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OFFICE LEASE

Office Lease Agreement

OFFICE LEASE | Document Parties: CRESCENT REAL ESTATE FUNDING VIII, LP | GAINSCO, INC You are currently viewing:
This Office Lease Agreement involves

CRESCENT REAL ESTATE FUNDING VIII, LP | GAINSCO, INC

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Title: OFFICE LEASE
Date: 5/9/2005
Industry: Insurance (Prop. and Casualty)     Sector: Financial

OFFICE LEASE, Parties: crescent real estate funding viii  lp , gainsco  inc
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EXHIBIT 10.37

C

OFFICE LEASE

BETWEEN

CRESCENT REAL ESTATE FUNDING VIII, L.P.

(“ LANDLORD ”)

and

GAINSCO, INC.

(“ TENANT” )

 


 

TABLE OF CONTENTS

             
        PAGE  
1.
  Basic Lease Information     1  
2.
  Lease Grant     2  
3.
  Term; Adjustment of Commencement Date; Possession     2  
4.
  Rent     3  
5.
  Tenant’s Use of Premises     8  
6.
  Security Deposit     8  
7.
  Services to be Furnished by Landlord     9  
8.
  Use of Electrical Services by Tenant     10  
9.
  Repairs and Alterations     10  
10.
  Entry by Landlord     12  
11.
  Assignment and Subletting     12  
12.
  Liens     14  
13.
  Indemnity and Waiver of Claims     14  
14.
  Insurance     14  
15.
  Mutual Waiver of Subrogation     15  
16.
  Casualty Damage     15  
17.
  Condemnation     16  
18.
  Events of Default     17  
19.
  Remedies     17  
20.
  Limitation of Liability     19  
21.
  No Waiver     20  
22.
  Tenant’s Right to Possession     20  
23.
  Relocation     19  
24.
  Holding Over     20  
25.
  Subordination to Mortgages; Estoppel Certificate     20  
26.
  Attorneys’ Fees     20  
27.
  Notice     21  
28.
  Reserved Rights     21  
29.
  Surrender of Premises     21  
30.
  Hazardous Materials     22  
31.
  Miscellaneous     22  

EXHIBITS AND RIDERS

     
EXHIBIT A-1
  OUTLINE AND LOCATION OF PREMISES
EXHIBIT A-2
  LEGAL DESCRIPTION OF PROPERTY
EXHIBIT B
  RULES AND REGULATIONS
EXHIBIT C
  COMMENCEMENT LETTER
EXHIBIT D
  WORK LETTER
EXHIBIT E
  PARKING AGREEMENT
EXHIBIT F
  SIGNAGE
RIDER NO. 1
  OPTION TO EXTEND
RIDER NO. 2
  PREFERENTIAL RIGHT TO LEASE

 


 

OFFICE LEASE

     This Office Lease (this “ Lease ”) is entered into by and between CRESCENT REAL ESTATE FUNDING VIII, L.P., a Delaware limited partnership (“ Landlord ”), and GAINSCO, INC., a Texas corporation (“ Tenant ”), and shall be effective as of the date set forth below Landlord’s signature (the “ Effective Date ”).

1. Basic Lease Information . The key business terms used in this Lease are defined as follows:

      A. Building ” shall mean the building located at 3333 Lee Parkway, Dallas, Texas 75219.

      B. Rentable Square Footage of the Building ” is agreed and stipulated to be 233,543 square feet.

      C. Premises ” shall mean the area shown on Exhibit A-1 to this Lease. The Premises are located on the 12 th floor and known as suite number 1200. The “ Rentable Square Footage of the Premises ” is deemed to be 20,585 square feet. If the Premises include one or more floors in their entirety, all corridors and restroom facilities located on such full floor(s) shall be considered part of the Premises. Landlord and Tenant stipulate and agree that the Rentable Square Footage of the Building and the Rentable Square Footage of the Premises are correct and shall not be remeasured.

      D. Base Rent ”:

                                 
                    Annual Rate     Monthly  
    Period             Per Square Foot     Base Rent  
CD
  through       8/31/06     $ 17.00     $ 17,330.08 *
9/01/06
  through       ED     $ 17.00     $ 29,162.08  

*calculated on 12,233 rsf
Base Rent on 8,352 rsf is abated
     
CD = Commencement Date
  ED = Expiration Date

      E. Tenant’s Pro Rata Share ” is equal to the Rentable Square Footage of the Premises divided by the Rentable Square Footage of the Building.

      F. Base Year ” for Operating Expenses: 2005.

      G. Term ”: The period of approximately 120 months starting on the Commencement Date, subject to the provisions of Article 3 .

      H. Estimated Commencement Date ”: August 1, 2005, subject to adjustment, if any, as provided in Section 3.A and the Work Letter, if any.

