Agreement, dated September 2, 1994, between Innovex Holdings Limited and David F. White 10.15(5) Deed of Non-Competition, dated November 29, 1996, between David F. White and the Company 10.16(2)(5) Employment letter agreement, dated May 31, 1994, by and between Gregory D. Porter and the Company 10.17(4)(5) Non-Qualified Employee Incentive Stock Option Plan 10.18(4)(5) Equity Compensation Plan 10.19(5)(6) Amended and Restated Employee Stock Ownership Plan and Trust 10.20(4)(5) Quintiles (UK) Limited Approved Profit Sharing Scheme
29 30 10.21(4)(5) Quintiles Ireland Limited Approved Profit Sharing Scheme 10.22(4)(5) Quintiles (UK) Limited Executive Share Option Scheme 10.23(2)(5) Quintiles Group Executive Share Option Scheme 10.24(5)(7) Quintiles Employee Stock Purchase Plan 10.25(5)(7) Quintiles/BRI Nonqualified Stock Option Plan 10.26(5)(7) Innovex Limited 1996 Unapproved Executive Share Option Scheme 10.27(5)(8) Quintiles/Lewin Stock Option Plan 10.28(6) Loan Agreement, dated August 31, 1994, between the Company and Branch Banking & Trust Company, as amended August 31, 1996 and February 28, 1997 (amendments filed herewith) 10.29(6) Form of Guaranty Agreement, dated August 31, 1994, by and between Branch Banking & Trust Company and each of Quintiles Pacific, Inc., Quintiles, Inc., Quintiles Laboratories Limited and International Clinical Research Corporation 10.30(4) Lease, dated January 20, 1992, by and between Durham Park, operating as a Joint Venture, Imperial Center, and Quintiles, Inc. as amended on April 6, 1992, April 16, 1992, May 12, 1992, May 13, 1992, March 10, 1993, and September 1, 1993 10.31(2)(6) Lease dated September 8, 1994, by and between Petula Associates Ltd. and Quintiles, Inc., as amended on September 30, 1994, January 10, 1995, April 12, 1995 and August 11, 1995 10.32(4) Lease Agreement, dated December 9, 1992, by and between South Bay/Copley Joint Venture and the Company, as amended March 3, 1993 10.33(6) Lease, effective January 1, 1995, by and between The Norwich Union Life Insurance Society, Earlsfort Centre and Quintiles Ireland Limited and guaranteed by Quintiles, Inc. 10.34(4) Leases, dated December 1, 1993, by and between The Norwich Union Life Insurance Society, Quintiles (UK) Limited, and the Company (as surety) 10.35(2) Lease, dated August 31, 1995, by and between California Public Employees' Retirement System and International Clinical Research Corp., as amended October 25, 1995
30 31 10.36 Lease, dated November 6, 1996, by and between Seagate Technology, Inc. and Innovex 10.37 Lease, dated December 20, 1996, by and between The Norwich Union Life Insurance Society and Quintiles (U.K.) Limited 10.38 Lease, dated August 14, 1996, by and between PRUBETA-3 and Innovex, Inc. 10.39 Lease, dated November 30, 1995, by and between Lenexa Industrial Park, Inc. and Innovex, Inc. 10.40 Sublease, dated January 18, 1996, by and between Legent Corporation and Innovex, Inc. 10.41(9) Agreement for the Provision of Research Services and Lease of Business Assets dated as of March 3, 1995, between Syntex Pharmaceuticals Limited, Quintiles Scotland Limited, Quintiles (UK) Limited, and Roche Products Limited 10.42(2)(5) Consulting Agreement dated as of March 15, 1995 between the Company and A.M. Pappas & Associates, L.L.C. 10.43(10) Share Exchange Agreement dated as of May 2, 1995 by and between Quintiles Transnational Corp., Quintiles Holding S.A., ACTA, Eric Jacques Souetre, Pierre Souetre, Jean Claude Souetre, Christophe Celerier, Paul Boilait, Caroline Boilait, Debessa BV, Marc Riviere 10.44(10) Employment and Consulting Agreement dated as of May 2, 1995 between Quintiles Inc. and Eric Jacques Souetre 10.45(10) Stock Option Agreement dated as of May 2, 1995 between Quintiles Transnational Corp. and Eric Jacques Souetre 10.46(10) Covenant to Assist Buyer and Covenant Not to Compete with Buyer dated as of May 2, 1995 between Quintiles Transnational Corp. or it assignee, Quintiles Holding S.A., and Eric Jacques Souetre 10.47(11) Share Purchase Agreement dated as of September 19, 1995 by and among Quintiles Holdings Limited, TSI Corporation (the sole shareholder of G.D.R.U. Limited) and Genzyme Transgenics Corporation 10.48(12) Merger Agreement, dated as of September 16, 1996, by and among the Company, BRI Acquisition Corp. and BRI 10.49(13) Share Exchange Agreement, dated as of October 4, 1996, among Innovex, the Company and the shareholders of Innovex
31 32 10.50(14) Registration Rights Agreement, dated as of November 29, 1996, by and among the Company and the shareholders of Innovex 10.51(15) Supplemental agreement to Registration Rights Agreement by and among the Company and Certain Shareholders Party Thereto, dated as of February 11, 1997 10.52(16) Asset Purchase Agreement, dated as of April 16, 1996, among The Lewin Group, Inc., the Company, Lewin-VHI, Inc., Value Health, Inc., Lawrence S. Lewin and Robert J. Rubin 10.53 Underwriting Agreement, dated March 6, 1997, by and between the Company and Goldman, Sachs & Co., Morgan Stanley & Co. Incorporated, Smith Barney Inc. and William Blair & Company, L.L.C., as representatives of the several Underwriters named in Schedule 1 thereto 10.54 Underwriting Agreement (International Version), dated March 6, 1997, by and between the Company and Goldman Sachs International, Morgan Stanley & Co. International Limited, Smith Barney Inc. and William Blair & Company, L.L.C., as representatives of the several Underwriters named in Schedule 1 thereto 13 Portions of the Annual Report to Shareholders for fiscal year ended December 31, 1996, which are incorporated herein by reference. 21 Subsidiaries of the Company 23 Consent of Ernst & Young LLP 99.01 Risk Factors relating to the Company
- ---------- (1) Exhibit to the Company's Registration Statement on Form S-3 as filed with the Securities and Exchange Commission (Registration No. 333-19009) effective February 21, 1997 and incorporated herein by reference. (2) Exhibit to the Company's Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 25, 1996, as amended on May 16, 1996, and incorporated herein by reference. (3) Exhibit to the Company's Quarterly Report on Form 10-Q as filed with the Securities and Exchange Commission on August 15, 1996 and incorporated herein by reference. (4) Exhibit to the Company's Registration Statement on Form S-1 as filed with the Securities and Exchange Commission (Registration No. 33-75766) effective April 20, 1994 and incorporated herein by reference. 32 33 (5) Executive compensation plans and arrangements. (6) Exhibit to the Company's Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 30, 1995 and incorporated herein by reference. (7) Exhibit to the Company's Registration Statement on Form S-8 as filed with the Securities and Exchange Commission (Registration No. 333-16553) effective November 21, 1996 and incorporated herein by reference. (8) Exhibit to the Company's Registration Statement on Form S-8 as filed with the Securities and Exchange Commission (Registration No. 333-03603) effective May 13, 1996 and incorporated herein by reference. (9) Exhibit to the Company's Current Report on Form 8-K as filed with the Securities and Exchange Commission on March 20, 1995 and incorporated herein by reference. (10) Exhibit to the Company's Current Report on Form 8-K as filed with the Securities and Exchange Commission on May 9, 1995 and incorporated herein by reference. (11) Exhibit to the Company's Current Report on Form 8-K as filed with the Securities and Exchange Commission on September 19, 1995 and incorporated herein by reference. (12) Exhibit to the Company's Registration Statement on Form S-4 as filed with the Securities and Exchange Commission (Registration No. 333-12573) effective October 15, 1996 and incorporated herein by reference. (13) Exhibit to the Company's Current Report on Form 8-K as filed with the Securities and Exchange Commission on October 11, 1996 and incorporated herein by reference. (14) Exhibit to the Company's Current Report on Form 8-K as filed with the Securities and Exchange Commission on December 6, 1996 and incorporated herein by reference. (15) Exhibit to the Company's Current Report on Form 8-K as filed with the Securities and Exchange Commission on March 5, 1997 and incorporated herein by reference. (16) Exhibit to the Company's Current Report on Form 8-K as filed with the Securities and Exchange Commission on April 23, 1996 and incorporated herein by reference. 33 EX-10.09 2 EMPLOYMENT AGREEMENT - HAIGH 1 EXHIBIT 10.09 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and dated as of November 29, 1996 by and between Quintiles Transnational Corp., a corporation organized under the laws of North Carolina (the "Company"), and Barrie Stevens Haigh ("Haigh"). WHEREAS, the Company and Innovex Limited ("Innovex"), a company organized under the laws of England and Wales, are parties to a Share Exchange Agreement dated as of October 4, 1996 (the "Share Exchange Agreement") providing for the exchange of all of Innovex's issued and outstanding share capital for shares of Common Stock of Quintiles based upon the terms and subject to the conditions set forth therein; WHEREAS, upon completion of the share exchange pursuant to the Share Exchange Agreement, Haigh will own approximately 4,302,327 shares of the outstanding common stock of the Company; and WHEREAS, the execution and delivery of this Agreement by the parties hereto is a condition precedent to certain of the parties' obligations under the Share Exchange Agreement. NOW, THEREFORE, in consideration of the mutual promises set forth below and of other good and valuable consideration, the receipt and legal sufficiency of which they hereby acknowledge, and intending to be legally bound hereby, the Company and Haigh agree as follows: 1. Employment. The Company hereby employs Haigh and Haigh hereby accepts employment on the terms and conditions set forth in this Agreement. 2. Nature of Employment. Haigh shall serve as Vice Chairman and shall have the responsibilities and authority customarily associated with such office and Haigh shall serve the Company in such capacity during the term of this Agreement. Haigh shall be based in Marlow, United Kingdom, and shall travel to such locations on such occasions as may from time to time be necessary in the conduct of his duties. 2.1. Haigh shall perform all duties and exercise all authority in accordance with, and otherwise comply with, the policies, procedures and practices as may from time to time be adopted by the Company's Board of Directors. 2.2. Haigh shall devote all working time and best efforts to perform successfully his duties and advance the Company's and/or its Affiliates' interests; provided, however that Haigh will not be precluded from acting as a non-executive director of any company for which he currently is so engaged, as a director or officer in any company through which he has made investments for his personal benefit, or as a trustee of any trust the principal beneficiaries of which are members of Haigh's family so long as such action does not violate the non-competition provisions hereof or 2 interfere with his duties hereunder; provided further, however, this provision does not prohibit Haigh from personally owning and trading in stocks, bonds, securities, real estate, commodities or other investment properties for his own benefit to the extent that such activities are not otherwise inconsistent with the terms of this Agreement. As used in this Agreement, "Affiliates" shall mean: (i) the Company; (ii) any Company subsidiary or related entity (including without limitation Innovex and its subsidiaries); and/or (iii) any entity directly or indirectly controlled or beneficially owned in whole or part by the Company or any Company subsidiary or related entity, in each case as existing at or prior to the date of termination of Haigh's employment. 3. Remuneration. 3.1. Haigh's base salary for all services rendered shall be (pound)250,000 per annum (less applicable withholdings) payable in accordance with the Company's policies, procedures and practices as they may exist from time to time, such salary being comparable to that provided to other Level 2 employees of the Company. Haigh's salary shall be reviewed at least annually and may be increased in accordance with the Company's policies, procedures and practices as they may exist from time to time. 3.2. Haigh may participate in the Quintiles Transnational Corp. Executive Compensation Plan (or successor plans) and any other cash bonus plan which may be made available from time to time to Level 2 employees of the Company on terms that are comparable to those provided to other Level 2 employees of the Company; provided, however, that Haigh's participation is subject to the applicable terms, conditions and eligibility requirements of each such plan, some of which are within the plan administrator's discretion, as they may exist from time to time. 3.3. Haigh may participate in the Quintiles Transnational Corp. Equity Compensation Plan (or successor plans) and any other incentive stock option or similar plan which may be made available from time to time to Level 2 employees of the Company on terms that are comparable to those provided to other Level 2 employees of the Company; provided, however, that Haigh's participation is subject to (i) satisfactory performance as determined by the Company Board of Directors or Compensation Committee in its sole discretion, (ii) continued Company employment and (iii) the applicable terms, conditions and eligibility requirements of each such plan, some of which are within the plan administrator's discretion, as they may exist from time to time. The terms of any such stock options will be set forth in separate option agreements between Haigh and the Company but shall be no less favorable than provided to other Level 2 employees of the Company; provided, however, that the Company will make or cause to be made two contributions of (pound)100,000 each on or before the last day of March 1997 and 1998, respectively, to the Cookham Security Plan (Haigh's occupational pension scheme approved by the Inland Revenue). Such payments shall be in lieu of, and the Company shall have no obligation to make, contributions to the Company's ESOP or successor plan and grant of stock options to Haigh otherwise contemplated by this Section 3.4 for the period through March 31, 1998, but the Company will make such contributions and grants for the year ended December 31, 1998, on a pro rata basis, for the period beginning April 1, 1998. 2 3 3.4. Haigh may participate in all medical, dental, disability, insurance, pension, tax return preparation and financial planning, consultation and advice by the Company's accounting firm, legal counsel or financial consultants as may be provided by the Company for Level 2 employees of the Company and other employee benefit plans and programs (excluding time off for holidays which shall be governed by Section 3.4) which may be made available from time to time to Level 2 employees of the Company on terms that are comparable to those provided to other level 2 employees of the Company; provided, however, that Haigh's participation is subject to the applicable terms, conditions and eligibility requirements of these plans and programs, some of which are within the plan administrator's discretion, as they may exist from time to time. In addition, Haigh shall be entitled to: (i) retain, at the Company's expense, the private medical insurance for Haigh and his family as heretofore maintained by Innovex (currently at a cost of approximately (pound)2,200 per year); (ii) maintain the two automobiles currently maintained by the Company for Haigh's benefit at a lease cost of approximately (pound)5,500 per month and to be retained by the Company at the end of Haigh's employment (for which the Company shall bear the cost of petrol, oil and other expenses reasonably and properly incurred in the use of such automobiles); (iii) reimbursement (in amounts up to $10,000 per annum) for the cost of financial consulting, tax return preparation and similar financial services, (iv) dues and expenses (in amounts up to $5,000 per annum) for business and country club dues maintained principally for business purposes and (v) reimbursement of ordinary and necessary expenses, in reasonable amounts, which Haigh incurs in performing his duties under this Agreement, including, but not limited to, travel, entertainment, professional dues and subscriptions, and all dues, fees and expenses associated with membership in various professional, business and civic associations and societies of which Haigh's participation is in the best interest of the Company. 3.5 In addition to public holidays Haigh shall be entitled in every calendar year to 30 working days' paid holiday to be taken at such time or times as will not interfere with the operations of the Company. 3.6. Nothing in this Agreement shall require the Company to create, continue or refrain from amending, modifying, revising or revoking any of the plans or programs made available to officers or employees of the Company generally and referred to in Sections 3.2, 3.3, and 3.4. Haigh acknowledges that the Company, in its sole discretion, may amend, modify, revise or revoke any such general plans or programs. Any amendments, modifications, revisions and revocations of these general plans or programs shall apply to Haigh from their respective effective dates. Nothing in this Agreement shall afford Haigh any greater rights or benefits with regard to these general plans or programs than are afforded to him under their applicable terms, conditions and eligibility requirements, some of which are within each plan administrator's discretion, as they may exist from time to time. 3.7. If, at any time during which Haigh is receiving salary or post-termination payments from the Company, Haigh receives payments on account of mental or physical disability from any source referred to in this Agreement, then the 3 4 Company, at its discretion, may reduce Haigh's salary or post-termination payments by the amount of such disability payments. The above-stated items of compensation shall not be deemed all-inclusive, and Haigh may receive other compensation, as may from time to time be determined by the Board, including bonuses that may be provided by the Company under the Company's annual incentive bonus plan or any comparable bonus plan that may succeed it. Except as is otherwise provided herein, Haigh shall be entitled to participate in all current and future employee stock option and other employee benefit plans and arrangements in which the senior management of the Company is permitted to participate and the provisions herein are not meant to be exclusive. 4. Term of Employment. The original term of employment shall be for a three (3) year period commencing on the date of this Agreement and terminating on the third anniversary of the date of this Agreement, subject to the following provisions. 4.1. On the third anniversary date of this Agreement, and each anniversary date thereafter the terms of Haigh's employment will be automatically extended one (1) year unless, ninety (90) days prior to such anniversary date, the Company or Haigh shall have delivered to the other written notice that the term of Haigh's employment hereunder will not be extended. During all periods of employment, the terms, conditions and provisions set forth in this Agreement shall remain in effect unless modified in accordance with Section 12. 4.2. The Company may terminate Haigh's employment immediately and without notice, at any time during the original term of employment or thereafter, for "cause." For purposes of this Agreement, "cause" shall be defined as (i) a willful and continued failure by Haigh to perform his duties as Vice Chairman of the Company as established by the Board (other than due to disability), or (ii) a material breach by Haigh of his fiduciary duties of loyalty or care to the Company, or (iii) a willful violation by Haigh of any provision of this Agreement, or (iv) a conviction of, or the entering of a plea of nolo contendre by Haigh for, any felony or any crime involving fraud or dishonesty. 4.3 Upon giving Haigh notice of its intent to terminate the employment relationship, the Company, in its sole discretion, may elect to pay Haigh his salary and, subject to the terms, conditions and eligibility requirements of the applicable plans, continue his benefits during the notice period and, in lieu of requiring him to continue his duties as Vice Chairman, may require him to perform only such other duties as it may assign to him or require him not to perform any duties whatsoever for the Company and/or exclude him from the Company and/or Affiliates' premises (without providing any reason therefor), all subject to his performance of his duties as a director. 4.4 Upon termination of his employment for whatever reason, Haigh shall immediately tender his resignation from all offices, directorships or other positions in the Company and/or its Affiliates; provided that the Company and Haigh will each agree to provide the other reasonable cooperation to assure the orderly disposition by Haigh of Haigh's shareholdings in the Company. 4 5 4.5. Sections 6 (Trade Secrets, Confidential Information, Company Property and Competitive Business Activities), 7 (Intellectual Property Ownership), 8 (License), and 9 (Release) shall survive the termination of Haigh's employment and/or the termination of this Agreement regardless of the reasons for such termination. 5. Compensation and Benefits Upon Termination. 5.1. If Haigh's employment terminates for any reason, the Company's obligation to remunerate Haigh shall cease on the effective termination date except as to amounts due at that time. 5.2. Haigh is not entitled to receive any compensation or benefits upon Haigh's termination except as: (i) set forth in this Agreement; (ii) otherwise required by law; or (iii) otherwise required by any employee benefit plan in which Haigh participates. The terms and conditions afforded Haigh under this Agreement are in lieu of any severance benefits to which Haigh otherwise might be entitled pursuant to a severance plan, policy or practice. Nothing in this Agreement, however, is intended to waive or supplant any death, disability, retirement, or pension benefits to which Haigh may be entitled under employee benefit plans in which he participates. 6. Trade Secrets, Confidential Information, Company Property and Competitive Business Activities. Haigh acknowledges and agrees that: (i) by virtue of his employment by and position with the Company, he has or will have access to Trade Secrets and Confidential Information (as defined in Sections 6.1.5 and 6.1.6) of the Company and its Affiliates, including valuable information about their worldwide business operations and entities with whom they do business in various locations throughout the world, and has developed or will develop relationships with their customers and others with whom they do business in various locations throughout the world; and (ii) the Trade Secret, Confidential Information and Competitive Business Activities' provisions set forth in this Agreement are reasonably necessary to protect the Company's and its Affiliates' legitimate business interests, are reasonable as to the time, territory and scope of activities which are restricted, do not interfere with public policy or public interest, and are described with sufficient accuracy and definiteness to enable him to understand the scope of the restrictions imposed on him. 6.1. Trade Secrets and Confidential Information. Haigh acknowledges and agrees that: (i) the Company and/or its Affiliates will disclose to him certain Trade Secrets and Confidential Information; (ii) Trade Secrets and Confidential Information are the sole and exclusive property of the Company and/or its Affiliates (or a third party providing such information to the Company and/or its Affiliates); and (iii) the disclosure of such Trade Secrets and Confidential Information to Haigh does not confer upon Haigh any license, interest or rights of any kind in or to the Trade Secrets or Confidential Information. 6.1.1. Haigh may use the Trade Secrets and Confidential Information only in accordance with applicable Company policies and procedures and solely for the Company's benefit, and only while Haigh is employed or otherwise retained by the Company. Except in the performance of services for the Company, Haigh will hold in confidence and not directly or indirectly, in any form, by any means, or for any purpose, 5 6 disclose, reproduce, distribute, transmit, or transfer Trade Secrets or Confidential Information or any portion thereof. 6.1.2. If Haigh is required to disclose Trade Secrets or Confidential Information pursuant to a court order or other government process or such disclosure is necessary to comply with applicable law or defend against claims, Haigh shall: (i) notify the Company promptly before any such disclosure is made; (ii) at the Company's request and expense take all reasonably necessary steps to defend against such disclosure, including defending against the enforcement of the court order, other government process or claims; and (iii) permit the Company to participate with counsel of its choice in any proceeding relating to any such court order, other government process or claims. 6.1.3. Haigh's obligations with regard to Trade Secrets shall remain in effect for as long as such information shall remain a trade secret under applicable law. 6.1.4. Haigh's obligations with regard to Confidential Information shall remain in effect while he is employed or otherwise retained by the Company and/or its Affiliates and for fifteen (15) years thereafter. 6.1.5. As used in this Agreement, "Trade Secrets" means information of the Company, its Affiliates and its and/or their licensors, suppliers, customers, or prospective licensors or customers, including, but not limited to, data, formulas, patterns, compilations, programs, devices, methods, techniques, processes, financial data, financial plans, product plans, or lists of actual or potential customers or suppliers, which: (i) derives independent actual or potential commercial value from not being generally known to or readily ascertainable through independent development or reverse engineering by persons or entities who can obtain economic value from its disclosure or use; and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. 6.1.6. As used in this Agreement, "Confidential Information" means information (other than Trade Secrets) that is of value to the Company and is treated as confidential, including, but not limited to, future business plans, licensing strategies, advertising campaigns, information regarding executives and employees, and the terms and conditions of this Agreement; provided, however, Confidential Information shall not include information which is in the public domain or becomes public knowledge through no fault of Haigh. 6.2. Company Property. Upon the termination of Haigh's employment, Haigh shall at the Company's request: (i) deliver to the Company all records, memoranda, data, documents and other property of any description which refer or relate in any way to Trade Secrets or Confidential Information, including all copies thereof, which are in Haigh's possession, custody or control; (ii) deliver to the Company all Company and/or Affiliate property (including, but not limited to, keys, credit cards, client files, contracts, proposals, work in process, manuals, forms, computer-stored work in process and other computer data, research materials, other items of business information concerning any Company and/or Affiliate client, or Company and/or Affiliate business or business methods, including all copies thereof) which is in Haigh's possession, custody or control; and (iii) provide reasonable cooperation to the Company at the Company's expense in 6 7 winding up Haigh's work and transferring that work to other individuals designated by the Company. 6.3. Competitive Business Activities. During Haigh's employment and the Non-Competition Period (as defined in Section 6.3.3), Haigh will not engage in the following activities: (a) Haigh shall not, either alone or jointly with another or others, whether as principal, agent, director, shareholder, independent contractor, officer, employee or in any other capacity, whether directly or indirectly, and whether for his own benefit or that of others, during the continuation of his employment by the Company nor after the termination of his employment for two years(howsoever caused): (i) be engaged or interested in any business which competes with any business carried on or engaged in by the Company or any of its Affiliates at or before (provided such business has not been terminated or abandoned by the Company or such Affiliate) the date of termination of Haigh's employment (hereinafter, a "Competitive Business"); (ii) solicit or endeavor to solicit on behalf of a Competitive Business from or with any person or entity: (aa) who or which was a customer of the Company or any of its Affiliates at any time during the period of twelve (12) months preceding the date of the termination of the employment; (bb) whom or which Haigh or someone for whom he was directly responsible solicited, negotiated, contracted, serviced, advised or had contact with on the Company's or any of its Affiliates' behalf; or (cc) to whom the Company or any of its Affiliates had made proposals to do business at any time during the period of twelve (12) months preceding the date of the termination of the employment; (iii) deal, do business or endeavor to deal or do business for a Competitive Business, from or with any person or entity: (aa) who or which was a customer of the Company or any of its Affiliates at any time during the period of twelve (12) months preceding the date of the termination of the employment; (bb) whom or which Haigh or someone for whom he was directly responsible solicited, negotiated, contracted, serviced, advised or had contact with on the Company's or any of its Affiliates' behalf; or (cc) to whom the Company or any of its Affiliates had made proposals to do business at any time during the period of twelve (12) months preceding the date of the termination of the employment; 7 8 (iv) without the written permission of the Board of the Company (such permission not to be unreasonably withheld if the Company considers that Haigh has neither a personal influence with clients nor is in possession of confidential information) offer employment to or otherwise solicit for employment the services of any individual who was an employee or director of the Company or any of its Affiliates during the period of twelve (12) months preceding the date of termination of employment whether or not such person would commit any breach of his contract of employment with the Company or any of its Affiliates by reason of his leaving service. (v) directly or indirectly take any action which is materially detrimental or otherwise intended to be adverse to the Company's and/or any of its Affiliates' goodwill, name, business relations, prospects and operations. Notwithstanding anything in this Agreement to the contrary, the following activities will not be deemed to contravene the provisions of Section 6.3 of this Agreement: (i) Owning, operating, controlling or serving as a director, officer or employee of or consultant to any company the principal business of which is manufacturing, distributing, marketing and/or selling pharmaceutical products the rights to which are owned by or licensed to such company; provided that no more than five percent (5%) of the consolidated revenues of such company in any year will be derived from operations (as defined below, "Related Activities") involving providing, on a contract, for hire, or similar basis (i) drug development services, (ii) pharmaceutical or clinical research services, (iii) pharmaceutical sales or marketing services, (iv) health information management services, and/or (v) any other activity which constitutes a significant part of the business of the Company or any of its Affiliates (in the case of subparagraph (v), at or before the date of termination of Vendor's employment); provided further that Vendor shall have no direct involvement in such Related Activities as a director, officer, employee, consultant or otherwise; provided further, it is agreed that Related Activities are intended to be limited to activities which are incidental to the operations of a pharmaceutical business and are not, without limiting the foregoing , any activities dedicated primarily to a Competitive Business or the purpose of drug development, marketing, sales services, or health benefit analysis of the products or potential products of third parties. (ii) the provision of executive search consulting services so long as such services are not provided to entities engaged in Related Activities; and (iii) the provision of financial consulting services so long as such services are not provided to entities engaged in Related Activities. (b) Section 6.3(a) shall not prohibit the holding (directly or through nominees or otherwise) of shares or other securities of another company which are listed or traded on any recognized stock exchange being a holding (which phrase shall include any interest in any such holding) entitling the holder to no more than two and one half percent (2.5%) of the voting power of such body corporate. 8 9 (c) Haigh shall not either before or after the termination of his employment hereunder disclose to any person or persons any confidential information in relation to the affairs of the Company or any of its Affiliates or any client or customer thereof of which he has become or any have become possessed whilst in the service of the Company except in the proper course of his duties hereunder or as authorized by the Board or as ordered by a court of competent jurisdiction or pursuant to other governmental process. (d) The restriction contained in clauses (a) and (c) are considered reasonable by the parties but if any such restriction shall be found void but would be valid if some part thereof were deleted or the period or area of application reduced, such restriction shall apply with such modifications as may be necessary to make it valid and effective. 6.3.1. The restriction set forth in Section 6.3(a)(i) apply to the following geographical areas: the United Kingdom, the Federal Republic of Germany and the United States of America, including the territories and possessions thereof. 6.3.2. Notwithstanding the foregoing, Haigh's ownership, directly or indirectly, of not more than two and one half percent (2.5%) of the issued and outstanding stock of a corporation the shares of which are regularly traded on a national securities exchange or in the over-the-counter market shall not violate Section 6.3. 6.3.3. As used in this Agreement "Non-Competition Period" means the greater of: (i) the two (2) year period following the termination of Haigh's employment (irrespective of the circumstances of such termination); or (ii) five years from November 26, 1996. 6.4. Remedies. Haigh acknowledges and agrees that Haigh's failure to abide by the Trade Secrets, Confidential Information, Company Property or Competitive Business Activities provisions of this Agreement would cause irreparable harm to the Company and/or its Affiliates for which legal remedies would be inadequate. Therefore, in addition to any legal or other relief to which the Company and/or its Affiliates may be entitled by virtue of Haigh's failure to abide by these provisions: (i) the Company may seek legal and equitable relief, including but not limited to preliminary and permanent injunctive relief, for Haigh's actual or threatened failure to abide by these provisions; (ii) Haigh will indemnify, upon final judicial determination that Haigh has breached the terms of Section 6 or Section 7, the Company and/or its Affiliates for all expenses (including attorneys' fees) in seeking to enforce these provisions; and (iii) if, as a result of Haigh's failure to abide by the Trade Secrets, Confidential Information, Company Property or Competitive Business Activities provisions, any commission or fee becomes payable to Haigh or to any person, corporation or other entity with which Haigh has become employed or otherwise associated, Haigh shall pay the Company or cause the person, corporation or other entity with whom he has become employed or otherwise associated to pay the Company an amount equal to such commission or fee. Notwithstanding that Haigh returns all post-termination payments received pursuant to this Agreement, Haigh shall remain obligated to abide by the Trade Secrets, Confidential 9 10 Information, Company Property and Competitive Business Activities provisions set forth in this Agreement. 6.5. Other Agreements. Nothing in this Agreement shall terminate, revoke or diminish Haigh's obligations or the Company's and/or its Affiliates' rights and remedies under law or under Haigh's Deed of Non-Competition with the Company and the Share Exchange Agreement relating to trade secrets, confidential information, non-competition and intellectual property. 7. Intellectual Property Ownership. 7.1. As used in this Agreement, "Work Product" shall mean the data, materials, documentation, computer programs, inventions (whether or not patentable), picture, audio, video, artistic works, and all works of authorship, including all worldwide rights therein under patent, copyright, trade secret, confidential information, or other property rights, created or developed in whole or in part by Haigh while employed by the Company (whether developed during work hours or not), whether prior or subsequent to the date of this Agreement. 7.2. All Work Product shall be considered work made for hire by Haigh and owned by the Company. If any of the Work Product may not, by operation of law, be considered work made for hire by Haigh for the Company, or if ownership of all right, title, and interest of the intellectual property rights therein shall not otherwise vest exclusively in the Company, Haigh hereby assigns to the Company, and upon the future creation thereof automatically assigns to the Company, without further consideration, the ownership of all Work Product. The Company shall have the right to obtain and hold in its own name copyrights, registrations, and any other protection available in the Work Product. Haigh agrees to perform, during or after Haigh's employment, such further acts which the Company requests as may be necessary or desirable to transfer, perfect, and defend the Company's ownership of the Work Product. 7.3. Notwithstanding the foregoing, this Agreement shall not require assignment of any invention that: (i) Haigh developed entirely on his own time without using the Company's equipment, supplies, facilities, Trade Secrets or Confidential Information; and (ii) does not relate to the Company's business or actual or anticipated research or development or result from any work performed by Haigh for the Company. 7.4. Haigh shall promptly disclose to the Company in writing all Work Product conceived, developed or made by him, individually or jointly that relates in any way to the business conducted by the Company. 8. License. To the extent that any preexisting materials are contained in Work Product which Haigh delivers to the Company or its customers, Haigh grants to the Company an irrevocable, nonexclusive, worldwide, royalty-free license to: (i) use and distribute (internally or externally) copies of, and prepare derivative works based upon, such preexisting materials and derivative works thereof; and (ii) authorize others to do any of the foregoing. 10 11 9. Releases. Haigh acknowledges and agrees that: (i) as a part of his services, he may provide his image, likeness, voice, or other characteristics; and (ii) the Company may use his image, likeness, voice, or other characteristics in its products and services with Haigh's reasonable review and approval. Haigh consents to the use of such characteristics and expressly releases the Company, its Affiliates and its and their respective agents, employees, licensees and assigns from and against any and all claims which Haigh has or may have for invasion of privacy, right of privacy, defamation, copyright infringement, or any other causes of action arising out of the use, adaptation, reproduction, distribution, broadcast, or exhibition of such characteristics. 10. Haigh Representation. Haigh represents and warrants that neither Haigh's employment nor the performance of Haigh's obligations under this Agreement will (i) breach any duty or obligation Haigh owes to another or (ii) violate any law, recognized ethics standard or recognized business custom. 11. Waiver of Breach. The Company's or Haigh's waiver of any breach of a provision of this Agreement shall not waive any subsequent breach by the other party. 12. Entire Agreement. Except as expressly provided in this Agreement, this Agreement: (i) supersedes and cancels all other understandings and agreements, oral or written, with respect to Haigh's employment with Innovex, including without limitation that certain Service Agreement dated March 31, 1993 between Haigh and Innovex; (ii) supersedes all other understandings and agreements, oral or written, between the parties with respect to the subject matter of this Agreement; and (iii) constitutes the sole agreement between the parties with respect to the terms of the Haigh's employment. Each party acknowledges that: (i) no representations, inducements, promises or agreements, oral or written, have been made by any party or by anyone acting on behalf of any party, which are not embodied in this Agreement; and (ii) no agreement, statement or promise not contained in this Agreement shall be valid. No change or modification of this Agreement shall be valid or binding upon the parties unless such change or modification is in writing and is signed by the parties. 13. Severability. If a court of competent jurisdiction holds that any provision or sub-part thereof contained in this Agreement is invalid, illegal or unenforceable, that invalidity, illegality or unenforceability shall not affect any other provision in this Agreement. Additionally, if any of the provisions, clauses or phrases in the Trade Secrets, Confidential Information or Competitive Business Activities provisions set forth in this Agreement are held unenforceable by a court of competent jurisdiction, then the parties desire that they be "blue-penciled" or rewritten by the court to the extent necessary to render them enforceable to the maximum similar effect permitted by applicable law. 14. Parties Bound. The terms, provisions, covenants and agreements contained in this Agreement shall apply to, be binding upon and inure to the benefit of the Company's successors and assigns. The Company, at its sole discretion, may assign this Agreement to any of its Affiliates. Haigh may not assign this Agreement without the Company's prior written consent. 11 12 15. Remedies. Haigh acknowledges and agrees that Haigh's breach of this Agreement would cause the Company and/or its Affiliates irreparable harm for which damages would be difficult, if not impossible, to ascertain and legal remedies would be inadequate. Therefore, in addition to any legal or other relief to which the Company and/or its Affiliates may be entitled by virtue of the Haigh's breach or threatened breach of this Agreement, the Company and/or its Affiliates may seek equitable relief, including but not limited to preliminary and injunctive relief, and such other available remedies. 16. Costs and Expenses. If a dispute occurs between the Company and Haigh in connection with or arising under this Agreement, the prevailing party in a final judgment in respect of such dispute shall be reimbursed by the other party for all reasonable costs, including attorneys' fees and any other necessary costs or expenses, incurred as a result of such dispute. 17. Law and Jurisdiction. This Agreement shall be governed by and construed in accordance with English law and the parties irrevocably submit to the non-exclusive jurisdiction of the High Court of Justice in London for all purposes connected with it. 12 13 IN WITNESS WHEREOF, the parties have entered into this Agreement on the date set forth in the preamble above. ---------------------------------------- Barrie Stevens Haigh QUINTILES TRANSNATIONAL CORP. By: ------------------------------------- Name: Title: 13 EX-10.10 3 NON-COMPETE AGREEMENT - HAIGH 1 EXHIBIT 10.10 DEED OF NON-COMPETITION BETWEEN QUINTILES TRANSNATIONAL CORP. AND BARRIE STEVENS HAIGH 29 NOVEMBER 1996 2 INDEX CLAUSE PAGE - ------ ---- 1. Certain Definitions............................................ 3 1.1 Certain Definitions.................................... 3 2. Non-competition and Non-solicitation Covenants................. 3 2.1 General................................................ 3 2.2 Non-Competition........................................ 3 2.3 Holding of Shares or Securities........................ 5 2.4 Nondisclosure.......................................... 5 2.5 Geographical Restriction............................... 5 2.6 Non-Competition Period................................. 6 2.7 Remedies............................................... 6 2.8 Other Agreements....................................... 6 3. General Provisions............................................. 6 3.1 Notices................................................ 6 3.2 Variation.............................................. 7 3.3 Entire Agreement....................................... 8 3.4 Assignment............................................. 8 3.5 Law and Jurisdiction................................... 9 2 3 THIS NON-COMPETE AGREEMENT dated 29 November, 1996 is executed as a Deed and is made BETWEEN (1) QUINTILES TRANSNATIONAL CORP., a corporation incorporated under the laws of North Carolina, U.S.A. (the "Purchaser"); and (2) BARRIE STEVENS HAIGH, an individual residing at Chimneys, Winter Hill, Cookham Dean, Berkshire, SL6 9TN (the "Vendor"). WHEREAS: (A) Concurrently with the execution of this Agreement, the Purchaser, the Vendor and others are consummating certain transactions under a Share Exchange Agreement ("the Share Exchange Agreement") pursuant to which the Vendor and other vendors are exchanging their shares of Innovex Limited ("Innovex") for shares of Quintiles Transnational Corp. (B) The Vendor is entering into this Agreement as a condition precedent to completion under the Share Exchange Agreement. (C) Upon completion of the share exchange pursuant to the Share Exchange Agreement, Vendor will own approximately 4,302,327 shares of the outstanding common stock of the Purchaser. NOW THIS DEED WITNESSETH as follows: 1. CERTAIN DEFINITIONS 1.1 Certain Definitions. In this Agreement the following words and expressions shall have the meanings respectively ascribed to them: "Affiliates" shall mean: (i) the Purchaser; (ii) any Purchaser subsidiary or related entity (including without limitation Innovex and its subsidiaries); and (iii) any entity directly or indirectly beneficially owned or controlled in whole or part by the Purchaser or any Purchaser subsidiary or related entity, in each case as existing at or prior to the date of termination of Vendor's employment. 2. NON-COMPETITION AND NON-SOLICITATION COVENANTS 2.1 General. In consideration of the Purchaser agreeing to complete the Share Exchange Agreement, during the Vendor's employment with the Purchaser and the Non-Competition Period (as defined in Section 2.6): 2.2 Non-Competition. The Vendor shall not, either alone or jointly with another or others, whether as principal, agent, director, shareholder, independent contractor, officer, employee or in any other capacity, whether directly or indirectly, and whether for his own benefit or that of others: 3 4 (a) be engaged or have an economic interest in any business which competes with any business carried on or engaged in by the Purchaser or any of its Affiliates at or before (provided such business has not been terminated or abandoned by Purchaser or such Affiliate) the date of termination of Vendor's employment, including without limitation Related Activities (as defined below) (hereinafter, a "Competitive Business"); (b) solicit or endeavor to solicit on behalf of a Competitive Business, from or with any person or entity: (i) who or which was a customer of the Purchaser or any of its Affiliates at any time during the period of twelve (12) months preceding the date of the termination of the Vendor's employment; (ii) who or which the Vendor or someone for whom he was directly responsible solicited, negotiated, contracted, serviced, advised or had contact with on the Purchaser's or any of its Affiliates' behalf; or (iii) to whom the Purchaser or any of its Affiliates had made proposals to do business at any time during the period of twelve (12) months preceding the date of the termination of the employment; (c) deal, do business or endeavor to deal or do business for a Competitive Business from or with any person or entity: (i) who or which was a customer of the Purchaser or any of its Affiliates at any time during the twelve (12) months preceding the date of the termination of the employment; (ii) who or which the Vendor or someone for whom he was directly responsible solicited, negotiated, contracted, serviced, advised or had contact with on the Purchaser's or any of its Affiliates' behalf; or (iii) to whom the Purchaser or any of its Affiliates had made proposals to do business at any time during the period of twelve (12) months preceding the date of the termination of the employment; (d) without the written permission of the Board of the Purchaser (such permission not to be unreasonably withheld or delayed and in particular such permission will not be withheld if the Purchaser considers that the Vendor has neither a personal influence with clients nor is in possession of confidential information) offer employment to or otherwise solicit for employment the services of any individual who was an employee or director of the Purchaser or any of its Affiliates during the period of twelve (12) months preceding the date of termination of employment whether or not such persons would commit any breach of his contract of employment with the Purchaser or any of its Affiliates by reason of his leaving service; or (e) directly or indirectly take any action which is intended to be materially detrimental or otherwise intended to be adverse to the Purchaser's and/or any of its Affiliates' 4 5 goodwill, name, business relations, prospects and operations. Notwithstanding anything in this Agreement to the contrary, the following activities will not be deemed to contravene the provisions of Section 2 of this Agreement: (i) Owning, operating, controlling or serving as a director, officer or employee of or consultant to any company the principal business of which is manufacturing, distributing, marketing and/or selling pharmaceutical products the rights to which are owned by or licensed to such company; provided that the amount of the consolidated revenues of such company in any year derived from operations (as defined below, "Related Activities") involving providing, on a contract, for hire, or similar basis (i) drug development services, (ii) pharmaceutical or clinical research services, (iii) pharmaceutical sales or marketing services (iv) health information management services, and/or (v) any other activity which constitutes a significant part of the business of the Purchaser (in the case of subparagraph (v), at or before the date of termination of Vendor's employment) will not exceed the greater of five percent (5%) of consolidated revenues or five percent (5%) of consolidated expenses of such company; provided further that Vendor shall have no direct involvement in such Related Activities as a director, officer, employee, consultant or otherwise; provided further, it is agreed that Related Activities are intended to be limited to activities which are incidental to the operations of a pharmaceutical business and are not, without limiting the foregoing, any activities dedicated primarily to a Competitive Business or the purpose of drug development, marketing, sales services, or health benefit analysis of the products or potential products of third parties. (ii) the provision of executive search consulting services so long as such services are not provided to an entity engaged in Related Activities; and (iii) the provision of financial consulting services so long as such services are not provided to an entity engaged in Related Activities. 2.3 Holding of Shares or Securities. Section 2.2 shall not prohibit the holding (directly or through nominees or otherwise) of shares or other securities of another company which are listed or traded on any recognized stock exchange being a holding (which phrase shall include any interest in any such holding) entitling the holder to no more than two and one half percent (2.5%) of the voting power of such body corporate. 2.4 Nondisclosure. The Vendor shall not either before or after the termination of his employment hereunder disclose to any person or persons any confidential information in relation to the affairs of the Purchaser or any of its Affiliates or any client or customer thereof which he has become or may have become possessed whilst in the service of the Purchaser except in the proper course of his duties as an officer, director or employee of the Purchaser or as authorized by the Board or as ordered by a Court of competent jurisdiction or pursuant to other governmental process. 2.5 Geographical Restriction. The restrictions set forth in Sections 2.2(a) apply to the following geographical areas: the United Kingdom, the Federal Republic of Germany and the United States of America, including the territories and possessions thereof. 5 6 2.6 Non-Competition Period. As used in this Agreement "Non-Competition Period" means: the greater of: (i) the two (2) year period following the termination of Vendor's employment with Purchaser (irrespective of the circumstances of such termination); or (ii) five (5) years from November 26, 1996. 2.7 Remedies. Vendor acknowledges and agrees that Vendor's failure to abide by the provisions of this Agreement would cause irreparable harm to the Purchaser and/or its Affiliates for which legal remedies would be inadequate. Therefore, in addition to any legal or other relief to which the Purchaser and/or its Affiliates may be entitled by virtue of Vendor's failure to abide by these provisions: (i) the Purchaser may seek legal and equitable relief, including but not limited to preliminary and permanent injunctive relief, for Vendor's actual or threatened failure to abide by these provisions; (ii) Vendor will, upon final judicial determination that Vendor has breached the terms of this Agreement, indemnify the Purchaser and/or its Affiliates for all expenses (including legal fees) in seeking to enforce these provisions; and (iii) if, as a result of Vendor's failure to abide by the provisions, any commission or fee becomes payable to Vendor or to any person, corporation or other entity with which Vendor has become employed or otherwise associated, Vendor shall pay the Purchaser or cause the person, corporation or other entity with whom he has become employed or otherwise associated to pay the Purchaser an amount equal to such commission or fee. 2.8 Other Agreements. Nothing in this Agreement shall terminate, revoke or diminish Vendor's obligations or the Purchaser's and/or its Affiliates' rights and remedies under law or under Vendor's Employment Agreement with Purchaser and the Share Exchange Agreement relating to trade secrets, confidential information, non-competition and intellectual property. 3. GENERAL PROVISIONS 3.1 Notices. All notices, demands, requests, or other communications which may be or are required to be given, served, or sent by any party to any other party pursuant to this Agreement shall be in writing and shall be hand delivered, sent by overnight courier or mailed by first-class registered post, postage prepaid, return receipt requested or transmitted by telegram, telecopy or telex, addressed as follows: (a) If to the Purchaser: Quintiles Transnational Corp. 4709 Creekstone Drive Riverbirch Building, Suite 300 Durham, North Carolina U.S.A. 27703 Attention: Gregory D. Porter Fax: 919-941-2090 6 7 with a copy which shall not constitute notice to: Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan L.L.P. 2500 First Union Capital Center Raleigh, North Carolina U.S.A. 27601 Attention: Gerald F. Roach Fax: 919-821 6800 (b) If to the Vendor: Barrie Stevens Haigh Chimneys, Winter Hill Cookham Dean Berkshire SL6 9TN With a copy which shall not constitute notice to: Attention: Fax: Each party may designate by notice in writing a new address to which any notice, demand, request or communication may thereafter be so given, served or sent. Each notice, demand, request, or communication which shall be hand delivered, sent, mailed, telecopied or telexed in the manner described above, or which shall be delivered to a telegraph company, shall be deemed sufficiently given, served, sent, received or delivered for all purposes at such time as it is delivered to the addressee (with the return receipt, the delivery receipt, or (with respect to a telecopy or telex) the answerback being deemed conclusive, but not exclusive, evidence of such delivery) or at such time as delivery is refused by the addressee upon presentation. 3.2 Variation. No variation of this Agreement shall be valid or effective unless made by one or more instruments in writing signed by all of the parties hereto. 7 8 3.3 Entire Agreement. Except as expressly provided in this Agreement, this Agreement: (i) supersedes and cancels all other understandings and agreements, oral or written, with respect to Vendor's obligations with respect to non-competition which Vendor has executed in the past; (ii) supersedes all other understandings and agreements, oral or written, between the parties with respect to the subject matter of this Agreement; and (iii) constitutes the sole agreement between the parties with respect to the matters covered. No change or modification of this Agreement shall be valid or binding upon the parties unless such change or modification is in writing and is signed by the parties. 3.4 Assignment. Neither of the parties hereto shall assign or otherwise deal with any of its right, title or interest in this Agreement without the prior written consent of the other party to this Agreement, which consent may be withheld in such party's absolute discretion, provided, however, that the Purchaser may in its absolute discretion assign all or any of its right title and interest in this Agreement to a an Affiliate or to a subsequent purchaser of all of the share capital of the Company or all or substantially all of the assets of the Company. 8 9 3.5 Law and Jurisdiction. This Agreement shall be governed by and construed in accordance with English law and the parties irrevocably submit to the non-exclusive jurisdiction of the High Court of Justice in London for all purposes connected with it. IN WITNESS whereof this Agreement has been executed and unconditionally delivered as a Deed the day and year first-above written. Signed and delivered as a Deed ) by Quintiles Transitional Corp. ) by its duty authorized ) Vice President, Rachel R. Selisker, ) and by its duly authorized ) Secretary, Gregory D. Porter ) /s/ Rachel R. Selisker - ------------------------------- Rachel R. Selisker Vice President /s/ Gregory D. Porter - ------------------------------- Gregory D. Porter Secretary Signed and delivered as a Deed ) /s/ Barrie Stevens Haigh by Barrie Stevens Haigh ) in the presence of: Name: David B. Rockwell ) ------------------------- ) Address: 28 Willow Road ) ----------------------- ) Hampstead, London ) ----------------------- ) NW3 1TL, England ) ----------------------- ) Occupation: Attorney ) ------------------- ) 9 EX-10.11 4 EMPLOYMENT AGREEMENT - LEWIN 1 EXHIBIT 10.11 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into by The Lewin Group, Inc., a North Carolina corporation (hereinafter the "Company") and Lawrence S. Lewin (hereinafter "Employee"). Pursuant to the Asset Purchase Agreement dated as of April 16, 1996 (hereinafter "Asset Purchase Agreement") by and between Company, Quintiles Transnational Corp. ("Quintiles"), Lewin - VHI, Inc. ("Lewin - VHI"), Value Health, Inc. ("VHI"), Lawrence S. Lewin, and Robert J. Rubin, Company agreed to purchase certain of the assets and assume certain of the liabilities of Lewin - VHI. As a condition of the Asset Purchase Agreement, Employee shall execute a written Employment Agreement with the Company upon the terms and conditions hereinafter set forth. In consideration of the mutual promises contained herein and the Asset Purchase Agreement, and other good and valuable consideration, the receipt and sufficiency of which is mutually acknowledged, the parties agree as follows: 1. EMPLOYMENT. The Company employs Employee and Employee accepts employment on the terms and conditions set forth below. 2. NATURE OF EMPLOYMENT. Employee shall serve as Chief Executive Officer and have such responsibilities and authority as may from time to time be assigned by the Company's Board of Directors. Subject to the Board's direction, Employee shall perform such duties as are commensurate with and required by the position of Chief Executive Officer. Employee shall devote all his working time and best efforts to successfully perform his duties and advance the Company's interests; provided, however, to the extent that there is no interference with Employee's performance of his duties under this Agreement, Employee may: (a) without consent of the Board, write professionally (subject to Section 9 below), (b) without consent of the Board, continue to serve and may be reelected to serve as a member of any Board of Directors and/or Board of Trustees on which he served as of the date of this Agreement (and to retain director's fees and other compensation, including stock options and awards, for services rendered), (c) with prior consent of Quintiles (which shall not be unreasonably withheld), accept election to Boards of Directors and/or Boards of Trustees other than those specified in clause (b) during the term of this Agreement, and (d) without consent of the Board, engage in voluntary or charitable activities and be elected to serve on the boards of voluntary, not-for-profit organizations. As to actions permitted by the preceding sentence, Employee shall (i) conduct any such professional writing individually or as an employee of or consultant to a person or entity other than the Company or any Affiliate (as defined below) and not as an employee of or consultant to the Company or any 2 Affiliate, and (ii) shall indemnify and hold harmless the Company and its Affiliates and their respective directors, officers, employees, agents and shareholders from and against any and all losses, claims, actions, damages, liabilities, costs and expenses (including attorneys' fees), joint or several, relating to or arising out of any such professional writing by Employee or any other conduct, act or omission of Employee, occurring on or after the date of this Agreement, other than in his capacity as an employee, officer or director of the Company or Quintiles. For purposes of this Agreement, "Affiliates" shall mean Quintiles, or any subsidiary or related entity of either the Company or Quintiles, or any entity directly or indirectly controlled or beneficially owned in whole or substantial part by the Company or Quintiles or any subsidiary or related entity of either. 3. TERM. The original term of employment shall begin on the Closing Date (as defined in the Asset Purchase Agreement) and end on the third anniversary date thereafter (the "Term") unless terminated earlier as set forth in Section 10. Upon the original term's or any renewal term's expiration, Employee's employment shall be automatically renewed for an additional one (1) year period unless either party gives the other party not less than ninety (90) days prior notice of its intent not to continue the employment relationship. During any renewal terms, all terms, conditions, and provisions of this Agreement shall remain in full force and effect. Sections 2 (Nature of Employment), 5 (Consultancy), 6 (Non-Competition), 7 (Remedies for Certain Breaches), 8 (Confidentiality), 9 (Intellectual Property), 14 (Arbitration) and 17 (Governing Law) shall survive any termination of this Agreement as provided herein. 4. COMPENSATION. (A) SALARY. Employee shall receive an annual salary of not less than $288,750 (less applicable withholdings) payable in equal biweekly installments. Employee's salary shall be subject to at least annual review and adjustment in accordance with the Company's current standard practice for executive compensation and subject to the discretion of the Company's Board of Directors or Compensation Committee thereof. The Company shall not reduce Employee's salary without Employee's consent. In addition, Employee shall be eligible to earn a discretionary annual performance bonus (the "Annual Bonus") at a target level of not less than 50% of salary pursuant to criteria to be approved by the Company's Board of Directors (or the Compensation Committee thereof). Employee may also be eligible to receive an additional discretionary bonus of up to 50% of the Annual Bonus (the "Additional Bonus Target Percentage") pursuant to criteria to be approved by the Company's Board of Directors (or the Compensation Committee thereof). Pursuant to Paragraph 1 (f) of the Indemnification Agreement entered into on April 16, 1996, by and among the Company, Quintiles, Lewin-VHI, VHI, Lawrence S. Lewin, Robert J. Rubin, Robert F. Atlas, Raymond J. Baxter, Donald W. Moran, and Kevin J. Sexton ("Indemnification Agreement"), any cash bonus pool established by the Company for Employee's or other employees' benefit shall be reduced by an amount necessary to recover a Loss (as defined in the Indemnification Agreement). Employee's total compensation under this Agreement (salary plus bonus) for payment dates following the date of any final determination or agreement described in clause (i) or (ii) below shall be reduced by: (i) any amount that a court or arbitrator with jurisdiction over 2 3 the subject matter finally determines, or that Employee agrees, is owed by Employee to either the Company or Quintiles pursuant to the Indemnification Agreement; and (ii) any amount that a court or arbitrator with jurisdiction over the subject matter finally determines, or that Employee agrees, is owed by Employee to either Lewin-VHI or VHI pursuant to that certain cross-indemnification agreement, dated April 16, 1996, by and among Employee, Lewin-VHI, VHI, and other employees of the Company (the "VHI Cross-Indemnification Agreement"). Such reduction shall be applied to payments of compensation hereunder until the aggregate amount of such reductions is equal to the amount so determined or agreed to be owed, plus interest at the rate of eight percent (8%) per annum. No salary reduction shall exceed the extent of Employee's remaining liability to the Company and Quintiles pursuant to Schedule 1 of the Indemnification Agreement. (B) STOCK OPTION. (i) Nonqualified. Employee shall be entitled to such stock options as are granted under the Stock Option Agreement attached as Exhibit 1; such options shall be governed by the terms and conditions of the Quintiles Lewin Nonqualified Stock Option Plan. Twenty-five percent (25%) of such options shall vest and become exercisable immediately and the remainder of such options shall vest and become exercisable in equal monthly installments over a three year period beginning as of the Closing Date. The options shall have an exercise price per share equal to the closing price per share of Quintiles Common Stock on the Nasdaq National Market as of the Closing Date. Any unvested stock options shall vest and become exercisable immediately: 1) upon the Company's termination of the employment relationship created by this Agreement, unless such termination is "for cause" pursuant to Section 10(a) hereof; 2) in the event Quintiles should sell all or substantially all of the assets or stock of the Company to any entity other than an Affiliate of Quintiles and, because of such sale, Employee elects to terminate the employment relationship created by this Agreement; and, 3) in the event of Employee's total disability (as defined hereinafter) or death. (ii) Qualified. As soon as practicable after the execution of this Agreement by all parties, Employee shall be granted an incentive stock option pursuant to Quintiles' Equity Compensation Plan ("the Plan") to purchase ten thousand (10,000) shares of Quintiles Common Stock. This option shall be governed by the terms and conditions of the Plan and, subject to the applicable terms and conditions, shall be evidenced by a stock option agreement in the standard form employed by Quintiles for incentive stock options issued pursuant to the Plan; shall vest and become exercisable in equal monthly installments over a three year period beginning as of the Closing Date; and shall have an exercise price per share equal to the closing price per share of Quintiles Common Stock on the Nasdaq National Market on the last trading day prior to the date the option is granted (subject to adjustment as provided in the applicable stock option agreement). (C) PARTICIPATION IN OTHER BENEFITS. Employee may participate (subject to applicable terms and conditions) in all pension, profit sharing, bonus, incentive, insurance, medical, disability and other benefit plans and programs made available to Company executives from time to time. Nothing in this Agreement, however, shall require the Company to create or confirm any such employee benefits. In addition, the Company agrees to purchase within sixty 3 4 days of the date this Agreement is executed, a term life policy on the life of Employee with an approximate annual cost to the Company of $15,000 so long as this Agreement remains in effect, but not beyond April 25, 2000, and provided that Employee is insurable. The Company may, in its discretion, satisfy its obligation with respect to such term life insurance policy by assuming any existing term life insurance policy which Employee may have. The beneficiary of such policy shall be designated by Employee. Employee shall be considered a level 3 employee (or the substantial equivalent thereof) under Quintiles' Executive Compensation Plan except that Employee shall not be eligible for Quintiles' cash bonus, automobile policy, vacation and noncompetition benefits and policies. (D) EXPENSES. Subject to the terms and conditions of applicable reimbursement policies, Employee shall be entitled to reimbursement of expenses actually incurred by Employee in performing the services under this Agreement. 5. CONSULTANCY. Upon the Company's request, Employee will serve as a consultant to the Company or its Affiliates for a term of one year after the termination of the employment relationship and make himself available for consulting assignments as requested by the Company or its Affiliates; such requests shall be upon reasonable notice and shall not require Employee's services as a consultant for more than twenty (20) hours per week or in a manner that would interfere with Employee's subsequent employment. Company will pay Employee a consulting fee for making himself available under this section equal to the base salary paid to Employee for the year immediately preceding the term of consultancy. As a consultant, Employee shall be an independent contractor, not an employee, and shall be responsible for paying all applicable income and other taxes on or related to such consulting fees and shall not be entitled to benefits, but shall remain subject to all obligations set forth in this Agreement in Sections 6 (Non-competition), 8 (Confidentiality) and 9 (Intellectual Property). 6. NON-COMPETITION. The Employee acknowledges that he shall have access to and control of confidential information concerning the Company and its Affiliates. In consideration of the Company's commitments to the Employee under this Agreement and under the Asset Purchase Agreement, Employee expressly covenants and agrees that during his employment and for a period that shall expire upon the latter of either one (1) year after termination of employment or five (5) years from the Closing Date unless such termination by the Company is not "for cause," in which case the period shall be one (1) year after termination of employment, Employee will not, without the Company's prior written consent duly authorized by resolution of the Board of Directors: (a) serve as a partner, trustee, officer, director, employee, consultant, stockholder, option holder, or guarantor of, or lender of money to, or otherwise assist, or have any interest in or referral or other agreement with, any other health economics or health policy consulting firm, contract research organization, corporation, firm or business engaged in the same business as, or a business competitive with, the Company's or its Affiliates' business, in any capacity connected with such entities' competitive activities in the geographical areas set forth below. This prohibition shall not apply to any business which the Company or its Affiliates did not engage in or contemplate engaging in on the Employee's termination date. It is agreed that ownership, 4 5 directly or indirectly, of not more than one (1%) percent of the issued and outstanding stock of a corporation, the shares of which are regularly traded on a national securities exchange or in the over-the-counter market, shall not be deemed to be in violation of the preceding sentence. Notwithstanding the foregoing provisions of this section, Employee may, after termination of employment under this Agreement,: (i) obtain employment with an institution of higher education or a local, state, or federal governmental body; (ii) accept speaking engagements, provided that such engagements shall not be presented to, on behalf of, or under the sponsorship of, a competitor of the Company; and (iii) unless the termination of his employment is "for cause," provide his personal consulting services to a person or entity which is not in competition with the Company. The provision of such personal consulting services is permissible during the term of this non-competition provision only if such services are performed through the Company and in accordance with any applicable Company policies or practices. Fees charged for such personal consulting services shall be charged through the Company to the consulting client and shall not exceed $500,000 in any twelve (12) month period. For the first $50,000 in fees received by the Company from such consulting clients in any twelve (12) month period, the Company shall pay Employee $50,000. For fees received by the Company in excess of $50,000 in the twelve (12) month period, the Company shall pay Employee an amount equal to the amount of fees received by the Company less a deduction for operating profit payable to the Company in the amount of fifteen percent (15%) of such fees. Arrangements for office space and secretarial services, if any, shall be separately negotiated to the mutual satisfaction of the parties. In performing such consulting services, Employee shall be an independent contractor and not an employee. If termination of employment is "for cause," then, unless the Company and the Employee agree otherwise, in lieu of the foregoing consulting arrangement, Employee may provide personal consulting services as a sole proprietor (or similar individual business without other consultants) directly to consulting clients which are not in competition with the Company so long as Employee's consulting does not in any way benefit a competitor, the Employee otherwise complies with the provisions of this Section 6, and so long as consulting fees arising from such services do not exceed $500,000 in any twelve (12) month period. Provided that, Employee must give reasonably prompt notice of personal consulting services to be so provided, and Employee must provide contemporaneous copies of billing and make payment to the Company of fifteen percent (15%) of net revenues (as defined by the Company's standard accounting practices) from such personal consulting services. Payment shall be made to the Company immediately upon Employee's receiving payment for such consulting services. For purposes of this subparagraph 6(a), "personal consulting services" shall be specialized services which Employee uniquely is qualified to provide (either by virtue of Employee's skills, knowledge, or experience or by virtue of Employee's past relationship with the client), and which are provided without any assistance from other consultants or staff except a personal secretary. (b) solicit, interfere with the Company's contractual relationship with, or entice away from Company, any customer, supplier, person, firm, or corporation who has at any time during the one (1) year immediately preceding termination of Employee's employment or consultancy done business with the Company or its Affiliates, or offer employment to or procure employment for any person who at any time during the one (1) year immediately preceding the termination of Employee's employment or consultancy with the Company, shall have been 5 6 employed by the Company or its Affiliates or done any substantial work for the Company or its Affiliates; provided, however, that this paragraph shall not apply in any manner to Employee's secretary. (c) take or engage in any action, in any form or manner, which directly or indirectly is materially detrimental to the goodwill or name of the Company or its Affiliates, or is otherwise intended to be adverse to the Company or its Affiliates; provided, however, that this paragraph shall not prohibit lawful competitive conduct so long as the Employee does not violate the restrictions in Section 6(a) and 6(b) above. The restrictions set forth above, in Sections 6(a) and 6(b), apply to the following geographical areas: (i) any city, metropolitan area or county in which the Company, or its subsidiaries or Affiliates, does or, during the Employee's employment, did business; (ii) any city, metropolitan area or county in which the Company, or its subsidiaries or Affiliates, or the Employee's services were provided, or for which the Employee had responsibility, while employed by the Company. In the event a court of competent jurisdiction holds that the five (5) year non-competition period is unenforceable, then the non-competition period shall be four (4) years; unless that period is held unenforceable, then the non-competition period shall be three (3) years; unless that period is held unenforceable, then the non-competition period shall be two (2) years; unless that period is held unenforceable, then the non-competition period shall be one (1) year. 7. REMEDIES FOR CERTAIN BREACHES. In addition to any other right and remedy it may have, the Company shall be entitled to an injunction enjoining or restraining the Employee from any violation or threatened violation of Sections 6, 8 and 9. If a court of competent jurisdiction should determine that any provision of Sections 6, 8 or 9 is unenforceable for any reason, Employee specifically agrees and requests that the court making such determination shall modify and reform the provision or provisions found to be unenforceable and, in its modified form, specifically enforce Sections 6, 8 and 9. Notwithstanding anything to the contrary, Employee's obligations under Sections 6, 8, and 9 are independent covenants without any conditions precedent or subsequent and the Company may enforce the provisions of Sections 6, 8 and 9 in any and all circumstances including but not limited to a termination of employment without cause and irrespective of whether the Company has fulfilled any or all its obligations to Employee; provided that Employee may specifically enforce any obligations owed to Employee by the Company, but Employee may not assert any alleged breach by the Company as a defense to the enforcement of any of the Company's rights under Sections 6, 8 or 9. The Company's rights under this Agreement are cumulative with, and not to the exclusion or limitation of, any and all rights of the Company and its Affiliates under the Asset Purchase Agreement or otherwise. It is specifically acknowledged and agreed by both parties that the Asset Purchase Agreement and this Employment Agreement were simultaneously bargained for by the parties and that the Asset Purchase Agreement was an inducement to each party to enter into this Agreement and vice versa. It is further agreed that neither party would have entered into the Asset Purchase Agreement without entry into this Agreement or vice versa. It is specifically agreed that the 6 7 provisions of Sections 6, 8 and 9 are reasonable and that they shall be interpreted, construed and enforced according to the laws of North Carolina. 8. CONFIDENTIALITY. During employment and for five (5) years thereafter, or such longer time as may be required by any obligation of confidentiality to third parties, which obligation is known to the Employee, Employee shall not, for any purpose other than in the performance of his work for the Company and in accordance with applicable policies and procedures, use, disclose or aid third parties in obtaining or using any confidential information of the Company or its Affiliates. For the purposes of this Agreement, Confidential Information means information of the Company or its Affiliates, not generally available to the public, including without limitation, information about customer identity, needs, practices; pricing lists and policies; marketing contracts and practices; and other corporate, business, marketing and technical information, methods and plans including without limitation formulae, computer programming techniques, documentation, software source codes, object codes, documentation, "know-how", processes, methods, research, development or marketing techniques, programs, materials or plans, client lists or any other of its or their trade secrets or confidential information. In the event that Employee shall be required to make disclosure pursuant to court order or other government process or that disclosure is necessary to enable the Employee to comply with applicable law or defend against claims, Employee shall promptly notify the Company and take at the Company's expense all reasonably necessary steps requested by the Company to defend against the enforcement of such court order or other government process, and permit the Company to participate with counsel of its choice in any proceeding relating to the enforcement thereof. Upon the termination of employment, Employee shall deliver to the Company all records, memoranda, data and other documents of any description which refer or relate in any way to such information, the disclosure of which is prohibited by these provisions, and return to the Company any of its equipment and property which may then be in Employee's possession or control. 9. INTELLECTUAL PROPERTY. Intellectual Property includes but is not limited to all ideas, discoveries and inventions (including without limitation machinery, apparatus, products, processes, methods, formulas, techniques, computer hardware, software, information systems and programs and works of authorship), and improvements thereof, and know-how related thereto--whether or not patentable, copyrightable or subject to other protection. (A) DISCLOSURE. Employee will disclose to the Company promptly in writing all Intellectual Property conceived, developed or made by him, individually or jointly, during his employment or consultancy with the Company. (B) ASSIGNMENT. Employee, upon the Company's request during his employment or consultancy with the Company or thereafter, will assign to the Company any of his rights or interest in any Intellectual Property, make all applications for patents, execute all other writings and perform all other acts, which in the Company's opinion may be necessary to establish and perfect in the Company the Employee's entire right, title and interest, foreign and domestic, in the Intellectual Property, patent applications and patents; provided, however, the Employee will not be required to assign any rights in any Intellectual Property that: 7 8 (i) he developed entirely on his own time without using the Company's equipment, supplies, facilities or confidential or trade secret information, including any professional writing as described in Section 2 hereof; and (ii) does not relate to the Company's business or actual or anticipated research or development, or result from his work for the Company. (c) Employee acknowledges that the name, "The Lewin Group, Inc.," is the property of the Company. Accordingly, Employee shall not use the name "Lewin," or grant the right to others to use the name "Lewin," as part of the name or identification of any other contract research organization, corporation, firm, or business engaged in the same business as, or a business competitive with, the Company's or its Affiliates' business for such time as the Company or its Affiliates may be in existence. 10. TERMINATION. (a) The Company shall have the right to terminate Employee's employment immediately for cause, or in the event of Employee's total disability as determined by an independent physician selected jointly by the Company and Employee, or death. For purposes of this Agreement, "total disability" shall mean a physical or mental infirmity which impairs the Employee's ability substantially to perform his employment duties for the Company and which continues for a period of at least one hundred and eighty (180) days. For purposes of this Agreement, "cause" shall include: (i) Employee's commission of any act of negligence, unlawfulness, or dishonesty , which is materially detrimental to the Company's interests; (ii) Employee's personal performance of his job in a grossly unsatisfactory manner, as reasonably determined by the Board of Directors of the Company and specified in writing, or failure to comply with the Company's directions, policies, rules or regulations, which performance or failure to comply, is materially detrimental to the Company's interests; or (iii) Employee's material breach of this Agreement. In the event of "cause" arising under Section 10(a)(i)(except for unlawfulness or dishonesty), (ii), or (iii), Employee shall be entitled to receive written notice from the Company specifying the deficiency giving rise to "cause" and a reasonable opportunity to cure such deficiency, and such notice shall be accompanied by an opinion of outside counsel to the Company confirming that in such counsel's opinion the facts alleged (which such counsel can assume as true) constitute cause under this Agreement. The Company also may terminate Employee's employment during the Term (or any renewal term) in its full discretion, for any reason or no reason, as provided for in subparagraph (c) below. (b) In the event that the Company terminates Employee's employment as provided in subparagraph (a) above, then the Company shall have no obligation to make any payments under this Agreement for any period subsequent to the date of such termination. Nothing in this Agreement is intended to supplant, waive, terminate or otherwise affect Employee's eligibility for or receipt of any death, disability or dismemberment benefits to which Employee otherwise would be entitled. 8 9 (c) In the event that the Company terminates Employee's employment during the Term (or any renewal term) otherwise than as provided in subparagraph (a) above or Employee terminates his employment during the Term (or any renewal term) by reason of the Company's breach of this Agreement, such termination by Employee being only after the Company receives written notice from the Employee specifying the deficiency alleged to constitute breach and a reasonable opportunity to cure such deficiency: (i) the Company shall continue to pay Employee's salary (in the amount and manner established in paragraph 4(a) above) for any then-remaining balance of the initial three (3) year Term, less any amount payable pursuant to paragraph (ii) below; and (ii) the Company's sole and exclusive other obligation, upon the Employee's execution of an enforceable waiver and release of all claims under this Agreement and claims related to employment, shall be to pay to Employee, in equal monthly installments, the greater of (A) an amount equal to Employee's salary pursuant to paragraph 4(a) at the rate in effect prior to such termination, for a period of one year or (B) the amount of severance pay applicable to Employee pursuant to the Company's standard severance policy as then in effect, if any. Notwithstanding anything to the contrary, the Company shall have no further liability or obligation to the Employee except as provided by law or if the terms of any employee benefit plan continue benefits under these circumstances of termination. (d) In the event Employee's employment terminates upon the Company's election not to renew the Term (or any extension of the Term), the Company's sole and exclusive obligation shall be to pay to Employee, in equal monthly payments, the greater of (i) an amount equal to the Employee's then current annual salary or (ii) the amount of severance pay applicable to Employee pursuant to the Company's standard severance policy as then in effect, if any. (e) If Quintiles should sell all or substantially all of the assets or stock of the Company to any entity other than an Affiliate of Quintiles, Employee may elect to terminate the employment relationship created by this Agreement. In the event Employee so elects, he shall have no entitlement to any further compensation or severance pay from the Company and he shall not be subject to the provisions of Section 6 (Non-competition) hereof, unless the Company should request his services as a consultant under Section 5 (Consultancy) hereof, in which case, he shall be subject to the provisions of Section 6 (Non-competition) as if the termination of employment were without "cause." (f) Notwithstanding anything in the foregoing to the contrary, upon the termination, for any reason, of Employee's employment pursuant to this Agreement, the Employee shall continue to receive health insurance coverage from the Company until Employee reaches age sixty-five (65) or is eligible for Medicare, whichever is earlier. If, in order to provide such insurance at a commercially reasonable rate, it is necessary for the Employee to remain an employee of the Company outside the terms of this Agreement, then the Company and the Employee shall agree to an employment relationship which would accomplish such provision; provided, however, that any such agreement shall not impose upon Employee any additional non- 9 10 compete, confidentiality, or related restriction. Employee and the Company agree to cooperate in the obtaining of such insurance at commercially reasonable rates. Employee agrees that he shall contribute to the cost of such insurance in an amount equal to the Company's average cost per employee for health insurance during the period Employee shall receive such coverage, and Employee also shall pay any ordinary employee contributions for such insurance. 11. GARNISHMENT OF WAGES. The Company will not garnish Employee's wages except as may be required by law or by court order or as expressly authorized by the third paragraph of Section 4(a). 12. ILLNESS OR INCAPACITY. If the Employee is unable to perform his services by reason of illness or incapacity, but is not totally disabled as defined herein, the Company shall continue the Employee's regular compensation for a period of up to, but not more than, one hundred eighty (180) days in any twelve (12) month period. 13. REPRESENTATION OF EMPLOYEE. Employee represents and warrants that his performance of the terms under this Agreement will not breach any duty or obligation owed by Employee to another under contract or otherwise, violate any confidence of another, or violate any law or recognized standard of ethics or business custom. Employee's breach of a representation or warranty in the Asset Purchase Agreement shall constitute a breach by Employee of this Agreement only if the representation or warranty in the Asset Purchase Agreement were made by Employee with actual and personal knowledge that such representation or warranty was untrue when made or upon the Closing Date. 14. ARBITRATION. The parties agree that any controversy or claim arising out of this Agreement shall be settled by arbitration in Raleigh, North Carolina in accordance with applicable rules of the American Arbitration Association and Exhibit 2 hereto. Any judgment of the arbitrator shall be final and binding on the parties. Provided, however, should a party desire to seek injunctive or other equitable relief with respect to such controversy or claim, then such party may bring the matter to a court of competent jurisdiction in lieu of arbitration and such judicial proceeding may resolve damages and other similar relief in addition to injunctive or equitable relief. Should the party seeking injunctive or equitable relief not be awarded any such relief, then to the extent unresolved, the claim or controversy shall be submitted to binding arbitration as described herein at the request of either party. Nothing herein shall be construed to require arbitration of disputes with respect to the Asset Purchase Agreement or other Transaction Documents. 15. WAIVER OF BREACH. Waiver by the Company or Employee of any breach of any of the provisions of this Agreement shall not operate or be construed as a waiver of any subsequent breach by the parties. 16. NOTICES. Any notice required or permitted to be given under this Agreement shall be considered sufficient if in writing, sent by overnight courier or fax to Employee at his residence of record with Company and/or to the Company at its principal office. 10 11 17. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of North Carolina. 18. ENTIRE AGREEMENT. This Agreement together with the Option Agreement: (i) supersedes all other understandings and agreements, oral or written, between the parties with respect to its subject matter; and (ii) constitutes the sole agreement between the parties with respect to its subject matter. Each party acknowledged that: (i) no representations, inducements, promises or agreements, oral or written, have been made by any party or by anyone acting on behalf of any party, which are not embodied in the Agreement; and (ii) no agreement, statement or promise not contained in the Agreement shall be valid or binding on the parties unless such change or modification is in writing and is signed by the parties. 19. SEVERABILITY. If a court of competent jurisdiction holds that any provision or sub-part thereof contained in the Agreement is invalid, illegal or unenforceable, that invalidity, illegality or unenforceability shall not affect any other provision in the Agreement. 20. PARTIES BOUND. The Agreement shall apply to, be binding upon and inure to the benefit of the parties' successors, assigns, heirs and other representatives; provided, however, the Employee cannot assign this Agreement without the Company's prior written consent, which consent the Company may withhold. In addition, the Company may not assign this Agreement to any entity that is not wholly-owned by Quintiles without Employee's consent, which consent Employee may withhold. 21. DUPLICATE ORIGINALS. This Agreement is executed in duplicate originals one of which is retained by each party. IN WITNESS WHEREOF, the parties have executed this Agreement this the 13th day of May, 1996. THE LEWIN GROUP, INC. By: /s/ Gregory D. Porter ------------------------ Title: Vice President ------------------------ EMPLOYEE: /s/ Lawrence S. Lewin -------------------------------- Lawrence S. Lewin 11 12 EXHIBIT 2 Dispute Resolution Procedures 1.0 For purposes of this Exhibit, "Dispute" shall mean any dispute, controversy or claim arising out of or related to the interpretation, application, or enforcement of the Employment Agreement or any breach, termination or claim of invalidity of the Employment Agreement. 2.0 In the event of any Dispute, the matter -- upon written request of either party detailing the nature of the Dispute (a "Dispute Notice") -- shall immediately be referred the arbitrator selected as provided below. Except as otherwise provided in Section 14 of the Employment Agreement, the Employee and the Company agree to submit all Disputes to binding arbitration. The arbitration shall be administered by the American Arbitration Association in Washington, D.C., and conducted in accordance with the Employment Dispute Resolution Rules of the American Arbitration Association, with the hearing locale to be Raleigh, North Carolina. 3.0 If a Dispute Notice is served, the parties shall promptly attempt to agree on and appoint a single arbitrator. If the parties have not, within 15 days of the delivery of the Dispute Notice, agreed unanimously on a single arbitrator to resolve the Dispute, either party may request that the American Arbitration Association appoint a neutral arbitrator in accordance with its rules. 4.0 A single neutral arbitrator (the "Arbitrator"), selected in accordance with the preceding subparagraph, shall preside over the arbitration and decide the Dispute (the "Decision"). The Decision shall be binding, and the prevailing party may enforce such decision in any court of competent jurisdiction. 5.0 The parties shall cooperate with each other in causing the arbitration to be held in as efficient and expeditious a manner as practicable and in this connection to furnish such documents and make available such of their respective personnel as the Arbitrator may request. The parties have selected arbitration in order to expedite the resolution of Disputes and to reduce the costs and burdens associated with litigation. The parties agree that the Arbitrator should take these concerns into account when determining whether to authorize discovery and, if so, the scope of permissible discovery and other hearing and pre-hearing procedures. 6.0 The Arbitrator shall render a Decision within 30 days after accepting an appointment to serve as Arbitrator unless the parties otherwise agree or the Arbitrator makes a finding that a party has carried the burden of showing good cause for a longer period. 12 EX-10.12 5 SERVICE AGREEMENT - INNOVEX/KNOTT 1 EXHIBIT 10.12 DATED 31ST MARCH 1993 (1) INNOVEX HOLDINGS LIMITED -and- (2) PAUL KNOTT ___________________________ SERVICE AGREEMENT ___________________________ HOBSON AUDLEY 7 Pilgrim Street London EC4V 6DR 2 THIS AGREEMENT is made the 31st day of March 1993 BETWEEN: (1) INNOVEX HOLDINGS LIMITED ("the Company") registered in England under number 1413055 whose registered office is at Innovex House, Reading Road, Henley-on-Thames, Oxon RG9 1EL; and (2) PAUL KNOTT of 9 Duncan Gardens, Purley on Thames, Berkshire RG8 8DW ("the Executive"). IT IS HEREBY AGREED as follows: 1. INTERPRETATION 1.1 In this Agreement the following words and expressions shall have the following meanings: "Associated Company": In relation to the Company, another company which is a subsidiary of, or a holding company of, or another subsidiary of a holding company of, the Company; "the Board": the Board of Directors from time to time of the Company including any committee of the Board duly appointed by it; "the Bonus Incentive Scheme": the bonus scheme for executives operated by the Company from time to time; "the Business": the carrying on of the business of the provision of advice and services connected with the provision of contract hire human resources and clinical research to serve the pharmaceutical industry; "Industrial Property": includes inventions, designs, processes, formulae, notations, improvements, know-how, goodwill, reputation, moulds, get-up, logos, devices, plans, models, literary, dramatic, musical and artistic works as defined by the Copyright Designs and Patents Act 1986; -1- 3 "Industrial Property Rights": includes patents, designs, trademarks, trade names, goodwill, copyrights, and all other forms of industrial or intellectual property (in each case in any part of the world and whether or not registered or registrable and to the fullest extent thereof and for the full period thereof and all extensions and renewals thereof) and all applications for registration thereof, and all rights and interests thereto and therein; "the Pension Scheme": the Innovex Holdings Limited Pension and Life Assurance Scheme; "production": (and consonant expressions) used in relation to Industrial Property includes the invention, creation, discovery, design, research, development and manufacture thereof; "relevant Industrial Property": all Industrial Property produced invented or discovered by the Executive either alone or with any other person at any time now or hereafter during the continuance in force of this Agreement (whether or not in the course of his employment hereunder) which is Industrial Property of the kind produced at any such time by the Company or any Associated Company, or relates directly or indirectly to the business of the Company or any Associated Company or which may in the opinion of the Company be capable of being used or adapted for use therein or in connection therewith; "the Restricted Territories": the United Kingdom, the Channel Islands, the Isle of Man, the Republic of Ireland, the Federal Republic of Germany and the United State of America; "subsidiary" and "holding company": the meanings respectively ascribed thereto by Section 736 of the Companies Act 1985; "the 1978 Act": the Employment Protection (Consolidation) Act 1978. 1.2 References in this Agreement to statutes shall include any statute modifying, re-enacting, extending or made pursuant to the same or which is modified, re-enacted, or extended by the same. -2- 4 1.3 Headings are for ease of reference only and shall not be taken into account in the construction of this Agreement. 2. APPOINTMENT The Company hereby engages the Executive and the Executive hereby agrees to serve the Company as Group Finance Director upon the terms and conditions hereinafter appearing. 3. TERM 3.1 The Executive's employment hereunder shall be deemed to have commenced on the date hereof and shall continue (subject to earlier termination as provided for herein) for an initial term of three years expiring on 31st day of March 1996 and thereafter until terminated by either party giving to the other twelve months' prior notice such notice to expire at or at any time after 31st March 1996. 3.2 The Company shall be entitled to pay salary in lieu of notice. 3.3 The Executive's previous employment with Innovex Limited from 30th November 1992 to date shall count as part of the Executive's continuous period of employment with the Company for the purposes of the 1978 Act. 3.4 In the event that the Company gives notice to terminate the employment of the Executive under this Agreement the Executive agrees:- (a) that for a period not exceeding the period of such notice the Board may in its absolute discretion require the Executive to perform only such duties as it may allocate to him or not to perform any of his duties under this Agreement and/or to exclude him from any premises of the Company or of any Associated Company (without providing any reason therefor); and (b) that such action taken on the part of the Company shall not constitute a breach of this Agreement of any kind whatsoever -3- 5 in respect of which the Executive has any claim against the Company; PROVIDED ALWAYS that throughout the period of any such action the Executive's salary and all other contractual benefits shall continue to be paid and provided to him unless and until his employment shall be terminated. 4. POWERS, DUTIES AND WORKING HOURS 4.1 During the continuance of his employment hereunder the Executive shall:- (a) unless prevented by ill health or accident devote all of his time and all his attention and abilities during normal business hours to carrying out his duties hereunder; (b) carry out his duties in a proper and efficient manner and use his best endeavours to promote and maintain the interests and reputation of the Company and of its Associated Companies; (c) exercise such powers and perform such duties in relation to the business of the Company and/or of its Associated Companies as may from time to time be vested in or assigned to him by the Board; such powers and duties may from time to time fall outside the normal ambit of the Executive's position but will not be duties inappropriate to the Executive's status; (d) comply with all reasonable directions from time to time given to him by the Board and with all rules and regulations from time to time laid down by the Company concerning its employees which are consistent with this Agreement; (e) work at such location in the United Kingdom as the Company shall require from time to time and, if the Company shall so require for this purpose, and subject to the Company's bearing the Executive's reasonable moving expenses in accordance with -4- 6 its then current policy for the relocation of executives shall move to and reside at such location; and (f) travel to such places (whether within or outside the United Kingdom) in such manner and on such occasions as the Company may from time to time reasonably require. 4.2 The Executive's normal working hours shall be such hours as are reasonably necessary for the proper performance of the Executive's duties. 5. REPORTING The Executive shall report to the Board and shall at all times keep the Board informed of his conduct of the affairs of the Company and its Associated Companies. 6. REMUNERATION 6.1 During the continuance of his employment hereunder the Executive shall be paid a salary at the initial rate of L.60,000 per annum which shall be reviewed annually on or with effect from 1st April each year but without commitment to increase (the first such review to be made on or to take effect from 1st April 1993) and such salary shall accrue from day to day and be paid by equal monthly installments in arrears on the last day of each month or if that is not a business day the immediately preceding business day. 6.2 The Executive shall be paid a Director's fee of L.250 in respect of each Board Meeting of the Company which he shall attend. 6.3 Save as provided in clause 6.2, notwithstanding anything to the contrary in the Articles of Association of the Company or of any Associated Company the Executive shall not be entitled to any remuneration as an officer or employee of the Company or of any Associated Company in addition to that specified in this Agreement. -5- 7 7. EXPENSES The Company shall reimburse to the Executive all reasonable travelling, hotel, entertainment and other out-of-pocket expenses properly incurred by him in the proper performance of his duties subject to production if required of receipts and vouchers. 8. COMPANY CAR 8.1 The Company shall provide the Executive with a motor car commensurate with the Executive's position for the purpose of performing his duties hereunder and the Company shall bear the cost of all petrol and oil, both business and private mileage, and all other expenses reasonably and properly incurred by him in the use of such motor car. 8.2 The Executive shall take good care of the vehicle and procure that the provisions and conditions of any policy of insurance relating thereto are observed in all respects, and shall comply with all regulations of the Company relating to company cars. 8.3 Upon the determination (howsoever arising) of his employment hereunder the Executive shall forthwith return the vehicle, its keys and all documents relating to it to the Company at its principal place of business or as otherwise directed by the Company. 9. PENSION, ETC. BENEFITS 9.1 During the continuance of his employment hereunder the Executive shall be entitled to become a member of the Pension Scheme (in relation to which there is not a contracting out certificate in force) subject to the rules and regulations of the Pension Scheme from time to time. The Company will at the Executive's option make contributions to a personal pension plan equal to those which it would pay in respect of the Executive to the Pension Scheme. 9.2 During the continuance of his employment hereunder the Executive shall be entitled to participate at the Company's expense in the Company's:- -6- 8 (a) life assurance scheme with Zurich Life; (b) private medical scheme with BUPA; and (c) permanent health scheme with Unum; subject to the rules of the schemes from time to time. 9.3 During the continuance of his employment hereunder the Executive shall be entitled to participate in:- (a) the Company's Bonus Incentive Scheme; and (b) the Innovex Limited profit related pay scheme; subject to the rules of such schemes as from time to time amended. 9.4 The Executive will be invited to participate in the share option scheme proposed to be adopted by the Company. 10. HOLIDAYS 10.1 In addition to bank and other public holidays the Executive shall be entitled in every calendar year to 25 working days' paid holiday, 22 days to be taken at such time or times as may be approved by the Board and 3 days to be taken at such time as shall be designated by the Board PROVIDED THAT to the extent that any holiday entitlement is not taken in any calendar year the same shall be lost. 10.2 Holiday entitlement shall be deemed to accrue at the rate of 2 days per month and on the determination of his employment hereunder the Executive shall be entitled to pay in lieu of outstanding holiday entitlement and shall be required to repay to the Company pay for holiday taken in excess of his actual entitlement and for the purposes of this Clause the basis for payment shall be 1/261 annual salary for each day's holiday entitlement. -7- 9 11. INCAPACITY 11.1 If the Executive is absent from work due to illness or accident he shall notify the Company Secretary as soon as possible and if this incapacity continues for seven or more consecutive days or for more than fourteen working days in any year he shall submit a doctor's certificate to the Company. 11.2 If the Executive is absent from work due to illness or accident duly notified and certified in accordance with Clause 11.1 the Company shall pay the Executive his full remuneration (including bonus/commission) for up to an aggregate of 130 working days absence in any period of twelve months and thereafter such remuneration (if any) as the Board shall in its discretion approve. 11.3 The remuneration paid under Clause 11.2 shall include any Statutory Sick Pay payable and when this is exhausted shall be reduced by the amount of any Social Security Sickness Benefit or other benefits recoverable by the Executive (whether or not recovered). 11.4 The Company may at its expense at any time whether or not the Executive is then incapacitated require the Executive to submit to such medical examinations and tests by doctor(s) nominated by the Company and the Executive hereby authorizes such doctor(s) to disclose to and discuss with the Company and its medical adviser(s) the results of such examinations and tests. 12. SECRECY The Executive shall during the continuance of his employment hereunder and at all times thereafter keep with inviolable secrecy and shall not reveal, disclose or publish to any person other than the Board or persons nominated by them or otherwise utilise other than for the proper performance of his duties any information of a confidential or secret nature (including without limitation trade secrets, know-how, inventions, designs, processes, formulae, notations, improvements, financial information and lists of customers) concerning the affairs or business or products of the -8- 10 Company or of any Associated Company or of any of their predecessors in business or of their suppliers, agents, distributors or customers of which he may now know or have learned or which he may hereafter know or learn while in the Company's employment, and shall not use for his own purposes or for any purposes other than those of the Company or of any Associated Company any such confidential information. 13. INTELLECTUAL PROPERTY 13.1 All relevant Industrial Property and all Industrial Property Rights therein shall to the fullest extent permitted by law belong to, vest in and be the absolute, sole and unencumbered property of the Company or an Associated Company. 13.2 The Executive hereby:- (a) acknowledges for the purposes of Section 39, Patents Act 1977 that because of the nature of his duties and the particular responsibilities arising from the nature of his duties he has and at all times during his employment will have a special obligation to further the interests of the undertakings of the Company and of any Associated Company; (b) undertakes to notify and disclose to the Company in writing full details of all relevant Industrial Property forthwith upon the production of the same, and promptly whenever requested by the Company and in any event upon the determination of his employment with the company deliver up to the Company all correspondence and other documents, papers and records, and all copies thereof in his possession, custody and power relating to any relevant Industrial Property; (c) undertakes to hold upon trust for the benefit of the Company or any Associated Company any relevant Industrial Property and the Industrial Property Rights therein to the extent the same may not be and until the same are vested absolutely in the Company or any Associated Company; -9- 11 (d) assigns by way of present assignment of future copyright all copyright in all relevant Industrial Property; (e) acknowledges that save as provided by law no further remuneration or compensation other than that provided for herein is or may become due to the Executive in respect of the performance of his obligations under this Clause; and (f) undertakes at the expense of the Company to execute all such documents, make such applications, give such assistance and do such acts and things as may in the opinion of the Board be necessary or desirable to vest in and register or obtain letters patents in the name of the Company or any Associated letters patents in the name of the Company or any Associated Company and otherwise to protect and maintain the relevant Industrial Property and the Industrial Property Rights therein. 13.3 To the extent that by law any relevant Industrial Property or the Industrial Property Rights therein do not, or are not permitted to, vest in or belong to the Company or any Associated Company the Executive agrees immediately upon the same coming into existence to offer to the Company or any Associated Company in writing a right of first refusal to acquire the same on arm's length terms to be negotiated and agreed between the parties in good faith. 14. RESTRICTIONS DURING EMPLOYMENT The Executive shall not during the continuance of his employment hereunder without the prior consent in writing of the Board either alone or jointly with or on behalf of others and whether directly or indirectly and whether as principal, partner, agent, shareholder, director, employee or otherwise howsoever engage in, carry on or be interested or concerned in any business other than that of the Company and its Associated Companies PROVIDED THAT nothing in this Clause shall preclude the Executive from:- (a) holding shares or other securities as a bona fide investment only in any company where such shares or other securities are quoted or otherwise dealt in on a recognized or designated -10- 12 investment exchange and the Executive's aggregate holding of such shares or securities does not constitute more than five per cent of all the equity shares in the capital of that company or confer the right to cast more than five per cent of all the votes ordinarily capable of being cast at general meetings of the shareholders of that company; or (b) maintaining his present outside business interests and investments as disclosed to, and approved by, the Board (such approval not to be unreasonably withheld) and PROVIDED ALWAYS that:- (i) such business is not at any time in competition with the Company or any of its subsidiaries; and (ii) the Executive's duties hereunder to the Company shall have priority and the pursuit of such outside interests shall not unduly interfere with the due and proper performance of such duties. 15. GRIEVANCE AND DISCIPLINARY PROCEDURE 15.1 If the Executive wishes to seek redress of any grievance relating to his employment he should refer such grievances to the Board for resolution. 15.2 The Company's disciplinary procedures from time to time in force shall apply to the Executive. 16. TERMINATION 16.1 If:- (a) the Executive shall be or become of unsound mind or be or become a patient for any purpose of any statute relating to mental health; or -11- 13 (b) the Executive shall enter into any composition or arrangement with or for the benefit of his creditors including a voluntary arrangement under the Insolvency Act 1986; or (c) a bankruptcy petition is presented against the Executive or if circumstances exist now or in the future under which such a petition could be presented; or (d) the Executive shall commit any act of dishonesty whether relating to the Company, any Associated Company, an employee or otherwise; or (e) the Executive is guilty of any misconduct or commits any serious or persistent breach of any of his obligations to the Company or any Associate Company (whether under this Agreement or otherwise) or refuses or neglects to comply with any lawful orders or directions given to him by the Board consistent with the terms of this Agreement; or (f) the Executive is guilty of any conduct tending to bring himself, the Company or any Associated Company into disrepute; or (g) the Executive shall be or be prohibited or disqualified from holding the office which he holds in the Company or any Associated Company or shall be removed from any such office or shall resign from any such office without the prior written consent of the Board; THEN the Company shall be entitled by notice in writing to the Executive to determine his employment under this Agreement forthwith whereupon the Executive shall have no claim against the Company for damages or otherwise by reason of such determination. -12- 14 16.2 This Agreement shall automatically terminate on the Executive's 65th birthday. 