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Operating Cost Escalations

Landlord and Tenant agree that the rent stipulated in Paragraph ---------- of this Lease is subject to increase or decrease as set forth below:

1. Definitions.

a. Base Operating Expenses. Landlord will determine the expenses incurred by Landlord in operating the building during the calendar year [year] (Base Year).

b. Lease Year. The term "Lease Year" means each calendar year after the Base Year, including the period of twelve months or less starting on the January 1 before the expiration of this Lease.

c. Operating Expenses. For purposes of this Lease, the term "Operating Expenses" means all expenses incurred by Landlord in the operation of the Building

[Optional clause: including the basement of the Building but excluding other space occupied by Landlord for purposes other than the operation of the Building], including the following:

i. Managing agent's fees, legal fees, accounting fees, disbursements, and salaries of all building employees paid by Landlord or on Landlord's behalf; fees paid to independent contractors involved in maintenance of the Building; and social security taxes and all other taxes levied on Landlord for employees' and employee salaries

ii. All cleaning, repair, and maintenance supplies used in the operation of the Building

iii. Water, gas, electric, and fuel expenses for heating, lighting, ventilating, and air conditioning the Building

iv. Expenses payable under maintenance and service agreements, including agreements for building security, window cleaning, and elevator service

v. Insurance premiums for workers' compensation, employer's liability insurance, comprehensive multi-peril and extended coverage insurance, and all other insurance that Landlord determines is necessary or desirable in the operation of the Building

vi. Expenses resulting from all repairs and general maintenance of the Building and land that would be deemed Operating Expenses under generally accepted accounting principles, but in all events excluding (A) alterations made to accommodate specific tenants and (B) sums constituting depreciation items and debt amortization payments

vii. Federal, state, county, and municipal taxes and assessments charged against real estate, personal property, rents, and the business of leasing real estate or collecting rents, excluding (A) federal, state, or other income taxes payable by Landlord; (B) sales taxes; (C) penalties or interest; and (D) taxes payable by Tenant, or other tenants in the building

2. Estimated Increases in Operating Expenses. Before the beginning of each Lease Year, Landlord will estimate any increase in (a) the Operating Expenses for the next Lease Year over (b) the Operating Expenses of the Base Year. During each Lease Year, Tenant will pay each month, in addition to the rent stipulated in Paragraph ---------- one twelfth (1/12) of the sum obtained by multiplying the estimated increase in Operating Expenses by ---------- percent (----------%) (Tenant's Proportionate Share). [Optional clause: Tenant's Proportionate Share is equal to the area of the premises leased to Tenant divided by the total rentable area of the Building.]

3. Actual Increases in Operating Expenses.

a. Notice. Within [number] days after the end of each Lease Year, Landlord will calculate the Operating Expenses for such Lease Year, and any increase or decrease over the Operating Expenses of the Base Year. Landlord will give Tenant written notice of the total amount due to Landlord, or Tenant, under the provisions of this Paragraph.

b. Payment or Credit. If the total amount of Tenant's estimated payments for increased Operating Expenses (as provided for in Paragraph ----------) for the Lease Year is (i) greater than the amount determined to be actually due to Landlord, such excess will be immediately credited to Tenant (to be applied against future payments due under this Paragraph); or (ii) less than the amount determined to be actually due to Landlord, such deficiency will be paid by Tenant to Landlord within [number] days after receipt of the notice of actual increase in Operating Expenses provided for above.

4. Right to Dispute Calculations. Tenant is given [number] days, after receiving any notice of actual increase in Operating Expenses, to examine and dispute the amount stated in the notice. If Tenant fails to notify Landlord of a dispute concerning the statement within such period, it becomes conclusively binding on Tenant. Tenant, or Tenant's authorized representative, has the right to examine the records relating to the amount in dispute at Landlord's office (or wherever such records may be kept) during business hours and after [number] days' prior written notice to Landlord. If, after such examination, Landlord and Tenant fail to agree on the issues raised by Tenant, then [method to resolve disputes, e.g., arbitration or appointment of independent certified public accountant whose finding shall be binding on both Tenant and Landlord].

5. No Reduction in Rent. No decrease in Operating Expenses will reduce the rent payable by Tenant under Paragraph ---------- of this Lease.

*** If Required By State Law ***

This Section for Notary:


State of _________

County of ________ [COUNTY]

On [DATE] before me, [NAME OF NOTARY], notary, personally appeared [NAME OF PERSON(S) INVOLVED], personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

Witness my hand and official seal.

Signature ________

My commission expires: _____