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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to __________________
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Commission File Number:
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<S> <C>
UNIVERSAL ACCESS, INC. 36-4186543
(Exact name of registrant as specified in its charter) (I.R.S. Employer Identification No.)
</TABLE>
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DELAWARE 60606
(State or other jurisdiction of incorporation or organization) (Zip Code)
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100 N. RIVERSIDE PLAZA, SUITE 2200
CHICAGO, ILLINOIS
(Address of principal executive offices)
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(312) 660-5000
(Registrant's telephone number, including area code)
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes No X
The number of shares outstanding of the issuer's common stock, par value $0.01,
as of April 30, 2000 was 89,134,906 shares.
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UNIVERSAL ACCESS, INC.
FORM 10-Q
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets at December 31, 1999
and March 31, 2000 (Unaudited) 3
Condensed Consolidated Statements of Operations for the
Three Months Ended March 31, 1999 and 2000 (Unaudited) 4
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1999 and 2000 (Unaudited) 5
Notes to Condensed Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8-22
Item 3. Quantitative and Qualitative Disclosures about Market Risk 22
PART II
OTHER INFORMATION
Item 1. Legal Proceedings 23
Item 2. Changes in Securities and Use of Proceeds 23
Item 4. Submission of Matters to a Vote of Security Holders 24
Item 6. Exhibits and Reports on Form 8-K 25-26
Signatures 27
2
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PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNIVERSAL ACCESS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
Dec. 31, March 31,
ASSETS 1999 2000
----------- ----------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 38,024 $ 172,859
Investments - 14,309
Accounts receivable, less allowances for doubtful accounts of $649 and $750, respectively 2,996 3,921
Prepaid expenses and other current assets 1,900 2,128
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Total current assets 42,920 193,217
Restricted cash - 1,850
Property and equipment, net 18,888 25,054
Intangible assets, net 2,457 2,321
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Total assets $ 64,265 $ 222,442
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 5,174 $ 8,283
Unearned revenue 2,113 2,606
Notes payable 1,019 977
Other liabilities 1,277 1,093
-------- ---------
Total current liabilities 9,583 12,959
Notes payable 2,246 2,012
Other liabilities 394 342
-------- ---------
Total liabilities 12,223 15,313
Commitments and contingencies (Note 5)
Stockholders' equity:
Series A Cumulative Convertible, $.01 par value; 1,000,000 shares authorized; 772,331 shares
issued and outstanding plus accrued dividends of $196 (liquidation value of $2,208) 2,208 --
Series A warrants 83 --
Series B Cumulative Convertible, $.01 par value; 2,400,000 shares authorized; 2,233,335 shares
issued and outstanding plus accrued dividends of $298 (liquidation value of $5,531) 5,531 --
Series B warrants 500 --
Series C Convertible, $.01 par value; 667,000 shares authorized; 666,667 shares
issued and outstanding (liquidation value of $1,941) 1,941 --
Series D Cumulative Convertible, $.01 par value; 7,058,823 shares authorized; 6,042,697 shares
issued and outstanding plus accrued dividends of $663 (liquidation value of $26,220) 27,102 --
Series E Cumulative Convertible, $.01 par value; 1,597,386 shares authorized; 1,557,385 shares
issued and outstanding plus accrued dividends of $50 (liquidation value of $27,954) 27,954 --
Series E warrants 136 --
Common stock, $.01 par value; 300,000,000 shares authorized; 31,975,021 and 89,069,716 shares
issued and outstanding 320 891
Common stock warrants 13 636
Additional paid-in-capital 22,930 249,349
Deferred stock option plan compensation (11,909) (11,070)
Accumulated deficit (23,039) (30,923)
Notes receivable - employees (1,728) (1,754)
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Total stockholders' equity 52,042 207,129
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Total liabilities and stockholders' equity $ 64,265 $ 222,442
======== =========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
3
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UNIVERSAL ACCESS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share data)
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<CAPTION>
Three Months Ended
March 31,
--------------------
1999 2000
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<S> <C> <C>
Revenues $ 1,531 $ 7,335
Costs and expenses:
Cost of revenues 1,285 5,926
Operations & administration (excluding stock option plan compensation) 1,175 9,740
Operations & administration (stock option plan compensation) 95 840
Depreciation & amortization 25 566
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Total costs and expenses 2,580 17,072
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Operating loss (1,049) (9,737)
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Other income (expense), net (2) 663
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Net loss (1,051) (9,074)
Accretion and dividends on redeemable and nonredeemable cumulative
convertible preferred stock (142) -
------- -------
Net loss applicable to common stockholders $(1,193) $(9,074)
======= =======
Basic and diluted net loss per share $ (0.04) $ (0.22)
Shares used in computing basic and diluted net loss per share 30,600 41,097
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
4
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UNIVERSAL ACCESS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
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<CAPTION>
Three Months Ended
March 31,
------------------------
1999 2000
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash used for operating activities $ (1,571) $ (7,137)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of UTX costs -- (3,542)
Purchase of Non-UTX costs (68) (1,340)
Purchase of short-term investments -- (14,309)
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Net cash used for investing activities (68) (19,191)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt issuance 600 --
Debt repayments (141) (333)
Restricted cash balance -- (1,850)
Proceeds from issuance of common stock -- 163,346
Proceeds from issuance of preferred stock and preferred stock warrants 5,878 --
Other 28 --
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Net cash provided by financing activities 6,365 161,163
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Net increase in cash and cash equivalents 4,726 134,835
Cash and cash equivalents, beginning of period 844 38,024
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Cash and cash equivalents, end of period $ 5,570 $ 172,859
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
5
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UNIVERSAL ACCESS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared by Universal Access, Inc. and its subsidiaries, Universal Access
of Virginia, Inc. and Universal Access Bermuda, Ltd., ("the Company" or "we")
without audit and reflect all adjustments, consisting only of normal recurring
adjustments, which in the opinion of management are necessary to present fairly
the financial position and the results of operations for the interim periods.
The statements have been prepared in accordance with the rules and regulations
of the Securities and Exchange Commission ("SEC"). Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted
pursuant to such rules and regulations. These statements should be read in
conjunction with the Financial Statements and Notes thereto included in the
Company's Registration Statement on Form S-1, as amended, filed with the SEC on
March 16, 2000. Results for fiscal 2000 interim periods are not necessarily
indicative of results to be expected for the fiscal year ending December 31,
2000.
RECENTLY ISSUED ACCOUNTING STANDARDS
In December 1999, the SEC issued SAB 101, which speaks to revenue
recognition. In March 2000, the SEC issued 101A, which delays the effective
date of SAB 101 until April 1, 2000. The Company has evaluated the impact of
SAB 101 and determined that it will not have a material impact.
NOTE 2 - INITIAL PUBLIC OFFERING AND COMMON STOCK
On March 17, 2000, the Company completed its initial public offering
("IPO") of common stock that resulted in the issuance of 12,650,000 shares at a
price to the public of $14.00 per share. This offering resulted in net proceeds
of $162,361,000 after deducting an underwriting discount of $12,397,000 and
offering expenses such as legal and accounting fees, printing costs and SEC
registration fees of approximately $2,342,000. Upon the closing of the IPO, all
outstanding preferred stock automatically converted to shares of common stock as
follows:
Series A Cumulative Convertible Preferred Stock 5,097,384
Series B Cumulative Convertible Preferred Stock 13,400,010
Series C Convertible Preferred Stock 2,000,001
Series D Cumulative Convertible Preferred Stock 18,128,091
Series E Cumulative Convertible Preferred Stock 4,672,155
Additionally, upon closing of the IPO, all outstanding preferred stock
warrants to purchase 166,667 shares of Series B Cumulative Convertible
Preferred Stock and 40,000 shares of Series E Cumulative Convertible
Preferred Stock converted into warrants to purchase 1,000,002 and 120,000
shares of common stock, respectively.
During February and March 2000, and prior to the IPO, 360,000 common
stock warrants were exercised. During the same period, 77,233 warrants to
purchase Series A Cumulative Convertible Preferred Stock were exercised and
were subsequently converted into 463,398 shares of common stock upon the IPO
date.
NOTE 3 - INVESTMENTS
The Company's short-term investments have original maturities of between
three and six months, are classified as held-to-maturity and are stated at
amortized cost. The Company had no such investments at December 31, 1999.
Investments consist of the following at March 31, 2000, (in thousands):
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Commercial paper $ 9,309
Time deposits 5,000
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Total investments $14,309
======
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6
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NOTE 4 -- PROPERTY AND EQUIPMENT, NET
Property and equipment consists of the following, stated at cost, at
December 31, 1999 and March 31, 2000, respectively (in thousands):
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<CAPTION>
1999 2000
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<S> <C> <C>
Furniture and fixtures $ 885 $ 1,488
UTX costs 3,974 4,332
Computer hardware and software 2,453 4,885
Other equipment 56 77
Construction in progress 12,260 15,444
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19,628 26,226
Less: Accumulated depreciation and amortization (740) (1,172)
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Property and equipment, net $18,888 $ 25,054
======= ========
</TABLE>
Construction in progress primarily relates to costs incurred during the
expansion of the Company's Universal Transport Exchange ("UTX") facilities.
NOTE 5 -- COMMITMENTS AND CONTINGENCIES
The Company leases UTX facilities, office facilities and certain equipment
over periods ranging from two to fifteen years. During the quarter ended March
31, 2000, the Company entered into a significant new lease agreement for its
corporate headquarters located in Chicago, Illinois. Future rentals for
operating leases are as follows at March 31, 2000 (in thousands):
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<S> <C> <C>
2000 $ 4,339
2001 6,869
2002 7,057
2003 7,242
2004 7,482
Thereafter 54,994
---------
Total minimum lease payments $ 87,983
=========
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The Company leases certain equipment under capital leasing arrangements
with periods ranging from two to five years. Additionally, the Company has
entered into non-cancelable agreements with various telecommunications vendors
to purchase minimum amounts of network services on a monthly basis. There were
no material changes in these commitments from amounts reported at December 31,
1999.
The Company is a party to certain litigation for which the claimants are
seeking damages in excess of $10,000,000. The litigation arose out of a letter
of intent that the Company entered into in December 1998 relating to the
Company's potential acquisition of a business. In the opinion of management,
such litigation is without merit and will not have a material adverse effect on
the operations or financial condition of the Company. Accordingly, no amount has
been accrued as a liability as of December 31, 1999 and March 31, 2000.
The Company is involved in various other legal matters in the ordinary
course of business. In the opinion of management, the ultimate resolution of
these matters will not have a material adverse impact on the Company's financial
position, results of operations or cash flows.
NOTE 6 - NET LOSS PER SHARE
Basic and diluted net loss per share has been computed by dividing the net
loss applicable to common stockholders by the weighted average number of shares
of common stock outstanding. Basic and diluted net loss per share for the
quarters ended March 31, 1999 and March 31, 2000 do not include the effect of 0
and 1,120,002 warrants to purchase shares of common stock or options to purchase
2,304,000 and 11,892,979 shares of common stock, respectively, as their effect
would be antidilutive. Basic and diluted net loss per share for the quarter
ended March 31, 1999 also do not include the effect of preferred stock and
preferred stock warrants that were convertible into 2,316,990 shares of common
stock and 231,699 common stock warrants, as their effect would also have been
antidilutive.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information in this discussion contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. Such
statements are based upon current expectations that involve risks and
uncertainties. Any statements contained herein that are not statements of
historical facts may be deemed to be forward-looking statements. For example,
words such as "may", "will", "should", "estimates", "predicts", "potential",
"continue", "strategy", "believes", "anticipates", "plans", "expects",
"intends", and similar expressions are intended to identify forward-looking
statements. Our actual results and the timing of certain events may differ
significantly from the results discussed in the forward-looking statements.
Factors that might cause or contribute to such a discrepancy include, but are
not limited to, those discussed under the heading "Factors That May Affect
Future Results."
OVERVIEW
We commenced operations on October 2, 1997 for the purpose of facilitating
the provisioning, installation and servicing of dedicated communications
circuits for service providers who buy network capacity and transport suppliers
who sell network capacity. To date, we have derived substantially all of our
revenues from providing ongoing, dedicated circuit access. Monthly recurring
circuit revenues are generated under client contracts with terms ranging from 12
to 60 months. Contracts with our clients may be terminated by the client at any
time, subject to additional payments. Circuit charges are billed monthly in
advance, and circuit revenues are recognized in the month that service is
provided. Amounts billed in advance are recorded on the balance sheet as
accounts receivable and unearned revenue. At March 31, 2000, unearned revenue
was $2.6 million.
Additionally, monthly recurring UTX revenues are generated from leasing
space in our UTX facilities. Our UTX billing and revenue recognition policies
are the same as those described above for circuits. To date, we have not charged
our clients for provisioning, installation or network management services.
At April 30, 2000, we had seven completed UTX facilities, two of which had
been placed into operations. In addition to the seven constructed UTX
facilities, we expect to complete construction of eight additional facilities
during the remainder of 2000, for a total of 15 UTX facilities. Construction,
equipment and facility leasing costs incurred in connection with the
construction of a UTX facility are capitalized until the facility is placed into
operations. Once the facility is placed into operations, these costs are
amortized over the lesser of the term of the lease, ranging from seven to 15
years, or the estimated useful life of the equipment. At March 31, 2000, for the
15 facilities, we had capitalized UTX construction costs of $15.4 million,
outstanding commitments of approximately $12.3 million and facility costs of
approximately $32.5 million.
Our clients are communications service providers and transport suppliers,
such as Internet service providers, competitive local exchange carriers,
incumbent telecommunication service providers and other application and network
service providers. Our largest client represented approximately 18% of total
revenues for the quarter ended March 31, 1999. Our largest two clients
represented approximately 47% of total revenues for the quarter ended March 31,
2000.
To date, cost of revenues primarily consist of amounts paid to transport
suppliers for circuits. We have negotiated volume discounts and network
route-specific discounts under contracts with the majority of our suppliers.
These contracts generally have terms ranging from three to ten years and include
minimum monthly purchase commitments that begin anywhere from six to twelve
months after we enter into the contract. At March 31, 2000, these minimum
purchase commitments totaled approximately $500,000 per month. However, actual
purchases, which totaled approximately $5.9 million, have exceeded these minimum
purchase commitments for the quarter ended March 31, 2000. In addition, we are
party to contracts that will impose additional minimum purchase commitments that
we anticipate will total approximately $1.6 million per month by September 2000.
Operations and administration costs consist of salaries and employee
benefits, costs associated with the development, expansion and maintenance of
our Universal Information Exchange ("UIX") databases, and costs associated with
sales, marketing, operations, administration and facilities. During the period
ended March 31, 2000, we entered into lease agreements for our new corporate
office headquarters in Chicago, Illinois, and a new sales office in Herndon,
Virginia.
In each quarter since our inception, we have incurred operating losses and
net losses, and experienced negative cash flows from operations. At March 31,
2000, we had an accumulated deficit of $30.9 million.
8
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Three Months Ended
March 31,
-------------------------------------
(in thousands, expect per share data)
1999 2000
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<S> <C> <C>
Net loss $(1,051) $ (9,074)
Dividends on redeemable and nonredeemable cumulative convertible
preferred stock (142) -
------- --------
Net loss applicable to common stockholders $(1,193) $ (9,074)
======= ========
Basic and diluted net loss per share $ (0.04) $ (0.22)
Basic and diluted net loss per share (excluding non-cash stock option
compensation expense) $ (0.04) $ (0.20)
Shares used in computing net loss per share 30,600 41,097
</TABLE>
RESULTS OF OPERATIONS
COMPARISON OF QUARTER ENDED MARCH 31, 1999 TO QUARTER ENDED MARCH 31, 2000
REVENUES
Revenues increased from $1.5 million for the quarter ended March 31, 1999
to $7.3 million for the quarter ended March 31, 2000. Substantially all of our
revenues consisted of circuit revenues in each of these periods. UTX revenues
represented less than 1% of revenues for the quarter ended March 31, 1999 and 4%
of revenues for the quarter ended March 31, 2000. Revenues derived from the
operations acquired during 1999 from Pacific Crest Networks, Inc. and Stuff
Software, Inc. represented 4.5% of revenues for the quarter ended March 31,
2000. The increase in revenues was primarily attributable to an increase in the
volume of circuits sold due to an increase in the number of clients and
additional sales to existing clients.
COST OF REVENUES
Cost of revenues increased from $1.3 million for the quarter ended March
31, 1999 to $5.9 million for the quarter ended March 31, 2000. Substantially all
of our cost of revenues consisted of circuit access costs in each of these
periods. As a percentage of total revenues, cost of revenues decreased from 84%
for the quarter ended March 31, 1999 to 81% for the quarter ended March 31,
2000. The increase in cost of revenues in absolute dollars was primarily
attributable to an increase in the volume of circuits sold due to an increase in
the number of clients and additional sales to existing clients. The decrease in
cost of revenues as a percentage of total revenues was primarily attributable to
the high margin revenues from the acquired operations of Pacific Crest Networks,
Inc. and Stuff Software, Inc. as well as from volume pricing efficiencies on
circuit access costs.
OPERATIONS AND ADMINISTRATION (EXCLUDING STOCK OPTION PLAN COMPENSATION)
Operations and administration expenses increased $8.5 million from $1.2
million to $9.7 million in the quarters ending March 31, 1999 and 2000,
respectively. This increase was primarily attributable to significant increases
in personnel, continued expansion of our UIX databases and the build-out of our
corporate infrastructure, including facilities, sales and marketing.
The number of employees increased from 29 at March 31, 1999 to 251 at
March 31, 2000. The cost of UIX development personnel as well as
non-capitalized development costs associated with the UIX increased $367,000
for the quarter ended March 31, 2000 as compared to March 31, 1999.
Facilities costs, including rent and utilities for corporate offices and
sales offices increased $726,000 for the quarter ended March 31, 2000 as
compared to March 31, 1999. Finally, sales and marketing costs for
tradeshows, advertising and promotions increased $830,000 for the quarter
ended March 31, 2000.
We expect total operations and adminstration expenses to continue to
increase in both absolute dollars and as a percentage of revenue as we continue
to increase personnel, expand the UIX databases and build-out corporate
infrastructure. Ultimately, we expect operations and administration expense to
significantly decrease as a percentage of revenue as we fully leverage our
operating systems, our UIX databases and our infrastructure.
9
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OPERATIONS AND ADMINISTRATION (STOCK OPTION PLAN COMPENSATION)
During fiscal years 1998 and 1999, we granted stock options to employees
and non-employees with per share exercise prices deemed to be below the fair
market value of our common stock at the date of grant. These stock option
issuances have resulted in stock option plan compensation charges, which are
initially deferred and subsequently amortized over the vesting period of the
related options. Amortization expense totaled $95,000 for the quarter ended
March 31, 1999 and $840,000 for the quarter ended March 31, 2000. The
substantial increase in stock option plan compensation charges between periods
primarily relates to the increase in stock options outstanding from 2,304,000 at
March 31, 1999 to 11,892,979 at March 31, 2000. We expect to recognize
additional stock option plan compensation charges of approximately $2.6 million
for the remainder of fiscal 2000 and $8.5 million over the next four years as
these options vest.
DEPRECIATION AND AMORTIZATION
Depreciation expense includes depreciation of furniture, fixtures and
equipment at our office facilities and of equipment at our UTX facilities. We
expect depreciation expense to increase substantially in the future as we
continue to place our UTX facilities into service.
Amortization expense relates to intangible assets acquired in connection
with the purchases of Pacific Crest Networks, Inc. and Stuff Software, Inc. in
July 1999 and November 1999, respectively.
OTHER INCOME (EXPENSE)
Other income increased to $663,000 for the quarter ended March 31, 2000.
The increase was attributable to our investment of substantially all of the
proceeds from our issuance of Series E Cumulative Convertible Preferred Stock
offering as well as the proceeds from our public stock offering, in cash
equivalents with original maturities of less than three months and marketable
securities with original maturities of between three to six months. Interest
income for the quarter ended March 31, 2000 was partially offset by interest
expense on notes payable and capital lease obligations.
INCOME TAXES
From our inception through September 27, 1998, we elected to be treated as
a subchapter S-corporation for income tax purposes. On September 27, 1998, we
converted to a C-corporation. At December 31, 1999, we had approximately
$10,091,000 of federal and state net operating loss carryforwards. These
carryforwards may be available to offset future taxable income. Our federal and
state net operating loss carryforwards expire at various dates beginning in
2018. Due to the uncertainty that we will generate future earnings sufficient to
enable us to realize the benefit of these net operating loss carryforwards, we
have recorded a valuation allowance for the full amount of our deferred tax
asset. As a result, no income tax benefit has been recorded in our statement of
operations. We assess the realizability of our deferred tax asset on an ongoing
basis and adjust the valuation allowance based on this assessment. Additionally,
Section 382 of the Internal Revenue Code of 1986, as amended, imposes annual
limitations on the use of net operating loss carryforwards if there is a change
in ownership, as defined, within any three year period. The utilization of
certain net operating loss carryforwards may be limited due to our capital stock
transactions.
LIQUIDITY AND CAPITAL RESOURCES
On March 17, 2000, we completed an initial public offering of our common
stock that resulted in the issuance of 12,650,000 shares of common stock at an
offering price of $14.00 per share. Net proceeds related to this offering
totaled $162.4 million. Until the time of our initial public offering, we had
financed our operations primarily through private placements as well as through
borrowings from stockholders and financial institutions. Since inception through
December 31, 1999, we have raised $63.4 million in capital through private
placements of common and convertible preferred stock and common and preferred
stock warrants. Our principal uses of cash are to fund operating losses, working
capital requirements and capital expenditures. At March 31, 2000, we had $172.9
million in cash and cash equivalents and $14.3 million in short-term
investments with original maturities of six months or less.
In March 2000, we entered into a lease commitment for office space located
in Chicago, Illinois which will serve as our new corporate headquarters. This
commitment will result in lease payments of $1.3 million during fiscal 2000 and
an additional $3.4 million of annual lease payments through July 2012.
10
<PAGE>
In March 1999, we entered into a credit agreement with a bank under which
we may request the bank to issue letters of credit or we may borrow up to a
total of $4.0 million. The agreement provides that outstanding borrowings bear
interest at the bank's prime rate. This agreement expired in April 2000 and we
do not intend to renew this line of credit. The collateral cash balance in the
amount of our outstanding letters of credit of $500,000 were outstanding as of
March 31, 2000.
In September 1999, we entered into a credit agreement with a bank under
which we may request the bank to issue letters of credit or we may borrow up
to a total of $6.0 million. The agreement expires in August 2000. Outstanding
borrowings under the agreement bear interest at the bank's prime rate and are
secured by substantially all of our assets. The agreement requires that we
maintain a cash balance in a custodial account in an amount equal to the
amount by which the borrowings and letters of credit outstanding exceed $3.0
million. The agreement requires that we maintain specified debt to tangible
net worth and quick ratios. We were in compliance with both ratios at March
31, 2000. Letters of credit totaling $4.85 million were outstanding under the
agreement as of March 31, 2000 and a $1.85 million cash balance was in a
custodial account as of March 31, 2000.
In December 1999, we entered into a credit agreement with a bank and
borrowed $3.3 million. Outstanding borrowings bear interest at approximately 15%
and are secured by specifically identified assets. The agreement expires in
November 2002 and requires that we maintain an unrestricted cash balance of at
least $15.0 million. As of March 31, 2000, the outstanding balance of this loan
was $3.0 million.
Net cash used in operating activities increased from $1.6 million for the
quarter ended March 31, 1999 to $7.1 million for the quarter ended March 31,
2000. The increase in net cash used was primarily due to increased net losses,
partially offset by increases in non-cash stock option compensation charges. We
anticipate that we will continue to require cash to support our future operating
activities.
Net cash used in investing activities increased from $68,000 for the
quarter ended March 31, 1999 to $19.2 million for the quarter ended March 31,
2000. The increase in net cash used in investing activities relates to the
purchases of property and equipment, primarily for the construction of our
UTX facilities, and short-term investments. We expect to substantially
increase our investments in equipment in the near term as we increase our
number of UTX facilities.
At April 30, 2000 we had seven completed UTX facilities, two of which had
been placed into operations. In addition to these facilities we intend to
complete construction on eight additional facilities during the remainder of
2000, for a total of 15 UTX facilities.
We plan to spend approximately $45.1 million on capital expenditures for
the remainder of 2000, $25.6 million on the construction of eight additional
facilities, approximately $12.0 million for the expansion of corporate
facilities and the remainder of which will be used to fund the build-out of our
corporate infrastructure. We will use part of the proceeds from our public stock
offering for these capital expenditures.
Net cash provided by financing activities increased from $6.4 million for
the quarter ended March 31, 1999 to $161.2 million for the quarter ended March
31, 2000. The increase was primarily due to the receipt of net proceeds of
$162.4 million from the public issuance of our common stock on March 17, 2000.
We have invested these proceeds primarily in cash equivalents, with original
maturities of less than 3 months and marketable securities, with
original maturities of between three and six months. We intend to continue
investing surplus cash in similar securities.
Our future capital requirements will depend on a number of factors,
including market acceptance of our services, the resources we devote to
developing, selling and marketing our services and the rate at which we expand
our UTX facilities. In addition, we plan to continue to evaluate possible
investments in complementary businesses, products and technologies. Although we
believe that the net proceeds from this offering, together with existing cash
balances, will be sufficient to fund our operations for at least the next twelve
months, we may require additional financing within this time frame. Additional
funding may not be available on terms acceptable to us, or at all.
FACTORS THAT MAY AFFECT FUTURE RESULTS
In addition to the factors discussed elsewhere in this Form 10-Q and the
Company's other reports filed with the SEC, the following are important
factors which could cause actual results or events to differ materially from
those contained in any forward-looking statements made by or on behalf of the
Company.
WE HAVE INCURRED SUBSTANTIAL LOSSES SINCE OUR INCEPTION, AND IF WE FAIL TO
INCREASE OUR REVENUES, WE WILL BE UNABLE TO ACHIEVE AND MAINTAIN PROFITABILITY.
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We have incurred significant losses since inception and expect to continue
to incur losses in the future. As of March 31, 2000, we had an accumulated
deficit of $30.9 million. Although our revenues have grown from $1.5 million in
the quarter ended March 31, 1999 to $7.3 million in the quarter ended March 31,
2000, we cannot be certain that our revenues will continue to grow, or that we
will achieve sufficient revenues to achieve profitability. We expect to continue
to incur significant and increasing expenses in order to:
o expand sales and marketing activities to increase market acceptance;
o expand our operational activities to further develop our business
model;
o expand our administrative organization to support the anticipated
growth of our business;
o expand and enhance our UIX databases; and
o build out our UTX facilities.
As a result, we will need to generate significantly higher revenues to achieve
and maintain profitability. If we fail to generate higher revenues, we may
continue to incur operating losses and net losses.
OUR LIMITED OPERATING HISTORY MAKES FORECASTING DIFFICULT.
We have a limited operating history and, therefore, limited meaningful
historical financial data upon which to base our planned operating expenses.
Specifically, our UTX business model is relatively new, and we have not operated
our UIX databases in conjunction with our UTX facilities long enough to
accurately predict trends in our business. Moreover, we have not built out
enough UTX facilities to be able to test whether our strategy to utilize these
facilities will work. Accordingly, we are subject to all of the risks that are
associated with companies in an emerging industry and in an early stage of
development, including:
o undercapitalization;
o cash shortages;
o the unproven nature of our business model;
o the new and unproven nature of the market for our services;
o the need to make significant expenditures and incur significant
expenses as we develop our business, infrastructure and operations;
o the lack of sufficient clients and revenues to sustain our operations
and growth without additional financing;
o difficulties in managing growth; and
o limited experience in providing some of the services that we offer or
plan to offer.
For example, from time to time we enter into long-term agreements with
communications transport suppliers for the supply and installation of
communications network capacity. These agreements generally provide for monthly
minimum revenue commitments from us, which we must negotiate based on forecasts
of our future network capacity requirements. As of March 31, 2000, we were party
to contracts that will impose minimum purchase commitments that we anticipate
will total approximately $1.6 million per month by September 2000. If we fail to
forecast our network capacity requirements accurately or fail to accurately
forecast other aspects of our business, it will be difficult for us to become
profitable.
WE HAVE AN UNPROVEN BUSINESS MODEL, AND WE CANNOT BE SURE THAT CLIENTS WILL
WIDELY ACCEPT OUR SERVICES.
Our business strategy is unproven. To be successful, we must convince
prospective clients to entrust their network capacity data and transport
requirements to a company without a long and proven track record. We are not
aware of any companies that have a directly comparable business, and we cannot
be sure that clients will widely accept our services.
Our ability to expand our client base may be limited by the following
factors:
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o the speed, reliability and cost effectiveness of our services;
o the willingness of clients to outsource the obtaining of circuits;
o our ability to market our services effectively; and
o the growth of the Internet.
We may not be able to execute our business model if the markets for our services
fail to develop or grow more slowly than anticipated, if competitors enter the
market or if we are unable to expand our client base.
OUR ABILITY TO IMPLEMENT AND MAINTAIN OUR UIX DATABASES IS UNPROVEN. IF WE
CANNOT INCREASE THE SCOPE AND ACCURACY OF THESE DATABASES AS PLANNED, OUR
ABILITY TO COST-EFFECTIVELY FACILITATE THE OBTAINING OF CIRCUITS FOR OUR CLIENTS
WILL BE AT RISK.
To be successful, we must increase and update information about pricing,
capacity, availability and location of circuits contained in our databases. Our
ability to cost effectively facilitate the supplying of circuits and to provide
ongoing dedicated line circuit access depends upon the information we collect
from our transport suppliers regarding their networks, which we include in our
UIX databases. Our suppliers are not obligated to provide us with this
information and could decide to stop providing this information to us at any
time. Moreover, we cannot be certain that the information that our suppliers
share with us is completely accurate or current. If we cannot continue to
maintain and expand our UIX databases as planned, we may be unable to increase
our revenues or to cost-effectively facilitate the supplying of the circuits,
and we may never achieve profitability.
THE MARKET FOR OUR UTX SERVICES IS NEW AND UNPROVEN, AND WE HAVE LIMITED
EXPERIENCE PROVIDING OUR UTX SERVICES.
The market for our UTX services is new and unproven. Our ability to
generate revenues will suffer if the market for these services fails to develop,
or develops more slowly than we expect. The growth of this market depends on
several uncertain events or occurrences including:
o our ability to remain a neutral intermediary between transport
suppliers and the willingness of these suppliers to install their
equipment in our UTX facilities;
o our ability to successfully and cost-effectively market our services
to a sufficiently large number of clients; and
o the increased need for high speed communications network services.
To date, we have derived substantially all of our revenues from providing
on-going circuit access, and we have only limited experience providing our UTX
services. At April 30, 2000, we had operational UTX facilities in Chicago and
Santa Clara, and completed UTX sites in San Francisco, Los Angeles, Miami,
Dallas and Washington, D.C. and seven UTX clients. However, these clients may
terminate their UTX contracts at any time, and our ability to generate revenues
will suffer if we fail to maintain our existing clients and to attract new
clients for our UTX services.
One of our key strategies is to expand our business by opening
additional UTX facilities in geographically diverse locations. In addition to
our seven completed or operational UTX facilities, we expect to construct
eight additional UTX facilities in the United States during the remainder of
2000, for a total of 15 completed UTX sites. Construction of UTX facilities
is expensive and time-consuming and will cause a significant strain on the
capital resources and operation of our business. If we are unable to generate
sufficient cash flows or raise sufficient funds, we may have to delay or
abandon some or all of our development and expansion plans. A delay in the
expansion of our UTX facilities may make it more difficult for us to respond
to competitive pressures and establish our presence in the market.
It usually takes us at least six months to select an appropriate location
for a new UTX facility, construct the facility, install equipment and
communications network infrastructure and hire operations and sales personnel.
We must incur these costs before we have clients who purchase our services to be
delivered from the UTX facilities. If the demand does not develop as we
anticipate, we will have fixed costs without corresponding revenue and our
business will be harmed. Once a UTX facility becomes operational, we expect it
to experience losses for at least one year.
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OUR ABILITY TO OPEN UTX FACILITIES IS SUBJECT TO A NUMBER OF RISKS, INCLUDING
THE FOLLOWING:
o the availability of appropriate space for these facilities on
reasonable terms;
o competition for limited space in desirable locations from large,
well-capitalized companies that may be more attractive tenants for
potential landlords;
o construction delays;
o cost overruns;
o equipment and material delays; and
o inability to obtain necessary permits on a timely basis.
In addition, our costs will increase as we continue to open UTX facilities.
These increased costs include:
o leasing additional real estate;
o expenses associated with hiring, training and managing new employees;
o purchasing new equipment;
o implementing power and redundancy systems;
o implementing multiple communications connections; and
o depreciation expense.
An inability to establish additional UTX facilities as planned, to
effectively manage our expansion or to attract sufficient clients to our UTX
facilities would harm our ability to generate revenues.
IF WE CANNOT SUCCESSFULLY IMPLEMENT OUR NETWORK OPERATIONS CENTER, WE WILL BE
UNABLE TO PROVIDE MONITORING, MAINTENANCE AND RESTORATION SERVICES TO OUR
CLIENTS.
One of our primary business objectives is to provide our clients with
network monitoring, maintenance and restoration services 24 hours a day, seven
days a week through a network operations center. However, we have not fully
developed this capacity and currently provide network management services
through an outsourcing arrangement with a third party, until our own facility
becomes operational. We recently acquired a network operations facility, but
have not yet upgraded this facility or begun hiring employees, and we have only
limited experience implementing services of this type. As a consequence, we
cannot be sure that our efforts to provide these services will be successful.
Our ability to implement this strategy will depend on many factors, including
our ability to upgrade the facility, install new equipment and hire, train and
manage employees.
If we fail to successfully implement a network operations center, we may
not be able to monitor network operations effectively or troubleshoot circuits
in a cost-effective manner, which would cause us to lose clients and make it
difficult for us to attract new clients.
ALTHOUGH WE PLAN TO EXPAND INTERNATIONAL OPERATIONS, WE HAVE NO EXPERIENCE
OPERATING INTERNATIONALLY.
An important component of our strategy is to expand into international
markets, such as Europe, Asia and South America. However, we have no experience
operating internationally. The risks inherent in conducting our business
internationally include:
o unexpected changes in regulatory requirements and trade barriers;
o unexpected changes in national and international (including European
Union and World Trade Organization) regulatory requirements and trade
barriers;
o challenges in staffing and managing foreign operations;
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o differences in technology standards;
o employment laws and practices in foreign countries;
o longer payment cycles and problems in collecting accounts receivable;
o inability to obtain access to transport capacity;
o political instability;
o fluctuations in currency exchange rates and imposition of currency
exchange controls; and
o potentially adverse tax consequences.
In addition, in order to expand internationally, we may enter into joint
ventures or outsourcing agreements with third parties, acquire complementary
businesses or operations, or establish and maintain new operations outside of
the United States. We may not control or manage some or all of these operations.
As a result, we may be required to depend on third parties for the management of
these international operations. If these foreign operations are not successful,
they could significantly damage our reputation, which would harm our ability to
attract new clients and retain existing clients.
COMPETITION IN OUR INDUSTRY IS INTENSE AND GROWING, AND WE MAY BE UNABLE TO
COMPETE EFFECTIVELY.
The market for the services we provide is highly fragmented. In addition,
the market in which we operate is new, rapidly evolving and highly competitive.
We believe that at this time no single competitor competes directly with us with
respect to all of the services we offer; however, we currently or potentially
compete with a variety of companies, including some of our transport suppliers,
with respect to our products and services individually, including:
o national and local carriers, such as AT&T, Broadwing, MCI WorldCom and
Williams Communications;
o companies that provide collocation facilities, such as AboveNet
Communications (MFN), AT&T, Equinix, Exodus Communications, Frontier
Global Center, and Intel;
o competitive local exchange carriers, such as AT&T, ELI, ICG
Communications, MCI WorldCom, NextLink Communications, and Pathnet;
and
o incumbent local exchange carriers, such as GTE and Sprint, and
regional Bell operating companies such as BellSouth and SBC
Communications.
We expect to face additional competition from new market entrants in the
future as there are few substantial barriers to entry in our market. Significant
new competitors could arise from increased consolidation and strategic alliances
in the telecommunications industry. Other new entrants could enter the market
with a business model similar to ours. Our target markets may support only a
limited number of competitors. Operations in such markets with multiple
competitive providers may be unprofitable for one or more of such providers.
Prices in both the long distance business and the data transmission business
have declined significantly in recent years and are expected to continue to
decline.
Moreover, while recent regulatory initiatives allow carriers such as us to
interconnect with incumbent local exchange carrier facilities and to obtain
unbundled network elements from incumbent local exchange carriers, certain
initiatives also provide increased pricing flexibility for, and relaxation of
regulatory oversight of, the incumbent local exchange carrier. This may present
incumbent local exchange carriers with an opportunity to subsidize services that
compete with our services with revenues generated from non-competitive services.
This would allow incumbent local exchange carriers to offer competitive services
at lower prices. Existing laws also restrict the regional Bell operating
companies from fully competing with us in the market for interstate and
international long distance telecommunications services, but also permit the
Federal Communications Commission, the FCC, to lessen or remove some
restrictions. If FCC decisions under existing law, or future amendments to
Federal telecommunications laws, permit the regional Bell operating companies to
compete fully with us in this market, our revenues from these services could be
reduced if these companies are able to attract a substantial portion of our
customers.
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We must distinguish ourselves through the quality of our client service,
our service offerings and brand name recognition. We may not be successful in
doing this.
Many of our potential competitors have certain advantages over us,
including:
o substantially greater financial, technical, marketing and other
resources, including brand or corporate name recognition;
o larger customer bases;
o longer operating histories; and
o more established relationships in the industry.
Our competitors may be able to use these advantages to:
o expand their offerings more quickly;
o adapt to new or emerging technologies and changes in customer
requirements more quickly;
o take advantage of acquisitions and other opportunities more readily;
o enter into strategic relationships to rapidly grow the reach of their
networks and capacity;
o devote greater resources to the marketing and sale of their services;
and
o adopt more aggressive pricing and incentive policies, which could
drive down margins.
If we are unable to compete successfully against our current and future
competitors, our gross margins could decline and we could lose market share,
either of which could materially and adversely affect our business.
IF WE HAVE DIFFICULTIES OR DELAYS IN DELIVERING CIRCUITS TO OUR CLIENTS, OUR
ABILITY TO GENERATE REVENUE WILL SUFFER AND WE MAY LOSE EXISTING AND POTENTIAL
NEW CLIENTS.
It typically takes 30 to 90 days to supply a circuit for a client, and we
do not begin to recognize revenue until a circuit has been installed and
accepted by the client. Once we agree to facilitate the supply of a circuit for
a client, we negotiate with one or more transport suppliers and manage the
personnel and field technicians of multiple vendors. A client can withdraw its
order with minimal liability at any time before accepting the circuit. We may
experience difficulties in facilitating the supply of circuits if our transport
suppliers run out of capacity, forcing us to look for alternative sources of
capacity at the last minute. If we are unable to facilitate the supply of a
circuit in a timely manner or fail to obtain client acceptance of the circuit,
we will be unable to recognize access revenues for that circuit, and our
operating results would be adversely affected. Furthermore, the ability of our
clients to cancel orders at any time before accepting the circuit may make it
difficult for us to forecast revenue and plan our expenses accordingly.
THE UNPREDICTABILITY OF OUR QUARTERLY RESULTS MAY ADVERSELY AFFECT THE TRADING
PRICE OF OUR COMMON STOCK.
Our revenues and operating results will vary significantly from quarter to
quarter due to a number of factors, many of which we cannot control and any of
which may cause our stock price to fluctuate. These factors include the
following:
o uncertainty regarding timing for supplying circuits or failure to
obtain client acceptance of circuits;
o timing of the completion of new UTX facilities;
o costs related to acquisitions of technology or businesses;
o decisions by existing clients not to renew services on a timely basis
when existing client contracts terminate;
o the amount of unused circuit capacity that we hold;
o general economic conditions as well as those specific to the Internet
and related industries; and
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o Internet growth and demand for Internet infrastructure.
In addition, we depend on decisions by our clients to expand their Internet
infrastructure, which decisions in turn depend upon the success and expected
demand for the services these clients offer.
We expect our operating expenses to increase significantly in future
periods. Our operating expenses are largely based on anticipated revenue trends,
and a high percentage of our expenses are, and will continue to be, fixed in the
short term due in large part to our construction of our UTX facilities. As a
result, fluctuations in our revenue for the reasons set forth above, or for any
other reason, could cause significant variations in our operating results from
quarter to quarter and could result in substantial operating losses.
Because of these factors, we believe that quarter-to-quarter comparisons of
our operating results are not, and will not be, a good indication of our future
performance. It is likely that, in some future quarters, our operating results
may not meet the expectations of public market analysts and investors. In that
event, the price of our common stock may fall.
OUR FACILITIES AND THE NETWORKS ON WHICH WE DEPEND MAY FAIL, WHICH WOULD
INTERRUPT THE CIRCUIT ACCESS WE PROVIDE AND MAKE IT DIFFICULT FOR US TO RETAIN
AND ATTRACT CLIENTS.
Our clients depend on our ability to provide ongoing dedicated circuit
access. The operation of these circuits depends on the networks of third party
transport suppliers, such as MCI WorldCom or Williams Communications. The
networks of transport suppliers and clients who may use our UTX facilities may
be interrupted by failures in or damage to these facilities. Our facilities and
the ongoing circuit access we provide may be interrupted as a result of various
events, many of which we cannot control, including:
o fire;
o human error;
o earthquakes, floods and other natural disasters;
o train derailments or similar disasters along communications
rights-of-way;
o power loss;
o telecommunications failures; or
o sabotage or vandalism.
We may be subject to legal claims and be liable for losses suffered by our
clients for disruptions to circuits or damage to client equipment resulting from
failures at our facilities or on the networks of third party providers. In
addition, we may be subject to legal claims and be liable for losses suffered by
clients and carriers who use our UTX facilities. Our contracts with our clients
and with carriers who use our UTX facilities attempt to eliminate our liability
for consequential or punitive damages and for damage to client equipment not
caused by our gross negligence or willful acts. However, those provisions may
not protect us from being held liable for those damages. We generally provide
outage credits to our clients if circuit disruptions occur. If our circuit
failure rate is high, we may incur significant expenses related to circuit
outage credits, which would reduce our revenues. We would also have to incur
significant expenses in investigating and addressing the causes of such circuit
failures, which would divert resources from the expansion of our services and
cause our business to suffer. Clients may seek to terminate their contracts with
us if there is a circuit failure. In addition, if our circuit failure rate is
high, our reputation could be harmed, which would make it difficult for us to
retain and attract clients.
WE DEPEND ON SEVERAL LARGE CLIENTS, AND THE LOSS OF ONE OR MORE OF THESE
CLIENTS, OR A SIGNIFICANT DECREASE IN TOTAL REVENUES FROM ANY OF THESE CLIENTS,
COULD SIGNIFICANTLY REDUCE OUR REVENUE AND INCOME.
Historically, a substantial portion of our revenues has come from a limited
number of clients. For example, for the quarter ended March 31, 1999, our
largest client accounted for approximately 18% of our total revenues, and for
the quarter ended March 31, 2000, our two largest clients accounted for
approximately 47% of our total revenues. We have a number of significant revenue
contracts with these customers. These contracts expire on various dates between
July 2000 and September 2004. If we lose one or more large clients, or if one or
more of our large clients reduces the
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services they purchase from us and we fail to add new clients, our revenues
could decline and our results of operations would suffer.
OUR CLIENTS MAY FAIL TO PAY OR BE UNABLE TO PAY THEIR OBLIGATIONS TO US IN A
TIMELY MANNER OR AT ALL.
Some of our clients may have limited operating histories and may have
inadequate financial resources to meet all of their obligations. We recorded a
substantial bad debt expense during the year ended December 31, 1999 primarily
in connection with the failure by one of our clients to pay its bills. If other
of our clients are unable to meet their obligations to us, we may incur
additional bad debt expenses, which could harm our cash flows and results of
operations.
THE REGULATORY FRAMEWORK UNDER WHICH WE OPERATE AND NEW REGULATORY REQUIREMENTS
OR NEW INTERPRETATIONS OF EXISTING REGULATORY REQUIREMENTS COULD REQUIRE
SUBSTANTIAL TIME AND RESOURCES FOR COMPLIANCE, WHICH COULD MAKE IT DIFFICULT FOR
US TO OPERATE OUR BUSINESS.
Our communications services are subject to both federal and state
regulation. In providing our interstate and international communications
services, we must comply with federal telecommunications laws and regulations
prescribed by the FCC. At the state level, we are subject to state laws and to
regulation by state public utility commissions. As we expand internationally, we
will also become subject to regulation by foreign authorities and, in some
markets, supra-national authorities, such as the European Union.
These laws and regulations are subject to frequent changes and different
interpretations, and therefore, it is difficult for us to assess the impact of
these factors on our operations. The current domestic and international trend is
toward deregulation of telecommunications and Internet services. However, we
cannot assure you that this trend will continue, and it is possible that changes
in regulatory policies could limit our ability to compete in some markets. The
implementation, modification, interpretation and enforcement of laws and
regulations vary and can limit our ability to provide many of our services.
We will need to obtain authorization from the FCC and many state public
utilities commissions to offer particular types of telecommunications services.
Once we receive this authorization, we will have to comply with a variety of
regulatory obligations on an ongoing basis. We cannot assure you that the FCC or
state commissions will grant the required authority (or do so in a timely
manner), or refrain from taking action against us if we are found to have
violated any requirements of their rules. If authority is not obtained or if our
schedules of prices, terms, and conditions are not filled, or are not updated,
or otherwise do not fully comply with the rules of the FCC or state regulatory
agencies, third parties or regulators could challenge our ability to offer our
services. Such challenges could cause us to incur substantial legal and
administrative expenses.
REQUIRED REGULATORY APPROVALS MAY INTERFERE WITH OR DELAY CORPORATE
TRANSACTIONS.
As a regulated company, we are required to obtain the approval of the FCC
and certain state regulators before engaging in certain types of transactions,
including mergers, acquisitions of other regulated companies, sales of all or
substantial parts of our business, issuance of stock, and incurrence of debt
obligations. The particular types of transactions that require approval differ
in each jurisdiction. In several states, any transaction that results in a
transfer of 10% or more of our voting stock may require prior approval. If we
cannot obtain the required approvals, or if we encounter substantial delays in
obtaining them, we may not be able to enter into transactions on favorable terms
and our flexibility in operating our business will be limited. If our
flexibility is limited, we may not be able to optimize our operating results.
TELECOMMUNICATIONS REGULATIONS OF OTHER COUNTRIES MAY RESTRICT OUR OPERATIONS.
We will be subject to the regulatory regimes in each of the countries in
which we conduct business. Local regulations range from permissive to
restrictive, depending upon the country. Changes to existing regulations of
foreign countries may decrease the opportunities that are available for us to
enter into those markets, or may increase our legal, administrative or
operational costs, or may constrain our activities in other ways that we cannot
necessarily anticipate. Any of these developments could impair our efforts to
develop foreign operations.
WE EXPECT TO INCUR OPERATIONAL AND MANAGEMENT INEFFICIENCIES WHEN WE ACQUIRE NEW
BUSINESSES.
Part of our expansion strategy includes acquiring businesses and
technologies that we believe will complement our existing business. For example,
in 1999 we acquired two companies, and we may acquire additional companies in
the future. These acquisitions will likely involve some or all of the following
risks:
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o difficulty of assimilating acquired operations and personnel and
information systems;
o potential disruption of our ongoing business;
o diversion of resources;
o possible inability of management to maintain uniform standards,
controls, procedures and policies;
o possible difficulty of managing our growth;
o risks of entering markets in which we have little experience; and
o potential impairment of relationships with employees or clients.
We may need to complete these transactions in order to remain competitive.
We cannot be sure that we will be able to obtain required financing for these
transactions or that these transactions will occur.
WE EXPECT TO REQUIRE ADDITIONAL THIRD-PARTY FINANCING, AND IF WE CANNOT OBTAIN
THIS FINANCING ON COMMERCIALLY REASONABLE TERMS, OUR ABILITY TO EXPAND OUR
BUSINESS WILL SUFFER.
Our ability to meet our planned growth will require substantial cash
resources. We expect that the anticipated expansion of our UTX facilities,
construction of eight additional facilities during the year 2000 (at an
estimated average cost of $3.2 million per facility), and our anticipated
funding of negative cash flow from operating activities, will require
substantial capital. In addition, part of our expansion strategy includes
acquiring complementary businesses and technology, which may require us to raise
additional funds. We do not expect to generate significant cash flow from
operations in the near term. Accordingly, our ability to meet our additional
future capital needs will depend upon our ability to renegotiate, extend or
replace our credit facilities, obtain supplemental financing or raise additional
capital. Additional debt financing may limit our financial and operating
flexibility. We may not be able to renegotiate or replace our credit and
equipment lease facilities on a timely basis, on acceptable terms or at all.
Additional equity financing may not be available or may be dilutive to existing
stockholders. If we are unable to obtain future financing when needed or on
acceptable terms we may have to delay or abandon our development and expansion
plans, which could materially adversely affect our growth and ability to
compete.
WE MUST EXPAND OUR MARKETING AND SALES OPERATIONS SUBSTANTIALLY TO INCREASE
MARKET AWARENESS AND SALES OF OUR SERVICES.
Our services require a sophisticated sales effort that targets key people
within our prospective clients' organizations. This sales effort requires the
efforts of select personnel as well as specialized system and consulting
engineers within our organization. We have recently expanded our sales force and
plan to hire additional marketing and sales personnel, and system and consulting
engineers, particularly individuals with experience in the telecommunications
industry. Competition for these individuals is intense, and we may not be able
to hire the number of qualified sales personnel and system and consulting
engineers we need. In addition, we may substantially increase our budget as part
of our marketing program. If we are unable to expand our marketing and sales
operations, we may not be able to increase market awareness or sales of our
products and services, which may prevent us from achieving and maintaining
profitability.
IF WE DO NOT CONTINUE TO EXPAND OUR CLIENT SUPPORT ORGANIZATION SUBSTANTIALLY,
CLIENTS MAY SIGNIFICANTLY REDUCE PURCHASES OF OUR SERVICES.
We recently hired a number of additional personnel for our client support
organization and will need to continue to increase our staff to support new
clients and the expanding needs of existing clients. Our client support
organization is responsible for providing our clients with technical and
operational support, and for identifying and developing opportunities to provide
additional services to our existing clients. Competition for qualified client
support personnel is intense because few people have the necessary level of
technical skills and experience in telecommunications provisioning and network
management. If we fail to further expand our client support organization, we may
be limited in our ability to gain more business from existing clients, and we
may be unable to obtain or maintain current information regarding our clients'
and suppliers' communications networks, which could limit our ability to
provision future circuits for our clients.
IF WE DO NOT ESTABLISH AND MAINTAIN KEY CLIENT RELATIONSHIPS, OUR REVENUES MAY
DECLINE.
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Our success will depend upon our ability to develop and manage key client
relationships in order to generate additional revenues from existing clients.
Our ability to develop and manage our client relationships depends on, among
other things:
o our ability to maintain the timeliness and quality of our services in
facilitating the supply of circuits;
o our ability to deliver our clients additional services, such as
network monitoring, maintenance and troubleshooting services;
o our ability to expand our client support organization with additional,
qualified personnel; and
o performance by the transport suppliers with whom we contract to
provide circuits to our clients.
If we fail to establish and maintain these client relationships, our
revenues may stagnate or decline.
IF WE FAIL TO MANAGE EXPANSION EFFECTIVELY, OUR ABILITY TO INCREASE OUR SERVICES
AND CLIENT BASE COULD SUFFER.
Our ability to successfully offer our services and implement our business
plan in a rapidly evolving market requires an effective planning and management
process. We continue to increase the scope of our operations and have
substantially increased the number of our employees. At December 31, 1997, we
had a total of five employees and at March 31, 2000, we had approximately 251
full-time employees. In addition, we plan to continue to hire a significant
number of employees. This growth has placed, and our anticipated growth in
future operations will continue to place, a significant strain on our management
systems and resources. We expect that we will need to continue to improve our
financial and managerial controls, reporting systems and procedures, and will
need to continue to expand, train and manage our work force. Furthermore, we
expect that we will be required to manage multiple relationships with various
clients, suppliers and other third parties. We cannot be sure that we will be
able to manage our expansion effectively.
IF WE FAIL TO SUCCESSFULLY COMPLETE THE IMPLEMENTATION OF OUR MANAGEMENT
INFORMATION SYSTEMS, WE MAY NOT BE ABLE TO OPERATE OR MANAGE OUR BUSINESS
EFFECTIVELY.
We are in the process of augmenting our management information systems to
facilitate management of client orders, client service, billing and financial
applications. Our ability to manage our business could be harmed if we fail to
successfully and promptly:
o implement all applications of our management information systems;
o integrate all the client records and the billing, ordering, inventory,
management, accounting and other financial information systems of the
businesses we have acquired or may acquire into our management
information systems;
o identify all of our information and processing needs;
o repair "bugs" and design defects that may exist in our management
information systems;
o implement a wide area network connecting our main offices and our UTX
facilities in different geographic locations; or
o maintain and upgrade our management information systems as necessary.
In addition, our ability to efficiently operate our business could suffer
if the software which runs our information systems malfunctions.
WE DEPEND ON OUR KEY PERSONNEL TO MANAGE OUR BUSINESS EFFECTIVELY IN A RAPIDLY
CHANGING MARKET, AND OUR ABILITY TO GENERATE REVENUES WILL SUFFER IF WE ARE
UNABLE TO RETAIN OUR KEY PERSONNEL AND HIRE ADDITIONAL PERSONNEL.
Our future success depends upon the continued services of our executive
officers and other key sales, marketing and support personnel. We do not have
"key person" life insurance policies covering any of our employees. In addition,
we depend on the ability of a relatively new management team to effectively
execute our strategies. We recently hired several of our key employees. Because
some members of our management team have worked together only for a short period
of time, we need to integrate these officers into our operations.
20
<PAGE>
We will need to hire additional personnel in our communications
provisioning, sales, marketing and support areas in the future, and we believe
our success depends, in large part, upon our ability to attract and retain these
key employees. Competition for these persons is intense, especially in the
communications provisioning area. In particular, we have experienced difficulty
in hiring qualified network engineers, and we may not be successful in
attracting and retaining these individuals. The loss of the services of any of
our key employees, the inability to attract or retain qualified personnel in the
future, or delays in hiring required personnel could limit our ability to
generate revenues.
BECAUSE WE HAVE NO PATENTED TECHNOLOGY AND HAVE LIMITED ABILITY TO PROTECT OUR
PROPRIETARY INFORMATION, COMPETITORS MAY MORE EASILY ENTER OUR MARKET AND HARM
OUR ABILITY TO GENERATE REVENUES.
We have no patented technology that would preclude or inhibit competitors
from entering our market. We rely on a combination of copyright, trademark,
service mark and trade secret laws and contractual restrictions to establish and
protect our intellectual property. We have no federally registered trademarks or
service marks, although we have applied for registration of certain of our
service marks. Even if registration is granted, we may be limited in the scope
of services for which we may exclusively use our service marks. We enter into
confidentiality agreements with our employees, consultants and partners, and we
control access to, and distribution of, our proprietary information. Our
intellectual property may be misappropriated or a third party may independently
develop similar intellectual property. Moreover, the laws of certain foreign
countries may not protect our intellectual property rights to the same extent as
do the laws of the United States. Unauthorized use of any of our proprietary
information could expose us to competition, which would harm our ability to
attract new and existing clients and generate revenues.
CERTAIN STOCKHOLDERS WILL CONTINUE TO HAVE SUBSTANTIAL CONTROL OVER UNIVERSAL
ACCESS, INC. AND COULD DELAY OR PREVENT A CHANGE IN CORPORATE CONTROL.
Internet Capital Group, Inc., funds affiliated with ComVentures and other
stockholders, directors and officers, in the aggregate, beneficially own
approximately 54% of our outstanding common stock. These stockholders, acting
alone or together, would be able to influence significantly all matters
requiring approval by our stockholders, including the election of directors and
the approval of mergers or other business combination transactions.
PROVISIONS OF OUR CHARTER DOCUMENTS MAY HAVE ANTI-TAKEOVER EFFECTS THAT COULD
PREVENT A CHANGE IN CORPORATE CONTROL.
Provisions of our amended and restated certificate of incorporation,
bylaws, and Delaware law could make it more difficult for a third party to
acquire us, even if doing so would be a benefit to our stockholders.
THERE MAY BE SALES OF A SUBSTANTIAL AMOUNT OF OUR COMMON STOCK THAT COULD CAUSE
OUR STOCK PRICE TO FALL.
Our current stockholders hold a substantial number of shares of our common
stock, which they will be able to sell in the public market in the near future.
Sales of a substantial number of shares of our common stock or market
expectations that these sales may occur could cause our stock price to fall. In
addition, the sale of these shares could impair our ability to raise capital by
selling additional common stock.
WE EXPECT TO EXPERIENCE VOLATILITY IN THE TRADING OF OUR STOCK, WHICH COULD
NEGATIVELY AFFECT ITS VALUE.
The market price of our common stock may fluctuate significantly in
response to a number of factors, some of which are beyond our control,
including:
o quarterly variations in operating results;
o changes in financial estimates by securities analysts;
o changes in market valuations of Internet-related companies;
o announcements by us or our competitors of new products and services or
of significant acquisitions, strategic partnerships or joint ventures;
o any loss of a major customer;
o additions or departures of key personnel;
21
<PAGE>
o any deviations in net revenues or in losses from levels expected by
securities analysts; future sales of common stock; and
o volume fluctuations, which are particularly common among highly
volatile securities of Internet-related companies.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The primary objective of our investment activities is to preserve principal
while at the same time maximizing the income we receive from our investments
without significantly increasing risk. Some of the securities that we may invest
in may be subject to market risk. This means that a change in prevailing
interest rates may cause the principal amount of the investment to fluctuate.
For example, if we hold a security that was issued with a fixed interest rate at
the then-prevailing rate and the prevailing interest rate later rises, the
principal amount of our investment will probably decline. To minimize this risk
in the future, we intend to maintain our portfolio of cash equivalents and
short-term investments in a variety of securities, including commercial paper,
money market funds, government and non-government debt securities. In general,
money market funds are not subject to market risk because the interest paid on
such funds fluctuates with the prevailing interest rate. As of March 31, 2000,
all of our investments were in cash equivalents and short-term investments.
We have operated primarily in the United States and all sales to date have
been made in U.S. dollars. Accordingly, we have not had any material exposure to
foreign currency rate fluctuations.
22
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In February 2000, a complaint was filed in the Superior Court of
California, County of Santa Clara, against us and other parties by Point West
Ventures, LP, previously known as Fourteen Hill Capital, LP and certain other
shareholders in Vaultline Incorporated. The claim arises out of a letter of
intent that we entered into in December 1998 relating to our potential
acquisition of Vaultline. The letter stated that it was not binding on the
parties except with respect to a $250,000 advance to be made by us and certain
obligations of Vaultline. The letter contemplated that we would undertake a due
diligence investigation of Vaultline. After performing the due diligence, we
determined not to complete the transaction and entered into a mutual settlement
agreement and release. Subsequently, Vaultline ceased doing business. The
claimants contend that the mutual settlement agreement executed by the president
of Vaultline was unauthorized. They allege that we, certain of our officers and
others conspired to deprive them of their interests in Vaultline. They are
seeking damages in excess of $10,000,000. We believe all of our legal
obligations were satisfied and intend to vigorously contest any claims asserted
against us relating to this matter. On May 4, 2000, the Superior Court granted
our petition to compel arbitration and to stay proceedings pending arbitration.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(c) During the quarter ended March 31, 2000, the Company granted stock
options to purchase 2,832,750 shares of common stock at exercise prices
ranging from $7.20 to $54.63 per share to employees and consultants pursuant
to its 1998 Employee Stock Option Plan and 1999 Stock Plan. During the
quarter ended March 31, 2000, the Company granted its outside directors
options to acquire a total of 120,000 shares of common stock at an exercise
price of $14.00 per share pursuant to its 1999 Director Option Plan.
(d) The effective date of the Registration Statement filed on Form S-1
under the Securities Act of 1933, as amended (File No. 333-93039), was March
16, 2000. The class of securities registered was Common Stock. The offering
commenced on March 16, 2000. The managing underwriters for the offering were
Goldman, Sachs & Co., Chase Securities Inc. and FleetBoston Robertson
Stephens Inc. Pursuant to the Registration Statement, 12,650,000 shares of
the Company's Common Stock were sold. After deducting approximately
$12,397,000 in underwriting discounts and commissions and approximately
$2,342,000 in other expenses related to the offering, the net proceeds to the
Company were approximately $162,361,000. The Company invested the proceeds
from the offering in short-term investment grade, interest-bearing securities
and intends to use the proceeds for working capital and general corporate
purposes, including expenditures for construction of additional UTX
facilities, sales channel development and other corporate purposes. In
addition, we may use a portion of the net proceeds to acquire businesses,
products or technologies that are complementary to our current or future
business and product lines. The use of proceeds from the offering does not
represent a material change in the use of proceeds described in the
prospectus for the offering.