      I. Security Deposit ”: $0.00.

      J. Guarantor(s) ”: N/A

1


 

      K. Notice Addresses ”:

      Tenant : On or after the Commencement Date, notices shall be sent to Tenant at the Premises 1 . Prior to the Commencement Date, notices shall be sent to Tenant at the following address:

         
1445 Ross Avenue
  with a copy to:    
Suite 5300
  1445 Ross Avenue    
Dallas, Texas 75202
  Suite 5300    
Attn: Glenn W. Anderson
  Dallas, Texas 75202    
Phone #: (214) 647-0415
  Attn: John Daniels    
Fax #:                                          
  Phone #: (214) 647-0415    
  Fax #:                                              
 
       
Landlord:
  With a copy to:    
 
       
3333 Lee Parkway
  777 Main Street   200 Crescent Court, Suite 250
Suite 100
  Suite 2100   Dallas, Texas 75201
Dallas, Texas 75219
  Fort Worth, Texas 76102   Attn: Senior Vice President
Attn: Property Manager
  Attn: Legal Department   Asset Management and Leasing
Phone #: (214) 559-2424
  Phone #: (817) 321-2100   Phone #: (214) 880-4545
Fax #: (214) 559-2266
  Fax #: (817) 321-2000   Fax #: (214) 880-4547

     Rent (defined in Section 4.A ) is payable to the order of Crescent Real Estate Funding VIII, L.P. at the following address: P.O. Box 844255, Dallas, Texas 75284-4255 or by wire transfer to Bank of America, Dallas, Texas, ABA #111-0000-25, for further credit to Crescent Real Estate Funding VIII, L.P., Account #479-584-8612, Reference: Gainsco, Inc./3333 Lee Parkway.

      L. Business Day(s) ” are 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 office buildings in the area where the Building is located.

      M. Law(s )” means all applicable statutes, codes, ordinances, orders, rules and regulations of any municipal or governmental entity, now or hereafter adopted, including the Americans with Disabilities Act and any other law pertaining to disabilities and architectural barriers (collectively, “ ADA ”), and all laws pertaining to the environment, including the Comprehensive Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C. §9601 et. seq. (“ CERCLA ”).

      N. Normal Business Hours ” for the Building are 7:00 A.M. to 7:00 P.M. on Business Days and 8:00 A.M. to 2:00 P.M. on Saturdays, exclusive of Holidays.

2. Lease Grant. Landlord leases the Premises to Tenant and Tenant leases the Premises from Landlord, together with the right in common with others to use any portions of the Property (defined below) that are designated by Landlord for the common use of tenants and others, such as sidewalks, common corridors, vending areas, lobby areas and, with respect to multi-tenant floors, restrooms and elevator foyers (the “ Common Areas ”). “ Property ” means the Building and the parcel(s) of land on which it is located as more fully described on Exhibit A-2 , together with all other buildings and improvements located thereon; and the Building garage(s) and other improvements serving the Building, if any, and the parcel(s) of land on which they are located.

3. Term; Adjustment of Commencement Date; Possession .

      A.  Term . This Lease shall govern the relationship between Landlord and Tenant with respect to the Premises from the Effective Date through the last day of the Term specified in Section 1.G (the “ Expiration Date ”), unless terminated early in accordance with this Lease. The Term of this Lease (as specified in Section 1.G ) shall commence on the “Commencement Date”, which shall be the earlier of (1) the date on which the Landlord Work (defined below) is Substantially Complete, as determined pursuant to Paragraph 4(c) of the Work Letter (defined below), or (2) the date on which the Landlord Work would have been Substantially Complete but for Tenant Delay, as such term is defined in Paragraph 4(c) of the Work Letter, or (3) the date Tenant takes possession of any part of the Premises

 


1 Attention: Glenn W. Anderson with a copy to the attention of John Daniels at the Premises

2


 

for purposes of conducting business. 2 If Landlord is delayed in delivering possession of the Premises or any other space due to any reason, including Landlord’s failure to Substantially Complete the Landlord Work by the Estimated Commencement Date, the holdover or unlawful possession of such space by any third party, or for any other reason, such delay shall not be a default by Landlord, render this Lease void or voidable, or otherwise render Landlord liable for damages. Promptly after the determination of the Commencement Date, Landlord and Tenant shall enter into a commencement letter agreement substantially in the form attached as Exhibit C . Notwithstanding any other provision of this Lease to the contrary, if the Expiration Date would otherwise occur on a date other than the last day of a calendar month, then the Expiration Date shall be automatically extended to the last day of such calendar month. “ Landlord Work ” means the work, if any, that Landlord is obligated to perform in the Premises pursuant to a separate work letter agreement (the “ Work Lette r”), if any, attached as Exhibit D . If a Work Letter is not attached to this Lease or if an attached Work Letter does not require Landlord to perform any work, the occurrence of the Commencement Date shall not be conditioned upon the performance of work by Landlord.

      B.  Acceptance of Premises . The Premises are accepted by Tenant in “as is” condition and configuration subject to (1) any Landlord obligation to perform Landlord Work, (2) Landlord’s repair obligations under Section 9.B , and (3) any latent defects (of which Tenant notifies Landlord within one year after the Commencement Date) in the Premises or the Landlord Work. By taking possession of the Premises, Tenant agrees that the Premises are in good order and satisfactory condition and agrees that 3 there are no representations or warranties, express or implied, by Landlord regarding the condition of the Premises or the Building .

