NINTH MODIFICATION OF OFFICE LEASE

Exhibit 10.6

 

NINTH MODIFICATION OF OFFICE LEASE

 

THIS NINTH MODIFICATION OF OFFICE LEASE (this “ Ninth Modification ”) is entered into as of the 25 ^th day of November, 2003, by and between CRESCENT REAL ESTATE FUNDING I, L.P., a Delaware limited partnership (“ Landlord ”), and WESTWOOD MANAGEMENT CORP., a New York corporation (“ Tenant ”).

 

RECITALS :

 

A. The Crescent, a Texas joint venture, predecessor-in-interest to Landlord, and Tenant executed that certain Office Lease, dated April 9, 1990 (the “ Original Lease ”), covering certain space therein designated as Suite 1110, containing approximately 1,621 rentable square feet (the “ Original Premises ”), situated on the eleventh floor of 300 Crescent Court which is part of an office building commonly known as The Crescent ^® , located at 100, 200 and 300 Crescent Court, Dallas, Texas (the “ Office Building ”).

 

B. The Original Lease has been amended by (i) that certain First Modification of Office Lease dated September 11, 1991 (the “ First Modification ”), pursuant to which the Original Premises were expanded to include an additional 1,783 rentable square feet to consist of a total of 3,404 rentable square feet; (ii) that certain Second Modification of Office Lease dated September 27, 1991 (the “ Second Modification ”), pursuant to which an error in the amount of the monthly installments of Basic Rental was corrected; (iii) that certain Third Modification of Office Lease dated October 5, 1994 (the “ Third Modification ”), pursuant to which Tenant relocated to Suite 1320, containing approximately 5,322 rentable square feet located in 300 Crescent Court, Dallas, Texas (hereinafter referred to as the “ New Premises ”); (iv) that certain Letter Agreement dated June 15, 1995 (the “ Letter Agreement ”), pursuant to which the term of the Original Lease was extended for an additional five (5) years, through and including March 31, 2000; (v) that certain Fourth Modification of Office Lease dated April 26, 1996 (the “ Fourth Modification ”), pursuant to which the New Premises were expanded to include an additional 2,691 rentable square feet located at 200 Crescent Court, Dallas, Texas (the “ First Expansion Space ”) and an additional 1,770 rentable square feet located in 300 Crescent Court, Dallas, Texas (the “ Second Expansion Space ”), and the term of the Original Lease was extended through June 30, 2001; (vi) that certain Fifth Modification of Office Lease dated May 30, 1996 (the “ Fifth Modification ”), pursuant to which the New Premises were expanded to include an additional 167 rentable square feet located at 200 Crescent Court, Dallas, Texas (the “ Third Expansion Space ”); (vii) that certain Sixth Modification of Office Lease dated September 18, 1997 (the “ Sixth Modification ”), pursuant to which the New Premises were expanded to include an additional 1,038 rentable square feet located at 200 Crescent Court, Dallas, Texas (the “ Fourth Expansion Space ”); (viii) that certain Seventh Modification of Office Lease dated June 24, 1998 (the “ Seventh Modification ”), pursuant to which the New Premises were reduced by approximately 3,896 rentable square feet of space located at 200 Crescent Court, Dallas, Texas (the “ Released Space ”) and expanded to include an additional 5,818 rentable square feet located on the thirteenth floor of 200 and 300 Crescent Court, Dallas, Texas (the “ Fifth Expansion Space ”); and (ix) that certain Eighth Modification of Office Lease dated September 21, 1998 (the “ Eighth Modification ”), pursuant to which an additional 665 rentable square feet located on the thirteenth floor of 200 Crescent Court, Dallas, Texas (the “ Sixth Expansion Space ”).

 

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C. The Original Lease, as modified by the First Modification, the Second Modification, the Third Modification, the Letter Agreement, the Fourth Modification, the Fifth Modification, the Sixth Modification, the Seventh Modification and the Eighth Modification, is hereinafter referred to as the “ Lease ”. The New Premises, together with the First Expansion Space, the Second Expansion Space, the Third Expansion Space, the Fourth Expansion Space, the Fifth Expansion Space, the Sixth Expansion Space and reduced by the Released Space, are hereinafter referred to as the “ Expanded Premises ”, collectively consisting of a total of approximately 13,575 rentable square feet. Unless otherwise expressly provided herein, capitalized terms used herein shall have the same meanings as designated in the Lease.

