EXHIBIT 10.10 DEED OF LEASE

EXHIBIT 10.10

 

DEED OF LEASE

 

By and between

 

PLAZA AMERICA OFFICE DEVELOPMENT II, LLC

 

(“Landlord”)

 

and

 

NCI INFORMATION SYSTEMS, INC.

 

(“Tenant”)

 

at

 

Plaza America Building IV

Reston, Virginia

TABLE OF CONTENTS

 

 

DEED OF LEASE

 

THIS DEED OF LEASE (“Lease”) is made as of the 13 ^th day of January, 2003, by and between PLAZA AMERICA OFFICE DEVELOPMENT II, LLC , a Delaware limited liability company (“Landlord”), and NCI INFORMATION SYSTEMS, INC ., a Virginia corporation (“Tenant”).

 

RECITALS:

 

Landlord, for and in consideration of the rents and all other charges and payments hereunder and of the covenants, agreements, terms, provisions and conditions to be kept and performed hereunder by Tenant, grants and conveys to Tenant, and Tenant hereby hires and takes from Landlord, a leasehold interest in the premises described below (“Premises”), subject to all matters hereinafter set forth and upon and subject to the covenants, agreements, terms, provisions and conditions of this Lease for the term hereinafter stated.

 

NOW THEREFORE Landlord and Tenant hereby agree to the following:

 

1. TERMS.

 

1.1 Premises, Storage Space and Lower Level Space . (a) Subject to the terms and conditions of Section 36 hereof (with respect to the Contraction Premises as is defined therein), the premises demised by this Lease will consist of (i) up to approximately 76,716 rentable square feet of space (the “Premises”) to be measured and certified in accordance with the ANSI/BOMA Z65.1-1996 Method of Measurement (the BOMA Standard”), a true and correct copy of which is attached hereto as Exhibit L , located on the fourth (4 ^th ), fifth (5 ^th ) and seventh (7 ^th ) floors, and (ii) approximately 2,000 useable square feet of space located on the lower level (such lower level space herein, the “Lower Level Space”) and (iii) approximately 1,000 useable square feet of space located on the lower level, if taken by Tenant pursuant to Section 8.5 hereof (such lower level space being referred to herein as the “Storage Space”) of that building located at 11730 Plaza America Drive, Reston, Fairfax County, Virginia 20190 containing approximately 189,647 rentable square feet (the “Building”), together with three and one-half (3.5) parking permits for each one thousand (1,000) square feet of the Premises (exclusive of the Storage Space and Lower Level Space) throughout the initial Lease Term and any Renewal Terms, located in the adjacent parking structure, and the non-exclusive use of various Common Areas (as defined in Section 39 hereof), as more particularly set forth herein. The Storage Space and the Lower Level Space is not considered a portion of the Premises for purposes of computing Tenant’s Share pursuant to Section 1.2 of this Lease. The land upon which the Building is situated, which is generally depicted on the diagram attached hereto as Exhibit B (the “Site Plan”) and incorporated herein by reference, shall be referred to hereinafter as the “Land”. The Land and the Building are collectively referred to herein as the “Project”. The location of the Premises, the Storage Space and the Lower Level Space are shown on the conceptual floor plans attached hereto as Exhibit A and incorporated herein by reference. No easement for light or air is incorporated in or intended to be conveyed with the Premises, the Storage Space or the Lower Level Space.

(b) Within thirty (30) days after the date hereof, Landlord shall cause Landlord’s architect to certify to Landlord and Tenant the final measurement of the Premises and the Building based upon the BOMA Standard. Landlord shall provide Tenant’s architect with Landlord’s actual measurements of the Premises and Building for Tenant’s architect to review, verify and approve. Tenant’s architect shall then have a period often (10) business days in which to remeasure the Premises and/or the Building using the BOMA Standard, and shall provide to each of Landlord and Tenant, Tenant’s architect’s resulting measurements. In the event Tenant’s architect, using the BOMA Standard, arrives at a measurement for the Premises and/or the Building which differs from the Landlord’s architect’s measurement by a factor of less than 1.5%, then the measurement of Landlord’s architect shall be final. If within ten (10) business days Tenant’s architect arrives at a rentable square footage measurement for the Premises and/or the Building, utilizing the BOMA Standard, which differs from the Landlord’s architect’s measurement by a factor of 1.5% or more, Tenant’s architect and Landlord’s architect shall be instructed by Tenant and Landlord to diligently cooperate and reach agreement on the final measurement of the Premises and the Building. If such mutual agreement is not reached between Landlord’s architect and Tenant’s architect within ten (10) business days of the date of Landlord’s receipt of the measurement prepared by Tenant’s architect, then Landlord’s architect and Tenant’s architect shall jointly select a third architect, with Tenant and Landlord sharing equally the cost of such third architect. The third architect will make an independent determination of the rentable square footage of the Premises and the Building applying the BOMA Standard. This determination by the third architect and the determination of the two (2) closest square footage measurements out of all three (3) architects’ measurements will be averaged, and that average measurement shall be binding on both parties for purposes of determining the measurement of the Premises and the Building; provided, however, that if the middle architect’s measurements is equally distant from the highest and lowest, that architect’s measurement shall constitute the measurement of the Premises and/or the Building.

 

1.2 Tenant’s Share . “Tenant’s Share” shall mean a fraction, the numerator of which is the total rentable square footage of the Premises (exclusive of Lower Level Space and Storage Space) as determined in accordance with Section 1.1 hereof, and the denominator of which is the total rentable square footage of the Building. No adjustment shall be made for rentable space within the Building occupied only by building engineers, it being further provided that any such rentable space will be located only within a core area location to be determined within the reasonable judgment of Landlord, which core area shall not be greater than 1,500 rentable square feet for the Building. Further, no reduction in the rentable square footage of the Building shall be made for any on-site property management office, provided the same does not exceed 1,500 rentable square feet of space.

 

1.3 Lease Term . The term of this Lease (the “Term” or “Lease Term”) shall commence on the “Rent Commencement Date” as defined in Section 1.4.2 below, and shall expire on the last day of the one hundred twentieth (120 ^th ) full calendar month following the Rent Commencement Date (the “Lease Expiration Date”). Between the Commencement Date (as defined below) and the Rent Commencement Date (as defined below), Tenant shall be entitled to occupy the Premises and other areas leased hereunder, and Landlord grants and conveys to Tenant the Premises and other areas leased hereunder in accordance with and subject to all of the terms and conditions of this Lease, exclusive of the payment of Base Rent and Additional Rent.

 

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1.4 Commencement and Rent Commencement Dates.

 

1.4.1 The “Commencement Date”, shall be the earlier of (i) June 1, 2003, or (ii) that date on which Tenant takes occupancy of the Premises for the conduct of its business therefrom, provided in either case that (i) such date shall be extended on a day for day basis for any actual delay suffered by Tenant in obtaining any permit or approval necessary for the completion of Tenant’s Work (as defined in Exhibit C ) resulting from any defect in Landlord’s Work (as defined in Exhibit C-1 ) discovered after the date hereof, or any governmental notice received after the date hereof advising of any defect or deficiency in Landlord’s Work (ii) as of the date hereof Landlord shall provide Tenant with access to the Premises and the Building so as not to delay Tenant’s development of the Tenant’s Work. Notwithstanding the foregoing, for purposes of this Lease, the term ^“ Commencement Date” shall also mean any adjusted Commencement Date which may be established pursuant to the provisions of this Lease. Landlord and Tenant hereby agree to execute a Declaration, in the form attached hereto as Exhibit E , to confirm the Commencement Date. Tenant’s failure to execute said Declaration shall not affect the Commencement Date, or the Lease Expiration Date, as the same may be determined by the terms of this Lease. As of the date hereof, all Base Building Shell and Common Area construction has been completed by Landlord and, upon the execution hereof by Tenant, Tenant shall be granted unencumbered access to the Premises (subject to all of the terms and conditions hereof other than the payment of Base Rent and Additional Rent) to permit Tenant to complete Tenant’s Work in a sequential, orderly and efficient fashion.

 

1.4.2 Subject to Section 1.5.3, the “Rent Commencement Date” shall be thirty (30) days after the Commencement Date (but not earlier than July 1, 2003); provided that if the Rent Commencement Date is a date other than the first day of a calendar month, the Base Rent for such partial month shall be pro rated based upon the number of calendar days remaining in such month.

 

1.5 Base Rent. The base rent payable by Tenant hereunder (“Base Rent”) is set forth in this Section 1.5.1 below. The Base Rent is in addition to (and not to be reduced by) any payment of Additional Rent (as hereinafter defined) hereunder. Base Rent shall be payable monthly, in equal monthly installments, in advance, on the first day of each calendar month of the Term, without prior notice, demand, deduction or offset.

 

1.5.1 Subject to the provisions of Section 1.5.3 below, the annual Base Rent (monthly installments of which maybe referred to herein as “Monthly Base Rent”) for the initial Lease Year of the Term shall be the sum of (i) Twenty Seven Dollars ($27.00) per rentable square foot of the Premises, plus (ii) Fifteen Dollars and 75/100 ($15.75) per useable square foot of the Lower Level Space plus (iii) Fifteen Dollars ($15.00) per useable square foot for the Storage Space. Thereafter, as of the first twelve (12) month anniversary of the Rent Commencement Date and each annual anniversary thereafter, the Base Rent applicable to the Premises (but not that applicable to the Storage Space or Lower Level Space) shall be increased to an amount equal to one hundred two

 

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and one-half percent (102.5%) of the Base Rent for the immediately preceding Lease Year (provided that any Additional Leasehold Improvement Allowance made available to Tenant in accordance with Section 2(D) of Exhibit C attached hereto shall not be subject to the annual increase imposed on Base Rent notwithstanding that such amount(s) shall be repaid to Landlord simultaneously with payments of Base Rent hereunder).

 

1.5.2 In the event Tenant exercises its Renewal Option in accordance with Section 51 of this Lease, Base Rent and escalations for any Renewal Term(s) under this Lease shall be as set forth in Section 51 below.

 

1.5.3 The foregoing notwithstanding, the Monthly Base Rent payable with respect to the Premises for the initial six (6) months following the Rent Commencement Date shall be abated. Thereafter, commencing as of the first day of the seventh calendar month following the Rent Commencement Date (and continuing thereafter), the Monthly Base Rent shall be the Base Rent for the initial Lease Year as is set forth in Section 1.5.1 above.

 

1.6 Additional Rent . Tenant’s Share (as defined in Section 1.2) of Increases in Real Estate Taxes (as defined in Section 10), Operating Costs (as defined in Section 9) and any other sum owed or reimbursable by Tenant to Landlord under this Lease (excluding Base Rent) shall be considered additional rent hereunder (collectively “Additional Rent”), and, except for items of Additional Rent for which demand is required pursuant to the express terms of this Lease, shall be payable without demand, set-off or deduction. Estimates of those items of Additional Rent described in Section 9 and Section 10 of this Lease shall be payable monthly, in advance, on the first day of each calendar month of the Term, together with Tenant’s monthly payment of Base Rent, without demand, set-off or deduction.

 

1.7 Notice and Payment Addresses . Any notices under this Lease shall be governed by the terms of Section 30, below. The notice addresses of the parties are as follows:

 

 

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Until Tenant takes occupancy of the Premises for the conduct of its business, and thereafter to each of the foregoing at the Premises.

 

 

Either party may, by ten (10) days’ prior written notice to the other, designate a new address to which all notices hereunder shall be directed.

