Exhibit 10.18
OFFICE BUILDING
LEASE
NEWQUEST OFFICE PARK
BY AND BETWEEN:
DEEP DOWN, INC.
TENANT
A-K-S-L 49 BELTWAY 8, L.P.
LANDLORD
NOVEMBER 24. 2008
TABLE OF CONTENTS
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SECTION
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PAGE
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1.
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LEASED
PREMISES; COMMON AREA
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1
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2.
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TERM
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1
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3.
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SECURITY
DEPOSIT
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2
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4.
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RENT AND OTHER
AMOUNTS PAYABLE BY TENANT
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2
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5.
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POSSESSION
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7
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6.
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USE
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7
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7.
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SERVICE TO BE
PROVIDED BY LANDLORD
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8
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8.
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REPAIR AND
MAINTENANCE
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9
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9.
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LANDLORD'S
INSURANCE; FIRE AND CASUALTY
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9
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10.
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COMPLIANCE WITH
LAWS AND USAGE
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10
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11.
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INDEMNITY
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11
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12.
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WAIVER OF
LIABILITY
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11
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13.
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WAIVER OF
SUBROGATION
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11
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14.
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TENANTS
INSURANCE
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11
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15.
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ADDITIONS AND
FIXTURES
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12
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16.
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ASSIGNMENT AND
SUBLETTING
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12
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17.
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SUBORDINATION
AND ATTORNMENT
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14
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18.
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RULES AND
REGULATIONS
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14
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19.
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EMINENT
DOMAIN
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15
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20.
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ACCESS BY
LANDLORD
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13
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21.
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LANDLORD'S LIEN
AND SECURITY INTEREST
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15
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22.
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DEFAULT AND
REMEDIES
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15
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23.
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NONWAIVER
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18
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24.
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HOLDING
OVER
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18
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25.
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NOTICE
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18
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26.
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LANDLORD'S
MORTGAGEE
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18
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27.
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QUIET
ENJOYMENT
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19
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28,
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TIME OF
ESSENCE
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19
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29.
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MECHANIC'S
LIEN
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19
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30.
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MEMORANDUM OF
LEASE
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19
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31.
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INVALIDITY OF
PARTICULAR PROVISIONS
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19
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32.
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WAIVER OF
BENEFITS
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19
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33.
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WAIVER OF TRIAL
BY JURY
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19
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34.
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MISCELLANEOUS
TAXES
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19
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35.
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SUBSTITUTE
PREMISES
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19
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36.
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BROKERAGE
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19
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37.
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NO
REINSTATEMENT
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20
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38,
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LIMITATION OF
IMPLIED WARRANTY
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20
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39.
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CAPTIONS AND
BINDING EFFECT
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20
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40.
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INTEREST
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20
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41.
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GUARANTY
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20
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42.
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ATTORNEYS'
FEES
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20
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43.
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FORCE
MAJEURE
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20
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44.
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USE OF
LANGUAGE
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20
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45.
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DAMAGE FROM
CERTAIN CAUSES
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20
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46.
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GOVERNING
LAW
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20
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47.
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ASBESTOS OR
OTHER HAZARDOUS SUBSTANCES
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20
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48.
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AMENDMENT
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21
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49.
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ENTIRE
AGREEMENT
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21
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EXHIBIT "A" -
DEPICTION OF LEASED PREMISES: I.EGAL DESCRIPTION
EXHIBIT "B" -
LANDLORD'S WORK LETTER
EXHIBIT "C" -
PYLON SIGN
EXHIBIT "D" -
FORM OF SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT
EXHIBIT "E" - RENEWAL OPTION
OFFICE BUILDING
LEASE
THIS OFFICE BUILDING LEASE ("Lease')
is entered into by and between A-K-S-L 49 BELTWAY 8. L.P., a Texas
limited partnership ("Landlord") and DEEP DOWN. INC., a Nevada
corporation ("Tenant").
WITNESSETH:
1.
LEASED PREMISES; COMMON AREA.
(a) Landlord
hereby leases to Tenant and Tenant hereby Leases from Landlord
approximately 8,856 square feet of Rentable Area on the first (
1st) floor designated in the office building within NewQuest Office
located at 8827 W. Sam Houston Parkway N., Houston, Harris County,
Texas (the Park "Building"). The area hereby leased in the Building
is hereinafter called "Leased Premises- and is outlined on the
floor plan drawing designated as Exhibit "A" attached hereto and
made a part hereof. and the legal description of the land on which
the Building is located is described in Exhibit "A". The land on
which the Building is located. the Building. and any parking garage
or other parking facility for use by tenants of the Building are
collectively referred to herein as the "Project'.
The term "Rentable Area as used
shall mean: On each floor of the Building on which the entire space
rentable to tenants is or will be leased to one tenant, the
Rentable Area for such floor ("Single Tenant Floor”) shall be
the entire area bounded by the exterior or the exterior walls of
the Building on such floor less the area contained within the
building stairs, vertical ducts, elevator shafts, flues, vents.
Stacks, and pipe shafts. All the area on any Single Tenant Floor
that is used for elevator lobbies, corridors, special stairways,
restrooms, mechanical rooms, electrical rooms, telephone closets
and all vertical penetrations that are included for the special use
by Tenant and columns and other structural portions of the Building
shall he included within the Rentable Area for such
floor.
On each floor of the Building on
which space is or will be leased to more than one tenant, the
Rentable Area attributable to each such lease shall be the total of
( i) the entire area included within the leased premises covered by
such lease, being the area bounded by the exterior of the exterior
wall or walls of the Building bounding such leased premises, the
exterior of all walls separating such leased premises, from any
public corridors or other public areas on such floor, and the
centerline of all walls separating such leased premises from other
areas leased or to be leased to other tenants on such floor, and
(ii) a pro rata portion of the area covered by the elevator
lobbies, corridors. restrooms, mechanical rooms, electrical rooms
and telephone closets or other common area situated on such
floor.