23
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
In the quarter ended March 31, 2000, the following matters were submitted
to the Company's security holders for approval:
By written consent effective January 21, 2000 the Company's security
holders approved the following:
a) The adoption of the Company's 1999 Employee Stock Purchase Plan (the
"Purchase Plan"). A total of 500,000 shares of common stock have been
reserved for issuance under the Purchase Plan. The Purchase Plan
permits eligible employees to purchase shares of common stock through
payroll deductions at 85% of the fair market value of the common stock,
as defined in the Purchase Plan.
b) The adoption of The Company's 1999 Stock Plan (the "1999 Plan"). A
total of 10,000,000 shares of common stock have been reserved for
issuance under the 1999 Plan. The 1999 Plan provides for the grant of
incentive and nonqualified stock options to employees.
c) The adoption of the Company's 1999 Director Option Plan (the "Director
Plan"). The Director Plan provides for the grant of common stock
options to non-employee directors. A total of 500,000 shares of common
stock have been reserved for issuance under the Director Plan.
d) The approval of the Company's amended and restated bylaws to be
effective concurrently with the closing of the Company's initial public
offering. The amended and restated bylaws included provisions
establishing, among other things, certain defensive strategies for the
protection of stockholders' value.
e) The approval of the Company's amended and restated certificate of
incorporation to be effective concurrently with the closing of the
Company's initial public offering. The amended and restated certificate
of incorporation, among other things, included provisions establishing
certain defensive strategies for the protection of stockholders' value,
deleted all reference to series of preferred stock and instead
authorized one class of undesignated preferred stock consisting of
20,000,000 shares, and authorized an increase in the authorized number
of shares of common stock to 1,000,000,000.
f) The approval and authorization of indemnification agreements to be
entered into with the Company's officers and directors.
Stockholders giving their written consent to the foregoing held
approximately 61.99 million shares, representing approximately 83% of the shares
outstanding at the time.
24
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits
Exhibit
NUMBER DESCRIPTION OF DOCUMENT
3.1** Certificate of Incorporation of the Company.
3.2** Amended and Restated Bylaws of the Company.
4.1** Form of Company's Common Stock certificate.
4.2** Form of warrant to purchase shares of Common Stock of the Company
issued to Internet Capital Group.
4.3** Amended and Restated Registration and Informational Rights
Agreement, dated June 28, 1999.
4.4** Amended and Restated Registration and Informational Rights
Agreement, dated June 30, 1999.
4.5** Registration Rights Agreement, dated November 10, 1999.
4.6** Form of warrant to purchase shares of Common Stock of the Company
issued to Advanced Equities.
10.1** Form of Indemnification Agreement entered into by the Company
with each of its directors and executive officers.
10.2** Amended 1998 Employee Stock Option Plan and forms of agreements
thereunder.
10.3** 1999 Stock Plan and forms of agreements thereunder.
10.4** 1999 Director Option Plan and forms of agreements thereunder.
10.5** 1999 Employee Stock Purchase Plan.
10.6** Form of Private Line Service Contract.
10.7** Master Loan and Security Agreement with Charter Financial, Inc.
dated December 15, 1999.
10.8** Lease Agreement with One Hundred North Riverside, Inc., dated
October 30, 1998.
10.8.1** Amended Lease Agreement with One Hundred North Riverside, Inc.,
dated July 26, 1999.
10.9** Sublease Agreement with Morton International, Inc. dated May 15,
1999, for property located at 100 N. Riverside Plaza, 22nd
Floor-East, Chicago, Illinois.
10.9.1** First Amendment to Sublease Agreement with Morton International,
Inc. dated January 25, 2000, for property located at 100 N.
Riverside Plaza, Chicago, Illinois.
10.10** Lease Agreement with Dallas Carrier Associates, Ltd. dated May
20, 1999, for property located at 400 S. Akard Street, Dallas,
Texas.
10.11** Lease Agreement with Telecom Center LA, LLC dated March 31, 1999,
for property located at 530 W. Sixth Street, Los Angeles,
California.
10.11.1 Amendment to Lease with Telecom Center LA, LLC dated September
30, 1999 for property located at 530 W. Sixth Street, Los
Angeles, California.
10.12** Lease Agreement with EWE Office Investments II, Ltd., as amended
on July 20, 1999, for property located at 200 S.E. First Street,
Miami, Florida.
10.13** Lease Agreement with Lafayette Business Park, LLC dated April 1,
1999, for property located at 1900 Lafayette Street, Santa Clara,
California.
10.14** Lease Agreement with The Cambay Group Inc. dated March 19, 1999,
for property located at 200 Paul Avenue, San Francisco,
California.
10.15** Lease Agreement with 1120 Vermont Avenue Associates dated March
19, 1999, for property located at 1120 Vermont Avenue, N.W.,
Washington, D.C.
10.16** Lease Agreement with 601 West Associates LLC dated September 23,
1999, for property located at 601 W. 26th Street, New York, New
York.
10.17** License Agreement for Use of Telecommunications Conduit and
Conduit Interconnection Room with One Wilshire Arcade Imperial,
Ltd. dated July 6, 1999, for property located at One Wilshire
Building, 624 S. Grand Avenue, Los Angeles, California.
10.18+** Master Service Agreement with IXC Communications Services, Inc.
dated November 6, 1997.
10.18.1+** Amendment No. 1, dated March 23, 1999, to Master Service
Agreement.
10.18.2+** Amendment No. 2, dated July 19, 1999, to Master Service
Agreement.
10.19+** Carrier Services Agreement with Williams Communications, Inc.
d/b/a Williams Network Services, dated June 29, 1998.
10.19.1+** Amendment No. 1, dated March 12, 1999, to Carrier Services
Agreement.
10.19.2+** Amendment No. 2, dated July 1, 1999, to Carrier Services
Agreement.
10.20+** Capacity Agreement with GTE Telecom Incorporated dated August 20,
1999.
10.21** Employment Agreement with Patrick C. Shutt, dated September 15,
1998.
10.21.1** Amendment to Employment Agreement with Patrick C. Shutt, dated
February 8, 1999.
10.21.2** Amendment to Employment Agreement with Patrick C. Shutt, dated
February 1, 2000.
10.22** Employment Agreement with Robert J. Pommer, Jr., dated September
15, 1998.
25
<PAGE>
10.22.1** Amendment to Employment Agreement with Robert J. Pommer, Jr.,
dated February 8, 1999.
10.22.2** Amendment to Employment Agreement with Robert J. Pommer, Jr.,
dated February 1, 2000.
10.22.3 Amendment to Employment Agreement with Robert J. Pommer, Jr.
dated April 28, 2000.
10.23** Employment Agreement with Donna M. Shore, dated November 16,
1998.
10.23.1** Amendment to Employment Agreement with Donna M. Shore, dated
February 1, 2000.
10.24** Employment Agreement with Holly A. Weller, dated August 4, 1999.
10.24.1** Amendment to Employment Agreement with Holly A. Weller, dated
February 1, 2000.
10.25** Employment Agreement with Kenneth A. Napier, dated July 1, 1999.
10.25.1** Amendment to Employment Agreement with Kenneth A. Napier, dated
February 1, 2000.
10.26** Employment Agreement with Mark A. Dickey, dated November 16,
1998.
10.26.1** Amendment to Employment Agreement with Mark A. Dickey dated
February 1, 2000.
10.26.2 Amendment to Employment Agreement with Mark A. Dickey dated April
14, 2000.
10.27** Employment Agreement with Scott D. Fehlan, dated September 9,
1999.
10.27.1** Amendment to Employment Agreement with Scott D. Fehlan, dated
February 1, 2000.
10.27.2 Amendment to Employment Agreement with Scott D. Fehlan, dated
April 14, 2000.
10.28** Employment Agreement with George A. King, dated August 27, 1999.
10.28.1** Amendment to Employment Agreement with George A. King, dated
February 1, 2000.
10.29** Promissory Note held by the Registrant for Robert Pommer dated
May 28, 1999.
10.30** Lease Agreement with Lafayette Business Park, LLC dated August
31, 1999, for property located at 1940 Lafayette Street, Santa
Clara, California.
10.31** Terms and Conditions for Delivery of Service with Level 3
Communications, LLC dated November 17, 1999.
10.31.1+** Addendum, dated November 17, 1999, to Terms and Conditions for
Delivery of Service.
10.32+** Global Services Agreement with MCI WorldCom Communications, Inc.
dated December 14, 1999.
10.33+** AT&T Master Carrier Agreement with AT&T Corp. dated September 27,
1999.
10.34** Lease Agreement with La Salle National Bank as Trustee under
Trust Agreement dated April 14, 1978, dated December 13, 1999,
for property located at 600-780 South Federal Street, 76 West
Polk Street and 75 West Harrison Street, Chicago, Illinois.
10.35** Lease Agreement with Peachtree Kessler Lofts, L.L.C. d/b/a/
Telecom Towers, dated December 14, 1999, for property located at
56 Marrieta Street, Atlanta, Georgia.
10.35.1** Amended Lease Agreement with Peachtree Kessler Lofts, L.L.C.
dated March 1, 2000.
10.36** Amended and Restated Promissory Note with Patrick Shutt dated
December 6, 1999.
10.37** Amended and Restated Promissory Note with Robert Pommer dated
December 6, 1999.
10.38** Amended and Restated Promissory Note with Donna Shore dated
December 6, 1999.
10.39** Employment Agreement with William J. Coyne III, dated February 1,
2000.
10.39.1** Amendment to Employment Agreement with William J. Coyne III,
dated February 1, 2000.
10.39.2** Amendment to Employment Agreement with William J. Coyne III,
dated February 15, 2000.
10.40** Employment Agreement with Robert E. Rainone, Jr. dated February
28, 2000.
10.40.1 Amendment to Employment Agreement with Robert E. Rainone, Jr.
dated April 28, 2000.
10.41 Lease Agreement with TH Tower Leasing L.L.C., dated March 10,
2000, for property located at 233 South Wacker Drive, Chicago,
Illinois.
10.41.1 License Agreement with TH Tower Leasing L.L.C., dated April 21,
2000 for property located at 233 South Wacker Drive, Chicago,
Illinois.
10.42 Lease Agreement with Herndon Lincoln I L.L.C., dated April 27,
2000, for property located at 13900 Lincoln Park Drive, Herndon,
Virginia.
11.1** Statement Re: Computation of Unaudited Net Loss Per Share and Pro
Forma Net Loss Per Share.
21.1 Subsidiaries of Company.
27.1 Financial Data Schedule.
- -----------
** Filed with the Company's Registration Statement on Form S-1 (No. 333-93039)
filed with the Securities and Exchange Commission by the Company in connection
with its initial public offering which became effective March 16, 2000.
+ Confidential treatment requested for certain portions of this Exhibit pursuant
to Rule 406 promulgated under the Securities Act, which portions are omitted and
filed separately with the Securities and Exchange Commission.
(b) Reports on Form 8-K: The Company did not file any reports on Form 8-K during
the quarter ended March 31, 2000.
26
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNIVERSAL ACCESS, INC.
----------------------
(Registrant)
Date MAY 15, 2000 By /s/ DONNA M. SHORE
------------ -----------------------------------
Donna M. Shore
Executive Vice President,
Chief Financial Officer
(Principal Financial and
Accounting Officer)
27
<PAGE>
AMENDMENT TO LEASE
This AMENDMENT TO LEASE ("Amendment") is made and entered into
effective as of September 30, 1999, by and between Telecom Center LA, LLC, a
Delaware limited liability company ("LANDLORD"), and Universal Access, an
Illinois corporation ("TENANT").
R E C I T A L S :
A. Landlord and Tenant entered into that certain Office Lease
dated March 31, 1999 (the "LEASE"), pursuant to which Landlord leased to
Tenant and Tenant leased from Landlord certain "Premises", as described in
the Lease, and known as Suite 1001 on the tenth (10th) floor of the office
building located at 530 W. 6th Street, Los Angeles, California (the
"BUILDING")
B. Except as otherwise set forth herein, all capitalized terms
used in this Amendment shall have the same meaning gives such terms in the
Lease.
C. Landlord and Tenant desire to amend the Lease to, among other
things, (i) confirm the commencement and expiration dates of the Lease Term,
and (ii) revise the number of rentable square feet within the Premises, all
as hereinafter provided.
W I T N E S S E T H :
NOW, THEREFORE, in consideration of the foregoing Recitals and the mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. CONFIRMATION OF DATES. The parties hereby confirm that (a) Landlord
has performed all work required to be performed by Landlord pursuant to the
Tenant Work Letter attached to the Lease, (b) the Lease Term for the Lease
commenced as of July 29, 1999 (the "LEASE COMMENCEMENT DATE") for a term of
ten (10) years ending on July 28, 2009 (the "LEASE EXPIRATION DATE") (unless
sooner terminated or extended as provided in the Lease) and (c) in accordance
with the Lease, Base Rent has commenced to accrue according to the following
schedule:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
ANNUAL
MONTH OF LEASE RENTAL RATE BASE RENT
TERM ANNUAL BASE RENT MONTHLY BASE RENT PER SQUARE FOOT CREDIT
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 - 12 $176,568.00 $14,714.00 $21.00 N/A
13 - 24 $181,865.04 $15,155.42 $21.63 N/A
- ---------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
ANNUAL
MONTH OF LEASE RENTAL RATE BASE RENT
TERM ANNUAL BASE RENT MONTHLY BASE RENT PER SQUARE FOOT CREDIT
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
25 - 36 $187,320.99 $15,610.08 $22.28 N/A
37 - 48 $192,940.62 $16,078.39 $22.95 N/A
49 - 60 $198,728.84 $16,560.74 $23.64 N/A
61 - 72 $204,690.70 $17,057.56 $24.34 N/A
73 - 84 $210,831.43 $17,569.29 $25.08 N/A
85 - 96 $217,156.37 $18,096.36 $25.83 N/A
97 - 108 $223,671.06 $18,639.25 $26.60 N/A
109 - 120 $230,381.19 $19,198.43 $27.40 N/A
- ---------------------------------------------------------------------------------------------
</TABLE>
2. GENERATOR MAINTENANCE FEE. Pursuant to Section 6.2 of the Lease,
the Generator Maintenance Fee to be paid by Tenant in the amount of Three
Hundred Sixty and No/100 Dollars ($360.00) per month commenced as of the
Lease Commencement Date.
3. Tenant has prepaid the first monthly installment of Base Rent, and
all other rent checks (including those due and owing for Base Rent and the
Generator Maintenance Fee for the months of July, August and September, 1999)
should be made payable to:
Telecom Center LA
c/o JMA Properties, Inc.,
10080 N. Wolfe Road, SW3-260
Cupertino, CA 95014.
4. SQUARE FOOTAGE OF PREMISES. The exact number of rentable square
feet within the Premises is 8,408.
5. TENANT'S SHARE. Tenant's Share (as that term is defined in the
Lease) is 5.28%
6. NO FURTHER MODIFICATION. Except as set forth in this Amendment, all
of the terms and provisions of the Lease shall remain unmodified and in full
force and effect.
7. ATTORNEYS' FEES. Should any dispute arise among the parties hereto
or the legal representatives, successors and assigns concerning any provision
of this First Amendment or the rights and duties of any person in relation
thereto, the party prevailing in such dispute shall be entitled, in addition
to such other relief that may be granted, to recover reasonable attorneys'
fees and legal costs in connection with such dispute.
8. COUNTERPARTS. This First Amendment may be executed in any number of
original counterparts. Any such counterpart, when executed, shall constitute
an original of this First Amendment, and all such counterparts together shall
constitute one and the same First Amendment.
-2-
<PAGE>
IN WITNESS WHEREOF, this Amendment has been executed as of the day and
year first above written.
"Tenant" "Landlord"
UNIVERSAL ACCESS, an Illinois TELECOM CENTER LA, LCC,
corporation, a Delaware limited liability company
By: /s/ Ken Napier By: JMA Properties, Inc., a California
-------------------------- corporation, Its: Manager
Name: Ken Napier
Title: EVP Operations By: /s/ Arthur K. Chapman
-------------------------------
Arthur K. Chapman, President
-3-
<PAGE>
Exhibit 10.22.3
AMENDMENT NO. 3 TO EMPLOYMENT AGREEMENT
Amendment No. 3 dated as of April 28, 2000 (the "Amendment") to the
Employment, Non-Competition and Proprietary Rights Agreement, as amended, and
any exhibits thereto (the "Agreement") by and between Universal Access, Inc., a
Delaware corporation (the "Company") and Robert J. Pommer, Jr. (the "Employee").
Any capitalized terms not defined herein shall have the meanings assigned to
those terms in the Agreement.
RECITALS
A. Company and Employee entered into the Agreement on September 15,
1998 and amended the Agreement by letter agreement dated February 8, 1999 and by
Amendment No. 2 dated February 1, 2000.
B. Company and Employee desire to amend the Agreement to reflect
certain changes agreed to by the Company and the Employee.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, it is hereby agreed as
follows:
1. All references in the Agreement to "Chief Operating Officer, Chief
Technical Officer and Secretary" shall be deleted and replaced by references to
"Chief Technical Officer".
2. MISCELLANEOUS. Upon the execution and delivery of this Amendment,
the Agreement shall be amended and supplemented as set forth herein, as fully
and with the same effect as if the amendments and supplements made hereby were
set forth in the Agreement as of the date hereof. This Amendment and the
Agreement shall henceforth be read, taken and construed as one and the same
instrument, but this Amendment shall not operate so as to render invalid or
improper any action previously taken under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of April 28, 2000.
COMPANY: UNIVERSAL ACCESS, INC.,
a Delaware corporation
By: /s/ Patrick C. Shutt
Name: Patrick C. Shutt
Title: President and CEO
EMPLOYEE: By: /s/ Robert J. Pommer, Jr.
<PAGE>
Exhibit 10.26.2
AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT
Amendment No. 2 dated as of April 14, 2000 (the "Amendment") to the
Employment Agreement, as amended, and any exhibits thereto (the "Agreement") by
and between Universal Access, Inc., a Delaware corporation (the "Company") and
Mark A. Dickey (the "Employee"). Any capitalized terms not defined herein shall
have the meanings assigned to those terms in the Agreement.
RECITALS
A. Company and Employee entered into the Agreement on November 16, 1998
and amended the Agreement by Amendment No. 1 dated February 1, 2000.
B. Company and Employee desire to amend the Agreement to reflect
certain changes agreed to by the Company and the Employee.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, it is hereby agreed as
follows:
1. All references in the Agreement to "Vice President, Business
Development" shall be deleted and replaced by references to "Senior Vice
President, Business Development."
2. MISCELLANEOUS. Upon the execution and delivery of this Amendment,
the Agreement shall be amended and supplemented as set forth herein, as fully
and with the same effect as if the amendments and supplements made hereby were
set forth in the Agreement as of the date hereof. This Amendment and the
Agreement shall henceforth be read, taken and construed as one and the same
instrument, but this Amendment shall not operate so as to render invalid or
improper any action previously taken under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of April 14, 2000.
COMPANY: UNIVERSAL ACCESS, INC.,
a Delaware corporation
By: /s/ Patrick C. Shutt
Name: Patrick C. Shutt
Title: President and CEO
EMPLOYEE: By: /s/ Mark A. Dickey
<PAGE>
Exhibit 10.27.2
AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT
Amendment No. 2 dated as of April 14, 2000 (the "Amendment") to the
Employment Agreement, as amended, and any exhibits thereto (the "Agreement") by
and between Universal Access, Inc., a Delaware corporation (the "Company") and
Scott D. Fehlan (the "Employee"). Any capitalized terms not defined herein shall
have the meanings assigned to those terms in the Agreement.
RECITALS
A. Company and Employee entered into the Agreement on September 9, 1999
and amended the Agreement by Amendment No. 1 dated February 1, 2000.
B. Company and Employee desire to amend the Agreement to reflect
certain changes agreed to by the Company and the Employee.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, it is hereby agreed as
follows:
1. Effective as of April 14, 2000, all references in the Agreement to
"General Counsel and Assistant Secretary" shall be deleted and replaced by
references to "General Counsel and Secretary".
2. MISCELLANEOUS. Upon the execution and delivery of this Amendment,
the Agreement shall be amended and supplemented as set forth herein, as fully
and with the same effect as if the amendments and supplements made hereby were
set forth in the Agreement as of the date hereof. This Amendment and the
Agreement shall henceforth be read, taken and construed as one and the same
instrument, but this Amendment shall not operate so as to render invalid or
improper any action previously taken under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of April 14, 2000.
COMPANY: UNIVERSAL ACCESS, INC.,
a Delaware corporation
By: /s/ Patrick C. Shutt
Name: Patrick C. Shutt
Title: President and CEO
EMPLOYEE: By: /s/ Scott D. Fehlan
<PAGE>
Exhibit 10.40.1
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
Amendment No. 1 dated as of April 28, 2000 (the "Amendment") to the
Employment Agreement and any exhibits thereto (the "Agreement") by and between
Universal Access, Inc., a Delaware corporation (the "Company") and Robert E.
Rainone, Jr. (the "Employee"). Any capitalized terms not defined herein shall
have the meanings assigned to those terms in the Agreement.
RECITALS
A. Company and Employee entered into the Agreement on February 28,
2000.
B. Company and Employee desire to amend the Agreement to reflect
certain changes agreed to by the Company and the Employee.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, it is hereby agreed as
follows:
1. All references in the Agreement to "Chief Development Officer" shall
be deleted and replaced by references to "Chief Operating Officer".
2. MISCELLANEOUS. Upon the execution and delivery of this Amendment,
the Agreement shall be amended and supplemented as set forth herein, as fully
and with the same effect as if the amendments and supplements made hereby were
set forth in the Agreement as of the date hereof. This Amendment and the
Agreement shall henceforth be read, taken and construed as one and the same
instrument, but this Amendment shall not operate so as to render invalid or
improper any action previously taken under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of April 28, 2000.
COMPANY: UNIVERSAL ACCESS, INC.,
a Delaware corporation
By: /s/ Patrick C. Shutt
Name: Patrick C. Shutt
Title: President and CEO
EMPLOYEE: By: /s/ Robert E. Rainone, Jr.
Robert E. Rainone, Jr.
<PAGE>
LEASE
SEARS TOWER
233 SOUTH WACKER DRIVE
CHICAGO, ILLINOIS
UNIVERSAL ACCESS, INC.
<PAGE>
LEASE
SEARS TOWER
233 SOUTH WACKER DRIVE
CHICAGO, ILLINOIS
UNIVERSAL ACCESS, INC.
<TABLE>
<CAPTION>
PAGE
----
TABLE OF CONTENTS
<S> <C>
SCHEDULE..........................................................................................................1
TERMS AND CONDITIONS..............................................................................................5
1. TERM........................................................................................................5
2. BASE RENT...................................................................................................5
3. ADDITIONAL RENT.............................................................................................5
4. USE OF THE PREMISES........................................................................................11
5. POSSESSION.................................................................................................12
6. SERVICES...................................................................................................13
7. REPAIRS....................................................................................................17
8. ADDITIONS AND ALTERATIONS..................................................................................18
9. COVENANT AGAINST LIENS.....................................................................................19
10. INSURANCE..................................................................................................19
11. FIRE OR CASUALTY...........................................................................................21
12. WAIVER OF CLAIMS - INDEMNIFICATION.........................................................................22
13. NONWAIVER..................................................................................................23
14. CONDEMNATION...............................................................................................23
15. ASSIGNMENT AND SUBLETTING..................................................................................24
16. SURRENDER OF POSSESSION....................................................................................27
17. HOLDING OVER...............................................................................................28
18. ESTOPPEL CERTIFICATE.......................................................................................29
19. OBLIGATIONS TO MORTGAGEES..................................................................................29
20. CERTAIN RIGHTS RESERVED BY LANDLORD........................................................................30
21. RULES AND REGULATIONS......................................................................................32
22. DEFAULT AND LANDLORD'S REMEDIES............................................................................32
23. EXPENSES OF ENFORCEMENT....................................................................................34
24. COVENANT OF QUIET ENJOYMENT................................................................................34
25. REAL ESTATE BROKER.........................................................................................35
26. MISCELLANEOUS..............................................................................................35
27. NOTICES....................................................................................................39
28. LIMITATION OF LIABILITY....................................................................................40
29. SECURITY DEPOSIT...........................................................................................40
30. RIGHT OF FIRST OFFER.......................................................................................43
31. EXPANSION OF PREMISES......................................................................................43
i
<PAGE>
32. TENANT'S OPTION TO RENEW...................................................................................44
</TABLE>
EXHIBITS
EXHIBIT A FLOOR PLAN OF PREMISES
EXHIBIT B TENANT WORK LETTER
EXHIBIT C RULES AND REGULATIONS
EXHIBIT D ESTOPPEL CERTIFICATE
EXHIBIT E CONDENSER WATER ADDENDUM
EXHIBIT F GENERATOR LOCATION
EXHIBIT G SIGNAGE
ii
<PAGE>
LEASE
SEARS TOWER
233 SOUTH WACKER DRIVE
CHICAGO, ILLINOIS
THIS AGREEMENT OF LEASE made as of this 10th day of March, 2000
(hereinafter referred to as the "Lease") between TH TOWER LEASING LLC, a
Delaware limited liability company (hereinafter referred to as "Landlord"), and
UNIVERSAL ACCESS, INC., a Delaware corporation (hereinafter referred to as
"Tenant");
SCHEDULE
1. DESCRIPTION OF PREMISES: The premises designated on the plans attached
hereto as Exhibits A-1-A-6, respectively, and containing approximately
18,378 square feet of Rentable Area on the 3rd floor (the "Third Floor
Premises") consisting of the 7,295 square feet of the Rentable Area
identified on Exhibit A-1 and herein as the "Phase 1 - 3rd Floor Space"
and the 11,083 square feet of Rentable Area identified on Exhibit A-1
and herein as the "Phase 2 - 3rd Floor Space" (the Phase 1 - 3rd Floor
Space and the Phase 2 - 3rd Floor Space are herein sometimes together
referred to as the "Third Floor Premises"); 14,284 square feet of
Rentable Area on the 4th floor identified on Exhibit A-2 and herein as
the "Fourth Floor Premises"; 50,033 square feet of Rentable Area on the
5th floor consisting of the 20,885 square feet of Rentable Area
identified on Exhibit A-3 and herein as the "Phase 1 - 5th Floor Space"
and the 29,148 square feet of Rentable Area identified on Exhibit A-3
and herein as the "Phase 2 - 5th Floor Space" (the Phase 1 - 5th Floor
Space and the Phase 2 - 5th Floor Space are herein sometimes together
referred to as the "Fifth Floor Premises"); 50,033 square feet of
Rentable Area on the 6th floor identified on Exhibit A-4 and herein as
the "Sixth Floor Premises"; 2,606 square feet of Rentable Area on the
7th floor identified on Exhibit A-5 and herein as the "Seventh Floor
Premises"; and 37,084 square feet of Rentable Area on the 8th floor
identified on Exhibit A-6 and herein as the "Eighth Floor Premises";
the Third Floor Premises, the Fourth Floor Premises, the Fifth Floor
Premises, the Sixth Floor Premises, the Seventh Floor Premises and the
Eighth Floor Premises are sometimes herein collectively referred to as
the "Premises", in the building commonly known as the Sears Tower (the
"Building") located at 233 South Wacker Drive in the City of Chicago,
Cook County, Illinois (hereinafter referred to together with all
present and future easements, additions, improvements and other rights
appurtenant thereto, as the "Land").
2. USE OF PREMISES: Tenant shall use the Premises solely as general
offices and for no other purpose whatsoever; provided, however, that
Tenant may use the Seventh Floor Premises for a Network Operating
Center and/or Universal Transport Exchange, but may not use the
Universal Transport Exchange to circumvent the obligation of all
service providers in the Building to pay fees for access to the
Building in accordance with individual license agreements.
3. BASE RENT: The per annum rate of Base Rent and the monthly installments
thereof are set forth on Schedule 1 attached hereto.
<PAGE>
4. TENANT'S PROPORTIONATE SHARE: shall mean (a) 4.64% for the purposes of
determining Taxes (as hereinafter defined) payable by Tenant hereunder,
such percentage being the percentage calculated by dividing the
Rentable Area contained in the Premises, as determined by Landlord and
shown in Item 1 of this Schedule by 3,716,292 rentable square feet
(being one hundred percent (100%) of the aggregate amount of all office
and retail space in the Building), and (b) 4.99% for purposes of
determining Operating Expenses (as hereafter defined) payable by Tenant
hereunder, such percentage being the percentage calculated by dividing
the Rentable Area of the Premises, by 3,457,851 rentable square feet
(being one hundred percent (100%) of the aggregate amount of all office
space in the Building). Tenant's Proportionate Share shall be adjusted
proportionately if the number of square feet of Rentable Area in the
Premises is increased or decreased or if the aggregate amount of office
or retail space in the Building is either increased or decreased.
Tenant's Proportionate Share will be adjusted to reflect the staged
take down of the space and Tenant shall not be responsible for Tenant's
Proportionate Share of Taxes or Operating Expenses for any portion of
the Premises until the Rent Commencement Date for such portion of the
Premises occurs.
5. COMMENCEMENT DATE: The date hereof.
6. TERMINATION DATE: July 31, 2012.
7. SECURITY DEPOSIT: Seven Million Five Hundred Thousand and 00/100
Dollars ($7,500,000.00) increasing and decreasing as provided in
Section 29 of the Lease.
8. ADDRESSES FOR NOTICES:
IF TO LANDLORD:
TH TOWER LEASING LLC
c/o TrizecHahn Office Properties Inc.
233 South Wacker Drive, Suite 4600
Chicago, Illinois 60606
Attention: Executive Vice President
WITH A COPY TO:
TH TOWER LEASING LLC
c/o TrizecHahn Office Properties Inc.
233 South Wacker Drive, Suite 3330
Chicago, Illinois 60606
Attention: General Manager
IF TO TENANT:
PRIOR TO THE RENT COMMENCEMENT DATE:
UNIVERSAL ACCESS, INC.
100 North Riverside Plaza, Suite 2200
Chicago, Illinois 60606
2
<PAGE>
Attention: Mr. Robert Pommer
AFTER THE RENT COMMENCEMENT DATE:
UNIVERSAL ACCESS, INC.
233 South Wacker Drive
Chicago, Illinois 60606
Attention: Mr. Robert Pommer
9. BROKER: TrizecHahn Office Properties Inc. and Dean Topping & Company.
This Lease is subject to the Terms and Conditions and the provisions of
any exhibits attached hereto, which Terms and Conditions and exhibits are hereby
made a part of this Lease.
LANDLORD: TENANT:
TH TOWER LEASING LLC, UNIVERSAL ACCESS, INC.,
A DELAWARE LIMITED LIABILITY COMPANY A DELAWARE CORPORATION
By: /s/ Stephen E. Budorick By: /s/ Robert Brown
Its Vice President Its Vice President
3
<PAGE>
SCHEDULE 1
BASE RENT
<TABLE>
<CAPTION>
Per Square Foot Monthly Annual
Period Base Rental Rate Base Rent Base Rent
------ ---------------- --------- ---------
<S> <C> <C> <C>
August 1, 2000 -
July 31, 2001* $18.00 $258,627.00 $3,103,524.00
August 1, 2001 -
July 31, 2002* $18.54 $266,385.81 $3,196,629.72
August 1, 2002 -
July 31, 2003 $19.10 $274,431.98 $3,293,183.80
August 1, 2003 -
July 31, 2004 $19.67 $282,621.84 $3,391,462.06
August 1, 2004 -
July 31, 2005 $20.26 $291,099.06 $3,493,188.68
August 1, 2005 -
July 31, 2006 $20.87 $299,863.64 $3,598,363.66
August 1, 2006 -
July 31, 2007 $21.50 $308,915.58 $3,706,987.00
August 1, 2007 -
July 31, 2008 $22.15 $318,254.89 $3,819,058.70
August 1, 2008 -
July 31, 2009 $22.81 $327,737.88 $3,932,854.58
August 1, 2009 -
July 31, 2010 $23.49 $337,508.24 $4,050,098.82
August 1, 2010 -
July 31, 2011 $24.19 $347,565.95 $4,170,791.42
August 1, 2011 -
July 31, 2012 $24.92 $358,054.71 $4,296,656.56
</TABLE>
* Base Rent during this period will be adjusted to reflect the staged take down
of the Premises.
4
<PAGE>
TERMS AND CONDITIONS
Landlord hereby leases to Tenant, and Tenant hereby leases from
Landlord, the premises (hereinafter referred to as the "Premises") described in
the SCHEDULE appearing at the beginning of this Lease (hereinafter referred to
as the "SCHEDULE") and designated on the plan attached hereto as EXHIBIT A,
subject to the covenants, terms, provisions and conditions of this Lease.
1. TERM
The term of this Lease (hereinafter referred to as the "Term") shall
commence on the Commencement Date and shall end on the Termination Date
each as provided in the SCHEDULE, unless sooner terminated as provided
herein.
2. BASE RENT
(a) BASE RENT PAYMENTS. Tenant shall pay to Landlord or Landlord's
agent at Sears Tower, 233 South Wacker Drive, Chicago,
Illinois, or at such other place as Landlord or Landlord's
agent may from time to time designate in writing, in currency
which, at the time of payment, is legal tender for private or
public debts in the United States of America, the applicable
annual Base Rent set forth in SCHEDULE 1 payable for the
corresponding portion of the Premises, commencing on the
applicable Rent Commencement Date (as provided in subparagraph
(b) below) in equal monthly installments in the applicable
amounts set forth in SCHEDULE 1 in advance on or before the
first day of each and every month during the Term without
demand and without any abatement, setoff or deduction
whatsoever, except as specifically set forth in this Lease.
Such Base Rent shall be escalated as set forth in SCHEDULE 1.
Any Base Rent payable for a partial month other than a partial
month at the end of the Term shall be paid on the first day of
the following month. Any Base Rent payable for a partial month
at the end of the Term shall be paid on the first day of such
month.
(b) RENT COMMENCEMENT DATE. The applicable Rent Commencement Date
for each portion of the Premises shall be the earlier to occur
of (x) the date which is one hundred twenty (120) days
following the date Landlord tenders such portion of the
Premises to Tenant pursuant to SECTION 5 hereof and (y) the
date upon which Tenant begins to use for the conduct of
Tenant's business such portion of the Premises; provided,
however, that with respect to the Sixth Floor Premises the
Rent Commencement Date shall be the date which is one hundred
twenty (120) days following the date Landlord tenders the
Sixth Floor Premises to Tenant pursuant to SECTION 5 hereof,
rather than the earlier to occur of the events set forth in
clauses (x) and (y) of this subparagraph.
3. ADDITIONAL RENT
In addition to paying the Base Rent specified in SECTION 2 hereof,
Tenant shall pay as "Additional Rent" the amounts described in this
SECTION 3. Such Additional Rent paid by Tenant and other tenants in the
Building shall reimburse Landlord for all expenses of owning, operating
and maintaining the Land and the Building, except as expressly
5
<PAGE>
excluded below, and shall permit Landlord to receive the Base Rent as
"net" rent. The Base Rent and the Additional Rent and all other amounts
due under this Lease are herein collectively referred to as the "Rent."
All Additional Rent shall be payable for the same periods and in the
same manner, time and place as the Base Rent is to be paid
notwithstanding any abatement of Base Rent. Without limitation on other
obligations of Tenant which shall survive the expiration of the Term,
the obligations of Tenant to pay Additional Rent shall survive the
expiration of the Term. For any Calendar Year which is not wholly
included in the Term, Tenant shall be obligated to pay only a pro rata
share of the Additional Rent for such Calendar Year, based on the
number of days of the Term falling within such Calendar Year. Except as
specifically provided in this Lease, Rent shall be paid without
abatement, deduction or set off of any kind (except as specifically set
forth in this Lease), it being the intention of the parties that, to
the full extent permitted by law, Tenant's covenant to pay Rent shall
be independent of all other covenants contained in this Lease.
(a) CERTAIN DEFINITIONS. As used in this Lease, the terms:
(i) "Calendar Year" shall mean each calendar year in
which any part of the Term falls, through and
including the year in which the Term expires.
(ii) "Operating Expenses" shall mean all expenses, costs
and disbursements of every kind and nature
(determined for the applicable Calendar Year on an
accrual basis) paid or incurred by Landlord or its
managing agent in connection with the ownership,
management, operation, maintenance and repair of the
Land and Building (including, without limitation, the
cost of providing electricity for lighting the
Premises as provided in Subsection 6(a)(ii) below and
other office space), except the following:
A. Taxes (as hereinafter defined);
B. Costs of capital improvements to any
tenant's premises;
C. Principal or interest payments on loans
secured by mortgages or trust deeds on the
Building or Land or rent payable on any
ground lease of the Land and/or the
Building;
D. Costs of capital improvements to the
Building, except that Operating Expenses
shall include (1) the costs of any capital
improvement which is intended to reduce any
component of Operating Expenses and (2) the
costs of any capital improvement which is
made by Landlord to keep the Land or
Building in compliance with all governmental
rules and regulations applicable from time
to time thereto (excluding such costs to
comply with governmental rules and
regulations in effect as of the date hereof,
other than costs for the conversion of the
chillers to comply with environmental
regulations), in each case as evenly
amortized over the useful life of each such
capital improvement with interest on the
unamortized amount at the greater of (A) ten
percent (10%) per annum or (B) four percent
(4%) per annum above the "prime rate"
6
<PAGE>
or "corporate base rate" announced from time
to time by a major Chicago bank selected by
Landlord (the "Prime Rate") (but in no event
at a rate which is more than the highest
lawful rate allowable in the State of
Illinois);
E. Costs of utilities and other services
provided to and used in the operation of the
retail stores in the Building, provided that
the costs of operating and maintaining the
common areas adjoining such retail stores at
and above the Franklin Street Level shall be
included in Operating Expenses; and
F. Costs and expenses incurred in connection
with leasing space in the Building, such as
leasing commissions, tenant allowances,
space planning fees and advertising and
promotional expenses and legal fees for the
preparation of leases;
G. Costs of initial improvements to, or
alterations of, space leased to any tenant;
H. Depreciation or amortization of any
improvements except as specifically set
forth in this Lease;
I. The cost of repairing or restoring any
portion of the Building damaged by a hazard,
to the extent Landlord has received
insurance proceeds with respect to such
damage (provided that the amount of any
deductible paid by Landlord shall be
included in Operating Expenses) or for which
Landlord would have received insurance
proceeds had Landlord maintained the
insurance required by this Lease;
J. The cost of repairs, alterations or
replacements required as the result of the
exercise of any right of eminent domain to
the extent Landlord receives net
condemnation proceeds in reimbursement of
such costs, as the result of such exercise;
K. Any late fees, fines, penalties and interest
on past due amounts incurred by Landlord due
to Landlord's violation of any applicable
law, rule or regulation;
L. Costs incurred for relocating tenants within
the Building;
M. Any other costs or expenses incurred by
Landlord to the extent Landlord has actually
collected funds in reimbursement of such
costs and expenses (x) from any policies of
insurance in effect and (y) from any other
tenant (other than through such tenant's
payment of its share of Operating Expenses
or Taxes);
N. Landlord's general corporate overhead and
general administrative expenses;
7
<PAGE>
O. Legal and auditing fees in connection with
disputes with tenants (excepting legal fees
in seeking to enforce Building rules and
regulations);
P. Costs for services paid to any affiliate of
Landlord which are in excess of the then
prevailing market costs for such services;
Q. Costs incurred for special services
performed for other tenants which are not
performed for Tenant;
R. Costs of removing, encapsulating or
otherwise abating any hazardous substance or
regulated material (as defined under any
federal, state or local law in effect as of
the date hereof) in or about the Land or
Building not placed there by Tenant;
S. Management fees charged by Landlord or
Landlord's agent to the extent such fees are
in excess of management fees which would be
charged in an arm's length transaction with
an independent property management company;
T. Executive salaries above the grade of
Building Manager, except for personnel,
off-site or otherwise, to the extent such
personnel perform services or functions
related to the management, operation or
maintenance of the Building, and whose
services Landlord would otherwise contract
for with a third party, and then only to the
extent the cost of such personnel is
allocated to the Building proportionately to
the amount of time spent on the Building by
such personnel;
U. Expenses incurred in connection with any
dining club, athletic club, parking garage,
observatory or antenna not available for use
by Tenant without payment of an additional
charge.
(iii) "Taxes" shall mean taxes levied, assessed, imposed,
accruing or due and payable during the Term (or which
Landlord is obligated to pay on behalf of any other
person or entity having any interest in the Land or
the Building) in connection with the Land, the
Building, the operation thereof or any rights or
responsibilities related thereto. "Taxes" shall
include without limitation: (a) real estate taxes and
assessments, special or otherwise, levied, assessed,
imposed, accruing or due and payable during the Term
upon the Land or Building; (b) ad valorem taxes for
any personal property owned or leased by Landlord and
used exclusively in connection with operating or
maintaining the Land or Building; (c) any tax,
assessment, charge or fee which is imposed in
substitution for, or in lieu of an increase in, such
real estate taxes or ad valorem personal property
taxes; (d) any income or franchise tax based on
Landlord's income from the Land and Building which
taxes such income in a different manner than income
from sources other than the ownership and operation
of income-producing real estate, which is
substantively the functional
8
<PAGE>
equivalent of a tax on gross rents or leases, but is
called by another name; or (e) a tax on gross rents
or leases; or (f) a tax on the development of real
estate or the construction or improvement of
buildings or premises therein. Taxes shall also
include, in the year paid, all fees for consultants
and attorneys and all other costs incurred by
Landlord in seeking to obtain a reduction of, or a
limit on the increase in, any Taxes, regardless of
whether any reduction or limitation is obtained.
Taxes shall not include any inheritance, estate,
succession, transfer, gift, franchise, or capital
stock tax or any current state or federal income
taxes or any income taxes other than those described
above. With respect to any Taxes which include
assessments against income or property not related to
the Land or Building, Taxes shall include only that
portion of such Taxes which would be payable if the
Land and Building and all rights related thereto were
the only assets of Landlord. Taxes shall not include
interest or penalties arising as a result of a late
payment, except to the extent such late payment is
due to the default of Tenant hereunder.
(b) EXPENSE ADJUSTMENT. Tenant shall pay to Landlord or Landlord's
agent as Additional Rent, an amount ("Expense Adjustment
Amount") equal to Tenant's Proportionate Share of the amount
of Operating Expenses plus Tenant's pro rata share of the
special allocation of Variable Operating Expenses (as defined
in SECTION 3(c)) incurred with respect to each Calendar Year
or any portion thereof. The Expense Adjustment Amount with
respect to each Calendar Year shall be paid in monthly
installments during that Calendar Year in an amount reasonably
estimated from time to time by Landlord and communicated by
written notice to Tenant. Following the close of each Calendar
Year, Landlord shall compute the Expense Adjustment Amount for
that Calendar Year based on the Operating Expenses (and any
special allocation of Variable Operating Expenses) for that
Calendar Year and shall deliver to Tenant a statement of the
Expense Adjustment Amount plus a statement of all estimated
installments paid by Tenant with respect to that Calendar
Year. Tenant shall pay to Landlord any deficiency shown by the
statement within thirty (30) days after Tenant receives the
statement. If the installments paid exceed the amounts due and
if Tenant is not then in Default under this Lease, Landlord
shall credit the excess against Rent or any other payment next
due to Landlord from Tenant hereunder and refund the excess to
Tenant. If Tenant is then in Default hereunder (and until
Tenant cures such Default), Landlord shall apply the
difference first to any delinquent Rent hereunder (including
interest thereon) and then to the next succeeding payments of
Rent coming due hereunder. The foregoing obligations of
Landlord and Tenant shall survive the expiration of the Term.
Delay in computation of the Expense Adjustment Amount shall
not be deemed a default hereunder or a waiver of Landlord's
right to collect the Expense Adjustment Amount. Landlord shall
cause to be kept books and records showing Operating Expenses
in accordance with an appropriate system of accounts and
accounting practices consistently maintained.
Tenant shall have the right to audit or cause to be audited by
a firm of certified public accountants designated by Tenant,
Landlord's books and records in respect
9
<PAGE>
of Operating Expenses, the cost (including, without
limitation, the charges of such accountants) of which shall be
borne by Tenant unless it is demonstrated that Landlord has
overstated Tenant's Expense Adjustment Amount by more than
five percent (5%), in which case Landlord shall bear the cost
including, without limitation, the charges of such
accountants) of the audit. Notwithstanding anything contained
herein to the contrary, any audit by Tenant (or by Tenant's
accountants, but not by an independent consultant on a
contingency fee basis) of Operating Expenses for any calendar
year must occur during normal business hours upon at least two
(2) weeks prior written notice; such audit must be commenced
within the two (2) month period following Tenant's receipt of
Landlord's Statement of Operating Expenses and completed
within the four (4) month period following Tenant's receipt of
Landlord's statement of Operating Expenses. Any overpayment by
Tenant, if Tenant is not then in Default hereunder, shall be
credited against the next payment of Rent due to Landlord from
Tenant hereunder and if such amount exceeds the next payment
of Rent due Landlord from Tenant hereunder such excess shall
be refunded to Tenant. If Tenant is then in Default hereunder
(and until Tenant cures such Default), Landlord shall apply
the difference first to any delinquent Rent hereunder
(including interest thereon) and then to the next succeeding
payment of Rent coming due hereunder. All information obtained
by Tenant in connection with such audit shall be utilized by
Tenant and its accountants and attorneys on a confidential
basis and shall not be shared with other tenants in the
Building or their representatives.
(c) ALLOCATION OF VARIABLE OPERATING EXPENSES. If at any time
during the Term less than ninety-five percent (95%) of the
then current office space in the Building is occupied, at
Landlord's option those components of Operating Expenses which
vary with occupancy ("Variable Operating Expenses") shall be
removed from general Operating Expenses and allocated to the
portion of the office space in the Building which is actually
occupied and generating such components of Operating Expenses.
This special allocation shall be made on a pro rata basis over
the occupied office space in the Building, based on both the
comparative Rentable Areas of the Building which are occupied
and the portion of the Calendar Year during which the portions
of the Building were occupied. Examples of Variable Operating
Expenses include, without limitation, janitorial services,
electricity for overhead lighting and HVAC costs. Operating
Expenses which do not vary with occupancy, such as public
liability insurance and lobby maintenance will continue to be
allocated on a pro rata basis over the office space in the
Building whether or not occupied and Tenant shall only be
responsible for Tenant's Proportionate Share of those
Operating Expenses.
(d) TAX ADJUSTMENT. Tenant shall pay to Landlord or Landlord's
agent as Additional Rent, an amount ("Tax Adjustment Amount")
equal to Tenant's Proportionate Share of the amount of Taxes
incurred with respect to each Calendar Year or any portion
thereof. The Tax Adjustment Amount with respect to each
Calendar Year shall be paid in monthly installments during
that Calendar Year in an amount reasonably estimated from time
to time by Landlord and communicated by written notice to
Tenant. If Taxes for any Calendar Year are payable in whole or
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in part before the end of that Calendar Year, Tenant shall,
within thirty (30) days after the written request of Landlord,
promptly pay Tenant's Proportionate Share of the payment as a
special installment, after deducting installments previously
paid by Tenant under this SECTION 3(d) for such Calendar Year.
Following the final payment of Taxes for each Calendar Year,
Landlord shall compute the Tax Adjustment Amount for that
Calendar Year and deliver to Tenant a statement of the Tax
Adjustment Amount plus a statement of all estimated
installments paid by Tenant for that Calendar Year. Tenant
shall pay to Landlord any deficiency shown by the statement
within thirty (30) days after Tenant receives the statement.
If the installments paid exceed the actual amount due and if
Tenant is not then in Default under this Lease, Landlord shall
credit the excess against Rent or any other payment next due
to Landlord from Tenant hereunder and refund the excess to
Tenant. If Tenant is then in Default hereunder (and until
Tenant cures such Default), Landlord shall apply the
difference first to any delinquent Rent hereunder (including
interest thereon) and then to the next succeeding payments of
Rent coming due hereunder. The amount of any refund of Taxes
received by Landlord shall be credited against Taxes for the
year in which such refund is received. The foregoing
obligations of Landlord and Tenant shall survive the
expiration of the Term. In determining the amount of Taxes for
any Calendar Year, the amount of special assessments to be
included shall be limited to the amount of the installment
(plus any interest payable thereon) of the special assessment
required to be paid during that year as if Landlord had
elected to have the special assessment paid over the maximum
period of time permitted by law. All references to Taxes "for"
a particular year shall be deemed to refer to Taxes levied or
assessed for the year without regard to when such Taxes are
paid or payable. Delay in computing the Tax Adjustment Amount
shall not be deemed a Default hereunder or a waiver of
Landlord's right to collect the Tax Adjustment Amount.
4. USE OF THE PREMISES
(a) RESERVED AREAS. This Lease does not give Tenant any right to
use, and Landlord hereby excludes and reserves for its sole
and exclusive use, the following areas in and about the
Premises: janitor closets, stairways and stairwells, fan,
mechanical, electrical, telephone and similar rooms (other
than those installed for Tenant's exclusive use); elevator,
pipe and other vertical shafts, flues and ducts; all areas
above the acoustical ceiling and below the finished floor
covering installed in the Premises; all other structural or
mechanical elements serving other areas of the Building; and
all subterranean, mineral, air, light and view rights.
(b) PERMITTED USE. Tenant shall use and occupy the Premises solely
for the purposes set forth in the SCHEDULE and for no other
purpose.
(c) COMPLIANCE WITH LAWS. Tenant shall not use or permit the use
of any part of the Premises for any purpose prohibited by law.
Tenant shall, at its sole expense, comply with and conform to
all of the requirements of all governmental authorities having
jurisdiction over the Building which relate in any way to the
condition, use and occupancy of the Premises throughout the
entire Term of this
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Lease; provided, however, that the foregoing shall not be
interpreted to require Tenant to perform structural or capital
work unless required due to Tenant's specific use of the
Premises as opposed to office use in general. Without
limitation of the foregoing, Tenant covenants and agrees not
to bring into the Premises or to use, store, treat or dispose,
or permit the use, storage, treatment or disposal, in the
Premises of (i) any hazardous substance or regulated materials
as defined under any present or future federal, state or local
law, rule or regulation or (ii) any explosives or any
flammable substances, including, but not limited to, gasoline,
liquified petroleum gas, turpentine, kerosene and naphtha (the
substances and materials referred to in clauses (i) and (ii)
hereof are collectively referred to herein as "Hazardous
Materials"), except for such materials customarily used in
office operation (x) in such quantities which do not exceed
any legal limits, and (y) used, stored, treated and disposed
of in compliance with all applicable laws and regulations.
(d) ENVIRONMENTAL DISCLOSURE. Tenant, from time to time, upon not
less than ten (10) business days prior written request by
Landlord, will provide Landlord with such information in
Tenant's possession which Landlord may request regarding
Tenant's operations in the Premises (including, without
limitation, whether or not such operations involve the
generation, transportation, storage, treatment or disposal of
Hazardous Materials) and shall cooperate with Landlord in the
event Landlord is required to prepare an Environmental
Disclosure Document pursuant to the provisions of the Illinois
Responsible Property Transfer Act of 1988 or any government
rules or regulations issued pursuant thereto or in connection
therewith or in connection with any other federal, state or
local laws, rules or regulations.
5. POSSESSION
(a) POSSESSION OF THE PREMISES. Possession of that portion of the
Third Floor Premises consisting of the 7,295 square feet of
Rentable Area identified on EXHIBIT A-1 hereto as the Phase 1
- 3rd Floor Space shall be tendered to Tenant by Landlord in
their "as-is" condition on April 1, 2000 and the remainder of
the Third Floor Premises identified on EXHIBIT A-1 as Phase 2
- 3rd Floor Space shall be tendered to Tenant by Landlord in
their "as-is" condition on July 2, 2000. Possession of the
Fourth Floor Premises shall be tendered to Tenant by Landlord
in their "as-is" condition on June 1, 2000. Possession of the
Phase 1 - 5th Floor Space shall be tendered to Tenant by
Landlord in their "as-is" condition on July 2, 2000 and
possession of the Phase 2 - 5th Floor Premises shall be
tendered to Tenant by Landlord in their "as-is" condition on
December 1, 2001. Possession of the Sixth Floor Premises shall
be tendered to Tenant by Landlord in their "as-is" condition
on April 1, 2000. Possession of the Seventh Floor Premises
shall be tendered to Tenant by Landlord in their "as-is"
condition on April 1, 2000. Possession of the Eighth Floor
Premises shall be tendered to Tenant by Landlord in their
"as-is" condition on October 1, 2000. Notwithstanding the
aforementioned references to "as-is" condition all portions of
the Premises when delivered by Landlord to Tenant shall be
broom clean with the electrical and mechanical systems to the
Premises in good working order. Following the tender of each
portion of the Premises Tenant shall thereafter perform its
obligations
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relating to the construction of such portion of the Premises
as described in the Tenant Work Letter attached as EXHIBIT B
hereto and made a part hereof. Tenant's obligation to pay Rent
for such portion of the Premises as herein provided shall
commence on the Rent Commencement Date for such portion of the
Premises even in the event Tenant's Work (as defined in the
Tenant Work Letter) therein shall not be completed.
Notwithstanding the foregoing, Tenant's obligation to pay Rent
for such portion of the Premises shall be delayed one (1) day
for each day that the completion of the Tenant's Work in such
portion of the Premises is delayed as a result of Landlord's
failure to deliver vacant possession of such portion of the
Premises to Tenant on or before the date set forth above in
this SECTION 5(a) for the delivery of such portion of the
Premises to Tenant. Except as provided above, Landlord shall
have no other liability whatsoever on account of any such
delays and this Lease shall nevertheless continue in full
force and effect.
(b) The Tenant's taking possession of any portion of the Premises
shall be conclusive evidence that such portion of the Premises
was in good order and satisfactory condition when the Tenant
took possession. No promise of the Landlord to construct,
alter, remodel or improve the Premises or the Building and no
representation by Landlord or its agents respecting the
condition of the Premises or the Building have been made to
Tenant or relied upon by Tenant other than as may be contained
in this Lease.
(c) Under no circumstances shall the occurrence of any of the
events described in this SECTION 5 be deemed to accelerate or
defer the Termination Date.
(d) If Tenant takes possession or enters into occupancy of any
portion of the Premises for the purpose of conducting its
business therefrom prior to the date set forth in SECTION 5(a)
hereof for such portion of the Premises, such possession and
occupancy shall be pursuant to all of the terms, covenants and
conditions of this Lease, including the obligation to pay Base
Rent and Additional Rent (except as provided in SECTIONS 2(b)
AND 3(e) hereof).
6. SERVICES
(a) LIST OF SERVICES. So long as Tenant is not in Default under
any covenant or condition of this Lease, Landlord shall
provide the following services on all days during the Term,
except Saturdays, Sundays and holidays, unless otherwise
stated:
(i) Heating and air conditioning in the Premises from
Monday through Friday, from 8 a.m. to 6 p.m. and on
any Saturday which is not a holiday from 8 a.m. to 1
p.m. Landlord will operate the system of distribution
ducts, supply registers and diffusers, return grilles
and associated fixtures to provide in the Premises
[as partitioned in accordance with the Preliminary
Space Plans (as defined in the Tenant Work Letter)],
heating and air conditioning with capacity to provide
the following results during the business hours set
forth above; which heating and air conditioning
shall, within tolerances normal in first class office
buildings, be capable of
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providing the following: (a) air conditioning which
shall be capable of maintaining inside space
conditions of seventy-eight degrees (78 DEG.)
Fahrenheit dry bulb and fifty percent (50%) relative
humidity when outside conditions are ninety-two
degrees (92 DEG.) Fahrenheit dry bulb and
seventy-five degrees (75 DEG.) Fahrenheit wet bulb
and (b) heating which shall be capable of maintaining
inside space conditions of not less than seventy-two
degrees (72 DEG.) Fahrenheit when outside air
temperatures are not less than minus ten degrees (-10
DEG.) Fahrenheit and not more than sixty-five degrees
(65 DEG.) Fahrenheit. The foregoing is based upon
occupancy density of not more than one (1) person per
hundred (100) square feet of floor area, and a
maximum electric lighting and office machine load of
five (5) watts per square foot of floor area.
Tenant will pay for all heating and air conditioning
requested and furnished prior to or following such
hours at rates to be established from time to time by
Landlord. Landlord's obligations with respect to
heating and air conditioning are subject to all
governmental rules, regulations and guidelines
applicable thereto. Wherever heat generating machines
or equipment are used by Tenant in the Premises,
which affect the temperature otherwise maintained by
the air-cooling system, or where the configuration
and placement of such equipment creates a per square
foot heat load above what would be considered normal
for office use, Landlord reserves the right to
install supplementary air-conditioning units in the
Premises and the expense of installation, operation
and maintenance of any such supplementary units shall
be paid by Tenant to Landlord as Additional Rent.
(ii) Electricity solely for the lighting fixtures in the
Premises of up to two (2) watts per square foot of
rentable area within the Premises, together with
adequate electrical wiring and facilities to the
Premises for standard building lighting fixtures and
for Tenant's incidental uses. Distribution within the
Premises is at Tenant's expense, although Tenant may
use any existing conduit system within the Premises.
All electricity used in the Premises other than for
lighting fixtures shall be separately metered by a
meter or meters to be installed at Landlord's
expense. Tenant agrees to pay for such electricity
directly to the utility providing such electricity.
Tenant shall bear the cost of providing all light
fixtures and replacement of all lamps, tubes,
ballasts and starters for lighting fixtures. With
respect to such incidental uses, adequate electrical
wiring and facilities will be furnished up to the
meter in the Premises by Landlord, provided that: (a)
the connected electrical load of the incidental use
equipment does not exceed an average of two (2) watts
per square foot of rentable area within the Premises;
(b) the electricity for incidental uses will be at a
nominal one hundred twenty (120) volts and no
electrical circuit for the supply of such incidental
use will have a current capacity exceeding twenty
(20) amperes with a load not exceeding sixteen (16)
amperes; and (c) such electricity will be used only
for equipment and accessories normal to office usage.
If Tenant's requirements for electricity for
incidental uses exceed those set
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forth in the preceding sentence, Landlord reserves
the right to require Tenant to install the conduit,
wiring and other equipment necessary to supply
electricity for such excess incidental use
requirements at Tenant's expense by arrangement with
Commonwealth Edison Company or another approved local
utility. If Tenant's actual usage of electricity for
lighting exceeds two (2) watts per square foot, then
Landlord may charge and collect from Tenant a fee for
such excess usage, the amount of such fee to be
determined by Landlord. With respect to electricity
for lighting, electricity for two hundred sixty (260)
hours of lighting per month will be provided by
Landlord as part of Operating Expenses. Tenant shall
be billed monthly for all overtime hours of lighting
in excess of two hundred sixty (260) hours per month.
With regard to the Seventh Floor Premises only,
Landlord shall make available to the seventh floor
electrical room 400 amps, 480 volt three phase (one
feed) electrical power. It shall be Tenant's
responsibility and cost to distribute such power from
the electrical room to and throughout the Seventh
Floor Premises. Landlord will work with the local
utility company to make available to Tenant a second
feed for such electrical power to the Seventh Floor
Premises. The installation of such second feed (if
available) to the seventh floor and thereafter to the
Seventh Floor Premises shall be entirely at Tenant's
cost and expense. In addition, Tenant shall pay all
of Landlord's out-of-pocket costs in connection with
obtaining such second feed.
(iii) City water from the regular Building outlets for
drinking, lavatory and toilet purposes. Upon
execution by Landlord and Tenant of the "Condenser
Water Addendum" attached hereto as EXHIBIT E,
Landlord agrees to make available to Tenant
supplemental condenser water as therein provided. If
Landlord and Tenant have not executed the Condenser
Water Addendum, then Landlord shall not have any
obligation to provide Tenant with supplemental
condenser water.
(iv) Janitorial services as generally provided in
first-class office buildings in downtown Chicago.
(v) Window washing of the inside and outside of those
windows in the Building's perimeter walls which are
situated in the Premises, weather permitting, at
intervals to be determined by Landlord, but in no
event less than two (2) times per Calendar Year with
respect to the inside of said windows and no less
than three (3) times per calendar year with respect
to the outside of said windows.
(vi) Adequate automatic passenger elevator service.
(vii) Freight elevator services, Monday through Friday
only, from 7 a.m. to 5 p.m. from the first lower
level of the Building to the level on which the
Premises are located, subject to reasonable
scheduling by Landlord. The
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use of freight elevators shall be subject to
reasonable regulations promulgated by Landlord from
time to time.
(viii) Receiving room and loading dock services, on any
Monday through Friday which is not a Holiday, from 7
a.m. to 4 p.m., subject to reasonable scheduling by
Landlord. The use of the receiving room and loading
dock shall be subject to reasonable regulations
promulgated by Landlord from time to time.
