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PRESTON PARK SOUTH
LEASE AGREEMENT
between
HMS OFFICE, L.P. ("LANDLORD")
and
ENTRUST TECHNOLOGIES, INCORPORATED ("TENANT")
Date: January 19, 1999
<PAGE>
TABLE OF CONTENTS
Page
----
I.......................................................................... -1-
1.1 LEASED PREMISES.......................................... -1-
II......................................................................... -3-
2.1 TERM..................................................... -3-
2.2 USE...................................................... -3-
2.3 INITIAL LEASEHOLD IMPROVEMENTS........................... -3-
2.4 SURVIVAL................................................. -3-
2.5 RELOCATION RIGHT......................................... -4-
III -5-
3.1 RENTAL PAYMENTS.......................................... -5-
3.2 BASE RENTAL.............................................. -5-
3.3 SECURITY DEPOSIT......................................... -9-
IV -10-
4.1 SERVICES TO BE FURNISHED BY LANDLORD..................... -10-
4.2 KEYS AND LOCKS........................................... -13-
4.3 WINDOW COVERINGS......................................... -13-
4.4 GRAPHICS................................................. -13-
4.5 REPAIRS BY LANDLORD...................................... -13-
4.6 PEACEFUL ENJOYMENT....................................... -13-
4.7 NO WARRANTIES............................................ -13-
4.8 FORCE MAJEURE............................................ -13-
V.......................................................................... -14-
5.1 PAYMENTS BY TENANT....................................... -14-
5.2 DAMAGE TO PROJECT........................................ -14-
5.3 CARE OF THE LEASED PREMISES.............................. -14-
5.4 ASSIGNMENT AND SUBLETTING................................ -14-
5.5 ALTERATIONS, ADDITIONS, AND IMPROVEMENTS................. -17-
5.6 LEGAL USE AND VIOLATIONS OF INSURANCE COVERAGE........... -19-
5.7 LEGAL REQUIREMENTS; RULES OF THE PROJECT................. -19-
5.8 RIGHTS RESERVED BY LANDLORD.............................. -20-
5.9 NUISANCE................................................. -20-
5.10 SUBORDINATION............................................ -20-
5.11 ESTOPPEL CERTIFICATE..................................... -21-
5.12 TENANT'S REMEDIES........................................ -21-
5.13 NAME OF BUILDING AND PROJECT............................. -21-
VI......................................................................... -21-
6.1 CONDEMNATION............................................. -21-
6.2 DAMAGES FROM CERTAIN CAUSES.............................. -22-
6.3 INTENTIONALLY OMITTED.................................... -22-
6.4 HOLDING OVER............................................. -22-
6.5 CASUALTY................................................. -22-
6.6 ATTORNEYS' FEES.......................................... -23-
6.7 ASSIGNMENTS BY LANDLORD.................................. -23-
-i-
<PAGE>
6.8 DEFAULT BY TENANT........................................ -23-
6.9 INSOLVENCY OR BANKRUPTCY................................. -26-
6.10 NON-WAIVER............................................... -26-
6.11 CASUALTY INSURANCE....................................... -26-
6.12 LIABILITY INSURANCE...................................... -26-
6.13 HOLD HARMLESS............................................ -27-
6.14 WAIVER OF SUBROGATION RIGHTS............................. -27-
6.15 PARKING.................................................. -27-
6.16 SEVERABILITY............................................. -28-
6.17 NOTICES.................................................. -28-
6.18 SUCCESSORS............................................... -29-
6.19 ENTIRETY................................................. -29-
6.20 FINANCIAL STATEMENTS..................................... -29-
6.21 AMENDMENTS............................................... -30-
6.22 BROKERS.................................................. -30-
6.23 VACATING THE LEASED PREMISES............................. -30-
VII........................................................................ -30-
7.1 RENEWAL OPTION........................................... -30-
7.2 RIGHT OF OFFER........................................... -32-
VIII....................................................................... -33-
8.1 MISCELLANEOUS............................................ -33-
EXHIBITS
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A - Description of Land
B - Floor Plan of Leased Premises
C-1 - Tenant Improvements Work Schedule
C-2 - Schedule of Building Standard Improvements
D - Certificate of Commencement Date
E - Project Rules & Regulations
-ii-
<PAGE>
INDEX
-----
DEFINED TERMS
-------------
TERM PAGE
---- ----
Access Equipment........................................................ -13-
Actual Tenant........................................................... -17-
Additional Contractor................................................... C-1-6
Additional Electrical Equipment......................................... -11-
Adjacent Building....................................................... -1-
Affiliate............................................................... -15-
Annual Reconciliation Payment........................................... -6-
Base Rental............................................................. -5-
Base Rental Adjustment.................................................. -6-
Base Rental Rate........................................................ -5-
Basic Cost Component.................................................... -6-
Basic Costs............................................................. -6-
Bid Documents........................................................... C-1-2
Bidding Contractors..................................................... C-1-1
Building................................................................ -1-
Building Operating Hours................................................ -10-
Building Standard....................................................... C-1-1
Building Standard Improvements.......................................... C-2-1
Building Standard Rated Electrical Design Load.......................... -11-
Building Standard Services.............................................. -10-
Business Days........................................................... -34-
Commencement Date....................................................... C-1-5
Common Areas............................................................ -2-
Company................................................................. -14-
Completion Date......................................................... C-1-5
Complex................................................................. -1-
Construction Allowance.................................................. C-1-2
Construction Contract................................................... C-1-2
Construction Cost....................................................... C-1-3
Contractor Date......................................................... C-1-2
Control................................................................. -15-
Costs................................................................... -20-
Effective Date.......................................................... -1-
Election Notice......................................................... -30-
Environmental Laws...................................................... -19-
Event of Default........................................................ -23-
Expense Stop............................................................ -31-
First Month's Rent...................................................... -9-
Garage.................................................................. -1-
General Common Areas.................................................... -2-
Governmental Authority.................................................. -19-
Hazardous Materials..................................................... -19-
Holidays................................................................ -10-
Initial Leased Premises................................................. C-1-1
Intent Notice........................................................... -30-
Interest Rate........................................................... -5-
-iii-
<PAGE>
Land.................................................................... -1-
Landlord................................................................ -1-
Lease................................................................... -1-
Leased Premises......................................................... -1-
Legal Requirements...................................................... -19-
Long Lead Time Items.................................................... C-1-5
Market Base Rental Rate................................................. -31-
Net Rentable Area....................................................... -1-
New Premises............................................................ -4-
Notice.................................................................. -15-
Notice of Substantial Completion........................................ C-1-4
Offer Election.......................................................... -32-
Offer Election Period................................................... -32-
Offer Notice............................................................ -32-
Offer Space............................................................. -32-
Operating Expenses...................................................... -6-
Outside Contractor...................................................... -18-
Parking Permits......................................................... -27-
Parking Rental.......................................................... -28-
PCB..................................................................... -20-
Permitted Affiliate..................................................... -15-
Project................................................................. -1-
Project Rules........................................................... -19-
Punch List.............................................................. C-1-3
Release................................................................. -20-
Relocation Effective Date............................................... -4-
Relocation Notice....................................................... -4-
Remaining Allowance..................................................... C-1-2
Renewal Option.......................................................... -30-
Renewal Term............................................................ -30-
Rent.................................................................... -5-
Reportable Quantity..................................................... -20-
Revised Bid Documents................................................... C-1-2
Right of Offer.......................................................... -32-
RO Expense Stop......................................................... -33-
RO Space................................................................ -32-
RO Space Rental Commencement Date....................................... -33-
Security Deposit........................................................ -9-
Service Areas........................................................... -2-
Substantial Completion.................................................. C-1-4
Substantially Complete.................................................. C-1-4
Successor............................................................... -20-
Superior Rights......................................................... -32-
Tenant.................................................................. -1-
Tenant Amounts.......................................................... C-1-3
Tenant Architect........................................................ C-1-1
Tenant Contractor....................................................... C-1-1
Tenant Delay............................................................ C-1-5
Tenant Engineering Drawings............................................. C-1-1
Tenant Improvements..................................................... C-1-1
Tenant Working Drawings................................................. C-1-1
Term.................................................................... -3-
-iv-
<PAGE>
Usable Area............................................................. -2-
-v-
<PAGE>
LEASE AGREEMENT
---------------
THE STATE OF TEXAS
COUNTY OF COLLIN
THIS LEASE AGREEMENT (this "Lease") is made and entered into as of
January 19, 1999 (the "Effective Date") between HMS OFFICE, L.P., a Delaware
--------------
limited partnership ("Landlord"), and ENTRUST TECHNOLOGIES, INCORPORATED, a
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Maryland corporation ("Tenant").
------
W I T N E S S E T H:
- - - - - - - - - -
In consideration of the sum of Ten Dollars ($10.00) and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
each in consideration of the duties, covenants and obligations of the other
hereunder, Landlord and Tenant hereby agree as follows:
1.
1.1. LEASED PREMISES. Subject to and upon the terms, provisions and
conditions hereinafter set forth, Landlord does hereby lease to Tenant and
Tenant does hereby lease from Landlord those certain premises (the "Leased
------
Premises") in the building commonly referred to as One Preston Park South as of
--------
the date hereof (the "Building") located at 4975 Preston Park Boulevard in
--------
Plano, Texas on the land (the "Land") described on Exhibit A (the Building, the
---- ---------
Land, and all additional improvements and additional facilities now or hereafter
located on the Land that serve the Building or the tenants of the Building
hereinafter referred to as the "Project"), such Leased Premises being more
-------
particularly described as follows:
Approximately 8,716 square feet of Net Rentable Area (defined below) on
Floor 4 of the Building as reflected on the floor plan of Floor 4 attached
hereto as Exhibit B.
---------
"Garage" shall mean the parking garage located adjacent to the
------
Building which serves the Complex (defined below).
"Adjacent Building" shall mean the building located on the Land and
-----------------
commonly referred to as Two Preston Park South, 4965 Preston Park Boulevard,
Plano, Texas.
"Complex" shall mean the Land and the development as it may be
-------
modified from time to time commonly referred to as Preston Park South located on
the Land, including without limitation, the Building, the Adjacent Building, the
basement tunnel which connects the Building with the Adjacent Building, the
Garage, all central plants, surface parking areas, plaza areas, driveways,
walkways, sidewalks, landscaping and water amenities, and other improvements
which are adjacent or related thereto, together with such additional
improvements and additional facilities now or hereafter located on the Land that
serve any of the foregoing.
"Net Rentable Area" shall mean the area or areas of space within the
-----------------
Building determined as follows: (i) Net Rentable Area in the case of a full
floor leased to a single tenant is determined by measuring from the inside
surface of the outer pane of glass and extensions of the plane thereof in non-
glass areas to the inside surface of the opposite outer pane of glass and
extensions of the plane thereof in non-glass areas and shall include all areas
enclosed by such surfaces, excluding only Service Areas (defined below) and
General Common Areas (defined below), plus an allocation of the square footage
of the General Common Areas, and (ii) Net Rentable Area in the case of a floor
leased to more than one tenant (i.e., a multi-tenant floor) shall include the
total square footage of all floor areas enclosed by the inside surface of the
outer pane of glass and extensions of the plane thereof in non-glass areas and
by demising walls (measured from the midpoint of demising walls), excluding only
Service Areas and General Common Areas, plus an
-1-
<PAGE>
allocation of the square footage of the Common Areas (defined below) and the
General Common Areas. In determining Net Rentable Area pursuant to (i) and (ii)
above, no deduction from Net Rentable Area shall be made for columns or
projections necessary to the Building.