The Rentable Area for the entire
Building shall be deemed to be 50,710 square feet for the purposes
of this Lease. The Rentable Area contained within the Leased
Premises and the Rentable Area of the Building shall be deemed for
all purposes of the Lease to be the number of square feet set forth
above. regardless of minor variations resulting from construction
of the Building and/or tenant improvements.
(b) Except
to the extent that Landlord is obligated to construct improvements
in the Leased Premises, as provided on Exhibit "B" attached
hereto and made a part hereof for all purposes. the Leased Premises
are delivered to Tenant and are being leased "AS IS" and "WITH ALL
FAULTS." and Landlord makes no representation or warranty of any
kind, expressed or implied, with respect to the condition of the
Leased Premises (including habitability, fitness or suitability for
particular purpose of the Leased Premises, or that the Building or
the improvements to the Leased Premises have been constructed in a
good and workmanlike manner). TO THE MAXIMUM EXTENT PERMITTED BY
APPLICABLE LAW, LANDLORD HEREBY DISCLAIMS. AND TENANT WAIVES
THE BENEFIT OF, ANY AND ALL EXPRESS OR IMPLIED
WARRANTIES. INCLUDING IMPLIED WARRANTIES OF HABITABILITY, FITNESS
OR SUITABILITY FOR ANY PARTICULAR PURPOSE, OR THAT THE BUILDING OR
THE IMPROVEMENTS IN THE LEASED PREMISES HAVE BEEN CONSTRUCTED IN A
GOOD AND WORKMANLIKE MANNER. TENANT EXPRESSLY ACKNOWLEDGES THAT
LANDLORD DID NOT CONSTRUCT OR APPROVE THE QUALITY OF CONSTRUCTION
OF THE BUILDING.
(c) The
"Common Area" of the Building as it shall exist from time to time
shall be that part of the Building designated by Landlord from time
to time for the common use of all tenants, (including among other
facilities, elevators. tunnels, skyways, halls, lobbies. delivery
passages, drinking fountains, public toilets and the like).
Landlord reserves the right to change from time to time the
dimensions and location of the Common Area, Tenant, and its
employees and invitees, shall have the nonexclusive right to use
the Common Area constituted from time to time, such use to be in
common with Landlord, other tenants of the Building, and other
persons entitled to use the same, and subject to the rules and
regulations governing use as Landlord may from time to time
prescribe. Tenant shall not solicit business or display merchandise
within the Common Area, distribute handbills therein, or take any
action which would interfere with the rights of other persons to
use the Common Area.
(d) Tenant
shall have the right to use thirty-six (36) unreserved parking
spaces on a non-exclusive basis at no charge during the Term of the
Lease. Subject to availability, Tenant may lease from Landlord
reserved parking spaces on an exclusive basis for Tenant's
employees, and Tenant shall pay to Landlord, as Additional Rent
therefor, Thirty-Five Dollars ($35.00) per month for each reserved
parking space.
2.
TERM . The term of this Lease ("Term") shall be for a period
of eighty-nine (89) months, commencing on the date that is five (5)
days following the substantial completion by Landlord of the
Leasehold Improvements pursuant to Exhibit B attached hereto and
terminating on the last day of the eighty-ninth (89th) month
thereafter. The estimated date on which Landlord will deliver the
Leasehold Improvements is February 15, 2009.
3.
SECURITY DEPOSIT . Intentionally Deleted.
4.
RENT AND OTHER AMOUNTS PAYABLE BY TENANT .
(a) As
base rental for the Lease and use of the Leased Premises ("Base
Rent"), Tenant will pay landlord at the Building managers office or
other location as Landlord may direct, without demand and without
deduction. abatement or setoff (except as otherwise expressly
provided for in Paragraph 9 or Paragraph 19), the sum of SIXTEEN
AND 50/100 DOLLARS ($16.50) per square foot of Rentable Area of the
Leased Premises per year at the monthly Rent of Twelve Thousand One
Hundred Seventy-Seven and 00/100 Dollars ($12,177.00) for months
six (6) through seventeen (17) of the Term; then SEVENTEEN AND
00/100 DOLLARS ($17.00) per square foot of Rentable Area of the
Leased Premises per year at the monthly Rent of Twelve Thousand
Five Hundred Forty-Six and 00/100 Dollars ($12,546.00) for months
eighteen (18) through twenty-nine (29) of the Term; then SEVENTEEN
AND 50/100 DOLLARS ($17.50) per square foot of Rentable Area of the
Leased Premises per year at the monthly Rent of Twelve Thousand
Nine Hundred Fifteen and 00/100 Dollars ($12,915.00) for months
thirty (30) through forty-one (41) of the Term; then EIGHTEEN AND
00/100 DOLLARS ($18.00) per square foot of Rentable Area of the
Leased Premises per year at the monthly Rent of Thirteen Thousand
Two Hundred Eight-Four and 00/100 Dollars ($ 13,284.00) for months
forty-two(42) through fifty- three (53) of the Term; then EIGHTEEN
AND 50/100 DOLLARS ($18.50) per square foot of Rentable Area of the
Leased Premises per year at the monthly Rent of Thirteen Thousand
Six Hundred Fifty-Three and 00/100 Dollars ($13,653.00) for months
fifty-four (54) through sixty-five (65) of the Term; then NINETEEN
AND 00/100 DOLLARS ($19.00) per square foot of Rentable Area of the
Leased Premises per year at the monthly Rent of Fourteen Thousand
Twenty-Two and 00/100 Dollars ($14,022.00) for months sixty-six
(66) through seventy-seven (77) of the Term; then NINETEEN AND
50/100 DOLLARS ($19.50) per square foot of Rentable Area of the
Leased Premises per year at the monthly Rent of Fourteen Thousand
Three Hundred Ninety-One and 00/100 Dollars ($14,391.00) for months
seventy- eight (78) through eighty-nine (89) of the Term. No Base
Rent shall be payable during months one (1) through five
(5) of the Term. Beginning on the sixth month of' the
Term, Base Rent shall be paid in advance on the first day of each
calendar month,. for each and every month in the Term, in lawful
money of the United States. If the Term does not commence on the
first day of a calendar month or end on the last day of a calendar
month, Tenant will pay in advance a pro rata part of such sum as
Base Rent for such partial month, which pro rata amount shall be
figured on the ratio that the number of days from the first day of
the Term bears to the total number of days in the first calendar
month of the Term.