(b) INTERRUPTION OF SERVICES. Except for the limited abatement of
Rent upon a fire or casualty described in SECTION 11, Tenant
agrees that Landlord shall not be liable in damages, by
abatement of Rent or otherwise, for failure to furnish or
delay in furnishing any service, or for any diminution in the
quality or quantity thereof, when such failure or delay or
diminution is occasioned, in whole or in part, by repairs,
replacements, or improvements, by any strike, lockout or other
labor trouble, by inability to secure electricity, gas or
other fuel, or water, at the Building after reasonable effort
so to do, by any accident or casualty whatsoever, by act or
default of Tenant or other parties, or by any cause beyond
Landlord's reasonable control. Except in cases of emergency,
Landlord shall give Tenant reasonable prior notice of any
delay or diminution in any service and shall use reasonable
efforts to minimize any inconvenience to Tenant where such
delay or diminution is the result of Landlord's voluntary
actions. Such failures or delays or diminution shall never be
deemed to constitute an eviction or disturbance of Tenant's
use and possession of the Premises or relieve Tenant from
paying Rent or performing any of its obligations under this
Lease; provided, however, that if any such service is
interrupted or diminished, and if (i) such interruption or
diminution does not arise as a result of an act or omission of
Tenant, (ii) such interruption or diminution does not arise as
a result of a matter or condition affecting two or more city
blocks, such as a city-wide power outage, (iii) as a result of
such interruption or diminution, the Premises or any material
portion thereof is rendered untenantable (meaning a lack of
elevator access or Tenant's inability to reasonably use the
Premises or such material portion thereof in the normal course
of its business) and Tenant in fact so ceases to use the
Premises or such material portion thereof for the normal
conduct of its business, and (iv) such interruption or
diminution continues for a period of three (3) or more
consecutive business days, then the Rent payable hereunder
shall be equitably abated according to the percentage of the
space in the Premises so rendered untenantable and not being
used by Tenant. The foregoing abatement of Rent shall become
effective as of the day the Premises or such material portion
thereof becomes untenantable and Tenant ceases to use such
space for the normal conduct of its business.
(c) CHARGES FOR SERVICES. Charges for any service for which Tenant
is required to pay, from time to time hereunder, including but
not limited to hoisting services or after hours heating or air
conditioning shall be due and payable at the same time as the
installment of Rent with which they are billed, or if billed
separately, shall be due and payable within twenty (20) days
after such billing. If Tenant shall fail to make payment for
any such services within five (5) days following Landlord's
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written demand therefor (which demand shall be in addition to
the original billing therefor), Landlord may, without further
notice to Tenant, discontinue any or all of such additional
services until Tenant pays all amounts due, and such
discontinuance shall not be deemed to constitute an eviction
or disturbance of Tenant's use and possession of the Premises
or relieve Tenant from paying Rent or performing any of its
other obligations under this Lease.
(d) ENERGY/NATURAL RESOURCES CONSERVATION. Notwithstanding
anything to the contrary in this SECTION 6 or elsewhere in
this Lease, Landlord shall have the right to institute such
policies, programs and measures as may be reasonably necessary
for the conservation, recycling and/or preservation of energy
and natural resources or energy or natural resource related
services, or as may be required to comply with any applicable
codes, rules and regulations, whether mandatory or voluntary.
(e) BILLING FOR ELECTRICITY.
(i) SEPARATE METERING. Tenant shall pay for the use of
the electrical service to the Premises for incidental
uses as described above directly to the utility
company supplying electricity to the Premises based
upon separate metering and billing. Tenant shall be
billed directly by such utility company and Tenant
agrees to pay each bill promptly in accordance with
its terms. If for any reason, Tenant cannot be billed
directly, Landlord shall forward to Tenant each bill
received by it with respect to such electrical usage
in the Premises and Tenant shall pay it promptly in
accordance with its terms.
(ii) LACK OF SEPARATE METERING. If Tenant's incidental
uses of electricity in the Premises cannot be
separately metered for any reason, Tenant shall pay
Landlord as Additional Rent, in monthly installments
at the time prescribed for monthly installments of
Rent, an amount, as estimated by Landlord from time
to time (which estimate shall be based on a survey
reasonably acceptable to Tenant), which Tenant would
pay for such electricity if the same were separately
metered to the Premises by the local electric utility
company and billed to Tenant at such utility
company's then current rates.
7. REPAIRS
(a) Landlord shall, as part of Operating Expenses, keep the common
areas of the Building (including, without limitation, all
concourses, pedestrian passageways, elevator lobbies and
restrooms), the roof, structural elements of the Building and
those portions of the mechanical, electrical, plumbing, HVAC
and other systems serving both the Premises and other areas of
the Building in good order, repair and condition, including
replacement or repair of all damaged or broken fixtures and
appurtenances, at all times during the Term.
(b) Except as provided in Paragraph 7(a) above, Tenant will, at
Tenant's own expense, keep the Premises in good order, repair
and condition at all times during
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the Term, subject to reasonable wear and tear, fire, casualty
and condemnation excepted, and Tenant shall promptly and
adequately repair all damage to the Premises and replace or
repair all damaged or broken fixtures and appurtenances
included in the Premises, under the supervision and subject to
the approval of the Landlord, and within any reasonable period
of time specified by the Landlord. If Tenant does not do so,
Landlord may, but need not, make such repairs and
replacements, and Tenant shall pay Landlord the reasonable
cost thereof plus a coordination fee payable to Landlord in
connection with each such repair and/or replacement equal to
three percent (3%) of the actual total cost of any such repair
or replacement, plus the cost of trash removal. Tenant shall
pay such costs and fee within twenty (20) days after being
billed therefor. Landlord may, but shall not be required to,
enter the Premises at all reasonable times to make such
repairs, alterations, improvements, installations and
additions to the Premises or to the Building or to any
equipment located in the Building as Landlord shall desire or
deem necessary or as Landlord may be required to do by
governmental authority or court order or decree; provided,
however, that Landlord shall use commercially reasonable
efforts not to interfere with Tenant's operation of its
business.
8. ADDITIONS AND ALTERATIONS
(a) Except with respect to (i) the Work described in the Tenant
Work Letter and (ii) minor painting, the moving of furniture
or the hanging of wall coverings or artwork, Tenant shall not,
without the prior written consent of Landlord, make any
alterations, improvements, installations or additions to the
Premises, which shall include, without limitation, installing
telephone, computer or internal sound or paging systems or
other similar systems or performing any decorating, painting
or other similar work in the Premises. Landlord's consent
shall not be unreasonably withheld or delayed so long as such
alterations, improvements, installations and additions are
consistent with the permitted uses of the Premises set forth
in the SCHEDULE hereof and do not adversely affect the
mechanical, electrical, plumbing, HVAC or structural
components or common systems of the Building. If Landlord
consents to any alterations, improvements, installations or
additions, it may impose such reasonable conditions with
respect thereto as Landlord deems 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 plus
permits necessary for such work and, following completion,
"as-built" drawings showing the actual location of the
alterations, improvements, installations and additions. The
work necessary to make any alterations, improvements,
installations or additions to the Premises, whether prior to
or subsequent to the Commencement Date shall be done at
Tenant's expense by contractors selected from a list of
contractors preapproved by Landlord. Tenant shall promptly pay
to Landlord or the Tenant's contractors, as the case may be,
when due, the cost of all such work plus, in all cases other
than decorating or redecorating, a coordination fee payable to
Landlord in connection with each such improvement,
installation, alteration and/or addition equal to three
percent (3%) of the actual total cost of any such improvement,
installation,
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alteration or addition, plus the cost of trash removal. Tenant
shall pay such costs and fee within twenty (20) days after
being billed therefor.
(b) All alterations, improvements, installations and additions to
the Premises, whether temporary or permanent in character,
made or paid for by Landlord or Tenant, shall without
compensation to Tenant become Landlord's property at the
termination of this Lease by lapse of time or otherwise and
shall, unless Landlord is entitled to and does request their
removal (in which case Tenant shall remove the same as
provided in SECTION 16), be relinquished to Landlord in good
condition, ordinary wear and damage resulting from fire or
other casualty and condemnation excepted.
9. COVENANT AGAINST LIENS
Tenant has no authority or power to cause or permit any lien or
encumbrance of any kind whatsoever, whether created by act of Tenant,
operation of law or otherwise, to attach to or be placed upon
Landlord's title or interest in the Land, Building or Premises, and any
and all liens and encumbrances created by Tenant shall attach to
Tenant's interest only. Tenant covenants and agrees not to suffer or
permit any lien of mechanics or materialmen or others to be placed
against the Land, Building or Premises or any improvement in the
Premises (whether installed or paid for by Landlord or Tenant) with
respect to work or services claimed to have been performed for or
materials claimed to have been furnished to Tenant or the Premises and,
if any such lien attaches or a claim for a lien is asserted, Tenant
covenants and agrees to cause it to be promptly released and removed of
record; provided, however, that if such lien is being contested in good
faith by Tenant by appropriate proceedings diligently pursued, Tenant
shall not be in default hereunder if Tenant shall, in a manner subject
to Landlord's prior written reasonable approval, cause such lien or
claim of lien to be bonded or insured over by a title insurance company
selected by Landlord (which title insurance shall, in any event, inure
to the benefit of Landlord, Landlord's mortgagees and any potential
purchasers of the Land or Building of which Tenant shall be notified),
and provided that, in any event, such lien or claim of lien shall be
released or removed within four (4) months of the date such lien first
attached. If such lien is not promptly released and removed or bonded
or insured over as aforesaid, Landlord, at its sole option, may take
all action necessary to release and remove such lien (without any duty
to investigate the validity thereof) and Tenant shall promptly upon
notice reimburse Landlord for all sums, costs and expenses (including
reasonable attorney's fees) incurred by Landlord in connection with
such lien.
Notwithstanding anything in this Lease to the contrary, Tenant
covenants and agrees not to suffer or permit any equipment lien to
attach to any of the fixtures or improvements in the Premises, whether
installed and/or paid for by Landlord or Tenant.
10. INSURANCE
(a) WAIVER OF SUBROGATION. Landlord and Tenant each hereby waive
any and every claim for recovery from the other for any and
all loss of or damage to the Building or Premises or to the
contents thereof, which loss or damage is covered by valid and
collectible physical damage insurance policies. Landlord
waives any and every claim against Tenant for any and all loss
of or damage to the Building or the
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Premises or the contents thereof which would have been covered
had the insurance policies required to be maintained by
Landlord by this Lease been in force, to the extent that such
loss or damage would have been recoverable under such
insurance policies. Tenant waives any and every claim against
Landlord for any and all loss of or damage to the Building or
the Premises or the contents thereof which would have been
covered had the insurance policies required to be maintained
by Tenant by this Lease been in force, to the extent that such
loss or damage would have been recoverable under such
insurance policies. Inasmuch as this mutual waiver will
preclude the assignment of any such claim by subrogation (or
otherwise) to an insurance company (or any other person),
Landlord and Tenant each agree to give to each insurance
company which has issued, or in the future may issue, to it
policies of physical damage insurance, written notice of the
terms of this mutual waiver, and to have said insurance
policies properly endorsed, if necessary, to prevent the
invalidation of said insurance coverage by reason of said
waiver.
(b) COVERAGE. Tenant shall purchase and maintain insurance during
the entire Term for the benefit of Tenant and Landlord (as
their interest may appear) with terms, coverages and in
companies reasonably satisfactory to Landlord, and with such
increases in limits as Landlord may from time to time
reasonably request, but initially Tenant shall maintain the
following coverages in the following amounts:
(i) Commercial General Liability Insurance naming
Landlord, Landlord's management, leasing and
development agents and any mortgagees designated by
Landlord as additional insureds, with coverage for
premises/operations, personal and advertising injury,
products/completed operations and contractual
liability with combined single limits of liability of
not less than $5,000,000 for bodily injury and
property damage per occurrence. If Tenant desires to
serve liquor in the Premises, host liquor insurance,
naming Landlord, Landlord's management, leasing and
development agents and any mortgagees designated by
Landlord as additional insureds covering any
liability that might arise from the provision or use
of alcoholic beverages by Tenant on the Premises in
an amount reasonably satisfactory to Landlord from
time to time in light of statutory limits.
(ii) Property Insurance covering the Work and all other
Tenant improvements in the Premises, office
furniture, trade fixtures, office equipment,
merchandise and all other items of Tenant's property
on the Premises, which insurance shall, with respect
only to the Work and other Tenant improvements, name
Landlord, and any mortgagees designated by Landlord
as additional loss payees as their interests may
appear. Such insurance shall be written on an "all
risks" of physical loss or damage basis including but
not limited to the perils of fire, extended coverage,
windstorm, vandalism, malicious mischief, sprinkler
leakage, flood and earthquake, for the full
replacement cost value of the covered items and in
amounts that meet any co-insurance clause of the
policies of insurance with a deductible amount not to
exceed $10,000.
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(iii) Workers' Compensation Insurance with statutory
benefits and Employers Liability Insurance with the
following amounts: Each Accident - $500,000; Disease
- Policy Limit - $500,000; Disease - Each Employee -
$500,000.
Tenant shall, prior to the commencement of the Term and on
each anniversary of the Commencement Date, furnish to Landlord
certificates evidencing such coverage, which certificates
shall state that such insurance coverage may not be changed or
cancelled without at least thirty (30) days prior written
notice to Landlord and Tenant. The insurance maintained by
Tenant shall be deemed to be primary insurance and any
insurance maintained by Landlord shall be deemed secondary
thereto.
Notwithstanding anything herein to the contrary, provided
Landlord approves Tenant's blanket policy (which approval
shall not be unreasonably withheld) Tenant shall have the
right to maintain the required liability insurance in the form
of a blanket policy covering other locations of Tenant in
addition to the Premises; Tenant shall provide Landlord with a
certificate of insurance specifically naming the location of
the Premises and naming Landlord as required by this
subsection.
(c) AVOID ACTION INCREASING RATES. Tenant shall comply with all
applicable laws and ordinances, all orders and decrees of
court and all requirements of other governmental authorities,
and shall not, directly or indirectly, make any use of the
Premises which may thereby be prohibited or be dangerous to
person or property or which may jeopardize any insurance
coverage or may increase the cost of insurance or require
additional insurance coverage. If Tenant fails to comply with
the provisions of this SECTION 10(c) and: (i) any insurance
coverage is jeopardized and Tenant fails to correct such
dangerous or prohibited use following notice within the
applicable cure period set forth in SECTION 22 hereof; or (ii)
insurance premiums are increased and Tenant fails, following
notice, to cease such use within the applicable cure period
set forth in SECTION 22 hereof, then in each event such
failure shall constitute a Default by Tenant hereunder and
Landlord shall have all of its remedies as set forth in this
Lease.
(d) INSURANCE MAINTAINED BY LANDLORD. Landlord agrees to maintain
property insurance written on an "all-risks" of physical loss
or damage basis insuring the Building for the full replacement
cost thereof (excluding the cost of excavations, foundations
and footings below the lowest basement floor).
11. FIRE OR CASUALTY
(a) SECTION 7 hereof notwithstanding, if the Premises or the
Building (including machinery or equipment used in its
operation) shall be damaged by fire or other casualty and if
such damage does not cause a termination of this Lease as
described in the following sentences, then Landlord shall
repair and restore the damage with reasonable promptness,
subject to reasonable delays for insurance adjustments and
delays caused by matters beyond Landlord's reasonable control,
but Landlord shall not be obligated to expend for repairing or
restoring the damage an amount in excess of the proceeds of
insurance recovered with respect
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to the damage. If in Landlord's estimate the Premises cannot
be restored within three hundred sixty-five (365) days from
the date of such fire or casualty, then Landlord shall give
notice to Tenant of such estimate within one hundred twenty
(120) days after such fire or casualty. Tenant may elect in
writing within sixty (60) days following the date of such
notice from Landlord to terminate this Lease effective as of
the date of Tenant's notice. If any such damage: (i) renders
three (3) or more floors of the Building untenantable; or (ii)
renders general Building systems inoperable and such systems
cannot be repaired in Landlord's reasonable estimate within
three hundred sixty-five (365) days from the date of such
damage, or (iii) occurs within the last two (2) Lease Years,
Landlord shall have the right to terminate this Lease as of
the date of such damage upon giving written notice to the
Tenant at any time within one hundred twenty (120) days after
the date of such damage. Landlord shall have no liability to
Tenant, and Tenant shall not be entitled to terminate this
Lease, by virtue of any delays in completion of such repairs
and restoration. Rent, however, shall abate on those portions
of the Premises as are, from time to time, untenantable as a
result of such damage.
(b) Notwithstanding anything to the contrary herein set forth,
Landlord shall have no duty pursuant to this SECTION 11 to
repair or restore any portion of the Work or any other
alterations, additions, installations or improvements in the
Premises or the decorations thereto except to the extent that
the proceeds of the insurance carried by Tenant are timely
received by Landlord. In the event Landlord does so timely
receive the proceeds of the insurance carried by Tenant,
Landlord shall work with Tenant to repair or restore the Work
or such other alterations, additions, installations or
improvements, but shall not be required to expend any of its
own funds in connection therewith. Such work shall be
performed in accordance with the provisions of SECTION 8
hereof. If Tenant desires any other or additional repairs or
restoration, and if Landlord consents thereto, it shall be
done at Tenant's sole cost and expense subject to all of the
provisions of SECTIONS 7 and 8 hereof. Tenant acknowledges
that Landlord shall be entitled to the full proceeds of any
insurance coverage, whether carried by Landlord or Tenant, for
damage to Tenant's Work or any other alterations, additions,
installations, improvements or decorations which would become
Landlord's property upon the termination of this Lease.
12. WAIVER OF CLAIMS - INDEMNIFICATION
To the extent not prohibited by law and subject to the waiver of
subrogation contained in SECTION 10(a), Landlord and its partners,
affiliates, officers, agents, servants and employees shall not be
liable for any damage either to person, property or business or
resulting from the loss of use thereof sustained by Tenant or by other
persons due to the Building or any part thereof or any appurtenances
thereto becoming out of repair, or due to the happening of any accident
or event in or about the Building, including the Premises, or due to
any act or neglect of any tenant or occupant of the Building or of any
other person, unless caused by the negligence or willful misconduct of
Landlord or its agents, employees or contractors. This provision shall
apply particularly, but not exclusively, to damage caused by gas,
electricity, snow, ice, frost, steam, sewage, sewer gas or odors, fire,
water or by the bursting or leaking of pipes, faucets, sprinklers,
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plumbing fixtures and windows, and, except as provided above, shall
apply without distinction as to the person whose act or neglect was
responsible for the damage and shall apply whether the damage was due
to any of the causes specifically enumerated above or to some other
cause of an entirely different kind. Tenant further agrees that all
personal property upon the Premises, or upon loading docks, receiving
and holding areas, or freight elevators of the Building, shall be at
the risk of Tenant only, and that Landlord shall not be liable for any
loss or damage thereto or theft thereof. Without limiting any other
provisions hereof, but subject to the provisions of SECTION 10(a)
hereof, except for liability caused by the negligence or willful acts
of Landlord or its agents, employees or contractors, Tenant agrees to
defend, protect, indemnify and save harmless Landlord and its partners,
affiliates, officers, agents, servants and employees from and against
all liability to third parties arising out of the use of the Premises
or the acts or omissions of Tenant or its servants, agents, employees,
contractors, suppliers or workers.
Except for liability caused by the negligence or willful acts or
omissions of Tenant or Tenant's partners, affiliates, officers, agents,
servants or employees and subject to SECTION 10(a) hereof, Landlord
agrees to defend, protect, indemnify and save harmless Tenant and its
partners, shareholders, directors, affiliates, officers, agents,
servants, contractors and employees from and against all liability to
third parties arising out of negligent acts or omissions of Landlord or
its servants, agents, employees, contractors, suppliers or workers.
The provisions of this SECTION 12 shall survive the expiration of the
Term or earlier termination of this Lease or the termination of
Tenant's right to possession of the Premises.
13. NONWAIVER
No waiver of any provision of this Lease shall be implied by any
failure of either Landlord or Tenant to enforce any remedy on account
of the violation of such provisions, even if such violation is
continued or repeated subsequently, and no express waiver shall affect
any provision other than the one specified in such waiver and that one
only for the time and in the manner specifically stated. No receipt of
monies by Landlord from Tenant after the termination of this Lease
shall in any way alter the length of the Term or of Tenant's right of
possession hereunder or after the giving of any notice shall reinstate,
continue or extend the Term or affect any notice given Tenant prior to
the receipt of such monies, it being agreed that after the service of
notice or the commencement of a suit or after final judgment for
possession of the Premises, Landlord may receive and collect any Rent
due, and the payment of said Rent shall not waive or affect said
notice, suit or judgment.
14. CONDEMNATION
If the Land or the Building (or any portion of the Building, the loss
of which would require reconfiguration or restoration of the Building
which Landlord reasonably estimates will cost in excess of $2,500,000)
shall be taken or condemned by any competent authority for any public
or quasi-public use or purpose, Landlord shall have the right,
exercisable at its sole discretion, to cancel this Lease upon not less
than sixty (60) days notice prior to the date of cancellation
designated in the notice. No money or
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other consideration shall be payable by Landlord to Tenant for the
right of cancellation and Tenant shall have no right to share in the
condemnation award or in any judgment for damages caused by such taking
or condemnation. Notwithstanding the foregoing, Tenant may pursue a
separate award to recover the cost of Tenant's moving expenses and
improvements to the Premises paid for by Tenant and the loss of any
trade fixtures or personal property, provided that such separate award
shall not reduce the award or judgment recoverable by Landlord.
15. ASSIGNMENT AND SUBLETTING
(a) Subject to any provisions of this SECTION 15 to the contrary,
Tenant shall not, without the prior written consent of
Landlord, which consent shall not be unreasonably withheld or
delayed, (i) assign, convey or mortgage this Lease or any
interest hereunder; (ii) permit to occur or permit to exist
any assignment of this Lease, or any lien upon Tenant's
interest, voluntarily or by operation of law; (iii) sublet the
Premises or any part thereof; (iv) advertise as available for
sublet or assignment all or any portion of the Premises,
except that Tenant may advertise to the brokerage community so
long as such advertising is in keeping with a standard of
professionalism and Landlord is given advance notice and
copies of such advertisements; or (v) permit the use of the
Premises by any parties other than Tenant and its employees.
Any such action on the part of Tenant shall be void and of no
effect. There shall be no partial assignment of Tenant's
interest in this Lease. Notwithstanding anything contained
herein to the contrary, Landlord shall not be deemed to have
acted unreasonably in its election not to consent to any such
action on the part of Tenant because (aa) a Default shall have
occurred and be continuing under this Lease or Tenant shall
otherwise be in default in the performance of the terms,
covenants or conditions contained in this Lease, (bb) the
proposed assignee or sublessee (the "Proposed Tenant") shall
be an existing tenant or occupant of the Building, (cc) such
assignment or subletting shall cause Landlord to be in breach
of any "exclusive use" or similar provision contained in any
other lease for space in the Building (provided that such
provision shall not be in conflict with the use provision set
forth in the SCHEDULE), (dd) in the reasonable judgment of
Landlord, the Proposed Tenant is of a character or is engaged
in a business which would be deleterious to the reputation of
the Building, or the Proposed Tenant is not sufficiently
financially responsible to perform its obligations under any
such assignment or sublease, (ee) the portion of the Premises
which Tenant proposes to sublease including the means of
ingress and egress thereto and the proposed use thereof, and
the remaining portion of the Premises will violate any city,
state or federal law, ordinance or regulation; (ff) the
Proposed Tenant is a government agency (or any subdivision
thereof); (gg) the Proposed Tenant is a party with whom
Landlord is then actively negotiating a lease for space in the
Building, provided, however, that the foregoing are merely
examples of the reasons for which Landlord may reasonably not
consent to any such actions by Tenant and shall not be deemed
exclusive of any reason for reasonably making such election,
whether similar or dissimilar to the foregoing examples. The
term "sublease" and all words derived therefrom, as used in
this SECTION 15 shall include any subsequent sublease or
assignment of such sublease and any other interest arising
under such sublease. Landlord's consent to any
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assignment, subletting or transfer or Landlord's election to
accept any assignee, subtenant or transferee as the Tenant
hereunder and to collect rent from such assignee, subtenant or
transferee shall not release Tenant or any subsequent Tenant
from any covenant or obligation under this Lease, and Tenant
further expressly acknowledges and agrees that any renewal
rights, expansion rights, reduction rights, rights of first
offer, termination rights or limitations on Taxes or Operating
Expenses shall be deemed personal to the original Tenant and
shall not inure to the benefit of any assignee (other than a
Permitted Assignee), subtenant or transferee taking from the
original Tenant. Landlord's consent to any assignment,
subletting or transfer shall not constitute a waiver of
Landlord's right to withhold its consent to any future
assignment, subletting, or transfer. Landlord may condition
its consent upon execution by the subtenant or assignee of an
instrument confirming such restrictions on further subleasing
or assignment and joining in the waivers and indemnities made
by Tenant hereunder insofar as such waivers and indemnities
relate to the affected space. Without limiting the foregoing,
Tenant agrees to indemnify, defend and hold Landlord and its
employees, agents, their officers and partners harmless from
and against any claims made by any broker or finder for a
commission or fee in connection with any subleasing or
assignment by Tenant or any subtenant or assignee of Tenant.
(b) If Tenant desires the consent of Landlord to an assignment or
subletting, Tenant shall submit to Landlord, at least thirty
(30) days prior to the proposed effective date of the
assignment or sublease, a written notice which includes:
(i) All documentation then available related to the
proposed sublease or assignment (copies of the final
executed documentation are to be supplied to Landlord
by Tenant as soon as possible, but in any event at
least ten (10) business days prior to the effective
date of such assignment or sublease); and
(ii) Reasonably sufficient information to permit Landlord
to determine the identity and character of the
proposed subtenant or assignee and the financial
condition of the proposed assignee or subtenant.
Landlord agrees to notify Tenant as to whether
Landlord consents to such assignment or sublease within thirty
(30) days after receipt by Landlord of all documents required
pursuant to (i) and (ii) above including final executed
documentation. If the terms of the proposed sublease or
assignment change in any material respect from the terms
contained in the documents delivered to Landlord pursuant to
(i) or (ii) above, or the identity of the sublessee or
assignee changes then Tenant shall resubmit such documents to
Landlord and indicate in writing such changes and Landlord
shall have an additional ten (10) business days after receipt
of such revised documents to either approve or disapprove of
such assignment or sublease.
(c) In addition to withholding its consent Landlord shall have the
right to terminate this Lease in the event of a proposed
assignment of this Lease or a proposed sublease of the entire
Premises or to terminate this Lease as to that portion of the
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Premises which Tenant seeks to sublet, if Tenant seeks to
sublease less than the entire Premises. Landlord may exercise
such right to terminate by giving written notice to Tenant at
any time on or before the date by which Landlord is required
to consent or object to such assignment or sublease. If
Landlord exercises its right to terminate, the Lease or
portion thereof shall be deemed terminated effective as of,
Landlord shall be entitled to recover possession of and Tenant
shall surrender such portion of the Premises on the later of:
(i) the proposed date for possession by such assignee or
subtenant, or (ii) ninety (90) days after the date of
Landlord's notice of termination to Tenant.
(d) If Landlord consents to any assignment of this Lease or a
sublease of the Premises, as a condition of Landlord's
consent, Tenant shall pay to Landlord any reasonable
attorneys' fees and expenses incurred by Landlord in
connection with such assignment or sublease plus fifty percent
(50%) of all Sublease Profits (as defined below) derived by
Tenant from such assignment or sublease. "Sublease Profits"
shall mean the entire excess (after deducting all reasonable
costs of subletting, including, without limitation, brokerage
commissions, rent concessions and improvement allowances) of
revenues generated by the assignment of this Lease or the
subleasing of the Premises over the Rent applicable thereto.
All such revenues shall be applied first to reimbursement of
such costs of subletting or assigning until they are paid in
full. Tenant shall furnish Landlord with a sworn statement,
certified by an officer of Tenant, setting forth in detail the
computation of Sublease Profits, and Landlord, or its
representatives, shall have access to the books, records and
papers of Tenant in relation thereto, and to make copies
thereof. If a part of the consideration for such assignment
shall be payable other than in cash, the payment to Landlord
shall be payable in accordance with the foregoing percentage
of the cash and other non-cash considerations in such form as
is reasonably satisfactory to Landlord. Such percentage of
Sublease Profits shall be paid to Landlord promptly by Tenant
upon Tenant's receipt from time to time of periodic payments
from such assignee or subtenant or at such other time as
Tenant shall realize Sublease Profits from such assignment or
sublease. If such sublease or assignment is part of a larger
transaction in which other assets of Tenant are being
transferred, the consideration for the assignment or sublease
shall be the amount by which the fair market value of the
Premises exceeds the value of the Rent to be paid by Tenant
hereunder.
(e) Subject to the provisions of SECTION 15(f) hereof, if Tenant
is a partnership, a withdrawal or change, whether voluntary,
involuntary or by operation of law or in one or more
transactions, of partners owning directly or indirectly a
controlling interest in Tenant shall be deemed an assignment
of this Lease and subject to the provisions of this SECTION
15. If Tenant is a corporation, any dissolution, merger,
consolidation or other reorganization of Tenant, or the sale,
transfer or redemption of a direct or indirect controlling
interest in the capital stock of Tenant, in one or more
transactions, shall be deemed a voluntary assignment of this
Lease and subject to the provisions of this SECTION 15.
Neither this Lease nor any interest therein nor any estate
created thereby shall pass by operation of law or otherwise to
any trustee, custodian or receiver in bankruptcy of Tenant or
any assignee for the assignment of the benefit of creditors of
Tenant.
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(f) Notwithstanding anything contained in this SECTION 15 to the
contrary, Tenant shall have the right, without Landlord's
consent, to assign or sublet all of the Premises to Permitted
Assignees (as hereinafter defined), provided that such
assignment or subletting shall not relieve Tenant of its
primary responsibility for the performance of all obligations
of Tenant hereunder, and in the event of an assignment to a
Permitted Assignee, such Permitted Assignee assumes, pursuant
to an agreement in form and substance reasonably satisfactory
to Landlord, the obligations of Tenant hereunder and in the
event of a sublet, such sublet is governed by a form of
sublease reasonably approved in advance by Landlord. As used
herein, a "Permitted Assignee" shall mean (i) any entity owned
or controlled by Tenant, (ii) any entity of which Tenant is a
subsidiary (on any level), (iii) any entity which is under
common ownership or control with Tenant, (iv) any entity into
which Tenant is merged or consolidated or which consolidates
into Tenant, (v) any entity which acquires all or
substantially all of the asset or stock of Tenant, or (vi) a
transaction in which Tenant becomes an entity whose shares of
stock or other ownership interests are, directly or
indirectly, sold on a national stock exchange or an
inter-dealer quotation system and in the event the foregoing
transaction has occurred any subsequent sale of ownership
interests or issuance of new ownership interests, directly or
indirectly in Tenant, provided in each case that Landlord is
reasonably satisfied with the business reputation and
financial condition of such entity, it being understood that
if such entity has a net worth at least equal to that of
Tenant on the date of such assignment, subletting or transfer
and maintains the Security Deposit Amount, the financial
condition of such entity shall be deemed satisfactory to
Landlord. Further, Tenant agrees to deliver to Landlord,
within ten (10) business days subsequent to the effective date
of such assignment or sublease, fully executed copies of the
documents effectuating such assignment or sublease.
16. SURRENDER OF POSSESSION
Upon the expiration of the Term or upon the termination of Tenant's
right of possession, whether by lapse of time or at the option of
Landlord as herein provided, Tenant shall forthwith surrender the
Premises to Landlord in good order, repair and condition, ordinary wear
and damage resulting from fire or other casualty and condemnation
excepted. Any interest of Tenant in the alterations, improvements,
installations and additions to the Premises made or paid for by
Landlord or Tenant shall, without compensation to Tenant, become
Landlord's property at the termination of this Lease by lapse of time
or otherwise and such alterations, improvements, installations and
additions shall be relinquished to Landlord in good condition, ordinary
wear excepted. Prior to the termination of the Term or of Tenant's
right of possession Tenant shall remove its office furniture, trade
fixtures, office equipment and all other items of Tenant's movable
property on the Premises. Unless requested to do so by Landlord, Tenant
shall not have any right to remove, any alterations, improvements,
installations or additions, which shall include built-in furniture or
shelves and all other attached items, excluding trade fixtures. Tenant
shall pay to Landlord upon demand the cost of repairing any damage to
the Premises and to the Building caused by any such removal. If Tenant
fails or refuses to remove any such property from the Premises, Tenant
shall be conclusively presumed to have abandoned the same, and title
thereto shall thereupon pass to Landlord without any
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cost either by set-off, credit, allowance or otherwise, and at its
option Landlord may: (i) accept the title to the property; (ii) or at
Tenant's expense remove the property or any part in any manner that
Landlord shall choose, repairing any damage to the Premises caused by
such removal; and store, destroy or otherwise dispose of the property
without incurring liability to Tenant or any other person. Landlord
expressly acknowledges and agrees that nothing contained in this Lease
to the contrary (except as provided in the next sentence) shall require
Tenant to remove any improvements or additions installed by or on
behalf of Tenant pursuant to the Tenant Work Letter or any alterations
performed by Tenant pursuant to SECTION 8 above (unless at the time
Landlord shall approve the installation of such alterations, Landlord
shall have notified Tenant in writing that such removal would be
required at the expiration of the Term) or otherwise require Tenant to
bring the Premises back to "raw space". Notwithstanding anything herein
to the contrary, at Landlord's election, which may be made at any time
up until sixty (60) days prior to the end of the Term, Tenant shall be
obligated to remove any of the following designated by Landlord: the
Network Operating Center, the Universal Transport Exchange and all
conduit and cable installed in the Premises and the Building in
connection therewith, and Tenant shall repair (or pay for the cost of
repairing) any damage to the Premises and Building caused by such
removal; if Landlord fails to designate that Tenant remove the same,
Tenant shall leave the Network Operating Center, the Universal
Transport Exchange, and/or such conduit and cable in the Premises and
Building.
17. HOLDING OVER
During each month or portion thereof for which Tenant shall retain
possession of the Premises or any portion thereof after the expiration
or termination of the Term or of Tenant's right of possession, whether
by lapse of time or otherwise, Tenant shall pay to Landlord an amount
as Rent equal to 250% of the Base Rent and 250% of the Additional Rent
payable by Tenant for the last month of the immediately prior Lease
Year (i.e., the Lease Year which concluded on the day immediately
preceding the first day of Tenant's hold over) for all of the Premises
(regardless of whether Tenant retains possession of all or only a
portion of the Premises) for each month Tenant so retains possession of
the Premises (regardless of whether for all or only a portion of such
month); provided, however, that during (x) the first three months
rather than paying 250% as stated aforesaid, Tenant shall pay an amount
as Rent equal to 150% of the Base Rent and 150% of the Additional Rent
payable by Tenant for the last month of the immediately prior Lease
Year for all of the Premises (regardless of whether Tenant retains
possession of all or only a portion of the Premises) for each month
Tenant retains possession of all or a portion of the Premises
regardless of whether Tenant retains possession of all or a portion of
such Premises for all or only a portion of such month; and (y) the
second three months rather than paying 250% as stated aforesaid Tenant
shall pay an amount as Rent equal to 200% of the Base Rent and 200% of
the Additional Rent payable by Tenant for the last month of the
immediately prior Lease Year for all of the Premises (regardless of
whether Tenant retains possession of all or only a portion of the
Premises) for each month Tenant retains possession of all or a portion
of the Premises regardless of whether Tenant retains possession of all
or a portion of the Premises for all or only a portion of such month.
Tenant shall also pay all damages sustained by Landlord on account of
Tenant's holding over; provided, however, that Tenant shall not be
liable for consequential damages
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incurred by Landlord during the first three months of such holding over
if Tenant notifies Landlord in writing that it will be holding over for
such three (3) month period on or before the date which is six months
prior to the end of the Term. The provisions of this SECTION 17 shall
not be deemed to limit or constitute a waiver of any other rights or
remedies of Landlord provided herein or at law.
18. ESTOPPEL CERTIFICATE
Tenant agrees, that, from time to time upon not less than ten (10)
business days prior written request by Landlord, Tenant, or Tenant's
duly authorized representative having knowledge of the following facts,
will deliver to Landlord a statement in writing certifying: (i) that
this Lease is unmodified and in full force and effect (or if there have
been modifications, a description of such modifications and that the
Lease as modified is in full force and effect); (ii) the dates to which
Rent and other charges have been paid; (iii) that the Landlord is not
in default under any provision of this Lease, or, if in default, the
nature thereof in detail; and (iv) such further matters as are set
forth on the form of estoppel certificate attached hereto as EXHIBIT D
and made a part hereof, or as may be reasonably requested by Landlord,
it being intended that any such statement may be relied upon by any
mortgagees or prospective mortgagees, or any prospective assignee of
any Mortgagee, or any prospective and/or subsequent purchaser or
transferee of all or a part of Landlord's interest in the Land and/or
Building.
19. OBLIGATIONS TO MORTGAGEES
(a) SUBORDINATION. This Lease is subject and subordinate to all
present and future ground or underlying leases of the Land
and/or improvement leases of the Building and to the lien of
any mortgages or trust deeds now and hereafter in force
against the Land or Building and to all renewals, extensions,
modifications, consolidation and replacements thereof other
than the Mortgages dated as of November 7, 1994 made by ST
Holdings, Inc. to Sears Roebuck and Co. and Partners Tower,
L.P. and filed as Document Nos. 94956335 (refiled as Document
No. 95106247) and 94956336. At Landlord's request (and after
consent from any prior mortgagee or lessor if Tenant has
agreed not to so subordinate without such consent), Tenant
shall execute such further instruments or assurances as
Landlord may deem necessary to evidence, confirm or effectuate
such subordination of this Lease thereto or, if requested, to
make Tenant's interest in this Lease superior thereto. If any
mortgage shall be foreclosed or property encumbered thereby is
transferred in lieu of foreclosure, or if any such future
ground or improvements lease or underlying lease is
terminated: (i) the liability of the mortgagee, trustee,
transferee, purchaser at such foreclosure sale or ground
lessor or improvements lessor and the liability of a
subsequent owner (all of the foregoing parties are
collectively referred to as "Mortgagee") shall exist only with
respect to the period during which the Mortgagee is the owner
of the Land or Building and the Mortgagee shall be released
from any further liability upon its transfer of ownership; and
(ii) the Mortgagee shall not have any liability whatsoever for
the acts of the Landlord prior to any such transfer nor any
liability for any deposits made by Tenant hereunder unless
Mortgagee has received such deposits; and (iii) Tenant hereby
agrees to attorn to and recognize as Landlord, Mortgagee or
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any successor lessor under the Master Lease (as hereinafter
defined) and, upon request of the Mortgagee, will execute such
instruments as may be required by said Mortgagee or successor
lessor under the Master Lease; and (iv) so long as Tenant is
not in default hereunder Tenant's right to possession of the
Premises will not be disturbed and this Lease will not be
terminated.
(b) NOTICE TO LANDLORD AND MORTGAGEE. If any act or omission by
Landlord would give Tenant the right to damages from Landlord
or any rights with respect to this Lease, Tenant will not sue
for such damages or exercise any such rights (other than the
abatement of Rent set forth in SECTION 6(b) hereof) until (i)
it shall have given written notice of the act or omission to
Landlord and to the holder(s) of the indebtedness or other
obligations secured by any mortgage or deed of trust affecting
the Premises or of any ground or underlying lease, if the name
and address of such holder(s) have been furnished to Tenant;
and (ii) a reasonable period of time (in light both of the
time required to cure the act or omission and the effect of
the act or omission on Tenant's business operations in the
Premises) to cure the act or omission has elapsed following
the giving of the notice, during which time Landlord and such
holder(s), or either of them, their agents or employees, will
be entitled to enter upon the Premises and do therein whatever
may be necessary to cure the act or omission.
20. CERTAIN RIGHTS RESERVED BY LANDLORD
Landlord shall have the following rights, each of which Landlord may
exercise without notice to Tenant (but subject to maintaining access to
the Premises as described in subparagraph (iii) below), and without
liability to Tenant for damage or injury to property, person or
business on account of the exercise thereof, and the exercise of any
such rights shall not be deemed to constitute an eviction or
disturbance of Tenant's use or possession of the Premises and shall not
give rise to any claim for set-off or abatement of rent or any other
claim:
(i) To change the name or street address of the Building.
(ii) To install, affix and maintain any and all signs on
the exterior or interior of the Building.
(iii) To decorate or to make repairs, alterations,
additions, installations or improvements, whether
structural or otherwise, in and about the Building,
or any part thereof, and for such purposes to enter
upon the Premises, and during the continuance of any
of said work, to temporarily close doors, entryways,
public space and corridors in the Building and to
interrupt or temporarily suspend services or use of
facilities, all without affecting any of Tenant's
obligations hereunder, so long as the Premises are
reasonably accessible and usable by Tenant.
(iv) To furnish door keys, magnetic cards or electronic
access systems for the entry door(s) in the Premises
at the commencement of the Lease and to retain at all
times, and to use in appropriate instances, keys or
access cards to all doors within and into the
Premises. Tenant shall be permitted to
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install a card key or other access control system
which shall, as Tenant shall elect, be in addition to
or in lieu of any pre-existing locks or card key or
other access control system; provided, however, that
if Tenant installs such a system Tenant shall furnish
a pass key or equivalent device to Landlord.
Notwithstanding the provisions for Landlord's access
to the Premises, Tenant relieves and releases
Landlord of all responsibility arising out of theft,
robbery, pilferage and personal assault, excluding
gross negligence or willful misconduct of Landlord or
its agents. Upon the expiration of the Term or
Tenant's right to possession, Tenant shall return all
keys and access cards to Landlord and shall disclose
to Landlord the combination of any safes, cabinets or
vaults left in the Premises.
(v) To designate and approve all window coverings used in
the Building, including, without limitation, solar
window coverings.
(vi) To approve the weight, size and location of safes,
vaults, vertical files and other heavy equipment and
articles in and about the Premises and the Building
so as not to exceed the legal live load per square
foot designated by the structural engineers for the
Building, and to require all such items and furniture
and similar items to be moved into or out of the
Building and Premises only at such times and in such
manner as Landlord shall direct in writing. Tenant
shall not install or operate machinery or any
mechanical devices of any nature not directly related
to Tenant's ordinary use of the Premises without the
prior written consent of Landlord. Movements of
Tenant's property into or out of the Building or
Premises and within the Building are entirely at the
risk and responsibility of Tenant, and Landlord
reserves the right to require permits before allowing
any property to be moved into or out of the Building
or Premises.
(vii) To establish reasonable controls for the purpose of
regulating all property and packages, both personal
and otherwise, to be moved into or out of the
Building and Premises and all persons using the
Building after normal office hours.
(viii) To regulate in a reasonable manner delivery and
service of supplies and the usage of the loading
docks, receiving areas and freight elevators.
(ix) To show the Premises to prospective tenants (during
the last 15 months of the Term), lien holders and
purchasers at reasonable times upon prior notice to
Tenant.
(x) To enter the Premises at any reasonable time to
inspect the Premises.
(xi) If Landlord elects to make available to tenants in
the Building any services or supplies (or arranges a
master contract therefor), in the nature of messenger
services or other operational security features for
the Building, Tenant agrees to obtain its
requirements, if any, therefor from Landlord or under
any such contract, provided that the charges therefor
are reasonable,
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and that the services contracted for are similar to
those provided in other buildings in downtown
Chicago.
21. RULES AND REGULATIONS
Tenant agrees to observe the rules and regulations for the Building
attached hereto as EXHIBIT C and made a part hereof. Landlord shall
have the right from time to time to prescribe additional reasonable
rules and regulations for general application to all office tenants
which, in its reasonable judgment, may be desirable for the use, entry,
operation and management of the Premises and Building, each of which
rules and regulations and any amendments thereto shall become a part of
this Lease. Tenant shall comply with all of the rules and regulations;
provided, however, that the rules and regulations shall not contradict
or abrogate any right or privilege herein expressly granted to Tenant.
Landlord shall use reasonable efforts to enforce such rules and
regulations in a uniform non-discriminatory manner against all
similarly situated tenants.
22. DEFAULT AND LANDLORD'S REMEDIES
(a) DEFAULT. Any one or more of the following events shall be a
default ("Default") under this Lease: (i) If Tenant does not
pay the Rent or any installment thereof or does not pay any
other sum (other than replenishment of the Security Deposit
which is governed by clause (x) below) required to be paid by
Tenant under this Lease or under the terms of any other
agreement between Landlord (or Landlord's predecessors in
title) and Tenant and such default shall continue for five (5)
days after written notice to Tenant; or (ii) if Tenant fails
to observe or perform any of the other covenants or conditions
in this Lease which Tenant is required to observe and perform
and such default shall continue for twenty (20) days after
written notice to Tenant, provided, however, if such default
does not involve a hazardous condition and is susceptible to
cure but cannot, by the use of reasonable efforts, be cured
within twenty (20) days, Landlord shall not exercise any of
its remedies hereunder if and so long as (a) Tenant shall have
commenced to cure such default within twenty (20) days and (b)
Tenant shall thereafter continuously and diligently proceed to
cure such default in a manner reasonably satisfactory to
Landlord, and (c) such default shall be cured within sixty
(60) days of such notice to Tenant; or (iii) if a default is
made in the performance by Tenant of any covenant of this
Lease which involves a hazardous condition and is not cured by
Tenant promptly upon written notice to Tenant; or (iv) if the
interest of Tenant in this Lease shall be levied on under
execution or other legal process; or (v) if any voluntary
petition in bankruptcy or for corporate reorganization or any
similar relief shall be filed by TENANT; or (vi) if any
involuntary petition in bankruptcy shall be filed against
Tenant under any federal or state bankruptcy or insolvency act
and shall not have been dismissed within ninety (90) days from
the filing thereof; or (vii) if a receiver shall be appointed
for Tenant or any of the property of Tenant by any court and
such receiver shall not have been dismissed within ninety (90)
days from the date of his appointment; or (viii) if Tenant
shall make an assignment for the benefit of creditors; or (ix)
if Tenant shall admit in writing Tenant's inability to meet
Tenant's debts as they mature; or (x) if Tenant fails to
replenish the Security Deposit as provided in SECTION 29
hereof.
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(b) LANDLORD'S REMEDIES. If a Default occurs, Landlord may, at its
sole option, with or without further notice or demand of any
kind to Tenant or any other person, have any one or more of
the following described remedies in addition to all other
rights and remedies provided at law or in equity or elsewhere
herein (provided that Landlord shall use such efforts as are
required by law to mitigate any damages resulting from such
Default):
(i) Terminate this Lease and the Term created hereby and
immediately, repossess the Premises. If Landlord does
terminate this Lease and repossess the Premises,
Landlord shall be entitled to immediately recover, in
addition to any other sums or damages for which
Tenant may be liable to Landlord, as damages a sum of
money equal to the greater of: (1) the excess of the
present value of the Rent provided to be paid by
Tenant for the balance of the Term (disregarding any
unexpired period of initial Rent abatement) over the
present value of the anticipated fair market rent for
the Premises (computed based upon the yield on U.S.
Treasury obligations having a maturity closest to the
Termination Date) that could be achieved for said
period, after deduction of all anticipated expenses
of reletting, including, without limitation, all
allowances, abatements, construction costs, brokerage
commissions and tenant concessions likely to be
required under then-existing market conditions; or
(2) the unamortized portion of any rent abatements,
allowances, construction costs, brokerage commissions
and other costs incurred by Landlord in connection
with this Lease, as amortized on a straight-line
basis with interest on the unamortized amount at
twelve percent (12%) per annum over the initial Term
during which Base Rent is payable. Should the present
value of the anticipated fair market rent for the
Premises, after deduction of all anticipated expenses
of reletting, that could be achieved for the balance
of the Term exceed the present value of the Rent
provided to be paid by Tenant for the balance of the
Term, Landlord shall have no obligation to pay to
Tenant the excess or any part thereof or to credit
such excess or any part thereof against any other
sums or damages for which Tenant may be liable to
Landlord.
(ii) Landlord may terminate Tenant's right of possession
and may repossess the Premises by forcible entry and
detainer suit, by taking peaceful possession or
otherwise, without terminating this Lease. If
Landlord terminates Tenant's right of possession
without terminating this Lease, Landlord shall take
reasonable measures to the extent required by law, to
relet the same for the account of Tenant, for such
rent and upon such terms as shall be reasonably
satisfactory to Landlord. Reasonable measures shall
not obligate Landlord to show the Premises before
showing other space in the Building to a prospective
tenant. For the purpose of such reletting, Landlord
is authorized to decorate, repair, remodel or alter
the Premises and to relet the Premises at such rental
rate (which may be higher than the rental rate then
applicable under this Lease), as Landlord reasonably
determines to be necessary to maximize the effective
rent on reletting. If Landlord shall fail to relet
the Premises, Tenant shall pay to
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Landlord as damages the amount of the Rent reserved
in this Lease for the balance of the Term as due
hereunder. If the Premises are relet and a sufficient
sum shall not be realized from such reletting after
paying all of the costs and expenses of all
decoration, repairs, remodeling, alterations,
installations and additions and the expenses of such
reletting (including all allowances, abatements and
other tenant concessions required under then-existing
market conditions), to satisfy the Rent provided for
in this Lease, Tenant shall satisfy and pay the same
upon demand therefor from time to time. Tenant shall
not be entitled to any rents received by Landlord in
excess of the Rent provided for in this Lease. Tenant
agrees that Landlord may file suit to recover any
sums falling due under the terms of this SECTION 22
from time to time and that no suit or recovery of any
portion due Landlord hereunder shall be any defense
to any subsequent action brought for any amount not
theretofore reduced to judgment in favor of Landlord.
(c) JURY TRIAL WAIVER. Each party hereto hereby waives its rights
to a trial by jury in any action or proceeding based upon or
related to the subject matter of this Lease and the business
relationship that is being established. This waiver is
knowingly, intentionally and voluntarily made by each party
hereto and each party hereto acknowledges neither the other
party nor any person acting on behalf of the other party has
made any representations of fact to include this waiver of
trial by jury or has taken any actions which in any way modify
or nullify its effect. Each party hereto acknowledges that
this waiver is a material inducement to enter into this Lease
and that the other party has already relied on this waiver in
entering into this Lease and that the other party will
continue to rely on this waiver in its future dealings
hereunder. Each party hereto further acknowledges that it has
been represented (or has had the opportunity to be
represented) in the signing of this Lease and in the making of
this waiver by independent legal counsel.
23. EXPENSES OF ENFORCEMENT
The prevailing party shall be entitled to receive from the other party
hereto upon demand all reasonable costs, charges and expenses including
the reasonable fees and out-of-pocket expenses of counsel (including
in-house attorneys), agents and others retained by the prevailing party
incurred in enforcing the obligations hereunder against the other party
hereto.
24. COVENANT OF QUIET ENJOYMENT
Landlord covenants that Tenant, on paying the Rent, charges for
services and other payments herein reserved and on keeping, observing
and performing all the other terms, covenants, conditions, provisions
and agreements herein contained on the part of Tenant to be kept,
observed and performed, shall, during the Term, peaceably and quietly
have, hold and enjoy the Premises subject to the terms, covenants,
conditions, provisions and agreements hereof.
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25. REAL ESTATE BROKER
Each party represents that it has dealt with (and only with) the
Broker(s) specified in ITEM 9 of the SCHEDULE as broker in connection
with this Lease, and that insofar as such party knows, no other brokers
negotiated this Lease or are entitled to any commissions in connection
therewith. Each party agrees to indemnify, defend and hold the other
and its employees, agents, their officers and partners, harmless from
and against any claims resulting from a breach of the foregoing
representation. Landlord agrees to pay the Brokers in accordance with
the terms of the separate agreements between such Broker and Landlord.
26. MISCELLANEOUS
(a) RIGHTS CUMULATIVE. All rights and remedies of Landlord under
this Lease shall be cumulative and none shall exclude any
other rights and remedies allowed by law.
(b) INTEREST. All payments becoming due under this Lease and
remaining unpaid when due shall bear interest until paid at
the greater of (i) twelve percent (12%) per annum or (ii) four
percent (4%) per annum above the Prime Rate (as such term is
defined in SECTION 3(a)(ii)d hereof) .
(c) TERMS. The necessary grammatical changes required to make the
provisions hereof apply either to corporations or partnerships
or individuals, men or women, as the case may require, shall
in all cases be assumed as though in each case fully
expressed. Tenant acknowledges that "Rentable Area" as used in
this Lease includes a portion of the common and service areas
of the Building. Landlord makes no representation or warranty
as to the rentable or usable square footage of the Premises,
and Tenant agrees that Landlord's determination of the
Rentable Area of the Premises and Tenant's Proportionate Share
shall be conclusive and binding upon Tenant absent manifest
error.
(d) BINDING EFFECT. Each of the provisions of this Lease shall
extend to and shall, as the case may require, bind or inure to
the benefit not only of Landlord and of Tenant, but also of
their respective successors or assigns, provided this clause
shall not permit any assignment by Tenant contrary to the
provisions of SECTION 15 hereof.
(e) LEASE CONTAINS ALL TERMS. All of the representations and
obligations of Landlord and Tenant are contained herein and in
the Work Letter and other Exhibits attached hereto, and no
modification, waiver or amendment of this Lease or of any of
its conditions or provisions shall be binding upon the
Landlord or Tenant unless in writing signed by such party or
by a duly authorized agent of such party empowered by a
written authority signed by such party.
(f) DELIVERY FOR EXAMINATION. Submission of the Lease for
examination shall not bind Landlord in any manner, and no
Lease or obligations of the Landlord shall arise until this
instrument is signed by both Landlord and Tenant and delivery
is made to each.
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(g) NO AIR RIGHTS. No rights to any view or to light or air over
any property, whether belonging to Landlord or any other
person, are granted to Tenant by this Lease.
(h) MODIFICATION OF LEASE. If (i) any lender requires, as a
condition to its lending funds the repayment of which is to be
secured by a mortgage or trust deed on the Land and Building
or either, or (ii) the fee owner of the Land requires, as a
condition to entering into a ground lease with Landlord or a
lease of the entire Building with Landlord, that certain
modifications be made to this Lease, which modifications will
not require Tenant to pay any additional amounts or otherwise
change materially the rights, benefits or obligations of
Tenant hereunder, Tenant shall, upon Landlord's request,
execute appropriate instruments effecting such modifications.
(i) TRANSFER OF LANDLORD'S INTEREST. Landlord is Lessee under a
Master Lease dated as of November 7, 1994 ("Master Lease")
with State Street Bank and Trust Company as Trustee under the
233 South Wacker Drive Trust ("Beneficial Fee Owner") and
Chicago Title and Trust Company Trust No. 1095841 (the "Land
Trustee") under a Trust Agreement dated June 12, 1990. Tenant
agrees that Landlord has the right to transfer its interest in
the Land and Building and in this Lease. If such a transfer
occurs, Landlord shall automatically be released from all
liability under this Lease arising after the date of such
transfer and Tenant agrees to look solely to such transferee
for the performance of Landlord's obligations hereunder
arising after the date of such transfer. Tenant further
acknowledges that the Landlord may assign its interest in this
Lease to a mortgage lender as additional security and agrees
that such an assignment shall not release Landlord from its
obligations hereunder and that Tenant shall continue to look
to Landlord for the performance of its obligations hereunder.
(j) LANDLORD'S TITLE. Nothing herein contained shall empower
Tenant to commit or engage in any act which can, shall or may
encumber the estate of Landlord or the title of the Beneficial
Fee Owner or Land Trustee. The Master Lease provides in part:
4.3 RECOGNITION BY TOWER OWNER. Tower Owner
expressly agrees that: (a) Master Lessee may enter
into leases (and other agreements) extending beyond
the Term of this Master Lease; (b) all leases and all
tenant's rights thereunder (and other agreements and
the rights of contracting parties thereunder) will
under no circumstances ever be terminated or impaired
as a result of any termination, modification,
assignment or surrender of this Master Lease; and (c)
in the event of any termination, modification,
assignment or surrender of this Master Lease, all
leases and agreements shall remain in full force and
effect as direct leases or agreements between Tower
Owner (or Master Lessee's successor or assign) and
such tenants (or contracting parties). Master Lessee
may, on behalf and in the name of Tower Owner,
execute any and all recognition, non-disturbance and
other agreements that Master Lessee deems appropriate
to assure to tenants of the Tower Real Property (or
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contracting parties) that the provisions of their
leases (and agreements) will continue throughout
their entire term (including all extension and
renewal options), notwithstanding any termination,
modification or surrender of this Master Lease.
(k) PROHIBITION AGAINST RECORDING. Neither this Lease, nor the
Subordination, Non-Disturbance and Attornment Agreement, nor
any memorandum, affidavit or other writing with respect
thereto, shall be recorded by Tenant or by anyone acting
through, under or on behalf of Tenant, and the recording
thereof in violation of this provision shall make this Lease
null and void at Landlord's election.
(l) CAPTIONS. The captions of Sections, Subsections, Paragraphs
and Subparagraphs are for convenience only and shall not be
deemed to limit, construe, affect or alter the meaning of such
Sections, Subsections, Paragraphs or Subparagraphs.
(m) COVENANTS AND CONDITIONS. All of the covenants of Tenant
hereunder shall be deemed and construed to be "conditions," if
Landlord so elects, as well as "covenants" as though the words
specifically expressing or importing covenants and conditions
were used in each separate instance.
(n) ONLY LANDLORD/TENANT RELATIONSHIP. Nothing contained in this
Lease shall be deemed or construed by the parties hereto or by
any third party to create the relationship of principal and
agent, partnership, joint venturer or any association between
Landlord and Tenant, it being expressly understood and agreed
that neither the method of computation of Rent nor any act of
the parties hereto shall be deemed to create any relationship
between Landlord and Tenant other than the relationship of
landlord and tenant.
(o) APPLICATION OF PAYMENTS. Landlord shall have the right to
apply payments received from Tenant pursuant to this Lease
(regardless of Tenant's designation of such payments) to
satisfy any obligations of Tenant hereunder, in such order and
amounts, as Landlord in its sole discretion, may elect.
(p) DEFINITION OF LANDLORD. All indemnities of Tenant contained
herein which inure to the benefit of Landlord shall be
construed to also inure to the benefit of (i) Landlord's
beneficiaries if Landlord is a trust, (ii) Landlord's partners
if Landlord is a partnership, (iii) Landlord's shareholders,
officers and directors if Landlord is a corporation, and (iv)
the Beneficial Fee Owner and Land Trustee, (v) any current or
future mortgagees of the Land and/or Building, (vi) the
successors and assigns of any of the foregoing, and (vii) the
respective beneficiaries, shareholders, directors, officers,
partners, agents and employees, agents, managers, affiliates
and employees of any persons mentioned in clauses (i) through
(vi) above.
(q) TIME OF ESSENCE. Time is of the essence of this Lease and each
of its provisions.
(r) GOVERNING LAW. Interpretation of this Lease shall be governed
by the laws of the State of Illinois.
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(s) PARTIAL INVALIDITY. If any term, provision or condition
contained in this Lease shall, to any extent, be invalid or
unenforceable, the remainder of this Lease (or the application
of such term, provision or condition to persons or
circumstances other than those in respect to which it is
invalid or unenforceable) shall not be affected thereby, and
each and every other term, provision and condition of this
Lease shall be valid and enforceable to the fullest extent
possible permitted by law.
(t) PARKING. Tenant shall have the right to license (i) four
reserved spaces (subject to availability) in the parking
garage located in the Building and (ii) so long as an
affiliate of Landlord owns the property directly east of the
Sears Tower bounded by Wells, Franklin, Adams and Jackson
Streets and is operating the same as a garage, ten reserved
parking spaces in such garage. Such right shall be for the
benefit of Tenant but individual partners or employees of
Tenant may sign the individual parking agreements required for
parking in such garage, provided Tenant guarantees the same.
Tenant or its partners or employees may cease at any time
during the Term to license any such spaces, and after so doing
Tenant and its partners and employees shall no longer have any
right to use or license and shall have no further obligation
to pay for such parking spaces; provided, however, if Tenant
or its partners or employees shall thereafter desire to again
license such space(s) or shall desire to license additional
spaces, Tenant and its partners and employees may thereafter
license such spaces in the parking garages subject to
availability. Tenant's (and its partners and employees) use of
such parking spaces shall be subject to Landlord's "Rules and
Regulations for Garage Parkers" as the same may from time to
time be reasonably modified. Landlord may terminate any
license for a parking space for rule infractions. In addition,
Landlord may terminate any license for a parking space for
failure to pay the monthly parking charges therefor. The
monthly parking rate for reserved spaces in the Building
garage is $460 per space per month; the monthly parking rate
for reserved spaces in the garage located across from the
Sears Tower is $350 per space per month; either or both of
such rates may be adjusted by Landlord from time to time.