      C.  Possession of Premises Prior to Commencement Date . Tenant shall not take possession of the Premises prior to the Commencement Date except with the prior written consent of Landlord. If Tenant takes possession of the Premises or commences business activities at the Premises before the Commencement Date with Landlord’s permission, such possession and occupancy shall be subject to the terms and conditions of this Lease and Tenant shall pay Rent (defined in Section 4.A ) to Landlord for each day of possession before the Commencement Date. However, except for the cost of services requested by Tenant (e.g., freight elevator usage), Tenant shall not be required to pay Base Rent and Tenant’s Pro Rata Share of Excess Operating Expenses and Tenant’s Pro Rata Share of electrical and other costs under Section 4.H for any days of possession before the Commencement Date during which Tenant, with the written consent of Landlord, is in possession of the Premises for the sole purpose of performing improvements or installing furniture, equipment or other personal property. 4

4. Rent .

      A.  Payments . As consideration for this Lease, commencing on the Commencement Date, Tenant shall pay Landlord, without any demand, setoff or deduction, the total amount of Base Rent,

 


2 Notwithstanding anything to the contrary in the foregoing, if the Landlord Work is Substantially Complete prior to the Estimated Commencement Date, Tenant may elect, by delivering written notice to Landlord, not to accept possession of the Premises earlier than the Estimated Commencement Date, in which event the Commencement Date shall be the Estimated Commencement Date.

3 ,EXCEPT FOR ANY REMAINING PUNCHLIST ITEMS RELATED TO THE LANDLORD WORK,

4 D. Early Termination . Tenant shall have the option to terminate this Lease at the end of the sixtieth (60 th ) full calendar month of the Term (the “ Termination Date ”), provided Tenant gives notice thereof (the “Termination Notice”) to Landlord not less than nine (9) months prior to the Termination Date, and provided Tenant is not in default under the Lease at the time of the giving of such notice nor on the Termination Date. Notwithstanding anything to the contrary contained in the immediately preceding sentence, in the event Tenant is in default under the Lease on the Termination Date, Landlord shall notify Tenant in writing of such default, and the Termination Date shall be extended by an amount of time equal to the cure period applicable to the default. In the event Tenant fails to cure such default during the applicable cure period, this termination option shall be null and void and the Lease shall continue in full force and effect as if Tenant had not delivered the Termination Notice to Landlord. In the event Tenant cures such default during the applicable cure period, the Lease shall terminate on the Termination Date, as extended pursuant to the provisions of this Section 3.D . Additionally, Tenant’s right to terminate hereunder is conditioned upon the payment in full by Tenant on or before the Termination Date, of (1) all Rent through and including the Termination Date, (2) the cash sum equal to four (4) times the Base Rent payable for the month immediately preceding the Termination Date, and (3) the unamortized cost (using an amortization rate of 10%) of all tenant improvement allowances and leasing commissions actually paid or provided by Landlord in connection with the Lease (collectively, the “ Termination Payment ”). Upon written request by Tenant, Landlord shall provide to Tenant, Landlord’s then-current calculation of all of such unamortized costs together with supporting documentation. After Landlord’s receipt of the full Termination Payment, and so long as Tenant has surrendered the Premises in the condition required under this Lease, neither party shall have any rights, liabilities or obligations under this Lease for the period accruing after the Termination Date, except those which, by the provisions of this Lease, expressly survive the termination of this Lease.

3


 

Tenant’s Pro Rata Share of Excess Operating Expenses (defined in Section 4.B ) and any and all other sums payable by Tenant under this Lease (all of which are sometimes collectively referred to as “ Rent ”). Tenant shall pay and be liable for all rental, sales and use taxes (but excluding income taxes), if any, imposed upon or measured by Rent under applicable Law. Base Rent and Tenant’s Pro Rata Share of Excess Operating Expenses shall be due and payable in advance on the first day of each calendar month without notice or demand, provided that the installment of Base Rent for the first full calendar month of the Term shall be payable upon the execution of this Lease by Tenant. All other items of Rent shall be due and payable by Tenant on or before 30 days after billing by Landlord. All payments of Rent shall be by good and sufficient check or by other means (such as automatic debit or electronic transfer) acceptable to Landlord. If the Term commences on a day other than the first day of a calendar month, the monthly Base Rent and Tenant’s Pro Rata Share of any Excess Operating Expenses for the month shall be prorated on a daily basis based on a 360 day calendar year. Landlord’s acceptance of less than the correct amount of Rent shall be considered a payment on account of the earliest Rent due. No endorsement or statement on a check or letter accompanying a check or payment shall be considered an accord and satisfaction, and either party may accept such check or payment without such acceptance being considered a waiver of any rights such party may have under this Lease or applicable Law. Tenant’s covenant to pay Rent is independent of every other covenant in this Lease.

