**Exhibit 10.23**

 

FACILITIES LEASE AGREEMENT

 

BETWEEN

INLAND PPD HUDSON ASSOCIATES, L.L.C.

AND

CORNELL CORRECTIONS OF CALIFORNIA, INC.

 

DATED AS OF SEPTEMBER 24, 2008

 

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** **

**TABLE OF CONTENTS**

 
|        |                                                  |   |                                                              | **Page** |
|-------------|-------------------------------------------------------|--------|-------------------------------------------------------------------|----------|
|        |                                                  |   |
| ARTICLE I   | DEFINITIONS AND CONSTRUCTION                          | 2      |
|        | 1.01                                                  |   | Defined  Terms                                                    | 2        |
|        | 1.02                                                  |   | Incorporation  of Defined Terms                                   | 6        |
|        | 1.03                                                  |   | Rules of  Construction                                       | 6        |
|        |                                                  |   |                                                              |     |
| ARTICLE II  | PREMISES AND TERM                                     | 7      |
|        | 2.01                                                  |   | Leased  Property                                                  | 7        |
|        | 2.02                                                  |   | Term                                                              | 7        |
|        | 2.03                                                  |   | Option  to Renew                                                  | 8        |
|        | 2.04                                                  |   | Holding  Over                                                     | 9        |
|        | 2.05                                                  |   | Surrender                                                         | 9        |
|        |                                                  |   |                                                              |     |
| ARTICLE III | RENT                                                  | 9      |
|        | 3.01                                                  |   | Base  Rent                                                        | 9        |
|        | 3.02                                                  |   | Additional  Rent                                                  | 9        |
|        | 3.03                                                  |   | Place(s) of  Direct Payment of Base Rent and Additional Rent | 10       |
|        | 3.04                                                  |   | Net  Lease                                                        | 10       |
|        | 3.05                                                  |   | No  Termination, Abatement, etc                                   | 10       |
|        |                                                  |   |                                                              |     |
| ARTICLE IV  | IMPOSITIONS AND UTILITIES                             | 11     |
|        | 4.01                                                  |   | Payment  of Impositions                                           | 11       |
|        | 4.02                                                  |   | Definition  of Impositions                                        | 11       |
|        | 4.03                                                  |   | Utilities                                                         | 12       |
|        | 4.04                                                  |   | Escrow  of Impositions                                            | 12       |
|        | 4.05                                                  |   | Discontinuance  of Utilities                                      | 13       |
|        | 4.06                                                  |   | Non-Duplication  of Additional Rent                               | 13       |
|        |                                                  |   |                                                              |     |
| ARTICLE V   | INSURANCE                                             | 13     |
|        | 5.01                                                  |   | Property  Insurance                                               | 13       |
|        | 5.02                                                  |   | Liability  Insurance                                              | 14       |
|        | 5.03                                                  |   | Insurance  Requirements                                           | 14       |
|        | 5.04                                                  |   | Replacement  Cost                                                 | 15       |
|        | 5.05                                                  |   | Blanket  Policy                                                   | 15       |
|        | 5.06                                                  |   | No  Separate Insurance                                            | 16       |
|        | 5.07                                                  |   | Waiver  of Subrogation                                            | 16       |
|        | 5.08                                                  |   | Mortgages                                                         | 16       |
|        |                                                  |   |                                                              |     |
| ARTICLE VI  | INDEMNITY; HAZARDOUS SUBSTANCES; DANGEROUS CONDITIONS | 16     |
|        | 6.01                                                  |   | Tenant’s  Indemnification                                    | 16       |
|        | 6.02                                                  |   | Hazardous  Materials                                              | 17       |

 

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**TABLEOF CONTENTS**

(continued)