"Service Areas" shall mean the total square footage within vertical
-------------
penetrations such as (and measured from the midpoint of the walls enclosing)
Building stairs, elevator shafts, fire towers, flues, vents, stacks, vertical
pipe shafts, and vertical ducts; however, structural columns are not included in
Service Areas. Areas for the specific use of Tenant or other tenants of the
Project or installed at the request of Tenant or other tenants such as special
stairs or elevators are not included within the definition of Service Areas.
"General Common Areas" shall mean the total square footage within (and
--------------------
measured from the midpoint of the walls enclosing or from the inside surface of
the outer pane of glass enclosing, or extensions of the plane thereof in non-
glass areas) the Building's elevator machine rooms, main mechanical rooms,
loading dock facilities, telephone switch rooms, main electrical rooms, public
lobbies (including the main floor lobby of the Building), engineering, security,
postal and cleaning areas, and other areas not leased or held for lease within
the Building but which are necessary or desirable for the proper utilization of
the Building or to provide customary services to the Building. The allocation of
the square footage of the General Common Areas referred to in this Section 1.1
shall be equal to the total square footage of the General Common Areas
multiplied by a fraction, the numerator of which is the Net Rentable Area of the
Leased Premises (excluding the allocation of the General Common Areas) and the
denominator of which is the total of all Net Rentable Area of space leased or
held for lease as office space or retail space contained in the Building
(excluding the allocation of the General Common Areas).
"Common Areas" shall mean the total square footage of all areas within
------------
(and measured from the midpoint of the walls enclosing or inside surface of the
outer pane of glass enclosing) public corridors, elevator foyers, rest rooms,
mechanical rooms, janitor closets, telephone, electrical and equipment rooms,
and other similar facilities for the use of all tenants on the floor on which
the Leased Premises are located. The allocation of the square footage of the
Common Areas shall be equal to the total square footage of the Common Areas on
said floor multiplied by a fraction, the numerator of which is the Net Rentable
Area of the portion of the Leased Premises (excluding the allocations of General
Common Areas and Common Areas) located on said floor and the denominator of
which is the total of all Net Rentable Area on said floor (excluding the
allocations of General Common Areas and Common Areas).
"Usable Area" shall mean (A) in the case of a full floor leased
-----------
entirely by a single tenant, the Net Rentable Area of the floor area minus the
allocation of General Common Areas (it being agreed that Common Areas are
included in the calculations of Usable Area in the case of a full floor leased
entirely by a single tenant), and (B) in the case of a floor not leased entirely
by one tenant, the Net Rentable Area of the floor area minus the allocation of
General Common Areas and Common Areas which were included in Net Rentable Area
pursuant to this Section 1.1.
"Initial Leased Premises" shall mean the Leased Premises as of the
-----------------------
Effective Date (and therefore shall specifically exclude any space added to the
Leased Premises after the Effective Date).
The Net Rentable Area in the Initial Leased Premises has been
calculated as of the Effective Date on the basis of the foregoing definition and
is hereby stipulated for all purposes hereof to be 8,716 square feet as of the
Effective Date (and such amount shall not be adjusted as a result of minor
variations resulting from actual construction and completion of the Leased
Premises for occupancy so long as such work is done in accordance with the terms
and provisions of this Lease).
-2-
<PAGE>
II.
2.1 TERM.
(a) Subject to and upon the terms and conditions set forth herein, or
in any exhibit or addendum attached hereto, the term of this Lease (the "Initial
-------
Term") shall commence on the Commencement Date (as defined in Exhibit C-1) and
---- -----------
shall expire as to the entire Leased Premises (subject to the provisions of
Section 7.1 and 7.2 hereof) at 6:00 P.M. on the day immediately preceding the
same date of the thirty-sixth (36th) calendar month after the Commencement Date.
The Initial Term of this Lease may be renewed pursuant to Section 7.1 hereof
(the Initial Term and, to the extent renewed and extended, the Renewal Term
[defined in Section 7.1] are hereinafter collectively called the "Term").
----
(b) After the Commencement Date, Landlord shall submit to Tenant and
Tenant shall execute and deliver to Landlord within fifteen (15) days of
Tenant's receipt thereof from Landlord, a declaration (in the form attached as
Exhibit D) to confirm the date upon which the Commencement Date occurred. Tenant
---------
shall have ten (10) days after receipt of such declaration to give written
notice to Landlord objecting to the declaration, failing which Tenant shall be
deemed to have agreed the declaration is correct and Tenant shall be required to
execute the declaration within five (5) days after the expiration of such
previous ten (10) day period. If Tenant objects to such declaration within such
ten (10) day period, Landlord and Tenant shall work together to resolve their
differences. After such differences have been resolved, Landlord and Tenant
shall execute the corrected declaration. All payments of Base Rental as adjusted
by the Base Rental Adjustment (each as defined in Article III), Parking Rental
(defined in Section 6.15) and all other payments required of Tenant herein shall
be made as and when required herein, notwithstanding any unresolved objections
to the declaration. All such payments shall be based upon Landlord's
determination of the Commencement Date of which Landlord will notify Tenant
(however, if such Commencement Date occurs as the result of Tenant's occupancy
of such portion of the Leased Premises, such notice shall not be required) until
such objections have been finally resolved, whereupon any overpayment or any
underpayment theretofore made shall be adjusted by reducing or increasing, as
the case may be, the next installment of Base Rental coming due by the amount of
such overpayment or underpayment, as applicable (and no interest or penalty
shall be applied thereto).
2.2 USE. The Leased Premises are to be used and occupied by Tenant
solely for general office purposes consistent with the uses of first class high-
rise office buildings in metropolitan Dallas, Texas, and for no other purpose.
Notwithstanding anything to the contrary in this Lease, the Leased Premises
shall not be used for any purpose which would (i) adversely affect the
appearance of the Complex, (ii) be visible from the exterior of, or the public
areas of, the Complex, (iii) adversely affect ventilation in other areas of the
Complex (including without limitation, the creation of offensive odors), (iv)
create unreasonable elevator loads, (v) cause structural loads to be exceeded,
(vi) create unreasonable noise levels, (vii) otherwise unreasonably interfere
with Complex operations or other tenants of the Complex, or (viii) violate Legal
Requirements (defined in Section 5.7 hereof). In all events, Tenant shall not
engage in any activity which is not in keeping with the first-class standards of
the Complex.
Without limiting the foregoing, Tenant agrees that Tenant will not use
any part of the Leased Premises for the following uses: health care services
(provided that management, administration and related services provided to a
health care provider shall not be prohibited hereby; however, in no event may
any portion of the Leased Premises be used for the treatment of patients),
telephone or telegraph agency, radio, television or other communication station,
employment agency, public restaurant or bar, retail, wholesale or discount shop
for sale of merchandise, retail service shop, school or classroom (except as
incidental to office uses but not as the principal use thereof), or governmental
or quasi-governmental bureau, department or agency.
2.3 INITIAL LEASEHOLD IMPROVEMENTS. Landlord and Tenant each shall
comply with the provisions of the Tenant Improvements Work Schedule attached
hereto as Exhibit C-1.
-----------
2.4 SURVIVAL. Any claim, cause of action, liability or obligation
arising during the Term and under the provisions hereof in favor of a party
hereto and against or obligating the other party hereto shall survive the
expiration or any earlier termination of this Lease.
-3-
<PAGE>
2.5 RELOCATION RIGHT. If the Leased Premises are less than 10,000
square feet of Net Rentable Area, then upon written notice to Tenant (the
"Relocation Notice"), Landlord may substitute for the Leased Premises other
-----------------
premises in the Complex (the "New Premises"), in which event the New Premises
------------
shall be deemed to be the Leased Premises for all purposes under this Lease,
provided:
(a) The New Premises must be of substantially comparable size to
the Leased Premises and constitute contiguous space on a floor;
(b) To the extent Tenant shall have incurred any expense in the
preparation of the Tenant Working Drawings and/or Tenant Improvements (each
as defined in Exhibit C-1 hereto and as may be applicable depending upon
-----------
which, if any, of the foregoing has then been prepared, purchased or
installed at the time of Landlord's election to relocate the Leased
Premises), Landlord and Tenant shall cooperate in good faith to cause each
of such applicable leasehold improvements to be reproduced for the New
Premises as closely as practicable as those planned to be installed or
installed (as applicable) in the Leased Premises and at Landlord's expense
so that Tenant shall not bear the expense in connection therewith by reason
of the exercise by Landlord of the relocation right contained herein, and
Landlord shall reimburse Tenant for the reasonable actual costs incurred by
Tenant to physically move Tenant's personal property from the Leased
Premises to the New Premises plus the costs incurred by Tenant to (i)
install the office telecommunications and computer equipment then located
in the Leased Premises, and (ii) reprint Tenant's stationery and business
cards in stock (not to exceed a three (3) month's supply);
(c) The effective date of such substitution (the "Relocation
----------
Effective Date") shall be the date specified in the Relocation Notice
--------------
(which date shall not be earlier than sixty (60) days after the date of
such Relocation Notice) or, if Landlord is required to perform tenant
finish work pursuant to subsection (b) above, then the date such tenant
finish work is substantially completed (which date shall be accelerated a
day for each day the performance of the tenant finish work is delayed by
the actions of Tenant or its agents, employees, contractors or
representatives, either by changes to the plans for such work, or
otherwise, so that the Relocation Effective Date will be the date the
Relocation Effective Date would have occurred but for such delays).
Tenant shall move from the Leased Premises to the New Premises
and shall surrender possession of the Leased Premises as provided in
Section 5.3 by the Relocation Effective Date. If Tenant occupies the Leased
Premises after the Relocation Effective Date, then Tenant's occupancy of
the Leased Premises shall be a tenancy at will (and without limiting all
other rights and remedies available to Landlord, including without
limitation, instituting a forcible detainer suit), Tenant shall pay the
Base Rental and Base Rental Adjustment for the Leased Premises as provided
in Section 6.4 and all other Rent (defined in Section 3.1) due therefor
until such occupancy of the Leased Premises ends (which amounts shall be in
addition to, and not in lieu of, the Rent due for the New Premises); and
(d) All of the terms, covenants and conditions of this Lease,
including without limitation, the Base Rental and other Rent payable under
this Lease, shall remain the same for the New Premises as are stated herein
to be applicable for the Leased Premises except the Lease shall be amended
(i) to identify the space comprising the New Premises after such relocation
as the Leased Premises, (ii) to state the Net Rentable Area of the New
Premises, and (iii) to adjust the Base Rental as necessary due to any
differences in the Net Rentable Area of the New Premises (however, if the
New Premises is larger than the Leased Premises, the Base Rental as to the
New Premises shall increase no more than five percent (5%) of the Base
Rental that would have been payable by Tenant as to the Leased Premises if
such relocation had not occurred).
-4-
<PAGE>
III.
3.1 RENTAL PAYMENTS.
(a) Commencing on the Commencement Date and continuing thereafter
throughout the Term, Tenant hereby agrees to pay Base Rental (defined in Section
3.2) as adjusted by the Base Rental Adjustment (defined in Section 3.2) in
accordance with this Section 3.1 and Section 3.2. Base Rental as adjusted by the
Base Rental Adjustment (excluding the Annual Reconciliation Payment [defined in
Section 3.2 below]) shall be due and payable in twelve (12) equal monthly
installments on the first day of each calendar month during the Term (subject to
the provisions of subsection (b) below), and Tenant hereby agrees to so pay such
rent monthly in advance and without demand to One Preston Park South - HMS
Office, L.P., P. O. Box 95403, Chicago, Illinois 60694-5403 (or such other
address as may be designated by Landlord from time to time). Notwithstanding the
foregoing, Base Rental for the first (1st) month of the Term shall be paid to
Landlord on the Effective Date as provided in Section 3.3 below. Parking Rental
shall be due and payable in accordance with this Section 3.1 and Section 6.15.