 

D. Landlord and Tenant desire to further amend and modify the Lease in certain respects as provided herein.

 

AGREEMENT :

 

In consideration of the sum of Ten Dollars ($10.00), the mutual covenants and agreements contained herein and in the Lease, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby further amend and modify the Lease as follows:

 

1. Lease Term . The Lease currently provides that the Lease Term expires on July 31, 2004. Paragraph 3 of the Lease is hereby modified and amended to provide that the Lease Term is hereby extended for a period commencing on the Substitution Space Commencement Date (hereinafter defined) and extending for 84 full calendar months (the “ Substitution Term ”), unless sooner terminated pursuant to the Lease, as modified by this Ninth Modification.

 

2. Premises . Effective as of the Substitution Space Commencement Date, the Lease is hereby modified and amended to substitute for the Expanded Premises, approximately 22,002 rentable square feet, designated as Suite 1200 and located on the twelfth floor of 200 Crescent Court, Dallas, Texas, as shown on Exhibit A attached hereto (the “ Substitution Space ”). As used herein, the term “ Substitution Space Commencement Date ” shall mean the earlier of (a) the date on which the Landlord Work (defined below) is Substantially Complete, as determined pursuant to the Work Letter (defined below), or (b) the date Tenant takes possession of any part of the Substitution Space for purposes of conducting business. If Landlord is delayed in delivering possession of the Substitution Space due to any reason, including without limitation the holdover or unlawful possession of such space by any third party, such delay shall not be a default by Landlord, render the Lease void or voidable, or otherwise render Landlord liable for damages. Notwithstanding the foregoing, if the construction contract to be executed by Landlord pursuant to the Work Letter is executed prior to March 24, 2004 and Landlord has not delivered the Substitution Space on or before October 1, 2004, subject to Tenant Delay (defined in the Work Letter) and Force Majeure (as defined in Paragraph 19(b) of the Lease), then Tenant shall have the right, as its sole remedy, to terminate the Lease upon written notice to Landlord given at any time after October 1, 2004 and prior to delivery of the Substitution Space. In the event the Landlord Work is not Substantially Complete by July 31, 2004, Landlord agrees that Tenant may remain in the Expanded Premises but shall not be charged holdover rent for the Expanded

 

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Premises from August 1, 2004 through the date of Substantial Completion of the Landlord Work. Landlord also agrees to use good faith efforts to provide Tenant up to 4,000 square feet of temporary space in the Office Building for Tenant’s use during the period between July 31, 2004 and the date of Substantial Completion of the Landlord Work. Such temporary space, if available, will be delivered to Tenant within 15 days after notice from Tenant requesting such space. All terms and conditions of the Lease, as modified by this Ninth Modification, shall apply to Tenant’s occupancy of the temporary space, except that Tenant shall not be required to pay Basic Rental or Additional Rental for such temporary space. However, Tenant shall be required to pay for the electrical service provided to such temporary space pursuant to Paragraph 7(b) of the Lease. From and after the Substitution Space Commencement Date, the term “ Premises ” wherever used in the Lease shall mean the Substitution Space. Tenant hereby acknowledges that the Substitution Space is leased by Tenant subject to all terms and conditions of the Lease, as amended by this Ninth Modification.

 

3. Surrender of Expanded Premises . On or before 11:59 p.m. on the day immediately preceding the Substitution Space Commencement Date, Tenant shall vacate and peaceably surrender to Landlord the Expanded Premises, including the alterations, improvements and changes thereto other than Tenant’s fixtures remaining the property of Tenant, broom-clean and in the condition the same were in on the Commencement Date, subject only to ordinary and customary wear and tear and damage by fire or casualty or other hazard. Notwithstanding anything to the contrary contained in the Lease, as modified by this Ninth Modification, Tenant shall have the right to remove from the Expanded Premises for re-installation in the Substitution Space, the following items presently situated in the Expanded Premises: (a) high density filing system; (b) metal racks in the server room; and (c) supplemental HVAC units (whether or not such units are portable); provided that such removal and re-installation right is subject to Tenant’s obligation to restore any damage to the Expanded Premises caused by the removal of such items. If any furnishings, equipment, furniture, trade fixtures or other removable equipment of Tenant are not removed from the Expanded Premises on or before 11:59 p.m. on the date which is 15 days after the Substitution Space Commencement Date, then Tenant hereby grants to Landlord the option, exercisable at any time thereafter without the requirement of any notice to Tenant, (a) to treat such property, or any portion thereof, as being abandoned by Tenant to Landlord, whereupon Landlord shall be deemed to have full rights of ownership thereof; (b) to elect to remove and store such property, or any portion thereof, on Tenant’s behalf (but without assuming any liability to any person) and at Tenant’s sole cost and expense, with reimbursement therefor to be made to Landlord upon demand; and/or (c) to sell, give away, donate or dispose of as trash or refuse any or all of such property without any responsibility to deliver to Tenant any proceeds therefrom.