(u) GENERATOR. Tenant shall have an option during the first
twenty-four (24) months of the Term to lease a generator pad
located in the room on Lower Level I of the Building shown on
EXHIBIT F attached hereto and made a part hereof (the
"Generator Pad"), such pad being approximately 72 square feet
plus such additional area required for circulation and
partitions as required by applicable codes and/or Landlord's
reasonable requirements. If Tenant exercises its right to
lease the Generator Pad by giving Landlord written notice
thereof within such twenty-four (24) month period, Landlord
and Tenant shall enter into an amendment to this Lease in form
and substance reasonably satisfactory to Landlord
incorporating the Generator Pad into this Lease on the terms
and conditions contained herein, except that the rent for the
Generator Pad will be $30 per square foot gross. If Tenant
exercises its right and executes the amendment incorporating
the Generator Pad into the Lease, Tenant may, in accordance
with SECTION 8 of this Lease, install a 500 kilowatt gas-fired
standby generator to furnish standby electricity for Tenant's
Premises and the equipment located
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therein. All gas used by Tenant shall be paid for by Tenant.
In the event Tenant installs the generator, Tenant may also
install (in accordance with the provisions of SECTION 8
hereof) three (3) - four inch (4") and one (1) - one inch (1")
conduits to connect the Premises to the generator power
connection point. The location, path, installation methods and
removal methods for such conduit are subject to Landlord's
sole determination. The monthly charge for each four inch (4")
conduit is $450 and the monthly charge for each one inch (1")
conduit is $250. The charges for the generator pad and conduit
shall be considered part of the Rent due under the Lease.
In the event Tenant does not so elect to lease the Generator
Pad during the first twenty-four (24) months of the Term and
enter into an amendment to the Lease as heretofore provided,
if Tenant thereafter expresses an interest in leasing the
Generator Pad and such Generator Pad is still available for
leasing, Landlord will use reasonable efforts to accommodate
Tenant at Landlord's then market rates.
(v) SIGNAGE. Tenant will have the right to hang a 3-dimensional
structural logo (but not lettering) at locations 1 and 2
designated on EXHIBIT G attached hereto and made a part
hereof. Each structural logo will be approximately three (3)
feet in diameter similar to the logo shown on EXHIBIT G, made
of polished and brushed stainless steel, and will be hung by
properly sized wire inside the glass wall of the Third Floor
Premises. Tenant will also have the right to install Tenant's
logo (including lettering) in the Third Floor Premises in
location 3 designated on EXHIBIT G. Such logo will be of
approximately the same dimensions as the signage currently
located at location 3 and will be of polished stainless steel.
At such times during the Term that Tenant occupies at least
206,000 square feet of Rentable Area (and for so long as
Tenant occupies at least 175,000 square feet of Rentable Area)
and provided more than six (6) years remains on the original
Term of the Lease, Tenant shall be granted the right to
signage in the 3-10 floor elevator bank in the lobby of the
Building. Such sign shall be comparable in size and design to
the sign of Bank of America located in the 23-28 elevator bank
in the lobby of the Building. The cost of installing,
maintaining and removing all signs and restoring the Premises
shall be the sole cost of Tenant.
27. NOTICES
(a) All notices to be given under this Lease shall be in writing
and delivered either (i) personally upon an officer of
Landlord or Tenant, as the case may be, or (ii) by depositing
such notice in the United States mail, certified or registered
mail with return receipt requested, postage prepaid, or (iii)
via reputable overnight air courier service (such as Federal
Express or Airborne) and in every case addressed as set forth
in the SCHEDULE or if no address for Tenant is inserted in the
SCHEDULE, addressed to Tenant at Tenant's present address,
and, after occupancy of the Premises by Tenant, to Tenant at
233 South Wacker Drive, Chicago, Illinois 60606.
(b) Notice via personal service shall be deemed to have been given
when actually delivered. Notice given by certified or
registered mail shall be deemed to have
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been given on the second business day after the date that the
notice is deposited into the mail postage prepaid. Notice
given via air courier shall be deemed given one (1) business
day after it is accepted by said courier for next day
delivery.
(c) Either Landlord or Tenant may change the location at which it
receives notices to another location within the United States
of America upon not less than ten (10) days notice to the
other pursuant to this SECTION 27.
28. LIMITATION OF LIABILITY
Tenant, and any person claiming an interest in the Premises through or
under Tenant, each agree to look solely to the interests of Landlord,
Beneficial Fee Owner and Land Trustee from time to time in the Land and
Building, and no judgments against such persons may be satisfied out of
any other assets. In no event shall Landlord, Beneficial Fee Owner or
Land Trustee (or any of their respective officers, directors, agents,
advisors, managers, shareholders, partners, beneficiaries, affiliates
or successors and assigns) ever have any personal liability for any
covenant, agreement, obligation, warranty, representation, indemnity or
undertaking under this Lease or otherwise or be answerable or liable in
any equitable, judicial or administrative proceeding or order.
29. SECURITY DEPOSIT
(a) Landlord's obligations and Tenant's rights hereunder are
expressly conditioned upon Tenant depositing with Landlord
Letters of Credit (as defined in subparagraph (b) below)
aggregating the Security Deposit Amount (as defined in
subparagraph (b) below) as the Security Deposit specified in
ITEM 7 of the SCHEDULE, as security for the prompt, full and
faithful performance by Tenant of each and every provision of
this Lease and of all obligations of Tenant hereunder. Such
Letters of Credit shall be deposited by Tenant as follows: (i)
a Letter of Credit in the amount of $2,500,000.00 on or before
April 1, 2000, (ii) a Letter of Credit in the amount of
$2,000,000.00 on or before June 1, 2000, (iii) a Letter of
Credit in the amount of $1,500,000.00 on or before August 1,
2000, (iv) a Letter of Credit in the amount of $1,000,000.00
on or before October 1, 2000, (v) a Letter of Credit in the
amount of $500,000.00 on or before December 1, 2001, and (vi)
if Tenant exercises the Expansion Option, a Letter of Credit
in the amount of $400,000.00 on or before September 1, 2004.
(b) The term "Letter of Credit" as used herein shall mean an
irrevocable, unconditional letter of credit, in form and
substance acceptable to Landlord in Landlord's sole judgment,
expiring no earlier than one (1) year from the date of its
issuance in the amounts stated above in subparagraph (a)
issued by American National Bank and Trust Company of Chicago,
or another national bank acceptable to Landlord in Landlord's
sole discretion, which Letter of Credit (i) shall be payable
to Landlord upon demand made pursuant to presentation of an
unconditional sight draft with an accompanying certificate
stating that Landlord is entitled to draw upon the Letter of
Credit pursuant to terms of this Lease, and (ii) shall be
renewed as hereafter provided in subparagraph (d) below. The
term "Security Deposit Amount" as used herein shall mean
$7,500,000.00, increased to $7,900,000.00 in the event Tenant
exercises its Expansion Option; provided,
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however, if there does not then exist a default or breach by
Tenant of its obligations or liabilities under this Lease then
the Security Deposit Amount shall be decreased as follows:
(w) if Tenant has as of December 1, 2002 a net current
asset balance of at least $100,000,000.00 as shown on
its most recent quarterly balance sheet (the "Asset
Test") then the Security Deposit Amount shall be
reduced by $750,000.00 on December 1 of each year
commencing December 1, 2002, but never below the
amounts set forth in clause (y) below; provided,
however, that in the event Tenant fails to
demonstrate that it has maintained an asset balance
of $100,000,000.00 the Security Deposit Amount and
Letters of Credit shall cease to reduce further
unless Tenant again meets the Asset Test; and
(x) if Tenant passes the Asset Test and achieves a
"Triple B" bond rating by a reputable rating agency
reasonably approved by Landlord (the "Triple B Bond
Test") on any December 1 occurring on or after
December 1, 2002, then the Security Deposit Amount
shall be reduced by $1,500,000.00 on December 1 of
each year commencing in the year of or after 2002
(but without doubling up with a reduction based on
clause (w) above, i.e., a $1,500,000.00 reduction,
not a $2,250,000.00 reduction) in which Tenant
achieves such bond rating, but never below the
amounts set forth in clause (y) below; provided,
however, that, in the event Tenant fails to maintain
such Triple B bond rating the Security Deposit Amount
and Letters of Credit shall cease to reduce further
unless Tenant again meets the Triple B Bond Test;
provided, further, however, that if at the time
Tenant fails to maintain the Triple B bond rating
Tenant meets and maintains the Asset Test, at that
point in time that the Security Deposit Amount and
Letters of Credit equal the amount which Tenant would
have been required to deposit pursuant to clause (w)
above, Tenant shall again be able to reduce the
Security Deposit Amount and Letters of Credit in
accordance with clause (w) above; and
(y) if Tenant passes the Asset Test and achieves an "A"
bond rating or better by a reputable rating agency
reasonably approved by Landlord (the "A Bond Test")
on any December 1 occurring during or after calendar
year 2006, then the Security Deposit Amount shall be
reduced to $750,000.00 for the balance of the Term or
$817,000.00 for the balance of the Term if Tenant has
exercised the Expansion Option; provided, however,
that, in the event Tenant fails to maintain such A
bond rating the Security Deposit Amount and Letters
of Credit shall be reinstated to that amount which
Tenant would have been required to deposit but for
this clause (y) in accordance with clauses (w) and
(x) above and Tenant shall increase the Security
Deposit Amount and Letters of Credit accordingly; and
(z) if Tenant exercises the Expansion Option and (i) has
met the Asset Test, the Letter of Credit to be
furnished on September 1, 2004 shall be reduced from
$400,000.00 to $333,000.00 and the $750,000.00 number
referenced
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in clause (w) above shall be $817,000.00, or (ii) has
met the Triple B Bond Test, the Letter of Credit to
be furnished on September 1, 2004 shall be reduced
from $400,000.00 to $266,000.00 and the $1,500,000.00
number referenced in clause (x) above shall be
$1,634,000.00.
(c) If Tenant fails to perform any of its obligations hereunder,
Landlord may use, apply or retain such part of the Security
Deposit as necessary for the payment of: (i) any Rent or other
sums of money which Tenant may not have paid when due (after
the expiration of all notice and cure periods, if any); (ii)
any sum expended by Landlord on behalf of Tenant in accordance
with the provisions of this Lease; or (iii) any sum which
Landlord may expend or be required to expend by reason of a
Default by Tenant, including, without limitation, any damage
or deficiency in or from the reletting of the Premises as
provided in SECTION 22 hereof. The use, application or
retention of the Security Deposit, or any portion thereof, by
Landlord shall not prevent Landlord from exercising any other
right or remedy provided by this Lease or by law (it being
intended that Landlord shall not first be required to proceed
against the Security Deposit) and shall not operate as a
limitation on any recovery to which Landlord may otherwise be
entitled. If any portion of the Security Deposit is used,
applied or retained by Landlord for the purposes set forth
above, Tenant agrees, within ten (10) days after the written
demand therefor is made by Landlord, to reinstate the Letters
of Credit to the full Security Deposit Amount determined
pursuant to subparagraph (b) above.
(d) No later than thirty (30) days prior to the expiration of any
Letter of Credit then deposited hereunder, Tenant shall
deliver to Landlord a new Letter of Credit expiring not
earlier than one (1) year from the expiration of the prior
Letter of Credit and meeting all of the other requirements set
forth herein or an amendment to the existing Letter of Credit
extending the maturity date thereof for one (1) year. In the
event Tenant fails to timely provide such substitute Letter of
Credit or amendment to the existing Letter of Credit, Landlord
shall be entitled to draw the full amount of the existing
Letter of Credit.
(e) If Tenant shall fully and faithfully comply with all of the
provisions of this Lease, the Security Deposit, or any balance
thereof, shall be returned to Tenant without interest after
the expiration of the Term or upon any later date after which
Tenant has vacated the Premises, and following the payment by
Tenant of any deficiency owed by Tenant with respect to the
Expense Adjustment Amount or the Tax Adjustment Amount for the
final Lease Year hereof following the reconciliation thereof
in accordance with SECTIONS 3(b) and 3(d) hereof. In the
absence of evidence satisfactory to Landlord of any permitted
assignment of the right to receive the Security Deposit, or of
the remaining balance thereof, Landlord may return the same to
the original Tenant, regardless of one or more assignments of
Tenant's interest in this Lease or the Security Deposit. In
such event, upon the return of the Security Deposit, or the
remaining balance thereof to the original Tenant, Landlord
shall be completely relieved of liability under this SECTION
29 or otherwise with respect to the Security Deposit.
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(f) Tenant acknowledges that Landlord has the right to transfer or
mortgage its interest in the Land and the Building and in this
Lease and Tenant agrees that if such a transfer or mortgage
occurs, Landlord shall have the right to transfer or assign
the Security Deposit to the transferee or mortgagee. Upon such
transfer or assignment, Landlord shall thereby be released by
Tenant from all liability or obligation for the return of such
Security Deposit and Tenant shall look solely to such
transferee or mortgagee for the return of the Security
Deposit.
30. RIGHT OF FIRST OFFER
If at any time any space becomes available for leasing to tenants not
then occupying space in the Building on the 3rd, 4th, 7th or 8th floors
of the Building, and if Tenant is not then in Default hereunder, then
Landlord shall not lease such space to any party without first giving
Tenant (i) notice of the availability of such space which shall include
a description of the space, the proposed term and rental rate
(including escalations, if any), abatements and allowances, if any, and
other economic concessions that Landlord believes that it would agree
to with respect to such space (the "Offered Terms") and (ii) ten (10)
days after the date of such notice in which to commit in writing to
lease such space on the Offered Terms for the remainder of Term, taking
into account any modifications in such Offered Terms required by the
fact that the remaining Term may be longer or shorter than that
proposed by Landlord, and otherwise on the terms, covenants and
conditions contained in this Lease. If Tenant fails, refuses or is
otherwise unable to commit to such a lease for all of such space
offered within the 10-day period, Landlord shall have the right to
lease the space to any third party or parties on such terms as are
acceptable to Landlord.
31. EXPANSION OF PREMISES
(a) EXPANSION SPACES. Tenant shall have the right (the "Expansion
Option") hereinafter described in this SECTION 31 to expand
the Premises by leasing approximately 12,949 square feet of
Rentable Area on the eighth (8th) floor of the Building
identified herein and on Exhibit A-6 as the "Expansion Space"
on or about September 1, 2004 (the "Expansion Date"). Tenant
shall exercise its right to add such Expansion Space by
written notice to Landlord given no later than September 1,
2003. If Tenant fails to give the advance notice required
herein to Landlord by the specified date with respect to the
Expansion Space, Tenant will be deemed to have declined to
exercise its right to lease such Expansion Space.
(b) MECHANICS OF EXPANSION. Upon the exercise by Tenant of its
right to expand as provided in this SECTION 31, Landlord and
Tenant shall promptly proceed to enter into a written
agreement modifying this Lease to include such Expansion Space
in the Premises. The Expansion Space so included will be
considered to be a part of the Premises as of the Expansion
Date, subject to the provisions of SECTION 31(d) hereof. The
Expansion Spaces shall be governed by all the terms of this
Lease, except that (i) Tenant's Proportionate Share shall be
increased accordingly, (ii) the Base Rent for the Expansion
Space will be at the then escalated rate under this Lease and
thereafter escalated as set forth in Schedule 1, (iii)
possession of the Expansion Space shall be delivered to Tenant
in an "as is" condition,
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provided, however, Landlord shall pay Tenant a construction
Allowance in the amount of $22.12 per square foot of Rentable
Area in the Expansion Space in accordance with Landlord's then
standard Work Letter, and (iv) Tenant shall commence to pay
Rent for the Expansion Space on the earlier to occur of (x)
one hundred twenty days after Landlord tenders delivery
thereof to Tenant and (y) the date Tenant occupies the
Expansion Space for the conduct of its business therefrom. In
the event Tenant fails for any reason to execute and deliver
the lease amendment within twenty (20) business days of
Tenant's receipt of the same (including, Tenant's desire to
withdraw its exercise of the Expansion Option during such
twenty (20) business day period) Tenant's purported exercise
of its Renewal Option shall be of no force or effect and the
Expansion Option shall become null and void.
(c) DELAYS. Landlord will use reasonable diligence to make the
Expansion Space available to Tenant on the Expansion Date. If
Landlord is unable to do so for reasons beyond landlord's
reasonable control (however, Landlord's leasing of Expansion
Space to other tenants shall be deemed to be within Landlord's
control), Landlord will not be liable for such failure or
inability, nor shall this failure or inability impair the
validity of this Lease, nor extend the Term, but the Expansion
Space will not become a part of the Premises, and therefore
the commencement of Tenant's obligation to pay Rent on such
space shall be deferred, until possession is delivered to
Tenant.
(d) CONDITIONS TO EXERCISE. If on the date when Tenant notifies
Landlord of its election to exercise the Expansion Option,
Tenant shall be in Default hereunder or otherwise in default
in the performance of any of the terms, covenants or
conditions contained in this Lease, or if at any time
following the exercise of the Expansion Option and prior to
the applicable date that Tenant is to take possession of the
Expansion Space Tenant shall be in Default hereunder or
otherwise in default in the performance of any of the terms,
covenants or conditions contained in this Lease, Landlord
shall have the option, on written notice to Tenant, to declare
Tenant's election to expand to be void and of no effect.
32. TENANT'S OPTION TO RENEW
The Tenant is hereby granted one (1) five (5) year option to renew the
Lease ("Renewal Option"). If the Tenant desires to exercise the Renewal
Option, it shall so notify the Landlord, in writing, not later than the
first day of the fifteenth (15th) month prior to the then current
expiration date of the Term. Such notice shall only be effective if
delivered at a time when the Tenant is not in Default hereunder or
otherwise in default in the performance of any of its obligations under
the terms and provisions of this Lease. Within thirty (30) days
following its receipt of Tenant's notice of its desire to exercise the
Renewal Option, given at the time and in the manner provided above,
Landlord shall prepare and transmit to Tenant an appropriate amendment
to this Lease extending the Term for five (5) years ("Extended Term")
and specifying (i) the Base Rent for such extension, which shall be the
base rental rate then being offered and accepted by Landlord to other
tenants of comparable size and location renewing leases in the
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Building, as reasonably determined by Landlord and evidenced by recent
transactions which shall be disclosed to Tenant ("Market Rent") and
(ii) that all other terms and conditions during the Extended Term are
the same as those during the Term, except for any expansion rights,
reduction rights or limitations on taxes and operating expenses. In the
event the Tenant shall fail for any reason to execute and deliver the
lease amendment within twenty (20) business days of Tenant's receipt of
the same (including Tenant's desire to withdraw its exercise of the
Renewal Option during such twenty (20) business day period), Tenant's
purported exercise of its Renewal Option shall be of no force or effect
and the Renewal Option and any subsequent Renewal Options shall become
null and void. In the event Tenant shall be in Default hereunder or
otherwise in default in the performance of any of its obligations under
the terms and provisions of this Lease at the commencement date of any
Extended Term, then in either such event, at Landlord's option,
Tenant's purported exercise of its Renewal Option shall be of no force
or effect and the Renewal Option and any subsequent Renewal Options
shall become null and void.
IN WITNESS WHEREOF, the parties have executed this Lease as of the day
and year first above written.
LANDLORD:
TH TOWER LEASING LLC,
A DELAWARE LIMITED LIABILITY COMPANY
By: /s/ Stephen E Budorick
Its Vice President
TENANT:
UNIVERSAL ACCESS, INC.,
A DELAWARE CORPORATION
By: /s/ Robert Brown
Its Vice President
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EXHIBIT A
FLOOR PLAN OF PREMISES
A-1
<PAGE>
EXHIBIT B
TENANT WORK LETTER
This is the Tenant Work Letter referred to in the Lease of even date
herewith (the "Lease") wherein UNIVERSAL ACCESS, INC., a Delaware corporation
("Tenant"), has agreed to lease certain space from TH Tower Leasing LLC, a
Delaware limited liability company ("Landlord"), at 233 South Wacker Drive,
Chicago, Illinois. Unless otherwise defined herein, all capitalized terms used
herein shall have the respective meanings assigned to them in the Lease. Tenant
may elect to install the initial improvements to the Premises in stages at
different times for different portions of the Premises, in which case this
Tenant Work Letter shall be applied separately to each stage ("Stage") as work
is performed in each portion of the Premises. The term Premises as used herein
shall mean that portion of the Premises in such Stage.
1. TENANT'S WORK
(a) Tenant shall provide the construction material, hardware and
equipment and the labor to construct and install the
improvements to the Premises described in the Plans (as that
term is hereinafter described). The material, hardware and
equipment as incorporated into the Premises pursuant to the
Plans are herein collectively referred to as the "Tenant's
Work". Subject to the provisions of this Work Letter, Tenant
shall proceed diligently to cause the Tenant's Work approved
by Landlord to be completed in accordance with the terms and
conditions of the Lease and this Work Letter. Notwithstanding
anything contained herein to the contrary, Tenant's Work in
all events shall include the Building Standard material,
hardware and equipment described on, and Tenant shall
otherwise comply with, SCHEDULE 1 attached hereto.
(b) Tenant agrees to cause its interior space planner (the
"Interior Space Planner"), to deliver to Landlord preliminary
space plans for the Premises, which preliminary space plans
shall include the following information: (1) partition layout;
(2) door layout; (3) identification of ceiling types; (4)
identification of flooring types;(5) identification of
proposed room types and uses; (6) identification of all
special floor loading areas and above standard furniture and
equipment (files, safes, etc.), along with applicable
structural loading information to determine if any structural
reinforcing is required; and (7) general information in the
form of outline specifications for all proposed millwork,
electrical, mechanical, fire protection, communication
technology systems and plumbing requirements. Such preliminary
space plans are herein referred to as the "Preliminary Space
Plans". The Preliminary Space Plans are subject to Landlord's
review and approval. Upon receipt of a complete set of the
Preliminary Space Plans Landlord will review the same and
shall submit specific written comments to Tenant within five
(5) business days. Tenant shall cause the Preliminary Space
Plans to be revised to incorporate Landlord's comments.
(c) Tenant shall deliver to Landlord architectural design
development plans and specifications (the "Architectural
Design Plans") for the Work to be performed in the Premises.
The Architectural Design Plans shall be sufficient in all
respects for
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Tenant to cause the mechanical/electrical/communications
technology systems engineer, Environmental Systems Design,
Inc. (the "Engineer" or "ED") to commence the preparation of
the mechanical/electrical/fire protection/plumbing plans and
the communications technology design and review (herein
referred to as the "MEP/CT Engineering Plans") and without
limiting the foregoing shall include the following: (1) all of
Landlord's comments to the Preliminary Space Plans; (2)
demolition plans; (3) partition plans; (4) reflected ceiling
plans; (5) flooring plans; (6) electrical and telephone outlet
plans; (7) furniture plans; (8) floor loading plans indicating
any special floor loading areas, specific weights for
concentrated loads in sufficient detail to allow for
structural engineering; (9) computer equipment and support
area plans; (10) special area plans (i.e., kitchens, A/V,
washrooms, etc.); (11) door, frame and hardware schedules;
(12) wall finish plans; (13) elevations, details and sections
as required; and (14) specific critical information required
by the Engineer to sufficiently engineer the aforesaid
Premises. The Architectural Design Plans shall be subject to
Landlord's prior written approval. Landlord shall either
approve or disapprove the Architectural Design Plans in
writing within five (5) days of receipt by Landlord of a
complete set thereof. If Landlord does not approve the same,
Landlord shall advise Tenant in writing of the specific
changes required in such Architectural Design Plans so that
they will meet with Landlord's approval. Tenant shall cause
the Interior Space Planner to revise the Architectural Design
Plans pursuant to Landlord's comments and to deliver to
Landlord, within five (5) days after receipt by Tenant of such
comments, revised Architectural Design Plans noting the
changes for Landlord's approval. Landlord shall continue to
comment on such Architectural Design Plans and Tenant shall
continue to revise said Architectural Design Plans within
seven (7) days of receipt of comments from Landlord until such
Architectural Design Plans are approved by Landlord.
Notwithstanding anything herein to the contrary, if Tenant
elects to use the services of a
mechanical/electrical/communication systems design engineer
other than ESD, Landlord requires that Tenant submit drawings
to Landlord for review and approval by ESD. The cost of such
review, along with the cost of updating Landlord's
infrastructure documents, shall be borne by Tenant.
(d) Tenant agrees to cause the Interior Space Planner and the
Engineer to prepare the MEP/CT Engineering Plans for the
Premises and deliver said drawings to Landlord. Tenant and the
Engineer shall cooperate fully to provide all information
necessary for the timely completion of the MEP/CT Engineering
Plans and approval thereof by Landlord. Landlord agrees to
either approve or disapprove said MEP/CT Engineering Plans in
writing within five (5) days of receipt thereof by Landlord.
If Landlord disapproves of said MEP/CT Engineering Plans,
Landlord agrees to advise Tenant in writing generally of the
required changes. Tenant shall deliver to Landlord revised
MEP/CT Engineering Plans pursuant to Landlord's comments
within five (5) days of receipt of Landlord's comments. This
procedure shall be repeated until Landlord approves the MEP/CT
Engineering Plans for the Premises.
(e) Tenant agrees to cause to be delivered to Landlord fully
completed and coordinated Architectural Design Plans and
MEP/CT Engineering Plans (the
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"Construction Documents") sufficient in detail so that Tenant
can use such revised plans to obtain a building permit and
contractors' bids for the Work. The Construction Documents
must be in a final and complete form with all necessary design
elements identified and specified to fully bid and construct
the Work. The Construction Documents are subject to Landlord's
review and approval. Landlord shall review the Construction
Documents and submit written comments to Tenant within five
(5) days of receipt by Landlord of a complete set thereof. If
Landlord does not approve the same, Landlord shall advise
Tenant in writing generally of the changes required in the
Construction Documents so that they meet with Landlord's
approval. Tenant shall cause the Construction Documents to be
revised until they will meet with Landlord's approval. The
Architectural Design Plans, the MEP/CT Engineering Plans and
the Construction Documents are herein collectively referred to
as the "Plans".
(f) Tenant represents to Landlord that Tenant has reviewed its
needs and the above specified delivery dates with the Interior
Space Planner and that Tenant has assured itself that the
Plans can be delivered as herein above required. Tenant agrees
to cooperate with the Interior Space Planner as promptly as
possible and in any event in sufficient time to cause the
Plans to be prepared and timely delivered as herein above
required.
(g) Neither review nor approval by Landlord of any of the Plans
shall constitute a representation or warranty by Landlord that
such Plans either (i) are complete or suitable for their
intended purpose or (ii) comply with applicable laws,
ordinances, codes and regulations, it being expressly agreed
by Tenant that Landlord assumes no responsibility or liability
whatsoever to Tenant or to any other person or entity for such
completeness, suitability or compliance.
2. COST OF TENANT'S WORK
(a) Prior to commencement of any portion of the Tenant's Work,
Tenant shall obtain a contract to perform the Tenant's Work by
bidding the Tenant's Work to certain of those general
contractors from Landlord's list of approved contractors which
list is attached hereto as SCHEDULE 2 and made a part hereof.
Tenant agrees to promptly give Landlord a copy of the
contract. The general contractor must use only those
subcontractors on Landlord's list of approved subcontractors
set forth on SCHEDULE 3 attached hereto, as the same may be
amended by Landlord from time to time.
(b) Landlord shall give Tenant a total allowance ("Allowance") of
Thirty Five and 00/100 Dollars ($35.00) per square foot of
Rentable Area in the Premises as a credit towards the cost of
the Tenant's Work including furniture to be installed in the
Premises and the cost of Tenant's initial move to the
Premises. Tenant shall pay all costs of the Tenant's Work in
excess of the Allowance. All amounts shall be paid by Tenant
within thirty (30) days after Tenant's receipt of invoices
therefor. Tenant agrees that all of the Premises shall be
built out to a minimal standard so that at least Thirty and
00/100 Dollars ($30.00) per square foot
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multiplied by the number of square feet in that portion of the
Premises shall have been expended for "hard costs".
(c) Tenant shall pay a construction coordination and overhead fee
to Landlord in an amount equal to $.75 per square foot of
Rentable Area in the Premises to cover Landlord's
coordination, supervision and overhead and related expense
allocable to such work (the "Coordination Fee"). The
Coordination Fee shall be deducted by Landlord from the
Allowance. The Coordination Fee is intended to be all
inclusive and includes: (i) the cost of Landlord's preliminary
and ongoing review of the Preliminary Space Plans, the Plans,
and all other construction documents; (ii) the cost of
temporary electricity, temporary toilets, access to phone
service and hot and cold water to the Premises during the
construction period; (iii) all hoisting charges for reserving
and using the Building's freight elevators during normal
Building hours for the construction of the Work which use is
related to the Tenant's Work and any punchlist items; (iv) the
costs of trash removal and disposal (as described in SECTION
4(d) hereof); and (v) freight dock services and normal
Building security during Tenant's construction and move-in
period. Landlord agrees that Tenant shall not be required to
pay any sums in addition to the Coordination Fee for other
coordination services by Landlord unless such services are
requested in writing by Tenant.
(d) Landlord shall make payments of the Allowance only one time
per month upon receipt of invoices, sworn statements,
mechanics lien waivers as provided herein and such other
documentation as Landlord may reasonably request. Payment of
the Allowance shall be made by Landlord upon Tenant's
direction through a construction escrow with the title
insurance company selected by Landlord pursuant to escrow
instructions reasonably approved by Landlord and Tenant.
Landlord shall have no obligation to make any payment of the
Allowance at any time that Tenant is in Default hereunder.
Landlord shall pay the cost of the escrow.
(e) Prior to commencing Tenant's Work, Tenant shall submit to
Landlord a total project budget (the "Budget") outlining the
cost of the Tenant's Work plus the cost of all non-tenant
improvement items, including soft costs, cabling, and
telephone to be incurred by Tenant in connection with the
Premises (collectively, the "Tenant's Project Costs"). Tenant
shall deliver to Landlord an updated Budget with each draw
request for a payment of a portion of the Allowance. If, as of
the time any such draw request is made, the Tenant's Project
Costs pursuant to the current Budget exceed the amount of the
Allowance, Tenant shall deposit into the escrow the amount by
which the Tenant's Project Costs set forth in the current
Budget exceed the remaining amount of the Allowance. All
amounts so deposited by Tenant are herein collectively called
"Tenant Deposits".
(f) Tenant shall make draw requests on the escrow based upon the
percentage of Tenant's Project Costs incurred as of the date
of the draw request. Tenant shall present to Landlord and to
the title company which is acting as escrowee, a letter
requesting a disbursement of funds, invoices (or paid receipts
for each item paid by Tenant and for which Tenant is seeking
reimbursement), a copy of any
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cancelled checks pursuant to which such invoice has been paid,
and, with respect to any construction to any portion of the
Premises, such lien waivers (for lienable items) required by
the title company or Landlord. The lien waiver from the
general contractor and from each subcontractor and material
supplier must be delivered with each draw request. Landlord
shall have no obligation to make a payment until all waivers
for the prior draw are submitted.
(g) Draw requests shall be submitted to Landlord and the title
company not later than the 23rd day of the calendar month. Not
later than the 20th day of the next calendar month Landlord
will review Tenant's Work and Tenant's draw request and advise
Tenant in writing of any respects in which the draw request is
disapproved and the reason for such disapproval. Such advice
need not comply with the notice provisions of the Lease.
Otherwise, the draw request will be deemed approved. Draw
requests submitted by the 23rd day of a calendar month shall
be paid, subject to the foregoing approval procedure, not
later than the 25th day of the following calendar month.
Landlord and Tenant agree to cooperate in attempting to
resolve disapproved portions of each draw request.
(h) Notwithstanding the foregoing, in the event, and only in the
event, that on the date that all Tenant's Work and all other
non-improvement items have been completed and paid for the sum
of the Allowance and any Tenant Deposits exceed the amount
disbursed by the escrowee on account of Tenant's Project Costs
(the amount of such excess being herein called the "Excess
Funds") and provided that Tenant is not then in Default under
the Lease, Landlord shall apply such Excess Funds in the
following order of priority until such Excess Funds are
exhausted:
(i) Landlord shall pay to Tenant, within sixty (60) days
following the Commencement Date out of such Excess
Funds an amount not to exceed the Tenant Deposits, if
any;
(ii) Landlord shall pay, out of any remaining Excess
Funds, Tenant Project Costs upon the delivery to
Landlord of such bills, invoices, receipts and other
supporting documentation as Landlord may reasonably
require to evidence Tenant's expenditure of such
other Tenant Project Costs; and
(iii) The balance of such Excess Funds, if any, shall be
applied as a credit against Base Rent and Additional
Rent payable under the Lease beginning with the first
full monthly payments of Rent after the partial
abatement of Base Rent under SECTION 2(b) of the
Lease and the partial abatement of the Tax Adjustment
Amount and the Expense Adjustment Amount under
SECTION 3(e) of the Lease have all expired.
3. ACCESS BY TENANT; WORK IN HARMONY.
Tenant agrees for itself and its agents, representatives, employees, suppliers,
contractors, subcontractors, workmen, mechanics, and suppliers, that all such
parties shall work in harmony and not unreasonably interfere with Landlord and
Landlord's agents, representatives, employees, suppliers, contractors,
subcontractors, mechanics, and workmen in doing work for other tenants and
occupants of the Building. Landlord agrees for itself and its agents,
representatives,
B-5
<PAGE>
employees, suppliers, contractors, subcontractors, workmen, mechanics, and
suppliers, that all such parties shall work in harmony and not unreasonably
interfere with Tenant and Tenant's agents, representatives, employees,
suppliers, contractors, subcontractors, mechanics, and workmen in doing the
Tenant Work.
4. CONSTRUCTION REQUIREMENTS.
(a) Tenant agrees that the entry into the Premises by Tenant and
its contractors shall be deemed to be under all of the terms,
covenants, conditions and provisions of the Lease except as to
the covenant to pay Rent, and Tenant further agrees that in
connection therewith Landlord shall not be liable in any way
for any injury, loss, or damage which may occur to any of
Tenant's Work and installations made in the Premises or to
property placed therein prior to the Commencement Date and
thereafter, the same being at Tenant's sole risk. In addition,
Tenant shall require all entities performing work on behalf of
Tenant to provide protection for existing improvements to an
extent that is satisfactory to Landlord and shall allow
Landlord access to the Premises, for inspection purposes, at
all times during the period when Tenant is undertaking
construction activities therein. If any entity performing work
on behalf of Tenant causes any injury to any person or any
damage to the Premises, the Building, any other property of
Landlord or any other person, then Tenant agrees to indemnify,
defend and hold Landlord harmless from any loss, damage or
injury suffered in connection with any such damage or injury.
Further, Tenant shall cause such damage to be repaired at
Tenant's expense and if Tenant fails to cause such damage to
be repaired promptly upon Landlord's demand therefor, Landlord
may in addition to any other rights or remedies available to
Landlord under this Lease or at law or equity cause such
damage to be repaired, in which event Tenant shall promptly
upon Landlord's demand pay to Landlord the cost of such
repairs;
(b) All contractors and subcontractors shall use only those
service corridors and service entrances designated by Landlord
for ingress and egress of personnel and the delivery and
removal of equipment and material through or across any common
areas of the Building shall only be permitted with the written
approval of Landlord and during hours determined by Landlord.
Landlord shall have the right to order Tenant or any
contractor or subcontractor who violates the above
requirements to cease work in the Building and leave the
Building and remove its equipment and its employees from the
Building and, at Landlord's option restore any portion of the
Building on which it has done work to its original condition;
(c) As part of the Coordination Fee Landlord shall allow Tenant
and Tenant's contractors to have use of the hoist serving the
Building during normal operating hours. To the extent Tenant
or Tenant's contractors require use of the hoist after normal
operating hours Landlord shall use reasonable efforts to
accommodate Tenant and the cost thereof shall be determined at
Landlord's reasonable discretion. Landlord shall not be
required to defer use of the hoist by Landlord or others until
after normal operating hours in order to allow use of the
hoist by Tenant or Tenant's contractors during normal
operating hours. Scheduling of
B-6
<PAGE>
Tenant's work in the Premises and the use of said hoist shall
be at the reasonable discretion of Landlord or Landlord's
contractor;
(d) During the performance of Tenant's Work and Tenant's
fixturing, Landlord may provide trash removal service from a
location designated by Landlord. Tenant shall be responsible
for breaking down boxes and placing trash in Landlord's
containers at such designated location. Tenant shall
accumulate its trash in containers supplied by Landlord and
Tenant shall not permit trash to accumulate within the
Premises or in the corridors or public areas adjacent to the
Premises. Tenant shall cause each entity employed by it to
perform work on the Premises to abide by the provisions of
this Work Letter as to the storage of trash and shall require
each such entity to perform its work in a way that dust or
dirt is contained entirely within the Premises and not within
any other portion of the Building and shall cause Tenant's
contractors to leave the Premises in broom clean condition at
the end of each day. Should Landlord deem it necessary to
remove Tenant's trash because of accumulation, Tenant shall
pay to Landlord an additional reasonable charge for such
removal on a time and material basis. The cost to Tenant for
Landlord removing such trash will be based on reasonable and
competitive cost which Tenant could have secured independently
had Landlord not provided such service;
(e) Tenant agrees that all services and work performed on the
Premises by, on behalf of, or for the account of Tenant,
including installation of telephones, carpeting, materials and
personal property delivered to the Premises shall be done in a
first-class workmanlike manner using only good grades of
material and shall be performed only by persons covered by a
collective bargaining agreement with the appropriate trade
union;
(f) Tenant agrees to protect, indemnify, defend and hold Landlord
and its agents, partners, contractors and employees harmless
from and against any and all losses, damages, liabilities,
claims, liens, costs, and expenses, including reasonable
attorneys' fees, of whatever nature including those to the
person and property of Tenant, its employees, agents,
invitees, licensees and others arising out of or in connection
with the activities of Tenant or Tenant's contractors in or
about the Premises or the Building, and the cost of any
repairs to the Premises or the Building necessitated by
activities of Tenant or Tenant's contractors;
(g) Tenant shall secure, pay for, and maintain during the
continuance of its work within the Premises, policies of
insurance with such coverages and such amounts as Landlord may
reasonably require, which policies shall be endorsed to
include Landlord and its contractor and their respective
employees and agents and Landlord's mortgagees as additional
insured parties and which shall provide thirty (30) days prior
written notice of any alteration or termination of coverage,
in such amounts and insuring such risks as Landlord may
require. Tenant shall not permit Tenant's contractors to
commence any work until all required insurance has been
obtained by Tenant and certificates evidencing such coverage
have been delivered to Landlord; and
B-7
<PAGE>
(h) Tenant's agents, subcontractors and vendors shall be required
to conform with the "Contractor & Vendor Guidelines" attached
hereto as SCHEDULE 4 and made a part hereof.
5. MISCELLANEOUS.
(a) Except as expressly set forth herein, Landlord has no other
agreement with Tenant and has no other obligation to do any
other work or pay any amounts with respect to the Premises.
Any other work in the Premises which may be permitted by
Landlord pursuant to the terms and conditions of the Lease
shall be done at Tenant's sole cost and expense and in
accordance with the terms and conditions of the Lease.
(b) This Work Letter shall not be deemed applicable to any
additional space added to the original Premises at any time or
from time to time, whether by any options under the Lease or
otherwise, or to any portion of the original Premises or any
additions thereto in the event of a renewal or extension of
the initial term of the Lease, whether by any options under
the Lease or otherwise, unless expressly so provided in the
Lease or any amendment or supplement thereto.
(c) The failure by Tenant to pay any monies due Landlord pursuant
to this Work Letter within the time period herein stated shall
be deemed a Default under the terms of the Lease for which
Landlord shall be entitled to exercise all remedies available
to Landlord for nonpayment of Rent. All late payments shall
bear interest and shall be subject to a late charge pursuant
to the Lease.
(d) This Work Letter is being executed in conjunction with the
Lease and is subject to each and every term and condition
thereof, including without limitation, the limitations of
Landlord's liability set forth therein.
(e) Tenant shall be solely responsible to determine at the site
all dimensions of the Premises and the Building which affect
any work to be performed by or for Tenant hereunder.
B-8
<PAGE>
Dated this 10th day of March, 2000.
LANDLORD:
TH TOWER LEASING LLC,
a Delaware limited liability company
By: /s/ Stephen E. Budorick
Its: Vice President
TENANT:
UNIVERSAL ACCESS, INC.,
a Delaware corporation
By: /s/ Robert Brown
Its: Vice President
B-9
<PAGE>
SCHEDULE 1
BUILDING STANDARD MATERIALS
SEARS TOWER
CEILING GRID - The ceiling system will be a City of Chicago
approved plenum rated, suspended 2' x 2' grid for
acoustical lay-in tile, air supply and return will
flow through compatible light fixtures with
supplemental diffusers as required. The suspended
2' x 2' grid will be Chicago Metallic Corp.'s 3500
Series in white, Donn Fineline or a similar
substitute acceptable to Landlord.
CEILING TILE - 2' x 2' panels; "Cirrus Travertone" by
Armstrong or "Eclipse" by USG Interiors.
TENANT STANDARD - Tenant Standard Partitions per DeStefano and
PARTITIONS Partners Drawing TN00.2. All core corridors to
be demised and all partitions above entryway
doors to be demised. 2"stud, 20 gauge, 24" O.C.
Floor to underside of deck. Corridor side 5/8"
sheetrock and 1/2" sheetrock. Tenant side 5/8".
Sound batten insulation.
LIGHT FIXTURES - 2' x 2' or 2' x 4' three fluorescent lamps, air
handling, separately fused for 20 AMP circuits,
with 18 cell parabolic lens electronic ballasts,
T8 lamps and 3500K lamp. 2 x 4 light fixtures to
be installed north to south direction.
EXIT & STAIR SIGNAGE - ALKO "Edge-glo" Series RPC-210-E-GLR-AP (ceiling
mounted).
SPRINKLER HEADS - Phantom 1, Model PH-1 concealed sprinkler with
flush cover plate, bright chrome, by Grunau
Sprinkler Manufacturing Co. or Model G1 concealed
sprinkler with flush cover plate, bright chrome,
by Reliable Automatic Sprinkler Co., Inc. Note:
Flush covers are required.
VINYL COMPOSITION TILE
1. Composition 1 - Asbestos-Free
2. Class 2 (Through Pattern)
3. Gage: 1/8"
4. Wearing Surface: Smooth
CARPETING - Broadloom tackless with pad or carpet tiles.
Note: Direct glue down is not allowed.
WINDOW BLINDS - Thin slat horizontal blinds. Perimeter window
blinds furnished and installed by building.
DOORS - Full height, solid core (refer to Chicago code for
fire rating).
1
<PAGE>
HARDWARE - A. Schlage lever handle, L-series 01A625 on
public corridor doors and Schlage compatible
hardware on all other doors.
B. Hinges - Stanley or Hager, in anodized
bronze finish, 2 pair per leaf, 4" x 4 1/2".
PUBLIC ADDRESS SYSTEM - Existing building emergency public address
speakers must be replaced to match base building
standard type: Wheelock ET-1080W. Existing speaker
wiring to be zoned throughout floor for building
standard speaker diffusion by tenant.
PRIVATE WASHROOMS - Private washrooms must have floor drains.
THERMOSTATS - One thermostat per bay for induction units
(optional).
VAV/DDC - All new construction and remodeling must have VAV
boxes/DDC control. 1 box per useable 1600 sq. ft.
OPEN SITE DRAINS - Open site drains for Package A/C units are to be
installed at floor level or under sink cabinets.
Open site drains in plenum ceiling are prohibited.
CAD DRAWINGS - All architectural and MEP drawings must be
produced on CAD.
FLOOR MOUNTED A/C UNITS - All new floor mounted A/C units must have a floor
drain.
ACCESS PANELS - If broadloom carpet is specified, the architect
make provisions for future access to the under
floor cell system hand holes and all utilized
cells.
ELEVATOR LOBBIES - The design must account for code compliant egress
out of the passenger and freight elevator lobbies
at all times with access to a minimum of one exit
stairwell. The Tenant's security concerns should
be evaluated with respect to this requirement.
STONE INSTALLATIONS - If stone flooring is specified, please coordinate
the stone installation so that there is no
tripping hazard at the elevator sills due to
elevation differences.
CECO DOORS - The existing CECO doors on floors cannot be
disturbed. Only a decorative surface can be
applied to these doors with Landlord approval and
supervision. Modifications to core doors, frames
and hardware are prohibited.
INDUCTION UNIT AIR FLOW - Please design any fixed drywall partitioning,
furniture system, and equipment a minimum of 12" -
18' away and a minimum of 4" up from floor from
the induction units to allow for proper air flow
through and access to the units for building
maintenance and window washing.
2
<PAGE>
SCHEDULE 2
Revised 11/99
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
SEARS TOWER
- ----------------------------------------------------------------------------------------------------------------------------------
APPROVED GENERAL CONTRACTORS
- ----------------------------------------------------------------------------------------------------------------------------------
CONTRACTOR CONTACT PHONE # FAX #
- ----------------------------------------- ------------------------------------ ------------------------ --------------------------
<S> <C> <C> <C>
Clune Construction Chris Redath (312) 726-6103 (630) 419-8139
10 S. LaSalle Street, Suite 300
Chicago, IL 60603
- ----------------------------------------- ------------------------------------ ------------------------ --------------------------
Exclusive Construction Services Mike Rosner (630) 257-8527 (630) 257-8527
1224 133rd Court
Lemont, IL 60439
- ----------------------------------------- ------------------------------------ ------------------------ --------------------------
Executive Construction Co. James Pierzchalski (630) 472-5817 (630) 472-5858
2122 York Road, Suite 360
Chicago, IL 60523
- ----------------------------------------- ------------------------------------ ------------------------ --------------------------
Fredrickson KRJ Don Haton (312) 875-9244 (312) 875-2166
233 S. Wacker, Suite 570
Chicago, IL 60606
- ----------------------------------------- ------------------------------------ ------------------------ --------------------------
Interior Construction Group Steve Zuwala (312) 553-4949 (312) 553-0649
230 West Monroe, Suite 2530
Chicago, IL 60606
- ----------------------------------------- ------------------------------------ ------------------------ --------------------------
JC Anderson David Goss (630) 834-1669 (630) 834-0142
245 Sydney Court
Villa Park, IL 60181
- ----------------------------------------- ------------------------------------ ------------------------ --------------------------
Krahl Construction Doug Harner (312) 648-9800 (312) 648-4610
223 West Jackson
Chicago, IL 60606
- ----------------------------------------- ------------------------------------ ------------------------ --------------------------
Leonard Companies, Inc. Rick DuPraw (312) 329-9556 (312) 329-9790
333 West Wacker Drive, Suite 250
Chicago, IL 60606
- ----------------------------------------- ------------------------------------ ------------------------ --------------------------
The Meyne Company Mark Evans (312) 207-2100 (312) 207-0488
1755 West Armitage Avenue
Chicago, IL 60610
- ----------------------------------------- ------------------------------------ ------------------------ --------------------------
Pepper Construction Co. David Pepper (312) 266-4700 (312) 266-2792
643 North Orleans
Chicago, IL 60610
- ----------------------------------------- ------------------------------------ ------------------------ --------------------------
Reed Illinois Corporation Joseph Bekken (312) 943-8100 (312) 943-8141
930 West Division Street
Chicago, IL 60622
- ----------------------------------------- ------------------------------------ ------------------------ --------------------------
Turner Construction Co. Tom Wichlinski (312) 704-0770 (312) 704-0563
11 South LaSalle Street, Suite 1800
Chicago, IL 60603
- ----------------------------------------- ------------------------------------ ------------------------ --------------------------
Victor Construction Co. Greg Kolinski (312) 944-6901 $312) 944-6927
950 North Michigan Avenue, Suite 1275
Chicago, IL 60611
- ----------------------------------------- ------------------------------------ ------------------------ --------------------------
Walsh Construction Steve Downey (312) 563-5400 (312) 563-5467
929 West Adams
Chicago, IL 60607
- ----------------------------------------- ------------------------------------ ------------------------ --------------------------
</TABLE>
<PAGE>
SCHEDULE 3
Revised 11/99
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
SEARS TOWER
- ----------------------------------------------------------------------------------------------------------------------------------
APPROVED PLUMBING CONTRACTORS
- ----------------------------------------------------------------------------------------------------------------------------------
CONTRACTORS CONTACT PHONE # FAX #
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
<S> <C> <C> <C>
Great Lakes Plumbing & Heating Gene Hyken (312) 876-0813 (312) 876-1932
4521 West Diversey
Chicago, IL 60639
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
Johns Plumbing Mike Shudy (773) 286-9030 (773) 286-5073
3116 North Cicero
Chicago, IL 60641
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
Pientka Plumbing Bob Klauk (847) 296-3326 (847) 296-3321
10 West Kathleen
Des Plaines, IL 60016
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
</TABLE>
<PAGE>
Revised 11/99
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
SEARS TOWER
- ----------------------------------------------------------------------------------------------------------------------------------
APPROVED HVAC SUB-CONTRACTORS
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
CONTRACTORS CONTACT PHONE # FAX #
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
<S> <C> <C> <C>
Anchor Mechanical Noel Daly (312) 492-6994 (312) 492-6996
600 West Jackson Blvd.
Suite 150
Chicago, IL 60661
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
James Anderson, Inc. Thad Bednarz (708) 345-2400 (708) 343-0581
2030 Janice Ave.
Melrose Park, IL 60160
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
Climatemp Frank Senese (312) 829-3131 (312) 829-7510
315 North May
Chicago, IL 60607
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
Hill Mechanical Group Warren Hill (773) 929-6600 (773) 929-9549
4241 Ravenswood
Chicago, IL 60613
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
Midwest Mechanical Ron Hill (630) 655-4200 (630) 655-0730
540 Executive Drive
Willowbrook, IL 60521
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
Talmar Metal Products Ed Slowinski (708) 280-0461 (708) 693-3106
7703 West 98th Street
Hickory Hills, IL 60457
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
Thermflo Kevin O'Brian (847) 541-0029 (847) 541-0272
251 Holbrook Drive
Wheeling, IL 60090
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
</TABLE>
<PAGE>
Revised 11/99
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
SEARS TOWER
- ----------------------------------------------------------------------------------------------------------------------------------
APPROVED TELECOMMUNICATIONS CONTRACTORS
- ----------------------------------------------------------------------------------------------------------------------------------
CONTRACTOR CONTACT PHONE # FAX #
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
<S> <C> <C> <C>
Continental Electric Joel Johnson (847) 677-1600 (847) 677-1668
5900 West Howard
Skokie, IL 60077
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
Maron Electric Co. Allen Kazamie (847) 679-6500 (847) 679-6503
5401 West Fargo Avenue
Skokie, IL 60077
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
Prime Electric Mike Magee (312) 433-9111 (312) 433-6493
215 South Aberdeen
Chicago, IL 60601
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
Shamrock Electric Co. Lee Mattson (312) 876-2970 (312) 876-3908
1281 East Brummel
Elk Grove, IL 60007
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
</TABLE>
<PAGE>
Revised 11/99
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
SEARS TOWER
- ----------------------------------------------------------------------------------------------------------------------------------
APPROVED ELECTRICAL SUB-CONTRACTORS
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
CONTRACTOR CONTACT PHONE # FAX #
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
<S> <C> <C> <C>
Commercial Light Co. Scott Morris (708) 449-6900 (708) 449-6942
245 Fencl Lane
Hillside, IL 60162
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
Continental Electric Joel Johnson (847) 677-1600 (847) 677-1668
5900 W. Howard
Skokie, IL 60077
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
J.W. O'Brien Corp. Jack O'Brien (847) 965-7780 (847) 965-7796
6314 Lincoln Ave.
Morton Grove, IL 60053
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
Maron Electric Company Allen Kazamie (847) 679-6500 (847) 679-6503
5401 W. Fargo Avenue
Skokie, IL 60077
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
Prime Electric Mike Magee (312) 433-9111 (312) 433-6493
215 South Aberdeen
Chicago, IL 60601
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
Shamrock Electric Co. Lee Mattson (312) 876-2970 (312) 876-3908
1281 E. Brummel
Elk Grove Village, IL 60007
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
Palos Electric Company, Inc. Brian Crehan (312) 251-1368 (312) 251-1435
4630 West 138th Street
Crestwood, IL 60445
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
</TABLE>
<PAGE>
Revised 11/99
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
SEARS TOWER
- ----------------------------------------------------------------------------------------------------------------------------------
APPROVED FIRE, LIFE SAFETY CONTROLS, SECURITY SUB-CONTRACTORS
- ----------------------------------------------------------------------------------------------------------------------------------
FIRE, LIFE SAFETY CONTROLS, SECURITY
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
CONTRACTOR CONTACT PHONE # FAX #
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
<S> <C> <C> <C>
Advent Systems Inc. John Lothrop (630) 279-7171 (630) 279-7676
477 W. Wrightwood Ave.
Elmhurst, IL 60126
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
Chicago Communication Systems Luis Marrero (847) 956-8500 (847) 956-1593
1699 Elmhurst Road
Elk Grove, Illinois 60007
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
Electronic Systems USA, Inc. Mark Eggerding (708) 449-3334 (708) 449-3454
4413 Roosevelt Rd., 110-B
Hillside, IL 60162
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
Sentry Fire Protection Systems Mary McDonnell (773) 489-6700 (773) 489-1197
1322 West North Avenue
Chicago, IL 60622
- ----------------------------------------------------------------------------------------------------------------------------------
Note: ESUSA must make ALL final terminations to Base Building System.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Revised 11/99
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
SEARS TOWER
- ----------------------------------------------------------------------------------------------------------------------------------
APPROVED TEMPERATURE CONTROL SUB-CONTRACTORS
- ----------------------------------------------------------------------------------------------------------------------------------
TEMPERATURE CONTROLS
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
CONTRACTOR CONTACT PHONE # FAX #
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
<S> <C> <C> <C>
Advent Systems Inc. John Lothrop (630) 279-7171 (630) 279-7676
477 W. Wrightwood Ave.
Elmhurst, IL 60126
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
Electronic Systems USA, Inc. Mark Eggerding (708) 449-3334 (708) 449-3454
4413 Roosevelt Road
Suite 110-B
Hillside, IL 60162
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
Johnson Controls Joel Lehman (847) 364-1500 (847) 364-1536
3007 Malmo Drive
Arlington Heights, IL 60005
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
Landis & Gyr Powers John Dwan 1-800-339-7800 (847) 499-3454
5440 W. Fargo
Skokie, IL 60077
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
Thermflo Kevin O'Brian (847) 541-0029 (847) 541-0272
251 Holbrook Drive
Wheeling, IL 60090
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
</TABLE>
<PAGE>
Revised 11/99
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
SEARS TOWER
- ----------------------------------------------------------------------------------------------------------------------------------
APPROVED SPRINKLER/PIPE FITTER SUB-CONTRACTORS
- ----------------------------------------------------------------------------------------------------------------------------------
CONTRACTOR CONTACT TELEPHONE # FAX #
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
<S> <C> <C> <C>
Ewing-Doherty Mechanical Doug Ewing (630) 766-5920 (630) 766-0734
304 North York Road
Bensenville, IL 60101
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
Great Lakes Plumbing & Heating Gene Hyken (312) 876-0813 (312) 876-1932
4521 W. Diversey
Chicago, IL 60639
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
Superior Mechanical Systems Patrick Sullivan (708) 599-5008 (708) 599-5017
7738 West 99th Street
Hickory Hills, IL 60457
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
U.S. Fire Protection Mike Peterson (847) 816-0050 (847) 816-0098
28427 N. Ballard Drive
Lake Forest, IL 60045
- -------------------------------------- ------------------------------------- ------------------------- ---------------------------
</TABLE>
<PAGE>
SCHEDULE 4
CONTRACTOR & VENDOR GUIDELINES
For the
SEARS TOWER
TRIZECHAHN OFFICE PROPERTIES, INC.
November 1, 1999
<PAGE>
SEARS TOWER
PROJECT DIRECTORY
<TABLE>
<CAPTION>
DIRECTORS TITLE PHONE
- --------- ----- -----
<S> <C> <C>
Alex Pappas Director of Design & Construction.....................................875-3643
Tom Keaty Director of Operations................................................875-0492
Liz Iozzo Assistant to Directors of Operation, Design & Construction ...........875-9763
MANAGERS
- --------
George Rumel General Manager.......................................................875-9463
Peg Kelley Assistant to General Manager..........................................875-9463
Steve Budorick Senior Vice President ................................................875-1848
Jocelyn Mousel Assistant to Senior Vice Preisdent....................................875-1848
SECURITY
- --------
Carlos Villarreal Director of Security..................................................875-8817
Peg Kelley Insurance (Certificates of Insurance).................................875-9463
Debbie Vrtis Command Center Supervisor.............................................875-0170
Mark Swiecionis Fire & Life Safety Officer............................................875-0070
SECURITY CONSOLE .............................................................875-7711
TENANT SERVICES
- ---------------
Jill Piunti Tenant Advocate.......................................................875-8785
Ashley Buchanan Assistant Manager, Tenant Services....................................875-6785
Calysta Johnson Assistant to Tenant Services..........................................875-6433
ENGINEERING
- -----------
Tom Cronin Chief Engineer........................................................875-0491
Bob Edwards Assistant Chief.......................................................875-0490
Mark Boswell Assistant Chief.......................................................875-0493
EMERGENCY NUMBER .............................................................875-7711
BUILDING SERVICES
- -----------------
Security Command Center (24 Hours a day)...........................................875-7711
Engineering Control Room (24 Hours a day)...........................................875-0488
Office of the Building (7:30 am. - 5:30 pm. Mon. - Fri.)..........................875-0066
Shipping/Receiving (7:30 am. - 3:30 pm.)......................................875-0063
Fire & Safety Officer (24 Hours a day)...........................................875-0070
Dave Brumirski Locksmith..................................................875-0076
1
<PAGE>
BUILDING HOURS OF OPERATION
- ---------------------------
Building Business Hours: Monday - Friday..............................8:00 am - 6:00 pm
After Hours: Monday - Friday..............................6:00 pm - 8:00 am
Saturday, Sunday and Holidays.........................24 hours
Loading Dock Hours: Monday - Friday..............................5:00 am - 3:30 pm
Saturday....................................7:00 am - 12:00 pm
Sunday and Holidays.....................................CLOSED
Freight Service Hours:
Monday - Friday..............................5:30 am - 3:30 pm
Saturday....................................7:00 am - 12:00 pm
Sunday and Holidays.....................................CLOSED
BUILDING HOLIDAYS
- -----------------
New Years Day Memorial Day Independence Day
Labor Day Thanksgiving Day Christmas Day
</TABLE>
2
<PAGE>
SEARS TOWER
CONTRACTOR & VENDOR GUIDELINES
These guidelines have been developed by building management of Sears Tower to
provide information regarding procedures in the building. The purpose being to
facilitate the completion of projects in a timely and safe manner.
Cooperation is essential and although not all possible situations can be
foreseen, these guidelines deal with general areas of concern. Should any issue,
not dealt with herein arise, contact building management in the Office of the
Building during regular business hours or the Security Command Center after
hours.
It is expected that the contractor will abide by all legal City of Chicago
building codes, OSHA, NFPA, and EPA guidelines.
Security for the construction area during construction work is the
responsibility of the contractor. This extends to possessions as well as the
securing of the area upon completion of the work period. All temporary locking
devices are to be provided by the building locksmith.
We expect a contractor working in our building to realize that he and his
employees are invited guests and will be expected to exercise good judgment and
courtesy at all times. Furthermore, be aware that many other businesses are
operating within the building simultaneously and building management is
committed to providing them with a QUIET, CLEAN, AND SAFE ENVIRONMENT.
MANAGEMENT RESERVES THE RIGHT TO HALT OR DELAY ANY WORK IN THE BUILDING IF WE
DETERMINE THAT THE WORK INTERFERES WITH OUR TENANT'S ABILITY TO REASONABLY
CONDUCT THEIR BUSINESS. ALL LOUD NOISE RELATED WORK SHALL BE COMPLETED PRIOR TO
7:30 A.M. OR AFTER 6:00 P.M. Any and all work that results in noise affecting
areas in the building other than the floor under construction, including but not
limited to concrete coring or sawing, hammering, drilling, SHOOTING OF CEILING
HANGERS, cutting of pipes along the columns or within the concrete slab, SHALL
BE DONE AFTER REGULAR BUSINESS HOURS OR ON WEEKENDS, or with the prior
permission of the building Project Manager. Security measures will be taken if
required to assure compliance.
When after-hours work is required, building management and the Director of
Security must be notified no later than the close of business on the preceding
business day. Also, arrangements must be made at this time for freight elevator
or rubbish removal service. See Contractor After Hours Building Access
Authorization Form.
Prior to the start of work, the General Contractor must submit the permit,
insurance certificates and the names and addresses of all subcontractors,
together with the name and telephone number of a contact person for each
subcontractor to the building Project Manager. Also, the General Contractor must
introduce the job superintendent to the Project Manager, Chief Engineer,
Director of Security and Freight & Dock Services Master. See Project Information
Sheet.
