Fill and Sign the Example 2 Adjustments of Rent Complex Operating Expense Form

19.03[6] Example 2: Adjustments of Rent (Complex Operating Expense Escalations Clause) ARTICLE 5 Adjustments of Rent [Sections 5.01 through 5.06 omitted]. 5.07. For all purposes of this Lease: (a) "Operating Expenses" for any lease year shall mean the aggregate of all costs, expenses and disbursements incurred and paid by Landlord (directly or by way of reimbursement by Landlord to its agents or contractors) which in accordance with generally accepted cash basis accounting standards and principles in the real estate industry and with Landlord's federal income tax reporting basis consistently applied from year to year with respect to the operation, repair, safety, cleaning, maintenance, management and security of the Building (excluding ground floor retail space or garage areas and their core, shell or facade), Building equipment and the Land, including any plazas, sidewalks and curbs immediately adjacent thereto (collectively, "Landlord's Property") and shall include (without limitation) the following: (i) salaries, wages, fringe benefits of every kind and nature, bonuses and the cost of any hospitalization, medical, surgical, Worker's Compensation, union and general welfare, pension, retirement or life insurance plans, disability or other benefits imposed by law or otherwise with respect to employees, and social security, unemployment and other payroll taxes (including only the foregoing and other benefits or expenses that are customary for workers in office buildings of this stature and are in fact given to the workers in the Building) (collectively, "Labor Costs") paid or incurred by Landlord (directly or by way of reimbursement by Landlord to its agents) relating to employees of Landlord or its agents engaged in the operation, repair, cleaning, maintenance, management and security of Landlord's Property; provided that if any such employees of Landlord or its agents provide services for more than one building, then a prorated portion of the Labor Costs shall be included in Operating Expenses, based on the portion of their working time devoted to Landlord's Property; (ii) the costs of electricity, gas, steam or other fuel for common areas and other non-leasable portions of the Building; operation of elevators and security systems; heating, cooling, air conditioning and ventilating; chilled water, hot and cold water, sewer and other utilities; utility taxes, water and sewer rates and charges; (iii) the cost of cleaning (including windows), janitorial, trash removal, concierge, security and other services and systems (excluding purchase and installation thereof); (iv) the cost of all appropriate insurance, including Worker's Compensation, property, casualty, liability, excess liability, plate glass, multiperil, and fidelity insurance without limitation and the fees and charges of insurance consultants and including the full replacement cost insurance required to be maintained by Landlord as elsewhere required by this Lease; (v) the cost of repair to, and maintenance of, Landlord's Property, including the Building systems; (vi) the cost of Building cleaning goods and supplies; (vii) the cost of machinery, equipment, materials and tools used in the operation, repair, cleaning, maintenance, management and security of the Landlord's Property and any sales and use taxes thereon; (viii) the cost of uniforms, work clothes and dry cleaning; (ix) management fees for managing the Landlord's Property, or if no management fee is being incurred, an imputed management fee which in either case shall not exceed the amount that would be paid to an independent third party manager for a property equal in size and class to the Building; (x) fees and charges payable under service agreements and other payments made to Landlord's agents or independent contractors for maintenance, cleaning and/or operation less any payments to such agents or contractors made pursuant to Section 5.05(a)(i) above. If there is any affiliation with such agent or independent contractor, the costs shall be comparable and competitive; (xi) owner's and agents' administrative costs and expenses, including bookkeeping, stationery, telephone, telegraph, telecopy (or other telecommunication) costs paid by Landlord with respect to the operation, repair, cleaning, maintenance, management or security of the Landlord's Property, except if a management fee is being paid by Landlord under (a)(ix) hereof such items shall be excluded to the extent there is duplication of charges; (xii) legal, accounting and professional fees and disbursements paid in connection with the operation, repair, cleaning, maintenance, management and security of Landlord's Property; (xiii) fees for and costs of licenses, permits and inspections required in connection with the operation, repair, cleaning, maintenance, management and security of the Building; (xiv) costs of successfully contesting the validity or applicability of any Legal Requirement (as defined in Exhibit D) for the Landlord's Property; provided, however, that the costs of any such contest included in Operating Expenses for any Lease Year shall not exceed the amount by which Operating Expenses for such Lease Year were actually reduced as a result of such contest; (xv) those taxes, duties, charges, levies and assessments that are payable in respect of amounts that are otherwise includable within Operating Expenses; (xvi) all