(b) If the Commencement Date is other than the first day of a calendar
month or if this Lease expires or terminates on other than the last day of a
calendar month, then the installments of Base Rental and Parking Rental for such
month or months shall be prorated and the installment or installments so
prorated shall be paid in advance. Said installments for such prorated month or
months shall be calculated by multiplying the equal monthly installment by a
fraction, the numerator of which shall be the number of days of the Term
occurring during said commencement or expiration month, as the case may be, and
the denominator of which shall be the number of days in said month. Landlord and
Tenant hereby agree that the provisions of this Section 3.1(b) shall survive the
expiration or termination of this Lease.
(c) Tenant agrees to pay all rent and other sums of money as shall
become due from and payable by Tenant to Landlord under this Lease
(collectively, the "Rent") at the times and in the manner provided in this
----
Lease, without abatement, notice, demand, set-off or counterclaim. All Rent in
addition to Base Rental shall constitute additional rental under this Lease and
Landlord shall be entitled to exercise the same rights and remedies provided for
in this Lease for the nonpayment of any Rent. All Rent owed by Tenant to
Landlord under this Lease shall bear interest from the date due until payment is
received at the rate (the "Interest Rate") equal to the lesser of (i) a per
-------------
annum rate equal to the "prime rate" or "base rate" announced by Chase Manhattan
Bank or its successor, from time to time (or if the "prime rate" or "base rate"
is discontinued, the rate announced by such bank as that being charged to its
most creditworthy commercial borrowers), plus three percent (3%), or (ii) the
maximum contract interest rate per annum allowed by law.
(d) If Tenant fails to pay any regular monthly installment of Rent by
the fifth (5th) day of the month in which the installment is due, or any other
sum or money owed to Landlord within five (5) days after such sums are due and
owing to Landlord, Tenant shall pay a late charge equal to the greater of (i)
$250.00, or (ii) an amount equal to five percent (5%) of the amount due, for
each and every thirty (30) day period that said amount remains unpaid (but in no
event shall the amount of such late charge exceed an amount based upon the
highest legally permissible contract rate chargeable at any time by Landlord
under the circumstances) to compensate Landlord for the administrative expenses
incurred. Should Tenant make a partial payment of past due amounts, the amount
of such partial payment shall be applied first to reduce all accrued and unpaid
late charges, in inverse order of maturity, and then to reduce all other past
due amounts, in inverse order of their maturity.
3.2 BASE RENTAL.
(a) Tenant hereby agrees to pay as the base annual rental ("Base
----
Rental") for the lease and use of the Leased Premises, an annual amount equal to
------
the product of (x) Twenty-Five and 35/100 Dollars ($25.35) ("Base Rental Rate"),
----------------
multiplied by (y) the number of square feet of Net Rentable Area comprising the
Leased Premises, subject to increase pursuant to subsection (b) below.
-5-
<PAGE>
From and after the expiration of the Initial Term (to the extent
Tenant renews and extends this Lease pursuant to Section 7.1), Tenant agrees to
pay Base Rental for the Leased Premises at the Base Rental Rate determined in
accordance with the provisions of Section 7.1, subject to increase pursuant to
subsection (b) below.
(b) The Base Rental payable under subsection (a) shall be adjusted
from time to time in accordance with the following provisions (any such
adjustment hereinafter the "Base Rental Adjustment"):
----------------------
(i) Base Rental includes a component (the "Basic Cost Component")
--------------------
attributable to Basic Costs (hereinafter defined) equal to $8.44 per square
foot of Net Rentable Area in the Leased Premises. The Basic Cost Component
is based on an estimate of Basic Costs to be incurred during calendar year
1999 as of the Effective Date. Prior to January 1 of each calendar year
during the Term after the calendar year in which the Commencement Date
occurs, or as soon thereafter as reasonably practical, Landlord shall
provide an estimate of Basic Costs for the forthcoming calendar year.
Tenant shall pay Base Rental for such forthcoming calendar year equal to
the Base Rental set forth in subsection (a) above for such time period
adjusted upward by an amount equal to the product of (A) the difference
between the Basic Cost Component and the coming calendar year's estimated
Basic Costs per square foot of Net Rentable Area in the Building,
multiplied by (B) the Net Rentable Area of the Leased Premises.
(ii) By June 1 of each calendar year during Tenant's occupancy,
or as soon thereafter as reasonably practical, Landlord shall furnish to
Tenant a statement of Basic Costs for the previous calendar year or partial
calendar year, as applicable, occurring during the Term. If actual Basic
Costs for such calendar year or partial calendar year, as applicable, are
greater than Landlord's estimate thereof pursuant to clause (i) above,
Tenant shall be obligated to pay to Landlord within thirty (30) days of the
delivery of such statement a lump sum payment (which payment shall be
deemed a payment of Rent hereunder for all purposes) equal to the product
of (x) the Net Rentable Area in the Leased Premises, multiplied by (y) the
amount by which actual Basic Costs per square foot of Net Rentable Area in
the Building exceed Landlord's estimate thereof for such calendar year or
partial calendar year, as applicable. If actual Basic Costs for such
calendar year or partial calendar year, as applicable, are less than
Landlord's estimate thereof pursuant to clause (i) above, Landlord shall
promptly after delivery of such statement make a lump sum payment to Tenant
(or at Landlord's option, Landlord may credit such lump sum amount against
remaining Base Rental installments for the current calendar year) equal to
the product of (A) the Net Rentable Area in the Leased Premises, multiplied
by (B) the amount by which estimated Basic Costs per square foot of Net
Rentable Area in the Building exceed the actual amount thereof (to the
extent such excess was actually paid by Tenant, but in no event shall such
payment or credit be in an amount which would result in Tenant paying Base
Rental for the applicable calendar year in an amount less than the annual
Base Rental specified in subsection (a) above). The effect of this
reconciliation payment (the "Annual Reconciliation Payment") is that Tenant
-----------------------------
will pay during the Term its proportionate share (as defined in clause
(iii) below) of Basic Costs increases over the Basic Cost Component, and no
more. Additionally, Landlord shall not collect from Tenant pursuant to this
subsection (b)(ii) any increase in Base Rental in an amount which would
result in Landlord collecting from all tenants in the Building in any one
(1) calendar year an amount in excess of one hundred percent (100%) of
Basic Costs for such calendar year. The provisions of this subsection (ii)
shall survive the expiration or earlier termination of this Lease.
(iii) All increases in Basic Costs shall be paid by Tenant in the
proportion that the Net Rentable Area of the Leased Premises bears to
ninety-five percent (95%) of the total Net Rentable Area of the space
leased or held for lease in the Building, or to the total Net Rentable Area
of space leased in the Building (if such total leased area is greater than
ninety-five percent (95%) of the total Net Rentable Area of space leased or
held for lease in the Building).
(iv) Nothing contained in this subsection (b) shall be construed
at any time so as to reduce the annual Base Rental payable hereunder below
the amount set forth in subsection (a) above.
(c) "Basic Costs," as that term is used herein, shall
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consist of all Operating Expenses (defined below) of the Project as reasonably
allocated by Landlord, computed on an accrual basis and determined in accordance
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with generally accepted accounting principles consistently applied. "Operating
---------
Expenses," as that term is used herein, shall mean all expenses and costs (but
--------
excluding charges separately paid by other tenants of the Project or other third
parties other than through the payment of its share of operating expenses) of
every kind and nature that Landlord shall pay or become obligated to pay because
of or in connection with the ownership, maintenance, repair, and operation of
the Project, including but not limited to, the following:
(i) Wages, salaries, fees and all related expenses (including,
without limitation, taxes, insurance, burdens and benefits and costs
incurred in providing same) of all personnel engaged in the operation,
maintenance, repair and access control of the Project and personnel who
provide traffic control relating to ingress and egress to and from the
Garage and surrounding public streets.
(ii) Cost of all supplies, tools, equipment and materials,
whether purchased or leased, used in the operation, maintenance, repair
and/or access control of the Project.
(iii) Cost of utilities for the Project, including but not
limited to, water, steam, sewer, waste disposal, gas and electricity, and
power for heating, lighting, air conditioning and ventilating the Project
(including all Common Areas, General Common Areas and Service Areas).
(iv) Management fees paid to the property manager for the
management of the Project (provided, however, in no event shall Landlord
include in Operating Expenses in any one calendar year a net management fee
in excess of three percent (3%) of the gross revenues of the Project for
such calendar year; and, provided further, however, in lieu thereof,
Landlord may charge Tenant separately, and not as a part of Basic Costs,
for a management fee contribution which shall not in any one (1) calendar
year exceed three percent (3%) of the Base Rental and the Base Rental
Adjustment payable by Tenant for such calendar year) and the cost of all
maintenance and service agreements for the Project and the equipment
therein, including but not limited to, access control service, window
cleaning, traffic control, janitorial service, landscape maintenance, and
elevator maintenance.
(v) Legal and accounting costs for the Project, including a
reasonable allocation of off-site costs, together with the costs of annual
audits of the Project operating costs by certified public accountants.
(vi) Cost of all insurance relating to the Project, including
but not limited to, fire and extended coverage insurance, rental loss or
abatement insurance, and casualty and liability insurance applicable to the
Project and Landlord's personal property used in connection therewith, plus
the cost of all deductible payments made by Landlord in connection
therewith.
(vii) Cost of repairs, replacements and general maintenance
(excluding repairs, replacements and general maintenance paid for with
proceeds of insurance or condemnation or by third parties).
(viii) Any and all common area maintenance
costs related to public areas, including without limitation, sidewalks
and landscaping for the Project.
(ix) All taxes, assessments and governmental charges, whether or
not directly paid by Landlord, whether federal, state, county or
municipal and whether they be by taxing districts or any Governmental
Authority (defined in Section 5.7 hereof) presently taxing the Project
or by others subsequently created, attributable to the Project or its
operation and an allocation to the Project of the taxes, assessments
and governmental charges for the roads which service the Complex, but
excluding, however, taxes and assessments attributable to the personal
property of tenants, federal and state taxes on income, death taxes,
franchise taxes, and any taxes imposed or measured on or by the income
of Landlord from the operation of the Project or imposed in connection
with any change of ownership of the Project; provided, however, if the
taxing authorities do not separately assess the Project, Landlord may
make a reasonable allocation of the taxes, assessments or charges to
give effect to this sentence, and provided further, however, that if at
any time during the Term, the present method of taxation or assessment
shall be so changed that the whole or any part of the taxes,
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assessments, levies, impositions or charges now levied, assessed or
imposed on real estate and the improvements thereon shall be
discontinued and as a substitute therefor, or in lieu of or in addition
thereto, taxes, assessments, levies, impositions or charges shall be
levied, assessed or imposed, wholly or partially, as a capital levy or
otherwise, on the rents received from the Project or the rents reserved
herein or any part thereof, then such substitute or additional taxes,
assessments, levies, impositions or charges, to the extent so levied,
assessed or imposed with respect to the Project, shall be deemed to be
included within Operating Expenses. Consultation, accounting and legal
fees and other fees and costs resulting from any challenge of tax
assessments as reasonably allocated by Landlord also shall be included
in Operating Expenses. Tenant hereby waives any and all rights under
Legal Requirements to an administrative or judicial review of any
determination of the appraised value of the Project, including without
limitation, any rights available under the Texas Tax Code (as amended).