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<PAGE>
INSURANCE REQUIREMENTS
The General Contractor, EACH subcontractor, architect, interior space planner,
and all of the Tenant's contractors and vendors must submit to the building
Project Manager, before the start of work, a current certificate of insurance
naming the Owner of the Building, its leasing agent and its mortgage lenders as
additional insureds in the following manner:
1. The name and address of the CERTIFICATE HOLDER:
TH TOWER LEASING LLC & PARTNERS TOWER, L.P. (OWNER)
c/o TrizecHahn Office Properties, Inc.
Attention: Insurance Records Administrator
233 South Wacker Drive, Suite 3330
Chicago, Illinois 60606
2. Your Certificate must correctly list the ADDITIONAL INSURED parties.
The following should be covered as additionally insured parties with
respect to general liability coverage:
TRIZECHAHN OFFICE PROPERTIES, INC. (MANAGING AGENT)
233 South Wacker Drive, Suite 3330
Chicago, Illinois 60606
TH TOWER LEASING LLC, PARTNERS TOWER, L.P., ATTORNEY FOR STATE STREET
BANK & TRUST COMPANY, (OWNER), TRUSTEE UNDER A GRANTOR TRUST AGREEMENT
DATED AS OF OCTOBER 31, 1994, AND KNOWN AS THE 233 SOUTH WACKER DRIVE
TRUST
c/o TrizecHahn Office Properties, Inc.
233 South Wacker Drive, Suite 4600
Chicago, Illinois 60606
Attention Vice President
METROPOLITAN LIFE INSURANCE COMPANY (MORTGAGE HOLDER)
2001 Spring Road, Suite 400____________________________________________
Oak Brook, Illinois 60521
Attention: Investment Officer - MPSAR
4
<PAGE>
PLEASE MAIL THE CERTIFICATE TO:
TRIZECHAHN OFFICE PROPERTIES, INC.
ATTENTION: INSURANCE RECORDS ADMINISTRATOR
233 SOUTH WACKER DRIVE, #3330
CHICAGO, IL 60606
Certificates should state the following limits of coverage:
1. Statutory Worker's Compensation for the General Contractor and each
Subcontractor and Vendor and the Architect/Interior Space Planner.
2. General Commercial Liability in the Amount of not less than $5 Million
per occurrence for the General Contractor and $1 Million per occurrence
for EACH Subcontractor, Vendor and the Architect/Interior Space Planner
(Combined Single Limit for Bodily Injury and Property Damage).
3. Automobile Liability in the Amount of not less than $3 Million for the
General Contractor and $1 Million for EACH Subcontractor, Vendor and
the Architect/Interior Space Planner (Combined Single Limit for Bodily
Injury and Property Damage).
Medical Expenses - $5,000 per person per accident
Uninsured/Underinsured Motorists' Coverage - $1,000,000
Excess Liability Coverage - $5,000,000
4. The General Contractor and EACH Subcontractor, Vendor and the
Architect/Interior Space Planner must maintain Employer's Liability
Insurance in the Amount of not less than $500,000 per accident and per
disease, per employee.
5. The General Contractor must maintain Owner's and Contractor's
Protective Insurance in the Amount of NOT LESS THAN $5 Million per
occurrence, and NOT LESS THAN $10 million per occurrence for any work
associated on the exterior of the building (i.e., roofs, antennas or
curtainwall work).
6. The Architect/Interior Space Planner must maintain Professional
Liability Insurance in the Amount of NOT LESS THAN $1 Million for
projects costing less than $10 Million and NOT LESS THAN $2 Million for
projects costing $10 Million or more.
Total Per Occurrence/Accident Limits for Commercial General Liability, Auto
Liability and Employer's Liability Insurance may be satisfied by a party with
any combination of primary and excess or umbrella liability policies totaling
the amount of the required insurance.
The General Contractor is responsible for coordinating ALL insurance
certificates for all subcontractors and vendors prior to mobilization and before
any work will be allowed to commence on site.
5
<PAGE>
It is the intention of the Building Ownership that each lease and each
construction contract and subcontract contain a MUTUAL WAIVER OF SUBROGATION so
that the parties thereto eliminate any law right of subrogation of, or the right
to assign, by way of subrogation, to any insurance company carrying insurance
policies on any portion of the building and its contents, any cause of action
which any party to a lease or construction contract or subcontract may have
against the other party to such subcontract, contract or lease because of
negligence or other wrongful conduct as a cause for any loss which is thus
insured.
Inasmuch as the mutual waivers contained in the leases and construction
contracts and subcontracts will preclude the assignment of any aforesaid claim
by way of subrogation (or otherwise) to an insurance company (or any other
party), each party providing insurance under a lease or a construction contract
or subcontract must agree to cause each insurance company which has issued to it
policies of insurance, to consent to such waiver and to waive all rights of
subrogation against the parties named as additional insureds above.
TRADES PERSONS RULES
1. UNIONS - All trades persons are to have the proper trade union or other
affiliations as required by the local jurisdictional entities.
2. ELEVATORS - TRADES PERSONS WILL USE FREIGHTS FOR ACCESS TO CONSTRUCTION
FLOORS. Building management reserves the right to monitor and require
specific rules for the use of elevators if it so warrants or to limit
the use of the elevators if the privilege is abused.
3. SECURITY IDENTIFICATION - All trades persons are to have Building
Identification Cards. All General Contractor supervisors working on the
project must display a building photo I.D. badge. (PICTURES ARE TAKEN
MONDAY-FRIDAY, FROM 10AM-11AM AT THE TOWER HEALTH CLUB, LOCATED ON LL3
OF THE SEARS TOWER). All other contractor employees and subcontractors
working on the project must be issued a contractor ID pass. (see
Contractor I.D. Authorization Form). This will allow them access into
the building Monday-Friday, from 6am-6pm. Any required dock passes will
also be issued at this time. The building I.D. badges are to be visibly
worn at all times when within the building. The General Contractor will
be responsible for any I.D. badges not returned upon completion of the
project. Building security will monitor all trades persons. Building
management reserves the right to interrupt any work in the building if
any Contract Vendor Guidelines are not followed and the General
Contractor will be responsible for delays caused as a result thereof.
Please refer to the Contractor I.D. Authorization Form for further
instructions on obtaining I.D.s.
4. PUBLIC AREAS - The building does not permit anyone to loiter in public
areas of the building and construction personnel may not loiter in the
areas of the building where they are not working.
CONSTRUCTION DOCUMENTS & SPECIFICATIONS
6
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No work will be allowed to proceed without Building Management first reviewing
the most current set of drawings outlining the scope of work. If the building
Project Manager requires the services of outside consultants, i.e., a structural
engineer to review load or coring requirements, the cost of such review will be
the responsibility of the contractor and/or tenant for whom the job is being
performed.
PERMITS
The following is required by the General Contractor prior to the start of
construction or the delivery of materials:
- - A copy of the building permit must be posted at the job site;
- - THE ORIGINAL BUILDING PERMIT must be kept on file in the management office of
the building, immediately upon receipt from the City of Chicago.
RUBBISH REMOVAL
The General Contractor will be responsible for bringing all rubbish to the
loading dock and placing it into a designated dumpster box. Scheduling for
freight elevator time required and dumpster box pick up and delivery is to be
coordinated by the General Contractor with the Director of Security.
ALL FOOD WASTE AND ANY OTHER DEBRIS THAT MAY CAUSE SAFETY HAZARDS, ODORS, OR ANY
OTHER BUILDING PROBLEM MUST BE REMOVED ON A DAILY BASIS.
Effective January 1, 1999, the Sears Tower will be issuing punch coupons for use
of building dumpsters at the loading dock.
Each coupon card will contain 25 punches to be used when dumping construction
debris into a dumpster at the Sears Tower loading dock. Each gondola, flat
truck, or "A" frame dolly brought to the loading dock will require one punch
from the coupon card.
If you are performing a remodeling project directly for an existing tenant of
the building, not in connection with a TrizecHahn contract or a new lease,
coupon cards must be purchased in advance by the contractor. The cost of each
card is $375 and contains 25 punches. (COST FOR ONE SQUARE YARD OF WASTE IS
EQUAL TO $15.00.)
If you are performing new construction and your contract is directly with
TrizecHahn, you must pick up coupon cards in advance.
All coupon cards will be issued directly to the contractor by the building
management for each project.
When dumping debris on the loading dock, a coupon card must be presented to the
Dock Manager (approx. one square yard of waste) for each gondola, "A" frame, or
flat truck load to be disposed.
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<PAGE>
Enclosed is an order form for your coupon cards. You must order your cards two
(2) weeks in advance. Please contact the Project manager should you have any
questions.
PREMIUM TIME SERVICE
The building will keep separate work tickets for the premium hours performed as
specifically requested. The premium time rate for personnel will be billed to
the tenant and/or contractor.
Note that there is a minimum charge of four (4) hours for each request of
premium time. This service should be scheduled a minimum of 48 hours, in
advance, with the Office of the Building.
FREIGHT ELEVATORS
The freight elevators are controlled by key card readers, which can be operated
by authorized key cards only or an operator, supplied by the building.
Scheduling should be arranged a minimum of 24 hours in advance with the Director
of Security.
FREIGHT CAR SIZES, CAPACITIES AND SPEEDS ARE LISTED BELOW:
<TABLE>
<CAPTION>
Low Tall Outer Outer
Freight Car Width Length Height Height Door Ht. Door Wd. Capacity Elev.speed
----------- ----- ------ ------ ------ -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
F1 7'3" 6'1" 12' 15'7" 8'1" 4' 4000 lb. @ 1200 fpm
(Serves Floors: LL3 - Lobby, 3, 31, 64, 66 - 102)
F2 7'11" 6'7" 12' 15'7" 8'9" 5'8" 5000 lb. @ 1000 fpm
(Serves Floors: LL3 - Rest 2, 33 - 63)
F3 11'9" 7'6" 12' 15'7" 8'9" 7'11" 10000 lb. @ 1200 fpm
(Serves Floors: LL1 - 102)
F4 7'10" 6'7" 12' 15'7" 8'9" 5'9" 5000 lb. @ 1000 fpm
(Serves Floors: LL1, 33 - 63)
F5 7'11" 6'7" 12' 15'7" 8'9" 5'8" 5000 lb. @ 1000 fpm
(Serves Floors: LL2 - Lobby, 3, 4 - 31, 63)
F6 7'11" 6'7" 12' 15'7" 8'9" 5'8" 5000 lb. @ 1000 fpm
(Serves Floors: LL1, 4 - 28, 63)
</TABLE>
Note: Special hoisting of oversized and/or heavy items must be done by building
elevator personnel. Coordination must be made through the building Project
Manager.
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<PAGE>
FREIGHT ELEVATOR LOBBY (TYPICAL FLOORS)
The design and construction phase must account for code compliant egress out of
the passenger and freight elevator lobbies at all times with access to a minimum
of one exit stairwell. The Tenant's security concerns should be evaluated with
respect to this requirement. (Maximum floor load is 75 lbs. per sq. ft. in
typical freight lobby).
THIS MEANS KEEP THE FREIGHT LOBBIES CLEAR OF ALL DEBRIS!
LOADING DOCK
All materials shall be brought into the building at the loading dock which is
located one level below grade and is accessible from Lower Wacker Drive or
freight elevators. All deliveries will be required to be scheduled and
coordinated with the Assistant Director of Security. The height restriction for
Lower Wacker Drive is 12'6". Trailer length restriction is 40'. A 48' maximum
trailer length may be accommodated during off hours only.
SITE SECURITY
The General Contractor is responsible for the security of the project site for
the duration of the work. Building security must have access to the site at all
times. The General Contractor is responsible to insure that building security
has the proper keys necessary for ALL such access.
HAZARDOUS MATERIAL STORAGE
All hazardous material must be properly stored on the job site. The location of
the stored hazardous material MUST BE listed and supplied to the building
Project Manager AND the Fire & Life Safety Officer. (In case of a fire, the
location of such material must be immediately available)
A list of all hazardous materials as well as copies of all MSDS sheets must be
supplied to the building Project Manager and Fire & Life Safety Officer.
WINDOWS/SOLAR WINDOW FILM
Building windows and solar window film must be protected during the construction
process. A site survey of the building windows will be performed both before and
at the conclusion of the project. Any damage not noted during the initial
walkthru will be the responsibility of the General Contractor at the end of the
construction. Any solar window film repair costs will be charged to the Tenant
or the General Contractor.
If there are any questions regarding the windows or window film, contact the
building Project Manager.
CARPETING
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Both broadloom and carpet tiles are approved for installation at the Sears
Tower. Carpet glued down directly onto the concrete slab is NOT allowed. In the
case of broadloom carpet, tackless strip installation must be scheduled for
either before or after regular business hours or on a weekend.
No permanent glued down carpet is acceptable and will be rejected.
All carpeting should be delivered to the loading dock and taken to the location
of installation within the building upon delivery. Old carpet must be disposed
of by the carpet installer or the General Contractor.
The cost to repair or repaint a wall or walls damaged as a result of carpet
installation will be the responsibility of the carpet installer or the General
Contractor.
HVAC
The perimeter induction units must be clean at job completion and inspected by
the building Chief Engineer.
Any HVAC test and air balance reports are to be submitted to the building
Project Manager upon completion of work. To be forwarded to the Director of
Mechanical Operations for review.
FIRE PROTECTION SPRINKLERS
Modifications must comply with the plans approved by the building Director of
Mechanical Operations. Before any work may begin, the contractor must first
check in with the Chief Engineer who will isolate the floor on which the work
takes place.
All fire protection system work that is started on a given day must be completed
by 3:00 p.m. on the same day. The General Contractor is responsible for
coordinating this activity.
All penetrations are to be sealed with approved fire rated material.
No welding or any other work that has the potential of activating the building
fire/smoke detection system or has the potential of attracting outside attention
may commence without first informing the Chief Engineer/Engineering Control Room
and the Fire & Life Safety Officer/Security Command Center. It is MANDATORY that
welding, torching, and soldering permits be obtained from building security
prior to the start of work. Upon completion of the work, it is mandatory that
the Security Command Center and Engineering Control Room be notified. Contact
can be made with those listed below:
SECURITY COMMAND CENTER.............................................. ..875-7711
ENGINEERING CONTROL ROOM................................................875-0488
TRIZECHAHN/OFFICE OF THE BUILDING.......................................875-0066
FIRE & LIFE SAFETY OFFICER..............................................875-0070
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<PAGE>
Permits will be issued through the Fire & Life Safety Officer, or in an after
hours emergency through the security shift supervisor on duty. Please supply the
following information:
A. Your company name
B. Nature of the job, i.e., welding, sweating water lines, etc.
C. The firm, floor, and specific location of the work area
D. The approximate time involved, start to finish
No work shall be performed if a welding/cutting permit has not been issued by a
building security department representative. The General Contractor is
responsible for fire safety including providing watchman and extinguishers
during construction.
PLUMBING
Before any plumbing shutdowns may begin, the contractor must first check in with
the Chief Engineer. The General Contractor is responsible for coordinating the
activity. Futures (for future work) must be provided at wet columns, vent, and
drainage systems.
ACCESSIBILITY
All new or existing MEP items, whether behind walls or above ceilings, which
require maintenance must remain accessible at the completion of the project.
HOT TAPS
Hot taps are to be pressure tested prior to doing actual hot tap, and be checked
by the building engineer.
ELECTRICAL
A. Panelboards shall be braced and rated for a minimum (10,000 AMP
Interrupt Capacity A.I.C.) with copper buss only.
B. Circuit breakers for panelboards shall be of the bolt on type, rated
for switching duty and rated for minimum (10,000 A.I.C.) and are to be
clearly marked with regard to use on the inside door of breaker panel.
C. Branch circuit breakers of 2P and 3P configuration shall have a common
trip.
D. Wire and cable to be copper and minimum size wire to be #12 except for
control wire.
E. Thin wall fittings shall be steel compression type.
F. Wire is to be installed in conduit unless otherwise approved.
G. Existing wiring and/or conduit and any temporary wiring, existing or
added, that is not to be reused shall be removed prior to the
completion of the project.
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<PAGE>
H. Emergency lights and exit sign wiring shall be separate conduit
systems.
I. City of Chicago plenum approved Flex must be used for installation of
all new or relocated light fixtures.
J. Electrical and telephone (if involved) closets are to be cleaned at
completion of work. All penetrations to be sealed equal to fire wall
rating. Panel directories are to be updated and inserted in panel door
with a copy submitted to building Project Manager.
AS-BUILT DRAWINGS
All mechanical trades are required to submit copies of as-built drawings to the
General Contractor. The General Contractor will make one submission of three
copies of as-built drawings for all trades to the building Project Manager. All
as-built drawings are to be dated and signed by the appropriate subcontractor as
well as the General Contractor and submitted to Landlord's Building Engineer,
ESD Inc., within 30 days of substantial completion. A 12% final payment
retention will be held from General Contractor and all MEP subcontractors until
all as-built drawings are received and APPROVED by ESD at close of project.
There will be no exceptions.
GENERAL INFORMATION
Building security and engineering departments are on duty in the building
twenty-four hours a day, every day of the year.
FINAL CLEAN
Prior to the space being turned over to the tenant/building, the site must be
final cleaned, to standards appropriate for tenant occupancy. The final cleaned
condition must be approved by the Housekeeping Manager. If the condition is
unacceptable for occupancy, building management will have the situation
corrected and backcharge the General Contractor.
Note: Building management is responsible for post-move in cleaning only.
SCHEDULED WORK
All work that does not take place during regular building business hours (refer
to page 1) should be noted on the After Hours Authorization form and sent to the
building Project Manager as soon as reasonably possible. It is important for
security and life-safety reasons that the security and engineering departments
be aware of contractor presence. If an after hours emergency arises, the
Security Command Center phone (875-7711) must be notified.
AFTER HOURS ACCESS
Entrance to the building after hours is controlled by the security department.
In order to facilitate after hours entrance or departure, it is important that
the building Project
12
<PAGE>
Manager be notified of the need as soon as reasonably possible. This is of
particular importance regarding freight elevator service and the loading dock as
manpower may have to be scheduled to handle the need. If an after hours
emergency arises, you must notify the Security Command Center (875-7711).
PROPERTY PASSES
For anything leaving the building, including tools and parts, a property pass is
required. This pass must be signed by the General Contractor, Job Superintendent
or Foreman. Security officers will not accept them unless they are signed by
authorized personnel. These property passes can be requested from the building
Project Manager.
ACCIDENTS
All accidents must be reported to the Security Command Center immediately. The
security department will dispatch personnel and facilitate the emergency
procedures. In serious cases call 911 for the Chicago Fire Department Paramedics
first, then notify the Security Command Center (875-7711).
FIRES
All fires must be reported to the Security Command Center IMMEDIATELY
(875-7711).
LOCKSMITHING
The building has a full-time locksmith who may consult, order, and install all
locking mechanisms. The locksmith is responsible for all keys and all other
types of locks and the installation of all lock cylinders/cores. Contact the
Director of Mechanical Operations for assistance.
Contractor will be backcharged for lock mechanisms tampered with in construction
area.
13
<PAGE>
SEARS TOWER
SAFETY PRACTICES
All contractors and its employees must follow safety practices outlined by
employer, General Contractor and OSHA but not limited to: CONTRACTORS ARE
RESPONSIBLE FOR MAINTAINING AND ENFORCING THEIR OWN SAFETY RULES AND PROCEDURES.
Under no circumstances will Building Management or its employees accept
responsibility for monitoring general safety guidelines. The following
guidelines for safety in the building should be followed BUT IS NOT ALL
INCLUSIVE OF SAFETY PRACTICES REQUIRED BY LAW, OR ANY OTHER RULES THAT MAY
APPLY.
- - Take special precautions if welding or cutting in a confined space is
stopped for some time. Disconnect the power on ARC welding or cutting
units and remove the electrode from the holder. Turn off the torch
valves on gas welding or cutting units, shut off the gas supply at a
point outside the confined area, and, if possible, remove the torch and
hose from area.
- - After welding or cutting is completed, mark hot metal or post a warning
sign to keep workers away from heated surfaces.
- - Follow safe housekeeping principles.
1. Don't throw electrode or rod stubs on the floor - discard them
in proper waste container.
2. Keep construction area as free of debris as possible.
3. Keep chemicals secured in approved storage cabinets.
4. Keep floors dry and clean.
- - Hard hats must be worn at all times inside the construction area.
- - All contractors must supply a list of all hazardous materials and their
locations as well as all MSD sheets to the building Project Manager.
- - Keep a fully stocked and clearly marked first aid supply kit on the job
site at all times.
- - Make sure there are fully charged, appropriate fire extinguishers
present on the job site.
- - An emergency brigade should be established and drills held. If you
should need help in establishing a brigade or holding a drill, contact
the building's Fire & Life Safety Officer.
14
<PAGE>
SEARS TOWER
GUIDELINES FOR CUTTING/WELDING
The following guidelines for cutting/welding in the building should be followed,
BUT IT IS NOT ALL INCLUSIVE OF SAFETY PRACTICES REQUIRED BY LAW, OR ANY OTHER
RULES THAT MAY APPLY.
- - Make sure that sprinklers are in service.
- - Make sure that cutting and welding equipment is in good repair.
PRECAUTIONS WITHIN 35 FEET
- - Make sure floors are swept clean of combustibles.
- - Combustible floors: wet down, cover with damp sand or fire-resistive sheets.
- - Flammable liquids are removed; other combustibles, if not removed, protected
with fire-resistive tarpaulins or metal shields.
- - Explosive atmosphere in area eliminated.
- - All wall and floor openings are covered.
- - Fire-resistive tarpaulins are suspended beneath work.
WORK ON WALLS OR CEILINGS
- - Construction of the building structure is noncombustible and without
combustible covering or insulation.
- - Make sure combustibles are moved away from the other side of wall.
- - Make sure all flammable liquids are purged from the work area.
- - Any type of "Hot Work" requires a fire watch, appropriate extinguishers or
fire hose, and a "Hot Work" Permit.
STRUCTURAL SLABS
- - Saw cutting or trenching of floor slab is NOT permitted without prior written
approval from Landlord and reviewed by building's structural consultant.
WORK ON ENCLOSED EQUIPMENT
- - Enclosed equipment cleaned of all combustibles.
- - Containers are purged of flammable liquids.
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<PAGE>
FIRE WATCH
* Fire watch will be provided by the Contractor during and for at least 60
minutes after work, and during coffee or lunch breaks.(1)
* The fire watch is supplied with suitable extinguishers.
* The fire watch is trained in use of this equipment and in sounding alarm.
* Report the beginning and conclusion of the fire watch to the Security Command
Center (875-7711).
*****PLEASE FILL OUT ALL APPLICABLE FORMS ATTACHED AND FAX COMPLETED FORMS TO
ALEX PAPPAS, FAX NUMBER 312-906-1118 IMMEDIATELY UPON SIGNING OF THIS
CONTRACT.
- --------------------------
(1) According to City Code, NFPA, and Factory Mutual Insurance Standards.
16
<PAGE>
SEARS TOWER
CONTRACTOR I.D. AUTHORIZATION FORMS
Please fill out the information below as it is required before any I.D.s will be
made. These I.D.s will only allow access in the building Monday through Friday,
6am-6pm. Any work done outside of these hours must be authorized by the Project
Coordinator or General Contractor Superintendent.
Picture I.D.s will be issued to Construction Supervisors. All other contractors
will have non-photo I.D. contractor pass. I.D.s can be taken Monday-Friday from
10am-11am at the Tower Health Club, located on LL3 of the Sears Tower. Please
complete this form and return to the building Project Manager.
COMPANY CONTRACTED BY:__________________________________________________________
(TENANT NAME)
OFFICE CONTACT/SUPERINTENDENT:__________________________________________________
PHONE NUMBER:___________________________________________________________________
FLOORS THAT WORK WILL BE DONE ON:_______________________________________________
ESTIMATED JOB COMPLETION DATE: _________________________________________________
CONSTRUCTION COMPANY NAME:______________________________________________________
SUPERVISOR: 1.____________________________PHONE:_____________________________
____________________________PAGER:_____________________________
__________________________CELL PHONE:__________________________
(BACKUP) 2.____________________________PHONE:_____________________________
____________________________PAGER:_____________________________
__________________________CELL PHONE:__________________________
NUMBER OF CONTRACTOR I.D.S NEEDED:______________________________________________
(Number of IDs needed)
NUMBER OF DOCK I.D.S NEEDED*:___________________________________________________
________________________________________________________________________________
(Number of IDs needed)
This form must be sent to the Director of Security before any I.D.s will be
issued. All I.D.s will be forwarded to the Project Coordinator or the building
Project Manager and not to the Contractor. All Contractor I.D.s must be returned
to the Office of the Building upon completion of the project. There will be a
$50.00 charge for any I.D.s not returned.
- ----------------------------------
* Dock IDs will only be issued to contractors who will be responsible for
deliveries/pickups and removing debris from the work area.
17
<PAGE>
If a contractor must access the building during non-business hours, please use
the "After Hours Building Access Authorization Form".
18
<PAGE>
SEARS TOWER
CONTRACTOR AFTER HOURS BUILDING ACCESS
AUTHORIZATION FORM
Please make sure that all information is filled out correctly and send to the
attention of the building Project Manager.
COMPANY NAME: __________________________________________________________________
PROJECT COORDINATOR: ___________________________________________________________
(OR JOB SUPERINTENDENT) (PLEASE SIGN)
CONTRACTOR NEEDING ACCESS: _____________________________________________________
FLOOR:__________________________________ LOCATION:______________________________
DATE OF ACCESS: ________________________________________________________________
TIME PERIOD OF ACCESS:__________________________ UNTIL: ________________________
BRIEF DESCRIPTION OF WORK: _____________________________________________________
If access to occupied tenant space is necessary, please present evidence of
TENANT AUTHORIZATION with this form or forward a request for such access NO LESS
THAN 48 HOURS IN ADVANCE TO WHEN THE WORK WILL COMMENCE.
Anyone accessing the building will be required to show the security officer a
type of photo identification card and Company ID. Please indicate the Supervisor
who will be in charge and if at all possible the name of the construction
workers who will be working in your space. If specific names are not known then
please list the number of workmen per trade:
______________________________________________________________________
(Supervisor)
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
NOTE: There is a service charge for any lock or unlock requests made of the
security department.
ALL ACCESS NOTICES MUST BE RECEIVED BY BUILDING SECURITY 24 HOURS IN ADVANCE.
19
<PAGE>
SEARS TOWER
PROJECT INFORMATION SHEET
Please fill out the information listed below. This information must be completed
before any work can begin in your space. Once this information has been
completed please send to the building Project Manager, in the Office of the
Building.
PROJECT:________________________________________________________________________
LOCATION:_______________________________________________________________________
GENERAL CONTRACTOR:_____________________________________________________________
SUPERINTENDENT:_________________________________________________________________
DAYTIME PHONE NUMBER:___________________________________________________________
AFTER HOURS PHONE NUMBER:_______________________________________________________
PAGER NUMBER:___________________________________________________________________
NORMAL WORKING HOURS:___________________________________________________________
DURATION OF PROJECT:____________________________________________________________
SUBCONTRACTORS: (INCLUDE M.E.P, CONTRACTORS AFTER HOUR PHONE NUMBER AND PAGER
NUMBER)
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
=======================================
This section to be completed by the Office of the Building
BUILDING PROJECT
MANAGER:_____________________________EXT.__________
20
<PAGE>
SEARS TOWER
CONSTRUCTION BADGES REQUEST FORM
This receipt confirms that the number of badges listed below were received by
the signee. All badges are to be returned to the building Project Manager upon
completion of the project. There will be a $50.00 charge for any I.D.s not
returned.
ISSUED TO:______________________________________________________________________
(YOUR NAME)
COMPANY NAME: __________________________________________________________________
NUMBER OF BADGES REQUESTED:_____________________________________________________
PROJECT:________________________________________________________________________
FLOOR: _________________________________________________________________________
RECEIVED BY: DATE:
___________________________________ ________________________________
(PLEASE PRINT YOUR NAME)
___________________________________
(PLEASE SIGN YOUR NAME)
21
<PAGE>
SEARS TOWER
CONSTRUCTION DISPOSAL
COUPON ORDER FORM
(TO BE COMPLETED BY GENERAL CONTRACTOR)
NAME OF PROJECT_________________________________________________________________
PROJECT START DATE______________________________________________________________
NAME OF APPLICANT_______________________________________________________________
PROJECT COMPLETION DATE_________________________________________________________
CONTRACT WITH___________________________________________________________________
ESTIMATED YARDS OF WASTE FOR ENTIRE PROJECT_____________________________________
TOTAL NUMBER OF COUPONS REQUESTED TODAY_________________________________________
TO DATE ___________________________________
- --------------------------------------------------------------------------------
(TO BE COMPLETED BY TRIZECHAHN PERSONNEL ONLY)
TRIZECHAHN AUTHORIZATION________________________________________________________
COUPON NUMBERS #________________THROUGH #_____________________________
AMOUNT OF PAYMENT RECEIVED $________CHECK #:__________________________
22
November 1, 1999
<PAGE>
SEARS TOWER
CONTRACTOR'S FREIGHT/DOCK DELIVERY REQUEST
TODAY'S DATE: __________________________________________________________________
CONTRACTOR: ____________________________________________________________________
TENANT NAME: ___________________________________________________________________
FLOOR #: _______________________________________________________________________
CONTACT: ___________________________________ TELEPHONE #:_______________________
THIS WILL SERVE AS A WRITTEN REQUEST FOR PRIORITY FREIGHT ELEVATOR/DOCK SERVICE
FOR THE ABOVE-MENTIONED CONTRACTOR/TENANT.
DELIVERY DATE: _____________________________
DELIVERY TIME: _____________________________TO__________________________________
(START TIME) (STOP TIME)
TIMES WILL BE STRICTLY ENFORCED.
AVAILABLE TIMES ARE BETWEEN 4:00 AM AND 6:00 AM
PURPOSE: _______________________________________________________________________
(TYPE OF DELIVERY)
A SERVICE FEE OF $30.00 PER HOUR WILL BE CHARGED TO THE CONTRACTOR/TENANT.
COMMENTS: ______________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
FOR OFFICE USE ONLY:
APPROVED AND FORWARDED BY: _____________________________________________________
DISTRIBUTION: LEROY BROWN
SECURITY - LL3
CARLOS VILLARREAL
23
November 1, 1999
<PAGE>
EXHIBIT C
RULES AND REGULATIONS
1. Tenant shall not in any manner deface or injure the Building or any
part thereof, nor do anything tending to injure the reputation of the
Building or its occupants.
2. Except as provided in Section 26(v) of the Lease, Tenant shall not
install any sign, lettering, picture, notice, advertisement or object
unacceptable to Landlord against glass partitions, doors or windows
which would be visible from the Building's corridors, or place same on
any outside window or in a position visible from outside the Building.
Tenant agrees to promptly remove same upon notice from Landlord. Any
sign, lettering, picture, notice or advertisement installed within the
Premises which is visible to the public from within the Building shall
be installed at Tenant's cost and in such manner, character and style
as approved by prior written consent of Landlord.
3. Tenant shall not, in advertising or other publicity, without prior
written consent of Landlord, use the name of the Building (Sears Tower)
or use pictures or illustrations of the Building.
4. The Tenant's mailing address shall include:
(Name of Company)
233 South Wacker Drive
Chicago, Illinois 60606-________
5. Tenant shall not obstruct sidewalks, entrances, passages, courts,
corridors, vestibules, halls, elevators, loading docks, escalators and
stairways in and about the Building.
6. Tenant shall not make noises, cause disturbances or vibrations or use
or operate any electrical or electronic devices or other devices that
emit sound or other waves or disturbances, or that create a fire
hazard, or create odors, any of which may be offensive to other Tenants
and occupants of the Building or that would interfere with the
operation of any device or equipment or radio or television
broadcasting or reception from or within the Building or elsewhere, and
shall not place or install any projections, antennae, aerials or
similar devices inside or outside the Premises.
7. Tenant shall not make any canvass in the Building to solicit business
or for any other reason.
8. Tenant shall not exhibit, sell or offer to sell, use, rent or exchange
any item or service in or from the Premises unless ordinarily embraced
within the Tenant's use of the Premises specified herein.
9. Tenant shall report all peddlers, solicitors and beggars immediately to
the office of the Building or as Landlord otherwise requests.
10. Tenant shall not waste water and agrees to cooperate fully with
Landlord to assure the most effective operating of the building's
heating and air conditioning, and shall refrain from adjusting any
controls other than room thermostats installed for Tenant's use, and
C-1
<PAGE>
shall keep public corridor doors closed, and shall not block any
heating and air conditioning induction units.
11. Tenant shall not employ persons to do janitor work in the Premises and
no persons other than the janitors of the Building shall clean the
Premises without prior written consent of Landlord. With prior written
consent of Landlord, any person employed by Tenant to do janitor's work
shall, while in the Building, either inside or outside of the Premises,
be subject to and under the control and direction of the manager of the
Building (but not as agent or servant of said manager or Landlord).
12. Tenant shall not:
(a) Cook in the Premises;
(b) Place vending or dispensing machines of any kind in or about
the Premises;
(c) At any time sell, purchase or give away, or permit the sale,
purchase or gift of, food in any form;
however, with prior written consent of Landlord, such activities may be
permitted in lounges or other facilities specifically designated for
this purpose.
13. Tenant shall not:
(a) Use the Premises for lodging or for any immoral or illegal
purposes.
(b) Use the Premises to engage in the manufacture or sale of, or
permit the use of, any spirituous, fermented, intoxicating or
alcoholic beverages on the Premises.
(c) Use the Premises to engage in the manufacture or sale of, or
permit the use of, any illegal drugs on the Premises.
14. Tenant shall not install any equipment utilizing an ammonia process or
using any ammonia products or any other noxious process necessitating
venting.
15. Tenant shall not bring firearms into the Premises.
16. Tenant shall keep doors and other means of entry to the Premises closed
and secured.
C-2
<PAGE>
EXHIBIT D
FORM OF TENANT ESTOPPEL CERTIFICATE
ESTOPPEL CERTIFICATE
Landlord: TH Tower Leasing LLC
Tenant:
Address of Tenant: Suite _____ consisting of approximately _____ square
feet of Rentable Area on the _____ Floor(s) of the
Building
Lease: That certain Lease, dated ______________________,
199__, by and between Landlord and Tenant, including
the Work Letter and the Condenser Water Addendum, if
any,and the following amendments, if any, (the
"Lease", a copy of which is attached and made a part
hereof).
Commencement Date:
Expiration Date:
Security Deposit $_______________
Monthly Base Rent: $_______________
Monthly License Fee: $_______________
Monthly Base Rent and
License Fee Paid Through:
Percentage Rent: ___% of Sales in excess of $___ Monthly
Current Estimated Monthly
Installment of the Expense
Adjustment Amount: $_______________
Current Estimated Monthly
Installment of the Tax
Adjustment Amount: $_______________
Lenders: Metropolitan Life Insurance Company and Partners Tower, L.P. (and/or
additional lenders, their respective successors and assigns).
1. In order to induce Lenders to make loans secured by, among other
things, Mortgages on property (the "property") which includes the
Premises, Tenant hereby certifies as true and correct the following
statements:
D-1
<PAGE>
(a) The Lease is a true, correct and complete agreement between
Landlord and Tenant with respect to the premises described
therein (the "Premises").
(b) The Lease is in full force and effect and constitutes the
entire agreement between Landlord and Tenant. The Lease has
not been amended, modified, supplemented or changed, whether
in writing or orally (including, without limitation, any
agreement by Landlord to assume any lease of Tenant covering
space in other property), except as disclosed herein.
(c) Tenant is in sole possession of and is occupying the Premises.
Except as specified below, Tenant is not in any respect in
default under the Lease and has not subleased all or any part
of the Premises or assigned the Lease, or otherwise
transferred or hypothecated its interest in the Lease or the
Premises.
(d) The Commencement Date and Expiration Date of the term of the
Lease are correctly stated above. Tenant has no options or
rights of renewal, extension, expansion, purchase or first
refusal concerning the Lease, the Premises or other space
within the building of which the Premises are a part, except
as may be stated in the Lease. Tenant has not exercised any
option or rights to renew, extend, amend, modify, or change
the term of the Lease, except as may be stated in the Lease.
Tenant does not have any preferential right to purchase all or
any part of the property of which the Premises are a part.
(e) The Monthly Base Rent (License Fee and Percentage Rent) and
other amounts payable under the Lease are correctly stated
above. Monthly Base Rent (and License Fees) has (have) been
paid through the date stated above. Tenant has not prepaid any
rent for more than one (1) month and is paying rent under the
Lease on a current basis with no offsets, credits, claims or
setoffs. Tenant has not been given any free rent, partial
rent, rebates, rent abatements, or rent concessions of any
kind, which are unexpired, except as disclosed herein.
(f) Tenant has deposited the Security Deposit stated above with
Landlord, and to the best of Tenant's knowledge, none of the
Security Deposit has been applied by Landlord to the payment
of rent or any other amounts due under the Lease.
(g) As of the date hereof, Landlord has fully performed all of its
obligations under the Lease and has satisfied all commitments
made to induce Tenant to enter into the Lease. To the best of
Tenant's knowledge, Landlord is not in default under the terms
and conditions of the Lease and no event has occurred which
would constitute a default under the Lease, either upon
service of notice or passage of time. To the best of Tenant's
knowledge, no claim, controversy or dispute exists between
Tenant and Landlord. As of the date hereof, Tenant is not
asserting that the Lease is not fully enforceable by Landlord
in accordance with its terms.
(h) All construction, build-out, improvements, or alterations to
the Premises required under the Lease have been fully
completed in accordance with the plans and specifications
described in the Lease and all contributions required to be
made by Landlord on account thereof have been made.
D-2
<PAGE>
(i) Landlord has not previously given any consent to Tenant (i.e.,
consent to sublease or alter the Premises) that is required
under the Lease before the taking of any action by Tenant,
except as disclosed herein.
(j) Tenant is not insolvent and is able to pay its debts as they
mature. There are no actions, whether voluntary or otherwise,
pending against Tenant under the bankruptcy or insolvency laws
of the United States or any state thereof.
2. Tenant agrees that from and after the date hereof, Tenant will not pay
any rent under the Lease more than thirty (30) days in advance of its
due date.
3. Tenant hereby certifies that the address for notices to Tenant under
the Lease is correctly set forth above.
This certificate has been given to Lenders with the understanding that
Lenders will rely hereon in connection with loans which will be secured by the
property of which the Premises constitute a part. The undersigned hereby
certifies that he or she is duly authorized to sign and deliver this Estoppel
Certificate.
IN WITNESS WHEREOF, Tenant has caused this Estoppel Certificate to be
executed by its duly authorized representative as of the ____ day of
___________, _____.
TENANT:
----------------------------------------
By:
-------------------------------------
Its:
---------------------------------
D-3
<PAGE>
EXHIBIT E
CONDENSER WATER ADDENDUM
This Condenser Water Addendum constitutes a part of the Lease, dated March 10,
2000, between TH TOWER LEASING LLC, a Delaware limited liability company, as
Landlord, and UNIVERSAL ACCESSS, INC., a Delaware corporation, as Tenant, for
premises as described in the Lease located at 233 South Wacker Drive, Chicago,
Illinois (the "Premises").
WHEREAS, Landlord has constructed and is operating an auxiliary
condenser water system (the "System") for its use and the use of tenants in the
Building; and
WHEREAS, Tenant is desirous of connecting certain facilities to the
System to be indicated on the plans;
NOW, THEREFORE, the parties agree as follows:
Tenant shall advise Landlord of its requirements for condenser water use,
determined separately for each floor of the Premises, and furnish to Landlord
plans and specifications of its facilities which it proposes to connect to the
System.
Upon Landlord's approval thereof and payment of Landlord's costs in connection
therewith, Landlord shall grant to Tenant the right to connect its facilities to
the System which connection shall be made only by Landlord's approved
contractor.
Prior to making said connection, Tenant shall pay Landlord a one time
"Connection Fee" of $500.00.
Tenant shall pay to Landlord a "Monthly Fee" for its dedicated capacity on the
System. The fee shall be calculated as follows:
CONDENSER WATER RATE -
(GPM x 60) x 728 hours per month x cost per gallon = Monthly
Fee
(GPM is to be calculated by using the equipment manufacturer's
technical specifications based on a condenser entering water
temperature (EWT) of 85 degrees Fahrenheit and a condenser
water temperature rise (WTR) of 10 degrees Fahrenheit).
All proposed changes in Tenant's facilities shall be submitted to Landlord in
advance for Landlord's approval. No changes shall be made in Tenant's facilities
without prior written approval of Landlord. Landlord shall have the right to
designate such conditions and charges for the making of Tenant's changes as
Landlord deems appropriate. It is expressly agreed that Landlord may refuse to
make any changes which increase the amount of condenser water supplied to
Tenant.
E-1
<PAGE>
All the terms and conditions of the Lease shall apply to this Addendum.
This Addendum shall become effective on the Commencement Date and will terminate
on the termination of the Lease.
IN WITNESS WHEREOF, Landlord and Tenant have caused this Condenser
Water Addendum to be duly executed this 10th day of March, 2000.
LANDLORD:
TH TOWER LEASING LLC,
a Delaware limited liability company
By: /s/ Stephen E. Budorick
------------------------------------
TENANT:
UNIVERSAL ACCESS, INC.,
a Delaware corporation
By: /s/ Robert Brown
------------------------------------
E-2
<PAGE>
EXHIBIT F
GENERATOR LOCATION
F-1
<PAGE>
EXHIBIT G
SIGNAGE
G-1
<PAGE>
tenant work letter switched for version 2 VPM 12-07-99
G-2
<PAGE>
LICENSE AGREEMENT
THIS LICENSE AGREEMENT ("License") is made as of this 21st day of April,
2000 between TH TOWER LEASING LLC, a Delaware limited liability company
("Licensor"), and UNIVERSAL ACCESS, INC., a Delaware corporation ("Licensee");
WITNESSETH:
WHEREAS, Licensor and Licensee have entered into a Lease dated as of March
10, 2000 (the "Lease") pursuant to which Licensee is leasing from Licensor
certain space in the Sears Tower located at 233 South Wacker Drive, Chicago,
Illinois; capitalized terms used herein shall have the meanings ascribed to such
terms in the Lease; and
WHEREAS, Licensee desires to license from Licensor the use of certain areas
in the risers and other common areas of the Building upon the terms and
conditions set forth below;
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, Licensor
and Licensee hereby agree as follows:
1. DEMISE/USE. Licensor licenses to Licensee, and Licensee licenses from
Licensor, certain space constituting a path for interconnecting Licensee's data,
telephone and alarm systems located in the Sixth Floor Premises and in the Third
Floor Premises (the "Licensed Areas"). Licensee shall be permitted to use the
Licensed Areas (after approval of all locations, installation methods and
materials by Licensor) for installation, use and maintenance of (a) one (1)
metallic conduit, the outside diameter of which shall not exceed two inches
(2"), (b) one (1) metallic conduit, the outside diameter of which shall not
exceed three-quarter inches (0.75") and for no other purpose whatsoever. It is
expressly understood that the interconnection permitted by this License shall be
used only for the interconnection of Licensee's internal systems and not for any
resale of communication service or to circumvent the obligation of all service
providers in the Building to pay Rent for access to the Building. Except as
expressly provided for herein or as otherwise provided in the Lease, Licensee
shall have no other license or right to use any other portion of the Building
(including, without limitation, the following areas in and about the Building
and Licensed Areas: janitor closets, stairways and stairwells, fan, mechanical,
electrical, telephone and similar rooms; roofs; antenna supports; elevator, pipe
and other vertical shafts, flues and ducts; all areas above any ceiling and
below any floor covering; all other structural or mechanical elements serving
other areas of the Building; and all subterranean, mineral, air, light and view
rights) during the Term without prior written consent of Licensor.
Licensee shall comply with the requirements of all governmental agencies
concerning the use of the Licensed Areas for the foregoing uses and shall not
directly make any use of the Licensed Areas which may be dangerous to persons or
property, which may jeopardize or increase the cost of any insurance coverage or
require additional insurance coverage. Upon the execution hereof, Licensee
shall provide Licensor with evidence that Licensee has received all licenses,
approvals and permits required under applicable law, if any, for the foregoing
use (including, without limitation, those from the Federal Communications
Commission ("FCC")) and shall keep all of the foregoing in full force and effect
during the entire Term of this License.
<PAGE>
2. TERM. The term (the "Term") of this License shall commence on April
21, 2000 (the "Commencement Date") and shall terminate (unless sooner terminated
as herein provided) on the earlier to occur of (x) December 31, 2000 and (y) the
date this License Agreement is superseded by a new License Agreement agreed to
by Licensor and Licensee.
3. LICENSE FEE. Licensee shall pay Licensor a fee (the "License Fee") at
the rate of $475.00 per month for use of the Licensed Areas. Licensee shall pay
said Licensee Fee to Licensor or Licensor's agent at Sears Tower, 233 South
Wacker Drive, Chicago, Illinois on or before the first (1st) day of each month.
Such License Fee shall be deemed part of the Rent due and payable under the
Lease.
4. EXPENSES. Licensee agrees to pay all costs associated with the
installation and maintenance of the conduit licensed in Section 1.
5. CONDITION OF LICENSED AREAS. Licensee shall take possession of the
Licensed Areas in "as-is" condition. Licensee, at its cost and expense, will
make all repairs and replacements to or upon the Licensed Areas necessitated by
the fault or neglect of Licensee, Licensee's employees and invitees, and will
keep the Licensed Areas in clean condition. At the end of the Term or earlier
termination of this License, Licensee, except for normal wear and tear and
casualty, shall surrender the Licensed Areas to Licensor in substantially the
same condition as when tendered to Licensee and in "broom clean" condition.
Licensee shall not make any additions or alterations to the Licensed Areas.
6. ACCESS TO LICENSED AREAS. Licensor may show the Licensed Areas to
prospective licensees, tenants of the Building or to any other third parties.
7. INCORPORATION OF LEASE PROVISIONS. Sections 7(b), 9, 10, 12, 13, 17
(except that all references to Rent in such Section shall refer to the License
Fee when incorporated herein), 18, 19, 21, 22, 23, 27 (and Paragraph 8 of the
Schedule) and 28 of the Lease shall be applicable to this License as if set
forth herein in their entirety, except that all references to (x) Tenant in the
Lease shall mean Licensee when incorporated herein, (y) Landlord in the Lease
shall mean Licensor when incorporated herein, and (z) Premises in the Lease
shall mean Licensed Areas when incorporated herein. To the extent of any
inconsistency between the terms of the Lease and the terms of this License, the
terms of this License shall control.
8. DEFAULT/RIGHT TO REENTER. Licensor may terminate this License or
pursue any other remedy available to it at law or in equity, if:
(a) Licensee fails to make any payment due hereunder and such failure
shall continue for five (5) days after written notice to Licensee; or
(b) a default is made in the performance by Licensee of any covenant
contained herein which involves a hazardous condition and is not cured
promptly by Licensee upon written notice to Licensee; or
(c) Licensee fails to observe or perform any other covenant or agreement
to be performed by Licensee herein and such default shall continue for
twenty (20) days after written notice to Licensee; or
2
<PAGE>
(d) a Default occurs under the Lease.
9. NO ASSIGNMENT OR SUBLETTING. Licensee shall not (i) assign or
otherwise transfer any interest in this License other than to a Permitted
Assignee, (ii) sublet the Licensed Areas or any part thereof, or (iii) permit
the use of the Licensed Areas by any parties other than Licensee or a Permitted
Assignee or their respective employees.
10. CONDEMNATION/DAMAGE. In the event of damage, destruction or eminent
domain takings which render the Licensed Areas or the Building no longer useful
for the purpose intended, either party may terminate this License by giving
written notice to the other party.
11. SURRENDER OF POSSESSION. Upon the expiration of the Term or upon the
termination of Licensee's License, whether by lapse of time or at the option of
Licensor as herein provided, (A) Licensee shall (i) at once vacate the Licensed
Areas, (ii) promptly dismantle and remove Licensee's cables and any other
equipment from any other portions of the Building (other than those portions of
the Building subject to the Lease), provided, however, that to the extent
Licensee's cables cannot be removed or dismantled in a manner which is
consistent with sound engineering practice and which will not disturb or
otherwise affect the structural integrity of any portion of the Building, then
the same shall remain at its location and title thereto shall thereupon
automatically pass to Licensor without any cost either by set-off, credit,
allowance or otherwise, and (iii) subject to the foregoing, repair, at its
expense, any damage caused to the Building, by the existence of such equipment
and/or by such dismantling and removal; and (B) Licensee shall immediately
remove all of its property from the Building (other than those portions of the
Building subject to the Lease) and if such portions of the Building, if any, are
not immediately vacated, Licensor may forthwith remove all persons and effects
therefrom and from the balance of the Building (other than those portions of the
Building subject to the Lease) using such force as may be necessary, without
being deemed guilty of any manner of trespass, eviction or forcible entry or
detainer and without thereby relinquishing any right given to Licensor hereunder
or by operation of law. If Licensee shall fail or refuse to remove (to the
extent permitted herein) any of the property described herein from any other
portions of the Building (other than those portions of the Building subject to
the Lease), Licensee shall be conclusively presumed to have abandoned same, and
title thereto shall thereupon pass to Licensor without any cost either by
set-off, credit, allowance or otherwise, and Licensor may, at its option, accept
the title to such property or at Licensee's expense may (i) remove the same or
any part in any manner that Licensor shall choose, and (ii) store, destroy or
otherwise dispose of the same without incurring liability to Licensee or any
other person.
12. OTHER COMMUNICATIONS FUNCTIONS. It is hereby acknowledged by Licensee
that Licensor conducts communications activities in, on and about the Building
and has granted to certain other parties the right, during the Term, to engage
in communication activities in, on and about the Building. Without limitation
of the foregoing, during the Term, Licensor may continue to (A) conduct
communications activities in, on and about the Building, (B) grant to other
parties the right to engage in other communication activities in, on and about
the Building, (C) erect, use and maintain, or to grant other licensees the right
to erect, use and maintain, pipes, ducts, wiring, cables and conduits and
appurtenances thereto, in and about the Building (including, without limitation,
through the areas containing the Licensed Areas), and (D) to attach cables,
ducts antenna masts and broadcast or other communication antennas, to portions
of the Building (or any roof thereof). Construction resulting from any grant
may from time to time result in the
3
<PAGE>
interruption of Licensee's operations in and from the Building for reasonable
periods, it being understood that any such interruption shall never be deemed to
constitute an eviction, constructive or partial eviction or disturbance of the
Licensee's Licensed Areas of the Building or relieve the Licensee from
performing any of its obligations under this License. Licensee shall conduct
its communications activities in and from the Building as permitted herein
during the Term of this License in a manner which will avoid objectionable
interference (a) with any other licensee's transmission or reception of signals
in, on, about or from the Building and (b) with Licensor's communications
systems within the Building, as such systems may now or hereafter exist. Upon
determination by Licensor that Licensee's activities are causing such
objectionable interference, Licensee will immediately take such action as may be
required to eliminate such objectionable interference. Without limitation of
the foregoing, Licensee shall execute and deliver to Licensor such addenda to
this License as Licensor, in the exercise of its discretion, may request from
time to time in order to further evidence and clarify Licensee's covenants and
agreements contained herein to conduct its communications activities in and from
the Building as permitted herein in a manner which will avoid objectionable
interference.
13. NO REAL ESTATE BROKER. Licensee represents that it has not dealt with
any broker in connection with this License, and that insofar as Licensee knows,
no broker negotiated this License or is entitled to any commission in connection
herewith. Licensee agrees to indemnify, defend and hold Licensor, its agents
and employees, harmless from and against any claims made by any broker for a
commission or fee in connection with this License, provided Licensor has not in
fact retained such broker.
14. SUBSTITUTION OF OTHER LICENSED AREAS. At any time during the Term of
this License, Licensor, upon thirty (30) days prior notice, may substitute for
the Licensed Areas other Licensed Areas in the Building (the "New Licensed
Areas"), provided such New Licensed Areas shall be usable by Licensee for
Licensee's permitted purpose and such New Licensed Areas are substantially
similar to the Licensed Areas.
15. MISCELLANEOUS. The preambles to this License are hereby incorporated
and made a part of this License.
16. ENTIRE AGREEMENT/BINDING EFFECT. This License covers in full every
obligation between the parties hereto concerning the Licensed Areas, and the
provisions of this License shall be binding upon and shall inure to the benefit
of the parties hereto and their respective heirs, executor, administrators,
successors and assigns, as the case may be.
4
<PAGE>
IN WITNESS WHEREOF, Licensor and Licensee have executed this License as of
the day and year first above written.
LICENSEE:
UNIVERSAL ACCESS, INC., a Delaware corporation
By: /s/ Robert Brown
-----------------------------------------------
Printed Name:
-------------------------------------
Its:
----------------------------------------------
LICENSOR:
TH TOWER LEASING, LLC, a Delaware
limited liability company
By: /s/ Stephen Budorick
-----------------------------------------------
Printed Name: STEPHEN BUDORICK
-------------------------------------
Its: VICE PRESIDENT
----------------------------------------------
5
<PAGE>
DEED OF LEASE
BY AND BETWEEN
HERNDON LINCOLN I LLC,
("LANDLORD")
AND
UNIVERSAL ACCESS, INC.,
("TENANT")
* * * * * *
13900 LINCOLN PARK DRIVE
HERNDON, VIRGINIA
HOLLAND & KNIGHT LLP
2100 Pennsylvania Avenue, N.W.
Suite 400
Washington, D.C. 20037
(202) 955-3000
(202) 955-5564 (Fax)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. BASIC LEASE TERMS..........................................................................................1
2. PREMISES...................................................................................................1
3. TERM AND COMMENCEMENT OF TERM..............................................................................2
4. RENT.......................................................................................................3
5. SECURITY DEPOSIT...........................................................................................7
6. USE........................................................................................................9
7. ASSIGNMENT AND SUBLETTING.................................................................................10
8. IMPROVEMENTS AND FIXTURES.................................................................................12
9. UTILITIES AND SERVICES....................................................................................13
10. RIGHTS OF LANDLORD........................................................................................14
11. LIABILITY.................................................................................................15
12. INSURANCE.................................................................................................16
13. FIRE OR CASUALTY..........................................................................................17
14. EMINENT DOMAIN............................................................................................17
15. SUBORDINATION AND ESTOPPEL CERTIFICATES...................................................................17
16. DEFAULT AND REMEDIES......................................................................................18
17. BANKRUPTCY................................................................................................20
18. PAYMENT OF TENANT'S OBLIGATIONS BY LANDLORD AND UNPAID RENT...............................................21
19. VOLUNTARY SURRENDER.......................................................................................21
20. ABANDONMENT OF PERSONAL PROPERTY..........................................................................21
21. HOLD-OVER.................................................................................................21
22. OPTION TO EXTEND TERM.....................................................................................22
23. PARKING...................................................................................................22
24. NOTICES...................................................................................................23
25. BROKERS...................................................................................................23
26. ENVIRONMENTAL CONCERNS....................................................................................23
27. LANDLORD'S LIEN...........................................................................................24
28. ROOFTOP COMMUNICATIONS EQUIPMENT..........................................................................24
29. EXTERIOR SIGNAGE..........................................................................................25
30. RULES AND REGULATIONS.....................................................................................25
31. QUIET ENJOYMENT...........................................................................................26
32. MISCELLANEOUS PROVISIONS..................................................................................26
</TABLE>
i
<PAGE>
LIST OF EXHIBITS
EXHIBIT A: Floor Plan of Premises
EXHIBIT B: Work Agreement
EXHIBIT C: Declaration of Commencement Date
EXHIBIT D: Location of Reserved Parking Spaces
EXHIBIT E: Location of Exterior Sign
EXHIBIT E-1: Dimensions of Exterior Sign
EXHIBIT F: Rules and Regulations
ii
<PAGE>
DEED OF LEASE
THIS DEED OF LEASE (this "Lease") is made as of the _____ day of April,
2000 (the "Effective Date"), by and between HERNDON LINCOLN I LLC ("Landlord")
and UNIVERSAL ACCESS, INC., a Delaware corporation ("Tenant"), who agree as
follows:
1. BASIC LEASE TERMS. The following terms shall have the following meanings in
this Lease:
<TABLE>
<S><C>
a. PREMISES: Approximately 41,957 rentable
square feet of space comprising
the entire fourth (4th)
floor of the Building
(described in Section 1b,
below), all as outlined on the
floor plan attached hereto
as EXHIBIT A.
b. BUILDING: 13900 Lincoln Park Drive, Herndon, Virginia
(the "Building"), containing approximately
201,376 rentable square feet of space.
c. COMMENCEMENT DATE: June 1, 2000*
[*subject to adjustment as provided for in this Lease]
TERM: Ten (10) years
d. INITIAL ANNUAL BASE RENT*: $26.00 per rentable square foot
$1,090,881.96 per annum
$90,906.83 per month
[*subject to escalation as provided for in this Lease]
e. BASE YEAR: 2000
f. TENANT'S PRO RATA SHARE OF OPERATING
EXPENSES: 20.84%*
TENANT'S PRO RATA SHARE OF REAL ESTATE
TAXES: 20.84%*
[*subject to adjustments provided for in this Lease]
g. ADDRESS FOR NOTICES:
TO LANDLORD: Herndon Lincoln I LLC
c/o Lincoln Property Company
1530 Wilson Boulevard, Suite 200
Arlington, Virginia 22209
Attention: Ms. Bari Nichols
WITH A COPY TO: Holland & Knight LLP
2100 Pennsylvania Avenue, N.W., Suite 400
Washington, D.C. 20037
Attention: David S. Kahn, Esquire
TO TENANT (BEFORE OCCUPANCY): Universal Access, Inc.
100 North Riverside Plaza
Suite 2200
Chicago, Illinois 60606
Attention: Mr. Robert Pommer
TO TENANT (AFTER OCCUPANCY): At the Premises
h. SECURITY DEPOSIT: $1,800,000.00
</TABLE>
2. PREMISES.
a. PREMISES. In consideration of Tenant's agreement to pay Annual
Base Rent (hereinafter defined) and Additional Rent (hereinafter defined) and
subject to the covenants and conditions hereinafter set forth, Landlord hereby
leases to Tenant and Tenant hereby hires and leases from Landlord, upon the
terms and conditions set forth herein, those certain premises described in
Section 1a hereof and located in the Building (the "Premises"). The rentable
square footage of the Premises has been determined in accordance with the BOMA
Standard Method of Measurement (rev. June 1996). The lease of the Premises to
Tenant includes the right, together with other tenants of the Building and
members of the
<PAGE>
public, to use the common public areas of the Land (hereinafter
defined) and the Building, but includes no other rights not specifically set
forth herein.
b. IMPROVEMENTS.
(i) Landlord shall deliver the Premises to Tenant in their
"as-is" condition; provided, however, that Landlord shall construct in the
Premises: (A) at Landlord's sole cost and expense, the Landlord Improvements
(hereinafter defined); and (B) at Tenant's sole cost and expense, subject,
however, to application of the Improvement Allowance (hereinafter defined), the
Tenant Improvements (hereinafter defined), all in accordance with the terms of
the Work Agreement attached hereto as EXHIBIT B (the "Work Agreement"). In the
event that Landlord and Tenant have not finally agreed upon the scope and
details of the Tenant Improvements as of the Effective Date, Tenant's submission
to Landlord of plans and specifications detailing such work shall be subject to
Landlord's written approval. The Tenant Improvements shall be subject to
Landlord's prior written approval, which approval shall not be unreasonably
withheld, conditioned or delayed, except to the extent that any Tenant
Improvement proposed by Tenant involves changes to, or modifications of, the
base Building or any of the systems therein, in which event Landlord may approve
or reject such Tenant Improvement in its sole discretion. Tenant shall insure
that the Tenant Improvements, as designed by the Space Planner (hereinafter
defined), comply with all applicable building codes, laws and regulations
(including without limitation the Americans With Disabilities Act) and do not
include or require any changes to or modifications of any of the mechanical,
electrical, plumbing or other systems of the Building.