16.3 Upon the termination of the Executive's employment for whatever reason the Executive shall:- (a) immediately tender his resignation from all offices he holds in the Company and in any Associated Company without prejudice to any other rights accruing to either party hereto: and (b) deliver to the Company forthwith all documents, (including copies), and all keys, credit cards, books and other property of the Company or any Associated Company then in his possession. 16.4 After the termination of the Executive's employment hereunder he shall not at any time thereafter represent himself as being in any way connected with or interested in the business of or employed by the Company or any Associated Company; or use for trade or other purposes the name of the Company or any Associated Company or any name capable of confusion therewith. 16.5 The termination of the Executive's employment hereunder for whatever reason shall not affect those terms of this Agreement which are expressed to have effect thereafter and shall be without prejudice to any accrued rights or remedies of the parties. 17. POST-TERMINATION OBLIGATIONS 17.1 The Executive undertakes to and covenants with the Company that, unless he shall be wrongfully dismissed:- (a) he will not for a period of 18 months after termination of this Agreement in the Restricted Territories directly or indirectly deal with or engage in business with or be in any way interested in or connected with (in each case in relation to the Business) any concern, undertaking, firm or body corporate which engages in or carries on within any part of -13- 15 the Restricted Territories the Business in competition with the Company or any Associated Company; and (b) he will not for a period of 2 years after the termination of this Agreement directly or indirectly:- (i) in competition with the Company or any Associate Company solicit the custom of (or offer or agree to provide goods or services of a like description to those provided by the Company or any Associated Company to) any person firm or company which is, or which has at any time during the period of 2 years preceding the termination of this Agreement been a customer or client of the Company or any Associated Company; (ii) interfere or seek to interfere with the relations between the Company or any Associated Company and any of its suppliers; (iii) solicit, interfere with or endeavour to entice away from the Company or any Associated Company any person who is an employee or director of the Company or any Associated Company (whether or not such person would commit a breach of the terms of his contract of employment by leaving the service of the company concerned) or knowingly employ, or assist in or procure the employment by any other person firm or company of, any such person. 17.2 Each of the obligations on the Executive contained in the above provisions of this Clause constitutes an entirely separate and independent restriction on the Executive notwithstanding that they may be contained in the same sub-clause, paragraph, sentence or phrase. 17.3 If any obligation set out in Clause 17.1 or any part thereof shall be held invalid or unenforceable or void but would not be so held if some part of it were deleted or modified or varied then such -14- 16 provision shall apply with such deletion, modification or variation as may be necessary to make it valid and effective. 18. GENERAL 18.1 No failure or delay by the Company in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof nor shall any single or partial exercise by the Company of any right, power or privilege preclude any further exercise thereof or the exercise of any other right, power or privilege. 18.2 The Executive hereby irrevocably and by way of security appoints the Company and each Associated Company now or in the future existing to be his attorney and in his name and on his behalf and as his act and deed to sign, execute and do all acts, things and documents which he is obliged to execute and do under the provisions of this Agreement and the Executive hereby agrees forthwith on the request of the Company to ratify and confirm all such acts, things and documents signed, executed or done in pursuance of this power. 19. NOTICES 19.1 Any notice or other communication given or made under this Agreement shall be in writing and may be delivered to the relevant party or sent by first class prepaid post to the address of that party specified in this Agreement or such other address in England as may be notified by that party from time to time for this purpose, and shall be effectual notwithstanding any change of address not so notified. 19.2 Unless the contrary shall be proved each such notice or communication shall be deemed to have been given or made, if by first class prepaid post, 72 hours after posting and, if by delivery, at the time of delivery. -15- 17 20. OTHER AGREEMENTS This Agreement supersedes all other agreements whether written or oral between the Company or any Associated Company and the Executive relating to the employment of the Executive and the Executive acknowledges and warrants to the Company that he is not entering into this Agreement in reliance on any representation not expressly set out herein. 21. GOVERNING LAW This Agreement shall be governed by and construed in all respects in accordance with English law and the parties agree to submit to the exclusive jurisdiction of the English Courts as regards any claim or matter arising in respect of this Agreement. IN WITNESS whereof this Agreement has been signed for and on behalf of the Company and duly executed as a Deed by the Executive the day and year first above written SIGNED by ) for and on behalf of ) /s/ Barrie S. Haigh INNOVEX HOLDINGS LIMITED ) in the presence of:- /s/ A.R. Gordon EXECUTED and DELIVERED as a ) /s/ Paul Knott Deed by PAUL KNOTT ) in the presence of:- /s/ A.R. Gordon EX-10.13 6 NON-COMPETE AGREEMENT - KNOTT 1 EXHIBIT 10.13 DEED OF NON-COMPETITION BETWEEN QUINTILES TRANSNATIONAL CORP. AND PAUL KNOTT 29 NOVEMBER 1996 2 INDEX CLAUSE PAGE ------ ---- 1. Certain Definitions.............................................. 3 1.1 Certain Definitions.................................. 3 2. Non-competition and Non-solicitation Covenants.................... 3 2.1 General.............................................. 3 2.2 Non-Competition...................................... 3 2.3 Holding of Shares or Securities...................... 5 2.4 Nondisclosure........................................ 5 2.5 Geographical Restriction............................. 5 2.6 Non-Competition Period............................... 6 2.7 Remedies............................................. 6 2.8 Other Agreements..................................... 6 3. General Provisions................................................ 6 3.1 Notices.............................................. 6 3.2 Variation............................................ 7 3.3 Entire Agreement..................................... 7 3.4 Assignment........................................... 8 3.5 Law and Jurisdiction................................. 9 2 3 THIS NON-COMPETE AGREEMENT dated 29 November 1996 is executed as a Deed and is made BETWEEN (1) QUINTILES TRANSNATIONAL CORP., a corporation incorporated under the laws of North Carolina, U.S.A. (the "Purchaser"); and (2) PAUL KNOTT, an individual residing at The Gables, Elvendon Road, Goring-on-Thames, Oxon, RG8 ODT (the "Vendor"). WHEREAS: (A) Concurrently with the execution of this Agreement, the Purchaser, the Vendor and others are consummating certain transactions under a Share Exchange Agreement ("the Share Exchange Agreement") pursuant to which the Vendor and other vendors are exchanging their shares of Innovex Limited ("Innovex") for shares of Quintiles Transnational Corp. (B) The Vendor is entering into this Agreement as a condition precedent to completion under the Share Exchange Agreement. (C) Upon completion of the share exchange pursuant to the Share Exchange Agreement, Vendor will own approximately 57,006 shares of the outstanding common stock of the Purchaser. NOW THIS DEED WITNESSETH as follows: 1. CERTAIN DEFINITIONS 1.1 Certain Definitions. In this Agreement the following words and expressions shall have the meanings respectively ascribed to them: "Affiliates" shall mean: (i) the Purchaser; (ii) any Purchaser subsidiary or related entity (including without limitation Innovex and its subsidiaries); and (iii) any entity directly or indirectly beneficially owned or controlled in whole or part by the Purchaser or any Purchaser subsidiary or related entity, in each case as existing at or prior to the date of termination of Vendor's employment. 2. NON-COMPETITION AND NON-SOLICITATION COVENANTS 2.1 General. In consideration of the Purchaser agreeing to complete the Share Exchange Agreement, during the Vendor's employment with the Purchaser and the Non-Competition Period (as defined in Section 2.6): 2.2 Non-Competition. The Vendor shall not, either alone or jointly with another or others, whether as principal, agent, director, shareholder, independent contractor, officer, employee or in any other capacity, whether directly or indirectly, and whether for his own benefit or that of others: 3 4 (a) be engaged or have an economic interest in any business which competes with any business carried on or engaged in by the Purchaser or any of its Affiliates at or before (provided such business has not been terminated or abandoned by Purchaser or such Affiliate) the date of termination of Vendor's employment, including without limitation Related Activities (as defined below) (hereinafter, a "Competitive Business"); (b) solicit or endeavor to solicit on behalf of a Competitive Business, from or with any person or entity: (i) who or which was a customer of the Purchaser or any of its Affiliates at any time during the period of twelve (12) months preceding the date of the termination of the Vendor's employment; (ii) who or which the Vendor or someone for whom he was directly responsible solicited, negotiated, contracted, serviced, advised or had contact with on the Purchaser's or any of its Affiliates' behalf; or (iii) to whom the Purchaser or any of its Affiliates had made proposals to do business at any time during the period of twelve (12) months preceding the date of the termination of the employment; (c) deal, do business or endeavor to deal or do business for a Competitive Business from or with any person or entity: (i) who or which was a customer of the Purchaser or any of its Affiliates at any time during the twelve (12) months preceding the date of the termination of the employment; (ii) who or which the Vendor or someone for whom he was directly responsible solicited, negotiated, contracted, serviced, advised or had contact with on the Purchaser's or any of its Affiliates' behalf; or (iii) to whom the Purchaser or any of its Affiliates had made proposals to do business at any time during the period of twelve (12) months preceding the date of the termination of the employment; (d) without the written permission of the Board of the Purchaser (such permission not to be unreasonably withheld or delayed and in particular such permission will not be withheld if the Purchaser considers that the Vendor has neither a personal influence with clients nor is in possession of confidential information) offer employment to or otherwise solicit for employment the services of any individual who was an employee or director of the Purchaser or any of its Affiliates during the period of twelve (12) months preceding the date of termination of employment whether or not such persons would commit any breach of his contract of employment with the Purchaser or any of its Affiliates by reason of his leaving service; or (e) directly or indirectly take any action which is intended to be materially detrimental or otherwise intended to be adverse to the Purchaser's and/or any of its Affiliates' 4 5 goodwill, name, business relations, prospects and operations. Notwithstanding anything in this Agreement to the contrary, the following activities will not be deemed to contravene the provisions of this Agreement: (i) Owning, operating, controlling or serving as a director, officer or employee of or consultant to any company the principal business of which is manufacturing, distributing, marketing and/or selling pharmaceutical products the rights to which are owned by or licensed to such company; provided that the amount of the consolidated revenues of such company in any year derived from operations (as defined below, "Related Activities") involving providing, on a contract, for hire, or similar basis (i) drug development services, (ii) pharmaceutical or clinical research services, (iii) pharmaceutical sales or marketing services, (iv) health information management services, and/or (v) any other activity which constitutes a significant part of the business of the Purchaser (in the case of subparagraph (v), at or before the date of termination of Vendor's employment) will not exceed the greater of five percent (5%) of consolidated revenues or five percent (5%) of consolidated expenses of such company; provided further that Vendor shall have no direct involvement in such Related Activities as a director, officer, employee, consultant or otherwise; provided further, it is agreed that Related Activities are intended to be limited to activities which are incidental to the operations of a pharmaceutical business and are not, without limiting the foregoing, any activities dedicated primarily to a Competitive Business or the purpose of drug development, marketing, sales services, or health benefit analysis of the products or potential products of third parties. (ii) the provision of executive search consulting services so long as such services are not provided to an entity engaged in Related Activities; and (iii) the provision of financial consulting services so long as such services are not provided to an entity engaged in Related Activities. 2.3 Holding of Shares or Securities. Section 2.2 shall not prohibit the holding (directly or through nominees or otherwise) of shares or other securities of another company which are listed or traded on any recognized stock exchange being a holding (which phrase shall include any interest in any such holding) entitling the holder to no more than two and one half percent (2.5%) of the voting power of such body corporate. 2.4 Nondisclosure. The Vendor shall not either before or after the termination of his employment disclose to any person or persons any confidential information in relation to the affairs of the Purchaser or any of its Affiliates or any client or customer thereof which he has become or may have become possessed whilst in the service of the Purchaser except in the proper course of his duties as an officer, director or employee of the Purchaser or as authorized by the Board or as ordered by a Court of competent jurisdiction or pursuant to other governmental process. 2.5 Geographical Restriction. The restrictions set forth in Sections 2.2(a) apply to the following geographical areas: the United Kingdom, the Federal Republic of Germany and the United States of America, including the territories and possessions thereof. 5 6 2.6 Non-Competition Period. As used in this Agreement "Non-Competition Period" means the eighteen (18) month period following the termination of Vendor's employment, (irrespective of the circumstances of such termination, except that the final six months of any garden leave shall run concurrently with the first six months of the Non-Competition Period), except that for purposes of the restrictions set forth in Sections 2.2(b) and 2.2(c) (regarding solicitation, etc.), "Non-Competition Period" shall mean the twenty-four (24) month period following the termination of Vendor's employment (irrespective of the circumstances of such termination). 2.7 Remedies. Vendor acknowledges and agrees that Vendor's failure to abide by the provisions of this Agreement would cause irreparable harm to the Purchaser and/or its Affiliates for which legal remedies would be inadequate. Therefore, in addition to any legal or other relief to which the Purchaser and/or its Affiliates may be entitled by virtue of Vendor's failure to abide by these provisions: (i) the Purchaser may seek legal and equitable relief, including but not limited to preliminary and permanent injunctive relief, for Vendor's actual or threatened failure to abide by these provisions; (ii) Vendor will, upon final judicial determination that Vendor has breached the terms of this Agreement, indemnify the Purchaser and/or its Affiliates for all expenses (including legal fees) in seeking to enforce these provisions; and (iii) if, as a result of Vendor's failure to abide by the provisions, any commission or fee becomes payable to Vendor or to any person, corporation or other entity with which Vendor has become employed or otherwise associated, Vendor shall pay the Purchaser or cause the person, corporation or other entity with whom he has become employed or otherwise associated to pay the Purchaser an amount equal to such commission or fee. 2.8 Other Agreements. Nothing in this Agreement shall terminate, revoke or diminish Vendor's obligations or the Purchaser's and/or its Affiliates' rights and remedies under law or under Vendor's existing service agreement and the Share Exchange Agreement relating to trade secrets, confidential information, non-competition and intellectual property. 3. GENERAL PROVISIONS 3.1 Notices. All notices, demands, requests, or other communications which may be or are required to be given, served, or sent by any party to any other party pursuant to this Agreement shall be in writing and shall be hand delivered, sent by overnight courier or mailed by first-class registered post, postage prepaid, return receipt requested or transmitted by telegram, telecopy or telex, addressed as follows: (a) If to the Purchaser: Quintiles Transnational Corp. 4709 Creekstone Drive Riverbirch Building, Suite 300 Durham, North Carolina U.S.A. 27703 Attention: Gregory D. Porter Fax: 919-941-2090 6 7 with a copy which shall not constitute notice to: Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan L.L.P. 2500 First Union Capital Center Raleigh, North Carolina U.S.A. 27601 Attention: Gerald F. Roach Fax: 919-821 6800 (b) If to the Vendor: Paul A. Knott The Gables Elvendon Road Goring-on-Thames Oxon, RG8 ODT, England With a copy which shall not constitute notice to: Attention: Fax: Each party may designate by notice in writing a new address to which any notice, demand, request or communication may thereafter be so given, served or sent. Each notice, demand, request, or communication which shall be hand delivered, sent, mailed, telecopied or telexed in the manner described above, or which shall be delivered to a telegraph company, shall be deemed sufficiently given, served, sent, received or delivered for all purposes at such time as it is delivered to the addressee (with the return receipt, the delivery receipt, or (with respect to a telecopy or telex) the answerback being deemed conclusive, but not exclusive, evidence of such delivery) or at such time as delivery is refused by the addressee upon presentation. 3.2 Variation. No variation of this Agreement shall be valid or effective unless made by one or more instruments in writing signed by all of the parties hereto. 3.3 Entire Agreement. Except as expressly provided in this Agreement, this Agreement: (i) supersedes and cancels all other understandings and agreements, oral or written, 7 8 with respect to Vendor's obligations with respect to non-competition which Vendor has executed in the past; (ii) supersedes all other understandings and agreements, oral or written, between the parties with respect to the subject matter of this Agreement; and (iii) constitutes the sole agreement between the parties with respect to the matters covered. No change or modification of this Agreement shall be valid or binding upon the parties unless such change or modification is in writing and is signed by the parties. 3.4 Assignment. Neither of the parties hereto shall assign or otherwise deal with any of its right, title or interest in this Agreement without the prior written consent of the other party to this Agreement, which consent may be withheld in such party's absolute discretion, provided, however, that the Purchaser may in its absolute discretion assign all or any of its right title and interest in this Agreement to an Affiliate or to a subsequent purchaser of all of the share capital of the Company or all or substantially all of the assets of the Company. 8 9 3.5 Law and Jurisdiction. This Agreement shall be governed by and construed in accordance with English law and the parties irrevocably submit to the non-exclusive jurisdiction of the High Court of Justice in London for all purposes connected with it. IN WITNESS whereof this Agreement has been executed and unconditionally delivered as a Deed the day and year first-above written. Signed and delivered as a Deed ) by Quintiles Transitional Corp. ) by its duly authorized ) Vice President, Rachel R. Selisker, ) and by its duly authorized ) Secretary, Gregory D. Porter ) /s/ Rachel R. Selisker - --------------------------- Rachel R. Selisker Vice President /s/ Gregory D. Porter - --------------------------- Gregory D. Porter Secretary Signed and delivered as a Deed ) /s/ Paul Knott by Paul Knott ) in the presence of: Name: David B. Rockwell ) ----------------------- Address: 28 Willow Road ) ------------------- Hampstead, London ) ------------------- NW3 1TL, England ) ------------------- Occupation: Attorney ) ---------------- 9 EX-10.14 7 SERVICE AGREEMENT - INNOVEX/WHITE 1 EXHIBIT 10.14 DATED 2nd September 1994 (1) INNOVEX PLC - and - (2) DAVID FINDLAY WHITE ------------------------------------------ SERVICE AGREEMENT ------------------------------------------ Hobson Audley 7 Pilgrim Street London EC4V 6DR 2 THIS AGREEMENT is made the 2nd day of September 1994 BETWEEN: (1) INNOVEX PLC ("the Company") registered in England under number 1413055 whose registered office is at Innovex House, Marlow Park, Marlow, Bucks; and (2) DAVID FINDLAY WHITE of Boughmoor Farm, Timbersbrook, Congleton, Cheshire CW123PS ("the Director"). IT IS HEREBY AGREED as follows: 1. Interpretation 1.1 In this Agreement the following words and expressions shall have the following meanings: "Associated Company": in relation to the Company, another company which is a subsidiary of, or a holding company of, or another subsidiary of a holding company of, the Company; "the Board": the Board of Directors from time to time of the Company including any Committee of the Board duly appointed by it; "the Bonus Incentive Scheme": the bonus scheme for executives operated by the Company from time to time; "the Business": the carrying on of the business of the provision of advice and services connected with the provision of contract hire human resources and clinical research to serve the pharmaceutical industry; "Industrial Property": includes inventions, designs, processes, formulae, notations, improvements, know-how, goodwill, reputation, moulds, get-up, logos, devices, plans, models, literary, dramatic musical and artistic works as defined by the Copyright Designs and Patents Act 1988; "Industrial Property Rights": includes patents, trademarks, designs, trade names, goodwill. Copyrights, and all other forms of industrial or intellectual property (in each case in any part of the world and whether or not registered or registrable and to the fullest extent thereof and for the full period thereof and all extensions and renewals thereof) and all applications for registration thereof, and all rights and interests thereto and therein; -2- 3 "Production": (and consonant expressions) used in relation to Industrial Property includes the invention, creation, discovery, design, research, development and manufacture thereof; "relevant Industrial Property": all Industrial Property produced invented or discovered by the Director either alone or with any other person at any time now or hereafter during the Continuance in force of this Agreement (whether or not in the course of his employment hereunder) which is Industrial Property of the kind produced at any such time by the Company or any Associated Company, or relates directly or indirectly to the business of the Company or any Associated Company or which may in the opinion of the Company be capable of being used or adapted for use therein or in connection therewith; "the Restricted Territories": the United Kingdom, the Channel Islands, the Isle of Man, the Republic of Ireland, the Federal Republic of Germany and the United States of America; "subsidiary" and "holding company": the meanings respectively ascribed thereto by Section 736 of the Companies Act 1985; "the 1978 Act": the Employment Protection (Consolidation) Act 1978. 1.2 References in this Agreement to statutes shall include any statute modifying, re-enacting, extending or made pursuant to the same or which is modified, re-enacted, or extended by the same. 1.3 Headings are for ease of reference only and shall not be taken into account in the construction of this Agreement. 2. Appointment The Company hereby engages the Director and the Director hereby agrees to serve the Company as a director of the Company and as Group Chief Executive Officer upon the terms and conditions hereinafter appearing. 3. Term 3.1 The Director's employment hereunder shall commence on 1st September 1994 ("the Commencement Date") and shall continue (subject to earlier termination as provided for herein) for an initial term of two years expiring on the second anniversary of the Commencement Date and thereafter until terminated by either party giving to the other twelve months' prior notice such notice to expire at or at any time after the second anniversary of the Commencement Date. 3.2 The Company shall be entitled to pay salary in lieu of notice. -3- 4 3.3 No previous period of employment shall count as part of the Director's continuous period of employment with the Company for the purposes of the 1978 Act. 3.4 In the event that the Company gives notice to terminate the employment of the Director under this Agreement the Director agrees: (a) that for a period not exceeding the period of such notice the Board may in its absolute discretion require the Director to perform only such duties as it may allocate to him or not to perform any of his duties under this Agreement and/ or to exclude him from any premises of the Company or of any Associated Company (without providing any reason therefor); and (b) that such action taken on the part of the Company shall not constitute a breach of this Agreement of any kind whatsoever in respect of which the Director has any claim against the Company; PROVIDED ALWAYS that throughout the period of any such action the Director's salary and all other contractual benefits shall continue to be paid and provided to him unless and (until his employment shall be terminated). 4. Powers, Duties, and Working Hours 4.1 During the continuance of his employment hereunder the Director shall: (a) unless prevented by ill health or accident devote all of his time and all his attention and abilities during normal business hours to carrying out his duties hereunder; (b) carry out his duties in a proper and efficient manner and use his best endeavors to promote and maintain the interests and reputation of the Company and of its Associated Companies; (c) exercise such powers and perform such duties in relation to the business of the Company and/or of its Associated Companies as may from time to time be vested in or assigned to him by the Board; such powers and duties may from time to time fall outside the normal ambit of the Director's position but will not be duties inappropriate to the Director's status; (d) comply with all reasonable directions from time to time given to him by the Board and with all rules and regulations form time to time laid down by the Company concerning its employees which are consistent with this Agreement; -4- 5 (e) the Director shall as soon as reasonably practicable relocate his residence to within a reasonable commuting distance of Marlow, Bucks. Notwithstanding the foregoing the Director shall work at such location in the United Kingdom as the Company shall require from time to time and, if the Company shall so require for this purpose. The Company shall bear the Director's reasonable moving expenses in compliance with the foregoing provisions of this sub-clause 4.1(e) in accordance with its then current policy for the relocation of executives; and (f) travel to such places (whether within or outside the United Kingdom) in such manner and on such occasions as the Company may from time to time reasonably require. 4.2 The Director's normal working hours shall be such hours as are reasonably necessary for the proper performance of the Director's duties. 5. Reporting The Director shall report to the Board and shall keep the Board informed of his conduct of the affairs of the Company and its Associated Companies. 6. Remuneration 6.1 During the continuance of his employment hereunder the Director shall be paid a salary at the initial rate of (pound)120,000 per annum which shall be reviewed annually on or with effect from 1st April each year but without commitment to increase (the first such review to be made on or to take effect from 1st April 1995) and such salary shall accrue from day to day and be paid by equal monthly installments in arrears on the last day of each month or if that is not a business day the immediately preceding business day. 6.2 Notwithstanding anything to the contrary contained in the Articles of Association of the Company or of any Associated Company the Director shall not be entitled to any remuneration as an officer or employee of the Company or of any Associated Company in addition to that specified in this Agreement. 7. Expenses The Company shall reimburse to the Director all reasonable travelling, hotel, entertainment and other out-of-pocket expense, properly incurred by him in the proper performance of his duties subject to production if required of receipts and Vouchers. -5- 6 8. Company Car 8.1 The Company shall provide the Director with a motor car up to the value of (pound)35,000 and commensurate with the Director's position for the purpose of performing his duties hereunder and the Company shall bear the cost of all petrol and oil, both business and private mileage, and all other expenses reasonably and properly incurred by him in the use of such motor car. The vehicle shall be replaced in accordance with the Company's car fleet policy from time to time. 8.2 The Director shall take good care of the vehicle and procure that the provisions and conditions of any policy of insurance relating thereto are observed in all respects, and shall comply with all regulations of the Company relating to company cars. 8.3 Upon the determination (howsoever arising) of his employment hereunder the Director shall forthwith return the vehicle, its keys and all documents relating to it to the Company at its principal place of business or as otherwise directed by the Company. 9. Pension, etc. Benefits 9.1 The Company will make contributions to a personal pension plan equal to 10% of the Director's salary. 9.2 During the continuance of his employment hereunder the Director shall be entitled to participate at the Company's expense in the Company's: (a) life assurance scheme; and (b) permanent health scheme; subject to the rules of the schemes and in accordance with the Company's participation policy from time to time. 9.3 During the continuance of his employment hereunder the Director shall be entitled to participate in: (a) the Company's Bonus Incentive Scheme; and (b) the Innovex Limited profit related pay scheme; subject to the rules of such schemes as from time to time amended. 9.4 The Director will be invited to participate in the Innovex PLC 1993 Executive Share Option Scheme. -6- 7 10. Holidays 10.1 In addition to bank and other public holidays the Director shall be entitled in every calendar year to 30 working days' paid holiday, 27 days to be taken at such time or times as may be approved by the Board and 3 days to be taken at such time as shall be designated by the Board PROVIDED THAT to the extent that any holiday entitlement is not taken in any calendar year the same shall be lost. 10.2 Holiday entitlement shall be deemed to accrue at the rate of 2.5 days per month and on the determination of his employment hereunder the Director shall be entitled to pay in lieu of outstanding holiday entitlement and shall be required to repay to the Company pay for holiday taken in excess of his actual entitlement and for the purposes of this Clause the basis for payment shall be 1/261 annual salary for each day's holiday entitlement. 11. Incapacity 11.1 If the Director is absent from work due to illness or accident he shall notify the Company Secretary as soon as possible and if this incapacity continues for seven or more consecutive days or for more than fourteen working days in any year he shall submit a doctors certificate to the Company. 11.2 If the Director is absent from work due to illness or accident duly notified and certified in accordance with Clause 11.1 the Company shall pay the Director his full remuneration (including bonus/commission) for up to an aggregate of 130 working day, absence in any period of twelve months and thereafter such remuneration (if any) as the Board shall in its discretion approve. 11.3 The remuneration paid under Clause 11.2 shall include any Statutory Sick Pay payable and when this is exhausted shall be reduced by the amount of any Social Security Sickness Benefit or other benefit, recoverable by the Director (whether or not recovered). 11.4 The Company may at its expense at any time whether or not the Director is then incapacitated require the Director to submit to such medical examinations and tests by doctor(s) nominated by the Company and the Director hereby authorises such doctor(s) to disclose to and discuss with the Company and its medical adviser(s) the results of such examinations and tests. -7- 8 12. Secrecy The Director shall during the continuance of his employment hereunder and at all times thereafter keep with inviolable secrecy and shall not reveal, disclose or publish to any person other than the Board or persons nominated by them or otherwise utilise other than for the proper performance of his duties any information of a confidential or secret nature (including without limitation trade secrets, know-how, inventions, designs, processes, formulae, notations, improvements, financial information and lists of customers) concerning the affairs or business or products of the Company or of any Associated Company or of any of their predecessors in business or of their suppliers, agents distributors or customers of which he may now know or have learned or which he may hereafter know or learn while in the Company, employment, and shall not use for his own purposes or for any purposes other than those of the Company or of any Associated Company any such confidential information. 13. Intellectual Property 13.1 All relevant Industrial Property and all Industrial Property Right, therein shall to the fullest extent permitted by law belong to, vest in and be the absolute, sole and unencumbered property of the Company or an Associated Company. 13.2 The Director hereby: (a) acknowledges for the purposes of Section 39, Patents Act 1977 that because of the nature of his duties and the particular responsibilities arising from the nature of his duties he has and at all times during his employment will have a special obligation to further the interests of the undertakings of the Company and of any Associated Company; (b) undertakes to notify and disclose to the Company in writing full details of all relevant Industrial Property forthwith upon the production of the same, and promptly whenever requested by the Company and in any event upon the determination of his employment with the Company deliver up to the Company all correspondence and other documents, papers, and records, and all copies thereof in his possession, custody and power relating to any relevant Industrial Property; (c) undertakes to hold upon trust for the benefit of the Company or any Associated Company any relevant Industrial Property and the Industrial Property Rights therein to the extent the same may not be and until the same are vested absolutely in the Company or any Associated Company; (d) assigns by way of present assignment of future copyright all copyright in all relevant Industrial Property; (e) acknowledges that save as provided by law no further remuneration or compensation -8- 9 other than that provided for herein is or may become due to the Director in respect of the performance of his obligations under this Clause; and (f) undertakes at the expense of the Company to execute all such documents, make such applications, give such assistance and do such acts and things as may in the opinion of the Board be necessary or desirable to vest in and register or obtain letters patents in the name of the Company or any Associated Company and otherwise to protect and maintain the relevant Industrial Property and the Industrial Property Rights therein. 13.3 To the extent that by law any relevant Industrial Property or the Industrial Property Rights therein do not, or are not permitted to, vest in or belong to the Company or any Associated Company the Director agrees immediately upon the same coming into existence to offer to the Company or any Associated Company in writing a right of first refusal to acquire the same on arm's length terms to be negotiated and agreed between the parties in good faith. 14. Restrictions During Employment The Director shall not during the continuance of his employment hereunder without the prior consent in writing of the Board either alone or jointly with or on behalf of others and whether directly or indirectly and whether as principal, partner, agent, shareholder, director, employee or otherwise howsoever engage in, carry on or be interested or concerned in any business other than that of the Company and its Associated Companies PROVIDED THAT nothing in this Clause shall preclude the Director from: (a) holding shares or other securities as a bona fide investment only in any company where such shares or other securities are quoted or otherwise dealt in on a recognized or designated investment exchange and the Directors aggregate holding of such shares or securities does not constitute more than five per cent of all the equity shares in the capital of that company or confer the right to cast more than five per cent of all votes ordinarily capable of being cast at general meetings of the shareholders of that company; or (b) maintaining his present outside business interests and investments as disclosed to, and approved by, the Board (such approval not to be unreasonably withheld) and PROVIDED ALWAYS that: (i) such business is not at any time in competition with the Company or any of its subsidiaries; and (ii) the Director's duties hereunder to the Company shall have priority and the pursuit of such outside interests shall not unduly interfere with the due and proper performance of such duties. -9- 10 15. Grievance and Disciplinary Procedure 15.1 If the Director wishes to seek redress of any grievance relating to his employment he should refer such grievances to the Board for resolution. 15.2 The Company's disciplinary procedures from time to time in force shall apply to the Director. 16. Termination 16.1 If: (a) the Director shall be or become of unsound mind or be or become a patient for any purpose of any statute relating to mental health; or (b) the Director shall enter into any composition or arrangement with or for the benefit of his creditors including a voluntary arrangement under the Insolvency Act 1986; or (c) a bankruptcy petition is presented against the Director or if circumstances exist now or in the future under which such a petition could be presented; or (d) the Director shall commit any act of dishonesty whether relating to the Company, any Associated Company, an employee or otherwise; or (e) the Director is guilty of any misconduct or commits any serious or persistent breach of any of his obligations to the Company or any Associated Company (whether under this Agreement or otherwise) or refuses or neglects to comply with any lawful orders or directions given to him by the Board consistent with the terms of this Agreement; or (f) the Director is guilty of any conduct tending to bring himself, the Company or any Associated Company into disrepute; or (g) the Director shall be or be prohibited or disqualified from holding the office which he holds in the Company or any Associated Company or shall be removed from any such office or shall resign from any such office without the prior written consent of the Board; THEN the Company shall be entitled by notice in writing to the Director to determine his employment under this Agreement forthwith whereupon the Director shall have no claim against the Company for damages or otherwise by reason of such determination. 16.2 This Agreement shall automatically terminate on the Director's 65th birthday. -10- 11 16.3 Upon the termination of the reason employment for whatever reason the Director shall: (a) immediately tender his resignation from all offices he holds in the Company and in any Associated Company without prejudice to any other rights accruing to either party hereto; and (b) deliver to the Company forthwith all documents, (including copies), and all keys, credit cards, books and other property of the Company or any Associated Company then in his possession. 16.4 After the termination of the Director's employment hereunder he shall not at any time thereafter represent himself as being in any way connected with or interested in the business of or employed by the Company or any Associated Company; or use for trade or other purposes the name of the Company or any Associated Company or any name capable of confusion therewith. 16.5 The termination of the Director's employment hereunder for whatever reason shall not affect those terms of this Agreement which are expressed to have effect thereafter and shall be without prejudice to any accrued rights or remedies of the parties. 17. Post-Termination Obligations 17.1 The Director undertakes to and covenants with the Company that, unless he shall be wrongfully dismissed: (a) he will not for a period of 18 months after termination of this Agreement in the Restricted Territories directly or indirectly deal with or engage in business with or be in any way interested in or connected with (in each case in relation to the Business) any concern, undertaking, firm or body corporate which engages in or carries on within any part of the Restricted Territories the Business in competition with the Company or any Associated Company; and (b) he will not for a period of 2 years after the termination of this Agreement directly or indirectly: (i) in competition with the Company or any Associated Company solicit the custom of (or offer or agree to provide goods or services of a like description to those provided by the Company or any Associated Company to) any person firm or company which is, or which has at any time during the period of 2 years preceding the termination of this Agreement been a customer or client of the Company or any Associated Company; -11- 12 (ii) interfere or seek to interfere with the relations between the Company or any Associated Company and any of its suppliers; (iii) solicit, interfere with or endeavor to entice away from the Company or any Associated Company any person who is an employee or director of the Company or any Associated Company (whether or not such person would commit a breach of the terms of his contract of employment by leaving the service of the company concerned) or knowingly employ, or assist in or procure the employment by any other person firm or company of, any such person. 17.2 Each of the obligations on the Director contained in the above provisions of this Clause constitutes an entirely separate and independent restriction on the Director notwithstanding that they may be contained in the same sub-clause, paragraph, sentence or phrase. 17.3 If any obligation set out in Clause 17.1 or any part thereof shall be held invalid or unenforceable or void but would not be so held if some part of it were deleted or modified or varied then such provision shall apply with such deletion, modification or variation as may be necessary to make it valid and effective. 18. General 18.1 No failure or delay by the Company in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof nor shall any single or partial exercise by the Company of any right, power or privilege preclude any further exercise thereof of the exercise of any other right, power or privilege. 18.2 The Director hereby irrevocably and by way of security appoints the Company and each Associated Company now or in the future existing to be his attorney and in his name and on his behalf and as his act and deed to sign, execute and do all acts, things and documents which he is obliged to execute and do under the provisions of this Agreement and the Director hereby agrees forthwith on the request of the Company to ratify and confirm all such acts, things and documents signed, executed or done in pursuance of this power. 19. Notices 19.1 Any notice or other communication given or made under this Agreement shall be in writing and may be delivered to the relevant party or sent by first class prepaid post to the address of that party specified in this Agreement or such other address in England as may be notified by that party from time to time for this purpose, and shall be effectual notwithstanding any change of address not so notified. 19.2 Unless the contrary shall be proved each such notice or communication shall be deemed to -12- 13 have been given or made, if by first class prepaid post, 72 hours after posting and, if by delivery, at the time of delivery. 20. Other Agreements This Agreement supersedes all other agreements whether written or oral between the Company or any Associated Company and the Director relating to the employment of the Director and the Director acknowledges and warrants to the Company that he is not entering into this Agreement in reliance on any representation not expressly set out herein. 21. Governing Law This Agreement shall be governed by and construed in all respects in accordance with English law and the parties agree to submit to the exclusive jurisdiction of the English Courts as regards any claim or matter arising in respect of this Agreement. IN WITNESS whereof this Agreement has been signed for and on behalf of the Company and duly executed as a Deed by the Director the day and year first above written. SIGNED by ) For and on behalf of ) INNOVEX PLC ) /s/ Barrie S. Haigh in the presence of: ) /s/ D. A. Walter D. A. Walter EXECUTED and DELIVERED as a ) Deed by DAVID FINDLAY WHITE ) /s/ David F. White in the presence of: ) /s/ D. A. Walter D. A. Walter -13- EX-10.15 8 NON-COMPETE AGREEMENT - WHITE 1 EXHIBIT 10.15 DEED OF NON-COMPETITION BETWEEN QUINTILES TRANSNATIONAL CORP. AND DAVID F. WHITE 29 NOVEMBER 1996 2 INDEX Clause Page ------ ---- 1. Certain Definitions.............................................. 3 1.1 Certain Definitions................................. 3 2. Non-competition and Non-solicitation Covenants................... 3 2.1 General............................................. 3 2.2 Non-Competition..................................... 3 2.3 Holding of Shares or Securities..................... 5 2.4 Nondisclosure....................................... 5 2.5 Geographical Restriction............................ 5 2.6 Non-Competition Period.............................. 6 2.7 Remedies............................................ 6 2.8 Other Agreements.................................... 6 3. General Provisions............................................... 6 3.1 Notices............................................. 6 3.2 Variation........................................... 7 3.3 Entire Agreement.................................... 7 3.4 Assignment.......................................... 8 3.5 Law and Jurisdiction................................ 9 2 3 THIS NON-COMPETE AGREEMENT dated 29 November 1996 is executed as a Deed and is made BETWEEN (1) QUINTILES TRANSNATIONAL CORP., a corporation incorporated under the laws of North Carolina, U.S.A. (the "Purchaser"); and (2) DAVID F. WHITE, an individual residing at Little Barlows, Frieth, Henley on Thames, Oxon, RG9 6PR (the "Vendor"). WHEREAS: (A) Concurrently with the execution of this Agreement, the Purchaser, the Vendor and others are consummating certain transactions under a Share Exchange Agreement ("the Share Exchange Agreement") pursuant to which the Vendor and other vendors are exchanging their shares of Innovex Limited ("Innovex") for shares of Quintiles Transnational Corp. (B) The Vendor is entering into this Agreement as a condition precedent to completion under the Share Exchange Agreement. (C) Upon completion of the share exchange pursuant to the Share Exchange Agreement, Vendor will own approximately 39,904 shares of the outstanding common stock of the Purchaser. NOW THIS DEED WITNESSETH as follows: 1. CERTAIN DEFINITIONS 1.1 Certain Definitions. In this Agreement the following words and expressions shall have the meanings respectively ascribed to them: "Affiliates" shall mean: (i) the Purchaser; (ii) any Purchaser subsidiary or related entity (including without limitation Innovex and its subsidiaries); and (iii) any entity directly or indirectly beneficially owned or controlled in whole or part by the Purchaser or any Purchaser subsidiary or related entity, in each case as existing at or prior to the date of termination of Vendor's employment. 2. NON-COMPETITION AND NON-SOLICITATION COVENANTS 2.1 General. In consideration of the Purchaser agreeing to complete the Share Exchange Agreement, during the Vendor's employment with the Purchaser and the Non-Competition Period (as defined in Section 2.6): 2.2 Non-Competition. The Vendor shall not, either alone or jointly with another or others, whether as principal, agent, director, shareholder, independent contractor, officer, employee or in any other capacity, whether directly or indirectly, and whether for his own benefit or that of others: 3 4 (a) be engaged or have an economic interest in any business which competes with any business carried on or engaged in by the Purchaser or any of its Affiliates at or before (provided such business has not been terminated or abandoned by Purchaser or such Affiliate) the date of termination of Vendor's employment, including without limitation Related Activities (as defined below) (hereinafter, a "Competitive Business"); (b) solicit or endeavor to solicit on behalf of a Competitive Business, from or with any person or entity: (i) who or which was a customer of the Purchaser or any of its Affiliates at any time during the period of twelve (12) months preceding the date of the termination of the Vendor's employment; (ii) who or which the Vendor or someone for whom he was directly responsible solicited, negotiated, contracted, serviced, advised or had contact with on the Purchaser's or any of its Affiliates' behalf; or (iii) to whom the Purchaser or any of its Affiliates had made proposals to do business at any time during the period of twelve (12) months preceding the date of the termination of the employment; (c) deal, do business or endeavor to deal or do business for a Competitive Business from or with any person or entity: (i) who or which was a customer of the Purchaser or any of its Affiliates at any time during the twelve (12) months preceding the date of the termination of the employment; (ii) who or which the Vendor or someone for whom he was directly responsible solicited, negotiated, contracted, serviced, advised or had contact with on the Purchaser's or any of its Affiliates' behalf; or (iii) to whom the Purchaser or any of its Affiliates had made proposals to do business at any time during the period of twelve (12) months preceding the date of the termination of the employment; (d) without the written permission of the Board of the Purchaser (such permission not to be unreasonably withheld or delayed and in particular such permission will not be withheld if the Purchaser considers that the Vendor has neither a personal influence with clients nor is in possession of confidential information) offer employment to or otherwise solicit for employment the services of any individual who was an employee or director of the Purchaser or any of its Affiliates during the period of twelve (12) months preceding the date of termination of employment whether or not such persons would commit any breach of his contract of employment with the Purchaser or any of its Affiliates by reason of his leaving service; or (e) directly or indirectly take any action which is intended to be materially detrimental or otherwise intended to be adverse to the Purchaser's and/or any of its Affiliates' 4 5 goodwill, name, business relations, prospects and operations. Notwithstanding anything in this Agreement to the contrary, the following activities will not be deemed to contravene the provisions of this Agreement: (i) Owning, operating, controlling or serving as a director, officer or employee of or consultant to any company the principal business of which is manufacturing, distributing, marketing and/or selling pharmaceutical products the rights to which are owned by or licensed to such company; provided that the amount of the consolidated revenues of such company in any year derived from operations (as defined below, "Related Activities") involving providing, on a contract, for hire, or similar basis (i) drug development services, (ii) pharmaceutical or clinical research services, (iii) pharmaceutical sales or marketing services, (iv) health information management services, and/or (v) any other activity which constitutes a significant part of the business of the Purchaser (in the case of subparagraph (v), at or before the date of termination of Vendor's employment) will not exceed the greater of five percent (5%) of consolidated revenues or five percent (5%) of consolidated expenses of such company; provided further that Vendor shall have no direct involvement in such Related Activities as a director, officer, employee, consultant or otherwise; provided further, it is agreed that Related Activities are intended to be limited to activities which are incidental to the operations of a pharmaceutical business and are not, without limiting the foregoing, any activities dedicated primarily to a Competitive Business or the purpose of drug development, marketing, sales services, or health benefit analysis of the products or potential products of third parties. (ii) the provision of executive search consulting services so long as such services are not provided to an entity engaged in Related Activities; and (iii) the provision of financial consulting services so long as such services are not provided to an entity engaged in Related Activities. 2.3 Holding of Shares or Securities. Section 2.2 shall not prohibit the holding (directly or through nominees or otherwise) of shares or other securities of another company which are listed or traded on any recognized stock exchange being a holding (which phrase shall include any interest in any such holding) entitling the holder to no more than two and one half percent (2.5%) of the voting power of such body corporate. 2.4 Nondisclosure. The Vendor shall not either before or after the termination of his employment disclose to any person or persons any confidential information in relation to the affairs of the Purchaser or any of its Affiliates or any client or customer thereof which he has become or may have become possessed whilst in the service of the Purchaser except in the proper course of his duties as an officer, director or employee of the Purchaser or as authorized by the Board or as ordered by a Court of competent jurisdiction or pursuant to other governmental process. 2.5 Geographical Restriction. The restrictions set forth in Sections 2.2(a) apply to the following geographical areas: the United Kingdom, the Federal Republic of Germany and the United States of America, including the territories and possessions thereof. 5 6 2.6 Non-Competition Period. As used in this Agreement "Non-Competition Period" means the eighteen (18) month period following the termination of Vendor's employment, (irrespective of the circumstances of such termination, except that the final six months of any garden leave period shall run concurrently with the first six months of the Non-Competition Period), except that for purposes of the restrictions set forth in Sections 2.2(b) and 2.2(c) (regarding solicitation, etc.), "Non-Competition Period" shall mean the twenty-four (24) month period following the termination of Vendor's employment (irrespective of the circumstances of such termination). 2.7 Remedies. Vendor acknowledges and agrees that Vendor's failure to abide by the provisions of this Agreement would cause irreparable harm to the Purchaser and/or its Affiliates for which legal remedies would be inadequate. Therefore, in addition to any legal or other relief to which the Purchaser and/or its Affiliates may be entitled by virtue of Vendor's failure to abide by these provisions: (i) the Purchaser may seek legal and equitable relief, including but not limited to preliminary and permanent injunctive relief, for Vendor's actual or threatened failure to abide by these provisions; (ii) Vendor will, upon final judicial determination that Vendor has breached the terms of this Agreement, indemnify the Purchaser and/or its Affiliates for all expenses (including legal fees) in seeking to enforce these provisions; and (iii) if, as a result of Vendor's failure to abide by the provisions, any commission or fee becomes payable to Vendor or to any person, corporation or other entity with which Vendor has become employed or otherwise associated, Vendor shall pay the Purchaser or cause the person, corporation or other entity with whom he has become employed or otherwise associated to pay the Purchaser an amount equal to such commission or fee. 2.8 Other Agreements. Nothing in this Agreement shall terminate, revoke or diminish Vendor's obligations or the Purchaser's and/or its Affiliates' rights and remedies under law or under Vendor's existing service agreement and the Share Exchange Agreement relating to trade secrets, confidential information, non-competition and intellectual property. 3. GENERAL PROVISIONS 3.1 Notices. All notices, demands, requests, or other communications which may be or are required to be given, served, or sent by any party to any other party pursuant to this Agreement shall be in writing and shall be hand delivered, sent by overnight courier or mailed by first-class registered post, postage prepaid, return receipt requested or transmitted by telegram, telecopy or telex, addressed as follows: (a) If to the Purchaser: Quintiles Transnational Corp. 4709 Creekstone Drive Riverbirch Building, Suite 300 Durham, North Carolina U.S.A. 27703 Attention: Gregory D. Porter Fax: 919-941-2090 6 7 with a copy which shall not constitute notice to: Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan L.L.P 2500 First Union Capital Center Raleigh, North Carolina U.S.A. 27601 Attention: Gerald F. Roach Fax: 919-821-6800 (b) If to the Vendor: David F. White Little Barlows, Frieth Henley on Thames Oxon, RG9 6PR With a copy which shall not constitute notice to: Attention: Fax: Each party may designate by notice in writing a new address to which any notice, demand, request or communication may thereafter be so given, served or sent. Each notice, demand, request, or communication which shall be hand delivered, sent, mailed, telecopied or telexed in the manner described above, or which shall be delivered to a telegraph company, shall be deemed sufficiently given, served, sent, received or delivered for all purposes at such time as it is delivered to the addressee (with the return receipt, the delivery receipt, or (with respect to a telecopy or telex) the answerback being deemed conclusive, but not exclusive, evidence of such delivery) or at such time as delivery is refused by the addressee upon presentation. 3.2 Variation. No variation of this Agreement shall be valid or effective unless made by one or more instruments in writing signed by all of the parties hereto. 3.3 Entire Agreement. Except as expressly provided in this Agreement, this Agreement: (i) supersedes and cancels all other understandings and agreements, oral or written, with respect to Vendor's obligations with respect to non-competition which Vendor has 7 8 executed in the past; (ii) supersedes all other understandings and agreements, oral or written, between the parties with respect to the subject matter of this Agreement; and (iii) constitutes the sole agreement between the parties with respect to the matters covered. No change or modification of this Agreement shall be valid or binding upon the parties unless such change or modification is in writing and is signed by the parties. 3.4 Assignment. Neither of the parties hereto shall assign or otherwise deal with any of its right, title or interest in this Agreement without the prior written consent of the other party to this Agreement, which consent may be withheld in such party's absolute discretion, provided, however, that the Purchaser may in its absolute discretion assign all or any of its right title and interest in this Agreement to a an Affiliate or to a subsequent purchaser of all of the share capital of the Company or all or substantially all of the assets of the Company. 8 9 3.5 Law and Jurisdiction. This Agreement shall be governed by and construed in accordance with English law and the parties irrevocably submit to the non-exclusive jurisdiction of the High Court of Justice in London for all purposes connected with it. IN WITNESS whereof this Agreement has been executed and unconditionally delivered as a Deed the day and year first-above written. Signed and delivered as a Deed ) by Quintiles Transitional Corp. ) by its duly authorized ) Vice President, Rachel R. Selisker, ) and by its duly authorized ) Secretary, Gregory D. Porter ) /s/ Rachel R. Selisker - ------------------------------ Rachel R. Selisker Vice President /s/ Gregory D. Porter - ------------------------------ Gregory D. Porter Secretary Signed and delivered as a Deed ) by David F. White ) /s/ David F. White in the presence of: Name: P. Knott ----------------------------- ) Address: The Gables ) ------------------------- ) Elvendon Road, Gorine-on- ) ------------------------- ) Thames, Oxon RG8 ODT ) ------------------------- ) Occupation: Director ) ---------------------- ) 9 EX-10.28 9 LOAN AGREEMENT - QUINTILES/BB&T 1 EXHIBIT 10.28 Maker QUINTILES TRANSNATIONAL CORP. ------------------------------------------------------------------------ Address PO BOX 13979 430-0064227 --------------------------------- -------------------- RESEARCH TRIANGLE PARK, NC 27709 Customer Number --------------------------------- [BB&T LOGO] Attn: Vincent Morgus 00007 --------------------------------- -------------------- Note Number
NOTE MODIFICATION AGREEMENT $ 15,000,000.00 08/31/94 $ 15,000,000.00 08-31-1996 ----------------------- ------------- ------------------- ------------------ Original Amount of Note Original Date Modification Amount Modification Date
This Note Modification Agreement (hereinafter Agreement) is made and entered into this 31 day of AUGUST, 1996, by and between QUINTILES TRANSNATIONAL CORP, maker(s), co-maker(s), endorser(s), or other obligor(s) on the Promissory Note(s) (as below defined) hereinafter also referred to jointly and severally as Borrower(s); Branch Banking and Trust Company, a North Carolina banking corporation, hereinafter referred to as Bank; and______________________________ ________________________________________, owners other than Borrower(s) (if any) of any property pledged to secure performance of Borrower(s)'s obligations to Bank, hereinafter referred to jointly and severally as Debtor(s)/Grantor(s). Witnesseth: Whereas, Borrower(s) has previously executed Promissory Note(s) in favor of Bank, (which Promissory Note(s) includes any original Promissory Note(s) and any renewal, extension or modification of said Promissory Note(s)) (collectively Promissory Note(s)), said Promissory Note(s) being more particularly identified by description of the original note above; and Whereas Borrower(s) and Bank agree that said Promissory Note(s) be modified only to the limited extent as is hereinafter set forth; that all other terms, conditions, and covenants of said Promissory Note(s) remain in full force and effect, and that all other obligations and covenants of Borrower(s), except as herein modified, shall remain in full force and effect, and binding between Borrower(s) and Bank; and Whereas Debtor(s)/Grantor(s), if different from Borrower(s), has agreed to the terms of this modification; NOW THEREFORE, in mutual consideration of the premises, the sum of Ten Dollars ($10) and other good and and valuable consideration, each to the other parties paid, the parties hereto agree that said Promissory Note(s) is amended as hereinafter described: INTEREST RATE, PRINCIPAL AND INTEREST PAYMENT TERM MODIFICATIONS (To the extent no change is made, existing terms continue. Sections not completed are deleted.) Interest shall accrue from the date hereof on the unpaid principal balance outstanding from time to time at the: [ ]Fixed Rate of __________________% per annum. [ ]Variable rate of the Bank's Prime Rate plus ______% per annum to be adjusted [ ] daily [ ]monthly beginning on the [ ] 1st [ ] 15th day of ___________ [ ] quarterly beginning on the [ ] 1st [ ] 15th day of ____________ as the Bank's Prime Rate changes. [ ] As of the Modification Date, any fixed, floating, or average maximum rate and fixed minimum rate in effect by virtue of the Promissory Note(s) are hereby deleted. If checked here [ ],the interest rate will not exceed a(n) [ ] fixed [ ] average maximum rate of ______% or a [ ] floating maximum rate of the greater of ______% or the Bank's Prime Rate; and the interest rate will not decrease below a fixed minimum rate of _____%. If an average maximum rate is specified, a determination of any required reimbursement of interest by Bank will be made: [ ] when the Note is repaid in full by Borrower [ ] annually beginning on ____________________. [ ] ___________________________________________________________________________ ___________________________________________________________________________ PRINCIPLE AND INTEREST IS PAYABLE AS FOLLOWS: [ ] Principal (plus any accrued interest } not otherwise scheduled herein) } Is due in full at maturity on FEBUARY 28, 1997. } [X] Principal plus accrued interest [ ] Payable in consecutive __________ installments of [ ] Principal commencing on _____________. [ ] Principal and interest and continuing on the same day of each calendar period thereafter, in ____________ equal payments of $____________, with one final payment of all remaining principal and accrued interest due on _______________.
[ ] Accrued interest is payable ______ commencing on ____________ and continuing on the same day of each calendar period thereafter, with one final payment of all remaining interest due on __________________________________________. [ ] Prior to an event of default, Borrower may borrow, repay, and reborrow pursuant to the terms of a Loan Agreement dated ___________________________ between Borrower and Bank. [ ] ___________________________________________________________________________ ___________________________________________________________________________ The following scheduled payment(s) is (are) deferred: [ ] $_________ principal [ ] $_________ interest payment(s) due on _____________________ [ ] $_________ principal and interest is (are) hereby deferred. Payments will resume on ______________ according to the schedule contained herein or to the existing schedule (if no other changes are made herein). The Borrowor(s) promises to pay Bank, or order, a late fee in the amount of four percent (4%) of any installment past due for fifteen (15) or more days. Where any installment payment past due for fifteen (15) or more days, subsequent payments shall first be applied to the past due balance. COLLATERAL: [ ] If marked, the Promissory Note(s), as modified, and the performance of the terms of any agreement or instrument relating to, evidencing, or securing the Promissory Note(s), as modified, shall be additionally secured by collateral hereafter described, a new security instrument shall be executed by Borrower(s), and/or Debtor(s)/Grantor(s), and all other steps necessary to perfect or record the Bank's lien with priority acceptable to Bank shall be taken. Date:_____________________ Type of Agreement:______________ From:______________ Collateral:____________________________________________________________________ Date:_____________________ Type of Agreement:______________ From:______________ Collateral:____________________________________________________________________ In addition to the collateral described above, the undersigned hereby grants to the Bank as collateral security for the indebtedness evidenced by the Note(s), as modified, a security interest and lien in and to all deposit accounts, certificates of deposit, securities and stocks now or hereafter in Bank's possession or on deposit with the Bank, including all renewals, amendments and proceeds thereof (if applicable), including but not limited to the following: [ ] #___________ in the amount of $__________ in the name(s)__________________. [ ] __________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ If any stock or securities are pledged to the Bank herein, the security interest includes all stock splits, reissued shares, substitute shares, and all proceeds thereof, which the undersigned promises to deliver to Bank. [ ] If marked, the collateral hereinafter described shall be and hereby is deleted as security interest for payment of the aforesaid Promissory Note(s): ___________________________________________________________________________ ___________________________________________________________________________ OTHER:_________________________________________________________________________ If the Promissory Note(s) being modified by this Agreement is signed by more than one person or entity, the modified Promissory Note(s) shall be the JOINT and SEVERAL obligation of all signers and the property and liability of each and all of them. It is expressly understood and agreed that this Agreement is a modification only and not a novation. The original obligation of the Borrower(s) as evidenced by the Promissory Note(s) above described is not extinguished hereby. It is also understood and agreed that except for the modification(s) contained herein said Promissory Note(s), and any other Loan Documents or Agreements evidencing, securing or relating to the Promissory Note(s) and all singular terms and conditions thereof, shall be and remain in full force and effect. This Agreement shall not release or affect the liability of any co-makers, obligors, endorsers or guarantors of said Promissory Note(s). Borrower(s) and Debtor(s)/Grantor(s), if any, jointly and severally consent to the terms of this Agreement, waive any objection thereto, affirm any and all obligations to Bank and certify that there are no defenses or offsets against said obligations or the Bank, including without limitation the Promissory Note(s). Bank expressly reserves all rights as to any party with right of recourse on the aforesaid Promissory Note(s). In the event periodic accruals of interest shall exceed any periodic fixed payment amount described above, the fixed payment amount shall be immediately increased or supplemental interest payments required on the same periodic basis as specified above (increased fixed payments or supplemental payments to be determined in Page 1 of 2 BBT373 (9701) 2 the Bank's sole discretion), in such amounts and at such times as shall be necessary to pay all accruals of interest for the period and all accruals of unpaid interest from previous periods. Such adjustments to the fixed payment amount or supplemental payments shall remain in effect for so long as any interest accruals shall exceed the original fixed payment amount and shall be further adjusted upward or downward to reflect changes in any variable interest rate based on an index such as Bank's Prime Rate. In no event shall the fixed payment amount be reduced below the original fixed payment amount specified in this Agreement or in the Promissory Note(s). Notwithstanding any other provision contained in this agreement, in no event shall the provisions of this paragraph be applicable to any Promissory Note(s) which requires disclosures pursuant to the Consumer Protection Act (Truth-in-Lending Act), 15 USC section 1601, et seq., as implemented by Regulation Z. The Bank may, at its option, charge any fees for the modification, renewal, extension, or amendment of any of the terms of the Promissory Note(s) permitted by N.C.G.S. section 24-1.1. In the words "Prime Rate", "Bank Prime Rate", "BB&T Prime Rate", Bank's Prime Rate" or "BB&T's Prime Rate" are used in this Agreement, they shall refer to the rate announced by the Bank from time to time as its Prime Rate. The Bank makes loans both above and below the Prime Rate and uses indexes other than the Prime Rate. Prime Rate is the name given a rate index used by the Bank and does not in itself constitute a representation of any preferred rate or treatment. Unless otherwise provided herein, it is expressly understood and agreed by and between Borrower(s), Debtor(s)/Grantor(s) and Bank that any and all collateral (including but not limited to real property, personal property, fixtures, inventory, accounts, instruments, general intangibles, documents, chattel paper, and equipment) given as security to insure faithful performance by Borrower(s) and any third party of any and all obligations to Bank, however created, whether now existing or hereafter arising, shall remain as security for the Promissory Note(s) as modified hereby. It is understood and agreed that if Bank has released collateral herein, it shall not be required or obligated to take any further steps to release said collateral from any lien or security interest unless Bank determines, in its sole discretion, that it may do so without consequence to its secured position and relative priority in other collateral; and unless Borrower(s) bears the reasonable cost of such action. No delay or omission on the part of the Bank in exercising any right hereunder shall operate as a waiver of such right or of any other right of the Bank, nor shall any delay, omission or waiver on any one occasion be deemed a bar to or waiver of the same, or of any other right on any further occasion. Each of the parties signing this Agreement regardless of the time, order or place of signing waives presentment, demand, protest, and notices of every kind, and assents to any one or more extensions or postponements of the time of payment or any other indulgences, to any substitutions, exchanges or releases of collateral if at any time there is available to the Bank collateral for the Promissory Note(s), as amended, and to the additions or releases of any other parties or persons primarily or secondarily liable. Whenever possible the provisions of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of the Agreement prohibited by or invalid under such law, such provisions shall be ineffective to the extent of any such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provision of this Agreement. All rights and obligations arising hereunder shall be governed by and construed in accordance with the laws of the same state which governs the interpretation and enforcement of the Promissory Note(s). From and after any event of default under this Agreement, the Promissory Note(s), or any related deed of trust or other security agreement or loan agreement, interest shall accrue on the sum of the principal balance and accrued interest then outstanding at the variable rate equal to the Bank's Prime Rate plus 5% per annum ("Default Rate"), provided that such rate shall not exceed at any time the highest rate of interest permitted by the laws of the State of North Carolina; and further that such rate shall apply after judgement. In the event of any default, the then remaining unpaid principal amount and accrued but unpaid interest then outstanding shall bear interest at the Default Rate called for hereunder until such principal and interest have been paid in full. BANK SHALL NOT BE OBLIGATED TO ACCEPT ANY CHECK, MONEY ORDER, OR OTHER PAYMENT INSTRUMENT MARKED "PAYMENT IN FULL" ON ANY DISPUTED AMOUNT DUE HEREUNDER, AND BANK EXPRESSLY RESERVES THE RIGHT TO REJECT ALL SUCH PAYMENT INSTRUMENTS. BORROWER AGREES THAT TENDER OF ITS CHECK OR OTHER PAYMENT INSTRUMENT SO MARKED WILL NOT SATISFY OR DISCHARGE ITS OBLIGATION UNDER THIS NOTE, DISPUTED OR OTHERWISE, EVEN IF SUCH CHECK OR PAYMENT INSTRUMENT IS INADVERTENTLY PROCESSED BY BANK UNLESS IN FACT SUCH PAYMENT IS IN FACT SUFFICIENT TO PAY THE AMOUNT DUE HEREUNDER. CREDIT LIFE AND DISABILITY INSURANCE ------------------------------------ Subject to certain underwriting criteria and limitations, INDIVIDUAL BORROWERS AND ADDITIONAL CO-MAKERS HAVE THE RIGHT TO REQUEST CREDIT LIFE AND DISABILITY INSURANCE PROTECTION FOR THIS LOAN. One or two Borrowers/Co-makers may be covered by BB&T Credit Life Insurance and one Borrower/Co-maker may be covered by BB&T Credit Disability Insurance. However, the purchase of credit life and credit disability insurance from the Bank is not a condition of obtaining or maintaining this loan. I, the undersigned, desire the credit insurance with the cost and terms described below and promise to pay the premium of such insurance coverage. I understand that I may cancel this credit insurance at any time. I represent that, to the best of my knowledge, I am in good health and am insurable. [ ] BB&T Type 1: Complete the following: [ ] BB&T Type 2: Complete separate application.
CREDIT LIFE INSURANCE Effective Date Term in Mos. Initial Ins. Amount Credit Life Premium [ ] Single [ ] Level [ ] Joint [ ] Decreasing $ $ ---------------- ----------- ------------------ -------------------
Monthly Benefit Amount Credit Disability Premium
CREDIT DISABILITY INSURANCE Effective Date and Terms in Mos. Same as Credit Life Insurance Above $ $ ----------------------------------- --------------------------- ----------------------------
Credit Disability Insurance is subject to a 14-day elimination period and a 60-month maximum benefit period. Only the Borrower or Co-Maker who signs on the first line under "Signature(s) of Insured" is covered by Credit Disability insurance. Date of Birth Signature(s) of Insured Total Credit Life and Disability Insurance Premium -------------- -------------------------------------- Signature of Primary Insured $ -------------- -------------------------------------- --------------------------------------- Signature of Secondary Insured
Witness the hand and seal of the undersigned. Each of the undersigned adopts as his seal the word or symbol for "seal" appearing beside or near his signature below. IF BORROWER IS A CORPORATION: Quintiles Transnational Corp ------------------------------------------- NAME OF CORPORATION ATTEST:/s/ Guy D. Porter By: /s/ Dennis B. Gillings ----------------------- --------------------------------------- Dennis B. Gillings Title:EVP Secretary Title: Chairman and Chief Executive Officer ------------------------ ------------------------------------ (SEAL) (Affix seal or By: insert name of ---------------------------------------- corporation in seal to adopt as Title: seal of borrower) ------------------------------------- IF BORROWER IS A PARTNERSHIP, LIMITED LIABILITY COMPANY, OR LIMITED LIABILITY PARTNERSHIP: WITNESS: ------------------------------------------- NAME OF PARTNERSHIP, LLC, OR LLP By: (SEAL) - ------------------------------ ---------------------------------- GENERAL PARTNER OR MANAGER By: (SEAL) - ----------------------------- ---------------------------------- GENERAL PARTNER OR MANAGER By: (SEAL) - ----------------------------- ---------------------------------- GENERAL PARTNER OR MANAGER IF BORROWER IS AN INDIVIDUAL WITNESS: (SEAL) - ----------------------------- ------------------------------------- ADDITIONAL BORROWERS AND DEBTORS/GRANTORS: WITNESS: /s/ Guy D. Porter Quintiles, Inc. CEO - --------------------------------------------- -------------------------------------------- (SEAL) Quintiles, Inc., Guarantor By: Dennis B. Gillings, CEO - --------------------------------------------- -------------------------------------------- (SEAL) /s/ Guy D. Porter Quintiles Pacific, Inc. CEO - --------------------------------------------- -------------------------------------------- (SEAL) Quintiles Pacific, Inc., Guarantor By: Dennis B. Gillings - --------------------------------------------- -------------------------------------------- (SEAL) /s/ Guy D. Porter Quintiles Laboratories Limited CEO - --------------------------------------------- -------------------------------------------- (SEAL) Quintiles Laboratories Limited, Guarantor By: Dennis B. Gillins - --------------------------------------------- -------------------------------------------- (SEAL)
Page 2 of 2 3 Maker QUINTILES TRANSNATIONAL CORP ------------------------------------------------------------------------ Address PO BOX 13979 430-0064227 --------------------------------- -------------------- RESEARCH TRIANGLE PARK, NC 27709 Customer Number --------------------------------- [BB&T LOGO] Attn: Vincent Morgus 00007 --------------------------------- -------------------- Note Number
NOTE MODIFICATION AGREEMENT $ 15,000,000.00 08/31/94 $ 15,000,000.00 02-28-1997 - ------------------------ ------------- ------------------- ------------------ Original Amount of Note Original Date Modification Amount Modification Date
This Note Modification Agreement (hereinafter Agreement) is made and entered into this 28 day of FEBRUARY, 1997, by and between QUINTILES TRANSNATIONAL CORP, maker(s), co-maker(s), endorser(s), or other obligor(s) on the Promissory Note(s) (as below defined) hereinafter also referred to jointly and severally as Borrower(s); Branch Banking and Trust Company, a North Carolina banking corporation, hereinafter referred to as Bank; and______________________________ ________________________________________, owners other than Borrower(s) (if any) of any property pledged to secure performance of Borrower(s)'s obligations to Bank, hereinafter referred to jointly and severally as Debtor(s)/Grantor(s). Witnesseth: Whereas, Borrower(s) has previously executed Promissory Note(s) in favor of Bank, (which Promissory Note(s) includes any original Promissory Note(s) and any renewal, extension or modification of said Promissory Note(s)) (collectively Promissory Note(s)), said Promissory Note(s) being more particularly identified by description of the original note above; and Whereas Borrower(s) and Bank agree that said Promissory Note(s) be modified only to the limited extent as is hereinafter set forth; that all other terms, conditions, and covenants of said Promissory Note(s) remain in full force and effect, and that all other obligations and covenants of Borrower(s), except as herein modified, shall remain in full force and effect, and binding between Borrower(s) and Bank; and Whereas Debtor(s)/Grantor(s), if different from Borrower(s), has agreed to the terms of this modification; NOW THEREFORE, in mutual consideration of the premises, the sum of Ten Dollars ($10) and other good and and valuable consideration, each to the other parties paid, the parties hereto agree that said Promissory Note(s) is amended as hereinafter described: INTEREST RATE, PRINCIPAL AND INTEREST PAYMENT TERM MODIFICATIONS (To the extent no change is made, existing terms continue. Sections not completed are deleted.) Interest shall accrue from the date hereof on the unpaid principal balance outstanding from time to time at the: [ ]Fixed Rate of __________________% per annum. [ ]Variable rate of the Bank's Prime Rate plus ______% per annum to be adjusted [ ] daily [ ]monthly beginning on the [ ] 1st [ ] 15th day of ________ [ ] quarterly beginning on the [ ] 1st [ ] 15th day of ____________ as the Bank's Prime Rate changes. [ ] As of the Modification Date, any fixed, floating, or average maximum rate and fixed minimum rate in effect by virtue of the Promissory Note(s) are hereby deleted. If checked here [ ], the interest rate will not exceed a(n) [ ] fixed [ ] average maximum rate of ______% or a [ ] floating maximum rate of the greater of ______% or the Bank's Prime Rate; and the interest rate will not decrease below a fixed minimum rate of _____%. If an average maximum rate is specified, a determination of any required reimbursement of interest by Bank will be made: [ ] when the Note is repaid in full by Borrower [ ] annually beginning on ____________________. [ ] ___________________________________________________________________________ ___________________________________________________________________________ PRINCIPLE AND INTEREST IS PAYABLE AS FOLLOWS: [ ] Principal (plus any accrued interest } Is due in full at maturity on APRIL 30, 1997. not otherwise scheduled herein) } [X] Principal plus accrued interest } [ ] Payable in consecutive __________ installments of [ ] Principal commencing on _____________. [ ] Principal and interest and continuing on the same day of each calendar period thereafter, in _____________ equal payments of $____________,with one final payment of all remaining principal and accrued interest due on _______________.
[ ] Accrued interest is payable ______ commencing on ____________ and continuing on the same day of each calendar period thereafter, with one final payment of all remaining interest due on _________________________________________ . [ ] Prior to an event of default, Borrower may borrow, repay, and reborrow pursuant to the terms of a Loan Agreement dated __________________________ between Borrower and Bank. [ ] ___________________________________________________________________________ ___________________________________________________________________________ The following scheduled payment(s) is (are) deferred: [ ] $_________ principal [ ] $_________ interest payment(s) due on_______________________ [ ] $_________ principal and interest is (are) hereby deferred. Payments will resume on _____________ according to the schedule contained herein or to the existing schedule (if no other changes are made herein). The Borrowor(s) promises to pay Bank, or order, a late fee in the amount of four percent (4%) of any installment past due for fifteen (15) or more days. Where any installment payment past due for fifteen (15) or more days, subsequent payments shall first be applied to the past due balance. COLLATERAL: [ ] If marked, the Promissory Note(s), as modified, and the performance of the terms of any agreement or instrument relating to, evidencing, or securing the Promissory Note(s), as modified, shall be additionally secured by collateral hereafter described, a new security instrument shall be executed by Borrower(s), and/or Debtor(s)/Grantor(s), and all other steps necessary to perfect or record the Bank's lien with priority acceptable to Bank shall be taken. Date:_____________________ Type of Agreement:______________ From:______________ Collateral:____________________________________________________________________ Date:_____________________ Type of Agreement:______________ From:______________ Collateral:____________________________________________________________________ In addition to the collateral described above, the undersigned hereby grants to the Bank as collateral security for the indebtedness evidenced by the Note(s), as modified, a security interest and lien in and to all deposit accounts, certificates of deposit, securities and stocks now or hereafter in Bank's possession or on deposit with the Bank, including all renewals, amendments and proceeds thereof (if applicable), including but not limited to the following: [ ] #___________ in the amount of $__________ in the name(s)__________________. [ ] __________________________________________________________________________. ______________________________________________________________________________ ______________________________________________________________________________ If any stock or securities are pledged to the Bank herein, the security interest includes all stock splits, reissued shares, substitute shares, and all proceeds thereof, which the undersigned promises to deliver to Bank. [ ] If marked, the collateral hereinafter described shall be and hereby is deleted as security interest for payment of the aforesaid Promissory Note(s): ______________________________________________________________________________ ______________________________________________________________________________ OTHER:________________________________________________________________________ If the Promissory Note(s) being modified by this Agreement is signed by more than one person or entity, the modified Promissory Note(s) shall be the JOINT and SEVERAL obligation of all signers and the property and liability of each and all of them. It is expressly understood and agreed that this Agreement is a modification only and not a novation. The original obligation of the Borrower(s) as evidenced by the Promissory Note(s) above described is not extinguished hereby. It is also understood and agreed that except for the modification(s) contained herein said Promissory Note(s), and any other Loan Documents or Agreements evidencing, securing or relating to the Promissory Note(s) and all singular terms and conditions thereof, shall be and remain in full force and effect. This Agreement shall not release or affect the liability of any co-makers, obligors, endorsers or guarantors of said Promissory Note(s). Borrower(s) and Debtor(s)/Grantor(s), if any, jointly and severally consent to the terms of this Agreement, waive any objection thereto, affirm any and all obligations to Bank and certify that there are no defenses or offsets against said obligations or the Bank, including without limitation the Promissory Note(s). Bank expressly reserves all rights as to any party with right of recourse on the aforesaid Promissory Note(s). In the event periodic accruals of interest shall exceed any periodic fixed payment amount described above, the fixed payment amount shall be immediately increased or supplemental interest payments required on the same periodic basis as specified above (increased fixed payments or supplemental payments to be determined in Page 1 of 2 BBT373 (9701) 4 the Bank's sole discretion), in such amounts and at such times as shall be necessary to pay all accruals of interest for the period and all accruals of unpaid interest from previous periods. Such adjustments to the fixed payment amount or supplemental payments shall remain in effect for so long as any interest accruals shall exceed the original fixed payment amount and shall be further adjusted upward or downward to reflect changes in any variable interest rate based on an index such as Bank's Prime Rate. In no event shall the fixed payment amount be reduced below the original fixed payment amount specified in this Agreement or in the Promissory Note(s). Notwithstanding any other provision contained in this agreement, in no event shall the provisions of this paragraph be applicable to any Promissory Note(s) which requires disclosures pursuant to the Consumer Protection Act (Truth-in-Lending Act), 15 USC section 1601, et seq., as implemented by Regulation Z. The Bank may, at its option, charge any fees for the modification, renewal, extension, or amendment of any of the terms of the Promissory Note(s) permitted by N.C.G.S. section 24-1.1. In the words "Prime Rate", "Bank Prime Rate", "BB&T Prime Rate", Bank's Prime Rate" or "BB&T's Prime Rate" are used in this Agreement, they shall refer to the rate announced by the Bank from time to time as its Prime Rate. The Bank makes loans both above and below the Prime Rate and uses indexes other than the Prime Rate. Prime Rate is the name given a rate index used by the Bank and does not in itself constitute a representation of any preferred rate or treatment. Unless otherwise provided herein, it is expressly understood and agreed by and between Borrower(s), Debtor(s)/Grantor(s) and Bank that any and all collateral (including but not limited to real property, personal property, fixtures, inventory, accounts, instruments, general intangibles, documents, chattel paper, and equipment) given as security to insure faithful performance by Borrower(s) and any third party of any and all obligations to Bank, however created, whether now existing or hereafter arising, shall remain as security for the Promissory Note(s) as modified hereby. It is understood and agreed that if Bank has released collateral herein, it shall not be required or obligated to take any further steps to release said collateral from any lien or security interest unless Bank determines, in its sole discretion, that it may do so without consequence to its secured position and relative priority in other collateral; and unless Borrower(s) bears the reasonable cost of such action. No delay or omission on the part of the Bank in exercising any right hereunder shall operate as a waiver of such right or of any other right of the Bank, nor shall any delay, omission or waiver on any one occasion be deemed a bar to or waiver of the same, or of any other right on any further occasion. Each of the parties signing this Agreement regardless of the time, order or place of signing waives presentment, demand, protest, and notices of every kind, and assents to any one or more extensions or postponements of the time of payment or any other indulgences, to any substitutions, exchanges or releases of collateral if at any time there is available to the Bank collateral for the Promissory Note(s), as amended, and to the additions or releases of any other parties or persons primarily or secondarily liable. Whenever possible the provisions of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of the Agreement prohibited by or invalid under such law, such provisions shall be ineffective to the extent of any such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provision of this Agreement. All rights and obligations arising hereunder shall be governed by and construed in accordance with the laws of the same state which governs the interpretation and enforcement of the Promissory Note(s). From and after any event of default under this Agreement, the Promissory Note(s), or any related deed of trust or other security agreement or loan agreement, interest shall accrue on the sum of the principal balance and accrued interest then outstanding at the variable rate equal to the Bank's Prime Rate plus 5% per annum ("Default Rate"), provided that such rate shall not exceed at any time the highest rate of interest permitted by the laws of the State of North Carolina; and further that such rate shall apply after judgement. In the event of any default, the then remaining unpaid principal amount and accrued but unpaid interest then outstanding shall bear interest at the Default Rate called for hereunder until such principal and interest have been paid in full. BANK SHALL NOT BE OBLIGATED TO ACCEPT ANY CHECK, MONEY ORDER, OR OTHER PAYMENT INSTRUMENT MARKED "PAYMENT IN FULL" ON ANY DISPUTED AMOUNT DUE HEREUNDER, AND BANK EXPRESSLY RESERVES THE RIGHT TO REJECT ALL SUCH PAYMENT INSTRUMENTS. BORROWER AGREES THAT TENDER OF ITS CHECK OR OTHER PAYMENT INSTRUMENT SO MARKED WILL NOT SATISFY OR DISCHARGE ITS OBLIGATION UNDER THIS NOTE, DISPUTED OR OTHERWISE, EVEN IF SUCH CHECK OR PAYMENT INSTRUMENT IS INADVERTENTLY PROCESSED BY BANK UNLESS IN FACT SUCH PAYMENT IS IN FACT SUFFICIENT TO PAY THE AMOUNT DUE HEREUNDER. CREDIT LIFE AND DISABILITY INSURANCE ------------------------------------ Subject to certain underwriting criteria and limitations, INDIVIDUAL BORROWERS AND ADDITIONAL CO-MAKERS HAVE THE RIGHT TO REQUEST CREDIT LIFE AND DISABILITY INSURANCE PROTECTION FOR THIS LOAN. One or two Borrowers/Co-makers may be covered by BB&T Credit Life Insurance and one Borrower/Co-maker may be covered by BB&T Credit Disability Insurance. However, the purchase of credit life and credit disability insurance from the Bank is not a condition of obtaining or maintaining this loan. I, the undersigned, desire the credit insurance with the cost and terms described below and promise to pay the premium of such insurance coverage. I understand that I may cancel this credit insurance at any time. I represent that, to the best of my knowledge, I am in good health and am insurable. [ ] BB&T Type 1: Complete the following: [ ] BB&T Type 2: Complete separate application.
CREDIT LIFE INSURANCE Effective Date Term in Mos. Initial Ins. Amount Credit Life Premium [ ] Single [ ] Level [ ] Joint [ ] Decreasing $ $ ---------------- ----------- ------------------ -------------------
Monthly Benefit Amount Credit Disability Premium
CREDIT DISABILITY INSURANCE Effective Date and Terms in Mos. Same as Credit Life Insurance Above $ $ ----------------------------------- --------------------------- ----------------------------
Credit Disability Insurance is subject to a 14-day elimination period and a 60-month maximum benefit period. Only the Borrower or Co-Maker who signs on the first line under "Signature(s) of Insured" is covered by Credit Disability insurance. Date of Birth Signature(s) of Insured Total Credit Life and Disability Insurance Premium -------------- -------------------------------------- Signature of Primary Insured $ -------------- -------------------------------------- --------------------------------------- Signature of Secondary Insured
Witness the hand and seal of the undersigned. Each of the undersigned adopts as his seal the word or symbol for "seal" appearing beside or near his signature below. IF BORROWER IS A CORPORATION: Quintiles Transnational Corp ------------------------------------------- NAME OF CORPORATION ATTEST:/s/ Guy D. Porter By: /s/ Dennis B. Gillings ----------------------- --------------------------------------- Dennis B. Gillings Title:EVP Secretary Title: Chairman and Chief Executive Officer ------------------------ ------------------------------------ (SEAL) By: ---------------------------------------- Title: ------------------------------------- IF BORROWER IS A PARTNERSHIP, LIMITED LIABILITY COMPANY, OR LIMITED LIABILITY PARTNERSHIP: WITNESS: ------------------------------------------- NAME OF PARTNERSHIP, LLC, OR LLP By: (SEAL) - ------------------------------ ---------------------------------- GENERAL PARTNER OR MANAGER By: (SEAL) - ----------------------------- ---------------------------------- GENERAL PARTNER OR MANAGER By: (SEAL) - ----------------------------- ---------------------------------- GENERAL PARTNER OR MANAGER IF BORROWER IS AN INDIVIDUAL WITNESS: (SEAL) - ----------------------------- ------------------------------------- ADDITIONAL BORROWERS AND DEBTORS/GRANTORS WITNESS: /s/ Guy D. Porter /s/ Quintiles, Inc. "By Dennis Gillings CEO" (SEAL) - ----------------------------- ----------------------------------------------------------- Quintiles, Inc., Guarantor By: Dennis B. Gillings, CEO (SEAL) - ----------------------------- ----------------------------------------------------------- /s/ Guy D. Porter /s/ Quintiles Pacific, Inc. "By Dennis Gillings CEO" (SEAL) - ----------------------------- ----------------------------------------------------------- Quintiles Pacific, Inc., Guarantor By: Dennis B. Gillings, CEO (SEAL) - ----------------------------- ----------------------------------------------------------- /s/ Guy D. Porter /s/ Quintiles Laboratories Limited "By Dennis Gillings CEO" (SEAL) - ----------------------------- ----------------------------------------------------------- Quintiles Laboratories Limited, Guarantor By: Dennis B. Gillings, CEO (SEAL) - ----------------------------- -----------------------------------------------------------
EX-10.36 10 LEASE - SEAGATE/INNOVEX 1 EXHIBIT 10.36 DATED 6th November, 1996 ------------------------ REPORT SECOND FLOOR OFFICES SOLAR HOUSE FIELDHOUSE LANE GLOBE PARK, MARLOW, BUCKINGHAMSHIRE Hobson Audley Hopkins & Wood 7 Pilgrim Street London EC4V 6DR MJH/INNB40 05.1l.96 [HA 38534] 2 1. THE PROPERTY The property comprises the leasehold interest in the premises known as Second floor, Solar House, Fieldhouse Lane, Globe Park, Marlow, Buckinghamshire ("the property"), shown on the plan numbered one annexed to this Report. This plan is taken from the Lease. 2. THE CONTRACT The Contract is governed by the standard Conditions of Sale (3rd Edition). We confirm that the Contract has been drawn in comprehensive and equitable form which properly protects the interests of both parties The following terms should be noted: 2.1 The Contract obliges both parties to complete the Lease within seven working days after the Contract becomes unconditional. 2.2. The Contract is conditional upon the superior landlord's consent being granted and also the parties obtaining a court order to exclude the security of tenure provisions of the Landlord and Tenant Act 1954. When both the consent and court order have been obtained the contract becomes unconditional. 2.3 There is a long stop date of three months from the date of the Contract and if the superior landlord's consent and the court order are not obtained within this period then either party can rescind the Contract. 2.4 The Contract allows you to occupy the demised premises as licensee at will from the date of exchange until the Lease is formally completed. Your occupation will be on the same terms as the Lease but can be brought to an end at any time by the landlord. 2.5 You will also be entitled to carry out your fitting out works whilst you occupy as licensee provided that they have been previously approved in writing by the landlord. 3. THE TITLE As Seagate are only granting you a lease for three years they are not obliged to deduce title to the property although we confirm that we have been provided with a copy of the lease under which they hold Solar House which is dated 31st May 1990 and made between AMEC Properties Limited (1) and Seagate Technology Inc (2) ("the Headlease"). AMEC's interest is now vested in The Prudential Insurance Company. We have not, however, been provided with a copy of the lease under which Prudential hold the development. 4. THE LEASE The Lease is an underlease and as such follows very closely the form of the Headlease. A summary of the main provisions of the Lease together with the agreed form of Lease are given in Appendix 1. Please note that not all the obligations under -1- 3 the Lease are repeated. We have merely tried to summarise the most important provisions. 5. PLANNING & LOCAL SEARCH INFORMATION We have obtained a personal local authority search through ICC Site Search Limited which is dated 30th October 1996. The results of the search reveal the following salient entries. 5.1 The property falls within the administrative district of Wycombe District Council. 5.2 The foul drainage is connected to the public foul water sewer. The property is not, however, connected to the public service water sewer. 5.3 Fieldhouse Lane is maintained at public expense. 5.4 The property is located within an employment area. 5.5 It appears that Solar House was erected pursuant to a Planning Permission W/88/6223 which authorised the redevelopment of the site and construction of two buildings for B1 business use together with associated parking. The search does not, in other respects, reveal anything adverse. 6. FIRE CERTIFICATE A Fire Certificate will be required in respect of the property due to the number of employees that it will house. You should also obtain confirmation from the Fire Officer that your fitting out works comply in all respects with fire precaution requirements. 7. DELETERIOUS MATERIALS The Vendor has provided no warranties concerning the use of non-deleterious materials but in view of the short term nature of the letting and the fact that the service charge is capped we do not consider this a cause of concern. 8. ENVIRONMENTAL LIABILITY No information has been provided by the landlord's solicitors. Again, in view of the short term nature of the letting we do not consider that an environmental audit is necessary. 9. REPLIES TO ENQUIRIES The replies reveal very little information and the information given does not appear to be adverse. The following points should be noted: -2- 4 9.1 No information has been provided in respect of rates or any other outgoings. Please let us know if you require us to make further enquiries. 9.2 Seagate give no warranty as to the condition of the property. 9.3 Seagate has received no notices of any breach of the terms of its lease or of any of the conditions attached to the planning permission referred to in paragraph 5.5 above. 9.4 The central heating was installed when the building was erected approximately 8 years ago and is regularly serviced under a maintenance contract. 9.5 The telephones will be removed. 9.6 The Superior Landlord is The Prudential Insurance Company Limited and the freehold reversioner is believed to be Wycombe District Council. 9.7 We have not been provided with any insurance information. 9.8 Limited service charge information has been provided. Copies of the replies to enquiries are attached at Appendix 2. Please note that the red edging on Plan 1 attached to the replies to enquiries is incorrect. The extent of the property to be let to you is shown on the Plan numbered 2 annexed to this report. 10. WORKS 10.1 The Contract provides that you are permitted to carry out your fitting out works. 10.2 We have negotiated that you will not be obliged to reinstate the existing partitioning that you intend to remove. You will, however, be obliged to take down the existing parkhousing carefully and store it until the end of the Term and then release it to Seagate. You are also obliged to remove the new partitioning that you install, if required. 10.3 The erection of the microwave dishes requires the consent of both Seagate and the Prudential which have both been obtained in principle. You are permitted to put up the dishes before a formal licence has been obtained provided that you sign the letter of indemnity which provides that the works are carried out at your own risk and that you will enter into a licence of alterations in a form reasonably required by Prudential. You are also liable to remove the dishes within 7 days of being required to. 10.4 With regard to the dishes required at Medina House, we confirm that a licence to erect the dishes will be required from your Landlord's YJ Lovell (Holdings) Limited and that this has been applied for. As you are aware such a licence may take a number of weeks. We would recommend that you discuss the situation with us if you need to erect the dishes before such a licence is available. -3- 5 10.5 You are obliged to obtain the necessary planning and building regulations consents in respect of the dishes. 11. CONCLUSION Subject to the points mentioned in this report we confirm that the terms of the Lease and Contract are acceptable. Dated the 6th day of November, 1996 /s/Hobson Audley Hopkins & Wood ------------------------------- HOBSON AUDLEY HOPKINS & WOOD -4- 6 THE PLANS REFERRED TO: --------------------- -5- 7 SECOND FLOOR OFFICES SOLAR HOUSE FIELD HOUSE LANE GLOBE PARK, MARLOW, BUCKINGHAMSHIRE [FLOOR PLAN] PLAN 1 8 LOCATION MAP SOLAR HOUSE FIELD HOUSE LANE GLOBE PARK, MARLOW, BUCKINGHAMSHIRE [FLOOR PLAN] 9 APPENDIX 1: ---------- -6- 10 LEASE SUMMARY 1. PROPERTY: Second Floor, Solar House, Fieldhouse Lane, Globe Park, Marlow, Buckinghamshire. A full definition is provided at the end of this summary. 2. LANDLORD: Seagate Technology Inc 3. TENANT: Innovex Holdings Limited 4. SUPERIOR LANDLORD: The Prudential Insurance Company. Their development is shown edged blue on the plan numbered 2 annexed to this report. 5. TERM: 3 years commencing on 1st November 1996 and expiring on 31st October 1999 6. RENT: L 92,300 per annum + VAT 7. RENT REVIEW: None 8. PAYMENT DATES: Quarterly in advance on the usual quarter days. 9. TENANT'S PERCENTAGE: 14.9%. It is the ratio that the net internal area of the Demised Premises bears to the net internal area of the building (Solar House) and is to be determined by the landlord's appointed surveyor in case of dispute. 10. BREAK CLAUSE: None. 11. RATES: Paid by Tenant. 12. SECURITY OF TENURE: No TENANT'S COVENANTS 1. RENT: To pay the rent on the usual quarter days without any deduction. Rent and other outgoings are payable from 1st November 1996. 2. OUTGOINGS: To pay all outgoings and other charges relating to the property including the Tenant's Percentage of all payments as may be assessed, charged or payable in respect of the building.
-1- 11 3. SERVICE CHARGE: To pay the Tenant's Percentage of the cost incurred by the Landlord in providing the Services and also the Tenant's Percentage of the amount paid by the Landlord for services under the Superior Lease. Payments are subject to a cap of L 4.00 per square foot. (i.e. L 14,045 per annum). Service charge is subject to VAT. The Tenant is liable for all the costs incurred by the Landlord in lighting and cleaning the toilets on the second floor and providing hot water to them. 4. REPAIRS AND DECORATION The tenant is responsible for keeping the property in good and substantial repair and condition. In addition the tenant is responsible for redecorating the Property in the last 6 months of the term. However there is no obligation to replace ceiling tiles or the carpet. 5. ALTERNATIONS/IMPROVEMENTS Alterations or additions to the property are prohibited. However, the tenant may with the prior written consent of the landlord which is not to be unreasonably withheld or delayed make non structural internal alterations or additions and install internal demountable partitions. The tenant is responsible for supplying the landlord with full specifications and drawings. The landlord can withhold its consent until such time as the tenant obtains confirmation that any such proposed partitioning conforms to the requirements of local fire officers. The landlord can insist on reinstatement. 6. USER: Only for uses within Class B1 of the Town and Country Planning (Use Classes) Order 1987. This covers (a) office use (other than for financial and professional services) (b) research and development or (c) any industrial process which can be carried out in any residential area without detriment to the amenity of that area.
-2- 12 7. ALIENATION Any dealing with part only of the property is prohibited. Underletting of the whole is prohibited. Assignment of the whole is permitted provided that the prior written consent of the landlord is obtained (such consent not to be unreasonably withheld or delayed). The landlord can reasonably withhold its consent if at the date of the application the tenant is in breach of its covenants under the lease or if the proposed assignee is not in the landlord's reasonable opinion of sound financial standing and capable of performing the tenant's covenants under the lease or if the landlord reasonably believes that the assignment would adversely affect its interest in Solar House. In addition, the assignee is to be a limited company whose annual profits before tax in each of the three years prior to the application for assignment exceeds 3 times the annual rent. The landlord can on all occasions require the tenant to guarantee the proposed assignee's obligations and where reasonable it can request the assignee to enter into a rent deposit deed or to provide a guarantor. In addition a proposed assignee must enter into a direct deed of covenant with the landlord. Notice of any assignment must be given within one calendar month. The tenant may share occupation with any subsidiary or holding company of the tenant. 8. REGULATIONS: The tenant must observe any reasonable regulations stipulated by the landlord. 9. SUPERIOR LEASE: The tenant must not do anything which might cause the landlord to be in breach of the terms of the superior lease dated 31st May 1990 and made between the Superior Landlord (1) and the Landlord (2). The form of the lease follows the superior lease and performance of the covenants in the lease will not be a breach of any covenants in the superior lease.
-3- 13 LANDLORD'S COVENANTS 1. SUPERIOR LEASE To pay the rents reserved by the Superior Lease and to perform the lessee's covenants thereunder and to use all reasonable endeavours to procure that the superior landlord observes and performs its covenants in the Superior Lease subject to the tenant bearing the Tenant's Percentage of the landlord's costs thereby incurred. 2. SERVICES To use its reasonable endeavours in an efficient manner and in accordance with the principals of good estate management unless so prevented by an event beyond its control and (subject to the tenant paying the service charge) to provide: (a) Air conditioning. (b) Cold water to the toilets and washroom facilities on the second floor of the building and hot water during normal office working hours from 8.00 a.m. to 6.00 p.m. (c) To keep the halls and passages leading to the demised premises and toilet and washroom facilities on the second floor of the building reasonably clean and lit during normal office working hours. (d) To keep the conducting media within the building in good and substantial repair. 3. SUPERIOR LEASE SERVICE CHARGE The landlord is obliged to supply to the tenant ACCOUNTS within fourteen days of receiving the same copies of such accounts together with copies of any written estimates. 4 SERVICE CHARGE ACCOUNTS The landlord is obliged to and to make available any receipts and vouchers for inspection and to provide accounts for each service charge year. INSURANCE The superior landlord is obliged to insure the building and the tenant is liable to repay to the landlord the Tenant's Percentage of the cost.
-4- 14 The landlord is obliged to insure plate glass within the building and again the tenant is obliged to pay to the landlord the Tenant's Percentage of the cost. If the property or any part or access to it is damaged or destroyed by an insured risk and the superior landlord's insurance policy has not been vitiated the rent is suspended until the damage is remedied or the end of the lease whichever is the sooner. If insurance money is refused due to an act or default of the tenant the tenant is responsible for repaying to the landlord the cost (or a fair proportion as the case may be) of rebuilding and reinstating the building. RE-ENTRY (a) If the rent is unpaid for 21 days; or (b) any of the tenant's covenants are not performed; or (c) there is an insolvency event (as defined on page 49 of the lease); or (d) the tenant's re-registers with unlimited liability or reduces its capital or is struck off the register of companies; or (e) distress is levied on any of the tenant's goods at the property; or (f) either of (c) or (d) happen in relation to a surety then the landlord can lawfully re-enter the property. SERVICES UNDER SUPERIOR LEASE (a) To light, clean, drain, repair and maintain in good condition and free from rubbish and litter and from time to time resurface or renew the common areas and all roads, footpaths, lawns, trees, gardens and landscaped amenity areas. (b) To clean, repair and maintain in good working order all conducting media that are laid from time to time under the common areas.
-5- 15 (c) To pay all outgoings in respect of the common areas. (d) To insure the common areas. (e) To manage the common areas. The Tenant is responsible for paying the Tenant's Percentage of the costs to the Landlord for such items. SERVICES UNDER THE LEASE (a) Provision of air conditioning in the building. (b) Keeping halls and passages in the building clean and lit. (c) Repairing, maintaining, renewing and cleaning the conducting media within the building and the plant within the building. (d) Providing security. (e) Insurance which the landlord may reasonably deem prudent in connection with any services. (f) Employing agent's contractors etc. (g) Procuring the supply of gas, water and electricity for the use of air conditioning and central heating. (h) providing hot and cold water to the water outlets in the Building. RIGHTS AND RESERVATIONS 1. Rights (a) to use the car parking spaces shown edged green on the plan numbered 2 annexed to this report or such other spaces that the landlord may be allocated under the Headlease. (b) to use the entrance halls and passages within the Building and also the toilets and washroom facilities on the first and second floors. (c) right of passage of services through the conducting media within the Building and Common Areas.
-6- 16 (d) right of support. (e) right to use Common Areas. 2. Reservations (a) support. (b) right of passage of services through the conducting media within the property. (c) right to alter any other property of the Landlord. (d) rights of entry upon the property for the purposes mentioned in the lease. DEMISED PREMISES A full definition is provided on the first schedule to the lease. It is recommended that this is read carefully. You will note that the demised premises comprise the second floor and the internal finishes but not the main structure.