(b) Beginning
on the sixth month of the Term, Tenant agrees to pay as additional
rent, as hereafter provided, an amount equal to Tenant's "Pro Rata
Share" of ''Operating Expenses" as such quoted terms are
herein defined) adjusted from time to time, pursuant to the
provisions hereafter stated. As used herein, the term "Pro Rata
Share" shall mean 17.46%, which is the percentage obtained by
dividing the rentable square feet of area in the Premises, which is
stipulated to be 8,856 rentable square feet by the total number of
square feet of area in the Building, which is stipulated to be
50,710 rentable square feet. Landlord shall utilize accounting
records and procedures conforming to generally accepted accounting
principles, consistently applied, with respect to all aspects of
determining Tenant's Pro Rata Share of the Total Cost (herein
defined). As used herein, the term "Operating Expenses' means all
expenses, costs and disbursements of every kind which Landlord
shall pay in connection with the operation and maintenance of the
Project, including, without limitation, the following:
(i) wages,
salaries and fees of all personnel or entities engaged in the
operation, maintenance or security of the Project, including taxes,
insurance and benefits relating thereto: provided, however, that if
during the Term such personnel or entities are working on other
projects periodically developed or operated by Landlord as well as
working on the Project, their wages. salaries, fees and related
expenses shall be appropriately allocated among all of such
projects and only those portions of such expenses reasonably
allocable to the Project shall be included as Operating
Expenses;
(ii) all
supplies and materials used in the operation, repair, cleaning and
maintenance of the Project;
(iii) cost of all
maintenance, security and service agreements for the Project and
the equipment thereon, including, without limitation. alarm
service, janitorial service, trash removal service, window
cleaning, elevator maintenance, landscaping, lawn care and
irrigation service, and parking area maintenance;
(iv) cost of all
insurance relating to the Project for which Landlord is responsible
hereunder, or which Landlord considers reasonably necessary for the
operation of the Project, including. without limitation, the cost
of casualty and liability insurance applicable to the Project and
Landlord's personal property used in connection therewith, and the
cost of business interruption insurance in such amounts as will
reimburse Landlord for all losses of earnings and other income
attributable to such perils as are commonly insured against by
prudent landlords;
(v) all taxes,
assessments, and other governmental charges, whether federal,
state, county. or municipal, and whether assessed by taxing
districts or authorities presently taxing the Project or by others,
subsequently created or otherwise, and any other taxes and
assessments attributable to the Project or its operation
(including, without limitation, any sales or use taxes), exclusive
of any inheritance, gift, franchise, income, corporate or profit
taxes which may be assessed against Landlord;
(vi) cost
of repairs and general maintenance (excluding repairs and general
maintenance paid by proceeds of insurance or paid directly by
Tenant or other third parties, and excluding alterations, other
than those standard for the Project, which are performed for the
benefit of tenants on the Project):
(vii) amortization
of the cost of installation of capital improvement items which are
primarily to reduce operating costs for the benefit of all tenants
on the Project or to enhance the Project or which may be required
by any governmental authority. All such costs, including interest
costs, shall be amortized over the reasonable life of the capital
investment items, with the reasonable life and amortization
schedule being determined by Landlord according to generally
accepted accounting principles, but in no event to extend beyond
the reasonable life of the Building;
(viii) all
charges for utilities (including. but not limited to, water, sewer,
electricity and gas) paid by Landlord;
(ix) rent
or rental value of Landlords leasing and management offices on or
near the Project;
(x) Landlord's
central accounting costs, together with the costs of all audits
required by the terms of this Lease, and legal and appraisal fees
relating to the operation of the Project; and
(xi) the
property management fee (not to exceed 4% of total Base Rent per
year for the Building) which is from time to time in effect and
which is due to the manager of the Project.
Notwithstanding anything to the contrary
contained in the Lease, the following items shall be excluded from
the calculation of Total Costs:
(A)
Corporate Overhead. All costs associated with the operation
of the business of the entity which constitutes "Landlord" or
"Landlord's managing agent" (as distinguished from the costs of the
operations of the Building/Project) including, but not limited to,
Landlord's or Landlord's managing agent's general corporate
overhead and general administrative expenses, legal,. risk
management, and corporate and/or partnership accounting and legal
costs, mortgages, debt costs or other financing charges, asset
management fees, administrative fees, any costs that would normally
be considered included in a management fee (e.g., property
accounting charges, local area network ("LAN") and wide area
network ("WAN") charges, travel expenses for company meetings or
training. etc.), placement/recruiting fees/costs for employees
whether they are assigned to the Building/Project or not, employee
training programs, real estate licenses and other industry
certifications, health/sports club dues, employee parking and
transportation charges, tickets to special events, costs of any
business licenses regardless if such costs are considered a form of
Real Estate Tax, costs of defending any lawsuits, costs of selling,
syndicating, financing, mortgaging or hypothecating any of
Landlord's interests in the Building/Project, bad debt loss, rent
loss or any reserves thereof, and costs incurred in connection with
any disputes between Landlord and/or Landlord's management agent
and their employees, tenants or occupants, and providers of goods
and services to the Building/Project;
(B)
Leasing. Any cost relating to the marketing, solicitation,
negotiation and execution of leases of space in the
Building/Project, including without limitation, promotional and
advertising expenses, commissions, finders fees, and referral fees,
accounting, legal and other professional fees and expenses relating
to the negotiation and preparation of any lease, license, sublease
or other such document, costs of design, plans, permits, licenses,
inspection, utilities, construction and clean up of tenant
improvements to the Premises or the premises of other tenants or
other occupants, the amount at' any allowances or credits paid to
or granted to tenants or other occupants of any such design or
construction, and all other costs of alterations of space in the
Building/Project leased to or occupied by other tenants or
occupants;
(C)
Executive/Unrelated/Off-Site Salaries. Wages, salaries,
fees, fringe benefits, and any other form of compensation paid to
any executive employee of Landlord and/or Landlord's managing agent