(ii) The cost of all design, architectural and engineering
work, demolition costs, construction costs, construction supervision (as set
forth in the Work Agreement), contractors' overhead and profit, licenses and
permits, and all other costs and expenses incurred in connection with the Tenant
Improvements shall be at Tenant's sole cost and expense, subject to the
application of the Improvement Allowance. Landlord shall pay the Improvement
Allowance as provided in the Work Agreement. All costs incurred in respect of
the Tenant Improvements in excess of the Improvement Allowance shall be paid by
Tenant.
c. ACCESS TO PREMISES PRIOR TO COMMENCEMENT DATE. Subject to the
terms and conditions set forth below, Tenant and its contractors shall be
permitted to enter the Building and the Premises during the thirty (30) day
period preceding the anticipated Commencement Date (hereinafter defined) of the
Lease (the "Pre-Occupancy Period") for the purpose of installing Tenant's
computer system, cabling, fixtures, furniture and telecommunications equipment
in the Premises, provided that such access does not interfere with, or delay the
completion of, the Landlord Improvements or the Tenant Improvements. Tenant
shall not be required to pay any Rent (hereinafter defined) during the
Pre-Occupancy Period. Tenant's contractors shall comply with the Construction
Rules and Regulations attached hereto as SCHEDULE B-6. Landlord shall determine
the days and hours of the day during which Tenant's contractors may undertake
work in the Premises during the Pre-Occupancy Period in order to coordinate such
schedules with those of the Contractor (hereinafter defined) and all
subcontractors performing portions of the Landlord Improvements and/or the
Tenant Improvements. Any delay in completing the Landlord Improvements or Tenant
Improvements resulting from Tenant's contractors' early access to the Building
or the Premises shall constitute Tenant Delay (hereinafter defined). In
addition, Tenant shall indemnify and hold harmless Landlord from any injury to
the Building or loss of life or injury to persons or property in or around the
Building resulting from such early occupancy by Tenant and its contractors.
d. ACCEPTANCE. The taking of possession of the Premises by Tenant shall
constitute an acknowledgment by Tenant that the Premises are in good condition,
that Landlord has provided or constructed all improvements to be provided or
constructed by Landlord in accordance with the Work Agreement and that all
materials and labor provided by Landlord are satisfactory except as to (i) any
defects or incomplete work that are specified on the Punch List (as defined in
the Work Agreement), which Punch List shall be delivered to Landlord by Tenant
in accordance with the Work Agreement; and (ii) Latent Defects (hereinafter
defined). As used herein, the term "Latent Defects" means any defects in the
initial construction of the Landlord Improvements or the Tenant Improvements
which affect Tenant's use or occupancy of the Premises and which would not be
reasonably discoverable by a competent architect or engineer who undertakes an
inspection of the Premises on the Commencement Date. Landlord agrees to complete
promptly all (A) Punch List items which the Construction Supervisor (hereinafter
defined) confirms are defects or incomplete items; and (B) Latent Defects about
which Landlord is notified in writing by Tenant within six (6) months after the
Commencement Date.
3. TERM AND COMMENCEMENT OF TERM.
a. TERM. This Lease shall be in full force and effect from the
Effective Date. The term of this Lease (the "Term") shall commence on the
Commencement Date (hereinafter defined) and shall expire on the last day of the
tenth (10th) Lease Year (hereinafter defined) (the "Lease Expiration Date"),
unless such Term is otherwise extended or terminated in accordance with the
terms hereof. As used herein, the "Commencement Date" shall be the earlier of:
(i) the date shown in Section 1c hereof, as such date may be extended pursuant
to Section 3b below, or (ii) the date on which Tenant, or anyone claiming
through or under Tenant, first commences use or occupancy of the Premises for
the conduct of Tenant's business. As used herein, the term "Lease Year" means
(a) each twelve (12)-month period commencing on the Commencement Date, except
that if the Commencement Date does not occur on the first day of a calendar
month, the first Lease Year shall commence on the Commencement Date and
terminate on the last day of the twelfth (12th) full calendar month after the
Commencement Date, and
2
<PAGE>
(b) each successive period of twelve (12) calendar months thereafter during the
Term. Reference is made to the form of Declaration of Commencement Date (the
"Declaration") attached hereto as EXHIBIT C. After the Commencement Date
Landlord shall complete the Declaration and deliver the completed Declaration to
Tenant. Within five (5) business days after Tenant receives the completed
Declaration from Landlord, Tenant shall execute and return the Declaration to
Landlord (to the extent the Declaration is accurate) to confirm the Commencement
Date, the Term and the actual number of rentable square feet in the Premises.
Failure to execute the Declaration shall not affect the commencement or
expiration of the Term.
b. DELAYS. In the event that substantial completion (hereinafter
defined) of the Landlord Improvements or the Tenant Improvements is delayed for
any reason, this Lease shall remain in full force and effect and Tenant shall
have no claim against Landlord by reason of any such delay. If such delay in
substantial completion of the Landlord Improvements or the Tenant Improvements
results from a cause other than Tenant Delay (defined in the Work Agreement),
the date set forth in Section 1c, above, shall be extended to the date on which
Landlord substantially completes the Landlord Improvements and the Tenant
Improvements, provided, however that if such delay in substantial completion
results in whole or in part because of a Tenant Delay, the Commencement Date
shall be the date on which Landlord would have substantially completed the
Premises but for any such Tenant Delay. The terms "substantially complete" and
"substantial completion" shall mean the time when the construction of the
Landlord Improvements and the Tenant Improvements shall have progressed to the
point that all areas of the Premises have been materially completed (except for
Punch List items which do not interfere with the use of the Premises for its
intended purposes or have any material adverse affect on the appearance of the
Premises) substantially in accordance with the requirements of the final
Contract Documents (defined in the Work Agreement) and any Tenant-requested and
Landlord-approved change orders, such that Tenant can use and occupy the
Premises for the purposes and uses for which the Premises are intended
hereunder. Tenant's failure to meet its obligations with respect to the Tenant
Improvements (including all obligations of Tenant under the terms of the Work
Agreement) shall constitute a default under this Lease, entitling Landlord to
pursue all of its remedies as provided under Section 16 hereof. Notwithstanding
the foregoing, in the event that the Landlord Improvements and/or the Tenant
Improvements have not been substantially completed by November 30, 2000, as such
date is extended day-for-day by Tenant Delay and Force Majeure (hereinafter
defined), Tenant shall have the right to terminate this Lease upon thirty (30)
days' written notice to Landlord; provided, however, if Landlord effects
substantial completion of the Landlord Improvements and the Tenant Improvements
within thirty (30) days after Landlord's receipt of Tenant's termination notice,
the Lease shall not terminate and shall continue in full force and effect for
the entire Term. Should Landlord fail to effect substantial completion of the
Landlord Improvements and the Tenant Improvements within the foregoing thirty
(30) day period, the Lease shall terminate, whereupon neither party shall have
any further rights or obligations under the Lease.
4. RENT. Beginning on the Commencement Date, Tenant covenants and agrees to pay
as Rent (hereinafter defined) for the Premises the following amounts set forth
in this Section 4 and as otherwise provided in this Lease. "Additional Rent"
shall mean such costs, expenses, charges and other payments to be made by (or on
behalf of) Tenant to Landlord (or to a third party if required under this
Lease), whether or not the same be designated as such. "Rent" or "rent" shall
mean all Annual Base Rent (hereinafter defined) and Additional Rent due
hereunder.
a. ANNUAL BASE RENT.
(i) During each Lease Year, Tenant shall pay the annual base
rent in the amounts set forth immediately below ("Annual Base Rent") which
Annual Base Rent shall be payable in equal monthly installments (the "Monthly
Base Rent"), in the amounts set forth immediately below:
<TABLE>
<CAPTION>
--------------------- ------------------------- ------------------- -----------------------
RENTAL RATE
(PER RENTABLE MONTHLY ANNUAL
LEASE YEAR SQUARE FOOT) BASE RENT BASE RENT
--------------------- ------------------------- ------------------- -----------------------
<S> <C> <C> <C>
1 $ 26.00 $ 90,906.83 $ 1,090,882.00
--------------------- ------------------------- ------------------- -----------------------
2 $ 26.78 $ 93,634.04 $ 1,123,608.46
--------------------- ------------------------- ------------------- -----------------------
3 $ 27.58 $ 96,443.06 $ 1,157,316.71
--------------------- ------------------------- ------------------- -----------------------
4 $ 28.41 $ 99,336.35 $ 1,192,036.22
--------------------- ------------------------- ------------------- -----------------------
5 $ 29.26 $102,316.44 $ 1,227,797.30
--------------------- ------------------------- ------------------- -----------------------
6 $ 30.14 $105,385.94 $ 1,264,631.22
--------------------- ------------------------- ------------------- -----------------------
7 $ 31.05 $108,547.51 $ 1,302,570.16
--------------------- ------------------------- ------------------- -----------------------
8 $ 31.98 $111,803.94 $ 1,341,647.26
--------------------- ------------------------- ------------------- -----------------------
9 $ 32.94 $115,158.06 $ 1,381,896.68
--------------------- ------------------------- ------------------- -----------------------
10 $ 33.92 $118,612.80 $ 1,423,353.58
--------------------- ------------------------- ------------------- -----------------------
</TABLE>
(ii) In addition to the payment of Annual Base Rent, Tenant
shall be responsible for the payment of Tenant's Pass-Through Costs (hereinafter
defined) pursuant to Section 4b hereof.
(iii) All installments of Monthly Base Rent shall be payable
in advance, with the first monthly installment due and payable upon execution of
this Lease. If the Commencement Date shall be a day other than the first day of
a calendar month, (1) the Annual Base Rent for the first Lease Year shall be an
amount equal to the sum of (x) the amount of Monthly Base Rent for the partial
month in which the Commencement Date occurs, plus (y) the amount of the Annual
Base Rent set forth in Section 1d, above, and (2) Monthly Base Rent for such
partial month shall be the prorated amount of the Monthly Base Rent
3
<PAGE>
payable hereunder during the first Lease Year, which proration shall be based
upon the actual number of days of such partial month. The prorated Monthly Base
Rent for such partial month shall be payable on the first day of the calendar
month after the month in which the Commencement Date occurs.
b. TENANT'S PASS-THROUGH COSTS.
(i) As used in this Lease:
(1) "OPERATING EXPENSES" shall mean any and all
expenses, costs and disbursements (but not specific costs billed to and paid by
specific tenants) of every kind and nature actually incurred by Landlord in
connection with the management, operation, maintenance, servicing and repair of
the Building and appurtenances thereto, including without limitation the common
areas thereof, and the land underlying the Building (the "Land"), including but
not limited to employees' wages, salaries, welfare and pension benefits and
other fringe benefits; payroll taxes; telephone service; painting of common
areas of the Building; exterminating service; detection and security services;
concierge services; sewer rents and charges; premiums for fire and casualty,
liability, rent, workmen's compensation, sprinkler, water damage and other
insurance; repairs and maintenance; building supplies; uniforms and dry
cleaning; snow removal; the cost of obtaining and providing electricity, water
and other public utilities to all areas of the Building; trash removal;
janitorial and cleaning supplies; and janitorial and cleaning services; window
cleaning; service contracts for the maintenance of elevators, boilers, HVAC and
other mechanical, plumbing and electrical equipment; fees for all licenses and
permits required for the ownership and operation of the Land and the Building;
business license fees and taxes, including those based on Landlord's rental
income from the Building; the rental value of the management office maintained
in the Building; all costs of operating, maintaining and replacing equipment in
the health and fitness facility located in the Building; sales, use and personal
property taxes payable in connection with tangible personal property and
services purchased for the management, operation, maintenance, repair, cleaning,
safety and administration of the Land and the Building; legal fees; accounting
fees relating to the determination of Operating Expenses and the tenants' share
thereof and the preparation of statements required by tenant's leases;
management fees, whether or not paid to any person having an interest in or
under common ownership with Landlord; purchase and installation of indoor plants
in the common areas of the Building; and landscaping maintenance and the
purchase and replacement of landscaping services, plants and shrubbery. If
Landlord makes a Permitted Capital Expenditure (hereinafter defined), and if,
under generally accepted accounting principles, such expenditure is not a
current expense, then the cost thereof shall be amortized over a period equal to
the useful life of such improvement, determined in accordance with generally
accepted accounting principles, and the amortized costs allocated to each
calendar year during the Term, together with an imputed interest amount
calculated on the unamortized portion thereof using an interest rate of ten
percent (10%) per annum, shall be treated as an Operating Expense. As used
herein, the term "Permitted Capital Expenditure" shall mean an expenditure for a
capital improvement to the Land and/or the Building by installing energy
conservation or labor-saving devices to reduce Operating Expenses, or to comply
with any law, ordinance or regulation pertaining to the Land and/or the
Building. The following costs shall specifically be excluded from the definition
of "Operating Expenses" under this Lease: (a) Real Estate Taxes (hereinafter
defined); (b) costs of initial improvements to any tenant's premises, or any
architectural, engineering or legal fees, relocation expense or any permit or
similar fees or charges associated with such improvements; (c) principal or
interest payments on loans, including loans secured by mortgages or trust deeds
on the Building and/or the Land and ground lease payments, if any; (d)
depreciation or amortization of any capital improvements (expressly excluding
Permitted Capital Expenditures, the cost of which shall be amortized and
included in Operating Expenses as set forth above); (e) costs of repairs,
alterations or replacements resulting from a casualty to the extent that
Landlord is reimbursed or compensated therefor through proceeds of insurance (or
with respect to which Landlord would have been compensated or reimbursed had
Landlord maintained the insurance required by this Lease); (f) costs of repairs,
alterations or replacements caused by the exercise of the power of eminent
domain; (g) costs and expenses incurred in connection with leasing space in the
Building, such as legal fees for the preparation of leases, tenant allowances,
space planner fees, real estate brokers' leasing commissions and advertising and
promotional expenses, expenses of any leasing office incurred with regard to
leasing the Building or portions thereof; (h) leasing commissions, attorneys'
fees, costs and disbursements and other expenses incurred in connection with
negotiations with tenants, occupants or prospective tenants or occupants of the
Building relating to the leasing of space in the Building; (i) costs incurred
due to the violation by Landlord of the terms of any lease for space in the
Building or any indemnity payments made by Landlord pursuant to any such lease
because of a violation by Landlord under such lease, but only to the extent that
any such cost would not have been incurred by Landlord absent the violation of
such lease by Landlord; (j) the portion, if any, of any payments made to
subsidiaries of Landlord or entities under common control with Landlord for
goods or services provided to, or in connection with the operation of, the
Building, to the extent that the cost of similar goods or services are
materially greater than the cost of such goods and services being provided by
unrelated third parties to landlords in the Herndon, Virginia area from time to
time; (k) any expense for goods or services for which any tenant of the Building
(including Tenant) directly reimburses Landlord (other than as a component of
Operating Expenses); (l) accounting fees (including those for the preparation of
Landlord's income taxes), other than reasonable accounting fees incurred in
connection with the operation and management of the Building; (m) any lender's
fees; (n) expenses for services provided to other tenants in the Building which
services are not being offered to Tenant; (o) costs to remediate Hazardous
Materials which are in, on or under the Land or the Building on the Commencement
Date (but expressly excluding Hazardous Materials brought on the Land or the
Building by Tenant); (p) management fees in excess of three percent (3%) of
gross rents for the Building; (q) wages, salaries and other compensation paid to
clerks or attendants in newsstands or other commercial concessions, if any,
operated by Landlord; (r) wages, salaries or other benefits or compensation paid
to any employee of Landlord or the property management company at the Building
4
<PAGE>
above the level of property manager; (s) costs relating to relocating
existing tenants in the Building; (t) expenses arising as a result of
Landlord's gross negligence of willful misconduct; (u) advertising and
promotional expenses of the Building; (v) the cost of installing, operating
and maintaining any athletic club or recreational facility, theater,
conference facility or art gallery unless Tenant is entitled to use such
facilities free of charge (or at a substantially reduced charge relative to
the general public); and (w) the cost of any Permitted Capital Expenditure
undertaken to cure a violation of law which existed on the Commencement Date.
(2) "REAL ESTATE TAXES" shall mean all taxes,
assessments and charges levied upon or with respect to the Land, the
Building, and any improvements adjacent thereto (computed as payable in
installments as permitted by law regardless of whether so paid), including
without limitation vault rents, if any, franchise taxes, any tax, fee or
excise on rents, on the square footage of the Premises including the Fairfax
County Business License Tax, on the act of entering into this Lease, on the
occupancy of Tenant, on account of the rent hereunder or the business of
renting space now or hereafter levied or assessed against Landlord by the
United States of America or the state, county, city or town in which the
Building are located, or any political subdivision, public corporation,
district or other political or public entity; and shall also include any
other tax to the extent that such tax is imposed in lieu of or in addition to
such Real Estate Taxes. Reasonable legal fees, costs and disbursements
incurred by Landlord in connection with any proceedings for appeal or
reduction of any Real Estate Taxes shall also be considered Real Estate Taxes
for the year in question. Notwithstanding anything to the contrary in this
section, the following shall be excluded from the definition of "Real Estate
Taxes:" (a) all excess profit taxes, gift taxes, capital stock taxes,
inheritance and succession taxes, estate taxes, federal and state income
taxes, capital gain taxes and other similar taxes based on Landlord's net
income, (b) any item(s) included within "Operating Expenses", (c) any taxes
or other charges with respect to which Tenant is directly responsible for
paying to such taxing authority and (d) except as set forth immediately
below, interest and late charges payable as the result of the late payment of
Real Estate Taxes by Landlord. In the event that, at any time during the
Term, a special assessment is imposed on the Land and/or the Building by any
taxing authority having jurisdiction (the "Special Assessment"), and Landlord
is permitted to pay such Special Assessment over a period of time which spans
more than one calendar year, then in such event Landlord shall pay the
Special Assessment over the longest period of time permitted by such taxing
authority (without being in default); provided that any interest or late
charges imposed as a result of such late payment by Landlord shall be
included within the definition of Real Estate Taxes that are payable by
Tenant hereunder.
(3) "TENANT'S PRO RATA SHARE OF OPERATING
EXPENSES," as of the date hereof, shall be as provided in Section 1f,
representing the ratio that the rentable area of the Premises bears to the
total rentable area of office space in the Building. If either the rentable
area of the Premises or the total rentable area of the Building shall be
increased or decreased, as reasonably determined by Landlord, Tenant's Pro
Rata Share of Operating Expenses shall be adjusted accordingly.
(4) "TENANT'S PRO RATA SHARE OF REAL ESTATE
TAXES," as of the date hereof, shall be as provided in Section 1f,
representing the ratio that the area of the Premises bears to the total
rentable area of the Building. If either the rentable area of the Premises or
the total rentable area of the Building shall be increased or decreased, as
reasonably determined by Landlord, Tenant's Pro Rata Share of Real Estate
Taxes shall be adjusted accordingly.
(5) "BASE YEAR" means calendar year 2000.
(ii) If, in any calendar year during the Term, the total
amount of Operating Expenses for the Building exceeds the amount of Operating
Expenses in the Base Year, then Tenant shall pay to Landlord, as Additional
Rent, an amount which is the product of (1) the amount of such increase in
Operating Expenses, multiplied by (2) Tenant's Pro Rata Share of Operating
Expenses. Tenant's Pro Rata Share of Operating Expenses for any partial calendar
year during the Term shall be determined by multiplying the amount of Tenant's
Pro Rata Share of Operating Expenses for the full calendar year by a fraction,
the numerator of which is the number of days during such calendar year falling
within the Term and the denominator of which is three hundred sixty five (365).
If in any calendar year during the Term, the amount of Real Estate Taxes exceeds
the amount of Real Estate Taxes for the Base Year, then Tenant shall pay, as
Additional Rent, an amount which is the product of (x) the amount of such
increase in Real Estate Taxes, multiplied by (y) Tenant's Pro Rata Share of Real
Estate Taxes. Tenant's Pro Rata Share of Real Estate Taxes for any partial
calendar year during the Term shall be determined by multiplying the amount of
Tenant's Pro Rata Share of Real Estate Taxes for the full calendar year by a
fraction, the numerator of which is the number of days during such calendar year
falling within the Term and the denominator of which is three hundred sixty five
(365).
(iii) If at any time during the Base Year, or during any
subsequent calendar year ("Subsequent Year"), less than ninety-five percent
(95%) of the total rentable square feet of office space in the Building is
occupied by tenants, the amount of Operating Expenses for the Base Year, or for
any such Subsequent Year, as the case may be, shall be deemed to be the amount
of Operating Expenses as reasonably estimated by Landlord that would have been
incurred if the percentage of occupancy of the Building during the Base Year or
any such Subsequent Year was ninety-five percent (95%). If at any time during
any calendar year, any part of the Building is leased to a tenant (hereinafter
referred to as a "Special Tenant") who, in accordance with the terms of its
lease, provides its own utilities, cleaning or janitorial services or other
services or is not otherwise required to pay a share of Operating Expenses in
accordance with the methodology set forth in this Section 4b, and Landlord does
not incur the cost of such services, Operating Expenses for such calendar year
shall be increased by the additional costs for cleaning and janitorial services
and such other applicable expenses as reasonably estimated by Landlord
5
<PAGE>
that would have been incurred by Landlord if Landlord had furnished and paid
for cleaning and janitorial services and such other services for the space
occupied by the Special Tenant, or if Landlord had included such costs in
"operating expenses" as defined in the Special Tenant's lease.
(iv) If, during the Base Year or during any Subsequent
Year thereafter, the amount of Real Estate Taxes payable by Landlord with
respect to the Land and the Building does not reflect an assessed value of
the Building equal to or greater than the then-current Fully Assessed Value
(hereinafter defined) of the Building, then in such event Landlord shall
increase the amount of Real Estate Taxes hereunder for the Base Year or any
Subsequent Year, as the case may be, to reflect such Fully Assessed Value for
the calendar year in question. As used herein, the term "Fully Assessed
Value" means the value of the Building, for the purpose of Real Estate Tax
assessment by the appropriate officials of Fairfax County, Virginia, using
the income method of valuation then being employed by Fairfax County,
Virginia, based upon the following assumptions for valuation purposes: (A)
the Building is substantially completed (including base Building improvements
and tenant improvements in 95% of the tenant space); (B) the Building is
ninety-five percent (95%) leased; and (C) the "average" rental rate for
valuation purposes shall be the applicable rental rate then being used by
Fairfax County for the Building and/or buildings comparable to the Building.
(v) During the month of December, 2000, and thereafter
during the month of December of each Lease Year, Landlord shall use
reasonable efforts to furnish to Tenant a statement of Landlord's estimate of
Tenant's Pass-Through Costs for the next calendar year. "Tenant's
Pass-Through Costs" shall be an amount equal to the sum of (1) Tenant's Pro
Rata Share of Operating Expenses multiplied by the difference between
Operating Expenses incurred during any calendar year during the Term, and
Operating Expenses incurred in the Base Year; plus (2) Tenant's Pro Rata
Share of Real Estate Taxes multiplied by the difference between Real Estate
Taxes for any calendar year during the Term and Real Estate Taxes incurred
during the Base Year. Such statement shall show the amount of Tenant's
Pass-Through Costs, if any, payable by Tenant for such calendar year pursuant
to this Section 4b on the basis of Landlord's estimate. Commencing on January
1, 2001, and continuing on each monthly rent payment date thereafter until
further adjustment pursuant to this Section 4b(v), Tenant shall pay to
Landlord one-twelfth (1/12) of the amount of said estimated Tenant's
Pass-Through Costs. Within one hundred twenty (120) days after the expiration
of each calendar year during the Term, Landlord shall furnish to Tenant a
statement (the "Expense Statement") showing the actual Operating Expenses and
Real Estate Taxes for such calendar year. The Expense Statement shall be
conclusive and binding on Tenant, unless objected to in writing by Tenant
within six (6) months following Tenant's receipt thereof. In case of an
underpayment, Tenant shall, within thirty (30) days after the receipt of such
statement, pay to Landlord an amount equal to such underpayment. In case of
an overpayment, Landlord shall credit the next monthly rental payment by
Tenant with an amount equal to such overpayment. Additionally, if this Lease
shall have expired, Landlord shall apply such excess against any sums due
from Tenant to Landlord and shall refund any remainder to Tenant within
thirty (30) days after the expiration of the Term, or as soon thereafter as
possible.
(vi) Within six (6) months of receipt of any Expense
Statement, Tenant shall be entitled to the following audit right with respect
to such Expense Statement. Such audit right shall be exercisable by Tenant
providing Landlord with a written notice of its exercise of such audit right.
If within sixty (60) days after Landlord's receipt of Tenant's written notice
and statement, Landlord and Tenant are unable to resolve Tenant's objections,
then not later than fifteen (15) days after the expiration of such sixty
(60)-day period Tenant shall deliver to Landlord written notice (the "Audit
Notice") that it wishes to employ on an hourly rate (and not a contingency
fee) basis an independent certified public accounting firm reasonably
acceptable to Landlord to inspect and audit Landlord's books and records
relating to the objections raised in Tenant's statement. If Tenant elects to
employ such accountant as set forth above, then Tenant shall deliver to
Landlord a confidentiality and nondisclosure agreement satisfactory to
Landlord executed by such accountant, and provide Landlord not less than
fifteen (15) days' notice of the date on which the accountant desires to
examine Landlord's books and records at the Building during regular business
hours; provided, however, that such date shall be between thirty (30) and
ninety (90) days after Tenant delivers to Landlord the Audit Notice. Such
audit shall be limited to a determination of whether Landlord calculated the
Expense Statement in accordance with the terms and conditions of this Lease,
and may include verification by Landlord of the costs and expenses on which
the Expense Statement in question is based. Except as otherwise expressly set
forth below, all costs and expenses of any such audit shall be paid by
Tenant. Any audit performed pursuant to the terms of this Section 4b(vi)
shall be conducted only by an independent certified public accounting firm
reasonably acceptable to Landlord. Notwithstanding anything contained herein
to the contrary, Tenant shall be entitled to exercise its right to audit
pursuant to this Section 4b(vi) only in strict accordance with the foregoing
procedures and each such audit shall relate only to the most recent calendar
year covered by the audited Expense Statement; provided, however, if (A) such
audit indicates that there was a demonstrated error in the calculation of a
component of Operating Expenses resulting in an overstatement of Operating
Expenses in the Expense Statement, and (B) such component is a recurring
Operating Expense and because of the nature of the component it is likely
that such component was similarly overstated in any prior calendar year
during the Term, then Tenant shall have the right to audit the books and
records relating solely to such component for each such prior year but such
audit shall be limited to determining whether or not the same component was
similarly in error in such prior calendar years. Such limited audit right
must be exercise only by Tenant delivering to Landlord written notice thereof
within thirty (30) days after the earlier of (1) the date Tenant receives the
audit report from the independent certified public accounting firm, or (2)
one hundred twenty (120) days after the date that Tenant delivers to Landlord
the Audit Notice in connection with the Expense Statement in which the error
was first discovered. The audit rights pursuant to this Section 4b(vi) shall
not transfer or apply to any subtenant or any other person or entity other
than the "tenant" hereunder. If on account of any demonstrated errors in the
Expense Statement under audit,
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Tenant is entitled to a refund of the amount paid by Tenant for Tenant's Pro
Rata Share of Operating Expenses for the calendar year or years under audit
because such Expense Statement overstated the amounts to which Landlord was
entitled hereunder by more than five percent (5%) of the amount of Expenses
for the applicable calendar year, then Landlord shall promptly reimburse
Tenant for the reasonable costs and expenses incurred in such audit.
(vii) All monies received from Tenant as Tenant's
Pass-Through Costs shall be received by Landlord to pay Operating Expenses
and Real Estate Taxes of the Building and the Land. Notwithstanding the
foregoing, Landlord shall have the right to commingle Tenant's Pass-Through
Costs with other funds collected by Landlord.
(viii) Tenant's obligation to pay, and Landlord's
obligation to refund, Tenant's Pass-Through Costs pursuant to the provisions
of this Section 4b, as applicable, shall survive the expiration or other
termination of this Lease with respect to any period during the Term hereof
and with respect to any holdover period of occupancy following the expiration
of the Term.
c. PAYMENT OF RENT. All Rent shall be paid in lawful money of the
United States of America without deduction, diminution, set-off, counterclaim
or prior notice or demand, at the office of Landlord as provided in Section
1g hereof or at such other place as Landlord may hereafter designate in
writing, on the first day of every calendar month during the Term. All such
payments shall be made by good checks payable to Landlord or such other
person, firm or corporation as Landlord may hereafter designate in writing.
No payment by Tenant or receipt and acceptance by Landlord of a lesser amount
than the Monthly Base Rent or Additional Rent shall be deemed to be other
than partial payment of the full amount then due and payable; nor shall any
endorsement or statement on any check or any letter accompanying any check,
payment of Rent or other payment, be deemed an accord and satisfaction; and
the Landlord may accept, but is not obligated to accept, such partial payment
without prejudice to the Landlord's right to recover the balance due and
payable or to pursue any other remedy provided in this Lease or by law. If
Landlord shall at any time or times accept Rent after it becomes due and
payable, such acceptance shall not excuse a subsequent delay or constitute a
waiver of Landlord's rights hereunder. Any Rent owed by Tenant to Landlord,
including without limitation Annual Base Rent, Additional Rent, Tenant's
Pass-Through Costs and Late Charges, which is not paid within five (5) days
after the date such payment is due shall bear interest from the due date at a
rate equal to the prime rate on corporate loans quoted in the WALL STREET
JOURNAL (the "Prime Rate") plus two percent (2%). In addition, if any amount
of Rent required to be paid by Tenant to Landlord under the terms of this
Lease is not paid within five (5) days after the date such payment is due,
then in addition to paying the amount of Rent then due, Tenant shall pay to
Landlord a late charge (the "Late Charge") equal to five percent (5%) of the
amount of Rent then required to be paid. Payment of such Late Charge will not
excuse the untimely payment of Rent. In the event Tenant makes any payment of
Rent by check and said check is returned by the bank unpaid, Tenant shall pay
to Landlord the sum of One Hundred Dollars ($100.00) to cover the costs and
expenses of processing the returned check, in addition to the Rent payment
and any other charges provided for herein. Any interest, Late Charge and
other amounts charged hereunder shall constitute Additional Rent.
d. SEPARATE METERING AND RENT REDUCTION. Landlord may elect to
discontinue the distribution or furnishing of electricity and/or water to the
Premises if such services may feasibly be furnished directly to Tenant by the
utility company supplying same. In the event of any such election by
Landlord: (i) Landlord agrees to give reasonable advance notice of such
discontinuance to Tenant; (ii) Landlord agrees to permit Tenant to receive
electricity and/or water directly from the utilities supplying such service
to the Building and to permit the existing feeders, risers, wiring, pipes and
other facilities serving the Premises to be used by Tenant for such purpose
to the extent they are suitable and safely capable of carrying Tenant's
requirements; (iii) Landlord agrees to pay such charges and costs, if any, as
such public utility may impose in connection with the installation of
Tenant's meters; (iv) the amount of Additional Rent payable in respect to the
Operating Expenses shall be decreased appropriately to reflect such
discontinuance; and (v) such discontinuance shall not occur until direct
service has been obtained by Tenant (or, if Tenant fails timely to take steps
to obtain such direct service, by Landlord, on Tenant's behalf and at
Tenant's sole cost).
5. SECURITY DEPOSIT.
a. Within seven (7) business days after the Effective Date (the
"Security Deposit Delivery Date"), time being of the essence, Tenant shall
tender to Landlord a security deposit in the amount set forth in Section 1h
hereof (the "Security Deposit") to be held by Landlord during the Term as
collateral security (and not prepaid rent), for the payment of Annual Base
Rent and Additional Rent and for the faithful performance by Tenant of all
other covenants, conditions and agreements of this Lease. Failure by Tenant
to deliver the Security Deposit to Landlord on or before the Security Deposit
Delivery Date shall constitute an Event of Default (hereinafter defined)
under this Lease. Landlord shall not be obligated to hold the Security
Deposit in a separate account. If the Security Deposit tendered by Tenant is
in the form of a Cash Security Deposit (hereinafter defined), the Security
Deposit shall earn simple interest at the rate of two and one half percent
(2 1/2%) per annum, which interest shall be included in the Cash Security
Deposit being held by Landlord hereunder. If any sum payable by Tenant to
Landlord shall be overdue and unpaid, or if Landlord makes any payments on
behalf of Tenant, or if Tenant fails to perform any of the terms of this
Lease, then Landlord, at its option and without prejudice to any other remedy
which Landlord may have, may apply such part of the Security Deposit
necessary to compensate Landlord for the payment of Annual Base Rent or
Additional Rent, or any loss or damage sustained by Landlord. Tenant shall
restore the Security Deposit to the original sum deposited upon demand.
Provided that Tenant shall have made all payments and performed all covenants
and agreements of this
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Lease, Landlord shall return the Security Deposit to Tenant (except to the
extent of any portion of the Security Deposit which has been applied by
Landlord and not restored by Tenant) within thirty (30) days after the
expiration of this Lease or the vacation of the Premises by Tenant, whichever
is later or as soon thereafter as possible.
b. In substitution for the cash Security Deposit (the "Cash
Security Deposit") required under Section 5a above, Tenant shall have the
right to deliver to Landlord, on or before the Effective Date, an
unconditional and irrevocable letter of credit reasonably acceptable to
Landlord issued by the Bank (hereinafter defined) in the face amount of One
Million Eight Hundred Thousand Dollars ($1,800,000.00) (the "Letter of
Credit"), as a security deposit to be held by Landlord until disposed of in
accordance with the provisions of this Section 5. As used herein, the term
"Bank" shall mean American National Bank and Trust Company of Chicago or any
other federally-insured banking institution reasonably acceptable to Landlord
and having total assets of at least Three Billion Dollars ($3,000,000,000)
and a Standard & Poor's commercial paper rating of at least A-1. If the
Letter of Credit (or any replacement thereof) is issued for an effective
period of time less than the remaining Term of this Lease (or any renewal
thereof), Tenant shall from time to time, and not later than sixty (60) days
prior to the expiration of the Letter of Credit, replace each such expiring
Letter of Credit with a new Letter of Credit in the same amount and upon the
same terms. The Letter of Credit (and any replacement thereof) may be drawn
upon by Landlord under the terms and conditions as provided in this Section
5. Failure of Tenant to renew the Letter of Credit at least thirty (30) days
prior to its expiration shall constitute an Event of Default under this Lease
and shall entitle Landlord, in addition to the other remedies contained in
this Lease, to draw upon the Letter of Credit.
c. Landlord (or the beneficiary under the Letter of Credit, if
such beneficiary is not Landlord) shall have the right to draw upon the
Letter of Credit in any of the following circumstances (in addition to any
other right to draw on the Letter of Credit that is set forth in this Section
5): (i) if the total assets of the Bank are at anytime less than Three
Billion Dollars ($3,000,000,000), or the Bank has a Standard & Poor's
commercial paper rating of less than A-1 (provided if at anytime the current
Standard & Poor's commercial paper rating system is no longer in existence, a
comparable rating of a comparable commercial paper rating system from a
comparable company shall be selected by Landlord, in its reasonable
discretion, for purposes of this Section 5) and Tenant fails to deliver to
Landlord a replacement Letter of Credit complying with the terms of this
Lease within thirty (30) days of request therefor from Landlord, (ii) if the
credit rating of the Bank is downgraded from the credit rating of such issuer
at the time of the issuance of the Letter of Credit, the Bank shall enter
into any supervisory agreement with any governmental authority, or the Bank
shall fail to meet any capital requirements imposed by applicable law, and
Tenant fails to deliver to Landlord (or the beneficiary under the Letter of
Credit, if such beneficiary is not Landlord) a replacement Letter of Credit
complying with the terms of this Lease within thirty (30) days of request
from Landlord, (iii) if Tenant fails to provide Landlord with any renewal or
replacement Letter of Credit complying with the terms of this Lease at least
sixty (60) days prior to expiration of the then-current Letter of Credit
where the Bank has advised Landlord of its intention not to renew the Letter
of Credit, (iv) if Tenant fails to provide Landlord with any renewal or
replacement Letter of Credit complying with the terms of this Lease at least
sixty (60) days prior to the final expiration date (i.e., the date that, by
the terms of the Letter of Credit, the Letter of Credit expires and is either
not subject to any automatic renewal or extension or the conditions to such
automatic renewal or extension have not then been satisfied) of the
then-current Letter of Credit if such Letter of Credit expires prior to the
date that is thirty (30) days after the end of the Term, or (v) any voluntary
in involuntary proceedings are filed by or against Tenant under any
bankruptcy, insolvency or similar laws. In the event the Letter of Credit is
drawn upon due solely to the circumstances described in the foregoing clauses
(i), (ii), (iii), (iv) or (v), the amount drawn shall be held by Landlord as
a Cash Security Deposit in accordance with the terms of this Section 5, and
shall be otherwise retained, expended or disbursed by Landlord for any
amounts or sums due under this Lease to which the proceeds of the Letter of
Credit could have been applied pursuant to this Lease, and Tenant shall be
liable to Landlord for restoration, in cash or Letter of Credit complying
with the terms of this Lease, of any amount so expended to the same extent as
set forth in this Section 5.
d. In the event of the sale or transfer of Landlord's interest
in the Building, Landlord shall have the right to transfer the Cash Security
Deposit or the Letter of Credit to the purchaser or assignee, and upon
notification of Tenant of such transfer Tenant shall look only to the new
landlord for the return of the Cash Security Deposit, and Landlord shall
thereupon be released from all liability to Tenant for the return of the Cash
Security Deposit or Letter of Credit. Tenant hereby agrees not to look to the
mortgagee, as mortgagee, mortgagee in possession, or successor in title to
the property, for accountability for any Security Deposit required by the
Landlord hereunder, unless said sums have actually been received by said
mortgagee as security for Tenant's performance of this Lease. In the event of
any permitted assignment of Tenant's interest in this Lease, the Cash
Security Deposit or the Letter of Credit may, at Landlord's sole option, be
held by Landlord as a deposit made by the assignee, and Landlord shall have
no further liability to Tenant with respect to the return of the Cash
Security Deposit or the Letter of Credit.
e. Notwithstanding anything to the contrary set forth herein,
provided that (i) no default then exists under the Lease, and (ii) Tenant (or
a sublessee or assignee approved by Landlord or a Permitted Transferee
(hereinafter defined)) is then occupying 100% of the Premises, on the first
day of the third (3rd) Lease Year and on the first day of each Lease Year
thereafter during the Term (including the Extension Term (hereinafter
defined) if applicable), the Cash Security Deposit or the Letter of Credit,
as the case may be, shall be reduced by One Hundred Eighty Thousand Dollars
($180,000.00). The balance of the Cash Security Deposit or the Letter of
Credit, as applicable, which has not been reduced as aforesaid shall be
retained by Landlord throughout the Term.
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6. USE.
a. Tenant shall use and occupy the Premises only for general
office use and/or as a Call Center (hereinafter defined), and for no other
purposes. Tenant shall not use the Premises or allow the Premises to be used
for any other purpose without the prior written consent of the Landlord. As
used herein, the term "Call Center" shall mean Tenant's business operations
in the Premises in which Tenant's employees field telecommunication inquiries
from Tenant's customers, and perform customer service functions related to
the operations of Tenant's business; provided, however, that the Call Center
may not be operated by Tenant to provide telecommunication answering services
or customer service functions for or on behalf of businesses that are not
customers of, or owned by, Tenant. Notwithstanding anything to the contrary
set forth in this Lease, in no event shall Tenant permit more than two
hundred eighty (280) people (or one (1) person per one hundred fifty (150)
rentable square feet of space in the Premises) to use or occupy the Premises
at any time during the Term. Should Tenant violate the foregoing provision:
(i) Tenant shall be in default of this Lease; (ii) Tenant shall indemnify
Landlord and hold Landlord harmless from and against all costs, injury, loss
or damage (including reasonable attorneys' fees) incurred by Landlord as a
result of such violation; and (iii) Tenant shall reimburse Landlord, within
ten (10) days of demand, for all costs incurred by Landlord to repair, or
increase the capacity of, any base Building system to the extent Landlord
believes such action is required due to such violation by Landlord, such
actions by Landlord to include without limitation the installation of one or
more supplemental HVAC units to service the Premises. Tenant, at Tenant's
expense, shall comply with all laws, codes, rules, orders, ordinances,
directions, regulation, and requirements of federal, state, county, and
municipal authorities, now in force or which may hereafter be in force, which
shall impose any duty upon Landlord or Tenant with respect to the condition,
maintenance, use, occupation, operation or alteration of the Premises, or the
conduct of Tenant's business therein, including without limitation the
Americans With Disabilities Act and all applicable zoning, recycling and
environmental laws and regulations. Tenant hereby agrees to indemnify and
hold harmless Landlord and its agents, officers, directors and employees from
and against any cost, damage, claim, liability and expense (including
attorneys' fees) arising out of claims or suits brought by third parties
against Landlord, its agents, officers, directors and employees alleging or
relating to the failure of the Premises to comply with the terms of the
Americans With Disabilities Act or any other law or regulation applicable to
the Premises and/or its occupancy by Tenant. Tenant shall not use or permit
the Premises or any part thereof to be used in any manner that constitutes
waste, nuisance or unreasonable disturbances to other tenants of the Building
or for any disorderly, unlawful or hazardous purpose and will not store or
maintain therein any hazardous, toxic or highly combustible items other than
usual and customary office supplies intended for Tenant's use and in such
event, only in such amounts as permitted by applicable law. Tenant covenants
not to change Tenant's use of the Premises without the prior written approval
of Landlord.
b. Tenant shall not put the Premises to any use, the effect of
which use is reasonably likely to cause cancellation of any insurance
covering the Premises or the Building, or an increase in the premium rates
for such insurance. In the event that Tenant performs or commits any act, the
effect of which is to raise the premium rates for such insurance, Tenant
shall pay Landlord the amount of the additional premium, as Additional Rent
payable by Tenant upon demand therefor by Landlord. The Premises shall not be
used for any illegal purpose or in violation of any regulation of any
governmental body or the regulations or directives of Landlord's insurance
carriers, or in any manner which interferes with the quiet enjoyment of any
other tenant of the Building. Tenant will not install or operate in the
Premises any electrical or other equipment, other than such equipment as is
commonly used in modern offices (specifically excluding mainframe computers),
without first obtaining the prior written consent of Landlord, who may
condition such consent upon the payment by Tenant of Additional Rent in
compensation for excess consumption of water, electricity and/or other
utilities, excess wiring and other similar requirements, and any changes,
replacements or additions to any base building system, as may be occasioned
by the operation of said equipment or machinery.
c. Tenant agrees to maintain the Premises, and the Tenant
Improvements and other Alterations (hereinafter defined) therein, in good
order, repair and condition during the Term at Tenant's sole cost and
expense, and Tenant will, at the expiration or other termination of the Term,
surrender and deliver the same and all keys, locks and other fixtures
connected therewith (excepting only Tenant's personal property) in good
order, repair and condition, as the same shall be at the Commencement Date,
except as repaired, rebuilt, restored, altered or added to pursuant to this
Lease, and except for ordinary wear and tear and damage by fire or casualty
and/or condemnation. Landlord shall have no obligation to Tenant to make any
repairs in or to the Premises, the Tenant Improvements or any Alterations.
Any and all damage or injury to the Premises (including, but not limited to,
the Tenant Improvements), the Building or the Land caused by Tenant, or by
any employee, agent, contractor, assignee, subtenant, invitee or customer of
Tenant shall be promptly reported to Landlord and, except for injury or
damage to the Building which is covered by Landlord's insurance, repaired by
Tenant at Tenant's sole cost; provided, however, that Landlord shall have the
option of repairing any such damage, in which case Tenant shall reimburse
Landlord for all costs incurred by Landlord in respect thereof as Additional
Rent within fifteen (15) days after Tenant receives Landlord's notice of such
costs.
d. Tenant shall not place a load upon the floor of the Premises
exceeding the designated floor load capacity of the Building (e.g. 100 pounds
per square foot: 80 pounds per square foot, live load, and 20 pounds per
square foot, dead load) without Landlord's prior written consent. Business
machines, mechanical equipment and materials belonging to Tenant which cause
vibration, noise, cold, heat or fumes that may be transmitted to the Building
or to any other leased space therein to such a degree as to be objectionable
to Landlord or to any other tenant in the Building shall be placed,
maintained, isolated, stored and/or vented by Tenant at its sole expense so
as to absorb and prevent such vibration, noise, cold, heat or fumes.
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7. ASSIGNMENT AND SUBLETTING.
a. Except with respect to transfers to Permitted Transferees,
Tenant shall not, without the prior written consent of Landlord (which
consent shall not be unreasonably withheld, conditioned or delayed, subject
to the conditions set forth below) in each instance: (i) assign or otherwise
transfer this Lease or any of Tenant's rights hereunder, (ii) sublet the
Premises or any part thereof, or permit the use of the Premises or any part
thereof by any persons other than Tenant or its employees, agent and
invitees, or (iii) permit the assignment or other transfer of this Lease or
any of Tenant's rights hereunder by operation of law. Landlord's consent to a
proposed assignment or sublease shall not be unreasonably withheld,
conditioned or delayed, provided Landlord determines that the proposed
assignee or subtenant (A) is of a type and quality consistent with the
first-class nature of the Building, (B) has the financial capacity and
creditworthiness to undertake and perform the obligations of this Lease or
the sublease, (C) is not a party by whom any suit or action could be defended
on the ground of sovereign immunity or diplomatic immunity and (D) will not
impose any additional material burden upon Landlord in the operation of the
Building (to an extent greater than the burden to which Landlord would have
been had Tenant continued to use such part of the Premises). In addition, the
following conditions must be satisfied at the time Tenant requests Landlord's
consent to an assignment or sublease:
(1) no Event of Default (hereinafter defined) exists
and no event has occurred which, with notice and/or the passage of time,
would constitute an Event of Default if not cured within the time, including
any applicable grace period, specified herein;
(2) Landlord receives at least thirty (30) days' prior
written notice of Tenant's intention to assign this Lease or sublet any
portion of the Premises;
(3) the proposed use of the Premises (if other than
general office use) will not violate any agreement affecting the Premises or
the Building;
(4) Tenant submits to Landlord at least thirty (30)
days prior to the proposed date of subletting or assignment such information
Landlord reasonably requests in order to permit Landlord to make a judgment
on the proposed subletting or assignment, including without limitation the
name, business experience, financial history, net worth and business
references of the proposed assignee or subtenant (and each of its
principals), an in-depth description of the transaction, and the
consideration delivered to Tenant for the assignment or sublease;
(5) the proposed assignee or subtenant is not a tenant
of the Building;
(6) Tenant is not then subletting more than thirty-five
percent (35%) of the rentable square feet of the Premises; and
(7) Tenant has paid to Landlord an administrative fee
in the amount of Seven Hundred Fifty Dollars ($750.00) which shall be
retained by Landlord whether or not such consent is granted.
b. All proposed subleases and assignments shall be on Landlord's
approved form of sublease or assignment, whichever is applicable; and shall
contain, INTER ALIA, the following provisions: (i) any such assignment or
sublease shall include an assumption by the assignee or subtenant, from and
after the effective date of such assignment or sublease, of the performance
and observance of the covenants and conditions to be performed and observed
on the part of Tenant as contained in this Lease, and (ii) any such sublease
or assignment shall specify that this Lease or sublease shall not be further
assigned nor the Premises further sublet and shall specify that the term of
such sublease shall not extend beyond one (1) day prior to the expiration of
this Lease. The consent by Landlord to any assignment, transfer or subletting
to any person or entity shall not be construed as a waiver or release of
Tenant from any provision of this Lease, unless expressly agreed to in
writing by Landlord (it being understood that Tenant shall remain primarily
liable as a principal and not as a guarantor or surety), nor shall the
collection or acceptance of rent from any such assignee, transferee,
subtenant or occupant constitute a waiver or release of Tenant from any such
provision. No consent by Landlord to any such assignment, transfer or
subletting in any one instance shall constitute a waiver of the necessity for
such consent in a subsequent instance.
c. In the event that Tenant assigns this Lease or sublets all or
any portion of the Premises to a party other than a Permitted Transferee
(hereinafter defined), Tenant shall pay to Landlord as Additional Rent an
amount equal to fifty percent (50%) of the difference between (i) all sums
paid to Tenant or its agent (if and when received) by or on behalf of such
assignee or subtenant under the assignment or sublease, less the reasonable
out-of-pocket costs incurred by Tenant in connection with such sublease or
assignment, including brokerage commissions and tenant improvement costs, and
(ii) the Annual Base Rent and Additional Rent paid by Tenant under this Lease
and attributable to the portion of the Premises assigned or sublet. As used
herein, the term "Approved Tenant Affiliate" shall mean an entity related to
or affiliated with Tenant that controls (hereinafter defined), is controlled
by or is under common control with, Tenant. As used herein, the term
"control" means ownership of more than fifty percent (50%) of the voting
stock, partnership interests or other ownership interests in the entity in
question, along with the right to effect all significant management decisions
of the "controlled" entity.
d. For purposes of this Section, a transfer, conveyance, grant or
pledge, directly or indirectly, in one or more transactions, of an interest in
Tenant (whether stock, partnership interest or
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other form of ownership or control, or the issuance of new interests) by
which an aggregate of more than twenty-five percent (25%) of the beneficial
interest in Tenant shall be vested in a party or parties who are not holders
of such interest(s) as of the date hereof) shall be deemed an assignment of
this Lease; provided, however, that this limitation shall not apply to (i)
any corporation which is listed on a national securities exchange as defined
in the Securities Exchange Act of 1934 (a "National Stock Exchange"); or (ii)
transfers to Permitted Transferees. The merger or consolidation of Tenant
into or with any other entity, the sale of all or substantially all of
Tenant's assets, or the dissolution of Tenant shall each be deemed to be an
assignment within the meaning of this Section, except or otherwise expressly
provided in Section 7j, below.
e. Any assignment or subletting not in conformance with the
terms of this Lease shall be void AB INITIO and shall, subject to the
provisions of Section 16, constitute a default under the Lease.
f. Upon receipt of the notice referred to in Section 7a(2),
above, except with respect to assignments, subleases or other transfers to
Permitted Transferees, Landlord may, at its option, in lieu of approving or
rejecting the proposed assignment or subletting, exercise all or any of the
following rights by written notice to Tenant of Landlord's intent to do so
within fifteen (15) business days of Landlord's receipt of Tenant's notice:
(i) with respect to a proposed assignment of this Lease,
the right to terminate this Lease on the effective date of proposed
assignment as though it were the Lease Expiration Date;
(ii) with respect to a proposed sublease of the entire
Premises, the right to terminate this Lease on the effective date of the
sublease as though it were the Lease Expiration Date;
(iii) with respect to a proposed sublease of less than the
entire Premises, the right to terminate this Lease as to the portion of the
Premises affected by such sublease on the effective date of the sublease, as
though it were the Lease Expiration Date, in which case Tenant shall execute
and deliver to Landlord an appropriate modification of this Lease, in form
satisfactory to Landlord in all respects within ten (10) business days of
Landlord's notice of partial termination, which modification of this Lease
shall provide that the number of rentable square feet of the Premises shall
be decreased by, and the Monthly Base Rent and Additional Rent payable by
Tenant hereunder shall be adjusted in proportion to, the number of rentable
square feet of the Premises affected by such termination, as determined by
Landlord; or
(iv) with respect to a proposed sublease for less than
the balance of the Term, the right to sublet the portion of the Premises from
Tenant upon the same terms and conditions (including Annual Base Rent and
Additional Rent) set forth in this Lease for the term of the proposed
sublease.
g. If Landlord exercises any of its options under Section 7f,
above, Landlord may then lease (or sublease) the Premises or any portion
thereof to Tenant's proposed assignee or subtenant, as the case may be,
without any liability whatsoever to Tenant.
h. Upon any assignment of this Lease or sublease of all or a
portion of the Premises (other than to a Permitted Transferee), any and all
option rights, rights of first refusal, rights of first negotiation, and
expansion rights shall terminate, it being understood that any and all such
rights are personal to Tenant (and not to any subtenant or, except for any
Permitted Transferee, assignee) and are not appurtenant to the Premises or
this Lease. Further, Tenant shall not have the right to exercise any such
rights unless Tenant (and not any assignee or subtenant of Tenant) shall be
in occupancy of all of the Premises at the time of the exercise of any such
right. In addition to the administrative fee described in Section 7a(7),
above, Tenant shall reimburse Landlord for its reasonable attorneys' fees and
other third party expenses incurred in reviewing any requested consent
whether or not such consent is granted. Tenant shall not collaterally assign,
mortgage, pledge, hypothecate or otherwise encumber this Lease or any of
Tenant's rights hereunder without the prior written consent of Landlord,
which consent Landlord may withhold in its sole discretion.
i. Notwithstanding any consent by Landlord to an assignment or
subletting, Tenant shall remain primarily liable for the performance of all
covenants and obligations contained in this Lease. Each approved assignee or
subtenant shall also automatically become liable for the obligations of
Tenant hereunder. Landlord shall be permitted to enforce the provisions of
this Lease directly against Tenant and/or against any assignee or sublessee
without proceeding in any way against any other person. Collection or
acceptance of Annual Base Rent or Additional Rent from any such assignee,
subtenant or occupant shall not constitute a waiver or release of Tenant from
the terms of any covenant or obligation contained in this Lease, nor shall
such collection or acceptance in any way be construed to relieve Tenant from
obtaining the prior written consent of Landlord to such assignment or
subletting or any subsequent assignment or subletting.
j. Notwithstanding anything contained in this Section 7 to the
contrary, Landlord's consent shall not be required in connection with a
sublease, assignment, transfer or change in ownership interest described
immediately below (nor shall Tenant be required to pay Landlord an
administrative fee in connection therewith):
(i) a sublease of all or any portion of the Premises to
an Approved Tenant Affiliate;
(ii) an assignment of the Lease to any Approved Tenant
Affiliate;
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(iii) a transfer of the ownership interests in, or change
in the ownership of, Tenant, but only so long as (A) the new owners of the
interests in Tenant continue to operate Tenant's business in the same manner
as it was operated before such transfer; (B) Tenant's net worth after such
change in ownership is substantially similar to or greater than Tenant's net
worth immediately prior to such change in ownership, and (C) such change in
ownership was effected for legitimate business purposes, and not merely as a
vehicle for transferring to the new owners the benefits and burdens of the
Lease;
(iv) a transaction in which the stock or other ownership
interests in Tenant are listed for sale to the public on a National Stock
Exchange;
(v) a merger or consolidation of Tenant into, or with,
an Approved Tenant Affiliate; and
(vi) a merger or consolidation of Tenant into, or with,
an unrelated third party or an arm's length sale of all, or substantially
all, of the assets of Tenant to an unrelated third party, provided that, in
connection with such transaction, Tenant satisfies the requirements of
Section 7j(iii)(A)-(C), above. As used in this Section 7, the term "Permitted
Transferee" shall mean (i) the Approved Tenant Affiliate described in
Sections 7j(i) and 7j(ii), above; and (ii) the person(s) or entity (ies)
which is the transferee of the ownership interests in Tenant in any of the
transactions described in Sections 7j(iii), (iv), (v) or (vi), of this Lease.
Notwithstanding the fact that Landlord's consent is not required in
connection with any assignment, sublease or other transfer to a Permitted
Transferee, Tenant shall provide Landlord with written notice of any such
transaction, along with whatever information or documentation Landlord
reasonably requires in order to confirm that the proposed transaction
constitutes a transfer to a Permitted Transferee, promptly after the
consummation of any such assignment, sublease or other transfer to a
Permitted Transferee, provided, however, that no information or documentation
other than the notice shall be required for transactions described in Section
7j(iv), above; provided further, however, that the only information or
documentation to which Landlord shall be entitled with respect to
transactions described in Section 7j(v), above, shall be a certified
statement by an officer of Tenant that the entity into which, or with which,
Tenant is effecting such merger or consolidation satisfies the criteria for
an "Approved Affiliate" set forth in Section 7c, above.
8. IMPROVEMENTS AND FIXTURES.
a. Tenant shall neither make nor allow any alterations,
decorations, replacements, changes, additions or improvements (collectively
referred to as "Alterations") to the Premises or any part thereof that will
or may affect the mechanical, electrical, plumbing, HVAC or other systems or
the exterior or structure of the Building, without the prior written consent
of Landlord, which may be withheld by Landlord in its sole discretion. Tenant
shall not make or allow any other kind of Alterations to the Premises or any
part thereof (except for Cosmetic Alterations (hereinafter defined)) without
the prior written consent of Landlord, which consent shall not be
unreasonably withheld, conditioned or delayed. As used herein, the term
"Cosmetic Alterations" shall mean any Alterations costing less than $25,000
in the aggregate and which do not require a building permit to undertake.
Tenant shall provide Landlord with at least ten (10) days prior written
notice (along with whatever documentation regarding same Landlord reasonably
requires) prior to undertaking any Cosmetic Alterations. All of such
Alterations, structural or otherwise, must conform to all rules and
regulations established from time to time by Landlord, must be performed in a
good and workmanlike manner, must comply with all applicable building codes,
laws and regulations (including without limitation the Americans With
Disabilities Act), shall not require any changes to or modifications of any
of the mechanical, electrical, plumbing, HVAC or other systems or the
exterior or structure of the Building, and shall otherwise be constructed in
strict accordance with the terms and conditions of this Section 8. Prior to
undertaking any Alterations in the Premises, Tenant shall furnish to Landlord
duplicate original policies or certificates thereof of worker's compensation
insurance (covering all persons to be employed by Tenant, and Tenant's
contractors and subcontractors in connection with such Alteration), builder's
all-risk insurance, and comprehensive public liability insurance (including
property damage coverage) in such form, with such companies, for such periods
and in such amounts as Landlord may reasonably require, naming Landlord and
its agents, and any mortgagee as additional insureds.
b. It is understood and agreed by Landlord and Tenant that any
Alterations undertaken in the Premises shall be constructed at Tenant's sole
expense. The costs of Alterations shall include without limitation the cost
of all architectural work, engineering studies, materials, supplies, plans,
permits and insurance. If requested by Landlord, Tenant shall provide to
Landlord satisfactory evidence of Tenant's ability to pay for such
Alterations (including, but not limited to, a payment or performance bond to
the extent that the cost of such work exceeds $100,000). No consent by
Landlord to any Alterations shall be deemed to be an agreement or consent by
Landlord to subject Landlord's interest in the Premises, the Building or the
Land to any mechanic's or materialman's liens which may be filed in respect
to such Alterations made by or on behalf of Tenant. If Landlord gives its
consent as specified in Section 8a above, Landlord may impose as a condition
to such consent such requirements as Landlord may deem necessary or
desirable, in its sole discretion exercised in good faith, including without
limitation the right to approve the plans and specifications for any work,
supervision of the work by Landlord or its agents or by Landlord's architect
or contractor and the payment to Landlord or its agents, architect or
contractor of a construction supervision fee (not to exceed 3% of the total
"hard" costs incurred) in connection therewith, the right to impose
requirements as to the manner in which or the time or times at which work may
be performed. Landlord shall also have the right to approve in its reasonable
discretion the contractor or contractors who shall perform any Alterations,
repairs in, to or about the Premises and to post notices of
non-responsibility and similar notices, as appropriate. In addition,
immediately after
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completion of any Alterations, Tenant shall assign to Landlord any and all
warranties applicable to such Alterations and shall provide Landlord with
as-built plans of the Premises depicting such Alterations.
c. Tenant shall keep the Premises free from any liens arising
out of any work performed on, or materials furnished to, the Premises, or
arising from any other obligation incurred by Tenant. If any mechanic's or
materialmen's lien is filed against the Premises, the Building and/or the
Land for work claimed to have been done for or materials claimed to have been
furnished to Tenant, such lien shall be discharged by Tenant within fifteen
(15) business days thereafter, at Tenant's sole cost and expense, by the
payment thereof or by filing any bond required by law. If Tenant shall fail
to timely discharge any such mechanic's or materialman's lien, Landlord may,
at its option, discharge the same and treat the cost thereof as Additional
Rent payable with the installment of rent next becoming due; it being
expressly covenanted and agreed that such discharge by Landlord shall not be
deemed to waive or release the default of Tenant in not discharging the same.
Tenant shall indemnify and hold harmless Landlord, the Premises and the
Building from and against any and all expenses, liens, claims, actions or
damages to person or property in connection with any such lien or the
performance of such work or the furnishing of such materials. Tenant shall be
obligated to, and Landlord reserves the right to, post and maintain on the
Premises at any time such notices as shall in the reasonable judgment of
Landlord be necessary to protect Landlord against liability for all such
liens or actions.
d. Any Alterations of any kind to the Premises or any part
thereof, except Tenant's furniture and moveable trade fixtures, shall at once
become part of the realty and belong to Landlord and shall be surrendered
with the Premises, as a part thereof, at the end of the Term hereof;
provided, however, that Landlord may, by written notice to Tenant at least
thirty (30) days prior to the end of the Term, require Tenant to remove any
Alterations and to repair any damage to the Premises caused by such removal,
all at Tenant's sole expense. Landlord agrees that if Tenant, simultaneously
with Tenant's delivery to Landlord of a request for Landlord's approval of
any proposed Alterations, requests in writing that Landlord state whether or
not Landlord will require the removal of such Alterations upon termination or
expiration of this Lease, Landlord shall so state within ten (10) business
days after Landlord's receipt of Tenant's written request; provided that such
written request by Tenant shall specify, in bold letters that, "IF LANDLORD
FAILS TO SPECIFY TO TENANT, WITHIN TEN (10) BUSINESS DAYS AFTER LANDLORD'S
RECEIPT OF THIS NOTICE, THAT THE ALTERATIONS PROPOSED BY TENANT HEREIN MUST
BE REMOVED BY TENANT UPON THE TERMINATION OR EXPIRATION OF THE LEASE, SUCH
FAILURE SHALL BE DEEMED TO CONSTITUTE AN AGREEMENT BY LANDLORD THAT SUCH
ALTERATIONS (IF APPROVED BY LANDLORD) NEED NOT BE REMOVED BY TENANT." If
Landlord fails to respond to such a written request, Landlord shall be deemed
to have not required the removal of such Alterations upon the termination or
expiration of this Lease. Any article of personal property, including
business and trade fixtures, not attached to or built into the Premises,
which were installed or placed in the Premises by Tenant at its sole expense,
shall be and remain the property of Tenant and may be removed by Tenant at
any time during the Term, provided that Tenant repairs any damage to the
Premises or the Building caused by such removal.