      B.  Excess Operating Expenses . Tenant shall pay Tenant’s Pro Rata Share of the amount, if any, by which Operating Expenses (defined in Section 4.D ) for each calendar year during the Term exceeds Operating Expenses for the Base Year (the “ Excess Operating Expenses ”). 5 If Operating Expenses in any calendar year decrease below the amount of Operating Expenses for the Base Year, Tenant’s Pro Rata Share of Operating Expenses for that calendar year shall be $0. In no event shall Base Rent be reduced if Operating Expenses for any calendar year are less than Operating Expenses for the Base Year. No later than January 1 of each calendar year, Landlord shall provide Tenant with a good faith estimate of the Excess Operating Expenses for such calendar year during the Term. On or before the first day of each month, Tenant shall pay to Landlord a monthly installment equal to one-twelfth of Tenant’s Pro Rata Share of Landlord’s estimate of the Excess Operating Expenses. If Landlord determines that its good faith estimate of the Excess Operating Expenses was incorrect, Landlord may provide Tenant with a revised estimate. After its receipt of the revised estimate, Tenant’s monthly payments shall be based upon the revised estimate. If Landlord does not provide Tenant with an estimate of the Excess Operating Expenses by January 1 of a calendar year, Tenant shall continue to pay monthly installments based on the most recent estimate(s) until Landlord provides Tenant with the new estimate. Upon delivery of the new estimate, an adjustment shall be made for any month for which Tenant paid monthly installments based on the same year’s prior incorrect estimate(s). Tenant shall pay Landlord the amount of any underpayment within 30 days after receipt of the new estimate. Any overpayment shall be credited against the next sums due and owing by Tenant or, if no further Rent is due, refunded directly to Tenant within 30 days of determination. The obligation of Tenant to pay for Excess Operating Expenses as provided herein shall survive the expiration or earlier termination of this Lease.

      C.  Reconciliation of Operating Expenses . Within 120 days after the end of each calendar year or as soon thereafter as is practicable, Landlord shall furnish Tenant with a statement of the actual Operating Expenses and Excess Operating Expenses for such calendar year. If the most recent estimated Excess Operating Expenses paid by Tenant for such calendar year are more than the actual Excess Operating Expenses for such calendar year, Landlord shall apply any overpayment by Tenant against Rent due or next becoming due; provided, if the Term expires before the determination of the overpayment, Landlord shall, within 30 days of determination, refund any overpayment to Tenant after first deducting the amount of Rent due. If the most recent estimated Excess Operating Expenses paid by Tenant for the prior calendar year are less than the actual Excess Operating Expenses for such year, Tenant shall pay Landlord, within 30 days after its receipt of the statement of Operating Expenses, any underpayment for the prior calendar year.

      D.  Operating Expenses Defined . “ Operating Expenses ” means all costs and expenses incurred or accrued in each calendar year in connection with the ownership, operation, maintenance,

 


5 Notwithstanding the foregoing, Tenant’s Pro Rata Share of Controllable Expenses (defined below) shall not increase by more than 8% (compounded annually) over Tenant’s Pro Rata Share of Controllable Expenses in the Base Year. However, any increases in Excess Operating Expenses not recovered by Landlord due to the foregoing limitation shall be carried forward into all succeeding calendar years during the Term (subject to the foregoing limitation) until fully recouped by Landlord. The term “ Controllable Expenses ” means all Operating Expenses excluding expenses relating to the cost of utilities, insurance, real estate taxes and other uncontrollable expenses.

4


 

management, repair and protection of the Property which are directly attributable or reasonably allocable to the Building, including Landlord’s personal property used in connection with the Property and including all costs and expenditures relating to the following:

  (1)   Operation, maintenance, repair and replacements of any part of the Property, including the mechanical, electrical, plumbing, HVAC, vertical transportation, fire prevention and warning and security systems; materials and supplies (such as light bulbs and ballasts); equipment and tools; floor, wall and window coverings; personal property; required or beneficial easements; and related service agreements and rental expenses.
 
  (2)   Administrative and management fees, including accounting, information and professional services (except for negotiations and disputes with specific tenants not affecting other parties) 6 ; 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 7 .
 
  (3)   Janitorial service; window cleaning; waste disposal; gas, water and sewer and other utility charges (including add-ons); and landscaping, including all applicable tools and supplies.
 
  (4)   Property, liability and other insurance coverages carried by Landlord, including deductibles and risk retention programs and an allocation of a portion of the cost of blanket insurance policies maintained by Landlord and/or its affiliates.
 
  (5)   Real estate taxes, assessments, business taxes, excises, association dues, fees, levies, charges and other taxes of every kind and nature whatsoever, general and special, extraordinary and ordinary, foreseen and unforeseen, including interest on installment payments, which may be levied or assessed against or arise in connection with ownership, use, occupancy, rental, operation or possession of the Property (including personal property taxes for property that is owned by Landlord and used in connection with the operation, maintenance and repair of the Property), or substituted, in whole or in part, for a tax previously in existence by any taxing authority, or assessed in lieu of a tax increase, or paid as rent under any ground lease. Real estate taxes do not include 8 Landlord’s income, franchise or estate taxes (except to the extent such excluded taxes are assessed in lieu of taxes included above).
 