It is agreed that Tenant will be responsible for ad valorem taxes on
its personal property and on the value of the leasehold improvements in
the Leased Premises to the extent that the same exceed Building
Standard Improvements (defined in Exhibit C-2) (and if the taxing
authorities do not separately assess Tenant's leasehold improvements,
Landlord may make a reasonable allocation of the ad valorem taxes
allocated to the Project to give effect to this sentence). All taxes,
assessments and governmental charges shall be included in Operating
Expenses in the calendar year in which such taxes, assessments or
governmental charges are levied, assessed or imposed without regard to
when such taxes, assessments or governmental charges are payable;
provided, however, in the case of special taxes and assessments which
may be payable in installments, only the amount of each installment
accruing during a calendar year shall be included in the Operating
Expenses for such year.
(x) Amortization of the cost, together with reasonable
financing charges, of furnishing and installing capital investment
items which are (1) included in the Basic Cost Component and any
unamortized amount of such costs for subsequent years, (2) primarily
for the purpose of reducing Operating Expenses or avoiding increases in
Operating Expenses in Landlord's good faith estimate, (3) primarily for
the purpose of promoting safety, (4) required to comply with the
Americans with Disabilities Act of 1990, as amended, 42 U.S.C. ss.
12101 et seq., or (5) required by Legal Requirements that become
effective after the Commencement Date. All such costs shall be
amortized over the useful life of the capital investment items with the
useful life and amortization schedule being determined in accordance
with generally accepted accounting principles.
(xi) Costs of licenses, permits and inspection fees related to
the Project.
(xii) Any allocation of expenditures for service, repair,
maintenance or operation of the Complex attributable to the Project,
determined in accordance with generally accepted accounting principles.
(xiii) Cost of an office in the Building or allocation of a
central office in the Complex (if applicable) maintained for management
of the Project (but not the costs reasonably allocable to any portion
of such office used for leasing activities for the Project).
Anything in the foregoing provisions hereof to the contrary
notwithstanding, Operating Expenses shall not include the following:
(A) Leasing commissions, attorneys' fees, costs, disbursements
and other expenses incurred in connection with negotiations for leases
with tenants, other occupants, or prospective tenants or other
occupants of the Project, or similar costs incurred in connection with
disputes with tenants, other occupants, or prospective tenants or other
occupants of the Project.
(B) Non-cash items, such as deductions
for depreciation or obsolescence of the Project and the Project
equipment, or interest on capital invested (except as provided in
clause (x) above).
(C) Payments of principal and interest
or other finance charges made on any debt (except as provided in clause
(x) above), and rental payments made under any ground or underlying
lease or leases,
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except to the extent that a portion of such payments is expressly for
ad valorem/real estate taxes or insurance premiums on the Project.
(D) Costs incurred by Landlord in the sale, financing,
refinancing, mortgaging, selling or change of ownership of the Project,
including brokerage commissions, attorneys' and accountants' fees,
closing costs, title insurance premiums, transfer taxes and interest
charges.
(E) Costs which are to be capitalized in accordance with
generally accepted accounting principles not included under Section
3.2(c)(i) through (xiii).
(F) Costs and expenses attributable to the initial construction
of the Project.
(G) Any penalty charges inccured by Landlord due to Landlord's
late payment of taxes, utility bills or other amounts included in
Operating Expenses except to the extent Landlord was contesting the
payment of any such item in good faith.
(H) Allowances and other costs and expenses incurred in
fixturing, furnishing, renovating or otherwise improving, decorating or
redecorating space for tenants or prospective tenants of the Building,
or vacant leasable space in the Building (including permit, license and
inspection costs but excluding normal maintenance, repair and
replacement costs).
(I) Cost of any political or charitable donations or
contributions.
(d) If an Annual Reconciliation Payment is due by Tenant to Landlord
with respect to the immediately preceding calendar year pursuant to Section
3.2(b)(ii) above, Tenant, at its sole cost and expense, shall have the right (to
be exercised by giving notice to Landlord within sixty (60) days after receipt
of the statement of Basic Costs for such previous calendar year) to audit and/or
inspect Landlord's books and records pertaining only to items affecting Basic
Costs for such preceding calendar year; provided that such audit and/or
inspection must be commenced and concluded by December 31 of the year following
the year to which any such disputed item relates; and provided further that such
audit and/or inspection does not unreasonably interfere with the conduct of
Landlord's business. Notwithstanding the foregoing, if Tenant elects to audit
and/or inspect Landlord's books and records to the extent permitted above,
Landlord, in its sole discretion, may elect to furnish Tenant a copy of an audit
prepared by a certified public accountant in lieu of Tenant performing the
aforementioned audit and/or review.
(e) Notwithstanding any other provision herein to the contrary, it
is agreed that in the event the Net Rentable Area of space leased or held for
lease in the Building is not fully occupied or provided with Building Standard
Services (defined in Section 4.1) during any partial year or any full calendar
year, Basic Costs shall be computed for such year as though the Net Rentable
Area of space leased or held for lease in the Building had been fully occupied
and provided with Building Standard Services.
3.3. SECURITY DEPOSIT. Tenant hereby agrees to pay to Landlord on
the Effective Date, in cash or by certified check, (a) a sum equal to the Base
Rental payment for the first (1st) calendar month of the Term equal in amount to
Eighteen Thousand Four Hundred Twelve and 55/100 Dollars ($18,412.55) (the
"First Month's Rent") plus (b) a sum equal to Eighteen Thousand Four Hundred
------------------
Twelve and 55/100 Dollars ($18,412.55) (the sums in (a) and (b) collectively,
the "Security Deposit"). Tenant hereby grants to Landlord a security interest in
----------------
the Security Deposit. Upon the occurrence of an Event of Default, Landlord, from
time to time, without prejudice to any other remedy, may use the Security
Deposit to the extent necessary to make good any arrears of Base Rental, Base
Rental Adjustment, Parking Rental or to pay any other sums owed to Landlord,
including any sums described in Section 6.8 or to pay the cost of any damage,
injury, expense, or liability caused by any default by Tenant under this Lease.
Landlord shall have, and Landlord expressly retains and preserves, all rights of
setoff and recoupment and any and all similar remedies available under
applicable laws or in equity. To the extent an Event of Default has not occurred
under this Lease, that portion of the Security Deposit equal to the First
Month's Rent (to the extent such portion of the Security Deposit has not
otherwise been applied by Landlord pursuant to this Section 3.3) shall be
applied by Landlord to Base Rental due by Tenant on
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<PAGE>
the Commencement Date (and if the Commencement Date does not occur on the first
(1st) day of a calendar month and therefore, the First Month's Rent exceeds the
Base Rental owed by Tenant on the Commencement Date, such excess portion of the
First Month's Rent shall be applied to Base Rental owed by Tenant on the first
(1st) day of the calendar month immediately after the Commencement Date). If an
Event of Default has not occurred, any remaining balance of the Security Deposit
held by Landlord pursuant to this Section 3.3 shall be returned by Landlord to
Tenant within a reasonable period of time after the termination or expiration of
this Lease. The Security Deposit shall not be considered an advance payment of
rental or a measure of Landlord's damages in case of a default by Tenant. Tenant
shall not be entitled to receive and shall not receive any interest on the
Security Deposit, and Landlord may commingle the same with other monies of
Landlord. In the event Landlord applies the Security Deposit or any portion
thereof to the payment of any sum described above and this Lease is not
terminated, Tenant immediately shall deposit with Landlord an amount of money
equal to the amount so applied and such amount shall be deemed to be part of the
Security Deposit.
IV.
4.1 SERVICES TO BE FURNISHED BY LANDLORD.
(a) Landlord shall furnish Tenant during Tenant's occupancy of
the Leased Premises the following Building standard services (the "Building
--------
Standard Services") so long as an Event of Default has not occurred:
-----------------
(i) Subject to Legal Requirements, common use rest rooms
with hot and cold domestic water at locations provided for general use
of other tenants in the Building.
(ii) Central heat and air conditioning in season, subject to
curtailment as required by Legal Requirements. Landlord shall furnish
such service to Tenant between the hours (the "Building Operating
------------------
Hours") of 8:00 A.M. and 6:00 P.M., Monday through Friday, and 8:00
-----
A.M. and 1:00 P.M., Saturday, excluding Holidays (defined below), with
equipment designed to perform so that the average indoor conditions
maintained in the Leased Premises during Building Operating Hours
shall be a minimum of 72 F dry bulb +/-2 in the winter when the
outdoor temperature is not lower than 22 F dry bulb and a maximum of
78 F dry bulb +/-2 in the summer when the outdoor temperature is not
higher than 92 F dry bulb, assuming sustained peak loading conditions
of one (1) person per 311 square feet of Usable Area and a combined
light and power demand load of three (3) watts per square foot of
Usable Area. As used herein, "Holidays" shall mean the following days
(or the day observed in lieu thereof by national banks): New Year's
Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
Upon request of Tenant made in accordance with the Project
Rules (defined in Section 5.7), Landlord will furnish air conditioning,
ventilating and heating at times other than Building Operating Hours,
in which event Tenant shall pay Landlord the then current charges
incurred by Landlord to provide such services. As of the Effective
Date, the after hour HVAC charge is $35.00 per hour per floor (subject
to a two (2) hour minimum); however such charge is subject to increase
by Landlord based upon actual increases in costs that Landlord may
incur.
(iii) Routine maintenance and electric lighting service for
all Common Areas on floors on which the Leased Premises are located not
leased entirely by Tenant, General Common Areas and Service Areas of
the Building.
(iv) Janitorial service on a five (5) day per week basis
(excluding the Holidays); provided, however, if Tenant's leasehold
improvements (including floor coverings) are other than Building
Standard Improvements, include a lunchroom, coffee bar or other similar
facility for its employees or otherwise require special or additional
cleaning in excess of the Building Standard Services, Tenant shall pay
the actual additional cleaning cost, if any, incurred by Landlord as
the result thereof plus a charge equal to ten percent (10%) of such
additional costs for administrative cost recovery.
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(v) Sufficient electrical capacity transformed to a panel box
located in the core of each floor of the Leased Premises for (A)
machines of low electrical consumption at standard voltage (120 volts,
single-phase) to the extent that the total demand load at 100%
capacity of said machines of low electrical consumption does not
exceed two (2) watts per square foot of Usable Area, and (B) lighting
and equipment at high voltage (277 volts, single-phase) to the extent
that the total demand load at 100% capacity of said lighting and
equipment does not exceed two (2) watts per square foot of Usable Area
(each such rated electrical design load to be hereinafter referred to
as the "Building Standard Rated Electrical Design Load").
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Should Tenant's non-linear electrical load (created by equipment
such as personal computers, television sets, laser printers, copiers
or other electronic devices connected to the power system) result in
harmonic distortion conditions which cause any adverse effects in the
Project, including but not limited to, deration of any transformer,
distribution stepdown transformer failures, overheating or melting of
neutral conductors, or malfunctioning of various electronic
components, Tenant acknowledges that Tenant, at Tenant's sole cost,
shall be obligated to eliminate such harmonic distortion conditions
and to repair any damage which results from such harmonic distortion
within thirty (30) days of Landlord's request. If Tenant fails to
eliminate such harmonic distortion and repair such damage caused
thereby within such thirty (30) day period, Landlord, at its option,
may make such corrections deemed necessary by Landlord to eliminate
such harmonic distortion and make such repairs, and Tenant shall pay
to Landlord on demand Landlord's cost thereof plus a charge equal to
fifteen percent (15%) of such costs for administrative cost recovery.