above the grade of Building Manager as such term is commonly
understood in the property management industry, provided, however,
all wages, salaries and other compensation otherwise allowed lobe
included in Operating Costs shall also exclude any portion of such
costs related to any employee's time devoted to other efforts
unrelated to the maintenance and operation of the
Building/Project;
(D)
Competitively Bid. Any amount paid by Landlord or Landlord's
managing agent to a subsidiary or affiliate of Landlord or
Landlord's managing agent, or to any party as a result of a
non-competitive selection process, for management or other services
to the Building/Project, or for supplies or other materials, to the
extent the cost of such services, supplies, or materials exceeds
the cost that would have been paid had the services, supplies or
materials been provided by parties unaffiliated with the Landlord
or Landlord's managing agent on a competitive basis and are
consistent with those incurred by similar buildings in the same
metropolitan area in which the Building/Project is
located;
(E)
Ground Lease. Any rental payments and related costs pursuant
to any ground lease of land underlying all or any portion of the
Building/Project, and any costs related to any reciprocal easement
agreement, and/or covenant, condition and restriction
agreement;
(F)
Office & Parking Charges. Any office rental and any
parking charges, either actual or nor, for the Landlord's and/or
Landlord's managing agent's management, engineering, maintenance,
security, parking or other vendor personnel:
(G)
Building Defects. Any costs incurred in connection with the
original design, construction, landscaping and clean-up of the
Building/Project or any major changes to same, including but not
limited to, additions or deletions of floors, renovations
of the common areas (except as otherwise expressly permitted
under this BOCA), correction of defects in design and/or
construction of the Building/Project including defective equipment,
replacement of major components which have reached the and of their
useful life irrespective of whether the replacement may result in
reducing the Total Costs, and the repair of damage to the
Building/Project in connection with any type of casualty, event of
damage or destruction or condemnation;
(H)
Capital. All costs of a capital nature, including, but not
limited to, capital improvements, capital repairs, capital
equipment, and capital tools, all as determined in accordance with
generally accepted accounting principles, consistently applied. and
sound management practices, except (i)any capital improvement made
to the Building which actually reduces Total Costs, amortized on a
straight- line basis, including interest as the lesser of the
interest rate actually paid by Landlord or 7.0% per annum, over the
improvement's useful life in accordance with generally accepted
accounting principles, provided, however, the annual amortization
shall not exceed the annual amount of Total Costs actually saved as
a result of such capital improvement, or (ii) capital expenditures
required by government regulation or law enacted after the
Commencement Date, the amount of such costs to be amortized on a
straight-line basis, with interest at the lesser of the interest
rate actually paid by Landlord or 7.0% per annum, over the asset's
useful life in accordance with generally accepted accounting
principles, or (iii) any cost incurred which is not considered
annual recurring routine maintenance but maintains the general
appearance of the Building/Project (i.e., painting of the common
areas, replacement of carpet in common areas. maintenance
of stone/tile) with the amount of all such costs to be
amortized on a straight-line basis over the useful life, with
interest at the lesser of the interest rate actually paid by
Landlord or 7.0% per annum;
(I)
Other Capital, Rentals and other related
expenses incurred in leasing air conditioning systems, elevators or
other equipment, the cost of which if purchased would be excluded
from Total Costs as a capital cost, excepting from this exclusion
equipment not affixed to the Building/Project which is used in
providing janitorial or similar services and, further excepting
from this exclusion such equipment rented or leased to remedy or
ameliorate an emergency condition in the
Building/Project;
(J)
Building Codes/ADA. Any cost incurred in
connection with upgrading the Building/Project to comply with
insurance requirements, life safety codes, ordinances, statutes, or
other laws as such laws are in effect prior to the Commencement
Date, including without limitation the Americans With Disabilities
Act (or similar laws, statutes, ordinances or rules imposed by the
State, County. City, or other agency where the Building/Project is
located), including penalties or damages incurred as a result of
non-compliance;
(K)
Hazardous Material. Any cost or expense
related to monitoring, testing, removal, cleaning, abatement
or remediation of any "hazardous material", including
toxic mold, in or about the Building/Project or real property, and
including, without limitation, hazardous substances in the ground
water or soil;
(L)
Reimbursements. Any
cost of any service or items sold or provided to tenants or other
occupants for which Landlord or Landlord's managing agent has been
or is entitled to be reimbursed by such tenants or other occupants
for such service or has been or is entitled to be reimbursed by
insurance or otherwise compensated by parties other than tenants of
the Building/Project to include replacement of any item covered by
a warranty;
(M)
Benefits to Others. Expenses
in connection with services or other benefits which are provided to
another tenant or occupant of the Building/Project and which do not
benefit Tenant to include the repairs and maintenance of the common
area of a multi-tenant floor (e.g. elevator lobby, restrooms and
hallways) if Tenant is a full-floor tenant and such repairs and
maintenance are not provided to Tenant;
(N)
Other Taxes. Landlord's gross receipts
taxes for the Building/Project, personal and corporate income
taxes, inheritance and estate taxes, other business taxes and
assessments, franchise, gift and transfer taxes, and all other Real
Estate Taxes relating to a period payable or assessed outside the
term of the Lease;
(O)
Special Assessment. Special assessments or special taxes
initiated as a means of financing improvements to the
Building/Project and the surrounding areas thereof;
(P)
Advertising/Promotion/Gifts. All advertising and promotional
costs including any form of entertainment expenses, dining
expenses, any costs relating to tenant or vendor relation programs
including flowers, gifts, luncheons, parties, and other social
events but excluding any cost associated with life safety
information services;
(Q)
FinesPenalties. Any fines, costs, lace charges. liquidated
damages, penalties, tax penalties or related interest charges,
imposed on Landlord or Landlord's managing agent;
(R)
Contributions/Dues/Subscriptions. Any costs, fees, dues,
contributions or similar expenses for political, charitable,
industry association or similar organizations, as well as the cost
of any newspaper, magazine, trade or other subscriptions. excepting
the Building's/Project's annual membership dues in the local
Building Owners and Managers Association ("BOMA").