9. UTILITIES AND SERVICES.
a. Landlord shall furnish the following utilities and services
to the Premises: electric current (for lighting and operation of normal
desk-type office machines); water; lavatory supplies; heat and
air-conditioning during the appropriate seasons of the year as reasonably
required; elevator service; and trash removal, cleaning and char service
(after normal business hours Monday through Friday, excluding Holidays
(hereinafter defined)). Heating and air conditioning shall be provided to the
Premises only during normal business hours (I.E., Monday through Friday 8:00
a.m. to 6:00 p.m., and Saturday 8:00 a.m. to 1:00 p.m., excluding Holidays).
As used herein, the term "Holidays" shall mean New Year's Day, Martin Luther
King's Birthday, President's Day, Memorial Day, Independence Day, Labor Day,
Columbus Day, Thanksgiving Day and Christmas Day. At times other than the
normal business hours and days aforesaid, central air conditioning and
heating shall be provided to Tenant upon at least twenty-four (24) hours'
prior notice from Tenant, and upon payment by Tenant of the hourly charge
established by Landlord for each hour (or a portion thereof) of after-hours
usage. All light bulbs and tubes in the Premises shall be replaced at
Tenant's expense. In addition, Landlord may impose a reasonable additional
charge for any additional or unusual services required to be provided by
Landlord to Tenant because of the carelessness of Tenant, the nature of
Tenant's business or the removal of any refuse and rubbish from the Premises
except for discarded material placed in wastepaper baskets and left for
emptying as an incident to Tenant's normal cleaning of the Premises. In the
event that Landlord must temporarily suspend or curtail services because of
accident and repair, Landlord shall have no liability to Tenant for such
suspension or curtailment or due to any restrictions on use arising therefrom
or relating thereto, and Landlord shall proceed diligently to restore such
service. No interruption or malfunction of any such services shall constitute
an actual or constructive eviction or disturbance of Tenant's use and
possession of the Premises, the Building or the parking garage or parking
areas in or around the Building or constitute a breach by Landlord of any of
its obligations hereunder or render Landlord liable for damages or entitle
Tenant to be relieved from any of Tenant's obligations hereunder (including
the obligation to pay rent) or grant Tenant any right of setoff or claim
against Landlord or constitute a constructive or other eviction of Tenant.
Notwithstanding the foregoing, in the event such interruption or cessation of
services required to be furnished by Landlord hereunder: (i) is not caused by
Tenant, its employees, agents, contractors, or invitees; (ii) renders the
Premises untenantable for Tenant's business use therein; and (iii) exists for
more than seven (7) consecutive days, then, provided Tenant in fact ceases to
use the Premises during the entirety of such period of cessation or
interruption, Monthly Base Rent and Additional Rent hereunder shall abate
from the day after Tenant vacates the Premises until such time as the service
which was interrupted has been restored. The foregoing abatement of Monthly
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Base Rent and Additional Rent shall be Tenant's sole and exclusive remedy
resulting from such cessation or interruption, and Landlord and Tenant agree
that Landlord's inability to furnish such services shall not be deemed to be
a constructive eviction of Tenant from the Premises. In the event of any such
interruption, Landlord shall use reasonable diligence to restore such
services.
b. Tenant will not, without the prior written consent of
Landlord (which consent shall not be unreasonably withheld, conditioned or
delayed, except to the extent that Landlord determines that the use of any
such apparatus or device may overburden or otherwise adversely affect any
base Building system herein, in which event Landlord may withhold its consent
in its sole discretion), use any apparatus or device in the Premises,
including without limitation electric data processing machines, punch card
machines and machines using current in excess of 110 volts which will in any
way increase the amount of the electricity or water which would otherwise be
furnished or supplied for the intended use of the Premises under this Section
9; and Tenant will not connect to electric current any apparatus or device
for the purpose of using electric current or water, except through existing
electrical outlets in the Premises or water pipes. If Tenant shall require
water or electricity in excess of that which would otherwise be furnished or
supplied for the intended use of the Premises, Tenant shall first secure the
written consent of Landlord for the use thereof, which consent shall not be
unreasonably withheld, conditioned or delayed; provided that Landlord may
condition its consent upon the requirement that a water meter or electric
current meter be installed in the Premises, so as to measure the amount of
water and electric current consumed for any such excess use. The cost of such
meters and installation, maintenance and repair thereof, the cost of any such
excess utility use as shown by said meter, the cost of any new or additional
utility installations, including without limitation wiring and plumbing,
resulting from such excess utility use, and the cost of any additional
expenses incurred in keeping count of such excess utility use shall be paid
by Tenant promptly upon demand by Landlord or, if Tenant is billed separately
therefor, promptly upon receipt of a bill for same. Whenever heat generating
machines or equipment are used in the Premises which affect the temperature
otherwise maintained by the air conditioning system, Landlord reserves the
right to install supplementary air conditioning units in the Premises and the
cost thereof, including the cost of installation, operation and maintenance
thereof, shall be paid by Tenant to Landlord upon demand by Landlord.
c. Tenant shall have the right to install and operate in the
Premises personal computers and other electrically-operated office equipment
normally used in modern offices. Tenant shall not install equipment of any
kind or nature whatsoever nor engage in any practice or use which will or may
necessitate any changes, replacements or additions to, or in the use of, the
water system, heating system, plumbing system, air conditioning system,
electrical system, floor load capacities, or other mechanical or structural
system of the Premises or the Building without first obtaining the prior
written consent of Landlord, which consent may be conditioned upon, but not
limited to, Tenant first securing at its expense additional capacity for any
said service in the Building; provided, however, Tenant shall be responsible
for paying for any excess utility consumption arising from any such change,
replacement, use or addition, such payments to be based on Landlord's
reasonable estimate or, at Landlord's option, a submeter or similar device to
measure such usage (said device to be installed at Tenant's expense).
Additionally, in the event that Landlord reasonably determines that Tenant's
electrical consumption exceeds standard office use, Tenant shall pay the
amount of such excess electrical consumption, as reasonably determined by
Landlord, within thirty (30) days after demand therefor. Machines, equipment
and materials belonging to Tenant which cause vibration, noise, cold, heat,
fumes or odors that may be transmitted outside of the Premises to such a
degree as to be objectionable to Landlord in Landlord's sole opinion or to
any other tenant in the Building shall be treated by Tenant at its sole
expense so as to eliminate such objectionable condition, and shall not be
allowed to operate until such time as the objectionable condition is remedied
to Landlord's satisfaction.
d. Tenant shall comply, at its sole cost and expense, with all
orders, requirements and conditions now or hereafter imposed by any
ordinances, laws, orders and/or regulations (hereinafter collectively called
"regulations") of any governmental body having jurisdiction over the Premises
or the Building, whether required of Landlord or otherwise, regarding the
collection, sorting, separation and recycling of waste products, garbage,
refuse and trash (hereinafter collectively called "waste products") including
but not limited to the separation of such waste products into receptacles
reasonably approved by Landlord and the removal of such receptacles in
accordance with any collection schedules prescribed by such regulations.
Landlord reserves the right (i) to refuse to accept from Tenant any waste
products that are not prepared for collection in accordance with any such
regulations, (ii) to require Tenant to arrange for waste product collection
at Tenant's sole cost and expense, utilizing a contractor reasonably
satisfactory to Landlord, and (iii) to require Tenant to pay all costs,
expenses, fines, penalties, or damages that may be imposed on Landlord or
Tenant by reason of Tenant's failure to comply with any such regulations.
Notwithstanding the foregoing, if Tenant is unable to comply with Landlord's
standard procedures regarding the internal collection, sorting, separation
and recycling of waste products, Landlord shall use reasonable efforts to
arrange for alternative procedures for Tenant, and Tenant shall pay Landlord
all additional costs incurred by Landlord with respect thereto.
10. RIGHTS OF LANDLORD.
a. Landlord reserves the following rights:
(i) to change the name or street address of the Building
without notice or liability to Tenant;
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(ii) to approve the design, location, number, size and
color of all signs or lettering on the Premises or visible from the exterior
of the Premises;
(iii) to have pass keys and/or access cards to the
Premises;
(iv) to grant to anyone the exclusive right to conduct
any particular business or undertaking in the Building, so long as Tenant is
not prohibited from conducting its business in the Premises;
(v) to enter the Premises at any reasonable time upon
forty-eight (48) hours notice (or at any time without notice in the event of
any emergency) for inspection; to supply any service to be provided by
Landlord hereunder; to submit the Premises to prospective purchasers or
tenants; to post notices of non-responsibility; to affix and display "For
Rent" signs during the last twelve (12) months of the Term; and to make
repairs, alterations, additions or improvements to the Premises or the
Building; and
(vi) to approve the design, location, number, size and
color of all signs located on the exterior of the Building.
b. Without limiting the generality of the provisions of Section
10a, above, at any time during the Term of this Lease, Landlord shall have
the right to remove, alter, improve, renovate or rebuild the common areas of
the Building (including but not limited to the lobby, hallways and corridors
thereof), and to install, repair, replace, alter, improve or rebuild in the
Premises, other tenants' premises and/or the common areas of the Building
(including the lobby, hallways and corridors thereof), any mechanical,
electrical, water, sprinkler, plumbing, heating, air conditioning and
ventilating systems, at any time during the Term of this Lease. In connection
with making any such installations, repairs, replacements, alterations,
additions and improvements under the terms of this Section 10, Landlord shall
have the right to access through the Premises as well as the right to take
into and upon and through the Premises or any other part of the Building, all
materials that may be required to make any such repairs, replacements,
alterations, additions or improvements, as well as the right in the course of
such work temporarily to close entrances, doors, corridors, elevators or
other facilities located in the Building or temporarily to cease the
operations of any services or facilities therein or to take portion(s) of the
Premises reasonably necessary in connection with such work, without being
deemed or held guilty of an eviction of Tenant; provided, however that
Landlord agrees to use all reasonable efforts not to interfere with or
interrupt Tenant's business operation in the Premises. Notwithstanding the
foregoing, in the event that, as a result of the exercise by Landlord of its
rights under this Section 10b, more than fifty percent (50%) of the rentable
area of the Premises is rendered untenantable for more than seven (7)
consecutive days, and Tenant ceases to use such untenantable portion of the
Premises during the entirety of such period, Annual Base Rent and Additional
Rent shall be equitably adjusted (based on the portion of the Premises which
is rendered untenantable) beginning on the eighth (8th) day of
untenantability until the Premises are no longer untenantable. Landlord shall
have the right to install, use and maintain pipes and conduits above the
ceilings, under the floors and behind the demising walls in the Premises,
including without limitation telephone and computer installations, provided
that such pipes and conduits do not permanently materially adversely affect
Tenant's access to or use of the Premises.
c. Except for injury, loss or damage resulting from Landlord's
negligence or willful misconduct, Landlord shall not be liable to Tenant for
any expense, injury, loss or damage resulting from Landlord's exercise of any
rights under this Section 10, all claims against Landlord for any and all
such liability being hereby expressly released by Tenant. Landlord shall not
be liable to Tenant for damages by reason of interference with the business
of Tenant or inconvenience or annoyance to Tenant or the customers of Tenant.
The Rent reserved herein shall not abate while the Landlord's rights under
this Section 10 are exercised, and Tenant shall not be entitled to any
set-off or counterclaims for damages of any kind against Landlord by reason
thereof, all such claims being hereby expressly released by Tenant.
d. Landlord shall have the right to use any and all means which
Landlord may deem proper to open all of the doors in, upon and about the
Premises, excluding Tenant's vaults and safes, in any emergency in order to
obtain entry to the Premises. Any entry to the Premises obtained by Landlord
by any of said means shall not be construed or deemed to be a forcible or
unlawful entry into, or a detainer of, the Premises, or an eviction of Tenant
from the Premises or any portion thereof.
11. LIABILITY.
a. Landlord and its agents, officers, directors and employees
assume no liability or responsibility whatsoever with respect to the conduct
or operation of the business to be conducted in the Premises and shall have
no liability for any claim of loss of business or interruption of operations
(or any claim related thereto). Landlord and its agents, officers, directors
and employees shall not be liable for any accident to or injury to any person
or persons or property in or about the Premises which are caused by the
conduct and operation of said business or by virtue of equipment or property
of Tenant in said Premises. Tenant agrees to hold Landlord and its agents,
officers, directors and employees harmless against all such claims, except to
the extent resulting from Landlord's negligence or willful misconduct.
Landlord and its agents, officer, directors and employees shall not be liable
to Tenant, its employees, agents, business invitees, licensees, customers,
clients, family members or guests for any damage, compensation or claim
arising out of or related to managing the Premises or the Building, repairing
any portion of the Premises or the Building, the interruption in the use of
the Premises, accident or damage resulting from the use or operation (by
Landlord and its agents, officers, directors and employees, Tenant, or any
other person or persons whatsoever) or failure of elevators, or heating,
cooling, electrical or
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plumbing equipment or apparatus, or the termination of this Lease by reason
of the destruction of the Premises, or from any fire, robbery, theft,
mysterious disappearance and/or any other casualty, or from any leakage in
any part of portion of the Premises or the Building, or from water, rain or
snow that may leak into or flow from any part of the Premises or the
Building, or from any other cause whatsoever, unless occasioned by the
willful misconduct or acts of negligence of Landlord. In no event shall
Landlord be liable for punitive or consequential damages, nor shall Landlord
be liable with respect to utilities furnished to the Premises, or the lack of
any utilities. Any goods, property or personal effects, stored or placed by
Tenant in or about the Premises or in the Building, shall be at the sole risk
of Tenant, and Landlord and its agents, officers, directors and employees
shall not in any manner be held responsible therefor, except if such injury
or damage results from Landlord's negligence or willful misconduct. The
agents and employees of Landlord are prohibited from receiving any packages
or other articles delivered to the Building for Tenant, and if any such agent
or employee receives any such package or articles, such agent or employee
shall be the agent of Tenant for such purposes and not of Landlord.
b. Tenant hereby agrees to indemnify and hold Landlord and its
agents, officers, directors and employees harmless from and against any cost,
damage, claim, liability or expense (including reasonable attorneys' fees)
incurred by or claimed against Landlord and its agents, officers, directors
and employees, directly or indirectly, as a result of or in any way arising
from (i) Tenant's use and occupancy of the Premises or in any other manner
which relates to the business of Tenant, including, but not limited to, any
cost, damage, claim, liability or expense arising from any violation of any
zoning, health, environmental or other law, ordinance, order, rule or
regulation of any governmental body or agency; (ii) the negligence or willful
misconduct of Tenant, its officers, directors, employees and agents; (iii)
any default, breach or violation of this Lease by Tenant; or (iv) injury or
death to individuals or damage to property sustained in or about the Premises.
c. Notwithstanding any other provision of this Lease to the
contrary, Landlord and Tenant agree that in the event that the Building, the
Premises or the contents thereof are damaged or destroyed by fire or other
casualty, each party hereto waives its rights, if any, against the other
party with respect to such damage or destruction to the extent such damage or
destruction is covered under the property insurance policy(ies) of the party
waiving such rights (or would have been covered had the party waiving such
rights carried the property insurance required hereunder to be carried by
such party); provided however, if any fire or other casualty caused by Tenant
shall have damaged or destroyed any part of the Building or the contents
thereof, Tenant shall be responsible for any deductible amount under
Landlord's property insurance policy(ies). All policies of fire and/or
extended coverage or other insurance covering the Premises or the contents
thereof obtained by Landlord or Tenant shall contain a clause or endorsement
providing in substance that (i) such insurance shall not be prejudiced if the
insureds thereunder have waived in whole or in part the right of recovery
from any person or persons prior to the date and time of loss or damage, if
any, and (ii) the insurer waives any rights of subrogation against Landlord
(in the case of Tenant's insurance policy) or Tenant (in the case of
Landlord's insurance policy), as the case may be.
12. INSURANCE.
a. Tenant shall maintain at all times during the Term hereof
and at its sole cost and expense, broad-form commercial general liability
insurance for bodily injury and property damage naming Landlord as an
additional insured, in such amounts as are adequate to protect Landlord and
Landlord's managing agents against liability for injury to or death of any
person in connection with the use, operation or condition of the Premises.
Such insurance at all times shall be in an amount of not less than Three
Million Dollars ($3,000,000) combined single limit aggregate for bodily
injury or death or damage to property. If, in the reasonable opinion of the
insurance broker retained by Landlord, the amount of public liability and
property damage insurance coverage at any time during the Term is not
adequate, Tenant shall increase the insurance coverage as required by
Landlord's insurance broker. In no event shall the limits of such policy be
considered as limiting the liability of Tenant under this Lease.
b. Tenant shall at all times during the Term hereof maintain in
effect policies of insurance covering the Leasehold Improvements (including
any Alterations, additions or improvements as may be made by Tenant after the
Commencement Date), plate glass, trade fixtures, merchandise and all other
personal property from time to time in or on the Premises, in an amount not
less than one hundred percent (100%) of their actual replacement cost,
providing protection against all risks covered by standard form of "Fire and
Extended Coverage Insurance," together with insurance against vandalism and
malicious mischief. Tenant shall also maintain at its sole cost and expense
workman's compensation insurance in the maximum amount required by law.
c. All insurance required to be carried by Tenant shall be
issued by responsible insurance companies, qualified to do business in the
Commonwealth of Virginia and reasonably acceptable to Landlord. Each policy
shall name Landlord, Landlord's mortgagee and the property management company
retained by Landlord at the Building, as additional insureds, and shall
contain a provision that the same may not be cancelled or reduced without
providing Landlord not less than thirty (30) days' prior written notice.
Copies of all policies or, at Landlord's option, certificates of insurance
(ACORD 27 only) evidencing the existence and amounts of said insurance shall
be delivered to Landlord no later than five (5) days prior to the
Commencement Date, and renewals thereof shall be delivered to Landlord at
least ten (10) days prior to the expiration of any such policy. If Tenant
fails to adhere to the requirements of this Section 12, Landlord may order
such insurance and charge the cost thereof to Tenant, which amount shall be
deemed Additional Rent hereunder and shall be payable by Tenant upon demand.
Tenant's failure to provide and keep in force the aforementioned insurance
shall be regarded as a material default
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hereunder, entitling Landlord to exercise any or all of the remedies provided
in this Lease. Any policy may be carried under so-called "blanket coverage"
form of insurance policies. Tenant shall obtain and furnish evidence to
Landlord of the waiver by Tenant's insurance carriers of any right of
subrogation against Landlord and Landlord's management company at the
Building.
d. Landlord agrees to maintain throughout the Term, property
damage insurance covering the Building in an amount equal to the then-full
replacement value of the Building. Such coverage may be provided by way of a
"blanket" policy of insurance maintained by Landlord.
e. Each party hereby waives any and every right or cause of
action for any and all loss of, or damage to, any of its property (whether or
not such loss or damage is caused by the fault or negligence of the other
party or anyone for whom said other party may be responsible), which loss or
damage is covered by valid and collectible fire, extended coverage, "All
Risk" or similar policies, maintained by such party or required to be
maintained by such party under this Lease, but only to the extent that such
loss or damage is recovered under said insurance policies (if such policy or
policies have been obtained) or would have been recovered if such party had
obtained the required insurance coverage hereunder. Written notice of the
terms of said mutual waivers shall be given to each insurance carrier and
said insurance policies shall be properly endorsed, if necessary, to prevent
the invalidation of said insurance coverages by reason of said waivers.
13. FIRE OR CASUALTY.
a. If the Premises or any part thereof shall be damaged by fire
or any other cause, Tenant shall give prompt notice thereof to Landlord. If,
in the reasonable judgment of Landlord's architect, restoration of the
Premises is feasible within a period of nine (9) months from the date of the
damage, Landlord shall restore the Premises to the extent of the Tenant
Improvements set forth in the Work Agreement, provided that adequate
insurance proceeds are made available to Landlord. Tenant agrees to make all
proceeds of Tenant's insurance policies available to Landlord in accordance
with Tenant's insurance obligations set forth in Section 12, above. In
addition, Tenant shall repair and restore, at Tenant's sole expense, all
furniture, fixtures and other property of Tenant located in the Premises
prior to such casualty. If the Premises are unusable, in whole or in part,
during such restoration, the Monthly Base Rent and Additional Rent hereunder
shall be abated to the extent and for the period that the Premises are
unusable; provided, however, that if such damage or destruction shall result
from the act or omission of Tenant, its employees, agents or invitees, Tenant
shall not be entitled to any abatement of Monthly Base Rent or Additional
Rent.
b. If restoration is not feasible in the reasonable judgment of
Landlord's architect within the aforesaid nine (9) month period, Landlord shall
so notify Tenant within thirty (30) days after the occurrence of such damage,
and Landlord and Tenant shall each have the right to terminate this Lease by
giving written notice thereof to the other party within sixty (60) days after
the occurrence of such damage, in which event this Lease and the tenancy
hereunder shall terminate as of the date of such damage or destruction and the
Monthly Base Rent and Additional Rent will be apportioned as of the date of such
damage or destruction. If neither party exercises its right of termination, the
Premises shall be restored as provided above.
c. In case the Building is so severely damaged by fire or other
casualty (although the Premises may not be affected) that Landlord shall decide
in its sole discretion not to rebuild or reconstruct such Building, then this
Lease and the tenancy hereunder shall terminate on the date specified by
Landlord in a notice given no later than sixty (60) days after the date of such
casualty.
14. EMINENT DOMAIN. If the Premises or any part thereof shall be taken by any
governmental or quasi-governmental authority pursuant to the power of eminent
domain, Tenant shall make no claim for compensation in such proceedings and
shall have no right to participate in any condemnation proceedings under any
statutes, laws or ordinances of the Commonwealth of Virginia. All sums awarded
or agreed upon between Landlord and the condemning authority for the taking of
the interest of Landlord or Tenant, whether as damages or as compensation, will
be the property of Landlord, provided, however, that Tenant may submit a claim
for its reasonable relocation costs incurred, if any. In the event of such
taking, Rent shall be paid to the date of vesting of title in the condemning
authority.
15. SUBORDINATION AND ESTOPPEL CERTIFICATES.
a. Subject to Tenant's receipt of an SNDA (hereinafter defined)
from the then-applicable mortgagee or ground lessor of the Building, this
Lease shall be subject and subordinate at all times to all ground or
underlying leases which now exist or may hereafter be executed affecting the
Building or any part thereof or the Land, and to the lien of any mortgages or
deeds of trust in any amount or amounts whatsoever now or hereafter placed on
or against the Building or any part thereof or the Land, or on or against
Landlord's interest or estate therein or on or against any ground or
underlying lease without the necessity of having further instruments on the
part of Tenant to effect such subordination. Upon request of Landlord, Tenant
will execute any further written instrument necessary to subordinate its
rights hereunder to any such underlying leases or liens. If, at any time, or
from time to time during the Term, any mortgagee shall request that this
Lease have priority over the lien of such mortgage, and if Landlord consents
thereto, this Lease shall have priority over the lien of such mortgage and
all renewals, modifications, replacements, consolidations and extensions
thereof and all advances made thereunder and interest thereon, and Tenant
shall, within fifteen (15) business days after receipt of a request therefor
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from Landlord, execute, acknowledge and deliver any and all documents and
instruments confirming the priority of this Lease. In any event, however, if
this Lease shall have priority over the lien of a first mortgage, this Lease
shall not become subject or subordinate to the lien of any subordinate
mortgage, and Tenant shall not execute any subordination documents or
instruments for any subordinate mortgagee, without the written consent of the
first mortgagee. Landlord shall obtain for Tenant's benefit, from the current
mortgagee of the Building, a subordination, non-disturbance and attornment
agreement ("SNDA"), in recordable form, on such mortgagee's standard form of
SNDA. The SNDA shall provide that, upon a foreclosure under such mortgagee's
deed of trust (or a deed-in-lieu thereof), so long as Tenant is not then in
default hereunder, Tenant's rights under this Lease shall not be extinguished
and such mortgagee (or such other purchaser at a foreclosure sale) shall
recognize this Lease and Tenant's rights hereunder, subject to certain
limitations regarding the obligations of the successor Landlord hereunder as
may be set forth in the SNDA. Landlord shall use reasonable efforts to obtain
for Tenant's benefit from any future mortgagee an SNDA on such mortgagee's
standard form of SNDA.
b. In the event of (i) a transfer of Landlord's interest in the
Building, (ii) the termination of any ground or underlying lease of the
Building, or the Land, or both, or (iii) the purchase or other acquisition of
the Building, or Landlord's interest therein in a foreclosure sale or by deed in
lieu of foreclosure under any mortgage or deed of trust, or pursuant to a power
of sale contained in any mortgage or deed of trust, then in any of such events
Tenant shall, at the request of Landlord or Landlord's successor in interest,
attorn to and recognize the transferee or purchaser of Landlord's interest or
the interest of the lessor under the terminated ground or underlying lease, as
the case may be, as "Landlord" under this Lease for the balance then remaining
of the Term, and thereafter this Lease shall continue as a direct lease between
such person or entity, as "Landlord," and Tenant, as "Tenant," except that such
lessor, transferee or purchaser shall not be liable for any act or omission of
Landlord before such lease termination or before such person's succession to
title, nor be bound by any payment of Monthly Base Rent or Additional Rent
before such lease termination or before such person's succession to title for
more than one month in advance, nor, in the case of a transfer of the Landlord's
interest as a result of a foreclosure sale (or deed-in-lieu thereof), be subject
to any offset, defense or counterclaim accruing before such lease termination or
before such person's succession to title.
c. Tenant agrees, at any time, and from time to time, upon not
less than fifteen (15) days' prior notice by Landlord, to execute,
acknowledge and deliver to Landlord, a statement in writing certifying (to
the extent accurate as delivered or, it not, by modifying same to be
accurate) that (i) this Lease is unmodified and in full force and effect (or
if there have been modifications, that the same is in full force and effect
as modified and stating the modifications); (ii) the Term of the Lease has
commenced and the full rental is now accruing hereunder; (iii) Tenant has
accepted possession of the Premises and is presently occupying the same; (iv)
all improvements required by the terms of the Lease to be made by Landlord
have been completed and all tenant improvement allowances have been paid in
full; (v) there are no offsets, counterclaims, abatements or defenses against
or with respect to the payment of any rent or other charges due under the
Lease; (vi) no rent under the Lease has been paid more than thirty (30) days
in advance of its due date; (vii) to the best of the knowledge of the Tenant,
Landlord is not in default in the performance of any covenant, agreement,
provision or condition contained in the Lease or, if so, specifying each such
default of which Tenant may have knowledge; (viii) the address for notices to
be sent to Tenant; (ix) the only security deposit tendered by Tenant is as
set forth in the Lease, and such security deposit has been paid to Landlord;
and (x) any other information reasonably requested by Landlord or any
mortgagee or ground lessor of the Building and/or the Land it being intended
that any such statement delivered pursuant hereto may be relied upon by any
prospective purchaser or lessee of the Building or any part thereof, any
mortgagee or prospective mortgagee thereof, any prospective assignee of any
mortgage thereof, any ground lessor or prospective ground lessor of the Land
and/or the Building, or any prospective assignee of any such ground lease.
Tenant also agrees to execute and deliver from time to time such reasonable
estoppel certificates as an institutional lender may require with respect to
this Lease.
16. DEFAULT AND REMEDIES.
a. If Tenant shall (i) fail to pay any installment of Monthly
Base Rent, although no legal or formal demand has been made therefor, within
five (5) business days after written notice by Landlord (provided that no
such notice shall be required with respect to the second (2nd) and each
successive late payment of Monthly Base Rent during any twelve (12) month
period hereunder, with respect to which an Event of Default shall occur
hereunder upon Tenant's failure to tender any such installment of Monthly
Base Rent to Landlord with five (5) business days after its due date), or
(ii) fail to make any payment of Additional Rent or any other payment
required by the terms and provisions hereof, within five (5) days after
notice or demand therefor; or (iii) convey, assign, mortgage or sublet this
Lease, the Premises or any part thereof, or Tenant's interest therein, or
attempt any of the foregoing, without the prior written consent of Landlord;
or (iv) commit or suffer to exist an Event of Bankruptcy (hereinafter
defined), or (v) fail to maintain the insurance coverage required by Section
12, above, or (vi) violate or fail to perform any of the other terms,
conditions, covenants, or agreements herein made by Tenant and fails to cure
such default within thirty (30) calendar days after notice, provided,
however, that if the nature of Tenant's failure is such that more than thirty
(30) days are reasonably required for its cure, then Tenant shall not be in
default if it begins such cure within the thirty (30) day period described
above and thereafter diligently prosecutes such cure to completion within an
additional thirty (30) days; then there shall be deemed to have been
committed an "Event of Default".
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b. In the event of any Event of Default by Tenant as defined in
Section 16a, Landlord may at any time thereafter, without notice and demand
and without limiting Landlord in the exercise of any other right or remedy
which Landlord may have by reason of such default or breach do any of the
following:
(i) Landlord may terminate this Lease, by giving written
notice of such termination to Tenant, whereupon this Lease shall automatically
cease and terminate and Tenant shall be immediately obligated to quit the
Premises. Any other notice to quit or notice of Landlord's intention to re-enter
the Premises is hereby expressly waived. If Landlord elects to terminate this
Lease, everything contained in this Lease on the part of Landlord to be done and
performed shall cease without prejudice, subject, however, to the right of
Landlord to recover from Tenant all rent and any other sums accrued up to the
time of termination or recovery of possession by Landlord, whichever is later.
(ii) With or without the termination of this Lease,
Landlord may proceed to recover possession of the Premises under and by
virtue of the provisions of the laws of the jurisdiction in which the
Building is located, or by such other proceedings, including re-entry and
possession, as may be applicable. If this Lease is terminated or Landlord
recovers possession of the Premises before the expiration of the Term by
reason of Tenant's default as hereinabove provided, Landlord shall take
reasonable steps to attempt to relet the Premises for such rent and upon such
terms as are not unreasonable under the circumstances and, if the full rental
reserved under this Lease (and any of the costs, expenses or damages
indicated below) shall not be realized by Landlord, Tenant shall be liable
for all damages sustained by Landlord, including without limitation
deficiency in rent during any period of vacancy or otherwise; the costs of
removing and storing the property of Tenant or of any other occupant; the
then-remaining unamortized portion of the Improvement Allowance described in
the Work Agreement; all reasonable expenses incurred by Landlord in enforcing
Landlord's remedies, including without limitation reasonable attorneys' fees
and Late Charges as provided herein, and advertising, brokerage fees and
expenses of placing the Premises in first class rentable condition. Landlord,
in putting the Premises in good order or preparing the same for rerental may,
at Landlord's option, make such alterations, repairs, or replacements in the
Premises as Landlord, in its sole judgment, considers advisable and necessary
for the purpose of reletting the Premises, and the making of such
alterations, repairs, or replacements shall not operate or be construed to
release Tenant from liability hereunder as aforesaid.
(iii) Any damage or loss of rent sustained by Landlord
may be recovered by Landlord, at Landlord's option, at the time of
termination of this Lease, the time of the reletting, or in separate actions,
from time to time, as said damage shall have been made more easily
ascertainable by successive relettings, or at Landlord's option in a single
proceeding deferred until the expiration of the Term (in which event Tenant
hereby agrees that the cause of action shall not be deemed to have accrued
until the date of expiration of said Term) or in a single proceeding prior to
either the time of reletting or the expiration of the Term. If the Landlord
elects to repossess the Premises without terminating this Lease, then Tenant
shall be liable for and shall pay to Landlord all Rent and other indebtedness
accrued to the date of such repossession, plus Rent required to be paid by
Tenant to Landlord during the remainder of this Lease until the date of
expiration of the Term, diminished by any net sums thereafter received by
Landlord through reletting the Premises during such period (after deducting
expenses incurred by Landlord as provided in Section 16b(ii), above). In no
event shall Tenant be entitled to any excess of any Rent obtained by
reletting over and above the Rent herein reserved. Actions to collect amounts
due from Tenant as provided in this Section 16(a)(iii) may be brought from
time to time, on one or more occasions, without the necessity of Landlord's
waiting until expiration of this Lease term. Upon termination of this Lease
or repossession of the Premises following a default hereunder, Landlord shall
attempt to relet the Premises or any portion thereof; provided that, if
Landlord is successful in reletting, it shall not be responsible for the
payment of Rent by such new tenant. In the event of reletting Landlord may
relet the whole or any portion of the Premises for any period, to any tenant,
and for any use and purpose on such terms and at such rentals as Landlord in
its exclusive judgment may determine.
c. Notwithstanding the foregoing, if Landlord terminates this
Lease pursuant to Section 16b(i), above, Landlord shall be entitled to
recover from Tenant, and Tenant shall pay to Landlord on demand, as and for
liquidated and agreed final damages for Tenant's default, an amount equal to
the difference between (i) all Monthly Base Rent, Additional Rent and other
sums which would be payable under this Lease from the date of such demand
(or, if it is earlier, the date to which Tenant shall have satisfied in full
its obligations under Section 16b(ii), above) for what would be the then
unexpired Term in the absence of such termination, and (ii) the fair market
rental value of the Premises over the same period (net of all expenses and
all vacancy periods reasonably projected by Landlord to be incurred in
connection with the reletting of the Premises), with such differential
discounted at the rate of seven percent (7%) per annum. Nothing herein shall
be construed to affect or prejudice Landlord's right to prove, and claim in
full, unpaid Rent or any other amounts accrued prior to termination of this
Lease.
d. Notwithstanding anything herein to the contrary, upon the
occurrence of an Event of Default hereunder, Landlord, with or without
terminating the Lease, may immediately reenter and take possession of the
Premises and evict Tenant therefrom, without legal process of any kind, using
such force as may be necessary, without being liable for or guilty of
trespass, forcible entry or any other tort. Landlord's right to exercise such
"self-help" remedy shall be in addition to, and not in limitation of,
Landlord's other rights and remedies hereunder for a breach by Tenant of its
obligations under the Lease.
e. Tenant hereby expressly waives any and all rights of
redemption granted by or under any present of future laws in the event Tenant
is evicted or dispossessed for any cause, or in the event Landlord obtains
possession of the Premises, by reason of the violation by Tenant of any of
the covenants and conditions of this Lease or otherwise. In addition, Tenant
hereby expressly waives any
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and all rights to bring any action whatsoever against any tenant taking
possession after Tenant has been dispossessed or evicted hereunder, or to
make any such tenant or party to any action brought by Tenant against
Landlord.
f. Landlord and Tenant shall and each does hereby waive trial
by jury in any action, proceeding or counterclaim brought by either of the
parties hereto against the other on any matters whatsoever arising out of or
in any way connected with this Lease or its termination, the relationship of
Landlord and Tenant, Tenant's use or occupancy of the Premises or any claim
of injury or damage and any emergency statutory or any other statutory
remedy. In the event Landlord commences any summary proceeding for nonpayment
of Rent or Additional Rent, or commences any other action or proceeding
against Tenant in connection with this Lease, Tenant will interpose no
counterclaim of whatever nature or description in any such proceeding.
g. Nothing contained herein shall prevent the enforcement of
any claim Landlord may have against Tenant for anticipatory breach of the
unexpired Term. In the event of a breach or anticipatory breach by Tenant of
any of the covenants or provisions hereof, Landlord shall have the right of
injunction and the right to invoke any remedy allowed at law or in equity as
if reentry, summary proceedings and other remedies were not provided for
herein.
h. Prior to exercising any rights or remedies upon a default by
Landlord, Tenant will give Landlord notice specifying such default, and
Landlord shall have thirty (30) days after receipt of such notice in which to
cure any such default; provided, however, that if such default cannot, by its
nature, be cured within such period, Landlord shall not be deemed in default
if Landlord shall within such period commence to cure such default and shall
diligently prosecute the same to completion. Unless and until Landlord fails
so to cure any default after notice, Tenant shall have no remedy or cause of
action by reason thereof. All obligations of Landlord hereunder will be
construed as covenants, not conditions; all such obligations will be binding
upon Landlord only during the period of its ownership of the Building and not
thereafter; and no default or alleged default by Landlord shall relieve or
delay performance by Tenant of its obligations to continue to pay Annual Base
Rent and Additional Rent hereunder as and when the same shall be due, except
as expressly provided in Section 9a, above.
17. BANKRUPTCY.
a. For purposes of this Lease, the following shall be deemed
"Events of Bankruptcy": (i) if a receiver or custodian is appointed for any
or all of Tenant's property or assets, or if there is instituted a
foreclosure action on any of Tenant's property and such action is not
dismissed within thirty (30) days thereafter; or (ii) if Tenant files a
voluntary petition under 11 U.S.C. Article 101, ET SEQ., as amended (the
"Bankruptcy Code"), or under the insolvency laws of any jurisdiction (the
"Insolvency Laws"); or (iii) if there is filed an involuntary petition
against Tenant as the subject debtor under the Bankruptcy Code or Insolvency
Laws, which is not dismissed within sixty (60) days of filing; or (iv) if
Tenant makes or consents to an assignment of its assets, in whole or in part,
for the benefit of creditors, or a common law composition of creditors; or
(v) if Tenant generally is not paying its debts as its debts become due.
b. Upon the occurrence of an Event of Bankruptcy, Landlord, at
its option and sole discretion, may terminate this Lease by written notice to
Tenant (subject, however, to applicable provisions of the Bankruptcy Code or
Insolvency Laws during the pendency of any action thereunder). If this Lease
is terminated under this Section 17, Tenant shall immediately surrender and
vacate the Premises, waives all statutory or other notice to quit, and agrees
that Landlord shall have all rights and remedies against Tenant provided in
Section 16 in case of an Event of Default by Tenant.
c. If Tenant becomes the subject debtor in a case pending under
the Bankruptcy Code (the "Bankruptcy Case"), Landlord's right to terminate
this Lease under this Section 17 shall be subject to the applicable rights
(if any) of the debtor-in-possession or the debtor's trustee in bankruptcy
(collectively, the "Trustee") to assume or assign this Lease as then provided
for in the Bankruptcy Code, however, the Trustee must give to Landlord, and
Landlord must receive, proper written notice of the Trustee's assumption or
rejection of this Lease, within sixty (60) days (or such other applicable
period as is provided pursuant to the Bankruptcy Code, it being agreed that
sixty (60) days is a reasonable period of time for election of an assumption
or rejection of this Lease) after the commencement of the Bankruptcy Case; it
being agreed that failure of the Trustee to give notice of such assumption
hereof within said period shall conclusively and irrevocably constitute the
Trustee's rejection of this Lease and waiver of any right of the Trustee to
assume or assign this Lease. The Trustee shall not have the right to assume
or assign this Lease unless said Trustee (i) promptly and fully cures all
defaults under this Lease, (ii) promptly and fully compensates Landlord and
any third party (including other tenants) for all monetary damages incurred
as a result of such default, and (iii) provides to Landlord "adequate
assurance of future performance." Landlord and Tenant (which term may include
the debtor or any permitted assignee of debtor) hereby agree in advance that
"adequate assurance of performance" as used in this paragraph, shall mean
that all of the following minimum criteria must be met: (1) the source of
Monthly Base Rent, Additional Rent, and other consideration due under this
Lease, and the financial condition and operating performance of Tenant, and
its guarantor, if any, shall be similar to the financial condition and
operating performance of Tenant as of the Lease Commencement Date; (2)
Trustee or Tenant must pay to Landlord all Monthly Base Rent and Additional
Rent payable by Tenant hereunder in advance, (3) Trustee or Tenant must agree
(by writing delivered to Landlord) that the use of the Premises shall be used
only for the permitted use as stated in this Lease, and that any assumption
or assignment of this Lease is subject to all of the provisions thereof and
will not violate or affect the rights or agreements of any other tenants or
occupants in the Building or of Landlord (including any mortgage or other
financing
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agreement for the Building, (4) Trustee or Tenant must pay to Landlord at the
time the next Monthly Base Rent is due under this Lease, in addition to such
installment of Monthly Base Rent, an amount equal to the installments of
Monthly Base Rent and Additional Rent due under this Lease for the next six
(6) months of this Lease, said amount to be held by Landlord in escrow until
either Trustee or Tenant defaults in its payment of Monthly Base Rent and
Additional Rent or other obligations under this Lease (whereupon Landlord
shall have the right to draw on such escrowed funds) or until the expiration
of this Lease (whereupon the funds shall be returned to Trustee or Tenant
except to the extent the funds have been drawn and not replaced); and (5)
Trustee or Tenant must agree to pay to Landlord at any time Landlord is
authorized to and does draw on the escrow account the amount necessary to
restore such escrow account to the original level required by clause (4),
above. The criteria stated above are not intended to be exhaustive or
all-inclusive and Landlord may determine that the circumstances of Tenant or
of this Lease require other or further assurances of future performance. In
the event Tenant is unable to: (a) cure its defaults, (b) reimburse Landlord
for its monetary damages, (c) pay the Monthly Base Rent and Additional Rent
due under this Lease on time, or (d) meet that criteria and obligations
imposed by (1) through (5), above, then Tenant hereby agrees in advance that
it has not met its burden to provide adequate assurance of future
performance, and this Lease may be terminated by Landlord in accordance with
Section 17b, above.
18. PAYMENT OF TENANT'S OBLIGATIONS BY LANDLORD AND UNPAID RENT. All covenants
and agreements to be performed by Tenant under any of the terms of this Lease
shall be performed by Tenant at Tenant's sole cost and expense. If Tenant shall
fail to pay any sum of money, other than Rent, required to be paid by it
hereunder or shall fail to perform any other act on its part to be performed
hereunder, and such failure shall continue beyond any applicable grace period
set forth in this Lease, Landlord may, without waiving or releasing Tenant from
any of its obligations hereunder, make any such payment or perform any such
other required act on Tenant's part. All sums so paid by Landlord, and all
necessary incidental costs, together with interest thereon at two percentage
points (2%) over the Prime Rate then in effect, from the date of such payment by
Landlord, shall be payable by Tenant to Landlord as Additional Rent hereunder,
on demand, and Tenant covenants and agrees to pay any such sums. Landlord shall
have (in addition to any other right or remedy of Landlord hereunder or at law)
the same rights and remedies in the event of the nonpayment thereof by Tenant as
in the case of default by Tenant in the payment of Additional Rent. In addition,
any Rent, including without limitation Annual Base Rent, Additional Rent,
Tenant's Pass-Through Costs and/or Late Charges, which is not paid timely will
accrue interest per annum at two percentage points (2%) over the Prime Rate from
the date such payment is due until the date paid in full (including all accrued
interest).
19. VOLUNTARY SURRENDER. The voluntary or other surrender of this Lease by
Tenant, or a mutual cancellation thereof, shall not work a merger, and shall, at
the sole option of Landlord, terminate all or any existing subleases or
subtenancies, or may, at the sole option of Landlord, operate as an assignment
to Landlord of any or all such subleases or subtenancies; provided however, that
if Landlord elects to treat such termination as an assignment of any such
sublease, Landlord shall have no obligation or liability to the subtenant
thereunder for any claim, damage or injury which accrued prior to the date of
surrender or mutual cancellation hereunder.
20. ABANDONMENT OF PERSONAL PROPERTY. Upon the expiration of the Term or earlier
termination of this Lease, Tenant shall forthwith remove Tenant's goods and
effects and those of any other persons claiming through or under Tenant, or
subtenancies assigned to it, and quit and deliver the Premises to the Landlord
peaceably and quietly. Goods and effects not removed by Tenant after termination
of this Lease (or within three (3) business days after a termination by reason
of Tenant's default) shall be considered abandoned. Landlord shall give Tenant
notice of right to reclaim abandoned property pursuant to applicable local law
and may thereafter dispose of the same as Landlord deems expedient, including
public or private sale and/or storage in a public warehouse or elsewhere at the
sole cost, and for the account, of Tenant, and Tenant shall promptly upon demand
reimburse Landlord for any expenses incurred by Landlord in connection
therewith, including reasonable attorneys' fees.
21. HOLD-OVER. If Tenant shall not immediately surrender the Premises at the
expiration of the Term then Tenant shall, by virtue of the provisions of this
Section 21, become a tenant by the month. In such event Tenant shall be
required to pay one hundred fifty percent (150%) of the amount of the Monthly
Base Rent then in effect and as subsequently escalated in accordance with the
provisions hereof, together with all Additional Rent in effect during the
last month of the Term commencing said monthly tenancy with the first day
next after the end of the Term; and said Tenant, as a month-to-month tenant,
shall be subject to all of the conditions and covenants of this Lease as
though the same had originally been a monthly tenancy, except as otherwise
provided above with respect to the payment of Rent. Each party hereto shall
give to the other at least thirty (30) days' written notice to quit the
Premises, except in the event of non-payment of Rent provided for herein when
due, or of the breach of any other covenant by the said Tenant, in which
event, Tenant shall not be entitled to any notice to quit, the usual thirty
(30) days' notice to quit being expressly waived; provided, however, that in
the event that Tenant shall hold over after expiration of the Term, and if
Landlord shall desire to regain possession of said Premises promptly at the
expiration of the Term, then at any time prior to the acceptance of the Rent
by Landlord from Tenant, as a monthly tenant hereunder, Landlord, at its
election or option, may reenter and take possession of the Premises
forthwith, without process, or by any legal action or process in the
Commonwealth of Virginia.
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22. OPTION TO EXTEND TERM.
a. Tenant shall have and is hereby granted the option to extend
the Term hereof for one (1) additional period of five (5) years (the
"Extension Period"), provided (i) Tenant gives written notice to Landlord of
Tenant's election to exercise such extension option no earlier than fifteen
(15), and no later than twelve (12), months prior to the expiration of the
last Lease Year of the Term; (ii) no Event of Default has occurred during the
Term, and no event exists at the time of the exercise of such option or
arises subsequent thereto, which event by notice and/or the passage of time
would constitute an Event of Default if not cured within the applicable cure
period; and (iii) Tenant has not assigned its interest in this Lease or
sublet more than twenty percent (20%) of the Premises to a person or entity
other than a Permitted Transferee.
b. All terms and conditions of this Lease, including without
limitation all provisions governing the payment of Additional Rent and annual
increases in the Annual Base Rent, shall remain in full force and effect
during the Extension Period, except that Annual Base Rent payable during the
first Lease Year of the Extension Period shall be the then-current Fair
Market Rental Rate (hereinafter defined) with respect to comparable office
space at the time of the commencement of the Extension Period (using a Base
Year of the calendar year in which the Extension Period commences for
purposes of determining Tenant's Pass-Through Costs); provided, however, in
no event shall the Annual Base Rent for the first Lease Year of the Extension
Period be less (on a per square foot basis) than the Annual Base Rent in
effect for the last Lease Year of the initial Term. Landlord shall not be
obligated to make, or pay for, any improvements or alterations in or to the
Premises. There shall be no rental abatement during the Extension Period. As
used in this Lease, the term "Fair Market Rental Rate" shall mean the fair
market rental rate per square foot of rentable area that would be agreed upon
between a landlord and a tenant entering into a new lease for comparable
space as to location, configuration, view and elevator exposure, size and
use, in a comparable building as to location, quality, reputation and age,
with a comparable build-out, a comparable term and a comparable base year for
operating expense and real estate tax pass-throughs assuming the following:
(1) the landlord and tenant are informed and well-advised and each is acting
in what it considers its own best interests; (2) a tenant improvement
allowance, free rent periods or any other special concessions (for example,
design fees, moving allowances, refurbishing allowances, etc.) will not be
provided to Tenant except to the extent that such allowances or concessions
are reflected in the fair market rental rates being obtained (in which event
the Fair Market Rental Rate shall be reduced by the economic equivalent of
the allowances or concessions not offered to Tenant); and (3) the tenant will
continue to pay its share of Operating Expenses and Real Estate Taxes over a
new base year (which, for Tenant, is the calendar year in which occurs the
first day of the Extension Period).
c. Landlord and Tenant shall negotiate in good faith to
determine the Annual Base Rent for the first Lease Year of the Extension
Period, for a period of thirty (30) days after the date on which Landlord
receives Tenant's written notice of Tenant's election to exercise the
extension option provided for under this Section 22. In the event Landlord
and Tenant are unable to agree upon the Annual Base Rent for the first Lease
Year of the Extension Period within said thirty (30)-day period, the Fair
Market Rental Rate for the Premises shall be determined by a board of three
(3) licensed commercial real estate brokers, one of whom shall be named by
the Landlord, one of whom shall be named by Tenant, and the two so appointed
shall select a third. Each real estate broker so selected shall be licensed
in the jurisdiction in which the Building is located as a real estate broker
specializing in the field of commercial office leasing in the Herndon area of
Fairfax County, Virginia, having no less than ten (10) years' experience in
such field, and recognized as ethical and reputable within the field.
Landlord and Tenant agree to make their appointments promptly within ten (10)
days after the expiration of the thirty (30)-day period, or sooner if
mutually agreed upon. The two (2) brokers selected by Landlord and Tenant
shall promptly select a third broker within ten (10) days after they both
have been appointed, and each broker, within fifteen (15) days after the
third broker is selected, shall submit his or her determination of the Fair
Market Rental Rate. The Fair Market Rental Rate shall be the mean of the two
closest rental rate determinations; provided, however, in no event shall the
Annual Base Rent for the first Lease Year of the Extension Period be less (on
a per square foot basis) than the Annual Base Rent in effect for the last
Lease Year of the initial Term. Landlord and Tenant shall each pay the fee of
the broker selected by it, and they shall equally share the payment of the
fee of the third broker.
d. Should the Term of the Lease be extended hereunder, Tenant
agrees to execute an amendment modifying this Lease within fifteen (15)
business days after Landlord presents same to Tenant, which agreement shall
set forth the Annual Base Rent and the Monthly Base Rent for first Lease Year
of the Extension Period. Should Tenant fail to execute the amendment (which
amendment accurately sets forth the economic terms of the demise of the
Premises during the Extension Period) within fifteen (15) business days after
presentation of same by Landlord, time being of the essence, Tenant's right
to extend the Term shall, at Landlord's sole option, terminate, and Landlord
shall be permitted to lease the Premises to any other person or entity upon
whatever terms and conditions are acceptable to Landlord in its sole
discretion.
23. PARKING.
a. Tenant shall be provided, without charge, one hundred
sixty-eight (168) parking spaces (or 4 spaces per 1,000 r.s.f. of the
Premises then being leased by Tenant) located on the surface lot adjacent to
the Building, for use by Tenant's employees, agents and guests. Of the one
hundred sixty-eight (168) spaces being provided by Landlord, one hundred
sixty-three (163) shall be unreserved spaces and five (5) shall be reserved
spaces. The reserved spaces shall be in the location shown on the attached
EXHIBIT D. A "Reserved Parking" sign bearing Tenant's name (the "Parking
Sign") shall be
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installed adjacent to each reserved parking space provided to Tenant.
Landlord, at Tenant's sole cost, shall design, fabricate and install the
Parking Signs.
b. Tenant agrees that it and its employees shall observe
reasonable safety precautions in the use of the surface parking lot, and
shall at all times abide by all rules and regulations promulgated by Landlord
or the parking operator governing the use of the surface parking lot. Tenant
understands and agrees that Landlord does not assume any responsibility for
any damage or loss to any automobiles parked on the surface parking lot, or
to any personal property located therein or thereon, or for any injury
sustained by any person in or about the surface parking lot. Landlord shall
not be responsible for "policing" Tenant's reserved parking spaces to insure
that such spaces are occupied only by automobiles belonging to Tenant, its
employees and guests.
24. NOTICES. Any and all notices or demands required or permitted herein
shall be in writing and served (a) personally, (b) by certified mail, return
receipt requested, or (c) by guaranteed overnight courier, at the addresses
provided in Section 1g above. If served personally, service shall be
conclusively deemed made at the time of such delivery. If served by certified
mail, service shall be conclusively deemed made forty-eight (48) hours after
the deposit thereof in the United States mail, postage prepaid, pursuant to
this Section 24. If served by overnight courier, service shall be
conclusively deemed made one (1) business day after deposit with such
courier. Either party may specify a different address according to the terms
of this Section 24.
25. BROKERS. Landlord and Tenant recognize Dean Topping & Company,
Charles E. Smith Commercial Realty and LPC Commercial Services, Inc.
(collectively, the "Brokers") as the sole brokers with respect to this Lease
and Landlord agrees to be responsible for the payment of any leasing
commissions owed to the aforesaid Brokers in accordance with the terms of
separate commission agreements entered into between Landlord and each of said
Brokers. Landlord and Tenant each represents and warrants to the other that,
except for the Brokers, no other broker has been employed in carrying on any
negotiations relating to this Lease and shall each indemnify and hold
harmless the other from any claim for brokerage or other commission arising
from or out of any breach of the foregoing representation and warranty.
26. ENVIRONMENTAL CONCERNS.
a. Tenant, its agents, employees, contractors or invitees shall
not (i) cause or permit any Hazardous Materials (hereinafter defined) to be
brought upon, stored, used or disposed on, in or about the Premises and/or
the Building, or (ii) knowingly permit the release, discharge, spill or
emission of any Hazardous Material in or from the Premises.
b. Tenant hereby agrees that it is and shall be fully
responsible for all costs, expenses, damages or liabilities (including, but
not limited to those incurred by Landlord and/or its mortgagee) which may
occur from the use, storage, disposal, release, spill, discharge or emissions
of Hazardous Materials by Tenant whether or not the same may be permitted by
this Lease. Tenant shall defend, indemnify and hold harmless Landlord, its
mortgagee and its agents from and against any claims, demands, administrative
orders, judicial orders, penalties, fines, liabilities, settlements, damages,
costs or expenses (including, without limitation, reasonable attorney and
consultant fees, court costs and litigation expenses) of whatever kind or
nature, known or unknown, contingent or otherwise, arising out of or in any
way related to the use, storage, disposal, release, discharge, spill or
emission of any Hazardous Material, or the violation of any Environmental
Laws, by Tenant, its agents, employees, contractors or invitees. The
provisions of this Section 26 shall be in addition to any other obligations
and liabilities Tenant may have to Landlord at law or in equity and shall
survive the transactions contemplated herein or any termination of this Lease.
c. As used in this Lease, the term "Hazardous Materials" shall
include, without limitation:
(i) those substances included within the definitions of
"hazardous substances", "hazardous materials," toxic substances," or
"solid waste" in the Comprehensive Environmental Response Compensation
and Liability Act of 1980 (42 U.S.C. Section 9601 ET SEQ.) ("CERCLA"),
as amended by Superfund Amendments and Reauthorization Act of 1986
("SARA"), the Resource Conservation and Recovery Act of 1976 ("RCRA"),
and the Hazardous Materials Transportation Act, and in the regulations
promulgated pursuant to said laws, all as amended;
(ii) those substances listed in the United States
Department of Transportation Table (49 CFR 172.101 and amendments
thereto) or by the Environmental Protection Agency (of any successor
agency) as hazardous substances (40 CFR Part 302 and amendments
thereto); and
(iii) any material, waste or substance which is (A)
petroleum, (B) asbestos, (C) polychlorinated biphenyl, (D) designated
as a "hazardous substance" pursuant to Section 311 of the Clean Water
Act, 33 U.S.C. Section 1251 ET SEQ. (33 U.S.C. Section 1321) or
listed pursuant to Section of the Clean Water Act (33 U.S.C. Section
1317); (E) flammables or explosives; or (F) radioactive materials.
d. All federal, state or local laws, statutes, regulations,
rules, ordinances, codes, standards, orders, licenses and permits of any
governmental authority or issued or promulgated thereunder shall be referred
to as the "Environmental Laws".
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27. LANDLORD'S LIEN. To secure the payment of all Annual Base Rent and
Additional Rent due and to become due hereunder and to assure the faithful
performance of all of the other covenants of this Lease required to be
performed by Tenant, Landlord shall continue to possess its statutory and
common law liens provided under Virginia law. Notwithstanding the foregoing,
Landlord agrees to subordinate its statutory and common law liens to the lien
of any purchase money mortgage or deed of trust securing a loan made by a
bank or other institutional lender to Tenant, the proceeds of which are used
by Tenant to purchase equipment and personalty used by Tenant in the
operation of its business in the Premises. No equipment which is leased
(rather than owned) by Tenant shall be subject to the Landlord's lien
described in this Section 27.
28. ROOFTOP COMMUNICATIONS EQUIPMENT.
a. Tenant shall have the non-exclusive right to use a portion
of the roof of the Building designated by Landlord in Landlord's sole
discretion for the installation of one (1) of the following types of
equipment: satellite dish, antenna and/or telecommunications and fiber optic
equipment (collectively, the "Communications Equipment"), provided that (i)
the Communications Equipment sought to be installed by Tenant is permitted
under, and conforms to the requirements of, the laws, rules and regulations
of the Town of Herndon, Virginia, Fairfax County, the Commonwealth of
Virginia and any other governmental or quasi-governmental authorities having
appropriate jurisdiction over the Building; (ii) Tenant obtains and maintains
all permits, licenses, variances, authorizations and approvals that may be
required in order to install such Communications Equipment; (iii) Tenant
shall obtain insurance coverages reasonably required by Landlord relating to
the installation and operation of such Communications Equipment; (iv) Tenant
shall install any screen or other covering for the Communications Equipment
that Landlord may require in order to camouflage or conceal the
Communications Equipment; (v) Landlord shall have approved in its sole
discretion the dimensions and specifications for the Communications
Equipment, and the proposed method of attaching the Communications Equipment
to the roof of the Building; (vi) the diameter of any Communications
Equipment installed by Tenant shall not exceed twenty-four (24) inches; (vii)
Landlord's engineer determines in its reasonable discretion that the portion
of the roof on which Tenant desires to install the Communications Equipment
is capable of bearing the weight of the Communications Equipment; and (viii)
Landlord's engineer determines in its reasonable discretion that there is
space available on the roof of the Building to accommodate Tenant's
Communication Equipment. Tenant shall pay to Landlord monthly rent for the
roof rights provided to Tenant in this Section 28 ("Communications Rent") in
an amount equal to Two Hundred Fifty Dollars ($250.00). Communications Rent
hereunder shall be increased as of the first day of the second (2nd) Lease
Year and each Lease Year thereafter during the Term by an amount equal to
three percent (3%) of the Communications Rent in effect during the last
calendar month of the previous Lease Year. Communications Rent shall be paid
by Tenant, in advance, beginning on the date on which Tenant installs the
Communications Equipment, and thereafter on the first day of each and every
calendar month of the Term during which such Communications Equipment is
located on the roof of the Building.
b. Prior to or contemporaneous with requesting Landlord's
approval of the installation of any Communications Equipment, Tenant shall
provide to Landlord: (i) plans and specifications for the Communications
Equipment; (ii) copies of all required governmental and quasi-governmental
permits, licensees, special zoning variances, and authorizations, all of
which Tenant shall obtain at its own cost and expense; and (iii) a policy or
certificate of insurance evidencing such insurance coverage as may reasonably
be required by Landlord for the installation, operation and maintenance of
the Communications Equipment and sufficient to cover, INTER ALIA, the
indemnities from Tenant to Landlord provided in the Lease relating to the
installation, maintenance, operation and removal of the Communications
Equipment. Landlord may withhold its approval of the installation of the
Communications Equipment if Landlord reasonably believes that the
installation, operation or removal of the Communications Equipment may (A)
damage the structural integrity of the Building or void any warranty or
guaranty applicable to the roof or Building; (B) cause the violation of any
zoning ordinance or other governmental or quasi-governmental law, rule or
regulation applicable to the Building; or (C) interfere with the use or
operation of any antenna or other communications device of any other tenant
in the Building, which has been installed or previously approved for
installation by Landlord. Landlord may require as a precondition to its
approval of the installation of the Communications Equipment that Tenant (or,
at Landlord's option, Landlord), at Tenant's sole cost and expense, install
additional structural support (in a manner determined by Landlord's engineer
in its sole discretion) to the portion of the roof on which Tenant desires to
install the Communications Equipment. Tenant shall not be entitled to rely on
any such approval as being a representation by Landlord that such
installation and operation is permitted by or in accordance with any zoning
ordinance or other governmental or quasi-governmental law, rule or regulation
applicable to the Building.
c. Landlord shall be provided with access to the roof of the
Building, including the portion of the roof on which the Communications
Equipment is located, in order to inspect the Communications Equipment and
roof to determine, INTER ALIA, if the Communications Equipment is causing
damage to the roof or any other part of the Building and/or to repair the
roof or remove or relocate the Communications Equipment. Landlord, at its
sole option and discretion, may require Tenant, at any time prior to the
expiration of the Lease, to terminate the operation of the Communications
Equipment if it is causing physical damage to the structural integrity of the
Building or voids any warranty or guaranty applicable to the roof or the
Building, or interfering with any satellite dish, antennae or other
telecommunications device being operated (or approved by Landlord for
operation) as of the Commencement Date, on the roof or elsewhere in the
Building by any tenant in the Building or other licensee authorized by
Landlord, or causing the violation of any condition or provision of the Lease
or any governmental or quasi-governmental law, rule or regulation (now or
hereafter in effect) applicable to the Building. If, however,
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Tenant can correct the damage or cure such violation to Landlord's reasonable
satisfaction within sixty (60) days after receipt of written notice from
Landlord, Tenant may restore its operation so long as Tenant promptly
commences to cure such damage and/or cure such violation and diligently
pursues such cure to completion.
d. Tenant acknowledges that the rights contained in this
Section 28 are non-exclusive, and that Landlord may grant such rights to any
other tenant in the Building or any other licensee of Landlord's choice
(whether or not such licensee is a tenant of the Building). Tenant expressly
acknowledges that it may not (i) license or otherwise permit third parties to
install on the roof of the Building or anywhere else in the Premises, any
Communications Equipment; or (ii) permit any third party to use any portion
of the roof for any purpose whatsoever. The breach of this provision shall
constitute a default under this Lease.
e. At the expiration or earlier termination of the Lease,
Tenant, at Tenant's sole cost, shall remove the Communications Equipment and
all cabling and other equipment relating thereto from the Building, and
Tenant shall restore the area where the Communications Equipment was located
to its condition existing prior to such installation in a manner and with
materials determined by Landlord. In the event Tenant fails to promptly do
so, Tenant hereby authorizes Landlord to remove the Communications Equipment
and restore the area of the roof and the other portions of the Building
affected thereby, and charge Tenant for all reasonable costs and expenses
incurred in connection therewith. Tenant's obligation to perform and observe
this covenant shall survive the expiration or earlier termination of the Term
of the Lease.
f. Tenant covenants and agrees that the installation, operation
and removal of the Communications Equipment will be at its sole cost and
risk. Tenant covenants and agrees absolutely and unconditionally to
indemnify, defend and hold Landlord harmless from and against all claims,
actions, damages, liability, judgments, settlements, costs and expenses
(including reasonable attorneys' fees and expenses) suffered or sustained by
Landlord arising out of the installation, operation, maintenance or removal
of the Communications Equipment, including without limitation any loss or
injury resulting from transmissions from the Communications Equipment, unless
resulting directly from the gross negligence or intentionally wrongful acts
or omissions of Landlord or any agent or employee of Landlord.
g. The rights contained in this Section 28 are personal to
Universal Access, Inc. and may not be exercised by any subtenant, licensee
or, except for a Permitted Transferee, assignee of Tenant.