Tenant shall cause Tenant's electrical system serving any
equipment producing non-linear electrical loads to be designed to
accommodate such non-linear electrical loads, including but not
limited to, over-sizing neutral conductors, derating transformers
and/or providing power line filters. The Tenant Working Drawings
(defined in Exhibit C-1) shall include a calculation of Tenant's fully
-----------
connected design load with and without demand factors and shall
indicate the number of watts of un-metered and sub-metered loads.
If Tenant's electrical equipment and lighting require electrical
circuits, transformers or other additional equipment in excess of
Tenant's pro rata share of the Building's electrical or HVAC systems
(which additional equipment shall be hereinafter referred to as the
"Additional Electrical Equipment"), Tenant may (at Tenant's cost,
-------------------------------
including the cost to design, install, maintain and replace the
Additional Electrical Equipment [including the meters]) install the
same, provided such installation is compatible with existing Building
systems, will not compromise Landlord's ability to provide services to
Tenant or other tenants of the Building and will not be burdensome to
the Project or to Landlord, in Landlord's reasonable opinion, and
Tenant shall pay all operating costs related to that requirement
(including, without limitation, the cost of electricity, water or
other services consumed through, or in connection with, the Additional
Electrical Equipment).
The method of design and installation of any Additional
Electrical Equipment (including any related meter) required by Tenant
shall be subject to the prior written approval of Landlord and shall
be performed by Landlord at Tenant's sole cost (including a charge
equal to ten percent (10%) of such cost for the review and
installation of such Additional Electrical Equipment for
administrative cost recovery).
Tenant shall pay to Landlord the cost of electricity consumed in
excess of the Building Standard Rated Electrical Design Load as
determined by meter, or if not metered, as otherwise reasonably
estimated by Landlord, plus any actual accounting expenses incurred by
Landlord in connection with the metering thereof. Landlord may cause
the entire Leased Premises to be separately metered (at Tenant's
expense, including, without limitation, the cost of installing,
maintaining, repairing and replacing such meters to the extent
necessary), in which event Tenant shall pay the actual cost of
electricity consumed by Tenant.
(vi) All Building Standard (defined in Exhibit C-1) fluorescent
-----------
bulb and ballast replacement in all areas of the Building and all
incandescent bulb replacement in the Common Areas on floors on which
the Leased Premises are located not leased entirely by Tenant, General
Common Areas and Service Areas.
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(vii) Perimeter access control for the Building during hours
other than Building Operating Hours; PROVIDED, HOWEVER, LANDLORD SHALL
HAVE NO RESPONSIBILITY TO PREVENT, AND SHALL NOT BE LIABLE TO TENANT,
ITS AGENTS, EMPLOYEES, CONTRACTORS, VISITORS OR INVITEES FOR, LOSSES
DUE TO THEFT OR BURGLARY, OR FOR DAMAGES OR INJURY TO PERSONS OR
PROPERTY DONE BY PERSONS GAINING ACCESS TO THE LEASED PREMISES, THE
PROJECT OR THE COMPLEX, AND TENANT HEREBY RELEASES LANDLORD FROM ALL
LIABILITY FOR SUCH LOSSES, DAMAGES OR INJURY, EVEN IF CAUSED BY
LANDLORD'S NEGLIGENCE (BUT NOT TO THE EXTENT CAUSED BY LANDLORD'S
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT). Tenant shall cooperate fully
in Landlord's efforts to maintain access control in the Building and
shall follow all regulations promulgated by Landlord with respect
thereto.
(viii) Non-exclusive multiple cab passenger elevator service to
the Leased Premises during Building Operating Hours, with passenger
elevator service to the Leased Premises by at least one (1) cab
twenty-four (24) hours per day, and non-exclusive freight elevator
service to the Leased Premises during Building Operating Hours with
such freight elevator service available at other times upon reasonable
prior notice (however, all of the foregoing shall be subject to
temporary cessation for ordinary repair and maintenance and during
times when life safety systems override normal Building operating
systems).
In the event Tenant desires Landlord to provide any of the
aforementioned services (including heating and air-conditioning) in amounts in
excess of Building Standard Services or in addition to the Building Operating
Hours, and provided such services are compatible with existing Building systems,
will not compromise Landlord's ability to provide services to Tenant or other
tenants of the Building and are not burdensome to the Complex or to Landlord, in
Landlord's opinion, and so long as an Event of Default is not in existence,
Landlord may elect (but is not required) to provide such excess or additional
services and Tenant shall pay Landlord as additional rent hereunder the cost of
providing such excess or additional services, including without limitation,
design, metering, installation and operating costs plus a charge equal to ten
percent (10%) of such costs for administrative cost recovery.
(b) To the extent the services described in Section 4.1(a) require
electricity, water, gas, steam or other utility services supplied by public
utilities, Landlord's covenants hereunder shall impose on Landlord only the
obligation to use its good faith, reasonable efforts to cause the applicable
public utilities to furnish the same. Landlord shall not be responsible for, and
shall have no liability with respect to, the quality or condition of any
services provided by such public utilities.
(c) Failure by Landlord to any extent to furnish any of the
aforementioned services to Tenant, the Leased Premises or the Project, or any
cessation (including any partial curtailment) thereof, shall not render Landlord
liable in any respect for damages to person, property or otherwise, nor to be
construed as an eviction of Tenant, nor work an abatement of Rent, nor relieve
Tenant from fulfillment of any covenant or agreement hereof. Should any of the
equipment or machinery utilized in supplying the services listed herein break
down, or for any cause cease to function properly, such failure shall not work
as an abatement of Rent, nor be construed as an eviction of Tenant, nor relieve
Tenant from fulfilling any covenant or agreement contained herein, nor render
Landlord liable for damages; provided, however, that should any of such services
be interrupted or terminated as a result of Landlord's negligence but not as the
result of (i) curtailment in services imposed by any Governmental Authority,
(ii) failure of the public utilities to furnish necessary services, or (iii)
Tenant's negligence, gross negligence or willful misconduct (a "Service
Interruption") and if, as a result of such Service Interruption, the Leased
Premises (or any part thereof) is untenantable, and such Service Interruption
continues for a period of five (5) or more consecutive Business Days after
Tenant delivered written notice to Landlord of such Service Interruption, then
all Rent including, without limitation, Base Rental and Base Rental Adjustment
shall abate as to those portions of the Leased Premises rendered untenantable
from and including the sixth (6th) Business Day after Landlord's receipt of such
written notice from Tenant and shall continue until such space is again
tenantable. The foregoing rental abatement shall constitute Tenant's sole and
exclusive remedy involving or with respect to a Service Interruption.
Notwithstanding the foregoing, if a Service Interruption occurs as a result of
or in connection with a fire or other casualty or a taking or condemnation for a
public purpose (or a conveyance in lieu thereof), the foregoing rental abatement
shall not be available to Tenant, and Landlord's and Tenant's rights and
obligations with respect thereto are governed by the provisions of Section 6.1
in the case of a taking or condemnation (or a conveyance
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in lieu thereof) or Section 6.5 in the case of a fire or other casualty. Should
any of the equipment or machinery utilized in supplying the services listed
herein break down, or for any cause cease to function properly, Landlord shall
use reasonable diligence to repair same promptly.
4.2 KEYS AND LOCKS. Landlord shall furnish Tenant with thirty-
three(33) keys and/or access cards (collectively, the "Access Equipment") for
----------------
each corridor door entering the Leased Premises (and additional Access Equipment
on an order signed by Tenant, at a charge by Landlord equal to the cost of such
Access Equipment plus an additional charge of ten percent (10%) of such cost for
administrative cost recovery). All such Access Equipment shall remain the
property of Landlord. No additional locks shall be allowed on any door of the
Leased Premises and Tenant shall not make or permit to be made any duplicate
Access Equipment, except those furnished by Landlord. Upon termination of this
Lease, Tenant shall surrender to Landlord all Access Equipment to the Leased
Premises and give to Landlord the keys and/or combination for all locks for
safes, safe cabinets and vault doors, if any, in the Leased Premises.
4.3 WINDOW COVERINGS. Landlord shall provide and install
Building Standard interior window coverings on all exterior windows in the
Building as Building Standard Improvements. Tenant agrees to use the Building
Standard window coverings on all exterior windows of the Building. Tenant shall
not place or maintain any window coverings, blinds or drapes on any exterior
window (other than those supplied by Landlord) without Landlord's prior written
approval which Landlord shall have the right to grant or withhold in its
absolute and sole discretion. Tenant acknowledges that breach of this covenant
will directly and adversely affect the exterior appearance of the Project and
the operation of the heating, ventilating and air conditioning systems.
4.4 GRAPHICS. Landlord shall provide and install Tenant's name
and suite numerals adjacent to the main entrance door to the Leased Premises.
All such letters and numerals shall be in the Building Standard graphics. All
graphics of Tenant visible in or from public corridors, elevator cabs or other
public areas shall be Building Standard graphics and subject to Landlord's prior
written approval in its sole and absolute discretion. Landlord also will be
responsible for the initial installation of Tenant's name and suite number in
the Building directory located in the main lobby on Floor 1 of the Building.
Landlord shall not be liable for any inconvenience or damage occurring as the
result of any error or omission in any directory or graphics.
4.5 REPAIRS BY LANDLORD. Landlord shall be required only to make
such improvements, repairs or replacements as may be required for normal
maintenance of the Leased Premises, and such additional maintenance as may be
necessary because of damage by persons other than Tenant, its agents, employees,
invitees or visitors. The obligation of Landlord to maintain and repair the
Leased Premises shall be limited to the Building Standard Improvements. Landlord
shall not otherwise be obligated to make improvements to, or repairs of, the
Leased Premises. All leasehold improvements other than the Building Standard
Improvements will be maintained by Tenant or, at Tenant's request, by Landlord
at Tenant's expense which shall be an amount equal to Landlord's actual cost
plus an additional charge of fifteen percent (15%) of such cost for
administrative cost recovery.
4.6 PEACEFUL ENJOYMENT. Tenant shall, and may peacefully have, hold
and enjoy the Leased Premises, subject to the other terms hereof, provided that
Tenant pays the Rent herein recited and performs all of Tenant's covenants and
agreements herein contained. It is understood and agreed that this covenant and
any and all other covenants of Landlord contained in this Lease shall be binding
upon Landlord and its successors only with respect to breaches occurring during
its and their respective ownerships of Landlord's interest hereunder.
4.7 NO WARRANTIES. LANDLORD'S DUTIES AND WARRANTIES ARE LIMITED TO
THOSE EXPRESSLY STATED IN THIS LEASE AND SHALL NOT INCLUDE ANY IMPLIED DUTIES OR
IMPLIED WARRANTIES, NOW OR IN THE FUTURE. NO REPRESENTATIONS OR WARRANTIES HAVE
BEEN MADE BY LANDLORD OTHER THAN THOSE CONTAINED IN THIS LEASE. TENANT HEREBY
WAIVES ANY AND ALL WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE LEASED
PREMISES WHICH MAY EXIST BY OPERATION OF LAW OR IN EQUITY, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTY OF HABITABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
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4.8 FORCE MAJEURE. Landlord and Tenant shall be excused for the
period of any delay and shall not be deemed in default with respect to the
performance of any of the terms, covenants and conditions of this Lease when
prevented from so doing by a cause or causes beyond Landlord's or Tenant's
control, respectively, which shall include without limitation, all labor
disputes, governmental regulations or controls, fire or other casualty,
inability to obtain any materials or services, or acts of God; provided,
however, in no event shall the foregoing (1) excuse Landlord or Tenant from, or
delay the due date of, any payment obligations under this Lease, or (2) extend
the time period within which, or deadline dates by which, notices must be
forwarded under this Lease.