 

1.8 Rent Payment Address . Tenant shall send payments of Base Rent and Additional Rent hereunder to Landlord at the following address, or to such other address of which Landlord may advise Tenant in writing:

 

 

1.9 Lease Year . Each twelve (12) month period within the Lease Term (including any Renewal Terms) shall be referred to herein as a “Lease Year.” The first Lease Year shall commence on the Rent Commencement Date and terminate on the last day of the twelfth full calendar month after the Rent Commencement Date. Each subsequent Lease Year shall commence on the date immediately following the last day of the preceding Lease Year and shall continue for a period of twelve (12) full calendar months, except that the last Lease Year of the Lease Term shall terminate on the date this Lease expires or is otherwise terminated.

 

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1.10 Deed of Lease . To the extent required under applicable law to make this Lease legally effective, this Lease shall constitute a deed of lease.

 

2. PAYMENT OF BASE RENT & ADDITIONAL RENT.

 

Tenant shall pay to Landlord the Base Rent due under this Lease, both without prior notice, demand, deduction or offset, in lawful money of the United States. Base Rent and Additional Rent shall be paid at the address noted in Section 1.8, or to such other party or at such other place as Landlord may hereafter from time to time designate in writing. Base Rent and Additional Rent under this Lease for any partial month at the beginning or end of the Lease Term shall be prorated. Except for monthly installments of estimated Additional Rent as set forth in Sections 9 and 10 of this Lease, or as otherwise provided in this Lease, all payments of Additional Rent shall be paid no later than thirty (30) days after the date Landlord notifies Tenant in writing of the amount thereof. In the event of any dispute concerning the computation of the amount of any Additional Rent due, Tenant shall pay the amount specified by Landlord pending the resolution of the dispute, and, subject to Section 9.4 hereof, such payment shall be without prejudice to Tenant’s right to continue to challenge the disputed computation.

 

3. SECURITY DEPOSIT.

 

3.1 Security Deposit . Simultaneously with the execution of this Lease by Tenant, Tenant shall provide Landlord with a security deposit in an amount equal to $172,611.00 in the form of cash or a letter of credit in such form as is reasonably acceptable to Landlord and drawn on an FDIC member bank located in the Washington metropolitan area (the “Security Deposit”). If Tenant initially provides the Security Deposit in the form of cash, it may thereafter replace such cash at any time with a letter of credit satisfying the provisions hereof. Landlord and Tenant agree that the Security Deposit shall not be increased to reflect any amounts provided by Landlord to Tenant in connection with the Leasehold Improvement Allowance or the Additional Leasehold Improvement Allowance. The Security Deposit shall constitute security for payment of Base Rent and Additional Rent and for any and all other obligations of Tenant under this Lease. If Tenant defaults, beyond any applicable cure period, with respect to any covenant or condition of this Lease, including but not limited to the payment of Base Rent, Additional Rent or any other payment due under this Lease, and the obligation of Tenant to maintain the Premises and deliver possession thereof back to Landlord at the expiration or earlier termination of the Lease Term in the condition required herein, then Landlord may (without any waiver of Tenant’s default being deemed to have occurred) apply all or any part of the Security Deposit to the payment of any sum in default beyond any applicable cure period, or any other reasonable sum which Landlord may be required or reasonably deem necessary to spend or incur by reason of Tenant’s default, or to satisfy in part or in whole any damages suffered by Landlord as a result of Tenant’s default which continues to exist beyond any applicable cure period. In the event of such application, Tenant shall promptly deposit with Landlord the amount necessary to restore the Security Deposit to the full amount set forth above. The parties expressly acknowledge and agree that the Security Deposit is not an advance payment of Base Rent or Additional Rent, nor a measure of Landlord’s damages in the event of any default by Tenant. If Tenant shall have fully complied with all of the covenants and conditions of this Lease, but not

 

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otherwise, the amount of the Security Deposit then held by Landlord shall be repaid to Tenant within thirty (30) days after the expiration or sooner termination of this Lease. In the event of a sale or transfer of Landlord’s estate or interest in the Building, Landlord shall transfer the Security Deposit to the purchaser or transferee, and upon such transfer Landlord shall be considered released by Tenant from all liability for the return of the Security Deposit, provided Landlord’s purchaser or transferee acknowledges said transfer of the Security Deposit in writing.

 

3.2 Advance Deposit . Simultaneously with the execution of this Lease by Tenant, Tenant shall deposit with Landlord the sum of $172,611.00, which sum shall be subject to adjustment upon final measurement of the Premises pursuant to Section 1.1, as a deposit of the first month’s Base Rent following the rental abatement period set forth in Section 1.5.3 hereof (the “Advance Deposit”), which shall be applied by Landlord on behalf of the Tenant to the payment of the first month’s Rent following such rental abatement period when due and payable. The Advance Deposit, prior to its being applied to the payment of monthly Base Rent, shall constitute security for the payment and performance by Tenant of all of Tenant’s obligations, covenants, conditions and agreements under this Lease, but shall not be deemed liquidated damages, but shall be applied in reduction of Tenant’s total obligation(s) to Landlord.

 

3.3 No Separate Account . Landlord shall not be obligated to hold the Security Deposit or the Advance Deposit in a separate account from other Building or Project funds, or to pay any interest thereon.

 

4. USES; TENANT COVENANTS.

 

4.1 Permitted Uses . The Premises are to be used for a general office uses, and for no other purpose whatsoever.

 

4.2 Other General Use Covenants. Tenant shall not commit or allow to be committed any waste upon the Premises, or any public or private nuisance. Tenant, at its expense, shall comply with all laws relating to its use and occupancy of the Premises and shall observe the Rules and Regulations, as applied, and attached hereto as Exhibit D . provided however, in the event of any inconsistency between the Rules and Regulations and the express provisions of this Lease, the provisions of this Lease shall control. No act shall be done in or about the Premises that is unlawful, or which will increase the existing rate of insurance on the Building. In the event of a breach of the covenant set forth in the immediately preceding sentence regarding insurance rates, Tenant shall cease the activity giving rise to such increase, and provided that the Landlord has delivered timely notice to Tenant and Tenant has failed to cease any such conduct or activity, and further provided that the increased insurance premiums were in fact paid by Landlord solely as a result of such activity, Tenant shall pay to Landlord any and all such increases in insurance premiums resulting solely from such breach. So long as Tenant continues to pay such increases in premiums, and provided that the activity giving rise to such increased premiums is an activity permitted under Section 4.1, above, the continuation of such activity by Tenant shall not be prohibited or constitute a breach of this Lease.

 

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5. ENVIRONMENTAL PROVISIONS; RECYCLING.

 

5.1 General . Tenant agrees to comply (and to cause its agents, employees, contractors and, while within the Premises, invitees to comply) with any and all applicable Environmental Laws (as defined below) in connection with (1) Tenant’s use and occupancy of the Premises, (2) any use and occupancy of the Premises arising in connection with any assignment of this Lease, or sublease or license of the Premises or any part thereof, and (3) any other fact or circumstance the existence of which legally imposes on Tenant the obligation to so comply therewith. Tenant shall provide all information within Tenant’s control requested by Landlord and/or governmental authorities in connection with Environmental Laws or Hazardous Materials (defined below) relating to the matters contemplated in the preceding sentence.

 

5.2 Tenant’s Warranties and Covenants

 

During the Term and any Renewal Term (as hereafter defined) of the Lease, Tenant warrants, represents and covenants to and with Landlord as follows:

 

5.2.1 Tenant will not introduce within the Premises or the Project (A) asbestos in any form, (B) urea formaldehyde foam insulation, (C) transformers or other equipment which contain dielectric fluid containing polychlorinated biphenyls, or (D) except as permitted below, any flammable explosives, radioactive materials or other substance constituting “hazardous materials” or “hazardous wastes” pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. Sections 9601 et seq.), the Hazardous Materials Transportation Act, as amended (49 U.S.C. Sections 1801 et seq.), the Resource Conservation and Recovery Act, as amended (42 U.S.C. Sections 9601 et seq.) and the regulations adopted and promulgated pursuant thereto, 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.), and in the regulations adopted and publications promulgated pursuant thereto, or successor legislation thereto, or any other Federal, state or local environmental law, ordinance, rule, regulation and/or other statute of a governmental or quasi-governmental authority relating to pollution or protection of the environment (collectively, “Environmental Laws”). The substances described in (A), (B), (C) or (D) above are hereinafter collectively referred to herein as “Hazardous Materials”.

 

5.2.2 Except as expressly permitted hereby, the Premises will never be used by Tenant for any activities involving, directly or indirectly, the use, generation, treatment, transportation, storage or disposal of any Hazardous Materials, or to refine, produce, store, handle, transfer, process or transport Hazardous Materials

 

5.2.3 Tenant (A) shall comply with the Environmental Laws and all other applicable laws, rules and regulations or orders pertaining to health, the environment or Hazardous Materials, in so far as such laws pertain to Tenant’s use and occupancy of the Premises or the need for such compliance arises due to the acts or omissions of Tenant, its agents, employees, contractors, invitees (while within the Premises), subtenants or assignees, (B) shall not, except as specifically permitted hereby, and shall not permit any

 

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Tenant Parties (as hereafter defined) to store, utilize, generate, treat, transport or dispose of any Hazardous Materials on or from the Premises, (C) shall cause its agents, employees, licensees, contractors, invitees (while within the Premises), subtenants and assignees to comply with the representations, warranties and covenants herein contained and be responsible for any non-compliance by any such party(ies), (D) agrees that no portion of the Premises will be used by Tenant or any assignee or subtenant of Tenant as a landfill or a dump, and (E) will not install any underground tanks of any type.

 

5.2.4 In the event of any future storage, presence, utilization, generation, transportation, treatment or disposal of Hazardous Materials in, on or about the Premises, or in the event of any Hazardous Materials Release (as hereinafter defined) which in either case is attributable, in whole or in part, to the presence of Hazardous Materials existing in, on or about on the Project subsequent to the Commencement Date and is caused, directly or indirectly, by Tenant or Tenant’s agents, employees, contractors, licensees, invitees (while within the Premises), sub-tenants or assignees (collectively, the “Tenant Parties”), or is otherwise Tenant’s responsibility under the terms of this Lease, Tenant shall, at the direction of Landlord or any federal, state, or local authority or other governmental authority, remove or cause the removal of any such Hazardous Materials and rectify any such Hazardous Materials Release, and otherwise comply or cause compliance with the laws, rules, regulations or orders of such authority, all at the expense of Tenant, including without limitation, the undertaking and completion of all investigations, studies, sampling and testing and all remedial, removal and other actions necessary to clean up and remove all such Hazardous Materials, on, from or affecting the Premises caused by Tenant or the Tenant Parties. If, under such circumstances, Tenant shall fail to proceed with such removal or otherwise comply with such laws, rules, regulations or orders within the cure period permitted under the applicable regulation or order, the same shall constitute a Default under this Lease (without any notice to Tenant required), and Landlord may, but shall not be obligated to, take such action as may be reasonably necessary under the circumstance to eliminate such Hazardous Materials from the Premises or otherwise comply with the applicable law, rule, regulation or order, acting either in its own name or in the name of Tenant pursuant to this Section, and the reasonable and actual cost thereof shall be borne by Tenant and thereupon become due and payable as Additional Rent hereunder; provided, however, that Landlord shall not exercise its self-help rights hereunder, nor exercise any right otherwise provided herein to terminate this Lease or Tenant’s right of possession due to Tenant’s failure or inability to correct such problem within a time certain as long as Tenant is at all times using commercially reasonable good faith efforts to correct the problem (provided however, that if Landlord determines, in its reasonable discretion, that there exists a substantial risk of governmental enforcement action against Landlord, or governmental or third party civil liability to Landlord, if Landlord fails to take independent action immediately to remediate an environmental problem which is otherwise Tenant’s responsibility under this Section 5, then Landlord shall, notwithstanding Tenant’s continuing efforts to correct the problem, be entitled to take such independent action, and to recover the reasonable and actual costs associated therewith from Tenant). Tenant shall give to Landlord and its authorized agents and employees access to the Premises for such purposes and hereby specifically grants to Landlord a license to remove the Hazardous Materials and otherwise comply with such applicable laws, rules, regulations or orders, acting either in its own name or in the name of the Tenant pursuant to this Section.