-7- 17 DATED 1996 ----------------------------------- (1) SEAGATE TECHNOLOGY INC. (2) INNOVEX HOLDINGS LIMITED --------------------------------------------- Counterpart UNDERLEASE relating to second floor of Solar House, Fieldhouse Lane, Marlow, Buckinghamshire Term: Commencing on 1st November 1996 expiring on 31 October 1999 Rent: L 92,300 pa --------------------------------------------- Baker & McKenzie 100 New Bridge Street London EC4V 6JA Tel: 0171-919 1000 Fax: 0171-919 1999 Ref: MDS/JFM 18 CONTENTS
Clause Page - ------ ---- 1. Preliminary .................................................................1 1.1 Definitions ........................................................1 1.2 Gender .............................................................5 1.3 Number..............................................................5 1.4 Obligations ........................................................5 1.5 Statutory References ...............................................5 1.6 Covenants by the Tenant ............................................5 2. Demise Habendum and Reddendum ...............................................6 3. Tenant's Covenants ..........................................................7 3.1 Pay Rents ..........................................................7 3.2 Discharge Outgoings and Pay for Services ...........................8 3.3 Value Added Tax ...................................................11 3.4 Observance of Statutory Requirements ..............................12 3.5 Fire Precautions ..................................................13 3.6 Repair ............................................................13 3.7 Decoration and Maintenance ........................................14 3.8 Rubbish and Appearance ............................................16 3.9 Matters Prejudicial to the Demised Premises .......................17 3.10 Improvements and Alterations ......................................19 3.11 Signs and Erections ...............................................21 3.12 Planning ..........................................................21 3.13 Inspection and Remedial Works .....................................24 3.14 User ..............................................................26 3.15 Assignment and Underletting .......................................27 3.16 Facilitate Landlord's Dealings with the Demised Premises ..........33 3.17 Landlord's Access to the Demised Premises .........................34 3.18 Provision of Information to the Landlord ..........................35 3.19 Payment of Fees and Expenses ......................................36 3.20 Substitution of Surety ............................................37 3.21 Indemnities .......................................................38 3.22 Yield Up ..........................................................40 3.23 Regulations .......................................................41 3.24 Superior Lease ....................................................41 4. Landlord's Covenants .......................................................41 4.1 Quiet enjoyment ...................................................41
19 5. Insurance ..................................................................45 5.1 Information regarding cover ............................................45 5.2 Suspension of Rent on Occurrence of Insured Risk .......................45 5.3 Access for reinstatement ...............................................46 5.4 Tenant not to Prejudice Insurance ......................................46 5.5 Re-building if Insurance Money Irrecoverable ...........................46 5.6 Tenant's User and Insurance - To Pay Costs .............................47 5.8 Tenant's Insurances ....................................................48 6. No Liability ...............................................................48 7. Provisos ...................................................................48 7.1 Re-Entry ...............................................................49 7.2 Distress ...............................................................51 7.3 Formal Licences ........................................................51 7.4 Resolution of Differences ..............................................52 7.6 Tenant's Goods Left in Premises ........................................52 7.7 Service of Notices .....................................................53 7.8 Exclusion of Implied Easements .........................................53 7.9 Superior leases ........................................................53 7.11 No Warranty as to Permitted Use .......................................54 7.12 Denial of Waiver ......................................................54 7.13 Exclusion of set off ..................................................55 7.14 Rights of Access ......................................................55 7.15 Consents and Approvals ................................................55 7.16 Exclusion of Landlord and Tenant Act 1954 .............................55 8. Surety Covenants ...........................................................56 9. Jurisdiction ...............................................................56 THE FIRST SCHEDULE ..............................................................56 The Demised Premises .......................................................56 THE SECOND SCHEDULE .............................................................57 Rights included in the Demise ..............................................57 THE THIRD SCHEDULE ..............................................................59 Part I .....................................................................59 Part 11 ....................................................................60 THE FOURTH SCHEDULE .............................................................60 The Surety's Covenants .....................................................60
20 THIS UNDERLEASE is made the day of One thousand nine hundred and ninety-six BETWEEN: (1) SEAGATE TECHNOLOGY INC. of 920 Disc Drive, Scotts Valley, California 95066-4544 ("the Landlord" which expression includes the person for the time being entitled to the reversion immediately expectant on the determination of the Term) 2) INNOVEX HOLDINGS LIMITED whose registered office is at Innovex House, Marlow Park, Buckinghamshire SL7 1TB ("the Tenant" which expression includes its successor or successors in title and permitted assigns) WITNESSETH as follows: 1. PRELIMINARY 1.1 Definitions In these presents: "Building" means the building situate at and known as Solar House Fieldhouse Lane Marlow Buckinghamshire shown for the purposes of identification only edged red on the plan annexed hereto marked "Plan 2"; "the Carparking Spaces" means those fourteen carparking spaces which are for the purposes of identification only shown edged green on the plan annexed hereto marked "Plan 1" or such other carparking spaces as the Landlord may designate from time to time being 1 21 either within the Estate or within the car park spaces allocated to the Landlord by the Superior Landlord pursuant to the Superior Lease; "the Common Areas" means all parts of the Estate not comprised nor intended to be comprised in any demise to tenants of the buildings constructed thereon and the use whereof is intended to be common to tenants on the Estate; "the Conducting Media" means drains sewers pipes wires and cables for the passage and running of water and soil gas electricity telecommunications and other electronic impulses fuel and oil; "Demised Premises" means (save where the context otherwise requires) the whole and each and every part of the premises described in the First Schedule hereto and any alterations or additions to the same together with the fixtures and fittings in the nature of landlord's fixtures which are now or at any time hereafter may be affixed to or upon the said premises; "the Estate" means the Superior Landlord's development situate at Fieldhouse Lane Marlow Buckinghamshire as the same is shown edged blue on the plan annexed hereto marked "Plan 2"; "Interest" means interest (as well after as before judgment) at that rate which is 4 percentage points above the base rate or its equivalent for the time being 2 22 in force of Royal Bank of Scotland plc (or if such rate shall no longer be published then such rate as the Landlord shall reasonably consider to be comparable and an appropriate replacement for the same); "Planning Acts" means the Town and Country Planning Acts 1971 to 1990 the Town and Country Planning (Amendment) Act 1977 the Local Government Planning and Land Act 1980 the Local Government and Planning (Amendment) Act 1981 the Local Government (Miscellaneous Provisions) Act 1982 and every other statute for the time being in force amending or replacing the same or dealing with planning or related matters or otherwise of a similar nature and every regulation order direction plan instrument permission or ruling made or issued under or deriving validity from any of the same; "the Plant" means all plant and machinery now in or serving the Building (other than tenant's trade plant and machinery) including (without prejudice to the generality of the foregoing) all lifts and lift machinery all air conditioning heating and ventilation plant and machinery all sprinklers and associated Conducting Media all window cleaning plant and machinery all drinking fountains all electrical systems all fire detection and fire prevention systems and all control or monitoring systems and installations (including in each case all associated Conducting Media 3 23 whether or not exclusively serving the Demised Premises) and together also with all plant and machinery which may from time to time be installed to replace any item of the foregoing; "the Service Charge Cap" means in each year of the Term the amount of L 16,052 (sixteen thousand and fifty-two pounds) being the maximum amount of service charge which may be charged to the Tenant in any twelve month period; "the Superior Landlord" means Amec Properties Limited or its successor in title for the time being entitled to the reversion immediately expectant upon the determination of the Superior Lease; "the Superior Lease" means the superior lease of the Building dated the 31st day of May 1990 and made between the Superior Landlord (1) and the Landlord (2); "the Surveyor" means a chartered surveyor appointed by the Landlord from time to time for the purposes of these presents; "the Tenant's Percentage" means the percentage attributable to the Demised Premises according to the ratio which the net internal area of the Demised Premises bears to the net internal area of the Building such percentage being 14.9% at the date hereof and to be determined by the Surveyor in the event of a dispute; 4 24 "Term" means the term hereby granted; "these presents" means this Lease as from time to time amended and any licence consent approval or other deed or document supplemental hereto. 1.2 Gender Each gender includes each other gender 1.3 Number Words importing the singular include the plural and vice versa 1.4 Obligations For so long as there are two or more persons included in the expressions "the Landlord ", "the Tenant" or "the Surety" covenants contained in these presents which are expressed to be made by or with such party shall be deemed to be made by or with such persons jointly and severally 1.5 Statutory References (Whether to a specific statute or to statutes generally) shall include any modification or re-enactment thereof for the time being in force and all instruments orders plans regulations permissions and directions for the time being issued or given thereunder or deriving validity therefrom 1.6 Covenants by the Tenant Not to do or omit any act or thing shall include an obligation not to permit cause or suffer such act or thing to be done or omitted by any other person 5 25 2. DEMISE HABENDUM AND REDDENDUM In consideration of the rents hereby reserved and of the covenants by the Tenant hereinafter contained the Landlord hereby demises unto the Tenant ALL THOSE the Demised Premises TOGETHER WITH the rights set out in the Second Schedule hereto EXCEPTING AND RESERVING unto the Landlord and persons authorised by it from time to time and all others entitled to the like rights the rights specified in Part 1 of the Third Schedule hereto and subject to all rights easements quasi-easements grants and wayleaves to which the Demised Premises are or may be subject and as mentioned in Part II of the Third Schedule hereto TO HOLD the same UNTO the Tenant for a term commencing on 1st November 1996 and expiring on 31st October 1999 YIELDING AND PAYING therefor to the Landlord by bankers standing order (if required) to an account specified by the Landlord: FIRST the rent (exclusive of value added tax) and so in proportion for any period less than a year of L 92,300 (ninety-two thousand three hundred pounds) per annum such rent to be paid quarterly in advance on the usual quarter days in each year and in each case without any deduction counterclaim or set-off whatsoever but with the first payment of rent in respect of the period from 1st November 1996 up to but not including the quarter day next following to be paid on the date hereof SECOND by way of further or additional rent payable throughout the Term on demand: (a) an amount or amounts equal to the Tenant's Percentage of the aggregate of all sums payable (whether incurred or to be incurred) by the Landlord to the Superior Landlord in respect of the rent secondly reserved by the Superior Lease and (b) an amount or amounts equal to the Tenant's Percentage of the aggregate of all sums payable (whether incurred or to be incurred) by the Landlord pursuant to clause 5.3 of the Superior Lease; THIRD by way of further or additional rent payable on demand an amount or amounts equal to the Tenant's Percentage of the aggregate of all sums payable (whether incurred or to be 6 26 incurred during the Term) by the Landlord to the Superior Landlord under Clause 7 of the Superior Lease; FOURTH by way of further or additional rent the sums payable by the Tenant under sub-clauses 3.2.1.(b), 3.2.2., 3.6.2. and 3.7.6. hereof; and Provided that the Tenant shall not be liable for paying to the Landlord any rent secondly thirdly or fourthly reserved more than 7 days before the Landlord is obliged to pay such sums. FIFTH by way of further or additional rent payable on demand but without prejudice to any other right remedy or power herein contained or otherwise available to the Landlord such sum or sums as shall equal Interest upon rents or other sums payable by the Tenant to the Landlord pursuant to these presents which shall have become due but remain unpaid for more than: (a) seven days (in all cases except the rent first reserved herein) (b) one day (in the case of the rent first reserved herein) after the date such rents or other sums are due 3. TENANT'S COVENANTS The Tenant hereby covenants with the Landlord that it will: 3.1 Pay Rents Pay the rents sums and payments at the times and in the manner at and in which the same are hereinbefore reserved and made payable without any deduction (except as required by law) and not to exercise or seek to exercise any right or claim to withhold rent or any right or claim to legal or equitable set off in relation to 7 27 withholding such rent sums and payment 3.2 Discharge Outgoings and Pay for Services 3.2.1 DISCHARGE OUTGOINGS Pay and discharge and indemnify the Landlord against: (a) all rates taxes duties charges assessments impositions and outgoings whatsoever whether parliamentary parochial local or of any other description and whether capital or non-recurring and even if of a wholly novel nature which are now or may at any time hereafter be taxed assessed charged or imposed upon or payable in respect of the Demised Premises or on the owners or occupiers in respect thereof; (b) (i) the Tenant's Percentage of all sums payable (whether incurred or to be incurred during the Term) by the Landlord pursuant to sub-clause 3.2(b) of the Superior Lease; (ii) the Tenant's Percentage of any rates taxes duties charges assessments impositions and outgoings of the nature hereinbefore mentioned which are now or may at any time hereafter be taxed assessed charged or imposed upon or payable in respect of the whole of the Building (or on the owners or occupiers in respect of the same; (c) any rates payable by the Landlord relating to the Demised Premises because of loss of rating relief applicable to empty premises suffered by it after the end of the Term by reason of such relief being allowed to the Tenant in respect of any period 8 28 before the end of the Term; (d) all charges for electricity water and gas supplied to or consumed in the Demised Premises and the meter rents in connection therewith and all telephone and other communications charges in respect of the Demised Premises and all other charges whatsoever for or in respect of any service whatsoever to or for or used in the Demised Premises 3.2.2 PAY FOR SERVICES To pay to the Landlord on demand (but subject always to the Service Charge Cap) an amount or amounts equal to the Tenant's Percentage of the costs expenses and outgoings reasonably incurred by the Landlord in: (a) providing air-conditioning to the Building including the cost of maintenance repairs or replacement of the air-conditioning system presently installed in the Building (b) providing or procuring the provision of hot and cold water to the water outlets situate in the Building (c) keeping the halls and passages in the Building clean and lit (d) repairing maintaining renewing and cleaning of the Conducting Media over under or within the Building which are used by the Demised Premises in common with other parts of the Building (e) repairing maintaining renewing and cleaning such of the Plant in the Building which is used in the provision of services to the Tenant hereunder 9 29 (f) repairing maintaining renewing and cleaning any matter or thing or providing any other service the use of which is enjoyed by the Tenant in common with the landlord or any other occupiers of the Building and the payment for which is not specifically provided for in any other provision of this Underlease Provided that this sub-clause (f) shall not include any repairing maintaining or renewing of the structural parts load bearing parts framework foundations and joists of the Building (g) providing security for the Building (h) insuring against any claim or liability which the Landlord may reasonably deem prudent including without limitation any which may arise in relation to or from any services provided or the provision of which is procured by the Landlord and Landlord's employees third party occupiers and public liability in connection with the parts of the Building which are not and are not intended to be used as offices including the halls passages staircases reception and toilet accommodation in the Building (i) employing such agents contractors and other persons and effecting such maintenance contracts as the Landlord may deem expedient in connection with the provision of services and other matters referred to in sub-clause 3.2.2 hereof (j) procuring a supply of electricity water and gas (including metered charges) for the use of the air-conditioning and central heating plant the lifts the stairwell lighting the reception area lighting and the toilet lighting in the Building and the external lighting equipment for the car park which is in the curtilage of the Building and any other matter or thing the use of which is either enjoyed by the Tenant in common with the Landlord and/or which 10 30 is not (in the case of electricity or gas) recorded on any of the meters for a particular floor in the Building 3.2.3 To pay to the Landlord on demand a fair proportion (according to user) of the costs expenses and outgoings reasonably incurred by the Landlord in: (a) providing or procuring the provision of hot and cold water to the toilets and washroom facilities and the water outlets situate on the first and second floor of the Building (b) keeping the washroom facilities on the first and second floors clean and lit PROVIDED THAT nothing in this sub-clause 3.2 shall oblige the Tenant to pay or indemnify the Landlord against any tax assessed or charged upon any dealing with the reversion expectant hereon or on the rents hereby reserved (other than Value Added Tax subject to the provisions of clause 3.3 hereof if charged by the Landlord on the rents hereby reserved) 3.3 Value Added Tax In addition to the rents fees and other payments of whatsoever nature which are or shall be reserved or which are or may become payable pursuant to the provisions of these presents by or on behalf of the Tenant to the Landlord or any person acting on its behalf the Tenant shall pay by way of further and additional rent to the Landlord or any such person Value Added Tax at the appropriate rate which is or may at any time hereafter become payable in respect of such payment or the supply to which it relates (including without limitation where the Tenant reimburses the Landlord for payments and such taxation (hereon made by the Landlord save to the extent that any Value Added Tax is recoverable by the Landlord as an input) and to indemnify the Landlord against the same 11 31 3.4 Observance of Statutory Requirements In relation to any and every statute and other obligation for the time being having the force of law (including without limitation the requirements of any government department local authority or other public authority or duly authorised officer or court of competent jurisdiction acting under or in pursuance of the same): (a) observe and comply in all respects with the provisions and requirements of the same so far as they relate to or affect the Demised Premises or any part thereof or the user thereof or the employment therein of any person or persons whether by the Landlord or Tenant or owner or occupier thereof; (b) execute all works and provide and maintain all arrangements which by or under the same are or may be directed or required to be executed provided and maintained (whether by the Landlord or Tenant or owner or occupier thereof) at any time during the Term upon or in respect of the Demised Premises or any part thereof or in respect of any user thereof or employment therein of any person or persons (c) indemnify the Landlord at all times against all costs charges and expenses of or incidental to the execution of any works or the provision or maintenance of any arrangements so directed or required as aforesaid; (d) not at any time during the Term do on or about the Demised Premises any act or thing by reason of which the Landlord may under any statute incur or have imposed upon the Landlord or become liable to pay any penalty damages compensation cost charge or expense 12 32 3.5 Fire Precautions 3.5.1 COMPLIANCE WITH RECOMMENDATIONS Without limiting the preceding sub-clause comply at all times with all recommendations from time to time of the appropriate authorities and with all reasonable recommendations from time to time of any insurer of the Demised Premises in relation to fire precautions affecting the Demised Premises and keep and maintain sufficient fire fighting and extinguishing apparatus in and about the Demised Premises installed in compliance with such recommendations and with any legal requirements and open to inspection and maintained to the reasonable satisfaction of the Landlord and not to obstruct the access to or means of working of the same 3.5.2 NOT OBSTRUCT ESCAPES Not at any time obstruct any fire escape doors corridors stairs or other equipment facilities or arrangements upon or in the Demised Premises 3.6 Repair 3.6.1 SOLE OBLIGATIONS To keep the Demised Premises in good and substantial repair and condition and properly maintained cleansed and amended in every respect and the Tenant hereby further agrees that the liability of the Tenant hereunder shall not be affected or lessened by reason of the age or state of dilapidation of the building or buildings or the fixtures fittings plant or equipment contained therein which are from time to time comprised in the Demised Premises (damage by any of the Insured Risks (as defined in the Superior Lease) excepted provided the policy or policies of insurance shall not have been vitiated or payment of any of the policy monies withheld or refused 13 33 by reason of any act neglect or default of the Tenant or their respective employees agents or of such licensees or invitees for whose acts the Tenant is or ought to be responsible) 3.6.2 CONTRIBUTIONS TO REPAIRS AND COMMON PAYMENTS Pay to the Landlord on demand (but subject always to the Service Charge Cap) the Tenant's Percentage of all costs expenses and outgoings incurred or to be incurred by the Landlord in complying with the provisions of sub-clause 3.6 of the Superior Lease (save for repairing maintaining and renewing of the structural parts load bearing parts framework foundations and joists of the Building and save insofar as the obligations therein contained fall to be performed by the Tenant in relation to the Demised Premises under the covenants on its part herein contained) and to keep the Landlord indemnified against such costs expenses and outgoings 3.7 Decoration and Maintenance 3.7.1 DECORATION During the six months immediately preceding termination of the Term (howsoever the same may be determined) properly prepare paint paper or otherwise treat as appropriate all the internal surfaces originally painted papered or treated and all additions thereto in the Demised Premises with appropriate materials and generally to redecorate the Demised Premises throughout restoring and making good the Demised Premises in accordance with good standards of workmanship and materials to a colour scheme previously approved in writing by the Landlord if different from that existing provided always that the Tenant will not be required to replace any ceiling tiles or the Carpet 14 34 3.7.2 CLEANING As often as necessary clean and treat in an appropriate manner to the reasonable satisfaction of the Landlord all materials surfaces and finishes of the Demised Premises which ought normally to be so cleaned and treated (including without limitation all wood plaster metal stonework cladding and concrete) and wash all surfaces requiring to be washed and keep clear all gutters drains downpipes and gulleys exclusively serving the Demised Premises 3.7.3 EQUIPMENT Keep all the equipment plant machinery apparatus and services for the time being exclusively serving the Demised Premises in good working order and properly and regularly maintained by competent and suitably qualified persons and operate the same properly 3.7.4 WINDOWS Clean the insides of the window glazing of the Demised Premises at least once in every month 3.7.5 GENERAL OBLIGATION Without limiting the foregoing obligations the Tenant shall in any event at all times keep the Demised Premises in every respect in good order well maintained tended decorated clean and tidy so as to be consistent with high standards of office and estate management and ensure the Demised Premises retain the attributes of high class administrative offices 15 35 3.7.6 CONTRIBUTIONS TO DECORATIONS AND CLEANING Pay to the Landlord on demand (but subject always to the Service Charge Cap) the Tenant's Percentage of all costs expenses and outgoings incurred or to be incurred by the Landlord in complying with the provisions of sub-clause 3.7 of the Superior Lease (save insofar as the obligations therein contained fall to be performed by the Tenant in relation to the Demised Premises under the covenants on its behalf however contained) and to keep the Landlord indemnified against such costs expenses and outgoings 3.8 Rubbish and Appearance 3.8.1 REMOVAL OF RUBBISH Not form any refuse dump or scrap heap on the Demised Premises or any part thereof but instead deposit and store all refuse rubbish scrap and waste material at all times in proper receptacles within the Demised Premises so as not to be unsightly and ensure that all the same is removed therefrom regularly and not less often than weekly 3.8.2 MAINTENANCE OF APPEARANCE Not bring or do upon the Demised Premises anything which is or may become in the reasonable opinion of the Landlord untidy unclean unsightly or otherwise detrimental to the amenities or appearance of the Demised Premises or any neighboring premises and comply forthwith with the requirements of any written notice given by the Landlord to restore the amenities or appearance of the Demised Premises or any neighbouring premises 16 36 3.8.3 GOODS OUTSIDE THE BUILDINGS Not place exhibit or hang any goods or articles outside the Demised Premises 3.9 Matters Prejudicial to the Demised Premises 3.9.1 NOT DAMAGE Not do or suffer on or to the Demised Premises anything which may prejudice damage weaken or endanger the same in any way or lessen their value 3.9.2 OVERLOADING Not place or keep in the Demised Premises any article in such position or in such quantity or weight or otherwise in such manner howsoever as to overload or cause damage to or be in the reasonable opinion of the Landlord likely to overload or damage the Demised Premises nor otherwise treat or use any part of the Demised Premises in such a manner as to subject them to any strain beyond that which they are designed to bear or otherwise to be likely to damage them in any respect 3.9.3 PROHIBITED EQUIPMENT Not instal or bring upon the Demised Premises any machinery or equipment which may cause a nuisance or annoyance to others or by vibration weight noise or otherwise be likely to damage or weaken the Demised Premises in any respect 17 37 3.9.4 DRAINAGE Take all such measures as may be reasonably necessary to ensure that any effluent or other matter discharged into or placed in the drains and sewers which belong to or are used for the Demised Premises alone or in common with other premises will not be corrosive or in any way harmful to the said drains or sewers or cause any obstruction or deposit therein 3.9.5 ELECTRICAL INSTALLATION Not use or treat the electrical wiring and electrical installations in the Demised Premises or any part thereof in such a way as to overload the same nor otherwise prejudice or cause damage to the same 3.9.6 DELETERIOUS SUBSTANCES Not store nor bring upon any part of the Demised Premises (including without limitation the car park save normal fuel in the fuel tanks of permitted vehicles) any petrol benzol kerosene or other highly or especially offensive combustible inflammable explosive radioactive or dangerous spirit liquor fluid or substance or any materials that may attack or in any way injure by percolation corrosion vibration or otherwise the structure of the Building except with the prior written consent of the Landlord and within a store properly designed and constructed for that purpose to the satisfaction of the Landlord and the storage of such substances and materials and their use within the Demised Premises shall in all respects be in accordance with all general or local statutes and any local regulation or byelaw and any provisions of the insurance effected in respect of the Demised Premises 18 38 3.9.7 ENCROACHMENTS Not obstruct any of the windows or lights belonging to the Demised Premises and use its best endeavours to prevent any new window light passage drainage or other encroachment or easement being made into against upon or over the Demised Premises and if any encroachment or easement whatsoever shall be attempted to be made or acquired by any person or persons give notice thereof in writing to the Landlord as soon as reasonably practicable after the same shall come to its notice and at the cost of the Tenant do all such things as the Landlord may request or which may be proper for preventing any encroachment or easement being made or acquired 3.9.8 SECURITY Reasonably ensure that the Demised Premises are at all times secure against damage by vandalism and malicious damage and to comply with all security arrangements relating to the Building as the Landlord reasonably considers appropriate 3.10 Improvements and Alterations 3.10.1 ANY CHANGES Not to make any alteration or addition to the Demised Premises (whether internal external structural or otherwise) or otherwise cut maim or remove any of the walls ceilings roofs floors girders or timbers of the Demised Premises 39 3.10.2 INTERNAL DEMOUNTABLE PARTITIONS 3.10.2.1 Notwithstanding the provisions of sub-clause 3.10.1 above the Tenant may with the prior written consent of the Landlord (which will not be unreasonably withheld or delayed) make non-structural internal alterations or additions and install internal demountable partitions Provided that the Tenant shall supply the Landlord with full specifications and scale drawings of any such proposed partitioning and the Landlord shall be reasonable in withholding its consent until such time as the Tenant obtains confirmation that any such proposed partitioning conforms to the requirements of the local Fire Officers 3.10.2.2 The Tenant may remove the existing internal demountable partitions at the Demised Premises provided that the Tenant does so in a careful and diligent manner causings as little damage as reasonably possible to the said partitions and provided further that the Tenant stores at its own cost the partitions and delivers up the partitions to the Landlord at the Demised Premises upon the expiry or sooner determination of the Term. 3.10.3 REINSTATEMENTS Unless otherwise requested by the Landlord to reinstate the Demised Premises to the condition in which they were in immediately prior to any permitted alterations and additions and remove any partitioning to the reasonable satisfaction of the Landlord at the end or sooner determination of the Term 20 40 3.10.4 NOTIFICATION OF VALUE OF ALTERATIONS Upon completion of any material alterations permitted hereunder notify the Landlord of the full reinstatement value thereof 3.10.5 WASTE Not commit any waste save as expressly permitted by the preceding sub-clause of this sub-clause 3.10 3.11 Signs and Erections Not exhibit on the Demised Premises (including the windows) (so as to be visible from the outside of the Demised Premises) any aerial antennae mast wire dish flagpole sign signboard advertisement hoarding fascia placard bill notice poster symbol sticker or other notification whatsoever save with the prior written consent of the Landlord which shall not be unreasonably withheld or delayed in addition to any permission required by statute and maintain to the reasonable satisfaction of the Landlord any of the same which are so approved and in the event Landlord's consent is given for the same to remove any such signs at the end or sooner determination of the Term and make good any damage done to the Demised Premises to the reasonable satisfaction of the Landlord 3.12 Planning 3.12.1 NOT BREACH THE PLANNING ACTS Not at any time during the Term do or omit anything on or in connection with the Demised Premises the doing or omission of which contravenes the Planning Acts or any licences consents permissions approvals and conditions (if any) granted or imposed thereunder or under any enactment repealed thereby and indemnify the Landlord against all actions proceedings 21 41 damages penalties costs charges claims and demands in respect of any such acts and omissions 3.12.2 APPROVAL OF APPLICATIONS Not enter into any agreement with the planning authority nor make any application for planning permission to develop including change of use of the Demised Premises without the prior written consent of the Landlord and not submit such application to the planning authority unless and until the form and wording of the application has been approved in writing by the Landlord and subject thereto any application shall be made forthwith at the cost of the Tenant and (if requested) in the name of the Landlord and all other persons (if any) interested in the Demised Premises 3.12.3 COPY PLANNING DECISIONS Give to the Landlord immediately upon receiving the same a copy of every licence consent permission approval and other decision by any planning authority whether granted or refused 3.12.4 CONDITIONAL GRANTS If the planning authority indicates its willingness to grant any desired licence consent permission or approval only with modifications or subject to conditions not effect such modifications or conditions without the prior written consent of the Landlord and give to the Landlord forthwith full particulars of such modifications or conditions 3.12.5 OBSERVANCE OF CONDITIONS Observe and perform all conditions attached to any planning permission and keep the Landlord fully and effectually indemnified against all actions 22 42 proceedings damages penalties costs charges claims and demands whatsoever in respect of the costs of the said application and works and things done in pursuance of the said planning permission and in respect of all breaches (if any) of the said conditions and every part thereof respectively and (without limiting the foregoing) unless the Landlord otherwise directs carry out during the Term all works required to be carried out by a date after its termination as a condition of any planning consent granted during the Term for development commenced during the Term 3.12.6 NOTIFY LANDLORD OF PLANNING COMMUNICATIONS Give notice forthwith to the Landlord of any notice order or proposal for a notice or order served on the Tenant under the Planning Acts and if so required by the Landlord at the Landlord's cost produce or join in making such objections or representations in respect of any proposal as the Landlord may reasonably require 3.12.7 COMPLIANCE WITH PLANNING REQUIREMENTS Promptly comply at the Tenant's own cost with any notice or order served under the provisions of the Planning Acts on the Landlord or the Tenant relating to the Demised Premises except any such that result from any action or application of or by the Landlord or its predecessor or predecessors 3.12.8 PLANNING COMPENSATION If the Tenant receives any compensation with respect to its interest hereunder because of revocation or modification of a planning permission or of any restriction placed upon the user of the Demised Premises under or by virtue of the Planning Acts then upon the termination of the Term in 23 43 any manner the Tenant shall forthwith make such provision as is just and equitable for the Landlord to receive a due proportion of such compensation Any dispute as to the proportion payable to the Landlord shall be determined in accordance with sub-clause 7.4 3.12.9 NOT PRECIPITATE COMPULSORY PURCHASE ORDER Not make any application or do any act which may give rise to a proposal or cause to be served an order for the compulsory acquisition of the Demised Premises or any part thereof 3.12.10 RESTRICTION ON PLANNING APPLICATIONS AND DEVELOPMENT Not make any application for planning permission in respect of the Demised Premises or any part thereof nor carry out any development or other works whatsoever at the Demised Premises or any part thereof if the making of such application for planning permission or the grant of a planning permission pursuant thereto or the carrying out of such development or other works would give rise to any tax charge or other levy payable by the Landlord or any Superior Landlord 3.13 Inspection and Remedial Works 3.13.1 PERMIT INSPECTION Permit the Landlord or the Landlord's agents and any Superior Landlord or any Superior Landlord's agents or such workmen as may be authorised by them upon reasonable prior written notice except in the case of emergency at reasonable times and as often as may be necessary to enter into and upon the Demised Premises and examine the state of repair and condition of the same 24 44 3.13.2 OPENING-UP AND TEST In any examination pursuant to sub-clause 3.13.1 the Landlord or any Superior Landlord may cause parts of the Demised Premises to be opened up or tested or subjected to other works and if any defect or breach of covenant is thereby revealed (or the extent of any defect or breach established) the Tenant shall make good any damage caused by such opening up tests or other works at its own expense but otherwise the Landlord shall make good the same 3.13.3 REMEDIAL WORKS Within six weeks (or sooner if requisite) after notice in writing to the Tenant by the Landlord of any defects wants of reparation maintenance decoration renewals or replacements for which the Tenant is liable under these presents and any other matters found on such examination to be in breach of the covenants by the Tenant in these presents the Tenant shall commence and proceed diligently to repair and make good maintain decorate or renew and replace the same as the case may be or (in the case of items existing in breach of covenant) remove the same or otherwise rectify the breach in a good and proper manner in all respects to the reasonable satisfaction of the Landlord and will complete all such works as soon as practicable and in any event within three months of such notice according to such notice and the covenants in that behalf hereinbefore contained 3.13.4 DEFAULT BY TENANT If the Tenant defaults in performing its obligations under sub-clause 3.13.3 it shall be lawful but not obligatory for the workmen or others to be employed by the Landlord to enter upon the Demised Premises and carry out the works required by the notice and all expenses properly incurred 25 45 thereby shall be paid on demand by the Tenant to the Landlord and if not so paid shall be recoverable by the Landlord as liquidated damages together with Interest thereon from the date of demand until the date of actual payment (both dates inclusive) AND the Tenant hereby irrevocably appoints the Landlord to be the agent of the Tenant throughout the Term (but without liability to account) for the purpose of entering on inspecting and viewing any parts of the Demised Premises not at the time of such inspection in the occupation of the Tenant 3.14 User 3.14.1 PERMITTED USER Not to use the Demised Premises or any part thereof or permit the same to be used except solely for uses within Class B.1 of the Schedule to the Town & Country Planning (Use Classes) Order 1987 as enacted at the date hereof 3.14.2 PROHIBITED ACTIVITIES Not use the Demised Premises or any part thereof for any illegal immoral noisy noxious offensive or dangerous purpose nor for any sale by auction public exhibition show or political meeting nor do or allow to remain upon the Demised Premises anything which may reasonably be considered to be an annoyance nuisance disturbance damage or otherwise to the detriment of the Landlord or the owners or occupiers of any adjoining or neighbouring premises 3.14.3 ELECTRONIC EQUIPMENT Not use any radio electric or electronic equipment in the Demised Premises in such manner or condition as to cause electric electronic or other 26 46 interference to adjoining or neighbouring premises or equipment owned or operated therein 3.14.4 MUSICAL INSTRUMENTS Not use any musical instruments radio sets television sets tape recorders or record players or other audio equipment in the Demised Premises so as to be audible from outside the Demised Premises 3.14.5 PARKING SPACES Use the Carparking Spaces of which the Tenant is granted the use solely for the parking of private motor cars for the benefit of persons occupying or visiting the Demised Premises and in particular but without limitation not to permit washing maintenance or (save in emergency to vehicles brought onto the Demised Premises for a purpose permitted by this sub clause other than the execution of such work) repair work to or upon motor vehicles and not burn or store rubbish or other material thereon 3.14.6 RESIDENTIAL PURPOSES Not use the Demised Premises or any part thereof as sleeping accommodation or for residential purposes 3.15 Assignment and Underletting 3.15.1 DEALINGS WITH PART Not assign mortgage charge underlet or part with or share the possession or occupation of part only of the Demised Premises or suffer any person or company to occupy or share the occupation of any part of the Demised Premises whether as a licensee or otherwise or grant or allow any rights 27 47 over the same same as permitted by clause 3.15.8 3.15.2 DEALINGS WITH WHOLE Not mortgage charge underlet or part with or share possession of the whole of the Demised Premises or suffer any person or company to occupy or share the occupation of the whole of the Demised Premises whether as a licencee or otherwise or grant or allow any rights over the same in accordance with the remainder of this clause 3.15.3 ASSIGNMENT 3.15.3.1 Not to assign the whole of the Demised Premises without first obtaining the prior written consent of the Landlord (which shall not be unreasonably withheld or delayed) and the Landlord and the Tenant agree that for the purpose of Section 19(1)(A) of the Landlord & Tenant Act 1927 the Landlord may (without prejudice to the rights of the Landlord to refuse consent on any other reasonable ground) withhold consent to an assignment if any of the following circumstances exist at the date of the application for consent: 3.15.3.1.1 there is in the reasonable opinion of the Landlord a substantial breach of any of the Tenant's covenants in this Lease 3.15.3.1.2 the proposed assignee is not an Acceptable Assignee and for the purposes of this paragraph an Acceptable Assignee shall be a person who in the reasonable opinion of the 28 48 Landlord will be a respectable and responsible tenant and -- is of sound financial standing and capable of performing the Tenant's covenants in this Lease throughout the residue of the Term -- is a limited liability Company whose annual profits before tax in each of the three completed financial years preceding the date of the application for the consent to assignment (as evidenced by properly audited accounts) exceed an amount equal to three times the yearly rent payable in accordance with this Lease 3.15.3.1.3 in the reasonable opinion of the Landlord the effect of the proposed assignment would be to diminish or adversely affect the value of the Landlord's interest in the Demised Premises 3.15.3.2 Prior to an assignment the Landlord may require: 3.15.3.2.1 on or before completion of any 29 49 assignment the Tenant to enter into an authorised guarantee agreement in a form form reasonably required by the Landlord; or 3.15.3.2.2 if the Landlord shall so reasonably require on or before completion of the assignment to it the assignee to deposit with the Landlord an amount equal to the yearly rent for six months payable at the date of the assignment as security for the performance of the Tenant's covenants in this Lease; or 3.15.3.2.3 on or before completion of the assignment if the Landlord shall reasonably so require the assignee to procure an acceptable guarantor or guarantors who shall execute and deliver to the Landlord a deed containing direct covenants by such guarantor (or if more than one such guarantor joint and several covenants) with the Landlord in the terms contained in clause 8 herein 3.15.3.3 Within 21 days of: 3.15.3.3.1 the death during the Term of any person who has or shall have guaranteed to the Landlord the payment to the Landlord of the rents and the 30 50 observance and performance of the covenants on the part of the Tenant herein contained or 3.15.3.3.2 a person or body (as the case may be) who has guaranteed to the Landlord as mentioned in sub-clause 3.15.3.3.1 being adjudged a bankrupt or (being a company) going into liquidation (other than a voluntary liquidation for the purposes of amalgamation or reconstruction of a solvent company in respect of which the Landlord's consent has first been obtained such consent not to be unreasonably withheld) or a Receiver Administrator Administrative Receiver or other encumbrancer taking possession of or being appointed in respect of the whole or any part of such person or body's assets or such person or body making any arrangement with creditors for the liquidation of his or its debts by composition composition or otherwise or any voluntary arrangement as defined in the Insolvency Act 1986 or ceasing or threatening to cease to carry on his or its business as a whole or becoming unable to pay its debts within the meaning of Section 123 of the Insolvency Act 1986 31 51 then to give notice thereof to the Landlord and if reasonably so required by the Landlord at the expense of the Tenant within 21 days to procure some other person reasonably acceptable to the Landlord to execute a Guarantee in respect of the payment of rents and the observance and performance of the covenants in the form set out in clause 8 (or in such other form as the Landlord may reasonably require) 3.15.4 COVENANTS BY DISPONSEES Not in any event assign the whole of the Demised Premises unless and until the intended assignee ("the Permitted Assignee") has entered into a Deed to be prepared by the Landlord at the cost of the Tenant containing a covenant with the Landlord by the Permitted Assignee to perform and observe during the Term the covenants terms and conditions contained in these presents and to be performed and observed by the Tenant in the same manner as if such covenants and conditions were therein repeated with the substitution of the name of the Permitted Assignee for the name of the Tenant 3.15.5 BENEFICIAL INTEREST Not hold or occupy the Demised Premises or any part thereof as trustee or agent or otherwise for the benefit of any other person 3.15.6 NOTICE OF ASSIGNMENT Within one calendar month next after any assignment or devolution of the Demised Premises to give notice in writing to the Landlord of such assignment or devolution and of the name address and description of the assignee or person upon whom the relevant term or any part thereof may 32 52 have devolved AND produce to the Landlord or the Solicitor for the time being of the Landlord the instrument of assignment or devolution or a certified copy thereof and to pay to him his reasonable fee (being not less than fifteen pounds) for the registration thereof 3.15.7 ASSOCIATED COMPANIES Notwithstanding the other provisions of this sub-clause the Tenant may share occupation (on the basis that no relationship of landlord and tenant is thereby created) of the whole or any part of the Demised Premises with any subsidiary company or holding company of the Tenant (the expressions "subsidiary company" and "holding company" having the meanings respectively assigned to them by section 736 Companies Act 1985) 3.16 Facilitate Landlord's Dealings with the Demised Premises 3.16.1 PERMIT INSPECTION BY PROSPECTIVE PURCHASERS At all reasonable times and subject to reasonable prior notice during the Term and provided that the same shall not materially interrupt or prejudice the business of the Tenant or of any lawful occupier of the Demised Premises permit all prospective purchasers of or dealers in the Landlord's reversionary interest or any Superior Landlord's reversionary interest by order in writing of the Landlord or the Landlord's agents to view and take measurements of the Demised Premises without interruption 3.16.2 PERMIT RE-LETTING NOTICES Permit the Landlord or the Landlord's agents at any time within six calendar months next before the expiration or sooner determination of the Term to enter upon the Demised Premises and to fix and retain without interference upon any suitable part or parts thereof a notice board for 33 53 re-letting the same provided that it does not obscure any window or access of light or air to the Demised Premises and permit all prospective lessees by order in writing of the Landlord or the Landlord's agents and by prior appointment to view the Demised Premises at reasonable hours in the daytime without interruption but not so as to materially interrupt or prejudice the business of the Tenant 3.17 Landlord's Access to the Demised Premises Permit the Landlord and any superior landlord with or without their agents surveyors workmen and others and the Surveyor at reasonable times (after at least forty-eight hours' notice except in case of emergency) to enter the Demised Premises: (a) for the purposes referred to in sub-clause 3.16 hereof; (b) to take inventories of the fixtures and things in the Demised Premises to be yielded up at the determination of the Term; (c) to estimate the value thereof for any purpose; (d) to execute any works to any adjacent adjoining or neighbouring premises; (e) to make the same secure against entry by any unauthorised person or against any danger which may appear to the Landlord or any superior landlord to threaten or endanger the Demised Premises or the Landlord's interest therein or any superior landlord's interest therein (and so that the Landlord shall be under no obligation to take such action and shall not by so doing be deemed to re-enter or determine the Term); (f) to ascertain whether the covenants and conditions herein contained on the part of the Tenant are being observed 34 54 3:18 Provision of Information to the Landlord 3.18.1 GIVE NOTICES Immediately upon becoming aware of the same give written notice to the Landlord of: (a) any notice order or proposal for a notice or order served on the Tenant by any person or authority and to provide the Landlord with a copy thereof and if so reasonably required by the Landlord to join in making such objections or representations in respect of any such notice order or proposal as the Landlord may require; and (b) any defect in the Demised Premises which is a 'relevant defect' as that expression is defined in Section 4 Defective Premises Act 1972 3.18.2 KEYHOLDERS Keep the Landlord informed as to the names addresses and telephone numbers for use at all times of the day and night including weekends of the person or persons for the time being responsible for the Demised Premises outside business hours and who have the means of access thereto in case of emergency Provided that such names addresses and telephone numbers shall only be made available for the purpose of the Landlord gaining access to the Demised Premises outside business hours and shall otherwise be strictly confidential 35 55 3.18.3 DISCLOSE INFORMATION Give to the Landlord at its request from time to time such plans drawings papers and other information relating to the Demised Premises as may be within the knowledge of the Tenant or available to it and which the Landlord may reasonably require whether in connection with any application or request by the Tenant or concerning any alteration or addition or user or safety matters or otherwise howsoever (and the Tenant hereby warrants that all information supplied by it or on its behalf to the Landlord will be complete accurate and not misleading so far as the Tenant is aware) 3.19 Payment of Fees and Expenses 3.19.1 ABATEMENT OF NUISANCE Pay all costs charges and expenses incurred by the Landlord in abating any nuisance in respect of the Demised Premises and executing all such works as may be necessary for abating a nuisance in respect of the Demised Premises in obedience to a notice served by a local or other competent authority 3.19.2 SECTIONS 146 AND 147 LAW OF PROPERTY ACT 1925 Pay to the Landlord all costs charges and expenses (including legal costs and fees payable to a surveyor) which may be properly incurred by the Landlord in or in contemplation of any proceedings under Section 146 or Section 147 Law of Property Act 1925 or either of them notwithstanding forfeiture is avoided otherwise than by relief granted by the court 36 56 3.19.3 COSTS OF LICENCES Pay the Landlord's reasonable legal expenses managing agents' and surveyors' and consultants' fees and other fees and expenses (in each case where reasonably incurred)(including disbursements and stamp duty and the fees of any surveyors in approving plans or the execution of any works carried out pursuant to any licence) in respect of all licences consents and approvals of or by the Landlord its agents or advisers in respect of all applications by the Tenant for any of the same including charges fees and disbursements actually incurred in cases where consent is reasonably refused or the application is withdrawn for any reason whatsoever 3.19.4 ENFORCEMENT EXPENSES Pay all proper expenses including solicitors' and other legal costs and surveyors' consultants' managing agents' and other fees and expenses incurred by the Landlord of and incidental to the preparation service and enforcement of any notice hereunder or the recovery or attempted recovery of any rent or other monies payable by the Tenant hereunder or otherwise in enforcing the obligations of the Tenant hereunder including without limitation those relating to the preparation and service of and otherwise concerning any schedules relating to want of repair to the Demised Premises and whether served during or after the determination of the Term 3.20 Substitution of Surety To notify the Landlord within 28 days of any of the following events: 3.20.1 If any surety being an individual (or if individuals any one of them) shall become bankrupt or make any assignment for the benefit of or enter into any arrangement with his creditors either by composition or otherwise 37 57 3.20.2 If any surety being an individual (or if individuals any one of them) shall die 3.20.3 If any surety being a company (or if companies any one of them) shall be wound up either voluntarily (save for the purpose of amalgamation or reconstruction) or compulsorily or shall for any reason be removed from the register of companies or (where the surety is a company incorporated outside the United Kingdom) proceedings or events analogous thereto shall occur in the country or state of its incorporation 3.21 Indemnities Indemnify and keep fully and effectually indemnified the Landlord in respect of: (a) all actions proceedings costs claims and demands which may be made by any adjoining owner tenant occupier or any other person whatsoever or any competent authority by reason of: (i) any defect in the Demised Premises for which the Tenant is liable or in the execution of any works or the existence of any alterations or additions to the Demised Premises for which the Tenant is liable; (ii) any interference or alleged interference or obstruction of any right or alleged right of light air drainage or other right or alleged right now existing for the benefit of any adjoining or neighbouring property caused by the Tenant or its employees or agents or by such licensees or invitees for whose acts the Tenant is or ought to be responsible; (iii) any stoppage of the drains used in common with the owner or occupier of adjoining or neighbouring property caused by the 38 58 Tenant (b) all liability which may be incurred by the Landlord in respect of any of the matters referred to in paragraph (a) of this sub-clause for which the Tenant is liable; (c) any claims proceeding or demands and the costs and expenses incurred thereby which may be brought against the Landlord by any employees workpeople agents or visitors of the Tenant in respect of any accident loss or damage whatsoever to person or property howsoever caused and occurring in or upon the Demised Premises for which the Tenant is liable; (d) all general rates and other outgoings which are payable by the Landlord as a result of the Tenant's vacating the Demised Premises at any date prior to the said expiry or earlier determination of the Term; (e) every loss and damage whatsoever incurred by the Landlord by reason of any negligence by the Tenant or any breach or non-observance of the Tenant's obligations in this Lease and indemnify the Landlord from and against all actions claims liabilities costs and expenses thereby arising all monies becoming payable under this covenant being payable by way of further rent (f) all liabilities costs claims demands arising by virtue of any breach act or omission caused by the Tenant or its employees or agents or by such licensees or invitees for whose acts the Tenant is or ought to be responsible in respect of the matters referred to in Part II of the Third Schedule hereto AND this sub-clause shall remain in force notwithstanding the expiry or earlier determination of the Term as aforesaid 39 59 3.22 Yield Up 3.22.1 YIELD UP At the expiration or sooner determination of the Term quietly yield up unto the Landlord the Demised Premises in such state and condition as shall in all respects be consistent with a full and due performance by the Tenant of its covenants in these presents PROVIDED ALWAYS that portable partitions and/or Tenant's fixtures and fittings affixed by the Tenant may or will if required by the Landlord be removed by the Tenant the Tenant making good to the reasonable satisfaction of the Landlord any damage caused to the Demised Premises by reason of such removal 3.22.2 REMOVAL OF ANCILLARY ITEMS The removal of the Tenant's portable partitions or fixtures as aforesaid may or shall if required by the Landlord include the removal of all ancillary equipment and supports of any kind and any other ancillary items placed or constructed upon the Demised Premises by the Tenant in relation to any items removed by the Tenant 3.22.3 DISCONNECTION FROM SERVICES Wherever such fixtures fittings plant or machinery are connected to or take supplies from any of the main services they shall be disconnected by the appropriate statutory undertaker or by a competent and properly qualified individual or company in such a manner that all redundant service media are removed and sealed off at points as close as possible to the various ring mains or principal distribution pipes which provide the supplies and such removal and sealing off shall be carried out so as not to interfere with the continued function of the main services 40 60 3.22.4 Make Good all buildings walls floors main services and any other parts of the Demised Premises after the removal of any such fixtures fittings plant or machinery 3.23 Regulations To observe and to use the Tenant's reasonable endeavours to ensure that the Tenant its employees agents licensees and invitees and persons doing business with the Tenant observe any reasonable regulations from time to time made in writing by the Landlord with regard to the management security or occupation of the Building or any part thereof 3.24 Superior Lease Not to do omit or allow anything which might cause the Landlord to be in breach of the Superior Lease or which if done omitted or allowed by the Landlord might be a breach of the covenants on the part of the Lessee or the conditions contained in the Superior Lease 4. LANDLORD'S COVENANTS 4.1 Quiet enjoyment THE Landlord so as to bind the persons for the time being entitled to the immediate reversion expectant on the Term but not so as to impose any personal liability on itself except as to the acts and defaults of it or of any person lawfully claiming under or in trust for it hereby covenants with the Tenant that the Tenant duly paying the said rents and sums and other payments (if any) hereby reserved and made payable and observing and performing the covenants and conditions herein contained and on the Tenant's part to be observed and performed shall and may peaceably and quietly possess and enjoy the Demised Premises during the Term without any disturbance by the Landlord or any persons lawfully claiming under or in trust for 41 61 the Landlord 4.2 Superior Lease At the request of the Tenant to use all reasonable endeavours to procure that the Superior Landlord observes and performs its covenants contained in the Superior Lease subject to the Tenant bearing the Tenants Percentage of the Landlord's costs thereby incurred 4.3 Superior Lease To pay the rents reserved by the Superior Lease and perform and observe the lessee's covenants and the conditions contained in the Superior Lease (save insofar as the same relate to the Demised Premises and are obligations which are the same or similar to those assumed by the Tenant to the Landlord hereunder) 4.4 Services To use its reasonable endeavours in an efficient manner and in accordance with the principles of good estate management unless prevented by any cause or event beyond its control and subject to payment by the Tenant of the payments referred to in sub-clause 3.2.2 to provide the following services ("the Services"): (a) to provide air-conditioning through the air conditioning system presently installed in the Building and to keep the same in good and substantial repair (b) to provide cold water to the toilets and washroom facilities situate on the first and second floors of the Building and other existing water outlets within the Demised Premises and hot water to the same during normal office working hours from 8 a.m. to 6 p.m. (c) to keep the halls and passages leading to the Demised Premises and the 42 62 toilets and washroom facilities situate on the first and d second floors of the Building (i) reasonably clean and (ii) lit during normal office working hours from 8 a.m. to 6 p.m. (d) to keep the Conducting Media within the Building in good and substantial repair. 4.5 Superior Lease service charge accounts The Landlord shall supply to the Tenant within fourteen days of receiving the same from the Superior Landlord copies of such accounts and vouchers as may be supplied to the Landlord in respect of the provision of the Services (as defined in the Superior Lease) together with a copy of any written estimate of the Surveyor (as defined in the Superior Lease). PROVIDED ALWAYS that: (i) Notwithstanding any obligation of the Landlord expressed or implied herein the Landlord shall not be liable to the Tenant for any interruption in or any failure to comply with its obligations because of breakdown works of maintenance repairs or renewals or because of shortage of materials government restrictions or damage by any Insured Risks (as defined in the Superior Lease) storm frost or other inclement conditions or by reason of another cause (not necessarily of a like nature) beyond the control of the Landlord and not until notice of the defect or want of repair shall have been given to and received by the Landlord and a reasonable period of time in which to remedy the same shall have elapsed (ii) The Landlord shall be free to make such alterations as it thinks fit to the internal arrangements of the Building (excepting the Demised Premises) and to the Plant and if the Landlord thinks fit the Landlord may install plant of a different type and suspend any services while the works of 43 63 alteration or installation are being executed PROVlDED ALWAYS that any such suspension of services shall be for as short a period of time as reasonably practicable 4.6 At the reasonable request of the Tenant and at the Tenant's expense to exercise the Landlord's rights to enter into parts of the Building for the purpose of repairing, renewing or maintaining any of the Tenant's conducting media 4.7.1 In this clause the "yearly cost of the services" shall mean the whole yearly cost reasonably incurred by the Landlord in providing the services referred to in clause 3.2.2 down to 31 December (or such other date as the Landlord may from time to time notify to the Tenant in writing) in each year of the Term ("an Account Period") 4.7.2 The Landlord shall keep a proper account (with vouchers so far as reasonably possible) of its income and expenditure in each calendar year in respect of the services which shall be available for inspection by the Tenant and its agents upon prior appointment with the Landlord and such account shall (save in the case of manifest error) be prima facie evidence of all matters recorded therein 4.7.3 Where the rent commencement date and the date of determination of the Term do not coincide with the beginning or end respectively of an Account Period the Tenant's liability for the initial and final partial Account Periods shall be that proportion of the Service Charge which relates to the period on and from the rent commencement date or ending on the date of determination of the Term as the case may be apportioned on a daily basis according to the number of days in the whole of the relevant Account Period. 4.7.4 Any over payment by the Tenant towards the yearly cost of the services shall be deducted from the amount next payable by the Tenant pursuant to 44 64 clause 3.2.2 provided that any overpayments to which the tenant may be entitled at the termination of the Term shall be repaid to the Tenant as soon as reasonably practicable 5. INSURANCE 5.1 Information regarding cover At the Tenant's request but not more than once in any year the Landlord shall ask the Superior Landlord to provide the information regarding insurance and a copy of the relevant policy or policies (or such other sufficient evidence of insurance) which the Landlord is entitled to require the Superior Landlord to provide pursuant to Clause 5.2 of the Superior Lease and upon receipt of the same from the Superior Landlord the Landlord shall immediately provide to the Tenant copies thereof 5.2 Suspension of Rent on Occurrence of Insured Risk If the Demised Premises or any part thereof or all the means of access thereto shall at any time be destroyed or so damaged by an Insured Risk (as the same are defined in the Superior Lease) as to be unfit for occupation or use and the relative policy or policies of insurance effected by the Superior Landlord shall not be vitiated or payment of the policy monies refused wholly or partly by any act or default of or suffered by the Tenant its contractors employees or licensees or invitees then the rents reserved by clause 2 of this Lease or a fair and just proportion thereof according to the nature duration and extent of the damage sustained shall be suspended and cease to be payable until the expiration of three years (or such longer period of years for which the Superior Landlord shall insure against loss of rent pursuant to the Superior Lease) from the occurrence of such damage or until the date on which the Demised Premises are again made fit for occupation and use (whichever shall first occur) and any dispute about such suspension and cesser shall be conclusively determined in accordance with sub-clause 9.4 of the Superior Lease 45 65 5.3 Access for reinstatement For the purpose of the Superior Landlord repairing and reinstating the Demised Premises in accordance with sub-clause 5.6 of the Superior Lease the Tenant shall permit the Superior Landlord and all persons authorised by it with equipment and materials to have full and uninterrupted right of entry at all times upon the Demised Premises and every part thereof and the Tenant shall not do or cause anything likely to impede such works 5.4 Tenant not to Prejudice Insurance The Tenant shall not do or permit or suffer any act or thing which may render void or voidable or otherwise vitiate or prejudice any insurance of or relating to the Demised Premises or any rents or other monies or the recoverability of any monies thereunder or render any increased premium payable for any such insurance (and without prejudice to the Landlord's remedies for a breach of such obligation the Tenant shall pay to the Landlord any sum paid by way of increased premiums or loading or other expenses thereby incurred by the Landlord) or which may make void or voidable any policy of insurance thereon and shall comply with all recommendations of the insurers as to fire precautions and otherwise relating to the Premises 5.5 Re-building if Insurance Money Irrecoverable If the Demised Premises or any part thereof are destroyed or damaged by any of the Insured Risks and the insurance money under any insurance against the same effected thereon by the Landlord being wholly or partially irrecoverable by reason solely or in part of any act neglect or default of the Tenant or any underlessee or other occupant of the Demised Premises or any employee of or contractor to or visitor for whose acts the Tenant or any sub-tenant is or ought to be responsible to any of the same then and in every such case the Tenant will pay to the Landlord upon demand the whole or (as the case may be) a fair proportion of the cost of 46 66 completely rebuilding and reinstating the same 5.6 Tenant's User and Insurance - To Pay Costs If the Tenant's user of the Demised Premises results in an increase in the insurance premium payable by the Superior Landlord or if the Superior Landlord's insurers shall require any works to be carried out to the Demised Premises or its appurtenances as a result of such user the Tenant shall repay on demand to the Landlord the full amount of such increased premium and shall comply with all requirements of the Superior Landlord's insurers as aforesaid and shall pay on demand to the Landlord the Landlord's and the Superior Landlord's proper costs arising as a result of any such requirement including all proper legal expenses and managing agents and surveyors' fees and disbursements 5.7 Frustration (a) If the rebuilding or reinstatement of the Demised Premises or any part thereof shall be frustrated or prove impossible or impracticable any insurance monies relating to the Demised Premises or part in respect of which the frustration occurs shall belong to and be the absolute property of the Superior Landlord without further obligation hereunder (b) If rebuilding or reinstatement has not been substantially completed within 3 years following damage or destruction to the Demised Premises by an Insured Risk either the Landlord or the Tenant may on giving to the other not less than 3 months written notice terminate the Term and upon expiry of such notice this Lease shall determine absolutely but without prejudice to any rights or remedy of either party in respect of any antecedent breaches 47 67 5.8 Tenant's Insurances If the Tenant shall be or become entitled to the benefit of any insurance relating to the Demised Premises or any part of the same the Tenant shall forthwith notify the Landlord of the same with all details which are relevant or requested by the Landlord and shall apply any monies received in respect thereof in making good the loss or damage to which the same relate in accordance with any directions of the Landlord 5.9 Notification of Damage Promptly upon the Tenant becoming aware of the same occurring the Tenant shall give notice to the Landlord of the occurrence of any damage to the Demised Premises by any means 6. NO LIABILITY Notwithstanding anything herein contained the Landlord shall not be liable to the Tenant nor any person or persons in the Demised Premises or the remainder of the Building with the actual or implied authority of the Tenant in respect of: (i) any interruption or failure of any of the services nor of the supplies of any public utility caused by circumstances beyond the Landlord's reasonable control; (ii) any accident happening or injury suffered or damage to or loss of any chattel or property sustained on the Demised Premises or the remainder of the Building unless caused by the act or neglect or default of the Landlord or of the relevant servants agents or contractors of the Landlord 7. PROVISOS PROVIDED ALWAYS AND IT IS HEREBY AGREED AND DECLARED as follows: 48 68 7.1 Re-Entry (a) These presents are upon the express condition that if any of the events specified in paragraph (b) of this sub-clause shall occur then and in any of such circumstances and thenceforth it shall be lawful for the Landlord or any person or persons duly authorised by the Landlord in that behalf to re-enter into or upon the Demised Premises or any part thereof in the name of the whole and the same to re-possess and enjoy as if these presents had not been made without prejudice to any right of action or remedy of the Landlord in respect of any antecedent breach of any of the covenants by the Tenant (b) The events referred to in paragraph (a) of this sub-clause are: (i) the rents reserved herein or any part thereof remaining unpaid for twenty-one days after becoming payable (whether formally demanded or not); or (ii) any covenant or stipulation by the Tenant or the Surety contained in this Underlease not being performed or observed; or (iii) in relation to the Tenant an Insolvency Event as defined in paragraphs (c) or (d) of this sub-clause occurring; or (iv) the Tenant being a company re-registering with unlimited liability or effecting a return or reduction of capital or being struck off the Register of Companies; (v) the Tenant permitting any execution or distress to be levied on any goods for the time being in the Demised Premises; or (vi) in relation to the Surety proceedings or events analogous to those 49 69 referred to in sub-clauses (iii) or (iv) occurring (c) "Insolvency Event" in relation to a company or corporation means any of the following events being: (i) the Company being deemed unable to pay its debts as defined in section 123 Insolvency Act 1986 (referred to as "the Act" in the remainder of this definition); (ii) a proposal being made for a voluntary arrangement under Part I of the Act; (iii) a petition being presented for an administration order under Part II of the Act; (iv) a receiver or manager being appointed whether under Part III of the Act (including an administrative receiver) or otherwise; (v) the company going into liquidation as defined in section 247(2) of the Act (other than a voluntary winding up solely for the purposes of amalgamation of reconstruction while solvent); (vi) a provisional liquidator being appointed under section 135 of the Act; (vii) a proposal being made for a scheme of arrangement under section 425 of the Companies Act 1985 (d) "Insolvency Event" in relation to an individual means: (i) an application being made for an interim order or a proposal being made for a voluntary arrangement under Part VIII of the Act: 50 70 (ii) a bankruptcy petition being presented to the Court under Part IX of the Act; (iii) his entering into an arrangement for the benefit of his creditors 7.2 Distress If any monies payable hereunder by way of rent shall be in arrear for twenty-one days whether lawfully demanded or not it shall be lawful for the Landlord to enter into and upon the Demised Premises or any part thereof to enter and distrain and the distress or distresses then and there found to dispose of in due course of law and to apply the proceeds thereof in or towards payment of the said rents sums or other payments so in arrear and all costs charges and expenses occasioned by the non-payment thereof and so that the power of the Landlord to distrain upon the Demised Premises for rent in arrear shall extend to and include any tenant's fixtures or fittings not otherwise by law distrainable which may from time to time be thereon and further if any such monies shall be paid only after the Landlord or the Landlord's Solicitors have instructed or caused distress to be levied therefor then the Tenant shall pay to the Landlord on demand the Landlord's Solicitors' reasonable costs incurred by reason of the foregoing including but without limiting the foregoing bailiff's commission 7.3 Formal Licences In any case where the consent of the Landlord is required hereunder the Landlord may require the Tenant and any surety for the time being to enter into a deed in such form containing such covenants conditions and provisions as the Landlord may reasonably require and in such event (whether or not the Landlord has previously consented in writing unless it has expressly stated in writing that it does not require such deed) the Tenant and any surety shall enter into such deed and the consent of the Landlord shall be deemed not to be given until the Landlord has received such deed duly executed by the relevant persons 51 71 7.4 Resolution of Differences Any matter (other than a matter of construction or law) on which a dispute or difference arises between the Landlord and the Tenant which these presents refer to this sub-clause for settlement shall be determined by an independent chartered surveyor agreed between them or in default of agreement appointed on the application of either of them by the President for the time being of the Royal Institution of Chartered Surveyors and a dispute or difference upon a matter of construction or law shall be determined as hereinbefore provided by senior counsel to be appointed in the absence of agreement as aforesaid by the President for the time being of the Law Society Any such surveyor or senior counsel shall act as an expert not arbitrator his determination of the matter shall be final and conclusive and his fees shall be borne as he directs and he shall afford the opportunity to the Landlord and the Tenant to make representations to him 7.5 Compensation Except where any statutory provision prohibits the Tenant's right to compensation being reduced or excluded by agreement the Tenant shall not be entitled to claim from the Landlord on quitting the Demised Premises or any part thereof any compensation whether under the Landlord and Tenant Act 1954 as amended by the Law of Property Act 1969 or otherwise howsoever 7.6 Tenant's Goods Left in Premises If at such time as the Tenant has vacated the Demised Premises after the determination of the Term either by effluxion of time or otherwise any property of the Tenant remains in or on the Demised Premises and the Tenant fails to remove the same within twenty eight days after being requested by the Landlord so to do by a notice in that behalf then and in such case the Landlord may as the agent of the Tenant (and the Landlord is hereby appointed by the Tenant to act in that behalf) sell such property (without being responsible for ensuring that the sale price is the 52 72 best price obtainable) and shall then hold the proceeds of sale after deducting the costs and expenses of removal storage and sale reasonably and properly incurred by it to the order of the Tenant PROVIDED THAT the Tenant will indemnify the Landlord against any liability incurred by it to any third party whose property shall have been sold by the Landlord in the bona fide mistaken belief (which shall be presumed unless the contrary be proved) that such property belonged to the Tenant and was liable to be dealt with as such pursuant to this sub-clause 7.7 Service of Notices In addition to any other prescribed mode of service any notice hereunder shall be validly served if served in accordance with Section 196 Law of Property Act 1925 as amended by the Recorded Delivery Act 1962 provided that in the case of the Tenant if there shall be more than one to any of them so that service on any one of the Tenant shall be good service on all or in the case of the Landlord Tenant and any surety if sent to it him or any of them by post or left at the last known address or addresses of it him or any of them in Great Britain and any notice sent by post shall be conclusively deemed to have been served twenty four hours after the same was posted 7.8 Exclusion of Implied Easements The Tenant shall not be entitled to any right easement liberty privilege or advantage whatsoever other than those expressly granted herein and no further right easement liberty privilege or advantage of any kind shall be implied herein whether by statutory implication or otherwise howsoever 7.9 Superior leases All of the rights powers and privileges of the Landlord shall be exercisable by any superior landlord and where the consent to act of the Tenant is required from the Landlord hereunder the grant of such consent by the Landlord shall (if requisite 53 73 under any superior lease) be subject also to the consent of the relevant superior landlord 7.10 No Restriction on use of Adjoining Land Nothing herein contained or implied shall impose or be deemed to impose any restriction on the use of any land or buildings of the Landlord or any superior landlord not comprised in this Lease or give the Tenant the benefit of or the right to enforce or to have enforced or to prevent the release or modification of any agreement covenant condition or stipulation entered into by any lessee or tenant of the Landlord in respect of property not comprised in this Lease or shall operate to prevent or restrict in any way the development of any land not comprised in this Lease so long as the light or air enjoyed by the Demised Premises is not thereby materially obstructed or diminished 7.11 No Warranty as to Permitted Use Nothing herein contained or implied shall be taken to be a covenant warranty or representation by the Landlord that the Demised Premises can lawfully be used for any particular purpose 7.12 Denial of Waiver No demand for or acceptance of rent by the Landlord or anyone on its behalf nor any other act or conduct consonant with a continuance of the tenancy whether or not made with knowledge of any breach of covenant or obligation by the Tenant shall constitute a waiver in whole or in part of such breach which shall be deemed to be a continuing breach and neither the Tenant nor any successor to the Tenant may set up any such demand acceptance act or conduct as a defence in any action for forfeiture or otherwise Each of the covenants by the Tenant herein shall continue in full effect notwithstanding that the Landlord may have waived any former breach of the same by the Tenant or may have waived any similar obligation of any other 54 74 person 7.13 Exclusion of set off Any payment due from the Tenant or Surety to the Landlord hereunder whether by way of rent or otherwise shall be paid without any set off deduction or counterclaim whatsoever 7.14 Rights of Access Rights of access reserved or allowed to the Landlord shall be exercisable as well by any superior landlord or any mortgagee of any interest of the Landlord or any superior landlord or both as by the Landlord and shall permit access by any persons authorised by the Landlord any superior landlord or such mortgagee including agents advisers contractors workmen and others whether with or without equipment and materials. 7.15 Consents and Approvals Consents and approvals required of the Landlord hereunder shall if the Landlord so requires be required equally from any mortgagee or superior landlord but nothing herein contained shall be construed as implying that any mortgagee or superior landlord is obliged not to unreasonably withhold its consent or approval (save as expressly specified herein) 7.16 Exclusion of Landlord and Tenant Act 1954 Having been authorised to do so by an Order of the Mayor's and City of Landlord Court made on the day of 1996 under the provisions of Section 38(4) Landlord and Tenant Act 1954 (as amended by Section 5 Law of Property Act 1969) the Landlord and the Tenant hereby agree that the provisions of Sections 24 to 28 (inclusive) of the said Act shall be excluded in relation to the tenancy hereby 55 75 created 8. SURETY COVENANTS 8.1 The Surety in consideration of the demise hereinbefore contained being made by the Landlord at the request of the Surety herein covenants with and guarantees to the Landlord as more particularly specified in the Fourth Schedule 8.2 The consent of the Surety shall not be required to the assignment by the Landlord or its successors in title of the benefit of the covenants and guarantees on the part of the Surety herein contained 9. JURISDICTION The proper law of these presents is English law. The parties hereby agree declare and irrevocably consent that the courts of England and Wales are in all respects convenient as a forum for the exercise of jurisdiction in respect of the Lease and the parties each irrevocably submit to the non-exclusive jurisdiction of such courts IN WITNESS whereof the parties hereto have executed this instrument as a deed and have delivered it upon dating it THE FIRST SCHEDULE The Demised Premises ALL THOSE offices and premises situate on the second floor of the Building which Demised Premises are for the purposes of identification only shown edged red on the plan annexed hereto marked "Plan 1" which shall include where they exist and where the context so admits for the purpose of obligation as well as grant: (a) the tiles the plaster work and the coverings of the main walls and of the ceilings including all suspended ceilings and all ornamental or architectural features 56 76 (b) all internal non load-bearing walls and internal partitioning (c) the boards and screed of floors and any floor sealants coverings carpets and carpet tiles in the Demised Premises provided by or at the cost of the Landlord (d) all windows the internal surface of all external window frames the whole of all internal window frames all doors and door frames and window and door furniture and all glass therein (e) all Conducting Media exclusively serving the Demised Premises up to the point of connection with the common or public system (f) all fire prevention and detection equipment all fire fighting equipment alarms and fire sprinklers and any intruder alarms therein save in so far as the same are part of the common system forming part of services relating to the Building BUT EXCLUDING all parts of the structural parts loadbearing parts framework foundations and joists of the Building and the Plant Conducting Media and machinery within but not exclusively serving the Demised Premises THE SECOND SCHEDULE Rights included in the Demise 1. The sole and exclusive right (subject to the extent that the Carparking Spaces are affected thereby to the right of the Southern Electricity Board to lay use inspect maintain repair relay supplement and remove cables and ducts for the transmission and distribution of electricity and the necessary ducts pipes and other apparatus appurtenant thereto granted by an Underlease dated 30th October 1989 and made between the Superior Landlord (1) and Southern Electricity Board (2)) to use the Carparking Spaces together with the right in common with the Landlord any person authorised by the Landlord and all other persons entitled thereto on foot or with vehicles for all purposes connected to the use of the Demised Premises to pass and 57 77 repass to and from the Demised Premises or any part thereof and to and from the Carparking Spaces or any part thereof over and along the road or way shown coloured blue on the plan annexed hereto marked "Plan 1" and the accessways to the Carparking Spaces 2. Subject to such security arrangements as the Landlord reasonably considers appropriate the right in common with the Landlord and any person authorised by the Landlord and all other persons entitled thereto to use (i) the entrance doors halls and passages leading to the Demised Premises for the purposes of ingress and egress to and from the Demised Premises and the toilets and washroom facilities situate on the first and second floors of the Building and (ii) the toilets and washroom facilities situate on the first and second floor of the Building AND PROVIDED ALWAYS that the Tenant exercises its right to use the toilet and washroom facilities on the first floor of the Building in a proper manner and does not thereby cause a nuisance to the Landlord. 3. The right of free passage of water and soil gas electricity fuel oil telecommunications and other electrical impulses serving the Demised Premises through the Conducting Media now or during the Term laid under through or across the Building or the Common Areas 4. Full right of support shelter and protection either now or intended to be enjoyed in connection with the Demised Premises 5. The right in common with all other persons entitled thereto to use the Common Areas for all purposes 58 78 THE THIRD SCHEDULE Part I Particulars of rights excepted and reserved unto the Landlord 1. Full right of support shelter and protection either now or intended to be enjoyed in connection with the Building and any other building or structure erected or to be erected over or under Demised Premises 2. Full and free right of passage of water and soil gas electricity fuel oil telecommunications and other electric impulses from and to all other parts of the Estate and adjoining or neighbouring buildings premises and land whether belonging to the Landlord or not through the Conducting Media now or during the Term laid under through or across the Demised Premises Together with the right of entry onto the Demised Premises for the Landlord with or without workmen and others at all reasonable times upon not less than forty-eight hours' prior written notice (except in case of emergency) for the purpose of inspecting maintaining renewing replacing and relaying and making connections with any of the Conducting Media and laying moving and maintaining new Conducting Media the person or persons exercising such right causing as little damage and inconvenience as possible to the Demised Premises and making good all damage thereby occasioned 3. Full and free right to build on or alter any building on the Estate (save for the Demised Premises) or other adjoining premises of the Landlord and to use such adjoining premises for any purpose provided the same does not materially affect or interfere with the passage of light and air to the Demised Premises 4. The right to enter upon the Demised Premises for all or any of the purposes mentioned in this Underlease and for all purposes relative to the services provided by the Landlord and for any purpose that is in the opinion of the Landlord necessary to enable it to comply with any of the covenants on the part of the lessee and the conditions contained in the Superior Lease the person or persons so entering causing 59 79 as little damage and inconvenience as possible to the Demised Premises and make good all damage thereby occasioned 5. All other easements or other rights in the nature of easements or quasi-easement now enjoyed by any adjoining or neighbouring property Part II Particulars of Matters to which the Demised Premises are subject The exceptions and reservation contained in (a) the Superior Lease and (b) a lease dated 6th October 1989 made between Wycombe District Council (1) and Amec Properties Limited (2) so far as the same affect the Demised Premises THE FOURTH SCHEDULE The Surety's Covenants 1. The Surety hereby covenants with by way of full indemnity and also guarantees to the Landlord and without the need for express assignment to the successors in title of the Landlord that the Tenant will at all times during the Term pay the rents and all other payments agreed to be paid by the Tenant in this Lease at the respective times and in manner appointed for payment thereof and will also duly perform and observe and keep the several covenants and stipulations on the part of the Tenant contained in this Lease (as well after as before any disclaimer of this Lease) and that the Surety will pay and make good to the Landlord all losses costs damages and expenses sustained by the Landlord through the default of the Tenant in respect of the before mentioned matters PROVIDED ALWAYS that any neglect forbearance or delay in endeavouring to obtain payment of such rents and payments as and when the same become due or in taking steps to enforce performance or observance of the several covenants and stipulations on the part of the Tenant in this Lease or any variation in this Lease (including any consents given or licences granted) or the transfer of the reversion or the assignment hereof or the release of any Surety or 60 80 any time which may be given or any other act omission or thing whereby (but for this provision) the Surety might be released or exonerated shall not release or in any way lessen or affect the liability of the Surety under the guarantee on the part of the Surety herein contained and the Surety hereby covenants with the Landlord that it will not do or omit to do anything by way of registration of land charges or otherwise howsoever that may prejudice the enforceability by the Landlord of the covenants on the part of the Surety herein contained 2. The Surety hereby further covenants as aforesaid with the Landlord that: (a) if the Tenant (being a company) shall go into liquidation and the liquidator shall disclaim this Lease or (b) if the Tenant (being a company) shall be dissolved and the Crown shall disclaim this Lease or (c) if the Tenant (being an individual) shall become bankrupt and the trustee in bankruptcy shall disclaim this Lease or (d) if this Lease shall be forfeited under the provisions in that behalf hereinbefore contained or (e) if the Tenant (being a company) shall cease for any reason to be registered with the registrar of companies then this schedule shall remain in full force and effect notwithstanding such disclaimer or forfeiture and the Landlord may within 3 months after any such disclaimer forfeiture or cessation by notice in writing require the Surety to accept a new Lease of the Demised Premises for a term equivalent to the residue which if there had been no disclaimer forfeiture or cessation would have remained of the Term granted by this Lease at the same Rent and subject to the like covenants and conditions (including those as to the review of rent) as are reserved by and 61 81 contained in this Lease the said new Lease and the rights and liabilities thereunder to take effect as from the date of such disclaimer forfeiture or cessation and in such case the Surety shall pay the Landlord's costs of and accept such new Lease accordingly and will execute and deliver to the Landlord a counterpart thereof 3. If the Landlord shall not require the Surety to take a new Lease of the Demised Premises pursuant to paragraph 2 of this schedule the Surety shall nevertheless upon demand pay to the Landlord a sum equal to the Rent and all other payments and outgoings that would have been payable under this Lease but for the disclaimer or other event as aforesaid in respect of the period from and including the date of the disclaimer or other event as aforesaid until the expiration of 6 months therefrom or until the Demised Premises shall have been re-let by the Landlord (whichever shall first occur) 4. The Surety waives any right it may have of first requiring the Landlord to proceed against or claim payment from the Tenant and the Surety agrees to subordinate and does hereby subordinate any and all claims the Surety may have against the Tenant existing now or arising later (whether in respect of payment made under this schedule or otherwise) to any and all claims by the Landlord Signed as a deed by SEAGATE ) TECHNOLOGY INC acting by ) its authorised signatory:- ) Authorised Signatory 62 82 Signed as a deed by ) INNOVEX HOLDINGS LIMITED ) acting by:- ) Director Director/Secretary 63 EX-10.37 11 LEASE - NORWICH/QUINTILES 1 EXHIBIT 10.37 THIS LEASE made the twentieth of December, One thousand nine hundred and ninety-six BETWEEN (1) THE NORWICH UNION LIFE INSURANCE SOCIETY whose registered office is situate at Surrey Street in the City of Norwich (hereinafter called "the Landlord") (2) QUINTILES (UK) LIMITED whose registered office is at Indigo House 29 Bedford Street London WC2E 9RT (hereinafter called "the Tenant") (3) QUINTILES TRANSNATIONAL CORPORATION of PO Box 13979 Research Triangle Park North Carolina 27708-3979 U.S.A. (hereinafter called "the Surety") WITNESSETH as follows:- 1. DEFINITIONS IN these presents except as otherwise provided or where the context otherwise requires:- 1.1 "Base Rate" means the base lending rate of Barclays Bank plc or should such rate cease to exist or be published in its present form such other rate of interest as the parties shall agree is most closely comparable to such rate and in default of agreement such rate as shall be determined by a Chartered Accountant who shall act and be deemed to act as an expert and shall be appointed in the absence of agreement between the Landlord and the Tenant by the President for the time being of the Institute of Chartered Accountants in England and Wales on the application of either party 1.2 "the Building" means the development at the corner of High Street and The Ring Bracknell in the County of Berkshire shown within the blue edging on the plan numbered 1 attached hereto 1.3 "the Car Park" means the underground car park forming part of the Building 1.4 "the Common Parts" means all parts of the Building the occupation or control of which shall be retained by the Landlord or which are from time to time designated by the Landlord for common use and not intended to be let or demised and shall include without prejudice to the generality of the foregoing all of the following which may from time to time be comprised in or appurtenant to 1 2 Tenant's own risk and it will reimburse the Landlord with any additional expense incurred in the provision of services or any increased insurance premium payable 8. The Tenant will advise the Landlord immediately should any of the said keys be lost or misplaced and if such keys shall be lost or misplaced and the Landlord considers it necessary to change the locks to the doors of the Building then the cost incurred will be borne by the Tenant 9. On the expiration or sooner determination of this Lease for any reason whatsoever or in the case of any assignment or underletting of the Demised Premises the keys are to be returned forthwith to the Landlord 10. The Tenant will observe all requirements communicated to it on the Landlord's behalf and comply with any reasonable regulations that the Landlord may from time to time impose in connection with the use of the Building outside the specified hours EXECUTED AS A DEED (but not ) delivered until the date inserted ) above) and the COMMON SEAL ) [SEAL] of THE NORWICH UNION LIFE ) INSURANCE SOCIETY affixed in ) the presence of:- ) Authorised Signatory Assistant Secretary 3 [QUINTILES LETTERHEAD] This is hereby certified to be a true copy of the original Signed /s/ Medaphis Dated 20/12/96 20 December 1996 Dear Sirs, THIRD FLOOR RINGSIDE 79 HIGH STREET BRACKNELL BERKSHIRE This letter is supplemental to a Lease of even date herewith and made between the Norwich Union Life Insurance Society (1) Quintiles (UK) Limited (2) and Quintiles Transnational Corporation (3) ("the Lease"). In consideration of your today completing the Lease we hereby covenant to notify you immediately upon the occurrence at any time while the Lease is vested in us of either of the following events and to indemnify you against any reasonable and proper costs incurred by you as a consequence of our failure to do so: ceasing to be a taxable person for the 1. Our ceasing to be a taxable person for the purposes of Value Added Tax. 2. The rate at which we are able to recover Value Added Tax (in respect of supplies made from the above named premises or generally) altering such as to permit or prevent (as the case may be) any election made or which might be made by you under paragraph 2 of Schedule 10 of the Value Added Tax Act 1995 applying to the grant of the Lease or to the supplies made to us under the Lease. Yours faithfully, /s/ - ------------------------------- SIGNED FOR AND on BEHALF QUINTILES (UK) LIMITED 4 DATED 20TH DECEMBER 1996 ------------------------ THE NORWICH UNION LIFE INSURANCE SOCIETY TO QUINTILES (UK) LIMITED LEASE Of Office Premises on third floor of "Ringside" 79 High Street Bracknell Berkshire [NORWICH UNION LOGO] Property Legal Surrey Street Norwich 5 DATED 1996 ------------------------ THE NORWICH UNION LIFE INSURANCE SOCIETY TO QUINTILES (UK) LIMITED COUNTERPART/ LEASE Of Office Premises on third floor of "Ringside" 79 High Street Bracknell Berkshire [NORWICH UNION LOGO] Property Legal Surrey Street Norwich 6 THIS LEASE made the day of One thousand nine hundred and ninety-six BETWEEN (1) THE NORWICH UNION LIFE INSURANCE SOCIETY whose registered office is situate at Surrey Street in the City of Norwich (hereinafter called "the Landlord") (2) QUINTILES (UK) LIMITED whose registered office is at Indigo House 29 Bedford Street London WC2E 9RT (hereinafter called "the Tenant") (3) QUINTILES TRANSNATIONAL CORPORATION of PO Box 13979 Research Triamgle Park North Carolina 27708-3979 U.S.A. (hereinafter called "the Surety") WITNESSETH as follows:- 1. DEFINITIONS IN these presents except as otherwise provided or where the context otherwise requires:- 1.1 "Base Rate" means the base lending rate of Barclays Bank plc or should such rate cease to exist or be published in its present form such other rate of interest as the parties shall agree is most closely comparable to such rate and in default of agreement such rate as shall be determined by a Chartered Accountant who shall act and be deemed to act as an expert and shall be appointed in the absence of agreement between the Landlord and the Tenant by the President for the time being of the Institute of Chartered Accountants in England and Wales on the application of either party 1.2 "the Building" means the development at the comer of High Street and The Ring Bracknell in the County of Berkshire shown within the blue edging on the plan numbered 1 attached hereto 1.3 "the Car Park" means the underground-car park forming part of the Building 1.4 "the Common Parts" means all parts of the Building the occupation or control of which shall be retained by the Landlord or which are from time to time designated by the Landlord for common use and not intended to be let or demised and shall include without prejudice to the generality of the foregoing all of the following which may from time to time be comprised in or appurtenant to 1 7 the Building namely the Common Service Media (but excluding the Tenants Service Media) party and perimeter walls all doors within and on the boundaries of the Building landscaped areas loading and unloading facilities entrance ways halls corridors, passages stairways lifts fire escape ways access roads ramps sign and notice boards toilet facilities air conditioning ventilation heating and cooling plant and machinery fire precaution and alarm system sprinklers 1.5 "the Common Service Media" means the common water courses water supply pipes waste water pipes sewer pipes drains sewers gutters downpipes sprinkler systems gas pipes fuel pipes oil pipes electricity cables telephone cables ducts conduits flues wires and all other common conducting media plant equipment meters and apparatus which now are or may during the period of eighty years from the date hereof be in upon through under or over the Building for the provision or supply of services serving the Building or any part thereof and where applicable serving in common any adjoining or adjacent building or premises 1.6 "the Demised Premises" means ALL THOSE premises shown edged red on the plan numbered 2 annexed hereto which premises include 1.6.1 the internal surfaces and finishes of the walls and columns therein bounding the Demised Premises 1.6.2 the floor finishes down to but excluding the structural slab 1.6.3 the ceiling finishes up to and excluding the underside of the structural slab but including any light fittings grilles and false ceilings 1.6.4 all internal faces of the window frames window furniture doors door frames and door furniture 1.6.5 the entirety of all non-structural or non-load-bearing walls and columns situate entirely within the Demised Premises 1.6.6 all Landlord's fixtures and fittings plant machinery apparatus and equipment (if any) now or at any time in or upon the Demised Premises 1.6.7 all additions alterations and improvements made thereto 2 8 1.6.8 the Tenants Service Media but excludes (for the avoidance of doubt) 1.6.9 all structural columns slabs walls and members (including the facade of the Building) the Common Service Media and any service media exclusively serving other premises and any fire precaution and alarm systems 1.7 "the Insured Risks" means the risks of fire explosion riot civil commotion malicious damage aircraft and other aerial devices and articles dropped therefrom and such additional risks as may from time to time be reasonably required by the Landlord 1.8 "the Landlord" means the person in whom the reversion for the time being immediately expectant on the determination of the Term is vested 1.9 "the Office Block" means the office block known as "Ringside" 79 High Street Bracknell forming part of the Building 1.10 "the Planning Acts" means the Town & Country Planning Act 1990 and any subsequent legislation of a similar nature and any Statutory Instrument Order or Direction made or issued pursuant thereto 1.11 "the Tenant" includes the successors in title of the Tenant and where more than one person is party hereto as tenant includes all or either or any of such persons and their liability in respect of the obligations on the part of the Tenant contained or implied herein shall be joint and several 1.12 "the Tenants Service Media" means all drains pipes flues wires cables meters gutters and sewers and all other conducting media plant equipment and apparatus exclusively serving the Demised Premises (whether the same are within the Demised Premises or any adjoining or adjacent premises owned by the Landlord) save those of statutory undertakers 1.13 "the Term" means the term hereby created and includes any statutory continuation or extension thereof 3 9 1.14 Any references to a specific statute include any statutory extension or modification amendment or re-enactment of such statute and any general reference to "statute" or "statutes" includes any regulations or orders made under such statute or statutes 2. DEMISE THE Landlord HEREBY DEMISES unto the Tenant ALL THOSE the Demised Premises TOGETHER with the rights set out in the First Schedule hereto EXCEPT AND RESERVING unto the Landlord and all other persons entitled thereto the matters set out in the Second Schedule hereto TO HOLD unto the Tenant for the term from the Twenty-fifth day of December One thousand nine hundred and ninety-six until the Thirtieth day of November Two thousand and eight (determinable as hereinafter provided) YIELDING AND PAYING therefor the principal yearly rent of ONE HUNDRED AND FORTY TWO THOUSAND FIVE HUNDRED POUNDS (Pounds 142,500) (capable of increase as provided in the Third Schedule hereto) and the additional yearly rent payable in accordance with the Fourth Schedule hereto such rents clear of all deductions to be paid by equal quarterly payments in advance on the usual quarter days in every year the first of such payments of the principal rent to be made on the Twenty-fifth day of December One thousand nine hundred and ninety-six and to be in respect of the period from the said Twenty-fifth day of December One thousand nine hundred and ninety-six to the next following quarter day 3. TENANT'S COVENANTS THE Tenant hereby covenants with the Landlord as follows:- 3.1 Rent To pay the said rent or rents at the times and in the manner aforesaid without any deductions 3.2 Rates and outgoings 3.2.1 To pay and discharge all existing and future rates taxes duties charges assessments and outgoings payable in respect of the Demised Premises whether by the owner or occupier and also all charges for water 4 10 electricity and gas used on the Demised Premises and in case any rate tax duty charge assessment or outgoing shall be assessed charged imposed upon or payable in respect of the Demised Premises jointly with other premises or the water electricity or gas shall be metered jointly with that used on other premises or any rate or charge for water shall be assessed on or payable in respect of the Building or any lavatories or water-closets therein used by the Tenant in common with others to pay to the Landlord on demand a fair proportion to be settled in case of difference by the Landlord's surveyor acting reasonably (except such as are payable on a disposal of any interest in reversion to this Lease) 3.2.2 As soon as the same shall come to the notice of the Tenant the Tenant shall notify the Landlord of any actual or proposed change in the details of or reference to the Demised Premises (or any part thereof or any hereditament of which the Demised Premises form part) in the local non-domestic rating list and of any material change in circumstances by reference to which any such change has been is being or might be proposed 3.2.3 The Tenant shall not make in relation to the local non-domestic rating list any proposal concerning the listing of the Demised Premises (or any part thereof or any hereditament of which the Demised Premises form part) without first having written details of such proposal to the Landlord 3.3 Costs of Notices 3.3.1 To pay all reasonable costs charges and expenses (including solicitors' costs and disbursements and surveyors' fees) properly incurred by the Landlord 3.3.1.1 for the purpose of incidental to or in contemplation of the preparation and service of a notice whether under Section 146 5 11 of the Law of Property Act 1925 and/or Section 147 of that Act or pursuant to the provisions hereof requiring the Tenant to remedy a breach of any of the Tenant's covenants herein contained (and including the costs (where appropriate) of the preparation and service of a schedule of dilapidations whether before or after the expiration of the Term) notwithstanding that forfeiture is avoided otherwise than by relief granted by the Court and 3.3.1.2 in the recovery or attempted recovery of arrears of rent or other sums due from the Tenant whether by distress levied upon the Tenants goods in the Demised Premises or otherwise 3.3.1.3 in respect of any action reasonably taken by or on behalf of the Landlord in order to prevent or procure the remedying of any breach or non-observance or non-performance of any of the covenants conditions or agreements herein contained and on the part of the Tenant to be observed and performed 3.3.2 to pay all reasonable costs and expenses (including solicitors costs and disbursements and surveyors' fees) properly incurred by the Landlord in considering and (if such be the case) granting consent licence or approval to any request or application for the Landlord's consent licence or approval to any matter in respect of which the Tenant seeks such consent licence or approval hereunder whether or not the request or application is withdrawn or refused or preferred subject to any lawful qualification or condition 3.4 Signboard To pay within 21 days of demand to the Landlord the cost incurred by the Landlord in writing in the general style adopted by the Landlord for the Office Block the name of the Tenant and the situation of the Demised Premises on such 6 12 name board and in such other situations within the Office Block as the Tenant shall desire and the Landlord shall approve 3.5 Entry by Landlord To permit the Landlord its agents and employees and all persons authorised by the Landlord with or without workmen and equipment to enter the Demised Premises at all reasonable times by appointment except in the event of emergency and then at any time - 3.5.1 to take inventories of the Landlord's fixtures therein or 3.5.2 to view the state of repair and condition of the Demised Premises 3.5.3 to inspect repair maintain decorate clean improve or alter any adjoining or adjacent property and any areas structures or things (if any) the maintenance of which is the responsibility of the Landlord hereunder but only to the extent that this cannot be done without entering the Demised Premises 3.5.4 to enable the Landlord to comply with its covenants hereunder or 3.5.5 to prepare a Schedule of dilapidations or 3.5.6 to exercise the rights excepted and reserved hereunder or 3.5.7 to ascertain that the covenants and conditions of this Lease have been observed and performed PROVIDED THAT the Landlord shall make good as soon as reasonably practicable any damage done to the Demised Premises and shall cause as little interruption to the Tenant's business as reasonably possible but the Tenant shall not be entitled to compensation for any inconvenience occasioned by such entry 3.6 Repair To keep the Demised Premises (including without prejudice in any way to the foregoing words all doors window furniture window stays the inner sills to windows inner framing and glazing beads and whole of any secondary double glazing units floors ceilings and plaster and other finishes to walls pipes and electrical and gas installations from the points where the supplies enter the 7 13 meters serving the demised premises) in good and tenantable repair and condition (damage by any of the Insured Risks excepted and the Tenant need not remedy but the Landlord will remedy at its own expense any defect in design or construction revealed by the 30th November 1998) and in such repair and condition (except as aforesaid) to yield up the same at the expiration or sooner determination of the Term AND in particular to clean treat repair or maintain in accordance with the manufacturers requirements (such requirements to be notified to the Tenant in writing by the Landlord) any part of the Demised Premises specified in writing by the Landlord and to indemnify and keep indemnified the Landlord against the consequences of failure so to do including (without limitation) the consequences of invalidating any guarantee or warranty given by the manufacturer or supplier of any such part 3.7 Repairs after notice Within 21 days or sooner if requisite and possible after receipt of written notice requiring the Tenant so to do to commence and diligently to proceed to repair such defects and wants of reparation as shall be specified in such notice and for which the Tenant is liable hereunder And if the Tenant shall fail so to do it shall be lawful for the Landlord and its workmen to enter the Demised Premises with all necessary equipment to carry out such repairs and all expenses incurred thereby shall be paid by the Tenant to the Landlord forthwith on demand as liquidated damages and the Tenant shall keep the Landlord indemnified against all costs claims actions or demands that may arise from the existence or remedying of any such defects or wants of reparation or the exercise of (or entitlement to exercise) the right of entry hereby reserved including without prejudice to the generality of the foregoing any liability arising under Section 4 of the Defective Premises Act 1972 8 14 3.8 Defects etc Upon any defect or want of repair for which the Landlord is responsible pursuant to Clause 4.1 hereof coming to the notice of the Tenant forthwith to give written notice thereof to the Landlord 3.9 Statutory Works To do and execute or cause to be done or executed all such works and things as under or by virtue of any enactment or statutory instrument or any notice order or direction given or made pursuant thereto for the time being in force are or shall be directed or necessary to be done or executed upon or in respect of the Demised Premises or any part thereof whether by owner or occupier landlord or tenant and not to do suffer or omit anything in contravention thereof and at all times to keep the Landlord indemnified against all claims demands and liability in respect thereof 3.10 Observe rules and regulations To abide by and observe all reasonable and proper general rules and regulations for the conduct of the tenants of the Building laid down by the Landlord from time to time and notified in writing to the Tenant a copy of those (if any) in force at the date hereof being annexed hereto 3.11 Decoration Once in every five years of the Term and in any event immediately before giving up possession of the Demised Premises to paint with two coats of good quality paint paper emulsion grain varnish or otherwise treat to the reasonable satisfaction in each case in all respects of the Landlord's surveyor (and where appropriate in accordance with the manufacturers requirements) such parts of the interior of the Demised Premises as have been previously or usually or which ought to be so treated 3.12 Cleaning To keep the interior of the Demised Premises properly cleaned and to clean the windows of the Demised Premises both inside and out at least once every month 9 15 3.13 Planning 3.13.1 To comply in all respects with the provisions and requirements of the Planning Acts and of all consents permissions and conditions (if any) granted or imposed or having effect thereunder so far as the same respectively relate to or affect the Demised Premises or any part thereof or any operations works acts or things already or hereafter to be carried out executed done or omitted thereon or the use thereof for any purpose 3.13.2 So often as occasion shall require at the expense in all respects of the Tenant to obtain all such consents and permissions (if any) as may be required for the carrying out of any operations on the Demised Premises or the institution or continuance thereon of any use thereof which may constitute development within the meaning of the Planning Acts but so that no application for planning permission shall be made without the previous written consent of the Landlord which consent shall not be unreasonably withheld or delayed 3.13.3 To pay and satisfy any charge that may hereafter be imposed under the Planning Acts in respect of the carrying out or maintenance of any such operations or the institution or continuance of any such use as aforesaid 3.13.4 Notwithstanding any consent which may be granted by the Landlord under this Lease not to carry out or make any alteration or addition to the Demised Premises or any change of use thereof (being an alteration or addition or change of use which is prohibited by or for which the Landlord's consent is required to be obtained under this Lease and for which a planning permission needs to be obtained) before a planning permission therefor has been produced to the Landlord and acknowledged by it in writing as satisfactory to it But so that the Landlord may refuse so to express its satisfaction with any such planning permission on the ground that the period thereof or any condition contained therein or anything omitted therefrom in the 10 16 reasonable opinion of its surveyor would be or be likely to be prejudicial to its interest in the Demised Premises whether during the Term or follow the determination or expiration thereof 3.13.5 Unless the Landlord shall otherwise direct to carry out and complete before the expiration or sooner determination of the Term any works stipulated to be carried out to the Demised Premises by a date subsequent to such expiration or sooner determination as a condition of any planning permission granted for any development begun before such expiration or sooner determination 3.13.6 If and when called upon so to do to produce to the Landlord or its surveyor all such plans documents and other evidence as the Landlord may reasonably require in order to satisfy itself that the provisions of this covenant have been complied with in all respects 3.14 Letting and sale notices Where the Tenant has lost or is not pursuing its rights to renew this Lease under the terms of the Landlord and Tenant Act 1954 or otherwise or where the Landlord has indicated that it will oppose any such renewal to permit the Landlord or its agent at any time during the Term to put up boards or notices at or on the Demised Premises advertising that the Landlord's interest in the Building is for sale and during the last three months before the expiration or sooner determination of the Term to put up boards or notices at or on the Demised Premises stating that the Demised Premises are to let which boards or notices shall not unreasonably obstruct any light or air to the Demised Premises and shall not be interfered with by the Tenant and to admit prospective purchasers or tenants who have written authority from the Landlord to view the Demised Premises during ordinary business hours causing as little interruption to the Tenant's business as reasonably possible 11 17 3.15 Notices Within seven days of the service thereof to give full particulars to the Landlord of any notice order or proposal therefor relating to or affecting the Demised Premises given made or issued by any competent authority and without delay to comply with the same PROVIDED that if the Landlord so requires in writing the Tenant will join with the Landlord in objecting to or contesting the same 3.16 Telecommunications Act 1984 Without prejudice to any other provisions of this Lease to give notice to the Landlord of any rights to be granted by the Tenant pursuant to the Telecommunications Act 1984 and full details of any works to be carried out prior to or as a result of the grant of such rights and (unless such rights or works shall have been approved by the Landlord under any other provision of this Lease) to withhold any agreement in writing by the Tenant to such rights or works for so long as it shall be competent to the Tenant so to do or for so long as shall be necessary to afford the Landlord a reasonable opportunity to make representations to the operator (as in the said Act defined) concerning any aspect of the rights or works which may affect the Landlord or any other tenant of the Landlord (whichever period shall be the shorter) 3.17 Alterations Not to make or suffer to be made any alterations in the construction or arrangement of the Demised Premises or the external appearance thereof or to cut maim or injure or permit or suffer to be cut maimed or injured any of the walls columns or structural members of the Demised Premises and in the event of non-observance to remove any such alterations and make good and restore the Demised Premises to their former state within twenty-one days of the Landlord giving written notice to the Tenant so to do PROVIDED THAT if the Tenant shall so fail to do it shall be lawful for the Landlord and its workmen to enter the Demised Premises with or without all necessary equipment to so remove such alterations make good and so restore the Demised Premises and all 12 18 expenses incurred or sustained thereby shall be paid by the Tenant to the Landlord on demand as liquidated damages and the Tenant shall keep the Landlord indemnified against all costs claims actions or demands that may arise from the existence of such alterations or such removal making good and restoration and the exercise of the right of entry hereby reserved PROVIDED THAT (subject always to Clause 3.31 hereof) this prohibition shall not prevent the Tenant from erecting or altering internal non-structural partitioning with the previous consent in writing of the Landlord (which consent shall not be unreasonably withheld or delayed) 3.18 User Not to use or suffer the use of the Demised Premises as a betting office or as offices in connection with any public or social service dealing with the payment of benefits to the public nor otherwise than as high class offices 3.19 Alienation 3.19.1 Not to assign underlet or charge part only of the Demised Premises 3.19.2 Not to assign the whole of the Demised Premises without the prior written consent of the Landlord (such consent not to be unreasonably withheld and which shall if the Landlord requires take the form of a formal licence under hand) provided that the Landlord shall be entitled:- 3.19.2.1 to withhold its consent in any of the circumstances set out in clause 3.19.4 3.19.2.2 to impose all or any of the matters set out in clause 3.19.5 as a condition of its consent 3.19.3 The provisos to clause 3.19.2 shall operate without prejudice to the right of the Landlord to withhold such consent on any other ground or grounds where such withholding of consent is reasonable or to impose any further condition or conditions upon the grant of consent where the imposition of such condition or conditions is reasonable 13 19 3.19.4 The circumstances referred to in clause 3.19.2 are as follows:- 3.19.4.1 where the assignee is an associated company of the Tenant unless that associated company is of no lesser financial strength than the Tenant at the date of the application for consent to assign 3.19.4.2 where in the reasonable opinion of the Landlord it has not been satisfactorily demonstrated that the proposed assignee is able and likely to perform and observe and will be able and likely to perform and observe the tenant's covenants and obligations under this Lease and any deed which has then been entered into supplemental or pursuant to this Lease 3.19.4.3 Where the proposed assignee enjoys diplomatic or state immunity 3.19.4.4 Where the assets of the proposed assignee upon which any reasonable assessment of financial strength is based are not in the United Kingdom or some other jurisdiction with which there is subsisting with the United Kingdom a system of reciprocal enforcement of judgements 3.19.5. The conditions refrred to in clause 3.19.2 are as follows:- 3.19.5.1 the execution and delivery to the Landlord prior to or contemporaneously with the assignment in question of a deed of guarantee in the form set out in the Fifth Schedule hereto (being an authorised guarantee agreement within Section 16 of the Landlord and Tenant (Covenants) Act 1995) 3.19.5.2 the payment to the Landlord of all rents and other sums which have fallen or which fall due under this Lease prior to the date of the assignment 14 20 3.19.6 Not to underlet hold in trust part with or share possession or occupation of the Demised Premises or any part thereof except to the extent permitted under this clause 3.19.7 Not to underlet the Demised Premises as a whole unless each of the following conditions is fulfilled:- 3.19.7.1 the Tenant obtains the prior written consent of the Landlord (such consent not to be unreasonably withheld) 3.19.7.2 the intended undertenant enters into a covenant by deed with the Landlord to observe and perform all the covenants herein contained and on the Tenant's part to be observed and performed (except the covenant to pay the rent reserved by this Lease) 3.19.7.3 the intended Underlease:- 3.19.7.3.1 is granted without any fine or premium and at the open market rental value at the time of the grant of the underlease 3.19.7.3.2 contains provisions for the upwards only review of the rent reserved by such underlease on the same terms and occurring at least as frequently as under this Lease 3.19.7.3.3 contains covenants conditions and provisions no less onerous than those imposed on the Tenant by or pursuant to this Lease (except the covenant to pay the rent reserved by this Lease) 3.19.7.3.4 contains a covenant by the undertenant with the Tenant not to assign charge underlet hold in trust part with or share possession or occupation of the Demised Premises or any part thereof Provided that the undertenant may assign or charge the 15 21 whole of the Demised Premises with the prior written consent of the Landlord (such consent not to be unreasonably withheld) 3.19.7.3.5 contains a covenant prohibiting the undertenant from doing or suffering any act or thing on or in relation to the Demised Premises underlet inconsistent with or in breach of the provisions of this Lease 3.19.7.3.6 contains a condition for re-entry on breach of any covenant by the undertenant 3.19.8 In relation to any permitted underlease to ensure that:- 3.19.8.1 all the covenants and obligations of the undertenant thereunder are enforced 3.19.8.2 the rent reserved by any underlease is neither reduced or commuted nor payable further in advance than provided for by that underlease 3.19.8.3 the rent reserved by any underlease is reviewed in accordance with its terms but the same shall not be agreed without the prior written consent of the Landlord (such consent not to be unreasonably withheld) 3.19.8.4 there is no waiver of any breach on the part of any undertenant and no variation in the terms or a surrender of any underlease without the prior written consent of the Landlord (such consent not to be unreasonably withheld) 3.19.8.5 every such underletting shall include rights to use all the said car parking spaces 3.19.8.6 the Tenant and the prospective undertenant first obtain from the Court an Order pursuant to section 38(4) of the Landlord and Tenant Act 1954 (as amended by the Law of Property 16 22 Act 1969) authorizing the inclusion in the proposed underlease of a provision that the terms of sections 24 to 28 of the said Act of 1954 shall be disregarded in relation to the said underletting and that the said underlease includes such a provision 3.19.9 Within one month after any assignment charge underletting or other disposition of the Demised Premises or of a devolution thereof in case of death to supply to the Landlord for registration two certified copies of every such assignment charge underlease instrument probate or letters of administration and pay to the Landlord a reasonable fee (but not less than twenty-five pounds) for every such registration 3.19.10 Within fourteen days of being requested so to do by the Landlord to give written notice to the Landlord of the names and addresses or registered offices of all persons or companies in occupation of the Demised Premises the rent review date or dates in any underleases relating to the Demised Premises and the rent or rents currently paid by such occupiers 3.20 Lavatories Not to use or suffer the use of the lavatories and water-closets for the disposal of refuse oil grease or any deleterious objectionable dangerous poisonous or explosive matter or substance or for any purpose which may cause a stoppage in the pipes connecting the lavatory basins and water-closets with the waste water pipes and soil pipes or in such waste water pipes and soil pipes 3.21 Nuisance Not to do or permit or suffer to be done upon the Demised Premises or the Car Park or any area over which the Tenant is granted rights under this Lease anything which may be or tend to be illegal or a nuisance annoyance or disturbance or cause damage to the Landlord or any of the occupants of the Building or the adjoining or adjacent property 17 23 3.22 Obstruction Not to place or deposit anything in or to obstruct or to suffer anything to be placed or deposited or any obstruction to be made in the vestibules passages and staircases or the Car Park the forecourt areas yards and fire escapes of the Building or to cover up or obstruct or suffer to be covered up or obstructed any glass windows or partitions in any manner whatsoever 3.23 Floor loading Not to overload the floors and where a loading capacity is prescribed by the Landlord's surveyor not to exceed such prescribed loading capacity 3.24 Auction Not to hold or suffer to be held any auction assembly or public meeting upon the Demised Premises 3.25 Machinery, etc Not to store or place or suffer to be stored or placed in or about the Demised Premises any articles or materials of a specially combustible inflammable or dangerous nature or any machinery or mechanical or electrical/electronic equipment other than small machines or mechanical or electrical/ electronic equipment generally used in offices subject at all times to the provisions of Clause 3.23 hereof 3.26 Signs etc Not without the written consent of the Landlord to affix paint or exhibit or suffer to be affixed painted or exhibited on the exterior of the Demised Premises or the Office Block or on or from the windows vestibules passages or staircases thereof any flag signboard placard poster or advertisement or show of business whatsoever 3.27 Hours of use etc Not to sleep nor suffer anyone to sleep upon the Demised Premises nor to use or suffer the use of the same or any part thereof for residential purposes nor to use or suffer the same to be used for any purpose whatsoever on Sundays or Bank or 18 24 other public holidays or before eight a.m. or after two p.m. on Saturdays or before eight a.m. or after seven p.m. on other days Provided that following a written request by the Tenant to the Landlord the Tenant may have access to the Demised Premises outside the said hours in accordance with the provisions contained in the Seventh Schedule hereto which provisions the Tenant hereby covenants to observe and perform 3.28 Not to leave premises vacant Not to leave the Demised Premises vacant for more than thirty consecutive days 3.29 Lifts Not without the consent of the Landlord to use any available passenger lift in the Office Block otherwise than for the conveyance of passengers 3.30 Not to invalidate insurance Not to do or suffer to be done anything whereby the policy or policies of insurance on the Demised Premises or on the Building against damage by the Insured Risks may become void or voidable or whereby the rate of premium thereon may be increased or the renewal thereof may be refused and to repay to the Landlord all sums paid by it by way of increased premium and all expenses incurred by it in or about any renewal of such policy or policies rendered necessary by a breach or non-observance hereof 3.31 Air-conditioning/cooling system That no equipment machinery or apparatus shall be installed or operated in the Demised Premises and nothing shall be done or omitted in the Demised Premises which may cause the efficiency of the heating ventilation air-conditioning and cooling system (if any) installed in the Demised Premises to be diminished or impaired in any way whatsoever 3.32 Car Park (a) Not to use or suffer the use of the Car Park otherwise than for the parking of private motor vehicles 19 25 (b) Not to bring in or upon the Car Park any inflammable or combustible material or substance save such petrol and oil as is contained in the storage tanks of any cars which the Tenant is at the time being entitled to park thereon (c) To comply with such reasonable regulations or directions as may from time to time be given by the Landlord to the Tenant concerning the use of the Car Park and the means of access thereto (d) Not to do or cause or permit or suffer to be done any damage to the Car Park or the Building or to any property of the Landlord of any kind whatsoever in or about or adjoining or adjacent to the Car Park or the Building and in the event of the Tenants doing or causing or permitting or suffering to be done any such damage as aforesaid forthwith to make good the same provided that in default the Landlord may make good such damage and recover the cost as a debt due from the Tenant 4. LANDLORD'S COVENANTS THE Landlord hereby covenants with the Tenant as follows:- 4.1 Repair To keep the roof external walls and load bearing members of the structure of the Office Block and all things in or about the Building used by the Tenant in common with others and not included in the Demised Premises and those parts of the windows of the Demised Premises not the responsibility of the Tenant in good and tenantable repair and condition PROVIDED THAT 4.1.1 the Landlord shall not be liable to make good any damage by any of the Insured Risks where the insurance moneys are irrecoverable through the act or default of the Tenant or any sub-tenant or licensee of his and 4.1.2 any liability of the Landlord hereunder to rebuild the Building or any part thereof shall be deemed to have been satisfied if the Landlord provides in the rebuilt premises accommodation as convenient and 20 26 commodious as but not necessarily identical with that previously existing 4.2 Insurance 4.2.1 To effect and maintain insurance of the Demised Premises (including insurance against loss of rent for three years and in respect of professional fees and debris removal) in the full reinstatement value thereof against damage by the Insured Risks and to apply any monies received by virtue of such insurance in making good the damage or loss to which it relates and any liability of the Landlord to reinstate the Demised Premises shall be satisfied if the Landlord provides in the rebuilt or reinstated premises accommodation as convenient and commodious as but not necessarily identical with that previously existing And if the Demised Premises shall be rendered wholly or partially unfit for occupation through damage by any of the Insured Risks then unless the insurance monies are irrecoverable through the act or default of the Tenant or any sub-tenant or Licensee of his the rent payable hereunder shall be abated to an extent proportionate to the extent of the damage and the duration of such unfitness for occupation but for a period not exceeding three years PROVIDED THAT the term "Insured Risks" and the Landlord's obligations under this subclause shall each be deemed to be qualified to the extent that Norwich Union Fire Insurance Society Limited (or such other company with which the Demised Premises are from time to time insured) shall decline to effect cover or shall impose any excess or qualification on the cover effected 4.2.2 Any dispute as to the amount or extent of such cesser of rent shall be referred to the award of a single arbitrator if the Landlord and the Tenant can agree upon one and otherwise to an arbitrator appointed by the President for the time being of the Royal Institution of Chartered Surveyors upon the application of either party and in either case in 21 27 accordance with the provisions of the Arbitration Acts 1950-1979 any statutory modification thereof for the time being in force 4.3 Quiet enjoyment That the Tenant paying the rent or rents and observing the covenants on the Tenant's part herein contained shall during the Term quietly enjoy the Demised Premises without any interruption by the Landlord or any person lawfully claiming under or in trust for it 4.4 Services To use reasonable endeavours to provide the services and carry out the works set out in sub-paragraphs 2 to 19 inclusive of Part II of the Schedule hereto Provided that - (a) no claim for loss damage or compensation shall lie against the Landlord for any failure to supply the same (b) if the Landlord acting reasonably deems it desirable in accordance with the principles of good estate management it may add to withdraw change or vary any of the services to be provided under this Lease or the method of providing or carrying out any such services 5. PROVISOS PROVIDED and it is hereby agreed and declared as follows:- 5.1 Re-entry If the rent or rents hereinbefore mentioned or any part thereof shall at any time be unpaid for twenty-one days after becoming payable (whether formally demanded or not) or if any covenant on the Tenant's part herein contained shall not be performed or observed or if the Tenant shall suffer any execution to be levied on the goods of the Tenant or being a company go into liquidation (otherwise than for the purpose of a reconstruction or amalgamation) or become the subject of an Administration Order or be struck off or dissolved or being a private person become bankrupt or make any assignment for the benefit of creditors or make any arrangement with creditors for liquidation of the debts of 22 28 the Tenant by composition or otherwise then and in any of the said cases it shall be lawful for the Landlord at any time thereafter to enter upon the Demised Premises or any part thereof in the name of the whole and thereupon the Term shall absolutely determine but without prejudice to the right of action of the Landlord in respect of any antecedent breach of the Tenant's covenants herein contained 5.2 Liability on Covenants No liability shall attach in respect of any breach of any positive covenant (other than covenants for the payment of money) on the part of the Landlord or the Tenant herein contained or implied so long as the Landlord or the Tenant as the case may be shall be prevented from performing the same by statutory restrictions non-availability of labour or materials or matters beyond their control except that if such breach shall occur as aforesaid the Landlord or the Tenant as the case may be shall immediately conditions permit remedy such breach and in the event of any such breach of a Tenant's covenant nothing been remedied before the Tenant gives up possession of the Demised Premises the Tenant shall forthwith pay to the Landlord such an amount as shall be necessary to remedy such breach as aforesaid 5.3 Lifts The Landlord shall not be responsible for any loss or inconvenience occasioned by the closing of any lift in the Building for repairs or any other necessary purposes or for any accidents that may occur to the Tenant 5.4 Light and air The Tenant shall not be entitled to any right of access of light or air to the Demised Premises which would restrict or interfere with the free user of any adjoining or neighbouring property for building or any other purpose 23 29 5.5 Service of notices Section 196 of the Law of Property Act 1925 (as amended by the Recorded Delivery Service Act 1962) shall apply to any notice to be served hereunder as if such notice were a notice authorized by that Act 5.6 Disputes Any disputes arising between the Tenant and other lessees tenants or occupiers of the Building as to any easement right or privilege in connection with the use of the Demised Premises and the Building shall either be decided by the Landlord acting fairly and reasonably whose decision shall be binding upon all parties to the dispute or be settled in such manner as the Landlord shall reasonably direct 5.7 Compensation To the extent permitted by sub-section (3) of Section 38 of the Landlord and Tenant Act 1954 any right of the Tenant to compensation under Section 37 of the said Act is hereby excluded and any right to compensation under any statutory amendment or re-enactment of such Act is hereby excluded to the extent therein permitted 5.8 Interest on arrears If and whenever the Tenant shall fail to pay the rent or rents hereby reserved or any part thereof by the date on which the same shall become due the Tenant shall pay to the Landlord interest on such arrears of rent or rents at the rate of four per cent above the Base Rate calculated from the date it was due to the date of actual payment thereof and where the Tenant pays any such arrears of rent following the appearance of a bailiff instructed by the Landlord then any such bailiffs charges and/or commissions shall be paid by the Tenant 5.9 VAT 5.9.1 Output Tax Any obligation of the Tenant hereunder or under any document entered into pursuant hereto to make payment to the Landlord shall include an 24 30 obligation to pay in addition any VAT payable in respect of the supply to which the payment relates 5.9.2 Unless the contrary is specified any sum specified in this Lease is (and any sum to be agreed certified determined or ascertained pursuant to the provisions hereof shall be) a sum net of VAT 5.9.3 Input Tax Any obligation of the Tenant hereunder to repay to the Landlord any expenditure incurred by the Landlord shall include an obligation to repay any VAT forming part of such expenditure but only to the extent that the Landlord is unable to recover such VAT from the Customs & Excise 5.10 Abandoned If at such time as the Tenant has vacated the Demised Premises on the determination of the Term either by effluxion of time or otherwise any property of the Tenant shall remain in or on the Demised Premises and the Tenant shall fail to remove the same within fourteen days after being requested by the Landlord so to do the Landlord may as agent of the Tenant (and the Landlord is hereby appointed by the Tenant to act in that behalf) sell such property and shall then hold the proceeds of sale after deducting the costs and expenses of removal storage and sale reasonably and properly incurred by it and any other moneys due from the Tenant to the Landlord to the order of the Tenant PROVIDED ALWAYS THAT if such proceeds of sale shall be insufficient to meet the costs and expenses as aforesaid the Tenant shall pay the amount of the deficiency on demand and will indemnify the Landlord against any claim or liability in respect thereof PROVIDED FURTHER THAT the Tenant will indemnify the Landlord against any liability by it to any third party whose property shall have been sold by the Landlord in the bona fide mistaken belief (which shall be presumed unless the contrary be proved) that such property belonged to the Tenant 25 31 5.11 Managing Agents The Landlord shall be at liberty to employ managing agents or other professional advisers to discharge the Landlord's duties under these presents and whenever the duties of the Landlord have been delegated to managing agents or other professional advisers the Tenant shall be entitled and required to accept their requirements in discharge of the Landlord's duties as being the requirements under these presents of the Landlord itself 5.12 Car Park The Landlord shall not be liable for any loss or damage whatsoever caused to or suffered by the Tenant or the servants agents licensees or visitors of the Tenant or any property of such person or to any private motor car or any of the contents or property of on or in any such car while it is approaching or in or upon or departing from the Car Park whether such loss or damage be due to the negligence of the Landlord or any of its servants or agents or to any other cause whatsoever 5.13 Tenant's option to determine 5.13.1 In this clause "Determination Date" means 25 December 1998 5.13.2 If the Tenant wishes to determine this Lease on the Determination Date it must 5.13.2.1 serve notice upon the Landlord not less than twelve months before the Determination Date of its intention to determine this Lease 5.13.2.2 yield up the Demised Premises on the Determination Date with vacant possession and otherwise in accordance with clause 3.6 5.13.3 Subject to compliance with clause 5.13.2 and the proviso hereinafter contained this Lease shall determine upon the Determination Date but without prejudice to the rights of any party against another in respect of any antecedent breach of covenant 26 32 5.13.4 Upon the Determination Date and subject to clauses 5.13.2 and 5.13.3 and the said proviso the Tenant shall hand over to the Landlord the original lease and all other title deeds and documents