V.
5.1 PAYMENTS BY TENANT. Tenant shall pay all Rent at the times and
in the manner herein provided. Any failure by Tenant to pay Rent shall give rise
to the rights and remedies provided in Section 6.8.
5.2 DAMAGE TO PROJECT. Subject to the provisions of Section 6.14,
at Tenant's own cost and expense, and by use of a contractor or contractors
approved in writing by Landlord, Tenant shall repair or replace in accordance
with all Legal Requirements any damage or injury done to the Leased Premises,
the Project or the Complex, or any portion thereof, caused by Tenant or Tenant's
agents, employees, invitees or visitors, which repairs or replacements must be
made to the same or as good a condition as existed prior to such injury or
damage; provided, however, Landlord, at its option, may make such repairs or
replacements, and Tenant shall repay Landlord on demand the actual cost thereof
(plus a charge equal to ten percent (10%) of such costs for administrative cost
recovery).
5.3 CARE OF THE LEASED PREMISES. Subject to the provisions of Section
4.5, at Tenant's own cost and expense, and by use of a contractor or contractors
approved in writing by Landlord, Tenant shall keep the Leased Premises and all
leasehold improvements in a good and presentable condition, at least similar to
the condition as of the Commencement Date, normal wear and tear excepted, and
shall perform all repairs and improvements required by any Legal Requirement. If
Tenant fails to commence any such repairs to the Leased Premises and the
leasehold improvements within ten (10) days after written notice from Landlord,
and thereafter diligently proceed with such repair until completion, Landlord,
at its option, may make such repair or any replacement deemed necessary by
Landlord, and Tenant shall pay to Landlord on demand Landlord's cost thereof
plus a charge equal to fifteen percent (15%) of such costs for administrative
cost recovery. Tenant shall not commit or allow any waste or damage to be
committed on any portion of the Leased Premises, the Project or the Complex.
Upon the expiration or any earlier termination of this Lease, Tenant shall
deliver up said Leased Premises to Landlord in as good a condition as such
premises existed on the date of initial occupancy of the Leased Premises,
ordinary wear and tear excepted. Upon the expiration or termination of this
Lease, Landlord shall have the right to re-enter and resume possession
immediately of the Leased Premises and Tenant's leasehold improvements.
5.4 ASSIGNMENT AND SUBLETTING.
5.5 Except as provided in Section 5.4(b), Tenant shall not,
without Landlord's prior written consent (which may be withheld in Landlord's
absolute discretion), (i) assign, convey, mortgage, pledge, encumber, or
otherwise transfer (whether voluntarily, by operation of law, or otherwise) this
Lease or any interest hereunder; (ii) allow any lien to be placed upon Tenant's
interest hereunder; (iii) sublet the Leased Premises or any part thereof; or
(iv) permit the use or occupancy of the Leased Premises or any part thereof by
any one other than Tenant. Any attempt to consummate any of the foregoing
without Landlord's consent shall be of no force or effect and shall be an Event
of Default under this Lease. For purposes hereof, 5.6. the transfer of the
ownership or voting rights in a controlling interest of the voting stock of
Tenant (if Tenant is a corporation), 5.7. the transfer of a general partnership
interest or the transfer of twenty-five percent (25%) of the limited partnership
interests in Tenant (if Tenant is a partnership), 5.8. the merger or
consolidation of Tenant with or into any other corporation or entity, or (D) a
sale or transfer of fifty percent (50%) or more of Tenant's assets, at any time
throughout the Term shall be deemed to be an assignment of this Lease.
Notwithstanding the provisions of the first sentence of this
subsection (a), the consent of Landlord need not be obtained if the assignment
or subletting is to an Affiliate (defined below) of Entrust Technologies,
Incorporated
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("Company") so long as (1) the assignee or sublessee shall be engaged in the
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same field of services as Company, (2) the assignee or sublessee is engaged in a
business customarily acceptable for a tenant in a first class high-rise office
building in metropolitan Dallas, Texas, (3) any assignee shall assume all of the
obligations of Company under this Lease, (4) at the time of such assignment or
subletting, this Lease is in full force and effect and there is no breach under
this Lease on the part of Tenant, and (5) the assignee's or sublessee's proposed
use of the Leased Premises is not in violation of this Lease (such Affiliate of
Company complying with clauses (1), (2), (3), (4) and (5), hereinafter a
"Permitted Affiliate"). At least ten (10) days prior to the effective date of
-------------------
any such assignment or sublease to a Permitted Affiliate, Tenant agrees to
furnish Landlord with notice of such assignment or sublease and copies of the
instruments effecting any such assignment or sublease. Additionally, within
thirty (30) days after the effective date of any such assignment or sublease to
a Permitted Affiliate, Tenant agrees to furnish Landlord with copies of the
fully executed instruments effecting any such assignment or sublease and
documentation establishing Tenant's satisfaction of the requirements set forth
above applicable to any such sublease or assignment. Any such assignee of Tenant
must assume and agree in writing to fully perform and observe all of the
obligations and agreements of Tenant under this Lease and any such sublessee
shall sublease such portion of the Leased Premises subject to the provisions of
this Lease. No such assignment or subletting shall relieve Company, any other
tenant, or any guarantor of this Lease of any covenants or obligations under
this Lease or any such guaranty and Company, any other tenant, and any
guarantors of this Lease shall remain fully liable hereunder and thereunder.
Notwithstanding anything to the contrary set forth in this Lease, the rights
granted to Company under this paragraph of subsection (a) as to assignments and
subleases to Permitted Affiliates shall not be assignable by Company, shall
inure only to the benefit of Company and shall not be enforceable by any
assignee or sublessee of Company.
As used herein, "Affiliate" shall mean any person or entity
---------
controlling, controlled by, or under common control with, another person or
entity. "Control" as used herein means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of
such controlled person or entity (the ownership, directly or indirectly, of at
least fifty-one percent (51%) of the voting securities of, or possession of the
right to vote, in the ordinary direction of its affairs, at least fifty-one
percent (51%) of the voting interest in, any person or entity shall be presumed
to constitute such control).
(b) Notwithstanding the provisions of Section 5.4(a) above, Tenant
shall be permitted to sublease the Leased Premises or assign its interest in
this Lease after Tenant initially occupies the Leased Premises subject to the
provisions of this Section 5.4(b). If Tenant should desire to assign this Lease
or sublet the Leased Premises or any part thereof, Tenant shall give Landlord
written notice (which shall specify the proposed economic terms and duration of
the proposed sublease or assignment and shall contain information concerning the
business, reputation and creditworthiness of the proposed sublessee or assignee
as shall be sufficient to allow Landlord to form a commercially reasonable
judgment with respect thereto) of Tenant's desire to sublease or assign at least
forty-five (45) days in advance of the date on which Tenant desires to make such
sublease or assignment (the "Notice"). Landlord then shall have thirty (30) days
following receipt of such Notice within which to notify Tenant in writing that
Landlord elects, in its sole and absolute discretion, to 5.10. permit Tenant to
assign this Lease or sublet such space subject to Landlord's approval of the
assignee or sublessee, or 5.11. terminate this Lease as to the space so affected
as of the date so specified by Tenant (and as to option (ii) only Tenant will be
relieved of all further obligations hereunder as to such terminated space). If
Landlord should fail to notify Tenant in writing of such election within said
thirty (30) day period, Landlord shall be deemed to have elected option (i). If
Landlord elects, or is deemed to have elected, option (i), Landlord shall not
unreasonably withhold such consent to such sublessee or assignee if (1) any such
sublessee or assignee is creditworthy as determined by Landlord and is of a
character, kind and type customarily found in first-class office buildings in
metropolitan Dallas, Texas, (2) such sublease or assignment does not violate any
lease agreement with any other tenant or potential tenant with which Landlord
has entered into a lease or a letter of intent (as applicable) in the Complex,
and (3) the use of the Leased Premises by such proposed assignee or sublessee is
permitted under this Lease. Without limiting the foregoing, in no event shall
the following be considered as suitable assignees or sublessees under this
subsection (b): any governmental body, agency or bureau (of the United States,
any state, county, municipality or any subdivision thereof); any foreign
government or subdivision thereof; any health care professional or health care
service organization; schools or similar organizations; employment agencies;
radio, television or other communication stations; restaurants; and retailers
offering retail services from the Leased Premises. If Landlord elects, or is
deemed to have elected, option (i) and fails to approve or disapprove any such
sublessee or assignee within ten (10) days following Landlord's election or
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deemed election of option (i), such sublessee or assignee and the proposed
sublease or assignment shall be deemed disapproved. If Landlord elects, or is
deemed to have elected, option (i) and the proposed sublessee or assignee is
approved by Landlord, the following shall apply to the sublease or assignment
(and shall be conditions thereto):
(1) Each sublessee or assignee shall fully observe all
covenants of this Lease, including without limitation, the provisions
of Section 2.2 of this Lease, and no consent by Landlord to an
assignment or sublease shall be deemed in any manner to be a consent to
(A) a use not permitted under Section 2.2, or (B) an assignment by
Tenant of any rights which are otherwise not assignable pursuant to
other provisions of this Lease;
(2) At the time of any such assignment or subletting,
this Lease is in full force and effect and there is no breach under
this Lease on the part of Tenant;
(3) Any such assignment or subletting shall be subject to
all the terms, covenants and conditions of this Lease and any assignee
must assume in writing all the rights and obligations of the assignor
hereunder;
(4) If the aggregate rental, bonus or other consideration
paid by the assignee or sublessee of any such space exceeds the sum of
(A) the Base Rental as adjusted by the Base Rental Adjustment paid to
Landlord for such space during the applicable period, plus (B) the
reasonable out-of-pocket third party costs and expenses actually
incurred by Tenant under or in connection with such sublease or
assignment for (x) broker's commissions paid by Tenant with regard to
the transfer, (y) reasonable legal fees with regard to the transfer,
and (z) expenses of finishing out or renovation of the space involved
[but specifically excluding any charges payable to partners,
shareholders or employees of Tenant in connection with such sublease or
assignment]), then such excess shall be paid to Landlord within fifteen
(15) days after receipt by Tenant together with all consideration
received in connection with such assignment. With any payment made by
Tenant to Landlord under this clause (4), Tenant shall furnish Landlord
with an accounting prepared and certified to by Tenant of its
determination of the sums owed to Landlord hereunder;
(5) No assignment or subletting by Tenant shall relieve
Tenant or any guarantor of this Lease of any obligations or covenants
under this Lease or any such guaranty and Tenant and any guarantor of
this Lease shall remain fully liable hereunder or thereunder (as
applicable); and
(6) A copy of the original sublease or assignment (and all
amendments thereto) shall be delivered to Landlord within fifteen (15)
days from the effective date thereof.
If the proposed sublessee or assignee is approved by Landlord
and Tenant fails to enter into the sublease or assignment with the approved
sublessee or assignee within one hundred eighty (180) days after the date Tenant
submitted its proposal to Landlord, then Landlord's approval of the proposed
sublease or assignment shall be deemed null and void and Tenant must comply
again with all of the conditions of this Section 5.4.