 

4. Basic Rental . Effective as of the Substitution Space Commencement Date and provided Tenant has surrendered the Expanded Premises to Landlord in accordance with the provisions of Paragraph 3 above, Tenant shall no longer be required to pay Rent for the Expanded Premises and neither Landlord nor Tenant shall have any further rights or obligations with respect to the Expanded Premises (except those which have accrued prior to the Substitution Space Commencement Date). Accordingly, commencing on the Substitution Space Commencement Date, and continuing through the Substitution Term, the Basic Rental due and payable for the Substitution Space shall be in the following amounts:

 

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Basic Rental, Additional Rental and any and all other sums payable by Tenant under the Lease, as amended by this Ninth Modification, are sometimes collectively referred to as “ Rent ”. Tenant shall continue to pay Rent for the Expanded Premises through and including the day immediately preceding the Substitution Space Commencement Date. In the event Tenant has not surrendered the Expanded Premises in accordance with Paragraph 3 above, then effective as of the Substitution Space Commencement Date, and for so long as Tenant remains in occupancy of the Expanded Premises, Tenant shall pay Rent for the Expanded Premises, in addition to Rent for the Substitution Space. All Rent shall be payable in accordance with the terms and provisions of the Lease, as modified by this Ninth Modification.

 

5. Operating Expense Stop . Effective as of the Substitution Space Commencement Date, Paragraph 1(h) of the Lease is modified and amended to provide that the term “ Operating Expense Stop ” shall mean the following:

 

“The amount of the Actual Operating Expenses for the Project for the calendar year 2004 (grossed up to full occupancy).”

 

6. Controllable Operating Expense Cap . Effective as of the Substitution Space Commencement Date, Paragraph 1(h) of the Lease is modified and amended to provide that the Actual Operating Expenses which are Controllable (defined below and hereinafter called “ Controllable Expenses ”) shall not increase by more than 6% over Controllable Expenses in the previous calendar year, on a cumulative, compounded basis. However, any increases in Controllable Expenses not recovered by Landlord due to the foregoing limitation shall be carried forward into all succeeding calendar years during the Lease Term (subject to the foregoing limitation) until fully recouped by Landlord. For example, if Controllable Expenses were $100.00 in 2004, then the total Controllable Expenses that could be included in Actual Operating Expenses in 2005 would be $106.00, for 2006 the amount would be $112.36, for 2007 the amount would be $119.10, and so on. In the preceding example, if Controllable Expenses in both 2006 and 2007 were $115.50, then Landlord could include only $112.36 in Operating Expenses in 2006, but $118.64 (the Controllable Expenses plus the carry-forward from 2006) in 2007. The term “ Controllable Expenses ” means all Actual Operating Expenses excluding expenses relating to the cost of utilities, security expenses, insurance, real estate taxes and assessments, and other expenses that are deemed by industry standards to be uncontrollable.

 

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7. Leasehold Improvements . Provided no event of default has occurred (following the expiration of any applicable notice and cure period provided in the Lease), Landlord agrees to construct leasehold improvements in and upon the Substitution Space in accordance with the Work Letter attached hereto as Exhibit B .

 

8. Condition of Substitution Space . EXCEPT FOR THE OBLIGATIONS OF LANDLORD SPECIFIED IN THE LEASE (AS AMENDED HEREBY), TENANT ACCEPTS THE SUBSTITUTION SPACE IN ITS “AS IS” CONDITION, AND LANDLORD MAKES NO REPRESENTATIONS OR WARRANTIES WHATSOEVER WITH RESPECT THERETO.

 

9. Termination Option . Tenant shall have the option to terminate this Lease with respect to the Substitution Space only effective on the last day of the 60th full calendar lease month following the Substitution Space Commencement Date (the “ Termination Date ”), provided (a) Tenant gives written notice thereof to Landlord not less than 12 months prior to the Termination Date, and (b) no uncured event of default exists under the Lease at the time of the giving of such notice nor on the Termination Date (following the expiration of any applicable notice and cure period provided in the Lease). Additionally, Tenant’s right to terminate hereunder is conditioned upon the continued payment by Tenant of all Basic Rental, Additional Rental, parking charges, charges for electrical service and any other charges due by Tenant under the Lease (collectively referred to herein as “ Rent ”) through and including the Termination Date in accordance with the terms of the Lease, and payment in full by Tenant, such payment to be delivered to Landlord with the written notice of termination, of a cash sum equal to (i) $220,020 (4 months of Basic Rental at the rate of $30.00 per rentable square foot) plus (ii) $391,480.00 (the unamortized cost (using an amortization rate of 10%) of all tenant improvement allowances, leasing commissions and other cash allowances incurred by Landlord in connection with the Lease) (the “ Termination Payment ”). After Landlord’s receipt of the Termination Payment and all Rent through and including the Termination Date, and so long as Tenant has surrendered the Premises in the condition required under the Lease as modified by this Ninth. Modification, neither party shall have any rights, liabilities or obligations under the Lease for the period accruing after the Termination Date, except those which, by the provisions of the Lease, expressly survive the termination of the Lease.