 
|         |                                                                                                   |   |                                                                 | **Page** |
|--------------|--------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------|----------|
|         |                                                                                                   |   |                                                                 |     |
|         | 6.03                                                                                                   |   | Tenant’s  Compliance/Indemnities                                | 17       |
|         | 6.04                                                                                                   |   | Definitions                                                          | 19       |
|         | 6.05                                                                                                   |   | Tenant’s  Risk: Limitation of Landlord’s Liability         | 19       |
|         | 6.06                                                                                                   |   | Dangerous  Condition                                                 | 19       |
|         |                                                                                                   |   |                                                                 |     |
| ARTICLE VII  | USE AND ACCEPTANCE OF LEASED PROPERTY                                                                  | 20     |
|         | 7.01                                                                                                   |   | Use  of Leased Property                                              | 20       |
|         | 7.02                                                                                                   |   | Acceptance  of Leased Property                                       | 20       |
|         | 7.03                                                                                                   |   | Conditions  of Use and Occupancy                                     | 20       |
|         | 7.04                                                                                                   |   | Financial  Reports                                                   | 21       |
|         |                                                                                                   |   |                                                                 |     |
| ARTICLE VIII | REPAIR, COMPLIANCE WITH LAWS: MECHANICS’ OR CONSTRUCTION LIENS:  MAINTENANCE OF SERVICE CONTRACTS | 21     |
|         | 8.01                                                                                                   |   | Repair  and Maintenance                                              | 21       |
|         | 8.02                                                                                                   |   | [Intentionally  Omitted.]                                            | 22       |
|         | 8.03                                                                                                   |   | Compliance  with Laws                                                | 22       |
|         | 8.04                                                                                                   |   | Required  Alterations                                                | 22       |
|         | 8.05                                                                                                   |   | Mechanics’  or Construction Liens                               | 22       |
|         | 8.06                                                                                                   |   | Replacements  of Fixtures                                            | 23       |
|         | 8.07                                                                                                   |   | Maintenance  of Service Agreements                                   | 23       |
|         |                                                                                                   |   |                                                                 |     |
| ARTICLE IX   | ALTERATIONS; TENANT’S PROPERTY; CAPITAL ADDITIONS TO THE LEASED  PROPERTY                         | 24     |
|         | 9.01                                                                                                   |   | Tenant’s  Right to Construct                                    | 24       |
|         | 9.02                                                                                                   |   | Scope  of Right                                                      | 24       |
|         | 9.03                                                                                                   |   | Cooperation  of Landlord                                             | 25       |
|         | 9.04                                                                                                   |   | Commencement  of Construction                                        | 25       |
|         | 9.05                                                                                                   |   | Rights  in Tenant Improvements                                       | 26       |
|         | 9.06                                                                                                   |   | [Intentionally  Omitted.]                                            | 26       |
|         | 9.07                                                                                                   |   | Requirements  for Personal Property                                  | 26       |
|         | 9.08                                                                                                   |   | Signs                                                                | 26       |
|         | 9.09                                                                                                   |   | Financings  of Capital Additions to a Leased Property                | 27       |
|         | 9.10                                                                                                   |   | Financings  of Capital Additions to Adjacent Land of Leased Property | 29       |
|         |                                                                                                   |   |                                                                 |     |
| ARTICLE X    | DEFAULTS AND REMEDIES                                                                                  | 29     |
|         | 10.01                                                                                                  |   | Events  of Default                                                   | 29       |
|         | 10.02                                                                                                  |   | Remedies                                                             | 30       |
|         | 10.03                                                                                                  |   | Right  of Set-Off                                                    | 32       |
|         | 10.04                                                                                                  |   | Performance  of Tenant’s Covenants                              | 32       |
|         | 10.05                                                                                                  |   | Interest  on past Due Payments                                       | 33       |

 

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**TABLEOF CONTENTS**

(continued)