(S)
Art . Costs, other than those incurred in ordinary
maintenance and repair, for sculptures. paintings, fountains or
other objects of art or the display of such items;
(T - )
Concessionaires. Any compensation or benefits paid to or
provided to clerks, attendants or other persons in commercial
concessions operated by or on behalf of the Landlord;
(U)
Insurance. Costs incurred by Landlord for the repair of
damage to the Building/Project caused by fire, windstorm,
earthquake or other casualty, condemnation or eminent domain to
include terrorism or environmental other than deductibles not to
exceed (i) $15,000 to Tenant per occurrence for windstorm, and
(ii) Tenant's Pro Rata Share of $10,000 per occurrence for other
casualties;
(V)
Other Insurance. Any increase in the cost of Landlord's
insurance caused by a specific use of another tenant or by
Landlord;
(W)
Reserves. Any reserves of any kind;
(X)
Telecommunications. Any cost incurred in connection with
modifying, upgrading, replacing, repairing or maintaining any
component of the Building's telecommunication systems which is not
used by Tenant; and
(Z)
Parking. Any maintenance, repair or replacement
of the canopies installed in the parking area for the
exclusive use of certain tenants on a reserved basis.
In determining the amount of Operating Expenses
for any calendar year (i) if less than 95% of the Building shall
have been occupied by tenants and fully used by them, at any time
during the year, Landlord shall make an appropriate adjustment in
accordance with industry standards and generally accepted
accounting principles, consistently applied, to the
Building/Project and Operating Expenses shall be increased to an
amount equal to the like operating expense which would normally be
expected to be incurred had such occupancy been 95% and had such
full utilization been made during the entire period, or (ii) if the
Landlord is not furnishing any particular work or service (the cost
of which if' performed by the Landlord would constitute an
Operating Expense) to tenants who have undertaken to perform such
work or service in lieu of the performance thereof by the Landlord,
Operating Expenses shall he deemed for the purposes of this
Paragraph to he increased by an amount equal to the additional
Operating Expense which would have reasonably been incurred during
such period by the Landlord if it had at its own expense furnished
such work or service. Tenant shall not pay Total Costs that exceed
cost actually paid by Landlord.
(i) Net Expenses
. Operating Expenses. Tax (herein defined) and Insurance Charges
(herein defined) shall be "net" only and shall therefore be reduced
by all cash discounts, trade discounts, quantity discounts,
rebates, refunds, credits, or other amounts received by Landlord or
Landlord's managing agent, including any such related amounts from
tenants of the Building/Project, for its purchase of or provision
of any goods, utilities, or services:
(ii) Partial Year .
Building/Project Operating Expenses that cover a period
of time not entirely within the Term of the Lease shall
be prorated based on the actual number of days in the
year:
(iii) Vacancy
Credit. Except in the event, Operating Expenses are to be
"grossed up”, in the event Tenant ceases to occupy (but still
leases) the Premises or any portion thereof, Tenant shall receive a
credit against rent (for example, a credit to either Base Rent or
Tenant's Pro Rata Share of Operating Costs) equal to Tenant's Pro
Rata Share of the reduction in the cost of utilities not incurred
as a result of such vacancy;
(iv) Duplicate
Charges . Landlord shall not (i) profit by including items in
Operating Costs and/or Real Estate Taxes that are otherwise also
charged separately to others, or (ii) collect Operating Costs
and/or Real Estate Taxes from Tenant and all other
tenants/occupants in the Building/Project in an amount in excess of
what Landlord actually incurred for the items included in Operating
Costs:
(d) Tenant
further agrees to pay as part of "Additional Rent", an amount equal
to Tenant's Pro Rata Share of the "Tax" and "Insurance Charges" (as
hereafter defined) adjusted from time to time, as hereafter
provided:
(i) The
phrases "Tax" and "Taxes", as used herein, shall mean all taxes,
assessments, impositions, levies, charges, and other sums
(whether now existing or hereafter arising, whether
foreseen or unforeseen and whether made under the present system of
real estate taxation or some other system), levied, assessed.
charged or imposed by any governmental authority or other taxing
authority (including, but not by way of limitation, municipal
utility district taxing authorities) or which accrue upon the
Project for any Calendar Year (or portion thereof) during the Term,
including, without limitation, any future tax upon rents
received by Landlord (to he distinguished from income, franchise or
profit taxes), as well as any costs incurred by Landlord contesting
any such Taxes or obtaining consultants relative to any tax
assessments, together with all penalties, interest and other
charges (with respect to taxes) payable by reason of any delay
and/or failure or refusal of Tenant to make timely payment as
required under this Lease. "Taxes" shall not include any of
Landlord's income, franchise or profit, estate, inheritance or gift
taxes.
(ii) The
phrase "Insurance Charges" shall mean the total annual insurance
premiums which accrue on all fire and extended coverage insurance,
boiler insurance, public liability and properly damage insurance,
rent insurance, and any other insurance which, from time to time,
may, at Landlord's election, be carried by Landlord with respect to
the Project during any Calendar Year (or portion thereof) during
the Term; provided, however, that in the event, during any such
Calendar Year, all or any part of such coverage is written under a
blanket policy or other policy form whereby Landlord is unable to
determine a specific insurance premium charge applicable to the
Project (or to determine an equitable manner in which to prorate
such charge among the properties covered by such policy), then in
such event, the amount considered to be the Insurance Charge with
respect to such policy shall be that amount, as
reasonably determined by Landlord. which would have been the annual
Insurance Charge payable under the rates in effect (at
approximately the same time that such policy was issued) for a
separate Texas standard form insurance policy generally providing
such type and amount of coverage (without any deductible amount)
with respect to the Project (considering the type of construction
and other relevant matters), even though Landlord carried such
insurance, or a portion thereof, under such blanket coverage.