(c) If, in accordance with this Section 5.4, the Leased Premises
or any part thereof is sublet or occupied by other than Tenant or this Lease is
assigned, Landlord, during the continuance of a breach under this Lease on the
part of Tenant, if any, may collect rent from the subtenant, assignee or
occupant, and apply the net amount collected to Rent due by Tenant to Landlord
under this Lease, and Tenant hereby authorizes and directs any such assignee or
sublessee to make such payments of rent direct to Landlord upon receipt of
notice from Landlord. Additionally, Landlord is authorized and empowered, on
behalf of Tenant, to endorse the name of Tenant upon any check, draft, or other
instrument payable to Tenant evidencing payment of rent, or any part thereof,
and to receive and apply the proceeds therefrom in accordance with the terms of
this Lease. No such subletting, assignment, occupancy, or collection shall be
deemed (i) a waiver of any of Tenant's covenants contained in this Lease, (ii) a
release of any guarantor of this Lease from further performance of its covenants
under such guaranty, (iii) a release of Tenant from further performance by
Tenant of its covenants under this Lease, or (iv) a waiver of any of Landlord's
other rights hereunder.
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<PAGE>
(d) Notwithstanding the giving by Landlord of its consent to any
sublease or assignment with respect to the Leased Premises, no sublessee or
assignee may exercise any renewal options, expansion options, rights of first
offer or similar rights under this Lease except (x) in accordance with a
separate written agreement entered into directly between such sublessee or
assignee and Landlord, or (y) the expansion options and the renewal options may
be exercised by any permitted assignee (but not a sublessee) of Tenant's entire
interest under this Lease that is a Permitted Affiliate, provided in the event
of clauses (x) or (y) Tenant continues to be liable for the performance of all
obligations hereunder, as increased or otherwise affected by the exercise of
such rights. Tenant may not exercise any renewal options, expansion options,
rights of first offer or similar rights under this Lease if Tenant has assigned
all of its interest in this Lease to other than a Permitted Affiliate.
(e) Any attempted assignment or sublease by Tenant in violation
of the terms and covenants hereof shall be void and shall be an Event of Default
under this Lease. Any consent by Landlord to a particular assignment or sublease
shall not constitute Landlord's consent to any other or subsequent assignment or
sublease, and any proposed sublease or assignment by a sublessee of Tenant shall
be subject to the provisions hereof as if it were a proposed sublease or
assignment by Tenant.
(f) In any subletting undertaken by Tenant, Tenant shall
reasonably seek to obtain not less than fair market rental value for subleased
space. In any assignment of this Lease in whole or in part, Tenant shall seek to
obtain from the assignee consideration reflecting a value of not less than fair
market rental value for the space subject to such assignment. Notwithstanding
anything to the contrary contained in this Section 5.4, Tenant shall not be
permitted to sublease any portion of the Leased Premises or assign this Lease to
(i) any person or entity that is actually a tenant of the Building or Complex at
the time the Notice is furnished to Landlord (an "Actual Tenant"), or (ii) any
-------------
Affiliate of an Actual Tenant if such Affiliate intends to use a significant
portion of the Leased Premises subject to such assignment or sublease for
purposes of the conduct of the business then being conducted by the Actual
Tenant in its leased premises or such Affiliate is entering into such assignment
or sublease as a means to circumvent the provisions of clause (i) above.
(g) Any improvements, additions, or alterations to the Building
or the Project that are required by Legal Requirements, or are reasonably deemed
necessary or appropriate by Landlord, as a result of any subletting or
assignment hereunder, shall be installed and provided without cost or expense to
Landlord.
5.5 ALTERATIONS, ADDITIONS, AND IMPROVEMENTS.
(a) Tenant shall not permit the Leased Premises to be used for
any purpose other than that stated in Section 2.2 hereof, or make or allow to be
made any alterations, physical additions or improvements in or to the Leased
Premises, or place signs on or in the Leased Premises which are visible from
outside the Leased Premises, without first obtaining the prior written consent
of Landlord (which consent may be withheld in Landlord's sole discretion).
Notwithstanding the foregoing, Landlord will not unreasonably withhold its
consent to alterations, physical additions or changes to the Leased Premises
that do not adversely affect the Building structural, mechanical, electrical,
plumbing, heating, ventilating, air conditioning, life safety or other base
Building improvements or systems, provided such changes (i) are not visible from
the exterior of the Leased Premises or the Building, (ii) do not affect the
exterior of the Building, the structure of the Building or any public areas of
the Project, (iii) do not violate any provision of this Lease, (iv) do not
violate any Legal Requirements, and (v) will not interfere with the use and
occupancy of any other portion of the Project or the Complex by any other tenant
or occupant of the Project or the Complex. If Landlord consents to said
alterations, improvements, or additions, or placement of signs, Landlord may
impose such conditions with respect thereto as are reasonably appropriate,
including without limitation, requiring Tenant to furnish Landlord with security
for the payment of all costs to be incurred in connection with such work,
insurance against liabilities which may arise out of such work, plans and
specifications, and permits for such work. Tenant's plans and specifications and
construction means and methods shall be subject to Landlord's written approval.
Tenant shall furnish to Landlord any documents and information requested by
Landlord in connection with the exercise of its rights hereunder. Landlord may
hire outside consultants to review such documents and information furnished to
Landlord and Tenant shall reimburse Landlord for the cost thereof, including
reasonable attorneys' fees, upon demand.
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(b) The work necessary to make any permitted alterations,
improvements, or additions to the Leased Premises shall be done at Tenant's
expense by contractors approved in writing by Landlord (each such contractor
hereinafter referred to as an "Outside Contractor") or, at Landlord's election,
------------------
by Landlord (without cost or expense to Landlord). If Landlord performs any such
work, upon completion of such work Tenant shall pay Landlord a fee for
Landlord's supervision and administration of such work equal to ten percent
(10%) of the cost of such work. All work performed by an Outside Contractor
shall be performed in a good and workmanlike manner and in compliance with all
Legal Requirements, Landlord's requirements (including without limitation
Paragraph 5 of Exhibit C-1), the provisions of this Section 5.5 and all
-----------
applicable Project Rules. Tenant shall give Landlord at least ten (10) days
prior written notice before the commencement of any work pursuant to this
Section 5.5. Additionally, if Landlord does not perform such work it shall be
Tenant's responsibility to ensure that the Outside Contractor shall (i) conduct
its work in such a manner so as not to unreasonably interfere with any other
construction occurring on or in the Project or the Complex or with the
transaction of business in the Project and in the Complex; (ii) comply with such
reasonable rules and regulations applicable to all work being performed in the
Project as may be promulgated from time to time by Landlord; (iii) maintain such
insurance and bonds in full force and effect as may be reasonably requested by
Landlord or as required by Legal Requirements; and (iv) be responsible for
reaching agreement with Landlord as to the reasonable terms and conditions for
all contractor items relating to conducting its work. As a condition precedent
to Landlord's approving the Outside Contractor pursuant hereto, Tenant and the
Outside Contractor shall deliver to Landlord such assurances or instruments as
Landlord may reasonably require to evidence the Outside Contractor's compliance
or agreement to comply with the provisions of clauses (i), (ii), (iii), and (iv)
of this subsection (b). Landlord retains the right to make periodic inspections
to assure conformity of the work of the Outside Contractor with the
aforementioned rules and regulations and with the plans and specifications
approved by Landlord. Within thirty (30) days after substantial completion of
any work by Tenant, Tenant, at Tenant's cost and expense, shall furnish Landlord
"as-built" drawings of such work and shall cause the architect(s) and/or
engineer(s) that performed in connection with the work to prepare a report, in
form and substance acceptable to Landlord, for the benefit of Landlord,
certifying to the compliance of the work constructed by any Outside Contractor
with the plans and specifications approved by Landlord. Each Outside Contractor
shall not perform and, upon the request of Landlord, whether written or oral,
each Outside Contractor shall cease to perform, any activity that is disruptive
to the conduct of business within the Project or Complex or other tenants or
occupants of the Project or Complex.
(c) Any and all such alterations, physical additions or
improvements, when made to the Leased Premises by Tenant or on Tenant's behalf,
shall at once become the property of Landlord and shall be surrendered to
Landlord upon the termination of this Lease by lapse of time or otherwise;
provided, however, this sentence shall not apply to movable equipment, trade
fixtures or furniture owned by Tenant. Notwithstanding the foregoing, Tenant
shall be obligated to repair any damage to the Leased Premises caused by the
removal by Tenant of any such movables and to restore any areas affected by such
removal of such movables such that the areas so affected are consistent with
surrounding areas. If Tenant fails to remove such movables upon termination of
this Lease, Landlord may have the same removed and any resulting damage repaired
at Tenant's expense. In such event, such movables will automatically become the
property of Landlord and may be disposed of by Landlord in its sole discretion,
without any right of reimbursement therefor to Tenant.
(d) Tenant shall not allow any liens to be filed against the
Leased Premises or the Project in connection with the installation of Tenant's
improvements in, or any repair or alteration work to, the Leased Premises
performed by Tenant or an Outside Contractor. If any such liens shall be filed,
Tenant shall cause the same to be released within ten (10) days after the filing
thereof by bonding or other method acceptable to Landlord; provided, however,
this sentence shall not apply to movable equipment or furniture owned by Tenant.
If Tenant shall fail to timely cancel or discharge said lien or liens as
required above, Landlord, at its sole option, may cancel or discharge the same
and Tenant shall pay to Landlord upon demand, Landlord's cost thereof plus a
charge equal to fifteen percent (15%) of such costs for administrative cost
recovery. Upon completion of any such work, Tenant shall deliver to Landlord
evidence of payment, contractors' affidavits and full and final waivers of all
liens for, labor, services, or material. Tenant shall indemnify and hold
harmless Landlord and Landlord's mortgagee from all losses, costs, damages,
claims and expenses (including attorneys' fees and costs of suits), liabilities
or causes of action arising out of or relating to any alterations, additions or
improvements that Tenant or any Outside Contractor makes to the Leased Premises,
including any occasioned by the filing of any mechanic's, materialman's,
construction or other liens or claims (and all costs or expenses
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associated therewith) asserted, filed or arising out of any such work. All
materialmen, contractors, artisans, mechanics, laborers and other parties
hereafter contracting with Tenant for the furnishing of any labor, services,
materials, supplies or equipment with respect to any portion of the Leased
Premises are hereby charged with notice that they must look solely to Tenant for
payment of same and Tenant's purchase orders, contracts and subcontracts in
connection therewith must clearly state this requirement. Landlord shall have
the right at all times to post and keep posted on the Leased Premises any
notices permitted or required by Legal Requirements, or that Landlord shall deem
proper for the protection of Landlord, the Leased Premises, the Project and any
other party having an interest therein, from liens. Without limiting the
generality of the foregoing, Tenant shall repair or cause to be repaired at its
expense all damage caused by any Outside Contractor, its subcontractors or their
employees. Tenant shall reimburse Landlord for any costs incurred by Landlord to
repair any damage caused by any Outside Contractor or any costs incurred by
Landlord in requiring any Outside Contractor's compliance with the rules and
regulations. Additionally, Tenant shall reimburse Landlord for the reasonable
costs Landlord may incur to have an engineer review all mechanical, structural,
electrical, plumbing and life safety systems installed by any Outside
Contractor.
(e) Tenant agrees specifically that no food, soft drink or other
vending machine will be installed within the Leased Premises without Landlord's
prior written approval; provided, however, such approval shall not be withheld
provided (i) the use of such machines is restricted to Tenant's employees and
clients (but not to the general public), and (ii) Landlord approves the
location, visibility and condition thereof.