 

10. After Hours Heat and Air Conditioning . Effective as of the Substitution Space Commencement Date, Paragraph 7(a) of the Lease is modified and amended to delete the second parenthetical in subparagraph (ii) and replace it with the following language: “Tenant, upon such notice as is reasonably required by Landlord, and subject to the capacity of the Building systems, may request heat and air conditioning service (“ HVAC Service ”) during hours other than the hours listed in the preceding sentence (hereinafter called “ Normal Business Hours ”). Tenant shall pay Landlord for such additional service at a rate equal to $40.00 per operating hour per floor (the “ Hourly HVAC Charge ”). Landlord shall have the right, upon 30 days prior written notice to Tenant, to adjust the Hourly HVAC Charge from time to time, but not more than once per calendar year, based proportionately upon increases in HVAC Service costs, which costs include utilities, taxes, surcharges, labor, equipment, maintenance and repair. Notwithstanding

 

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the foregoing, Landlord agrees to waive the Hourly HVAC Charge for up to 248 hours of additional HVAC Service requested by Tenant after Normal Business Hours in each lease year during the Substitution Term. Such waiver shall not be cumulative (in other words, if Tenant does not use 248 hours of additional HVAC Service in any given lease year, Landlord’s agreement to waive the Hourly HVAC Charge will not be increased in the following lease year by the number of such unused hours).”

 

11. Option to Extend . Tenant shall have options to extend the Substitution Term in accordance with Rider No. 1 attached hereto.

 

12. Right of First Refusal . Tenant shall have a right of first refusal to lease additional space in the Office Building in accordance with Rider No. 2 attached hereto.

 

13. Parking . Effective as of the Substitution Space Commencement Date, the Lease is modified and amended to include the Parking Agreement attached hereto as Rider No. 3 . In the event of any conflict between the Lease and the attached Parking Agreement, the latter shall control.

 

14. Business Days . As used in this Ninth Modification and all exhibits and riders attached hereto, the term “ Business Day ” shall mean Monday through Friday of each week, exclusive of New Year’s Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, the day after Thanksgiving and Christmas Day (“ Holidays ”). Landlord may designate additional Holidays, provided that the additional Holidays are commonly recognized by other comparable first-class office buildings in the area where the Office Building is located, taking into account age, size, location and other relevant operating factors (“ Comparable Buildings ”).

 

15. Broker . Tenant represents and warrants that no broker or agent has represented Tenant in connection with this Ninth Modification, other than Paul Whitman with The Staubach Company (“ Broker ”) whose commission shall be paid by Landlord in accordance with a separate agreement between Landlord and Broker. Except as provided in the immediately preceding sentence, each party shall indemnify and defend the other party against any Claims (hereinafter defined) for real estate commissions or fees in connection with this Ninth Modification made by any other party claiming through the indemnifying party. “ Claims ” shall mean all damages, losses, injuries, penalties, disbursements, costs, charges, assessments, expenses (including attorneys’ fees, experts’ fees and expenses incurred in investigating, defending or prosecuting any allegation, litigation or proceeding), demands, litigation, causes of action (whether in tort or contract, in law, at equity or otherwise) or judgments. The foregoing indemnification obligation of each indemnifying party shall include indemnification of any affiliates or subsidiaries of the foregoing, and all of their respective officers, directors, employees, shareholders, members, partners, agents and contractors (and, in the case of Landlord as the indemnified party, shall include Landlord’s mortgagees and the manager of the Office Building).

 

16. Time of the Essence . Time is of the essence with respect to Tenant’s execution and delivery of this Ninth Modification to Landlord. If Tenant fails to execute and deliver a signed copy of this Ninth Modification to Landlord by 5:00 p.m. (Dallas, Texas time), on November 30, 2003, it shall be deemed null and void and shall have no force or effect, unless otherwise agreed in writing by Landlord. Landlord’s acceptance, execution and return of this document shall constitute Landlord’s agreement to waive Tenant’s failure to meet the foregoing deadline.