  (6)   Compliance with Laws, including license, permit and inspection fees (but not in duplication of capital expenditures amortized as provided in Section 4.D(9) ) 9 ; and all expenses and fees, including attorneys’ fees and court or other venue of dispute resolution costs, incurred in negotiating or contesting real estate taxes or the validity and/or applicability of any governmental enactments which may affect Operating Expenses; provided Landlord shall credit against Operating Expenses any refunds received from such negotiations or contests to the extent originally included in Operating Expenses (less Landlord’s costs).
 
  (7)   Security services, to the extent provided or contracted for by Landlord.
 
  (8)   Goods and services purchased from Landlord’s subsidiaries and affiliates to the extent the cost of same is generally consistent with rates charged by unaffiliated third parties for similar goods and services.

 


6 , provided that the management fee shall not exceed 4% of gross revenues for the Property

7 at or below the level of regional property manager and regional asset manager

8 (A) any penalties and interest incurred because of the delinquency by Landlord in timely paying such taxes (unless such penalties and interest are incurred as a result of Tenant’s failure to timely pay its portion of such taxes or as a result of Landlord’s contesting such taxes in good faith), and (B)

9 (only to the extent that such compliance relates to Laws which are amended, become effective, or are interpreted or enforced differently, after the date of this Lease)

5


 
  (9)   Amortization of capital expenditures incurred: (A) to conform with Laws 10 ; (B) to provide or maintain building standards (other than building standard tenant improvements); or (C) with the intention of promoting safety or reducing or controlling increases in Operating Expenses, such as lighting retrofit and installation of energy management systems. Such expenditures shall be amortized uniformly over a reasonable period of time determined by Landlord, together with interest on the unamortized balance at the Prime Rate (defined in Section 19.A(6) ) (as of the date incurred) plus 2%.

      E.  Exclusions from Operating Expenses . Operating Expenses exclude the following expenditures:

  (1)   Leasing commissions, attorneys’ fees and other expenses related to leasing tenant space and constructing improvements for the sole benefit of an individual tenant.
 
  (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 Excess Operating Expenses.
 
  (3)   Repairs, replacements and general maintenance paid by insurance proceeds or condemnation proceeds.
 
  (4)   Except as provided in Section 4.D(9) , depreciation, amortization, interest payments on any encumbrances on the Building and the cost of capital improvements or additions.
 
  (5)   Costs of installing any specialty service, such as an observatory, broadcasting facility, luncheon club, or athletic or recreational club.
 
  (6)   Expenses for repairs or maintenance related to the Property which have been reimbursed to Landlord pursuant to warranties or service contracts.
 
  (7)   Compensation paid to clerks, attendants or other persons in commercial concessions operated by Landlord which customarily sell products or services to the public, including tenants of the Building.
 
  (8)   Costs (other than maintenance costs) of any art work (such as sculptures or paintings) used to decorate the Building.
 
  (9)   Principal payments on indebtedness secured by liens against the Building, or costs of refinancing such indebtedness.
 
  (10)   Electrical service costs paid separately pursuant to Section 4.H .
 
  11      

 


10 which are amended, become effective, or are interpreted or enforced differently, after the date of this Lease; provided, however, all capital expenditures made in order to conform to or comply with ADA shall be included in Operating Expenses other than ADA compliance work performed as part of the Landlord Work described in the Work Letter.
11 (11)    Salaries of officers and executives of Landlord, except as included in Section 4.D(2) .
 
(12)   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.
 
(13)   Legal, auditing, consulting and professional fees paid or incurred in connection with negotiations for financings, refinancings or sales of the Property.
 
(14)   Costs relating to disputes between Landlord and a specific tenant of the Building.
 
(15)   Costs incurred as a result of an intentional tort by Landlord or its agents.
 
(16)   Costs, penalties and fines incurred due to the violation by Landlord or any other tenant of the Building of Laws, or the terms and conditions of any lease pertaining to the Building, except such as may be incurred by Landlord in contesting in good faith the alleged violation.

6


 

      F.  Proration of Operating Expenses; Adjustments . If Landlord incurs Operating Expenses for the Property together with one or more other buildings or properties, whether pursuant to a reciprocal easement agreement, common area agreement or otherwise, the shared costs and expenses shall be equitably prorated and apportioned by Landlord between the Property and the other buildings or properties. If the Building is not 100% occupied during any calendar year or partial calendar year or if Landlord is not supplying services to 100% of the total Rentable Square Footage of the Building at any time during a calendar year or partial calendar year, Operating Expenses shall be determined as if the Building had been 100% occupied and Landlord had been supplying services to 100% of the Rentable Square Footage of the Building during that calendar year. If Tenant pays for its Pro Rata Share of Operating Expenses based on increases over a “ Base Year ” and Operating Expenses for a calendar year are determined as provided in the prior sentence, Operating Expenses for the Base Year shall also be determined as if the Building had been 100% occupied and Landlord had been supplying services to 100% of the Rentable Square Footage of the Building. The extrapolation of Operating Expenses under this Section shall be performed by Landlord by adjusting the cost of those components of Operating Expenses that are impacted by changes in the occupancy of the Building.