relating to the Demised Premises PROVIDED that in the event of the Tenant exercising this option it shall pay to the Landlord on or prior to the Determination Date a sum of SEVENTY ONE THOUSAND TWO HUNDRED AND FIFTY POUNDS (POUNDS 71,250) BUT PROVIDED FURTHER that in the event of the Tenant not exercising this option the Landlord shall grant to the Tenant a 7 month rent-free period with effect from the Determination Date which rent-free period for the avoidance of doubt shall apply to a reviewed rent payable in accordance with the provisions of the Third Schedule from the Determination Date whether or not such reviewed rent has been agreed on the Determination Date. 5.14 Headings The clause and schedule headings and the index do not form part of this Lease and shall not be taken into account in its construction or interpretation 6. SURETY The Surety in consideration of the demise hereinbefore contained having been made at its request hereby covenants with the Landlord:- 6.1 as well after as before any disclaimer of this Lease that the Tenant will pay the rent hereby reserved on the days and in manner aforesaid and will perform and observe all the Tenant's covenants herein contained or implied and that in case of default in such payment of rent or in the performance or observance of such covenants as aforesaid or any one or more of them then and in every such case the Surety will pay the rent or observe and perform any covenant in respect whereof the Tenant shall be in default as aforesaid PROVIDED ALWAYS and it is hereby agreed that any neglect or forbearance of the Landlord in endeavouring to obtain payment of the rent hereby reserved when the same become payable or to enforce performance of the several covenants herein on 27 33 the Tenant's part contained or implied and any time which may be given to the Tenant by the Landlord shall not release or exonerate or in any way affect the liability of the Surety under this clause 6.2 that if the Tenant shall cease to exist (whether by being struck off the Register of Companies or otherwise) or shall go into liquidation (otherwise than for the purpose of a reconstruction or amalgamation) or being individuals or an individual is adjudicated bankrupt and the liquidator or trustee in such bankruptcy as the case may be shall disclaim this Lease or a Receiver shall abandon or in any other manner terminate the Term or if the Landlord shall forfeit this Lease and if the Landlord shall within six months after having actual notice that the Tenant has ceased to exist or within six months after such disclaimer abandonment termination or forfeiture by notice in writing require the Surety to accept a lease of the Demised Premises for a term commencing on the day after the Tenant ceased to exist or the day after any such disclaimer abandonment termination or forfeiture and expiring on the day the Term is due to expire at the same rents and under the like covenants and conditions as are reserved by and contained in this Lease (the said new lease and rights and liabilities thereunder to take effect as from the date of the said disclaimer abandonment or termination) then and in such case the Surety shall accept such lease accordingly and execute a counterpart thereof 6.3 that if in relation to any assignment of this Lease the Tenant (which term in this sub-clause means the party hereto as tenant and not any successor in title) enters into an agreement with the Landlord (being an authorised guarantee agreement within the meaning of section 16 of the Landlord and Tenant (Covenants) Act 1995) the Surety will execute and deliver to the Landlord an agreement under seal in the form set out in the Sixth Schedule hereto under which the Surety will guarantee the performance of the Tenant's obligations under the said authorised guarantee agreement and will (if the Tenant is required by virtue of such agreement to take a new lease of the Demised Premises or takes an overriding 28 34 lease of the Demised Premises under section 19 of the said Act) guarantee in the terms of this clause 6 the performance of the covenants on the part of the Tenant contained in such new lease or overriding lease 7. AGREEMENT FOR LEASE It is hereby certified that there is no Agreement for Lease to which this Lease gives effect IN WITNESS whereof this instrument has been duly executed as a deed by the parties hereto the day and year first above written The First Schedule hereinbefore referred to Rights granted to the Tenant (1) The right in common with the Landlord and all other persons having a like right to use for the purpose of access to and egress from the Demised Premises the vestibules passages and staircases of the Office Block and also any available passenger lift therein AND ALSO the right to use in common with all other persons authorised by the Landlord the lavatories and water closets in the Office Block allocated to the Tenants use from time to time by the Landlord AND ALSO the right in common with all other persons entitled thereto and so far as the Landlord has power to grant the same of free passage and running of water soil smoke gas and electricity from and to the Demised Premises through the Common Service Media and the adjoining or adjacent property (2) The right to park 22 private motor vehicles in the Car Park in such space or spaces as the Landlord in its sole discretion shall from time to time allocate in writing to the use of the Tenant which allocation, may be changed by the Landlord on giving previous notice as frequently as it may deem fit and nothing herein shall be construed as conferring on the Tenant the exclusive right to use any particular space or spaces in the Car Park (3) The right for the Tenant and all persons authorised by the Tenant as ancillary to the Tenant's occupation of the Demised Premises and in common with the Landlord and all other persons having similar rights and in accordance with such reasonable 29 35 regulations (including those relating to security) as the Landlord may from time to time determine to use (A) on foot only and with or without trolleys and similar small-wheeled vehicles the paladin store indicated as such on the plan numbered 3 attached hereto for the storage of refuse originating in the Demised Premises pending its removal by the local authority (B) with or without vehicles (i) so much of the service yard shown coloured brown on the said plan numbered 3 as is necessary for the unloading of goods intended for the Demised Premises (ii) the service road and ramps serving the said service yard and the Car Park as means of access to and egress from the said yard and the Car Park respectively (iii) the roadway shown edged brown on the said plan numbered 3 as a means of access between the public highway and the service road and ramps referred to in item (B)(ii) hereof until the said roadway edged brown becomes adopted as an area maintainable at public expense The Second Schedule hereinbefore referred to Exceptions and Reservations EXCEPT AND RESERVING unto the Landlord and all other persons entitled thereto the free passage and running of water soil smoke gas and electricity from other parts of the Building and the adjoining or adjacent property through the Common Service Media in or under the Demised Premises and the right to enter the Demised Premises at any time or times by previous appointment (except in the event of emergency and then at any time) to inspect maintain alter add to or repair the same the person or persons exercising such right making good any damage caused thereby and 30 36 The Third Schedule hereinbefore referred to Rent Review 1. The rent payable hereunder shall be reviewed on the Twenty-fifth day of December in the years One thousand nine hundred and ninety-eight and Two thousand and three each such date being hereinafter called a "Rent Review Date" 2. For the purpose of this Schedule the expression "Market Rental Value" means the annual rack rent of the Demised Premises having the benefit of (for the avoidance of doubt) the car parking rights referred to in the First Schedule at the relevant Rent Review Date (A) On the following assumptions: (1) that the Demised Premises are available and fit for immediate occupation and are ready for any use permitted by this Lease or any licence or consent granted by the Landlord or for such other purpose for which planning permission may have been granted and that no work has been carried out thereon by the Tenant its sub-tenants or their predecessors in title during the Term which has diminished the rental value of the Demised Premises and that if the Demised Premises have been destroyed or damaged they have been fully restored (2) that the Demised Premises are available to be let in the open market by a willing landlord to a willing tenant as a whole without a premium but with vacant possession and subject to the provisions of this Lease (other than the amount of the rent hereby reserved but including the provisions for rent review) for a term equal to the residue of the Term of this Lease then remaining unexpired or a Term of five years commencing on the Rent Review Date whichever is the greater (3) that the Demised Premises may be used for the purposes permitted by this Lease or any licence or consent granted by the Landlord or for such other purpose for which planning permission may have been granted at the request of the Tenant whichever would yield the highest rent 31 37 (4) that the covenants herein contained have been fully performed and observed and (5) that no reduction is to be made to take account of any rental concession which on a new letting with vacant possession might be granted to the incoming tenant whether in respect of a period within which its fitting-out works would take place or otherwise (B) But disregarding:- (1) any effect on rent of the fact that the Tenant its sub-tenants or their respective predecessors in title have been in occupation of the Demised Premises and (2) any goodwill attached to the Demised Premises by reason of the carrying on thereat of the business of the Tenant its sub-tenants or their predecessors in title (3) the effect on rent of any improvement (shown to be such by the Tenant) to the Demised Premises or any part thereof completed not more than twenty one years before the relevant Rent Review Date and carried out:- (a) by the Tenant its sub-tenants or their respective predecessors in tide and (b) with the previous written approval of the Landlord and with all other necessary consents where required and (c) otherwise than in pursuance of an obligation to the Landlord and (d) without liability on the part of the Landlord to reimburse any part of the cost thereof and (e) during the Term or during any period of occupation prior thereto arising out of an agreement to grant such Term (4) Any rent-free period granted to the Tenant by the Landlord pursuant to the terms of Clause 5.13 32 38 3. The Landlord and the Tenant shall endeavour to agree the Market Rental Value as at the relevant Rent Review Date but in the event of the Landlord and the Tenant failing so to agree in writing by the relevant Rent Review Date (or within such extended period as the Landlord and the Tenant shall agree) the Market Rental Value shall be determined by an arbitrator such arbitrator to be nominated in the absence of agreement between the Landlord and the Tenant by the President of the Royal Institution of Chartered Surveyors on the application of the Landlord or the Tenant and the decision of such arbitrator shall be binding on both the Landlord and the Tenant save to the extent that such decision is set aside or varied or remitted by any Court of competent jurisdiction 4. If the Market Rental Value so agreed or determined as at any Rent Review Date shall be found to exceed the rent payable hereunder immediately prior to such Rent Review Date there shall be substituted for the yearly rent then payable hereunder an increased yearly rent equal to the Market Rental Value so agreed or determined but if the Market Rental Value as aforesaid shall be equal to or less than the rent payable hereunder immediately prior to such Rent Review Date the rent payable immediately prior to such Rent Review Date shall continue to be payable until such time as it is increased pursuant to the provisions hereof 5. Such increased yearly rent shall be payable from the relevant Rent Review Date for the residue of the Term or until a greater rent is substituted therefor under this Schedule but in the event of the Market Rental Value not having been agreed or determined by such Rent Review Date then the rent payable immediately prior to such Rent Review Date shall continue to be payable until such agreement or determination as aforesaid and on demand following or in the event of no demand having been made on the quarter day next after such agreement or determination whichever is the earlier the Tenant shall pay in addition to the increased quarter's rent then payable the sums by which the rent paid on each rent payment date on or after the Rent Review Date in question fell short of the rent subsequently agreed or determined to have been payable on that date together with interest (at the annual rate of one per cent above Base Rate) 33 39 calculated in respect of each such sum from the rent payment date on which it was payable to the date on which it is paid 6. it is hereby further provided in relation to the Market Rental Value as follows:- (A) (1) the arbitration shall be conducted in accordance with the Arbitration Acts 1950 and 1979 or any statutory modification or re-enactment thereof for the time being in force (2) the arbitrator shall have knowledge of and be experienced in the valuation and letting of premises similar to the Demised Premises and in the locality of the Demised Premises (3) it is the intention of the parties that the arbitrator shall make a reasoned award (B) When the amount of any rent to be ascertained as hereinbefore provided shall have been so ascertained memoranda thereof shall thereupon be signed by or on behalf of the Landlord and the Tenant and annexed to this Lease and counterpart thereof and the parties shall bear their own costs in respect thereof (C) For the purpose of this Schedule time shall not be of the essence (D) The fees and expenses of the arbitrator including the cost of his appointment shall be borne equally by the Landlord and the Tenant unless the arbitrator directs otherwise The Fourth Schedule hereinbefore referred to Part I Payment of service charge 1. In this Schedule the expressions:- 1.1 "Accounting Period" shall mean the period from lst January to 31st December in any year or such other period (not being more than twelve months) as the Landlord may in its discretion from time to time determine 1.2 "the Building" shall also include all areas facilities and features within the curtilage of the Building and any extensions or alterations thereto 34 40 1.3 "the Common Parts" means the Common Parts defined in Clause 1.1.4 of this Lease 1.4 "the Engineering Risks" means the risks of impact damage caused by fragmentation of plant and machinery death or injury to persons and damage to property caused by explosion or collapse of boilers or pressure plant sudden and unforeseen physical damage to boilers or pressure plant lifts and hoists and other machinery (and damage thereby caused to the demised premises) and liability to third parties in respect of any accident (other than fire or explosion) involving lifts or hoists or such other risks as the Landlord may from time to time require PROVIDED that any additional or different risks required by the Landlord shall be those against which Norwich Union Fire Insurance Society Limited (or another comparable and reputable insurance company) from time to time offers cover at standard rates in respect of properly installed operated and maintained plant and machinery 1.5 "the Expenditure" shall mean:- 1.5.1 the expenses and outgoings incurred by the Landlord in the Accounting Period in effecting and maintaining insurance carrying out the repairs and other obligations providing the services and facilities and making the payments relating to the Building all of which are mentioned in Clause 4.1 hereof and Part II of this Schedule 1.5.2 the reasonable and proper fees of any agents retained by the Landlord to manage and supervise the Building or (at the discretion of the Landlord) a surcharge of 10% of the cost of the obligations and services set out in Clause 4.1 hereof and in sub-paragraphs 2 to 19 inclusive of Part II of this Schedule as a management fee 1.5.3 any Value Added Tax which the Landlord may incur and which is irrecoverable as input tax by the Landlord 1.5.4 any Value Added Tax which the Landlord may be liable to levy in respect of the Service Charge 35 41 1.5.5 such provision for anticipated future expenditure in relation to the services and works referred to in Clause 4.1 and Part II of this Schedule as the Landlord shall reasonably deem appropriate but subject to the provisions of Part III of this Schedule including for the avoidance of doubt the replacement and renewal of apparatus machinery or equipment 1.5.6 interest at: (1) such reasonable borrowing rate as the Landlord shall have incurred thereon OR (2) if the Landlord funds the expenditure itself a rate of two per centrum. above Base Rate on any expenditure charged to any subsequent Accounting Period 1.6 "the Service Charge" shall be a fair proportion to be fixed by the Landlords Surveyor acting fairly and reasonably of the Expenditure The Landlord shall have the right to make allowances in such calculation for the differences in the insurance of or the repairs services and facilities provided or supplied to any premises in the Building 2. As soon as may be practicable prior to the beginning of an Accounting Period the Landlord may notify the Tenant in writing of the Landlord's reasonable estimate of the Service Charge for the forthcoming Accounting Period ("the Interim Sum") and the Tenant shall pay the Interim Sum to the Landlord on account of the Service Charge by four equal instalments on the usual quarter days Such Interim Sum shall be in substitution for that previously payable. The Interim Sum for the period from the Twenty-fifth day of December One thousand nine hundred and ninety-six until the end of the first Accounting Period shall be the yearly sum of FORTY ONE THOUSAND SEVEN HUNDRED POUNDS (Pounds 41,700) 3. If the Landlord shall fail to notify the Tenant in accordance with the preceding subparagraph then until such notification the Tenant shall continue to make payments in 36 42 accordance with the last notified Interim Sum or if there has been no such notification at the rate specified in the preceding paragraph 4. The amount of the Service Charge shall be ascertained and certified by a certificate (hereinafter called "the certificate") so soon after the end of the Accounting Period as may be practicable and shall relate to such period and shall be signed by the Landlord's Surveyor (who shall be an Associate or Fellow of the Royal Institution of Chartered Surveyors and who may be an employee of the Landlord) or the Landlord's Accountant (who shall be an Associate or Fellow of the Institute of Chartered Accountants of England and Wales or the Chartered Association of Certified Accountants and who may be an employee of the Landlord) or managing agent (at the discretion of the Landlord) acting as an expert and not as an arbitrator 5. In the event of 5.1 the Interim Sum being less than the Service Charge so certified the Tenant shall within 21 days of demand pay to the Landlord the difference between the Interim Sum and the Service Charge so certified (and in relation to the Accounting Period in which the term shall expire or determine the obligation to pay the said difference shall continue notwithstanding such expiration or determination) or 5.2 the Interim Sum being in excess of the Service Charge so certified the overpayment shall be refunded to the Tenant or at the discretion of the Landlord shall be credited to the Tenant against any outstanding rent or other payments due from the Tenant or if there are none against the next payment or payments of the Interim Sum 6. A copy of the certificate for an Accounting Period shall be supplied by the Landlord to the Tenant on written request and without charge 7. The certificate shall contain a summary of the Expenditure during the Accounting Period to which it relates together with a summary of the relevant details and figures forming the basis of calculation of the Service Charge and the certificate (or a 37 43 certified copy thereof) shall be conclusive evidence for the purposes hereof of facts which it purports to certify save for any manifest errors Part 11 Service charge items 1. Premiums incurred by the Landlord 1.1 in insuring the Building and the Landlord's fixtures and fittings therein of thereon (including insurance against loss of rent for three years professional fees and debris removal) against the Insured Risks 1.2 in effecting property owners liability insurance and third party insurance in respect of the Building in a sum reasonably determined by the Landlord from time to time 1.3 in effecting insurance in respect of any plant machinery apparatus and equipment in the Building against the Engineering Risks AND including the cost of any valuation of the Building carried out for the purpose of insurance Provided that there shall be no more than one such valuation in any period of 3 years 2. Maintenance repair renewal and decoration of such parts of the Building as are not the responsibility of the tenants of the Building including (without limitations) the Common Parts the Car Park and the vehicle control barriers at the entrance thereto any landscaped areas service are as roadways ramps walls fences and ornamental features) 3. Providing maintaining repairing and renewing the lighting of the Car Park the exterior of the Building and the interior of the Common Parts including service areas paths paved areas roadways and ramps 4. The cost of carrying out any works (or other actions including adequate fire drill instruction) upon or to such parts of the Building as shall be necessary to comply with any statutory requirement or any notice or direction deriving authority under statute and any reasonable requirement or recommendation of any relevant authority or the insurance company with which the Building is from time to time insured and the cost 38 44 of taking all steps deemed desirable or expedient by the Landlord in making representations against or otherwise contesting the incidence of the provisions of any statute byelaw or notice concerning town planning public health highways streets drainage or other matters relating to or alleged to relate to the Building or any part of it for which any tenant is not directly and exclusively liable 5. Provision of a passenger lift service including maintenance repair renewal and decoration 6. Heating the Office Block through the heating installation in the Office Block to such temperatures and between such dates in the cold season as the Landlord shall determine including insurance maintenance servicing repair renewal and decoration of the installation 7. Ventilating and/or cooling the Office Block including maintenance repair renewal and any decoration of the system 8. The cost of the supply of electricity gas oil or other fuel for the provisions of the services 9. Cleaning the exterior of the Building and the interior of the Common Parts including the cleaning of all windows both inside and out insofar as such window cleaning is not the responsibility of the tenants of the Budding including insurance maintenance repair and any decoration of the equipment used in connection with such cleaning 10. Gritting sanding or treating with chemical ice prevention materials and snow clearance when and where appropriate 11. Provision of such apparatus and equipment (including the maintenance repair renewal and insuring of any such apparatus and equipment) and staff for the servicing management supervision cleaning and security of the Building as the Landlord shall reasonably consider necessary such cost to include 11.1 insurance pension and welfare contributions 11.2 transport facilities and benefits in kind 11.3 the provision of uniforms and working clothing 39 45 11.4 the provision of vehicles tools appliances cleaning and other materials fixtures and fittings and other equipment for the proper performance of their duties and a store for housing the same and 11.5 a notional rent (not exceeding current market rent) for any premises provided for every such person's use occupancy or residence 12. Providing maintaining repairing and replacing all floor coverings all signs signposts furniture furnishings seasonal decorations displays ornamental features plants shrubs trees cut flowers public pay telephones first aid or other amenities as the Landlord at its discretion shall provide in the Common Parts 13. Provision of and maintaining repairing and replacing the fire fighting equipment and securing a supply of water thereto including any sprinkler system fire detection equipment and alarm system and any burglar alarms or surveillance system and any loud speaker public address or music broadcast system in the Building 14. Provision of hot and cold water and other requisites to the lavatories in the Common Parts and including as appropriate the maintenance repair renewal and cleaning of all equipment necessary for such provision 15. Removal and disposal of trade or other refuse from the Building at such times and in such manner as the Landlord shall determine including the provision maintenance replacement and renewal of any compacting or other necessary equipment 16. Marking out the spaces in the Car Park 17. All rates taxes assessments duties charges impositions and outgoings payable by the Landlord in respect of the Common Parts 18. The reasonable and proper cost of any works (forming part of the services) carried out Pursuant to a planned maintenance programme for the Building and the reasonable and proper fees payable by the Landlord to any professional consultant engaged to prepare and implement such programme 19. Any other services and facilities as may be provided or supplied by the Landlord in accordance with the provisions of Clause 4.4 hereof 40 46 Part III The following Provisions shall apply to sums recovered by the Landlord from the Tenant pursuant to 1aragraph 1.5.5 of Part I of this Schedule in respect of the anticipated future expenditure:- 1. The annual sum recovered shall be the proper proportion attributable to the Demised Premises of the annual amount (determined by the Landlord acting reasonably) required to cover the cost of replacing or renewing the item of items in question at prices current in the financial year in respect of which the recovery is made and over the period estimated (in the same year) to be the expected life of the said item or items (whether or not extending beyond the Term) 2. All such sums shall be used by the Landlord (insofar as such sums are adequate) in discharging the Landlord's obligations under Clause 4 hereof and any income arising therefrom shall be so used 3. The Tenant shall not be entitled to repayment of any such sums or any part thereof in the event of an assignment or parting with the Tenant's interest in the Demised Premises 4. If the Landlord shall sell or otherwise part with its interest in the Building the sums recovered and any income (net of tax) accrued thereon shall on completion be handed to the Purchaser or other party acquiring the Landlord's interest in the Building The Fifth Schedule hereinbefore referred to Authorised Guarantee Agreement THIS AGREEMENT is made the day of One thousand nine hundred and ninety- BETWEEN (1) THE NORWICH UNION LIFE INSURANCE SOCIETY whose registered office is at Surrey Street in the City of Norwich ("the Landlord" which expression includes the person in whom the reversion expectant on the determination of the Term hereinafter defined is vested) (2) ("the Assignor") 41 47 WHEREAS:- (1) This Agreement is supplemental to the document or documents ("the Lease") short particulars whereof appear in the Schedule hereto whereby the premises ("the Premises') described in the said Schedule were demised for the term of years ("the Term") mentioned in the said Schedule (2) The Assignor is entitled to the Premises for the residue of the Term subject to the covenants contained in the Lease and the reversion expectant on the determination thereof is vested in the Landlord (3) Pursuant to the covenant in the Lease application has been made to the Landlord by the Assignor for consent to assign the Premises and the Landlord has agreed to give licence to assign the Premises to of ("the Assignee") for the residue of the Term subject to the Assignor covenanting with the Landlord in manner hereinafter appearing NOW THIS DEED WITNESSETH as follows:- IN consideration of the grant of the licence hereinbefore referred to the Assignor covenants with the Landlord:- 1. (as an obligation distinct from and without prejudice to any contained in the Lease) to:- 1.1 procure that notice is given to the Landlord within 14 days of the completion of the assignment indicating the name and address of the party to whom future rent demands should be sent 1.2 give to the Landlord within twenty-eight days of the completion of the assignment full particulars thereof including the amount of any consideration therefor 2. that the Assignee will from and after the date of the assignment to it pay the rents reserved by the Lease on the days and in manner therein provided and will perform and observe all the lessee's covenants in the Lease contained or implied and that in case of default in such payment of rent or in the performance or observance of such covenants as aforesaid or any one or more of them then and in every such case the 42 48 Assignor or the Personal Representative(s) of the Assignor will pay the rents and observe and perform any covenant in respect whereof the Assignee shall be in default as aforesaid PROVIDED ALWAYS and it is hereby agreed that any neglect or forbearance of the Landlord in endeavouring to obtain payment of the rents reserved by the Lease when the same become payable or to enforce performance of the several covenants on the lessee's part in the Lease contained or implied and any time which may be given to the Assignee by the Landlord shall not release or exonerate or in any way affect the liability of the Assignor 3. that if the Assignee shall cease to exist (whether by being struck off the Register of Companies or otherwise) or shall go into liquidation (otherwise than for the purpose of a reconstruction or amalgamation) or being individuals or an individual is adjudicated bankrupt and the liquidator or trustee in such bankruptcy as the case may be shall disclaim the Lease or a Receiver shall abandon or in any other manner terminate the Term or if the Landlord shall forfeit the Lease and if the Landlord shall within six months after having actual notice that the Assignee has ceased to exist or within six months after such disclaimer abandonment termination or forfeiture by notice in writing require the Assignor or his Personal Representative(s) to accept a lease of the Premises for a term commencing on the day after the Assignee ceased to exist or the day after any such disclaimer abandonment termination or forfeiture and expiring on the day the Term is due to expire at the same rents and under the like covenants and conditions as are reserved by and contained in the Lease (the said new lease and rights and liabilities thereunder to take effect as from the date of the said disclaimer abandonment or termination) then and in such case the Assignor or his Personal Representative(s) shall accept such lease accordingly and execute a counterpart thereof and shall pay the Landlord's solicitors' costs in connection. with the grant of such lease. IN WITNESS whereof this instrument has been duly executed as a deed the day and year first above written 43 49 THE SCHEDULE above referred to Nature of document: Date: Parties: (1) (2) Term: Premises: The Sixth Schedule hereinbefore referred to Agreement guaranteeing obligations in an AGA THIS AGREEMENT is made the day of One thousand nine hundred and ninety- BETWEEN (1) THE NORWICH UNION LIFE INSURANCE SOCIETY whose registered office is at Surrey Street in the City of Norwich ("the Landlord" which expression includes the person in whom the reversion expectant on the determination of the Term hereinafter defined is vested) (2) ("the Surety") WHEREAS:- (1) By an, Authorised Guarantee Agreement dated ____________ and made between the Landlord of the one part and ("the Assignor") of the other part the Assignor has entered into obligations guaranteeing the performance by its assignee of the obligations of the tenant under the lease short particulars whereof appear in the Schedule hereto whereby the premises ("the Premises") described in the said Schedule were demised for the term of years ("the Term") mentioned in the said Schedule (2) By virtue of the obligations on the part of the Surety contained in the Lease ("the Original Surety Covenants") the Surety has agreed to enter into this agreement to 44 50 guarantee the performance of the obligations on the part of the Assignor as hereinafter appears NOW THIS DEED WITNESSETH as follows:- THE Surety hereby covenants with the Landlord:- 1. that the Assignor will perform and observe all the obligations on its part contained in the Authorised Guarantee Agreement and that in case of default in such performance or observance as aforesaid then and in any such case the Surety or the Personal Representative(s) of the Surety will observe and perform any covenant in respect whereof the Assignor shall be in default as aforesaid and shall pay or make good to the Landlord any losses damages costs or expenses incurred by the Landlord as a consequence of such default PROVIDED ALWAYS and it is hereby agreed that any neglect or forbearance of the Landlord in endeavouring to enforce performance of the said obligations on the part of the Assignor or any of them and any time which may be given to the Assignor by the Landlord shall not release or exonerate or in any way affect the liability of the Surety 2. that if the Assignor shall (either) be called upon under the terms of the Authorised Guarantee Agreement to take up a lease of the Premises (or) shall call for the grant to the Assignor of an overriding lease of the Premises pursuant to the provisions of section 19 of the Landlord and Tenant (Covenants) Act 1995 or any amendment or reenactment thereof having similar effect then and in either such case the Surety shall enter into covenants with the Landlord mutatis mutandis the same as the Original Surety Covenants (to be contained either in such lease or in a separate deed as the Landlord shall require in writing) guaranteeing the performance of the obligations o the Assignor under such lease IN WITNESS whereof this instrument has been duly executed as a deed the day and year first above written THE SCHEDULE above referred to Nature of document: Date: 45 51 Parties: (1) (2) Term: Premises: The Seventh Schedule hereinbefore referred to The Landlord shall on written request supply to the Tenant keys to enable the Tenant to use the Demised Premises outside the hours referred to in clause 3.27 hereof (hereinafter called "the specified hours") on the following conditions:- 1. The keys supplied are to remain in the possession of senior personnel of the Tenant whose names shall be notified to the Landlord in writing and no further copies of the keys are to be made 2. The Tenant will use all reasonable endeavours to ensure that no unauthorised person gains access to the Building during such times and the Tenant has access outside the specified hours 3. The exterior doors to the Building are to be locked when the Building is used outside the specified hours and upon leaving the Building all doors are to be locked and the Building left secure 4. The Tenant will indemnify the Landlord from and against any claim arising from or in connection with or caused by the use of the Building outside the specified hours attributable to misuse or negligence by the Tenant or other permitted occupiers of the Demised Premises 5. The Landlord reserves the right to withdraw the privilege to use the Demised Premises outside the specified hours at any time in the event of the Tenant being in breach of the conditions of this Schedule or Clause 3.21 hereof and thereupon the Tenant will return the keys to the Landlord 6. The Tenant accepts that the use of the Building outside the specified hours is entirely at its own risk 7. The Landlord will not undertake to provide heating lifts or other services outside the specified hours but if any such services are used then this will be entirely at the 46 52 Tenant's own risk and it will reimburse the Landlord with any additional expense incurred in the provision of services or any increased insurance premium payable 8. The Tenant will advise the Landlord immediately should any of the said keys be lost or misplaced and if such keys shall be lost or misplaced and the Landlord considers it necessary to change the locks to the doors of the Building then the cost incurred will be borne by the Tenant 9. On the expiration or sooner determination of this Lease for any reason whatsoever or in the case of any assignment or underletting of the Demised Premises the keys are to be returned forthwith to the Landlord 10. The Tenant will observe all requirements communicated to it on the Landlord's behalf and comply with any reasonable regulations that the Landlord may from time to time impose in connection with the use of the Building outside the specified hours THE COMMON SEAL of ) QUINTILES (UK) LIMITED ) was hereunto affixed in the ) [SEAL] presence of:- ) Director Secretary THE COMMON SEAL of ) QUINTILES TRANSNATIONAL ) CORPORATION was hereunto ) [SEAL] affixed in the presence of:- ) Director Assistant Secretary 47 53 1. DEFINITIONS 1 2. DEMISE 4 3. TENANT'S COVENANT'S 4 3.1 Rent 4 3.2 Rates and outgoings 4 3.3 Costs of Notices 5 3.4 Signboard 6 3.5 Entry by Landlord 7 3.6 Repair 7 3.7 Repairs after notice 8 3.8 Defects etc 9 3.9 Statutory Works 9 3.10 Observe rules and regulations 9 3.11 Decoration 9 3.12 Cleaning 9 3.13 Planning 10 3.14 Letting and sale notices 11 3.15 Notices 12 3.16 Telecommunications Act 1984 12 3.17 Alterations 12 3.18 User 13 3.19 Alienation 13 3.20 Lavatories 17 3.21 Nuisance 17 3.22 Obstruction 18 3.23 Floor loading 18 3.24 Auction 18 3.25 Machinery etc 18 3.26 Signs etc 18
i 54 3.27 Hours of use etc 18 3.28 Not to leave premises vacant 19 3.29 Lifts 19 3.30 Not to invalidate insurance 19 3.31 Air-conditioning/cooling system 19 3.32 Car Park 19 4. LANDLORD'S COVENANTS 20 4.1 Repair 20 4.2 Insurance 21 4.3 Quiet enjoyment 22 4.4 Services 22 5. PROVISOS 22 5.1 Re-entry 22 5.2 Liability on Covenants 23 5.3 Lifts 23 5.4 Light and air 23 5.5 Service of notices 24 5.6 Disputes 24 5.7 Compensation 24 5.8 Interest on arrears 24 5.9 VAT 24 5.10 Abandoned Property 25 5.11 Managing Agents 26 5.12 Car Park 26 5.13 Tenant's option to determine 26 5.14 Headings 27 6. SURETY 27 7. AGREEMENT FOR LEASE 29 The First Schedule hereinbefore referred to 29
ii 55 Rights granted to the Tenant 29 The Second Schedule hereinbefore referred to 30 Exceptions and Reservations 30 The Third Schedule hereinbefore referred to 31 Rent Review 31 The Fourth Schedule hereinbefore referred to 34 The Fifth Schedule hereinbefore referred to 41 Authorised Guarantee Agreement 41 The Sixth Schedule hereinbefore referred to 44 Agreement guaranteeing obligations in an AGA 44 The Seventh Schedule hereinbefore referred to 46
iii EX-10.38 12 LEASE - PRUBETA/INNOVEX 1 EXHIBIT 10.38 COMMENCEMENT DATE MEMORANDUM THIS AGREEMENT made as of the 31st day of January, 1997 between PRUBETA-3, a general partnership organized under the laws of New Jersey, with an office c/o THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, The Prudential Business Campus, 8 Campus Drive, Parsippany, New Jersey ("Landlord") and INNOVEX, INC. with an office at 9 Campus Drive, Parsippany, New Jersey ("Tenant"). WITNESSETH: WHEREAS, Landlord and Tenant entered into a Lease dated August 14, 1996 ("Lease") setting forth the terms of occupancy by Tenant for 7,265 sf of space on the second floor of 9 Campus Drive located at The Prudential Business Campus in Parsippany-Troy Hills, New Jersey; and WHEREAS, the Lease is for the initial term of five years with the Target Commencement Date of the term being defined in Basic Lease Provisions; and NOW, THEREFORE, in consideration of the premises and covenants hereinafter set forth, it is agreed: 1. The Commencement Date of the initial term of the Lease is December 1, 1996 and the Expiration Date thereof is November 30, 2001. 2. This Agreement is executed by the parties for purposes of providing a record of the commencement date and termination date of the initial term of the Lease. 2 IN WITNESS WHEREOF, the parties hereto have duly executed this instrument as of the day and year first above written. Landlord: ATTEST: PRUBETA-3 BY: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, General Partner /s/ By:/s/ - ------------------------ ---------------------------------------- ASSISTANT SECRETARY VICE PRESIDENT BY: EQUITY PARSIPPANY VENTURE, a Colorado general partnership, General Partner By: US WEST Real Estate, Inc., a Colorado corporation, as Managing Partner By: BetaWest, Inc., a Colorado corporation, formerly known as BW Acquisitions, Inc., as authorized agent Approved as to legal form: By: By:/s/ ---------------------- ---------------------------------------- Date: Title: Tenant: ATTEST: (or Witness:) INNOVEX, INC. /s/ Mary C. Foss By:/s/ Janet H. Parkey - ------------------------ ---------------------------------------- JANET H. PARKEY VICE PRESIDENT FINANCE AND SUPPORT SERVICES 3 LEASE AGREEMENT for Premises located at THE PRUDENTIAL BUSINESS CAMPUS between PRUBETA-3, Landlord and INNOVEX INC. Tenant Date: as of August 14, 1996 4 THIS LEASE (the "LEASE") is made this 14th day of August 1996, between PRUBETA-3, a general partnership organized under the laws of New Jersey, with an office c/o THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, Newark Realty Group Office, Three Gateway Center 100 Mulberry Street, 13th Floor, Newark, New Jersey 07102 hereinafter called "LANDLORD," and INNOVEX INC., a Corporation of the State of Delaware, having its principal office at 9 Campus Drive, Parsippany, New Jersey 07054 hereinafter called "TENANT." LEASE OF PREMISES: Landlord hereby leases to Tenant and Tenant hereby hires from Landlord, subject to all of the terms and conditions hereinafter set forth, those certain premises (the "PREMISES") as set forth in Item 1 of the Basic Lease Provisions and as shown in the drawing(s) attached hereto as Exhibit "A-l"; said Premises being located on the floor(s) indicated in that certain office building (the "BUILDING") situated on certain land, which said land together with the parking facilities located thereon (the "PARKING AREAS") and the Building are collectively hereinafter referred to as the "PROJECT," being known as Linden Plaza and being located at 9 Campus Drive in the Township of Parsippany-Troy Hills, County of Morris, State of New Jersey and being a part of The Prudential Business Campus (the "COMPLEX" OR "CAMPUS"). BASIC LEASE PROVISIONS: l. Location of Premises: A portion of the second Floor: 2. Rentable Area of Premises: 7,265 rentable, not useable, square feet 3. Percentage Share: 4.64% 4. Term: Five years with one option, upon twelve (12) months notice, to renew for one five year period at Fair Market Value 5. Initial Estimated Annual Electricity Charge: $1.25 per square foot per year 6. Basic Annual Rent: $159,830 ($22.00 per square foot) plus tenant electric 7. Basic Monthly Rental $13,319.16 plus tenant electric Installments: 8. Commencement Date: December 1, 1996 9. Security Deposit: $13,319.16 10. Parking Spaces: Twenty-eight(28)spaces of unreserved parking for use in common with other tenants and one reserved space in the Building's garage 11. Broker(s): Peter Elliot LLC, Incorporated and Cushman Wakefield of New Jersey, Inc. 12. Permitted Use: General Office Use
-2- 5 13. Base Year 1996 14. Addresses for Notices:
LANDLORD: TENANT: THE PRUDENTIAL INSURANCE INNOVEX INC. COMPANY OF AMERICA 9 Campus Drive Newark Realty Group Parsippany, NJ 07054 Three Gateway Center, 13th Floor 100 Mulberry Street Newark, New Jersey 07102 Attn: Attn: David Stack, President General Manager with copy to: with a copy to: THE PRUDENTIAL INSURANCE Innovex Inc. COMPANY OF AMERICA 11250 Corporate Avenue Newark Realty Group Lenexa, KS 66219 Three Gateway Center, 13th Floor 100 Mulberry Street Attn: Stephen Garlow, General Counsel Newark, New Jersey 07102 Attn: Regional Counsel with a copy to: EQUITY PARSIPPANY VENTURE c/o BetaWest Properties, Ltd. 1999 Broadway, Suite 2000 Denver, Colorado 80202 Attn: Legal Department 15. All payments under this Lease shall be payable and delivered to: Premisys Real Estate Services, Inc. Two Hilton Parsippany-Troy Hills, New Jersey 07054 or such other payee or address as Landlord may designate from time to time. -3- 6 IN WITNESS WHEREOF, the parties hereto have executed this Lease, consisting of the foregoing and Paragraphs 1 through 45 which follow, together with Exhibits A through F inclusive, incorporated herein by this reference as of the date first above written. LANDLORD: PRUBETA-3 Attest: BY: THE PRUDENTIAL INSURANCE OF AMERICA, a New Jersey Corporation, as General Partner /s/ By: /s/ David B. Berkowitz - ------------------------ -------------------------------------- Assistant Secretary Name: David B. Berkowitz --------------------------------- Title: Vice President --------------------------------- BY: EQUITY PARSIPPANY VENTURE, a Colorado general partnership, as General Partner By: US WEST Real Estate, Inc., a Colorado corporation, as Managing Partner By: BetaWest, Inc., a Colorado corporation formerly known as BW Acquisition, Inc. as authorized agent Approved as to legal form by Counsel to Landlord: By: /s/ -------------------------------------- /s/Edward Lippincott Name: - ------------------------- ------------------------------- Title: ------------------------------ By: Edward N. Lippincott ---------------------- Date: August 21, 1996 -------------------- ATTEST:(or Witness:) TENANT: INNOVEX INC /s/ - -------------------- By:/s/ David M Stack ----------------------- Name: David M Stack ------------------ Title: President ----------------- Tenant's Federal Tax identification Number is: -4- 7 STATE OF NEW JERSEY: :ss COUNTY OF ESSEX : BE IT REMEMBERED, that on this 20th day of August 1996, before me, the subscriber, a notary public of New Jersey, personally appeared David Berkowitz Vice President of THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, who I am satisfied, is the person who has signed the within instrument; and he did acknowledge that he signed, sealed and delivered the same as such officer aforesaid; and that the within instrument is the voluntary act and deed of said corporation made by virtue of authority from its Board of Directors. /s/ Helen H. Graham ------------------------------- Helen H. Graham Notary Public of New Jersey My Commission Expires 6/17/2000 STATE OF COLORADO ) ss. COUNTY OF DENVER ) BE IT REMEMBERED, that on this 29th day of August, 1996, before me, the subscriber, a notary public of Colorado, personally appeared Robert E. Cardwell, who, I am satisfied, is the authorized agent of BetaWest, Inc., and who has signed the within instrument, and he thereupon acknowledged that he signed, sealed and delivered the said instrument as the voluntary act and deed of said corporation as authorized agent of US WEST Real Estate, Inc., the managing partner of Equity Parsippany Venture, and that the within instrument is the voluntary act and deed of said partnership made in accordance with and fully authorized by its partners and the partnership agreement. /s/ Marta A. Caudle ------------------------------- [SEAL] Marta A. Caudle Notary Public of Colorado My Commission Expires 3/23/97 STATE OF NEW JERSEY : ss. 025428300 COUNTY OF MORRIS : BE IT REMEMBERED, that on this 14th day of August, 1996, before me, the subscriber a notary public of New Jersey, personally appeared David M. Stack President of INNOVEX INC, who I am satisfied, is the person who has signed the within instrument; and he did acknowledge that he signed, sealed and delivered the same as such officer aforesaid; and that the within instrument is the voluntary act and deed of said corporation made by virtue of authority from its Board of Directors. /s/ Melinda Ann Masek ---------------------------------- MELINDA ANN MASEK NOTARY PUBLIC OF NEW JERSEY MY COMMISSION EXPIRES MAR. 9, 1997 -5- 8 PARAGRAPH 1 TERM: The term of this Lease shall be as shown in Item 4 of the Basic Lease Provisions. The Lease shall commence on the Commencement Date as shown in Item 8 of the Basic Lease Provisions, or upon such earlier date as Tenant takes possession or commences use of the Premises for any purpose, excluding construction. Such date of commencement, hereinafter the "COMMENCEMENT DATE," and the date of expiration, hereinafter the "EXPIRATION DATE," shall be confirmed by Landlord by means of a "COMMENCEMENT DATE MEMORANDUM" in form substantially similar to Exhibit "C." PARAGRAPH 2 BASIC ANNUAL RENT: (A) Tenant agrees to pay as Basic Annual Rent for the Premises the sum or sums shown in Item 6 of the Basic Lease Provisions. The Basic Annual Rent shall be payable in U.S. currency in equal monthly installments, hereinafter sometimes referred to as "BASIC MONTHLY RENTAL INSTALLMENTS," in advance and without notice, deduction, offset, or abatement except as otherwise provided herein. Basic Monthly Rental Installments shall be in the sum or sums shown in Item 7 of the Basic Lease Provisions. Basic Annual Rent shall commence on the Commencement Date and continue on the first day of each calendar month thereafter except the first Basic Monthly Rental Installment shall be paid at execution hereof. The Basic Monthly Rental Installment for any partial month during the term hereof shall be prorated in the proportion that the number of days this Lease is in effect during such partial month bears to the number of days in that calendar month, and such Basic Monthly Rental Installment shall be paid at the commencement of such partial month. (B) In addition to the Basic Annual Rent stipulated herein, Tenant covenants and agrees to pay in U.S. currency, without deduction, offset, or abatement except as otherwise provided herein to Landlord as additional rent, hereinafter "ADDITIONAL RENT," all other sums and charges which are to be paid by Tenant pursuant to the terms of this Lease. Except as otherwise provided in this Lease, Additional Rent shall be due and payable on the first day of the month following the date on which Tenant is given notice that Additional Rent is due. (C) The Basic Annual Rent plus Additional Rent are sometimes collectively referred to as "RENT." PARAGRAPH 3 ADDITIONAL RENT FOR TAXES AND OPERATING EXPENSES, ETC.: (A) Commencing with the first anniversary of the Commencement Date, Tenant agrees to pay as items of Additional Rent for the Premises, Tenant's "Percentage Share" (being the percentage indicated in Item 3 of Basic Lease Provisions) of all increases in "Project Operating Expenses" and "Project Property Taxes" over the Base Year shown in Item 13 of the Basic Lease Provisions incurred by Landlord in the operation of the Project. For purposes of this paragraph, during each year actual occupancy of the Building is less than one hundred (100%) percent, Landlord will adjust the costs of all Project Operating Expenses to assume one hundred (100%) percent occupancy of the Building and Landlord will adjust Project Property Taxes to reflect assumed standard tenant improvements for one hundred (100%) percent occupancy. (B) The items of Additional Rent contemplated under subparagraph 3(A) shall be determined in accordance with the following procedures: (i) Each December during the term hereof or as soon thereafter as practical, Landlord shall give Tenant written notice of Landlord's reasonable estimate of any amounts payable under subparagraph 3(A) above for the ensuing calendar year. On or before the first day of each month during the ensuing calendar year, Tenant shall pay Landlord without further notice one-twelfth (l/12) of such estimated amounts, provided that if such notice is not given in December, Tenant shall continue to pay -6- 9 on the basis of the then applicable rental until the month after such notice is given. If at any time or times it appears to Landlord that the increased amounts payable under subparagraph 3(A) for the current calendar year will exceed its estimate, Landlord may, by notice to Tenant, revise its estimate for such year. Subsequent payments by Tenant for such year shall be based upon such revised estimate. (ii) Within 90 (ninety) days after the close of each calendar year or as soon thereafter as is practical, Landlord shall deliver to Tenant a statement of the annual adjustment of those Additional Rent items made pursuant to subparagraph 3(A) for such calendar year. If on the basis of such statement Tenant owes an amount that is less than the estimated payments for such calendar year previously made by Tenant, Landlord shall refund or credit such excess to Tenant. If on the basis of such statement Tenant owes an amount that is more than the estimated payments for such calendar year previously made by Tenant, Tenant shall pay the deficiency to Landlord within 30 (thirty) days after delivery of the statement. (iii) The Additional Rent or any credit or refund due Tenant due under the terms and conditions of this Paragraph 3 shall survive termination of this Lease, shall be payable by Tenant without any setoff or deduction except as otherwise expressly provided in this Lease, and shall be computed by Landlord on a prorated basis for any period less than a full calendar year. (C) Definitions: (i) The term "Project Operating Expenses" as used herein shall include all costs of operation, management, and maintenance of the Project calculated on an accrual basis for each calendar year as determined by generally accepted accounting principles consistently applied. Project Operating Expenses shall, by way of illustration but not limitation, include water and sewer charges, insurance premiums, license, permit, and inspection fees, fees assessed by any campus or owner's association affecting the Project, fuel, heat, light, power (except for that electricity charged directly to the Premises and other rental space on the Project), steam, janitorial and security services, labor, salaries to persons engaged full time in the operation or maintenance of the Project but not above the level of general manager, air conditioning, landscaping, maintenance and repair of the Building and driveways, parking structures and surface parking areas, ice and snow removal, supplies, materials, equipment, tools; repair or replacement of equipment, machinery, and other items of Landlord's property; the property management fees and costs including but not limited to office rent for the on-site property management office; and the cost incurred in contesting the validity or an assessment of Project Property Taxes. Project Operating Expenses shall also include but not be limited to the cost of any capital improvements made to the Project by Landlord that reduce operating expenses (but only to the extent of the annual savings) or that are required under any governmental law or regulation not previously applicable to the Project or not in effect at the time it was constructed. Such capital cost shall be amortized over such reasonable periods as Landlord shall determine with a return on capital at the then current prime interest rate of the largest national bank in New York City or at such higher rate as may have been paid by Landlord on the funds borrowed for the purpose of providing such capital improvements. Project Operating Expenses shall not include (a) depreciation; (b) interest and amortization on debt; (c) all other capital expenses; (d) costs of correcting latent defects; (e) costs which are reimbursed by insurance proceeds or eminent domain awards, (f) costs of any tenant improvements or special service to another tenant not furnished to tenants generally and any construction allowance to Tenant or other tenants (g) -7- 10 costs of collecting rent from other tenants and of enforcing lease rights against other tenants, (h) leasing commissions, costs, disbursements, and other expenses incurred for leasing, renovating, or improving space for tenants; (i) Landlord's cost of electricity or other service sold to tenants for which Landlord is to be reimbursed as a charge over the Rent payable under the lease with that tenant; (j) costs incurred because the Landlord violated the terms of any lease; (k) overhead and profit paid to subsidiaries or affiliates of Landlord for management or other services, supplies or materials exceed the competitive costs of the services, supplies, or materials were they not provided by a subsidiary or affiliate; (l) compensation paid to persons in commercial concessions operated by Landlord; (m) advertising and promotional expenditures directly related to leasing space; (n) repairs or other work needed because of fire, windstorm, or other casualty or cause insured against by Landlord; (o) any costs, fines, or penalties incurred because landlord violated or failed to timely comply with any governmental law or ordinance, (p) costs incurred to cleanup, hazardous wastes or asbestos containing materials from the Project unless the wastes or asbestos containing materials were in or on the Project because of Tenant's acts (ii) The term "Project Property Taxes" as used herein shall include all real estate taxes or personal property taxes and other taxes, charges and assessments, unforeseen as well as foreseen, which are levied with respect to the Project and any improvements, fixtures and equipment and other property of Landlord, real or personal, located in the Building or on the Project and used in connection with the operation of the Project for each calendar year and shall include any tax, surcharge or assessment which shall be levied in addition to or in lieu of real estate or personal property taxes, other than taxes covered in Paragraph 11, and shall also include any rental, excise, sales, transaction, privilege, or other tax or levy, however denominated, imposed upon or measured by the rental reserved hereunder or on Landlord's business of leasing the Premises and Project, excepting only net income taxes. Project Property Taxes shall be based upon the fully assessed value of the fully completed Building including standard tenant improvements, driveways, and other common areas of the Building and Project. In the event tax assessment is not detailed, sufficiently or, in the event either party shall dispute the tax assessor's determination of full assessment value, then Landlord and Tenant shall look to the following two alternatives in the order given to determine assessed value: (i) notes and records of tax assessor and (ii) any reasonable method upon which the parties may agree. Notwithstanding the provisions above, Project Property Taxes exclude: (1) franchise gift, transfer, excise, capital stock, estate, succession, or inheritance taxes, and (2) penalties or interest for late payment of Project Property Taxes, and (D) Tenant shall have ninety (90) days after receiving the statement referred to in subparagraph 3(B)(ii) to audit Landlord's books and records at Landlord's offices. Unless Tenant takes written exception to any item in the statement referred to in subparagraph 3(B)(ii) within ninety (90) days after the furnishing of the statement, such statement shall be considered as final and accepted by Tenant. Any amount due Landlord as shown on any such statement shall be paid by Tenant within thirty (30) days after it is furnished to Tenant. If Tenant shall dispute in writing any specific item or items in the statement of Project Operating Expenses and Project Property Taxes, and such dispute is not resolved between Landlord and Tenant within sixty (60) days after the date the statement was rendered, either party may, during the thirty (30) days next following the expiration of the sixty (60) days, refer such disputed item or items to an independent certified public accountant selected by Landlord, for a determination which shall be final, conclusive and binding upon Landlord and Tenant. Tenant agrees to pay all costs involved in such determination unless it is determined that Landlord's original calculation of both Project Property Taxes and Project -8- 11 Operating Expenses was in error, in Landlord's favor, by more than five (5%) percent. Pending the determination of any dispute with respect to the statement submitted by Landlord, Tenant shall pay when due the sums shown as due on such statement. If it shall be determined that any portion of such sums were not properly chargeable to Tenant, then Landlord shall credit or refund the appropriate sum to Tenant. (E) As one of the items of Additional Rent, payable monthly, Tenant shall also pay to Landlord the full cost of Tenant's consumption of electricity (including heating and air-conditioning installed for a particular use by Tenant), as reasonably determined from time to time by Landlord through proration, engineering survey by Landlord's electric rate consultant, or other reasonable method. In the event Landlord meters or submeters Tenant's electricity usage, Tenant shall pay Tenant's share of any surcharge, "peak-hour" premium or other similar additional charge. The initial estimated monthly electricity charge for the Premises shall be as shown in Item 5 of the Basic Lease Provisions. Commencing on Commencement Date Tenant shall also pay Landlord any increase in the cost of electricity to the Premises based upon increases in the billing rate after the date hereof. (F) Notwithstanding anything to the contrary in this Lease, in no event shall the Basic Annual Rent be reduced in any way because of anything in this Paragraph 3. PARAGRAPH 4 SECURITY DEPOSIT: Tenant has paid or agrees to pay to Landlord such sum(s) as are set forth in Item 9 of the Basic Lease Provisions as security for the performance of the terms hereof by Tenant. Unless required by law, Landlord shall not be required to keep said Security Deposit separate from its general funds and Tenant shall not be entitled to receive interest thereon. In no instance shall the amount of such Security Deposit be considered a measure of liquidated damages. If Tenant defaults with respect to any provision of this Lease, including but not limited to the provisions relating to the payment of Rent or the surrender of the Premises in accordance with the terms hereof upon the termination of the Lease, Landlord may, but shall not be required to use, apply or retain all or any part of this Security Deposit for the payment of any Rent or any other sum in default, or for the payment of any other amount which Landlord may spend or become obligated to spend by reason of Tenant's default or to compensate Landlord for any other loss or damage which Landlord may suffer by reason of Tenant's default including, without limitation, costs and attorneys' fees incurred by Landlord. If any portion of said deposit is so used or applied, Tenant shall, upon demand therefor, deposit cash with Landlord in an amount sufficient to restore the Security Deposit to its original amount and Tenant's failure to do so shall constitute a default hereunder by Tenant. If Tenant shall fully and faithfully perform every provision of this Lease to be performed by it, the Security Deposit, or any balance thereof, shall be returned to Tenant (or, at Landlord's option, to the permitted assignee of Tenant's interest hereunder) within thirty (30) days following the expiration of the Lease term and after Tenant has vacated and delivered possession of the Premises to Landlord in accordance with the provisions of this Lease. In the event of bankruptcy or other debtor-creditor proceeding against Tenant, such Security Deposit shall be deemed to have been applied first to the payment of Rent and other charges due Landlord for all periods prior to filing of such proceedings. PARAGRAPH 5 REPAIRS: (A) Subject to subparagraph 5(B), Landlord shall cause all necessary repairs to be made to the exterior walls, exterior doors, windows, corridors and other common areas of the Building and the Project and Landlord shall cause the Building and the Project to be kept in a safe, clean and neat condition, and shall use reasonable efforts to keep all equipment used in common with other Tenants (such as elevators, plumbing, heating, air conditioning and similar equipment) in good condition and repair. Landlord shall also repair all heat pumps, and shall repair or replace the heat pumps in the exterior or peripheral areas of the Building in the Premises. Except as provided in Paragraph 13 hereof, there shall be no abatement of Rent and no liability of Landlord by reason of any injury to or interference with Tenant's business arising from the making of any repairs, alterations or improvements in or to any portion -9- 12 of the Building or the Project or in or to fixtures, appurtenances and equipment therein or thereon. (B) Tenant agrees that all repairs to the Premises not required above to be made by Landlord during the term of this Lease, if approved by Landlord, shall be made by Landlord at the sole cost and expense of Tenant. Tenant will pay for any repairs to the Premises, the Building or the Project made necessary by any negligence or willful acts or omissions of Tenant or its assignees, subtenants, employees or their respective agents or other persons permitted in the Building or on the Project by Tenant, or any of them. Tenant will also maintain the Premises, and, upon termination of this Lease, will leave the Premises in a safe, clean, neat and sanitary condition. PARAGRAPH 6 IMPROVEMENTS AND ALTERATIONS: (A) Landlord will provide a construction allowance of $159,830.00 for planning, supervision and construction of Tenant's interior Premises. Tenant shall contract separately for space planning and preliminary design services. Landlord's sole construction obligation under this Lease is as set forth in Landlord's Work Letter attached hereto as Exhibit "B" and incorporated herein by this reference. Prior to the Commencement Date, Tenant's obligations with respect to alterations and improvements to the Premises are governed by Landlord's Work Letter. Any unused portion of the Construction Allowance shall be applied in payment of Rent first coming due. (B) Landlord shall have the right at any time to change the arrangement and/or location of entrances or passageways, doors and doorways, and corridors, (provided that such changes do not unreasonably interfere with Tenant's access to the Premises) elevators, stairs, toilets, or other public parts of the Building or Project, and, upon giving Tenant reasonable notice thereof, to change the name, number or designation by which the Building or the Project is commonly known. (C) From and after the Commencement Date, Tenant shall not make or suffer to be made any alterations, additions or improvements (excluding decorating, and painting) to or of the Premises or any part thereof, or attach any fixtures or equipment thereto, without first obtaining Landlord's prior written consent, which shall not be unreasonably withheld or delayed. Any consent by Landlord may be subject to such reasonable conditions as Landlord may deem necessary. Any such alterations, additions or improvements to the Premises consented to by Landlord shall, at Landlord's option, be made by Landlord for Tenant's account and Tenant shall pay Landlord for the cost thereof (including a reasonable charge for Landlord's overhead) within ten (10) days after receipt of Landlord's statement. All such alterations, additions and improvements shall (without compensation to Tenant) immediately become Landlord's property (except easily moveable furniture and trade fixtures) and, at the end of the term hereof, shall remain on the Premises unless Landlord elects by notice given to Tenant at the time of the original request for consent (which notice Landlord must give Tenant at the time Landlord consents to the alteration, addition or improvement) to have Tenant remove same, in which event Tenant shall promptly restore the Premises to their condition prior to the installation of such alterations, additions and improvements. Tenant will obtain, at Tenant's expense, all necessary permits and certificates and Tenant shall furnish Landlord copies of all such permits and certificates. PARAGRAPH 7 LIENS: Tenant shall keep the Premises free from any mechanics notices of intention, liens or encumbrances (collectively in this paragraph hereinafter referred to as "lien" or "liens") arising out of any work performed, materials furnished, or obligations incurred by or for Tenant. In the event that Tenant shall not, within ten (10) days following the imposition of any such lien, cause the same to he released of record by payment or posting of a proper bond, Landlord shall have, in addition to all other remedies provided herein or by law, the right, but not the obligation, to cause the same to be released by such means as it shall deem proper, including payment of or defense against the claim giving rise to such lien. All sums paid by Landlord and all expenses (including, without limitation, reasonable attorneys' fees) incurred by it in connection -10- 13 therewith, shall create automatically an obligation of Tenant to pay to Landlord an equivalent amount as Additional Rent, which Additional Rent shall be payable by Tenant upon Landlord's demand, with interest at the maximum rate per annum permitted by law, until paid. To the extent permitted by law, Tenant shall require all Tenant's contractors and materialmen to waive any and all rights they may have to file any liens. PARAGRAPH 8 USE OF THE PREMISES: (A) Tenant shall use the Premises only as set forth in Item 12 of the Basic Lease Provisions and shall not use or permit the Premises to be used for any other purpose without the prior written consent of Landlord. Tenant shall comply with all laws, and shall not use or occupy the Premises in violation of law or of the certificate of occupancy issued for the Building, and shall immediately discontinue any use of the Premises which is declared by Landlord or any governmental authority having jurisdiction to be a violation of law or of said certificate of occupancy. Tenant shall comply with any direction of any governmental authority having jurisdiction which shall, by reason of the nature of Tenant's use or occupancy of the Premises, impose any duty upon Tenant or Landlord with respect to the Premises or with respect to the use or occupancy thereof. Landlord represents that no applicable law prohibits use of the Building for office purposes. Tenant shall not do or permit to be done anything which will invalidate or increase the cost of any fire, extended coverage or any other insurance policy covering the Building, the Project and/or property located therein and shall comply with all rules, orders, regulations and requirements of the appropriate fire rating bureau or any other organization performing a similar function. Tenant shall upon demand reimburse Landlord for the full amount of any additional premium charged for such policy by reason of Tenant's failure to comply with the provisions of this paragraph. Such reimbursement shall not be Landlord's exclusive remedy. (B) With respect to Tenant's use and occupancy of the Premises, Tenant shall not store, use, or dispose of any hazardous materials, in, on, under or about the Premises or the Project other than office supplies and cleaning products. Tenant shall, at Tenant's own expense, comply with the Industrial Site Recovery Act, N.J.S.A. 13:1k-6 et seq., ("ISRA") and all other applicable federal, state, and local laws, promulgated with respect to hazardous substances and the regulations promulgated thereunder (the "Hazardous Substances Laws"). Tenant shall, at Tenant's own expense, make all submissions to, provide all information to, and comply with all requirements of, the New Jersey Department of Environmental Protection or its replacement and any similar federal, state or local department, agency, bureau or division which is charged with the enforcement of laws regulating hazardous wastes (the "Hazardous Substances Agencies") and promptly comply with Landlord's requirements in connection therewith.). Should any Hazardous Substance Agency determine that a Cleanup Plan be prepared and that a cleanup be undertaken because of any spills or discharges of hazardous substances or wastes at the Building or land in or on which the Premises is located which were caused by Tenant or its officers, employees, agents, contractors or invitees, then Tenant shall, at Tenant's own expense, prepare and execute a Cleanup Plan which shall be approved by such Hazardous Substance Agency and complete the cleanup. If the Hazardous Substance Agency determines that a Cleanup Plan be prepared at the Building or land for reasons other than those stated in the preceding sentence, then Landlord at Landlord's own expense shall prepare and execute a Cleanup Plan which shall be approved by NJDEP and Landlord shall complete the cleanup and Tenant shall cooperate with Landlord in every way reasonable. Tenant shall defend, indemnify and hold harmless Landlord from and against all claims, costs, and liabilities, including reasonable attorneys' fees, arising out of or in connection with Tenant's breach of its obligations under this Paragraph 8. Tenant's obligations under this paragraph 8 shall survive the expiration or earlier termination of this Lease. PARAGRAPH 9 UTILITIES AND SERVICES: (A) Provided that Tenant is not in material default hereunder, Landlord agrees to furnish or cause to be furnished to the Premises the following utilities and services, subject to the conditions and standards set forth below and -11- 14 elsewhere herein: (i) Landlord shall provide automatic elevator facilities from 8:00 a.m. to 6:00 p.m., Monday through Friday (legal holidays listed in Exhibit "E" "Legal Holidays" excepted), and shall have at least one elevator available for use at all other times. (ii) From 8:00 a.m. to 6:00 p.m., Monday through Friday (Legal Holidays excepted), Landlord shall, subject to interruptions beyond Landlord's control and subject to subparagraph 3(E), furnish heat or air-conditioning subject to any governmental requirements or standards relating to, among other things, energy conservation. Upon reasonable, prior written request, Landlord shall make available at Tenant's expense, after-hours heat or air-conditioning, and Tenant shall be responsible for payment of all costs associated with such after hours heat or air conditioning. The charge for after-hours heat or air-conditioning shall be reasonably determined by Landlord and confirmed in writing to Tenant, as the same may change from time to time. At the date of this Lease the charge is $50.00 per hour per zone There shall be a minimum charge of one hour for every partial hour of usage. Tenant shall pay the after hours charges promptly and, in any event, within ten (10) days after receipt of written confirmation. (iii) Landlord shall furnish to the Premises, subject to interruptions beyond Landlord's control and subject to subparagraphs 3(E) and 9(B), electric current as required by the building standard office lighting and receptacles. At no time shall Tenant's use of electric current exceed the Premises' capacity of 3.5 watts per square foot for lighting and power. Landlord represents that Landlord will furnish electric current of 3.5 watts per square foot for lighting and power and for purposes of air supply and distribution of HVAC System and that Landlord will not reduce said capacity during the term hereof. To the extent Tenant design exceeds the electrical current design capacity, then Tenant will pay all costs of providing additional required electrical service. Tenant shall pay the after hours charges promptly and, in any event, within ten (10) days after receipt of written confirmation. (iv) Landlord shall, subject to interruptions beyond Landlord's control and other provisions hereunder, furnish the building with water for heating, ventilating, air conditioning, drinking and lavatory purposes only. (v) Landlord shall provide janitorial services to the Building and Premises, in accordance with Exhibit "F" provided that the Premises are kept in good order by Tenant. Tenant shall pay to Landlord the cost of removal of any of Tenant's refuse and rubbish to the extent that the same exceeds the refuse and rubbish usually attendant upon the use of the Premises as offices. (vi) Landlord shall replace, as necessary, the fluorescent tubes in the standard lighting fixtures installed by Landlord. Tenant agrees to reimburse Landlord upon demand for the cost of such fluorescent tubes and the labor and overhead for their installation. (B) Landlord may impose a reasonable charge which Tenant hereby agrees to pay upon demand, for any utilities and services, including without limitation, heating, air-conditioning, electric current and water, provided by Landlord by reason of any use of the Premises at any time other than the hours of 8:00 a.m. to 6:00 p.m. Monday through Friday (excluding Legal Holidays), or any use beyond that which Landlord agrees to furnish as described above, or special electrical, cooling and ventilating needs created in certain areas by telephone equipment, computers -12- 15 and other similar equipment or uses. At Landlord's option, separate meters for such utilities and services may be installed for the Premises, and upon demand, Tenant shall immediately pay Landlord for the installation, maintenance and/or repair of such meters and for all charges with respect to consumption of such utilities or services so metered or provided. (C) Tenant agrees to cooperate fully at all times with Landlord and to abide by all reasonable regulations and requirements which Landlord may prescribe for the use of the above utilities and services. Any failure to pay any costs as described above shall constitute a breach of the obligation to pay Rent under this Lease and shall entitle Landlord to the rights herein granted for such breach. (D) Landlord shall not be liable for, and, except as otherwise provided in subsection E below, Tenant shall not be entitled to, any abatement or reduction of Rent by reason of Landlord's failure to furnish any of the foregoing services, nor shall any such failure, stoppage or interruption of any such service be construed either as an eviction of Tenant, or relieve Tenant from the obligation to perform any covenant or agreement. However, in the event of any failure, stoppage or interruption thereof, Landlord shall use reasonable diligence to have service resumed promptly, and (E) If Landlord fails to deliver certain services as enumerated below required under this Paragraph 9, and such failure continues for ten (10) consecutive calendar days after Landlord's receipt of notice specifying the exact nature of such failure and such failure is the result of Landlord's acts or omissions and not caused by (i) Tenant or Tenant's contractors or any agent or employee thereof, or (ii) by an event of Force Majeure as defined in Paragraph 40 hereof, Tenant shall have the right to offset Basic Rent and Additional Rent (except Additional Rent resulting from services requested by Tenant) commencing on the 11th day according to the following schedule: Service Not Provided Percent of Daily Basic Rent Withheld Electricity 100% HVAC 100% Water 25% Elevator service 25%
(F) Notwithstanding anything herein to the contrary, Landlord reserves the right from time to time to make reasonable modifications to the above provisions for utilities and services; provided, such modifications do not diminish the level or quality of service below that level or quality which is consistent with a first class office building. PARAGRAPH 10 RULES AND REGULATIONS: Tenant agrees to abide by all rules and regulations of the Building and Project ("Rules and Regulations") imposed by Landlord as set forth in Exhibit "D" attached hereto, and as the same may be changed from time to time upon reasonable notice to Tenant. Landlord shall not enforce these Rules and Regulations arbitrarily among tenants. Landlord shall not be liable for the failure of any tenant, its agents or employees to conform to the Rules and Regulations. PARAGRAPH 11 TAXES ON TENANT'S PROPERTY: (A) Tenant shall be liable for and shall pay not later than ten (10) days before delinquency, all taxes, levies and assessments levied against any personal property or trade fixtures placed by Tenant in or about the Premises. If any such taxes, levies and assessments on Tenant's personal property or trade fixtures are levied against Landlord or Landlord's property or if the assessed value of the Building or the Project is increased by the inclusion therein of a value placed upon such personal property or trade fixtures of Tenant and if Landlord pays the taxes, levies and assessments based upon such increased assessment, -13- 16 Tenant shall, within five days after demand therefore, repay to Landlord the taxes, levies and assessments so levied against Landlord, or the proportion of such taxes, levies and assessments resulting from such increase in the assessment, together with interest thereon at the default rate determined in accordance with paragraph 36 of this Lease. (B) If the Tenant Improvements, whether installed and/or paid for by Landlord or Tenant and whether or not affixed to the real property so as to become a part thereof, are assessed for real property tax purposes at a valuation higher than the valuation at which tenant improvements conforming to building standard (as determined by Landlord) are assessed, then the real property taxes and assessments levied against Landlord or the Project by reason of such excess assessed valuation shall be deemed to be taxes levied against personal property of Tenant and shall be governed by the provisions of subparagraph ll(A). If the records of the tax assessor are available and sufficiently detailed to serve as a basis for determining whether said Tenant Improvements are assessed at a higher valuation than building standard, such records shall be binding on both Landlord and Tenant; otherwise, the actual cost of construction shall be the basis for such determination. PARAGRAPH 12 OMITTED PARAGRAPH 13 FIRE OR CASUALTY: (A) In the event that the Project (regardless of whether the Premises or access thereto is affected) is so damaged or destroyed to the extent of more than one-third (1/3) of its replacement cost, or to any substantial extent by a casualty not covered by Landlord's insurance (or, in the event Landlord self-insures which Landlord reserves the absolute right to do, by a casualty not ordinarily covered by all-risk insurance) or during the last two years of this Lease, Landlord, upon giving thirty (30) days notice to Tenant, may elect to terminate this Lease. (B) In the event the Premises are completely destroyed or so badly damaged that, in Landlord's reasonable opinion, repairs to the Premises cannot be commenced within ninety (90) days and completed within one hundred eighty (180) days from the date of damage or destruction, Landlord will so notify Tenant, in which event this Lease may be terminated by either Landlord or Tenant by giving thirty (30) days advance written notice, said notice to be given within 15 days following receipt of Landlord's notice. Also, if notice of such opinion or notice of termination has not been given, and if repairs have not been commenced by Landlord within ninety (90) days from the date of damage or destruction, this Lease may be terminated immediately thereafter upon written notice from Tenant given no later than one hundred twenty (120) days after the date of damage or destruction. In the event Tenant shall fail to terminate this Lease as provided in this subparagraph (B) then, Tenant shall thereafter have no further right to so terminate based upon the provisions of this subparagraph (B). (C) If this Lease is not terminated as provided in Subsection 13(A) and ] 13(B), or if the damage or destruction is other than as provided in Subsection 13(A) and 13(B), then Landlord shall commence within ninety (90) days after such damage or destruction to rebuild, repair or restore the Premises and access thereto to substantially the same condition as when the same were delivered to Tenant, excluding any improvements owned by Tenant, and the Lease shall continue in full force and effect. (D) If this Lease is terminated as provided above, Tenant's obligation to pay Rent hereunder shall cease as of the date (i) of damage or destruction if Premises are rendered untenantable or (ii) Tenant vacates the Premises if Premises are not rendered untenantable. (E) Landlord shall in no event: be obligated to make any repairs or replacement of any fixtures furniture, equipment or other property (real or personal) owned by Tenant. If the Lease is not -14- 17 terminated but the Premises are rendered untenantable. Rent shall abate during the period of such untenantability in proportion to that part of the Premises that is unfit for use in Tenant's business Tenant acknowledges (i) that Landlord shall not obtain insurance of any kind on Tenant Improvements, alterations, additions and improvements to the Premises owned by Tenant or on Tenant's furniture, fixtures, equipment and other personal property, (ii) that it is Tenant's obligation to obtain such insurance at Tenant's sole cost and expense, and (iii) that Landlord shall not be obligated to repair any damage thereto or replace the same. The provisions of this Paragraph 13 shall be considered an express agreement governing any case of damage or destruction of the Premises by fire or other casualty, and any law of the State of New Jersey, providing for such a contingency in the absence of an express agreement, and any other law of like import, now or hereafter in force, shall have no application in such case. PARAGRAPH 14 EMINENT DOMAIN: In case the whole of the Premises, or such part as shall substantially interfere with Tenant's use and occupancy thereof, shall be taken by any lawful power or authority by exercise of the power of eminent domain, this Lease shall terminate effective as of the date possession is required to be surrendered to said authority. In the event of any taking (in whole or part) of the Project whether or not the Premises or access thereto are affected thereby which taking in Landlord's judgment will render continued operation of the Project economically infeasible, Landlord shall have the right to terminate this Lease. Except as provided herein, Tenant shall not, because of any taking, assert any claim against Landlord or the taking authority for any compensation because of such taking, and Landlord shall be entitled to receive the entire amount of any award without deduction for any estate or interest of Tenant. In the event the amount of property or the type of estate taken shall not substantially interfere with Tenant's use of the Premises, and Landlord does not terminate this Lease, Landlord shall proceed to restore the Premises (to the extent permitted by the taking) to substantially their condition prior to such partial taking, and a proportionate allowance shall be made to Tenant for Rent corresponding to the time during which, and to the part of the Premises of which, Tenant shall be so deprived on account of such taking and restoration. Provided same shall not diminish Landlord's award in any way, nothing contained in this Paragraph 14 shall prevent Tenant from seeking any award against the taking authority for the taking of personal property and fixtures owned by Tenant or for relocation expenses recoverable from the taking authority. In no event shall Landlord be required to expend more for restoration than received from the taking authority for such taking. For the purposes of this paragraph, "taking" shall also include any conveyance in lieu of condemnation. PARAGRAPH 15 ASSIGNMENT AND SUBLETTING: (A) Tenant shall not voluntarily or involuntarily assign, sublet, mortgage or otherwise encumber all or any portion of its interest in this Lease or in the Premises without obtaining the prior written consent of Landlord and any such attempted assignment, subletting, mortgage or other encumbrance without such consent shall be null and void and of no effect. (B) No assignment, subletting, mortgage or other encumbrance of Tenant's interest in this Lease shall relieve Tenant of its obligation to pay the Rent and to perform all of the other obligations to be performed by Tenant hereunder. The acceptance of rent by Landlord from any other person shall not be deemed to be a waiver by Landlord of any provision of this Lease or be a consent to any subletting, assignment, mortgage or other encumbrance. Consent to one sublease, assignment, mortgage or other encumbrance shall not be deemed to constitute consent to any subsequent attempted subletting, assignment, mortgage or other encumbrance. No permitted assignment or sublease shall permit any further assignment, subletting, mortgage or other encumbrance. (C) If Tenant desires at any time to assign this Lease or to sublet the Premises or any portion thereof, Tenant shall first notify Landlord of Tenant's desire to do so and shall submit in writing to Landlord no less than forty-five (45) days prior to such assignment or subletting (i) the name of the proposed subtenant or assignee; (ii) the nature of the proposed subtenant's or assignee's business -15- 18 to be carried on in the Premises; (iii) the terms and provisions of the proposed sublease or assignment and a copy of the proposed sublease or assignment; and (iv) such financial information as Landlord may reasonably request concerning the proposed subtenant or assignee. (D) At any time within thirty (30) days after Landlord's receipt of the information specified in subparagraph (C) above, Landlord may by written notice to Tenant, elect (i) to take from Tenant a sublease of the Premises or the portion thereof proposed to be subleased by Tenant, or to take an assignment of Tenant's leasehold estate hereunder, or such part thereof as shall be specified in said notice, upon the same terms as those offered to the proposed subtenant or assignee, as the case may be; (ii) to give Tenant written consent to the proposed assignment or sublease, provided that the Rent payable monthly by the Tenant to the Landlord under the terms of this Lease shall be increased by a sum equal to fifty (50%) percent of all rental and other considerations received by Tenant from its subtenant or assignee in excess of the Rent payable by Tenant under the terms of this Lease reasonable leasing commissions paid by Tenant, free rent, payments attributable to the amortization of the cost of Tenant improvements made to the Premises at Tenant's cost for the assignee or sublessee, and other reasonable, out-of-pocket costs paid by Tenant, such as attorneys' fees directly related to Tenant's obtaining an assignee or sub- lessee; (iii) to terminate this Lease as to the portion (including all) of the Premises proposed to be subleased or assigned with a proportionate abatement in the Rent payable hereunder; or (iv) to deny consent, in writing, to Tenant's proposed sublet or assignment, which shall specify the reasons for the denial. If Landlord does not exercise any option set forth in this subparagraph (D) within said thirty (30) days period, Landlord shall be deemed to have consented to the proposed assignment or sublease. (E) Landlord shall not unreasonably exercise its rights under subparagraph (D) (iv) above, provided all the following conditions are present: (i) Tenant shall send notice to Landlord, in writing, including all the information specified in subparagraph (C) above; (ii) the subtenant or assignee is of high quality, character and financial stability consistent with the high standards of the Building as determined by Landlord in Landlord's reasonable business judgment; (iii) the proposed subtenant or assignee is not a party then occupying space in the Building or party who has negotiated with Landlord for space in the Building within the three (3) month period preceding the date of Tenant's notice pursuant to this subparagraph (E); (iv) Tenant shall not have publicly advertised the availability for assignment, sublease or occupancy of all or any part of the Premises at a rental rate lower than the rate at which Landlord is then offering to lease similar space in the Building. (F) Landlord, in any case which does not involve an assignment for the benefit of creditors or an assignment growing out of, or having any connection with, operation of law or any other of the eventualities made the subject of an event of default in Paragraph 22 of this Lease, shall not withhold its consent to bona-fide assignments of this Lease as a whole to "subsidiary or affiliate corporations" as the term is hereinafter defined upon the satisfaction of the respective conditions and upon compliance with the requirements by Tenant of all notice provisions of this Paragraph 15. Subparagraph 15(D) shall not apply to such an assignment. A "subsidiary or affiliate corporation" is defined for the purposes of this Lease as a corporation or other legal entity organized and existing or qualified or otherwise permitted to do business in the State of New Jersey, and under common control and ownership of Tenant, or which owns and controls Tenant or which is owned and controlled by Tenant or by any corporation or legal entity wholly-owned and controlled directly or through other corporations or legal entities wholly-owned and controlled by Tenant. For the purposes of this Paragraph 15, "owned and controlled" shall, in the case of a corporation, mean the ownership of at least fifty (50%) percent of the capital stock entitled to vote, and shall, in the case of any other legal entity, mean ownership of at least fifty (50%) percent of the beneficial interest therein and at least a fifty (50%) percent voice in the management thereof: (G) If Tenant is a corporation, an unincorporated association or partnership, the transfer, -16- 19 assignment or hypothecation of any stock or interest in such corporation, association or partnership, in the aggregate in excess of twenty-five (25%) percent, shall be deemed an assignment within the meaning and provisions of this Paragraph 15. Any initial public offering of the stock of Tenant shall not be deemed to be an assignment and the trading of shares of stock of Tenant on any stock exchange shall not be deemed to be an assignment. (H) Tenant shall not be entitled to make, nor shall Tenant make, any claim, and Tenant hereby waives any claims, for money damages (nor shall Tenant claim any money damages by way of setoff, counterclaim, or defense) based upon any claim or assertion by Tenant that Landlord has unreasonably delayed its consent or approval to a proposed assignment or subletting as provided for in this section. Tenant's sole remedy shall be an action or proceeding to enforce any such provision, or for specific performance, injunction, or declaratory judgement. PARAGRAPH 16 LANDLORD'S ACCESS TO PREMISES: Upon reasonable prior notice by telephone, except in an emergency in which case no notice is required, Landlord reserves and shall at any and all times have the right to enter the Premises to inspect the same, to supply janitor service and any other service to be provided by Landlord to Tenant hereunder, to show said Premises to prospective purchasers, mortgagees, or tenants, to alter or repair the Premises or any portion of the Building or Project, all without being deemed guilty of an eviction of Tenant and without abatement of Rent, and may for that purpose erect scaffolding and other necessary structures where reasonably required by the character of the work to be performed, provided that the business of Tenant shall be interfered with as little as is reasonably practicable. Tenant hereby waives any claim for damages or any injury or inconvenience to or interference with Tenant's business, any loss of occupancy or quiet enjoyment of the Premises, and any other loss occasioned thereby. For each of the aforesaid purposes, Landlord shall at all times have and retain a key with which to unlock all of the doors in, upon and about the Premises, excluding Tenant's vaults and safes, and Landlord shall have the right to use any and all means which Landlord may deem proper to open said doors in an emergency in order to obtain entry to the Premises, and any entry to the Premises obtained by Landlord by any of said means shall not under any circumstances be construed or deemed to be a forcible or unlawful entry into, or a detainer of the Premises, or any eviction of Tenant from the Premises or any portion thereof. No provision of this Lease shall be construed as obligating Landlord to perform any repairs, alterations or decoration except as otherwise expressly agreed to be performed by Landlord. PARAGRAPH 17 SUBORDINATION, ATTORNMENT, ESTOPPEL CERTIFICATES: (A) This Lease is junior, subject, and subordinate to all ground leases, mortgages, deeds of trust, and other security instruments of any kind now covering the Project or any portion thereof. Landlord reserves the right to place liens or encumbrances on the Project or any part thereof or interest therein superior in lien and effect to this Lease. This Lease, at the option of Landlord, shall be subject and subordinate to any and all such liens or encumbrances now or hereafter imposed by Landlord without the necessity of the execution and delivery of any further instruments on the part of Tenant to effectuate such subordination. Notwithstanding the foregoing, Tenant covenants and agrees to execute and deliver upon request such further instruments evidencing such subordination of this Lease as may be requested by Landlord. (B) Either party ("Answering Party") shall at any time and from time to time upon not less than ten (10) days prior notice by the other party ("Asking Party"), execute, acknowledge and deliver to Asking Party a statement in writing and in form and substance reasonably satisfactory to Asking Party certifying that this Lease is unmodified and in full force and effect (or if there have been modifications, that the same is in full force and effect as modified and stating the modifications), and the dates to which the Basic Annual Rent, Additional Rent and other charges have been paid in advance, if any, and stating whether or not to the best knowledge of Tenant, Landlord is in default in the performance of any covenant, agreement or condition contained in this Lease and, if so specifying each such default of which Answering Party may have knowledge and such other -17- 20 matters as may be reasonably requested by Asking Party or any lender or purchaser of the Project. Any such statement delivered pursuant to this Paragraph 17 may be relied upon by any prospective purchaser of the fee of the Building or the Project or any mortgagee, ground lessor or other encumbrancer thereof or any assignee of any such person, and by any prospective assignee of this Lease, subtenant, party acquiring Tenant or underwriter of any stock offering by Tenant. Tenant shall also, at any time, and from time to time, upon not less than ten (10) days prior notice by Landlord execute and deliver to Landlord forms and documents as may be necessary for compliance with any applicable law, statute, ordinance, rule or regulation. (C) Tenant agrees that in the event that any holder of any ground or underlying lease, mortgage, deed of trust, or other encumbrance encumbering any part of the Project succeeds to Landlord's interest in the Premises, Tenant shall pay to such holder all rents subsequently payable under this Lease and shall, upon request of any such person or party succeeding to Landlord's interest, automatically become the Tenant of and attorn to such successor in interest without change in the terms or provisions of this Lease. Such successor in interest shall not be bound by (i) any payment of Basic Monthly Rental Installments for more than one month in advance except prepayments in the nature of a Security Deposit, or (ii) any amendment or modification of this Lease made without the written consent of such successor in interest. Upon request by such successor in interest and without cost to Landlord or such successor in interest, Tenant shall execute, acknowledge, and deliver an instrument or instruments confirming the attornment. PARAGRAPH 18 SALE BY LANDLORD: In the event of a sale or conveyance by Landlord of the Project or any part thereof, the same shall operate to release Landlord from any and all liability under this Lease accruing after the date of such conveyance of title. If any Security Deposit has been made by Tenant, Landlord shall transfer such Security Deposit to the purchaser, and thereupon Landlord shall be discharged from any further liability in reference thereto. PARAGRAPH 19 INDEMNIFICATION AND INSURANCE: (A) Tenant shall indemnify, hold Landlord harmless from and defend Landlord against any and all claims, loss, costs, damage, expense or liability, including without limitation reasonable attorneys' fees, for any injury or damages to any person or property whatsoever, when such injury or damage has been caused in part or in whole by any default, act, neglect, fault, or omission of Tenant, its agents, servants, employees or invitees. This indemnity shall not require any payment by Landlord as a condition precedent to recovery. In addition, if any person not a party to this Lease shall institute any other type of action against Tenant in which Landlord shall be made a party defendant, Tenant shall indemnify, hold Landlord harmless from and defend Landlord from all liabilities and costs by reason thereof. For the purposes of subparagraphs l9(A) and l9(B), the term "Landlord" shall also include as indemnitees, as the case may be, Landlord's servants, employees, officers, agents, and/or contract managers. (B) Landlord shall indemnify, hold Tenant harmless from and defend Tenant against any and all claims, loss, cost, damage, expense or liability including, without limitation, reasonable attorneys' fees for any injury or damage to any person or property whatsoever, occurring in the Common Areas of the Building or Project when such injury or damage has been caused in part or in whole by any default, act, neglect, fault or omission of Landlord, its agents, employees or invitees. This indemnity shall not require any payment by Tenant as a condition precedent to recovery. Landlord hereby agrees to maintain in full force and effect at all times during the term of this Lease, at Landlord's own expense (subject to reimbursement pursuant to Paragraph 3 hereof) property insurance on the Building and improvements (the amount of such coverages and of all deductibles to be in Landlord's absolute and sole discretion) or to self-insure against the losses insured against by property coverage. Landlord shall also be entitled, at its option, to carry such other insurance, as Landlord shall, in its sole discretion, deem appropriate and the costs of such insurance shall be reimbursable pursuant to paragraph 3 hereof. -18- 21 (C) Tenant hereby agrees to maintain in full force and effect at all times during the term of this Lease, at its own expense, for the protection of Tenant and Landlord as their interests may appear, policies of insurance issued by a responsible carrier or carriers acceptable to Landlord which afford the following coverages: (i) Worker's Compensation --Statutory or higher Employer's Liability, if such --Not less than coverage is available $250,000 (ii) General Liability Insurance --Not Less than including Blanket $2,000,000 Contractual Liability, Combined Single Broad Form Property Limit for both Damage, Personal Injury, bodily injury and Fire Damage property damage liability (iii) Automobile liability for --Not less than owned, non-owned, or $500,000 combined hired vehicles operated on single limit for bodily the Project injury and property damage Landlord, and any other person or entity reasonably designated by Landlord, shall be named as an additional insured on all policies listed under (ii) and (iii). (iv) All Risk Property Coverage in an amount sufficient to cover the full cost of replacement of all improvements and betterments to the Premises owned by Tenant and all of Tenant's fixtures and other personal property. (D) Tenant shall deliver to Landlord at least thirty (30) days prior to the time such insurance is first required to be carried by Tenant, and thereafter at least thirty (30) days prior to expiration of each such policy, certificates of insurance evidencing the above coverage with limits not less than those specified above. Such certificate, with the exception of Worker's Compensation, shall expressly provide that the interest of Landlord therein shall not be affected by any breach by Tenant of any provision of any such policy. Further, all certificates shall expressly provide that no less than thirty (30) days prior written notice shall be given Landlord in the event of material alterations to or cancellation of the coverages evidenced by such certificates. (E) Upon demand, Tenant shall provide Landlord, at Tenant's expense, with such increased amount of existing insurance, and such other insurance in such limits as Landlord may reasonably require and such other hazard insurance as the nature and condition of the Premises may require in the judgment of Landlord, to afford Landlord adequate protection for said risks. (F) If on account of the failure of Tenant to comply with the provisions of this Paragraph 19, Landlord is adjudged a co-insurer by its insurance carrier, then any loss or damage Landlord shall sustain by reason thereof shall be borne by Tenant and shall be immediately paid by Tenant upon receipt of a bill therefor and evidence of such loss. (G) Landlord makes no representation that the limits of liability specified to be carried by Tenant under the terms of this Lease are adequate to protect Tenant against Tenant's undertaking under this Paragraph 19. In the event Tenant believes that any such insurance coverage called for under this Lease is insufficient Tenant shall provide, at its own expense, such additional insurance as Tenant deems adequate. -19- 22 PARAGRAPH 20 WAIVER OF SUBROGATION: Tenant and Landlord each agree that the respective insurance carried by it against loss or damage by fire or other casualty shall contain a clause whereby the insurer waives its right of subrogation against the other party. Notwithstanding anything to the contrary in this Lease, Landlord and Tenant hereby waive all claims for recovery from the other party for any loss or damage to any of its property insured under valid and collectible insurance policies to the extent of any recovery collectible under such insurance, or which is required to be insured pursuant to paragraph 19. PARAGRAPH 21 NO WAIVER: No failure by Landlord to insist upon the strict performance of any covenant, agreement, term or condition of this Lease, or to exercise any right or remedy consequent upon a breach thereof, and no acceptance of full or partial Rent during the continuance of any such breach, shall constitute a waiver of any such breach or of such covenant, agreement, term or condition. Landlord's waiver, if any, shall only be as expressly stated in writing and signed by Landlord. No consent or waiver by Landlord to or of any breach of any covenant, condition or duty of Tenant shall be construed as a consent or waiver to or of any other breach of the same or any other covenant, condition or duty, unless expressly stated otherwise in writing and signed by Landlord. No payment by Tenant or receipt by Landlord of a lesser amount than the Rent and additional charges payable hereunder shall be deemed to be other than a payment on account of the earliest stipulated Rent, nor shall any endorsement or statement on any check or any letter accompanying any check or payment for Rent be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right to recover the balance of such Rent or pursue any other remedy provided herein or by law. PARAGRAPH 22 DEFAULT: (A) The occurrence of any of the following shall constitute a material default and breach of this Lease by Tenant: (i) Any failure by Tenant to pay the Rent or to make any other payment required to be made by Tenant hereunder within five (5) days of date due; (ii) The abandonment of the Premises by Tenant which for purposes of this clause means Tenant's failure to maintain the Premises as required hereunder, subject to notice and right to cure as provided in clause (iii) hereof; (iii) Any failure by Tenant to observe and perform any of its other obligations under this Lease, where such failure continues for fifteen (15) days (except where a different period of time is specified in this Lease) after Landlord has given Tenant written notice or such other notice as may be required by law; provided, however, if such obligation cannot be cured within said fifteen (15) day period, such longer period (but in no event more than six (6) months) as may be reasonably necessary to effect such cure and upon condition that Tenant is diligently and continuously proceeding to effect said cure; (iv) Tenant makes, or has made, or furnishes, or has furnished, any warranty, representation or statement to Landlord in connection with this Lease, or any other agreement to which Tenant and Landlord are parties, which is or was false or misleading in any material respect when made or furnished; (v) Except as permitted in this Lease, any substantial portion of the assets of Tenant is transferred unless such transfer is incurred in the ordinary course of Tenant's business in good faith for fair equivalent consideration; (vi) Tenant becomes insolvent as defined in the Federal Bankruptcy Code, admits in writing its insolvency or its present or prospective inability to pay its debts as they -20- 23 become due, is unable to or does not pay all or any material portion in number or dollar amount) of its debts as they become due, permits or suffers a judgment to exist against it which affects Tenant's ability to conduct its business in the ordinary course (unless enforcement thereof is stayed pending appeal), makes or proposes an assignment for the benefit of creditors or any class thereof for purposes of effecting a moratorium upon or extension or composition of its debts, proposes any such moratorium, extension or composition, or commences or proposes to commence any bankruptcy, reorganization or insolvency proceeding, or other proceeding under any federal, state or other law for the relief of debtors; (vii) Tenant fails to obtain the dismissal, within ninety (90) days after the commencement thereof, of any bankruptcy, reorganization or insolvency proceeding, or other proceeding under any law for the relief of debtors, instituted against it by one or more third parties, or fails actively to oppose any such proceeding, or, in any such proceeding, defaults or files an answer admitting the material allegations upon which the proceeding was based or alleges its willingness to have an order for relief entered or its desire to seek liquidation, reorganization or adjustment of any of its debts; (viii) Any receiver, trustee or custodian is appointed to take possession of all or any substantial portion of the assets of Tenant, or any committee of Tenant's creditors, or any class thereof is formed for the purpose of monitoring or investigating the financial affairs of Tenant or enforcing such creditors' rights. (B) In the event of any such default by Tenant, then in addition to any other remedies available to Landlord at law or in equity, Landlord shall have the option to immediately terminate this Lease and all rights of Tenant hereunder by giving written notice of such intention to terminate. In the event that Landlord shall elect to so terminate the Lease then Landlord may recover from Tenant: (i) any unpaid Rent which shall have accrued at the time of such termination; plus (ii) the amount by which the entire amount of unpaid Rent for the balance of the Lease term which amount shall, at Landlord's option, be immediately due and payable, is greater than the fair market rental value of the Premises, but discounted at the interest rate payable on United States five (5) year Treasury Notes issued immediately prior to default; plus (iii) any other amount necessary to compensate Landlord for Landlord's loss or damage caused directly or indirectly by Tenant's failure to perform its obligations under this Lease including, but not limited to, reasonable attorneys' fees and costs; plus (iv) at Landlord's election, such other amounts in addition to, or in lieu of the foregoing, as may be permitted from time to time by applicable law. (C) In the event of any such default by Tenant, Landlord shall also have the right, with or without terminating this Lease, to reenter and to take possession of the Premises and to remove all persons and property from the Premises. Landlord is hereby granted a lien, in addition to any statutory lien or right to distrain that may exist, on all personal property of Tenant in or upon the Premises, to assure payment of the Rent and performance of the covenants and conditions of this Lease. Landlord shall have the right, as agent of Tenant, to take possession of all personal property of Tenant found in or about the Premises including without limitation furniture and fixtures of Tenant and, to sell the same at public or private sale and to apply the proceeds thereof to the payment of any monies due or becoming due under this Lease, or to remove all such effects and store same in a public warehouse or elsewhere at the cost of and for the account of Tenant, or -21- 24 any other owner or occupant, Tenant hereby waiving the benefit of all laws exempting property from execution, levy and sale on distress or judgment. (D) In the event of abandonment of the Premises by Tenant or in the event that Landlord shall elect to reenter as provided above or shall take possession of the Premises pursuant to legal proceeding or pursuant to any notice provided by law, then if Landlord does not elect to terminate this Lease as provided in this Paragraph 22, Landlord may from time to time, without terminating this Lease, either recover all Rent as it becomes due or relet the Premises or any part thereof for such term or terms and at such commercially reasonable rental or rentals and upon such other commercially reasonable terms and conditions as Landlord in its sole discretion may deem advisable with the right to make alterations and repairs to the Premises. Tenant hereby waives all Tenant's rights under N.J.S.A. 2A: 18-60. (E) In the event that Landlord shall elect to so relet, then rentals received by Landlord from such reletting shall be applied: first, to the payment of any indebtedness other than Rent due hereunder from Tenant to Landlord; second, to the payment of any cost of such reletting including, but not limited to, broker's commissions and reasonable attorneys' fees; third, to the payment of the cost of any alterations and repairs to the Premises; fourth, to the payment of Rent due and unpaid hereunder; and the residue, if any, shall be held by Landlord and applied in payment of future Rent as the same may become due and payable hereunder. Should any such reletting result in the payment of rentals less than the Rent payable by Tenant hereunder, then Tenant shall pay such deficiency to Landlord immediately upon demand therefor by Landlord. Tenant shall also pay Landlord as soon as ascertained, any costs and expenses incurred by Landlord in such reletting or in making such alterations and repairs not covered by the rentals received from such reletting. (F) No reentry or taking possession of the Premises by Landlord pursuant to this Paragraph 22 shall be construed as an election to terminate this Lease unless a written notice of such intention be given to Tenant. Notwithstanding any reletting without termination by Landlord because of any default by Tenant, Landlord may at any time after such reletting, elect to terminate this Lease for any such default. PARAGRAPH 23 RIGHT OF LANDLORD TO CURE TENANT'S DEFAULT: If Tenant defaults in the making of any payment or in the doing of any act herein required to be made or done by Tenant, then Landlord may, but shall not be required to, make such payment or do such act and charge to Tenant the amount of all costs in connection therewith including, but not limited to, reasonable legal fees and expenses incurred by Landlord, with interest thereon as provided in Paragraph 36 from the date paid by Landlord to the date of payment thereof by Tenant. Such payment and interest shall constitute Additional Rent hereunder due and payable upon demand but the making of such payment or the taking of such action by Landlord shall not operate to cure such default or to stop Landlord from the pursuit of any other remedy to which Landlord would otherwise be entitled. PARAGRAPH 24 NOTICES: All notices which Landlord or Tenant may be required or may desire to serve on the other may be delivered either personally, by courier, or by mailing the same by registered or certified mail, return receipt requested, postage prepaid, addressed as set forth in Item 13 of the Basic Lease Provisions, or addressed to such other address or addresses as either Landlord or Tenant may from time to time designate to the other by written notice. PARAGRAPH 25 INSOLVENCY OR BANKRUPTCY: In no event shall this Lease be assigned or assignable by operation of law and in no event shall this Lease be an asset of Tenant in any receivership, bankruptcy, insolvency, or reorganization proceeding. PARAGRAPH 26 SURRENDER AND HOLDOVER: (A) On the expiration or the sooner -22- 25 termination hereof, Tenant shall peaceably surrender the Premises broom clean, in the same, condition that the Premises were in on the Commencement Date, except for ordinary wear and tear, damage by fire or other casualty that Tenant is not required to repair, repairs required to be completed by Landlord. On or before the last day of the Lease term or the sooner termination hereof, Tenant shall at its expense remove its trade fixtures, signs and other personal property from the Premises. Any property not removed shall be deemed abandoned and may either be retained by Landlord as its property, or disposed of, without accountability and at Tenant's expense, in such manner as Landlord may determine. If the Premises are not surrendered at the end of the Lease term or the sooner termination Tenant shall indemnify Landlord against loss or liability resulting from delay by Tenant in so surrendering the Premises, including, without limitation, claims made by any succeeding tenants founded on such delay. Tenant shall promptly surrender all keys for the Premises and Building restrooms to Landlord at the place then fixed for payments of Rent. Tenant's covenants hereunder shall survive the expiration or termination of this Lease. (B) If Tenant holds over after the expiration or sooner termination hereof without the express written consent of Landlord, Tenant shall become a Tenant at sufferance only at two times the greater of (i) the Rent due hereunder or (ii) the then prevailing market rate rent, as determined by Landlord in its sole and absolute discretion, plus all items of Additional Rent provided herein, and either (i) or (ii) shall be prorated on a daily basis according to the number of days contained in the month that such expiration or earlier termination takes place, and otherwise upon the terms, covenants and conditions herein specified, so far as applicable. Acceptance by Landlord of Rent after such expiration or earlier termination shall not constitute a consent to a holdover hereunder or result in a renewal. The foregoing provisions of this paragraph are in addition to and do not affect Landlord's rights of reentry or any other rights of Landlord hereunder or as otherwise provided by law. PARAGRAPH 27 CONDITION OF PREMISES: Landlord's responsibility with respect to the condition of the Premises is set forth in Exhibit "B-1" Landlord's Work Letter. Tenant acknowledges that except as expressly set forth herein neither Landlord nor any agent of Landlord has made any representation or warranty with respect to the Premises, the Building or the Project or with respect to the suitability of any part of the Project for the conduct of Tenant's business. The taking of possession of the Premises by Tenant shall conclusively establish that the Building and the Premises were at such time in good order and repair. PARAGRAPH 28 QUIET POSSESSION: Upon Tenant's paying the rent reserved hereunder and observing and performing all of the covenants, conditions and provisions on Tenant's part to be observed and performed hereunder, Tenant shall have quiet possession of the Premises for the entire term hereof, subject to all of the provisions of this Lease. This covenant shall be binding upon any landlord hereunder only during its respective ownership of the Premises. PARAGRAPH 29 LIMITATION OF LANDLORD'S LIABILITY: (A) Landlord and its employees and agents shall not be liable for any damage to Tenant's property entrusted to employees of Landlord or its agents, nor for any loss or interruption of Tenant's possession, nor for loss of or damage to any property by theft or otherwise, nor for any injury or damage to property resulting from fire, explosion, falling plaster, steam, gas, electricity, water or rain which may leak from any part of the Building or from the pipes, appliances or plumbing works therein or from the roof, street or sub-surface or from any other place or resulting from dampness or any other cause whatsoever in the Building or the Project. Landlord and its employees and agents shall not be liable for any property loss resulting from any latent defect in the Premises or in the Building. Tenant shall give prompt notice to Landlord in case of fire, accidents or defects in the Premises or in the Building. (B) Tenant shall look solely to Landlord's estate and property in the Project (or the proceeds thereof) for the satisfaction of Tenant's remedies for the collection of a judgment (or other judicial -23- 26 process) requiring the payment of money by Landlord in the event of any default by Landlord hereunder, and no other property or assets of Landlord or Landlord's partners or members shall be subject to levy, execution or other enforcement procedure for the satisfaction of Tenant's remedies under or with respect to either this Lease, the relationship of Landlord and Tenant hereunder, or Tenant's use and occupancy of the Premises. PARAGRAPH 30 GOVERNING LAW: This Lease shall be governed by and construed pursuant to the law of the State of New Jersey. PARAGRAPH 31 COMMON FACILITIES: Tenant shall have the non-exclusive right in common with others, to the use of common entrances, lobbies, elevators, ramps, drives, stairs, ad similar access and serviceways and the other common facilities (except for parking spaces other than those provided for in Paragraph 39) in and adjacent to the Building or Project, as may be provided by Landlord from time to time for general use, subject to such rules and regulations as maybe adopted by the Landlord including, but not limited to, the right to close from time to time all or any portion of said common facilities to such extent as may be legally sufficient, in Landlord's sole opinion, to prevent a dedication thereof or the accrual of rights to any person or to the public therein. PARAGRAPH 32 SUCCESSORS AND ASSIGNS: Except as otherwise provided in this Lease, all of the covenants, conditions and provisions of this Lease shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and assigns. However, the obligations of Landlord under this Lease shall not be binding upon Landlord herein named with respect to any period subsequent to the transfer of its interest in the Project as owner or lessee thereof, and in the event of such transfer said obligations shall thereafter be binding upon each transferee of the interest of Landlord herein named as such owner or lessee of the Project, but only with respect to the period commencing with its respective transfer in and ending with a subsequent transfer out, and such transferee, by accepting such interest, shall be deemed to have assumed such obligations except only as may be expressly otherwise provided in this Lease. Any lease of all or substantially all of Landlord's interest in the Project as owner or lessee thereof shall be deemed a transfer, to the tenant under such lease, within the meaning of Paragraph 32. PARAGRAPH 33 BROKERS: (A) Tenant represents and agrees that it has not directly or indirectly dealt with any real estate broker(s) other than the firm(s) specified in Item ll of the Basic Lease Provisions in connection with this transaction. Tenant agrees to defend, indemnify and hold Landlord harmless from and against any claims for brokerage commission or finder's fee arising out of or based on any alleged actions of Tenant with any other broker or brokers. (B) Landlord represents and agrees that it has not directly or indirectly dealt with any real estate broker(s) other than the firm(s) specified in Item ll of the Basic Lease Provisions in connection with this transaction, whose fees shall he paid by Landlord. Landlord agrees to defend, indemnify and hold Tenant harmless from and against any claims for brokerage commission or finder's fee arising out of or based on any alleged actions of Landlord with any other broker or brokers. C) If, after the date hereof, either Landlord or Tenant shall employ, retain or consult with any real estate broker or brokers other than the firms specified in Item 11 of the Basic Lease Provisions in connection with any matters pertaining to this Lease, the Premises or the Project, the employing party hereby agrees to pay the broker or brokers and the employing party hereby agrees to defend, indemnify and to hold harmless the other party hereto from and against any claims for brokerage commission or finder's fee arising out of or based on any alleged actions of the employing party with respect to said broker or brokers not specified in Item 11. -24- 27 PARAGRAPH 34 NAME: LANDLORD'S RIGHTS: (A) Tenant shall not, without the written consent of Landlord, use the name of the Building or the Project for any purpose other than as the address of the business to be conducted by Tenant in the Premises, and in no event shall Tenant acquire any rights in or to such names. Landlord reserves the right to change the name and/or address of the Building or Project at any time and from time to time, and agrees to give reasonable notice of same to Tenant. (B) It is understood and agreed that the architectural design, aesthetic appeal and use of the Building and the Project are and shall remain always in the sole control of Landlord. Therefore, notwithstanding anything to the contrary contained herein, Landlord does hereby reserve the right from time to time and at any time to make changes and additions, without restriction, to the Building and the Project, improvements or other areas, including without limitation, eliminating land, adding other lands, decreasing or changing the Building and the Project, which are deemed desirable by Landlord, and the making of such changes or additions shall not invalidate or affect this Lease or any rights hereunder nor constitute an eviction of Tenant or a breach of this Lease, nor give rise to any claim for damages. Notwithstanding the foregoing provisions, Landlord represents and confirms that no such changes will unreasonably and substantially interfere with Tenant's use and occupancy of the Premises or Tenant's access to the Building. PARAGRAPH 35 EXAMINATION OF LEASE: Submission of this instrument for examination or signature by Tenant does not constitute a reservation of or option for lease, and it is not effective as a lease or otherwise until execution by and delivery to both Landlord and Tenant. PARAGRAPH 36 ADDITIONAL CHARGES: Any amount due from Tenant to Landlord which is not paid when due, in addition to other remedies available to Landlord shall, at Landlord's option, bear interest which shall be at the lesser of (i) eighteen (18%) percent per annum or (ii) the maximum lawful rate per annum, from the date such payment is due until the date actually paid, but the payment of such interest shall not excuse or cure the default. In addition to the foregoing, unless prohibited by law, Landlord may also impose a late charge of four (4%) percent of the amount past due, and a charge for reasonable legal fees and costs. PARAGRAPH 37 DEFINED TERMS AND ADDITIONAL HEADINGS: The words "Landlord" and "Tenant" as used herein shall, as the case may be, include the plural as well as the singular. If more than one person or entity is named as Tenant the obligations of such persons or entities are joint and several. The marginal headings and titles to the Paragraphs of this Lease are not a part of this Lease and shall have no effect upon the construction or interpretation of any part hereof. This Lease shall be construed without regard to any presumption or other rule requiring construction against the party causing this Lease to be drafted. PARAGRAPH 38 PRIOR AGREEMENTS; SEVERABILITY: This Lease contains all of the agreements of the parties hereto with respect to any matter covered or mentioned in this Lease, and no prior agreement, understanding or representation pertaining to any such matter shall be effective for any purpose. No provision of this Lease may be amended or added to except by an agreement in writing signed by the parties hereto or their respective successors in interest. If any term or provision of this Lease, the deletion of which would not adversely affect the receipt of any material benefit by either party hereunder, shall be held invalid or unenforceable to any extent, the remainder of this Lease shall not he affected thereby and each term and provision of this Lease shall be valid and enforceable to the fullest extent permitted by law. PARAGRAPH 39 PARKING: Tenant shall have the right to the use of the number of parking spaces (the "Parking Spaces") shown in Item 10 of Basic Lease Provisions. Landlord shall have, in its absolute discretion, the right to assign parking spaces. Tenant covenants and agrees to comply with all reasonable rules and regulations which Landlord may from time to time make to assure proper use of parking spaces by permitted users, including but not limited to the prohibition -25- 28 of overnight parking. Landlord's remedies under such rules and regulations may include, but shall not be limited to, the right to tow away at owner's expense any vehicles not parked in compliance with these rules and regulations. Landlord shall not be responsible to Tenant for the noncompliance or breach by any other tenant of said rules and regulations. PARAGRAPH 40 FORCE MAJEURE: Except as otherwise expressly provided herein, this Lease and the obligations of Tenant to pay Rent hereunder and perform all of the other covenants, agreements, terms, provisions and conditions hereunder on the part of Tenant to be performed shall in no way be affected, impaired or excused because Landlord is unable to fulfill any of its obligations under this Lease, if Landlord is prevented or delayed from so doing by reason of any cause beyond Landlord's reasonable control including, but not limited to, Acts of God, strikes, labor troubles, shortage of materials, governmental preemption in connection with a national emergency or by reason of any rule, order or regulations of any governmental agency or by reason of war, hostilities or similar emergency; provided that Landlord shall in each instance exercise reasonable diligence to effect performance as soon as possible. It is agreed that Landlord shall not be required to incur any overtime or additional expenses in Landlord's reasonable diligence to effect the performance of any of Landlord's obligations hereunder. PARAGRAPH 41 NO LIGHT, AIR OR VIEW EASEMENT: Any diminution or shutting off of light, air or view by any structure which may be erected on lands adjacent to the Building shall in no way affect this Lease or impose any liability on Landlord. PARAGRAPH 42 AUTHORITY AND SIGNATORIES: If Tenant executes this Lease in other than individual capacity, each of the persons executing this Lease on behalf of Tenant does hereby personally covenant and warrant that Tenant is a duly authorized and existing entity as herein represented, that Tenant was and is qualified to do business in the State of New Jersey, that the Tenant has full right and authority to enter into this Lease, and that each person signing on behalf of the Tenant is authorized to do so. Upon Landlord's request, the Tenant's signatories hereto will furnish satisfactory evidence of Tenant's authorization, and their personal authority on behalf of Tenant, to execute this Lease. PARAGRAPH 43 CAMPUS ASSOCIATION: (A) This lease, and all rights of Tenant hereunder, are and shall be subject and subordinate in all respects to all present and future recorded covenants and restrictions (and any amendments, renewals, replacements, or modifications thereof) referring to any owners' or campus association for the Complex or any part thereof in which the Building is located. Landlord shall advise Tenant of such recordings. Tenant covenants and agrees that it will not perform (or fail to perform) any act which may constitute a default under such covenants and restrictions. (B) Tenant further covenants and agrees to cooperate with programs of any such aforesaid association including but not limited to: car and van pooling; flex-time work scheduling; jitney buses to nearby train stations, airports, etc.; relocation of, or new, bus routes and bus stops through and at the Complex to Newark, Morristown, etc.; development of a park-and-ride facility, possibly to ultimately become a transportation center; and other programs and projects. PARAGRAPH 44 TENANT'S OPTION TO RENEW: Upon condition that Tenant is not in default in the payment of any Basic Annual Rent, Additional Rent or other charge payable by Tenant under this lease and is not in default in the performance of any covenant or obligation to be performed by Tenant under this lease; and upon Tenant's giving Landlord twelve (12) months notice in writing in the manner prescribed in Paragraph 24 hereof ("Notices") prior to the expiration of the term hereof in accordance with Paragraph 1, Tenant shall have the option to renew accordance with Item 4 of the Basic Lease Provisions and extend this lease for the demised premises, including all additional space which Tenant shall have acquired during each term of the -26- 29 Lease, for one further term of five (5) years, pursuant and subject to all the terms, covenants, provisions and conditions of this lease, including, without limitation, the payment of all items of Additional Rent as provided for hereunder, except that Basic Annual Rent shall be adjusted to the then fair market rent. PARAGRAPH 45 FAIR MARKET RENTAL VALUE - APPRAISAL: (A) For purposes of Paragraph 44, "fair market rental value:" shall mean that rental value for the Premises under the existing zoning on an "as is" basis which a landlord and tenant would agree to in an arms-length transaction. If Tenant disagrees with the fair market rental value determined by Landlord, then Tenant shall within thirty (30) days of Landlord's notice so advise Landlord in writing, and thereafter, Landlord and Tenant shall use their best efforts to reach agreement on the fair market rental value during the thirty (30) days following Tenant's giving Landlord notice to renew and extend this Lease. (B) If Landlord and Tenant cannot reach agreement, the fair market rental value of the Premises shall be determined by an appraisal made by three reputable New Jersey real estate appraisers who shall be appointed in the manner hereinafter provided and each of whom shall be a member of the American Institute of Real Estate Appraisers or a successor body hereinafter constituted exercising a similar function, shall have experience in appraising property similar to the Premises, and shall have no substantial direct or indirect financial or other business interests in Landlord, or its affiliates, or Tenant or its affiliates. The appraisal of the Premises will be conducted by three reputable real estate appraisers, one appointed by Landlord, one appointed by Tenant and the third appointed by the first two appraisers. The costs and expenses of each appraiser appointed separately by Tenant and Landlord will be borne by the party who appointed the appraiser. The costs and expenses of the third appraiser will be shared equally by Landlord and Tenant. Any appraisal process required pursuant to this lease may be commenced by Landlord or Tenant (the "Initiating Party") by notice to the other (the "Other Party") in which the Initiating Party appoints its appraiser. Said notice shall be given no earlier than thirty (30) days after Tenant sends Landlord notice of exercise of the renewal option. The Other Party shall appoint its appraiser by notice given to the Initiating Party within twenty (20) days after the Initiating Party's Notice. The appraisers appointed by the Initiating Party and the Other Party shall select a third appraiser within twenty (20) days of the appointment of the appraiser appointed by the Other Party. If the first two appraisers are unable to agree on a third appraiser, such third appraiser shall be appointed by the President of the Society of Real Estate Appraisers, North Jersey Chapter, Chatham, New Jersey. If such individual refuses to act, such third appraiser shall be appointed pursuant to the rules of the American Arbitration Association, as the same are applicable in the State of New Jersey. (C) The appraisers shall appraise the Premises, and notify Tenant and Landlord by written notice of the fair market rental value which notices shall be accompanied by copies of their appraisal reports. If the determinations of the fair market rental value of any two or all three of the appraisers shall be identical in amount, said amount shall be deemed to be the fair market rental value, but if such determinations of all three appraisers shall be different in amount, the appraised value which is the closest in amount to the middle appraised value, whether it be the highest or the lowest appraised value, shall be averaged with the middle appraised value and the resulting averaged appraised value shall be the fair market value of the Premises. The appraised value which is the furthest from the middle appraised value will not be utilized or considered. (D) The fair market rental value, determined in accordance with the provisions of this Paragraph, shall be binding and conclusive on Tenant and Landlord. Notwithstanding the foregoing, if the Other Party shall fail to appoint the appraiser to be appointed by such Other Party within twenty (20) days after the Initiating Party's notice requiring the Other Party to do so, the appraisal shall be conducted only by the appraiser appointed by the Initiating Party, and the fair market rental value as determined by the appraiser appointed by the Initiating Party shall be binding and conclusive upon Landlord and Tenant. Anything herein to the contrary notwithstanding, -27- 30 Landlord and Tenant shall have similar rights to appeal said determination which may then exist under New Jersey Law with respect to binding arbitration. -28- 31 EXHIBIT A-1 Floor Plan(s) of Premises -29- 32 EXHIBIT A-2 Tax Lot in Block as shown on the Parsippany-Troy Hills Tax Map. ---- ----- -30- 33 EXHIBIT-B TENANT'S WORK LETTER Landlord and Tenant acknowledge and agree that Tenant shall do all work to the Premises which is required to prepare the Premises for Tenant's occupancy which work shall be done in accordance with Landlord's Construction Rules and Regulations attached as Exhibit B-1. Therefore, it is the intent of this Exhibit that Tenant shall be permitted access to the Premises prior to the Commencement Date during days and hours stipulated in Article 9 and, subject to Landlord's prior approval, at such other times as Tenant may require for the purposes set forth in this Work Letter, subject, however, to all applicable terms and provisions of the Lease to the extent not inconsistent with Tenant's performance of the work, and that Tenant shall have reasonable freedom in the interior design and layout of the premises, consistent with applicable building codes and sound architectural and construction practices in first class office buildings. Tenant and Tenant's employees, agents and contractors shall not cause any interference with the operation of the Building's mechanical, heating, cooling or electrical systems or other Building operations or functions, and shall not cause any increase in maintenance or utility charges for the Building. Any additional costs of design, construction, operation or maintenance of the Building or Premises which results from Tenant's construction, design or specifications shall be charged to Tenant. A. IMPROVEMENTS All improvements required by Tenant in the Premises shall be completed at Tenant's sole cost and expense (subject to the reimbursement provisions set forth in Paragraph C3 of this Work Letter) in accordance with Tenant's Plan (as defined in Paragraph B of this Work Letter). As set forth above, Tenant may commence such work prior to Commencement Date, but Tenant's occupancy of Premises for such purposes will be subject to all applicable terms of the Lease to the extent not inconsistent with Tenant's performance of the work. B. PLANS AND SPECIFICATIONS Not later than September 15, 1996 Tenant shall submit to Landlord for Landlord's written approval a complete set of working drawings and specifications prepared by Spector Associates - Architects which shall show all the work to the Premises. Landlord agrees not to unreasonably withhold its approval of such drawings and specifications and Landlord agrees to notify Tenant of Landlord's approval or disapproval within seven (7) business days after Landlord's receipt of the same. If Landlord fails to notify Tenant of Landlord's disapproval within seven (7) business days then Landlord shall be deemed to have approved the plans. Such plans as approved by Landlord are hereinafter referred to as "TENANT'S PLAN". If Tenant's Plan requires any variance or any modifications of any existing Building system, Tenant agrees to pay for obtaining, at Tenant's expense, all required approvals. Tenant shall pay all costs incurred in connection with the preparation of Tenant's Plan and any revisions thereto (subject to the reimbursement provisions set forth in Paragraph C 3 of this Work Letter) and all costs resulting from Tenant's Plan, including but not limited to architectural and engineering charges, and any special permits or fees attributed thereto. C. CONSTRUCTION 1. By Tenant: All work in the Premises, shall be done by Tenant in compliance with the following: -31- 34 (a) No such work shall proceed without Landlord's prior written approval which approval shall not be unreasonably withheld or delayed, of (i) Tenant's contractor; (ii) detailed plans and specifications for the work; and (iii) a certificate of worker's compensation insurance in an amount and with a company and on a form acceptable to Landlord and a certificate of insurance in form and from an insurer acceptable to Landlord, showing Tenant or Tenant's contractor to have in effect public liability, comprehensive general liability and property damage insurance with limits of not less than $1,000,000/$5,000,000 and $2,000,000 respectively. All such certificates except worker's compensation shall be endorsed to show Landlord, Landlord's Contract Manager (Herb Maierle) and Landlord's Property Manager as an additional insured and such insurance shall be maintained by Tenant or Tenant's contractor at all times during the performance of Tenant's work. (b) All such work shall be done in conformity with applicable codes and regulations of governmental authorities having jurisdiction over the Building and Premises and with valid building permits. Such permits and other authorizations from appropriate governmental agencies, when required, shall be obtained by Tenant's representative at Tenant's sole expense. Any work not acceptable to the appropriate governmental agencies or Landlord, shall be promptly replaced at Tenant's sole expense. Notwithstanding any failure by Landlord to object to any such work, Landlord shall have no responsibility therefor. Tenant agrees to save and hold Landlord harmless as provided in the Lease for said work. (c) Tenant and Tenant's contractors shall abide by all safety and construction laws, ordinances, rules and regulations. All work and deliveries shall be scheduled through Landlord's Contract Manager and Landlord's Property Manager by notice telecopied to (201) 285-9642 Entry by Tenant's contractors shall be deemed to be complete under all the terms, covenants, provisions and conditions of the Lease to the extent not inconsistent with Tenant's performance of the work. All Tenant's materials, work, installations and decorations of any nature brought upon or installed in the Premises before the Commencement Date shall be at Tenant's risk, and neither Landlord nor any party acting on Landlord's behalf shall be responsible for any damage thereto or loss or destruction thereof. Tenant shall not employ any contractor who in Landlord's opinion may prejudice Landlord's negotiations or relationships with Landlord's contractors or subcontractors or the negotiations or relationship of those contractors or subcontractors with their employees, or as may disturb harmonious labor relations. (d) Tenant shall reimburse Landlord for any extra expenses incurred by Landlord by reason of faulty work done by Tenant or Tenant's contractors, or by reason of delays caused by such work, or by reason of cleanup which fails to comply with Landlord's Rules and Regulations, or by reason of use of elevators outside normal working hours. (e) Tenant's contractors shall not post any signs on any part of the Building or the Premises. (f) Tenant shall, upon Landlord's request, provide Landlord with copies of bills and invoices for the cost of Tenant's Work hereunder and Tenant shall certify as to the correctness of such bills and invoices. (g) Tenant shall reimburse Landlord for the cost of Landlord's Contract Manager in the amount of $7,265.00. -32- 35 2. Changes: If Tenant requests any changes after Landlord's approval of Tenant's Plan, Tenant shall be responsible for all costs (subject to the reimbursement provisions set forth in Paragraph C3 of this Work Letter) including but not limited to architectural, engineering and related design expenses resulting from such changes. No such changes shall be made without prior written approval of Landlord. Tenant shall notify Landlord's Contract Manager and Landlord's Property Manager of any proposed changes. Landlord agrees not to unreasonably withhold its approval of any proposed changes, and Landlord agrees to notify Tenant of Landlord's approval or disapproval within three (3) business days after Landlord's receipt of a detailed description of any proposed changes, together with such revised plans and specifications and such other documents as Landlord may reasonably request in connection with said proposed changes. If Landlord fails to notify Tenant of Landlord's disapproval within three (3) business days after Landlord's receipt of the description, the revised plans and specifications and the other documents, then Landlord shall be deemed to have approved the proposed change in question. Landlord shall not be responsible for delay in occupancy by Tenant because of changes. 3. Tenant Allowance: Landlord shall provide Tenant a Work Allowance in the amount of $159,830.00 to be paid in accordance with the provisions of this Paragraph C3 with the balance, if any, at the election of Tenant being taken as a credit against rent due under the Lease or being paid in cash. Landlord agrees to disburse the Work Allowance to Tenant in two (2) installments. The first installment shall be paid on October 31, 1996 and shall not exceed the aggregate of all approved requisitions submitted to Landlord on or before October 15, 1996. The second installment shall be paid within fifteen (15) business days after receipt of Tenant's requisition, a final certificate of occupancy and a certificate from Tenant's architect certifying to Landlord that all work has been completed in accordance with Tenant's Plan. Attached to each requisition shall be (i) a certificate from Tenant's architect certifying that the work described on Tenant's requisition has been completed in accordance with Tenant's Plan, (ii) copies of all bills submitted by the contractors, subcontractors, suppliers and materialmen for the work described on the requisition, and (iii) lien waivers from all contractors, suppliers and materialmen who performed work, furnished services or provided materials and supplies in connection with the immediately preceding requisition. Landlord shall have the right to refuse to pay all or any portion of a requisition if Landlord determines that the work described thereon has not been completed, has not been completed in a good and workmanlike manner or has not been completed in accordance with Tenant's Plan. Landlord shall deduct from each of the payments an amount equal to the cost of Landlord's Contract Manager incurred on or before said payment, subject, however, to the limitation set forth in Paragraph C 1(g). Landlord's Contract Manager shall make periodic inspections of the Premises during construction and at completion. If, during any inspection of the work, Landlord's Contract Manager discovers any problems with the work or has any objections to the work, Landlord shall advise Tenant of any such problems or objections within a reasonable period of time after such inspection. After Landlord's inspection and upon completion of all Tenant's Work and issuance of a permanent Certificate of Occupancy and upon Tenant's presenting satisfactory evidence to Landlord of actual payments of cost of Tenant's work, Landlord will pay the second (and final) installment of the Work Allowance. D. DELAYS If Tenant shall cause any delay in the construction of the Premises, whether by reason of any failure by Tenant to comply with the applicable time schedule or by Tenant's requirement of specific materials or installations, or by delays in performance of completion by a party employed by Tenant, or by reason of building code problems arising from Tenant's design, -33- 36 or by reason of changes in the work ordered by Tenant, then notwithstanding the provisions of the Lease or any other provision of this Exhibit, any such delay in completing the Premises shall not in any manner affect the Commencement Date or Tenant's liability for the payment of Rent as set forth in the Lease. E. INCORPORATION IN LEASE This Work Letter is, and shall be incorporated by reference in the Lease and all of the terms and provisions of said Lease are and shall be incorporated herein by this reference. F. ELECTRICAL CONSUMPTION CALCULATION During the construction of the work, Tenant shall pay to Landlord the cost of all electricity consumed by Tenant in the Premises. Said cost shall be determined in accordance with the provisions of Paragraph 3(E) of the Lease and shall be paid to Landlord from time to time within ten (10) business days after Tenant's receipt of a statement. G. MISCELLANEOUS Wherever in this Work Letter Tenant is obligated to comply with the terms and conditions of the Lease, such obligation shall be deemed to mean that Tenant shall comply with the terms and conditions of the Lease to the extent not inconsistent with Tenant's performance of the work. -34- 37 EXHIBIT B-1 ----------- [THE PRUDENTIAL BUSINESS CAMPUS LETTERHEAD] TO: All Contractors, Sub-Contractors & Tenants FROM: Herb Maierle Director of Construction DATE: 1996 SUBJECT: BUILDING RULES & REGULATIONS FOR TENANT BUILD-OUTS In order to make tenant improvements, alterations or other work in buildings at The Prudential Business Campus run smoothly, it's important that the following guidelines be adhered to: 1. Prior to commencement of work, the contractor is to submit a certificate of liability insurance of not less than $5,000,000. PruBeta-3 & Premisys Real Estate Services, Inc. shall be named as additional insured. Said certificates shall provide that insurance will not be canceled or reduced without thirty days written notice to the owner. In addition, contractor shall submit to the owner a copy of the building permit before starting work. 2. The corridors, walls & floors, lobby and elevator shall be protected during construction. No material shall be delivered through the lobby or main entrance. 3. All required demolition and new construction is to be accomplished without interference to the tenants within the adjoining space and building. 4. The building utilities can not be shut-down during normal business hours and any and all such shut-downs must be prearranged with the building management. The cost associated with shut-downs after normal working hours shall be borne solely by the tenant contractor, i.e. salaries for maintenance staff. 5. It is the responsibility of the tenant or contractor to obtain all approvals required by the Municipal Authorities, including building permits and certificate of occupancy. 38 [LOGO] 1996 All Contractors, Sub-Contractors & Tenants Building Rules & Regulations for Tenant Build-outs Page 2 6. The contractor shall provide and install fire extinguishers as required by the fire department. 7. Contractor shall maintain fire extinguishers in all work areas at all times during construction. 8. Contractor shall be responsible for cleaning toilet facilities being used during construction. 9. Contractor shall use only the freight elevator for all work. The building passenger elevator shall not be used by contractors. Contractors shall protect the freight elevator with plywood at all times. 10. During construction operations involving removal of substantial debris, contractor and/or its subcontractors shall supply their own containers and be placed where designated by building management. 11. Contractor shall remove all debris from the work area on a daily basis. Contractor shall prevent the storage of debris or any other materials that would constitute a fire hazard. 12. Contractor shall maintain the service of the wet sprinklers at all times. Contractor shall notify the building manager, at least 24 hours in advance, when the system is to be activated or deactivated in connection with the performance of work thereon. 13. Building management is to be present at all plumbing,, electrical, fire and building inspections. It is the responsibility of the general contractor to advise management when inspections are scheduled, and to provide adequate notice to building management. 14. Any systems which tie into the base building shall be coordinated through building management. Fire detection system to be connected to the fire panel by building management contractor, Stillwell-Hansen, at tenant or tenant contractor's expense. 15. Smoke detector service shall be maintained in any area already under protection, including but not limited to demised premises, elevator lobby, stairs, etc. 16. Contractor shall maintain a smoke detector on the return air side of any active air handlers. 39 [LOGO] 1996 All Contractors, Sub-Contractors & Tenants Building Rules & Regulations for Tenant Build-outs Page 3 17. Contractor shall supply and install construction grade filters with 35% efficiency on the HVAC system return ducts. Filters to be changed monthly. 18. Any work which may cause an inconvenience or annoyance to tenants is to be performed before or after normal working hours (7:00 a.m. through 6:00 p.m. Monday to Friday). 19. At the commencement of the project, owner shall designate employee parking areas for the employees of contractor and its subcontractors. 20. Contractor shall be responsible for patching steel fireproofing, as required. 21. Cutting, chasing, drilling or demolition of walls, slab, etc., requiring the use of jackhammers or other heavy power tools shall be performed during the off hours. 22. All unused electrical and communication cabling within the plenum area to be disconnected and removed to point of origin. 23. Contractor shall provide re-keying of all doors to match Premisys' existing master keying. Contact building management for information. 24. At the commencement of the project, owner shall designate, if required, an appropriate location for the placement of any trailers of contractor and its subcontractors and owner retains the right to demand the prompt removal of any such trailers within five (5) days after the Certificate of Occupancy for the project has been obtained. 25. Tenant contractor's assume complete responsibility for the security of contractor's and subcontractor's materials, supplies and equipment. 26. At the completion of the project, the tenant shall submit to the owner a complete set of as-built drawings and all product warranties including cut sheets, maintenance and operations manuals. 27. All work shall be accomplished using harmonious labor. 28. Post construction clean-up (including but not limited to vacuuming and inside window cleaning) shall be contractors responsibility. All material stored in the building by the contractor or sub-contractors is to be removed upon or prior to job completion. 40 [LOGO] 1996 All Contractors, Sub-Contractors & Tenants Building Rules & Regulations for Tenant Build-outs Page 4 29. Lunch and break areas will be designated by general contractor's supervisor. These areas are to be located within the construction space. All food and food wrappers are to be bagged and discarded in cans with tight lids. All construction areas are to be policed nightly by contractor and all refuse is to be placed in contractors dumpster. Loose food is to be placed in plastic garbage bags, secured then put in contractors' dumpster. 30. Building management is to be notified regarding use of the freight elevator for extended periods or work performed other than normal hours. 31. The sidewalks and public portions of the building, such as entrances, passages, courts, elevators, vestibules, stairways, corridors or halls should not be obstructed or encumbered by any tenant or used for any purpose other than ingress and egress to and from the demised premises. 32. The water and wash closets and other plumbing fixtures shall not be used for any purposes other than those for which they were constructed, and no sweepings, rubbish, rags or other substances shall be thrown therein. All damages resulting from any misuse of the fixtures shall be borne by the tenant contractor. 33. In order that the building can and will maintain a uniform appearance from the outside, each tenant in building perimeter areas shall (a) use only building standard lighting, as defined in work letter, in areas where lighting, is visible from outside of the building and (b) use only inch horizontal blinds (or other building standard) in window areas which are visible from the outside of the building. 34. No sign, advertisement, notice or other lettering shall be exhibited, inscribed, painted or affixed by any tenant contractor on any part of the outside of the demised premises, on any entrance door or doors to the demised premises or on the outside of the building. 35. It is understood and agreed that tenant contractor shall not place a load on any floor of the premises exceeding the floor load per square foot area which such floor was designed to carry and which is allowed by code. 36. The premises shall not be used for lodging or sleeping or for any immoral or illegal purpose. 41 [LOGO] 1996 All Contractors, Sub-Contractors & Tenants Building Rules & Regulations for Tenant Build-outs Page 5 37. All construction shall be performed and completed in compliance with all applicable codes and regulations, including Uniform New Jersey Building Code, Federal Occupational Safety and Health Act (OSHA) and American Disability Act (ADA). 38. Contractor shall replace all defective thermostats and repair all new and existing VAV boxes found to be inoperative. 39. All doors to be 8'8" nominal height, suite entry doors to match building standard. 40. All door frames to be welded at the corners. (No knock-down) 41. All door frames shall be properly secured by diagonal bracing at each top corner and fastened to the deck above. In addition, the bottom shall be mechanically fastened to the floor slab. 42. Tenant shall clean and repair all window blinds located in the tenant space. 43. Tenant shall clean and relamp all light fixtures in tenant area, as required. 44. Check all AC ducts for air leaks and reseal where necessary. 45. The contractor shall insulate all new ducts & flex, as part of the contract. 46. The contractor shall check all existing ducts for proper support. If additional hangers are required, contractor shall supply same at no additional cost to the owner. 47. The balancing of the HVAC system to required air flow (minimum & maximum) shall be performed by the contractor's independent balancing/testing agency. 48. Provide return air grills in all offices and open areas. 49. Contractor or tenant shall submit architectural, mechanical and electrical drawings for owners' review and approval prior to commencement of work. 50. Tenant shall submit a building permit to the owner issued by the Town of Parsippany prior to commencement of work. 42 EXHIBIT C COMMENCEMENT DATE MEMORANDUM THIS AGREEMENT made as of the day of , 1996 between PRUBETA-3, a general partnership organized under the laws of New Jersey, with an office at c/o THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, Newark Realty Group Office, Three Gateway Center, 100 Mulberry Street, 13th Floor, Newark, New Jersey 07102 ("Landlord") and INNOVEX INC with an office at 9 Campus Drive, Parsippany, New Jersey ("Tenant"). WITNESSETH: WHEREAS, Landlord and Tenant entered into a Lease dated ______, 1996 ("Lease") setting forth the terms of occupancy by Tenant for a portion of the ______ floor of 9 Campus Drive located at The Prudential Business Campus at Parsippany-Troy Hills, New Jersey; and WHEREAS, the Lease is for an initial term of ___ years with the "Target Commencement Date" of the term being defined in Basic Lease Provisions; and WHEREAS, it has been determined in accordance with these provisions that __________, 1996 is the Commencement Date of the initial term of the Lease. NOW, THEREFORE, in consideration of the premises and the covenants hereinafter set forth, it is agreed: 1. The Commencement Date of the initial term of the Lease is ________, 1996 and the Expiration Date thereof is ___________, 19 . 2. This agreement is executed by the parties for purposes of providing a record of the commencement and termination dates of the initial term of the Lease. IN WITNESS WHEREOF, the parties hereto have duly executed this instrument as of the day and year first above written. PRUBETA-3 Attest: BY: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey corporation, as General Partner By: - ------------------------- ----------------------------------------------- Assistant Secretary Name: ------------------------------------------ Title: ----------------------------------------- BY: EQUITY PARSIPPANY VENTURE, a Colorado general partnership, as General Partner By: U S WEST Real Estate, Inc., a Colorado corporation, as Managing Partner By: BetaWest, Inc., a Colorado corporation formerly known as BW Acquisition, Inc. as authorized agent Approved as to legal form by Counsel to Landlord: By: --------------------------------------- - ------------------------- Name: ---------------------------------- Title: --------------------------------- By: ---------------------- Date: -------------------- ATTEST:(or Witness:) INNOVEX INC By: - ------------------------- ---------------------------------- Name: ----------------------------- Title: ----------------------------
