ESCALATION
(1)
Base Rental Adjustment: c. If after initial occupancy of the Lease Premises r
commencement of the term of the Lease Agreement, whichever occurs first,
the Building Operating Costs, or the ad valorem taxes, or hazard insurance
premiums on the Building increase, Lessee agrees to pay Lessor as
additional rent an amount equal to Lessee's prorata share of said increase,
as determined by the ratio of Lessee's "rentable area" to the whole of the
Building and other improvements, as defined in Exhibit ( ).
d. Building Operating Costs, as used herein, shall consist of all
expenditures by Lessor to maintain all facilities including common areas,
grounds, parking lot maintenance, security, and other services, as may be
determined by Lessor as being necessary for the continued operation of the
Building. All Building operating Costs and expenses shall be computed on
the accrual basis and shall be determined in accordance with generally
accepted accounting principles which shall be consistently applied. Building
Operating Costs shall include all expenses, costs and disbursements (but
not replacement of capital investment items, depreciation, debt service,
income and franchise tax, nor specific costs especially billed to and paid
by specific tenants, nor rental commissions) of every kind and nature which
Lessor shall pay or become obligated to pay because of or in connection
with the ownership and operation of the Building, including but not limited to
Items 1-11, listed below. In the event during any calendar year any portion
of the Building is unoccupied, the Building Operating Costs shall be adjusted
so as to reflect costs as though fully occupied, and any rental adjustment
shall be based upon Building Operating Costs so adjusted.
Building Operating Costs, as estimated by Lessor on an annual basis,
predicated on 100% occupancy from the completion of both buildings,
at this time include the following:
1. Yard Maintenance
2.
3. Building maintenance, including all equipment service
contracts or agreements, parking lot maintenance,
trash disposal, etc.
4. Janitorial
5. Janitorial supplies
6. Security
7. Maintenance man
8. Management
9. Electricity
10. Water and sewer
11. Miscellaneous
e. Ad valorem taxes shall include all taxes and assessments and
governmental charges, whether state, federal, county or municipal, and
whether levied by taxing district or authorities presently taxing the Building
and other improvements or by others subsequently created, and any other
taxes and assessments attributable to the Building or its operation excluding,
however, federal and state taxes on income. It is agreed that Lessee will be
responsible for ad valorem taxes on its personal property and on the value of
leasehold improvements, to the extent that same exceeds standard Building
allowances. Ad Valorem taxes on Building
, as estimated by Lessor on an annual basis, predicated on 100%
occupancy from the completion of the Building, are $ If during any calendar
year part of the Building is unoccupied, the ad valorem taxes shall be
adjusted so as to reflect costs as though fully occupied, and any rental
adjustment shall be based upon ad valorem taxes so adjusted.
f. Hazard insurance premiums shall include all casualty, liability,
workmen's compensation, and rental insurance premiums, applicable to
the Building and to Lessor's personal property as used in connection
therewith. The combined insurance premiums, on Building
predicated on 100% occupancy from are estimated by
Lessor to be $ annually. If during any calendar year part of the
Building is unoccupied, the combined insurance premiums shall be adjusted
so as to reflect costs as though fully occupied, and any rental adjustment
shall be based upon combined insurance premiums so adjusted.
g. Lessor will determine on a monthly basis whether the Building
Operating Costs will result in an increase on an annual basis over the
annual Building Operating Costs estimates contained in Paragraph.
Lessor will invoice Lessee for its prorata share on or about the first day
of the first calendar month following the determination of Building
Operating Costs increases. Lessee shall pay to Lessor, in addition to
the monthly rent, as stipulated in Paragraph . the amount of said
invoice, and shall continue to make said adjusted rental payments on
the first day of each succeeding month until or unless Lessor invoices
Lessee for subsequent changes in Building Operating Costs. Within
ninety (90) days of the end of each calendar year, Lessor shall
compute Lessee's annual prorata share of the Building Operating
Costs to determine if Lessee has made any overpayment. Any credit
owing Lessee shall be credited towards the next month's rental
adjustment becoming due, and the estimated monthly installment of
Building Operating Costs to be paid shall be adjusted to reflect
current Building Operating Costs. Any deficit owed by Lessee shall
be due and payable in full upon invoice by Lessor.
h. If during the term of Lessee's Lease Agreement, Lessor's costs
for ad valorem taxes or hazard insurance premiums increase over
the estimates contained in Paragraphs e and f, Lessor will invoice Lessee
for Lessee's prorata share of said increases. Payment of Lessee's prorata
share shall be due within thirty (30) days of receipt of invoice.
i. Lessee at his expense, shall have the right at all reasonable times
during the last week of any calendar month, to audit Lessor's books and
records relating to this Lease, for any year or years for which additional
rental payments became due for increases in Building Operating Costs, ad
valorem taxes, or hazard insurance premiums.