 

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5.2.5 Landlord represents, warrants and covenants that to the best of its current actual knowledge, as of the date of execution hereof, the Land, the Building and the Project is free from any Hazardous Materials and is not in violation of any Environmental Laws.

 

5.2.6 Each of Tenant and Landlord hereby indemnifies and holds the other and their respective shareholders, constituents, subsidiaries, affiliates, officers, directors, partners, employees, agents and trustees harmless from, against, for and in respect of, any and all damages, losses, settlement payments, obligations, liabilities, claims, actions or causes of actions, encumbrances, fines, penalties, and costs and expenses suffered, sustained, incurred or required to be paid by any such indemnified party (including, without limitation, reasonable fees and disbursements of attorneys, engineers, laboratories, contractors and consultants) because of, or arising out of or relating to a violation of any of the indemnifying party’s representations, warranties and covenants under this Section, including any Environmental Liabilities (as herein below defined) arising therefrom. For purposes of this indemnification clause, “Environmental Liabilities” shall include all costs and liabilities with respect to the presence, removal, utilization, generation, storage, transportation, disposal or treatment of any Hazardous Materials or any release, spill, leak, pumping, pouring, emitting, emptying, discharge, injection, escaping, leaching, dumping or disposing into the environment (air, land or water) of any Hazardous Materials (each a “Hazardous Materials Release”), including without limitation, cleanups, remedial and response actions, remedial investigations and feasibility studies, permits and licenses required by, or undertaken in order to comply with the requirements of, any federal, state or local law, regulation, or agency or court, any damages for injury to person, property or natural resources, claims of governmental agencies or third parties for cleanup costs and costs of removal, discharge, and satisfaction of all liens, encumbrances and restrictions on the Premises relating to the foregoing. The foregoing notwithstanding, the foregoing indemnifications shall not encompass consequential damages or damages related to loss of business or business interruption which may arise on account of the presence of any Hazardous Materials on or about the Project. The foregoing indemnification and the responsibilities of Tenant and Landlord under this Section shall survive the termination or expiration of this Lease.

 

5.2.7 Tenant and Landlord shall promptly notify each other in writing of the occurrence of any Hazardous Materials Release or any pending or threatened regulatory actions, or any claims made by any governmental authority or third party, relating to any Hazardous Materials or Hazardous Materials Release on or from the Premises the Building, the Land and/or the Project, and shall promptly furnish each other with copies of any correspondence or legal pleadings or documents in connection therewith. Each of Tenant and Landlord shall have the right, but shall not be obligated, to notify any governmental authority of any state of facts which may come to its attention with respect to any Hazardous Materials or Hazardous Materials Release on or from the Premises, the Building, the Land and/or the Project following consultation with the other.

 

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5.2.8 Tenant agrees that, in the event Landlord has a good faith basis to believe a breach by Tenant of its covenants contained in Section 5.2.3 has occurred, Landlord shall have the right (but not the obligation) to conduct, or to have conducted by its agents or contractors, such periodic environmental inspections of the Project as Landlord shall reasonably deem necessary or advisable from time to time. Landlord shall provide Tenant with no less than seventy-two (72) hours prior notice of any such inspection within the interior of the Premises, except in case of an emergency, in which case only such notice as may be practicable under the circumstance shall be required. The cost of any such inspection shall be borne by Tenant in the event such inspection determines that Tenant has breached the covenants set forth in Section 5.2.3 above, otherwise the cost shall be at Landlord’s sole cost and expense.

 

5.3 Permitted Materials . Notwithstanding the foregoing, Tenant and its assignees, subtenants and licensees shall be permitted to store reasonable amounts of Hazardous Materials that are typically used in an ordinary office use (the “Permitted Materials”) provided such Permitted Materials are properly used, stored and disposed of in a manner and location meeting all Environmental Laws, and further provided that Tenant shall not, without Landlord’s consent, have any on-site laboratory facility within the Premises. Any such use, storage and disposal shall be subject to all of the terms of this Section (except for the terms prohibiting same), and Tenant shall be responsible for obtaining any required permits and paying any fees and providing any testing required by any governmental agency with respect to the Permitted Materials. If Landlord in its reasonable opinion determines that said Permitted Materials are being improperly stored, used or disposed of, then Tenant shall immediately take such corrective action as requested by Landlord. Should Tenant fail to take such corrective action within twenty-four (24) hours, Landlord shall have the right to perform such work on Tenant’s behalf and at Tenant’s sole expense, and Tenant shall promptly reimburse Landlord for any and all costs associated with said work.

 

5.4 Recycling Regulations . Tenant shall be solely responsible for compliance with all orders, requirements and conditions now or hereafter imposed by any ordinances, laws, orders and/or regulations (hereinafter collectively called “regulations”) of any governmental body having jurisdiction over the Premises or the Building regarding the collection, sorting, separation and recycling of waste products, garbage, refuse and trash (hereinafter collectively called “waste products”).

 

6. LATE CHARGES; INTEREST LATE CHARGES; INTEREST.

 

6.1 Tenant hereby acknowledges that late payment to Landlord of Base Rent or Additional Rent will cause Landlord to incur administrative costs and loss of investment income not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. If any Base Rent or Additional Rent due from Tenant is not received by Landlord or Landlord’s designated agent within five (5) days after the date due, then Tenant shall pay to Landlord a late charge equal to five percent (5%) of such overdue amount. The parties hereby agree that such late charges represent a fair and reasonable estimate of the administrative cost that Landlord will incur by reason of Tenant’s late payment. Landlord’s acceptance of such late charges shall not constitute a waiver of

 

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Tenant’s Default with respect to such overdue amount or otherwise stop Landlord from exercising any of the other rights and remedies granted hereunder. Notwithstanding the foregoing, Landlord agrees to waive the imposition of such charge one (1) time during each Lease Year of the Term.

 

6.2 In addition to the administrative late charge provided for under Section 6.1, above, if any Base Rent or Additional Rent or any other sum due hereunder from Tenant to Landlord is not paid as and when due under this Lease, and such amount remains unpaid five (5) days after such due date, then the unpaid amount shall bear interest from the date originally due until the date paid at an annual rate of interest equal to the “prime rate” of interest as published in the Wall Street Journal (or, if not published, as established by the then largest national banking association in the United States of America) from time to time (the “Prime Rate”) plus five percent (5%) (the “Default Rate”). Notwithstanding the foregoing, Landlord agrees to waive the imposition of such charge one (1) time during each Lease Year of the Term.

 

7. REPAIRS AND MAINTENANCE.

 

7.1 Landlord’s Obligations . Landlord shall maintain, repair, replace and keep in good operating condition, comparable to similar properties in the Reston, Virginia area, the Common Areas (as defined in Section 39 below), the roof, foundation, load-bearing elements, conduits and structural walls and other structural elements of the Building, the underground utility and sewer pipes of the Building, all base building mechanical, electrical, plumbing, HVAC system and the sprinkler system and other fire and life-safety systems (including, without limitation, all base building systems serving, connected to or within the Premises, exclusive however of any such system installed by or on behalf of Tenant as a part of Tenant’s Work), and the adjacent parking structure and connector, the cost of which shall be included within Operating Costs except to the extent set forth in Section 9.5, hereof, provided that, to the extent the need for any such repairs or replacements arise as a the result of the gross negligence or willful misconduct of Tenant (or Tenant’s agents, employees, contractors, invitees (while within the Premises), assignees or sub-tenants) and the same is not covered under the policies of casualty insurance which are required to be carried by the parties pursuant to this Lease (in which case the proceeds of such insurance will be utilized to satisfy the cost thereof), the cost of such repairs or replacements shall be reimbursable by Tenant to Landlord as Additional Rent under this Lease, and such reimbursement shall be due not later than thirty (30) days after Landlord’s written demand therefore.

 

7.2 Repair Standards . All repairs and maintenance required of Landlord pursuant to this Section or elsewhere in this Lease shall be performed in accordance with standards applicable to comparable buildings in Reston, Virginia, the applicable building and governmental codes, and performed in a timely and diligent fashion. Landlord agrees to diligently attend to any routine repairs or maintenance needs brought to its attention by Tenant as soon as reasonably practicable and in a manner calculated to minimize to the extent possible disruption of Tenant’s business activities.

 

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7.3 Tenant’s Obligations . Subject to Landlord’s obligations as set forth in Section 7.1 above and its right of access pursuant to Section 18, Tenant shall be exclusively responsible for the maintenance and repairs to the interior non-structural portions of the Premises. Tenant shall report in writing to Landlord any defective condition in the Premises becoming known to Tenant which Landlord is required to repair, and failure to so report such defects shall excuse any delay by Landlord in commencing and completing such repair, provided that (i) Landlord shall not be so excused if Landlord had actual knowledge of the need for such repair independent of Tenant’s notification, and (ii) once Landlord is notified or has actual knowledge of the need for such repair, Landlord’s repair obligation under Section 7.1, above, shall be fully effective as to such item (and, to the extent that any Tenant failure in reporting such defects that constitutes gross negligence or willful misconduct and results in the otherwise avoidable need to perform a capital repair or replacement which under Section 9.5 is excluded from Operating Costs, in lieu of an ordinary repair which under Section 9.4 would be included within Operating Costs, Tenant shall be responsible for the reasonable and actual cost of such capital repair or replacement (less the anticipated ordinary repair costs) unless Tenant can demonstrate that a capital repair or replacement to such item would in any event have been necessary within twelve (12) months thereafter, even if the defective condition had been promptly reported to Landlord or known by Landlord in a timely fashion). Landlord’s obligation to make repairs shall be limited to the express obligations stated herein.

 

8. UTILITIES AND SERVICES.

 

8.1 Services . Landlord shall furnish Tenant with the following services and facilities: (i) hot and cold running water in public lavatory facilities located within the Common Areas; (ii) public lavatory facilities and supplies within the Common Areas; (iii) day porter services to the Building; (iv) janitorial service within the Premises (including any executive lavatory or other lavatories within the Premises) and Common Areas, Monday through Friday (excluding holidays) in accordance with the cleaning standards and specifications established from time to time by Landlord for the entirety of the Building, the current version of which cleaning standards and specifications being attached hereto as Exhibit K ; (v) heating ventilation and air conditioning (“HVAC”) service to the Premises and the Common Areas Monday through Saturday during the business hours set forth below, excluding holidays, and shall operate to the standards defined in Section VII of Exhibit C-1 ; (vi) at least one (1) on-site building engineer Monday through Friday, excluding holidays, from 7:00 a.m. to 5:30 p.m.; (vii) at least one (1) elevator available for service after business hours; and (viii) access to the Building and adjacent parking structure and parking areas 24 hours a day, 365 days a year, including holidays; the cost of all of which shall be deemed an Operating Cost hereunder (unless excluded pursuant to Section 9.5). For purposes hereof, “holidays” shall be limited to: New Year’s Day, Memorial Day, July 4th, Labor Day, Thanksgiving, and Christmas, and business hours shall be 7:00 a.m. to 6:00 p.m. Monday through Friday, excluding designated holidays, and 9:00 a.m. to 2:00 p.m. on Saturdays, excluding designated holidays (provided that Tenant shall have access to the Premises 24 hours per day, 7 days per week).