Landlord may, from time to time, make a corresponding calculation
as such policy is renewed or replaced. The phrase "Insurance
Charges" shall also include the amount of any deductibles payable
with respect to insurance carried by Landlord with respect to the
Project.
(d) Tenant
shall pay to Landlord monthly estimated Operating Expenses, and
estimated Tax and Insurance Charges (all of which are hereafter
referred to as the "Monthly Estimated Costs"), as determined by
Landlord from time to time, which shall be due and payable on or
before the first day of each month during the Term hereof. Within
one hundred twenty (120) days after the end of each Calendar Year
occurring during the Term (and subsequent to the expiration or
other termination of this Lease, if such occurs on a date other
than the last day of the Calendar Year), Landlord will give Tenant
notice of the total amount paid by Tenant for the applicable
Calendar Year together with the actual amount of (i) Operating
Expenses and (ii) Tax and Insurance Charges for such Calendar Year
(collectively referred to in this section as the "Total Costs"). It
the actual amount of Tenant's Pro Rata Share the Total Costs with
respect to such period exceeds the aggregate amount previously paid
by Tenant with respect thereto during such period, Tenant shall pay
to Landlord the deficiency within thirty (30) days following notice
from Landlord: if, however, the aggregate amount previously paid by
Tenant with respect thereto exceeds Tenant's Pro Rata Share of the
Total Costs for such period, then, at Landlord's election, such
excess (net of any amounts then owing by Tenant to
Landlord) shall be credited against the next installment of any
such cost due hereunder by Tenant, or Landlord may refund such net
excess to Tenant within thirty (30)days following delivery of
Landlord's notice. Periodically, during the Term of this Lease,
Tenant shall pay all taxes assessed against Tenant's personal
property and leasehold improvements. Notwithstanding anything
contained in this Article 4 to the contrary, annual
increases in the amount of Tenant's Additional Rent (Tenant's Pro
Rata Share of Operating Expenses, Taxes and insurance) shall be
capped at ten percent (10%), calculated on a cumulative basis,
solely with respect to Controllable Expenses following the first
full calendar year of the Project. “Controllable
Expenses” specifically does not include ( i) Insurance, (ii)
Taxes, (iii) utilities, and (iv) any change in Additional Rent
which is a result of an increase in minimum wage, labor unions, or
any change mandated by governmental regulation.
(e) The
term "Calendar Year as used herein, means each calendar year and
partial calendar year for the full Term hereof. The First (1st)
Calendar Year means the period which begins with the
Commencement Date and which ends on the following 31st
day of December. Each following Calendar Year period shall be for a
term of a full twelve (12) months beginning with the next following
January 1st and shall continue for each and every twelve (12) month
period thereafter; however the last Calendar Year shall be for less
than twelve (12) months if the Lease Term ends on a date other than
December 31 st .
(f) For
all purposes tinder this Lease, "Rent" shall mean the Base Rent and
Additional Rent. Tenant acknowledges that late payment by Tenant to
Landlord of all Rent or other charges due from Tenant under this
Lease will cause Landlord to incur costs not contemplated by this
Lease, the exact amount of such costs being extremely difficult and
impractical to fix. Such costs include, without limitation,
processing accounting charges, and late charges that may be imposed
on landlord by the terms of any encumbrance and note secured by any
encumbrance covering the demised premises. Therefore, if any
installment of Rent or other charges due from Tenant under this
Lease is not received within ten (10) days of the date when due,
Tenant shall pay to Landlord an additional sum of ten percent (10%)
of the overdue Rent or earlier charges due from Tenant under this
Lease as a late charge. Further, the parties agree that this late
charge represents a fair and reasonable estimate of the costs that
Landlord will incur by reason of late payments by Tenant, however,
Landlord's acceptance of any late charge shall not constitute a
waiver of Tenant's default with respect to the overdue amount, nor
prevent Landlord from exercising any of the other rights and
remedies available to Landlord.
(g) Tenant, at
Tenant's sole cost and expense, shall have the right, to be
exercised by written notice given to Landlord within ninety (90)
days after receipt of aforesaid statement showing Total Costs for
the previous calendar year, to audit, at the place where Landlord
maintains its books and records, Landlord's books and records
pertaining only to such Total Costs for such previous calendar
year, provided (A) such audit commences within thirty (30) days
after Tenant's notice to Landlord and thereafter proceeds
regularly and continuously to conclusion, (B) that Tenant or
Tenant's employee is present at all times during the audit, (C)
such audit does not unreasonably interfere with the conduct of
Landlord's business, (D) such audit is performed by a national or
regional auditing Finn which is commonly known to be reputable, and
(E) said auditing firm signs a nondisclosure agreement in favor of
Landlord, acceptable to Landlord in all respects, agreeing that
information derived from such audit shall not be used directly or
indirectly in connection with soliciting additional auditing
business from other existing, previous or future tenants in the
Building, Landlord agrees to cooperate in good faith with Tenant in
the conduct of any such audit. Notwithstanding anything to the
contrary set forth in this Paragraph, however, in no event shall
Tenant ever be permitted to audit or cause to be audited Landlord's
records concerning Total Costs through, or with the assistance of
auditors or others whose compensation is contingent upon, or the
amount of whose compensation is affected by, the outcome of such
audit, in whole or in part, or on any payment or reimbursement by
Landlord to Tenant in connection with such audit, or which is
otherwise done in whole or in part on any basis other than
reasonable hourly charges for the hours expended in the performance
of such audit, and reimbursement of reasonable out-of-pocket
expenses incurred by such auditors in connection with such audit.