(2)
ESCALATION. As used in this Paragraph:
(a) "Index" shall mean the "Consumer Price Index for Urban Wage
Earners and Clerical Workers" 11(1967100)" specified for "All
Items." relating to and issued by the Bureau of Labor Statistics of
the United States Department of Labor. In the event the Index
shall hereafter be converted to a different standard reference base
or otherwise revised, the determination of the Percentage Increase
(defined below) shall be made with the use of such conversion factor,
formula or table for converting the Index as may be published by the
Bureau of Labor Statistics, or if said Bureau shall not publish the
same, then with the use of such conversion factor, formula or table
as may be published by Prentice Hall, Inc. or, failing such publication,
by any other nationally recognized publisher of similar statistical
information. In the event the Index shall cease to be published, then,
for the purposes of this Lease, there shall be substituted for the Index
such other index as Lessor and Lessee shall agree upon, and if, they
are unable to agree within ninety (90) days after the Index ceases to
be published, such matter shall be determined in
by arbitration in accordance with the rules of the American Arbitration
Association then obtaining.
(b) "Base Index" shall mean the Index in effect in December of 1978.
(c) "Anniversary Month" shall mean December of 1981 and each
succeeding December of each calendar year during any extensions,
if any, as herein above provided, of this Lease.
(d) "Percentage Increase or Decrease" shall mean the percentage equal
to the fraction the numerator of which shall be Index in the Anniversary
Month less the Base Index and the denominator of which shall be the
Base Index.
If the Index is any Anniversary Month exceeds the Base Index or shall be less
than the Base Index or the Index in the preceding Anniversary Month, then the
annual rental payable for the ensuing calendar year, and thereafter until a new
Index comparative statement is sent to Lessee, shall be increased ordecreased, as appropriate, by the Percentage Increase or Decrease. On or
before February 28 of each said ensuing calendar year, Lessor shall send
Lessee an Index comparative statement setting forth:
(a) the Index in the Anniversary Month preceding the date of the
statement;
(b) the Base Index;
(c) the Percentage Increase or Decrease; and
(d) the increase or decrease in the annual rental.
On the first day of the calendar month ("Current Month") first occurring at
least thirty (30) days following the receipt of the comparative statement by
Lessee (i) either Lessee shall pay to Lessor a sum equal to one-twelfth
(1/12th) of said increase in the annual rental multiplied by the number of
calendar months of the lease term then elapsed since January 1 or Lessee
shall receive a credit against the annual rental equal to one-twelfth (1/12th)
of any said decrease in the annual rental multiplied by the number of calendar
months of the lease term then elapsed since said January 1, whichever is
appropriate, and (ii) thereafter, commencing with the Current Month and
continuing monthly hereafter until a different Index comparative statement
is sent to Lessee, the monthly installments of rental shall be either
increased or decreased, as appropriate, by an amount equal to one twelfth
(1/12th) of said increase or decrease. Any rental credit shall be applied by
Lessee to the next ensuing rental payment or payments due to Lessor. In
the event the last-mentioned increased or decreased monthly installments
of rent shall continue beyond the end of the calendar year for which such
payments or credits were payable or chargeable, then any necessary
adjustments will be made with the next succeeding Index comparative
statement is sent to Lessee.
(3)
Tax and Operation Cost Escalation: Increase (if any) in ad valorem taxes
and operation costs during each year of the Lease term over and above
such costs for the calendar year of shall be borne by the Lessor, such
excess of cost shall be charged to the Lessee in the same ratio as space
occupied by the Lessee bears to the total rentable area of the Building.
"Operating Cost" shall be defined as the total of all expenses for operating
and maintaining the building including, but not limited to insurance, charges
of water, gas, and electricity and labor materials and supplies necessary for
the maintenance and operation of the Building. Such amounts due under the
terms of this paragraph shall be increased to the Lessee annually and shall
be paid to Lessor by Lessee within 15 days after the date of the invoice.