expenses and costs (excluding extraordinary repairs or Capital Expenses) paid by Landlord as a result of or in order to comply with applicable laws, including laws pertaining to energy or natural resource conservation or environmental protection (such as the costs of securing alternative sources of utilities, energy or other products or services and the costs of making the Building compatible with the use of such alternative sources); and codes or regulations of any governmental authority having or asserting jurisdiction or any order, rule, requirement of any utility company, insurer of Landlord or the Board of Fire Underwriters (or successor organization), but excluding the cost of curing any existing violations of New York City Local Law #5; (xvii) rent for personal property leased to Landlord the purchase price of which, if purchased, would be fully includable in Operating Expenses in the year of purchase; (xviii) Capital Expenses (as defined in § 5.07(f)); (xix) painting, wallpapering, decorations, displays and exhibits in public or other non-leasable areas, excluding areas (if any) being used by Landlord for purposes not connected with the operation, maintenance, management or security of the Landlord's Property; (xx) costs of compliance with Legal Requirements (defined below) to the extent not elsewhere included, but excluding any non-compliance existing as of the date of execution of the Lease; (xxi) any and all other expenses paid by Landlord for operation and maintenance of Landlord's Property which are customary for similar buildings in New York City. (b) "Operating Expenses-Exclusions". The following shall be excluded from Operating Expenses: (i) expenses relating to leasing space in the Building or preparing space for lease or for occupancy (including Landlord's work, other tenant work or tenant improvements, leasing commissions and advertising expenses); (ii) legal fees and disbursements paid for collection of tenant accounts, or negotiations of leases, or relating to negotiation and disputes between Landlord and other lessees and occupants of the Building; (iii) the cost of electricity furnished to any leasable space in the Building and the cost of electricity otherwise furnished to any tenant or occupant of the Building or to equipment owned, installed or exclusively serving such tenant or occupant; (iv) the cost of repairs or replacements or restorations incurred by reason of fire or other casualty or condemnation for which Landlord should have coverage under agreed value replacement cost insurance policies or should receive pursuant to condemnation awards and in any event, any Operating Expenses shall be net of insurance reimbursements or what would have been reimbursed had Landlord maintained the insurance levels required under this Lease; (v) expenditures for refinancing and debt service; (vi) taxes on any inheritance, estate, succession, transfer, gift, franchise, corporation, income, gains or profit tax or capital levy; (vii) depreciation; (viii) telephone, telegraph, telecopy or other telecommunications costs reimbursed by lessees and occupants of the Building and telecommunications related services provided to any tenants or to others including tenant's shared services, except such as are provided without separate charge to all office tenants of the Building; (ix) capital expenditures, including lobby and elevator renovation costs, except to the extent permitted in Section 5.05(a)(xix) and not excluded by any other provision of this Section 5.05(b); (x) rent payable by Landlord under any ground lease; (xi) Labor Costs of any person above the grade of Building manager; (xii) costs and expenses otherwise includable in Operating Expenses, to the extent that Landlord is reimbursed from other sources (including other tenants) for such costs and expenses; (xiii) expenditures (capital or otherwise) paid in connection with the removal, replacement, enclosure, encapsulation or other treatment of asbestos containing material ("ACM"); (xiv) expenditures (capital or otherwise) paid in connection with the removal, replacement, enclosure, encapsulation or other treatment of any hazardous material undertaken by reason of the same being hazardous material; (xv) any amount paid by Landlord to a company or other entity affiliated with Landlord in excess of the amount which would have been incurred on an arms-length basis; (xvi) the costs of HVAC services provided to any leasable space in the Building (other than such HVAC services as a prudent owner would customarily furnish for the proper maintenance of the Building, the costs of which shall be included in Operating Expenses) during any time when Tenant is not entitled hereunder to the same or does not receive same without separate or additional charge therefor, including labor, electricity, steam, fuel and maintenance costs allocable thereto; (xvii) the costs of any other service or facility, or level or amount thereof, provided to Tenant or any other tenant or occupant in the Building which either (i) is not generally offered, supplied or furnished to tenants, (ii) is at a greater level than provided to Tenant at no additional cost or (iii) is supplied or furnished to Tenant pursuant to the terms of this Lease with separate or additional charge (other than the Labor Costs relating to those employees of Landlord, or any of their agents who man any messenger receiving area in the Building, which Labor Costs shall be