 

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8.2 Additional Services. If Tenant requires HVAC services on weekends or holidays, Landlord shall provide such additional service after reasonable prior written request therefor from Tenant, and Tenant shall reimburse Landlord for such additional service within thirty (30) days of request therefor, at the actual and direct cost to Landlord in providing such service. Any additional building engineer hours beyond that set forth in Section 8.1(vi) above required by the Tenant shall be at Tenant’s sole cost and expense, and the charge therefore shall be equal to Thirty Five Dollars ($35.00) per hour. Any after hours HVAC service requested by Tenant shall be at Tenant’s sole cost and expense and the charge therefor shall be equal to Thirty Five Dollars ($35.00) per hour/per floor during the first Lease Year. Two (2) zones are located on each floor and after hours HVAC, per zone, for the first Lease Year shall be Twenty and 00/100 Dollars ($20.00) for the initial hour and each hour thereafter. By request, Tenant shall have the capability to activate overtime HVAC per zone, per floor. After the first Lease Year, Landlord shall notify Tenant in writing of its actual and direct cost of providing after hours HVAC.

 

8.3 Additional Provisions . Except when due to the gross negligence and/or misconduct of Landlord or its agents, employees or contractors or except as expressly set forth below, in no event shall Landlord be liable to Tenant for (a) any damage to the Premises, or (b) any loss, damage or injury to any property therein or thereon, or (c) any claims for the interruption of or loss to Tenant’s business or for any damages or consequential losses occasioned by bursting, rupture, leakage or overflow of any plumbing or other pipes or other similar cause in, above, upon or about the Premises or the Building, or (d) any interruption in any utility or other services to the Premises. If any public utility or governmental body shall require Landlord or Tenant to restrict the consumption of any utility or reduce any service to the Premises or the Building, Landlord and Tenant shall comply with such requirements, without any abatement or reduction of the Base Rent, Additional Rent or other sums payable by Tenant hereunder.

 

In the event Landlord shall fail to comply with its obligations hereunder to provide or undertake any maintenance or repair of life safety systems, elevators, required lighting, HVAC systems or electricity in the Building as required by the terms of the Lease within two (2) business days of written notice to Landlord from Tenant of the necessity thereof, then, Tenant shall provide a second written notice to Landlord requesting that Landlord comply with its obligation hereunder in connection therewith, and in the event Landlord has not commenced (and thereafter diligently pursues to completion) the remediation thereof within two (2) business days after receipt of such second notice, Tenant shall be entitled to take such action as may be commercially reasonable under the circumstance to correct such uncured default and Landlord shall reimburse Tenant for all costs reasonably incurred in the exercise of such rights, together with interest thereon at the Prime Rate from the date paid until the date reimbursed, within ten (10) days after written demand; provided that Tenant hereby waives any and all rights or claims of offset as a result thereof.

 

8.4 Lower Level Space . Tenant shall pay, commencing (i) on the Rent Commencement Date and on the first day of each month thereafter, the cost of all electricity actually utilized for or in connection with the Lower Level Space, as evidenced by a submeter or check meter (if so installed at Landlord’s sole cost and expense) or as

 

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otherwise reasonably estimated by Landlord and agreed to by Tenant, and (ii) on the first day of the Second Lease Year, and on the first day of each month thereafter, a pro rata share of increases in janitorial expenses attributable to the Lower Level Space which are over and above that amount of janitorial expenses attributable to the Lower Level Space during the Base Year (adjusted, as necessary, to reflect an entire year of Landlord’s providing janitorial service to the Lower Level Space), as reasonably estimated by Landlord and agreed to by Tenant. The Landlord and Tenant expressly agree that there shall be no Base Rent increase, Operating Expenses (except for electricity and janitorial expenses attributable to the Lower Level Space as set forth herein) or real estate taxes applied to the Lower Level Space. The rental rate for the Lower Level Space, consisting of approximately 2,000 square feet of space shall be Fifteen & 75/100 Dollars per useable square foot thereof, with no increases thereto during the Term of this Lease.

 

8.5 Storage Space . If exercised by Tenant from time to time on or prior to the Commencement Date and to be effective as of the Commencement Date (and thereafter on an as-available basis) for the Lease Term (including renewal options), Tenant shall have the right to occupy up to One Thousand (1,000) usable square feet of contiguous, dry space in a lower level of the Building (the “Storage Space”), with elevator access to the upper floors, which may be used for storage and/or ancillary office purposes. The rental rate for such space shall be Fifteen & 00/100 Dollars ($15.00) per useable square foot thereof, with no increases thereto during the Term of this Lease. Except as set forth herein, there shall be no Additional Rent applicable to the Storage Space, if taken by Tenant, whether for operating expenses, real estate taxes, or other such expenses. In the event Tenant at any time requires HVAC or janitorial for such Storage Space taken by it, the agreed upon cost thereof shall be reimbursed by Tenant as Additional Rent under this Lease. Landlord agrees to paint such Storage Space, provide demising partitioning with a Building standard door and lockset, and hang basic lighting fixtures from the ceiling, all at Landlord’s sole expense. If Tenant has taken the Storage Space then, commencing on the Rent Commencement Date (or, if later, the date Tenant takes the Storage Space) and on the first day of each month thereafter, Tenant shall pay, on a monthly basis, the cost of all electricity utilized for or in connection with the Storage Space, as evidenced by a check meter or submeter (if so installed at Landlord’s sole cost and expense) or as otherwise reasonably estimated by Landlord and agreed to by Tenant.

 

9. OPERATING COSTS.

 

9.1 Defined . Commencing with the first annual anniversary of the Rent Commencement Date and continuing thereafter during each calendar year or portion thereof during the Term, Tenant shall pay as Additional Rent to Landlord, without diminution, set-off or deduction, Tenant’s Share of “Increases in Operating Costs” (as defined in Section 9.4 below) for each calendar year. For purposes hereof, Tenant’s Share of Increases in Operating Costs shall mean Tenant’s Share of the amount by which all Operating Costs for the calendar year in question exceed Operating Costs incurred in calendar year 2003 (calendar year 2003 being herein referred to as the “Base Year”).

 

9.2 Estimated Payments . Commencing as of the first day of the second Lease Year and continuing on a monthly basis thereafter, Tenant shall make monthly

 

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installment payments toward Tenant’s Share of Increases in Operating Costs on an estimated basis, based on Landlord’s reasonable good faith estimate of Operating Costs for such calendar year. Tenant shall pay Landlord, as Additional Rent, commencing on the first day of the second Lease Year and on the first day of each month thereafter throughout the Term (and any extension thereof), one-twelfth (1/12th) of Landlord’s reasonable good faith estimate of Tenant’s Share of Increases in Operating Costs for the then-current calendar year. If at any time or times during such calendar year, but not more after than once per calendar year, it appears to Landlord that Tenant’s Share of Increases in Operating Costs for such calendar year will materially vary from Landlord’s estimate, Landlord may, by written notice to Tenant, reasonably revise its estimate for such calendar year and Tenant’s estimated payments hereunder for such calendar year shall thereupon be based on such revised estimate.

 

9.3 Annual Reconciliation . Landlord shall provide to Tenant within a reasonable time after the end of each calendar year (Landlord agreeing to endeavor so to do within 120 days after the end of the applicable year, provided that such shall not be a condition of Tenant’s obligations arising as a result thereof or based thereon), a detailed, itemized statement (the “Expense Statement”), calculated in accordance with Section 9. 1, above, setting forth the total actual Operating Costs for such calendar year and Tenant’s Share of Increases in Operating Costs. Landlord shall respond to any inquiries and requests for invoices or other information with respect to Operating Costs within thirty (30) days of any written request therefore by Tenant. Within thirty (30) days after the delivery of such Expense Statement, Tenant shall pay to Landlord the amount of any shortfall in the amount of estimated payments made to Landlord pursuant to Section 9.2 on account of Tenant’s Share of Increases in Operating Costs for such calendar year, and the actual amount shown as Tenant’s Share of Increases in Operating Costs for such calendar year. In the event the Expense Statement reflects an overpayment of Tenant’s Share of Increases Operating Costs for such year, such overpayment shall be credited against the next due Base Rent hereunder, except if Tenant’s Lease is no longer in effect then Landlord shall refund such amount to Tenant within thirty (30) days.

 

9.4 Operating Costs . The term “Operating Costs” shall mean all reasonable and necessary expenses incurred by Landlord in connection with the operation, management, maintenance and repair of the Building, Common Areas and the Land in accordance with the standards applicable to similar first class properties in the Reston, Virginia area, subject to the qualifications set forth below. All Operating Costs shall be determined according to generally accepted accounting principles which shall be consistently applied. Operating Costs include the following items: (a) the cost of the personal property used in conjunction with the operation, management, maintenance and repair of the Building and the Project; (b) costs to repair and maintain the Building, the Building roof and the Common Areas; (c) all expenses paid or incurred by Landlord for water, gas, electric, sewer and oil services for the Building (including Common Areas); (e) building supplies and materials used in connection with repairs to the Project; (f) cleaning and janitorial services in or about the Premises, the Building (including, without limitation, Common Areas, but not including the below grade levels of the Building other than any Common Areas within such lower levels) and the Land; (g) window glass replacement, repair and cleaning; (h) repair, replacement and maintenance of the grounds, including

 

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costs of landscaping, lighting, Project and Building signage, gardening and planting, including service or management contracts with independent contractors, including but not limited to security and energy management services and costs; (i) operational costs to achieve compliance with any governmental laws, rules, orders or regulations which are enacted or become effective after the Commencement Date, and excluding capital expenses associated therewith except to the extent specifically set forth below; 0) utility taxes; (k) compensation (including employment taxes, fringe benefits, salaries, wages, medical, surgical, and general welfare benefits (including health, accident and group life insurance), pension payments, payroll taxes for all personnel employed by Landlord or its management company who perform duties in connection with the operation, management, maintenance and repair of the Building (allocated among all properties served by such employees as determined by Landlord in its reasonable discretion, if such employees are utilized by more than one property) plus the salary and benefits of the property manager specifically assigned to the Project; (l) any (i) capital expenditures incurred to reduce Operating Costs, to the extent of such reduction (and with any amount remaining unrecovered by virtue of such limitation to carry forward to subsequent calendar years, to the extent of any such continuing reduction achieved in each such subsequent calendar year, until recovered in full), (ii) the annual amortized portion of capital expenditures incurred to comply with any governmental law, order, regulation or other requirement which is enacted or becomes effective after the Commencement Date, and (iii) capital expenditures made for the replacement of items (the repair of which would be includable within Operating Costs) in lieu of repairs thereto, provided (A) replacement of the item in lieu of repair is either less costly on an annual basis than repair of the item in question, or is necessary given the non-functioning condition of the item in question, as determined by Landlord in good faith, (B) this provision shall not apply to general renovations, as opposed to needed repairs, of the Building or any elements therein, and (C) such expenditure shall be recoverable only over the useful life of the item in question by amortizing such expenditure over such useful life (in accordance with applicable federal income tax guidelines) at an annual interest rate equal to the Prime Rate at the time of such expenditure, and only the sum of all amortization payments payable or deemed payable during the year in question shall be includable in Operating Costs in each year during such recovery period; (m) cost of premiums for casualty and liability insurance policies required to be maintained by Landlord hereunder and any other insurance carried by Landlord with respect to the Project; (n) license, permit and inspection fees; (o) reasonable management fees based upon a percentage of gross rental receipts, Increases in Operating Costs, Increases in Real Estate Taxes and utility costs not to exceed four percent (4%) of the aggregate amount thereof; (p) consulting fees in connection with the provision of common area maintenance services; (q) personal property and BPOL taxes; (r) trash removal, including all costs incurred in connection with waste product recycling; (s) snow and ice removal or prevention; (t) maintenance, repair and striping of all parking areas used by tenants of the Building, and any other cost or assessment payable in connection with the maintaining of such parking areas; (u) uniforms and dry cleaning; (v) telephone, cellular phone, paging, telegraph, postage, stationery supplies and other materials and expenses required for the routine operation of the Building; (w) association and other assessments for maintenance of offsite improvements serving or benefiting the Building or the Land; (x) costs and expenses relating to compliance with any ongoing

 

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existing proffer obligations applicable to the Project; (y) the cost of acquisition, repair, maintenance and replacement of seasonal Building decoration; (z) the cost of operating, maintaining, repairing and replacing conduits and other electrical fixtures, fire protection, alarm and sprinkler systems, Building and Project plumbing and storm and sanitary sewer systems, and (aa) other association assessments for common area services provided to owners in the Plaza America complex.