(4)
CHANGE IN REAL PROPERTY TAXES:
In the event the aggregate amount of real property taxes or assessments
(excluding special assessments for paving, water hydrant, and sewer) paid
by Lessor with respect to the building in which the premises are located and
the parking area servicing the building shall exceed in any lease year during
the term of this lease, or any extension period, the aggregate amount of such
taxes paid with respect to said building and land during the year in which the
tax assessment includes the land and the building as fully completed, Lessee
shall pay Lessor as additional rental a prorated share of such increase in
taxes in the ratio that the aggregate square feet of floor area of the premises
bears to the aggregate net rentable square feet of floor area in the building
(exclusive of basement area) in which the premises are located, which ratio is
( / or %). Lessee's prorated share of
such increased taxes for each applicable lease year shall be paid annually
upon presentation of an invoice by Lessor, together with documentation
substantiating the increase to the satisfaction of the Lessee. In no event
shall such tax escalation commence earlier than . If
the taxes for any fiscal tax year occurring after the base tax year are reduced
below the taxes for the base tax year, then Lessor will pay to Lessee the net
amount of such tax saving proportionately attributable to the payment made by
Lessee for the fiscal year for which the reduction is made, but the aggregate
of all such tax-saving payments by Lessor shall never exceed the aggregate
of all tax-increase payments made by Lessee and not theretofore refunded by
virtue of this paragraph. The expression "net amount of such tax saving"
means the net amount of the saving after deducting all expenses, if any, of
Lessor in achieving the saving, including counsel fees and fees of experts.
Lessor shall not be liable for escalation charges, for any year that Lessor
fails to submit a bill for such charges within six months of the end of the
year for which the escalation charge is applicable.
(5)
TAXES AND ASSESSMENTS: (Optional Clause - Tax Escalation)
Lessor shall pay, prior to delinquency, all real estate taxes, assessments,
and charges which are levied, imposed, or assessed upon or against the
leased premises. If Lessor shall fail to pay any such taxes, assessments,
or charges prior to delinquency, Lessee shall have the right to pay same
and to deduct from any rent which may then or thereafter be due all amounts
expended by Lessee in making such payment.
(b) That during the term of this lease, Lessee shall pay as additional
rental its pro rata share of any real estate tax (allocable to the land and
building of which the leased premises are a part) which is in excess of the
real estate tax imposed or assessed on the same land and building for the
base tax year. The base tax year shall be the calendar year of provided the
premises are then taxed and assessed as fully improved. In the event said
premises are not taxed and assessed as fully improved for the calendar year
of , then the base year shall be the next calendar year in which the
premises are so taxed and assessed as fully improved.
Lessee's obligation for payment of increased real estate tax as specified
herein shall be limited to such increases as are based on increased millage
or assessments on the land and building as existing during the base tax year.
Notwithstanding any provision herein contained to the contrary, Lessee shall
not be responsible for the payment of tax increases based upon increased
assessments for improvements which benefit the property, such as, but not
limited to, installation, paving or widening of streets or sidewalks,
installation of sewer or water lines; general renovation of the premises, etc.
Lessee's share of any increased real estate tax shall be due and payable 30
days after presentation of appropriate tax statements and substantiating tax
receipts by Lessor. If said tax reimbursement is not requested within one (1)
year from the date said tax is due, then Lessor shall have waived his right to
said reimbursement.
The Lessor shall promptly notify the Lessee of any increase or proposed
increase in real estate tax and assessment of which Lessor has knowledge,
Lessee shall have the right to contest by appropriate legal proceedings the
amount and validity of any tax assessment or charge which it is required to
pay under the terms of this section. Lessor shall, at the request of Lessee,
join or otherwise assist in any such proceeding. .
If, as a result of a decrease in the general millage or assessment, the real
estate tax allocable to the land and building of which the leased premises
are a part shall be less for any year during the term of this lease than the
amount of said tax for the base year, then Lessor shall remit to Lessee a
proportionate amount of any such decrease.
Lessee or Lessor, as appropriate, shall pay to the other any fractional part
of any applicable increase or decrease in real estate tax as provided in this
section for any period of this lease not constituting a full calendar year.
The Lessee's proportionate share of any increase or decrease in real estate
tax shall be that percentage derived by dividing the number of square
feet of rentable space leased by Lessee ( sq. ft.) by the total
number of square feet of rentable space in the building ( sq. ft.)
of which the leased premises are a part.
(6)
Change in Operating Expenses: The monthly operating expenses for the
premises during the year 19 are established at a figure of $
per lease year beginning with the lease year
and ending with the lease year ending
the monthly rent shall be increased by an amount equal to the product of
($ ) x the percentage amount by which the Consumer Price
Index, as published by the U.S. Department of Labor Statistics, for the
previous lease year ( ) shall exceed the Consumer Price
Index for the lease year ending ( ).