      G.  Audit Rights . Within 60 days (the “ Audit Election Period ”) after Landlord furnishes its statement of actual Operating Expenses for any calendar year (including the Base Year), Tenant may, at its expense during Landlord’s normal business hours, elect to audit Landlord’s Operating Expenses for such calendar year only, subject to the following conditions: (1) there is no uncured event of default under this Lease; (2) the audit shall be prepared by an independent certified public accounting firm of recognized national 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 where Landlord maintains its books and records and shall not unreasonably interfere with the conduct of Landlord’s business; (6) Tenant and its accounting firm shall treat any audit in a confidential manner 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 Rent when due, including estimated Excess Operating Expenses. Landlord shall credit any overpayment determined by the final approved audit report against the next Rent due and owing by Tenant or, if no further Rent is 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 Date. If Tenant does not give written notice of its election to audit Landlord’s Operating Expenses during the Audit Election Period, Landlord’s 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. 12

      H.  Electrical Costs. In addition to the Excess Operating Expenses, and as a separate obligation, Tenant shall pay Landlord Tenant’s Pro Rata Share of the following costs incurred by Landlord which are directly attributable or reasonably allocable to the Building: (1) electrical services used in the operation, maintenance and use of the Property; (2) sales, use, excise and other taxes assessed by governmental authorities on electrical services supplied to the Property; and (3) other costs of providing electrical services to the Property. Tenant shall, with each monthly payment of Base Rent,

 


(17)   Costs relating to or arising, directly or indirectly, from the handling, removal, treatment, disposal or replacement of Hazardous Materials in the Property, which were not caused by the actions of Tenant, its agents, employees, contractors, subtenants, assignees or invitees.

12 If the audit proves that Landlord’s calculation of Operating Expenses and electrical costs 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.

7


 

pay Landlord’s estimate of Tenant’s Pro Rata Share of such electrical service costs in the same manner as provided for Operating Expenses in Section 4.B 13 .

      5.  Tenant’s Use of Premises .

      A.  Permitted Uses . The Premises shall be used only for general office use (the “ Permitted Use ”) and for no other use whatsoever. Tenant shall not use or permit the use of the Premises for any purpose which is illegal, creates obnoxious odors (including tobacco smoke), noises or vibrations, is dangerous to persons or property, could increase Landlord’s insurance costs, or which, in Landlord’s reasonable opinion, unreasonably disturbs any other tenants of the Building or interferes with the operation of the Building. Except as provided below, the following uses are expressly prohibited in the Premises: schools, government offices or agencies; personnel agencies; collection agencies; credit unions; data processing, telemarketing or reservation centers; medical treatment and health care; radio, television or other telecommunications broadcasting; restaurants and other retail; customer service offices of a public utility company; or any other purpose which would, in Landlord’s reasonable opinion, impair the reputation or quality of the Building, overburden any of the Building systems, Common Areas or parking facilities (including any use which would create a population density in the Premises which is in excess of the density which is standard for the Building), impair Landlord’s efforts to lease space or otherwise interfere with the operation of the Property. Notwithstanding the foregoing, the following ancillary uses are permitted in the Premises only so long as they do not, in the aggregate, occupy more than 10% of the Rentable Square Footage of the Premises or any single floor (whichever is less): (A) the following services provided by Tenant exclusively to its employees: schools, training and other educational services; credit unions; and similar employee services; and (B) the following services directly and exclusively supporting Tenant’s business: telemarketing; reservations; storage; data processing; debt collection; and similar support services.

      B.  Compliance with Laws . Tenant shall comply with all Laws regarding the operation of Tenant’s business and the use, condition, configuration and occupancy of the Premises and the use of the Common Areas. Tenant, within 10 days after receipt, shall provide Landlord with copies of any notices Tenant receives regarding a violation or alleged or potential violation of any Laws. Tenant shall comply with the rules and regulations of the Building attached as Exhibit B and such other reasonable rules and regulations (or modifications thereto) adopted by Landlord from time to time. Such rules and regulations will be applied in an equitable manner as determined by Landlord. Tenant shall also cause its agents, contractors, subcontractors, employees, customers, and subtenants to comply with all rules and regulations.

      C.  Tenant’s Security . Tenant shall (1) lock the doors to the Premises and take other reasonable steps to secure the Premises and the personal property of all Tenant Parties (defined in Section 13.A ) and any of Tenant’s transferees, contractors or licensees in the Common Areas and parking facilities of the Building and Property, from unlawful intrusion, theft, fire and other hazards; (2) keep and maintain in good working order all security devices installed in the Premises by or for the benefit of Tenant (such as locks, smoke detectors and burglar alarms); and (3) cooperate with Landlord and other tenants in the Building on security matters. Tenant acknowledges that any security measures employed by Landlord are for Landlord’s own protection; that Landlord is not a guarantor of the security or safety of the Tenant Parties or their property; and that such security matters are the responsibility of Tenant and the local law enforcement authorities.