 

9.5 Exclusions . Except as otherwise specifically provided in this Lease to be an Operating Cost, Operating Costs shall not include any of the following:

 

(a) costs of repairs, restoration, replacements or other work occasioned by (1) fire, windstorm or other casualty of an insurable nature (whether such destruction be total or partial) and either (aa) payable (whether paid or not) by insurance required to be carried by Landlord under this Lease, or (bb) otherwise payable (whether paid or not) by insurance then in effect obtained by Landlord, (2) the exercise by governmental authorities of the right of eminent domain, whether such taking be total or partial, (3) the negligence or intentional tort of Landlord, or any subsidiary or affiliate of Landlord, or any representative, employee or agent of same (including the costs of any deductibles paid by Landlord), or (4) the act of any other tenant in the Building, or any other tenant’s agents, employees, licensees or invitees to the extent Landlord has the right to recover the applicable cost from such person;

 

(b) Leasing commissions; attorneys’ fees, except for those reasonable attorney’s fees in connection with enforcing rules and regulations; costs disbursements and other expenses incurred in connection with negotiations for leases with tenants, other occupants, or prospective tenants or other occupants of the Building, or similar costs incurred in connection with disputes with tenants, other occupants, or prospective tenants, or similar costs and expenses incurred in connection with negotiations or disputes with purchasers or mortgagees of the Building;

 

(c) Allowances, concessions and other costs and expenses incurred in completing, fixturing, furnishing, renovating or otherwise improving, decorating or redecorating space for tenants (including Tenant), prospective tenants or other occupants and prospective occupants of the Building, or vacant, leasable space in the Building;

 

(d) Costs of the initial construction of the Building and repairing, replacing or otherwise correcting defects (but not the costs of repair for normal wear and tear) in the construction of the base Building, any tenant’s improvements, the adjacent parking structure or other improvements in the Building, or in the Building equipment;

 

(e) Costs or expenses relating to another tenant’s or occupant’s space which (1) were incurred in rendering any service or benefit to such tenant that Landlord was not required, or were for a service in excess of the service that Landlord was required, to provide Tenant without additional charge hereunder (including without limitation insurance coverage for another tenant’s or occupant’s leasehold improvements), or (2) were otherwise in excess of the Building standard services then being provided by Landlord to all tenants or other occupants in the Building, whether or not such other tenant or occupant is actually charged therefor by Landlord;

 

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(f) Payments of principal and interest or other finance charges made on any debt and rental payments made under any ground or underlying lease or leases;

 

(g) Costs incurred in connection with the sales, financing, refinancing, mortgaging, selling or change of ownership of the Building, including brokerage commissions, attorneys’ and accountants’ fees, closing costs, title insurance premiums, transfer taxes and interest charges;

 

(h) Costs, fines, interest, penalties, legal fees or costs of litigation incurred due to the late payments of taxes, utility bills and other costs incurred by Landlord’s failure to make such payments when due;

 

(i) Costs incurred by Landlord for trustee’s fees, partnership organizational expenses and accounting fees except accounting fees relating solely to the ownership and operation of the Building.

 

(j) Costs of a capital nature, including without limitation, capital improvements, capital repairs, capital equipment and capital tools, all as determined in accordance with generally accepted accounting principles other than those that actually reduce operating expenses to the extent of such reduction;

 

(k) Landlord’s general corporate overhead and general and administrative expenses;

 

(l) Any compensation paid to clerks, attendants or other persons in commercial concessions operated by Landlord or in the parking garage of the Building;

 

(m) Rentals and other related expenses incurred in leasing air conditioning systems, elevators or other equipment ordinarily considered to be of a capital nature, except equipment not affixed to the Building which is used in providing janitorial or similar services, but excluding any portion of such rental or lease payment(s) which include a maintenance or repair agreement or contract;

 

(n) The rent for any offices or spaces of Landlord or any related entity other than any on-site property management office;

 

(o) Landlord’s income and franchise taxes, special assessments and other business taxes except those business taxes which relate solely to the operation of the Building (specifically including BPOL Taxes which shall be considered a part of Operating Costs and/or Real Estate Taxes);

 

(p) All amounts which would otherwise be included in Operating Costs which are paid to any affiliate or subsidiaries of Landlord, or any representative, employee or agent of same, to the extent the costs of such services exceed the competitive rates for similar services of comparable quality rendered by persons or entities of similar skill, competence and experience;

 

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(q) Subject to the management fee contribution provided for in the Lease, all other fees for management of the Building;

 

(r) Costs or expenses of utilities directly metered to tenants of the Building and payable separately by such tenants;

 

(s) Increased insurance premiums caused by Landlord’s or any other tenant’s hazardous acts;

 

(t) Moving expense costs of tenants of the Building to the extent not provided by Landlord (i) to Tenant and (ii) generally to other initial tenants of the Building;

 

(u) Advertising and promotional costs associated with the leasing of the Building, and costs of signs in or on the Building identifying the owners of the Building or any individual tenant of the Building to the exclusion of other tenants;

 

(v) Costs incurred to correct violations by Landlord of any law, rule, order or regulation which was in effect as of the Commencement Date;

 

(w) Costs incurred (less costs of recovery) for any items to the extent covered by a manufacturer’s, materialman’s, vendor’s or contractor’s warranty (a “Warranty”) which are paid by such manufacturer, materialman, vendor or contractor (Landlord shall pursue a breach of warranty claim for items covered by a Warranty unless Landlord determines in good faith that such action would not be in the best interest of the tenants of the Building) and the costs of any items that are not covered by a Warranty but for which a reasonable, prudent landlord would have obtained a warranty;

 

(x) Non-cash items, such as deductions for depreciation and amortization of the Building and the Building equipment, or interest on capital invested, except on materials, tools, supplies and vendor-type equipment purchased by Landlord to enable Landlord to supply services Landlord might otherwise contract for with a third party where such depreciation in the charge for such third party’s service, all as determined in accordance with generally accepted accounting principles, consistently applied;

 

(y) Electric power costs for which any tenant directly contracts with the local public service company;

 

(z) Services provided and costs incurred in connection with the operation of any retail or other ancillary operations owned, operated or subsidized by Landlord;

 

(aa) Expenses and costs not normally, in accordance with generally accepted accounting principles, included by landlords of first-class institutional office buildings or that are not competitive or not prudent in view of the goods and services obtained for such expense or costs;

 

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(bb) Consulting costs and expenses paid by Landlord, other than those incurred to reduce Operating Costs and/or Real Estate Taxes;

 

(cc) The cost of any “tap fees” or one-time lump sum sewer or water connection fees for the Building payable in connection with the initial construction of the Building;

 

(dd) Rental for any space in the Building set aside for conference facilities, storage facilities or exercise facilities;

 

(ee) Vault rental;

 

(ff) Wages and salaries for off-site employees and employees at the Building above the level of property manager;

 

(gg) the cost of any parking garage operator or the cost of operating the parking facilities to the extent that any such costs of operating are borne by a third party operator and not Landlord;

 

(hh) those costs and/or expenses stated to be at Landlord’s cost and expense (or words of like import), or subject to Landlord’s indemnification obligations, pursuant to the provisions of Sections 5.2.6, 5.2.8, 8.4, 8.5, 20.2, 40, 42, 51.6 and 53 hereof and pursuant to paragraph 1 of Exhibit C and General Note 1 of Exhibit C-1 hereto, and those costs and expenses for which Landlord actually receives direct reimbursement from third parties; and/or

 

(ii) any costs separately paid directly by retail tenants in the Building.

 

9.6 Further Adjustment . Operating Costs for each calendar year (including the Base Year) shall be adjusted to include all costs, expenses and disbursements which vary by occupancy or not otherwise provided to all tenants that Landlord reasonably determines, based upon normal and customary market standard for similar projects in the Reston, Virginia area, would have been incurred if Landlord had provided all utilities and services within the definition of Operating Costs to tenants and occupants in the Building had the Building been ninety five percent (95%) occupied throughout such year. Operating Costs for the Base Year shall also be increased by any amounts which would have been deemed Operating Costs but which were not actually incurred as a result of warranties and maintenance/service contracts in place and applicable to the Base Year.

 

9.7 Multi-Project Operating Costs . The Building is a part of a larger project or development, and as such, Landlord shall have the right (but not the obligation) to allocate to the Building an appropriate portion of those Operating Costs which are incurred with respect to the project as a whole. By way of example, landscaping costs for a multi-building project shall be allocated on an appropriate basis between all tenantable buildings in the project.

 

9.8 Limitation on Increases in Operating Costs . Beginning calendar year 2004 and continuing for the balance of the Term, Operating Expenses shall not include increases in “controllable” Operating Costs that exceed six percent (6%) of the amount thereof, on a

 

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cumulative basis, utilized in the prior calendar year’s calculation of Operating Expenses. (for purposes hereof “on a cumulative basis” shall mean that in the event increases of controllable Operating Costs in any one year are less than 6% of the prior years increases in controllable Operating Costs, the amount by which such increases fell below 6% may be carried forward to subsequent years and applied to increases in controllable Operating Costs that exceed 6%. For example, if increases in controllable Operating Costs in 2005 are 5% and increases in controllable Operating Costs in 2006 are 8%, then, for purposes of determining the amount of increases in controllable Operating Costs that may be passed through to Tenant, up to a 7% increase for 2006 may be passed through (i.e., the 6% allowable in 2006 plus a 1% carryover from 2005). “Controllable” Operating Costs shall mean all Operating Costs as are defined in Section 9.4 above, exclusive only of expenses paid or incurred by Landlord for water, gas, electric, sewer, oil services and other utilities for the Building, cost of premiums for casualty and liability insurance policies required to be maintained by Landlord hereunder (provided such insurance has been competitively bid on an annual basis) and any other insurance carried by Landlord with respect to the Building (provided such insurance has been competitively bid on an annual basis), and the costs of snow and ice removal.

 

10. REAL ESTATE TAXES.

 

10.1 Defined . Commencing with the first annual anniversary of the Rent Commencement Date and continuing during each calendar year or portion thereof during the Term, Tenant shall pay as Additional Rent to Landlord, without diminution, set-off or deduction, Tenant’s Share of “Increases in Real Estate Taxes” (as defined in Section 10.3, below) paid in such calendar year. For purposes hereof, Tenant’s Share of Increases in Real Estate Taxes shall mean Tenant’s Share of the amount by which all Real Estate Taxes for the year in question exceed Real Estate Taxes incurred for the Base Year.