43 EXHIBIT D RULES AND REGULATIONS 1. The sidewalks, and public portions of the Building, such as entrances, passages, courts, elevators, vestibules, stairways, corridors or halls shall not be obstructed or encumbered by any tenant or used for any purpose other than ingress and egress to and from the demised premises ("demised premises" in this Exhibit D shall mean the "Premises" as set forth in the Lease). 2. No awnings or other projections shall be attached to the outside walls of the Building. No curtains, blinds, shades, louvered openings or screens shall be attached to or hung in, or used in connection with, any window or door of the demised premises, without the prior written consent of Landlord, unless installed by Landlord. 3. No sign, advertisement, notice or other lettering shall be exhibited, inscribed, painted or affixed by any tenant on any part of the outside of the demised premises or Building or on corridor walls. Signs on entrance door or doors shall conform to building standard signs, samples of which are on display in Landlord's rental office. Signs on doors shall, at the tenant's expense, be inscribed, painted or affixed for each tenant by sign makers approved by Landlord. In the event of the violation of the foregoing by any tenant, Landlord may remove same without any liability, and may charge the expense incurred by such removal to the tenant or tenants violating this rule. 4. The sashes, sash doors, skylights, windows, heating, ventilating and air conditioning vents and door that reflect or admit light and air into the halls, passageways or other public places in the Building shall not be covered or obstructed by any tenant, nor shall any bottles, parcels, or other articles be placed outside of the demised premises. 5. No show cases or other articles shall be put in front of or affixed to any part of the exterior of the Building, nor placed in the public halls, corridors or vestibules without the prior written consent of Landlord. 6. The water and wash closets and other plumbing fixtures shall not be used for any purposes other than those for which they were constructed, and no sweepings, rubbish, rags, or other substances shall be thrown therein. All damages resulting from any misuse of the fixtures shall be borne by the tenant who, or whose servants, employees, agents, visitors or licensees, shall have caused the same. 7. No tenant shall in any way deface any part of the demised premises or the Building. No tenant shall lay linoleum, or other similar floor covering, so that the same shall come in direct contact with the floor of the demised Premises, and, if linoleum or other similar floor covering is desired to be used, an interlining of builder's deadening felt shall be first affixed to the floor, by a paste or other material, soluble in water, the use of cement or other similar adhesive material being expressly prohibited. 8. No bicycles, vehicles or animals of any kind (except seeing eye dogs) shall be brought into or kept in or about the Premises. 9. No cooking shall be done or permitted by Tenant in the Premises except in conformity to law -36- 44 and then only in the cafeteria kitchen. No tenant shall cause or permit any unusual or objectionable odors to be produced upon or permeate from the Premises. lO. No space in the Building shall be used for manufacturing or distribution or for the storage of merchandise, or for the sale at auction or otherwise of merchandise, goods or property of any kind. 11. No tenant shall make, or permit to be made, any unseemly or disturbing noises or disturb or interfere with occupants of the Building or neighboring buildings or premises or those having business with them whether by the use of any musical instrument, radio, in any other way. 12. No tenant, nor any of the tenant's servants, employees, agents, visitors or licensees, shall at any time bring or keep upon the premises any inflammable, combustible or explosive fluid, or chemical substance, other than reasonable amounts of cleaning fluids and solvents required in the normal operation of tenant's business offices. 13. No additional locks or bolts of any kind shall be placed upon any of the doors or windows by any tenant, nor shall any changes be made in existing locks or the mechanism thereof, without the prior written approval of the Landlord and unless and until a duplicate key is delivered to Landlord. Each tenant must, upon the termination of his tenancy, restore to the Landlord all keys of offices and toilet rooms, either furnished to, or otherwise procured by, such tenant, and in the event of the loss of any keys, so furnished, such tenant shall pay to Landlord the cost thereof. 14. All removals, or the carrying in or out of any safes, freight, furniture or bulky matter of any description must take place during the hours which Landlord or its agent may determine from time to time. Landlord reserves the right to inspect all freight to be brought into the Building and to exclude from the Building all freight which violates any of these Rules and Regulations or the Lease of which these Rules and Regulations are a part. 15. No tenant shall occupy or permit any portion of the premises demised to it to be occupied as, by or for a public stenographer or typist, barber shop, bootblacking, beauty shop or manicuring, beauty parlor, telephone or telegraph agency, employment agency open to the public, public restaurant or bar, commercial document reproduction or offset printing service, public vending machines, retail, wholesale or discount shop for sale of merchandise, retail service shop, labor union, school or classroom, governmental or quasi-governmental bureau, department or agency, including an autonomous governmental corporation, a firm the principal business of which is real estate brokerage, or a company engaged in the business of renting office or desk space; or for a public finance (personal loan) business, or for manufacturing. No tenant shall engage or pay any employees on the demised premises, except those actually working for such tenant on said premises, nor advertise for laborers giving an address at said Premises. Nothing herein shall be interpreted to prevent Tenant from making up at the Premises payroll and payroll checks for employees at other location. 16. Landlord shall have the right to prohibit any advertising by any tenant mentioning the Building which, in Landlord's reasonable opinion, tends to impair the reputation of the Building or its desirability as a building for offices, and upon written notice from Landlord, tenant shall refrain from and discontinue such advertising. 17. In order that the Building can and will maintain a uniform appearance from the outside, each Tenant in building perimeter areas shall (a) use only building standard lighting, as defined in Work Letter, in areas where lighting is visible from outside of the Building and (b) use only inch (") horizontal blinds in window areas which are visible from the outside of the Building. 18. Landlord reserves the right to exclude from the Building between the hours of 6:00 p.m. and -37- 45 8:00 a.m. and at all hours on non-business days all persons who do not present a pass to the Building signed by a tenant. Each tenant shall be responsible for all persons for whom such pass is issued and shall be liable to Landlord for all acts of such persons. 19. The premises shall not be used for lodging or sleeping or for any immoral or illegal purpose. 20. At Landlord's option, tenants shall purchase from Landlord or its designee all lighting tubes, lamps, bulbs and ballasts used in the demised premises and tenants shall pay Landlord's actual costs including reasonable overhead and profit for providing and installing same, on demand. 21. Canvassing, soliciting and peddling in the Building are prohibited and each tenant shall cooperate to prevent the same. 22. There shall not be used in any space, or in the public halls of any building, either by any tenant or by jobbers or others, in the delivery or receipt of merchandise, any hand trucks, except those equipped with rubber tires and side guards. No hand trucks shall be used in passenger elevators. 23. Tenants, in order to obtain maximum effectiveness of the cooling system, shall lower and/or close venetian or vertical blinds or drapes when sun's rays fall directly on windows of demised Premises. 24. Replacement of ceiling tiles after they are removed for Tenant by telephone company installers, in both the demised premises and the public corridors, will be charged to Tenant on a per tile basis. Landlord's charge will be actual costs plus reasonable overhead and profit. 25. All panelling, grounds or other wood products which are incorporated in construction of fire rated assembly shall be of fire retardant materials. Before installation of any such materials, certification of the materials' fire retardant characteristics shall be submitted to Landlord, or its agents, in a manner satisfactory to the Landlord. 26. Tenant shall not in any way obstruct or interfere with the rights of other tenants or occupants of the Building or the Project or injure or annoy them, or use or allow the Premises to be used for any unlawful or objectionable purpose, nor shall Tenant cause, maintain, or permit any nuisance in, on, or about the Premises. Tenant shall not commit or suffer to be committed any waste in or upon the Premises. 27. It is understood and agreed that Tenant shall not place a load on any floor of the premises exceeding the floor load per square foot area which such floor was designed to carry and which is allowed by law. Landlord reserves the right to prescribe the weight and position of all safes, vaults, and other equipment which must be placed so as to distribute the weight. Business machines and mechanical equipment shall be placed and maintained by the Tenant, at Tenant's expense, in settings sufficient in the Landlord's judgment to absorb and prevent vibrations, noise and annoyance. 28. Tenant (including Tenant's employees, agents, invitees, and visitors) will use the Parking Spaces solely for the purpose of parking passenger model cars, small vans and small trucks and will comply in all respects with any rules and regulations that may be promulgated by Landlord from time to time, with respect to the Parking Areas. The Parking Areas may be used by Tenant, its agents or employees, for occasional overnight parking of vehicles. Tenant will ensure that any vehicle parked in any of the Parking Spaces will be kept in proper repair and will not leak excessive amounts of oil or grease or any amount of gasoline. If any of the Parking Spaces are at any time used (a) for any purpose other than parking as provided above; (b) in any way or -38- 46 manner reasonably objectionable to Landlord; or (c) by Tenant after default by Tenant under the Lease, Landlord, in addition to any other rights otherwise available to Landlord, may consider such default an event of default under the Lease. 29. Tenant's right to use the Parking Areas will be in common with other tenants of the Project and with other parties permitted by Landlord to use the Parking Areas. Landlord reserves the right to assign and reassign, from time to time, particular Parking Spaces for use by persons selected by Landlord, provided that Tenant's rights under the Lease are preserved. Landlord will not be liable to Tenant for any unavailability of Tenant's designated spaces, if any, nor will any unavailability entitle Tenant to any refund, deduction, or allowance. Tenant will not park in any numbered space or any space designated as: RESERVED, HANDICAPPED, VISITORS ONLY, or LIMITED TIME PARKING (or similar designation). 30. If the Parking Areas are damaged or destroyed, or if the use of the Parking Areas is limited or prohibited by any governmental authority, or the use or operation of the Parking Areas is limited or prevented by strikes or other labor difficulties or other causes beyond Landlord's control, Tenant's inability to use the Parking Spaces will not subject Landlord or any operator of the Parking Areas to any liability to Tenant and will not relieve Tenant of any of its obligations under the Lease and the Lease will remain in full force and effect. Tenant will pay to Landlord upon demand, and Tenant indemnifies Landlord against, any and all loss or damage to the Parking Areas, or any equipment, fixtures, or signs used in connection with the Parking Areas and any adjoining buildings or structures caused by Tenant or any of its employees, agents, invitees, or visitors. 31. Tenant has no right to assign or sublicense any of its rights in the Parking Spaces, except as part of a permitted assignment or sublease of the Lease; however, Tenant may allocate the Parking Spaces among its employees. Whenever and to the extent that the above rules conflict with any of the rights or obligations of Tenant pursuant to the provisions of the Paragraphs of the Lease, the provisions of the Paragraphs shall govern. -39- 47 EXHIBIT "E" PRUDENTIAL BUSINESS CAMPUS HOLIDAY SCHEDULE NEW YEAR'S DAY MEMORIAL DAY INDEPENDENCE DAY LABOR DAY THANKSGIVING DAY CHRISTMAS DAY -40- 48 EXHIBIT "F" JANITORIAL SERVICES - TENANT AREAS OFFICES - NIGHTLY CLEANING 1. Empty and clean ash trays and screen all sand urns (sand furnished by Contractor). Wipe ash trays with cloth or sponge dampened with detergent to remove soil. 2. Empty wastebaskets and other trash receptacles (liners to be furnished by Contractor). Remove rubbish to compactor area and compact. Plastic bags used for rubbish removal to be furnished by Contractor and shall be adequate to hold contents without breaking. 3. Clean, polish and sanitize drinking fountains. 4. Dust, (using treated dust mop) or vacuum uncarpeted areas. 5. Remove fingermarks and smudges from doors, door frames, walls, light switches and glass. EVERY OTHER NIGHT - OFFICES 6. Dust with treated cloths, all office furniture, desk accessories (including telephone shelving, window frames, sills up to 84" in height) and other surfaces. 7. Vacuum all carpeted areas including edges and corners using beater bar or brush vacuum cleaner. WEEKLY - OFFICES 8. Spot clean walls, partitions, fixtures, and doors. 49 MONTHLY - OFFICES 9. Wipe trash receptacles to remove evident soil. 10. High dust with treated cloths and vacuum all vents, louvers and moldings and all other areas above hand high reach. 11. Dust picture frames and wash picture glass. QUARTERLY - OFFICES 12. Dust all blinds. NIGHTLY CLEANING - PUBLIC AREAS 13. Vacuum, clean and polish all elevator interiors, doors, tracks, saddles and call buttons. 14. Clean and polish all entrance glass, frames and saddles. 15. Vacuum carpeted corridors. 16. Clean Lobby Floor. -A Nightly - sweep and damp mop. -B Nightly spray buff with high speed buffing machine. -C Re-coat with non-slip wax as needed. 17. Maintain all janitorial closets in a clean and orderly condition. 18. Sweep stairways and landings, wiping clean all railings. 19. Clean, polish and sanitize drinking fountain. 20. Clean and screen all sand urns - refill sand as needed (sand supplied by Contractor). 21. Sweep or dust mop all non-carpeted floors with treated cloth or mop. 22. Remove fingermark and smudges from doors and wall surfaces. 23. Wash concrete flooring and disinfect compactor area. WEEKLY CLEANING - PUBLIC AREAS 24. Wet mop stairways and landings. 25. Spot check all carpeted areas. 26. Spray buff V.C.T. and recoat with non-slip wax as needed. -42- 50 27. Shampoo elevator carpet as required - public areas. LAVATORIES - NIGHTLY CLEANING 28. Sweep, wash and disinfect all floors. 29. Clean and polish mirrors, shelves, fixtures and brightwork. 30. Wash and disinfect basins, bowls, urinals and walls around urinals. 31. Empty and clean waste receptacles and sanitary napkin disposal; fill dispensers with tissues, towels, sanitary napkins and soap. LAVATORIES - WEEKLY 32. Spot clean all non-tiled wall surfaces. 33. Tile walls and dividing partitions to be washed and disinfected. 34. High dust all doors, frames, ceilings and vents with treated cloth. LAVATORIES - MONTHLY 35. Vacuum all vents and louvers. 36. Machine scrub floors. SUPPLIES 37. All supplies furnished will be of a high quality conforming with building standards. -43- EX-10.39 13 LEASE - LENEXA/INNOVEX 1 EXHIBIT 10.39 LEASE AT SOUTHLAKE THIS LEASE is made and entered into as of this 30 day of November, 1995, by and between LENEXA INDUSTRIAL PARK, INC., a Kansas corporation, hereinafter referred to as Lessor, and INNOVEX INC., a Delaware corporation, hereinafter referred to as Lessee. WITNESSETH: Lessor, for and in consideration of the rent and other covenants herein contained to be kept and performed by Lessee, does hereby demise, lease, and let to Lessee, and Lessee does hereby rent, hire, and take from Lessor and agrees to occupy in accordance with the covenants hereinafter set forth, the premises described in Exhibit "A" hereto. The premises are known and numbered as 15705 College Boulevard, Lenexa, Kansas 66219 and for purposes of this lease are deemed to contain 15,474 square feet of rentable area. 1. TERM: The original term of this Lease shall commence on the 1st day of January, 1996, and shall continue for FIVE (5), ending on the 31st day of December, 2000. (SEE ADDITIONAL PARAGRAPH 1A.) Upon the expiration of the term of this Lease or its other termination, Lessee shall return all keys, remove all of its personal property, and return the premises to Lessor in accordance with the terms of this Lease. Should the last day of this Lease fall on a Sunday or on a legal holiday, the termination shall be on the preceding business day. In the event Lessor is unable to deliver possession of the premises to Lessee on the commencement date specified above, the ending date shall be extended for a period equal to the delay in delivery of possession, plus the number of days necessary to end the term on the last day of a month. Lessor and Lessee shall execute an amendment to this Lease setting forth said revised beginning and ending dates. (SEE ADDITIONAL PARAGRAPH 1B.) Lessee agrees to vacate the premises on the ending date of the lease term and shall indemnify Lessor from any damages which Lessor incurs from Lessee's delay in vacating the premises. In the absence of any agreement to the contrary, any occupancy of the premises after the ending date of this Lease shall be a "month-to-month" tenancy, subject to all of the terms of this Lease applicable to a month-to-month tenancy except that the basic rent then in effect shall be increased by twenty-five percent (25%). 2. RENTAL: The basic rental for the premises shall be at the rate of (SEE ADDITIONAL PARAGRAPH 2A.) annually, payable in equal monthly installments, without deduction or set off, each due and payable to Lessor on the first day of each and every month of the term hereof in advance. Any rentals or other payments required by this Lease not received by Lessor within ten (10) days after the due date set forth herein shall be subject to a late charge of five percent (5%) of the amount thereof for each month or portion of a month during which said amount remains unpaid. Failure by Lessee to pay said late charge, within ten (10) days after notice from Lessor that it is due shall constitute a default of this Lease by Lessee. Lessor acknowledges receipt of Nine Thousand One Hundred Sixty-Seven and 00/100 Dollars ($9,167.00) paid to Lessor by Lessee concurrently with the execution of this Lease as a deposit, to be applied as rent for the first month of the term hereof. All rental payments and other payments required under this Lease shall be made to Lessor at P.O. Box 411299, Kansas City, Missouri 64141-1299 or at such other place as may be requested by Lessor in writing. 3. POSSESSION AND CONDITION AT BEGINNING OF TERM: Lessor shall use diligence to give possession as nearly as possible at the beginning of the term of this Lease, and rent shall abate pro rata for the period of any delay in so doing, which abatement shall be in full for Lessee's damages therefrom. Lessee has inspected and knows the condition of the premises and accepts the same in their present condition (subject to ordinary wear, tear, and deterioration in the event the term commences after the date hereof and to the rights of present or former occupant, if any, to take his removable property). Lessee acknowledges that neither Lessor, nor Lessor's agent, has Page 1 - Defined Service Lease (SOUTHLAKE) 9IZM2 2 made any representations or warranties concerning premises or their suitability for Lessee's use, except as is set forth in this Lease. Any changes in or to the premises to be accomplished by Lessor shall only be as specifically set forth in Exhibit "B" hereto. Certification of the completion of any such changes by the architect for the building shall be conclusive evidence of such completion. Lessor covenants and warrants to Lessee and to Realtor that to its knowledge there are no conditions concerning the property except as set forth on Exhibit "C" hereto related to the existence of asbestos, PCB transformers, or other toxic, hazardous or contaminated substances (hereinafter referred to as hazardous substances), and/or underground storage tanks on or about the premises existing at the date of this Lease. 4. USE OF PREMISES: The demised premises are leased as a commercial facility for the purpose of administrative, data entry, and other general office functions and are not to be used for any other purpose without first having secured the written consent of the Lessor, which consent shall not be unreasonably withheld. Lessee agrees to conduct its business in a manner that will not be objectionable to other businesses in SOUTHLAKE including noise, vibration, odor, or fumes. In the event Lessor receives complaints from other businesses in SOUTHLAKE and determines, in its sole reasonable judgment, that Lessee is conducting its operations in a manner so as to be objectionable to such other businesses, Lessee agrees, upon notice from Lessor, to promptly modify the conduct of its operations to eliminate such objectionable operations. Lessee shall not use, store, generate, treat, transport, or dispose of any hazardous substance on the premises without first obtaining Lessor's written approval. Lessor may withdraw approval of any hazardous substance at any time, for reasonable cause related to the threat of site contamination, or damage or injury to persons, property or resources on or near the premises. Upon withdrawal of such approval by Lessor, Lessee shall immediately remove the hazardous substance from the premises. (SEE ADDITIONAL PARAGRAPH 4A.) For any month in which any hazardous substances have been used, generated, treated, stored, transported or otherwise been present on or about the premises pursuant to the above provisions, Lessee shall provide Lessor with a written report listing the hazardous substances which were present on the premises, all releases that occurred or were discovered on the premises, all compliance activities related to such hazardous substances including any contacts with government agencies or private parties concerning the same. If requested by Lessor, Lessee shall furnish Lessor with copies of all documents and correspondence related to such activities and written reports of any oral contacts relating thereto. 5. PUBLIC REQUIREMENTS: Lessee shall comply with all applicable laws, ordinances, governmental orders and regulations and other public requirements now and hereafter affecting the premises or Lessee's use thereof, including but not limited to the Declaration of Covenants and Restrictions Affecting SOUTHLAKE (attached hereto as Exhibit "D") as the same may be lawfully amended from time to time, and shall save and hold Lessor harmless from expense or damage resuming from failure to do so. (SEE ADDITIONAL PARAGRAPH 5A.) 6. ASSIGNING AND SUBLEASING: Lessee shall not sublet the premises or any part thereof and Lessee shall not assign, transfer, pledge, mortgage or otherwise encumber this Lease, or any portion of the term thereof, without the previous written consent in each instance of Lessor, and Lessee shall furnish to Lessor with each request a copy of such proposed instrument; Lessor agreeing, however, not to arbitrarily withhold consent to subletting for any legitimate business not detrimental to the premises or adjacent property, or occupants thereof, and not more hazardous on account of fire or otherwise, and not creating wear and tear to the premises more than the business for which the premises are herein leased. Permission is, however, granted Lessee to assign this Lease and Page 2 - Defined Service Lease (SOUTHLAKE) 9IZM2 3 also to sublet the premises to any subsidiary corporation or parent corporation of Lessee, upon giving Lessor written notice of intent so to do. In the event of any assignment or subletting, Lessee shall remain the principal obligor to the Lessor under all covenants of this Lease, and by accepting any assignment or subletting, an assignee or sublessee shall become bound by and shall perform all of the terms, conditions and covenants by which the Lessee hereunder is bound. 7. INSURANCE: Lessor shall, throughout the term of this Lease, maintain fire and extended coverage insurance on the premises leased in an amount equal to the full insurable value thereof, subject to any allowances for coinsurance rating provisions utilized by Lessor. Lessor shall also carry owner's public liability and property damage insurance coverage on the premises with limits not less than $1,000,000 combined single limits. Subject to the provisions of Paragraph 16 hereof, all such insurance shall be for the sole benefit of the Lessor and under its sole control. Lessee shall comply with all insurance regulations so the lowest insurance rates consistent with the use of the premises permitted by this Lease may be obtained, and shall not permit anything on or about the leased premises which would make void or voidable any insurance now or hereafter on the premises. If, during the term of this Lease, the fire and extended coverage insurance rates are increased, or the amount of insurance coverage is increased in order to comply wish Lessor's obligations contained in this Paragraph 7. Lessee agrees to reimburse Lessor for Lessee's percentage of the amount of such increased insurance cost in any year of the Lease term in excess of the base insurance cost to which this Lease is subject. It is agreed, that the base insurance cost for the leased premises (or for the entire building of which the premises are a part if the premises are a part of a multi-tenant building) is $ 0. Proration shall be made for partial year's occupancy in the first and last year of the Lease term. 8. TAXES: Lessor shall pay all ad valorem taxes and special assessments lawfully levied against the premises during the term of this Lease. Lessee agrees to pay Lessor the Lessee's percentage of the amount of ad valorem taxes and special assessments, if any, levied against the leased premises in any year of the lease term in excess of the base taxes to which this Lease is subject. In the event Lessor retains the services of an attorney or tax consulting firm to attempt to reduce the valuation of the premises for tax purposes, Lessee shall pay Lessor the Lessee's percentage of the cost of said professional services. It is agreed that the base taxes for the leased premises (or for the entire building of which the premises are a part if the premises are part of a multi-tenant building) are $ 0. Proration shall be made for partial years occupancy during the first and last year of the lease term. 9. MAINTENANCE BY LESSOR: Lessor shall keep in repair, ordinary wear and tear excepted, only the roof, foundations, exterior walls (exclusive of inside surfaces, glass, dock bumpers, louvers or doors therein), gutters and downspouts of any building of which the premises are a part and shall also make any repairs required due to fire or other insured casualty, but Lessee shall be responsible for the cost of any of the foregoing repairs resulting from Lessee's negligence or abuse or the negligence or abuse of Lessee's invitees (e.g. delivery truck, etc.), including, but not being limited to, the neglect or abusive handling or storage of hazardous substances, and shall also be responsible for the deductible portion only of any repair covered by Lessor's insurance on the premises. Before any obligation on Lessor to make repairs, Lessor shall first be given written notice of any defects and shall have a reasonable time thereafter to make such repairs; and Lessor shall in no event be liable for damages beyond the actual cost of any repairs Lessor fails to make within a reasonable time after such written notice. Lessee shall reimburse Lessor for Lessee's percentage of the foregoing maintenance costs. Lessor shall also be responsible for such additional maintenance responsibilities, if any, as are set forth in Paragraph 23 of this Lease. 10. OUTSIDE STORAGE: Lessee shall not use any part of the exterior of the premises for outside storage except for proper storage of trash in enclosed metal containers located as directed by Lessor, pending regular pickup of the same. 11. MAINTENANCE BY LESSEE: Subject to the foregoing obligation of Lessor and further subject to the provisions of Paragraph 23 of this Lease, Lessee agrees to take good care of the premises and appur- Page 3 - Defined Service Lease (SOUTHLAKE) 9IZM2 4 tenances thereto, and to keep them in good repair and sanitary condition, free from filth, and hazardous substances, overloading, danger of fire, or any pest or nuisance, and to keep all mechanical systems in good working order. Lessee shall conduct a continuing program of preventive maintenance covering such mechanical equipment, including regular service and maintenance to heating and air conditioning equipment by competent tradesmen and shall furnish Lessor evidence of such maintenance upon request. Lessee shall not permit any waste of the premises. At the expiration or other termination of this Lease, Lessee shall return the premises to Lessor pursuant to the terms of this Lease, broom clean, and in good and sanitary order, condition and repair, except for such wear and tear as would be normal for the period of Lessee's occupancy and except for damage by fire, explosion or other insured casualty. If Lessee fails to do anything required of Lessee in this paragraph or elsewhere in this Lease within a reasonable time, Lessor may, at Lessor's option, perform the same at Lessee's expense. (SEE ADDITIONAL PARAGRAPH 11A.) No spill, deposit, emission, leakage or other release of hazardous substances on the premises shall be deemed to be "wear and tear as would be normal for the period of Lessee's occupancy". Lessee shall be responsible to promptly and completely clean up any such release caused by Lessee, its employees, agents, contractors and invitees as shall occur on the premises during the term of this Lease and shall surrender the premises free of any contamination or other damage caused by such occurrences during the term of this Lease. 12. ALTERATIONS AND ADDITIONS: Lessee shall have the right, at its sole expense, to make non-structural additions, improvements, or modifications to the interior of the premises for the convenient conduct of its business. All such changes shall be made in a good workman-like manner and in accordance with applicable codes and regulations, and shall become a part of the premises; provided, however, that at Lessor's option Lessor may require Lessee to restore the premises to their original condition at the termination of this Lease. Lessee shall give Lessor poor written notice of any alterations, additions, improvements or modifications so made. Any increase in ad valorem taxes or insurance premiums resulting from such improvements shall be the sole responsibility of Lessee. Lessee shall have the right to install such machinery, equipment, and business and trade fixtures as it deems necessary, and such items shall remain the property of Lessee and shall be removed at the termination of this Lease, the Lessee repairing any damage occasioned by removal If Lessee shall obtain written consent of Lessor to leave any machinery or like equipment in the premises, then the full title to such machinery and equipment shall thereupon pass to Lessor. 13. LESSOR'S RIGHT OF ENTRY: Lessor, or Lessor's Agent, may enter upon the premises at reasonable hours, upon reasonable prior notice, to examine the same and to do anything required of Lessor hereunder or which Lessor may deem necessary for the good of the premises. Such right of entry and inspection shall not constitute managerial or operational control by Lessor over any actvities of Lessee in the premises. During the last 180 days of this Lease, Lessor may display a sign offering bee premises for sale or for lease, which sign may be affixed in a conspicuous place on the front of the premises. 14. SIGNS AND ADVERTISEMENTS: Lessee shall not install nor permit the installation of any signs in or upon the premises which are visible from the exterior thereof without the written approval of Lessor. All such signs shall be installed in accordance with the terms of such approval and in conformance with applicable laws and regulations and provisions of the Declaration of Covenants and Restrictions Affecting SOUTHLAKE. Lessee shall remove all signs from the premises at the termination of this Lease and shall repair any damage to the premises caused by its signs at as sole cost and expense. 15. LIABILITY: Lessee hereby relinquishes all claims, releases, assumes all risks and agrees to hold Lessor harmless from any liability for any damage done or occasioned by or from any plumbing, wiring, gas, water, steam, sprinkler system, equipment or other pipes, or the bursting, leaking or running of any tank, washstand, water closet, waste pipe or other articles in, above, upon or about the building or premises, or for damage occasioned from or by water, snow, or ice being upon, above or about the premises unless caused by the Page 4 - Defined Service Lease (SOUTHLAKE) 9IZM2 5 intentional act or omission of Lessor. Lessee also agrees to hold Lessor harmless from any claim, damage, liability or expense (inducing attorneys' fees) incurred by, claimed, or assessed against Lessor in any way occasioned by hazardous substances on the premises or by the negligent or intentional activities of Lessee during or in conjunction with, or arising from Lessee's occupancy of the premises pursuant to this Lease. Lessor and Lessee hereby expressly waive any cause of action or right of recovery which either may have hereafter against the other for any loss or damage to the leased premises, or to the contents thereof, from all claims and liabilities arising from or caused by any hazard chat could be covered by a standard fire insurance policy with extended coverage and "all risk" endorsement on the leased premises, or on the contents thereof, and each party hereto shall obtain a waiver from any insurance carrier with which it carrier insurance covering the leased premises, or the contents thereof, releasing its subrogation rights as against the other party, and upon request by either party evidence of said waiver shall be furnished by each party hereto to the other party. Lessee agrees to save and hold Lessor harmless from any claim, damage, liability, or expense arising from any injury, (including death) to persons or damage to property occurring in, on or about the premises arising out of the use or occupancy of the premises by Lessee. Lessee shall maintain in effect throughout the term of this Lease, general public liability insurance covering the premises, and including the Lessor as an additional insured, with combined single limits not less than $1,000,000.00. (SEE ADDITIONAL PARAGRAPH 15A.) All merchandise and property in or about the premises shall be at Lessee's sole duty and risk and Lessee does hereby now and forever relinquish all claims, release, and agree to hold Lessor harmless from any claims for damages thereto or any of same, howsoever caused. 16. DAMAGE BY CASUALTY: If, during the term hereof, or previous thereto, the premises or any building of which the premises are a part shall suffer damage by fire, explosion, providential means, or any other casualty to the extent that the premises or building cannot reasonably be repaired within 120 days after date of such damage, or to such an extent that under the then existing laws, orders, ordinances or other public requirements the same cannot be repaired to substantially the same form and with substantially the same materials as before such damage, then the term hereby created shall terminate as of the date of such damage and rent shall cease as of the date of such damage, with proportionate refund of any prepayment, on condition Lessee forthwith surrenders the premises to Lessor. If this Lease is not so terminated, then Lessor shall repair the premises as soon as practicable with due diligence, placing the same in as good condition as they were just before such damage, and rent shall abate pro rata and in proportion to untenantability of the premises from the time of such damage until restoration of the premises by Lessor. It is further agreed that the period for reconstruction shall be extended for such time during which strikes, riots, civil commotion, governmental intervention, acts of God, or any other contingency beyond Lessor's control shall delay the construction. In case of such damage, whether this Lease is thereby terminated or not, Lessee shall remove all of the rubbish and debris of Lessee's property within five (5) days after written request by Lessor, and if this Lease is not thereby terminated. Lessee shall not do anything to hinder or delay Lessor's work of repair, and will cooperate with Lesson such work. Lessor shall not be liable for inconvenience to Lessee by making repairs to any part of the premises or building, nor for the restoration of any improvements made by Lessee. nor for the restoration of any property of Lessee. Notwithstanding anything herein to the contrary in the event the holder of any indebtedness secured by a mortgage or deed of trust covering the premises requires that the insurance proceeds be applied to such indebtedness, then Lessor shall have the right to terminate this Lease by delivering written notice of termination to Lessee, whereupon all rights and obligations hereunder shall cease and terminate. 17. DEFAULT: If there be default in payment of any rent or in any other of Lessee's obligations hereunder or if the premises be abandoned or vacated, and if such default or condition shall continue after ten (10) days' notice, or thirty (30) days notice for non-monetary defaults, in writing, from Lessor to Lessee to make good such default or correct such condition, Lessor may, at Lessor's option, at any time thereafter while such default or condition continues, without further notice or demand, declare His Lease terminated and enter upon and repossess the premises free of this Lease; or Lessor may, at Lessor's option in the event Page 5 - Defined Service Lease (SOUTHLAKE) 9IZM2 6 the premises be abandoned or vacated, enter upon and repossess the premises without judicial proceedings, or in the event the premises are not abandoned or vacated Lessor may obtain possession of the premises by summary proceedings, such as by an action for rent and possession (it being understood that rent and possession is only an example of a summary proceeding and is not intended to limit the type of summary proceeding this right would extend to), Lessee hereby acknowledging that the repossession of the premises without judicial proceedings as aforesaid or the obtaining of possession by summary proceedings as aforesaid (and any subsequent judgment entered as a result of such a proceeding), shall not terminate the Lease and shall not absolve the Lessee from liability for rent for the remainder of the term; Lessee hereby acknowledging that in the event Lessor receives possession by abandonment, agreement or by summary proceeding, possession has been obtained and retained by Lessor as Agent of the Lessee and Lessor is authorized to relet the premises as Agent for the balance of the term of this Lease, for a shorter or longer term, at such rental as Lessor deems fit, and may receive the rents therefor, applying the same first to the payment of the expense of such reletting and second to the payment of rent due and to become due under this Lease, Lessee remaining liable for and agreeing hereby to pay Lessor any deficiency. Provided, however, if any such default be other than for non-payment of money and it would take more than to thirty (30) days to cure the same, Lessor shall not be entitled to terminate this Lease or enter upon the premises for such default if Lessee begins the cure of such default within said Thirty (30) days and prosecutes the cure thereof with due diligence to completion. If any proceedings under the present or any other Bankruptcy Code, including but not being limited to voluntary or involuntary straight bankruptcy proceedings, arrangements or reorganizations, be instituted by or against Lessee, or if a receiver or trustee be appointed for or ordered to dispose of Lessee's business or property, or if Lessee makes any assignment or conveyance for benefit of creditors, the same shall constitute a breach of this Lease and Lessor shall forthwith on such breach be entitled to collect damages therefor as provided by law, and, in addition thereto, Lessor shall, to the extent permitted by law, have the right of termination, entry and repossession as above, in this paragraph set forth. 18. EMINENT DOMAIN: If the premises or any substantial part thereof shall be taken by any competent authority under the power of eminent domain, or a conveyance thereof be made in lieu of or in anticipation of the exercise of such power, or if the premises or any substantial part thereof be acquired for any public or quasi-public use or purpose, the term of this Lease shall cease and terminate upon the date when the possession of said premises or the part thereof so taken shall be required for such use or purpose and without apportionment of the award, and Lessee shall have no claim against Lessor for the value of any unexpired term of this Lease. In said event, rent at the then current rate shall be apportioned as of the date of the termination. No money or other consideration shall be payable by the Lessor to the Lessee for the right of cancellation and the Lessee shall have no right to share in the condemnation award or in any judgment for damages caused by the taking. Nothing in this paragraph shall preclude an award being made to Lessee for loss of business or depreciation to and cost of removal of equipment or fixtures. 19. UTILITIES: Except as set forth in Paragraph 23 hereof, Lessee shall contrast in its own name and pay for all charges for water, sewer charges, gas, heat, oil, electricity, fuel, telephone and other utilities used in or serving the premises during the term of this Lease. 20. MECHANIC'S LIENS: Lessee will not permit any mechanic's liens, or other liens, to be placed upon the premises or any building improvement thereon during the term hereof, and in case of the filing of any such lien, Lessee will promptly pay same; provided, however, that Lessee shall have the right to contest the validity or amount of any such lien upon posting security with Lessor which in Lessors sole reasonable judgment is adequate to pay and discharge any such lien in full if held valid. If Lessee fails to pay or otherwise discharge any lien after thirty (30) days' notice from Lessor that a lien has been filed, Lessor shall have the right and privilege at Lessor's option of paying the same or any portion thereof without inquiry as to the validity thereof, and any amounts so paid, including expenses and interest, shall be immediately due by Lessee to Lessor and shall be paid promptly upon presentation of bill thereof. 21. MORTGAGES AND ESTOPPEL CERTIFICATES: This Lease shall be subject and subordinate to any mortgage or deed or trust now or at any time hereafter constituting a lien or charge upon the premises or the improve- Page 6 - Defined Service Lease (SOUTHLAKE) 9IZM2 7 ments situated thereon. Lessee shall at any hereafter on demand execute any instruments, releases or other documents which may be required by any such mortgagee for the purpose of subjecting and subordinating this Lease to the lien of any such mortgage. (SEE ADDITIONAL PARAGRAPH 21A.) Lessee shall at any time and from time to time, upon not less than (10) days' prior request by Lessor, execute, acknowledge and deliver to Lessor a statement in writing certifying that (i) this Lease is unmodified and in full force and effect (or if there have been modifications that the same is in full force and effect as modified and identifying the modifications, (ii) the dates to which the base rent and other charges have been paid, and (iii) so far as the person making the certificate knows, Lessor is not in default under any provisions of this Lease (or if there are defaults, specifying the defaults). It is intended that any such statement may be relied upon by any person proposing to acquire Lessor's interest in this Lease or the premises, or any prospective mortgagee of, or assignee of any mortgage upon such interest or the premises. 22. SECURITY DEPOSIT: Lessee agrees to deposit on the date hereof the sum of Fourteen Thousand One Hundred Eighty-Four and 00/100 Dollars ($14,184.00), which sum shall be held by Lessor, without obligation for interest, as security for the performance of Lessee's covenants and obligations under this Lease; it being expressly understood that such deposit is not an advance rental deposit or a measure of Lessor's damages in case of Lessee's default. Upon the occurrence of any event of default by Lessee, Lessor may, from time to time, without prejudice to any other remedy provided herein or provided by law, use such fund to the extent necessary to make good any such default, or any damage, expense, or liability caused by such default, and Lessee shall promptly pay to Lessor on demand the amount as applied in order to restore the security deposit to its original amount. Failure of Lessee to restore the security deposit, as set forth above, within ten (10) days from demand by Lessor shall constitute an act of default under this Lease. If Lessee is not then in default hereunder, the balance of such deposit shall be returned by Lessor to Lessee upon termination of this Lease and return of the premises to Lessor in accordance with the terms thereof. 23. DEFINED SERVICES BY LESSOR TO LESSEE: It is agreed chat for purposes of this Lease, Lessee occupies 36.14% of the floor space in the building of which the premises are a part (Lessee's percentage) and 11.35% of the floor space in the project in which the premises are located (Lessee's CAM percentage). (a) Lessor shall furnish and pay for water, fire sprinkler charges and normal trash removal used in and servicing the building of which the premises are a part and Lessee shall reimburse Lessor for Lessee's usage of said services. If Lessee's usage reasonably exceeds normal usage in the building as measured by floor space occupied by Lessee, Lessor may levy an appropriate surcharge to properly reflect Lessee's usage of said utilities and services. (b) Lessor shall also furnish other services for the benefit of Lessee pertaining to the building and the project of which the premises are a part such as landscaping and paving maintenance, maintenance to project and tenant signage, snow removal, exterior lighting, and charges levied pursuant to the Declaration of Covenants and Restrictions to which the premises are subject and Lessee shall reimburse Lessor for Lessee's CAM percentage of such costs incurred by Lessor on Lessee's behalf. It is agreed that Lessee's payment to Lessor for paving maintenance during the original term of this Lease shall be $ 774.00 annually, payable as set forth in 23(f) below. Lessor reserves the right to equitably adjust said payment during extensions of said original term. In consideration of such payment, Lessor agrees to be responsible for all paving maintenance in the project of which the premises are a part and Lessee shall bear no additional cost for paving maintenance unless the same is occasioned by Lessee's abuse of paved areas serving the premises. Page 7 - Defined Service Lease (SOUTHLAKE) 9IZM2 8 (e) It is specifically understood that Lessor's performance of any of the defined services set forth in this Paragraph 23 shall not extend to the assumption of any of Lessee's responsibilities under this Lease related to hazardous substances as the same are defined and covered throughout this Lease. (f) Promptly following execution of this Lease, and on or about the commencement of each calendar year during the term of this Lease, Lessor shall notify Lessee of the estimated annual amount of Lessee's cost of the reimbursements for defined services called for in this Paragraph 23 and including Paragraphs 7, 8, and 9 hereof, and Lessee shall pay one-twelfth (1/12) of said amount as additional rent with each monthly installment of basic rent due under this Lease. As near as possible following the end of each calendar year, Lessor shall furnish Lessee with a statement of Lessee's reimbursements called for in this Paragraph 23 and Lessee shall pay the balance due, if any, upon receipt of statement therefor, or shall receive credit in the coming year for any excess paid by Lessee during the previous year. 24. WAIVER: A waiver by Lessor of any default or breach hereunder shall not be construed to be a continuing waiver of such default or breach, nor as a waiver or permission, expressed or implied, of any other or subsequent default or breach. All waivers must be in writing and no course of conduct shall establish a custom or confer any rights upon Lessee. 25. NOTICES: Unless otherwise designated by like notice in writing by either party to the other, notices required herein shall be sent by registered or certified mail as follows: To Lessor: Lenexa Industrial Park, Inc. 1220 Washington Kansas City, Missouri 64105 To Lessee: Innovex Inc. 11250 Corporate Avenue Lenexa, Kansas 66219 Attn: Life Starbird Notices so mailed shall be deemed duly given upon mailing, postage prepaid, addressed as above indicated. 26. SUCCESSORS: All of the terms, covenants and conditions of this Lease shall apply and inure to the benefit of, and be binding upon the parties hereto, and upon their respective successors in interest and legal representatives, except as otherwise provided herein. 27. QUIET POSSESSION: Lessor covenants with Lessee that Lessee, on paying the rent herein required to be paid and performing the covenants herein contained, shall and may peaceably and quietly have, hold and enjoy the premises during the term of this Lease. 28. PROCUREMENT OF THIS LEASE: It is understood by the parties hereto that this Lease has been negotiated by The Zimmer Companies, Inc., hereinafter called Realtor. It is understood that said Realtor has acted in the capacity of Agent for the Lessor and both Lessor and Lessee acknowledge that said Realtor and no other was the procuring cause of this Lease. Lessor agrees to pay said Realtor, and no other, a commission for services rendered herein in accordance with written agreement between Lessor and Realtor named herein. Page 8 - Defined Service Lease (SOUTHLAKE) 9IZM2 9 It is understood that the above named Realtor, or members of the above named Realtor firm, have a financial interest in the ownership of the premises covered by this Lease. 29. ATTORNEY'S FEES: If any action at law or in equity shall be brought to enforce any of the covenants, terms or conditions of this Lease, the prevailing party shall be entitled to recover from the other party, as part of the prevailing party's costs, reasonable attorney's fees, the amount of which shall be fixed by the court, and shall be made a part of any judgment or decree rendered. 30. DEFINITIONS: (a) HAZARDOUS SUBSTANCE "Hazardous Substance(s)" shall mean any substance which at any time shall be listed as "hazardous" or "toxic" under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. Section 9601 et seq., as amended and the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. Section 6901 et seq., as amended, or in the regulations implementing such statutes, or which has been or shall be determined at any time by any agency or court to be a hazardous or toxic substance regulated under any other applicable laws (as hereinafter defined). The term "hazardous substance(s)" shall also include, without limitation, raw materials, building components, the products of any manufacturing or other activities on the premises, wastes, petroleum products, or special nuclear or by-product material as defined by the Atomic Energy Ad of 1954, 42 U.S.C. Section 3011, et seq., as amended. (b) APPLICABLE LAW(S) "Applicable Law(s)" shall include, but shall not be limited to, CERCLA, RCRA, the Federal Water Pollution Control Act, 33 U.S.C. Section 1251 et seq., the Clean Air Act, 42 U.S.C. Section 7401 et seq., as amended, and the regulations promulgated thereunder, and any other federal, state and/or local laws or regulations, whether currently in existence or hereafter enacted or promulgated, that govern or relate to: (1) The existence, cleanup and/or remedy of contamination of property; (2) The protection of the environment from spilled, deposited or otherwise emplaced contamination. (3) The control of hazardous or toxic substances or wastes; or (4) The use, generation, discharge, transportation, treatment, removal or recovery of hazardous or toxic substances or wastes, including building materials 31. LEASE CONSTITUTES ENTIRE CONTRACT: Each party to this Lease acknowledges that this Lease constitutes all of the agreements between the parties hereto, and that no representations, warranties, or other covenants are included except as set forth herein, and this Lease shall not be recordable, but a "Memorandum of Lease" in usual and customary form will be executed and acknowledged by the parties, upon request of either party, which may be recorded. Page 9 - Defined Service Lease (SOUTHLAKE) 9IZM2 10 IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease Agreement or have caused it to be executed by their respective authorized representatives the day and year first above written. Each of the persons executing this Lease represent that they are authorized to execute the same on behalf of the party for whom they have executed hereafter. INNOVEX INC. /s/ Janet H. Parkey - ---------------------------- ----------------------------------------------------- By: /s/ Janet H. Parkey Lessee ----------------------------------------------------- Title: Vice Pres. - Finance & Support Services LENEXA INDUSTRIAL PARK, INC. /s/ Hugh J. Zimmer - ---------------------------- ----------------------------------------------------- By: Hugh J. Zimmer Lessor
For the provisions of Paragraph 3, POSSESSION AND CONDITION AT BEGINNING OF TERM, and Paragraph 28, PROCUREMENT OF THIS LEASE, only, the undersigned Realtor is made a party to this Contract. THE ZIMMER COMPANIES, INC. /s/ Hugh J. Zimmer ---------------------------- -----------------------------------------------------
This lease consists of 12 pages, together with attached Exhibits "A", "B", "B-1.1", B-1.2", "B-2", "C" and "D". Page 10 - Defined Service Lease (SOUTHLAKE) 9IZM2 11 ADDITIONAL PARAGRAPHS TO LEASE LESSEE: INNOVEX INC. LESSOR: LENEXA INDUSTRIAL PARK, INC. 1A. TERM: Lessee is hereby granted the option of terminating this Lease Agreement at one time during the term hereof. The following termination schedule shall apply and shows the date in which written notification of Lessee's desire to terminate shall be delivered to Lessor along with the effective date of the termination, as well as the corresponding termination penalty which shall be paid by Lessee to Lessor on the effective date of said termination.
Notification Date Effective Date Termination Penalty By Lessee to Lessor of Termination Paid by Lessee to Lessor ------------------- -------------- ------------------------ June 30, 1998 December 31, 1998 $56,736.00
1B. TERM In the event Lessor is unable to deliver possession of the premises to Lessee, with Lessor's work as set forth on Exhibit "B" substantially completed, by March 1, 1996, Lessee shall have the right to terminate this Lease by notice thereof to Lessor. Lessor will use its best efforts to prepare the Northeast area of the space including the reception area and restrooms in a tenantable condition by January 1,1996. 2A. RENTAL: Basic rental for the premises shall be the following:
Period $/Month -------------------------------- ------------- January 1, 1996 - June 30, 1996 $ 9,167.00 July 1, 1996 - December 31, 1996 $11,458.00 January 1, 1997 - June 30, 1997 $12,830.00 July 1, 1997 - December 31, 2000 $14,184.00
4A. USE OF PREMISES: Notwithstanding the foregoing, Lessee shall have the right to use hazardous substances in insubstantial amounts, in the ordinary course of the operation of an office. 5A. PUBLIC REQUIREMENTS: It is expressly acknowledged and agreed by the Lessor that the responsibility for and cost associated with causing the exterior common areas of the building and property to comply with Title III of the Americans with Disabilities Act ("ADA") are the Lessor's. 11A. MAINTENANCE BY LESSEE: Notwithstanding the foregoing, Lessee's obligations under this paragraph shall be limited to such mechanical equipment, utility lines and other facilities which serve the premises exclusively. 15A. LIABILITY: Lessor agrees to save and hold Lessee harmless from any claim, damage, liability or expense arising from any injury (including death) to persons or damage to property occurring in, on or about the premises, to the extent caused by or arising out of the activities of Lessor, its employees, agents, contractors, servants or invitees. 21A. MORTGAGES AND ESTOPPEL CERTIFICATES: As a condition of any subordination of this Lease to any mortgage or deed of trust at any time hereafter constituting a lien or charge upon the premises, or the improvements situated thereon, the holder of any such mortgage or deed of trust shall be required to agree in writing with Lessee that so long as Lessee is not in default of its obligations under this Lease beyond the period, if any, provided herein for the cure of such default, Lessee's possession of the premises and its estate under this Lease shall not be disturbed by reason of a foreclosure of such mortgage or deed of trust or conveyance in lieu thereof. 32. PREFERENTIAL RIGHT TO LEASE ADJACENT SPACE: Lessee is granted a preferential right to lease the 12,025 rentable square feet which are currently under lease to VisualTools, Inc. by Lease dated February 10, 1993 and are Page 11 - Defined Service Lease (SOUTHLAKE) 9IZM2 12 adjacent to the premises in the building of which the premises are a part as the same may become available for lease to third parties and occupancy from time to time during the term of this Lease. At such time as said adjacent floor space becomes available for lease, Lessor shall notify Lessee of said availability stipulating the amount of space available, the rental, and other terms by which Lessor is agreeable to lease said space. For a period of twenty (20) days following receipt of said notice, Lessee shall have the right to lease said adjacent space upon the terms offered, or upon such other terms as Lessor and Lessee may agree. If Lessor and Lessee have failed to execute a lease covering said adjacent space within twenty (20) days from the date of Lessor's notice of availability, this preferential right shall automatically expire without further notice and Lessor shall have the right to lease said adjacent space to others without regard to this preferential right except if Lessor is willing to accept a cash rental less than ninety percent (90%) of the cash rental specified in Lessor's notice to Lessee. Lessor shall then give a second notice to Lessee specifying said revised terms and Lessee shall have an additional ten (10) day period following receipt of said second notice in which to lease said adjacent space upon the revised terms offered. This preferential right granted to Lessee is subject to the provisions of a Lease between Lessor and Bankline MidAmerica, Inc., dated February 25, 1991, which grants to Bankline MidAmerica, Inc. a preferential right to lease space which is adjacent to their premises on the east. 33. OPTION TO RENEW: Provided Lessee is not then in default of any of the provisions hereunder and this Lease has not been terminated or canceled under any other provisions hereof, it is agreed that the Lessee shall have the option to extend the original term hereof for one (1) additional and consecutive five (5) year term commencing with the end of the original term. The five (5) year term shall be referred to hereinafter as the extended term. In the even Lessee exercises this option, all terms and conditions of this Lease shall be applicable to the extended term except for basic rental, which shall be adjusted as set forth hereafter. In the event Lessee wishes to extend the term as set forth above, Lessee shall give written notice to Lessor of its intent to so extend at least six (6) months prior to the expiration of the original term. Basic rental for the extended term shall be at the rate of One Hundred Ninety Five Thousand Seven Hundred Forty Four and 00/100 Dollars ($195,744.00) annually, payable in equal monthly installments of Sixteen Thousand Three Hundred Twelve and 00/100 Dollars ($16,312.00). Page 12 - Defined Service Lease (SOUTHLAKE) 9IZM2 13 [THE TECH CENTER AT SOUTHLAKE MAP] 14 EXHIBIT "B" Southlake Tech Center #1 15705 College Blvd Lenexa, Kansas 66219 [FLOOR PLAN] 15 [FLOOR PLAN] EXHIBIT B1 [SPACE PLAN] 16 [FLOOR PLAN] EXHIBIT B-1.1 [WALL FINISHES] 17 [LEGEND] [FLOOR PLAN] EXHIBIT B-1.2 [ADDITIONAL ELECTRICAL OUTLETS] 18 EXHIBIT B-2 Outline Specifications for Innovex Southlake Tech Building #1 15705 College Blvd. Lenexa, Kansas 66219 - - The Lessor will procure all necessary building permits as required by the City of Lenexa in order to expedite occupancy for the Lessee. - - The premises, prior to occupancy will be cleaned and left in a state that will allow the Lessee to occupy the premises. All carpeted areas will be vacuumed and cleaned as required. All restrooms and public areas will be cleansed and sanitized. All VCT flooring will be cleaned and waxed. All interior windows will be cleaned. All walls and doors/frames will be cleaned as required. All cleaned as required. - - Demolition of existing walls as noted on the attached Exhibit B will be removed by Lessor. Areas requiring repair and patch back will be performed in a good workmanlike manner and in a standard conforming to good quality commercial construction. - - Wood blocking and backing as required will be installed. - - Demolition areas receiving new acoustical ceiling will have 3-1/2 blanket insulation installed. - - All new roof penetrations for new mechanical equipment installed by the Lessor will be performed as required by the roofing manufacturer to insure proper warranty continuance. - - All existing and new doors installed will be equipped with lever style door hardware. - - Drywall surfaces requiring patching and repair will be performed prior to final wall finish. Final wall finishes shall be installed as outlined on Exhibit B-1.1. Wallcovering shall be Koroseal Palais Antique 8921-10 Walls as indicated to receive paint shall he painted Sherwin Williams Interior Latex Paint. Walls and door frames shall be painted with SW 1305. - - New acoustical ceilings installed will be standard 2x4x5/8" non-directional ceiling tile as manufactured by Armstrong or equal. Acoustical grid system shall be Armstrong Series 200. - - New 4" rubber cove base with toe will be installed on all new and existing partitions. Color to be #64 Smoke. - - Floor areas to receive VCT shall be the rear vestibule area, telephone, room, janitor closet, and breakroom. Tile shall be 12x12x1/8" Armstrong or equal. - - Carpeted areas will he furnished with new 26 oz. Level Loop Direct glue carpet as manufactured by Holleytex. Carpet shall be Holleytex 730 Blue Suede. Areas with existing ceramic file or quarry tile shall remain. - - The existing fire protection system will be modified to accommodate the revised floor plan and shall be performed in conformance with NFPA and the City of Lenexa Codes Enforcement and Fire Department. - - The base HVAC system will be modified to accommodate a Parker Control Zoning System. Ten zones of control will be included. The existing demolished area will have a new 5 ton combination roof top unit installed. The existing will be modified to be in conformance with ASHRAE standards for this location. - - All existing light fixtures will be modified with T8 lamps with electronic ballast, and paracube lenses. All lighting in general open office areas will be controlled by motion sensor devices. Emergency and exit lights will be installed as required by building codes and the fire department. New electrical devices to be installed shall be installed as indicated on Exhibit B-1.2. Exact locations shall be determined by Lessee prior to installation. 19 EXHIBIT"C" NO EXCEPTIONS. 20 Exhibit "D" DECLARATION WITH RESPECT TO COVENANTS AND RESTRICTIONS AFFECTING SOUTHLAKE [SOUTHLAKE LOGO] 21 DECLARATION WITH RESPECT TO COVENANTS AND RESTRICTIONS AFFECTING SOUTHLAKE THIS DECLARATION is made as of this 1st day of April, 1986 by LENEXA INDUSTRIAL PARK, INC., a Kansas Corporation, (hereinafter called Declarant). WHEREAS, this Declaration relates to a tract of land situated in the City of Lenexa, County of Johnson, State of Kansas, legally described as set forth in Exhibit 1 hereto, fee simple title to which is vested in Declarant, hereinafter referred to as the Entire Tract; and, WHEREAS, Declarant proposes to develop said tract as an integrated business development for office, commercial and limited industrial purposes, and desires to fix and establish certain covenants, conditions and restrictions upon and subject to which the Entire Tract, or any part thereof, shall be improved, held, leased, sold and/or conveyed. NOW, THEREFORE, Declarant, as owner of the land described in Exhibit 1 hereto, for itself and its successors and assigns, hereby declares as follows: ARTICLE 1 CERTAIN DEFINITIONS 1.01 The following terms shall, except where the context otherwise requires, have the respective meanings hereinafter specified: (a) The term "BUILDING" shall mean any structure which (i) is permanently affixed to the land, (ii) has one or more floors and a roof, and (iii) is bounded by either an open area or the lot lines of a Building Site. A Building shall not include such structures as billboards, fences, or radio towers, or structures with interior surfaces not normally accessible for human use, such as tanks, smokestacks, or similar structures. (b) The term "BUILDING LINE" shall have the meaning given to such term in Section 4.01 hereof. (c) The term "BUILDING SITE" shall mean a portion of the Entire Tract on which a Building is erected or on which a Building could be constructed within the terms of this Declaration. If a Building is one of a group of Buildings constructed upon a contiguous portion of the Entire Tract according to an integrated plan approved by the Trustees, then the portion of the Entire Tract utilized for such development may be designated a Building Site for purposes of these Restrictions. (d) "COMMON PROPERTIES" shall mean and refer to those areas of land shown on any recorded plat or its equivalent, or any area of land designated by recorded document in Johnson County, Kansas, comprising a portion of the Entire Tract which are identified thereon as "Common Properties of the Southlake Association." (e) The term "DECLARANT" shall mean Lenexa Industrial Park, Inc., a Kansas corporation, its successors and assigns. (f) The term "FLOOR AREA" shall mean the aggregate area of all floors within all Buildings erected on any Building Site. Each floor shall be measured to the Page 2 22 ARTICLE 1 CERTAIN DEFINITIONS 1.01 (f) exterior side of each outside wall where such floor extends to an outside wall and shall be measured to the interior side of the supporting pillars or walls where such floor does not extend to an outside wall. The term "Floor Area" shall not include truck ramps or shipping or delivery areas situated outside any Building, improvement or other structure. (g) The term "PERSON" shall mean an individual, corporation, trust, partnership or unincorporated organization. (h) The term "RECORD OWNER" shall mean the owner at the time of any part of the Entire Tract as shown on the records of the Recorder for the County of Johnson, State of Kansas, as of the date of any action to be taken by such Record Owner under the provisions of this Declaration, and shall also mean and include any person designated in writing, whether in a lease or otherwise, by any such Record Owner to act in the manner provided herein with complete authority and in the place of such owner in the matter for which action is taken. (i) The term "RESTRICTIONS" shall mean the covenants, conditions and restrictions upon and subject to which the Entire Tract, or any part thereof, shall be improved, held, leased, sold and/or conveyed, all as hereinafter set forth. (j) The term "SIGN" is any writing (including letter, word, or numeral); pictorial representation (including illustration or declaration); emblem (including device, symbol or trademark); flag (including banner or pennant); or any other figure of similar character, which (i) is a structure or any part thereof, or is attached to, painted on or in any other manner represented on a Building or other structure, (ii) is used to announce, direct attention to, or advertise, and (iii) is visible from outside a Building. A Sign shall include writing, representation, or other figure of similar character within a Building only when regularly visible from outside the Building. The following shall not he deemed to be a Sign within the meaning as hereinabove set forth: (i) signs of a duly constituted governmental body, including traffic or regulatory devices, legal notices or warnings; (ii) small signs displayed for the direction or convenience of the public, including signs which identify restrooms, freight entrances or the like, but these shall also be subject to the approval of the Trustees. (k) The term "STRUCTURE" shall mean any physical object temporarily or permanently affixed to the land, except grass, shrubbery, trees or other landscaping. (1) The term "SUBSIDIARY" shall mean any corporation at least a majority of the outstanding voting stock of which shall at the time he owned by a Record Owner. (m) The term "TRUSTEE" shall mean those persons selected and elected as members of the Board of Trustees as hereinafter provided. (n) The term "UNAVOIDABLE DELAYS" shall mean strikes, lockouts, acts of God, casualty, boycotts, governmental restrictions, war, national emergency, inability to obtain labor or materials or other cause beyond the reasonable control of the Record Owner or the person claiming under such Record Owners; provided, however, lack of funds or financing shall not be deemed an Unavoidable Delay. Page 3 23 ARTICLE 2 GENERAL PURPOSES OF RESTRICTIONS 2.01 The Entire Tract is hereby subjected to the Restrictions for the following purposes: (a) To encourage development in a manner which is free from danger of fire, explosion, toxic and noxious matter and other hazards, and from offensive noise, vibration, smoke, dust, odorous matter and other objectionable influences. (b) To protect the Entire Tract against congestion by limiting the bulk of Buildings in relation to the land around them and to one another, and providing for off-street parking and loading facilities. (c) To promote the proper and most desirable use and development of the various parts of the Entire Tract in accordance with a well considered plan. (d) To conserve the value of Building Sites and Buildings of Owners in the Entire Tract. (e) To protect against construction of improvements on Building Sites which are of poor design or quality and to encourage construction of improvements utilizing good quality and attractive material and good architectural and planning standards, compatible with other improvements in the Entire Tract. (f) To ensure compliance with all applicable federal, state and local laws and regulations. (g) To provide for the continuing care and maintenance of all land, Buildings and Structures in the Entire Tract so that Southlake may be, and continue to be, a location which provides an aesthetically pleasing workplace for Record Owners, their tenants, employees and invitees. ARTICLE 3 REVIEW AND APPROVAL OF IMPROVEMENTS 3.01 No Building or Structure, or other improvement including, but not limited to, any signs, poles or towers, paved areas or fences shall be erected, placed or altered on any Building Site in the Entire Tract until the plans and specifications therefor, and a plot plan showing the location thereof on the particular Building Site and a landscaping plan shall have been submitted to and approved in writing by the Trustees. In reviewing such plans, specifications and plot plans, the Trustees shall give consideration to conformity and harmony of exterior design with existing Buildings, Structures and other improvements in the Entire Tract, and to the location of existing Buildings, Structures and other improvements on the Building Site, giving due regard to the anticipated use thereof, as the same may affect adjoining Buildings, uses and operations, and as to location of such proposed Buildings, Structures and improvements with respect to topography, grade and finished ground elevation. In the event the Trustees fail to approve or disapprove such plans, specifications, and plot plans, in writing, within sixty (60) days after the same have been submitted to the Trustees, then such plans, specifications, and plot plans shall be deemed to have been approved, provided, however, that lack of approval by the Trustees shall not waive any express covenant contained herein. 3.02 Neither the Trustees, nor Declarant, nor any member, employee or agent of any of them shall be liable to any Record Owner or tenant or to anyone else submitting plans for approval, or to any other action in connection with its or their duties hereunder. Page 4 24 ARTICLE 3 REVIEW AND APPROVAL OF IMPROVEMENTS 3.02 Likewise, anyone so submitting plans to the Trustees for approval, by submitting such plans, and any person when he or it becomes a Record Owner or tenant, agrees that he or it will not bring any action or suit to recover any damages against the Trustees, Declarant or any member, employee or agent of any of them, arising or in any way connected with this Declaration or the approval or failure to approve any plans submitted by anyone. 3.03 After approval of aforementioned plans and specifications by the Trustees, no deviation shall be made during construction which would materially change the scope of the improvements, and no changes in exterior quality or appearance of the improvements shall be made without written approval of the Trustees. 3.04 The Trustees may require all or any part of the following information be submitted to them in connection with their consideration of any plans, submittal or application: (a) Architectural plans for the proposed building or structure, which shall include outline specifications designating materials and mechanical, electrical and structural systems, and samples of external colors. (b) A site plan for traffic engineering analysis, showing the location and design of buildings, driveways, driveway intersections with streets, parking areas, loading areas, maneuvering areas and sidewalks designated. (c) A grading plan and planting plan, including screen walls and fences for analysis of adequacy of visual screening, erosion control, drainage and landscape architectural design, together with plan for automatic underground sprinklering system. (d) A site plan showing utilities and utility easements. (e) Plans for all signs to be erected, including details of materials, location, design, size, color and lighting. (f) Plans showing exterior illumination of the Building, as well as parking and loading areas. (g) A description of the proposed business operation in sufficient detail to permit judgment (i) of the extent of any noise, odor, glare, vibration, smoke, dust, gases, hazard, radiation, radioactivity or liquid wastes that may be created; and (ii) as to whether or not the proposed operation includes only uses permitted under the terms of any existing zoning ordinances and this Declaration and other laws and governmental regulations. (h) Any other information as may he reasonably requested by the Trustees in order to insure compliance with the covenants contained herein. 3.05 The Trustees shall have the right to approve a variance in conformance to these Restrictions which does not, in the sole reasonable judgment of the Trustees, violate the spirit and intent of the Restrictions. 3.06 Once The Trustees have approved plans and specifications for a Building or other Structure and such Building or other Structure has been constructed in conformity with PAGE 5 25 ARTICLE 3 REVIEW AND APPROVAL OF IMPROVEMENTS 3.06 such plans and specifications, the approval shall not be withdrawn and such Building or other Structure shall thereafter be deemed to be in compliance with these Restrictions as then in effect or thereafter amended. ARTICLE 4 BUILDING AND SETBACK LINES 4.01 Except as hereinafter provided, no Building or other Structure shall at any time be erected on a Building Site nearer than one hundred feet (100') to the right-of-way line of College Boulevard, or to Santa Fe Trail Drive, or nearer than fifty feet (50') to the right-of-way line of any other street adjoining the Building Site. Likewise, no Building or other Structure shall be nearer than thirty feet (30') to any side boundary line or rear boundary line of such Building Site, except as provided herein. The foregoing are designated as a Building Line. 4.02 No parking or loading areas nor vehicle maneuvering areas shall at any time be constructed or maintained nearer than thirty feet (30') to the right-of-way line of any street adjoining the Building Site nor nearer than fifteen feet (15') to any other side or rear boundary line of a Building Site, but the same may be permitted on other portions of a Building Site between the property line and the Building Lines. 4.03 Incidental structures, such as flagpoles, light standards, sign standards, meter pits, fire hose houses, sidewalks, patios and similar accessory Structures, may be permitted between property lines and Building Lines upon the written approval of the Trustees. 4.04 Except as provided above, the area between property lines and Building Lines shall be used for landscaped areas, lawn, driveways to parking and loading areas, and walks in accordance with other provisions of this Declaration. ARTICLE 5 PARKING AND LOADING 5.01 No parking of automobiles, trucks, trailers, or other vehicles will be permitted on any public or private streets in the Entire Tract, and it will be the responsibility of each Record Owner to provide sufficient parking and loading facilities on its Building Site at least to the minimum standards set forth herein, and each Record Owner shall be responsible for compliance with the provision of this Article by its employees, customers, visitors, invitees, and motor carriers serving the Building Site. Each Record Owner shall keep available on its Building Site paved areas, or land for future permitted paved areas, at least as set forth below: (a) Four (4) parking spaces per thousand (1,000) square feet of Floor Area devoted to office, administrative, or similar purposes. (b) Four (4) parking spaces per thousand (1,000) square feet of Floor Area devoted to retail or commercial purposes. (c) Two (2) parking spaces per thousand (1,000) square feet for Floor Area devoted to distribution or manufacturing purposes. 5.02 No loading dock or loading door used for the frequent receipt or shipment of goods or materials shall be erected fronting on any public street without the written permission Page 6 26 ARTICLE 5 PARKING AND LOADING 5.02 of the Trustees. Any loading docks or loading doors so permitted shall be constructed so that any exposed sides of a loading space so created shall be appropriately and effectively screened by landscaping or otherwise and to the extent considered reasonable by the Trustees. The front of the loading space so created shall be screened by landscaping or berms so as to minimize view from public streets and adjacent Building Sites as determined by the Trustees. 5.03 All portions of any Building Site used for driveways, parking areas and loading areas shall be paved with a dustfree, all-weather surface at least equal to the required specifications of the City of Lenexa and shall be kept in a good condition and state of repair. 5.04 With respect to any Building devoted to industrial purposes and involving the frequent loading and unloading of products and materials at the Building Site on which such Building is erected, the Record Owner shall provide, or reserve land for future provision, off-street loading space on the basis of space for loading and unloading one (1) truck for the first ten thousand (10,000) square feet of Floor Area devoted to such industrial purposes and space for loading and unloading one (1) additional truck for each succeeding twenty thousand (20,000) square feet of Floor Area devoted to such industrial purposes. A truck loading space shall have a minimum horizontal width of eleven feet six inches (11' 6"), a minimum depth of sixty feet (60') and a minimum vertical clearance of fourteen feet (14'). ARTICLE 6 BUILDING CONSTRUCTION 6.01 All Buildings erected on a Record Owner's Building Site shall be masonry construction or its equivalent, or better as determined by the Trustees. 6.02 Exterior walls of Buildings shall be finished with face brick, stone, modern metal paneling with enduring finish, glass, concrete panels painted or finished with a permanent and attractive surface, or their equivalent, as determined by the Trustees. With the written permission of the Trustees, exterior walls of Buildings not facing streets may be constructed of painted concrete blocks, provided returns of twenty feet (20') are constructed from walls facing streets of the same material as the material on walls facing streets. 6.03 The improvements on each Building Site shall include a flagpole flying the American flag or the flag of national origin of the occupant of a Building on said Building Site. 6.04 The exterior of all Buildings on a Building Site shall be illuminated according to a plan approved in writing by the Trustees. 6.05 In the event that any Building or other improvement on a Building Site is to be constructed or otherwise improved with an exposed metal roof, such as a standing seam metal roof or similar installations, the Trustees may require that said roof be finished with an enduring finish in a color approved by the Trustees to achieve an aesthetically pleasing appearance of said roof from other portions of the Entire Tract. Page 7 27 ARTICLE 7 LANDSCAPING AND MAINTENANCE OF GROUNDS AND BUILDINGS 7.01 The maintenance of all land, Buildings and other Structures in the Entire Tract is the continuing responsibility and obligation of each Record Owner and each of the same covenant and agree with the other Record Owners and the Trustees to keep and maintain the same in accordance with the provisions of this Declaration. The standards of maintenance of all improvements in the Entire Tract shall be determined by the Trustees in their sole reasonable judgment and shall be based upon the terms and provisions of these covenants and the intent of these covenants to create and maintain a modern and prestigious business park consistent with the provisions of Article 2 hereof. (a) All land areas between required Building Lines and property lines (including street rights-of-way adjoining the same) of a Building Site which has been improved with a Building, not used for drives, walks or parking areas, must be attractively landscaped and maintained as lawn and landscaped areas. Weeds and undergrowth must be kept mowed to a height of not more than twelve inches (12") on all other unimproved land areas. Common Areas shall he kept in a clean and orderly condition as determined by the Trustees and in accordance with the provisions of Article 16 hereof. (b) No trash, debris or litter shall be permitted on any Building Site and it shall be the responsibility of each Record Owner to conduct its business in a manner which will not result in the same being generated on its or other Building Sites. (c) Exterior surfaces of Buildings, Structures and other improvements, including all paved areas, must be kept in a good condition and state of repair and otherwise in conformity with the intent of these Restrictions. Said exteriors shall be maintained and renewed or replaced as necessary to keep the same consistent with the plans therefore originally approved by the Trustees. Color or finish of exterior surfaces shall not be changed except as the same may be approved by the Trustees. 7.02 Improved Building Sites shall be landscaped in accordance with a plan submitted to and approved in writing by the Trustees; and no tenant or Record Owner shall occupy the Building or Structure until such plan, together with adequate provisions for implementing the same, has been so approved. The plan shall include the use of conifers and tall evergreens, particularly in the screened areas defined in Article 5.02 above, as well as in other areas of the site that require plantings. Owners are urged to also provide groupings of conifers and tall evergreens in areas between property lines and Building Lines along streets and abutting Common Properties to provide year round screening in these areas. Minimum size of trees to be installed upon improved Building Sites at the time of initial or replacement planting shall be as follows: Shade Trees- 2-2 1/2" calipers Flowering and ornamental trees - 5-6' high Conifers - 5-6' high Upright evergreens - 4' high 7.03 It is the intent of Declarant that landscaping shall be provided in a manner and to an extent to properly compliment the building improvements on a site and to properly screen parking and loading areas. Initial planting, exclusive of sodding, seeding, and Page 8 28 ARTICLE 7 LANDSCAPING AND MAINTENANCE OF GROUNDS AND BUILDINGS 7.03 lawn sprinkler system shall be included at a cost or value of not less than two percent (2%) of the estimated cost of building and other improvements up to $250,000; and one percent (1%) of the estimated cost over $250,000 and less than $500,000; and one-half percent (1/2%) for any cost or value over $500,000. 7.04 The landscape development, having been installed, shall be maintained by the Record Owner or tenant of the Building Site in a neat and adequate manner, which shall include the mowing of lawns, trimming of hedges, fertilizing, watering when needed, and removal of weeds from planted areas on Record Owner's Building Sites and public rights-of-way adjacent thereto. Maintenance of the landscaping development shall include replacement of all plant material included in the approved landscaping plan, as well as replacement of any street trees on or adjacent to a Building Site originally provided by Declarant. 7.05 Installation and utilization of an automatic underground lawn and landscape watering system is required for each Building Site which has been improved with a Building pursuant to this Declaration. Said system shall be designed so as to properly water all lawn and landscaped areas of a Building Site. The Trustees may waive the installation of a watering system in areas of a Building Site other than between Building Lines and property lines if such area is held for the expansion of a Building or parking areas. Such a waiver shall only be for the term and under conditions stated in the written approval of the Trustees regarding said improvements. 7.06 The approved plan for landscaping the Building Site may not be altered without written approval by the Trustees. 7.07 Each Record Owner and tenant shall keep its premises, Buildings, improvements and appurtenances in a safe, sightly, clean, neat and wholesome condition, and shall comply in all respects with all governmental, health and police requirements. Each Record Owner and tenant shall remove at its own expense any rubbish or trash of any character which may accumulate on its property and shall keep unlandscaped areas mowed as required by these Restrictions. Rubbish and trash shall not be disposed of on the premises by burning in open fires. Use of any incinerators shall only be with written approval of the Trustees. 7.08 A part of each Record Owner's obligations set forth in this Article shall be the implementation and maintenance of an erosion control program on its Building Site. This program shall be designed to insure that, to the greatest extent deemed practical by the Trustees, measures shall be taken to minimize water discharge from a Building Site onto the Common Properties in a manner to prevent erosion of banks or silting in of lakes on said Common Properties. 7.09 In the event any Record Owner or tenant does not comply with the provisions of this Article within ten (10) days after written notice by the Trustees, the Trustees and their representatives or employees shall have the right to enter on such Building Site and perform the work specified in such notice and the Record Owner or tenant shall pay the cost thereof upon demand. If the cost of such work is not paid within ten (10) days after demand is made therefor upon such Record Owner or tenant, it shall become a lien on such land the same as and enforceable to the extent provided for assessment in this Declaration. Page 9 29 ARTICLE 8 OUTSIDE STORAGE 8.01 No outside storage of any type, including but not limited to materials, supplies, equipment, vehicles, finished or semifinished products, raw materials or articles of any nature shall be stored or permitted to remain on any Building Site outside of the Building or Buildings constructed thereon, without the written approval of the Trustees. Any permitted storage shall be screened and/or fenced in a manner so as to not be objectionable to any occupant of other Building Sites in the Entire Tract, and shall be continued only in accordance with the terms of the Trustee's approval. 8.02 Facilities for storage of waste and rubbish shall be maintained within a screened area in closed metal containers of type approved by the Trustees in writing and only in locations approved by the Trustees in writing. 8.03 The bulk storage of any liquids or materials on the outside of Buildings shall be permitted only in locations and in a manner as may he approved in writing by the Trustees. ARTICLE 9 MINERALS 9.01 No oil or gas drilling, oil development, mining or quarrying operations of any kind shall be permitted upon the entire Tract, or any part thereof, nor shall oil wells, gas wells, tanks, tunnels, mineral excavations or shafts be permitted upon the Entire Tract or any part thereof without written approval of the Trustees. ARTICLE 10 SIGNS 10.01 No sign shall be erected, placed or otherwise installed upon a Building Site or affixed to a Building, Structure, or other improvement erected on a Building Site until the plans for such sign shall have been approved in writing by the Trustees. All signs, whether or not included or excluded from the definition of such term in Section 1.01 (j) hereof (except such signs as may be wholly within a Building and not visible from outside thereof) shall be conservative and in good taste, shall be identification signs as distinguished from promotional signs or billboards, and shall comply with the general purposes of this Declaration as set forth in Section 2.01 hereof. Flashing or moving signs shall be prohibited. Product or service replicas or models shall be prohibited unless the same are conservative and in good taste, are for identification purposes as distinguished from promotional purposes, and shall comply with the general purposes of this Declaration as set forth in Section 2.01 hereof. Declarant, or its agent, or authorized agents of Record Owners, shall be permitted to erect a reasonable number of Signs, which shall be conservative and in good taste, for the purpose of identifying the development and advertising the availability of Buildings and Building Sites therein, but the same shall only be permitted as authorized by the Trustees. ARTICLE 11 PERFORMANCE STANDARDS 11.01 No operation shall be conducted on any Building Site or any part thereof which results in the emission of noise, smoke, dust, dirt, fly ash or odor to an extent to be reasonably objectionable to any other Record Owner or occupant of other Building Sites in the Entire Tract. Page 10 30 ARTICLE 12 RIGHT TO REPURCHASE 12.01 If, after the expiration of two (2) years from the date of conveyance of any Building Site within the Entire Tract, any Record Owner (or anyone claiming under such Record Owner) shall not have begun in good faith (subject, however, to Unavoidable Delays) the construction of an acceptable and approved Building upon such Building Site for the uses permitted hereunder, and thereafter, with diligence, prosecuted such construction in strict compliance with the provisions hereof, Declarant may within a two (2) year period thereafter, at its option, require the Record Owner to reconvey the Building Site to Declarant, free and clear from all liens, charges, encumbrances, tenancies and other such title exceptions except those in existence at the time of such original conveyance, and at such time Declarant shall refund to the Record Owner the purchase price and enter into possession of said Building Site. At any time Declarant may extend, in writing, the time in which such Building may be commenced and/or completed. Such right to repurchase shall be an additional material consideration to Declarant for the conveyance of any Building Site. A notice of such right to repurchase or an agreement with respect to such right may be included in contracts for sale or in deeds by which Declarant conveys title, but the failure in any particular transaction so to include either the notice or the agreement or both shall not deprive Declarant of such right without specific recitation to such effect in such contracts and deeds. ARTICLE 13 UTILITY CONNECTION 13.01 All public utility connections and installations of wires and conduits to Buildings shall be made underground from the nearest available power source. No transformer, electric, gas or other meter of any type or other apparatus shall be located on any power pole but the same shall be placed on or below the surface of the land or hung on the outside of a Building on a wall not facing a street, and where placed on the surface of the land shall be adequately screened and fenced, and all such installations shall be subject to prior written approval of the Trustees. 13.02 The provisions of this Article 13 shall not operate to prohibit or modify the overhead electrical transmission line of Kansas City Power & Light Company located on portions of the Entire Tract at the date of these Restrictions. ARTICLE 14 SUBDIVISION 14.01 No Building Site shall be subdivided, nor shall any portion be separately sold, leased or rented, until a plan for such proposed subdivision or separate sale, leasing or renting, shall have been submitted to and approved by the Trustees in writing. ARTICLE 15 THE BOARD OF TRUSTEES 15.01 There hereby is established a Board of Trustees, for all purposes set forth in these Restrictions, which shall consist of three members. Declarant hereby appoints Hugh J. Zimmer, David J. Zimmer, and Ellen B. Zimmer, as the initial Board of Trustees, the appointment to be effective upon the recordation of this declaration in the Office of the Recorder of Deeds for Johnson County, Kansas, who shall hold office until their respective successors are appointed and qualified, unless sooner removed pursuant hereto. Page 11 31 ARTICLE 15 THE BOARD OF TRUSTEES 15.02 So long as fifty percent (50%) or more of the acreage subject to these Restrictions (exclusive of public roadways and Common Properties) is owned by Declarant, the three (3) members of the Board of Trustees shall be appointed by Declarant. So long as twenty percent (20%) to forty-nine percent (49%) of the acreage subject to these Restrictions is owned by Declarant, two (2) members shall be appointed by Declarant and one (1) member shall be elected by the other Record Owners. So long as five percent (5%) to nineteen percent (19%) of the acreage subject to these restrictions is owned by Declarant, one (1) member shall be appointed by it and two (2) members shall be elected by the other Record Owners. If less than five percent (5%) of the acreage subject to these Restrictions is owned by Declarant, all of the members of the Board of Trustees shall be elected by the other Record Owners. 15.03 Subject to the provisions of 15.02, in all elections for members of the Board of Trustees, every Record Owner shall have the right to vote in person or by proxy, having one (1) vote for each full acre owned, and fraction of an acre owned in excess of one-half (1/2) acre, for as many persons as there are Trustees to be elected, or to accumulate said votes and give one (1) candidate as many votes as the number of Trustees multiplied by the total number of full acres and fractional acres in excess of one-half (1/2) of an acre shall equal, or to distribute such votes on the same principle among as many candidates as a Record Owner shall see fit. 15.04 The term of office of the members of the Board of Trustees shall be for two (2) years and shall run from January 1st through December 31st of the second year or until their successors are elected and/or appointed and qualified; provided, however, that upon written notice by the Record Owners of over fifty percent (50%) of the square foot land area of the Entire Tract (exclusive of public road ways and Common Properties) the term of any Trustee shall automatically terminate and the unexpired term shall be filled in accordance with provisions of this Article within thirty (30) days from the date of said termination. 15.05 Two (2) members of the Board of Trustees shall constitute a quorum, and actions of the Board shall be by majority vote of those members in attendance at any meeting at which there is a quorum present. The Board of Trustees shall promulgate operating procedures for the conduct of its affairs, which procedures shall provide for written notice to all Trustees of meetings, given at least three (3) days prior to any such meeting, provided that such notice may be waived. However, if all Trustees severally or collectively consent in writing to any action to be taken by the Trustees, such consents shall have the same force and effect as a unanimous vote of the Trustees or a resolution unanimously passed by the Trustees at a meeting duly held, and may be hereinafter referred to as such. Such consent shall be filed with the minutes of the meetings of the Trustees. 15.06 The Board of Trustees shall provide for the enforcement of the Restrictions herein set forth, shall establish policies and procedures for the review and approval of plans and the like required by these Restrictions, shall have the right to provide for any improvements or maintenance of improvements, or services, which they may deem necessary or desirable, shall have the power as hereinafter provided to levy assessments, shall set dates for the election of Trustees when such elections are appropriate, and shall otherwise establish such procedures and policies necessary or deemed desirable to provide for the general welfare of the Entire Tract, in accordance with the spirit and letter of the Restrictions set forth in this Declaration. Page 12 32 ARTICLE 15 THE BOARD OF TRUSTEES 15.07 Without limiting the generality of the foregoing, the Board of Trustees shall have the following powers, provided, however, that nothing herein contained shall be deemed to prevent any Record Owner having the contractual right to do so from enforcing any Restrictions in its own name: (a) To enforce, either in the name of one or more Trustees, or in the name of any Record Owner within the Entire Tract, any and all Restrictions herein contained. The expenses and costs, if any, in such proceedings shall be paid out of the funds of the Trustees raised by assessments or otherwise. (b) To provide for the plowing or removal of snow from sidewalks and streets. (c) To care for, protect and replant trees, shrubbery, grass and other improvements on all parkways, streets, Common Properties and in other public places. (d) To mow, care for and maintain parkways in front of vacant or other property and to cut and remove weeds and grass from such parkways, vacant property or other places; to pick up and remove therefrom loose material, trash and rubbish of all kinds and to do such other things necessary or desirable to keep vacant and unimproved property neat in appearance and in good order. (e) To provide and maintain such lights as the Trustees may deem advisable on streets, parks, parkways, gateways, entrances or other features, Common Properties and in other public or semi-public places. (f) To exercise such control over streets, sidewalks, parks, Common Properties and pedestrian ways as may be within its powers including the cleaning of the same, and the erection and maintenance of street signs. (g) To acquire and hold the title in its name, or the name of one of the Trustees or a nominee or otherwise, to such real estate and easements as may be reasonably necessary to carry out purposes of this Declaration, or to the Common Properties, and to pay taxes on such real estate as may be so used by it, as well as such taxes as may be assessed against land in public or semi-public places or the Common Properties. (h) To provide for grounds and lawn maintenance, snow removal, trash removal or other services to be performed for Record Owners on their Building Sites, all of said services to be billed to and paid for by said Record Owners. If the Trustees so determine, said services may he mandatory on all Building Sites and shall be according to a degree and specification consistent with the intent of these Restrictions. Said services may he performed by employees of the Trustees or their agents, or may he performed by contract or both. The charges for such services shall be comparable to prevailing charges for similar services in the area and shall be equitably billed to each Record Owner. Said billings shall be in a manner determined by the Trustees and may include reasonable charges for administration and supervision, as well as for other direct and indirect costs approved by the Trustees. The Trustees may, in their sole discretion, exempt any Record Owner from the obligation to accept such services. All charges billed in accordance with this Section shall be collectible in the manner called for regarding payment of assessments and shall constitute liens as hereinafter provided. Page 13 33 ARTICLE 15 THE BOARD OF TRUSTEES 15.08 The Trustees shall have power to levy assessments upon and against the Record Owners and against the Building Sites themselves for the purpose of carrying out the general duties and powers of the Board of Trustees set forth in this Article and elsewhere in these Restrictions. In making such assessments, the Trustees may levy a charge of not more than $.005 per square foot of land area in the Entire Tract in any one (1) calendar year against the Record Owners of property and the Building Sites themselves within the Entire Tract, apportioned to and against such property and Building Sites according to the square foot area of land contained therein. Such maximum amount may not be exceeded, provided, however, that such maximum amount shall be changed, if the change results in an increase, but not if the change results in a decrease, on the fifth (5th) anniversary of the date of the recording of this Declaration in the Recorder of Deeds of Johnson County, Kansas, and on each successive fifth (5th) anniversary thereafter, to an amount in each case, which is the product of five (5) mills, multiplied by a fraction, the numerator of which shall be the Consumer Price Index for Urban Wage Earners and Clerical Workers, U.S. City Average, All Items (1967 equals 100) published by the Bureau of Labor Statistics, United States Department of Labor ("CPI-U"), or its successor or other comparable index in the event of the discontinuance of CPI-U, for June of the calendar year in which each fifth (5th) anniversary falls, and the denominator of which shall be the CPI-U as defined above for December, 1985. Any charge pursuant to Article 7.09 or 15.07 (h) enforceable as an assessment lien shall not be limited as herein set forth, but shall be in the amount as set forth in said Articles. All assessments shall be made in the manner and subject to the following provisions: (a) Notice of the levying of all assessments shall be given by mail, addressed to the address for such Record Owner as set forth in the deed from Declarant conveying title to the Building Site in question or to such other address as the Record Owner may have given notice pursuant to Section 19.01 hereof and deposited in the United States mail with postage prepaid, or may be given by posting a brief notice of the assessment upon the Building Site itself. (b) Every assessment shall become due and payable upon the date set forth in the notice thereof, which shall not be less than thirty (30) days after such notice. From and after the date when said payment is due, the same shall bear interest at the Kansas legal rate of interest per annum until paid, and such payment with accrued interest shall constitute a lien on the affected property which shall continue in full force and effect until the amount is fully paid. At any time after the passage of the resolution (whether at a meeting or by consent) levying an assessment and its entry in its minutes, the Board of Trustees or any one of the Trustees acting in behalf of the Board, may, in addition, execute and acknowledge an instrument reciting the levy of the assessment with respect to any one or more Building Sites and cause the same to be recorded in the Johnson County, Kansas Recorder's office; and the Board of Trustees may upon payment cancel or release any one or more Building Sites from the liability of the assessment (as shown by recorded instrument) by recording (at the expense of the affected owner) a like instrument releasing such assessment with respect to any property affected. The Trustees shall cause to be noted from time to time in the minutes of their proceedings or in other appropriate records the payments made on account of assessments. All statutory laws and rights for enforcing and collecting general taxes in the State of Kansas, now or hereafter existing, are conferred upon the Trustees, and the Trustees may bring suits to collect such assessment or enforce such liens. Such liens shall continue for a period of three years from the date of delinquency, unless within such time suit shall have Page 14 34 ARTICLE 15 THE BOARD OF TRUSTEES 15.08 (b) been instituted for the collection of the assessment, in which event the lien shall continue until termination of the suit and satisfaction of the judgment resulting therefrom. 15.09 In addition to the annual charges permitted in Section 15.08 above, the Trustees shall have the right to levy special assessments on all of the Building Sites in the Entire Tract for the sole purpose of reconstruction, unexpected repair or replacement of improvements within the Common Properties of SOUTHLAKE. Such special assessments shall only be levied after at least thirty (30) days' notice to each Record Owner specifying the nature and amount of such proposed special assessment and the approval of the same by a vote representing approval by the Record Owners of a majority of the acreage in the Entire Tract. After approval as set forth herein, special assessments shall be subject to collection in the same manner as annual charges set forth in 15.08 above. 15.10 The Board of Trustees shall have all powers and authority necessary or desirable to carry out the spirit and letter of the Restrictions set forth in this Declaration even though such powers and authority are not specifically granted in this Declaration. 15.11 The Board of Trustees shall have such bank accounts in which shall be deposited the funds of the Board of Trustees, whether raised by assessment or otherwise, in such banks, and requiring such signatures for withdrawal as the Board of Trustees shall determine. The Board of Trustees shall keep books of account relating to the collection and disbursement of funds. 15.12 The Board of Trustees may, at any time, and from time to time, create and terminate an association or associations to be composed of Record Owners or their tenants or both in the Entire Tract. The Association shall be incorporated or unincorporated as the Trustees shall determine, shall have such duration and such articles and bylaws as the Trustees shall determine, and shall have such duties, powers and responsibilities as the Trustees shall determine and assign to it, including, but not limited to, such of the powers and duties of the Trustees as are set forth in this Article. ARTICLE 16 COMMON PROPERTIES 16.01 Common Properties, as the same may be vested in SOUTHLAKE, shall be held by the Trustees for the use and benefit of all Record Owners and their employees and invitees in the Entire Tract, and others as may he determined by the Trustees. The Trustees may hold the Common Properties in fee simple, by easement, or in any other manner approved by the Trustees. 16.02 The Trustees shall establish such rules and regulations for the use of Common Properties by Record Owners and others as they shall deem to be appropriate and shall have the right to enforce the same with the same authority granted by these Covenants. 16.03 The Trustees shall establish standards of maintenance for the Common Properties which shall be consistent with the intent of these Restrictions and shall maintain the same in accordance with such standards. 16.04 The Trustees shall have the right to enter into contracts with the City of Lenexa or other appropriate public bodies for the maintenance, use, control, development, and operation of the Common Properties, all in the sole discretion of the Trustees. The Page 15 35 ARTICLE 16 COMMON PROPERTIES 16.04 rights referred to in this Article may include conveyance by easement, contract, or in fee simple of all or any part of the Common Areas as determined by the Trustees. ARTICLE 17 ADDITIONAL LAND TO BE MADE SUBJECT HERETO 17.01 Declarant, from time to time, shall have the right at any time before it has conveyed all of the land then subject hereto to render other lands also subject and subservient to the Restrictions, if such land is contiguous, adjoining or adjacent to the Entire Tract or some point thereof, or if separated from the Entire Tract only by a dedicated street, by executing, delivering to the Board of Trustees, and recording a supplement to the Restrictions stating: (a) A description of the land to be added and made subject to the Restrictions. (b) A statement that Declarant is the owner in fee simple of such land; or, in lieu thereof, a statement that all persons joining in such supplement constitute the entire fee simple ownership of such land. (c) A statement of any additional restrictions or burdens to which the land to be added shall be subjected, if any, and a statement of any restrictions or provisions of the Restrictions which shall in whole or in part not be applicable to such land to be added, or which shall be applicable in modified form, if any; provided, however, that such land to be added must be subject to assessment as herein provided. 17.02 Following the execution, delivery and recording of such supplement, but subject to its terms, such land to be added and the then or future owners thereof shall in all respects be fully subject to the Restrictions and all rights, privileges, obligations and the like set forth herein, except as otherwise provided in such supplement, including, but not limited to, the right to serve as and elect members of the Board of Trustees and to the payment of assessments as though said land had originally been included in and subject to these Restrictions. ARTICLE 18 ENFORCEMENT AND DURATION 18.01 The conditions, covenants, restrictions and reservations herein contained shall run with the land, and be binding upon and inure to the benefit of Declarant and the now and future Record Owners of every part of the land now or hereafter covered by the provisions hereof; shall create mutual, equitable servitudes upon each Building Site in favor of every other such Building site; and shall create reciprocal rights and obligations between and among Declarant and the respective Record Owners and tenants of all Building Sites and privity of contract and estate between Declarant and all grantees of said Building Sites, their heirs, successors and assigns. 18.02 These conditions, covenants, restrictions and reservations may be enforced as herein provided and by Declarant, any Record Owner, or any Tenant with approval of the Record Owner of the Building Site of which the Tenant occupies in whole or in part, as well as by the Trustees acting on behalf of Declarant and Record Owners, and violation of any conditions, covenant, restriction or reservation herein contained shall give to Declarant, the Trustees, the Association and to the Record Owners or any of them, the right to bring proceedings at law or in equity against the party or parties violating or Page 16 36 ARTICLE 18 ENFORCEMENT AND DURATION 18.02 attempting to violate any of said covenants, conditions, restrictions and reservations; to enjoin them from so doing; to cause such violation to be remedied; or to recover damages resulting from any such violation. Every act, omission to act, or condition which violates the covenants, conditions, restrictions and reservations herein contained shall constitute a nuisance and every remedy available at law or in equity for the abatement of public or private nuisances shall he available to Declarant, the Record Owners, the Association and the Trustees. In any legal or equitable proceeding to enforce the provisions hereof or to enjoin their violation, the party or parties against whom judgment is entered shall pay the reasonable attorneys' fees of the party or parties for whom judgment is entered in such amount as may be fixed by the court in such proceeding. Such remedies shall be cumulative and not exclusive. 18.03 It is understood that from time to time Declarant or other Record Owners may dedicate portions of the Entire Tract to various governmental bodies to be used as public streets, parks, or for similar purposes essential to the use and development of the Entire Tract. It is further understood that Declarant may also from time to time designate certain portions of the Entire Tract to be used for private roads or Common Properties, without dedication to governmental bodies. So long as any of the foregoing are dedicated or conveyed by deed or easement for purposes as set forth above, and are used for such purposes, they shall be automatically released from this Declaration including the obligation for assessments set forth in Article 15. In the event, however, that any of the foregoing are vacated, and revert to and become a part of adjoining Building Sites, they shall automatically come under the terms and provisions of this Declaration. 18.04 All restrictions and other provisions herein contained shall be deemed prior and superior to all mortgages and deeds of trust hereafter executed upon land subject to this Declaration, and to all leases covering part or all of any Building Site; provided, however, the violation of these restrictions shall not defeat nor render invalid the lien of any mortgage or deed of trust made in good faith and for value, nor the leasehold estate of any tenant except to the extent otherwise expressly provided in its lease. If any portion of the land is sold under foreclosure of any mortgage or deed of trust, any purchaser at such sale, and his successors and assigns, shall hold any and all of such properties purchased subject to all of the Restrictions and other provisions hereof as fully as if he were an original party to this Declaration. 18.05 The failure of Declarant, the Trustees, the Association or any Record Owner to take action to enforce the provisions hereof or to enjoin their violation shall in no event be deemed a waiver of its right to subsequently do so, nor shall it be deemed a waiver of any subsequent default or of the continuation of any existing default. 18.06 Invalidation of any part or parts of this Declaration by judgment or court action shall in no way affect any of the other provisions which shall remain in full force and effect. 18.07 These Restrictions shall run with the land and shall he binding upon and shall inure to the benefit of all parties and all persons claiming under or through Declarant or any Record Owner until December 31, 2015, at which time the Restrictions shall be automatically extended for successive periods of ten (10) years; provided, however, that at any time the Record Owners of more than fifty percent (50%) of the acreage in the Entire Tract, and Declarant (whose acreage may be included for the fifty percent (50%) computation) may, by written declaration signed and acknowledged by them and recorded in the office of the Recorder of Deeds for Johnson County, Kansas, alter, amend, modify or terminate these Restrictions, except that no amendment shall be made which shall change Section 3.06, the maximum amount of the assessments Page 17 37 ARTICLE 18 ENFORCEMENT AND DURATION 18.07 provided for in Section 15.08, or the provisions protecting mortgages, deeds of trust, and leasehold estates in Section 18.04, without the agreement of one hundred percent (100%) of the Record Owners. ARTICLE 19 MISCELLANEOUS 19.01 All notices, consents, approvals or other communications (herein called Notices) required or permitted to be given hereunder shall be in writing and shall be deemed to have been properly given if sent by registered or certified mail, postage prepaid, if to Declarant, or the Trustees, addressed to Declarant at 1220 Washington, P.O. Box 414317, Kansas City, Missouri 64141, or to any Record Owner at the address specified in the deed from Declarant to the Record Owner owning the Building Site in question, or at such other address as shall be furnished to Declarant by a Record Owner in accordance with the terms of this Section 19.01 or to the street address of a Building located on a Building Site. Declarant, the Trustees, or any Record Owner may change the address to which Notices are to be sent in the manner herein before provided. Notices shall be deemed given on the date of the registration or certification thereof. Declarant shall not be bound by any change in record ownership of any Building Site until it has been given notice of such change in ownership in the manner herein provided for the giving of Notices. 19.02 Every person who now or hereafter owns or acquires any rights, title, estate or interest to any portion of the property covered hereby is and shall be conclusively deemed to have consented and agreed to every covenant, condition and restriction contained herein, whether or not reference to this Declaration is contained in the instrument by which such person acquired an interest in said property. 19.03 This Agreement and the separate provisions thereof shall be construed and enforced in accordance with the laws of the State of Kansas. IN WITNESS WHEREOF, LENEXA INDUSTRIAL PARK, INC. has caused this Declaration to be duly executed as of the date first above written. LENEXA INDUSTRIAL PARK, INC. By: /s/ Hugh J. Zimmer ------------------------------- Hugh J. Zimmer, President ATTEST: /s/ Oneta F. Copeland - -------------------------------- Oneta F. Copeland, Secretary Page 18 38 STATE Of MISSOURI ) ) ss. COUNTY OF CLAY ) On this 1st day of April, 1986, personally appeared Hugh J. Zimmer to me personally known, who being duly sworn, did say that he is President of Lenexa Industrial Park, Inc., that the seal affixed to the foregoing instrument was signed and sealed on behalf of said corporation and said Hugh J. Zimmer acknowledged said instrument to be the free act and deed of said corporation. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial seal at my office in Kansas City, Missouri, the day and year last above written. My commission expires: June 24, 1989 /s/ Cheryl A. Brockman - ------------- ---------------------- Cheryl A. Brockman Notary Public EXHIBIT 1 All that part of the North One-Half of Section 17, Township 13, Range 24, now in the City of Lenexa, Johnson County, Kansas, more particularly described as follows: Beginning at the Northwest corner of said Section 17; thence North 90 (degree) East, along the North line of said Section 17, a distance of 5299.71 feet, to the Northeast corner of said Section 17; thence South 0 (degree) 31'59" West, along the East line of the Northeast Quarter of said Section 17, a distance of 165.00 feet; thence South 90 (degree) West, parallel with the North line of said Section 17, a distance of 220.00 feet; thence South 0 (degree) 31'59" West, parallel with the East line of the Northeast Quarter of said Section 17, a distance of 120.00 feet; thence North 90 (degree) East, parallel with the North line of said Section 17, a distance of 220.00 feet, to a point on the East line of the Northeast Quarter of said Section 17; thence South 0 (degree 31'59" West, along said East line, a distance of 116.00 feet; thence North 87 (degree) 38'58" West, a distance of 311.40 feet; thence South 0 (degree) 31'59" West, parallel with the East line of the Northeast Quarter of said Section 17, a distance of 182.50 feet; thence South 8 (degree) 38'58" East, a distance of 311.40 feet, to a point on the East line of the Northeast Quarter of said Section 17; thence South 0(degree) 31'59" West, along said East line, a distance of 377.74 feet, to a point on the Westerly right-of-way line of the St. Louis and San Francisco Railroad and the Missouri and Kansas Interurban Railway Company; thence South 33 (degree) 32'14" West, along said Westerly Railroad right-of-way line, a distance of 2028.93 feet, to a point on the South line of the Northeast Quarter of said Section 17; thence North 89 (degree) 56'09" West, along said South line, a distance of 1538.74 feet, to the Southwest corner of the Northeast Quarter of said Section 17; thence North 89 (degree) 55'30" West, along the South line of the Northwest Quarter of said Section 17, a distance of 2639.70 feet, to the Southwest corner of the Northwest Quarter of said Section 17; thence North 0(degree)11'10" East, along the West line of the Northwest Quarter of said Section 17, a distance of 2647.20 feet, to the Point of Beginning, containing 298.6062 acres, more or less. Page 19 EX-10.40 14 SUBLEASE - LEGENT/INNOVEX 1 EXHIBIT 10.40 THIS SUBLEASE (the "Sublease") is entered into as of the date set forth in Section 1.l(e) below, by and between the Sublandlord and the Subtenant set forth below. WITNESSETH 1. SUBLEASE SUMMARY AND DEFINITIONS. 1.1. The Sublease provisions and definitions set forth in this SECTION 1.1 in summary form are solely to facilitate convenient reference by the parties. If there is any conflict between this Section and any other provisions of this Sublease, the latter shall control. (a) Sublandlord's Name LEGENT CORPORATION and address: 1 Computer Associates Plaza Islandia, N.Y. 11788-7000 Attn: Senior Vice President - Facilities (b) Sublandlord's State of Incorporation: Delaware (c) Subtenant's Name and INNOVEX INC. address: 9 Campus Drive Parsippany, NJ Attn: Mr. David Stack (d) Subtenant's State of Delaware Incorporation: (e) Sublease Date: January 18, 1996 (f) Overlandlord's Name and Address: Prubeta-3 c/o The Prudential Insurance Co. of America 3 Gateway Center 100 Mulberry Street, 13th Floor Newark, NJ 07102 (g) Overlease: Between Overlandlord and Sublandlord dated October 10, 1989. Amended by First Amendment to Lease dated September 20, 1990, Second Amendment to Lease dated May 16, 1994 and Commencement Date Memorandum dated March 14, 1995. (h) Unincorporated provisions of the Overlease: Articles: 1, 2(a), 6(a), 27, 29(B), 44 and 45; First Amendment Articles 4, 5, 6, 7, 10; Second
2 Amendment Articles 1, 3, 4, 6, 7, 9. Exhibits: B-1, C; First Amendment Exhibits B and C; (i) Building: 9 CAMPUS DRIVE PARSIPPANY, NJ (j) Premises: 10,857 Rentable Square Feet on the 2nd floor (k) Sublease Commencement Date: The later of (i) Overlandlord's consent and (ii) February 1, 1996 (1) Sublease Expiration Date: July 30, 2000 (m) Base Rent:
Annual Rent per rentable Yearly Periods square foot Monthly Base Rent Annual Base Rent - -------------- ----------------- ----------------- ---------------- Sublease Commencement through March 31, 2000 $16.50 $14,928.37 $179,140.50 April 1, 2000 through Sublease Expiration Date - 0 - - 0 - - 0 -
(n) Prepaid Base Rent: $14,928.37 (o) Operating Expenses: See Section 13/Base year 1996 (p) Subtenant's Proportionate Share: 7% (q) Electric Charge: Per Overlease - See Section 14 (r) Security Deposit: Letter of Credit - See Section 16 (s) Alterations: See Section 7
SUBLEASE AGREEMENT BETWEEN COMPUTER ASSOCIATES INTERNATIONAL, INC. AND INNOVEX JANUARY 17, 1996 PAGE 2 -2- 3 (t) Brokers: For Sublandlord: Cushman & Wakefield For Subtenant: Cushman & Wakefield (u) Parking: Included - per Overlease (v) Termination: See Article 18