In the event that the audit determines that the amount charged to
Tenant exceeds the correct amount by 5% or more. Landlord will
promptly refund the Tenant all amounts overpaid and Landlord shall
pay for the reasonable cost of the audit.
5.
POSSESSION . If Landlord is unable to deliver
possession of the Leased Premises on the date of the commencement
of the Term because the Leased Premises are not ready for
occupancy, Landlord shall not be subject to any liability for the
failure to deliver possession on said date. Under such
circumstances, unless the delay is the fault of Tenant, the Rent
shall not commence until Leased Premises are ready for occupancy by
Tenant, and no such failure to deliver possession on the date of
commencement of the Term shall in any way affect the validity of
this Lease or the obligations of Tenant hereunder, nor shall same
be construed in any way to extend the Term, the delay in the
accrual of rent described in the foregoing sentence constitutes
full settlement of all claims that Tenant might otherwise have by
reason of the Leased Premises not being ready for occupancy on the
commencement of the Term. If, at Tenant's
request, Landlord shall make the Leased Premises available to
Tenant prior to the date of commencement of the Term for the
purposes of decorating. constructing, furnishing, and equipping he
Leased Premises, the use of the Leased Premises for such work
shall not create a landlord-tenant relationship between the parties
nor constitute occupancy of the Leased Premises within the meaning
of the next sentence, but the provisions of Paragraph 9, 11, 12,13
and 14 of the Lease shall apply from the date the Leased Premises
are made available to the Tenant. If with the consent of Landlord,
Tenant shall enter into occupancy on the Leased Premises to do
business therein prior to the date of commencement of the Term, the
provisions of the Lease shall apply and rent shall accrue and he
payable from the date of occupancy. If pursuant to the terms of
this Paragraph 3, the Term shall commence on any data other than
that commencement date noted in Paragraph 2, Tenant agrees to enter
into a letter amendment to this Lease identifying the new "Term"
hereof. Notwithstanding anything to the contrary contained in this
Lease upon execution of this Lease by Landlord and Tenant. Landlord
and Tenant hereby agree that they are bound by the terms of this
Lease from and after the date both parties executed this
Lease.
6.
USE.
(a) Tenant
shall use the Leased Premises solely for the purpose of general
office space. Tenant shall use the Leased Premises for no other
purpose without the prior written consent of Landlord. In addition,
Tenant covenants and agrees to operate its approved business in a
first-class, reputable and efficient manner, throughout the Term
°runs Lease in or on the Leased Premises.
(b) Tenant
shall be entitled to place, at Tenant's sole cost and expense. a
sin panel on the pylon sign to be constructed for the Building,
which pylon sign shall be constructed by Landlord at its sole cost
and expense within thirty (30) days following the Commencement
Date. The location and appearance of such sign and panel are shown
on the attached Exhibit "C". Landlord shall furnish and
install building standard graphics including Tenant's name and/or
logo on all Building directories and at Tenant's entry door, at
Landlord's cost.
(c) The
Project will be at all times under the control, management and
operation of Landlord: provided. However, nothing in this
subparagraph (c) shall create liability on the part of Landlord, if
such liability arises out of any obligation undertaken by Tenant
under this Lease. Landlord may from time to time (i) alter or
redecorate the Project (including any Common Area) or construct
additional facilities adjoining or approximate to the Project: (ii)
close, temporarily, doors, entryways, public spaces and
corridors and interrupt or suspend, temporarily, Building services
and facilities in order to perform any redecorating or alteration
or in order to prevent the public from acquiring prescriptive
rights in any Common Area; (iii) change the name or street address
of the Building: and (iv) install, maintain or change a sign or
signs on the exterior or interior of the Building.
(d) Landlord
will use commercially reasonable efforts not to disrupt Tenant's
operations in the Leased Premises during the proper exercise of
Landlord's rights under Paragraph 6(c) or Paragraph 20 hereof, but
it is not required to incur any unreasonable expenses in order to
minimize the disruption. Tenant hereby waives all claims for
damages. injuries or interference with Tenant's business, loss of
occupancy, or quiet enjoyment and for claims under any other laws
resulting from the proper exercise by Landlord of any right under
Paragraph 6(c) or Paragraph 20 hereof. No proper exercise by
Landlord of any right under Paragraph 6(c) or Paragraph 20 hereof
constitutes actual or constructive eviction or breach of any
expressed or implied covenant for quiet enjoyment.
(e) If, at any
time during the Term, Tenant vacates, abandons, or ceases its
operation at the Lease Premises for more than ninety (90) days
(except as a result of casualty or condemnation). Landlord shall
provide written notice to Tenant thereof. and if Tenant shall not
have recommenced its occupancy for operation at the Premises within
thirty (30) days following receipt of such notice, then Landlord
shall have the right to immediately recapture the Leased Premises
and in such event, the Lease Term shall expire and end on the date
stated in Landlord's notice (the "Recapture Notice"), in which
event neither Landlord nor Tenant shall have any further liability
hereunder, except for those obligations which expressly survive the
expiration or earlier termination of this Lease.
7. SERVICE
TO BE PROVIDED BY LANDLORD .
(a) Subject to
the Building rules and regulations hereinafter set forth, Landlord
shall furnish Tenant, at Landlord's expense, except as provided in
Paragraph 4 above, the following services while Tenant is occupying
the Leased Premises during the Term:
(i) During
normal business hours (7:00 a.m. - 7:00 p.m.) on Mondays through
Fridays, and, Saturdays (9:00. a.m. - 12:00 p.m.) air-conditioning
and beating in season, at such temperatures and in such amounts as
are considered by Landlord to be standard. but such service outside
normal business hours and on Sundays and holidays shall be
furnished only at Landlord's discretion and in any event only upon
forty-eight (48) hours prior written request by Tenant, who shall
bear the standard charges of Landlord therefor, which shall never
be less than the cost thereof
(ii) Hot
and cold water at those points of supply provided for general
use.