(7)
INSURANCE: (Second Optional Clause - Insurance Escalation)
(a) Lessor shall procure and maintain all insurance which it
deems necessary for its protection against loss of or damage to the leased
premises or any other property of Lessor situated thereon.
(b) Lessee shall procure and maintain all insurance which it
deems necessary for its protection against loss of or damage to any of its
property situated on the leased premises.
(c) Nothing contained in this lease shall be construed to
require either party to repair, replace, reconstruct, or pay for any property
of the other party which may be damaged or destroyed by fire, flood,
windstorm, earthquake, strikes, riots, civil commotions, acts of public
enemy, acts of God, or other casualty, and each party hereby waives on
behalf of itself and its insurer all rights of subrogation and all claims
against the other for all loss or damage arising out of perils normally
insured against by standard fire and extended coverage insurance.
(d) That during the term of this lease, Lessee shall pay as
additional rental, its prorata share of the amount of any increase in
premiums for Lessor's policy of (public liability insurance) (business
interruption insurance )(boiler insurance) (Plate glass insurance) fire and
extended coverage insurance covering % of the replacement cost of
the building of which the leased premises are a part) over and above such
premiums paid by Lessor during the first full year of the term of this lease
(base year) in which Lessor shall have maintained such coverage, provided
that the building is insured as fully improved and ready for occupancy.
In the event the building is not insured as fully improved and ready for
occupancy, the base year of insurance shall be the next full lease in which
the building shall be insured as fully improved and ready for occupancy.
Such increase shall be due and payable to Lessor only if such increase in
premium is due directly as a result of the nature of Lessee's use or
occupancy of the leased premises, any act or omission of Lessee directly
resulting in increased premium, requirements of the holder of a mortgage or
deed of trust covering the premises, or increased valuation of the premises.
Lessee shall not be required to pay any increases in premium which are the
result of the nature of use or occupancy of other parts of the building by other
tenants. Lessor shall insure the building with consistent amounts and types
of insurance from year to year with a reputable insurance company licensed
to do business in the State of .
The Lessee's proportionate share of any increase in insurance premium shall
be that percentage ( %) derived by dividing the number of square feet of
rentable space leased by Lessee ( sq. ft.) by the total number
of square feet in the building ( sq. ft.) of which the leased
premises are a part.
Lessee shall pay such increases in premium to Lessor within thirty (30) days
after receipt by Lessee of a copy of the premium statement and a statement
by Lessor explaining in reasonable detail the reason for such increase.
Lessor shall also submit to Lessee a copy of said insurance policy on written
request. If the insurance policies maintained by Lessor cover other buildings
or other parts of the building in which the leased premises are located, Lessor
shall also deliver to Lessee a statement of the amount of such increases
attributable solely to the leased premises and showing in reasonable detail
the manner in which such amount was computed. If the term of this lease
shall not expire concurrently with the expiration of the period covered by such
insurance, Lessee's liability for the payment of premium increases shall be
prorated according to the period for which the premium installments are due.
If said insurance premium reimbursement is not requested by Lessor within
one (1) year from the date of the statement for the increased premium, then
Lessor shall have waived his right to said insurance reimbursement.
(8)
FOR INFORMATION ONLY
THE INFAMOUS PENNY ESCALATION CLAUSE - DO NOT USE
Rider attached to and forming a part of lease, dated by
and between ,
Lessor, and , Lessee.
RENTAL ADJUSTMENT - JANITORIAL WAGES RATE
The demised premises covered by this lease contain approximately
square feet of gross area which shall be the square footage basis of
this agreement.
The present hourly wage and fringe benefits paid to janitorial labor engaged
in the maintenance of the Building is .
It is agreed by and between the parties hereto that if during the term of this
lease there shall be an increase or decrease in said hourly wage and fringe
benefits then the rental rate shall increase or decrease in the amount equal
to 1.5 cents per square foot for each 1 cent per hour increase or reduction in
hourly wages and fringe benefits paid to said employees.
Employees as described in this paragraph, shall be those whose hours and
working conditions are controlled by agreements with labor unions.
The readjustment shall not be made oftener than on successive anniversary
date of the lease.
IN WITNESS WHEREOF, the parties hereto have caused this Rider to
be executed this day of .
LESSOR: LESSEE:
BY By
See also "Taxes and Assessments" and
"Utilities and Services" for clauses relating to escalation.
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