2. SUBLEASE GRANT 2.1. By lease (hereinafter referred to as the "Overlease") described above, the Overlandlord leased to Sublandlord certain space (hereinafter called the "Leased Space") in the Building in accordance with the terms of the Overlease. Sublandlord represents that a complete copy of the Overlease (from which certain terms which do not relate to Subtenant's obligations hereunder may have been deleted) is annexed hereto as EXHIBIT A. 2.2. In consideration of the obligation of Subtenant to pay rent as herein provided and in consideration of the other terms, covenants and conditions hereof, Sublandlord hereby leases to Subtenant and Subtenant hereby hires from Sublandlord, upon and subject to the provisions of this Sublease and the Overlease, the square feet of rentable area as set forth in SECTION 1.1 herein and as shown hatched on EXHIBIT B annexed hereto and made a part hereof (hereinafter called the "Premises"). 3. SUBLEASE TERM 3.1. Subject to the other provisions hereof, this Sublease shall continue in full force and effect for a primary term beginning on the Sublease Commencement Date and ending on the Sublease Expiration Date as defined above. Such term, as it may be extended or modified only by written agreement of the parties or pursuant to an express provision of this Sublease, is herein called the "Sublease Term". Notwithstanding anything herein to the contrary, Subtenant may terminate this Sublease if Overlandlord's approval is not received within forty (40) days after Subtenant has executed and delivered this Sublease to Sublandlord in which event Sublandlord shall return to Subtenant the Prepaid Rent and Letter of Credit provided herewith; provided that Subtenant has cooperated with Sublandlord in seeking such approval. 4. RENT 4.1. Subtenant, in consideration of this Sublease agrees to pay to Sublandlord as rent ("Base Rent") the amounts set forth in SECTION 1.1 hereof. Base rent is payable in advance and without demand, at Sublandlord's office (or such other location as Sublandlord shall designate) by check in equal monthly installments, on the first day of each month during the Sublease Term without any set-off, off-set, abatement or reduction whatsoever except that no Base Rent shall be due for the last four (4) months of the Sublease Term. Subtenant's failure to receive an invoice from Sublandlord for the rent shall not relieve Subtenant from its obligation of timely SUBLEASE AGREEMENT BETWEEN COMPUTER ASSOCIATES INTERNATIONAL, INC. AND INNOVEX JANUARY 17, 1996 PAGE 3 -3- 4 payment hereunder. The Prepaid Base Rent shall be paid upon Subtenant's execution of this Sublease. Notwithstanding anything to the contrary contained herein, Subtenant shall not be considered in default for late payment of Base Rent provided that (i) such Base Rent is paid within five (5) days after written notice that such Base Rent is past due; and (ii) such notice shall not be required more than twice in any twelve (12) month period. 4.2. As used in this Sublease, "Rent" shall mean the Base Rent, the Operating Expense reimbursements pursuant to SECTION 1.1, and all other monetary obligations provided for in this Sublease to be laud by Subtenant, all of which constitute rental in consideration for this Sublease. 4.3. In the event the rent is not paid when due as aforesaid, interest shall accrue thereon at the lesser of 18% per annum or the maximum rate permitted by law. In addition, if the rent is not paid by the tenth day of any given month, Subtenant shall pay as a penalty to Sublandlord an additional amount equal to five percent (5%) of the rent which is due, but not less than $100. 5. ASSIGNMENT OR UNDERLETTING 5.1. Subtenant shall not (a) assign this Sublease, nor (b) permit this Sublease to be assigned by operation of law or otherwise, nor (c) underlet all or any desk space therein to be occupied by any person(s), without first obtaining: (a) Overlandlord's consent and all other required consents to such assignment or subletting as set forth in and pursuant to the Overlease, and (b) Sublandlord's consent. Notwithstanding anything hereinbefore contained in SECTION 5.1 hereof, in the event Subtenant desires Sublandlord's consent to an assignment of this Sublease or an underletting of all of the Premises, Subtenant by notice in writing (a) shall notify Sublandlord of the name of the proposed assignee or undertenant, furnish such information as to the proposed assignee's or undertenant's financial responsibility and standing as Sublandlord may reasonably request, and advise Sublandlord of the covenants, agreements, terms, provisions and conditions contained in the proposed assignment or underlease and (b) shall offer to vacate the Premises and to Surrender the same to Sublandlord as of a date (hereafter called the "Surrender Date") specified in said offer which shall be the last day of any calendar month during the term hereof, provided, however, that the Surrender Date shall not be earlier than the date occurring 120 days after the giving of such notice nor be later than the effective date of the proposed assignment or the commencement date of the term of the proposed underlease. Sublandlord may accept such offer by notice to Subtenant given within 30 days after the receipt of such notice from Subtenant. SUBLEASE AGREEMENT BETWEEN COMPUTER ASSOCIATES INTERNATIONAL, INC. AND INNOVEX JANUARY 17, 1996 PAGE 4 -4- 5 If Sublandlord accepts such offer, Subtenant shall surrender to Sublandlord, effective as of the Surrender Date, all Subtenant's right, title and interest in and to the entire Premises. If the Premises be so surrendered by Subtenant, this Sublease shall be canceled and terminated as of the Surrender Date with the same force and effect as if the Surrender Date were the date hereinbefore specified for the expiration of the full term of this Sublease. 5.2. In the event Sublandlord does not accept such offer of Subtenant referred to in SECTION 5.2 hereof, Sublandlord covenants not to unreasonably withhold its consent to such proposed assignment or underletting by Subtenant of the Premises to the proposed assignee or undertenant and such consent shall be granted or denied within thirty (30) days of receipt of Subtenant's request, on said covenants, agreements, terms, provisions and conditions set forth in notice to Sublandlord referred to in clause (a) of the first sentence of Section 5.2 hereof; provided, however, that Sublandlord shall not in any event be obligated to consent to any such proposed assignment or underletting unless: (a) the proposed assignee or undertenant is of a financial standing and is engaged in a business and the Premises will be used in a manner which is in keeping with the then standards of the Building; (b) the assignment or underletting shall not have the effect (or give the utility company servicing the Building with electricity cause to claim) that Sublandlord may not service the Premises, or any part thereof, with electricity on a Rent inclusion" basis; (c) Sublandlord shall have the right, upon five (5) days prior written notice to Subtenant, to require Subtenant thereafter to pay to Sublandlord a sum equal to one half of: (i) any rent or other consideration paid to Subtenant by any undertenant which is in excess of the fixed annual rent and additional rent then being paid by Subtenant to Sublandlord pursuant to the terms of this Sublease, and (ii) any other profit or gain realized by Subtenant from any such assignment or underletting in connection with any underletting; all sums payable hereunder by Subtenant shall be paid to Sublandlord as additional rent immediately upon receipt thereof by Subtenant and, if requested by Sublandlord, Subtenant shall promptly enter into a written agreement with Sublandlord setting forth the amount of additional rent to be paid to Sublandlord pursuant to this Section; (d) there shall be no default by Subtenant under any of the terms, covenants and conditions of this Sublease beyond the applicable cure period at the time that Sublandlord's consent to any such assignment or underletting is requested and on the effective date of the assignment or the proposed underlease; SUBLEASE AGREEMENT BETWEEN COMPUTER ASSOCIATES INTERNATIONAL, INC. AND INNOVEX JANUARY 17, 1996 PAGE 5 -5- 6 (e) the proposed assignee or undertenant shall not be (i) a government or any subdivision or agency thereof, or (ii) a school college, university or educational institution of any type, whether for profit or non-profit; (f) Subtenant shall reimburse Sublandlord for any reasonable expenses that may be incurred by Sublandlord in connection with the proposed assignment or underlease, including without limitation the reasonable costs of making investigations as to the acceptability of a proposed assignee or undertenant and reasonable legal expenses incurred in connection with the granting of any requested consent to the assignment or underlease; (g) such proposed underletting will result in there being no more than one occupant of the Premises including Subtenant. 6. TERMS OF THE OVERLEASE 6.1. Except as herein otherwise expressly provided in Section l.l(h) and except for the obligation to pay rent and additional rent under the Overlease, all of the terms, covenants, conditions and provisions in the Overlease are hereby incorporated in, and made a part of this Sublease, and such rights and obligations as are contained in the Overlease are hereby imposed upon the respective parties hereto; the Sublandlord herein being substituted for the Landlord in the Overlease, and the Subtenant herein being substituted for the Tenant named in the Overlease; provided, however, that the Sublandlord herein shall not be liable for any defaults by Overlandlord and, if Overlandlord is not the fee owner, the owner in fee of the land and Building of which the Premises are a part. If the Overlease shall be terminated for any reason (except due to Sublandlord's acts of default) during the term hereof, then and in that event this Sublease shall thereupon automatically terminate and Sublandlord shall have no liability to Subtenant by reason thereof. In the event of a default by Sublandlord under the Overlease for which Sublandlord does not have a reasonable dispute which would, if uncured, lead to a termination of the Overlease, Subtenant may, after providing Sublandlord with then (10) business days notice, perform Sublandlord's obligation under the Overlease and Sublandlord shall reimburse Subtenant upon receipt of paid invoices for its actual costs incurred in so performing, provided that Subtenant shall indemnify and hold Sublandlord harmless from any costs incurred by Sublandlord as a result of Subtenant's negligence or willful misconduct in this regard. In the event Sublandlord does not so reimburse Subtenant within ten (10) days after additional written notice from Subtenant, Subtenant may reduce its payments of Base Rent for the following month(s) by an amount equal to the unreimbursed costs. Upon the termination of this Sublease, whether by forfeiture, lapse of time or otherwise, or upon the termination of Subtenant's right to possession, Subtenant will at once surrender and deliver up the Premises in good condition and repair, reasonable wear and tear excepted. SUBLEASE AGREEMENT BETWEEN COMPUTER ASSOCIATES INTERNATIONAL, INC. AND INNOVEX JANUARY 17, 1996 PAGE 6 -6- 7 6.2. This Sublease is subject to, and Subtenant accepts this Sublease subject to, any amendments and supplements to the Overlease hereafter made between Overlandlord and Sublandlord, provided that any such amendment or supplement to the Overlease will not prevent or adversely affect the use by Subtenant of the Premises in accordance with the terms of this Sublease, increase the obligations of Subtenant or decrease its rights under the Sublease or in any other way adversely affect Subtenant. 6.3. This Sublease is subject and subordinate to the Overlease and to all ground or underlying leases and to all mortgages which may now or hereafter affect such leases or the real property of which the Premises are a part and all renewals, modifications, replacements and extensions of any of the foregoing. This Section 6.3 shall be self-operative and no further instrument of subordination shall be required. To confirm such subordination, Subtenant shall execute promptly any certificate that Sublandlord may request. 7. CONDITION OF PREMISES 7.1. Subtenant has examined the Premises, is aware of the physical condition thereof, and agrees to take the same "as is," (unless otherwise provided in SECTION 15 herein) with the understanding that (a) the shelving in the mailroom and the extra air conditioning unit in the telephone room will remain in the Premises, and (b) there shall be no obligation on the part of Sublandlord to incur any expense whatsoever in connection with the preparation of the Premises for Subtenant's occupancy thereof except that Sublandlord shall clean and paint the Premises prior to the Sublease Commencement Date. Any work performed by Subtenant shall be in accordance with the terms of the Overlease and Section 15 herein. 8. USE OF PREMISES 8.1. Subtenant agrees that the Premises shall be occupied only as executive, administrative and general offices for Subtenant's business. 9. CONSENT OF OVERLANDLORD 9.1. This Sublease is conditioned upon the consent thereto by Overlandlord which consent shall be evidenced by Overlandlord's signature appended hereto or a separate consent in the form utilized by Overlandlord for such purposes. Provided Overlandlord's consent does not affect the terms of this Sublease, Subtenant shall immediately execute any documents requested by Overlandlord in order to obtain Overlandlord's approval. 9.2. Sublandlord makes no representation with respect to obtaining Overlandlord's approval of this Sublease except that Sublandlord agrees to send the Sublease to Overlandlord within five (5) business days of receipt of an executed-copy from Subtenant, and will use reasonably diligent efforts to seek Overlandlord's consent as expeditiously as reasonably possible, and, in the event that Overlandlord notifies Sublandlord that Overlandlord will not give SUBLEASE AGREEMENT BETWEEN COMPUTER ASSOCIATES INTERNATIONAL, INC. AND INNOVEX JANUARY 17, 1996 PAGE 7 -7- 8 such approval, Sublandlord will so notify Subtenant and, upon receipt of such notification by Sublandlord of the disapproval by Overlandlord, this Sublease shall be deemed to be null and void and without force or effect, and Sublandlord and Subtenant shall have no further obligations or liabilities to the other with respect to this Sublease. 9.3 Except as otherwise specifically provided herein, wherever in this Sublease Subtenant is required to obtain Sublandlord's consent or approval, Subtenant understands that Sublandlord may be required to first obtain the consent or approval of Overlandlord. If Overlandlord should refuse such consent or approval, Sublandlord shall be released of any obligation to grant its consent or approval whether or not Overlandlord's refusal, in Subtenant's opinion, is arbitrary or unreasonable. 10. DEFAULT 10.1. Subtenant acknowledges that the services to be rendered to the Premises are to be rendered by Overlandlord. Anything in this Sublease to the contrary notwithstanding, if there exists a breach by Sublandlord of any of its obligations under this Sublease and, concurrently, a corresponding breach by Overlandlord under the Overlease of its obligations under the Overlease exists, then and in such event, Subtenant's sole remedy against Sublandlord in the event of any breach of obligations under this Sublease shall be the right to pursue a claim in the name of Sublandlord against Overlandlord, and Sublandlord agrees that it will, at Subtenant's expense, cooperate with Subtenant in the pursuit of such claim. 10.2. Anything contained in any provisions of this Sublease to the contrary notwithstanding, Subtenant agrees, with respect to the Premises, to comply with and remedy any default claimed by Overlandlord and caused by Subtenant, within the period allowed to Sublandlord as tenant under the Overlease, even if such time period is shorter than the period otherwise allowed in the Overlease, due to the fact that notice of default from Sublandlord to Subtenant is given after the corresponding notice of default from Overlandlord. Sublandlord agrees to forward to Subtenant, upon receipt thereof by Sublandlord, a copy of each notice of default received by Sublandlord in its capacity as tenant under the Overlease. Subtenant agrees to forward to Sublandlord, upon receipt thereof, copies of any notices received by Subtenant with respect to the Premises from Overlandlord or from any governmental authorities. 10.3. Subtenant acknowledges that upon breach of any provisions of this Sublease by Subtenant, any rights or options granted to Subtenant under this Sublease or the Overlease relating to expansion, renewal, or any other equity option, shall immediately terminate and shall not be exercisable for the remainder of the Sublease term. If and whenever there shall occur any event of monetary default of this Sublease which is not cured within five (5) days of receipt of written notice (except a default for failure to pay Base Rent, for which the cure period is set forth in Section 4.1 hereof), or any non-monetary default which is not cured within fifteen (15) SUBLEASE AGREEMENT BETWEEN COMPUTER ASSOCIATES INTERNATIONAL, INC. AND INNOVEX JANUARY 17, 1996 PAGE 8 -8- 9 days of receipt of notice from Sublandlord (which cure period shall be extended if the default cannot be cured within such period, and Subtenant is diligently pursuing a cure), Sublandlord may, at Sublandlord's option, in addition to any other remedy or right given under the Overlease or by law or equity, do any one or more of the following: (a) Terminate this Sublease without notice to Subtenant, in which Subtenant shall immediately surrender possession of the Premises to Sublandlord; (b) Terminate Subtenant's right to possession of the Premises under this Sublease without terminating the Sublease itself, by written notice to Subtenant, in which event Subtenant shall immediately surrender possession of the Premises to Sublandlord; (c) Enter upon and take possession of the Premises and expel or remove Subtenant and any other occupant therefrom, with or without having terminated this Sublease; (d) Alter locks and other security devices at the Premises with or without having terminated this Sublease or Subtenant's right to possession under the Sublease; (e) Enter upon the Premises by force if necessary without being liable for prosection or any claim for damages therefor, and do whatever Subtenant is obligated to do under the terms of this Sublease; and Subtenant agrees to reimburse Sublandlord on demand for any direct or indirect expenses which Sublandlord or Overlandlord may incur in thus effecting compliance with Subtenant's obligations under this Sublease, and Subtenant further agrees that Sublandlord shall not be liable for any damages resulting to Subtenant from such action. 10.4. It is hereby expressly stipulated by Sublandlord and Subtenant that any of the above listed actions including, without limitation, termination of this Sublease, termination of Subtenant's right to possession, and re-entry by Sublandlord, will not affect the obligations of Subtenant for the unexpired Sublease Term, including the obligations to pay an amount ("Accelerated Damages") equal to the excess of (x) the then present value of all Base Rent and all Additional Rent that would be payable under this Sublease from the date of demand for what would be the unexpired term of this Sublease, plus (y) any estimated or actual reletting expenses not previously paid by Subtenant, over (z) the then present value of the then fair rental value of the Premises at the date of such demand for what would be the unexpired term of this Sublease beginning a reasonable period of time (not to exceed five months) after the date of the demand. SUBLEASE AGREEMENT BETWEEN COMPUTER ASSOCIATES INTERNATIONAL, INC. AND INNOVEX JANUARY 17, 1996 PAGE 9 -9- 10 Present value shall be determined for the purpose of the immediate preceding sentence by application of a discount factor equal to the Federal Discount Rate per year. If the Premises has been relet, the fair rental value of the Premises for purpose of determining the Accelerated Damages shall be the amount of rent obtained upon such reletting, provided such reletting is on commercially reasonable terms. Sublandlord shall not refuse to relet the Premises, but the good faith failure of Sublandlord to relet the Premises or any part or parts thereof, or the good faith failure of Sublandlord to collect the rent thereof under such reletting, shall not release or affect Subtenant's liability for damages. If an event of default occurs, Sublandlord is entitled and is hereby authorized, without notice to Subtenant, to enter upon the Premises by use of a master key, a duplicate key, or other peaceable means, and to change, alter, and/or modify the door locks on all entry doors of the Premises, thereby permanently excluding Subtenant, and its officers, principals, agents, employees, and representatives therefrom. In the event that Sublandlord has either terminated Subtenant's right to possession of the Premises pursuant to the foregoing provisions of this Sublease, or has terminated the Sublease by reason of Subtenant's default, Sublandlord shall not thereafter be obligated to provide Subtenant with a key to the Premises at any time; provided, however, that in any such instance, during Sublandlord's normal business hours and at the convenience of Sublandlord, and upon the written request of Subtenant accompanied by such written waiver and releases as the Sublandlord may require, Sublandlord will escort Subtenant or its authorized personnel to the Premises to retrieve any personal belongings or other property of Subtenant. If Sublandlord elects to exclude Subtenant from the Premises without permanently repossessing the Premises or terminating the Sublease pursuant to the foregoing provisions of this Sublease, the Sublandlord (at any time prior to actual permanent repossession or termination) shall not be obligated to provide Subtenant a key to re-enter the Premises until such time as all delinquent rental and other amounts due under this Sublease have been paid in full (and all other defaults, if any, have been completely cured to Sublandlord's satisfaction), and Sublandlord has been given assurance reasonably satisfactory to Sublandlord evidencing Subtenant's ability to satisfy its remaining obligations under this Sublease. During any such temporary period of exclusion, Sublandlord will, during Sublandlord's regular business hours, and at Sublandlord's convenience, upon written request by Subtenant accompanied by such waivers and releases as the Sublandlord may require, escort Subtenant or its authorized personnel to the Premises to retrieve personal belongings of Subtenant or its employees. This remedy of Sublandlord shall be in addition to, and not in lieu of, any of its other remedies set forth in this Sublease, the Overlease, or otherwise available to Sublandlord at law or in equity. 10.5. Exercise by Sublandlord of any one or more remedies hereunder granted or otherwise available shall not be deemed to be an acceptance of surrender of the Premises by Subtenant, whether by agreement or by operation of law, it being understood that such surrender can be effected only by the written agreement of Sublandlord and Subtenant. No such alteration of locks or other security devices and no removal or other exercise of dominion by Sublandlord SUBLEASE AGREEMENT BETWEEN COMPUTER ASSOCIATES INTERNATIONAL, INC. AND INNOVEX JANUARY 17, 1996 PAGE 10 -10- 11 over the property of Subtenant or others at the Premises shall be deemed unauthorized or constitute a conversion, Subtenant hereby consenting, after any event of default, to the aforesaid exercise of dominion over Subtenant's property within the Premises. All claims for damages by reason of such re-entry and/or repossession and/or alteration of locks or other security devices are hereby waived, as are all claims for damages by reason of any distress warrant, forcible detainer proceedings, sequestration proceedings or other legal process. Subtenant agrees that any re-entry by Sublandlord may be pursuant to a judgment obtained in forcible detainer proceedings or other legal proceedings or without the necessity for any legal proceedings, as Sublandlord may elect, and Sublandlord shall not be liable in trespass or otherwise. 11. SUBLANDLORD REPRESENTATION 11.1. Sublandlord represents (a) that it is the holder of the interest of the tenant under the Overlease, (b) that the Overlease is in full force and effect. 12. BROKERS 12.1. Both parties covenant, represent and warrant that they have had no dealings or communications with any broker or agent in connection with ] the consummation of this Sublease other than those set forth in SECTION 1.1 hereof (which Sublandlord is obligated to compensate), and each party covenants and agrees to pay, hold harmless and indemnify the other from and against any and all cost, expense (including reasonable attorneys' fees) or liability for any compensation, commissions or charges claimed by any broker or agent other than such brokers with respect to this Sublease or the negotiation thereof. 13. OPERATING EXPENSES/TAXES 13.1. All charges for standard Operating Expenses and Property Taxes, as defined in the Overlease, incurred during normal business hours for the Base Year set forth in Subsection l.l(o) hereof shall be included in the rent paid herein and will not be passed through to Subtenant. Any additional charges shall be paid by Subtenant to Sublandlord as additional rent at the times that Tenant is required to pay its percentage share of increases in Project Operating Expenses and Project Property Taxes over Base Project Operating Expenses and Base Project Property Taxes (as such terms are defined in the Overlease); provided, however, for purposes of this Sublease the Base Project Operating Expenses and Base Project Taxes shall be actual expenses and taxes per square foot for calendar year 1996, adjusted as provided in the second sentence of Paragraph 3(A) of the Overlease. Any rights granted to Sublandlord under the Overlease relating to Project Operating Expenses and Project Property Taxes shall be provided to Subtenant hereunder, and Sublandlord agrees to cooperate with Subtenant in seeking any rebates or reimbursements in this regard from Overlandlord on Subtenant's behalf. SUBLEASE AGREEMENT BETWEEN COMPUTER ASSOCIATES INTERNATIONAL, INC. AND INNOVEX JANUARY 17, 1996 PAGE 11 -11- 12 14. ELECTRIC CHARGE 14.1. Subtenant shall pay the monthly electric fee set forth in the Overlease as Additional Rent hereunder which shall cover all charges for normal office electric service use associated with the Premises during normal business hours. 15. ALTERATIONS 15.1. In the event Subtenant is permitted to perform alterations in the Premises hereunder, Subtenant may make no changes, alterations, additions, improvements or decorations in, to or about the Premises without submitting detailed plans and construction schedules to Sublandlord and receiving Sublandlord's prior written consent to such plans. Sublandlord will not withhold its consent to any alterations which were approved in writing by Overlandlord. Subtenant shall 'make no changes, alterations, additions, improvements or decorations which would result in Overlandlord charging Sublandlord for the cost of same, including any removal costs associated therewith unless Subtenant expressly agrees to pay such costs, and Subtenant shall comply with all laws and regulations relating to such construction including, but not limited to, receipt of certificates of occupancy, permits and ADA requirements, and shall be responsible for all costs associated therewith. 16. SECURITY DEPOSIT 16.1. As security for the faithful performance and observance by Subtenant of the terms, provisions, covenants and conditions of this Sublease, Subtenant is simultaneously herewith delivering to Sublandlord an irrevocable letter of credit in the amount of $89,570.22 from a recognized financial institution which shall be renewed on an annual basis until the Sublease Expiration Date. In the event Subtenant cannot renew the letter of credit, it shall allow Sublandlord to draw the amount of the security and hold the cash amount as security. Beginning on October 31, 1997, Subtenant may decrease the amount of the letter of credit to $44,785.11. Such letter of credit shall have Sublandlord as the beneficiary thereunder. 16.2. In the event Subtenant defaults in respect of any of the terms, provisions, covenants and conditions of this Sublease, including, but not limited to, the payment of annual fixed rent and additional rent, and such default is not cured within the applicable cure period, Sublandlord may use, apply or retain the whole or any part of the security so deposited to the extent required for the payment of any annual fixed rent and additional rent or any other sum as to which Subtenant is in default or for any sum which Sublandlord may expend or may be required to expend by reason of Subtenant's default in respect of any of the terms, provisions, covenants, and conditions of this Sublease, including, but not limited to, any damages or deficiency accrued before or after summary proceedings or other re-entry by Landlord. 16.3. In the event that Subtenant defaults in respect of any of the terms, provisions, covenants and conditions of the Sublease beyond the applicable cure period, and Sublandlord SUBLEASE AGREEMENT BETWEEN COMPUTER ASSOCIATES INTERNATIONAL, INC. AND INNOVEX JANUARY 17, 1996 PAGE 12 -12- 13 utilizes all or any part of the security but does not terminate this Sublease as provided herein, Sublandlord may in addition to exercising its rights as provided in Section 16.2, retain the unapplied and unused balance of the principal amount of the security as security for the faithful performance and observance by Subtenant thereafter of the terms, provisions and conditions of this Sublease and may use, apply or retain the whole or any part of said balance to the extent required for payment of rent, additional rent, or any other sum as to which Subtenant is in default or for any sum which Sublandlord may expend or be required to expend by reason of Subtenant's default in respect of any of the terms, covenants, and conditions of this Sublease. In the event Sublandlord applies or retains any portion or all of the security delivered hereunder, Subtenant shall forthwith restore the amount so applied or retained so that at all times the amount deposited shall be no less than the security required by SECTION 16.1. 16.4. Provided Subtenant is not then in default of this Sublease, the security, together with the interest accrued thereon, shall be returned to Subtenant (i) after the Sublease Expiration Date and after delivery of entire possession of the Premises to Sublandlord, or (ii) upon Sublandlord's receipt of an equivalent amount of security from a assignee or undertenant pursuant to an assignment or Underletting permitted by SECTION 5 of this Sublease. In the event of an assignment of the Overlease by Sublandlord, Sublandlord shall have the right to transfer any interest it may have in the security to the assignee and Sublandlord shall thereupon be released by Subtenant from all liability for the return of such security, provided such assignee assumes any responsibilities of Sublandlord with respect to such security, and Subtenant agrees to look solely to the new Sublandlord for the return of said security; and it is agreed that the provisions hereof shall apply to every transfer or assignment made of the security to a new sublandlord. Subtenant further covenants that it will not assign or encumber or attempt to assign or encumber the monies deposited herein as security and that neither Sublandlord nor its successors or assigns shall be bound by any such assignment, encumbrance, attempted assignment or attempted encumbrance. 17. QUIET ENJOYMENT 17.1. So long as Subtenant pays all of the rent and additional rent due under this Sublease and performs all of Subtenant's other obligations hereunder, Subtenant shall peacefully and quietly have, hold and enjoy the Premises subject, however, to the terms, provisions and obligations of this Sublease and the Overlease. 17.2. In the event Subtenant does not completely vacate the Premises by the Sublease Expiration Date or earlier termination of this Sublease, Subtenant shall indemnify and hold harmless Sublandlord in respect of any and all holdover charges or penalties imposed under the Overlease upon Sublandlord in respect of the entire Leased Space and in respect of any and all costs, liabilities or expenses (including attorneys fees) suffered by Sublandlord in respect of same, as and when such costs, liabilities or expenses are incurred. In this regard, Subtenant SUBLEASE AGREEMENT BETWEEN COMPUTER ASSOCIATES INTERNATIONAL, INC. AND INNOVEX JANUARY 17, 1996 PAGE 13 -13- 14 shall, if requested by Sublandlord, in Sublandlord's sole discretion, defend Sublandlord against any action or proceeding brought against Sublandlord which arises out of said holdover. 18. TERMINATION OPTION 18.1. Subtenant shall have the right to terminate this Sublease as of October 30, 1997, provided that (i) Subtenant is not then in default under this Sublease beyond applicable cure periods, and (ii) Subtenant gives Sublandlord notice of such termination on or before November 30, 1996 and simultaneously delivers to Sublandlord a certified check in the amount of One Hundred Eighty Five Thousand Seven Hundred Ninety Seven Dollars ($185,797.00) as a termination fee. This termination fee shall be in addition to all Base Rent and Additional Rent falling due during the balance of the Sublease Term through the date of termination. 19. NO WAIVER 19.1. The failure of either party to seek redress for violation of, or to insist upon the strict performance of any covenant or condition of this Sublease or of any of the Rules and Regulations set forth or hereafter adopted by Sublandlord, shall not prevent a subsequent act which would have originally constituted a violation from having all the force and effect of an original violation. The receipt by Sublandlord of rent with knowledge of the breach of any covenant of this Sublease shall not be deemed a waiver of such breach and no provision of this Sublease shall be deemed to have been waived by either party unless such waiver be in writing signed by the waiving party. No payment by Subtenant or receipt by Sublandlord of a lesser amount than the monthly rent herein stipulated shall be deemed to be other than on account of the earliest stipulated base rent, additional rent or other charge, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction, and Sublandlord may accept such check or payment without prejudice to Sublandlord's right to recover the balance of such base rent, additional rent or other charge, or pursue any other remedy in this Sublease provided. No act or thing done by Sublandlord or Sublandlord's agents during the term hereby demised shall be deemed an acceptance of a surrender of the demised premises and no agreement to accept such surrender shall be valid unless in writing signed by Sublandlord. No employee of Sublandlord of Sublandlord's agent shall have any power to accept the keys of the demised premises prior to the termination of the Sublease and the delivery of keys to any such agent or employee shall not operate as a termination of the Sublease or a surrender of the demised premises. 20. NOTICES 20.1. Any notice, demand or communication which, under the terms of this Sublease or under any statute or municipal regulation must or may be given or made by the parties hereto, shall be in writing and given or made by mailing the same by registered or certified mail, return receipt requested to the address and person designated in Section 1.l(a) and (c) herein. SUBLEASE AGREEMENT BETWEEN COMPUTER ASSOCIATES INTERNATIONAL, INC. AND INNOVEX JANUARY 17, 1996 PAGE 14 -14- 15 Either party, however, may designate such new or other address to which such notices, demands or communications thereafter shall be given, made or mailed by notice (given in the manner prescribed herein). Any such notice, demand or communication shall be deemed given or served, as the case may be, on the date of the posting thereof. In the event Subtenant's address is not set forth above, notice to Subtenant shall be deemed sufficient if sent to the Premises. 21. MISCELLANEOUS 21.1. Where applicable, Subtenant shall be responsible for all additional costs incurred as a result of this Sublease including, but not limited to, security cards, keys and parking cards. 21.2. This Sublease may not be changed orally, but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification or discharge is sought. 21.3. This Sublease shall not be binding upon Sublandlord unless and until it is signed by Sublandlord and delivered to Subtenant. This SECTION 21.3 shall not be deemed to modify the provisions of SECTION 9 hereof. 21.4. This Sublease constitutes the entire agreement between the parties and all representations and understandings have been merged herein. SUBLEASE AGREEMENT BETWEEN COMPUTER ASSOCIATES INTERNATIONAL, INC. AND INNOVEX JANUARY 17, 1996 PAGE 15 -15- 16 21.5. This Sublease shall inure to the benefit of all of the parties hereto, their successors and (subject to the provisions hereof) their assigns. IN WITNESS WHEREOF, the parties have hereunto set their hands and seals of the day and year first above written. ATTEST: LEGENT CORPORATION, Sublandlord /s/ By /s/ Peter A. Schwartz - ------------------------ -------------------------------- ATTEST: INNOVEX INC., Subtenant /s/ Christine S. Stack By /s/ David Stack - ------------------------ -------------------------------- 1-19-96 David Stack President, General Manager 1-19-96 ACKNOWLEDGED AND AGREED: PRUBETA-3, Overlandlord By --------------------- SUBLEASE AGREEMENT BETWEEN COMPUTER ASSOCIATES INTERNATIONAL, INC. AND INNOVEX JANUARY 17, 1996 PAGE 16 -16- 17 LEASE AGREEMENT PRUBETA 3 BUSINESS CAMPUS LEGENT CORPORATION TENANT DATE: October l0, 1989 18 JV #528.3 9/28/89 THIS LEASE is made this 10th day of October, 1989, between PRUBETA 3, a general partnership organized under the laws of New Jersey, with an office at c/o THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, Newark Realty Group Office, Three Gateway Center 100 Mulberry Street, 13th Floor, Newark, New Jersey 07102-4077 hereinafter called "Landlord," and LEGENT CORPORATION, a Corporation of the State of Delaware, having its principal office at Two Allegheny Center, Pittsburgh, Pennsylvania 15212 hereinafter called "Tenant." LEASE OF PREMISES: Landlord hereby leases to Tenant and Tenant hereby hires from Landlord, subject to all of the terms and conditions hereinafter set forth, those certain premises (the "Premises") as set forth in Item 1 of the Basic Lease Provisions and as shown in the drawing(s) attached hereto as Exhibit "A-1"; said Premises being located on the floor(s) indicated in that certain office building (the "Building") situated on certain land, which said land together with the Building are collectively hereinafter referred to as the "Project," being known as Linden Plaza being located at 9 Campus Drive in the Township of Parsippany-Troy Hills, County of Morris, State of New Jersey and being a part of PruBeta-3 Business Campus (the "Complex" or "Campus"). BASIC LEASE PROVISIONS: 1. Location of Premises: Floor: Second 2. Rentable Area of Premises: 5,873 rentable, not usuable, square feet 3. Percentage Share: 3.79% 4. Base Project Operating Expenses: $5.50 per square foot per year Base Project Property Taxes: $2.75 per square foot per year 5. Term: 5 years 6. Initial Estimated Annual Electricity Charge: $1.50 per square foot per year 7. Basic Annual Rent: $123,333.00 ($21.00 per square foot) 8. Basic Monthly Rental Installments: $10,277.75 9. Target Commencement Date: November 1, 1989 10. Security Deposit: None 10. Parking Spaces: 24 non-designated 11. Broker(s): Cushman & Wakefield of Hew Jersey, Inc. 1099 Wall Street West Lyndhurst, New Jersey 07071 12. Permitted Use: General Office Use 13. Addresses for Notices:
LANDLORD: TENANT: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA LEGENT CORPORATION Newark Realty Group Two Allegheny Drive Three Gateway Center, 13th Floor Pittsburgh, Pennsylvania 15212 100 Mulberry Street Newark, New Jersey 07102 Attn: Carolyn D. Vetovich Attn: Vice President Prudential Property Company with copy to: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA Newark Realty Group Three Gateway Center, 13th Floor 100 Mulberry Street Newark, New Jersey 07102 Attn: Susan L. Blount Regional Counsel
19 14. All payments under this Lease shall be payable and delivered to: Property Management Systems 9 Campus Drive Parsippany-Troy Hills, New Jersey 07054 or such other payee or address as Landlord may designate from time to time. IN WITNESS WHEREOF, the parties hereto have executed this Lease, consisting of the foregoing and Paragraphs 1 through 43 which follow, together with Exhibits A through F, inclusive, incorporated herein by this reference as of the date first above written. (LANDLORD) PRUBETA 3 ATTEST: BY: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, General Partner /s/ Richard E. Pigott By: /s/John S. Gregorits - --------------------- -------------------------------- RICHARD E. PIGOTT JOHN S. GREGORITS ASSISTANT SECRETARY VICE PRESIDENT (TENANT) ATTEST: LEGENT CORPORATION /s/ Kim Steffanina By: /s/ Arthur F. Knapp. Jr. - CFO - --------------------- -------------------------------- Arthur F. Knapp. Jr. - CFO By: EQUITY PARSIPPANY VENTURE, General Partner APPROVED AS TO LEGAL FORM: By: BetaWest Properties, Inc. General Partner By: /s/ Sara E. Culhane By: /s/ -------------------- ---------------------------- VICE PRESIDENT Date: 10/26/89 Its: ASSET MANAGEMENT ------------------ ---------------------------- Tenant's Federal Tax Identification Number is: 25-1589745 -------------------------------- 20 STATE OF NEW JERSEY: SS. COUNTY OF ESSEX : BE IT REMEMBERED, that on this 16th day of October, 1989, before me, the subscriber, a notary public of New Jersey, personally appeared John S. Gregorits, Vice President of THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, who I am satisfied, is the person who has signed the within instrument; and he did acknowledge that he signed, sealed and delivered the same as such officer aforesaid; and that the within instrument is the voluntary act and deed of said corporation made by virtue of authority from its Board of Directors. /s/ Angelina C. Monti --------------------- ANGELINA C. MONTI A NOTARY PUBLIC OF NEW JERSEY My Commission Expires March 14, 1990 STATE OF COLORADO) :SS COUNTY OF DENVER ) BE IT REMEMBERED, that on this day of , 1989, before me, the subscriber, a notary public of , personally appeared , who, I am satisfied is the of BetaWest Properties, Inc. General Partner of EQUITY PARSIPPANY VENTURE who has signed the within instrument, and he thereupon acknowledged that he signed, sealed and delivered the said instrument as the voluntary act and deed of said corporation as General Partner of said partnership made in accordance with and fully authorized by its partners and the partnership agreement. ------------------------ STATE OF Pennsylvania SS. COUNTY OF Allegheny: BE IT REMEMBERED, that on this 10th day of October, 1989, before me, the subscriber, a notary public of State of Pennsylvania, personally appeared Arthur F. Knapp, Jr. - CFO of LEGENT CORPORATION, who I am satisfied, is the person who has signed the within instrument; and he did acknowledge that he signed, sealed and delivered the same as such officer aforesaid; and that the within instrument is the voluntary act and deed of said corporation made by virtue of authority from its Board of Directors. /s/ Karen M. Lutsko ------------------------ [Seal] 21 TABLE OF CONTENTS
PARAGRAPH: PAGE 1. Term .................................................................... 1 2. Basic Annual Rent ....................................................... 1 3. Additional Rent for Taxes and Operating Expenses, Etc.................... 1 4. Security Deposit ........................................................ 3 5. Repairs ................................................................. 4 6. Improvements and Alterations ............................................ 4 7. Liens ................................................................... 5 8. Use of Premises ......................................................... 5 9. Utilities and Services .................................................. 5 10. Rules and Regulations ................................................... 7 11. Taxes on Tenant's Property .............................................. 7 12. Substituted Premises .................................................... 7 13. Fire or Casualty ........................................................ 7 14. Eminent Domain .......................................................... 8 I5. Assignment and Subletting ............................................... 8 16. Landlord's Access to Premises ...........................................10 17. Subordination; Attornment; Estoppel Certificates ........................10 18. Sale by Landlord ........................................................10 19. Indemnification of Landlord and Insurance ...............................10 20. Waiver of Subrogation ...................................................12 21. No Waiver ...............................................................12 22. Default .................................................................12 23. Right of Landlord to Cure Tenant's Default ..............................13 24. Notices .................................................................14 25. Insolvency or Bankruptcy ................................................14 26. Surrender and Holdover ..................................................14 27. Condition of Premises ...................................................14 28. Quiet Possession ........................................................14 29. Limitation of Landlord's Liability ......................................14 30. Governing Law ...........................................................15 31. Common Facilities .......................................................15 32. Successors and Assigns ..................................................15 33. Brokers .................................................................15 34. Name; Landlord's Rights .................................................16 35. Examination of Lease ....................................................16 36. Additional Charges ......................................................16 37. Defined Terms and Marginal Headings .....................................16 38. Prior Agreements; Severability ..........................................17 39. Parking .................................................................17 40. Force Majeure ...........................................................17 41. No Light, Air or View Easement ..........................................17 42. Authority and Signatories ...............................................17 43. Campus Association ......................................................18 44. Tenant's Option to Cancel ...............................................18 45. Tenant's Option to Renew ................................................19
Exhibit "A-1" Floor Plan(s) of Premises Exhibit "A-2" Description of the Land Exhibit "B-1" Landlord's Work Letter Exhibit "C" Commencement Date Memorandum Exhibit "D" Rules and Regulations Exhibit "E" Holiday Schedule Exhibit "F" Janitorial Services Exhibit "G" Tenant's Plan
22 PARAGRAPH 1 TERM: (A) The term of this Lease shall be as shown in Item 4 of the Basic Lease Provisions. The Lease shall commence on the Target commencement Date as shown in Item 8 of the Basic Lease Provisions or upon such earlier date as Tenant takes possession or commences use of the Premises. Such date of commencement, hereinafter the "Commencement Date", and the date of expiration, hereinafter the "Expiration Date", shall be confirmed by Landlord by means of a "Commencement Date Memorandum" in form substantially similar to Exhibit "C." (B) Anything herein to the contrary notwithstanding and expressly subject to extension by reason of 1) events or circumstances described in Paragraph 40 (Force Majeure) hereof, and 2) delays and extensions of time described in Exhibit "B-1" Landlord's Work Letter, if Landlord shall be unable or shall otherwise fail to give possession of the Premises as provided herein on or before December 1, 1989 then Landlord shall give written notice to Tenant within thirty (30) days prior to that date of another date for delivery of possession, which date Tenant may, at its option given within ten (10) days of the date of Landlord's notice, elect to accept or reject. If that date is rejected by Tenant, Landlord and Tenant shall be relieved of all obligations hereunder. If that date is accepted by Tenant and Landlord delivers possession on said date, the date of delivery of possession shall be the Commencement Date. If accepted by Tenant and Landlord fails to deliver possession on said date, then Tenant may reject this Lease and be relieved of all obligations hereunder or Tenant may permit Landlord an additional period of thirty (30) days within which to deliver possession and if possession is not delivered on such date, Tenant may reject or continue to permit Landlord additional thirty (30) day periods until Tenant rejects the Lease or is delivered possession hereunder. Under no circumstances shall Landlord be responsible to Tenant for any cost of Tenant's Improvements installed in the Premises and not removed by Tenant immediately upon Tenant's rejection of this Lease as permitted in this subparagraph. PARAGRAPH 2 BASIC ANNUAL RENT: (A) Tenant agrees to pay as Basic Annual Rent for the Premises the sum or sums shown in Item 6 of the Basic Lease Provisions. The Basic Annual Rent shall be payable in U.S. currency in equal monthly installments, hereinafter sometimes referred to as "Basic Monthly Rental Installments", in advance and without notice, deduction, offset, or abatement. Basic Monthly Rental Installments shall be in the sum or sums shown in Item 7 of the Basic Lease Provisions. Basic Annual Rent shall commence on the first day of the third month after the Commencement Date and continue on the first day of each calendar month thereafter. The Basic Monthly Rental Installment for any partial month during the term hereof shall be prorated in the proportion that the number of days this Lease is in effect during such partial month bears to the number of days in that calendar month, and such Basic Monthly Rental Installment shall be paid at the commencement of such partial month. (B) In addition to the Basic Annual Rent stipulated herein, Tenant covenants and agrees to pay in U.S. currency, without deduction, offset, or abatement, to Landlord as additional rent, hereinafter "Additional Rent", all other sums and charges which are to be paid by Tenant pursuant to the terms of this Lease. Except as otherwise provided in this Lease, Additional Rent shall be due and payable on the later of the first day of the month following the date on which Tenant is given notice that Additional Rent is due or fifteen (15) days from date of notice. (C) The Basic Annual Rent plus Additional Rent are sometimes collectively referred to as "Rent". PARAGRAPH 3 ADDITIONAL RENT FOR TAXES AND OPERATING EXPENSES, ETC.: (A) Commencing with the Commencement Date, Tenant agrees to pay as items of Additional Rent for the Premises, Tenant's "Percentage Share" (being the percentage indicated in Item 3 of Basic Lease Provisions) of all increases in "Project Operating Expenses" and "Project Property Taxes" (as hereinafter defined) over Base Project Operating Expenses and Base Project Property Taxes (being the amounts indicated in Item 4 of Basic Lease Provision incurred by Landlord in the operation of the Project. For purposes of this paragraph, during each year actual occupancy of the Building is less than one hundred (100%) percent, Landlord will adjust the costs of all Project Operating Expenses to assume one 23 2 hundred (100%) percent occupancy of the Building and Landlord will adjust Project Property Taxes to reflect assumed standard tenant improvements for one hundred (100%) percent occupancy. (B) The items of Additional Rent contemplated under subparagraph 3(A) shall be determined in accordance with the following procedures: (i) Each December during the term hereof or as soon thereafter as practical, Landlord shall give Tenant written notice of Landlord's itemized estimate of any amounts payable under subparagraph 3(A) above for the ensuing calendar year. On or before the first day of each month during the ensuing calendar year, Tenant shall pay Landlord without further notice one-twelfth (1/12) of such estimated amounts, provided that if such notice is not given in December, Tenant shall continue to pay on the basis of the then applicable rental until the month after such notice is given. If at any time or times it appears to Landlord that the increased amounts payable under subparagraph 3(A) for the current calendar year will exceed its estimate, Landlord may, by thirty (30) days written notice to Tenant, revise its estimate for such year. Subsequent payments by Tenant for such year shall be based upon such revised estimate. (ii) Within 90 (ninety) days after the close of each calendar year or as soon thereafter as is reasonably practical, Landlord shall deliver to Tenant a statement of the annual adjustment of those Additional Rent items made pursuant to subparagraph 3(A) for such calendar year. If on the basis of such statement Tenant owes an amount that is less than the estimated payments for such calendar year previously made by Tenant, Landlord shall refund or credit within thirty (30) days such excess to Tenant. If on the basis of such statement Tenant owes an amount that is more than the estimated payments for such calendar year previously made by Tenant, Tenant shall pay the deficiency to Landlord within 30 (thirty) days after delivery of the statement. (iii) The Additional Rent due under the terms and conditions of this Paragraph 3 shall survive termination of this Lease, shall be payable by Tenant without any setoff or deduction, and shall be computed by Landlord on a prorated basis for any period less than a full calendar year. (C) Definitions: (i) The term "Project Operating Expenses" as used herein shall include all costs of operation and maintenance of the Project calculated on an accrual basis for each calendar year as determined by generally accepted accounting principles consistently applied. Project Operating Expenses shall, by way of illustration but not limitation, include water and sewer charges, insurance premiums, license, permit, and inspection fees, fuel, heat, light, power (except for that electricity charged directly to the Premises and other rental space on the Project), steam, janitorial and security services, labor, salaries, air conditioning, landscaping, maintenance and ordinary repair of the Building and driveways, parking structures and surface parking areas, ice and snow removal, supplies, materials, equipment, tools; repair or replacement of equipment, machinery, and other items of Landlord's property; the property management fees and costs including but not limited to office rent for the on-site property management office; and the cost incurred in contesting the validity or an assessment of Project Property Taxes. Project Operating Expenses shall also include but not be limited to the cost of any capital improvements made to the Project by Landlord that reduce operating expenses or that are required under any governmental law or regulation not previously applicable to the Project or not in effect at the time it was constructed. Such capital cost shall be amortized over such reasonable periods as Landlord shall determine with a return on capital at the then current prime interest rate of the largest national bank in New York City or at such higher rate as may have been paid by Landlord on the funds borrowed for the purpose of providing such capital improvements. Project Operating Expenses shall not include (a) depreciation; (b) interest and amortization on debt; (c) all other capital expenses; (d) costs of correcting latent defects; (e) costs which are reimbursed by insurance proceeds or eminent domain awards; (f) costs of any special service to another tenant not 24 3 furnished to tenants generally, and (g) costs of collecting rent from other tenants and of enforcing lease rights against other tenants. (ii) The term "Project Property Taxes" as used herein shall include all real estate taxes or personal property taxes and other taxes, charges and assessments, unforeseen as well as foreseen, which are levied with respect to the Project and any improvements, fixtures and equipment and other property of Landlord, real or personal, located in the Building or on the Project and used in connection with the operation of the Project for each calendar year and shall include any tax, surcharge or assessment which shall be levied in addition to or in lieu of real estate or personal property taxes, other than taxes covered in Paragraph 11, and shall also include any rental, excise, sales, transaction, privilege, or other tax or levy, however denominated, imposed upon or measured by the rental reserved hereunder or on Landlord's business of leasing the Premises and Project, excepting only net income taxes. Project Property Taxes shall be based upon the fully assessed value of the fully completed Building including standard tenant improvements, driveways, and other common areas of the Building and Project. In the event tax assessment is not detailed, sufficiently or, in the event either party shall dispute the tax assessor's determination of full assessment value, then Landlord and Tenant shall look to the following two alternatives in the order given to determine assessed value: (i) notes and records of tax assessor and (ii) any reasonable method upon which the parties may agree. (D) Unless Tenant takes written exception to any item in the statement referred to in subparagraph 3(B)(ii) within thirty (30) days after the furnishing of the statement, such statement shall be considered as final and accepted by Tenant. Any amount due Landlord as shown on any such statement shall be paid by Tenant within thirty (30) days after it is furnished to Tenant. If Tenant shall dispute in writing any specific item or items in the statement of Project Operating Expenses and Project Property Taxes, and such dispute is not resolved between Landlord and Tenant within sixty (60) days after the date the statement was rendered, either party may, during the thirty (30) days next following the expiration of the sixty (60) days, refer such disputed item or items to a mutually agreed upon Big Eight accounting firm for a determination which shall be final, conclusive and binding upon Landlord and Tenant. Tenant agrees to pay all costs involved in such determination unless it is determined that Landlord's original calculation of both Project Property Taxes and Project Operating Expenses was in error by more than five (5%) percent. Pending the determination of any dispute with respect to the statement submitted by Landlord, Tenant shall pay when due the sums shown as due on such statement. If it shall be determined that any portion of such sums were not properly chargeable to Tenant, then Landlord shall refund or immediately credit the appropriate sum to Tenant. E) As one of the items of Additional Rent, payable monthly, Tenant shall also pay to Landlord the full cost of Tenant's consumption of electricity (including heating and air-conditioning installed for a particular use by Tenant), as determined from time to time by Landlord through proration, engineering survey by Landlord's electric rate consultant, or other reasonable method. In the event Landlord meters or submeters Tenant's electricity usage, Tenant shall pay Tenant's share of any surcharge, "peak-hour" premium or other similar additional charge. The initial estimated monthly electricity charge for the Premises shall be as shown in Item 5 of the Basic Lease Provisions. Commencing on Commencement Date Tenant shall also pay Landlord any increase in the cost of electricity to the Premises based upon increases in the billing rate after the date hereof. (F) Notwithstanding anything to the contrary in this Lease, in no event shall the Basic Annual Rent be reduced in any way because of anything in this Paragraph 3. PARAGRAPH 4 SECURITY DEPOSIT: INTENTIONALLY DELETED PARAGRAPH 5 REPAIRS: (A) Subject to subparagraph 5(B), Landlord shall cause all necessary repairs to be made to the exterior walls, exterior doors, windows, corridors and other common areas of the Building and the Project and Landlord shall cause the Building and the Project to be kept in a safe, clean and neat condition, and shall use reasonable efforts to keep all equipment used in common with other Tenants (such as elevators, plumbing, heating, air conditioning and similar equipment) in good condition and repair. Landlord shall also repair all 25 4 heat pumps, and shall repair or replace the heat pumps in the exterior or peripheral areas of the Building in the Premises. Except as provided in Paragraph 13 hereof, there shall be no abatement of Rent and no liability of Landlord by reason of any injury to or interference with Tenant's, business arising from the making of any repairs, alterations or improvements in or to any portion of the Building or the Project or in or to fixtures, appurtenances and equipment therein or thereon. (B) Tenant agrees that all repairs to the Premises not required above to be made by Landlord during the term of this Lease, if approved by Landlord, shall be made by Landlord at the sole cost and expense of Tenant unless Landlord has been otherwise compensated therefore. Tenant will pay for any repairs to the Premises, the Building or the Project made necessary by any negligence or willful acts or omissions of Tenant or its assignees, subtenants, employees or their respective agents or other persons permitted in the Building or on the Project by Tenant, or any of them. Tenant will also maintain the Premises, and, upon termination of this Lease, will leave the Premises in a safe, clean, neat and sanitary condition. PARAGRAPH 6 IMPROVEMENTS AND ALTERATIONS: (A) Landlord's sole construction obligation under this Lease is as set forth in Landlord's Work Letter attached hereto as Exhibit "B-1" and incorporated herein by this reference. Prior to Commencement Date, Tenant's obligations with respect to alterations and improvements to the Premises are governed by Landlord's Work Letter. If no work letter is attached, Tenant hereby accepts the Premises in its current "as is" condition less any items owned or removable by the prior tenant. (B) Landlord shall have the right at any time to change the arrangement and/or location of entrances or passageways, doors and doorways, and corridors, (provided that such changes do not unreasonably interfere with Tenant's access to the Premises) elevators, stairs, toilets, or other public parts of the Building or Project, and, upon giving Tenant prompt notice thereof, to change the name, number or designation by which the Building or the Project is commonly known. (C) From and after Commencement Date, Tenant shall not make or suffer to be made any alterations, additions or improvements (including decorating, remodeling and painting) to or of the Premises or any part thereof, or attach any fixtures or equipment thereto, without first obtaining Landlord's prior written consent. Any consent by Landlord may be subject to such reasonable conditions as Landlord may deem necessary. Any such alterations, additions or improvements to the Premises consented to by Landlord shall, at Landlord's option, be made by Landlord for Tenant's account and Tenant shall pay Landlord for the cost thereof (including a reasonable charge for Landlord's overhead) within ten (10) days after receipt of Landlord's statement. All such alterations, additions and improvements shall (without compensation to Tenant) immediately become Landlord's property (except easily moveable furniture, equipment, and trade fixtures) and, at the end of the term hereof, shall remain on the Premises unless Landlord elects by notice given to Tenant at the time of the original request for consent (which notice Landlord must give Tenant at the time Landlord consents to the alteration, addition or improvement) to have Tenant remove same, in which event Tenant shall promptly restore the Premises to their condition prior to the installation of such alterations, additions and improvements. Tenant will obtain, at Tenant's expense, all necessary permits and certificates and Tenant shall furnish Landlord copies of all such permits and certificates. PARAGRAPH 7 LIENS: Tenant shall keep the Premises free from any mechanics notices of intention, liens or encumbrances (collectively in this paragraph hereinafter referred to as "lien" or "liens") arising out of any work performed, materials furnished, or obligations incurred by or for Tenant. In the event that Tenant shall not, within ten (10) days following the imposition of any such lien, cause the same to be released of record by payment or posting of a proper bond, Landlord shall have, in addition to all other remedies provided herein or by law, the right, but not the obligation, to cause the same to be released by such means as it shall deem proper, including payment of or defense against the claim giving rise to such lien. All sums paid by Landlord and all expenses incurred by it in connection therewith, shall create automatically an obligation of Tenant to pay to Landlord an equivalent amount as Additional Rent, which Additional Rent shall be payable by Tenant upon Landlord's demand, with interest at the maximum rate per annum permitted by law, until paid. To the extent permitted by law, Tenant shall require all Tenant's contractors and materialmen to waive any and all rights they may have to file any liens. 26 5 PARAGRAPH 8 USE OF THE PREMISES: (A) Tenant shall use the Premises only as set forth in Item 12 of the Basic Lease Provisions and shall not use or permit the Premises to be used for any other purpose without the prior written consent of Landlord. Tenant shall comply with all laws, and shall not use or occupy the Premises in violation of law or of the certificate of occupancy issued for the Building, and shall immediately discontinue any use of the Premises which is declared by Landlord or any governmental authority having jurisdiction to be a violation of law or of said certificate of occupancy. Tenant shall comply with any direction of any governmental authority having jurisdiction which shall, by reason of the nature of Tenant's use or occupancy of the Premises, impose any duty upon Tenant or Landlord with respect to the Premises or with respect to the use or occupancy thereof. Landlord represents that no applicable law prohibits use of the Building for office purposes. Tenant shall not do or permit to be done anything which will invalidate or increase the cost of any fire, extended coverage or any other insurance policy covering the Building, the Project and/or property located therein and shall comply with all rules, orders, regulations and requirements of the appropriate fire rating bureau or any other organization performing a similar function. Tenant shall upon demand reimburse Landlord for the full amount of any additional premium charged for such policy by reason of Tenant's failure to comply with the provisions of this paragraph. Such reimbursement shall not be Landlord's exclusive remedy. B) With respect to Tenant's use and occupancy of the Premises, Tenant shall, at Tenant's own expense, comply with the Environmental Cleanup Responsibility Act, N.J.S.A. 13:1k-6 et seq., and the regulations promulgated thereunder ("ECRA"). Tenant shall, at Tenant's own expense, make all submissions to, provide all information to, and comply with all requirements of, the New Jersey Department of Environmental Protection or its replacement or similar department, agency, bureau or division ("NJDEP") and promptly comply with Landlord's requirements in connection therewith. Should any division of NJDEP determine that a Cleanup Plan be prepared and that a cleanup be undertaken because of any spills or discharges of hazardous substances or wastes at the Building or land in or on which the Premises is located which were caused by Tenant or its officers, employees, agents, contractors or invitees and which occur during the term of this Lease, then Tenant shall, at Tenant's own expense, prepare and execute a Cleanup Plan which shall be approved by NJDEP and complete the cleanup. PARAGRAPH 9 UTILITIES AND SERVICES: (A) Provided that Tenant is not in default hereunder, Landlord agrees to furnish or cause to be furnished to the Premises the following utilities and services, subject to the conditions and standards set forth below and elsewhere herein: (i) Landlord shall provide automatic elevator facilities from 8:00 a.m. to 6:00 p.m., Monday through Friday (legal holidays listed in Exhibit "E" "Legal Holidays" excepted), and shall have at least one elevator available for use at all other times. (ii) From 8:00 a.m. to 6:00 p.m., Monday through Friday (Legal Holidays excepted), Landlord shall, subject to interruptions beyond Landlord's control and subject to subparagraph 3(E), furnish heat or air conditioning in accordance with Exhibit "B-2", subject to any governmental requirements or standards relating to, among other things, energy conservation. Upon reasonable, prior written request, Landlord shall make available at Tenant's expense, after-hours heat or air conditioning. The charge for after-hours heat or air conditioning shall be determined by Landlord and confirmed in writing to Tenant, as the same may change from time to time. There shall be a minimum charge of one hour for every partial hour of usage. (iii) Landlord shall furnish to the Premises, subject to interruptions beyond Landlord's control and subject to subparagraphs 3(E) and 9(B), electric current as required by the building standard office lighting and receptacles. At no time shall Tenant's use of electric current exceed the capacity of 7 1/2 watts per square foot for lighting and power and for purposes of air supply and distribution of HVAC System. Landlord represents that Landlord will furnish electric current of 7 1/2 watts per square foot for lighting and power and for purposes of air supply and distribution of HVAC System and that Landlord will not reduce said capacity during the term hereof. To the extent Tenant design exceeds the electrical current design capacity, then Tenant will pay all costs of providing additional required electrical service. 27 6 (iv) Landlord shall, subject to interruptions beyond Landlord's control and other provisions hereunder, furnish the building with water for heating, ventilating, air-conditioning. drinking and lavatory purposes only. (v) Landlord shall provide janitorial services to the Building and Premises, in accordance with Exhibit "F" provided that the Premises are kept in good order by Tenant. Tenant shall pay to Landlord the cost of removal of any of Tenant's refuse and rubbish to the extent that the same exceeds the refuse and rubbish usually attendant upon the use of the Premises as offices. (vi) Landlord shall replace, as necessary, the fluorescent tubes in the standard lighting fixtures installed by Landlord. Tenant agrees to reimburse Landlord upon demand for the cost of such fluorescent tubes and the labor and overhead for their installation. (B) Landlord may impose a reasonable charge, which Tenant hereby agrees to pay upon demand, for any utilities and services, including without limitation, heating, air conditioning, electric current and water, provided by Landlord by reason of any use of the Premises at any time other than the hours of 8:00 a.m. to 6:00 p.m. Monday through Friday (excluding Legal Holidays), or any use beyond that which Landlord agrees to furnish as described above, or special electrical, cooling and ventilating needs created in certain areas by telephone equipment, computers and other similar equipment or uses. At Landlord's option, separate meters for such utilities and services may be installed for the Premises, and upon demand, Tenant shall immediately pay Landlord for the installation, maintenance and/or repair of such meters and for all charges with respect to consumption of such utilities or services so metered or provided. (C) Tenant agrees to cooperate fully at all times with Landlord and to abide by all regulations and requirements which Landlord may prescribe for the use of the above utilities and services. Any failure to pay any costs as described above shall constitute a breach of the obligation to pay Rent under this Lease and shall entitle Landlord to the rights herein granted for such breach. (D) Landlord shall not be liable for, and Tenant shall not be entitled to, any abatement or reduction of Rent by reason of Landlord's failure to furnish any of the foregoing services, more than for a reasonable period of time nor shall any such failure, stoppage or interruption of any such service be construed either as an eviction of Tenant, or relieve Tenant from the obligation to perform any covenant or agreement. However, in the event of any failure, stoppage or interruption thereof, Landlord shall use reasonable diligence to have service resumed promptly. (E) Notwithstanding anything herein to the contrary, Landlord reserves the right from time to time to make reasonable modifications to the above provisions for utilities and services; provided, such modifications do not diminish the level or quality of service below that level or quality which is consistent with a first class office building. PARAGRAPH 10 RULES AND REGULATIONS: (Other than that which interferes with the quiet enjoyment of Tenant) Tenant agrees to abide by all rules and regulations of the Building and Project ("Rules and Regulations") imposed by Landlord as set forth in Exhibit "D" attached hereto, and as the same may be changed from time to time upon reasonable notice to Tenant. These Rules and Regulations are imposed for the cleanliness, good appearance, proper maintenance, good order and reasonable use of the Premises and the Project, as may be necessary for the enjoyment of the Project by all tenants and their employees and invitees. Landlord shall not enforce these Rules and Regulations arbitrarily among tenants. Landlord shall not be liable for the failure of any tenant, its agents or employees to conform to the Rules and Regulations. PARAGRAPH 11 TAXES ON TENANT'S PROPERTY: (A) Tenant shall be liable for and shall pay not later than ten (10) days before delinquency, all taxes, levies and assessments levied against any personal property or trade fixtures placed by Tenant in or about the Premises. If any such taxes, levies and assessments on Tenant's personal property or trade fixtures are levied against Landlord or Landlord's property or if the assessed value of the Building or the Project is increased by the inclusion therein of a value placed upon such personal property or trade fixtures of Tenant and if Landlord pays the taxes, levies and assessments 28 7 based upon such increased assessment, Tenant shall, upon demand, repay to Landlord the taxes, levies and assessments so levied against Landlord, or the proportion of such taxes, levies and assessments resulting from such increase in the assessment. (B) If the Tenant Improvements, whether installed and/or paid for by Landlord or Tenant and whether or not affixed to the real property so as to become a part thereof, are assessed for real property tax purposes at a valuation higher than the valuation at which tenant improvements conforming to building standard (as determined by Landlord) are assessed, then the real property taxes and assessments levied against Landlord or the Project by reason of such excess assessed valuation shall be deemed to be taxes levied against personal property of Tenant and shall be governed by the provisions of subparagraph 11(A). If the records of the tax assessor are available and sufficiently detailed to serve as a basis for determining whether said Tenant Improvements are assessed at a higher valuation than building standard, such records shall be binding on both Landlord and Tenant; otherwise, the actual cost of construction shall be the basis for such determination. PARAGRAPH 12 SUBSTITUTED PREMISES: Landlord reserves the right without Tenant's consent, on thirty (30) days written notice to Tenant, to substitute other premises within the Building for the Premises described above, provided that the substituted premises: (i) contain approximately the same square footage as the Premises, (ii) contain comparable tenant improvements, and (iii) are made available to Tenant at the same rental rate {per rentable square foot) for such space, as the rental rate specified herein. Landlord shall pay all reasonable moving expenses of Tenant incidental to such substitution of premises. PARAGRAPH 13 FIRE OR CASUALTY: (A) In the event that the Project (regardless of whether the Premises or access thereto is affected) is so damaged or destroyed to the extent of more than one-third (1/3) of its replacement cost, or to any substantial extent by a casualty not covered by Landlord's insurance (or, in the event Landlord self-insures which Landlord reserves the absolute right to do, by a casualty.* (B) In the event the Premises are completely destroyed or so badly damaged that, in Landlord's reasonable opinion, repairs to the Premises cannot be commenced within ninety (90) days and completed within one hundred eighty (180) days from the date of damage or destruction, Landlord will so notify Tenant, in which event this Lease may be terminated by either Landlord or Tenant by giving thirty (30) days advance written notice. Also, if notice of such opinion or notice of termination has not been given, and if repairs have not been commenced by Landlord within ninety (90) days from the date of damage or destruction, this Lease may be terminated immediately thereafter upon written notice from Tenant given no later than one hundred twenty (120) days after the date of damage or destruction. In the event Tenant shall fail to terminate this Lease as provided in this subparagraph (B) then, Tenant shall thereafter have no further right to so terminate based upon the provisions of this subparagraph (B). (C) If this Lease is not terminated as provided in Subsection 13(b), or if the damage or destruction is other than as provided above, then Landlord shall commence within ninety (90) days after the occurrence of such damage or destruction to rebuild, repair or restore the Premises and access thereto to substantially the same condition as when the same were delivered to Tenant, excluding any improvements owned by Tenant, and the Lease shall continue in full force and effect. (D) If this Lease is terminated as provided above, Tenant's obligation to pay Rent hereunder shall cease as of the date (i) of damage or destruction if Premises are rendered untenantable or (ii) Tenant vacates the Premises if Premises are not rendered untenantable. (E) Landlord shall in no event be obligated to make any repairs or replacement of any fixtures, furnitures, equipment or other Property (real or personal) owned by Tenant. If the lease is not terminated but the Premises are rendered totally untenantable, Rent shall abate during the period of such untenantabillty. Tenant acknowledges (i) that Landlord shall not obtain insurance of any kind on Tenant Improvements, alterations, additions and improvements to the Premises owned by Tenant or on Tenant's furniture, fixtures, equipment and other personal property, *not ordinarily covered by all-risk insurance) or during the last two years of this lease, landlord upon giving thirty (30) days notice to Tenant, may elect to terminate this lease. 29 8 (ii) that it is Tenant's obligation to obtain such insurance at Tenant's sole cost and expense, and (iii) that Landlord shall not be obligated to repair any damage thereto or replace the same. The provisions of this Paragraph 13 shall be considered an express agreement governing any case of damage or destruction of the Premises by fire or other casualty, and NJSA 46:8-6 shall have not application in such case. PARAGRAPH 14 EMINENT DOMAIN: In case the whole of the Premises, or such part thereof as shall substantially interfere with Tenant's use and occupancy thereof, shall be taken by any lawful power or authority by exercise of the power of eminent domain, this Lease shall terminate effective as of the date possession is required to be surrendered to said authority. In the event of any taking (in whole or part) of the Project whether or not the Premises or access thereto are affected thereby, which taking in Landlord's judgment will render continued operation of the Project economically infeasible, Landlord shall have the right to terminate this Lease. Except as provided herein, Tenant shall not, because of any taking, assert any claim against Landlord or the taking authority for any compensation because of such taking, and Landlord shall be entitled to receive the entire amount of any award without deduction for any estate or interest of Tenant. In the event the amount of property or the type of estate taken shall not substantially interfere with Tenant's use of the Premises, and Landlord does not terminate this Lease, Landlord shall proceed to restore the Premises (to the extent permitted by the taking) to substantially their condition prior to such partial taking, and a proportionate allowance shall be made to Tenant for Rent corresponding to the time during which, and to the part of the Premises of which, Tenant shall be so deprived on account of such taking and restoration. Provided same shall not diminish Landlord's award in any way, nothing contained in this Paragraph 14 shall prevent Tenant from seeking any award against the taking authority for the taking of personal property and fixtures owned by Tenant or for relocation expenses recoverable from the taking authority. In no event shall Landlord be required to expend more for restoration than received from the taking authority for such taking. For the purposes of this paragraph, "taking" shall also include any conveyance in lieu of condemnation. PARAGRAPH 15 ASSIGNMENT AND SUBLETTING: (A) Tenant shall not voluntarily or involuntarily assign, sublet, mortgage or otherwise encumber all or any portion of its interest in this Lease or in the Premises without obtaining the prior written consent of Landlord and any such attempted assignment, subletting, mortgage or other encumbrance without such consent shall be null and void and of no effect. (B) No assignment, subletting, mortgage or other encumbrance of Tenant's interest in this Lease shall relieve Tenant of its obligation to pay the Rent and to perform all of the other obligations to be performed by Tenant hereunder. The acceptance of rent by Landlord from any other person shall not be deemed to be a waiver by Landlord of any provision of this Lease or be a consent to any subletting, assignment, mortgage or other encumbrance. Consent to one sublease, assignment, mortgage or other encumbrance shall not be deemed to constitute consent to any subsequent attempted subletting, assignment, mortgage or other encumbrance. No permitted assignment or sublease shall permit any further assignment, subletting, mortgage or other encumbrance. (C) If Tenant desires at any time to assign this Lease or to sublet the Premises or any portion thereof, Tenant shall first notify Landlord of Tenant's desire to do so and shall submit in writing to Landlord no less than sixty (60) days prior to such assignment or subletting (i) the name of the proposed subtenant or assignee; (ii) the nature of the proposed subtenant's or assignee's business to be carried on in the Premises; (iii) the terms and provisions of the proposed sublease or assignment and a copy of the proposed sublease or assignment; and (iv) such financial information as Landlord may reasonably request concerning the proposed subtenant or assignee. (D) At any time within thirty (30) days after Landlord's receipt of the information specified in subparagraph (C) above, Landlord shall by written notice to Tenant, elect (i) to take from Tenant a sublease of the Premises or the portion thereof proposed to be subleased by Tenant, or to take an assignment of Tenant's leasehold estate hereunder, or such part thereof as shall be specified in said notice, upon the same terms as those offered to the proposed subtenant or assignee, as the case may be; (ii) to give Tenant written consent to the proposed assignment or sublease, provided that the Rent payable monthly by the Tenant to 30 9 the Landlord under the terms of this Lease shall be increased by a sum equal to all rental and other considerations received by Tenant from its subtenant or assignee in excess of the Rent payable by Tenant under the terms of this Lease; or (iii) to terminate this Lease as to the portion (including all) of the Premises proposed to be subleased or assigned, with a proportionate abatement in the Rent payable hereunder (iv) to deny consent, in writing, to Tenant's proposed sublet or assignment. If Landlord does not exercise any option set forth in this subparagraph (D) within said thirty (30) day period, Landlord shall be deemed to have consented to the proposed assignment or sublease. (E) Landlord shall not unreasonably exercise its rights under subparagraph (D) (iv) above, provided, all the following conditions are present: (i) Tenant shall send notice to Landlord, in writing, including all the information specified in subparagraph (C) above; (ii) the subtenant or assignee is of high quality, character and financial stability consistent with the high standards of the Building as determined by Landlord in Landlord's reasonable business judgment; (iii) the proposed subtenant or assignee is not a party then occupying space in the Building or party who has negotiated with Landlord for space in the Building within the twelve (12) month period preceding the date of Tenant's notice pursuant to this subparagraph (E); (v) Tenant shall not have publicly advertised the availability for assignment, sublease or occupancy of all or any part of the Premises at a rental rate lower than the rate at which Landlord is then offering to lease similar space in the Building. (F) Landlord, in any case which does not involve an assignment for the benefit of creditors or an assignment growing out of, or having any connection with, operation of law or any other of the eventualities made the subject of an event of default in Paragraph 22 of this Lease, shall not withhold its consent to bona-fide assignments of this Lease as a whole to "subsidiary or affiliate corporations" as the term is hereinafter defined upon the satisfaction of the respective conditions and upon compliance with the requirements by Tenant of all notice provisions of this Paragraph 15. A "subsidiary or affiliate corporation" is defined for the purposes of this Lease as a corporation or other legal entity organized and existing or qualified or otherwise permitted to do business in the State of New Jersey, and under common control and ownership of Tenant, or which owns and controls Tenant or which is owned and controlled by Tenant or by any corporation or legal entity wholly-owned and controlled directly or through other corporations or legal entities wholly-owned and controlled by Tenant. For the purposes of this Paragraph 15, "owned and controlled" shall, in the case of a corporation, mean the ownership of at least fifty (50%) percent of the capital stock entitled to vote, and shall, in the case of any other legal entity, mean ownership of at least fifty (50%) percent of the beneficial interest therein and at least a fifty (50%) percent voice in the management thereof. (G) If Tenant is a corporation, an unincorporated association or partnership, the transfer, assignment or hypothecation of any stock or interest in such corporation, association or partnership, in the aggregate in excess of twenty-five (25%) percent, shall be deemed an assignment within the meaning and provisions of this Paragraph 15. See Subsection (H) attached as Page 9A. PARAGRAPH 16 LANDLORD'S ACCESS TO PREMISES: Landlord reserves and shall at any and all times have the right to enter the Premises to inspect the same, to supply janitor service and any other service to be provided by Landlord to Tenant hereunder, to show said Premises to prospective purchasers, mortgagees, or tenants, to alter or repair the Premises or any portion of the Building or Project, all without being deemed guilty of an eviction of Tenant and without abatement of Rent, and may for that purpose erect scaffolding and other necessary structures where reasonably required by the character of the work to be performed, provided that the business of Tenant shall be interfered with as little as is reasonably practicable. Tenant hereby waives any claim for damages or any injury or inconvenience to or interference with Tenant's business, any loss of occupancy or quiet enjoyment of the Premises, and any other loss occasioned thereby. For each of the aforesaid purposes, Landlord shall at all times have and retain a key with which to unlock all of the doors in, upon and about the Premises, excluding Tenant's vaults and safes, and Landlord shall have the right to use any and all means which Landlord may deem proper to open said doors in an emergency in order to obtain entry to the Premises, and any entry to the Premises obtained by Landlord by any of said means shall not under any circumstances be construed or deemed to be a forcible or unlawful entry into, or a detainer of the Premises, or any eviction of Tenant from the Premises or any portion thereof. No provision of this Lease shall be construed as obligating Landlord to perform any repairs, alterations or decoration except as otherwise expressly agreed to be performed by Landlord. 31 10 PARAGRAPH 17 SUBORDINATION, ATTORNMENT, ESTOPPEL CERTIFICATES: (A) This Lease is junior, subject, and subordinate to all ground leases, mortgages, deeds of trust, and other security instruments of any kind now covering the Project or any portion thereof. Landlord reserves right to place liens or encumbrances on the Project or any part thereof or interest therein superior in lien and effect to this Lease. This Lease, at the option of Landlord, shall be subject and subordinate to any and all such liens or encumbrances now or hereafter imposed by Landlord without the necessity of the execution and delivery of any further instruments on the part of Tenant to effectuate such subordination. Notwithstanding the foregoing, Tenant covenants and agrees to execute and deliver upon request such further instruments evidencing such subordination of this Lease as may be requested by Landlord. (B) Tenant shall at any time and from time to time upon not less than ten (10) days prior notice by Landlord, execute, acknowledge and deliver to Landlord a statement in writing and in form and substance satisfactory to Landlord certifying that this Lease is unmodified and in full force and effect (or if there have been modifications, that the same is in full force and effect as modified and stating the modifications), and the dates to which the Basic Annual Rent, Additional Rent and other charges have been paid in advance, if any, and stating whether or not to the best knowledge of Tenant, Landlord is in default in the performance of any covenant, agreement or condition contained in this Lease and, if so, specifying each such default of which Tenant may have knowledge. Any such statement delivered pursuant to this Paragraph 17 may be relied upon by any prospective purchaser of the fee of the Building or the Project or any mortgagee, ground lessor or other encumbrancer thereof or any assignee of any such person. Tenant shall also, at any time, and from time to time, upon not less than ten (10) days prior notice by Landlord execute and deliver to Landlord forms and documents as may be necessary for compliance with any applicable law, statute, ordinance, rule or regulation. See Subsection (C) attached as Page 10A. PARAGRAPH 18 SALE BY LANDLORD: In the event of a sale or conveyance by Landlord of the Project or any part thereof, the same shall operate to release Landlord from any and all liability under this Lease accruing after the date of such conveyance of title. If any Security Deposit has been made by Tenant, Landlord shall transfer such Security Deposit to the purchaser, and Purchaser has been notified in writing of such transfer, and thereupon Landlord shall be discharged from any further liability in reference thereto. Notwithstanding any sale by Landlord, Tenant's possession under this Lease shall not be disturbed if Tenant is not in default and so long as Tenant shall pay all amounts due hereunder and otherwise observe and perform all provisions of this Lease. PARAGRAPH 19 INDEMNIFICATION AND INSURANCE: (A) Tenant shall indemnify, hold Landlord harmless from and defend Landlord against any and all claims, loss, costs, damage, expense or liability, including without limitation reasonable attorneys' fees, for any injury or damages to any person or property whatsoever, when such injury or damage has been caused in part or in whole by any default, act, neglect, fault, or omission of Tenant, its agents, servants, employees or invitees. This indemnity shall not require any payment by Landlord as a condition precedent to recovery. In addition, if any person not a party to this Lease shall institute any other type of action with respect to Tenant's occupancy of the Premises or Tenant's obligations under this Lease against Tenant in which Landlord shall be made a party defendant, Tenant shall indemnify, hold Landlord harmless from and defend Landlord from all liabilities and costs by reason thereof. For the purposes of subparagraphs 19(A) and 19(B), the term "Landlord" shall also include as indemnitees, as the case may be, Landlord's servants, employees, officers, agents, and/or contract managers. (B) Landlord shall indemnify, hold Tenant harmless from and defend Tenant against any and all claims, loss, cost, damage, expense or liability including, without limitation, reasonable attorneys' fees for any injury or damage to any person or property whatsoever, occurring in the Common Areas of the Building or Project when such injury or damage has been caused in part or in whole by any default, act, neglect, fault or omission of Landlord, its agents, employees or invitees. This indemnity shall not require any payment by Tenant as a condition precedent to recovery. Landlord hereby agrees to maintain in full force and effect at all times during the term of this Lease, at Landlord's own expense (subject to reimbursement pursuant to Paragraph 3 hereof) property damage insurance on the Building and improvements (the amount of such coverages and of all deductibles to be In Landlord's absolute and sole discretion) or to self-insure against the losses insured against by property damage coverage. 32 -10A- (c) Tenant agrees that in the event that any holder of any ground or underlying lease, mortgage, deed of trust, or other encumbrance encumbering any part of the Project succeeds to Landlord's interest in the Premises, Tenant shall pay to such holder all rents subsequently payable under this Lease and shall, upon request of any such person or party succeeding to Landlord's interest, automatically become the Tenant of and attorn to such successor in interest without change in the terms or provisions of this Lease. Such successor in interest shall not be bound by (i) any payment of Basic Monthly Rental Installments for more than one month in advance except prepayments in the nature of a security deposit, or (ii) any amendment or modification of this Lease made without the written consent of such successor in interest. Upon request by such successor in interest and without cost to Landlord or such successor in interest, Tenant shall execute, acknowledge, and deliver an instrument or instruments confirming the attornment. 33 11 (C) Tenant hereby agrees to maintain in full force and effect at all times during the term of this Lease, at its own expense, for the protection of Tenant and Landlord as their interests may appear, policies of insurance issued by a responsible carrier or carriers acceptable to Landlord which afford the following coverages: (i) Worker's Compensation --Statutory or higher Employer's Liability, if such --Not less than coverage is available $250,000 (ii) Comprehensive General --Not Less than Liability Insurance, $2,000,000 including Blanket Combined Single Contractual Liability, Limit for both Broad Form Property bodily injury and Damage, Personal Injury, property damage Fire Damage
Landlord shall be named as an additional insured on all policies listed under (ii). (iii) All Risk Property Coverage in an amount sufficient to cover the full cost of replacement of all improvements and betterments to the Premises owned by Tenant and all of Tenant's fixtures and other personal property. (D) Tenant shall deliver to Landlord at least thirty (30) days prior to the time such insurance is first required to be carried by Tenant, and thereafter at least thirty (30) days prior to expiration of each such policy, certificates of insurance evidencing the above coverage with limits not less than those specified above. Such certificate, with the exception of Worker's Compensation, shall expressly provide that the interest of Landlord therein shall not be affected by any breach by Tenant of any provision of any such policy. Further, all certificates shall expressly provide that no less than thirty (30) days prior written notice shall be given Landlord in the event of material alterations to or cancellation of the coverages evidenced by such certificates. (E) Upon demand, Tenant shall provide Landlord, at Tenant's expense, with such increased amount of existing insurance, and such other insurance in such limits as Landlord may reasonably require and such other hazard insurance as the nature and condition of the Premises may require in the judgment of Landlord, to afford Landlord adequate protection for said risks. (F) If on account of the failure of Tenant to comply with the provisions of this Paragraph 19, Landlord is adjudged a co-insurer by its insurance carrier, then any loss or damage Landlord shall sustain by reason thereof shall be borne by Tenant and shall be immediately paid by Tenant upon receipt of a bill therefor and evidence of such loss. (G) Landlord makes no representation that the limits of liability specified to be carried by Tenant under the terms of this Lease are adequate to protect Tenant against Tenant's undertaking under this Paragraph 19. In the event Tenant believes that any such insurance coverage called for under this Lease is insufficient, Tenant shall provide, at its own expense, such additional insurance as Tenant deems adequate. PARAGRAPH 20 WAIVER OF SUBROGATION: Tenant and Landlord each agree that the respective insurance carried by it against loss or damage by fire or other casualty shall contain a clause whereby the insurer waives its right of subrogation against the other party. Pursuant to the foregoing, Landlord and Tenant hereby waive all claims for recovery from the other party for any loss or damage to any of its property insured under valid and collectible insurance policies to the extent of any recovery collectible under such insurance. PARAGRAPH 21 NO WAIVER: No failure by Landlord to insist upon the strict performance of any covenant, agreement, term or condition of this Lease, or to exercise any right or remedy consequent upon a breach thereof, and no acceptance of full or partial Rent during the continuance of any such breach, shall constitute a waiver of any such breach or of such covenant, agreement. term or 34 12 condition. Landlord's waiver, if any, shall only be as expressly stated in writing and signed by Landlord. No consent or waiver by Landlord to or of any breach of any covenant, condition or duty of Tenant shall be construed as a consent or waiver to or of any other breach of the same or any other covenant' condition or duty, unless expressly stated otherwise in writing and signed by Landlord. No payment by Tenant or receipt by Landlord of a lesser amount than the Rent and additional charges payable hereunder shall be deemed to be other than a payment on account of the earliest stipulated Rent, nor shall any endorsement or statement on any check or any letter accompanying any check or payment for Rent be deemed an accord and satisfaction, and Landlord may accept SUCH check or payment without prejudice to Landlord's right to recover the balance of such Rent or pursue any other remedy provided herein or by law. PARAGRAPH 22 DEFAULT: (A) The occurrence of any of the following shall constitute a material default and breach of this Lease by Tenant: (i) Any failure by Tenant to pay the Rent or to make any other payment required to be made by Tenant hereunder within five (5) days of date due; (ii) The abandonment or vacation of the Premises by Tenant; (iii) Any failure by Tenant to observe and perform any of its other obligations under this Lease, where such failure continues for fifteen (15) days (except where a different period of time is specified in this Lease) after Landlord has given Tenant written notice or such other notice as may be required by law; provided, however, if such obligation cannot be cured within said fifteen (15) day period, such longer period (but in no event more than six (6) months) as may be reasonably necessary to effect such cure and upon condition that Tenant is diligently and continuously proceeding to effect said cure; (iv) Tenant makes, or has made, or furnishes, or has furnished, any warranty, representation or statement to Landlord in connection with this Lease, or any other agreement to which Tenant and Landlord are parties, which is or was false or misleading in any material respect when made or furnished; (v) Any substantial portion of the assets of Tenant is transferred unless such transfer is incurred in the ordinary course of Tenant's business in good faith for fair equivalent consideration; (vi) Tenant becomes insolvent as defined in the Federal Bankruptcy Code, admits in writing its insolvency or its present or prospective inability to pay its debts as they become due, is unable to or does not pay all or any material portion (in number or dollar amount) of its debts as they become due, permits or suffers a judgment to exist against it which affects Tenant's ability to conduct its business in the ordinary course (unless enforcement thereof is stayed pending appeal), makes or proposes an assignment for the benefit of creditors or any class thereof for purposes of effecting a moratorium upon or extension or composition of its debts, proposes any such moratorium, extension or composition, or commences or proposes to commence any bankruptcy, reorganization or insolvency proceeding, or other proceeding under any federal, state or other law for the relief of debtors; (vii) Tenant fails to obtain the dismissal, within thirty (30) days after the commencement thereof, of any bankruptcy, reorganization or insolvency proceeding, or other proceeding under any law for the relief of debtors, instituted against it by one or more third parties, or fails actively to oppose any such proceeding, or, in any such proceeding, defaults or files an answer admitting the material allegations upon which the proceeding was based or alleges its willingness to have an order for relief entered or its desire to seek liquidation, reorganization or adjustment of any of its debts; (viii) Any receiver, trustee or custodian is appointed to take possession of all or any substantial portion of the assets of Tenant, or any committee of Tenant's creditors, or any class thereof is formed for the purpose of monitoring or investigating the financial affairs of Tenant or enforcing such creditors' rights. 35 13 (B) In the event of any such default by Tenant then in addition to any other remedies available to Landlord at law or in equity, Landlord shall have the option to immediately terminate this Lease and all rights of Tenant hereunder by giving written notice of such intention to terminate. In the event that Landlord shall elect to so terminate the Lease then Landlord may recover from Tenant: (i) any unpaid Rent which shall have accrued at the time of such termination; plus (ii) the entire amount of unpaid Rent for the balance of the Lease term which amount shall, at Landlord's option, be immediately due and payable, but discounted at the interest rate payable on United States five (5) year Treasury Notes issued immediately prior to default; plus (iii) any other amount necessary to compensate Landlord for Landlord's loss or damage caused directly or indirectly by Tenant's failure to perform its obligations under this Lease including, but not limited to, reasonable attorneys' fees and costs; plus (iv) at Landlord's election, such other amounts in addition to, or in lieu of the foregoing, as may be permitted from time to time by applicable law. (C) In the event of any such default by Tenant, Landlord shall also have the right, with or without terminating this Lease, to reenter and to take possession of the Premises and to remove all persons and property from the Premises. Landlord is hereby granted a lien, in addition to any statutory lien or right to distrain that may exist, on all personal property of Tenant in or upon the Premises, to assure payment of the Rent and performance of the covenants and conditions of this Lease. (D) In the event of the vacation or abandonment of the Premises by Tenant or in the event that Landlord shall elect to reenter as provided above or shall take possession of the Premises pursuant to legal proceeding or pursuant to any notice provided by law, then if Landlord does not elect to terminate this Lease as provided in this Paragraph 22, Landlord may from time to time, without terminating this Lease, either recover all Rent as it becomes due or relet the Premises or any part thereof for such term or terms and at such rental or rentals and upon such other terms and conditions as Landlord in its sole discretion may deem advisable with the right to make alterations and repairs to~ the Premises. Notwithstanding the provisions of NJSA 2A:18-60 Tenant agrees not to seek to remove any Summary Dispossess Action to Superior Court. (E) In the event that Landlord shall elect to so relet, then rentals received by Landlord from such reletting shall be applied: first, to the payment of any indebtedness other than Rent due hereunder from Tenant to Landlord; second, to the payment of any cost of such reletting including, but not limited to, broker's commissions and reasonable attorneys' fees; third, to the payment of the cost of any alterations and repairs to the Premises; fourth, to the payment of Rent due and unpaid hereunder; and the residue, if any, shall be held by Landlord and applied in payment of future Rent as the same may become due and payable hereunder. Should any such reletting result in the payment of rentals less than the Rent payable by Tenant hereunder, then Tenant shall pay such deficiency to Landlord immediately upon demand therefor by Landlord. Tenant shall also pay Landlord as soon as ascertained, any costs and expenses incurred by Landlord in such reletting or in making such alterations and repairs not covered by the rentals received from such reletting. F) No reentry or taking possession of the Premises by Landlord pursuant to this Paragraph 22 shall be construed as an election to terminate this Lease unless a written notice of such intention be given to Tenant. Notwithstanding any reletting without termination by Landlord because of any default by Tenant, Landlord may at any time after such reletting, elect to terminate this Lease for any such default. PARAGRAPH 23 RIGHT OF LANDLORD TO CURE TENANT'S DEFAULT: If Tenant defaults in the making of any payment or in the doing of any act herein required to be made or done by Tenant, then Landlord may, but shall not be required to, make such payment or do such act and charge to Tenant the amount of all costs in connection therewith including, but not limited to, reasonable legal fees and expenses 36 14 incurred by Landlord, with interest thereon as provided in Paragraph 36 from the date paid by Landlord to the date of payment thereof by Tenant. Such payment and interest shall constitute Additional Rent hereunder due and payable upon demand but the making of such payment or the taking of such action by Landlord shall not operate to cure such default or to stop Landlord from the pursuit of any other remedy to which Landlord would otherwise be entitled. PARAGRAPH 24 NOTICES: All notices which Landlord or Tenant may be required or may desire to serve on the other may be served, as an alternative to personal service, by mailing the same by registered or certified mail, return receipt requested, postage prepaid, addressed as set forth in Item 13 of the Basic Lease Provisions, or addressed to such other address or addresses as either Landlord or Tenant may from time to time designate to the other by written notice. PARAGRAPH 25 INSOLVENCY OR BANKRUPTCY: In no event shall this Lease be assigned or assignable by operation of law and in no event shall this Lease be an asset of Tenant in any receivership, bankruptcy, insolvency, or reorganization proceeding. PARAGRAPH 26 SURRENDER AND HOLDOVER: (A) On the expiration or the sooner termination hereof, Tenant shall peaceably surrender the Premises broom clean, in good order, condition and repair. On or before the last day of the Lease term or the sooner termination hereof, Tenant shall at its expense remove within fifteen (15) days its trade fixtures, signs and other personal property from the Premises. Any property not removed shall be deemed abandoned and may either be retained by Landlord as its property, or disposed of, without accountability and at Tenant's expense, in such manner as Landlord may determine. If the Premises are not surrendered at the end of the Lease term or the sooner termination Tenant shall indemnify Landlord against loss or liability resulting from delay by Tenant in so surrendering the Premises, including, without limitation, claims made by any succeeding tenants founded on such delay. Tenant shall promptly surrender all keys for the Premises and Building restrooms to Landlord at the place then fixed for payments of Rent. Tenant's covenants hereunder shall survive the expiration or termination of this Lease. (B) If Tenant holds over after the expiration or sooner termination hereof without the express written consent of Landlord, Tenant shall become a Tenant at sufferance only at one and one half times the greater of (i) the Rent due hereunder or (ii) the then prevailing market rate rent, as determined by Landlord in its sole and absolute discretion, plus all items of Additional Rent provided herein, and either (i) or (ii) shall be prorated on a daily basis according to the number of days contained in the month that such expiration or earlier termination takes place, and otherwise upon the terms, covenants and conditions herein specified, so far as applicable. Acceptance by Landlord of Rent after such expiration or earlier termination shall not constitute a consent to a holdover hereunder or result in a renewal. The foregoing provisions of this paragraph are in addition to and do not affect Landlord's rights of reentry or any other rights of Landlord hereunder or as otherwise provided by law. PARAGRAPH 27 CONDITION OF PREMISES: Landlord's responsibility with respect to the condition of the Premises is set forth in Exhibit "B-1" Landlord's Work Letters Tenant acknowledges that neither Landlord nor any agent of Landlord has made any representation or warranty with respect to the Premises, the Building or the Project or with respect to the suitability of any part of the Project for the conduct of Tenant's business. The taking of possession of the Premises by Tenant shall conclusively establish that the Building and the Premises were at such time in good order and repair. PARAGRAPH 28 QUIET POSSESSION: Upon Tenant's paying the rent reserved hereunder and observing and performing all of the covenants, conditions and provisions on Tenant's part to be observed and performed hereunder, Tenant shall have quiet possession of the Premises for the entire term hereof, subject to all of the provisions of this Lease. This covenant shall be binding upon any landlord hereunder only during its respective ownership of the Premises. PARAGRAPH 29 LIMITATION OF LANDLORD'S LIABILITY: (A) Landlord and its employees and agents shall not be liable for any damage to Tenant's property entrusted to employees of Landlord or its agents, nor for any loss or interruption of Tenant's possession, nor for loss of or damage to any property by theft or 37 15 otherwise, nor for any injury or damage to property resulting from fire, explosion, falling plaster, steam, gas, electricity, water or rain which may leak from any part of the Building or from the pipes, appliances or plumbing works therein or from the roof, street or sub-surface or from any other place or resulting from dampness or any other cause whatsoever in the Building or the Project. Landlord and its employees and agents shall not be liable for any property loss resulting from any latent defect in the Premises or in the Building. Tenant shall give prompt notice to Landlord in case of fire, accidents or defects in the Premises or in the Building. Tenant shall give prompt notice to Landlord in case of fire, accident or defects in the Premises or in the Building. (B) Tenant shall look solely to Landlord's estate and property in the Project (or the proceeds thereof) for the satisfaction of Tenant's remedies for the collection of a judgment (or other judicial process) requiring the payment of money by Landlord in the event of any default by Landlord hereunder, and no other property or assets of Landlord or Landlord's partners or members shall be subject to levy, execution or other enforcement procedure for the satisfaction of Tenant's remedies under or with respect to either this Lease, the relationship of Landlord and Tenant hereunder, or Tenant's use and occupancy of the Premises. PARAGRAPH 30 GOVERNING LAW: This Lease shall be governed by and construed pursuant to the law of the State of New Jersey. PARAGRAPH 31 COMMON FACILITIES: Tenant shall have the non-exclusive right in common with others, to the use of common entrances, lobbies, elevators, ramps, drives, stairs, and similar access and serviceways and the other common facilities (except for parking spaces other than those provided for in Paragraph 39) in and adjacent to the Building or Project, as may be provided by Landlord from time to time for general use, subject to such rules and regulations as may be adopted by the Landlord including, but not limited to, the right to close from time to time all or any portion of said common facilities to such extent as may be legally sufficient, in Landlord's sole opinion, to prevent a dedication thereof or the accrual of rights to any person or to the public therein. PARAGRAPH 32 SUCCESSORS AND ASSIGNS: Except as otherwise provided in this Lease, all of the covenants, conditions and provisions of this Lease shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and assigns. However, the obligations of Landlord under this Lease shall not be binding upon Landlord herein named with respect to any period subsequent to the transfer of its interest in the Project as owner or lessee thereof, and in the event of such transfer said obligations shall thereafter be binding upon each transferee of the interest of Landlord herein named as such owner or lessee of the Project, but only with respect to the period commencing with its respective transfer in and ending with a subsequent transfer out, and such transferee, by accepting such interest, shall be deemed to have assumed such obligations except only as may be expressly otherwise provided in this Lease. Any lease of all or substantially all of Landlord's interest in the Project as owner or lessee thereof shall be deemed a transfer, to the tenant under such lease, within the meaning of Paragraph 32. PARAGRAPH 33 BROKERS: (A) Tenant represents and agrees that it has not directly or indirectly dealt with any real estate broker(s) other than the firm(s) specified in Item 11 of the Basic Lease Provisions in connection with this transaction. Tenant agrees to defend, indemnify and hold Landlord harmless from and against any claims for brokerage commission or finder's fee arising out of or based on any alleged actions of Tenant with any other broker or brokers. (B) Landlord represents and agrees that it has not directly or indirectly dealt with any real estate broker(s) other than the firm(s) specified in Item 11 of the Basic Lease Provisions in connection with this transaction. Landlord agrees to defend, indemnify and hold Tenant harmless from and against any claims for brokerage commission or finder's fee arising out of or based on any alleged actions of Landlord with any other broker or brokers. (C) If, after the date hereof, either Landlord or Tenant shall employ, retain or consult with any real estate broker or brokers other than the firms specified in Item 11 of the Basic Lease Provisions in connection with any matters pertaining to this Lease, the Premises or the Project, the employing party hereby agrees to pay the broker or brokers and the employing party hereby agrees to defend, 38 16 indemnify and to hold harmless the other party hereto from and against any claims for brokerage commission or finder's fee arising out of or based on any alleged actions of the employing party with respect to said broker or brokers not specified in Item 11. PARAGRAPH 34 NAME; LANDLORD'S RIGHTS: (A) Tenant shall not, without the written consent of Landlord, use the name of the Building or the Project for any purpose other than as the address of the business to be conducted by Tenant in the Premises, and in no event shall Tenant acquire any rights in or to such names. Landlord reserves the right to change the name and/or address of the Building or Project at any time and from time to time, and agrees to give reasonable notice of same to Tenant. (B) It is understood and agreed that the architectural design, aesthetic appeal and use of the Building and the Project are and shall remain always in the sole control of Landlord. Therefore, notwithstanding anything to the contrary contained herein, Landlord does hereby reserve the right from time to time and at any time to make reasonable changes and additions, without restriction, to the Building and the Project, improvements or other areas, including without limitation, eliminating land, adding other lands, decreasing or changing the Building and the Project, which are deemed desirable by Landlord, and the making of such changes or additions shall not invalidate or affect this Lease or any rights hereunder nor constitute an eviction of Tenant or a breach of this Lease, nor give rise to any claim for damages. Notwithstanding the foregoing provisions, Landlord represents and confirms that no such changes will unreasonably and substantially interfere with Tenant's use and occupancy of the Premises or Tenant's access to the Building. PARAGRAPH 35 EXAMINATION OF LEASE: Submission of this instrument for examination or signature by Tenant does not constitute a reservation of or option for lease, and it is not effective as a lease or otherwise until execution by and delivery to both Landlord and Tenant. PARAGRAPH 36 ADDITIONAL CHARGES: Any amount due from Tenant to Landlord which is not paid when due, in addition to other remedies available to Landlord shall, at Landlord's option, bear interest which shall be at the lesser of (i) eighteen (18%) percent per annum or (ii) the maximum lawful rate per annum, from the date such payment is due until the date actually paid, but the payment of such interest shall not excuse or cure the default. PARAGRAPH 37 DEFINED TERMS AND ADDITIONAL HEADINGS: The words "Landlord" and "Tenant" as used herein shall, as the case may be, include the plural as well as the singular. If more than one person or entity is named as Tenant the obligations of such persons or entities are joint and several. The marginal headings and titles to the Paragraphs of this Lease are not a part of this Lease and shall have no effect upon the construction or interpretation of any part hereof. This Lease shall be construed without regard to any presumption or other rule requiring construction against the party causing this Lease to be drafted. PARAGRAPH 38 PRIOR AGREEMENTS; SEVERABILITY: This Lease contains all of the agreements of the parties hereto with respect to any matter covered or mentioned in this Lease, and no prior agreement, understanding or representation pertaining to any such matter shall be effective for any purpose. No provision of this Lease may be amended or added to except by an agreement in writing signed by the parties hereto or their respective successors in interest. If any term or provision of this Lease, the deletion of which would not adversely affect the receipt of any material benefit by either party hereunder, shall be held invalid or unenforceable to any extent, the remainder of this Lease shall not be affected thereby and each term and provision of this Lease shall be valid and enforceable to the fullest extent permitted by law. PARAGRAPH 39 PARKING: Tenant shall have the right to the use of the number of parking spaces shown in Item 10 of Basic Lease Provisions. Landlord shall have, in its absolute discretion, the right to assign parking spaces. Tenant covenants and agrees to comply with all reasonable rules and regulations which Landlord may from time to time make to assure proper use of parking spaces by permitted users including but not limited to the prohibition of overnight parking. Landlord's remedies under such rules and regulations may include, but shall not be limited to, the right to tow away at owner's expense any vehicles not parked in compliance with these rules and regulations. Landlord shall not be responsible to Tenant for the noncompliance or breach by any other tenant of said rules and regulations. 39 17 PARAGRAPH 40 FORCE MAJEURE: Except as otherwise expressly provided herein, this Lease and the obligations of either party Rent hereunder to perform all of the covenants, agreements, terms, provisions and conditions hereunder on the part of Tenant to be performed shall in no way be affected, impaired or excused because such party's is unable to fulfill any of its obligations under this Lease, if such party's is prevented or delayed from so doing by reason of any cause beyond such party's reasonable control including, but not limited to, Acts of God, strikes, labor troubles, shortage of materials, governmental preemption in connection with a national emergency or by reason of any rule, order or regulations of any governmental agency or by reason of war, hostilities or similar emergency; provided that Landlord shall in each instance exercise reasonable diligence to effect performance as soon as possible. It is agreed that Landlord shall not be required to incur any overtime or additional expenses in Landlord's reasonable diligence to effect the performance of any of Landlord's obligations hereunder. PARAGRAPH 41 NO LIGHT, AIR OR VIEW EASEMENT: Any diminution or shutting off of light, air or view by any structure which may be erected on lands adjacent to the Building shall in no way affect this Lease or impose any liability on Landlord. PARAGRAPH 42 AUTHORITY AND SIGNATORIES: If Tenant executes this Lease in other than individual capacity, each of the persons executing this Lease on behalf of Tenant does hereby personally covenant and warrant that Tenant is a duly authorized and existing entity as herein represented, that Tenant was and is qualified to do business in the State of New Jersey, that the Tenant has full right and authority to enter into this Lease, and that each person signing on behalf of the Tenant is authorized to do so. Upon Landlord's request, the Tenant's signatories hereto will furnish satisfactory evidence of Tenant's authorization, and their personal authority on behalf of Tenant, to execute this Lease. PARAGRAPH 43 CAMPUS ASSOCIATION: (A) This lease, and all rights of Tenant hereunder, are and shall be subject and subordinate in all respects to all present and future recorded covenants and restrictions (and any amendments, renewals, replacements, or modifications thereof) referring to any owners' or campus association for the Complex or any part thereof in which the Building is located. Landlord shall promptly advise Tenant of such recordings. The aforesaid association shall be intended to benefit the owners and tenants of the Complex, and shall have the following main purposes: sustain the first-class quality of the Complex; maintain on-site and off-site common improvements (landscaping, etc.) of the Complex; and engage in projects and programs which improve traffic and transportation concerning the Complex. Tenant covenants and agrees that it will not perform (or fail to perform) any act which may constitute a default under such covenants and restrictions. (B) Tenant further covenants and agrees to cooperate with, and participate in, programs of any such aforesaid association, including but not limited to: car and van pooling; flex-time work scheduling; jitney buses to nearby train stations, airports, etc.; relocation of, or new, bus routes and bus stops through and at the Complex to Newark, Morristown, etc.; development of a park-and-ride facility, possibly to ultimately become a transportation center; and other programs and projects. PARAGRAPH 44 TENANT'S OPTION TO CANCEL: Anything in this Lease to the contrary notwithstanding and upon condition that Tenant is not in default in the payment of any Rent under this Lease and not in default in the performance of any covenant or obligation to be performed by Tenant under this Lease, Tenant may at Tenant's option given by written notice to Landlord six (6) months in advance, terminate this Lease in accordance with the schedule set forth below provided said notice is accompanied by payment to Landlord of (i) $41,111.00 plus (ii) the amount set forth in said schedule.
END OF LEASE MONTH ADDITIONAL PAYMENT ------------------ ------------------ 24 $97,246.00 25 $94,781.00 26 $92,293.00 27 $89,779.00 28 $87,240.00
40 18 29 $84,676.oo 30 $82,086.00 31 $79,470.00 32 $76,828.00 33 $74,160.00 34 $71,465.00 35 $68,743.00 36 $65,994.00 37 $63,218.00 38 $60,413.00 39 $57,581.00 40 $54,720.00 41 $51,831.00 42 $48,913.00 43 $45,965.00 44 $42,988.00 45 $39,982.00 46 $36,945.00 47 $33,878.00 48 $30,780.00 49 $27,651.00 50 $24,491.00 51 $21,300.00 52 $18,076.00 53 $14,820.00
(said payments to be in addition to all Rent falling due during any time the Premises are occupied). Should Tenant default in any payment to be made by Tenant or in the performance of any obligation to be performed by Tenant under this Lease after exercising the option to cancel herein granted, the exercise of the option shall be null and void. PARAGRAPH 45 TENANT'S OPTION TO RENEW Upon condition that Tenant is not in default in the payment of any Rent, under this Lease and not in default in the performance of any covenant or obligation to be performed by Tenant under this Lease and upon Tenant's giving Landlord six (6) months notice in writing prior to the expiration of the term hereof Tenant shall have the option to renew and extend this Lease for a further term of five (5) years, pursuant and subject to all the terms, covenants, provisions and conditions of the Lease, including, without limitation, the payment of all items of Additional Rent as provided for hereunder, except that Basic Annual Rent shall be adjusted to $26.00 per rentable square foot. 41 EXHIBIT A-1 FLOOR PLANS OF SECOND FLOOR NINE CAMPUS DRIVE PARSIPPANY, NJ [FLOOR PLAN] 42 EXHIBIT A-2 ALL those tracts or parcels of land and premises, situate, lying and being in the Township of Parsippany-Troy Hills in the County of Morris and State of New Jersey, more particularly described as follows: 43 9/28/89 EXHIBIT B-1 LANDLORD'S WORK LETTER (I) Tenant's Plan (a) Landlord has approved certain architectural, mechanical and electrical working plans and specifications for the Premises (hereinafter collectively referred to as "Tenant's Plan" and attached hereto as Exhibit "G"). Plans prepared by TEC 3, 2E-1 through 2E-4 AND D-1, dated July 31, 1989 as revised Comments through August 7, 1989 for Legent Corporation, second floor - east wing at Prudential Business Center, 9 Campus Drive, Linden Plaza, Parsippany-Troy Hills, N.J. Tenant's Plan contains all designations and selections required to be made by Tenant in connection with Landlord's installation and the heat factor if any, of all equipment intended to be used in, and the human load heat factor proposed for each room or other area in the Premises. Landlord will pay the costs of Tenant's Plan. Tenant shall pay for any changes made to Tenant's Plan subsequent to the dates indicated thereon. (II) Tenant shall pay all cost associated with any changes to Tenant's Plan made by Tenant (except Tenant is not obligated to pay any amounts toward Landlord's overhead and profit) including but not limited to: labor, materials, legal, architectural, and engineering fees and costs; permits and licenses; structural modifications to the Building. No change can be made without Landlord's written consent, and Landlord shall have no obligation to consent to any change which it believes might delay the Commencement Date. (III) Landlord shall complete and prepare the Premises for Tenant's initial occupancy in accordance with Tenant's Plan and the provisions of this Exhibit B-1, and Landlord's general contractor shall schedule the performance of said work in such a manner as in its sole discretion it considers proper for the expeditious completion thereof. In making this undertaking, Landlord has assumed and Tenant agrees (i) that all of Tenant's work stations are prewired for communication, telephone and electrical capability, and that Landlord is only responsible for bringing electrical wiring to the point of initial connection with such work stations, and (ii) that indications on Tenant's Plans regarding telephone equipment are locational only and that Tenant is paying the cost of all telephone and communication wiring and equipment. Tenant may at its own expense select and employ its own contractors for finishing work, such as carpeting, cabinet work, millwork, draperies, installation of special equipment or decorations (hereinafter called "Tenant's Work"), provided that Tenant abides by all the terms, covenants and conditions of Paragraph 6(c) of the Lease is which this Work Letter is Exhibit B-1. Tenant and its contractors shall be responsible for transportation, safekeeping and storage of materials and equipment used in the performance of Tenant's Work and for the removal of waste and debris resulting form the performance of Tenant's Work, and Landlord and its general contractor or representative shall not be responsible for the coordination of the work of Tenant's own contractors. With reasonable charge being made therefor, Landlord shall allow Tenant and its contractors during normal working hours to use utilities, to the extent available, as may be reasonably required in the Demised Premises for the performance of Tenant's Work. Prior to the commencement of Tenant's Work, Tenant shall obtain and maintain, or cause to be obtained and maintained, at its own expense Worker's Compensation and Bodily Injury and Property Damage, Public Liability Insurance and so called "Builder's Risk" insurance (all such insurance shall conform to the requirements of Article 12 hereof) in amounts as will be acceptable to Landlord and shall submit certificates as evidence thereof to Landlord with provisions for at least 30 days written notice of cancellation to the Landlord. 44 (IV) Landlord shall afford Tenant and its employees, agents or contractors access to the Premises, at reasonable times prior to the commencement date, and at Tenant's sole risk and expense, for the purposes of inspecting and verifying the performance of the work being done by the Landlord pursuant to Landlord's obligation hereunder and of making preparations for and performing, or inspecting and verifying the performance of, Tenant's Work, and Tenant shall inspect the performance of all such work regularly and diligently and shall advise Landlord promptly in writing of any objection to the performance of such work as is the Landlord's responsibility. Access for only such purposes shall not be deemed to constitute possession or occupancy accelerating the commencement date of Tenant's obligation to pay rent under this lease. Tenant will not store building materials, equipment, or machinery outside the Premises except with prior written consent of the Landlord, as reasonably required for the diligent prosecution of Tenant's Work and if such consent is given, such storage is to be done in a manner so as to cause as little inconvenience to the Landlord, Landlord's contractors, other tenants, their employees, invitees and visitors, and as little interference with their business pursuits as is reasonably possible. Landlord shall not be liable in any way for any injury, loss, damage or claim which may occur to or because of any Tenant's Work, the same being solely at Tenant's risk and expense unless due to negligence or willful misconduct of Landlord. The Premises will be considered as "ready for occupancy" on the earlier of (a) the date a certificate of occupancy is issued for the Premises or (b) the date on which the Landlord shall have in Landlord's reasonable business judgment, substantially completed all standard improvement work to be performed in accordance with Tenant's Plans, except for any work which could reasonably follow Tenant's work (as defined in Section III) or (c) the date Tenant accepts the Premises with the exception of punch list items. (V) If the whole of the Premises shall not be ready for occupancy at approximately the same time, Tenant may, with the written consent of Landlord, take possession of any part or parts of the Premises for its use and occupancy prior to an otherwise intended commencement date, provided that a temporary or permanent Certificate of Occupancy shall have been obtained for the part or parts of the Premises in respect to which Tenant desires to take possession. Tenant shall be deemed to have taken possession of the Premises for use and occupancy (herein called "actual possession") when any personnel of Tenant or anyone claiming under or through Tenant shall first occupy any part thereof for the conduct of business. Tenant's actual possession of any part or parts of the demised Premises shall constitute effectuation of the Commencement Date, if not already effectuated otherwise pursuant to this lease, and shall be subject to all of the obligations of this lease, including the payment of rent, except that Landlord may apportion the rent to the rentable area of each such part, prorated from the date of taking actual possession, which shall be payable at the beginning of each calendar month. (VI) On the Commencement Date, and if a different date, at such time as Tenant shall take actual possession of the whole or part of the Premises, it shall be conclusively presumed that the same were in satisfactory condition as of such dates and that to each of the dates thereof Landlord shall have performed all of its obligations hereunder, subject to punchlist items. -2- 45 JV #528.3 9/28/89 EXHIBIT C COMMENCEMENT DATE MEMORANDUM THIS AGREEMENT made the day of 1989, between PRUBETA-3, a general partnership organized under the laws of New Jersey, with an office at c/o THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, Newark Realty Group Office, Three Gateway Center 100 Mulberry Street, 13th Floor, Newark, New Jersey 07102 ("Landlord") and LEGENT CORPORATION, with an office at Two Allegheny Center, Pittsburgh, Pennsylvania 15212 ("Tenant"). WITNESSETH: WHEREAS, Landlord and Tenant entered into a Lease dated ______________ 1989 ("Lease") setting forth the terms of occupancy by Tenant a portion of the second floor of the PruBeta 3 Business Campus at Parsippany-Troy Hills, New Jersey; and WHEREAS, the Lease is for an initial term of five (5) years with the "Target Commencement Date" of the term being defined in Basic Lease Provisions; and WHEREAS, it has been determined in accordance with these provisions that __________, 19__ is the Commencement Date of the initial term of the Lease. NOW, THEREFORE, in consideration of the premises and the covenants hereinafter set forth, it is agreed: 1. The Commencement Date of the initial term of the Lease is , 1989 and the Expiration Date thereof is , 1994. 2. This agreement is executed by the parties for purposes of providing a record of the commencement and termination dates of the initial term of the Lease. IN WITNESS WHEREOF, the parties hereto have duly executed this instrument as of the day and year first above written. PRUBETA-3 ATTEST: BY: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, General Partner By: - -------------------------- --------------------------------- ASSISTANT SECRETARY VICE PRESIDENT WITNESS: BY: PARSIPPANY EQUITY VENTURE General Partner By: - -------------------------- --------------------------------- GENERAL PARTNER ATTEST: LEGENT CORPORATION By: - -------------------------- --------------------------------- 46 EXHIBIT D RULES AND REGULATIONS 1. The sidewalks, and public portions of the Building, such as entrances, passages, courts, elevators, vestibules, stairways, corridors or halls shall not be obstructed or encumbered by any tenant or used for any purpose other than ingress and egress to and from the demised premises ("demised premises" in this Exhibit D shall mean the "Premises" as set forth in the Lease). 2. No awnings or other projections shall be attached to the outside walls of the Building. No curtains, blinds, shades, louvered openings or screens shall be attached to or hung in, or used in connection with, any window or door of the demised premises, without the prior written consent of Landlord, unless installed by Landlord. 3. No sign, advertisement, notice or other lettering shall be exhibited, inscribed, painted or affixed by any tenant on any part of the outside of the demised premises or Building or on corridor walls. Signs on entrance door or doors shall conform to building standard signs, samples of which are on display in Landlord's rental office. Signs on doors shall, at the tenant's expense, be inscribed, painted or affixed for each tenant by sign makers approved by Landlord. In the event of the violation of the foregoing by any tenant, Landlord may remove same without any liability, and may charge the expense incurred by such removal to the tenant or tenants violating this rule. 4. The sashes, sash doors, skylights, windows, heating, ventilating and air conditioning vents and door that reflect or admit light and air into the halls, passageways or other public places in the Building shall not be covered or obstructed by any tenant, nor shall any bottles, parcels, or other articles be placed outside of the demised premises. 5. No show cases or other articles shall be put in front of or affixed to any part of the exterior of the Building, nor placed in the public halls, corridors or vestibules without the prior written consent of Landlord. 6. The water and wash closets and other plumbing fixtures shall not be used for any purposes other than those for which they were constructed, and no sweepings, rubbish, rags, or other substances shall be thrown therein. All damages resulting from any misuse of the fixtures shall be borne by the tenant who, or whose servants, employees, agents, visitors or licensees, shall have caused the same. 7. No tenant shall in any way deface any part of the demised premises or the Building. No tenant shall lay linoleum, or other similar floor covering, so that the same shall come in direct contact with the floor of the demised Premises, and, if linoleum or other similar floor covering is desired to be used, an interlining of builder's deadening felt shall be first affixed to the floor, by a paste or other material, soluble in water, the use of cement or other similar adhesive material being expressly prohibited. 8. No bicycles, vehicles or animals of any kind (except seeing eye dogs) shall be brought into or kept in or about the Premises. 9. No cooking shall be done or permitted by Tenant in the Premises except in conformity to law and then only in the cafeteria kitchen. No tenant shall cause or permit any unusual or objectionable odors to be produced upon or permeate from the Premises. D-1 47 10. No space in the Building shall be used for manufacturing or distribution or for the storage of merchandise, or for the sale at auction or otherwise of merchandise, goods or property of any kind. 11. No tenant shall make, or permit to be made, any unseemly or disturbing noises or disturb or interfere with occupants of the Building or neighboring buildings or premises or those having business with them whether by the use of any musical instrument, radio, in any other way. 12. No tenant, nor any of the tenant's servants, employees, agents, visitors or licensees, shall at any time bring or keep upon the premises any inflammable, combustible or explosive fluid, or chemical substance, other than reasonable amounts of cleaning fluids and solvents required in the normal operation of tenant's business offices. 13. No additional locks or bolts of any kind shall be placed upon any of the doors or windows by any tenant, nor shall any changes be made in existing locks or the mechanism thereof, without the prior written approval of the Landlord and unless and until a duplicate key is delivered to Landlord. Each tenant must, upon the termination of his tenancy, restore to the Landlord all keys of offices and toilet rooms, either furnished to, or otherwise procured by, such tenant, and in the event of the loss of any keys, so furnished, such tenant shall pay to Landlord the cost thereof. 14. All removals, or the carrying in or out of any safes, freight, furniture or bulky matter of any description must take place during the hours which Landlord or its agent may determine from time to time. Landlord reserves the right to inspect all freight to be brought into the Building and to exclude from the Building all freight which violates any of these Rules and Regulations or the Lease of which these Rules and Regulations are a part. 15. No tenant shall occupy or permit any portion of the premises demised to it to be occupied as, by or for a public stenographer or typist, barber shop, bootblacking, beauty shop or manicuring, beauty parlor, telephone or telegraph agency, employment agency, public restaurant or bar, commercial document reproduction or offset printing service, public vending machines, retail, wholesale or discount shop for sale of merchandise, retail service shop, labor union, school or classroom, governmental or quasi-governmental bureau, department or agency, including an autonomous governmental corporation, a firm the principal business of which is real estate brokerage, or a company engaged in the business of renting office or desk space; or for a public finance (personal loan) business, or for manufacturing. No tenant shall engage or pay any employees on the demised premises, except those actually working for such tenant on said premises, nor advertise for laborers giving an address at said Premises, nor advertise for laborers giving an address at the Premises. Nothing herein shall be interpreted to prevent Tenant from making up at the Premises payroll and payroll checks for employees at other location. 16. Landlord shall have the right to prohibit any advertising by any tenant mentioning the Building which, in Landlord's reasonable opinion, tends to impair the reputation of the Building or its desirability as a building for offices, and upon written notice from Landlord, tenants shall refrain from and discontinue such advertising. 17. In order that the Building can and will maintain a uniform appearance from the outside, each Tenant in building perimeter areas shall (a) use only building standard lighting, as defined in Work Letter, in areas where lighting is visible from outside of the Building and (b) use only inch (") horizontal blinds in window areas which are visible from the outside of the Building. 18. Landlord reserves the right to exclude from the Building between the hours of 6:00 p.m. and 8:00 a.m. and at all hours on non-business days all persons who do not present a pass to the Building signed by a tenant. Each D-2 48 tenant shall be responsible for all persons for whom such pass is issued and shall be liable to Landlord for all acts of such persons. 19. The premises shall not be used for lodging or sleeping or for any immoral or illegal purpose. 20. At Landlord's option, tenants shall purchase from Landlord or its designee all lighting tubes, lamps, bulbs and ballasts used in the demised premises and tenants shall pay Landlord's actual costs including reasonable overhead and profit for providing and installing same, on demand. 21. Canvassing, soliciting and peddling in the Building are prohibited and each tenant shall cooperate to prevent the same. 22. There shall not be used in any space, or in the public halls of any building, either by any tenant or by jobbers or others, in the delivery or receipt of merchandise, any hand trucks, except those equipped with rubber tires and side guards. No hand trucks shall be used in passenger elevators. 23. Tenants, in order to obtain maximum effectiveness of the cooling system, shall lower and/or close Venetian or vertical blinds or drapes when sun's rays fall directly on windows of demised Premises. 24. Replacement of ceiling tiles after they are removed for Tenant by telephone company installers, in both the demised premises and the public corridors, will be charged to Tenant on a per tile basis. Landlord's charge will be actual costs plus reasonable overhead and profit. 25. All panelling, grounds or other wood products which are incorporated in construction of fire rated assembly shall be of fire retardant materials. Before installation of any such materials, certification of the materials' fire retardant characteristics shall be submitted to Landlord, or its agents, in a manner satisfactory to the Landlord. 26. Tenant shall not in any way obstruct or interfere with the rights of other tenants or occupants of the Building or the Project or injure or annoy them, or use or allow the Premises to be used for any unlawful or objectionable purpose, nor shall Tenant cause, maintain, or permit any nuisance in, on, or about the Premises. Tenant shall not commit or suffer to be committed any waste in or upon the Premises. 27. It is understood and agreed that Tenant shall not place a load on any floor of the premises exceeding the floor load per square foot area which such floor was designed to carry and which is allowed by law. Landlord reserves the right to prescribe the weight and position of all safes, vaults, and other equipment which must be placed so as to distribute the weight. Business machines and mechanical equipment shall be placed and maintained by the Tenant, at Tenant's expense, in settings sufficient in the Landlord's judgment to absorb and prevent vibrations, noise and annoyance. Whenever and to the extent that the above rules conflict with any of the rights or obligations of Tenant pursuant to the provisions of the Paragraphs of the Lease, the provisions of the Paragraphs shall govern. D-3 49 EXHIBIT "E" PRUBETA 3 OFFICE CAMPUS HOLIDAY SCHEDULE NEW YEAR'S DAY MEMORIAL DAY INDEPENDENCE DAY LABOR DAY THANKSGIVING DAY CHRISTMAS DAY 50 EXHIBIT "F" JANITORIAL SERVICES - TENANT AREAS OFFICES - NIGHTLY CLEANING 1. Empty and clean ash trays and screen all sand urns (sand furnishes by Contractor). Wipe ash trays with cloth or sponge dampened with detergent to remove soil. 2. Empty wastebaskets and other trash receptacles (liners to be furnished by Contractor). Remove rubbish to compactor area and compact. Plastic bags used for rubbish removal to be furnished by Contractor and shall be adequate to hold contents without breaking. 3. Clean, polish and sanitize drinking fountains. 4. Dust, (using treated dust mop) or vacuum uncarpeted areas. 5. Remove fingermarks and smudges from doors, door frames, walls, light switches and glass. EVERY OTHER NIGHT - OFFICES 6. Dust with treated cloths, all office furniture, desk accessories (including telephone shelving, window frames, sills up to 84" in height and other surfaces. 7. Vacuum all carpeted areas including edges and corners using beater bar or brush vacuum cleaner. WEEKLY - OFFICES 8. Spot clean walls, partitions, fixtures, and doors. MONTHLY - OFFICES 9. Wipe trash receptacles to remove evident soil. lO. High dust with treated cloths and vacuum all vents, louvers and moldings and all other areas above hand high reach. 11. Oust picture frames and wash picture glass. QUARTERLY - OFFICES 12. Dust all blinds. NIGHTLY CLEANING - PUBLIC AREAS 13. Vacuum, clean and polish all elevator interiors, doors, tracks, saddles and call buttons. 14. Clean and polish all entrance glass, frames and saddles. 15. Vacuum carpeted corridors. F-1 51 FIRST AMENDMENT TO LEASE THIS FIRST AMENDMENT TO LEASE (the "Amendment") made as of this 20th day of September, 1990, by and between PRUBETA-3 ("Landlord") a general partnership organized under the laws of New Jersey, with an office at c/o THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, Newark Realty Group Office, Three Gateway Center, 100 Mulberry Street, 13th Floor, Newark, New Jersey 07102-4077, and LEGENT CORPORATION, ("Tenant"), a Delaware Corporation authorized to do business in New Jersey, having an office at Nine Campus Drive, Parsippany, New Jersey 07054. WITNESSETH: WHEREAS, Landlord and Tenant entered into that certain Lease (the "Lease") dated as of October 10, 1989 pursuant to which Landlord leased to Tenant and Tenant rented from Landlord 5,873 rentable square feet (the "Original Premises") in the office building known as Linden Plaza, (the "Building") located at Nine Campus Drive in the Prudential Business Campus, Parsippany, Morris County, New Jersey, and WHEREAS, Tenant desires to rent from Landlord and Landlord desires to lease to Tenant an additional 1,341 square feet of rentable, not useable, space in the Building (the "Additional Premises"), subject to the terms of the Lease, except as amended by this Amendment; NOW, THEREFORE, Landlord and Tenant, in consideration of ten dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree to amend the Lease as follows, effective as of the Additional Space Commencement Date defined in Paragraph 6 of this Amendment: 1. The Premises described in the preamble to the Lease entitled "Lease of Premises" (the "Premises") is expanded to include the Additional Premises on the second floor of the Building, as depicted on Exhibit "A" attached hereto. Landlord shall perform certain work ("Landlord's Work") at the Additional Premises as described in Exhibit "C" ("Landlord's Work Letter") attached hereto. 2. Item 2 of the Basic Lease Provisions of the Lease is amended to provide that the rentable area of the Premises is 7,214 rentable, not useable, square feet, being the sum of the Original Premises and the Additional Premises. 3. Item 3 of the Basic Lease Provisions of the Lease is amended to provide that the Tenant's Percentage Share is 4.65%, representing an increase of .8652% over the previous Percentage Share of 3.79%. 4. Item 5 of the Basic Lease Provisions of the Lease is amended to provide that the Term of the Lease shall run until November 5, 1994. 1 52 5. Item 7 of the Basic Lease Provisions of the Lease is amended to provide that the Basic Annual Rent for the Premises shall be one hundred fifty one thousand four hundred ninety four dollars ($151,494.00), representing the sum of the Basic Annual Rent for the Original Premises of one hundred twenty three thousand three hundred thirty three dollars ($123,333.00) and the Basic Annual Rent for the Additional Premises of twenty eight thousand one hundred sixty one dollars ($28,161.00). 6. Item 8 of the Basic Lease Provisions is amended to provide that the Basic Monthly Rental Installments for the Premises shall be twelve thousand six hundred twenty four and 50/100 dollars ($12,624.50) representing the sum of the Basic Monthly Rental Installments for the Original Premises of ten thousand two hundred seventy seven and 75/100 dollars ($lO,277.75) and the Basic Monthly Rental Installments for the Additional Premises of two thousand three hundred forty six and 75/100 dollars ($2,346.75). 7. Item 9 of the Basic Lease provisions of the Lease is supplemented to provide that the Commencement Date for the Additional Premises (the "Additional Space Commencement Date") is October 1, 1990 or upon such earlier date as Tenant takes possession or commences use of the Additional Premises. The Additional Space Commencement Date is subject to extension by reason of 1) events or circumstances described in Paragraph 40 of the Lease ("Force Majeure") and 2) delays and extensions of time described in Exhibit "B-1" of the Lease ("Landlord's Work Letter"). 8. Item 10 of the Basic Lease Provisions of the Lease is amended to provide that the number of parking spaces is 29. 9. Item 14 of the Basic Lease Provisions of the Lease is amended to delete the name "Property Management Systems" and replace it with "Premisys Real Estate Services, Inc. " 10. Paragraph 44 of the Lease ("Tenant's Option to Cancel") is amended to supplement the table of Additional Payments with the Table attached hereto as Exhibit "B". 11. In all other aspects not inconsistent herewith, the Lease is hereby ratified and confirmed by Landlord and Tenant. Landlord and Tenant expressly acknowledge that, effective as of the Additional Space Commencement Date, the Premises shall be regarded as a single, indivisible unit and all provisions of the Lease shall apply to the Additional Premises as though the Additional Premises had been a portion of the Original Premises at the time of the execution of the Lease, subject only to the terms of this Amendment. 2 53 IN WITNESS WHEREOF, this First Amendment to Lease is signed by the parties as of the day and year above written (LANDLORD) PRUBETA 3 Attest: BY: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, General Partner /s/ Richard E. Pigott By:/s/ John Gregorits - ---------------------- -------------------- ASSISTANT SECRETARY VICE PRESIDENT BY: EQUITY PARSIPPANY VENTURE, a Colorado general partnership By: US WEST Real Estate, Inc., a Colorado corporation formerly known as BetaWest Properties, Inc., as managing partner By: BetaWest Properties, Ltd., a Colorado limited partnership, as authorized agent By: BetaWest, Inc., a Colorado corporation, as general partner Approved as to legal form: By:/s/ By:/s/ ---------------------- ------------------------ Date: Title: -------------------- --------------------- (TENANT) LEGENT CORPORATION ATTEST:(or Witness:) /s/ Carolyn D. Vetovich By:/s/ Authur F. Knapp, Jr. ---------------------- --------------------------------- CAROLYN D. VETOVICH ARTHUR F. KNAPP, JR. VICE PRESIDENT & CFO 54 EXHIBIT "A" 2nd FLOOR 9 CAMPUS DRIVE LEGENT CORPORATION 1,341 RSF (the "Additional Premises") [FLOOR PLAN] 55 EXHIBIT "B" (Page one of two) LEGENT CORPORATION ADDITIONAL PREMISES TERMINATION PAYMENT SCHEDULE The payments contained on this page are for the Additional Premises only and are payable in addition to those payments contained in Paragraph 44 of the Lease and on Page Two of this Exhibit.