5.6 LEGAL USE AND VIOLATIONS OF INSURANCE COVERAGE. Tenant shall
not occupy or use the Leased Premises, or permit any portion of the Leased
Premises to be occupied or used, for any business or purpose other than that
stated in Section 2.2 hereof, or for any business or purpose which is unlawful,
disreputable or deemed to be extra-hazardous on account of fire, which creates
noxious or offensive odors emanating from the Leased Premises, or generates
chemicals or hazardous substances. Tenant shall not use, operate or maintain the
Leased Premises in such manner that any of the rates for any insurance carried
by Landlord or any other owner or occupant of premises in the Complex shall
thereby be increased, or in such manner as will affect or cause a cancellation
of any such insurance policy.
5.7 LEGAL REQUIREMENTS; RULES OF THE PROJECT.
(a) As used in this Lease, "Legal Requirements" shall mean any
------------------
applicable law, statute, ordinance, order, rule, regulation, decree or
requirement of a Governmental Authority, and "Governmental Authority" shall mean
----------------------
the United States, the state, county, city and political subdivisions in which
the Project is located or which exercise jurisdiction over the Project, and any
agency, department, commission, board, bureau or instrumentality of any of them
which exercise jurisdiction over the Project. Tenant shall comply with (and
shall indemnify Landlord for Tenant's failure to comply with), and shall cause
its employees, contractors and agents to comply with, and shall use its best
efforts to cause its customers, visitors and invitees to comply with, all Legal
Requirements relating to the use, condition or occupancy of the Leased Premises
(including, without limitation, the Americans with Disabilities Act, all Legal
Requirements applicable to Tenant's business and operations in the Leased
Premises and all orders and requirements imposed by any Health Officer, Fire
Marshall, Building Inspector or other Governmental Authority) and with the rules
of the Project adopted by Landlord from time to time for the safety, care and
cleanliness of the Leased Premises and the Project and for preservation of good
order therein (the "Project Rules"). In the event of any conflict between the
-------------
provisions of this Lease and the Project Rules, the provisions of this Lease
shall control. The initial Project Rules are attached hereto as Exhibit E.
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(b) Without limiting the provisions of subsection (a) above,
Tenant shall comply with all applicable Legal Requirements regarding health,
safety or the environment (the "Environmental Laws"), including without
------------------
limitation the application for and maintenance of all required permits, the
submittal of all notices and reports, proper labeling, training and
recordkeeping, and timely and appropriate response to any Release (defined
below) or other discharge of a substance under Environmental Laws. In no way
limiting the generality of the foregoing, Tenant shall not cause or permit the
use, generation, storage, Release or disposal in or about the Leased Premises,
the Project or the Complex of any substances, materials or wastes subject to
regulation under Legal Requirements from time to time in effect concerning
hazardous, toxic or radioactive materials (collectively, the "Hazardous
---------
Materials"), unless Tenant shall
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have received Landlord's prior written consent, which consent Landlord may
withhold or revoke at any time in its sole discretion. Additionally, Tenant
shall not permit to be present upon the Leased Premises, or contained in any
transformers or other equipment thereon, any PCB's. "PCB" means any oil or other
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substance containing polychlorinated biphenyl (as defined in 40 CFR 761.3).
Tenant shall not permit any asbestos, or any structures, fixtures, equipment or
other objects or materials containing asbestos on the Leased Premises. Tenant
shall immediately notify Landlord of the presence of any Reportable Quantity
(defined below) of a Hazardous Material on or about the Leased Premises. As used
in this Lease, "Reportable Quantity" shall mean that amount defined in the
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Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, the Federal Water Pollution Control Act, as amended, pertinent
regulations thereunder or other relevant Environmental Laws.
Tenant shall indemnify, protect, defend (with counsel reasonably
approved by Landlord) and hold Landlord, the directors, officers, shareholders,
employees and agents of Landlord, and Landlord's mortgagee harmless from any and
all obligations, claims, administrative proceedings, judgements, damages, fines,
costs, and liabilities, including reasonable attorneys' fees incurred in
enforcing this Lease, performance on Tenant's behalf, or collecting any sums due
hereunder, (collectively, the "Costs") that arise directly or indirectly from or
in connection with the presence, suspected presence, Release (defined below), or
suspected Release of Hazardous Materials arising out of, in connection with, or
by reason of the action or inaction of Tenant, or Tenant's officers, directors,
partners, agents, employees, contractors, subtenants, invitees and visitors. As
used in this Lease, "Release" shall mean any spilling, leaking, pumping,
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pouring, emitting, emptying, discharging, injecting, escaping, leaching,
dumping, or disposing into the environment (including the abandonment or
discarding of barrels, containers and other closed receptacles). If Landlord
incurs any Costs, Tenant shall pay to Landlord the amount thereof upon demand.
Without limiting the generality of the foregoing, there shall be included in
Costs, capital, operating, and maintenance costs incurred in connection with any
investigation or monitoring of site conditions, any clean up, containment,
remedial, removal or restoration work required or performed by any federal,
state or local governmental agency or political subdivision or performed by any
nongovernmental entity or person.
5.8 RIGHTS RESERVED BY LANDLORD. Tenant shall permit Landlord or
its agents or representatives to enter into and upon any part of the Leased
Premises at all reasonable hours and upon reasonable notice (except for
emergencies and routine cleaning for which such entry may be made at any time
and without notice) to inspect same, clean or make repairs, alterations or
additions thereto and to show same to prospective tenants, subtenants,
mortgagees and purchasers as Landlord may deem necessary or desirable.
Additionally, Landlord shall have the right from time to time, without
unreasonable interference with Tenant's use of the Leased Premises, to decorate
and to make repairs, alterations, additions, changes or improvements, whether
structural or otherwise, in and about the Complex, or any part thereof, to enter
upon the Leased Premises therefor, and to alter or relocate entrances,
passageways, doors, corridors, elevators, stairs, rest rooms, or other General
Common Areas, Service Areas or Common Areas, and during the continuance of such
work, to temporarily close doors, entryways, public space and corridors in the
Complex. Tenant shall not be entitled to any abatement or reduction of any sums
due under this Lease by reason of the foregoing activities, nor shall such
activities be construed to be an eviction of Tenant, a default by Landlord
hereunder, or a breach of the covenant of quiet enjoyment.
5.9 NUISANCE. Tenant shall conduct its business and control its
agents, employees, invitees, contractors and visitors in such a manner as not to
create any nuisance, or interfere with, annoy or disturb any other tenant or
Landlord in its operation of the Complex.
5.10 SUBORDINATION. This Lease is subject and subordinate to each
ground or land lease which may now or hereafter cover all or any part of the
Project and to each mortgage or deed of trust which may now or hereafter
encumber all or any portion of the Project and to all renewals, modifications,
consolidations, replacements and extensions thereof. This Section 5.10 shall be
self-operative and no further instrument of subordination need be required by
any mortgagee or lessor. Tenant, however, upon Landlord's request, shall execute
promptly any appropriate certificate or instrument in confirmation of such
subordination. In the event of the enforcement by the lessor under any such
ground or land lease or the trustee, the mortgagee or the beneficiary under any
such mortgage or deed of trust of the remedies provided for by law or by such
ground or land lease, mortgage or deed of trust, Tenant, upon request of any
person or party succeeding to the interest of Landlord as a result of such
enforcement (collectively, "Successor"),
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automatically will become the tenant of such Successor without change in the
terms or other provisions of this Lease; provided, however, that such Successor
shall not be (a) subject to any credits, offsets, defenses or claims which
Tenant may have against any prior landlord, (b) bound by any payment of Rent for
more than one (1) month in advance, except prepayments in the nature of security
for the performance by Tenant of its obligations under this Lease, (c) bound by
any amendment or modification of this Lease made after the applicable ground or
land lease, mortgage or deed of trust is placed against the Project (and Tenant
has been given notice thereof) without the written consent of such trustee,
mortgagee, beneficiary or landlord, (d) liable for any act, omission, neglect or
default of any prior landlord, or (e) required to make any capital improvements
to the Complex or the Leased Premises which Landlord may have agreed to make but
had not completed. Notwithstanding the foregoing, the holder of any ground or
land lease that may affect all or any portion of the Project or the holder of
any mortgage or deed of trust that may encumber all or any portion of the
Project may elect at any time to cause their interest in the Project to be
subordinate and junior to Tenant's interest under this Lease by filing an
instrument in the real property records of Collin County, Texas effecting such
election and providing Tenant with notice of such election.
5.11. ESTOPPEL CERTIFICATE. Within ten (10) Business Days after
Landlord's request, Tenant will execute an estoppel certificate certifying as to
such facts (if true) as Landlord (or mortgagees, ground or land lessors or
proposed purchasers of the Project) may reasonably request (including, in the
case of mortgagees or ground or land lessors, reasonable notice and cure
provisions). Failure to deliver such estoppel certificate within such ten (10)
Business Day period shall be deemed Tenant's agreement to and acknowledgment of
the statements contained therein.
5.12. TENANT'S REMEDIES. Tenant specifically agrees to look
solely to Landlord's (or its successors') interest in the Project for the
recovery of any judgment from Landlord, it being agreed that Landlord (and if
Landlord is a partnership, its partners [direct or indirect, general or
limited], or if Landlord is a corporation, its directors, officers or any
successors in interest) shall never be personally liable for any such judgment.
5.13. NAME OF BUILDING AND PROJECT. Tenant shall not utilize the
name of the Building, the Project or the Complex for any purpose whatsoever,
except to identify the location of the Leased Premises in Tenant's address.
Landlord shall have the right to change the name of the Building and/or the
Complex or the design or construction thereof whenever Landlord, in its sole
discretion, deems it appropriate without any liability to Tenant and without any
consent of Tenant being necessary.
VI.
6.1. CONDEMNATION.
(a) If the Leased Premises shall be taken or condemned (or
sold in lieu thereof) for any public purpose to such an extent as to render the
Leased Premises untenantable, either party shall have the right to terminate
this Lease by giving notice of such election to terminate to the other party
within ten (10) days from the date of such condemnation or taking (or sale in
lieu thereof), which termination shall be effective on the date of the transfer
of possession of the Leased Premises to the condemning authority. If only a
portion thereof shall be so taken so as not to render the remainder
untenantable, this Lease shall not terminate, and Base Rental shall be
diminished by an equitable amount (based upon the square footage of Net Rentable
Area so taken) and Landlord shall, to the extent practicable, restore the Leased
Premises so that the remaining portion of the Leased Premises shall be
partitioned off from the portion so taken or condemned; however, Landlord shall
be obligated to restore or rebuild the damaged property only to the extent the
holder of any mortgage or deed of trust or the landlord under any ground lease
makes the proceeds of such taking available to Landlord for the purposes of
rebuilding and restoration, or if no mortgage or ground lease then affects the
Complex or Project, then only to the extent of the net proceeds of such taking.
If all or substantially all of the Complex or Project (whether or not the Leased
Premises are affected), or a portion of the Complex or Project (whether or not
the Leased Premises are affected) as to cause the remainder of the Complex or
Project not to be economically feasible to operate, as reasonably determined by
Landlord, should be taken or condemned (or sold in lieu thereof) for any public
purpose, then this Lease, at the option of Landlord upon the giving of notice to
Tenant within ten (10) days from the date of such condemnation or taking (or
sale in lieu thereof), shall cease and terminate effective on the date of
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