29. EXTERIOR SIGNAGE. Tenant shall have the non-exclusive right to install, at
Tenant's sole cost and expense, a sign bearing Tenant's name (the "Exterior
Sign") on the exterior of the Building, in the location shown on the attached
EXHIBIT E. All attributes of the Exterior Sign, including without limitation
size, materials and color, shall be subject to Landlord's prior approval, which
shall not be unreasonably withheld, conditioned or delayed; provided, however,
in no event shall any aspect of the Exterior Sign, including without limitation
the size of Tenant's name or logo thereon, be larger than the dimensions shown
on the attached EXHIBIT E-1. Prior to installing the Exterior Sign, Tenant shall
submit to Landlord for its approval a drawing of the Exterior Sign, which
drawing shall specify the size, materials, color and other attributes of the
Exterior Sign which Tenant desires to install. Tenant's right to install the
Exterior Sign shall be subject to Tenant's receipt of all necessary permits and
governmental approvals for such installation; provided that the failure to
obtain such permits or approvals shall not affect the Lease (or Tenant's
obligations hereunder) in any way. The exact placement of the Exterior Sign on
the Building shall be subject to Landlord's approval regarding structural
support issues. Tenant shall be solely responsible for obtaining and maintaining
all permits and governmental approvals necessary for the installation and
operation of the Exterior Sign. Tenant shall be responsible for repairing and
maintaining the Exterior Sign installed by Tenant in a first-class condition
throughout the Term. The Exterior Sign shall be installed by a licensed
contractor reasonably acceptable to Landlord using a mounting procedure approved
by Landlord in its reasonable discretion exercised in good faith. Tenant shall
cause its insurance carrier to include the Exterior Sign in the coverage
required to be obtained by Tenant pursuant to Section 12, above. The right to
install the Exterior Sign shall be personal to Universal Access, Inc.; provided
that, upon the assignment of the Lease to a Permitted Transferee and the removal
of the then-existing Exterior Sign by Tenant, such Permitted Transferee shall be
permitted to install an Exterior Sign, such installation to be undertaken
subject to, and in accordance with, the provisions of this Section 29. Tenant
agrees to indemnify Landlord and hold it harmless from and against all claims,
damage or liability (including reasonable attorneys' fees) sustained or suffered
by Landlord arising out of or related to the installation, maintenance or
removal of the Exterior Sign, except to the extent such claims or liability
results from the negligence or willful misconduct of Landlord, its employees or
agents. Tenant shall remove the Exterior Sign at the end of the Term and shall
restore the portions of the Building affected by such removal to their condition
immediately prior to the installation of such signs, reasonable wear and tear
and casualty excepted.
30. RULES AND REGULATIONS. Tenant shall at all times comply with the rules and
regulations set forth in EXHIBIT F attached hereto and with any reasonable
additions thereto and modifications thereof adopted from time to time by
Landlord for all tenants of the Building; and Tenant shall be given five (5)
days' written notice of any such additions and modifications. Each such rule or
regulation shall be deemed to be a covenant of this Lease to be performed and
observed by Tenant. The rules and regulations shall be uniformly applied by
Landlord as against all tenants in the Building.
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31. QUIET ENJOYMENT. Landlord covenants that, if Tenant is not in default
hereunder, Tenant shall at all times during the Term peaceably and quietly
have, hold and enjoy the Premises without disturbance from Landlord or any
party claiming by or through Landlord, subject to the terms of this Lease.
32. MISCELLANEOUS PROVISIONS.
a. Time is of the essence with respect to all of Tenant's
obligations under this Lease.
b. The waiver by Landlord or Tenant of any term, covenant or
condition herein contained shall not be deemed to be a waiver of such term,
covenant or condition of any prior or subsequent breach of the same or any
other term, covenant or condition herein contained. The subsequent acceptance
of rent hereunder by Landlord shall not be deemed to be a waiver of any prior
breach by Tenant of any term, covenant or condition of this Lease, other than
the failure of Tenant to pay the particular rental so accepted, regardless of
Landlord's knowledge of such prior breach at the time of acceptance of such
rent.
c. In the event of any action or proceeding brought by either
party against the other under this Lease, the prevailing party shall be
entitled to recover from the other party the fees of its attorneys in such
action or proceeding in such amount as the court may judge to be reasonable
for such attorneys' fees.
d. Except as expressly otherwise provided in this Lease, all of
the provisions of this Lease shall bind and inure to the benefit of the
parties hereto and to their heirs, successors, representatives, executors,
administrators, transferees and assigns. The term "Landlord," as used herein,
shall mean only the owner of the Building and the Land or of a lease of the
Building and the Land, at the time in question, so that in the event of any
transfer or transfers of title to the Building and the Land, or of Landlord's
interest in a lease of the Building and the Land, the transferor shall be and
hereby is relieved and freed of all obligations of Landlord under this Lease
accruing subsequent to such transfer, and it shall be deemed, without further
agreement, that such transferee has assumed and agreed to perform and observe
all obligations of Landlord herein during the period it is the holder of
Landlord's interest under this Lease.
e. At Landlord's request, Tenant will execute a memorandum of
this Lease in recordable form setting forth such provisions hereof as
Landlord deems desirable. Further, at Landlord's request, Tenant shall
acknowledge before a notary public its execution of this Lease, so that this
Lease shall be in form for recording. The cost of recording this Lease or
memorandum thereof shall be borne by Landlord.
f. Notwithstanding any provision to the contrary herein, Tenant
shall look solely to the estate and property of Landlord in and to the Land
and the Building in the event of any claim against Landlord arising out of or
in connection with this Lease, the relationship of Landlord and Tenant, or
Tenant's use of the Premises, and Tenant agrees that the liability of
Landlord arising out of or in connection with this Lease, the relationship of
Landlord and Tenant, or Tenant's use of the Premises, shall be limited to
such estate and property of Landlord in and to the Land and the Building. No
properties or assets of Landlord other than the estate and property of
Landlord in and to the Building and no property owned by any partner of
Landlord shall be subject to levy, execution or other enforcement procedures
for the satisfaction of any judgment (or other judicial process) or for the
satisfaction of any other remedy of Tenant arising out of or in connection
with this Lease, the relationship of Landlord and Tenant or Tenant's use of
the Premises.
g. Landlord and Landlord's agents have made no representations
or promises with respect to the Building, the Land or the Premises except as
herein expressly set forth.
h. Landlord and Tenant shall be excused from performing an
obligation or undertaking provided for in this Lease so long as such
performance is prevented or delayed, retarded or hindered by an Act of God,
force majeure, fire, earthquake, flood, explosion, action of the elements,
war, invasion, insurrection, riot, mob violence, sabotage, inability to
procure or a general shortage of labor, equipment, facilities, materials or
supplies in the open market, failure of transportation, strike, lockout,
action of labor unions, a taking by eminent domain, requisition, laws orders
of government, or of civil, military or naval authorities, or any other cause
whether similar or dissimilar to the foregoing, not within the reasonable
control of Landlord or Tenant, as applicable, including reasonable delays for
adjustments of insurance (collectively, "Force Majeure"); provided, however,
that no such event or cause shall relieve Tenant of its obligations hereunder
to make full and timely payments of Rent as provided herein.
i. Tenant hereby elects domicile at the Premises for the
purpose of service of all notices, writs of summons or other legal documents
or process in any suit, action or proceeding which Landlord or any mortgagee
may undertake under this Lease.
j. Landlord shall not be liable to Tenant for any damage caused
by other tenants or persons in the Building or caused by operations of others
in the construction of any private, public or quasi-public work.
k. If in this Lease it is provided that Landlord's consent or
approval as to any matter will not be unreasonably withheld, and it is
established by a court or body having final jurisdiction thereover that
Landlord has been unreasonable, the sole effect of such finding shall be that
Landlord shall be deemed to have given its consent or approval, but Landlord
shall not be liable to Tenant in any respect for money damages or expenses
incurred by Tenant by reason of Landlord having withheld its consent. Nothing
26
<PAGE>
contained in this paragraph shall be deemed to limit Landlord's right to give
or withhold consent unless such limitation is expressly contained in the
paragraph to which such consent pertains.
L. If any governmental entity or authority hereafter imposes a
tax or assessment upon or against any of the rent or other charges payable by
Tenant to Landlord hereunder (whether such tax takes the form of a lease tax,
sales tax or other tax), Tenant shall be responsible for the timely payment
thereof. Unless Landlord and Tenant otherwise agree in writing with respect
to the payment thereof, Tenant shall pay the applicable tax to Landlord in
monthly installments on the date upon which Tenant pays to Landlord the
installments of Monthly Base Rent due under this Lease.
M. This Lease and the Exhibits hereto constitute the entire
agreement between the parties, and supersedes any prior agreements or
understandings between them. This Lease is not effective until executed and
delivered by Landlord and Tenant and approved by any current mortgagee of the
Building and/or the Land. The provisions of this Lease may not be modified in
any way except by written agreement signed by both parties.
N. This Lease shall be subject to and construed in accordance
with the laws of the Commonwealth of Virginia.
IN WITNESS WHEREOF, duly authorized representatives of Landlord and
Tenant have executed this Deed of Lease under seal on the day and year first
above written.
LANDLORD:
HERNDON LINCOLN I LLC, a Delaware limited
liability company
By: Lincoln-Herndon LLC, a Delaware limited
liability company, its Managing Member
By: Lincoln Investors Group 2, Inc., a
Texas corporation, its Managing
Member
WITNESS:
/s/ Barbara Murphy By: /s/ William Hickey Jr.
- ------------------------------ Name: William Hickey Jr.
Title: Vice President
TENANT:
WITNESS:
UNIVERSAL ACCESS, INC., a Delaware
corporation
By: /s/ Patrick Shutt
/s/ Robert Brown Name: Patrick Shutt
- ----------------------- Title: CEO
LIST OF EXHIBITS
EXHIBIT A: Floor Plan of Premises
EXHIBIT B: Work Agreement
EXHIBIT C: Declaration of Commencement Date
EXHIBIT D: Location of Reserved Parking Spaces
EXHIBIT E: Location of Exterior Sign
EXHIBIT E-1: Dimensions of Exterior Sign
EXHIBIT F: Rules and Regulations
27
<PAGE>
EXHIBIT A
FLOOR PLAN OF PREMISES
[Attach]
<PAGE>
EXHIBIT B
WORK AGREEMENT
This Work Agreement (the "Work Agreement") is attached to and made a
part of that certain Deed of Lease (the "Lease") dated April ___, 2000, by and
between HERNDON LINCOLN I LLC, as landlord ("Landlord") and UNIVERSAL ACCESS,
INC., as tenant ("Tenant") for the premises (the "Premises") described therein
in the building known as 13900 Lincoln Park Drive, Herndon, Virginia (the
"Building"). It is the intent of this Work Agreement that Tenant shall be
permitted freedom in the design and layout of the Premises, consistent with
applicable building codes and requirements of law, including without limitation
the Americans With Disabilities Act, and with sound architectural and
construction practice in first-class office buildings, provided that neither the
design nor the implementation of the Tenant Improvements (hereinafter defined)
shall cause any interference to the operation of the Building's HVAC,
mechanical, plumbing, life safety, electrical or other systems or to other
Building operations or functions, nor shall they increase maintenance or utility
charges for operating the Building. Capitalized terms not otherwise defined in
this Work Agreement shall have the meanings set forth in the Lease. In the event
of any conflict between the terms hereof and the terms of the Lease, the terms
hereof shall prevail for the purposes of design and construction of the Tenant
Improvements.
A. BASE BUILDING AND LEASEHOLD IMPROVEMENTS.
1. BASE BUILDING. Landlord, at Landlord's sole cost
and expense, shall construct on the Land, the base Building improvements (the
"Base Building Improvements") described in the plans and specifications
listed on SCHEDULE B-1 attached hereto and incorporated herein by reference
(the "Base Building Plans"). Landlord reserves the right to make changes to
the Base Building Plans, provided however, that the quality and finish of the
Base Building, as constructed, shall be consistent with the level of quality
and finish set forth in the Base Building Plans. The Base Building shall be
constructed in a workmanlike manner by a general contractor and
subcontractors selected by Landlord in its sole discretion.
2. LANDLORD IMPROVEMENTS. Landlord, at Landlord's
sole cost and expense, shall construct and install the components of the
Building located within the Premises, or provided for the benefit of the
Premises, as are shown on SCHEDULE B-2 (the "Landlord Improvements"). The
Landlord Improvements shall be constructed in a workmanlike manner by a
general contractor and subcontractors selected by Landlord in its sole
discretion.
3. TENANT IMPROVEMENTS. Landlord shall furnish and
install in the Premises in accordance with the terms of this Work Agreement,
the improvements set forth in the Tenant's Plans (hereinafter defined) which
have been approved by Landlord in accordance with Paragraph B-2, below (the
"Tenant Improvements"). The parties agree that (a) no furniture (including
systems furniture) or equipment shall be included in the Tenant Improvements;
and (b) no delay by Landlord or Tenant in installing Tenant's furniture
(including systems furniture) or equipment in the Premises shall delay or
otherwise affect the Commencement Date under the Lease. The costs of all
design, space planning, and architectural and engineering work for or in
connection with the Tenant Improvements, including without limitation all
drawings, plans, specifications, permits or other approvals relating thereto,
and all insurance, bonds and other requirements and conditions hereunder, and
all costs of demolition and construction, including supervision thereof,
shall be at Tenant's sole cost and expense, subject to the application of the
Improvement Allowance in accordance with the terms of this Work Agreement.
B. PLANS AND SPECIFICATIONS
1. SPACE PLANNER. Tenant has retained the services of
The Architects Partnership, Ltd. (the "Space Planner"), who will design the
Premises and prepare the Contract Documents (hereinafter defined). The Space
Planner shall meet with the Construction Supervisor (hereinafter defined)
from time to time to obtain information about the Building and to insure that
the improvements envisioned in the Contract Documents do not interfere with
and/or adversely affect the Building or any systems therein. The Space
Planner and the Engineers (hereinafter defined), shall prepare all plans and
specifications described in Paragraph B.2, below, in conformity with the base
Building plans and systems, and the Space Planner shall coordinate its plans
and specifications with the Engineers and the Construction Supervisor. All
fees of the Space Planner and the Engineers shall be borne solely by Tenant,
subject to application of the Improvement Allowance as hereinafter provided.
2. ENGINEERS. Tenant shall retain the services of
mechanical, electrical, plumbing and structural engineers approved by
Landlord in its reasonable discretion (the "Engineers") to: (i) design the
type, number and location of all mechanical systems in the Premises,
including without limitation the heating, ventilating and air conditioning
system therein, and to prepare all of the mechanical plans; (ii) assist
Tenant and the Space Planner in connection with the electrical design of the
Premises, including the location and capacity of light fixtures, electrical
receptacles and other electrical elements, and to prepare all of the
electrical plans; (iii) assist Tenant and the Space Planner in connection
with plumbing-related issues involved in designing the Premises and to
prepare all of the plumbing plans; (iv) assist Tenant and the Space Planner
in connection with the structural elements of the Space Planner's design of
the Premises and to prepare all the structural plans. All fees of the
Engineers shall be borne solely by Tenant, subject to application of the
Improvement Allowance as hereinafter provided.
<PAGE>
3. TIME SCHEDULE.
a. On or before April 4, 2000, Tenant shall
have furnished to Landlord for its review and approval a proposed detailed
space plan for the Tenant Improvements (the "Final Space Plan") prepared by
the Space Planner, in consultation with the Construction Supervisor and the
Engineers. The Final Space Plan shall contain the information and otherwise
comply with the requirements therefor described in SCHEDULE B-3 attached
hereto. Landlord shall advise Tenant of Landlord's approval or disapproval of
the Final Space Plan tendered by Tenant within seven (7) days after Tenant
submits the Final Space Plan to Landlord. In the event Landlord disapproves
the Final Space Plan, Landlord shall specify its reasons for such
disapproval. Tenant shall revise the proposed Final Space Plan to the extent
reasonably necessary meet Landlord's objections, if any, and resubmit the
Final Space Plan to Landlord for its review and approval within five (5) days
after Landlord notifies Tenant of Landlord's objections, if any.
b. On or before April 30, 2000, Tenant shall
furnish to Landlord for its review and approval, all architectural plans,
working drawings and specifications (the "Contract Documents") necessary and
sufficient (i) for the construction of the Tenant Improvements in accordance
with the Final Space Plan; and (ii) to enable the Contractor (hereinafter
defined) to obtain a building permit for the construction of the Tenant
Improvements. The Contract Documents shall (A) contain the information and
otherwise comply with the requirements therefore described in SCHEDULE B-4
attached hereto; and (B) incorporate into the Tenant Improvements the
Building standard materials set forth on SCHEDULE B-5 attached hereto (the
"Building Standard Materials"). Landlord shall advise Tenant of Landlord's
approval or disapproval of the Contract Documents, or any of them, within ten
(10) days after Tenant submits the Contract Documents to Landlord, and in the
event Landlord disapproves same, Landlord shall specify its reasons for such
disapproval. Tenant shall revise the Contract Documents to the extent
reasonably necessary meet Landlord's objections, if any, and resubmit the
Contract Documents to Landlord for its review and approval within five (5)
business days after Landlord notifies Tenant of Landlord's objections, if
any. Notwithstanding anything herein to the contrary, approval by Landlord of
the Contract Documents shall not constitute an assurance by Landlord that the
Contract Documents: (A) satisfy applicable code requirements, (B) are
sufficient to enable the Contractor to obtain a building permit for the
undertaking of the Tenant Improvements in the Premises, or (C) will not
interfere with, and/or otherwise adversely affect, base Building systems;
provided, however, that if the Contract Documents must be revised for such
reasons, or otherwise, such revisions shall be at Tenant's cost and any delay
arising in connection therewith shall constitute a "Tenant Delay"
(hereinafter defined).
c. In the event that: (i) Landlord fails to
approve or reject the Final Space Plan within seven (7) days of Tenant's
submission of same to Landlord (pursuant to Section 3.a, above), or (ii)
Landlord fails to approve or reject the Contract Documents within ten (10)
days after Tenant's submission of same to Landlord (pursuant to Section 3.b,
above), Tenant shall have the right to deliver to Landlord (at the address
set forth in Section 1.g, above, provided that such notice shall also name
"Neil Alt" as an addressee thereof), a written notice (the "Plans Approval
Notice") advising Landlord that Landlord has failed to timely approve the
Final Space Plan or the Contract Documents, as the case may be in accordance
with Paragraphs B.3 of the Work Agreement. The Plans Approval Notice shall
state, in bold letters, the following:
"FAILURE BY LANDLORD TO APPROVE OR REJECT THE FINAL SPACE
PLAN OR THE CONTRACT DOCUMENTS (AS APPLICABLE) WHICH WAS
PREVIOUSLY TENDERED BY UNIVERSAL ACCESS, INC. ("TENANT"),
WITHIN FIVE (5)BUSINESS DAYS AFTER LANDLORD'S RECEIPT
HEREOF MAY RESULT IN LANDLORD'S HAVING TO ABATE RENT
PURSUANT TO SECTION 3.C OF TENANT'S LEASE OF PREMISES AT
13900 LINCOLN PARK DRIVE, HERNDON, VIRGINIA."
In the event that Landlord fails to approve or reject the Final Space Plan or
Contract Documents described in the Plans Approval Notice, by the date (the
"Final Approval/Rejection Date") which is five (5) business days after
Landlord's receipt of the Plans Approval Notice (which notice contains the
language set forth above), and as a result of such delay by Landlord, the
Tenant Improvements are not substantively completed by October 1, 2000
(extended day-for-day by Tenant Delay or Force Majeure), then in such event,
for each day after the Final Approval/Rejection Date that Landlord fails to
approve or reject the Final Plan or the Contract Documents, as applicable,
Tenant shall be entitled to receive, after the Commencement Date, an
abatement of one day of Annual Base Rent under the Lease.
d. Within two (2) business days after
Landlord approves the Contract Documents, the Space Planner shall deliver to
Landlord (i) a reasonable number of "permit sets" of the Contract Documents;
and (ii) a reasonable number of sets of the Contract Documents for delivery
to the Approved Bidders (hereinafter defined) for review and pricing.
e. The Final Space Plan and the Contract
Documents are referred to collectively herein as the "Tenant's Plans." All
approvals by Landlord hereunder shall be in Landlord's reasonable discretion,
except to the extent that any proposed Tenant Improvement affects or alters
the base Building or any base Building system, in which event Landlord's
approval or rejection of such Tenant Improvement shall be made by Landlord in
its sole discretion.
f. The Tenant's Plans shall be prepared in
accordance with a Data Cadd or convertible DXF format for working drawings in
conformity with the base Building plans and systems and
EXHIBIT B, PAGE 2
<PAGE>
with information furnished by and in coordination with the Construction
Supervisor and Engineers. Tenant's Plan shall comply with all applicable
building codes, laws and regulations (including without limitation the
Americans With Disabilities Act), shall not interfere with or require any
changes to or modifications of the base Building's HVAC, mechanical,
electrical, plumbing, life safety or other systems or to other Building
operations or functions, and shall not increase maintenance or utility
charges for operating the Building in excess of the standard requirements for
normal first-class office buildings in the Herndon, Virginia area.
4. BASE BUILDING CHANGES. If Tenant requests work to
be done in the Premises or for the benefit of the Premises that necessitates
revisions or changes in the design or construction of the base Building or
Building systems, any such changes shall be subject to prior written approval
of Landlord, in its sole discretion, and Tenant shall be responsible for all
costs and delays resulting from such design revisions or construction
changes, including architectural and engineering charges, and any special
permits or fees attributed thereto. Before any such design and/or
construction changes are made, Tenant shall pay to Landlord the full costs
incurred by Landlord in connection with such changes including without
limitation the Construction Supervision Fee (hereinafter defined)
attributable thereto.
5. CHANGES.
a. In the event that Tenant requests any
changes to the Final Space Plan or the Contract Documents after Landlord has
approved same, or if it is determined that the Contract Documents prepared in
accordance with the Final Space Plan deviate from the requirements of
applicable law, do not utilize the Building Standard Materials, or interfere
with, and/or otherwise adversely affect, base Building systems, Tenant shall
be responsible for all costs and expenses and for all delay resulting
therefrom, including without limitation costs or expenses relating to (i) any
additional architectural or engineering services and related design expenses,
(ii) any changes to materials in process of fabrication, (iii) cancellation
or modification of supply or fabricating contracts, or (iv) removal or
alteration of work or plans completed or in process. In addition, Tenant
shall pay Landlord or, at Landlord's direction, the Construction Supervisor
(hereinafter defined), a change order fee equal to three percent (3%) of any
costs or expenses charged in connection with a change or modification of the
Contract Documents. In those instances in which such proposed revision
results from a change voluntarily requested by Tenant, upon the completion of
such revised working drawings and specifications, Landlord shall notify
Tenant in writing of the cost which will be chargeable to Tenant by reason of
such change, addition or deletion. Tenant shall within three (3) business
days after receipt of Landlord's notice of cost increase notify Landlord in
writing whether Tenant desires to proceed with such change, addition or
deletion. In the absence of (A) such written authorization and payment in
full of the total costs of such change, addition or deletion or (B) written
notice by Tenant that it has elected not to proceed with proposed the
change(s), Landlord shall not be obligated to continue work on construction
of the Tenant Improvements and may suspend work and Tenant shall be
chargeable with any and all delays in the completion of the Premises
resulting therefrom. Landlord shall notify Tenant in writing of any changes
to the Final Space Plan or the Contract Documents required by Landlord after
such plan and/or documents have been approved by Landlord which it determines
are necessitated by the deviation of such plan and/or documents from
applicable code requirements, and Landlord shall notify Tenant of the
additional cost to Tenant resulting from any such required change(s).
b. No changes shall be made to the Contract
Documents without the prior written approval of Landlord, which approval
shall not be unreasonably withheld, conditioned or delayed except to the
extent such change affects the base Building or Building systems; provided,
however, that Landlord shall not be obligated to approve any such change or
modification which, in Landlord's reasonable opinion, will cause an
unreasonable delay in the completion of the Tenant Improvements or any cost
or expense to Landlord in the performance of the Tenant Improvements.
Landlord shall not be responsible for delay in occupancy by Tenant, nor shall
the Commencement Date be delayed, because of any changes to the Final Space
Plan or the Contract Documents after approval by Landlord, or because of
delay caused by or attributable to any deviation from applicable code
requirements contained in the Contract Documents. Tenant shall be required to
pay the costs incurred in connection with any changes to the Contract
Documents or Final Space Plan to Landlord, in full, within ten (10) days
after invoice.
6. DEADLINES. Tenant acknowledges that it is vital
that it meet all of the schedule deadlines set forth herein in order to allow
Landlord sufficient time to review the Tenant's Plans, estimate costs, and to
substantially complete the work within the contemplated time frame. The
foregoing deadlines are required to be met even if certain deadlines occur
prior to the date the Lease is executed.
C. COST OF TENANT IMPROVEMENTS
1. CONSTRUCTION COSTS. All costs of design and
construction of the Tenant Improvements, including without limitation the
costs of all space planning, architectural and engineering work related
thereto; all governmental and quasi-governmental approvals and permits
required therefor; all demolition costs; all direct and indirect construction
costs (the "Hard Costs"); insurance, bonds and other requirements; and any
changes and the Construction Supervision Fee (collectively, "Construction
Costs"), shall be paid by Tenant, subject, however, to the application of the
Improvement Allowance described in Paragraph C.2 below, not previously
disbursed pursuant to this Work Agreement (the "Available Allowance").
2. IMPROVEMENT ALLOWANCE. Provided that Tenant has
fully performed all of its obligations under this Work Agreement and the
Lease, Landlord agrees to provide to Tenant an allowance (the "Improvement
Allowance") in the amount of One Million One Hundred Seventy-Four
EXHIBIT B, PAGE 3
<PAGE>
Thousand Seven Hundred Fifty-Six Dollars ($1,174,756.00) (or Twenty-Eight
Dollars ($28.00) per rentable square foot of the Premises), to be applied
solely to the Construction Costs. Notwithstanding the foregoing, up to Two
Hundred Fifty-One Thousand Seven Hundred Forty-Two Dollars ($251,742.00) (or
$6.00 per rentable square foot of the Premises) of the Improvement Allowance
may be used by Tenant to pay for space planning, architectural and
engineering services, cabling, wiring, telephone equipment, and, the
Construction Management Fee (hereinafter defined). Subject to the provisions
of Paragraph C.3, below, the Construction Costs shall be paid by Landlord to
the extent of, and shall be deducted by Landlord from, the Available
Allowance, as invoices therefor are rendered to Landlord as and when
Construction Costs are actually incurred by Tenant; provided, however, that
Landlord shall have received partial lien waivers and such other
documentation as Landlord may require from the party requesting such payment.
3. COSTS EXCEEDING AVAILABLE ALLOWANCE. All
Construction Costs outstanding upon exhaustion of the Improvement Allowance
shall be borne exclusively by Tenant, and Tenant agrees to indemnify Landlord
from and against any such costs. All amounts payable by Tenant pursuant to
this Work Agreement shall be deemed to be Additional Rent for purposes of the
Lease. If required by Landlord, Tenant shall provide evidence reasonably
satisfactory to Landlord that Tenant has sufficient funds available to pay
all Construction Costs in excess of the Improvement Allowance.
D. CONSTRUCTION
1. SELECTION OF GENERAL CONTRACTOR. Once Landlord has
approved the Contract Documents, Landlord shall prepare a bid package
containing such requirements as Landlord, in its reasonable discretion, shall
determine and shall submit the Contract Documents to at least three (3)
general contractors selected by Landlord and approved by Tenant, such
approval not to be unreasonably withheld (the "Approved Bidders"), in order
to obtain from such Approved Bidders market rate, fixed price bids (the "Bid
Price") for the contract for construction of the Tenant Improvements. Within
three (3) business days after Landlord receives bids from those Approved
Bidders which timely submit conforming bids, Tenant shall (a) discuss with
the Approved Bidders the bids they submitted; (b) select the contractor
("Contractor") which will undertake construction of the Tenant Improvements
from among the Approved Bidders submitting conforming bids; and (c) instruct
Landlord to enter into the Construction Contract (hereinafter defined) and
begin construction of the Tenant Improvements.
2. CONSTRUCTION SUPERVISION. All Tenant Improvements
shall be performed by the Contractor selected in accordance with this Work
Agreement. Landlord shall retain LPC Commercial Services, Inc. ("Construction
Supervisor") as Landlord's construction supervisor in connection with the
construction of the Tenant Improvements, and Tenant shall pay the
Construction Supervisor a construction supervision fee ("Construction
Supervision Fee") equal to (a) three percent (3%) of the first $1,174,796.00
of Hard Costs incurred in connection with the Tenant Improvements, and (b)
one and one-half percent (1 1/2%) of Hard Costs incurred in connection with
the Tenant Improvements in excess of $1,174,796.00, to cover the costs of
coordination and supervision of the Tenant Improvements work. The
Construction Supervision Fee shall be deducted from the Improvement Allowance.
3. TENANT INSPECTION. Tenant is authorized by
Landlord to make periodic inspections of the Premises during construction
during reasonable business hours, provided Tenant is accompanied by a
representative of Landlord or the Contractor.
4. DELAYS.
a. If Landlord shall be delayed in
substantially completing the Landlord Improvements or the Tenant Improvements
or in delivering the Premises to Tenant, as a result of any act, neglect,
failure or omission of Tenant, its employees or agents (including without
limitation the Space Planner and any contractor or subcontractor employed by
Tenant performing work at the Premises), including any of the following, such
delay shall be deemed a "Tenant Delay": (1) Tenant's failure to timely
furnish to Landlord the Final Space Plan or the Contract Documents; (2)
Tenant's failure to timely furnish to Landlord a revised Final Space Plan or
Contract Documents after objection by Landlord; (3) Tenant's delay in
submitting or approving any other drawings, plans or specifications; (4)
Tenant's failure, within three (3) business days after request therefor, to
provide Landlord with any other information requested by Landlord for the
purpose of completing the Tenant's Plans or the ordering of materials or the
letting of bids for the Tenant Improvements; (5) any change by Tenant (to the
extent such change is permitted by this Work Agreement) in the Contract
Documents after Landlord has approved same; furnished by Tenant; (6)
installation of Tenant's telephone and/or other communications systems; (7)
any Change Orders (hereinafter defined) or direction by Tenant that Landlord
hold up proceeding or continuing with a segment of the Tenant Improvements
preliminary to a possible Change Order or for any other reason; (8) Long Lead
Items (hereinafter defined); or (9) any delay in completing the Tenant
Improvements resulting from the Contract Documents: (a) being incomplete,
inaccurate or otherwise deficient, or (b) deviating from the Final Space
Plan, applicable code requirements and/or any Legal Requirements (hereinafter
defined). In any such event, such delay or delays shall not postpone or defer
the Commencement Date, or Tenant's obligation to pay Rent as of the
Commencement Date, but the Commencement Date shall occur on the day when it
would otherwise have occurred if such delay or delays had not occurred, and
the period of time for the substantial completion of the Premises shall be
extended for a period of time equal to the number of days of such delay or
delays. In addition, Tenant shall pay to Landlord all additional costs
incurred by Landlord resulting from any Tenant Delay, including without
limitation delay damages to the Contractor under the contract for the
construction of the Tenant Improvements (the "Construction Contract"). Any
such sums shall be paid to Landlord within ten (10) days after demand
therefor by Landlord. Any costs payable by Tenant to Landlord hereunder may
be
EXHIBIT B, PAGE 4
<PAGE>
satisfied from the Improvement Allowance and shall be deemed to be Additional
Rent under the Lease, and in the event of any default by Tenant in any
payment thereof, Landlord shall (in addition to all other rights and
remedies) have the same rights and remedies arising under the Lease in the
event of an Event of Default regarding the payment of Rent. As used herein,
the term "Change Order" shall mean any change in the Tenant's Plans and/or
the work included within the Tenant Improvements which results in an
amendment to or modification of the Construction Contract, including without
limitation Change Orders which: (i) arise out of a request by Tenant to
modify the Tenant's Plans or to otherwise change the scope of the work
included within the Tenant Improvements; (ii) are required because the
Contract Documents are incomplete, inaccurate or otherwise deficient, or
deviate from the Preliminary Plan or the Final Space Plan approved by
Landlord or from applicable code requirements and/or any Legal Requirements;
and/or (iii) are required because certain work performed or to be performed
in the Premises (and shown in the Tenant's Plans) deviates from any
applicable Legal Requirements. All Change Orders must be submitted to
Landlord for its approval in its reasonable discretion; provided however, if
Change Orders involve construction which involves structural changes to the
Building or the modification of any base Building systems, such approval by
Landlord shall be in its sole discretion. As used herein, the term "Long Lead
Item" shall mean any component of the Tenant Improvements which is not
readily available in reasonable quantities in the metropolitan Washington,
D.C. area or which requires a long term lead time for procurement or
installation. As used herein, the term "Legal Requirements" shall mean any
laws, ordinances, regulations and orders of the United States of America, the
County of Fairfax, the Commonwealth of Virginia and any other governmental
authority with jurisdiction over the Building or the construction of the
Tenant Improvements.
b. If Landlord has substantially completed
all of the Tenant Improvements, as certified by Landlord's architect or the
Construction Supervisor, except for Tenant Improvements constituting Long
Lead Items, then the Tenant Improvements shall be deemed to be substantially
completed and the Commencement Date shall not be delayed. After delivery of
such materials for the items of Tenant Improvements, Landlord shall proceed
with due diligence to install such materials and to complete all other
portions of the Tenant Improvements that could not be completed until after
the installation of such items of Tenant Improvements.
E. ACCEPTANCE OF PREMISES. Approximately three (3) days prior
to the delivery of possession of the Premises to Tenant, Landlord, Tenant and
the Contractor shall make an inspection of the Premises to determine that (1)
the Landlord Improvements have been substantially completed by Landlord; and
(2) the construction and installation of the Tenant Improvements has been
completed in accordance with the Tenant's Plans and to prepare a "Punch List"
of work requiring correction or completion by Landlord. Subject to
Unavoidable Delays, Landlord shall correct or complete all Punch List items
within forty-five (45) days after the Commencement Date.
F. CONTRACTOR'S RULES AND REGULATIONS. Tenant's contractors,
subcontractors and vendors may not enter the Building to perform any work or
installations prior to the Commencement Date without Landlord's prior written
consent in accordance with the provisions of Section 2c of the Lease. If
Landlord consents to such entry, each contractor, subcontractor or vendor
shall observe all rules and regulations (the "Construction Rules and
Regulations") promulgated by Landlord in connection with the performance of
work in the Building, attached hereto as SCHEDULE B-6.
G. TENANT'S AGENT. Tenant hereby designates Robert M. Brown,
whose address is c/o Universal Access, Inc., 100 North Riverside Plaza, Suite
2200, Chicago, Illinois 60609 and whose telephone number is (312) 660-5059,
to act as Tenant's agent for purposes of authorizing and executing any and
all documents, workletters or other writings and changes thereto needed to
effect this Work Agreement, and any and all changes, additions or deletions
to the work contemplated herein, and Landlord shall have the right to rely on
any documents executed by such authorized party.
LIST OF SCHEDULES
SCHEDULE B-1 BASE BUILDING PLANS AND SPECIFICATIONS
SCHEDULE B-2 LANDLORD WORK
SCHEDULE B-3 REQUIREMENTS FOR FINAL SPACE PLAN
SCHEDULE B-4 REQUIREMENTS FOR CONTRACT DOCUMENTS
SCHEDULE B-5 LIST OF BUILDING STANDARD MATERIALS
SCHEDULE B-6 CONSTRUCTION RULES AND REGULATIONS
EXHIBIT B, PAGE 5
<PAGE>
SCHEDULE B-1
BASE BUILDING PLANS AND SPECIFICATIONS
<PAGE>
SCHEDULE B-1, PAGE 2
<PAGE>
SCHEDULE B-2
LANDLORD WORK
LOBBIES AND COMMON AREAS: Ground floor and second (2nd) floor fully finished.
Floors three (3) through five (5) will be fully finished with the exception of
the floor covering.
RESTROOMS: Two (2) sets of Men's and Women's bathrooms will be fully finished on
each floor (one set on each wing).
EXTERIOR WALLS: Exterior walls will include drywall and insulation. The drywall
will be ready to bed, tape and finish.
MECHANICAL SYSTEM: Cooling will be provided by self-contained variable air
volume package units (two (2) per floor) serving a medium pressure sheet metal
duct system. Outside air will be ducted from the roof through a vertical chase
to each packaged unit on each floor. The main ductwork trunk lines will be
provided.
Twenty-one (21) Power Induction Boxes ("PIB's") and five (5) Variable Air Volume
Units ("VAV's") shall be furnished and installed in the Premises, in accordance
with the Base Building Plans and Specifications. An additional fifteen (15)
VAV's shall be supplied, but not installed by Landlord in the Premises.
ELECTRICAL SYSTEM: Two (2) watts of lighting load and six (6) watts of power
load diversified for normal office usage to a total lighting and power load of
eight (8) watts per square foot.
Switches shall serve feeders from the main switchboard to two (2) 2500 amp
vertical bus ducts located in each electrical room (two (2) rooms per floor).
Room for additional switches will be provided for future requirements. Within
each electrical room, a bus tap will feed a 42 circuit, 400 amp 277-480 volt
high voltage panel and the self-contained package unit, lighting loads, and a
112.5 Kva transformer serving a 42 circuit 400 amp, 120-208 volt panel for low
voltage power loads.
LIFE SAFETY: Fire standpipe and base building fire alarm system are installed
per building code. The system shall be a complete multi-plexed intelligent,
addressable system with a remote enunciator panel located in the building lobby.
The fire alarm system will monitor and enunciate manual pull stations, smoke
detectors, fire protection systems, flow and tamper switches, etc. An automatic
dialer shall notify the fire department or local monitoring service in case of
trouble alarm.
SPRINKLER SYSTEM: Upturned sprinkler heads will be provided in accordance with
NFPA 13 at a spacing of one head per 225 square feet.
WET STACKS: Two (2) wet stacks will be provided per floor, one (1) per wing.
These stacks shall include sanitary waste connections, vent connections and
domestic water connections.
WINDOW COVERINGS: Horizontal 1 inch slat venetian blinds will be provided.
<PAGE>
SCHEDULE B-3
REQUIREMENTS FOR FINAL SPACE PLAN
Floor plans, together with related information for mechanical,
electrical and plumbing design work, showing partition arrangement and reflected
ceiling plans (three (3) sets), including without limitation the following
information:
a. identify the location of conference rooms and density of
occupancy;
b. indicate the density of occupancy for all rooms;
c. identify the location of any food service areas or vending
equipment rooms;
d. identify areas, if any, requiring twenty-four (24) hour air
conditioning;
e. indicate those partitions that are to extend from floor to
underside of structural slab above or require special
acoustical treatment;
f. identify the location of rooms for, and layout of, telephone
equipment other than building core telephone closet;
g. identify the locations and types of plumbing required for
toilets (other than core facilities), sinks, drinking
fountains, etc.;
h. indicate light switches in offices, conference rooms and all
other rooms in the Premises;
i. indicate the layouts for specially installed equipment,
including computer and duplicating equipment, the size and
capacity of mechanical and electrical services required and
heat rejection of the equipment;
j. indicate the dimensioned location of: (A) electrical
receptacles (one hundred twenty (120) volts), including
receptacles for wall clocks, and telephone outlets and their
respective locations (wall or floor), (B) electrical
receptacles for use in the operation of Tenant's business
equipment which requires two hundred eight (208) volts or
separate electrical circuits, (C) electronic calculating and
CRT systems, etc., and (D) special audio-visual requirements;
k. indicate proposed layout of sprinkler and other life safety
and fire protection equipment, including any special equipment
and raised flooring;
l. indicate the swing of each door;
m. indicate a schedule for doors and frames, complete with
hardware, if applicable; and
n. indicate any special file systems to be installed.
<PAGE>
SCHEDULE B-4
REQUIREMENTS FOR CONTRACT DOCUMENTS
Final architectural detail and working drawings, finish schedules and
related plans (three (3) reproducible sets) including without limitation the
following information and/or meeting the following conditions:
a. materials, colors and designs of wallcoverings, floor
coverings and window coverings and finishes;
b. paintings and decorative treatment required to complete all
construction;
c. complete, finished, detailed mechanical, electrical, plumbing
and structural plans and specifications for the Tenant
Improvements, including but not limited to the fire and life
safety systems and all work necessary to connect any special
or non-standard facilities to the Building's base mechanical
systems;
d. all final drawings and blueprints must be drawn to a scale of
one-eighth (1/8) inch to one (1) foot. Any architect or
designer acting for or on behalf of Tenant shall be deemed to
be Tenant's agent and authorized to bind Tenant in all
respects with respect to the design and construction of the
Premises;
e. for all new construction, Tenant shall purchase from Landlord
(or its suppliers) and install in the Premises the following
building standard equipment and materials: (1) ceiling tiles
and suspension system, (2) diffusers, (3) doors (interior and
exterior) and (4) door frames and hinges; and
f. notwithstanding anything to the contrary set forth herein, in
the Work Agreement or in the Lease, Tenant shall not request
any work which would: (1) require changes to structural
components of the Building or the exterior design of the
Building; (2) require any material modification to the
Building's mechanical installations or installations outside
the Premises; (3) not comply with all applicable laws, rules,
regulations and requirements of any governmental department
having jurisdiction over the construction of the Building
and/or the Premises, including specifically, but without
limitation, the Americans With Disabilities Act; (4) be
incompatible with the building plans filed with the
appropriate governmental agency from which a building permit
is obtained for the construction of the Tenant Improvements or
with the occupancy of the Building as a first-class office
building; or (5) delay the completion of the Premises or any
part thereof. Tenant shall not oppose or delay changes
required by any governmental agency affecting the construction
of the Building and/or the Tenant Improvements in the
Premises.
<PAGE>
SCHEDULE B-5
LIST OF BUILDING STANDARD MATERIALS
Partitions: Partitions within the tenant suite shall
be constructed using 2 1/2" steel studs
and 1/2" gypsum wallboard, floor to
ceiling.
Demising partitions between suites will be
slab-to-slab using 2 1/2" steel studs with
1/2" gypsum wallboard with sound batt
insulation. Walls shall be one (1) hour
rated as required by local building codes.
Door Frames: Door frames will be 3'-0" x 9'-2" factory
finished aluminum frames with 1 1/2" trim.
Color to be building standard painted
finish.
Suite Entry Doors: 3'-0" x 9'-0" prefinished solid core wood
with hardwood edge bands to match face
veneers. Veneers to be plain sliced Red
Oak stained to match existing core doors
with a catalyzed lacquer satin sheen top
coat. Doors to be prepped to receive
concealed closers, mortise locksets and
four hinges.
Tenant Doors: 3'-0" x 9'-0" prefinished solid core wood
with hardwood edge bands to match face
veneers. Veneers to be plain sliced Red
Oak stained in a manner to be selected by
Tenant from the choices offered by
Landlord.
Hardware: Suite entry doors shall Schlage Mortise
Lever Locksets. Interior tenant doors
shall have Schlage Heavy Duty Cylindrical
Lever Locksets. The finish for all
hardware is 32D (Stainless Steel). Suite
entry doors shall have overhead fully
concealed closers.
Suite Entry Glass Doors: Glass doors at suite entries are subject
to the owner's review and approval of all
details.
Ceiling Grid: Armstrong Silhouette XL 9/16" Bolt-Slot
white grid with 1/4" reveal. Typical
ceiling height to be 9'-6" AFF.
Ceiling Tile: Armstrong Cortega 24" x 24" white tile,
item #2195.
Vinyl Composite Tile: 12"x12"x 1/8" standard commercial grade
vinyl composite tile in standard colors as
selected by tenant.
Vinyl Wall Base: 4" high vinyl straight base for carpet. 4"
high vinyl cove base for VCT flooring.
Standard colors as selected by tenant.
Carpet: Commercial grade, 30 oz. (or greater),
with a ten year warranty. Installation is
direct glue. Colors and patterns as
selected by tenant.
Paint: Two (2) coats as selected by Tenant
(includes prime coat and one coat of
latex, eggshell finish) with a limit of
one (1) color per room and two (2) colors
per suite. All wood and metal surfaces
will receive a primer coat and
two (2) coats of semi-gloss paint.
Window Blinds: Levelor Monaco (Contract) 1" horizontal
aluminum blinds; Color #201 - Ivory or
equal.
Tenant Suite Signage: Building standard tenant suite
identification signage will be provided by
the Landlord and paid for by the tenant.
Sprinkler Piping: Black steel piping manufactured to satisfy
ASTM Standards A53 or A135. For ASTM
Standard A53, use schedule 40 piping for
sizes up to 8" and schedule 30 for sizes
8" and greater. For ASTM Standard A135,
use schedule 10 piping for sizes through
5". For 6" through 10" sizes, use NFPA
specified wall thickness. Fittings to be
class 250 threaded cast iron or
grooved-end type iron fittings, style 77,
as manufactured by Victaulic Corporation
or accepted equal.
Sprinkler Heads: Fully-recessed heads rated at 165(Deg.)
F with painted off white escutcheon
plates. All sprinkler heads to be center
of tile in acoustical tile ceilings;
provided, however, in no event shall any
sprinkler head(s) be closer than 3"
from the edge of any ceiling tile.
Fire Dampers: Ruskin Type 1BD2, with a 165(Deg.) F
fusible link; UL approved. Style A
directly behind registers, Style B for
rectangular duct, and Style LR for
round duct or equal.
<PAGE>
Registers/Grilles/Diffusers: Perimeter diffusers to be plenum slot
diffusers.
24" x 24" supply air diffusers to, 3/4"
slots, with integral building standard
ceiling tile.
24" x 24" return air diffusers to 3/4" slots,
with integral building standard ceiling tile.
VAV Boxes: Fan Powered VAV Boxes with electric heat
to be Trane Model VPEE2415 or equal.
10" outlet standard VAV boxes to be Trane
Model VCCE17 or equal; 1700 CFM rated, 270
CFM minimum, 1500 CFM maximum.
8" outlet standard VAV boxes to be Trane
Model VCCE11 or equal; 1100 CFM rated, 170
CFM minimum, 615 CFM maximum.
Bottom of thermostats to be 60" AFF typical.
Fire Alarm System: Fire Alarm System to be fully addressable.
All connections to base building fire
alarm panels must be performed by the
Landlord's fire alarm contractor.
Light Fixtures: 2'x4' Fluorescent 277V fixtures with
chrome 18 cell parabolic lenses, high
efficiency electronic ballasts and cool
white F32/T8 lamps.
Public Corridor light fixtures shall be
2'x 4' Fluorescent 277V fixtures with
chrome 9 cell parabolic lenses, high
efficiency electronic ballasts and cool
white F32/T8 lamps
Exit Lights: LED exit lights with a white steel housing
and red letters.
Electrical Meters: Provided for tenant supplemental HVAC
systems within the tenant suite. National
Meters Industries, Series 3000, Model
K3240, 240V 1 phase 2W 60 Hz or equal. A
4000 Series model or equal may be required
for large HVAC units.
Electrical Panels: All panels to be GE to match building
standard.
Schedule B-5, page 2
<PAGE>
SCHEDULE B-6
CONSTRUCTION RULES AND REGULATIONS
1. Tenant and/or the general contractor will supply Landlord with a copy
of all permits prior to the start of any work.
2. Tenant and/or the general contractor will post applicable permits on a
wall of the construction site while work is being performed.
3. Public area corridor, and carpet, is to be protected by plastic runners
or a series of walk-off mats from the elevator to the suite under
reconstruction.
4. Walk-off mats are to be provided at entrance doors.
5. Contractors will remove their trash and debris daily, or as often as
necessary to maintain cleanliness in the building. Building trash
containers are not to be used for construction debris. Landlord
reserves the right to bill Tenant for any cost incurred to clean up
debris left by the general contractor or any subcontractor. Further,
the building staff is instructed to hold the driver's license of any
employee of the contractor while using the freight elevator to ensure
that all debris is removed from the elevator.
6. No utilities (electricity, water, gas, plumbing) or services to the
tenants are to be cut off or interrupted without first having
requested, in writing, and secured, in writing, the permission of the
Landlord.
7. No electrical services are to be put on the emergency circuit, without
specific written approval from the Landlord.
8. When utility meters are installed, the general contractor must provide
the property manager with a copy of the operating instructions for that
particular meter.
9. The Landlord will be notified of all work schedules of all workmen on
the job and will be notified, in writing, of names of those who may be
working in the building after "normal" business hours.
10. Passenger elevators shall not be used for moving building materials and
shall not be used for construction personnel except in the event of an
emergency. The designated freight elevator is the only elevator to be
used for moving materials and construction personnel. This elevator may
be used only when it is completely protected as determined by
Landlord's building engineer.
11. Contractors or personnel will use loading dock area for all deliveries
and will not use loading dock for vehicle parking.
12. Contractors will be responsible for daily removal of waste foods, milk
and soft drink containers, etc. to trash room and will not use any
building trash receptacles but trash receptacles supplied by them.
13. No building materials are to enter the building by way of main lobby,
and no materials are to be stored in any lobbies at any time.
14. Construction personnel are not to eat in the lobby or in front of
building nor are they to congregate in the lobby or in front of
building.
15. The Landlord is to be contacted by Tenant when work is completed for
inspection. All damage to building will be determined at that time.
16. All key access, fire alarm work, or interruption of security hours must
be arranged with the Landlord's building engineer.
17. There will be no radios allowed on job site.
18. All workers are required to wear a shirt, shoes, and full length
trousers.
19. Protection of hallway carpets, wall coverings, and elevators from
damage with masonite board, carpet, cardboard, or pads is required.
20. Public spaces -- corridors, elevators, bathrooms, lobby, etc. -- must
be cleaned immediately after use. Construction debris or materials
found in public areas will be removed at Tenant's cost.
21. There will be no smoking, eating, or open food containers in the
elevators, carpeted areas or public lobbies.
22. There will be no yelling or boisterous activities.
<PAGE>
23. All construction materials or debris must be stored within the project
confines or in an approved lock-up.
24. There will be no alcohol or controlled substances allowed or tolerated.
25. The general contractor and Tenant shall be responsible for all loss of
their materials and tools and shall hold Landlord harmless for such
loss and from any damages or claims resulting from the work.
Schedule B-6, page 2 HOLLAND & KNIGHT LLP
<PAGE>
EXHIBIT C
DECLARATION OF COMMENCEMENT DATE
This Declaration of Commencement Date is made as of__________________,
2000, by HERNDON LINCOLN I LLC ("Landlord"), and UNIVERSAL ACCESS, INC.
("Tenant"), who agree as follows:
1. Landlord and Tenant entered into a Deed of Lease dated April
___, 2000, in which Landlord leased to Tenant and Tenant leased from Landlord
certain Premises described therein in the office building located at 13900
Lincoln Park Drive, Herndon, Virginia (the "Building"). All capitalized terms
herein are as defined in the Lease.
2. Pursuant to the Lease, Landlord and Tenant agreed to and do
hereby confirm the following matters as of the Commencement Date of the Term:
a. the Commencement Date of the Lease is _____________,
2000;
b. the Lease Expiration Date of the Lease is
_____________, 2010;
c. the number of rentable square feet of the Premises is
_____________;
d. Tenant's Pro Rata Share of Operating Expenses is
_____________%; and
e. Tenant's Pro Rata Share of Real Estate Taxes is
_____________%.
3. Tenant confirms that:
a. it has accepted possession of the Premises as
provided in the Lease;
b. any work required to be performed or furnished by
Landlord under the Lease has been completed and/or
furnished;
c. Landlord has fulfilled all of its obligations under
the Lease as of the date hereof;
d. the Lease is in full force and effect and has not
been modified, altered, or amended, except as
follows: __________________________________; and
e. there are no set-offs or credits against Rent, and
no Security Deposit or prepaid Rent has been paid
except as provided by the Lease.
4. The provisions of this Declaration of Commencement Date
shall inure to the benefit of, or bind, as the case may require, the parties
and their respective successors and assigns, and to all mortgagees of the
Building, subject to the restrictions on assignment and subleasing contained
in the Lease, and are hereby attached to and made a part of this Lease.
LANDLORD:
HERNDON LINCOLN I LLC, a Delaware limited
liability company
By: Lincoln-Herndon LLC, a Delaware
limited liability company, its
Managing Member
WITNESS:
By: Lincoln Investors Group 2, Inc.,
a Texas corporation, its
Managing Member
- ----------------------- By:
-----------------------------
Name:
Title:
TENANT:
WITNESS: UNIVERSAL ACCESS, INC., a Delaware
corporation
- ----------------------- By:
----------------------------------
Name:
Title:
<PAGE>
EXHIBIT D
LOCATION OF RESERVED PARKING SPACES
[Attach]
<PAGE>
EXHIBIT E
LOCATION OF EXTERIOR SIGN
[Attach]
<PAGE>
EXHIBIT E-1
DIMENSIONS OF EXTERIOR SIGN
[Attach]
<PAGE>
EXHIBIT F
RULES & REGULATIONS
1. The water and wash closets and other plumbing fixtures shall not be
used for any purposes other than those for which they were constructed,
and no sweepings, rubbish, rags or other substances (including without
limitation coffee grounds) shall be thrown therein. All damages
resulting from misuse of the fixtures shall be borne by Tenant if
Tenant or its servants, employees, agents, visitors or licensees shall
have caused the same.
2. No cooking (except for hot-plate and microwave cooking by Tenants'
employees for their own consumption, the location and equipment of
which is first approved by Landlord), sleeping or lodging shall be
permitted by any tenant on the Premises. No tenant shall cause or
permit any unusual or objectionable odors to be produced upon or
permeate from the Premises.
3. No inflammable, combustible, or explosive fluid, material, chemical or
substance shall be brought or kept upon, in or about the Premises. Fire
protection devices, in and about the Building, shall not be obstructed
or encumbered in any way.
4. Canvassing, soliciting and peddling in the Building is prohibited and
each tenant shall cooperate to prevent the same.
5. There shall not be used in any space, or in the public halls of the
Building, either by any tenant or by its agents, contractors, jobbers
or others, in the delivery or receipt of merchandise, freight, or other
matters, any hand trucks or other means of conveyance except those
equipped with rubber tires, rubber side guards, and such other
safeguards as Landlord may require, and Tenant shall be responsible to
Landlord for any loss or damage resulting from any deliveries to Tenant
in the Building. Deliveries of mail, freight or bulky packages shall be
made through the freight entrance or through doors specified by
Landlord for such purpose.
6. Mats, trash or other objects shall not be placed in the public
corridors. The sidewalks, entries, passages, elevators, public
corridors and staircases and other parts of the Building which are not
occupied by Tenant shall not be obstructed or used for any other
purpose than ingress or egress.
7. Tenant shall not install or permit the installation of any awnings,
shades, draperies and/or other similar window coverings, treatments or
like items visible from the exterior of the Premises other than those
approved by the Landlord in writing.
8. Tenant shall not construct, maintain, use or operate within said
Premises or elsewhere in the Building or on the outside of the
Building, any equipment or machinery which produces music, sound or
noise which is audible beyond the Premises.
9. Bicycles, motor scooters or any other type of vehicle shall not be
brought into the lobby or elevators of the Building or into the
Premises except for those vehicles which are used by a physically
disabled person in the Premises.
10. All blinds for exterior windows shall be building standard and shall be
maintained by Tenant.
11. No additional locks shall be placed upon doors to or within the
Premises except as shall be necessary adequately to safeguard United
States Government security classified documents stored with the
Premises. The doors leading to the corridors or main hall shall be kept
closed during business hours, except as the same may be used for
ingress or egress.
12. Tenant shall maintain and clean all areas or rooms within the Premises
in which security classified work is being conducted or in which such
work is stored; Landlord shall not provide standard janitorial service
to such areas, the provisions of Section 9 of this Lease
notwithstanding.
13. Landlord reserves the right to shut down the air conditioning,
electrical systems, heating, plumbing and/or elevators when necessary
by reason of accident or emergency, or for repair, alterations,
replacements or improvement.
14. No carpet, rug or other article shall be hung or shaken out of any
window of the Building; and Tenant shall not sweep or throw or permit
to be swept or thrown from the Premises any dirt or other substances
into any of the corridors or halls, elevator, or out of the doors or
windows or stairways of the Building. Tenant shall not use, keep or
permit to be used or kept any foul or noxious gas or substance in the
Premises, or permit or suffer the Premises to be occupied or used in a
manner offensive or objectionable to Landlord or other occupants of the
Building by reason of noise, odors and/or vibrations, or interfere in
any way with other tenants or those having business therein, nor shall
any animals or birds be kept in or about the Building. Smoking or
carrying lighted cigars or cigarettes in the elevators of the Building
is prohibited.
15. Landlord reserves the right to exclude from the Building on weekdays
between the hours of 6:00 p.m. and 8:00 a.m. and at all hours on
weekends and legal holidays, all persons who do not present a pass to
the Building signed by Landlord; provided, however, that reasonable
access for
<PAGE>
Tenant's employees and customers shall be accorded. Landlord
will furnish passes to persons for whom Tenant requires same in
writing. Tenant shall be responsible for all persons for whom it
requests such passes and shall be liable to Landlord for all acts of
such persons.
16. Tenant agrees to keep all windows closed at all times and to abide by
all rules and regulations issued by Landlord with respect to the
Building's air conditioning and ventilation systems.
17. Tenant will replace all broken or cracked interior windows and glass
doors within the Premises at its own expense, with glass of like kind
and quality, provided that such windows and doors are not broken or
cracked by Landlord, its employees, agents or contractors.
18. In the event it becomes necessary for the Landlord to gain access to
the underfloor electric and telephone distribution system for purposes
of adding or removing wiring, then upon request by Landlord, Tenant
agrees to temporarily remove the carpet over the access covers to the
underfloor ducts for such period of time until work to be performed has
been completed. The cost of such work shall be borne by Landlord except
to the extent such work was requested by or is intended to benefit
Tenant or the Premises, in which case the cost shall be borne by
Tenant.
19. Violation of these rules, or any amendments thereof or additions
thereto, may be considered a default of Tenant's lease after written
notice of such violation and the failure by Tenant to cure such
violation within thirty (30) days thereafter, and shall be sufficient
cause for termination of this Lease at the option of Landlord.
Exhibit F, page 2
<PAGE>
EXHIBIT 21.1
LIST OF THE C0MPANY'S SUBSIDIARIES
1. Universal Access of Virginia, Inc., a Public Service Company under the
laws of the Commonwealth of Virginia.
2. Universal Access Bermuda, Ltd., a limited liability company under the
laws of Bermuda.
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