CANCELLATION DATE PAYMENT ---- ------- 10/31/91 15,910.00 11/30/91 15,535.00 12/31/91 15,157 00 01/31/92 14,775.00 02/29/92 14,390.00 03/31/92 14,001.00 04/30/92 13,608.00 05/31/92 13,212.00 06/30/92 12,812.00 07/31/92 12,409.00 08/31/92 12,001.00 09/30/92 11,591.00 10/31/92 11,176.00 11/30/92 10,758.00 12/31/92 10,335.00 01/31/93 9,909.00 02/28/93 9,479.00 03/31/93 9,045.00 04/30/93 8,607.00 05/31/93 8,165.0O 06/30/93 7,719.00 07/31/93 7,269.00 08/31/93 6,185.00 09/30/93 6,356.00 10/31/93 5,894.00 11/30/93 5,427.00 12/31/93 4,956.00 01/31/94 4,480.00 02/28/94 4,000.00 03/31/94 3,516.00 04/30/94 3,027.00 05/31/94 2,534.00 06/30/94 2,036.00 07/31/94 1,534.00 08/31/94 1,028.00 09/30/94 516.00 10/31/94 -0-
56 EXHIBIT "B" (Page two of two)
ORIGINAL PREMISES PAYMENT SCHEDULE Months 54 through 60 End of Lease Month Additional Payment ------------------ ------------------ 54 $12,215.00 55 10,132.00 56 8,029.00 57 5,907.00 58 3,766.00 59 1,605.00 60 -0-
57 EXHIBIT "C" Landlord's Work Letter Landlord will perform certain architectural, mechanical and electrical work ("Landlord's Work") for the Additional Premises in accordance with working plans and specifications which have been prepared by Tec 3, Inc. and which are known as Drawings 2-1, 2-2, and 2-3 dated August 13, 1990 and which were approved by Tenant August 22, 199O. All other terms and conditions contained in Exhibit B-1 of the Lease ("Landlord's Work Letter") shall govern the operation of this Exhibit "C". 58 SECOND AMENDMENT TO LEASE THIS SECOND AMENDMENT TO LEASE (the "Second Amendment") made as of this 16th day of May, 1994, by and between PRUBETA-3 ("Landlord") a general partnership organized under the laws of New Jersey, with an office at c/o THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, Newark Realty Group Office, Three Gateway Center, 100 Mulberry Street, 13th Floor, Newark, New Jersey 07102-4077, and LEGENT CORPORATION, ("Tenant"), a Delaware Corporation authorized to do business in New Jersey, having an office at Nine Campus Drive, Parsippany, New Jersey 07054. WITNESSETH: WHEREAS, Landlord and Tenant entered into that certain Lease (the "Lease") dated as of October 10, 1989 pursuant to which Landlord leased to Tenant and Tenant rented from Landlord 5,873 rentable square feet (the "Original Premises") in the office building known as Linden Plaza, (the "Building") located at Nine Campus Drive in the Prudential Business Campus, Parsippany, Morris County, New Jersey, and WHEREAS, Landlord and Tenant entered into a certain First Amendment to Lease wherein an additional 1,341 square feet of rentable, not useable, space in the Building (the "Additional Premises"), were added to the Premises, which Additional Premises have subsequently been subleased to Asea, Brown Boveri, Inc., and WHEREAS, Landlord and Tenant wish to further amend the Lease to provide for, among other things, the deletion of the Additional Premises (1,341 rentable square feet) from the Premises, the addition of an additional 4,984 square foot unit to the Premises as depicted in Exhibit "A" attached hereto (the "New Space") and the extension of the Term of the Lease. NOW, THEREFORE, in consideration of ten dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree to amend the Lease as follows: 1. TERM; RENEWAL OPTIONS: Subject to the conditions contained in Paragraph 2 herein, the Term of the Lease is hereby extended to the last calendar day of the month which is five (5) years and nine (9) months from the date of the Substantial Completion of Landlord's Work, as that term is defined in the Landlord's Work Letter, attached hereto as Exhibit "B". This date shall be referred to as the "New Commencement Date" and shall be memorialized in a Commencement Date Memorandum signed by Landlord and Tenant. The revised Term shall be referred to as the "Revised Term." Upon condition that Tenant is not in default in the payment of any Rent under this Lease and is not in default in the performance of any covenant or obligation to be performed by Tenant under this Lease, and upon Tenant's giving Landlord six (6) months' notice in writing prior to the expiration of the Term, hereof, Tenant shall have the option to renew and extend this Lease for two (2) three (3) year periods each (the "First Renewal Term" and the "Second Renewal Term", respectively) pursuant and subject to all the terms, covenants, provisions and conditions of this Lease. Paragraph 45 of the Lease ("Tenant's Option to Renew") is deleted in its entirety, and Landlord and Tenant acknowledge that this Amendment is made outside the provisions thereof. 1 59 2. PREMISES: Effective as of April 4, 1994, the Additional Premises shall be deleted from the Premises and Tenant and/or its subtenant shall vacate the Additional Premises in accordance with the terms of the Lease. Upon the New Commencement Date, Item 2 of the Basic Lease Provisions of the Lease shall be amended to provide that the rentable area of the Premises is 10,857 rentable, not useable, square feet, being the sum of the Original Premises and the New Space, and Item 3 of the Basic Lease Provisions of the Lease shall be amended to provide that the Tenant's Percentage Share shall be seven per cent (7)%. 3. BASIC ANNUAL RENT: Item 7 of the Basic Lease Provisions of the Lease is amended to provide that from the New Commencement Date to the Expiration Date of the Revised Term, Basic Annual Rent for the entire Premises shall be $17.75 per rentable square foot. For the First Renewal Term Basic Annual Rent shall be ninety five per cent (95%) of Fair Market Rental Value, as defined in Paragraph 3 herein, and for the Second Renewal Term Basic Annual Rent shall be one hundred per cent (100%) of Fair Market Rental Value. Basic Annual Rent for months two (2) through five (5) of the Revised Term shall be abated. 4. FAIR MARKET RENTAL VALUE: (A) For purposes of Paragraph 3, "Fair Market Rental Value" shall mean that rental value for the Premises under the existing zoning on an "as is" basis which a landlord and tenant would agree to in an arms-length transaction. If Tenant disagrees with the Fair Market Rental Value determined by Landlord, then Tenant shall within thirty (30) days of Landlord's notice so advise Landlord in writing, and thereafter, Landlord and Tenant shall use their best efforts to reach agreement on the Fair Market Rental Value during the thirty (30) days following Tenant's giving Landlord notice to renew and extend this Lease. (B) If Landlord and Tenant cannot reach agreement, the Fair Market Rental Value of the Premises shall be determined by an appraisal made by a reputable New Jersey real estate appraiser mutually acceptable to Landlord and Tenant who shall be a member of the American Institute of Real Estate Appraisers or a successor body hereinafter constituted exercising a similar function, shall have experience in appraising property similar to the Premises, and shall have no substantial direct or indirect financial or other business interests in Landlord, or its affiliates, or Tenant or its affiliates. The cost of the appraiser shall be divided equally between Landlord and Tenant. In the event Landlord and Tenant are unable to agree on a mutually acceptable appraiser within thirty (30) days after Tenant's notice of its exercise of the renewal option, the appraisal shall be performed by three New Jersey real estate appraisers possessing the qualifications described above in this subparagraph, one of whom shall be appointed by Landlord, one appointed by Tenant and the third appointed by the first two appraisers. If the first two appraisers are unable to agree on a third appraiser, such third appraiser shall be appointed by the President of the Society of Real Estate Appraisers, North Jersey Chapter, Chatham, New Jersey. If such individual refuses to act, such third appraiser shall be appointed pursuant to the rules of the American Arbitration Association, as the same are applicable in the State of New Jersey. The costs and expenses of each appraiser appointed separately by Tenant and Landlord will be borne by the party who appointed the appraiser. The costs and expenses of the third Appraiser will be shared equally by Landlord and Tenant. Landlord and Tenant will have twenty (20) days running coterminously to select their own appraisers, who, in turn, will have twenty (20) days to select a third appraiser. (C) The appraiser(s) shall appraise the Premises and notify Tenant and Landlord by written notice of the Fair Market Rental Value, which notice(s) shall be accompanied by copies of their appraisal report(s). If the determinations of the Fair Market Rental Value of any two or all three of the appraisers shall be identical in amount, said amount shall be deemed to be the Fair Market Rental Value, but if such determinations of all three 2 60 appraisers shall be different in amount, the appraised value which is the closest in amount to the middle appraised value, whether it be the highest or the lowest appraised value, shall be averaged with the middle appraised value and the resulting averaged appraised value shall be the fair market value of the Premises. The appraised value which is the furthest from the middle appraised value will not be utilized or considered. (D) The Fair Market Rental Value, determined in accordance with the provisions of this Paragraph, shall be binding and conclusive on Tenant and Landlord. Notwithstanding the foregoing, in the event that the three appraisal process is required to be utilized and if one party shall fail to appoint an appraiser on a timely basis. the appraisal shall be conducted only by the appraiser appointed by the other party, and the Fair Market Rental Value as determined by the appraiser appointed by the other party shall be binding and conclusive upon Landlord and Tenant. Anything herein to the contrary notwithstanding, Landlord and Tenant shall have similar rights to appeal said determination which may then exist under New Jersey Law with respect to binding arbitration. 5. ADDITIONAL RENT FOR TAXES AND OPERATING EXPENSES: Paragraph 3 of the Lease is amended to delete as of the New Commencement Date the words "Base Project Operating Expenses" and "Base Project Property Taxes" and replace them with "Base Year Project Operating Expenses" and "Base Year Project Property Taxes" respectively. In both instances, the "Base Year" shall be the calendar year 1994. 6. LANDLORD'S WORK: Landlord shall perform in accordance with the terms of Landlord's Work Letter all the work described therein ("Landlord's Work"). Landlord's contribution in connection therewith shall be $162,855.00 (the "Tenant Allowance"). Tenant shall also receive an allowance of $2.00 per rentable square foot of the combined Original Premises and New Space (together, the "Entire Space") for architectural drawings and $1.00 per rentable square foot of the Entire Space for engineering drawings. The architectural and engineering drawings allowances shall be paid as a credit towards the cost of Landlord's Work. 7. TERMINATION OPTION: Article 44 of the Lease ("Tenant's Option to Cancel") is hereby deleted and replaced with the following provision: Tenant shall have a one-time option to terminate this Lease as of the last day of the calendar month which is thirty six (36) months after the New Commencement Date by giving Landlord nine (9) months prior notice of intent to terminate, time being the essence thereof, provided said notice is accompanied by payment to Landlord of the "Termination Fee" in the amount of One Hundred Eighty Five Thousand Seven Hundred Ninety Seven Dollars ($185,797.00), and provided further that no Event of Default exists and is continuing at the time of the exercise of this Termination Option. The Termination Fee shall be in addition to all Basic Annual Rent and Additional Rent falling due during the balance of the Term, as reduced. 8. PARKING: The second "Item 10" of the Basic Lease Provisions of the Lease is amended to provide that effective on the New Commencement Date the number of unreserved, non-designated parking spaces shall be forty (40) and Tenant shall receive one (1) reserved covered space. 9. REIMBURSEMENT TO TENANT: Upon the final execution and delivery of this Second Amendment, Landlord shall incur an obligation to refund to Tenant the amount of $55,931.00 ("Tenant's Refund."). Tenant's Refund shall be paid as a credit toward tenant improvements in the Premises in the event that the cost of such improvements exceeds the 3 61 Tenant Allowance. Any remaining amount of Tenant's Refund shall be paid in a cash payment to Tenant no later than sixty (60) days after the New Commencement Date. 10. SUBSTITUTION OF PREMISES: Paragraph 12 of the Lease ("Substituted Premises") is hereby deleted in its entirety. 11. PLACE OF PAYMENT OF RENT: Item 14 of the Basic Lease Provisions of the Lease is amended to delete the name and address of "Property Management Systems" and replace it with "Premisys Real Estate Services, Inc., 2 Hilton Court, Parsippany, NJ 07054". 12. NOTICES: Item No. 16 of the Basic Lease Provisions is amended to provide that unless directed otherwise all Notices to Landlord shall be delivered as follows: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA Newark Realty Group Three Gateway Center, 13th Floor 100 Mulberry Street Newark, New Jersey 07102 Attn: General Manager, with copy to: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA Newark Realty Group Three Gateway Center, 13th Floor 100 Mulberry Street Newark, New Jersey 07102 Attn: Regional Counsel with a copy to: BetaWest, Inc. 1050 17th Street, Suite 10 Denver, CO 80265 Attn: Legal Department 13. ADA: Landlord represents and warrants that to the best of the knowledge of John Gregorits, Vice President of The Prudential Realty Group, all improvements in the common areas of the Building are in substantial compliance with the accessibility requirements promulgated pursuant to Title III of the Americans With Disabilities Act ("ADA"). Tenant shall be responsible for compliance with the ADA within the Premises. 14. In all other aspects not inconsistent herewith, the Lease is hereby ratified and confirmed by landlord and Tenant. 4 62 IN WITNESS WHEREOF, this Amendment to Lease is signed by the panics as of the day and year above written. Tenant: LEGENT CORPORATION WITNESS: /s/ By:/s/ - ------------------- ------------------------------ ------------------------------ By:/s/ ------------------------------ ------------------------------ Landlord: PRUBETA-3 ATTEST: BY: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey corporation, as General Partner of PruBeta-3 - ------------------- By: /s/John Gregorits Assistant Secretary ------------------------------ Vice President By: EQUITY PARSIPPANY VENTURE, a Colorado general partnership, as General Partner of PruBeta-3 Approved as to legal form: By: ------------------- Date: ----------------- By: U S WEST Real Estate, Inc., a Colorado corporation as Managing Partner By: BetaWest, Inc., a Colorado Corporation formerly know as BW Acquisition, Inc., as authorized agent By: /s/Robert E. Cardwell --------------------- Name: ROBERT E. CARDWELL --------------------- Its: Principal --------------------- 5 63 [SECOND FLOOR PLAN] FLOOR PLANS OF SECOND FLOOR [NEW SPACE] NINE CAMPUS DRIVE PARSIPPANY, NJ [FLOOR PLAN] 64 EXHIBIT B LANDLORD'S WORK LETTER A. IMPROVEMENTS Landlord shall furnish and install all improvements ("Landlord's Work") as described in certain plans to be prepared by Interior Space Services, Inc. to be reasonably acceptable to Landlord and Tenant (the "Plans"). Tenant shall be solely responsible for the Plans' compliance with the Americans With Disabilities Act. In the event that the cost of Landlord's Work exceeds the Tenant Allowance and all other credits to Tenant provided in this Amendment, or in the event of any subsequent changes made to Landlord's Work, Tenant shall pay, as Additional Rent, the additional cost thereof within thirty (30) days of receipt of invoices from Landlord. In the event that the cost of Landlord's Work is less than the Tenant Allowance, Landlord shall, at Tenant's option, either (i) remit such savings to Tenant within thirty (30) days of the New Commencement Date or (ii) apply such savings towards the Rent due under the Lease until exhausted. In the event Tenant defaults in any payment required by this Work Letter, Landlord shall, in addition to all other legally allowable remedies, have the same right as in the case of default in Rent under the Lease. B. CONSTRUCTION 1. Changes: If there are any changes to the Plans, Tenant shall pay all costs including, but not limited to, permits and fees, architectural, engineering and related design expenses resulting from such changes. 2. Construction By Tenant: Any work in the Premises beyond that described in the Plans and done by Tenant shall done in compliance with subparagraphs (a) through (g) of this Paragraph. (a.) No such work shall proceed without Landlord's prior written approval of (i) Tenant's contractor; (ii) detailed plans and specifications for the work; and (iii) a certificate or worker's compensation insurance in an amount and with a company and on a form acceptable to Landlord and a certificates of insurance in form and from an insurer acceptable to Landlord, showing Tenant or Tenant's contractor to have in effect comprehensive general public liability and property damage insurance with limits of not less than $1,000,000/$2,000,000 and $1,000,000 respectively. All such certificates, except worker's compensation, shall be endorsed to show Landlord as an additional insured and such insurance shall be maintained by Tenant or Tenant's contractor at all times during the performance of Tenant's Work. (b.) All such work shall be done in conformity with applicable codes and regulations of governmental agencies having jurisdiction over the Building and the Base Building Specifications, a copy of which is available for review in Building Manager's Office. Valid building permits and other authorizations from appropriate governmental agencies, when required, shall be obtained by Landlord's representative at Tenant's sole expense. Any work not acceptable to the appropriate governmental agencies or not reasonably 6 65 satisfactory to Landlord, shall be promptly replaced at Tenant's expense. Notwithstanding any failure by Landlord to object to any such work, Landlord shall have no responsibility therefor. Tenant agrees to save and hold Landlord harmless as provided in the Lease for said work. (c.) Tenant and Tenant's contractors shall abide by all safety and construction laws, ordinances, rules and regulations. All work and deliveries shall be scheduled through Landlord. Entry by Tenant's contractors shall be deemed to be under all the terms, covenants, provisions and conditions of the Lease. All Tenant's materials, work, installations and decorations of any nature brought upon or installed in the Premises before the Lease Commencement Date shall be at Tenant's risk, and neither Landlord nor any party acting on Landlord's behalf shall be responsible for any damage thereto or loss or destruction thereof. Tenant shall not employ any contractor in doing Tenant's work or removing Tenant's property, who, in Landlord's opinion, may prejudice Landlord's negotiations or relationships with Landlord's contractors or subcontractors with their employees, or any may disturb harmonious labor relations. (d.) Tenant shall reimburse Landlord for any extra expenses incurred by Landlord by reason of faulty work done by Tenant or its contractors, or by reason of delays caused by such work, or by reason of cleanup which fails to comply with landlord's rules and regulations, or by reason of use of elevators outside normal working hours. (e.) Tenant shall pay to Landlord a building service fee of five (5%) percent of the total cost of Tenant's work not done by Landlord's contractor to cover Landlord's cost of coordination of Tenant's Work. Such building service fee shall be paid to Landlord at the time of completion of Tenant's Work. (f.) Tenant's contractors shall not post any signs on any part of the Building. (g.) Tenant shall, upon Landlord's request, provide Landlord with copies of bills and invoices for the cost of Tenant's Work hereunder, and shall also provide Landlord with a set of sepias of as-built plans depicting Tenant's Work. C. PUNCHLIST Within five (5) business days of Landlord's notice that such work has been substantially completed except for minor finishing matters ("Substantially Completed" or "Substantial Completion") Tenant shall inspect the Premises in the presence of Landlord and Landlord's contractor and Architect in order to establish a punchlist of items to be completed or corrected which Landlord shall cause to be completed as soon thereafter as is reasonably possible. ii 66 D. INCORPORATION IN LEASE This Work Letter is, and shall be incorporated by reference in the Lease and all of the terms and provisions of said Lease are and shall be incorporated herein by this reference. iii 67 COMMENCEMENT DATE MEMORANDUM THIS AGREEMENT made as of the 14th day of March, 1995 between PRUBETA-3, a general partnership organized under the laws of New Jersey, with an office c/o THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, Newark Realty Group Office, Three Gateway Center, 100 Mulberry Street, 13th Floor, Newark, New Jersey 07102 ("Landlord") and LEGENT CORPORATION, a Delaware corporation, having an office at 9 Campus Drive, Parsippany, New Jersey ("Tenant"). WITNESSETH: WHEREAS, Landlord and Tenant entered into a Lease dated October 10, 1989 ("Lease") setting forth the terms of occupancy by Tenant for a portion of the second floor of 9 Campus Drive located at The Prudential Business Campus at Parsippany-Troy Hills, New Jersey; and WHEREAS, the Lease is for the initial term of five (5) years with the Target Commencement Date" of the term being defined in Basic Lease Provisions; and WHEREAS, by virtue of the Second Amendment To Lease (the "Second Amendment") the Lease was amended, among other things, to delete 1,341 square feet (the "Additional Premises") and to increase the size of the Premises by an additional 4,984 rentable square feet (the "New Space") so that the demised premises now equals 10,857 rentable, not usable square feet, and WHEREAS, it has been determined in accordance with these provisions that October 10, 1994 is the Commencement Date for the Additional Space (the "New Commencement Date"), and WHEREAS, the Second Amendment provided that the Term of the Lease is five (5) years and nine (9) months from the date of Substantial Completion of Landlord's Work Letter, unless terminated earlier by Tenant as of October 31, 1997 in accordance with Paragraph 7 of the Second Amendment ("Termination Option"). NOW, THEREFORE, in consideration of the premises and covenants hereinafter set forth, it is agreed: 1. The Original Commencement Date of the initial term of the Lease was November 6, 1989 and the Expiration Date thereof was originally November 5, 1994. 2. The New commencement Date is October 10, 1994. 68 3. The Expiration Date of the Lease, provided Tenant's Termination is not exercised, is July 31, 2000. 4. This Agreement is executed by the parties for purposes of providing a record of the Original Commencement Date, the New Commencement Date and Expiration Date of the Lease. IN WITNESS WHEREOF, the parties hereto have duly executed this instrument as of the day and year first above written. Landlord: ATTEST: PRUBETA-3 BY: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, General Partner /s/ Richard E. Pigott By: /s/ John S. Gregorits - ------------------------ ------------------------------- RICHARD PIGOTT JOHN S. GREGORITS ASSISTANT SECRETARY VICE PRESIDENT BY: EQUITY PARSIPPANY VENTURE, a Colorado general partnership, General Partner By: U S WEST Real Estate, Inc., a Colorado corporation, as managing partner By: BetaWest, Inc., a Colorado corporation, formerly known as BW Acquisition, Inc. as authorized agent Approved as to legal form By: /s/ ------------------- By: /s/ Date: 3/8/95 --------------------------------- ------------------- Title: ------------------------------- Tenant: ATTEST: (or Witness:) LEGENT CORPORATION /s/ By: /s/ Franchon M. Smithson - ------------------------- --------------------------------- Franchon M. Smithson Chief Financial Officer EX-10.53 15 UNDERWRITING AGREEMENT (U.S.) 1 EXHIBIT 10.53 Quintiles Transnational Corp. Common Stock, $.01 par value ----------------------------- UNDERWRITING AGREEMENT (U.S. VERSION) ----------------------- March 6, 1997 Goldman, Sachs & Co. Morgan Stanley & Co. Incorporated Smith Barney Inc. William Blair & Company, L.L.C. As representatives of the several Underwriters named in Schedule I hereto, c/o Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004. Ladies and Gentlemen: Quintiles Transnational Corp., a North Carolina corporation (the "Company"), proposes, subject to the terms and conditions stated herein, to issue and sell to the Underwriters named in Schedule I hereto (the "Underwriters") an aggregate of 1,132,000 shares of Common Stock, $.01 par value ("Stock") of the Company and the shareholders of the Company named in Schedule II hereto (the "Selling Shareholders") propose, subject to the terms and conditions stated herein, to sell to the Underwriters an aggregate of 2,708,000 shares and, in the case of certain Selling Shareholders identified with an asterisk in Schedule II hereto and at the election of the Underwriters, up to 576,000 additional shares of Stock. The aggregate of 3,840,000 shares to be sold by the Company and the Selling Shareholders hereto is herein called the "Firm Shares" and the aggregate of 576,000 additional shares to be sold by the Selling Shareholders identified with an asterisk in Schedule II hereto is herein called the "Optional Shares". The Firm Shares and the Optional Shares that the Underwriters elect to purchase pursuant to Section 2 hereof are herein collectively called the "Shares". 2 It is understood and agreed to by all parties that the Company and the Selling Shareholders are concurrently entering into an agreement (the "International Underwriting Agreement") providing for the sale by the Company and the Selling Shareholders of up to a total of 1,104,000 shares of Stock (the "International Shares"), including the overallotment option thereunder, through arrangements with certain underwriters outside the United States (the "International Underwriters"), for whom Goldman Sachs International, Morgan Stanley & Co. International Limited, Smith Barney Inc. and William Blair & Company, L.L.C. are acting as lead managers. Anything herein or therein to the contrary notwithstanding, the respective closings under this Agreement and the International Underwriting Agreement are hereby expressly made conditional on one another. The Underwriters hereunder and the International Underwriters are simultaneously entering into an Agreement between U.S. and International Underwriting Syndicates (the "Agreement between Syndicates") which provides, among other things, for the transfer of shares of Stock between the two syndicates. Two forms of prospectus are to be used in connection with the offering and sale of shares of Stock contemplated by the foregoing, one relating to the Shares hereunder and the other relating to the International Shares. The latter form of prospectus will be identical to the former except for certain substitute pages as included in the registration statement and amendments thereto as mentioned below. Except as used in Sections 2, 3, 4, 9 and 11 herein, and except as the context may otherwise require, references hereinafter to the Shares shall include all the shares of Stock which may be sold pursuant to either this Agreement or the International Underwriting Agreement, and references herein to any prospectus whether in preliminary or final form, and whether as amended or supplemented, shall include both the U.S. and the international versions thereof. 1. (a) The Company represents and warrants to, and agrees with, each of the Underwriters that: (i) A registration statement on Form S-3 (File No. 333-21393) (the "Initial Registration Statement") in respect of the Shares has been filed with the Securities and Exchange Commission (the "Commission"); the Initial Registration Statement and any post-effective amendment thereto, each in the form heretofore delivered to you, and, excluding exhibits thereto but including all documents incorporated by reference in the prospectus contained therein, delivered to you for each of the other Underwriters, have been declared effective by the Commission in such form; other than a registration statement increasing the size of the offering, filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the "Act"), which became effective upon filing (the "Rule 462(b) Registration Statement"), no other document with respect to the Initial Registration Statement, any post-effective amendment thereto or the Rule 462(b) Registration Statement or document incorporated by reference therein has heretofore been filed with the Commission; and no stop order suspending the effectiveness of the Initial Registration Statement has been issued and no proceeding for that purpose has been initiated or threatened by the Commission (any preliminary prospectus included in the Initial Registration Statement or filed with the Commission pursuant 2 3 to Rule 424(a) of the rules and regulations of the Commission under the Act is hereinafter called a "Preliminary Prospectus"); the various parts of the Initial Registration Statement and the Rule 462(b) Registration Statement, including all exhibits thereto and including (A) the information contained in the form of final prospectus filed with the Commission pursuant to Rule 424(b) under the Act in accordance with Section 5(a) hereof and deemed by virtue of Rule 430A under the Act to be part of the Initial Registration Statement at the time it was declared effective and (B) the documents incorporated by reference in the prospectus contained in the Initial Registration Statement at the time such part of the Initial Registration Statement became effective or such part of the Rule 462(b) Registration Statement became or hereafter becomes effective, each as amended at the time such part of the Initial Registration Statement became effective or such part of the Rule 462(b) Registration Statement became effective, are hereinafter collectively called the "Registration Statement"; such final prospectus, in the form first filed pursuant to Rule 424(b) under the Act, is hereinafter called the "Prospectus"; any reference herein to any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 under the Act, as of the date of such Preliminary Prospectus or Prospectus, as the case may be; any reference to any amendment or supplement to any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include any documents filed after the date of such Preliminary Prospectus or Prospectus, as the case may be, under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and incorporated by reference in such Preliminary Prospectus or Prospectus, as the case may be; and any reference to any amendment to the Registration Statement shall be deemed to refer to and include any annual report of the Company filed pursuant to Section 13(a) or 15(d) of the Exchange Act after the effective date of the Initial Registration Statement that is incorporated by reference in the Registration Statement; (ii) No order preventing or suspending the use of any Preliminary Prospectus has been issued by the Commission, and each Preliminary Prospectus, at the time of filing thereof, conformed in all material respects to the requirements of the Act and the rules and regulations of the Commission thereunder, and did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by an Underwriter through Goldman, Sachs & Co. expressly for use therein or by a Selling Shareholder expressly for use in the preparation of the answers therein to Item 7 of Form S-3; (iii) The documents incorporated by reference in the Prospectus, when they became effective or were filed with the Commission, as the case may be, conformed in all material respects to the requirements of the Act or the Exchange 3 4 Act, as applicable, and the rules and regulations of the Commission thereunder, and none of such documents contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and any further documents so filed and incorporated by reference in the Prospectus or any further amendment or supplement thereto, when such documents become effective or are filed with the Commission, as the case may be, will conform in all material respects to the requirements of the Act or the Exchange Act, as applicable, and the rules and regulations of the Commission thereunder and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by an Underwriter through Goldman, Sachs & Co. expressly for use therein; (iv) The Registration Statement conforms, and the Prospectus and any further amendments or supplements to the Registration Statement or the Prospectus will conform, in all material respects to the requirements of the Act and the rules and regulations of the Commission thereunder and do not and will not, as of the applicable effective date as to the Registration Statement and any amendment thereto and as of the applicable filing date as to the Prospectus and any amendment or supplement thereto, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by an Underwriter through Goldman, Sachs & Co. expressly for use therein or by a Selling Shareholder expressly for use in the preparation of the answers therein to Item 7 of Form S-3; (v) Other than as set forth or contemplated in the Prospectus, since the respective dates as of which information is given in the Registration Statement and the Prospectus, there has not been any change in the capital stock or long-term debt of the Company and its subsidiaries, taken as a whole, or any material adverse change, or any development involving a prospective material adverse change, in the condition (financial or otherwise) or the earnings, business or operations of the Company and its subsidiaries, taken as a whole; (vi) The Company and each of its subsidiaries possesses all certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses, and neither the Company nor any such subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a material adverse effect on the 4 5 Company and its subsidiaries, taken as a whole, except as set forth or contemplated by the Prospectus; (vii) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of North Carolina, with corporate power and authority to own its properties and conduct its business as described in the Prospectus; and has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole. Each Significant Subsidiary (as defined below) of the Company has been duly incorporated or otherwise formed as a non-corporate entity, is validly existing as a corporation or other entity, as the case may be, in good standing under the laws of the jurisdiction of its organization, with corporate or other organizational power and authority to own its properties and to conduct its business as described in the Prospectus and has been duly qualified as a foreign corporation or other entity, as the case may be, for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole. As used in this Agreement, the term "Significant Subsidiary" shall have the meaning set forth for the term "Significant Subsidiary" in Rule 1-02(w) of Regulation S-X promulgated pursuant to the Securities Act; (viii) The Company has an authorized capitalization as set forth in the Prospectus, and all of the issued shares of capital stock of the Company have been duly authorized and validly issued, are fully paid and non-assessable and conform to the description of the Stock contained in the Prospectus; and all of the issued shares of capital stock of each Significant Subsidiary of the Company have been duly authorized and validly issued, are fully paid and non-assessable and (except for directors' qualifying shares and except as set forth in the Prospectus) are owned directly or indirectly by the Company, free and clear of all liens, encumbrances, equities or claims; (ix) The unissued Shares to be issued and sold by the Company to the Underwriters hereunder and under the International Underwriting Agreement have been duly authorized and, when issued and delivered against payment therefor as provided herein, will be validly issued and fully paid and non-assessable and will conform to the description of the Stock contained in the Prospectus; (x) The issue and sale of the Shares to be sold by the Company hereunder and under the International Underwriting Agreement, the compliance by the Company with all of the provisions of this Agreement and the International Underwriting Agreement and the consummation of the transactions herein and therein contemplated will not contravene any provision of applicable law or the 5 6 Amended and Restated Articles of Incorporation or Amended and Restated Bylaws of the Company or any agreement or other instrument binding upon the Company or any of its subsidiaries that is material to the Company and its subsidiaries, taken as a whole, or any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company or any subsidiary, and no consent, approval, authorization or order of, or qualification with, any governmental body or agency is required for the issue and sale of the Shares by the Company or the consummation by the Company of the transactions contemplated by this Agreement and the International Underwriting Agreement except such consents, approvals, authorizations, registrations or qualifications as may be required under state or foreign securities or Blue Sky laws in connection with the purchase and distribution of the Shares by the Underwriters and the International Underwriters; (xi) Other than as set forth in the Prospectus, there are no legal or governmental proceedings pending to which the Company or any of its subsidiaries is a party or of which any property of the Company or any of its subsidiaries is the subject which, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a material adverse effect on the current or future consolidated financial position, shareholders' equity or results of operations of the Company and its subsidiaries, taken as a whole; and, to the best of the Company's knowledge, no such proceedings are threatened or contemplated by governmental authorities or threatened by others; (xii) Neither the Company nor any of its subsidiaries has taken, directly, any action which was designed to or which has constituted or which might reasonably be expected to cause or result in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Stock; (xiii) The Company is not and, after giving effect to the offering and sale of the Shares, will not be an "investment company" "unit investment trust", "closed-end investment company", "face-amount certificate company" or an entity "controlled" by an "investment company" that is required to be registered under Section 8 of the United States Investment Company Act of 1940, as amended (the "Investment Company Act"); (xiv) The Company and its subsidiaries (A) are in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health or safety, the environment or any hazardous or toxic substances or wastes, pollutants or contaminants ("Environmental Laws"), (B) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (C) are in compliance with all terms and conditions of any such permit, license or approval, except where such noncompliance with Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole; 6 7 (xv) The Company has conducted a review of the effect of Environmental Laws on the current and former businesses, operations and properties of the Company and its subsidiaries, in the course of which it identified and evaluated potential associated costs and liabilities (including, without limitation, any capital or operating expenditures required for clean-up or closure of any property, or compliance with Environmental Laws or any permit, license or approval, any related constraints on operating activities or any potential liabilities to third parties). On the basis of such review, the Company has reasonably concluded that such associated costs and liabilities would not, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole; (xvi) The use of the proceeds from the sale of the Securities will not violate or result in a violation of Section 7 of the Exchange Act, or any regulation promulgated thereunder, including, without limitation, Regulations G, T, U, and X of the Board of Governors of the Federal Reserve System; (xvii) Ernst & Young LLP, who have certified certain financial statements of the Company and its subsidiaries, are, to the best of the Company's knowledge, independent public accountants as required by the Act and the rules and regulations of the Commission thereunder; (xviii) This Agreement has been duly authorized, executed and delivered by the Company; (xix) There are no contracts, agreements or understandings between the Company and any person granting such person the right (A) to require the Company to file a registration statement under the Securities Act with respect to any securities of the Company, except as disclosed in the Registration Statement or (B) to require the Company to include securities in the securities registered pursuant to the Registration Statement, except any such right that has been effectively waived or satisfied by the inclusion of securities in the Registration Statement; (xx) The statements set forth in the Prospectus under the caption "Description of Capital Stock", insofar as they purport to constitute a summary of the terms of the Stock, are accurate, complete and fair; and (xxi) Certain of the directors, officers and shareholders of the Company listed in Schedule III hereto who are not Selling Shareholders have each entered into a written agreement with the Company (each such agreement, a "Lock-up Agreement"), and executed originals of each Lock-up Agreement have been delivered to you. (b) Each of the Selling Shareholders severally represents and warrants to, and agrees with, each of the Underwriters and the Company that: (i) All consents, approvals, authorizations and orders necessary for the execution and delivery by such Selling Shareholder of this Agreement, the 7 8 International Underwriting Agreement, the Power of Attorney and the Custody Agreement hereinafter referred to, and for the sale and delivery of the Shares to be sold by such Selling Shareholder hereunder and under the International Underwriting Agreement, have been obtained; and such Selling Shareholder has full right, power and authority to enter into this Agreement, the International Underwriting Agreement, the Power of Attorney and the Custody Agreement and to sell, assign, transfer and deliver the Shares to be sold by such Selling Shareholder hereunder and under the International Underwriting Agreement; (ii) The sale of the Shares to be sold by such Selling Shareholder hereunder and under the International Underwriting Agreement and the compliance by such Selling Shareholder with all of the provisions of this Agreement, the International Underwriting Agreement, the Power of Attorney and the Custody Agreement and the consummation of the transactions herein and therein contemplated will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any statute, indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which such Selling Shareholder is a party or by which such Selling Shareholder is bound, or to which any of the property or assets of such Selling Shareholder is subject, nor will such action result in any violation of the provisions of the Certificate of Incorporation and By-laws or other governing instrument of such Selling Shareholder if such Selling Shareholder is a corporation, the Partnership Agreement of such Selling Shareholder if such Selling Shareholder is a partnership, the governing trust agreement or other governing instrument of such Selling Shareholder if such Selling Shareholder is a trust, or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over such Selling Shareholder or the property of such Selling Shareholder; (iii) Such Selling Shareholder has, and immediately prior to each Time of Delivery (as defined in Section 4 hereof) such Selling Shareholder will have, good and valid title to the Shares to be sold by such Selling Shareholder hereunder and under the International Underwriting Agreement, free and clear of all liens, encumbrances, equities or claims; and, upon delivery of such Shares and payment therefor pursuant hereto and thereto, good and valid title to such Shares, free and clear of all liens, encumbrances, equities or claims, will pass to the several Underwriters or the International Underwriters, as the case may be; (iv) During the period beginning from the date that is 30 days prior to the First Time of Delivery and continuing to and including the date 90 days after the date of the Prospectus, such Selling Shareholder shall not offer, sell, contract to sell or otherwise dispose of, except as provided hereunder or under the International Underwriting Agreement, any shares of Common Stock or any securities of the Company that are substantially similar to the Shares, including but not limited to any securities that are convertible into or exchangeable for, or that represent the right to receive, Stock or any such substantially similar securities (other than pursuant to employee stock option plans existing on, or upon the 8 9 conversion or exchange of convertible or exchangeable securities outstanding as of, the date of this Agreement), without the prior written consent of Goldman, Sachs & Co. and the Company; (v) Such Selling Shareholder has not taken and will not take, directly or indirectly, any action which is designed to or which has constituted or which might reasonably be expected to cause or result in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Shares; (vi) To the extent that any statements or omissions made in the Registration Statement, any Preliminary Prospectus, the Prospectus or any amendment or supplement thereto are made in reliance upon and in conformity with written information furnished to the Company by such Selling Stockholder expressly for use therein, such Preliminary Prospectus and the Registration Statement did, and the Prospectus and any further amendments or supplements to the Registration Statement and the Prospectus, when they become effective or are filed with the Commission, as the case may be, will conform in all material respects to the requirements of the Act and the rules and regulations of the Commission thereunder and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; (vii) In order to document the Underwriters' compliance with the reporting and withholding provisions of the Tax Equity and Fiscal Responsibility Act of 1982 with respect to the transactions herein contemplated, such Selling Shareholder will deliver to you prior to or at the First Time of Delivery (as hereinafter defined) a properly completed and executed United States Treasury Department Form W-8 or Form W-9 (or other applicable form or statement specified by Treasury Department regulations in lieu thereof); (viii) Certificates in negotiable form representing all of the Shares to be sold by such Selling Shareholder hereunder and under the International Underwriting Agreement have been placed in custody under a Custody Agreement, in the form heretofore furnished to you (the "Custody Agreement"), duly executed and delivered by such Selling Shareholder to First Union National Bank of North Carolina, as custodian (the "Custodian"), and such Selling Shareholder has duly executed and delivered a Power of Attorney, in the form heretofore furnished to you (the "Power of Attorney"), appointing the persons indicated in Schedule II hereto, and each of them, as such Selling Shareholder's attorneys-in-fact (the "Attorneys-in-Fact") with authority to execute and deliver this Agreement and the International Underwriting Agreement on behalf of such Selling Shareholder, to determine the purchase price to be paid by the Underwriters and the International Underwriters to the Selling Shareholders as provided in Section 2 hereof, to authorize the delivery of the Shares to be sold by such Selling Shareholder hereunder and otherwise to act on behalf of such Selling Shareholder in connection 9 10 with the transactions contemplated by this Agreement, the International Underwriting Agreement and the Custody Agreement; (ix) The Shares represented by the certificates held in custody for such Selling Shareholder under the Custody Agreement are subject to the interests of the Underwriters hereunder and the International Underwriters under the International Underwriting Agreement; the arrangements made by such Selling Shareholder for such custody, and the appointment by such Selling Shareholder of the Attorneys-in-Fact by the Power of Attorney, are to that extent irrevocable; the obligations of the Selling Shareholders hereunder shall not be terminated by operation of law, whether by the death or incapacity of any individual Selling Shareholder or, in the case of an estate or trust, by the death or incapacity of any executor or trustee or the termination of such estate or trust, or in the case of a partnership or corporation, by the dissolution of such partnership or corporation, or by the occurrence of any other event; if any individual Selling Shareholder or any such executor or trustee should die or become incapacitated, or if any such estate or trust should be terminated, or if any such partnership or corporation should be dissolved, or if any other such event should occur, before the delivery of the Shares hereunder, certificates representing the Shares shall be delivered by or on behalf of the Selling Shareholders in accordance with the terms and conditions of this Agreement, of the International Underwriting Agreement and of the Custody Agreements; and actions taken by the Attorneys-in-Fact pursuant to the Powers of Attorney shall be as valid as if such death, incapacity, termination, dissolution or other event had not occurred, regardless of whether or not the Custodian, the Attorneys-in-Fact, or any of them, shall have received notice of such death, incapacity, termination, dissolution or other event; (x) If such Selling Shareholder was previously a shareholder of Innovex Limited ("Innovex") and became a shareholder of the Company as a result of receiving shares of stock of the Company in exchange for such Selling Shareholder's shares of Innovex in connection with the acquisition of Innovex by the Company, pursuant to the Share Exchange Agreement, dated as of October 4, 1996 by and among the Company, Innovex and the shareholders of Innovex (the "Exchange Agreement"), that all of the Shares being sold by such Selling Shareholder hereunder and under the International Underwriting Agreement were received pursuant to the Exchange Agreement or obtained pursuant to the exercise of options to purchase Common Stock received pursuant to the Exchange Agreement and not otherwise; and (xi) Any and all rights in the nature of those described in Section 1(a)(xix) hereof to which such Selling Shareholder is entitled are satisfied in full with respect to the registration and public offering contemplated by this Agreement and the International Underwriting Agreement by the inclusion of such Selling Shareholder's shares of Common Stock in the Registration Statement, and such Selling Shareholder hereby waives any and all rights whatsoever to have any additional securities included in the Registration Statement. 10 11 2. Subject to the terms and conditions herein set forth, (a) each Selling Shareholder agrees that the purchase price per share at which the Underwriters will purchase Shares from such Selling Shareholder (as set forth in clause (b) below) shall be the same as the purchase price per share at which the Company sells shares to be purchased by the Underwriters from the Company hereunder, (b) the Company and each of the Selling Shareholders agree, severally and not jointly, to sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase from the Company and each of the Selling Shareholders, at a purchase price per share of $60.355, the number of Firm Shares (to be adjusted by you so as to eliminate fractional shares) determined by multiplying the aggregate number of Firm Shares to be sold by the Company and each of the Selling Shareholders as set forth opposite their respective names in Schedule II hereto by a fraction, the numerator of which is the aggregate number of Firm Shares to be purchased by such Underwriter as set forth opposite the name of such Underwriter in Schedule I hereto and the denominator of which is the aggregate number of Firm Shares to be purchased by all of the Underwriters from the Company and all of the Selling Shareholders hereunder and (c) in the event and to the extent that the Underwriters shall exercise the election to purchase Optional Shares as provided below, each of the Selling Shareholders identified with an asterisk in Schedule II hereto, agrees, severally and not jointly, to sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase from each of the Selling Shareholders, at the purchase price per share set forth in clause (b) of this Section 2, that portion of the number of Optional Shares as to which such election shall have been exercised (to be adjusted by you so as to eliminate fractional shares) determined by multiplying such number of Optional Shares by a fraction the numerator of which is the maximum number of Optional Shares which such Underwriter is entitled to purchase as set forth opposite the name of such Underwriter in Schedule I hereto and the denominator of which is the maximum number of Optional Shares that all of the Underwriters are entitled to purchase hereunder. The Selling Shareholders identified with an asterisk in Schedule II hereto, hereby grant, severally and not jointly, to the Underwriters the right to purchase at their election up to 576,000 Optional Shares, at the purchase price per share set forth in the paragraph above, for the sole purpose of covering overallotments in the sale of the Firm Shares. Any such election to purchase Optional Shares shall be made in proportion to the maximum number of Optional Shares to be sold by each such Selling Shareholder as set forth in Schedule II hereto. Any such election to purchase Optional Shares may be exercised only by written notice from you to the Attorneys-in-Fact, given within a period of 30 calendar days after the date of this Agreement and setting forth the aggregate number of Optional Shares to be purchased and the date on which such Optional Shares are to be delivered, as determined by you but in no event earlier than the First Time of Delivery (as defined in Section 4 hereof) or, unless you and the Attorneys-in-Fact otherwise agree in writing, earlier than two or later than ten business days after the date of such notice. 11 12 3. Upon the authorization by you of the release of the Firm Shares, the several Underwriters propose to offer the Firm Shares for sale upon the terms and conditions set forth in the Prospectus. 4. (a) The Shares to be purchased by each Underwriter hereunder, in definitive form, and in such authorized denominations and registered in such names as Goldman, Sachs & Co. may request upon at least two full business days' prior notice to the Company and the Selling Shareholders shall be delivered by or on behalf of the Company and the Selling Shareholders to Goldman, Sachs & Co., for the account of such Underwriter, against payment by or on behalf of such Underwriter of the purchase price therefor in United States dollars by wire transfer of immediately available funds to an account or accounts designated by the Custodian and the Company. The Company and the Selling Shareholders will cause the certificates representing the Shares to be made available for checking and packaging at least one full business day prior to the Time of Delivery (as defined below) with respect thereto at the office of Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004 (the "Designated Office"). The time and date of such delivery and payment shall be, with respect to the Firm Shares, 9:30 a.m., New York City time, on March 12, 1997 or such other time and date as Goldman, Sachs & Co., the Company and the Selling Shareholders may agree upon in writing, and, with respect to the Optional Shares, 9:30 a.m., New York City time, on the date specified by Goldman, Sachs & Co. in the written notice given by Goldman, Sachs & Co. of the Underwriters' election to purchase such Optional Shares, or such other time and date as Goldman, Sachs & Co., the Company and the Selling Shareholders may agree upon in writing. Such time and date for delivery of the Firm Shares is herein called the "First Time of Delivery", such time and date for delivery of the Optional Shares, if not the First Time of Delivery, is herein called the "Second Time of Delivery", and each such time and date for delivery is herein called a "Time of Delivery". (b) The documents to be delivered at each Time of Delivery by or on behalf of the parties hereto pursuant to Section 7 hereof, including the cross-receipt for the Shares and any additional documents requested by the Underwriters pursuant to Section 7(k) hereof, will be delivered at the offices of Sullivan & Cromwell, 125 Broad Street, New York, New York 10004 (the "Closing Location"), and the Shares will be delivered at the Designated Office, all at each Time of Delivery. A meeting will be held at the Closing Location at 2:00 p.m., New York City time, on the New York Business Day next preceding each Time of Delivery, at which meeting the final drafts of the documents to be delivered pursuant to the preceding sentence will be available for review by the parties hereto. For the purposes of this Section 4, "New York Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York are generally authorized or obligated by law or executive order to close. 5. The Company agrees with each of the Underwriters: (a) To prepare the Prospectus in a form approved by you and to file such Prospectus pursuant to Rule 424(b) under the Act not later than the Commission's 12 13 close of business on the second business day following the execution and delivery of this Agreement, or, if applicable, such earlier time as may be required by Rule 430A(a)(3) under the Act; to make no further amendment or any supplement to the Registration Statement or Prospectus prior to the last Time of Delivery which shall be reasonably objected to by you promptly after reasonable notice thereof; to advise you, promptly after it receives notice thereof, of the time when any amendment to the Registration Statement has been filed or becomes effective or any supplement to the Prospectus or any amended Prospectus has been filed and to furnish you copies thereof; to file promptly all reports and any definitive proxy or information statements required to be filed by the Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of the Prospectus and for so long as the delivery of a prospectus is required in connection with the offering or sale of the Shares; to advise you, promptly after it receives notice thereof, of the issuance by the Commission of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or prospectus, of the suspension of the qualification of the Shares for offering or sale in any jurisdiction, of the initiation or threatening of any proceeding for any such purpose, or of any request by the Commission for the amending or supplementing of the Registration Statement or Prospectus or for additional information; and, in the event of the issuance of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or prospectus or suspending any such qualification, promptly to use its best efforts to obtain the withdrawal of such order; (b) Promptly from time to time to take such action as you may reasonably request to qualify the Shares for offering and sale under the securities laws of such jurisdictions as you may request and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions for as long as may be necessary to complete the distribution of the Shares, provided that in connection therewith the Company shall not be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction; (c) Prior to 5:00 p.m., New York City time, on the New York Business Day next succeeding the date of this Agreement and from time to time, to furnish the Underwriters with copies of the Prospectus in New York City in such quantities as you may reasonably request, and, if the delivery of a prospectus is required by law at any time prior to the expiration of nine months after the time of issue of the Prospectus in connection with the offering or sale of the Shares and if at such time any events shall have occurred as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such Prospectus is delivered, not misleading, or, if for any other reason it shall be necessary during such period to amend or supplement the Prospectus or to file under the Exchange Act any document incorporated by reference in the Prospectus in order to comply with the Act or the Exchange Act, to notify you and upon your 13 14 request to file such document and to prepare and furnish without charge to each Underwriter and to any dealer in securities as many copies as you may from time to time reasonably request of an amended Prospectus or a supplement to the Prospectus which will correct such statement or omission or effect such compliance, and in case any Underwriter is required by law to deliver a prospectus in connection with sales of any of the Shares at any time nine months or more after the time of issue of the Prospectus, upon your request but at the expense of such Underwriter, to prepare and deliver to such Underwriter as many copies as you may request of an amended or supplemented Prospectus complying with Section 10(a)(3) of the Act; (d) To make generally available to its securityholders as soon as practicable, but in any event not later than eighteen months after the effective date of the Registration Statement (as defined in Rule 158(c) under the Act), an earnings statement of the Company and its subsidiaries (which need not be audited) complying with Section 11(a) of the Act and the rules and regulations of the Commission thereunder (including, at the option of the Company, Rule 158); (e)(i) During the period beginning from the date that is 30 days prior to the First Time of Delivery and continuing to and including the 90th day after the date of the Prospectus, the Company shall not, directly or indirectly, offer, sell, contract to sell or otherwise dispose of any shares of Common Stock, any securities of the Company which are substantially similar to the Common Stock, including but not limited to any other securities that are convertible into or exchangeable for, or that represent the right to receive, any shares of Common Stock, or any such substantially similar securities, other than (A) the Shares to be sold by the Company pursuant to this Agreement and the International Underwriting Agreement (B) shares of Common Stock issued pursuant to the Company's stock option plans or agreements existing as of the date hereof, (C) shares of Common Stock issued upon the conversion of securities of the Company outstanding as of the date hereof, or (D) shares of Common Stock issued as consideration for acquisitions of businesses, properties or assets, provided, however, that each offeree, purchaser or other transferee of any shares of Common Stock so issued in connection with any such acquisition shall agree in writing for the benefit of the Underwriters and the International Underwriters, in form and substance satisfactory to Goldman, Sachs & Co., that all such shares of Common Stock shall remain subject to the restrictions of this Section 5(e); and (ii) that it will use best efforts to cause each person who has entered into a Lock-up Agreement to comply therewith, will not grant any waivers or consents to non-compliance therewith and will enforce its rights under each such agreement, in each case unless and to the extent that it shall have obtained the prior written consent of Goldman, Sachs & Co.; (f) To furnish to its shareholders as soon as practicable after the end of each fiscal year an annual report (including a balance sheet and statements of income, 14 15 shareholders' equity and cash flows of the Company and its consolidated subsidiaries certified by independent public accountants); (g) During a period of five years from the effective date of the Registration Statement, to furnish to you, upon request, copies of any reports mailed to stockholders, together with the exhibits thereto, and copies of all reports filed with the Commission or any national securities exchange on which any class of securities of the Company is listed, together with the exhibits thereto; (h) To use the net proceeds received by it from the sale of the Shares pursuant to this Agreement and the International Underwriting Agreement in the manner specified in the Prospectus under the caption "Use of Proceeds"; (i) To use its best efforts to list for quotation the Shares on the National Association of Securities Dealers Automated Quotations National Market System ("NASDAQ"); and (j) The Company shall file a Rule 462(b) Registration Statement with the Commission in compliance with Rule 462(b) by 10:00 P.M., Washington, D.C. time, on the date of this Agreement, and the Company shall at the time of filing either pay to the Commission the filing fee for the Rule 462(b) Registration Statement or give irrevocable instructions for the payment of such fee pursuant to Rule 111(b) under the Act. 6. The Company and each of the Selling Shareholders, jointly and severally, covenant and agree with one another and with the several Underwriters that (a) the Company will pay the following: (i) the fees, disbursements and expenses of the Company's counsel and accountants in connection with the registration of the Shares under the Act and all other expenses in connection with the preparation, printing and filing of the Registration Statement, any Preliminary Prospectus and the Prospectus and amendments and supplements thereto and the mailing and delivering of copies thereof to the Underwriters and dealers; (ii) the cost of printing or producing any Agreement among Underwriters, this Agreement, the International Underwriting Agreement, the Agreement between Syndicates, the Selling Agreements, the Blue Sky Memorandum, closing documents (including any compilations thereof) and any other documents in connection with the offering, purchase, sale and delivery of the Shares; (iii) all expenses in connection with the qualification of the Shares for offering and sale under state securities laws as provided in Section 5(b) hereof, including the fees and disbursements of counsel for the Underwriters in connection with such qualification and in connection with the Blue Sky surveys; (iv) all fees and expenses in connection with listing the Shares on the NASDAQ; and (v) the filing fees incident to, and the fees and disbursements of counsel for the Underwriters in connection with, securing any required review by the National Association of Securities Dealers, Inc. of the terms of the sale of the Shares; and (b) the Company will pay or cause to be paid: (i) the cost of preparing stock certificates; (ii) the cost and charges of any transfer agent or registrar; (iii) the fees and expenses of the Attorney-in-Fact and the Custodian; and (iv) all other costs and expenses incident to the performance of its obligations hereunder 15 16 which are not otherwise specifically provided for in this Section; and (c) such Selling Shareholder will pay or cause to be paid all costs and expenses incident to the performance of such Selling Shareholder's obligations hereunder which are not otherwise specifically provided for in this Section, including (i) any fees and expenses of counsel for such Selling Shareholder, (ii) all expenses and taxes incident to the sale and delivery of the Shares to be sold by such Selling Shareholder to the Underwriters hereunder. In connection with Clause (c) (iii) of the preceding sentence, Goldman, Sachs & Co. agrees to pay New York State stock transfer tax, and the Selling Shareholder agrees to reimburse Goldman, Sachs & Co. for associated carrying costs if such tax payment is not rebated on the day of payment and for any portion of such tax payment not rebated. It is understood, however, that the Company shall bear, and the Selling Shareholders shall not be required to pay or to reimburse the Company for, the cost of any other matters not directly relating to the sale and purchase of the Shares pursuant to this Agreement, and that, except as provided in this Section, and Sections 8 and 11 hereof, the Underwriters will pay all of their own costs and expenses, including the fees of their counsel, stock transfer taxes on resale of any of the Shares by them, and any advertising expenses connected with any offers they may make. 7. The obligations of the Underwriters hereunder, as to the Shares to be delivered at each Time of Delivery, shall be subject, in their discretion, to the condition that all representations and warranties and other statements of the Company and of the Selling Shareholders herein are, at and as of such Time of Delivery, true and correct, the condition that the Company and the Selling Shareholders shall have performed all of its and their obligations hereunder theretofore to be performed, and the following additional conditions: (a) The Prospectus shall have been filed with the Commission pursuant to Rule 424(b) within the applicable time period prescribed for such filing by the rules and regulations under the Act and in accordance with Section 5(a) hereof; the Rule 462(b) Registration Statement shall have become effective by 10:00 P.M., Washington, D.C. time, on the date of this Agreement; no stop order suspending the effectiveness of the Registration Statement or any part thereof shall have been issued and no proceeding for that purpose shall have been initiated or threatened by the Commission; and all requests for additional information on the part of the Commission shall have been complied with to your reasonable satisfaction; (b) Sullivan & Cromwell, counsel for the Underwriters, shall have furnished to you such opinion or opinions, dated such Time of Delivery, with respect to the incorporation of the Company, the validity of the Shares being delivered by the Company and certain of the Selling Shareholders at such Time of Delivery, the Registration Statement, and the Prospectus as well as such other related matters as you may reasonably request, and such counsel shall have received such papers and information as they may reasonably request to enable them to pass upon such matters. In rendering such opinions, such counsel may rely as to all matters 16 17 governed by North Carolina law upon the opinion referred to in subsection (c) of this Section; (c) Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P., counsel for the Company, shall have furnished to you their written opinion, dated such Time of Delivery, in form and substance satisfactory to you, to the effect that: (i) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the North Carolina, with corporate power and authority to own its properties and conduct its business as described in the Prospectus; (ii) The Company has an authorized capitalization as set forth in the Prospectus, and all of the issued shares of capital stock of the Company (including the Shares being delivered at such Time of Delivery) have been duly authorized and validly issued, are fully paid and non-assessable and are not subject to any preemptive rights under any North Carolina statute or the Company's Amended and Restated Articles of Incorporation or Amended and Restated Bylaws; and the Shares conform to the description of the Stock contained in the Prospectus; (iii) The Company has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries taken as a whole (such counsel being entitled to rely in respect of the opinion in this clause upon opinions of local counsel and in respect of matters of fact upon certificates of officers of the Company and the significant subsidiaries of the Company, provided that such counsel shall state that they believe that both you and they are justified in relying upon such opinions and certificates); (iv) Each Significant Subsidiary of the Company has been duly incorporated or otherwise formed as a non-corporate entity and is validly existing as a corporation or other entity, as the case may be, in good standing under the laws of the jurisdiction of its organization; with corporate or other organizational power and authority to own its properties and to conduct its business as described in the Prospectus and has been duly qualified as a foreign corporation or other entity, as the case may be, for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole (such counsel being entitled to rely in respect of the opinion in this clause upon opinions of local counsel and in respect of matters of fact upon certificates of officers of the Company, provided that such counsel shall state that they believe that both you and they are justified in relying upon such opinions and certificates); 17 18 (v) To the best of such counsel's knowledge and other than as set forth in the Prospectus, there are no legal or governmental proceedings pending to which the Company or any of its subsidiaries is a party or of which any property of the Company or any of its subsidiaries is the subject which, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a material adverse effect on the current consolidated financial position, shareholders' equity or results of operations of the Company and its subsidiaries; and, to the best of such counsel's knowledge, no such proceedings are threatened or contemplated by governmental authorities or threatened by others; (vi) This Agreement and the International Underwriting Agreement have been duly authorized, executed and delivered by the Company; (vii) The issue and sale of the Shares, and the compliance by the Company with all of the provisions of this Agreement and the International Underwriting Agreement and the consummation of the transactions herein and therein contemplated will not contravene (A) any provision of applicable federal or North Carolina law which in such counsel's experience is normally applicable to transactions of the type contemplated by this Agreement and the contravention of which would have a material adverse effect on the business of the Company and its Significant Subsidiaries, taken as a whole, (B) the Amended and Restated Articles of Incorporation or Amended and Restated Bylaws of the Company, (C) any agreement or other instrument filed as an exhibit to the Registration Statement or incorporated by reference in the Prospectus, or (D) to the best of such counsel's knowledge, any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company or any Significant Subsidiary; (viii) No consent, approval, authorization, order of, or qualification with, any governmental agency or body is required for the issue and sale of the Shares or the consummation by the Company of the transactions contemplated by this Agreement and the International Underwriting Agreement, except such consents, approvals, authorizations, registrations or qualifications as may be required under state or foreign securities or Blue Sky laws in connection with the purchase and distribution of the Shares by the Underwriters and the International Underwriters; (ix) The statements set forth in the Prospectus under the caption "Description of Capital Stock", insofar as they purport to constitute a summary of the terms of the Stock, under the caption "Certain U.S. Federal Tax Considerations for Non-U.S. Holders of Common Stock", and under the caption "Underwriting", insofar as they purport to describe the provisions of the laws and documents referred to therein, are accurate, complete and fair; (x) The Company is not an "investment company" or an entity "controlled" by an "investment company", as such terms are defined in the Investment Company Act; 18 19 (xi) The documents incorporated by reference in the Prospectus or any further amendment or supplement thereto made by the Company prior to such Time of Delivery (other than the financial statements and related schedules therein or other financial data derived from accounting records, as to which such counsel need express no opinion), when they became effective or were filed with the Commission, as the case may be, complied as to form in all material respects with the requirements of the Act or the Exchange Act, as applicable, and the rules and regulations of the Commission thereunder; and they have no reason to believe that any of such documents (other than the financial statements and related schedules therein or other financial data derived from accounting records), when such documents became effective or were so filed, as the case may be, contained, in the case of a registration statement which became effective under the Act, an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or, in the case of other documents which were filed under the Exchange Act with the Commission (other than the financial statements and related schedules therein or other financial data derived from accounting records), an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such documents were so filed, not misleading; and (xii) (A) The Registration Statement and the Prospectus and any further amendments and supplements thereto made by the Company prior to such Time of Delivery (other than the financial statements and related schedules therein or other financial data derived from accounting records, as to which such counsel need express no opinion) comply as to form in all material respects with the requirements of the Act and the rules and regulations thereunder; (B) no facts have come to the attention of such counsel which lead them to believe that, as of its effective date, the Registration Statement or any further amendment thereto made by the Company prior to such Time of Delivery (other than the financial statements and related schedules therein or other financial data derived from accounting records, as to which such counsel need express no opinion) contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that, as of its date, the Prospectus or any further amendment or supplement thereto made by the Company prior to such Time of Delivery (other than the financial statements and related schedules therein or other financial data derived from accounting records, as to which such counsel need express no opinion) contained an untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading or that, as of such Time of Delivery, either the Registration Statement or the Prospectus or any further amendment or supplement thereto made by the Company prior to such Time of Delivery (other than the financial statements and related schedules therein or other financial data derived from accounting records, as to which such counsel need express no opinion) contains 19 20 an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (C) and they do not know of any amendment to the Registration Statement required to be filed or of any contracts or other documents of a character required to be filed as an exhibit to the Registration Statement or required to be incorporated by reference into the Prospectus or required to be described in the Registration Statement or the Prospectus which are not filed or incorporated by reference or described as required. In rendering their opinions contained in this Section 7(c), such counsel may state that they express no opinion as to the laws of any jurisdiction outside the United States. In rendering the opinion contained in clause (vi) of this Section 7(c), such counsel may rely as to all matters governed by New York law upon the opinion referred to in subsection (b) of this Section 7. With respect to the matters referred to in clause (xii)(B) of this Section 7(c), such counsel may state that their opinion and belief are based upon their review of the Registration Statement and the Prospectus and any amendments or supplements thereto made by the Company prior to such Time of Delivery and participation in conferences and discussions with officers and other representatives of the Company, representatives of the independent public accountants for the Company, and representatives of the Underwriters at which the contents of the Registration Statement and the Prospectus and any amendments or supplements thereto made by the Company prior to such Time of Delivery and related matters were discussed and, that, except to the extent set forth in clause (ix) of this Section 7(c), they do not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement and the Prospectus and any amendments or supplements thereto made by the Company prior to such Time of Delivery. (d) (A) Skadden, Arps, Slate, Meagher & Flom LLP, counsel for each of the Selling Shareholders indicated with footnote (a) or (b) in Schedule II hereto, shall have furnished to you their written opinion with respect to each of such Selling Shareholder, dated such Time of Delivery, in form and substance satisfactory to you, to the effect that: (i) A Power of Attorney and a Custody Agreement have been duly executed and delivered by such Selling Shareholder and constitute valid and binding agreements of such Selling Shareholder in accordance with their terms except (a) to the extent that the enforcement thereof may be limited by (1) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting creditors' rights generally and (2) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity); (ii) This Agreement and the International Underwriting Agreement have been duly executed and delivered by or on behalf of such Selling Shareholder; and the execution and delivery of the Power of Attorney, the Custody Agreement by such Selling Shareholder, the execution of this Agreement and the International 20 21 Underwriting Agreement by or on behalf of such Selling Shareholder and the sale of the Shares to be sold by such Selling Shareholder hereunder and thereunder and the compliance by such Selling Shareholder with all of the provisions of this Agreement and the International Underwriting Agreement, the Power of Attorney and the Custody Agreement and the consummation of the transactions herein and therein contemplated will not (a) result in the violation of the provisions of the Memorandum and Articles of Association or other constitutional documents of such Selling Shareholder, (b) conflict with or constitute a breach of, or default under any instrument identified to such counsel by such Selling Shareholder as material to such Selling Shareholder's interest in the Shares being sold by such Selling Shareholder, nor (c) result in a breach or violation by such Selling Shareholder of the laws of the State of New York, the federal laws of the United States of America or the laws of England, in each case, that such counsel believes, are applicable to transactions of the type contemplated by the Power of Attorney, the Custody Agreement, this Agreement and the International Underwriting Agreement, except that such counsel need not express any opinion with respect to compliance with the registration or filing requirements or disclosure provisions of state securities laws of the United States or the securities or blue sky laws of any other jurisdiction. (iii) No consent or approval of, or other action by or filing with, any English, United States or New York State court or administrative or governmental body is required under the federal laws of the United States of America, the laws of England or the laws of the State of New York for such Selling Shareholder to execute and deliver the Power of Attorney, the Custody Agreement, for the execution and delivery by or on behalf of such Selling Shareholder of this Agreement and the International Underwriting Agreement or for such Selling Shareholder to consummate the transactions provided for herein and therein, except as have been obtained, and such consents, approvals, authorizations, orders, registrations or qualifications as may be required under state securities or blue sky laws in connection with the purchase and distribution of the Shares to be purchased from such Selling Shareholder under this Agreement by the Underwriters or under the International Underwriting Agreement by the International Underwriters. (iv) Assuming that Goldman, Sachs & Co., as agent for the other Underwriters and the International Underwriters, and each of the Underwriters and the International Underwriters acquired their interest in a new certificate, registered in the name of Goldman, Sachs & Co., as an Underwriter and as agent for the other Underwriters and the International Underwriters, representing the Shares delivered at such Time of Delivery by such Selling Shareholders (the "Securities") in good faith and without notice of any adverse claims, upon delivery of the Securities to Goldman, Sachs & Co., as an Underwriter and as agent for the other Underwriters and the International Underwriters, in the State of New York, Goldman, Sachs & Co., as an Underwriter and as agent for the other Underwriters and the International Underwriters, will acquire the Securities free of any adverse 21 22 claims within the meaning of Section 8-302 of the New York Uniform Commercial Code and free of any action or claims under Section 8-315 of such Code. (B) Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P., counsel for each of the Selling Shareholders indicated with footnote (c) in Schedule II hereto, shall have furnished to you their written opinion with respect to each of such Selling Shareholders, dated such Time of Delivery, in form and substance satisfactory to you, to the effect that: (i) A Power of Attorney and a Custody Agreement have been duly executed and delivered by such Selling Shareholder and constitute valid and binding agreements of such Selling Shareholder in accordance with their terms; (ii) This Agreement and the International Underwriting Agreement have been duly executed and delivered by or on behalf of such Selling Shareholder; and the sale of the Shares to be sold by such Selling Shareholder hereunder and thereunder and the compliance by such Selling Shareholder with all of the provisions of this Agreement and the International Underwriting Agreement, the Power of Attorney and the Custody Agreement and the consummation of the transactions herein and therein contemplated will not conflict with or result in a breach or violation of any terms or provisions of, or constitute a default under, any statute, indenture, mortgage, deed of trust, loan agreement or other agreement or instrument known to such counsel to which such Selling Shareholder is a party or by which such Selling Shareholder is bound, or to which any of the property or assets of such Selling Shareholder is subject, nor will such action result in any violation of the provisions of the Articles of Incorporation and By-laws or other governing instrument of such Selling Shareholder if such Selling Shareholder is a corporation, the Partnership Agreement of such Selling Shareholder if such Selling Shareholder is a partnership, the governing trust agreement or other governing instrument of such Selling Shareholder if such selling Shareholder is a trust, or any order, rule or regulation known to such counsel of any court or governmental agency or body having jurisdiction over such Selling Shareholder or the property of such Selling Shareholder; (iii) No consent, approval, authorization or order of any court or governmental agency or body is required for the consummation of the transactions contemplated by this Agreement and the International Underwriting Agreement in connection with the Shares to be sold by such Selling Shareholder hereunder or thereunder, except such as shall have been specified in such opinion which have been duly obtained and are in full force and effect and such as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of such Shares by the Underwriters or the International Underwriters; (iv) Immediately prior to such Time of Delivery such Selling Shareholder had good and valid title to the Shares to be sold at such Time of Delivery by such Selling Shareholder under this Agreement and the International Underwriting Agreement, free and clear of all liens, encumbrances, equities or 22 23 claims, and full right, power and authority to sell, assign, transfer and deliver the Shares to be sold by such Selling Shareholder hereunder and thereunder; and (v) Good and valid title to such Shares, free and clear of all liens, encumbrances, equities or claims, has been transferred to each of the several Underwriters or International Underwriters, as the case may be, who have purchased such Shares in good faith and without notice of any such lien, encumbrance, equity or claim or any other adverse claim within the meaning of the Uniform Commercial Code. In rendering the opinion in subparagraph (iv) such counsel may rely upon a certificate of such Selling Shareholder in respect of matters of fact as to ownership of, and liens, encumbrances, equities or claims on the Shares sold by such Selling Shareholder, provided that such counsel shall state that they believe that both you and they are justified in relying upon such certificate; (e) On the date of the Prospectus at a time prior to the execution of this Agreement, at 9:30 a.m., New York City time, on the effective date of any post-effective amendment to the Registration Statement filed subsequent to the date of this Agreement and also at each Time of Delivery (A) Ernst & Young LLP shall have furnished to you and the Company a letter or letters, dated the respective date of delivery thereof, in form and substance satisfactory to you, to the effect set forth in Annex I(a) hereto, (B) Coopers & Lybrand shall have furnished to you and the Company a letter or letters, dated the respective date of delivery thereof, in form and substance satisfactory to you, to the effect set forth in Annex 1(b) and (C) KPMG shall have furnished to you and the Company a letter or letters, dated the respective date of delivery thereof, in form and substance satisfactory to you, to the effect set forth in Annex I(c). (f) Since the respective dates as of which information is given in the Prospectus, there shall not have been any change in the capital stock or long-term debt of the Company or any of its subsidiaries, taken as a whole, or any change, or any development involving a prospective change, in the condition (financial or otherwise) or the earnings, business or operations of the Company and its subsidiaries, taken as a whole, otherwise than as set forth or contemplated in the Prospectus, the effect of which, in any such case described in this subsection (f), is in the judgment of the Representatives so material and adverse as to make it impracticable or inadvisable to proceed with the public offering or the delivery of the Shares being delivered at such Time of Delivery on the terms and in the manner contemplated in the Prospectus; (g) On or after the date hereof (i) no downgrading shall have occurred in the rating accorded the Company's debt securities by any "nationally recognized statistical rating organization", as that term is defined by the Commission for purposes of Rule 436(g)(2) under the Act, and (ii) no such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the Company's debt securities; 23 24 (h) On or after the date hereof there shall not have occurred any of the following: (i) a suspension or material limitation in trading in securities generally on the New York Stock Exchange or on NASDAQ; (ii) a suspension or material limitation in trading in the Company's securities on NASDAQ; (iii) a general moratorium on commercial banking activities declared by either Federal or New York State authorities; (iv) the outbreak or escalation of hostilities involving the United States or the declaration by the United States of a national emergency or war, if the effect of any such event specified in clause (iv) above in the judgment of the Representatives makes it impracticable or inadvisable to proceed with the public offering or the delivery of the Shares being delivered at such Time of Delivery on the terms and in the manner contemplated in this Agreement and in the Prospectus; (i) The Shares to be sold by the Company and the Selling Shareholders at such Time of Delivery shall have been duly listed for quotation on NASDAQ; (j) The Company has obtained and delivered to the Underwriters executed copies of the Lock-up Agreements referred to in Subsection 1(a)(xxii) hereof in form and substance satisfactory to you; (k) The Company and the Selling Shareholders shall have furnished or caused to be furnished to you at such Time of Delivery certificates of officers of the Company and of the Selling Shareholders, respectively, satisfactory to you as to the accuracy of the representations and warranties of the Company and the Selling Shareholders, respectively, herein at and as of such Time of Delivery, as to the performance by the Company and the Selling Shareholders of all of their respective obligations hereunder to be performed at or prior to such Time of Delivery, and as to such other matters as you may reasonably request, and the Company shall have furnished or caused to be furnished certificates as to the matters set forth in subsections (a) and (f) of this Section, and as to such other matters as you may reasonably request; and (l) The Company shall have complied with the provisions of Section 5(c) hereof with respect to the furnishing of prospectuses on the New York Business Day next succeeding the date of this Agreement. 8. (a) The Company will indemnify and hold harmless each Underwriter against any losses, claims, damages or liabilities, joint or several, to which such Underwriter may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Registration Statement or the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will periodically reimburse each Underwriter for any legal or other expenses reasonably incurred by such Underwriter in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage or liability 24 25 arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any Preliminary Prospectus, the Registration Statement or the Prospectus or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company by any Underwriter through Goldman, Sachs & Co. or by any Selling Shareholder expressly for use therein; and provided, further, that the Company shall not be liable to any Underwriter under the indemnity agreement in this subsection (a) with respect to any Preliminary Prospectus to the extent that any such loss, claim, damage or liability of such Underwriter results from the fact that such Underwriter sold Shares to a person as to whom it shall be established that there was not sent or given, at or prior to the written confirmation of such sale, a copy of the Prospectus (excluding documents incorporated by reference) or of the Prospectus as then amended or supplemented (excluding documents incorporated by reference) in any case where such delivery is required by the Act if the Company has previously furnished copies thereof in sufficient quantity to such Underwriter and the loss, claim, damage or liability of such Underwriter results from an untrue statement or omission of a material fact contained in the Preliminary Prospectus which was identified in writing prior to the date hereof to such Underwriter and corrected in the Prospectus (excluding document incorporated by reference) or in the Prospectus as then amended or supplemented (excluding documents incorporated by reference). (b) Each of the Selling Shareholders will indemnify and hold harmless each Underwriter against any losses, claims, damages or liabilities, joint or several, to which such Underwriter may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Registration Statement or the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any Preliminary Prospectus, the Registration Statement or the Prospectus or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company by such Selling Shareholder expressly for use therein, or (ii) the failure of such Selling Shareholder at or prior to the written confirmation of the sale of the Shares to be sold by such Selling Shareholder to send or deliver a copy of an amended Preliminary Prospectus or Prospectus (or the Prospectus as amended or supplemented) to the person asserting any such losses, claims, damages or liabilities against any Underwriter, which person purchased the Shares which are the subject thereof, and the untrue statement or alleged untrue statement or omission or alleged omission of a material fact made in such Preliminary Prospectus was corrected in the amended Preliminary Prospectus or the Prospectus (or the Prospectus as amended and supplemented); and each Selling Shareholder will periodically reimburse each Underwriter for any legal or other expenses reasonably incurred by such Underwriter 25 26 in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that the amount of such indemnity shall be limited to the total net proceeds received by each such Selling Shareholder from the offering of Shares purchased under this Agreement (before deducting expenses). (c) Each Underwriter will indemnify and hold harmless the Company and each Selling Shareholder against any losses, claims, damages or liabilities to which the Company or such Selling Shareholder may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Registration Statement or the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any Preliminary Prospectus, the Registration Statement or the Prospectus or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company by such Underwriter through Goldman, Sachs & Co. expressly for use therein; and will reimburse the Company and each Selling Shareholder for any legal or other expenses reasonably incurred by the Company or such Selling Shareholder in connection with investigating or defending any such action or claim as such expenses are incurred. (d) Promptly after receipt by an indemnified party under subsection (a), (b) or (c) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against an indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under such subsection. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (which shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under such subsection for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) 26 27 includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any indemnified party. (e) If the indemnification provided for in this Section 8 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a), (b) or (c) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Selling Shareholders on the one hand and the Underwriters on the other from the offering of the Shares. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law or if the indemnified party failed to give the notice required under subsection (d) above, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company and the Selling Shareholders on the one hand and the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company and the Selling Shareholders on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering of the Shares purchased under this Agreement (before deducting expenses) received by the Company and the Selling Shareholders bear to the total underwriting discounts and commissions received by the Underwriters with respect to the Shares purchased under this Agreement, in each case as set forth in the table on the cover page of the Prospectus. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Selling Shareholders on the one hand or the Underwriters on the other and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, each of the Selling Shareholders and the Underwriters agree that it would not be just and equitable if contributions pursuant to this subsection (e) were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this subsection (e). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (e) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (e), (i) no Selling Shareholder shall be required to contribute any amount by which the total price at which the Shares sold by such Selling Shareholder and distributed to the public were offered to the public (before deducting expenses) exceeds the amount of any damages 27 28 that such Selling Shareholder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, and (ii) no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations in this subsection (e) to contribute are several in proportion to their respective underwriting obligations and not joint. The remedies provided for in this Section 8 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. (f) The obligations of the Company and the Selling Shareholders under this Section 8 shall be in addition to any liability which the Company and the respective Selling Shareholders may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Underwriter within the meaning of the Act; and the obligations of the Underwriters under this Section 8 shall be in addition to any liability which the respective Underwriters may otherwise have and shall extend, upon the same terms and conditions, to each officer and director of the Company (including any person who, with his or her consent, is named in the Registration Statement as about to become a director of the Company) and to each person, if any, who controls the Company or any Selling Shareholder within the meaning of the Act. 9. (a) If any Underwriter shall default in its obligation to purchase the Shares which it has agreed to purchase hereunder at a Time of Delivery, you may in your discretion arrange for you or another party or other parties to purchase such Shares on the terms contained herein. If within thirty-six hours after such default by any Underwriter you do not arrange for the purchase of such Shares, then the Company and the Selling Shareholders shall be entitled to a further period of thirty-six hours within which to procure another party or other parties satisfactory to you to purchase such Shares on such terms. In the event that, within the respective prescribed periods, you notify the Company and the Selling Shareholders that you have so arranged for the purchase of such Shares, or the Company and the Selling Shareholders notify you that they have so arranged for the purchase of such Shares, you or the Company and the Selling Shareholders shall have the right to postpone such Time of Delivery for a period of not more than seven days, in order to effect whatever changes may thereby be made necessary in the Registration Statement or the Prospectus, or in any other documents or arrangements, and the Company agrees to file promptly any amendments to the Registration Statement or the Prospectus which in your opinion may thereby be made necessary. The term "Underwriter" as used in this Agreement shall include any person substituted under this Section with like effect 28 29 as if such person had originally been a party to this Agreement with respect to such Shares. (b) If, after giving effect to any arrangements for the purchase of the Shares of a defaulting Underwriter or Underwriters by you and the Company and the Selling Shareholders as provided in subsection (a) above, the aggregate number of such Shares which remains unpurchased does not exceed one-eleventh of the aggregate number of all of the Shares to be purchased at such Time of Delivery, then the Company and the Selling Shareholders shall have the right to require each non-defaulting Underwriter to purchase the number of Shares which such Underwriter agreed to purchase hereunder at such Time of Delivery and, in addition, to require each non-defaulting Underwriter to purchase its pro rata share (based on the number of Shares which such Underwriter agreed to purchase hereunder) of the Shares of such defaulting Underwriter or Underwriters for which such arrangements have not been made; but nothing herein shall relieve a defaulting Underwriter from liability for its default. (c) If, after giving effect to any arrangements for the purchase of the Shares of a defaulting Underwriter or Underwriters by you and the Company and the Selling Shareholders as provided in subsection (a) above, the aggregate number of such Shares which remains unpurchased exceeds one-eleventh of the aggregate number of all of the Shares to be purchased at such Time of Delivery, or if the Company and the Selling Shareholders shall not exercise the right described in subsection (b) above to require non-defaulting Underwriters to purchase Shares of a defaulting Underwriter or Underwriters, then this Agreement (or, with respect to the Second Time of Delivery, the obligations of the Underwriters to purchase and of the Selling Shareholders to sell the Optional Shares) shall thereupon terminate, without liability on the part of any non-defaulting Underwriter or the Company or the Selling Shareholders, except for the expenses to be borne by the Company and the Selling Shareholders and the Underwriters as provided in Section 6 hereof and the indemnity and contribution agreements in Section 8 hereof; but nothing herein shall relieve a defaulting Underwriter from liability for its default. 10. The respective indemnities, agreements, representations, warranties and other statements of the Company, the Selling Shareholders and the several Underwriters, as set forth in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall remain in full force and effect, regardless of any investigation (or any statement as to the results thereof) made by or on behalf of any Underwriter or any controlling person of any Underwriter, or the Company, or any of the Selling Shareholders, or any officer or director or controlling person of the Company, or any controlling person of any Selling Shareholder, and shall survive delivery of and payment for the Shares. 11. If this Agreement shall be terminated pursuant to Section 9 hereof, neither the Company nor the Selling Shareholders shall then be under any liability to any Underwriter except as provided in Sections 6 and 8 hereof; but, if for any other reason any Shares are not delivered by or on behalf of the Company and the Selling 29 30 Shareholders as provided herein, the Company and each of the Selling Shareholders pro rata (based on the number of Shares to be sold by the Company and such Selling Shareholder hereunder) will reimburse the Underwriters through you for all out-of-pocket expenses approved in writing by you, including fees and disbursements of counsel, reasonably incurred by the Underwriters in making preparations for the purchase, sale and delivery of the Shares not so delivered, but the Company and the Selling Shareholders shall then be under no further liability to any Underwriter in respect of the Shares not so delivered except as provided in Sections 6 and 8 hereof. 12. In all dealings hereunder, you shall act on behalf of each of the Underwriters, and the parties hereto shall be entitled to act and rely upon any statement, request, notice or agreement on behalf of any Underwriter made or given by you jointly or by Goldman, Sachs & Co. on behalf of you as the representatives; and in all dealings with any Selling Shareholder hereunder, you and the Company shall be entitled to act and rely upon any statement, request, notice or agreement on behalf of such Selling Shareholder made or given by any or all of the Attorneys-in-Fact for such Selling Shareholder. All statements, requests, notices and agreements hereunder shall be in writing, and if to the Underwriters shall be delivered or sent by mail, telex or facsimile transmission to you as the representatives in care of Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004, Attention: Registration Department; if to any Selling Shareholder shall be delivered or sent by mail, telex or facsimile transmission to counsel for such Selling Shareholder at its address set forth in Schedule II hereto; and if to the Company shall be delivered or sent by mail, telex or facsimile transmission to the address of the Company set forth in the Registration Statement, Attention: Secretary; provided, however, that any notice to an Underwriter pursuant to Section 8(c) hereof shall be delivered or sent by mail, telex or facsimile transmission to such Underwriter at its address set forth in its Underwriters' Questionnaire or telex constituting such Questionnaire, which address will be supplied to the Company or the Selling Shareholders by you upon request. Any such statements, requests, notices or agreements shall take effect upon receipt thereof. 13. This Agreement shall be binding upon, and inure solely to the benefit of, the Underwriters, the Company and the Selling Shareholders and, to the extent provided in Sections 8 and 10 hereof, the officers and directors of the Company and each person who controls the Company, any Selling Shareholder or any Underwriter, and their respective heirs, executors, administrators, successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No purchaser of any of the Shares from any Underwriter shall be deemed a successor or assign by reason merely of such purchase. 14. Time shall be of the essence of this Agreement. As used herein, the term "business day" shall mean any day when the Commission's office in Washington, D.C. is open for business. 30 31 15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 16. This Agreement may be executed by any one or more of the parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. If the foregoing is in accordance with your understanding, please sign and return to us 10 counterparts hereof, and upon the acceptance hereof by you, on behalf of each of the Underwriters, this letter and such acceptance hereof shall constitute a binding agreement among each of the Underwriters, the Company and each of the Selling Shareholders. It is understood that your acceptance of this letter on behalf of each of the Underwriters is pursuant to the authority set forth in a form of Agreement among Underwriters (U.S. Version), the form of which shall be submitted to the Company and the Selling Shareholders for examination upon request, but without warranty on your part as to the authority of the signers thereof. 31 32 Any person executing and delivering this Agreement as Attorney-in-Fact for a Selling Shareholder represents by so doing that he has been duly appointed as Attorney-in-Fact by such Selling Shareholder pursuant to a validly existing and binding Power of Attorney which authorizes such Attorney-in-Fact to take such action. Very truly yours, Quintiles Transnational Corp. By:/s/ Rachel R. Selisker -------------------------- Name: Rachel R. Selisker Title: Chief Financial Officer, Executive Vice President Finance and Treasurer Barrie S. Haigh David F. White Irene White Paul Knott, Ph.D. Kathryn M. Knott Stella D. Haigh Barrie Haigh Children's Settlement No.1 Barrie Haigh Children's Settlement No.2 David Martin Fleet Victoria S. Fleet Jonathan Kenneth Bolter Sally-Ann Bolter Nicholas John McCooke Susan McCooke Christopher S. Morley Elaine Morley By: /s/ Rachel R. Selisker -------------------------- Name: Rachel R. Selisker As Attorney-in-Fact acting on behalf of the above named Selling Shareholders. 32 33 HSBC Private Equity Investments Limited Lloyds Development Capital Limited MSS Nominees Limited (Account 758170) MSS Nominees Limited (Account 758979) MSS Nominees Limited (Account 757549) MSS Nominees Limited (Account 778392) General Accident Executor and Trustee Company Limited (Account H715) General Accident Executor and Trustee Company Limited (Account H716) By: /s/ Christopher M. Masterson -------------------------------- Name: Christopher M. Masterson As Attorney-in-Fact acting on behalf of the above named Selling Shareholders. Ludo J. Reynders, Ph.D Santo J. Costa Gregory D. Porter By: /s/ Rachel R. Selisker ------------------------------ Name: Rachel R. Selisker As Attorney-in-Fact acting on behalf of the above named Selling Shareholders. Accepted as of the date hereof at: Goldman, Sachs & Co. Morgan Stanley & Co. Incorporated Smith Barney Inc. William Blair & Company, L.L.C. By: /s/ Goldman, Sachs & Co. ----------------------------------- (Goldman, Sachs & Co.) On behalf of each of the Underwriters 33 34 SCHEDULE I
NUMBER OF OPTIONAL SHARES TO BE TOTAL NUMBER OF PURCHASED IF FIRM SHARES MAXIMUM OPTION UNDERWRITER TO BE PURCHASED EXERCISED ----------- ------------------- ----------------------- Goldman, Sachs & Co. . . . . . . . . . . . . . . . . . . . . . . 720,750 108,113 Morgan Stanley & Co. Incorporated . . . . . . . . . . . . . . . . 720,750 108,113 Smith Barney Inc. . . . . . . . . . . . . . . . . . . . . . . . . 720,750 108,112 William Blair & Company, L.L.C. . . . . . . . . . . . . . . . . . 720,750 108,112 Genesis Merchant Group Securities LLC . . . . . . . . . . . . . . 95,000 14,250 Gerard Klauer Mattison & Co., Inc. . . . . . . . . . . . . . . . 95,000 14,250 Hambrecht & Quist . . . . . . . . . . . . . . . . . . . . . . . . 168,000 25,200 Lehman Brothers Inc. . . . . . . . . . . . . . . . . . . . . . . 168,000 25,200 Scott & Stringfellow, Inc. . . . . . . . . . . . . . . . . . . . 95,000 14,250 Vector Securities International, Inc. . . . . . . . . . . . . . . 168,000 25,200 Wessels, Arnold & Henderson, L.L.C. . . . . . . . . . . . . . . . 168,000 25,200 --------- --------- Total . . . . . . . . . . . . . . . . . . . . . . . . . 3,840,000 576,000 --------- ---------
35 SCHEDULE II
NUMBER OF OPTIONAL SHARES TO BE TOTAL NUMBER OF SOLD IF FIRM SHARES MAXIMUM OPTION TO BE SOLD EXERCISED ------------------ -------------------- The Company . . . . . . . . . . . . . . . . . . . . . . . 1,132,000 0 The Selling Shareholders: Barrie S. Haigh(a)* . . . . . . . . . . . . . . . . . . 181,586 99,777 David F. White(a) . . . . . . . . . . . . . . . . . . . 400 0 Irene White(a) . . . . . . . . . . . . . . . . . . . . 800 0 Paul Knott, Ph.D.(a) . . . . . . . . . . . . . . . . . 20,072 0 Kathryn M. Knott(a) . . . . . . . . . . . . . . . . . 19,600 0 Stella D. Haigh(a)* . . . . . . . . . . . . . . . . . . 40,000 40,000 Barrie Haigh Children's Settlement No. 1(a)* . . . . . 80,000 40,000 Barrie Haigh Children's Settlement No. 2(a)* . . . . . 60,000 20,000 HSBC Private Equity Investments Limited(b)* . . . . . . 1,310,006 244,480 Lloyds Development Capital Limited(b) . . . . . . . . . 240,000 0 MSS Nominees Limited (Account 758170)(b)* . . . . . . . 94,701 17,673 MSS Nominees Limited (Account 758979)(b)* . . . . . . . 42,303 7,894 MSS Nominees Limited (Account 757549)(b)* . . . . . . . 378,854 70,704 MSS Nominees Limited (Account 778392)(b)* . . . . . . . 32,190 6,009 General Accident Executor and Trustee Company Limited (Account H715)(b)* . . . . . . . . . 126,285 23,568 General Accident Executor and Trustee Company Limited (Account H716)(b)* . . . . . . . . . 31,583 5,895 David Martin Fleet(a) . . . . . . . . . . . . . . . . . 7,560 0 Victoria S. Fleet(a) . . . . . . . . . . . . . . . . . 8,000 0 Jonathan Kenneth Bolter(a) . . . . . . . . . . . . . . 2,526 0 Sally-Ann Bolter(a) . . . . . . . . . . . . . . . . . 2,526 0 Nicholas John McCooke(a) . . . . . . . . . . . . . . . 3,628 0 Susan McCooke(a) . . . . . . . . . . . . . . . . . . . 3,192 0 Christopher S. Morley(a) . . . . . . . . . . . . . . . 2,854 0 Elaine Morley(a) . . . . . . . . . . . . . . . . . . . 2,854 0 Ludo J. Reynders, Ph.D.(c) . . . . . . . . . . . . . . 12,000 0 Santo J. Costa(c) . . . . . . . . . . . . . . . . . . . 4,000 0 Gregory D. Porter(c) . . . . . . . . . . . . . . . . . 480 0 --------- ------- Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,840,000 576,000 --------- -------
(a) This Selling Shareholder is represented by Skadden, Arps, Slate, Meagher & Flom LLP and has appointed Barrie S. Haigh, Paul Knott, Ph.D., Dennis B. 36 Gillings, Ph.D. and Rachel R. Selisker, and each of them, as the Attorneys-in-Fact for such Selling Shareholder. (b) This Selling Shareholder is represented by Skadden, Arps, Slate, Meagher & Flom LLP and has appointed Christopher M. Masterson and Ian M. Forrest, and each of them, as the Attorneys-in-Fact for such Selling Shareholder. (c) This Selling Shareholder is represented by Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P. and has appointed Barrie S. Haigh, Paul Knott, Ph.D., Dennis B. Gillings, Ph.D. and Rachel R. Selisker, and each of them, as the Attorneys-in-Fact for such Selling Shareholder. II-2 37 SCHEDULE III Dennis B. Gillings, Ph.D. Santo J. Costa Rachel R. Selisker Lawrence S. Lewin Eric J. Souetre, M.D., Ph.D. Robert C. Bishop Chester W. Douglass, Ph.D. John G. Fryer, Ph.D. Arthur M. Pappas Richard H. Thompson 38 ANNEX I(A) Pursuant to Section 7(e)(A) of the Underwriting Agreement, Ernst & Young LLP shall furnish letters to the Underwriters to the effect that: (i) They are independent certified public accountants with respect to the Company and its subsidiaries, BRI International, Inc. and Lewin-VHI within the meaning of the Act and the applicable published rules and regulations thereunder; (ii) In their opinion, the financial statements and any supplementary financial information and schedules (and, if applicable, financial forecasts and/or pro forma financial information) of the Company and its subsidiaries, BRI International, Inc. and Lewin-VHI examined by them and included or incorporated by reference in the Registration Statement or the Prospectus comply as to form in all material respects with the applicable accounting requirements of the Act or the Exchange Act, as applicable, and the related published rules and regulations thereunder; and, if applicable, they have made a review in accordance with standards established by the American Institute of Certified Public Accountants of the consolidated interim financial statements, selected financial data, pro forma financial information, financial forecasts and/or condensed financial statements derived from audited financial statements of the Company or Lewin-VHI, as the case may be, for the periods specified in such letter, as indicated in their reports thereon, copies of which have been furnished to the representatives of the Underwriters (the "Representatives") and are attached hereto; (iii) They have made a review in accordance with standards established by the American Institute of Certified Public Accountants of the unaudited condensed consolidated statements of income, consolidated balance sheets and consolidated statements of cash flows included in the Prospectus and/or included in the Company's Quarterly Reports on Form 10-Q incorporated by reference into the Prospectus; and on the basis of specified procedures including inquiries of officials of the Company who have responsibility for financial and accounting matters regarding whether the unaudited condensed consolidated financial statements referred to in paragraph (vi)(A)(i) below comply as to form in all material respects with the applicable accounting requirements of the Act and the Exchange Act and the related published rules and regulations, nothing came to their attention that caused them to believe that the unaudited condensed consolidated financial statements do not comply as to form in all material respects with the applicable accounting requirements of the Act and the Exchange Act and the related published rules and regulations; (iv) The unaudited selected financial information with respect to the consolidated results of operations and financial position of the Company for the five most recent fiscal years included in the Prospectus and included or incorporated by reference in Item 6 of the Company's Annual Report on Form 10-K for the year ended 39 December 31, 1995 agrees with the corresponding amounts (after restatement where applicable) in the audited consolidated financial statements for such five fiscal years which were included or incorporated by reference in the Company's Annual Reports on Form 10-K for such fiscal years; (v) They have compared the information in the Prospectus under selected captions with the disclosure requirements of Regulation S-K and on the basis of limited procedures specified in such letter nothing came to their attention as a result of the foregoing procedures that caused them to believe that this information does not conform in all material respects with the disclosure requirements of Items 301, 302, 402 and 503(d), respectively, of Regulation S-K; (vi) On the basis of limited procedures, not constituting an examination in accordance with generally accepted auditing standards, consisting of a reading of the unaudited financial statements and other information referred to below, a reading of the latest available interim financial statements of the Company and its subsidiaries, inspection of the minute books of the Company and its subsidiaries since the date of the latest audited financial statements included or incorporated by reference in the Prospectus, inquiries of officials of the Company and its subsidiaries responsible for financial and accounting matters and such other inquiries and procedures as may be specified in such letter, nothing came to their attention that caused them to believe that: (A) (i) the unaudited condensed consolidated statements of income, consolidated balance sheets and consolidated statements of cash flows included in the Prospectus and/or included or incorporated by reference in the Company's Quarterly Reports on Form 10-Q incorporated by reference in the Prospectus do not comply as to form in all material respects with the applicable accounting requirements of the Exchange Act and the related published rules and regulations, or (ii) any material modifications should be made to the unaudited condensed consolidated statements of income, consolidated balance sheets and consolidated statements of cash flows included in the Prospectus or included in the Company's Quarterly Reports on Form 10-Q incorporated by reference in the Prospectus, for them to be in conformity with generally accepted accounting principles; (B) any other unaudited income statement data and balance sheet items included in the Prospectus do not agree with the corresponding items in the unaudited consolidated financial statements from which such data and items were derived, and any such unaudited data and items were not determined on a basis substantially consistent with the basis for the corresponding amounts in the audited consolidated financial statements included or incorporated by reference in the Prospectus for the year ended December 31, 1996; (C) the unaudited financial statements which were not included in the Prospectus but from which were derived the unaudited condensed financial statements referred to in Clause (A) and any unaudited income statement data and balance sheet items included in the Prospectus and referred to in Clause (B) were A1a-2 40 not determined on a basis substantially consistent with the basis for the audited financial statements included or incorporated by reference in the Prospectus for the year ended December 31, 1996; (D) any unaudited pro forma consolidated condensed financial statements included or incorporated by reference in the Prospectus do not comply as to form in all material respects with the applicable accounting requirements of the Act and the published rules and regulations thereunder or the pro forma adjustments have not been properly applied to the historical amounts in the compilation of those statements; (E) as of a specified date not more than five days prior to the date of such letter, there have been any changes in the consolidated capital stock (other than issuances of capital stock upon exercise of options and stock appreciation rights, upon earn-outs of performance shares and upon conversions of convertible securities, in each case which were outstanding on the date of the latest balance sheet included or incorporated by reference in the Prospectus) or any increase in the consolidated long-term debt of the Company and its subsidiaries, or any decreases in consolidated net current assets or shareholders' equity or other items specified by the Representatives, or any increases in any items specified by the Representatives, in each case as compared with amounts shown in the latest balance sheet included or incorporated by reference in the Prospectus, except in each case for changes, increases or decreases which the Prospectus discloses have occurred or may occur or which are described in such letter; and (F) for the period from the date of the latest financial statements included or incorporated by reference in the Prospectus to the specified date referred to in Clause (E) there were any decreases in consolidated net revenues or operating profit or the total or per share amounts of consolidated net income or other items specified by the Representatives, or any increases in any items specified by the Representatives, in each case as compared with the comparable period of the preceding year and with any other period of corresponding length specified by the Representatives, except in each case for increases or decreases which the Prospectus discloses have occurred or may occur or which are described in such letter; and (vii) In addition to the examination referred to in their report(s) included or incorporated by reference in the Prospectus and the limited procedures, inspection of minute books, inquiries and other procedures referred to in paragraphs (iii) and (vi) above, they have carried out certain specified procedures, not constituting an examination in accordance with generally accepted auditing standards, with respect to certain amounts, percentages and financial information specified by the Representatives which are derived from the general accounting records of the Company and its subsidiaries, which appear in the Prospectus (excluding documents incorporated by reference) or in Part II of, or in exhibits and schedules to, the Registration Statement specified by the Representatives or in documents incorporated by reference in the Prospectus specified by the Representatives, and have compared A1a-3 41 certain of such amounts, percentages and financial information with the accounting records of the Company and its subsidiaries and have found them to be in agreement. A1a-4 42 ANNEX I(B) Pursuant to Section 7(e)(B) of the Underwriting Agreement, Coopers & Lybrand shall furnish letters to the Underwriters to the effect that, in their opinion, the financial statements and any supplementary financial information and schedules of BRI International, Inc. examined by them and included or incorporated by reference in the Registration Statement or the Prospectus comply as to form in all material respects with the applicable accounting requirements of the Act or the Exchange Act, as applicable, and the related published rules and regulations thereunder. 43 ANNEX I(C) Pursuant to Section 7(e)(C) of the Underwriting Agreement, KPMG shall furnish letters to the Underwriters to the effect that: (i) In their opinion, the financial statements and any supplementary financial information and schedules (and, if applicable, financial forecasts and/or pro forma financial information) of the Innovex Companies, which comprised a combination of Innovex PLC and Innovex Holdings Limited (the "Combined Innovex Companies"), examined by them and included or incorporated by reference in the Registration Statement or the Prospectus comply as to form in all material respects with the applicable accounting requirements of the Act or the Exchange Act, as applicable, and the related published rules and regulations thereunder; (ii) They have made a review in accordance with standards established by the American Institute of Certified Public Accountants of the unaudited condensed consolidated statements of income, consolidated balance sheets, consolidated statements of cash flows and consolidated total recognized gains and losses of Innovex PLC and its subsidiaries included in the Company's Current Reports on Form 8-K incorporated by reference into the Prospectus; and on the basis of specified procedures including inquiries of officials of the Innovex PLC who have responsibility for financial and accounting matters regarding whether the unaudited condensed consolidated financial statements referred to in paragraph (iii)(A)(i) below comply as to form in all material respects with the applicable accounting requirements of the Act and the Exchange Act and the related published rules and regulations, nothing came to their attention that caused them to believe that the unaudited condensed consolidated financial statements do not comply as to form in all material respects with the applicable accounting requirements of the Act and the Exchange Act and the related published rules and regulations; (iii) On the basis of limited procedures, not constituting an examination in accordance with generally accepted auditing standards, consisting of a reading of the unaudited financial statements and other information referred to below, inspection of the minute books of Innovex PLC and its subsidiaries since the date of the latest audited financial statements of the Combined Innovex Companies included or incorporated by reference in the Prospectus, inquiries of officials of the Innovex PLC and its subsidiaries responsible for financial and accounting matters and such other inquiries and procedures as may be specified in such letter, nothing came to their attention that caused them to believe that: (A) (i) the unaudited condensed consolidated statements of income, consolidated balance sheets, consolidated statements of cash flows and consolidated total recognized gains and losses of Innovex PLC and its subsidiaries 44 included in the Company's Current Reports on Form 8-K incorporated by reference into the Prospectus do not comply as to form in all material respects with the applicable accounting requirements of the Exchange Act and the related published rules and regulations, or (ii) any material modifications should be made to the unaudited condensed consolidated statements of income, consolidated balance sheets, consolidated statements of cash flows and consolidated total recognized gains and losses of Innovex PLC and its subsidiaries included in the Company's Current Reports on Form 8-K incorporated by reference into the Prospectus, for them to be in conformity with generally accepted accounting principles; (B) the unaudited financial statements which were not included in the Prospectus but from which were derived the unaudited condensed financial statements referred to in Clause (A) were not determined on a basis substantially consistent with the basis for the audited financial statements of the Combined Innovex Companies included or incorporated by reference in the Prospectus for the year ended March 31, 1996; and (C) any unaudited pro forma consolidated condensed financial statements of the Combined Innovex Companies or Innovex PLC and its subsidiaries included or incorporated by reference in the Prospectus do not comply as to form in all material respects with the applicable accounting requirements of the Act and the published rules and regulations thereunder or the pro forma adjustments have not been properly applied to the historical amounts in the compilation of those statements. A1c-2 EX-10.54 16 UNDERWRITING AGREEMENT (INTERNATIONAL) 1 EXHIBIT 10.54 QUINTILES TRANSNATIONAL CORP. COMMON STOCK, $.01 PAR VALUE UNDERWRITING AGREEMENT (INTERNATIONAL VERSION) March 6, 1997 Goldman Sachs International Morgan Stanley & Co. International Limited Smith Barney Inc. William Blair & Company, L.L.C. As representatives of the several Underwriters named in Schedule I hereto, c/o Goldman Sachs International, Peterborough Court, 133 Fleet Street, London EC4A 2BB, England. Ladies and Gentlemen: Quintiles Transnational Corp., a North Carolina corporation (the "Company"), proposes, subject to the terms and conditions stated herein, to issue and sell to the Underwriters named in Schedule I hereto (the "Underwriters") an aggregate of 283,000 shares of Common Stock, $.01 par value ("Stock") of the Company and the shareholders of the Company named in Schedule II hereto (the "Selling Shareholders") propose, subject to the terms and conditions stated herein, to sell to the Underwriters an aggregate of 677,000 shares and, in the case of certain Selling Shareholders identified with an asterisk in Schedule II hereto and at the election of the Underwriters, up to 144,000 additional shares of Stock. The aggregate of 960,000 shares to be sold by the Company and the Selling Shareholders is herein called the "Firm Shares" and the aggregate of 144,000 additional shares to be sold by the Selling Shareholders identified with an asterisk in Schedule II hereto is herein called the "Optional Shares". The Firm Shares and the Optional Shares which the Underwriters elect to purchase pursuant to Section 2 hereof are herein collectively called, the "Shares". It is understood and agreed to by all parties that the Company and the Selling Shareholders are concurrently entering into an agreement, a copy of which is attached hereto (the "U.S. Underwriting Agreement"), providing for the sale by the Company and the Selling Shareholders of up to a total of 4,416,000 shares of Stock (the "U.S. Shares"), including the overallotment option thereunder, through arrangements with certain underwriters in the United States (the "U.S. Underwriters"), for whom Goldman, Sachs & Co., Morgan Stanley & Co. Incorporated, Smith Barney Inc. and William Blair & Company, L.L.C. are acting as representatives. Anything herein or therein to the contrary notwithstanding, the respective closings under this Agreement and the U.S. Underwriting Agreement are hereby expressly 2 made conditional on one another. The Underwriters hereunder and the U.S. Underwriters are simultaneously entering into an Agreement between U.S. and International Underwriting Syndicates (the "Agreement between Syndicates") which provides, among other things, for the transfer of shares of Stock between the two syndicates and for consultation by the Lead Manager hereunder with Goldman, Sachs & Co. prior to exercising the rights of the Underwriters under Section 7 hereof. Two forms of prospectus are to be used in connection with the offering and sale of shares of Stock contemplated by the foregoing, one relating to the Shares hereunder and the other relating to the U.S. Shares. The latter form of prospectus will be identical to the former except for certain substitute pages as included in the registration statement and amendments thereto as mentioned below. Except as used in Sections 2, 3, 4, 9 and 11 herein, and except as context may otherwise require, references hereinafter to the Shares shall include all of the shares of Stock which may be sold pursuant to either this Agreement or the U.S. Underwriting Agreement, and references herein to any prospectus whether in preliminary or final form, and whether as amended or supplemented, shall include both the U.S. and the international versions thereof. In addition, this Agreement incorporates by reference certain provisions from the U.S. Underwriting Agreement (including the related definitions of terms, which are also used elsewhere herein) and, for purposes of applying the same, references (whether in these precise words or their equivalent) in the incorporated provisions to the "Underwriters" shall be to the Underwriters hereunder, to the "Shares" shall be to the Shares hereunder as just defined, to "this Agreement" (meaning therein the U.S. Underwriting Agreement) shall be to this Agreement (except where this Agreement is already referred to or as the context may otherwise require) and to the representatives of the Underwriters or to Goldman, Sachs & Co. shall be to the addressees of this Agreement and to Goldman Sachs International ("GSI"), and, in general, all such provisions and defined terms shall be applied mutatis mutandis as if the incorporated provisions were set forth in full herein having regard to their context in this Agreement as opposed to the U.S. Underwriting Agreement. 1. The Company and each of the several Selling Shareholders hereby make to the Underwriters the same respective representations, warranties and agreements as are set forth in Section 1 of the U.S. Underwriting Agreement, which Section is incorporated herein by this reference. 2. Subject to the terms and conditions herein set forth, (a) each Selling Shareholder agrees that the purchase price per share at which the Underwriters will purchase Shares from such Selling Shareholder (as set forth in clause (b) below) shall be the same as the purchase price per share at which the Company sells shares to be purchased by the Underwriters from the Company hereunder, (b) the Company and each of the Selling Shareholders agree, severally and not jointly, to sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase from the Company and each of the Selling Shareholders, at a purchase price per share of $60.355, the number of Firm Shares (to be adjusted by you so as to eliminate fractional shares) determined by multiplying the aggregate number of Firm Shares to be sold by the Company and each of the Selling Shareholders as set forth opposite their respective names in Schedule II hereto by a fraction, the numerator of which is the aggregate number of Firm Shares to be purchased by such Underwriter as set forth opposite the name of such Underwriter in Schedule I hereto and the denominator of 2 3 which is the aggregate number of Firm Shares to be purchased by all the Underwriters from the Company and all the Selling Shareholders hereunder and (c) in the event and to the extent that the Underwriters shall exercise the election to purchase Optional Shares as provided below, each of the Selling Shareholders identified with an asterisk in Schedule II hereto, agrees, severally and not jointly, to sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase from each of the Selling Shareholders, at the purchase price per share set forth in clause (b) of this Section 2, that portion of the number of Optional Shares as to which such election shall have been exercised (to be adjusted by you so as to eliminate fractional shares) determined by multiplying such number of Optional Shares by a fraction the numerator of which is the maximum number of Optional Shares which such Underwriter is entitled to purchase as set forth opposite the name of such Underwriter in Schedule I hereto and the denominator of which is the maximum number of Optional Shares that all of the Underwriters are entitled to purchase hereunder. The Selling Shareholders identified with an asterisk in Schedule II hereto, hereby grant, severally and not jointly, to the Underwriters the right to purchase at their election up to 144,000 Optional Shares, at the purchase price per share set forth in the paragraph above, for the sole purpose of covering overallotments in the sale of the Firm Shares. Any such election to purchase Optional Shares shall be made in proportion to the maximum number of Optional Shares to be sold by each Selling Shareholder as set forth in Schedule II hereto. Any such election to purchase Optional Shares may be exercised only by written notice from you to the Attorneys-in-Fact, given within a period of 30 calendar days after the date of this Agreement and setting forth the aggregate number of Optional Shares to be purchased and the date on which such Optional Shares are to be delivered, as determined by you but in no event earlier than the First Time of Delivery (as defined in Section 4 hereof) or, unless you and the Attorneys-in-Fact otherwise agree in writing, earlier than two or later than ten business days after the date of such notice. 3. Upon the authorization by GSI of the release of the Firm Shares, the several Underwriters propose to offer the Firm Shares for sale upon the terms and conditions set forth in the Prospectus and in the forms of Agreement among Underwriters (International Version) and Selling Agreements, which have been previously submitted to the Company and the Selling Shareholders by you. Each Underwriter hereby makes to and with the Company and the Selling Shareholders the representations and agreements of such Underwriter as a member of the selling group contained in Sections 3(d) and 3(e) of the form of Selling Agreements. 4. (a) The Shares to be purchased by each Underwriter hereunder, in definitive form, and in such authorized denominations and registered in such names as Goldman, Sachs & Co. may request upon at least two business days' prior notice to the Company and the Selling Shareholders shall be delivered by or on behalf of the Company and the Selling Shareholders to Goldman, Sachs & Co., for the account of such Underwriter, against payment by or on behalf of such Underwriter of the purchase price therefor in United States dollars by wire transfer of immediately available funds to an account or accounts designated by the Custodian and the Company. The Company and the Selling Shareholders will cause the certificates representing the Shares to be made available for checking and packaging at least one full business day prior to the Time of Delivery (as defined below) with respect thereto at the office of Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004 (the "Designated 3 4 Office"). The time and date of such delivery and payment shall be, with respect to the Firm Shares, 9:30 a.m., New York City time, on March 12, 1997 on such other time and date as Goldman, Sachs & Co. and the Company and the Selling Shareholders may agree upon in writing, and, with respect to the Optional Shares, 9:30 a.m., New York time, on the date specified by Goldman, Sachs & Co. in the written notice given by Goldman, Sachs & Co. of the Underwriters' election to purchase such Optional Shares, or such other time and date as Goldman, Sachs & Co. and the Company and the Selling Shareholders may agree upon in writing. Such time and date for delivery of the Firm Shares is herein called the "First Time of Delivery", such time and date for delivery of the Firm Optional Shares, if not the First Time of Delivery, is herein called the "Second Time of Delivery", and each such time and date for delivery is herein called a "Time of Delivery". (b) The documents to be delivered at each Time of Delivery by or on behalf of the parties hereto pursuant to Section 7 of the U.S. Underwriting Agreement, including the cross-receipt for the Shares and any additional documents requested by the Underwriters pursuant to Section 7(k) of the U.S. Underwriting Agreement will be delivered at the offices of Sullivan & Cromwell, 125 Broad Street, New York, New York 10004 (the "Closing Location"), and the Shares will be delivered at the Designated Office, all at each Time of Delivery. A meeting will be held at the Closing Location at 2:00 p.m., New York City time, on the New York Business Day next preceding each Time of Delivery, at which meeting the final drafts of the documents to be delivered pursuant to the preceding sentence will be available for review by the parties hereto. For the purposes of this Section 4, "New York Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York are generally authorized or obligated by law or executive order to close. 5. The Company hereby makes with the Underwriters the same agreements as are set forth in Section 5 of the U.S. Underwriting Agreement, which Section is incorporated herein by this reference. 6. The Company, each of the Selling Shareholders, and the Underwriters hereby agree with respect to certain expenses on the same terms as are set forth in Section 6 of the U.S. Underwriting Agreement, which Section is incorporated herein by this reference. 7. Subject to the provisions of the Agreement between Syndicates, the obligations of the Underwriters hereunder shall be subject, in their discretion, at each Time of Delivery to the condition that all representations and warranties and other statements of the Company, and the Selling Shareholders herein are, at and as of each Time of Delivery, true and correct, the condition that the Company and the Selling Shareholders shall have performed all of their respective obligations hereunder theretofore to be performed, and additional conditions identical to those set forth in Section 7 of the U.S. Underwriting Agreement, which Section is incorporated herein by this reference. 8. (a) The Company will indemnify and hold harmless each Underwriter against any losses, claims, damages or liabilities, joint or several, to which such Underwriter may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the 4 5 Registration Statement or the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will periodically reimburse each Underwriter for any legal or other expenses reasonably incurred by such Underwriter in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any Preliminary Prospectus, the Registration Statement or the Prospectus or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company by any Underwriter through GSI or by any Selling Shareholder expressly for use therein; and provided, further, that the Company shall not be liable to any Underwriter under the indemnity agreement in this subsection (a) with respect to any Preliminary Prospectus to the extent that any such loss, claim, damage or liability of such Underwriter results from the fact that such Underwriter sold Shares to a person as to whom it shall be established that there was not sent or given, at or prior to the written confirmation of such sale, a copy of the Prospectus (excluding documents incorporated by reference) or of the Prospectus as then amended or supplemented (excluding documents incorporated by reference) in any case where such delivery is required by the Act if the Company has previously furnished copies thereof in sufficient quantity to such Underwriter and the loss, claim, damage or liability of such Underwriter results from an untrue statement or omission of a material fact contained in the Preliminary Prospectus which was identified in writing prior to the date hereof to such Underwriter and corrected in the Prospectus (excluding documents incorporated by reference) or in the Prospectus as then amended or supplemented (excluding documents incorporated by reference). (b) Each of the Selling Shareholders will indemnify and hold harmless each Underwriter against any losses, claims, damages or liabilities, joint or several, to which such Underwriter may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Registration Statement or the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any Preliminary Prospectus, the Registration Statement or the Prospectus or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company by such Selling Shareholder expressly for use therein, or (ii) the failure of such Selling Shareholder at or prior to the written confirmation of the sale of the Shares to be sold by such Selling Shareholder to send or deliver a copy of an amended Preliminary Prospectus or Prospectus (or the Prospectus as amended or supplemented) to the person asserting any such losses, claims, damages or liabilities against any Underwriter, which person purchased the Shares which are the subject thereof, and the untrue statement or alleged untrue statement or omission or alleged omission of a material fact made in such Preliminary Prospectus was corrected in the amended Preliminary Prospectus or the Prospectus (or the Prospectus as amended and 5 6 supplemented); and each Selling Shareholder will periodically reimburse each Underwriter for any legal or other expenses reasonably incurred by such Underwriter in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that the amount of such indemnity shall be limited to the total net proceeds received by each such Selling Shareholder from the offering of Shares purchased under this Agreement (before deducting expenses). (c) Each Underwriter will indemnify and hold harmless the Company and each Selling Shareholder against any losses, claims, damages or liabilities to which the Company or such Selling Shareholder may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Registration Statement or the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any Preliminary Prospectus, the Registration Statement or the Prospectus or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company by such Underwriter through GSI expressly for use therein; and will reimburse the Company and each Selling Shareholder for any legal or other expenses reasonably incurred by the Company or such Selling Shareholder in connection with investigating or defending any such action or claim as such expenses are incurred. (d) Promptly after receipt by an indemnified party under subsection (a), (b) or (c) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against an indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under such subsection. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (which shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under such subsection for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (ii) does not include a statement 6 7 as to or an admission of fault, culpability or a failure to act, by or on behalf of any indemnified party. (e) If the indemnification provided for in this Section 8 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a), (b) or (c) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Selling Shareholders on the one hand and the Underwriters on the other from the offering of the Shares. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law or if the indemnified party failed to give the notice required under subsection (d) above, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company and the Selling Shareholders on the one hand and the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company and the Selling Shareholders on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering of the Shares purchased under this Agreement (before deducting expenses) received by the Company and the Selling Shareholders bear to the total underwriting discounts and commissions received by the Underwriters with respect to the Shares purchased under this Agreement, in each case as set forth in the table on the cover page of the Prospectus. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Selling Shareholders on the one hand or the Underwriters on the other and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, each of the Selling Shareholders and the Underwriters agree that it would not be just and equitable if contributions pursuant to this subsection (e) were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this subsection (e). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (e) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (e), (i) no Selling Shareholder shall be required to contribute any amount by which the total price at which the Shares sold by such Selling Shareholder and distributed to the public were offered to the public (before deducting expenses) exceeds the amount of any damages that such Selling Shareholder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, and (ii) no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to 7 8 pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations in this subsection (e) to contribute are several in proportion to their respective underwriting obligations and not joint. The remedies provided for in this Section 8 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. (f) The obligations of the Company and the Selling Shareholders under this Section 8 shall be in addition to any liability which the Company and the respective Selling Shareholders may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Underwriter within the meaning of the Act; and the obligations of the Underwriters under this Section 8 shall be in addition to any liability which the respective Underwriters may otherwise have and shall extend, upon the same terms and conditions, to each officer and director of the Company (including any person who, with his or her consent, is named in the Registration Statement as about to become a director of the Company) and to each person, if any, who controls the Company or any Selling Shareholder within the meaning of the Act. 9. (a) If any Underwriter shall default in its obligation to purchase the Shares which it has agreed to purchase hereunder at a Time of Delivery, you may in your discretion arrange for you or another party or other parties to purchase such Shares on the terms contained herein. If within thirty-six hours after such default by any Underwriter you do not arrange for the purchase of such Shares, then the Company and the Selling Shareholders shall be entitled to a further period of thirty-six hours within which to procure another party or other parties satisfactory to you to purchase such Shares on such terms. In the event that, within the respective prescribed periods, you notify the Company and the Selling Shareholders that you have so arranged for the purchase of such Shares, or the Company and the Selling Shareholders notify you that they have so arranged for the purchase of such Shares, you or the Company and the Selling Shareholders shall have the right to postpone such Time of Delivery for a period of not more than seven days, in order to effect whatever changes may thereby be made necessary in the Registration Statement or the Prospectus, or in any other documents or arrangements, and the Company agrees to file promptly any amendments to the Registration Statement or the Prospectus which in your opinion may thereby be made necessary. The term "Underwriter" as used in this Agreement shall include any person substituted under this Section with like effect as if such person had originally been a party to this Agreement with respect to such Shares. (b) If, after giving effect to any arrangements for the purchase of the Shares of a defaulting Underwriter or Underwriters by you and the Company and the Selling Shareholders as provided in subsection (a) above, the aggregate number of such Shares which remains unpurchased does not exceed one-eleventh of the aggregate number of all the Shares to be purchased at such Time of Delivery, then the Company and the Selling Shareholders shall have the right to require each non-defaulting Underwriter to purchase the number of Shares which such Underwriter agreed to purchase hereunder at such Time of Delivery and, in addition, to require each non-defaulting Underwriter to purchase its pro rata share (based on the number of Shares which such Underwriter agreed to purchase hereunder) of the Shares of such 8 9 defaulting Underwriter or Underwriters for which such arrangements have not been made; but nothing herein shall relieve a defaulting Underwriter from liability for its default. (c) If, after giving effect to any arrangements for the purchase of the Shares of a defaulting Underwriter or Underwriters by you and the Company and the Selling Shareholders as provided in subsection (a) above, the aggregate number of such Shares which remains unpurchased exceeds one-eleventh of the aggregate number of all the Shares to be purchased at such Time of Delivery, or if the Company and the Selling Shareholders shall not exercise the right described in subsection (b) above to require non-defaulting Underwriters to purchase Shares of a defaulting Underwriter or Underwriters, then this Agreement (or, with respect to the Second Time of Delivery, the obligations of the Underwriters to purchase and of the Selling Shareholders to sell the Optional Shares) shall thereupon terminate, without liability on the part of any non-defaulting Underwriter or the Company or the Selling Shareholders, except for the expenses to be borne by the Company and the Selling Shareholders and the Underwriters as provided in Section 6 hereof and the indemnity and contribution agreements in Section 8 hereof; but nothing herein shall relieve a defaulting Underwriter from liability for its default. 10. The respective indemnities, agreements, representations, warranties and other statements of the Company, the Selling Shareholders and the several Underwriters, as set forth in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall remain in full force and effect, regardless of any investigation (or any statement as to the results thereof) made by or on behalf of any Underwriter or any controlling person of any Underwriter, or the Company or any of the Selling Shareholders, or any officer or director or controlling person of the Company or any controlling person of any Selling Shareholders, and shall survive delivery of and payment for the Shares. 11. In all dealings hereunder, you shall act on behalf of each of the Underwriters, and the parties hereto shall be entitled to act and rely upon any statement, request, notice or agreement on behalf of any Underwriter made or given by you jointly or by GSI on your behalf; and in all dealings with any Selling Shareholder hereunder, you and the Company shall be entitled to act and rely upon any statement, request, notice or agreement on behalf of such Selling Shareholder made or given by any or all of the Attorneys-in-Fact for such Selling Shareholder. All statements, requests, notices and agreements hereunder shall be in writing, and if to the Underwriters shall be delivered or sent by mail, telex or facsimile transmission to the Underwriters in care of GSI, Peterborough Court, 133 Fleet Street, London EC4A 2BB, England, Attention: Equity Capital Markets, Telex No. 94012165, facsimile transmission No. (071) 774-1550; if to any Selling Shareholder shall be delivered or sent by mail, telex or facsimile transmission to counsel for such Selling Shareholder at its address set forth in Schedule II hereto; and if to the Company shall be delivered or sent by mail, telex or facsimile transmission to the address of the Company set forth in the Registration Statement, Attention: Secretary; provided, however, that any notice to an Underwriter pursuant to Section 8(c) hereof shall be delivered or sent by mail, telex or facsimile transmission to such Underwriter at its address set forth in its Underwriters' Questionnaire, or telex constituting such Questionnaire, which address will be supplied to the Company or the Selling 9 10 Shareholders by GSI upon request. Any such statements, requests, notices or agreements shall take effect upon receipt thereof. 12. This Agreement shall be binding upon, and inure solely to the benefit of, the Underwriters, the Company and the Selling Shareholders and, to the extent provided in Sections 8 and 10 hereof, the officers and directors of the Company and each person who controls the Company, any Selling Shareholder or any Underwriter, and their respective heirs, executors, administrators, successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No purchaser of any of the Shares from any Underwriter shall be deemed a successor or assign by reason merely of such purchase. 13. Time shall be of the essence of this Agreement. 14. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA. 15. This Agreement may be executed by any one or more of the parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. If the foregoing is in accordance with your understanding, please sign and return to us one for the Company and one for each of the Lead Managers or Lead Managing Underwriters plus one for each counsel and the Custodian, if any, counterparts hereof, and upon the acceptance hereof by you, on behalf of each of the Underwriters, this letter and such acceptance hereof shall constitute a binding agreement among each of the Underwriters, the Company and each of the Selling Shareholders. It is understood that your acceptance of this letter on behalf of each of the Underwriters is pursuant to the authority set forth in a form of Agreement among Underwriters (International Version), the form of which shall be furnished to the Company and the Selling Shareholders for examination upon request, but without warranty on your part as to the authority of the signers thereof. 10 11 Any person executing and delivering this Agreement as Attorney-in-Fact for a Selling Shareholder represents by so doing that he has been duly appointed as Attorney-in-Fact by such Selling Shareholder pursuant to a validly existing and binding Power of Attorney which authorizes such Attorney-in-Fact to take such action. Very truly yours, Quintiles Transnational Corp. By: /s/ Rachel R. Selisker ------------------------------------------- Name: Rachel R. Selisker Title: Chief Financial Officer, Executive Vice President Finance and Treasurer Barrie S. Haigh David F. White Irene White Paul Knott, Ph.D. Kathryn M. Knott Stella D. Haigh Barrie Haigh Children's Settlement No.1 Barrie Haigh Children's Settlement No.2 David Martin Fleet Victoria S. Fleet Jonathan Kenneth Bolter Sally-Ann Bolter Nicholas John McCooke Susan McCooke Christopher S. Morley Elaine Morley By: /s/ Rachel R. Selisker ------------------------------------------- Name: Rachel R. Selisker As Attorney-in-Fact acting on behalf of the above named Selling Shareholders. 11 12 HSBC Private Equity Investments Limited Lloyds Development Capital Limited MSS Nominees Limited (Account 758170) MSS Nominees Limited (Account 758979) MSS Nominees Limited (Account 757549) MSS Nominees Limited (Account 778392) General Accident Executor and Trustee Company Limited (Account H715) General Accident Executor and Trustee Company Limited (Account H716) By: /s/ Christopher M. Masterson ------------------------------------ Name: Christopher M. Masterson As Attorney-in-Fact acting on behalf of the above named Selling Shareholders. Ludo J. Reynders, Ph.D. Santo J. Costa Gregory D. Porter By: /s/ Rachel R. Selisker ----------------------------------- Name: Rachel R. Selisker As Attorney-in-Fact acting on behalf of the above named Selling Shareholders. Accepted as of the date hereof: Goldman Sachs International Morgan Stanley & Co. International Limited Smith Barney Inc. William Blair & Company, L.L.C. By: Goldman Sachs International By:/s/ Elizabeth J. Ford --------------------------- (Attorney-in-fact) On behalf of each of the Underwriters 12 13 SCHEDULE I
NUMBER OF OPTIONAL SHARES TO BE TOTAL NUMBER OF PURCHASED IF FIRM SHARES MAXIMUM OPTION UNDERWRITER TO BE PURCHASED EXERCISED ----------- ------------------ ------------------------- Goldman Sachs International . . . . . . . . . . . . . . . . . . . 288,000 43,200 Morgan Stanley & Co. International Limited . . . . . . . . . . . 288,000 43,200 Smith Barney, Inc. . . . . . . . . . . . . . . . . . . . . . . . 144,000 21,600 William Blair & Company, L.L.C. . . . . . . . . . . . . . . . . 144,000 21,600 ABN AMRO Rothschild . . . . . . . . . . . . . . . . . . . . . . . 48,000 7,200 Bayerische Landesbank Girozentrale . . . . . . . . . . . . . . . 48,000 7,200 ------- ------- Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 960,000 144,000 ------- -------
14 SCHEDULE II
NUMBER OF OPTIONAL SHARES TO BE TOTAL NUMBER OF SOLD IF FIRM SHARES MAXIMUM OPTION TO BE SOLD EXERCISED ------------------ ----------------- The Company . . . . . . . . . . . . . . . . . . . . . . . 283,000 0 The Selling Shareholders: Barrie S. Haigh(a)* . . . . . . . . . . . . . . . . . . 45,395 24,945 David F. White(a) . . . . . . . . . . . . . . . . . . . 100 0 Irene White (a) . . . . . . . . . . . . . . . . . . . . 200 0 Paul Knott, Ph.D.(a) . . . . . . . . . . . . . . . . . 5,017 0 Kathryn M. Knott(a) . . . . . . . . . . . . . . . . . . 4,900 0 Stella D. Haigh(a)* . . . . . . . . . . . . . . . . . . 10,000 10,000 Barrie Haigh Children's Settlement No. 1(a)* . . . . . 20,000 10,000 Barrie Haigh Children's Settlement No. 2(a)* . . . . . 15,000 5,000 HSBC Private Equity Investments Limited(b)* . . . . . . 327,502 61,120 Lloyds Development Capital Limited(b) . . . . . . . . . 60,000 0 MSS Nominees Limited (Account 758170)(b)* . . . . . . . 23,675 4,418 MSS Nominees Limited (Account 758979)(b)* . . . . . . . 10,576 1,973 MSS Nominees Limited (Account 757549)(b)* . . . . . . . 94,714 17,676 MSS Nominees Limited (Account 778392)(b)* . . . . . . . 8,047 1,502 General Accident Executor and Trustee Company Limited (Account H715)(b)* . . . . . . . . . 31,571 5,892 General Accident Executor and Trustee Company Limited (Account H716)(b)* . . . . . . . . . 7,896 1,474 David Martin Fleet(a) . . . . . . . . . . . . . . . . . 1,890 0 Victoria S. Fleet(a) . . . . . . . . . . . . . . . . . 2,000 0 Jonathan Kenneth Bolter(a) . . . . . . . . . . . . . . 632 0 Sally-Ann Bolter(a) . . . . . . . . . . . . . . . . . . 632 0 Nicholas John McCooke(a) . . . . . . . . . . . . . . . 907 0 Susan McCooke(a) . . . . . . . . . . . . . . . . . . . 798 0 Christopher S. Morley(a) . . . . . . . . . . . . . . . 714 0 Elaine Morley(a) . . . . . . . . . . . . . . . . . . . 714 0 Ludo J. Reynders, Ph.D.(c) . . . . . . . . . . . . . . 3,000 0 Santo J. Costa(c) . . . . . . . . . . . . . . . . . . . 1,000 0 Gregory D. Porter(c) . . . . . . . . . . . . . . . . . 120 0 ------- ------- Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 960,000 144,000 ------- -------
(a) This Selling Shareholder is represented by Skadden, Arps, Slate, Meagher & Flom LLP and has appointed Barrie S. Haigh, Paul Knott, Ph.D., Dennis B. Gillings, Ph.D. 15 and Rachel R. Selisker, and each of them, as the Attorneys-in-Fact for such Selling Shareholder. (b) This Selling Shareholder is represented by Skadden, Arps, Slate, Meagher & Flom LLP and has appointed Christopher M. Masterson and Ian M. Forrest, and each of them, as the Attorneys-in-Fact for such Selling Shareholder. (c) This Selling Shareholder is represented by Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P. and has appointed Barrie S. Haigh, Paul Knott, Ph.D., Dennis B. Gillings, Ph.D. and Rachel R. Selisker, and each of them, as the Attorneys-in-Fact for such Selling Shareholder. II-2 EX-13 17 QUINTILES ANNUAL REPORT 1 EXHIBIT 13 20 SELECTED CONSOLIDATED FINANCIAL DATA INCOME FROM OPERATIONS* DOLLARS IN THOUSANDS (GRAPH) NET INCOME PER SHARE* DOLLARS (GRAPH) *Excludes non-recurring costs The following selected consolidated financial data should be read in conjunction with "Management's Discussion & Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and accompanying Notes thereto appearing elsewhere herein.