6. Security Deposit . 14 Landlord may, from time to time while an event of default remains uncured, without prejudice to any other remedy, use all or a portion of the Security Deposit to satisfy past due Rent or to cure any uncured default by Tenant. If Landlord uses the Security Deposit, Tenant shall on demand restore the Security Deposit to its original amount. Provided that Tenant has performed all of its obligations hereunder, Landlord shall return any unapplied portion of the Security Deposit to

 


13 , C , and F . Any reference in this paragraph to Section 4.F shall not apply to the gross-up provision described in Section 4.F . Electrical service costs charged to Tenant shall not be grossed up, but will instead be charged based on the method described in this Section 4.H . Tenant’s Pro Rata Share of electrical service costs shall be calculated by excluding from the costs described above in this Section 4.H any services furnished to an individual tenant of the Building which are above building standard and which are separately reimbursable directly to Landlord.

14 The parties have agreed that no Security Deposit will be required of Tenant at the outset of this Lease. However, if Tenant is thirty (30) days late paying monthly rentals more than two (2) times in any twelve (12) month period, then upon written demand by Landlord, a Security Deposit in an amount equal to one monthly rental payment shall be delivered by Tenant to Landlord and retained by Landlord for the remainder of the Term.

8


 

Tenant within 30 days after the later to occur of: (A) the determination of Tenant’s Pro Rata Share of any Excess Operating Expenses for the final year of the Term; (B) the date Tenant surrenders possession of the Premises to Landlord in accordance with this Lease; or (C) the Expiration Date. If Landlord transfers its interest in the Premises, Landlord shall assign the Security Deposit to the transferee and, following the assignment, Landlord shall have no further liability for the return of the Security Deposit. Landlord shall not be required to keep the Security Deposit separate from its other accounts.

7. Services to be Furnished by Landlord .

      A.  Standard Services . Landlord agrees to furnish Tenant with the following services during the Term:

  (1)   Water service for use in the lavatories on each floor on which the Premises are located.
 
  (2)   Heat and air conditioning in season during Normal Business Hours, at such temperatures and in such amounts as required by governmental authority or as Landlord 15 determines are standard for the Building. Tenant, upon such notice as is reasonably required by Landlord, and subject to the capacity of the Building systems, may request HVAC service during hours other than Normal Business Hours. Tenant shall pay Landlord the standard charge for the additional service as determined by Landlord from time to time.
 
  (3)   Maintenance and repair of the Property as described in Section 9.B .
 
  (4)   Janitorial service five days per week (excluding Holidays), as determined by Landlord. If Tenant’s use of the Premises, floor covering or other improvements require special services in excess of the standard services for the Building, Tenant shall pay the additional cost attributable to the special services.
 
  (5)   Elevator service, subject to proper authorization and Landlord’s policies and procedures for use of the elevator(s) in the Building.
 
  (6)   Exterior window washing at such intervals as determined by Landlord.
 
  (7)   Electricity to the Premises for general office use, in accordance with and subject to the terms and conditions in Article 8 .
 
      16

      B.  Service Interruptions . 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. 17 In no event shall Landlord be liable to Tenant for any loss or damage, including the theft of Tenant’s Property (defined in Article 14 ), arising out of or in connection with the failure of any security services, personnel or equipment.

      C.  Third Party Services . If Tenant desires any service which Landlord has not specifically agreed to provide in this Lease, such as private security systems or telecommunications services serving the Premises, Tenant shall procure such service directly from a reputable third party service provider (“ Provider ”) for Tenant’s own account. Tenant shall require each Provider to comply with the

 


15 reasonably

16 (8) Subject to (a) the Building limited access system being operative, (b) there being no Event of Default for which Tenant’s time to cure has elapsed, and (c) events of Force Majeure, Tenant shall have the right of access to the Premises twenty-four (24) hours per day, seven days per week during the Term of this Lease.

17 Notwithstanding the foregoing, commencing on the 11 th consecutive Business Day of a Service Failure which is beyond the control of Landlord (unless the Service Failure is caused by a fire or other casualty, in which event Section 16 controls), Tenant shall, as its sole remedy, be entitled to an equitable diminution of Base Rent based upon the pro rata portion of the Premises which is rendered unfit for occupancy for the Permitted Use, except to the extent such Service Failure is caused by a Tenant Party. Commencing on the 6th consecutive Business Day of any Service Failure within Landlord’s control, (unless the Service Failure is caused by a fire or other casualty, in which event Section 16 controls), Tenant shall, as its sole remedy, be entitled to an equitable diminution of Base Rent based upon the pro rata portion of the Premises which is rendered unfit for occupancy for the Permitted Use, except to the extent such Service Failure is caused by a Tenant Party.