(iii) Standard
building janitor service in and about the Building and the Leased
Premises, five (5) days per week, and periodic window washing;
however, Tenant shall pay the additional costs attributable to the
cleaning of improvements within the Leased Premises other titan
building standard improvements.
(iv) Elevators
for ingress to and egress from the Building during normal business
hours and other such periods as are considered by Landlord to be
standard.
(v) Proper
building standard facilities to furnish sufficient electrical power
for standard lighting, typewriters, dictating equipment,
calculating machines and other machines of similar low electrical
consumption, but not including electricity required for special
lighting in excess of building standard, or which, in Landlord's
reasonable judgment, exceeds the capacity of existing feeders,
conductors, risers, or wiring in or to the Leased Premises or
Building, and not including electricity for any other item of
electrical equipment which singly consumes more than 0.25 kilowatts
per hour at rated capacity, or voltage other than 120 volts or
single phase. Tenant shall pay to landlord, monthly as billed, such
charges as may be separately metered or as Landlord's engineer may
compute for any electrical service furnished to Tenant in excess of
that stated above.
(vi) Replacement
of fluorescent lamps in building standard ceiling mounted fixtures
installed by Landlord and incandescent bulb replacement in public
areas.
(b) No
interruption, moratorium or malfunction of any services, or failure
of any machinery, equipment or systems, or components thereof, to
operate, or malfunction in the operation thereof, for any cause
whatsoever shall constitute an eviction or disturbance of Tenant's
use and possession of the Leased Premises or Project or a breach by
Landlord of any of its obligations hereunder or render Landlord
liable for damages or entitle Tenant to be relieved from any of its
obligations hereunder (including the obligation to pay Rent) or
grant Tenant any right of setoff or recoupment. In the event of any
such interruption, however, Landlord shall use reasonable diligence
to restore such service in any circumstances in which such
restoration is within the reasonable control of Landlord and the
interruption was not caused by Tenant's fault or the fault of
Tenant's employees, agents, contractors, invitees, or licensees.
Notwithstanding anything contained herein, Landlord shall use
reasonable efforts to restore any service required of it that
becomes unavailable: however, such unavailability shall not render
Landlord liable for any damages caused thereby, be
a constructive eviction of Tenant,
constitute a breach of any implied warranty, or, except as provided
in the next sentence, entitle Tenant to any abatement of Tenant's
obligations hereunder. If, however, Tenant is prevented from using
the Premises for more than live (5) consecutive business days
because of the unavailability of any such service and such service
is within Landlord's control, then Tenant shall, as its exclusive
remedy be entitled to a reasonable abatement of Base Rent and
Additional Rent for each consecutive day (after such 5-day period)
that Tenant is so prevented from using the Premises.
(c) Should
Tenant desire any additional services beyond those described in
Subparagraph (a) of this Paragraph 7 or rendition of any such
services outside the normal times of Landlord for providing such
services. Landlord may (at Landlord's option), upon reasonable
advance notice from Tenant to Landlord, furnish such services, and
Tenant agrees to pay Landlord such charges as may be agreed on
between Landlord and Tenant, but in no event at a charge less than
Landlord's actual cost plus reasonable overhead for the additional
services provided. By way of illustration and not limitation,
special equipment requiring abnormal use of water or electricity
used as a power source for data processing machines, including, air
conditioning costs therefor, large business machines and similar
equipment of high electrical consumption characteristics shall not
constitute standard water consumption or electrical service, as the
case may be, and the costs thereat' shall he paid by Tenant. Tenant
hereby agrees to cause, at its sole expense, separate meters for
measuring units of' consumption to be installed within the Leased
Premises, if the services consumed by Tenant are reasonably
determined by Landlord to be beyond or more than those services
described in Subparagraph (a) of this Paragraph 7 to be provided by
Landlord.
(d) Tenant
shall pay to the Landlord the amount provided for in this Paragraph
7(c) for additional services within five (5) business days
after receipt of an invoice therefor from Landlord.
(e) Tenant
shall also pay for, before delinquencies, all telephone charges and
the cost or charge for all other materials and services not
expressly the obligation of Landlord that are Furnished to or used
on, in or about the Leased Premises by other parties during the
Term of this Lease.
8 . REPAIR AND
MAINTENANCE .
(a) Landlord
shall, subject to the casualty provisions of Paragraph 9, maintain
the (i) Common Area and service areas of the Project, ( ii)
roof, foundation, exterior windows and load-bearing items of the
Building; (iii) exterior (located outside the Leased Premises)
surfaces of walls; (iv) plumbing, pipes and conduits located
in the Common Area or service areas of the Project; and (v) the
Buildings central heating, ventilation and air conditioning,
electrical, mechanical and plumbing systems, landlord is not
required to make any repair in connection with or resulting from
(1) any alteration or modification to the Leased Premises or to
Building equipment performed by, for or because of Tenant or to
special equipment or systems, installed by, for or because of
Tenant, (2) the installation, use or operation of Tenant's
property, fixtures, and equipment, (3) the moving of Tenant's
property in or out of the Building, or in and about the Leased
Premises, (4) Tenant's use or occupancy of the Leased Premises in
violation of Paragraph 6 or in a manner set out in this Lease (e.g.
subsequent installation of special use rooms), (5) the acts or
omissions of Tenant and Tenant's employees, agents, invitees,
subtenants, licensees or contractors, or (6) fire or other
casualty, except as provided in Paragraph 9. Depending on the
nature of repairs undertaken by Landlord, the cost of the repairs
will be borne solely by Landlord (if required to be under the terms
of the Lease) or will be reimbursed to Landlord either by a
particular tenant or tenants or by all tenants as part of the
Operating Expenses.
(b) Except
for janitorial services provided by Landlord and landlord's
obligations under Paragraph I(b) and 8(a), and subject to the
terms of Paragraph 15. Tenant shall maintain the Leased Premises,
including all fixtures installed by Tenant, in good and tenantable
condition and repair and shall promptly make all reasonably
necessary nonstructural repairs and replacements thereto
except those caused by fire or other casualty cove
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