included in Operating Expenses); (xviii) costs and damages resulting from the negligent or tortious acts of Landlord, its employees and agents; (xix) any costs or expenses paid in connection with any other building or improvement other than Landlord's Property; (xx) any costs or expenses paid for maintenance or repair of ground floor retail stores, garage or parking areas, including windows, storefronts, or heating, ventilating or air conditioning not part of a building wide system, utilities or other services; (xxi) any doubling up of payments causing two (2) years expenses to be paid in one calendar year. (c) "Operational Year" shall mean the calendar year 1992 and each subsequent calendar year during the Term of the Lease and any renewal or extension term; (d) "Operational Year Operating Expenses" shall mean the Operating Expenses incurred during the applicable Operational Year; (e) "Base Operating Expenses" shall mean Operating Expenses incurred during the 1992 Operational Year; (f) The term "Capital Expenses" shall mean the annual amortization (reasonably determined by Landlord on a straight-line basis over an appropriate period, determined in accordance with generally accepted accounting principles, but not to exceed ten (10) years) of expenditures for capital improvements or capital equipment which either (i) under generally accepted real estate accounting standards and principles are expended or regarded as deferred expenses or (ii) are made by reason of Legal Requirements (excluding requirements, obligations or conditions, compliance with which is necessary to obtain a permanent Certificate of Occupancy for the Building or pre-existing this Lease) or Insurance Requirements as defined in Exhibit D, provided, however, that in the event Landlord receives a reduction, an exemption or abatement of Taxes or insurance premiums by reason of any such capital improvement or capital equipment, for purposes of calculating Capital Expenses, shall be reduced by the amount of such exemption or abatement. There shall be included in the annual amortization of such costs interest payable by Landlord during such year on money borrowed by Landlord in order to make such capital improvement or purchase any item of capital equipment or interest on money borrowed by Landlord in connection with the operation of the Building and which Landlord certifies to Tenant was allocated to such capital improvement or the purchase of capital equipment. Notwithstanding the foregoing, "Capital Expenses" shall not include the (a) construction of the Building or any expenditures for any alteration, renovation, subdivision, layout or finish of any space in the Building performed in connection with occupancy of such space by a tenant or in connection with renewal of a lease for such space with any tenant thereof, and (b) any item which does not result in a reduction of Operating Expenses greater than the annual amortization of the cost of such item. Before undertaking any work that Landlord intends to be a Capital Expense, Landlord shall forward a lifecycle cost statement for such work to Tenant. 5.08. In determining the amount of the Base Operating Expenses or the Operating Expenses for any Operational Year, if less than ninety-five (95%) percent of the rentable area of the Building shall have been occupied by tenants at any time during any such year, Operating Expenses for such Operational Year shall be determined for such year to be an amount equal to the like expenses which would normally be expected to be incurred had the occupancy of the Building been ninety-five (95%) percent throughout the applicable year. 5.09. If Landlord is not furnishing any particular work or service (the cost of which if performed by Landlord would constitute an Operating Expense i.e., such service at such level is available to or being given to Tenant without charge) to a tenant who has undertaken to perform such work or service in lieu of the performance thereof by Landlord, the Operational Year Operating Expenses for each Operational Year during which such situation shall occur shall be increased by an amount equal to the actual consideration paid by Landlord therefor (including any rent reduction) and if not ascertainable then by an amount equal to the additional Operating Expense which reasonably would have been incurred during such period by Landlord if it had at its own expense furnished such service or services to such tenant. 5.10. In any Operational Year in which Operational Year Operating Expenses exceed Base Operating Expenses, Tenant shall pay to Landlord Tenant's Proportionate Share of such excess. 5.11. During or after the first Operational Year, and each year thereafter Landlord shall forward Tenant an itemized statement prepared by Landlord's certified public accountants in accordance with generally accepted cash basis accounting standards and principles, consistently applied, ("Statement") and certified by Landlord as correct, of the Base Operating Expenses and the occupancy adjustment pursuant to Section 5.08. Thereafter, each Operational Year during the Term Landlord shall forward to Tenant a Statement of the Operational Year Operating Expenses for that prior Operational Year and a computation of the amount payable by Tenant pursuant to this Article for such Operational Year. 5.12. With each installment of Fixed Rent payable during the Term during and after the 1994 Operational Year, Tenant shall pay to Landlord on