9


 

Building’s rules and regulations, all Laws, and Landlord’s reasonable policies and practices for the Building. Tenant acknowledges Landlord’s current policy that requires all Providers utilizing any area of the Building outside the Premises to be approved by Landlord and to enter into a written agreement acceptable to Landlord prior to gaining access to, or making any installations in or through, such area. Accordingly, Tenant shall give Landlord written notice sufficient for such purposes.

8. Use of Electrical Services by Tenant .

      A.  Landlord’s Electrical Service . Landlord shall furnish building standard electrical service to the Premises sufficient to operate customary lighting, office machines and other equipment of similar low electrical consumption. Landlord may, at any time and from time to time, calculate Tenant’s actual electrical consumption in the Premises either by a survey conducted by a reputable consultant selected by Landlord, or through separate meters installed, maintained and read by Landlord, all at Tenant’s expense. The cost of any electrical consumption in excess of that which Landlord determines is standard for the Building 18 shall be paid by Tenant in accordance with Section 8.D . The furnishing of electrical services to the Premises shall be subject to the rules, regulations and practices of the supplier of such electricity and of any municipal or other governmental authority regulating the business of providing electrical utility service. Landlord shall not be liable or responsible to Tenant for any loss, damage or expense which Tenant may sustain or incur if either the quantity or character of the electrical service is changed or is no longer available or no longer suitable for Tenant’s requirements.

      B.  Selection of Electrical Service Provider . Landlord reserves the right to select the provider of electrical services to the Building and/or the Property. To the fullest extent permitted by Law, Landlord shall have the continuing right, upon 30 days written notice, to change such utility provider. All charges and expenses incurred by Landlord due to any such changes in electrical services, including maintenance, repairs, installation and related costs, shall be included in the electrical services costs referenced in Section 4.H , unless paid directly by Tenant.

      C.  Submetering . Landlord shall have the continuing right, upon 30 days written notice, to install a submeter for the Premises at Tenant’s expense 19 . If submetering is installed for the Premises, Landlord may charge for Tenant’s actual electrical consumption monthly in arrears at commercially reasonable rates determined by Landlord (plus, to the fullest extent permitted by applicable Laws, Landlord’s then quoted administrative fee for such submetering), except as to electricity directly purchased by Tenant from third party providers after obtaining Landlord’s consent to the same. Even if the Premises are submetered, Tenant shall remain obligated to pay Tenant’s Pro Rata Share of the cost of electrical services as provided in Section 4.H , except that Tenant shall be entitled to a credit against electrical services costs equal to that portion of the amounts actually paid by Tenant separately and directly to Landlord which are attributable to building standard electrical services submetered to the Premises.

      D.  Excess Electrical Service . Tenant’s use of electrical service shall not exceed, in voltage, rated capacity, use beyond Normal Business Hours or overall load, that which Landlord deems to be standard for the Building 20 . If Tenant requests permission to consume excess electrical service, Landlord may refuse to consent or may condition consent upon conditions that Landlord reasonably elects (including the installation of utility service upgrades, meters, submeters, air handlers or cooling units). The costs of any approved additional consumption (to the extent permitted by Law), installation and maintenance shall be paid by Tenant.

9. Repairs and Alterations .

      A.  Tenant’s Repair Obligations . Tenant shall, at its sole cost and expense, promptly perform all maintenance and repairs to the Premises that are not Landlord’s express responsibility under this Lease, and shall keep the Premises in good condition and repair, ordinary wear and tear excepted.

 


18 (which standard shall be set by comparison of the Tenant’s electrical consumption with the electrical consumption of other general office use tenants in the Building that do not have submeters)

19 , but only if Landlord is installing submeters for all tenants or has a reasonable belief that Tenant’s electrical consumption is above Building standard

20 (which standard shall be set by comparison of the Tenant’s overall usage, voltage rated capacity, use beyond Normal Business Hours, and overall electrical load with the overall usage, voltage rated capacity, use beyond Normal Business Hours and overall electrical load of other general office use tenants in the Building that do not have submeters)

10


 

Tenant’s repair obligations include, without limitation, repairs to: (1) floor covering and/or raised flooring; (2) interior partitions; (3) doors; (4) the interior side of demising walls; (5) electronic, phone and data cabling and related equipment (collectively, “ Cable ”) that is installed by or for the benefit of Tenant and located in the Premises or other portions of the Building; (6) supplemental air conditioning units, private showers and kitchens, including hot water heaters, plumbing, dishwashers, ice machines and similar facilities serving Tenant exclusively; (7) phone rooms used exclusively by Tenant; (8) Alterations (defined below) performed by contractors retained by Tenant, including related HVAC balancing; and (9) all of Tenant’s furnishings, trade fixtures, equipment and inventory. Landlord reserves the right to perform any of the foregoing maintenance or repair obligations or require that such obligations be performed by a contractor approved by Landlord, all at Tenant’s expense. All work shall be performed in accordance with the rules and procedures described in Section 9.C below. If Tenant fails to make any repairs to the Premises for more than 15 days after notice from Landlord (although notice shall not be required if there is an emergency), Landlord may, in addition to any other remedy available to Landlord, make the repairs, and Tenant shall pay the reasonable cost of the


 
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