 

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17. Method of Calculation . Tenant is knowledgeable and experienced in commercial transactions and does hereby acknowledge and agree that the provisions of the Lease for determining charges and amounts payable by Tenant are commercially reasonable and valid and constitute satisfactory methods for determining such charges and amounts as required by Section 93.004 (assessment of charges) of the Texas Property Code, as enacted by House Bill 2186, 77th Legislature. Tenant further voluntarily and knowingly waives (to the fullest extent permitted by applicable Law) all rights and benefits of Tenant under such section, as it now exists or as it may be hereafter amended or succeeded.

 

18. Miscellaneous . This Ninth Modification shall become effective only upon full execution and delivery of this Ninth Modification by Landlord and Tenant. This Ninth Modification contains the parties’ entire agreement regarding the subject matter covered by this Ninth Modification, and supersedes all prior correspondence, negotiations, and agreements, if any, whether oral or written, between the parties concerning such subject matter. There are no contemporaneous oral agreements, and there are no representations or warranties between the parties not contained in this Ninth Modification. Except as modified by this Ninth Modification, the terms and provisions of the Lease shall remain in full force and effect, and the Lease, as modified by this Ninth Modification, shall be binding upon and shall inure to the benefit of the parties hereto, their successors and permitted assigns. In case of a conflict between the Lease and this Ninth Modification, the terms of this Ninth Modification shall control.

 

19. Ratification . Landlord and Tenant hereby ratify and confirm their respective obligations under the Lease and each party represents and warrants to the other that to its current actual knowledge, it has no defenses thereto. Additionally, Tenant further confirms and ratifies that, as of the date hereof, (a) the Lease is and remains in good standing and full force and effect, and (b) to its current actual knowledge, Tenant has no claims, counterclaims, set-offs or defenses against Landlord arising out of the Lease or in any way relating thereto. Landlord confirms that, to its current actual knowledge, Tenant is not in default under the Lease.

 

20. SNDA . Landlord shall obtain, within 30 days after the date of this Ninth Modification, a nondisturbance agreement from Landlord’s mortgagee for the benefit of Tenant in the form attached hereto as Exhibit C .

 

21. Notices . The Lease is hereby amended to provide that, from and after the Substitution Space Commencement Date, Tenant’s address for notice purposes shall be 200 Crescent Court, Suite 1200, Dallas, Texas 75201.

 

22. Operating Expenses Exclusions . The Lease is hereby amended to delete the second sentence of Paragraph 6(c) and provide that the following items shall be excluded from the definition of Actual Operating Expenses:

 

(1) Leasing commissions, attorneys’ fees and other expenses related to leasing tenant space and constructing improvements for the sole benefit of an individual tenant.

 

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(2) Goods and services furnished to an individual tenant of the Building which are above building standard and which are separately reimbursable directly to Landlord in addition to Actual Operating Expenses.

 

(3) Repairs, replacements and general maintenance paid by insurance proceeds or condemnation proceeds or by another tenant or responsible third party, or which are attributable solely to specific tenants or occupants of the Office Building;

 

(4) Depreciation, amortization, interest payments on any encumbrances on the Project;

 

(5) Costs of capital expenditures other than those incurred: (a) to conform with Laws (hereinafter defined); and (b) primarily to reduce current or future Operating Expenses, upgrade Building security or otherwise improve the operating efficiency of the Property. Such expenditures shall be amortized uniformly over the following periods of time (together with interest on the unamortized balance at the Prime Rate (hereinafter defined) in effect as of the date incurred plus 2%): for building improvements, the shorter of 10 years or the estimated useful life of the improvement; and for all other items, 3 years for expenditures under $50,000 and 5 years for expenditures in excess of $50,000. Notwithstanding the foregoing, Landlord may elect to amortize capital expenditures under this subparagraph over a longer period of time based upon (i) the purpose and nature of the expenditure, (ii) the relative capital burden on the Property, (iii) for cost savings projects, the anticipated payback period, and (iv) otherwise in accordance with sound real estate accounting principles consistently applied. “ Prime Rate ” shall be the per annum interest rate publicly announced by a federally insured bank selected by Landlord in the state in which the Building is located as such bank’s prime or base rate.

 

(6) Costs of installing any specialty service, such as an observatory, broadcasting facility, luncheon club, or athletic or recreational club.

 

(7) Expenses for repairs or maintenance related to the Project which have been reimbursed to Landlord pursuant to warranties or service contracts.