 

10.2 Estimated Payment . Tenant shall make monthly installment payments toward Tenant’s Share of Increases in Real Estate Taxes on an estimated basis, based on Landlord’s reasonable good faith estimate of Real Estate Taxes for such calendar year. Tenant shall pay Landlord, as Additional Rent, commencing on the first day of the second Lease Year and on the first day of each month thereafter throughout the Term (and any extension thereof), one-twelfth (1/12th) of Landlord’s reasonable but good faith estimate of Tenant’s Share of Increases in Real Estate Taxes for the then-current calendar year. If at any time or times during such calendar year it appears to Landlord that Tenant’s Share of Increases in Real Estate Taxes for such calendar year will materially vary from Landlord’s estimate, Landlord may, by written notice to Tenant, once during any calendar year, reasonably revise its estimate for such calendar year and Tenant’s estimated payments hereunder for such calendar year shall thereupon be based on such revised estimate.

 

10.3 Real Estate Taxes. For purposes of this Lease, “Real Estate Taxes” shall mean all taxes and assessments, general or special, ordinary or extraordinary, foreseen or unforeseen, assessed, levied or imposed upon the Building or the Land, or assessed, levied or imposed upon the fixtures, machinery, equipment or systems in, upon or used in connection with the operation of the Building or the Land under the current or any future

 

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taxation or assessment system or modification of, supplement to, or substitute for such system. Real Estate Taxes shall include all reasonable expenses (including, but not limited to, reasonable attorneys’ fees, disbursements and actual costs) incurred by Landlord in obtaining or attempting to obtain a reduction of such taxes, rates or assessments, including any legal fees and costs incurred in connection with contesting or appealing the amounts or the imposition of any Real Estate Taxes, but not in excess of the annual reduction in Real Estate Taxes achieved. In the event Real Estate Taxes (including special assessments) may be paid in installments, they maybe paid in installments or in lump sum, at Landlord’s election (and in such event Real Estate Taxes shall include such installments and interest paid on the unpaid balance of the assessment, or the entirety thereof, as applicable). The foregoing notwithstanding, Real Estate Taxes shall not include: (i) any franchise, corporation, income or net profits tax which may be assessed against Landlord or the Project or both, (ii) transfer taxes assessed against Landlord or the Project or both, (iii) penalties, interest, legal fees or costs of litigation incurred due to any late payments of Landlord, or (iv) personal property taxes of Tenant.

 

10.4 Annual Reconciliation . Landlord shall provide to Tenant within a reasonable time after the end of each calendar year (Landlord agreeing to endeavor so to do within 120 days after the end of the applicable year, provided that such shall not be a condition of Tenant’s obligations arising as a result thereof or based thereon), with Landlord’s calculation of Tenant’s Share thereof (the “Tax Statement”). Within thirty (30) days after the delivery of the Tax Statement, Tenant shall pay to Landlord the amount of any shortfall in the amount of estimated payments made to Landlord pursuant to Section 10.2 on account of Tenant’s Share of Increases in Real Estate Taxes for such calendar year, and the actual amount shown as Tenant’s Share of Increases in Real Estate Taxes for such calendar year. In the event the Tax Statement reflects an overpayment of Tenant’s Share of Real Estate Taxes for such year, such overpayment shall be credited against the next due Base Rent hereunder, except if Tenant’s Lease is no longer in effect then Landlord shall refund such amount to Tenant within thirty (30) days.

 

11. ADDITIONAL PROVISIONS; OPERATING COSTS AND REAL ESTATE TAXES.

 

11.1 Partial Year; End of Term . To the extent that a more accurate method of allocating same cannot be implemented by Landlord, Tenant’s Share of Increases in Operating Costs and Real Estate Taxes for any partial calendar year shall be determined by multiplying the amount of Tenant’s Share thereof for the full calendar year by a fraction, the numerator of which is the number of days during such partial calendar year falling within the Term and the denominator of which is 365. If this Lease terminates on a day other than the last day of a calendar year, the amount of any adjustment to Tenant’s Share of Increases in Operating Costs and Real Estate Taxes with respect to the year in which such termination occurs shall be prorated on the basis which the number of days from January 1 of such year to and including such termination date bears to 365; and any amount payable by Landlord to Tenant or Tenant to Landlord with respect to such adjustment shall be payable within thirty (30) days after delivery by Landlord to Tenant of the applicable Expense Statement and Tax Statement with respect to such year.

 

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11.2 Other Taxes . In addition to Tenant’s Share of Increases in Operating Costs and Increases in Real Estate Taxes, Tenant shall pay, prior to delinquency, all personal property taxes payable with respect to all property of Tenant located in the Premises or the Building, and shall provide promptly, upon reasonable request of Landlord, written proof of such payment.

 

11.3 Covenant Regarding Timely Payment of Operating Costs and Real Estate Taxes . Landlord covenants to pay all Operating Costs and Real Estate Taxes before the same become delinquent, subject to Tenant’s obligation to make the payments contemplated by Article 9 and Article 10, above, in a timely fashion.

 

11.4 Contesting Real Estate Taxes . Landlord will have the right to employ a tax consulting firm to attempt to assure a fair tax burden on the Project, provided Landlord will use reasonable efforts to minimize the cost of such service. The reasonable cost of such service shall be included in the Real Estate Taxes hereunder in the year same were incurred or paid, at Landlord’s election, but only to the extent of the annual reduction in Real Estate Taxes achieved. Additionally, during any such period, Landlord shall have the right, in its reasonable judgment, to contest any tax assessment, valuation or levy against the Project, and to retain legal counsel and expert witnesses to assist in such contest and otherwise to incur expenses in such contest, and any reasonable fees, expenses and costs incurred by Landlord in contesting any assessments, levies or tax rate applicable to the Project shall be included in Real Estate Taxes as set forth above.

 

11.5 Tenant’s Audit Right . Tenant shall have the right, on an annual basis, beginning on the first annual anniversary of the Commencement Date, to have a certified public accounting firm or other representative audit the Landlord’s books and records pertaining to Operating Costs and Real Estate Taxes for the immediately preceding year (including, as appropriate, the Base Year). Tenant shall be responsible for the entire cost of said audit unless an error greater than four percent (4%) of aggregate Operating Costs and Real Estate Taxes is identified for the year in question, and in this instance, Landlord shall be responsible for all audit costs incurred by Tenant in addition to any and all legal fees incurred in recovering any Operating Cost and Real Estate Tax pass through overpayments Tenant has made to Landlord, provided the same shall not be in the nature of a contingency or success fee. In the event an error greater than four percent (4%) is identified, Tenant shall have the right, at Tenant’s cost, to audit that specific item for the remaining Initial Lease Term. Landlord, upon thirty (30) days written notice from Tenant, shall make available at the offices of Landlord’s property manager all appropriate books and records including but not limited to paid bill files, operating expense billing files and contracts relating to the year in question. In the event of any overpayment, Landlord shall immediately credit against the next due Base Rent hereunder all overpayments plus 10% per annum interest from the date paid to the date credited.

 

11.6 Arbitration . Disputes regarding Operating Costs, Real Estate Taxes, and any audit thereof, shall be subject to arbitration in accordance with the provisions of Section 49 hereof.

 

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12. TENANT’S INSURANCE.

 

12.1 Coverage Requirements . Tenant shall during the Term of this Lease, procure at its expense and keep in force the following insurance:

 

(a) Commercial general liability insurance naming the Landlord and Landlord’s managing agent as additional insureds against claims for bodily injury and property damage occurring in or about the Premises or any appurtenances thereto covering the operation of the Tenant and any subtenants, licensees and concessionaires of the Tenant. Such insurance shall be written on an “Occurrence Form” and shall include, without limitation, blanket contractual liability recognizing provisions of this Lease, broad form property damage, coverage for independent contractors, personal injury liability and coverage for hired auto and non-ownership auto liability. Such insurance shall be primary. Such insurance shall have a limit of not less than Two Million Dollars ($2,000,000.00) per occurrence with a Two Million Dollars ($2,000,000.00) general aggregate with an excess (umbrella) liability insurance in the amount of Two Million Dollars ($2,000,000.00) per occurrence and Ten Million Dollars ($10,000,000.00) annually in the aggregate; provided, however that no such limits shall be deemed limitation of the liability of Tenant hereunder. If Tenant has other locations that it owns or leases and its commercial general liability insurance coverage hereunder is covered as part of blanket coverage, the blanket policy shall include an aggregate limit per location endorsement. Such liability insurance shall be primary. In no event shall the limits of such insurance be considered as limiting the liability of Tenant under this Lease;

 

(b) Personal property insurance insuring all equipment, trade fixtures, inventory, fixtures and personal property located within the Premises (excluding leasehold improvements, which shall be insured by and remain the property of Landlord, but specifically including plate glass insurance covering breakage of any glass frontage installed by or on behalf of Tenant within or as a part of the Premises or otherwise as a part of the Building but adjoining the Premises). Such insurance shall be written on a replacement cost basis in an amount equal to one hundred percent (100%) of the full replacement value of the aggregate of the foregoing;

 

(c) Workers’ compensation and occupational disease insurance, employee benefit insurance and any other insurance in the statutory amounts required by the laws of the State where the operations are to be performed with broad-form all-states endorsement.

 

(d) Employer’s liability insurance with a limit of One Hundred Thousand Dollars ($100,000.00) for each accident, with any claims in excess of such amount covered by Tenant’s umbrella liability policy; and

 

(e) Business income insurance and loss of rental insurance in an amount equal to at least to eighteen (18) months Base Rent.

 

12.2 Rating; Certificates; Cancellation . The policies required to be maintained by Tenant shall be with companies rated A-X or better in the most current issue of Best’s Insurance Reports. Insurers shall be licensed to do business in the Commonwealth of Virginia and domiciled in the USA. Any deductible amounts under any insurance policies required hereunder shall be commercially reasonable. Certificates of insurance or

 

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certified copies of the policies shall be delivered to Landlord prior to the Commencement Date and annually thereafter at least thirty (30) days prior to the expiration date of the old policy. Tenant shall have the right to provide insurance coverage which it is obligated to carry pursuant to the terms hereof in a blanket policy, provided such blanket policy expressly affords coverage to the Premises and to Landlord as required by this Lease. Each policy of insurance shall provide notification to Landlord and any mortgagee(s) of Landlord at least thirty (30) days prior to any cancellation or modification to reduce the insurance coverage.

 

12.3 Other . In the event Tenant does not purchase the insurance required by this Lease or keep the same in full force and effect, and the same is not corrected within five (5) business days following written notice thereof from Landlord to Tenant, then Landlord may, but shall not be obligated to, purchase the necessary insurance and pay the premium therefore. Tenant shall repay to Landlord, as Additional Rent, any and all reasonable expenses (including attorneys’ fees) and damages which Landlord may sustain by reason of the failure of Tenant to obtain and maintain insurance.

 

13. LANDLORD’S INSURANCE.

 

13.1 Coverage . At all times during the Lease Term, Landlord will maintain, the cost of which shall be reimbursable as an Operating Cost hereunder, (a) fire and extended coverage insurance covering the Project, including all of Landlord’s Work, in an amount equal to one hundred percent (100%) of the replacement value thereof, and (b) public liability and property damage insurance in such amounts as Landlord deems reasonable from time to time. Landlord shall also have the right to obtain such other types and amounts of insurance coverage on the Building (including loss of rental insurance) and Landlord’s liability in connection with the Building as are customary or advisable for a comparable project in the Reston, Virginia area, as determined by Landlord in Landlord’s reasonable judgment. Any dispute regarding the appropriateness of such additional insurance coverage shall be subject to arbitration pursuant to Section 49 of this Lease.