account of the amount payable pursuant to this Article for the then Operational Year:(i) until the earlier of (a) nine (9) months after the end of the preceding Operational Year or (b) the date Landlord forwards the applicable Statement for the preceding Operational Year, the amount of the monthly payment due during December of such Operational Year; and (ii) Landlord shall use all reasonable efforts to forward the applicable Statement for the preceding Operational Year within six (6) months after the end of such Operational Year, but if Landlord does not forward the applicable Statement for the preceding Operational Year, within nine (9) months after the end of the Operational Year, payments by Tenant shall be suspended until the applicable Statement is forwarded; and (iii) after Landlord forwards the applicable Statement for the preceding Operational Year, one-twelfth (1/12th) of Landlord's estimate of the amount payable to Tenant for the current Operational Year, not to exceed one hundred five (105%) percent of the amount payable pursuant to this Article for such preceding Operational Year. 5.13. Once Landlord forwards the applicable Statement for the preceding Operational Year, Landlord and/or Tenant, as the case may be, promptly shall make appropriate payment to the other within thirty (30) days (without interest) of any amount overpaid by Tenant or owing to Landlord for such Operational Year based on the amount due pursuant to such Statement and amounts theretofore paid by Tenant for such preceding Operational Year. Such payments shall not be deemed a waiver of Tenant's rights to dispute any Statement. 5.14. Landlord's and Tenant's obligations to make any payment pursuant to this Article shall survive the Expiration Date or any sooner termination of this Lease and shall be appropriately prorated for any Operational Year which is only partially within the Term. 5.15. Each Statement given by Landlord pursuant to Section 5.11 shall be binding upon Tenant unless, within six (6) months after its receipt of such Statement, Tenant notifies Landlord of its disagreement therewith, specifying the portion thereof with which Tenant disagrees. Pending resolution of such dispute, Tenant shall, without prejudice to its rights, pay all amounts determined by Landlord to be due, subject to prompt refund by Landlord (without interest) upon contrary determination.Provided that Tenant complies with the provisions of this Section 5.15 and Section 5.16, Tenant shall have the right to reasonably review books and records relevant to Operating Expenses for each Operational Year and for the Base Operating Year. The right of the Tenant under this paragraph to dispute Operating Expenses may only be exercised once for any Statement. Tenant agrees that any review of records under this paragraph shall occur at Landlord's office. Except as provided in Section 5.14, any review to be conducted under this paragraph shall be at the sole expense of Tenant and shall be conducted by public accountants. 5.16. Landlord's failure to render Statements with respect to any Operational Year shall not prejudice Landlord's right to thereafter render a Statement with respect thereto or with respect to any subsequent Operational Year, nor shall the rendering of a Statement prejudice Landlord's right to thereafter render a corrected Statement for that Year. If such dispute shall not be resolved within ninety (90) days after the giving of such Landlord's Statement or estimate, as the case may be, Tenant shall, within sixty (60) days after written notice from Landlord of the expiration of such ninety (90) day period, submit the dispute to arbitration pursuant to Article 34, failing which Tenant shall be deemed to have waived its objections. Tenant agrees to use reasonable efforts to see that any information obtained by Tenant pursuant to this section shall be treated as confidential (but such information may be disclosed in the arbitration proceeding on a confidential basis). Any agreed on or arbitrated errors disclosed by the review of records under this Article shall be promptly corrected. In the event that the results of the review of records (taking into account, if applicable, the results of any arbitration) reveal that Tenant has overpaid its obligations for a preceding period, the amount of such overpayment shall be credited against Tenant's next subsequent installment payments of rent or if after the Expiration Date, refunded to Tenant. In the event that such results show that Tenant has underpaid its obligations for a preceding period, the amount of such underpayment shall be paid by Tenant to Landlord with the next succeeding installment obligation of rent. 5.17. Landlord's and Tenant's obligation to make the adjustments or payments referred to in this Article 5 shall survive any expiration or termination of this Lease. Any delay or failure of Landlord in billing any amounts due under this Article 5 shall not constitute a waiver of or in any way impair the continuing obligation of Tenant to make any such payments hereunder; provided however if Landlord fails to render a Statement within two (2) years after the expiration of any Operational Year, then Landlord waives the right to collect any additional Operating Expenses based on such Statement for that Operational Year and Landlord's future Statements (for increases, if any, of subsequent Operational Years over the Base Year) shall not thereby be affected if timely sent.