 

(8) Costs (other than maintenance costs) of any art work (such as sculptures or paintings) used to decorate the Building.

 

(9) Principal or interest payments (and other payments including without limitation, points and fees) on indebtedness secured by liens against the Project and all refinancings of such indebtedness.

 

(10) Electrical service costs paid separately pursuant to Paragraph 7(b) or paid by other tenants of the Office Building;

 

(11) Any inheritance, estate, gift, franchise, corporation, income, net profits, or similar tax which may be, or is, assessed against or imposed upon Landlord and/or the Office Building (except to the extent such excluded taxes are assessed in lieu of real estate taxes);

 

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(12) Expenses incurred in leasing or procuring new tenants, including advertising and marketing expenses and expenses for preparation of leases or renovating space for new tenants, rent allowances, lease takeover costs, payment of moving costs, signage costs and similar costs and expenses;

 

(13) Payments made under any ground leases of the Project;

 

(14) Legal, auditing, consulting and other professional fees (including, without limitation, real estate commissions) paid or incurred in connection with negotiations for financings, refinancings or sales of the Project;

 

(15) Costs relating to disputes between Landlord and a specific tenant or occupant of the Office Building;

 

(16) Expenses in connection with services or other benefits which are not provided to Tenant, but which are provided solely to other tenants or occupants of the Office Building;

 

(17) Costs incurred by Landlord due to the violation by Landlord, or any other tenants of the Office Building, of the terms and conditions of any lease of space in the Office Building

 

(18) Landlord’s general overhead and general administrative expenses other than a reasonable allocation of administrative costs and management fees relating to the operation of the Project, including accounting, information and professional services; management office(s); and wages, salaries, benefits, reimbursable expenses and taxes (or allocations thereof) for full and part time personnel involved in operation, maintenance and management at or below the level of regional property manager and regional asset manager;

 

(19) Costs, penalties and fines incurred due to the violation by Landlord or any other tenant of the Office Building of any applicable Law, except such as may be incurred by Landlord in contesting in good faith the alleged violation;

 

(20) Interest and penalties due to late payment of any amounts owed by Landlord, except such as may be incurred as a result of Tenant’s failure to timely pay its portion of such amounts or as a result of Landlord’s contesting such amounts in good faith;

 

(21) Salaries of officers and executives of Landlord, except as included in the administrative fees included in Actual Operating Expenses pursuant to (18) above;

 

(22) Goods and services purchased from Landlord’s subsidiaries and Affiliates to the extent the cost of same exceeds rates charged by unaffiliated third parties for similar goods and services; and

 

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(23) Costs of correcting latent defects in the Premises which are disclosed to Landlord within one year after the Substitution Space Commencement Date.

 

23. Right to Audit . Within 60 days after Landlord furnishes its estimate of Additional Rental for any calendar year (the “ Audit Election Period ”), Tenant may, at its expense, elect to audit Actual Operating Expenses for such calendar year only, subject to the following conditions: (1) there is no uncured event of default under the Lease (following the expiration of any applicable notice and cure period provided in the Lease); (2) the audit shall be prepared by an independent certified public accounting firm of recognized regional standing; (3) in no event shall any audit be performed by a firm retained on a “contingency fee” basis; (4) the audit shall commence within 30 days after Landlord makes Landlord’s books and records available to Tenant’s auditor and shall conclude within 60 days after commencement; (5) the audit shall be conducted during Landlord’s normal business hours at the location where Landlord maintains its books and records and shall riot unreasonably interfere with the conduct of Landlord’s business; (6) Tenant and its accounting firm shall treat any audit in a confidential manner (except for such disclosures as may be required by applicable Law or court order) and shall each execute Landlord’s confidentiality agreement for Landlord’s benefit prior to commencing the audit; and (7) the accounting firm’s audit report shall, at no charge to Landlord, be submitted in draft form for Landlord’s review and comment before the final approved audit report is delivered to Landlord, and any reasonable comments by Landlord shall be incorporated into the final audit report. Notwithstanding the foregoing, Tenant shall have no right to conduct an audit if Landlord furnishes to Tenant an audit report for the calendar year in question prepared by an independent certified public accounting firm of recognized national standing (whether originally prepared for Landlord or another party). This paragraph shall not be construed to limit, suspend, or abate Tenant’s obligation to pay Basic Rental or Additional Rental when due. Landlord shall credit any overpayment determined by the final approved audit report against the next amounts due and owing by Tenant or, if no further amounts are due, refund such overpayment directly to Tenant within 30 days of determination. Likewise, Tenant shall pay Landlord any underpayment determined by the final approved audit report within 30 days of determination. The foregoing obligations shall survive the expiration or termination of the Lease. If Tenant does not give written notice of its election to audit Actual Operating Expenses during the Audit Election Period, Actual Operating Expenses for the applicable calendar year shall be deemed approved for all purposes, and Tenant shall have no further right to review or contest the same. The right to audit granted hereunder is personal to Westwood Management Corp. and to any assignee under a Permitted Transfer and shall not be available to any subtenant under a sublease of the Premises. If the audit proves that Landlord’s calculation of Actual Operating Expenses for the calendar year under inspection was overstated by more than five percent (5%), then, after verification, Landlord shall pay Tenant’s actual reasonable out-of-pocket audit and inspection fees applicable to the review of said calendar year statement within thirty (30) days after receipt of Tenant’s invoice therefor.