 

13.2 Rating; Certificates; Cancellation . The policies required to be maintained by Landlord shall be with companies rated A-X or better in the most current issue of Best’s Insurance Reports. Insurers shall be licensed to do business in the Commonwealth of Virginia and domiciled in the USA. Any deductible amounts under any insurance policies required hereunder shall be commercially reasonable, in Landlord’s reasonable judgment. Landlord shall have the right to provide insurance coverage which it is obligated to carry pursuant to the terms hereof in a blanket policy, provided such blanket policy expressly affords coverage to the Project and to Tenant as required by this Lease.

 

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14. DAMAGE OR DESTRUCTION.

 

14.1 Damage Repair.

 

14.1.1 If the Premises shall be destroyed or rendered untenantable, as agreed to by Landlord and Tenant or determined by the local fire marshal or building inspector, either wholly or in part, by fire or other casualty, then, unless this Lease is terminated for reasons permitted pursuant to Sections 14.2 and/or 14.5, below, Landlord shall, within thirty (30) days after the date of such casualty, provide Tenant with Landlord’s good faith written estimate (the “Estimate”) of how long it will take to repair or restore the Premises.

 

14.1.2 If the Estimate indicates that Landlord will require less than one hundred eighty (180) days after the date of such casualty to perform such repairs or restoration, then this Lease shall continue in full force and effect, and Landlord shall, promptly after adjusting the insurance claim and obtaining governmental approvals for reconstruction, commence and diligently prosecute to completion the restoration of the Premises to their condition immediately prior to such casualty, subject to Section 14.4 below and subject to Force Majeure (as defined in Section 47.7, below). Pending termination of this Lease or substantial completion of such restoration, the Base Rent shall be abated from the date of the casualty in the same proportion as the untenantable portion of the Premises bears to the whole thereof, as agreed to by Landlord and Tenant, or determined by the governmental official set forth above.

 

14.1.3 If Landlord indicates within the Estimate that it will require in excess of one hundred eighty (180) days after the date of such casualty to fully repair or restore the Premises in accordance herewith, then within thirty (30) days after Landlord delivers Tenant the Estimate, either Landlord or Tenant shall have the right to terminate this Lease by written notice to the other, which termination shall be effective as of the date of such notice of termination, and all liabilities and obligations of Landlord and Tenant thereafter accruing shall terminate and be of no legal force and effect.

 

14.1.4 If neither party elects to terminate the Lease, as aforesaid, and Landlord fails or declines to exercise any other termination right pursuant to this Section 14, Landlord shall, promptly after adjusting the insurance claim and obtaining governmental approvals for reconstruction, commence and diligently prosecute to completion the restoration of the Premises to their condition immediately prior to such casualty, subject to Section 14.4 below and subject to Force Majeure (as defined herein). If such restoration is not substantially completed within one hundred eighty (180) days after the date of the casualty (or such longer period as was referenced in the Estimate and agreed to by Tenant, if applicable), then for a period of up to thirty (30) days after the expiration of such period (but in all events no later than the date Landlord substantially completes its restoration of the Premises), Tenant shall have the right to terminate this Lease upon thirty (30) days prior written notice to Landlord without any cost, fee or penalty of any kind or nature; provided, however, that if Landlord completes such restoration prior to the end of the thirty (30) day notice period, Tenant’s notice of termination shall be deemed rescinded and ineffective for all purposes, and this Lease

 

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shall continue in full force and effect. The provisions of this Section are in lieu of any statutory termination provisions allowable in the event of casualty damage and shall not be subject to extension by virtue of the other provisions hereof including, but not limited to, Force Majeure.

 

14.2 Termination for Material or Uninsured Damages . If (i) the Building shall be materially destroyed or damaged to the extent that the restoration of such, in Landlord’s judgment, is not economical or feasible, or (ii) the Building shall be materially destroyed or damaged by any casualty other than a casualty covered by the insurance policies required to be maintained by Landlord hereunder, notwithstanding that the Premises may be unaffected directly by such destruction or damage, or (iii) Landlord’s mortgagee (if any) requires that the proceeds of insurance be applied to reduce any amounts outstanding under such mortgage, then in any such event, Landlord may, at its election, terminate this Lease by notice in writing to Tenant within thirty (30) days after such destruction or damage. Such notice shall be effective thirty (30) days after receipt thereof by Tenant.

 

14.3 Business Interruption . Other than rental abatement as and to the extent provided in Section 14. 1, and as provided in Section 8, no damages, compensation or claim shall be payable by Landlord for inconvenience or loss of business arising from interruption of business, repair or restoration of the Building or the Premises.

 

14.4 Repairs . Landlord’s repair obligations, if any, shall be limited to restoration of improvements which are covered by the insurance policies required to be maintained by Landlord hereunder. Tenant acknowledges that any such repairs or restorations shall be subject to applicable laws and governmental requirements, the requirements of Landlord’s mortgagee (if any), and to delay in the process of adjusting any insurance claim associated therewith; and neither delays resulting from any of the foregoing nor modifications to the Building or to the interior of the Premises occurring by virtue of the application of such requirements shall constitute a breach of this Lease by Landlord (but may result in termination pursuant to Section 14.1.4) as long as Landlord uses reasonable efforts to commence and complete such repairs and restorations in a timely fashion consistent with the pre-existing condition of the applicable improvements.

 

14.5 End of Term Casualty. Anything herein to the contrary notwithstanding, if the Premises are destroyed or damaged during the last eighteen (18) months of the Lease Term, then Tenant shall have the right to terminate this Lease upon thirty (30) days prior written notice to the Landlord, which termination shall be effective on the thirtieth (30th) day after the Landlord’s receipt of such notice. In addition, if the Premises are destroyed or substantially damaged (which, for purposes of this Section 14.5 shall mean that the repair thereof can not, in accordance with the terms hereof, be completed within sixty (60) days after the date of such casualty) during the last ten (10) months of the Lease Term, and Tenant does not and has not timely exercised any Renewal Option pursuant to Section 51.1 hereof, then Landlord shall also have the right to terminate this Lease upon thirty (30) days prior written notice to the Tenant, which termination shall be effective on the thirtieth (30th) day after the Tenant’s receipt of such notice. In either case, such notice must be delivered within thirty (30) days after such casualty, or such termination rights shall be deemed waived.

 

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15. MACHINERY AND EQUIPMENT; ALTERATIONS AND ADDITIONS; REMOVAL OF FIXTURES .

 

15.1 Tenant shall not place a load upon the floor of the Premises which exceeds the maximum live load which Landlord (or Landlord’s architect or engineer) reasonably determines is appropriate for the Building (and advises Tenant in writing) without Landlord’s prior written consent which consent shall not be unreasonably withheld. Tenant will not install or operate in the Premises any electrical or other equipment requiring any changes, replacements or additions to any base building system, without Landlord’s prior written consent (and if such consent is granted Tenant shall be responsible for the costs of such changes, replacements or additions).

 

15.2 Except for the Tenant’s Work, which will be governed Exhibit C hereto, Tenant shall not make or allow to be made any alterations, additions or improvements to or on the Premises which (i) affect any structural or building system components of the Premises, (ii) under applicable codes, rules and/or regulations require any building electrical, plumbing or other permit, or (iii) cost, in the aggregate in excess of $25,000.00 (other than wall coverings, floor coverings and similar work which is of a purely cosmetic nature), without Landlord’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed. Any alterations, additions or improvements to the Premises shall be made at Tenant’s sole expense, in compliance with all applicable laws, by a licensed contractor, and in a good and workmanlike manner conforming in quality with the Premises existing as of the Rent Commencement Date, shall not diminish the value of the Building or the Premises and shall at once become a part of the realty and shall be surrendered with the Premises (except as provided in Section 15.3 and 15.4, below). In addition, any alterations, additions or improvements which fall within the purview of subsection (i) through (iii) above shall also be undertaken according to plans and specifications, with a contractor and during hours reasonably approved in writing by Landlord all as provided herein. Any such approved alterations, additions or improvements shall be made at Tenant’s sole cost and expense.

 

15.3 Upon the expiration or sooner termination of the Lease Term, Tenant shall, at Tenant’s sole expense, with due diligence, remove any alterations, additions, or improvements made by Tenant which are designated by Landlord to be removed at the time its consent to the installation thereof is granted, and repair any damage to the Premises caused by such removal. None of Landlord’s Work or Tenant’s Work shall be subject to any removal obligation on Tenant’s part. Tenant shall remove all of its movable property, trade fixtures and roof devices. Tenant shall retain one hundred percent (100%) ownership of its movable special Tenant improvements including but not limited to trade fixtures and their related mechanical support systems and detachable furniture. Tenant shall be responsible for the repair of any damage to the Premises caused by such removal. Tenant shall pay Landlord any reasonable damages for injury to the Premises or Building resulting from such removal. All items of Tenant’s personal property that are not removed from the Premises or the Building by Tenant at the termination of this Lease may be

 

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removed and/or stored by Landlord at Tenant’s expense, if Tenant does not remove same within five (5) days of Landlord’s written notice to or demand upon Tenant. Tenant’s obligations under these Sections 15.2 and 15.3 shall survive the expiration or termination of this Lease.

 

15.4 Subject to the approval of Landlord as set forth in Subsections 15.1 and 15.2 above, Tenant shall have the right to install, at Tenant’s expense, and operate, at Tenant’s expense, additional (package) air-conditioning equipment to provide after-hours heating, ventilating and air-conditioning for the Premises. Any such additional air-conditioning equipment shall remain the property of Tenant and shall be removed at Tenant’s option, upon the expiration or sooner termination of the Term, in accordance with the terms of Section 15.3 above. Any base Building modification required to accommodate such equipment shall be undertaken by Landlord, at Tenant’s sole expense, and shall in all events be subject to the approval of Landlord, which approval shall not be unreasonably withheld, conditioned or delayed.

 

15.5 Tenant shall, at its sole cost and expense, maintain, repair and/or replace any special installations (finishes, equipment or other facilities including, without limitation, special plumbing, electrical or heating, ventilating and air-conditioning) required for Tenant’s use and occupancy of the Premises (whether or not such special items are located within said Premises). No such special installations shall be undertaken by Tenant absent Landlord’s written approval therefore in accordance with the terms of this Section 15, which approval shall not be unreasonably withheld, conditioned or delayed.

 

15.6 Subject to the terms of this Section 15.6, Tenant shall have the right to install its own generator (the “Generator”) at an exterior location approved by Landlord, which approval shall not be unreasonably withheld, delayed or conditioned. The Generator shall remain the property of Tenant and shall be removed by and at the expense of Tenant at the expiration or earlier termination of the Term. Upon Landlord’s approval as set forth herein, Landlord hereby grants Tenant a license to install and use the Generator to the extent not located within the Premises. In addition to and not in lieu of any other right or rights of Tenant under this Lease currently or in the future, Landlord grants to Tenant the following cumulative rights, which may be exercised by Tenant itself or through its agents, employees, licensees, contractors or subcontractors at all times during the Term with respect to Tenant’s Generator: (i) the right to test and exercise the Generator during the hours between 3:00 a.m. and 6:00 a.m. and such additional times as may otherwise be approved by Landlord or Landlord’s property manager, at Tenant’s request, that accommodate the reasonable needs of the other tenants in the Project; (ii) the right to run Tenant’s Generator at anytime when a commercial utility power outage, reduction or “brownout” occurs with respect to the Project and/or the Premises; and (iii) the right of access to Tenant’s Generator for operation, maintenance and replacement purposes at all times.