- ------------------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31 1996(1) 1995(1) 1994(1) 1993(1) 1992(1) - ------------------------------------------------------------------------------------------------------------------- (In Thousands, Except Per Share Data) Consolidated Statement of Operations Data: Professional fee income $620,117 $397,998 $247,595 $159,508 $111,745 Less reimbursed costs(2) 82,509 74,306 51,695 17,585 15,409 ---------------------------------------------------------------- Net revenue 537,608 323,692 195,900 141,923 96,336 Costs and expenses: Direct costs 272,590 165,313 97,293 70,258 45,957 General and administrative expense 187,589 113,247 73,432 53,335 37,833 Depreciation and amortization 24,780 16,903 10,352 7,823 4,607 Non-recurring costs: Restructuring costs 13,102 2,373 - - - Special pension contribution 2,329 2,329 - - - ---------------------------------------------------------------- Total costs and expenses 500,390 300,165 181,077 131,416 88,397 ---------------------------------------------------------------- Income from operations 37,218 23,527 14,823 10,507 7,939 Non-recurring transaction costs (17,118) - - - - Other expense (2,975) (1,445) (1,191) (2,890) (2,635) ----------------------------------------------------------------- Total other expense (20,093) (1,445) (1,191) (2,890) (2,635) ----------------------------------------------------------------- Income before income taxes 17,125 22,082 13,632 7,617 5,304 Income taxes 11,914 8,181 4,585 3,272 2,467 ---------------------------------------------------------------- Income before cumulative effect of accounting change 5,211 13,901 9,047 4,345 2,837 Cumulative effect of accounting change - - - (158) - ----------------------------------------------------------------
2 21 WORKING CAPITAL DOLLARS IN THOUSANDS (GRAPH) CASH AND INVESTMENTS DOLLARS IN THOUSANDS (GRAPH)
- ------------------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31 (CONTINUED) 1996(1) 1995(1) 1994(1) 1993(1) 1992(1) - ------------------------------------------------------------------------------------------------------------------- (In Thousands, Except Per Share Data) Net income $ 5,211 $ 13,901 $ 9,047 $ 4,187 $ 2,837 Non-equity dividend (846) - - - - --------------------------------------------------------------- Net income available for common shareholders $ 4,365 $ 13,901 $ 9,047 $ 4,187 $ 2,837 =============================================================== Net income per share $ 0.13 $ 0.45 $ 0.32 $ 0.17 $ 0.14 =============================================================== Weighted average shares outstanding(3) 33,714 31,233 28,044 23,972 20,888 =============================================================== CONSOLIDATED BALANCE SHEET DATA: Cash and cash equivalents $ 62,032 $ 80,061 $ 45,625 $ 14,539 $ 4,333 Working capital 96,008 70,020 46,384 16,896 2,773 Total assets 518,005 334,642 193,568 125,366 70,993 Long-term debt and obligations, including current portion 182,293 51,831 21,874 21,373 12,931 Shareholders' equity $144,348 $161,805 $ 87,092 $ 40,097 $23,585 Employees 7,394 4,372 2,592 1,908 1,376 ---------------------------------------------------------------
(1) Prior to the Company's November 29, 1996 share exchange with Innovex Limited ("Innovex"), Innovex had a fiscal year end of March 31 and the Company had (and continues to have) a fiscal year end of December 31. As a result, the pooled data presented above for 1992 through 1995 include Innovex's March 31 fiscal year data in combination with the Company's December 31 fiscal year data. In connection with the share exchange, Innovex changed its fiscal year end to December 31. Accordingly, the pooled data presented above for 1996 include both Innovex's and the Company's data on a December 31 year end basis. Because of the difference between Innovex's fiscal year end in 1995 compared with 1996, Innovex's quarter ended March 31, 1996 data are included in the Company's pooled data for both 1995 and 1996. (2) Reimbursed costs consist primarily of payments to third party physician investigators, travel and other costs that are billed to and reimbursed by the Company's clients. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." (3) Restated to reflect a two-for-one stock split of the Company's Common Stock effected as a 100% stock dividend on November 27, 1995. 3 22 MANAGEMENT'S DISCUSSION AND ANALYSIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS OVERVIEW Quintiles Transnational Corp. ("Quintiles" or the "Company") is a leading provider of full-service contract research, sales and marketing services to the global pharmaceutical, biotechnology and medical device industries. Additionally, the Company supports the developing information needs of the broader healthcare industry by providing health economics and healthcare policy consulting and disease and health information management services. Since its inception in 1982, the Company has followed a focused strategy of expanding the scope of its services and geographic presence to support the worldwide needs of its client base. During 1996, through internal expansion and strategic acquisitions, the Company considerably broadened its array of services, created new opportunities for growth and enhanced its management team and scientific and technical operating staff. Specifically: - - On February 15, 1996, the Company acquired PMC Contract Research AB ("PMC"), a CRO located in Uppsala, Sweden. The Company acquired PMC for approximately 273,000 shares of the Company's Common Stock. Additionally, approximately $1.3 million in cash was paid to a dissenting shareholder. The acquisition of PMC was accounted for as a pooling of interests, and all consolidated financial data for periods subsequent to January 1, 1996 have been restated to include the results of the pooled company. The financial data of the pooled companies prior to January 1, 1996 were not materially different from that previously reported by the Company, and thus have not been restated. - - On May 13, 1996, the Company acquired the operating assets of Lewin-VHI, Inc., a healthcare consulting firm, headquartered in Fairfax, VA, and formed a new subsidiary of the Company, Lewin. In connection with this transaction, the Company paid approximately $30.0 million in cash for the operating assets of Lewin and issued options to Lewin's management team and key staff to purchase 203,717 shares of the Company's Common Stock. - - In August 1996, the Company began construction of a new 171,000 square foot facility in Bathgate, Scotland, for formulation, manufacturing, packaging and distribution of clinical trial drugs. The Bathgate facility, currently estimated to be completed in late 1997, is anticipated to house 300 employees and will also include a data management center. - - On November 22, 1996, the Company acquired BRI International, Inc. ("BRI"), a leading international contract research firm, headquartered in Arlington, VA, specializing in medical device development and regulatory compliance consulting. The Company exchanged 1,614,862 shares of its Common Stock for all of BRI's outstanding shares of capital stock and exchanged options exercisable for 336,112 shares of the Company's Common Stock. The Company recognized in the fourth quarter of 1996 approximately $2.5 million in non-recurring transaction costs and approximately $2.3 million in non-recurring restructuring costs related to the transaction. The acquisition was accounted for as a pooling of interests, and accordingly, the Company has restated all historical financial data to include the historical financial data of BRI. - - On November 29, 1996, the Company effected a share exchange with Innovex Limited ("Innovex"), an international contract services organization headquartered in Marlow, U.K., specializing in the sales and marketing of drugs for the pharmaceutical industry. In the Innovex transaction, which was 4 23 accounted for as a pooling of interests, the Company acquired 100% of the outstanding shares of Innovex in exchange for 9,214,239 shares of the Company's Common Stock and exchanged 786,226 options to purchase shares of the Company's Common Stock for Innovex stock options. Subsequently, the Company retired approximately $56.8 million of Innovex obligations. In the fourth quarter of 1996, related to the Innovex transaction, the Company recognized approximately $14.5 million in non-recurring transaction costs and approximately $8.5 million in non-recurring restructuring costs. In addition, Innovex had previously recognized approximately $2.4 million and $2.3 million, respectively, in non-recurring restructuring and special pension costs in the quarter ended March 31, 1996. The Company has restated all historical financial data to include Innovex historical financial data in accordance with pooling of interests accounting. During the year ended December 31, 1996, the Company added more than 20 offices through its acquisitions and internal growth, expanded its presence from 16 to 20 countries, and grew from approximately 2,025 employees to approximately 7,375 employees worldwide. To facilitate the integration of its acquisitions, capitalize on the synergies each acquisition provides and manage its internal growth, the Company recently reorganized into three operating divisions which work closely together to provide the Company's services on an integrated basis. The Contract Research Division includes clinical trial studies, clinical data management and biostatistical analysis, laboratory services, formulation and packaging of clinical trial drugs, pre-clinical services, regulatory affairs and medical device consulting services. The Innovex Division includes perimarketing clinical trial studies in Phases IIIb and IV, as well as the Company's pharmaceutical sales and marketing services. The Lewin-Benefit Division encompasses the Company's health economics and healthcare policy consulting and disease and health information management services. CONTRACT REVENUE Most of the Company's contracts are fixed price, with some variable components, and range in duration from a few months to several years. Generally, a portion of the contract fee is paid at the time the project is initiated with performance-based installments payable over the contract duration. Most contracts are terminable upon 15-90 days' notice by the client, and typically provide for termination or winding down fees. Also, some client contracts call for the client to reimburse the Company at cost for certain items such as investigator payments and travel. These reimbursed costs are deducted from professional fee income in calculating net revenue. The Company recognizes net revenue from its contracts on a percentage-of-completion or per diem basis as work is performed. Consistent with prior years' practice, the Company considers net revenue its primary measure of revenue growth. RESULTS OF OPERATIONS YEAR ENDED DECEMBER 31, 1996 COMPARED WITH YEAR ENDED DECEMBER 31, 1995 Prior to the Company's November 29, 1996 share exchange with Innovex, Innovex had a fiscal year end of March 31, and the Company had (and continues to have) a fiscal year end of December 31. As a result, the pooled data presented for 1992 through 1995 include Innovex's March 31 fiscal year data in combination with the Company's December 31 fiscal year data. In connection with the share exchange, Innovex changed its fiscal year end to December 31. Accordingly, the pooled data presented for 1996 include both Innovex's and the Company's data on a 5 24 MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) December 31 year end basis. Because of the difference between Innovex's fiscal year end in 1995 compared with 1996, Innovex's quarter ended March 31, 1996 data are included in the Company's pooled data for both 1995 and 1996. Net revenue for the year ended December 31, 1996 was $537.6 million, an increase of $213.9 million or 66.1% over fiscal 1995 net revenue of $323.7 million. In general, growth occurred across each of the Company's three geographic regions and within each contract service sector. Factors contributing to both the regional and service growth include the provision of increased services rendered under existing contracts, the initiation of services under contracts awarded subsequent to January 1, 1996 and the Company's acquisitions (excluding BRI and Innovex) completed during 1996 and 1995 which contributed approximately $44.8 million in 1996 versus $11.7 million in 1995. Without these acquisitions, the Company's 1996 net revenue increased by $180.8 million or 57.9% over comparable 1995 net revenue. As a result of the Company's broad range of contract service offerings, one client accounted for 11.9% of the Company's 1996 net revenue. Direct costs, which include compensation and related fringe benefits for billable employees and any other expenses directly related to contracts which are not included as reimbursed costs, were $272.6 million or 50.7% of 1996 net revenue versus $165.3 million or 51.1% of 1995 net revenue. The decrease in direct costs as a percentage of net revenue is primarily attributable to efficiency realized through the use of information technology in the Company's provision of services related to global, long-term contracts, offset by increased costs attributable to the increase in net revenue generated from contract sales and marketing services, which incur a higher level of direct costs (but lower general and administrative expenses) relative to net revenue than contract research services. General and administrative expense, which includes compensation and fringe benefits for administrative employees, non-billable travel, professional services, advertising, computer and facility expenses, was $187.6 million or 34.9% of 1996 net revenue versus $113.2 million or 35.0% of 1995 net revenue. The $74.3 million growth in general and administrative expense is primarily due to an increase in personnel, facilities and locations, business development and marketing activities, and outside services brought on by the Company's growth. Depreciation and amortization was $24.8 million or 4.6% of 1996 net revenue versus $16.9 million or 5.2% of 1995 net revenue. Income from operations was $37.2 million or 6.9% of 1996 net revenue versus $23.5 million or 7.3% of 1995 net revenue. Net of non-recurring costs, income from operations was $52.6 million or 9.8% of 1996 net revenue versus $28.2 million or 8.7% of 1995 net revenue. During the quarter ended March 31, 1996, Innovex recognized two non-recurring charges: a $2.4 million expense for an Innovex internal reorganization and a related $2.3 million special pension contribution. Accordingly, the Company's pooled, consolidated financial results include such charges, totalling $4.7 million, in both the fiscal years ended December 31, 1996 and 1995. In the fourth quarter of 1996, the Company recognized approximately $10.7 million in non-recurring restructuring costs related to the BRI and Innovex transactions. Other expense increased to $20.1 million in 1996 from $1.4 million in 1995. Other expense includes approximately $17.1 million of non-recurring acquisition transaction costs for the year ended December 31, 1996, most of which were not deductible for tax purposes. Net of such non-recurring transaction 6 25 costs, other expense was $3.0 million for 1996 and $1.4 million in 1995. This increase of approximately $1.5 million was primarily due to an increase of interest and miscellaneous expense of $5.9 million which was offset by an increase in interest income of approximately $4.4 million. The effective tax rate for 1996 was 69.6% versus a 37.0% rate in 1995. The increase in the 1996 effective tax rate was primarily attributable to the non-tax deductible, non-recurring acquisition transaction costs incurred and a portion of the non-recurring costs relating to the Innovex internal reorganization prior to its pooling of interests with the Company. The lack of tax relief for the Innovex internal reorganization cost is reflected in both the effective tax rates for 1996 and 1995. The effective tax rate for 1996 was 33.6% versus a 34.7% rate in 1995 excluding the non-recurring costs. The Company's effective tax rate may vary as profits in locations with different tax rates change. See "-Taxes." YEAR ENDED DECEMBER 31, 1995 COMPARED WITH YEAR ENDED DECEMBER 31, 1994 Net revenue for 1995 was $323.7 million versus $195.9 million in 1994, an increase of $127.8 million or 65.2%. In general, the growth occurred across each of the Company's three geographic regions. The growth can be attributed primarily to the increase in services rendered under existing contracts and the initiation of services under new contract work awarded in 1995. Excluding fiscal 1995 acquisitions, which contributed net revenue of approximately $11.7 million in that year, the Company's net revenue was $312.0 million, which represented growth of $116.2 million or 59.3% over 1994. Direct costs, which include compensation and related fringe benefits for billable employees and any other expenses directly related to contracts which are not included as reimbursed costs, were $165.3 million or 51.1% of 1995 net revenue versus $97.3 million or 49.7% of 1994 net revenue. The increase in direct costs as a percentage of net revenue is due primarily to costs attributable to the increasing net revenue from sales and marketing services, which incur a higher level of direct costs (but lower general and administrative expenses) relative to revenue than contract research services, the establishment of start-up operations and direct costs associated with the operational integration of the Company's acquitions in 1995. General and administrative expense, which includes compensation and fringe benefits for administrative employees, non-billable travel, professional services, advertising, computer and facility expenses, was $113.2 million or 35.0% of 1995 net revenue versus $73.4 million or 37.5% of 1994 net revenue. The $39.8 million growth in general and administrative expense is primarily due to an increase in personnel, facilities and locations, business development and marketing activities, information technology investments and the use of outside services brought on by the Company's growth and operation as a publicly-held company. Depreciation and amortization was $16.9 million or 5.2% of 1995 net revenue versus $10.4 million or 5.3% of 1994 net revenue. Income from operations was $23.5 million or 7.3% of net revenue in 1995 versus $14.8 million or 7.6% of net revenue in 1994. The decrease as a percentage of net revenue was due to the recognition of two non-recurring charges: Innovex recorded a $2.4 million expense related to an internal reorganization and a $2.3 million expense related to a special pension contribution. Excluding these costs, income from operations would have been approximately $28.2 million or 8.7% of 1995 net revenue. 7 26 MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) Other expense increased to $1.4 million in 1995 from $1.2 million in 1994. Net of a 1994 one-time gain of approximately $460,000, other expense decreased approximately $210,000. This decrease is primarily attributable to an increase in interest income and other income of approximately $1.7 million, offset by an increase in interest expense of $970,000 and $475,000 in non-recurring acquisition transaction costs expensed by the Company in 1995, most of which were non-tax deductible. The effective tax rate for 1995 was 37.0% versus a 33.6% rate in 1994. The increase in the 1995 effective tax rate was primarily attributable to the non-tax deductible nature of some of the non-recurring costs relating to the internal reorganization, some of the foreign operating losses and some of the acquisition transaction costs incurred. The Company's effective tax rate may vary as profits in locations with different tax rates change. See "-T axes." LIQUIDITY AND CAPITAL RESOURCES Cash flows generated from operations were $28.3 million in 1996 versus $34.5 million and $14.8 million in 1995 and 1994, respectively. Investing activities in 1996 were $142.6 million, versus $38.1 million and $14.3 million in 1995 and 1994, respectively. The change in the amount of cash used in investing activities is primarily due to the investment of the Company's net proceeds from the May 1996 private placement of its 4.25% Convertible Subordinated Notes due May 31, 2000 and its October 1995 equity offering. Such proceeds were used as follows: $62.7 million was invested in investment-grade, interest-bearing securities with maturities of greater than 90 days; $11.4 million was used for the payment of non-recurring transaction costs in connection with business combinations described above; $33.4 million was used for acquisitions; and $56.8 million was used to retire Innovex obligations assumed in the share exchange with Innovex. Approximately $45.2 million of the Innovex obligations was related to debt incurred for the recapitalization of Innovex in April 1996. Capital asset purchases required $39.1 million in 1996 versus $25.7 million and $16.1 million in 1995 and 1994, respectively. Capital asset expenditures in 1996 included approximately $5.0 million related to the Company's purchase of land and commencement of construction of a facility in Bathgate, Scotland. The remaining capital expenditures were predominantly incurred in connection with the expansion of existing operations, the enhancement of information technology capabilities and the opening of new offices. Total working capital was $96.0 million at December 31, 1996 compared to $70.0 million at December 31, 1995. Total accounts receivable and unbilled services increased 69.9% to $178.6 million at December 31, 1996 from $105.1 million at December 31, 1995, as a result of the growth in net revenue. The number of days revenue outstanding in accounts receivable and unbilled services, net of unearned income was 48 days at December 31, 1996 and December 31, 1995. In August 1996, the Company began construction of a 171,000 square foot facility in Bathgate, Scotland, expected to be completed in late 1997. Management's current best estimate of the total capital required for the Bathgate facility is 17.5 million (approximately $28.4 million), which includes the acquisition of land, construction of the facility and purchase of machinery and equipment. As of December 31, 1996, the Company had spent approximately 3.0 million (approximately $5.0 million) relating to the acquisition of land and construction of the Bathgate facility. 8 27 In November 1996, in conjunction with the Company's share exchange with Innovex, the Company assumed the following commitments: - - During 1993, Innovex acquired Clinical Research Foundation, an international contract research organization, for total consideration of approximately Deutsche marks ("DM") 30.0 million, of which a final payment of approximately DM6.6 million (approximately $4.0 million) is due from the Company in April 1997. - - In August 1996, Innovex acquired Eminent, a Spanish contract sales and marketing services firm. An initial payment of 100 Spanish Pesetas million was made in August 1996. A remaining amount of up to 700 Spanish Pesetas million (approximately $5.0 million) would be due over the next three years if certain performance measures are met. During 1995, the Company acquired a drug development facility in Edinburgh, Scotland. Related to this acquisition, the Company entered into a purchase commitment valued at 13.0 million pound (approximately $21.8 million) with payment due in December 1999. The Company has hedged this commitment by purchasing forward contracts. The Company's forward contracts mature on December 29, 1999, and as of December 31, 1996, the Company had committed to purchasing approximately 600,000 pound (approximately $852,000) under such contracts. The Company has renewed its previously expired $15.0 million unsecured line of credit with a U.S. bank. Also, the Company has a $4.0 million secured line of credit with a second U.S. bank. Additionally, the Company has available to it a 6.0 million pound unsecured line of credit with a U.K. bank and a 5.0 million pound secured overdraft facility with a second U.K. bank. At December 31, 1996, the Company had $19.0 million and 5.7 million pound available under these credit agreements. All foreign currency denominated amounts due, subsequent to December 31, 1996, have been translated using the Wednesday, January 29, 1997 foreign exchange rate as published in the January 30, 1997 edition of the Wall Street Journal. On March 12, 1997, the Company completed its public offering. The Company intends to use the net proceeds from the sale of the shares of common stock offered by the Company for the replenishment of working capital following the Company's repayment in November 1996 of approximately $56.8 million of obligations assumed in the share exchange with Innovex. The Company intends to use this working capital and the remaining proceeds for geographic expansion, addition of new services, potential acquisitions, genera l corporate purposes and capital expenditures, including approximately $23.4 million to complete construction of the Company's 171,000 square foot clinical trial drug formulation, manufacturing, packaging and distribution facility in Bathgate, Scotland. See "Recent Events." Based on its current operating plan, the Company believes that its available cash and cash equivalents (including the net proceeds from the common stock offering), together with future cash flows from operations and borrowings under its line of credit agreements will be sufficient to meet its foreseeable cash needs in connection with its operations. As part of its business strategy, the Company reviews many acquisition candidates in the ordinary course of business, and in addition to acquisitions already made, the Company continually is evaluating new acquisition and expansion possibilities. The Company may from time to time seek to obtain debt or equity financing to facilitate possible acquisitions or expansion. 9 28 MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) FOREIGN CURRENCY Approximately 56.5%, 59.2% and 57.0% of the Company's net revenue for the years ended December 31, 1996, 1995, and 1994, respectively, were derived from the Company's operations outside the United States. The Company's consolidated financial statements are denominated in U.S. dollars, and accordingly, changes in the exchange rate between foreign currencies and the U.S. dollar will affect the translation of such subsidiaries' financial results into U.S. dollars for purposes of reporting the Company's consolidated financial results. The Company may be subject to foreign currency transaction risks when the Company's service contracts are denominated in a currency other than the currency in which the Company incurs expenses related to such contracts. The Company limits its foreign currency transaction risks through exchange rate collars stated in its contracts with clients or the Company hedges the transaction risk with foreign exchange contracts or options. The Company recognizes changes in value in income only when contracts are settled or options are exercised. There were no open foreign exchange contracts or options relating to service contracts at December 31, 1996. TAXES Since the Company conducts operations on a global basis, the Company's effective tax rate has depended and will continue to depend on the amount of profits in locations with varying tax rates. The Company's results of operations will be impacted by changes in the tax rates of the various jurisdictions and by changes in any applicable tax treaties. In particular, as the portion of the Company's non-U.S. business increases, the Company's effective tax rate may vary significantly from period to period. The Company's effective tax rate may also depend upon the extent to which the Company is allowed (and is able to use under applicable limitations) United States foreign tax credits in respect of taxes paid on its foreign operations. INFLATION The Company believes the effects of inflation generally do not have a material adverse impact on its operations or financial condition. RECENT EVENTS On March 12, 1997, the Company closed a 5,520,000 common stock offering to the public at a share price of $62.875 per share. Of the 5,520,000 shares sold, 1,415,000 were sold by the Company. Net proceeds to the Company which exclude underwriting discounts and offering expenses amounted to approximately $85 million. 10 29 CONSOLIDATED STATEMENTS OF INCOME
- ------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31 1996 1995 1994 - ------------------------------------------------------------------------------------------- (In thousands, except per share data) Professional fee income $620,117 $397,998 $247,595 Less reimbursed costs 82,509 74,306 51,695 ---------------------------------- Net revenue 537,608 323,692 195,900 Costs and expenses Direct costs 272,590 165,313 97,293 General and administrative expense 187,589 113,247 73,432 Depreciation and amortization 24,780 16,903 10,352 Non-recurring costs: Restructuring costs 13,102 2,373 - Special pension contribution 2,329 2,329 - ---------------------------------- 500,390 300,165 181,077 ---------------------------------- Income from operations 37,218 23,527 14,823 Other income (expense): Interest income 6,947 2,548 1,250 Interest expense (9,526) (3,765) (2,795) Non-recurring transaction costs (17,118) - - Other (396) (228) 354 ----------------------------------- (20,093) (1,445) (1,191) ----------------------------------- Income before income taxes 17,125 22,082 13,632 Income taxes 11,914 8,181 4,585 ----------------------------------- Net income 5,211 13,901 9,047 Non-equity dividend (846) - - ---------------------------------- Net income available for common shareholders $ 4,365 $ 13,901 $ 9,047 ================================== Net income per share $ 0.13 $ 0.45 $ 0.32 ================================== Weighted average shares outstanding 33,714 31,233 28,044 ==================================
See accompanying notes. 11 30 CONSOLIDATED BALANCE SHEETS
- ------------------------------------------------------------------------------- DECEMBER 31 1996 1995 - ------------------------------------------------------------------------------- (In thousands) ASSETS Current assets: Cash and cash equivalents $ 62,032 $ 80,061 Accounts receivable and unbilled services 178,579 105,124 Investments 37,623 - Prepaid expenses and other current assets 12,656 11,182 ---------------------- Total current assets 290,890 196,367 Property and equipment: Land, buildings and leasehold improvements 50,060 41,411 Equipment and software 68,321 47,239 Furniture and fixtures 30,314 14,437 Motor vehicles 29,771 19,557 ---------------------- 178,466 122,644 Less accumulated depreciation 54,286 35,288 ---------------------- 124,180 87,356 Intangibles and other assets: Intangibles 66,804 47,965 Investments 25,083 - Deposits and other assets 11,048 2,954 ---------------------- 102,935 50,919 ---------------------- ====================== Total assets $518,005 $334,642 ======================
12 31
- -------------------------------------------------------------------------------- DECEMBER 31 1996 1995 - -------------------------------------------------------------------------------- (In thousands) LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Lines of credit $ 9,013 $ 8,667 Accounts payable 33,396 18,254 Accrued expenses 51,970 33,290 Unearned income 77,825 42,986 Income taxes payable 3,047 2,385 Current portion of obligations held under capital leases 11,704 7,300 Current portion of long-term debt 1,897 8,021 Other current liabilities 6,030 5,444 ------------------- Total current liabilities 194,882 126,347 Long-term liabilities: Obligations held under capital leases, less current portion 5,407 3,287 Long-term debt and obligation, less current portion 163,285 33,223 Deferred income taxes 4,747 3,491 Other liabilities 5,336 6,489 ------------------- 178,775 46,490 ------------------- Total liabilities 373,657 172,837 Commitments and contingencies Shareholders' equity: Preferred Stock, none issued and outstanding - - Common Stock and additional paid-in capital, 33,149,962 and 32,216,251 shares issued and outstanding in 1996 and 1995, respectively 139,221 132,223 Retained earnings 5,702 29,431 Other equity (575) 151 ------------------- Total shareholders' equity 144,348 161,805 ------------------- Total liabilities and shareholders' equity $518,005 $334,642 ===================
See accompanying notes. 13 32 CONSOLIDATED STATEMENTS OF CASH FLOWS
- ----------------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31 1996 1995 1994 - ----------------------------------------------------------------------------------------------------------------- (In thousands) OPERATING ACTIVITIES: Net income $ 5,211 $ 13,901 $ 9,047 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 25,397 16,903 10,352 Non-recurring transaction costs 17,118 - - Net gain on sale of property and equipment (139) (140) (847) Provision for deferred income tax expense (benefit) 731 1,926 (596) Change in operating assets and liabilities: Accounts receivable and unbilled services (66,205) (36,231) (13,512) Prepaid expenses and other current assets (11,382) (834) (3,477) Accounts payable and accrued expenses 21,431 17,331 12,348 Unearned income 42,777 21,044 1,797 Income taxes payable and other current liabilities 2,805 606 8 Change in fiscal year of pooled entity (9,378) - - Other (24) (25) (335) - ---------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 28,342 34,481 14,785 INVESTING ACTIVITIES: Proceeds from disposition of property and equipment 1,429 4,216 3,158 Purchase of investments held to maturity (95,939) - - Maturities of investments held to maturity 43,345 - - Purchase of investments available for sale (19,003) - - Proceeds from sale of investments available for sale 8,936 - - Acquisition of property and equipment (39,143) (25,716) (16,073) Acquisition of businesses, net of cash acquired (33,352) (16,571) (1,357) Payment of non-recurring transaction costs (11,440) - - Change in fiscal year of pooled entity 2,606 - - - ---------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (142,561) (38,071) (14,272)
14 33
- -------------------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31 1996 1995 1994 - -------------------------------------------------------------------------------------------------------------------- (In thousands) FINANCING ACTIVITIES: Increase (decrease) in lines of credit, net $ 2,536 $ 3,917 $ (609) Proceeds from issuance of debt 139,650 568 1,355 Repayment of debt (56,792) (1,371) (4,151) Principal payments on capital lease obligations (9,382) (6,506) (2,890) Issuance of common stock 3,575 56,746 35,378 Issuance of debt for capitalization of pooled entity 45,197 - - Recapitalization of pooled entity (29,230) - - Non-equity dividend (846) - - Dividend paid by pooled entity - (9,162) - Change in fiscal year of pooled entity 1,399 - - Other (249) (6,047) 918 - ------------------------------------------------------------------------------------------------------------------ Net cash provided by financing activities 95,858 38,145 30,001 Effect of foreign currency exchange rate changes on cash 332 (119) 572 - ------------------------------------------------------------------------------------------------------------------ (Decrease) increase in cash and cash equivalents (18,029) 34,436 31,086 Cash and cash equivalents at beginning of year 80,061 45,625 14,539 - ------------------------------------------------------------------------------------------------------------------ Cash and cash equivalents at end of year $ 62,032 $80,061 $45,625 ================================================================================================================== SUPPLEMENTAL CASH FLOW INFORMATION: Interest paid $ 9,446 $ 2,644 $ 2,621 Income taxes paid $ 11,523 $ 8,978 $ 4,417 NON-CASH INVESTING AND FINANCING ACTIVITIES: Capitalized leases $ 12,867 $11,544 $ 4,597 Equity impact of mergers and acquisitions $(23,253) $11,803 $ 687
See accompanying notes 15 34 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------------------------------------------------ Employee Stock Ownership Additional Plan Loan Currency Common Paid-In Retained Guarantee Translation Stock Capital Earnings & Other Adjustments Total - ------------------------------------------------------------------------------------------------------------------------------------ (In thousands) Balance, December 31, 1993, as previously reported $ 72 $ 26,073 $ 11,380 $(1,567) $ (838) $ 35,120 Adjustments for poolings of interests 108 727 4,240 (1,311) 1,212 4,976 - ------------------------------------------------------------------------------------------------------------------------------------ Balance, December 31, 1993 180 26,800 15,620 (2,878) 374 40,096 Issuance of common stock 21 36,128 - - - 36,149 Principal payments on ESOP loans - - - 920 - 920 Other equity transactions - (171) (6) - 1,057 880 Net income - - 9,047 - - 9,047 - ------------------------------------------------------------------------------------------------------------------------------------ Balance, December 31, 1994 201 62,757 24,661 (1,958) 1,431 87,092 Issuance of common stock 10 56,893 - - - 56,903 Principal payments on ESOP loans - - - 401 - 401 Common stock issued for acquisitions 4 11,799 31 - - 11,834 Reduction of liability under stock option plan, - 693 - - - 693 net of tax Dividends paid by pooled entity - - (9,162) - - (9,162) Two-for-one stock split 107 (107) - - - - Other equity transactions - (134) - - 277 143 Net income - - 13,901 - - 13,901 - ------------------------------------------------------------------------------------------------------------------------------------ Balance, December 31, 1995 322 131,901 29,431 (1,557) 1,708 161,805 Common stock issued for acquisitions 3 516 608 - - 1,127 Issuance of common stock 7 3,739 - - - 3,746 Principal payments on ESOP loans - - - 420 - 420 Effect due to change in fiscal year of pooled company - - 326 - - 326 Recapitalization of pooled entity - (202) (29,028) - - (29,230) Tax benefit from the exercise of non-qualified stock options - 2,920 - - - 2,920 Non-equity dividend - - (846) - - (846) Other equity transactions - 15 - 45 (1,191) (1,131) Net income - - 5,211 - - 5,211 - ------------------------------------------------------------------------------------------------------------------------------------ Balance, December 31, 1996 $332 $138,889 $ 5,702 $(1,092) $ 517 $144,348 ====================================================================================================================================
See accompanying notes 16 35 NOTES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1996 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES THE COMPANY The Company is a leading provider of comprehensive contract research and sales and marketing services to the worldwide pharmaceutical, biotechnology and medical device industries. Additionally, the Company supports the developing information needs of the broader healthcare industry by providing health economics and healthcare policy consulting and disease and health information management services. PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements include the accounts and operations of the Company and its subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. Prior to the Company's November 29, 1996 share exchange with Innovex, Innovex had a fiscal year end of March 31 and the Company had (and continues to have) a fiscal year end of December 31. As a result, the pooled data presented for 1992 through 1995 include Innovex's March 31 fiscal year data in combination with the Company's December 31 fiscal year data. In connection with the share exchange, Innovex changed its fiscal year end to December 31. Accordingly, the pooled data presented for 1996 include both Innovex's and the Company's data on a December 31 year end basis. Because of the difference between Innovex's fiscal year end in 1995 compared with 1996, Innovex's quarter ended March 31, 1996 data are included in the Company's pooled data for both 1995 and 1996. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. FOREIGN CURRENCIES Assets and liabilities recorded in foreign currencies on the books of foreign subsidiaries are translated at the exchange rate on the balance sheet date. Revenues, costs and expenses are recorded at average rates of exchange during the year. Translation adjustments resulting from this process are charged or credited to equity. Gains and losses on foreign currency transactions are included in other income (expense). REVENUE RECOGNITION The Company recognizes net revenue from its contracts on a percentage-of-completion or per diem basis as work is performed. The Company's exposure to credit loss is equal to the outstanding accounts receivable and unbilled services balance. Although the Company does not require collateral for unpaid balances, credit losses have consistently been within management's expectations. Certain contracts contain provisions for price redetermination for cost overruns. Such redetermined amounts are included in service revenue when realization is assured and the amounts can be reasonably determined. In the period in which it is determined that a loss will result from the performance of a contract, the entire amount of the estimated ultimate loss is charged against income. One client accounted for 11.9% of consolidated net revenue in 1996. 17 36 NOTES (CONTINUED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) UNBILLED SERVICES AND UNEARNED INCOME In general, prerequisites for billings are established by contractual provisions including predetermined payment schedules, the achievement of contract milestones or submission of appropriate billing detail. Unbilled services arise when services have been rendered but clients have not been billed. Similarly, unearned income represents prebillings for services that have not yet been rendered. REIMBURSED COSTS Investigator payments are recognized as expense based upon patient enrollment over the life of the contract. Investigator payments are made based on predetermined contractual arrangements, which may differ from the recognition of the expense. Payments to investigators in excess of the expense recognized are classified as prepaid expenses, and recognized expenses in excess of amounts paid are classified as accrued expenses. CASH EQUIVALENTS AND INVESTMENTS The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Company has excluded from cash and cash equivalents in the accompanying balance sheets cash held for clients for investigator payments in the amount of $4.6 million and $3.0 million at December 31, 1996 and 1995, respectively, that pursuant to agreements with these clients, remains the property of the clients. The Company's investments in debt and equity securities are classified as held-to-maturity and available for sale. Investments classified as held-to-maturity are recorded at amortized cost. Investments classified as available for sale are measured at market value and net unrealized gains and losses are recorded as a separate component of stockholders' equity until realized. Any gains or losses on sales of investments are computed by specific identification. PROPERTY AND EQUIPMENT Property and equipment are carried at historical cost and are depreciated using the straight-line method over the shorter of the asset's estimated useful life or the lease term ranging from three to 50 years. INTANGIBLE ASSETS Intangibles consist principally of the excess cost over the fair value of net assets acquired ("goodwill") and are being amortized on a straight-line basis over periods not exceeding 40 years. Accumulated amortization totaled $10.5 million and $5.2 million at December 31, 1996 and 1995, respectively. The carrying values of intangible assets are reviewed if the facts and circumstances suggest impairment. If this review indicates that carrying values will not be recoverable, as determined based on undiscounted cash flows over the remaining amortization period, the Company would reduce carrying values by the estimated shortfall of cash flows. LONG-LIVED ASSETS The Company adopted Financial Accounting Standard Board ("FASB") Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("Statement 121") in the first quarter of 1996. The adoption of Statement 121 had no material effect on the financial statements in 1996. NET INCOME PER SHARE Net income per share has been computed using the weighted average number of common shares (including the common shares held by the Employee Stock Ownership Plan) and common share equivalents outstanding during each period. Common equivalent shares are excluded from the computation in periods in which they have an anti-dilutive effect. All share and per share data in the 18 37 financial statements and notes thereto have been retroactively adjusted to give effect to the two-for-one stock split in November 1995 and to the pooling of interests combinations with BRI and Innovex (see Note 3). For all periods presented, the difference between primary and fully diluted net income per common share is not significant. INCOME TAXES Income tax expense includes U.S. and international income taxes. Certain items of income and expense are not reported in tax returns and financial statements in the same year. The tax effects of these differences are reported as deferred income taxes. Tax credits are accounted for as a reduction of tax expense in the year in which the credits reduce taxes payable. RESEARCH AND DEVELOPMENT COSTS Research and development costs relating principally to new software applications and computer technology are charged to expense as incurred. These expenses totaled $2.3 million, $1.9 million and $1.7 million in 1996, 1995 and 1994, respectively. FOREIGN CURRENCY HEDGING The Company uses foreign exchange contracts and options to hedge the risk of changes in foreign currency exchange rates associated with contracts in which the expenses for providing services are incurred in one currency and paid for by the client in another currency. The Company recognizes changes in value in income only when contracts are settled or options are exercised. There were no open foreign exchange contracts or options relating to service contracts at December 31, 1996. 2. SHAREHOLDERS' EQUITY The Company is authorized to issue 25 million shares of preferred stock, $.01 per share par value. At December 31, 1996, 200 million common shares of $.01 par value were authorized. On November 26, 1996, the Company's shareholders approved an increase in the number of authorized shares of the Common Stock from 50 million to 200 million. On July 25, 1996, the Board of Directors authorized an employee stock purchase plan for all eligible employees effective October 1, 1996. Under the plan, shares of the Company's Common Stock may be purchased at three month intervals at 85% of the lower of the fair market value on the first or the last day of each three month period. Employees may purchase shares having a value not exceeding the lesser of 15% of their gross compensation during an offering period or $25,000. During 1996, employees purchased 4,788 shares at $56.3125 per share. At December 31, 1996, 95,212 shares were reserved for future issuance. On April 3, 1996, in anticipation of a planned initial public offering, Innovex was recapitalized by the purchase of the entire issued share capital of Innovex Holdings Limited (the former holding company of the Innovex Group) from its shareholders in exchange for a combination of newly issued Ordinary Shares, Preferred Ordinary Shares (the "Preferred Shares"), loan notes and cash. In exchange for its holdings in Innovex Holdings Limited, the principal shareholder received 67,994,225 newly issued Ordinary Shares of Innovex Limited, approximately $26.0 million of loan notes and approximately $2.4 million of cash. In exchange for their respective 19 38 NOTES (continued) 2. SHAREHOLDERS' EQUITY (CONTINUED) holdings, certain investors received 14,285,720 newly issued Preferred Shares, and certain members of management received 4,637,080 Ordinary Shares. Pursuant to an investment agreement, Innovex also issued 28,533,345 additional preferred shares and created and issued 11 million 7.5% preference shares ("Preference Shares") and approximately $10.7 million of loan stock. In connection with the Preference Shares, the Company paid $846,000 of non-equity dividends in 1996. Prior to the recapitalization, Innovex paid a dividend of $9.2 million to the principal shareholder and made a special pension contribution of $2.3 million. In connection with the Innovex merger, the Company has paid off $56.8 million of Innovex obligations. On October 4, 1995, the Company completed a stock offering of 3,500,000 shares of its Common Stock. Of the shares sold, 2,019,960 shares were sold by the Company and 1,480,040 shares by certain selling shareholders. The offering provided the Company with approximately $55.9 million, net of expenses. On October 16, 1995, the Board of Directors authorized a two-for-one split of the Company's Common Stock in the form of a 100% stock dividend. A total of 10,678,575 shares of Common Stock were issued in connection with the split. The stated par value of each share was not changed from $.01. A total of $107,000 was reclassified from additional paid in capital to Common Stock. All references in the financial statements to number of shares, per share amounts, stock option data and market prices of Common Stock have been restated to retroactively reflect the stock split. 3. MERGERS AND ACQUISITIONS On November 29, 1996, the Company acquired 100% of the outstanding stock of Innovex, an international contract pharmaceutical organization based in Marlow, United Kingdom, for 9,214,239 shares of the Company's Common Stock and the exchange of options to purchase 786,226 shares of the Company's Common Stock. On November 22, 1996, the Company acquired BRI, a global contract research organization, through an exchange of 100% of BRI's stock for 1,614,862 shares of the Company's Common Stock. Related to the Innovex and BRI transactions, the Company recognized approximately $17.1 million in non-recurring transaction costs and approximately $10.7 million in non-recurring restructuring costs. Both transactions were accounted for by the pooling of interests method. Included in the consolidated statements of income for the year ended December 31, 1996, are the following results of the previously separate companies:
YEAR ENDED DECEMBER 31, 1996 - -------------------------------------------------------------------------------------------- (in thousands) COMPANY INNOVEX BRI CONSOLIDATED - -------------------------------------------------------------------------------------------- Net revenue $259,476 $218,891 $59,241 $537,608 Net income (loss) available for common shareholders $ 2,437 $ 2,392 $ (464) $ 4,365 - --------------------------------------------------------------------------------------------
The following are reconciliations of net revenue and net income available for common shareholders previously reported by the Company for the years ended December 31, 1995 and 1994, with the combined amounts currently presented in the financial statements for those years:
YEAR ENDED DECEMBER 31, 1995 - --------------------------------------------------------------------------------------------- (in thousands) COMPANY INNOVEX BRI CONSOLIDATED - ---------------------------------------------------------------------------------------------- Net revenue $156,437 $129,055 $38,200 $323,692 Net income available for common shareholders $ 11,259 $ 1,641 $ 1,001 $ 13,901 - -----------------------------------------------------------------------------------------------
20 39
YEAR ENDED DECEMBER 31, 1994 - ------------------------------------------------------------------------------------------------- (in thousands) COMPANY INNOVEX BRI CONSOLIDATED - ------------------------------------------------------------------------------------------------- Net revenue $ 90,067 $ 81,063 $24,770 $195,900 Net income available for common shareholders $ 6,672 $ 2,083 $ 292 $ 9,047 - --------------------------------------------------------------------------------------------------
On May 13, 1996, the Company acquired the operating assets of Lewin-VHI, Inc., a healthcare consulting company, for approximately $30 million in cash. The Company recorded approximately $20 million related to the excess cost over the fair value of net assets acquired. The acquisition was accounted for as a purchase and accordingly, the consolidated financial statements include the results of operations of the business from the date of acquisition. In addition to the above mergers and acquisitions, the Company has completed other mergers and acquisitions all of which are immaterial to the consolidated financial statements. 4. CREDIT ARRANGEMENTS AND OBLIGATIONS On May 23, 1996, the Company completed a private placement of $143.75 million of 4.25% Convertible Subordinated Notes ("Notes") due May 31, 2000. Net proceeds to the Company amounted to approximately $139.7 million. The Notes are convertible into 1,737,160 shares of Common Stock, at the option of the holder, at a conversion price of $82.75 per share, subject to adjustment under certain circumstances, at any time after August 21, 1996. The Notes are redeemable, at the option of the Company, beginning May 31, 1999. Interest is payable on the notes semi-annually on May 31 and November 30 each year. The Company has a $15 million unsecured line of credit agreement with a bank. The line of credit is available through February 1997, and it is guaranteed by the Company's domestic subsidiaries. Interest is charged either at the LIBOR rate (5.5625% at December 31, 1996), plus 1.25% to 1.85% or the bank's prime rate (8.25% at December 31, 1996), at the option of the Company, and the interest rate is established every 90 days. At December 31, 1996 and 1995, there was no outstanding balance on the line of credit. The Company also has a $4 million line of credit with a second U.S. bank. The line of credit is available through June 30, 1997 and interest is charged at the bank's prime rate (currently 8.25%). The line of credit had an outstanding balance of $0 and $2.6 million at December 31, 1996 and 1995, respectively. The Company has 6.0 million pound (approximately $10 million) line of credit which is guaranteed by the Company's United Kingdom subsidiaries. The line of credit is available through March 31, 1997. Interest is charged at the bank's base rate (6.0% at December 31, 1996), plus 1.25%, with a minimum of 5.75%. The line of credit had an outstanding balance of $6.6 million and $160,000 at December 31, 1996 and 1995, respectively. The Company has a 5.0 million pound (approximately $8.5 million) line of credit with a second U.K. bank. The line of credit is available through April 1997 and is charged interest at the bank's published base rate (6.0% at December 31, 1996) plus 1.5%. The line of credit had an outstanding balance of $2.4 million and $5.9 million at December 31, 1996 and 1995, respectively. In March, 1995, Quintiles Scotland Limited, a wholly-owned subsidiary of the Company, acquired assets of a drug development facility in Edinburgh, Scotland from Syntex Pharmaceuticals Limited, a member of the Roche group based in Basel, Switzerland for a purchase commitment valued at 13.0 million pound (approximately $21.8 million), with payment due in December 1999. As of December 31, 1996, the Company has committed to purchasing approximately 600,000 pound (approximately $852,000) under foreign exchange contracts. The Company is obligated to purchase up to an additional 21 40 NOTES (continued) 4. CREDIT ARRANGEMENTS AND OBLIGATIONS (CONTINUED) pound 8.6 million through December 28, 1999 in varying amounts as the daily dollar-to-pound exchange rate ranges between 1.5499 and 1.6800. Long-term debt and obligation consist of the following (in thousands):
- -------------------------------------------------------------------------------- DECEMBER 31 1996 1995 - -------------------------------------------------------------------------------- 4.25% Convertible Subordinated Notes due 2000 $143,750 $ -- Employee Stock Ownership Plan notes payable, due 1997 1,138 1,556 Other notes payable 1,953 9,459 Loan stock at 10% (15.1% effective interest rate) -- 10,715 Long-term obligation 21,823 19,514 --------------------------- 168,664 41,244 Less: current portion 1,897 8,021 unamortized issuance costs 3,482 -- --------------------------- $163,285 $ 33,223 ===========================
Maturities of long-term debt and obligation at December 31, 1996 are as follows (in thousands): 1997 $ 1,897 1998 697 1999 22,161 2000 143,854 2001 55 - -------------------------------------------------------------------------------- $168,664 ================================================================================
5. INVESTMENTS The following is a summary of held-to-maturity securities and available-for-sale securities by contractual maturity where applicable (in thousands):
- -------------------------------------------------------------------------------- GROSS GROSS AMORTIZED UNREALIZED UNREALIZED MARKET HELD-TO-MATURITY SECURITIES: COST GAINS LOSSES VALUE - -------------------------------------------------------------------------------- U.S. Government Securities -- Maturing in one year or less $ 5,707 $ -- $ -- $ 5,707 Maturing between one and three years 9,951 -- -- 9,951 State and Municipal Securities -- Maturing in one year or less 22,327 -- -- 22,327 Maturing between one and three years 5,065 -- -- 5,065 Other 8,564 -- -- 8,564 - -------------------------------------------------------------------------------- $ 51,614 $ -- $ -- $ 51,614 ================================================================================
- -------------------------------------------------------------------------------- GROSS GROSS AMORTIZED UNREALIZED UNREALIZED MARKET AVAILABLE-FOR-SALE SECURITIES: COST GAINS LOSSES VALUE - -------------------------------------------------------------------------------- U.S. Government Securities -- Maturing between one and three years $ 10,008 $ 59 $ -- $ 10,067 Money Funds 1,019 6 -- 1,025 - -------------------------------------------------------------------------------- $ 11,027 $ 65 $ -- $ 11,092 ================================================================================
Differences between cost and market of $65,000 (less deferred taxes of $20,190) were credited to shareholders' equity. 22 41 6. ACCOUNTS RECEIVABLE AND UNBILLED SERVICES Accounts receivable consist of the following (in thousands):
- -------------------------------------------------------------------------------- DECEMBER 31 1996 1995 - -------------------------------------------------------------------------------- Trade: Billed $117,196 $ 63,163 Unbilled services 52,772 35,610 --------------------------- 169,968 98,773 Other 10,657 7,105 Allowance for doubtful accounts (2,046) (754) --------------------------- $178,579 $105,124 ===========================
The Company provides professional services involved in the development, testing, approval, sale and marketing of new drugs. Substantially all of the Company's accounts receivable are due from companies in the pharmaceutical and biotechnology industries located in the Americas and Europe. The percentage of accounts receivable and unbilled services by region is as follows:
- -------------------------------------------------------------------------------- DECEMBER 31 1996 1995 - -------------------------------------------------------------------------------- REGION Americas 45% 41% Europe 53 57 Asia-Pacific 2 2 --------------------------- 100% 100% ===========================
7. ACCRUED EXPENSES Accrued expenses consist of the following (in thousands):
- -------------------------------------------------------------------------------- DECEMBER 31 1996 1995 - -------------------------------------------------------------------------------- Compensation and payroll taxes $ 21,829 $ 15,378 Transaction and restructuring costs 16,047 -- Other 14,094 17,912 --------------------------- $ 51,970 $ 33,290 ===========================
8. LEASES The Company leases certain office space and equipment under operating leases. The leases expire at various dates through 2049 with options to cancel certain leases at five-year increments. Some leases contain renewal options. Annual rental expenses under these agreements were approximately $20.6 million, $10.1 million and $7.0 million for the years ended December 31, 1996, 1995 and 1994, respectively. The Company leases certain assets, primarily vehicles, under capital leases. Capital lease amortization is included with depreciation and amortization expense and accumulated depreciation in the accompanying financial statements. The following is a summary of future minimum payments under capitalized leases and under operating leases that have initial or remaining noncancelable lease terms in excess of one year at December 31, 1996 (in thousands):
- -------------------------------------------------------------------------------- CAPITAL OPERATING LEASES LEASES - -------------------------------------------------------------------------------- 1997 $ 12,959 $ 23,015 1998 5,675 20,101 1999 50 13,091 2000 4 7,709 2001 4 4,738 Thereafter -- 17,170 - -------------------------------------------------------------------------------- Total minimum lease payments 18,692 $ 85,824 ======== Amounts representing interest 1,581 - --------------------------------------------------------------- Present value of net minimum payments 17,111 Current portion 11,704 - --------------------------------------------------------------- Long-term capital lease obligations $ 5,407 ===============================================================
23 42 NOTES (continued) 9. INCOME TAXES The U.S.-based and U.K.-based subsidiaries file consolidated tax returns in the U.S. and U.K., respectively. The other foreign subsidiaries are taxed separately under the laws of their respective countries. Income before income taxes from foreign operations was approximately $20 million, $8 million and $5 million for the years 1996, 1995 and 1994, respectively. The components of income tax expense are as follows (in thousands):
- -------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31 1996 1995 1994 - -------------------------------------------------------------------------------- Current: Federal $ 4,530 $ 4,133 $ 3,123 State 1,645 829 719 Foreign 4,483 1,440 1,328 -------------------------------------- 10,658 6,402 5,170 Deferred expense (benefit): Federal (682) 598 (854) Foreign 1,938 1,181 269 -------------------------------------- $ 11,914 $ 8,181 $ 4,585 ================================================================================
The Company's consolidated effective tax rate differed from the statutory rate as set forth below (in thousands):
- -------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31 1996 1995 1994 - -------------------------------------------------------------------------------- Federal taxes at statutory rate $ 5,992 $ 7,507 $ 4,669 State and local income taxes net of federal benefit 980 635 496 Non-deductible transaction costs 4,761 -- -- Foreign earnings taxed at different rates (135) 13 (118) Foreign losses for which no benefit has been recognized -- 646 404 Utilization of net operating loss carryforwards -- (1,520) (1,244) Other 316 900 378 - -------------------------------------------------------------------------------- $ 11,914 $ 8,181 $ 4,585 ================================================================================
Undistributed earnings of the Company's foreign subsidiaries amounted to approximately $19 million at December 31, 1996. Those earnings are considered to be indefinitely reinvested, and accordingly, no U.S. federal and state income taxes have been provided thereon. Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to both U.S. income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to the various countries. The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities are presented below (in thousands):
- -------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31 1996 1995 - -------------------------------------------------------------------------------- Deferred tax liabilities: Depreciation and amortization $ 16,359 $ 6,945 Prepaid expenses 1,034 573 Other 213 560 -------------------------- Total deferred tax liabilities 17,606 8,078 Deferred tax assets: Net operating loss carryforwards 7,028 5,745 Accrued expenses and unearned income 5,345 928 Benefit plans 675 2,512 Non-deductible transaction costs 2,206 -- Other 2,445 866 -------------------------- Total deferred tax assets 17,699 10,051 Valuation allowance for deferred tax assets (4,840) (5,464) -------------------------- Net deferred tax assets 12,859 4,587 -------------------------- Net deferred tax liabilities $ 4,747 $ 3,491 ================================================================================
The decrease in the Company's valuation allowance for deferred tax assets from $5,464,000 at December 31, 1995 to $4,840,000 at December 31, 1996 is primarily due to the net operating losses utilized in 1996 which had been fully reserved in prior years. 24 43 The Company's deferred income tax expense (benefit) results from the following (in thousands):
- -------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31 1996 1995 1994 - -------------------------------------------------------------------------------- Excess (deficiency) of tax over financial reporting: Depreciation and amortization $ 9,414 $ 1,681 $ 793 Net operating loss carryforwards (1,907) 1,025 (550) Accrued expenses and unearned income (4,417) 110 (374) Benefit plans -- (656) -- Other items, net (1,834) (381) (454) ------------------------------------ $ 1,256 $ 1,779 $ (585) ================================================================================
The U.K. subsidiaries qualify for Scientific Research Allowances (SRAs) for 100% of capital expenditures on certain assets under the Inland Revenue Service guidelines. For 1996, 1995 and 1994, these allowances were $11 million, $6 million and $3 million, respectively, which helped to generate net operating loss carryforwards of $3 million to be used to offset taxable income in that country. Assuming the U.K. subsidiaries continue to invest in qualified capital expenditures at an adequate level, the portion of the deferred tax liability relating to the U.K. subsidiaries may be deferred indefinitely. Quintiles Transnational has state net operating loss carryforwards of approximately $10 million which begin to expire in 2001. Innovex has German net operating loss carryforwards that do not expire of $10 million to be used to offset taxable income in that country. In addition, Innovex, Inc. has U.S. net operating loss carryforwards of approximately $5 million which will expire beginning 2005. 10. EMPLOYEE BENEFIT PLANS The Company has numerous employee benefit plans for which contributions are discretionary. Plans exist in the United States, Germany, the United Kingdom, Ireland, Belgium, France, and Australia which cover substantially all eligible employees in those countries. Plans include Approved Profit Sharing Schemes in Great Britain and Ireland which are funded with Company stock, a defined contribution plan funded by Company stock in Belgium and Australia, defined contribution plans in Great Britain, a profit sharing scheme in France, and defined benefit plans in Great Britain and Germany. The defined benefit plan in Germany is an unfunded plan which is provided for in the balance sheet. The Company has two leveraged Employee Stock Ownership Plans ("ESOPs") which provide benefits to eligible employees. Contributions and related compensation expenses for these plans totaled $585,000, $734,000, and $174,000 in 1996, 1995 and 1994, respectively. Interest paid by the Company on the ESOP loan was approximately $130,000, $157,000, and $179,000 for 1996, 1995, and 1994, respectively. Shares allocated to participants totaled 938,000 at December 31, 1996. Unallocated shares totaled 178,000 as of December 31, 1996 with a fair value of $11,820,000. The Company has two employee savings and investment plans (401(k) Plans) available to all eligible employees meeting certain specified criteria. The Company matches employee deferrals at varying percentages, set at the discretion of the Board of Directors. For the years ended December 31, 1996, 1995 and 1994, the Company expensed $539,000, $177,000 and $0, respectively as matching contributions. 25 44 NOTES (continued) 10. EMPLOYEE BENEFIT PLANS (CONTINUED) On July 25, 1996, the Company's Board of Directors adopted the Quintiles Transnational Corp. Employee Stock Purchase Plan (the "Purchase Plan") which is intended to provide eligible employees an opportunity to acquire the Company's Common Stock. Participating employees have the option to purchase shares at 85% of the lower of the closing price per share of Common Stock on the first or last day of the calendar quarter. The Purchase Plan is intended to qualify as an "employee stock purchase plan" under Section 423 of the Internal Revenue Code of 1986, as amended. The Board of Directors has reserved 100,000 shares of Common Stock for issuance under the Purchase Plan. As of December 31, 1996, 4,788 shares were purchased under the Purchase Plan at a cost of $56.3125 per share. The Company has elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related Interpretations in accounting for its employee stock options because, as discussed below, the alternative fair value accounting provided for under FASB Statement No. 123, "Accounting for Stock-Based Compensation" ("Statement 123"), requires use of option valuation models that were not developed for use in valuing employee stock options. Under APB 25, because the exercise price of the Company's employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized. The Company has stock option plans to provide incentives to eligible employees, officers, and directors in the form of incentive stock options, non-qualified stock options, stock appreciation rights, and restricted stock. The Board of Directors determines the option price (not to be less than fair market value of incentive options) at the date of grant. The majority of options, granted under the Executive Compensation Plan, typically vest twenty five percent per year over four years, and expire ten years from the date of grant. Other options including options granted and exchanged as a result of acquisitions have various vesting schedules and expiration periods. Information with respect to the consolidated option plans is as follows:
- ------------------------------------------------------------------------ WEIGHTED AVERAGE NUMBER EXERCISE PRICE - ------------------------------------------------------------------------ Outstanding January 1, 1994 633,958 $ 5.70 Granted 276,400 12.72 Exercised (9,666) 3.37 Canceled (82,586) 6.47 - ------------------------------------------------------- Outstanding at December 31, 1994 818,106 8.14 Granted 552,655 27.98 Exercised (155,870) 5.15 Canceled (19,580) 10.33 - ------------------------------------------------------- Outstanding at December 31, 1995 1,195,311 17.13 Granted 2,070,866 68.60 Exercised (656,005) 5.06 Canceled (205,840) 72.64 - ------------------------------------------------------- Outstanding at December 31, 1996 2,404,332 $ 31.92 ================================================================================
Pro forma information regarding net income and earnings per share is required by Statement 123, and has been determined as if the Company had accounted for its employee stock options under the fair value method of that Statement. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for 1996 and 1995: risk-free interest rate of 6%; dividend yields of 0%; volatility factors of the expected market price of the Company's Common Stock of 0.4; and an average expected life of the option of one year from the date of vesting. 26 45 For options outstanding and exercisable at December 31, 1996 the following number of options, range of exercise prices, weighted average exercise prices and weighted average contractual lives existed:
====================================================================================== OPTIONS OUTSTANDING OPTIONS EXERCISABLE - ------------------------------------------------ ----------------------------------- WEIGHTED WEIGHTED WEIGHTED NUMBER AVERAGE AVERAGE NUMBER AVERAGE OF EXERCISE EXERCISE CONTRACTUAL OF EXERCISE OPTIONS PRICE PRICE LIFE OPTIONS PRICE ------- -------------- -------- ----------- -------- --------- 214,596 $ 0.015-$ 2.07 $ 1.40 6.6 214,596 $ 1.40 262,106 $ 2.615-$ 6.45 5.20 4.9 262,106 5.20 319,072 $ 8.635-$12.625 9.59 6.3 308,572 9.61 389,556 $13.24 -$19.00 16.08 7.1 245,056 14.48 165,691 $21.375-$31.50 28.77 8.8 64,298 28.83 512,641 $41.00 -$61.31 48.82 8.6 48,144 41.15 480,920 $62.50 -$66.25 65.86 8.0 107,022 65.65 59,750 $68.50 -$77.00 75.24 6.7 14,711 77.00 - --------- --------- 2,404,332 $31.92 7.3 1,264,505 $15.95 ========= =========
The Black-Scholes valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are transferable. In addition, the option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options and changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The grant date Black-Scholes value of the options for 1996 was $10,900,000. Of this amount, $7,145,000 relates to options issued and exchanged to employees of acquired companies. The remaining $3,755,000 relates to Quintiles options, representing 7% of operating income. The Black-Scholes value of the options for 1995 was $739,000 which includes $85,000 relating to acquired companies. The Company's pro forma information follows (in thousands except for per share data):
- -------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31 1996 1995 - -------------------------------------------------------------------------------- Net income available for common shareholders $ 4,365 $ 13,901 Pro forma (loss) net income available for common shareholders (6,535) 13,162 Pro forma (loss) earnings per share $ (0.20) $ 0.42
The effects on net income available for common shareholders and earnings per share are not likely to be representative of the effects on reported net income for future years since 1995 reflects expense for only one year's vesting. 27 46 NOTES (continued) 11. OPERATIONS The following table presents the Company's operations by geographical location (in thousands):
- -------------------------------------------------------------------------------- 1996 1995 1994 - -------------------------------------------------------------------------------- NET REVENUE: Americas $ 235,572 $ 132,199 $ 84,231 Europe 289,325 184,506 108,468 Asia-Pacific 12,711 6,987 3,201 ----------------------------------------- $ 537,608 $ 323,692 $ 195,900 ================================================================================ INCOME (LOSS) FROM OPERAIONS: Americas $ 15,228 $ 11,951 $ 7,138 Europe 21,974 12,016 8,008 Asia-Pacific 16 (440) (323) ----------------------------------------- $ 37,218 $ 23,527 $ 14,823 ================================================================================ IDENTIFIABLE ASSETS: Americas $ 267,512 $ 152,857 $ 96,308 Europe 241,549 176,609 94,979 Asia-Pacific 8,944 5,176 2,279 ----------------------------------------- $ 518,005 $ 334,642 $ 193,566 ================================================================================
12. PRO FORMA QUARTERLY FINANCIAL DATA (UNAUDITED) Prior to the Innovex merger, Innovex had a March 31 fiscal year. The pro forma unaudited quarterly financial data presented below reflect the financial results of the combined companies on a calendar year basis including nonrecurring costs. The non-recurring costs consist of transaction and restructuring costs of $27.8 million in the fourth quarter of 1996 and $4.7 million of one-time restructuring costs and special pension contribution in the first quarter of 1996. The Company's Consolidated Statements of Income contained herein reports financial results on a fiscal year basis (which includes Innovex results for the quarter ended March 31, 1996 in both 1995 and 1996 fiscal years). The following pro forma quarterly financial information reflects actual calendar quarter results of operations (in thousands, except for per share data): 28 47
- ----------------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 1996 FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER - ----------------------------------------------------------------------------------------------------------------- Net revenue $ 110,592 $ 127,416 $ 137,498 $ 162,102 Income from operations 7,042 11,519 13,396 5,261 Net income (loss) available for common shareholders 4,436 6,884 7,831 (14,786) Earnings (loss) per share $ 0.13 $ 0.20 $ 0.23 $ (0.45) Range of stock prices $37.000-69.250 $56.500-82.000 $52.500-83.250 $58.250-83.250 ................................................................................................................. YEAR ENDED DECEMBER 31, 1995 FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER - ----------------------------------------------------------------------------------------------------------------- Net revenue $ 62,409 $ 72,822 $ 78,546 $ 89,032 Income from operations 6,077 5,140 5,921 8,590 Net income available for common shareholders 4,190 2,647 3,645 5,665 Earnings per share $ 0.14 $ 0.09 $ 0.12 $ 0.17 Range of stock prices $14.500-19.438 $17.250-24.125 $22.000-32.125 $26.250-46.000 - -----------------------------------------------------------------------------------------------------------------
The following pro forma quarterly financial information reflects actual calendar quarter results of operations excluding non-recurring costs (in thousands):
- ----------------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 1996 FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER - ----------------------------------------------------------------------------------------------------------------- Net revenue $ 110,592 $ 127,416 $ 137,498 $ 162,102 Income from operations 11,744 11,519 13,396 15,990 Net income available for common shareholders $ 8,024 $ 6,884 $ 7,831 $ 9,382 - ----------------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 1995 FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER - ----------------------------------------------------------------------------------------------------------------- Net revenue $ 62,409 $ 72,822 $ 78,546 $ 89,032 Income from operations 6,077 5,140 5,921 8,590 Net income available for common shareholders $ 4,190 $ 2,647 $ 3,645 $ 5,665 =================================================================================================================
29 48 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Shareholders of Quintiles Transnational Corp. We have audited the accompanying consolidated balance sheets of Quintiles Transnational Corp. and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the 1995 and 1994 consolidated financial statements of BRI International, Inc. and Innovex Limited, each of which was combined with the Company in 1996 in transactions accounted for as poolings of interests. Total assets of the two businesses represent 39% of the consolidated assets for 1995, and total revenues constituted 42% and 43% of consolidated revenue for 1995 and 1994, respectively. Those statements were audited by other auditors whose reports have been provided to us, and our opinion, insofar as it relates to amounts included for BRI International, Inc. and Innovex Limited for 1995 and 1994, is based solely on the reports of the other auditors. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the reports of other auditors, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Quintiles Transnational Corp. and subsidiaries at December 31, 1996 and 1995, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. /S/ ERNST & YOUNG LLP Raleigh, North Carolina January 29, 1997 EX-21 18 QUINTILES SCHEDULE OF SUBSIDIARIES 1 EXHIBIT 21 QUINTILES TRANSNATIONAL CORP. SCHEDULE OF SUBSIDIARIES
Name Jurisdiction of Organization - ---- ---------------------------- Quintiles, Inc.(1) North Carolina Quintiles (UK) Limited United Kingdom Quintiles Pacific, Inc.(1)(2) North Carolina Quintiles Ireland Limited Ireland Quintiles GmbH Germany Quintiles Laboratories Limited North Carolina Quintiles S.A. France Quintiles (UK) Holdings Limited United Kingdom Toxicol Laboratories Limited United Kingdom Histological Services Limited United Kingdom Quintiles Australia Pty. Limited Australia Quintiles Asia, Inc. North Carolina Quintiles Ireland (Finance) Limited Ireland Quintiles S.r.l. Italy Quintiles Scotland Limited United Kingdom Quintiles East Asia Pte. Limited Singapore Quintiles Latin America, Inc.(1) North Carolina Quintiles Canada, Inc.(1) Canada International Clinical Research Limited United Kingdom G.D.R.U. Limited United Kingdom PMC Contract Research AB Sweden Benefit, Inc. North Carolina Benefit Holding, Inc. North Carolina Benefit Transnational Holding Corp. North Carolina Benefit Canada Medico-Economic Studies, Inc. Canada Benefit Deutschland Gmbh Germany Benefit Research Italia Italy Benefit B.V. The Netherlands Quintiles Holding SNC France Benefit International SNC France Innovex Merger Corp. [North Carolina][United Kingdom] Innovex (UK) Merger Limited United Kingdom Innovex Limited United Kingdom Innovex Holdings Limited United Kingdom Innovex (UK) Ltd. United Kingdom Innovex Medical Products Ltd. United Kingdom Novex Pharma Ltd. United Kingdom Ethical Contact Ltd. United Kingdom Innovex Overseas Holdings Ltd. United Kingdom Innovex (North America) Inc. [United States] Innovex (Benelux) BV Holland
2 Innovex Nordic AB Sweden Innovex S.r.l. Italy Innovex SARL France Penderwood Limited England Eminent Innovex International Spain Innovex GmbH Germany Innovex (Biodesign) GmbH Germany The Clinical Research Foundation (UK) Ltd. England Innovex (DCCG) Holdings Pty. Limited Australia BRI Quality Regulatory Alliance, Inc. Virginia BRI International Limited England BRI International S.A.R.L. France BRI International Holdings N.V. Belgium BRI International N.V. Belgium Health Care Research U.K. Limited England Health Care Research A.G. Sweden Medical Technology Consultants - BRI International Limited England MTCE France S.A.R.L. France AR-MED Limited England The Lewin Group, Inc. North Carolina Debra Chapman Consulting Group Pty. Limited Australia Medical Alliances Pty. Limited Australia Alchemy Pharmaceutical Pty. Limited Australia PharmaBio Development, Inc. North Carolina Synapse Pharmaceuticals Pty. Limited Australia
(1) Quintiles, Inc., Quintiles Pacific, Inc., Quintiles Latin America, Inc. and Quintiles Canada, Inc. sometimes are referred to collectively for internal and marketing purposes as "Quintiles Americas". (2) Effective January 1, 1996, the Company's wholly-owned subsidiaries International Clinical Research Corporation, a California corporation, and Quintiles Pacific, Inc., a North Carolina corporation, merged into the Company's wholly-owned subsidiary San Diego Clinical Research Associates, Inc., a North Carolina corporation, which changed its corporate name to "Quintiles Pacific, Inc." (3) Quintiles Scotland Limited and Quintiles England Limited sometimes are referred to collectively for internal and marketing purposes as "Quintiles Preclinical Services". EX-23 19 CONSENT OF ERNST & YOUNG 1 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in this Annual Report (Form 10-K) of Quintiles Transnational Corp. of our report dated January 29, 1997 included in the 1996 Annual Report to Shareholders of Quintiles Transnational Corp. We also consent to the incorporation by reference in the Registration Statement (Form S-3 No. 333-19009) and related Prospectus of Quintiles Transnational Corp. for the registration of $75,990,000 of its 4.25% Convertible Subordinated Notes Due May 31, 2000 and 918,282 shares of its Common Stock of our report dated January 29, 1997, with respect to the consolidated financial statements incorporated by reference in this Annual Report (Form 10-K) of Quintiles Transnational Corp. for the year ended December 31, 1996. We also consent to the incorporation by reference in the Registration Statement (Form S-8 No. 33-91026) pertaining to the Quintiles Transnational Corp. Equity Compensation Plan of our report dated January 29, 1997, with respect to the consolidated financial statements incorporated by reference in this Annual Report (Form 10-K) of Quintiles Transnational Corp. for the year ended December 31, 1996. We also consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-16553) pertaining to the Quintiles Transnational Corp. Employee Stock Purchase Plan, the Quintiles Transnational Corp./BRI International, Inc. Nonqualified Stock Option Plan and the Innovex Limited 1996 Unapproved Executive Share Option Scheme of our report dated January 29, 1997, with respect to the consolidated financial statements incorporated by reference in this Annual Report (Form 10-K) of Quintiles Transnational Corp. for the year ended December 31, 1996. We also consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-03603) pertaining to the Quintiles Transnational Corp. Lewin Nonqualified Stock Option Plan of our report dated January 29, 1997, with respect to the consolidated financial statements incorporated by reference in this Annual Report (Form 10-K) of Quintiles Transnational Corp. for the year ended December 31, 1996. Ernst & Young LLP Raleigh, North Carolina March 25, 1997 EX-99.01 20 RISK FACTORS OF THE COMPANY 1 EXHIBIT 99.01 RISK FACTORS OF THE COMPANY DEPENDENCE ON CERTAIN INDUSTRIES AND CLIENTS The Company's revenues are highly dependent upon the research and development and sales and marketing expenditures of the pharmaceutical and biotechnology industries. The Company has benefited to date from the growing tendency of pharmaceutical and biotechnology companies to engage independent outside organizations to conduct large clinical research and sales and marketing projects. The Company's operations could be materially and adversely affected by a general economic decline in these industries or by any reduction in the outsourcing of development or sales and marketing expenditures. The Company has in the past derived, and may in the future derive, a significant portion of its net revenue from a relatively limited number of major projects or clients. In 1996, 10 clients accounted for approximately 48% of the Company's consolidated net revenue. As pharmaceutical companies continue to outsource large projects and studies to fewer full-service global providers, the concentration of business could increase. The Company is likely to experience such concentration in 1997 and in future years. The loss of any such client could materially and adversely affect the Company. See "Business -- Clients and Marketing". MANAGEMENT OF GROWTH The Company has experienced rapid growth over the past 10 years. The Company believes that its sustained growth places a strain on operational, human and financial resources. In order to manage its growth, the Company must continue to improve its operating and administrative systems and to attract and retain qualified management, professional, scientific and technical personnel. Foreign operations may involve the additional risks of assimilating differences in foreign business practices, hiring and retaining qualified personnel, and overcoming language barriers. The Company has a transnational organizational structure, comprised of three operating divisions performing complementary functions with a holding company performing management functions. While this transnational structure has successfully supported the Company's growth to date, the Company recently has completed a number of acquisitions, and there can be no assurance that this structure will continue to be effective. See "Business -- General". Failure to manage growth effectively could have a material adverse effect on the Company. ACQUISITION RISKS Acquisitions involve numerous risks, including difficulties and expenses incurred in connection with the acquisition and the assimilation of the operations and services of the acquired companies, the diversion of management's attention from other business concerns and the potential loss of key employees of the acquired companies. Acquisitions of foreign companies also may involve the additional risks of assimilating differences in foreign business practices and overcoming language barriers. Since February 1996, the Company has completed four acquisitions, both within the United States and internationally. There can be no assurance that the Company's past and any future acquisitions will be successfully integrated into its operations. See "Business -- General". The Company reviews many acquisition candidates in the ordinary course of business, and the Company continually is evaluating new acquisition opportunities. Given the CRO industry consolidation which is occurring, the Company expects to continue to evaluate and compete for suitable acquisition candidates. There can be no assurance that the Company will successfully complete future acquisitions nor that acquisitions, if completed, will contribute favorably to the Company's operations and future financial condition. Although the Company performs due diligence investigations on each company or business it seeks to acquire, there may be liabilities which the Company fails or is unable to discover for which the Company, as a successor owner, may be liable. The Company generally seeks to minimize its exposure to such liabilities by obtaining 2 indemnification from each seller, which may be supported by deferring payment of a portion of the purchase price. However, there is no assurance that such indemnifications, even if obtainable, enforceable and collectible (as to which there also is no assurance), will be sufficient in amount, scope or duration to fully offset the potential liabilities arising from the acquisitions. RISKS RELATING TO CONTRACT SALES SERVICES Outsourced contract sales services is a relatively new industry outside the U.K. The Company believes that the contract sales industry emerged in the 1980s, primarily in the U.K., because of regulatory cost containment pressure on pharmaceutical companies. As a result, large pharmaceutical companies began to outsource their sales and marketing activities incident to product launch. There is a relatively low level of market penetration for outsourced sales and marketing services in most other countries, including the United States. As such, companies in this industry are subject to all of the risks inherent in a new or emerging industry, including an inability to attract and retain clients, changes in the regulatory regime, an absence of an established earnings history, the availability of adequately trained sales representatives and additional and unforeseen costs and expenses. There can be no assurance that the Company will be able to market successfully its contract sales and marketing services outside the U.K. See "Business -- Services". COMPETITION; INDUSTRY CONSOLIDATION The market for the Company's contract research services is highly competitive, and the Company competes against traditional CROs, the in-house research and development departments of pharmaceutical companies, as well as universities and teaching hospitals. In sales and marketing services, the Company competes against the in-house sales and marketing departments of pharmaceutical companies and small local contract sales organizations in each country in which it operates. The Company also competes against consulting firms offering healthcare consulting services, including boutique firms specializing in the healthcare industry and the healthcare departments of large firms. Expansion by these competitors into other areas in which the Company operates could affect the Company's competitive position. Increased competition may lead to price and other forms of competition that may affect the Company's margins. See "Business -- Competition". Consolidation within the pharmaceutical industry, as well as a trend by pharmaceutical companies to limit outsourcing to fewer organizations, has heightened the competition for contract research services. As a result, consolidation also has occurred among the providers of contract research services, and several large, full-service providers have emerged, including the Company. If these consolidation trends continue, they may result in greater competition among the larger contract research providers for clients and acquisition candidates. LOSS OR DELAY OF LARGE CONTRACTS; FIXED PRICE NATURE OF CONTRACTS Most of the Company's contracts are terminable upon 15-90 days' notice by the client. Although the contracts typically provide for payment of certain fees for winding down the study and, in some cases, a termination fee, the loss or delay of a large contract or the loss or delay of multiple contracts could adversely affect the Company's future net revenue and profitability. Contracts may be terminated for a variety of reasons, including the failure of a product to satisfy safety requirements, unexpected or undesired results of the product, the client's decision to forego a particular study or insufficient patient enrollment or investigator recruitment. The Company contracts with investigators who undertake to recruit large numbers of patients in many of its studies. There can be no assurance that the Company will always be able to satisfy recruitment targets, particularly in large studies for which there is little precedent. In addition, most of the Company's contracts for the provision of its services are fixed price or fee-for-service subject to a cap. Since the Company's contracts are predominantly structured in this manner, the Company bears the risk of cost overruns. Underpricing of contracts or significant cost overruns could have a material adverse effect on the Company. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Contract Revenue". 3 DEPENDENCE ON PERSONNEL The Company relies on a number of key executives, including Dennis B. Gillings, Ph.D., its Chairman of the Board of Directors and Chief Executive Officer. The Company maintains key man life insurance on Dr. Gillings in the amount of $3 million. The loss of the services of any key executives could have a material adverse effect on the Company. In addition, the Company's performance depends on its ability to attract and retain qualified management and professional, scientific and technical operating staff, as well as its ability to recruit qualified representatives for its contract sales services. There can be no assurance that the Company will be able to continue to attract and retain qualified personnel. POTENTIAL LIABILITY In connection with its provision of contract research services, the Company contracts with physicians to serve as investigators in conducting clinical trials to test new drugs on human volunteers. Such testing creates risk of liability for personal injury to or death of volunteers, particularly to volunteers with life-threatening illnesses, resulting from adverse reactions to the drugs administered. Although the Company does not believe it is legally accountable for the medical care rendered by third party investigators, it is possible that the Company could be held liable for the claims and expenses arising from any professional malpractice of the investigators with whom it contracts or in the event of personal injury to or death of persons participating in clinical trials. The Company also could be held liable for errors or omissions in connection with the services it performs. In addition, as a result of its Phase I clinical trials facilities, the Company could be liable for the general risks associated with a Phase I facility including, but not limited to, adverse events resulting from the administration of drugs to clinical trial participants or the professional malpractice of Phase I medical care providers. The Company believes that its risks are reduced by contractual indemnification provisions with clients and investigators, insurance maintained by clients and investigators and by the Company, various regulatory requirements, including the use of institutional review boards and the procurement of each volunteer's informed consent to participate in the study. The contractual indemnifications generally do not protect the Company against certain of its own actions such as negligence. The contractual arrangements are subject to negotiation with clients and the terms and scope of such indemnification vary from client to client and from trial to trial. The financial performance of these indemnities is not secured. Therefore, the Company bears the risk that the indemnifying party may not have the financial ability to fulfill its indemnification obligations. The Company maintains professional liability insurance that covers worldwide territories in which the Company currently does business and includes drug safety issues as well as data processing errors and omissions. There can be no assurance that the Company will be able to maintain such insurance coverage on terms acceptable to the Company. The Company could be materially and adversely affected if it were required to pay damages or bear the costs of defending any claim outside the scope of or in excess of a contractual indemnification provision or beyond the level of insurance coverage or in the event that an indemnifying party does not fulfill its indemnification obligations. DEPENDENCE ON GOVERNMENT REGULATION The Company's contract research business has benefited from the extensive governmental regulation of the drug development process, particularly in the United States. In Europe, the general trend has been towards establishing common standards for clinical testing of new drugs, leading to changes in the various requirements currently imposed by each country. The Company believes that the level of regulation is generally less burdensome outside the United States. From time to time legislation is introduced in the U.S. Congress to substantially modify regulations administered by the Food and Drug Administration ("FDA") governing the drug approval process. Changes in regulation in the United States or elsewhere, including mandatory substitution of generic drugs for patented drugs, relaxation in the scope of regulatory requirements or the introduction of simplified drug approval procedures, could decrease the business opportunities available to the Company. In addition, the failure on the part of the Company to comply with applicable regulations could result in the termination of ongoing clinical research 4 or sales and marketing projects or the disqualification of data for submission to regulatory authorities, either of which could have a material adverse effect on the Company. UNCERTAINTY IN HEALTHCARE INDUSTRY AND POSSIBLE HEALTHCARE REFORM The healthcare industry is subject to changing political, economic and regulatory influences that may affect the pharmaceutical, biotechnology and medical device industries. Numerous governments have undertaken efforts to control growing healthcare costs through legislation, regulation and voluntary agreements with medical care providers and pharmaceutical companies. Implementation of government healthcare reform may adversely affect research and development expenditures by pharmaceutical, biotechnology and medical device companies which could decrease the business opportunities available to the Company. Management is unable to predict the likelihood of healthcare reform legislation being enacted or the effects such legislation would have on the Company. EXCHANGE RATE FLUCTUATIONS Approximately 56.5%, 59.2% and 57.0% of the Company's net revenue for the years ended December 31, 1996, 1995, and 1994, respectively, were derived from the Company's operations outside the United States. The Company's operations and financial results could be significantly affected by factors associated with international operations such as changes in foreign currency exchange rates and uncertainties relative to regional economic circumstances, as well as by other risks sometimes associated with international operations. Since the revenue and expenses of the Company's foreign operations are generally denominated in local currencies, exchange rate fluctuations between such local currencies and the U.S. dollar will subject the Company to currency translation risk with respect to the reported results of its foreign operations. Also, the Company may be subject to foreign currency transaction risks when the Company's service contracts are denominated in a currency other than the currency in which the Company incurs expenses related to such contracts. The Company limits its foreign currency transaction risks through exchange rate collars stated in its contracts with clients or the Company hedges the transaction risk with foreign exchange contracts or options. There can be no assurance that the Company will not experience fluctuations in financial results from the Company's operations outside the United States, and there can be no assurance the Company will be able to contractually or otherwise favorably reduce its currency transaction risk associated with its service contracts. See "Management's Discussion and Analysis of Financial Condition and Results of Operations". VARIATION IN QUARTERLY OPERATING RESULTS The Company's results of operations have been and can be expected to be subject to quarterly fluctuations. Quarterly results can fluctuate as a result of a number of factors, including the timing of start-up expenses for new offices, acquisitions, the completion or commencement of significant contracts, changes in the mix of services offered and foreign exchange fluctuations. The Company believes that quarterly comparisons of its financial results should not be relied upon as an indication of future performance. See "Management's Discussion and Analysis of Financial Condition and Results of Operations". VOLATILITY OF STOCK PRICE The market price of the Company's Common Stock has been and may continue to be subject to wide fluctuations in response to variations in operating results from quarter to quarter, changes in earnings estimates by analysts, market conditions in the industry and general economic conditions. See "Price Range of Common Stock and Dividend Policy". -----END PRIVACY-ENHANCED MESSAGE-----