 

24. Building Services . Paragraph 7 of the Lease is hereby further amended: (a) to provide that Landlord shall provide the services set forth in Paragraph 7 at a level and quality consistent with that of other Comparable Buildings; (b) to provide that the janitorial services to be provided pursuant to Paragraph 7(a)(iii) shall be provided in accordance with the janitorial contract specifications set forth on Exhibit D attached hereto; (c) to provide that Landlord shall

 

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provide exterior window washing at such intervals as determined by Landlord, but in no event less frequently than twice annually; and (d) by deleting Paragraph 7(c) and substituting the following new paragraph in lieu thereof:

 

“(c) Interruption of Services . Landlord’s failure to furnish, or any interruption or termination of, services due to the application of Laws, the failure of any equipment, the performance of repairs, improvements or alterations, or the occurrence of any other event or cause whether or not within the reasonable control of Landlord (a “ Service Failure ”), shall not render Landlord liable to Tenant, constitute a constructive eviction of Tenant, give rise to an abatement of rent, or relieve Tenant from the obligation to fulfill any covenant or agreement. In no event shall Landlord be liable to Tenant for any loss or damage, including the theft of Tenant’s personal property, arising out of or in connection with the failure of any security services, personnel or equipment. Any provision herein to the contrary notwithstanding, if a Service Failure results in the Premises or any material portion thereof not being reasonably usable by Tenant for its business purpose (“ Untenantable ”) (unless the Service Failure is caused by the negligence or intentional misconduct of Tenant, its agents, contractors or employees, in which event Tenant shall not be entitled to the rights expressed in this paragraph, or unless the Service Failure is caused by a fire or other casualty, in which event Paragraph 11 of the Lease, as amended hereby, controls) and same remains uncured for a total of 5 Business Days during any 10 consecutive Business Day period (the “ Cure Period ”) after Landlord’s receipt of Tenant’s written notice of the Service Failure, Tenant shall be entitled to the following: for each day or portion thereof that such Service Failure continues beyond the fifth business day in the Cure Period, Tenant shall be entitled to an equitable abatement of Rent commensurate to that portion of the Premises rendered Untenantable by the Service Failure calculated on a per square foot basis beginning on the sixth Business Day in the Cure Period and ending at the time the Premises are again suitable for use by Tenant for its intended purposes.”

 

Paragraph 7 is further amended to provide that the building standard HVAC system is designed to maintain, and Landlord shall cause to be provided, temperatures within the Premises during all seasons of not less than 72° Fahrenheit dry bulb and not more than 76° Fahrenheit dry bulb, when, for cooling purposes, outside temperatures are not more than 100° Fahrenheit dry bulb, and when, for heating purposes, outside temperatures are not less than 20° Fahrenheit dry bulb, based on a tenant electrical design load of 4 watts per square foot high and/or low voltage electrical use, building envelope loads, building equipment loads and a building density of 1 person per 250 square feet of rentable square feet in the Substitution Space.

 

25. Repairs/Maintenance .

 

(a) The last sentence of Paragraph 7(a) of the Lease is amended: (i) to include within Landlord’s repair and maintenance obligations (in addition to Landlord’s other obligations thereunder) the Office Building’s common areas, the underground parking facility, and standard mechanical, electrical, plumbing and fire/life safety systems serving the Office Building generally; and (ii) to provide that the repair and maintenance required to be done by Landlord shall be done in a manner consistent with other Comparable Buildings.

 

(b) With respect to Tenant’s repair and maintenance obligations under

 

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Paragraph 8(d) of the Lease, it is agreed that there shall be excluded from Tenant’s obligations any item required to be repaired or maintained by Landlord pursuant to the Lease (as amended hereby).