 

In the event that Tenant installs the Generator, Tenant agrees to undertake, through its authorized contractors and otherwise at Tenant’s cost, the following measures with respect thereto: (i) installation of spill protective measures for the fueling of the Generator in accordance

 

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with applicable laws and codes; (ii) location of a fuel storage tank above-ground and installation of a double-walled steel fuel tank in accordance with applicable laws and codes but only in a location approved by Landlord; (iii) installation of appropriate and customary noise reduction measures in accordance with standards acceptable to Landlord and customary for a first class office building in the Reston, Virginia area; and (iv) installation of appropriate and customary screening measures in accordance with standards acceptable to Landlord and customary for a first class office building in the Reston, Virginia area. In addition, Tenant shall be solely responsible for the cost of (and shall contract directly for the performance of) all maintenance, repair and replacement of the Generator, shall maintain appropriate insurance in accordance with the terms of this Lease which shall include coverage of and against all perils related to the Generator, and shall indemnify and hold Landlord harmless from and against all cost, loss, and liability whatsoever arising as a result of Tenant’s installation, use, the malfunction of, or personal injury or property damage occasioned by the existence of, the Generator.

 

At the end of the Term, Landlord and Tenant agree that Tenant’s Generator system consisting of an emergency generator, any approved fuel supply tank, manual transfer switch, roll-up generator termination box and conduit and cable distribution connecting to the automatic transfer switches of the distribution system shall be removed by Tenant and Tenant shall be solely responsible for the full cost of such work without any obligation on the part of Landlord whatsoever.

 

16. ACCEPTANCE OF PREMISES.

 

Landlord shall tender, and Tenant shall accept possession of, the Premises in accordance with the terms of Exhibit C-1 attached hereto. All provisions regarding delivery of possession of the Premises, construction of leasehold improvements to the Premises and any adjustments which may be made with respect to the Commencement Date (as defined in Section 1.4) are set forth in Exhibits C and C-1 .

 

17. TENANT IMPROVEMENTS.

 

The provisions governing initial improvements to be performed by Tenant to the Premises are set forth in Exhibit C hereto. Such provisions include Landlord’s making available to Tenant a Leasehold Improvement Allowance (at an amount equal to the sum of $50.00 per rentable square foot of the Premises and $30.00 per useable square foot of the Lower Level Space) and an Additional Leasehold Improvement Allowance (at up to $15.00 per rentable square foot of the Premises) in accordance with and subject to the terms of Exhibit C attached hereto.

 

18. ACCESS.

 

18.1 Subject to the restrictions set forth below, Tenant shall permit Landlord and its agents to enter the Premises at all reasonable times, upon reasonable advance notice except for emergencies, during Tenant’s normal business hours to inspect the same; to show the Premises to prospective tenants, or interested parties such as prospective lenders and purchasers; to exercise its rights under Section 48; to repair, alter or improve the Premises or the Building, provided such alterations and repairs do not

 

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unreasonably interfere with Tenant’s ability to conduct its business during normal business hours; to discharge Tenant’s obligations when Tenant has failed to do so within a reasonable time after such written notice from Landlord and the lapse of any opportunity to cure as is set forth in Section 24 hereof; to post notices of non-responsibility and similar notices and “For Sale” signs and to place “For Lease” signs upon (which signs shall not impair Tenant’s window line in the Premises) or adjacent to the Building or the Premises. Tenant shall permit Landlord and its agents to enter the Premises at any time in the event of an emergency. When reasonably necessary, Landlord may temporarily close entrances, doors, corridors, elevators or other facilities without liability to Tenant by reason of such closure. In exercising the foregoing rights, Landlord shall use reasonable efforts to minimize any disruption to Tenant’s business. Landlord shall coordinate any entry into the Premises with Tenant’s facilities supervisor at least 24 hours in advance (except in cases of emergency involving fire or other casualty, or other risk of injury or death to persons), and Landlord acknowledges that Tenant may require Landlord and its agents to be accompanied by a representative of Tenant for security purposes upon Landlord’s entry to the Premises (other than in cases of emergency involving fire or other casualty, or other risk of injury or death to persons) for legitimate, documented security purposes. Tenant shall supply Landlord with telephone numbers for Tenant’s facilities supervisor so that Landlord will be able to comply with established security procedures to the extent feasible under the circumstances in the event Landlord requires immediate access to the Premises to cure any emergency situation

 

18.2 Landlord shall be excused from such of its obligations under this Lease as are directly and materially impacted by the inability of Landlord to access the Premises or any applicable part thereof due to Tenant’s security measures which may limit or restrict access to any portion of the Premises, if and to the extent the performance of such obligations was in fact hindered, frustrated, or rendered impossible or impracticable due to the effect of such restrictions on access.

 

19. MUTUAL WAIVER OF SUBROGATION.

 

19.1 Tenant . Notwithstanding anything to the contrary in this Lease, whether the loss or damage is due to the negligence, gross negligence and/or willful misconduct of Landlord or Landlord’s agents or employees, or any other cause, Tenant hereby releases Landlord and Landlord’s agents and employees from responsibility for and waives its entire claim of recovery for (i) any and all loss or damage to the personal property of Tenant located in the Project, arising out of any of the perils which are covered by Tenant’s property insurance policy, with extended coverage endorsements which Tenant is required to obtain under the applicable provisions of this Lease, whether or not actually obtained, or (ii) loss resulting from business interruption at the Premises, arising out of any of the perils which may be covered by the business interruption insurance policy required to be carried by Tenant under this Lease.

 

19.2 Landlord . Notwithstanding anything to the contrary in this Lease, whether the loss or damage is due to the negligence, gross negligence and/or willful misconduct of Tenant or Tenant’s agents or employees, or any other cause, Landlord hereby releases Tenant and Tenant’s agents and employees from responsibility for and waives its entire

 

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claim of recovery for any and all loss or damage to the Building or any personal property of Landlord located about the Project and the Building generally and all property attached thereto (excluding any such property required to be insured by Tenant hereunder), arising out of any of the perils which are covered by Landlord’s property insurance policy which Landlord is required to obtain under the applicable provisions of this Lease, whether or not actually obtained.

 

19.3 Carriers . Landlord and Tenant shall each cause its respective insurance carrier(s) to consent to such waiver of all rights of subrogation against the other, and to issue an endorsement to all policies of insurance obtained by such party confirming that the foregoing release and waiver will not invalidate such policies.

 

20. INDEMNIFICATION.

 

20.1 Subject to the provisions of Section 19 hereof and other provisions of this Lease, Tenant shall indemnify and hold harmless Landlord, its agents, employees, officers, directors, partners and shareholders from and against any and all third party claims, liabilities, judgments, demands, causes of action, claims, losses, damages, costs and expenses, including reasonable attorneys’ fees and costs, arising out of such third party claims, to the extent arising out of (i) the use and occupancy of the Premises by Tenant, its officers, contractors, licensees, agents, servants, employees, guests, invitees, visitors, assignees or subtenants; (ii) the negligence or willful misconduct of Tenant, its officers, contractors, licensees, agents, servants, employees, guests, invitees, visitors, assignees or subtenants, in or about the Project; and/or (iii) any breach or Default by Tenant under this Lease; provided that this indemnity shall not apply to any loss, damage, liability or expense resulting from injuries to third parties caused by the gross negligence or willful misconduct of Landlord, or its officers, contractors, licensees, agents, employees or invitees (while within the Premises).

 

20.2 Subject to the provisions of Section 19 hereof and other provisions of this Lease, Landlord shall indemnify and hold harmless Tenant, its agents, employees, officers, directors, partners and shareholders from and against any and all third party claims, liabilities, judgments, demands, causes of action, claims, losses, damages, costs and expenses, including reasonable attorneys’ fees and costs, arising out of such third party claims, to the extent arising out of (i) the use and occupancy of the Building by the Landlord, its officers, contractors, licensees within Landlord’s control, agents, servants, employees, or guests, invitees and/or visitors to the extent within Landlord’s control; and/or (ii) the negligence or willful misconduct (including breach of this Lease) of Landlord, its officers, contractors, agents, servants, or employees, in or about the Project; provided that this indemnity shall not apply to any loss, damage, liability or expense resulting from injuries to third parties caused by the gross negligence or willful misconduct of Tenant, or its officers, contractors, licensees, agents, employees or invitees (while within the Premises).

 

20.3 The indemnifications set forth in this Section 20 shall survive termination of this Lease.

 

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21. ASSIGNMENT AND SUBLETTING.

 

21.1 Consent Required . Except as specifically set forth herein to the contrary, Tenant shall not assign, encumber, mortgage, pledge, license, hypothecate or otherwise transfer the Premises or this Lease, or sublease all or any part of the Premises, or permit the use or occupancy of the Premises by any party other than Tenant, without the prior written consent of Landlord, which consent shall not be unreasonably withheld.

 

21.2 Procedure . Tenant must request Landlord’s consent to such assignment or sublease in writing at least thirty (30) days prior to the commencement date of the proposed sublease or assignment, which written request must include (a) the name and address of the proposed assignee or subtenant, (b) the nature and character of the business of the proposed assignee or subtenant, (c) financial information (including financial statements) of the proposed assignee or subtenant, (d) all other terns of the proposed sublet or assignment as well as a copy of the agreement evidencing same, and (e) any additional information Landlord reasonably requests regarding such proposed assignment or subletting. Within ten (10) business days after Landlord receives Tenant’s request (with all information required pursuant to clauses (a) - (d) hereof included), Landlord shall, by written notice to Tenant, elect either: (i) to grant its consent to such proposed assignment or subletting, or (ii) to deny its consent to such proposed assignment or subletting, setting forth with specificity the reason for such denial. If Landlord does not exercise either of the above options within ten (10) business days after Landlord receives Tenant’s request, then Tenant shall provide a second notice to Landlord, specifically referencing this section of the Lease, and if Landlord does not elect either of the foregoing alternatives within three (3) business days of receipt of such second notice, Tenant may assign or sublease the Premises upon the terms stated in Tenant’s request.

 

21.3 Conditions . Any subleases and/or assignments hereunder are also subject to all of the following terms and conditions:

 

21.3.1 If Landlord approves an assignment or sublease as herein provided, Tenant shall pay to Landlord, as Additional Rent due under this Lease (which amounts shall be due immediately upon receipt by Tenant), fifty percent (50%) of the “Net Profits” (as defined below) generated from such transaction during each Lease Year. For purposes hereof, the term “Net Profits” means: (i) with respect to assignment, the amount paid by the assignee to acquire Tenant’s rights under the Lease, less (1) the portion of such sum fairly attributable to the acquisition of Tenant’s leasehold improvements or personal property which were funded solely by Tenant, and (2) all reasonable and actual out-of-pocket expenses incurred and paid by Tenant in procuring such assignment, including, without limitation, brokerage fees, advertising costs, legal fees, allowances, the cost of leasehold improvements and other concessions; and (ii) with respect to a sublease, the amount, if any, by which the rent, any additional rent and any other sums payable by the subtenant to Tenant under such sublease exceeds the sum of (x) that portion of the Base Rent plus Additional Rent payable by Tenant hereunder which is allocable to the portion of the Premises which is the subject of such sublease, (y) all reasonable and actual out-of-pocket expenses incurred by Tenant in procuring such sublease, including, without limitation, brokerage fees, advertising costs, legal fees, allowances, the cost of leasehold

 

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improvements and other concessions, and (z) the costs of any leasehold improvements or personal property provided as a part of such transaction and existing prior to the commencement of the sublease term to the extent funded by Tenant. The foregoing payments shall be made to Landlord by Tenant within ten (10)