 

26. Alterations . Paragraph 8(a) of the Lease is hereby amended to provide that: (a) Landlord’s consent shall not be required with respect to any alteration, change or improvement that satisfies all of the following criteria: (i) is of a cosmetic nature such as painting, wallpapering, hanging pictures and installing carpeting; (ii) is not visible from outside the Premises or Office Building; (iii) will not affect the systems or structure of the Office Building; and (iv) does not require work to be performed inside the walls or above the ceiling of the Premises; and (b) with respect to alterations, changes or improvements requiring Landlord’s consent, such consent shall not be unreasonably withheld or delayed.

 

27. Assignment/Subletting . Paragraph 9 of the Lease is hereby amended as follows:

 

(a) Tenant may assign its entire interest under the Lease to its Affiliate (defined below) or to a successor to Tenant by purchase, merger, consolidation or reorganization without the consent of Landlord or sublease a portion of the Premises to an Affiliate without the consent of Landlord, provided that all of the following conditions are satisfied in Landlord’s reasonable discretion (a “ Permitted Transfer ”): (1) no uncured event of default exists under the Lease (following the expiration of any applicable notice and cure period provided in the Lease); (2) Tenant’s successor (in the case of a purchase, merger, consolidation or reorganization) shall own all or substantially all of the assets of Tenant; (3) such successor (in the case of a purchase, merger, consolidation or reorganization) shall have a net worth which is at least equal to the greater of Tenant’s net worth at the date of this Ninth Modification or Tenant’s net worth as of the day prior to the proposed purchase, merger, consolidation or reorganization; provided however, such net worth requirement shall not be required of any Affiliate subleasing a portion of the Premises; (4) no portion of the Office Building or Premises would likely become subject to additional or different Laws as a consequence of the proposed Transfer; (5) such Affiliate’s or successor’s use of the Premises shall not conflict with the Permitted Use or any exclusive usage rights granted to any other tenant in the Office Building; (6) neither the Transfer nor any consideration payable to Landlord in connection therewith adversely affects the real estate investment trust qualification tests applicable to Landlord or its Affiliates; and (7) Tenant shall give Landlord written notice at least 10 days prior to the effective date of the proposed Transfer, along with all applicable documentation and other information necessary for Landlord to determine that the requirements of this Paragraph 9 have been satisfied, including if applicable, the qualification of such proposed transferee as an Affiliate of Tenant. The term “ Affiliate ” means any person or entity controlling, controlled by or under common control with Tenant or Landlord, as applicable. If requested by Landlord, the Affiliate or successor shall sign a commercially reasonable form of assumption agreement. The transferee in any Permitted Transfer is referred to herein as a “ Permitted Transferee ”.

 

(b) With respect to sublettings or assignments or other transfers (a “ Transfer ”) for which Landlord’s consent is required, Landlord’s consent shall not be unreasonably withheld. Without limitation, Tenant agrees that Landlord’s consent shall not be considered unreasonably withheld if: (1) the proposed transferee’s financial condition does not meet the criteria Landlord

 

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uses to select Office Building tenants having similar leasehold obligations; (2) the proposed transferee is a governmental organization or present occupant of the Project, or Landlord is otherwise engaged in lease negotiations with the proposed transferee for other premises in the Project; (3) any uncured event of default exists under the Lease (following the expiration of any applicable notice and cure period provided in the Lease); (4) any portion of the Building or Premises would likely become subject to additional or different Laws as a consequence of the proposed Transfer; (5) the proposed transferee’s use of the Premises conflicts with the Permitted Use or any exclusive usage rights granted to any other tenant in the Office Building; (6) the use, nature, business, activities or reputation in the business community of the proposed transferee (or its principals, employees or invitees) does not meet Landlord’s standards for Office Building tenants; (7) either the Transfer or any consideration payable to Landlord in connection therewith adversely affects the real estate investment trust qualification tests applicable to Landlord or its Affiliates; or (8) the proposed transferee is or has been involved in litigation with Landlord or any of its Affiliates. Tenant shall not be entitled to receive monetary damages based upon a claim that Landlord unreasonably withheld its consent to a proposed Transfer and Tenant’s sole remedy shall be an action to enforce any such provision through specific performance or declaratory judgment. Any attempted Transfer in violation of this Article is voidable at Landlord’s option.

 

(c) Landlord’s termination right contained in the penultimate sentence of Paragraph 9(a) of the Lease shall not apply to any Permitted Transfer.

 

(d) Paragraph 9(c) of the Lease is hereby amended to provide that only