 
|         |                                                                  |   |                                  | **Page** |
|--------------|-----------------------------------------------------------------------|--------|---------------------------------------|----------|
|         |                                                                  |   |                                  |     |
|         | 10.06                                                                 |   | Litigation;  Attorneys’ Fees     | 33       |
|         | 10.07                                                                 |   | Remedies  Cumulative                  | 33       |
|         | 10.08                                                                 |   | Escrows  and Application of Payments  | 33       |
|         | 10.09                                                                 |   | Power  of Attorney                    | 33       |
|         |                                                                  |   |                                  |     |
| ARTICLE XI   | DAMAGE AND DESTRUCTION                                                | 34     |
|         | 11.01                                                                 |   | General                               | 34       |
|         | 11.02                                                                 |   | Landlord’s  Inspection           | 35       |
|         | 11.03                                                                 |   | Landlord’s  Costs                | 35       |
|         | 11.04                                                                 |   | Rent  Abatement                       | 35       |
|         | 11.05                                                                 |   | Substantial  Damage During Lease Term | 36       |
|         | 11.06                                                                 |   | Damage  Near End of Term              | 36       |
|         | 11.07                                                                 |   | Assignment  of Insurance Proceeds     | 36       |
|         |                                                                  |   |                                  |     |
| ARTICLE XII  | CONDEMNATION                                                          | 37     |
|         | 12.01                                                                 |   | Definition                            | 37       |
|         | 12.02                                                                 |   | Apportionment  of Compensation        | 37       |
|         | 12.03                                                                 |   | Effect  on Lease Obligations          | 37       |
|         | 12.04                                                                 |   | [Intentionally  Omitted.]             | 38       |
|         | 12.05                                                                 |   | Restoration  of Premises              | 38       |
|         | 12.06                                                                 |   | Landlord’s  Inspection           | 39       |
|         |                                                                  |   |                                  |     |
| ARTICLE XIII | TENANT’S RIGHT OF FIRST REFUSAL                                  | 39     |
|         | 13.01                                                                 |   | Rights  of First Refusal              | 39       |
|         |                                                                  |   |                                  |     |
| ARTICLE XIV  | ASSIGNMENT AND SUBLETTING: ATTORNMENT                                 | 41     |
|         | 14.01                                                                 |   | [Intentionally  Omitted.]             | 41       |
|         | 14.02                                                                 |   | Permitted  Transfers                  | 41       |
|         | 14.03                                                                 |   | [Intentionally  Omitted.]             | 43       |
|         | 14.04                                                                 |   | Permitted  Subleases                  | 43       |
|         | 14.05                                                                 |   | Effect  of Assignment                 | 43       |
|         |                                                                  |   |                                  |     |
| ARTICLE XV   | QUIET ENJOYMENT; SUBORDINATION, ATTORNMENT AND ESTOPPEL  CERTIFICATES | 43     |
|         | 15.01                                                                 |   | Quiet  Enjoyment                      | 43       |
|         | 15.02                                                                 |   | Landlord  Mortgages: Subordination    | 44       |
|         | 15.03                                                                 |   | Attornment:  Non-Disturbance          | 44       |
|         | 15.04                                                                 |   | Estoppel  Certificate                 | 45       |
|         |                                                                  |   |                                  |     |
| ARTICLE XVI  | MISCELLANEOUS                                                         | 46     |
|         | 16.01                                                                 |   | Notices                               | 46       |
|         | 16.02                                                                 |   | Advertisement  of Leased Property     | 46       |

 

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**TABLEOF CONTENTS**

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|                                                                                                   |   |   |                                 | **Page** |
|--------------------------------------------------------------------------------------------------------|--------|--------|--------------------------------------|----------|
|                                                                                                   |   |   |                                 |     |
|                                                                                                   | 16.03  |   | Landlord’s  Access              | 47       |
|                                                                                                   | 16.04  |   | Entire  Agreement                    | 47       |
|                                                                                                   | 16.05  |   | Severability                         | 47       |
|                                                                                                   | 16.06  |   | Captions  and Headings               | 47       |
|                                                                                                   | 16.07  |   | Governing  Law                       | 47       |
|                                                                                                   | 16.08  |   | Waiver                               | 47       |
|                                                                                                   | 16.09  |   | Binding  Effect                      | 48       |
|                                                                                                   | 16.10  |   | Authority                            | 48       |
|                                                                                                   | 16.11  |   | Transfer  of Permits, Etc            | 48       |
|                                                                                                   | 16.12  |   | Modification                         | 48       |
|                                                                                                   | 16.13  |   | Incorporation  by Reference          | 48       |
|                                                                                                   | 16.14  |   | [Intentionally  Omitted.]            | 48       |
|                                                                                                   | 16.15  |   | Laches                               | 48       |
|                                                                                                   | 16.16  |   | Permitted  Contests                  | 48       |
|                                                                                                   | 16.17  |   | Construction  of Lease               | 49       |
|                                                                                                   | 16.18  |   | Counterparts                         | 49       |
|                                                                                                   | 16.19  |   | Relationship  of Landlord and Tenant | 49       |
|                                                                                                   | 16.20  |   | Submission  to Jurisdiction          | 49       |
|                                                                                                   | 16.21  |   | Appraisal                            | 50       |
|                                                                                                   | 16.22  |   | Brokers                              | 51       |
|                                                                                                   | 16.23  |   | Warranties                           | 51       |
|                                                                                                   |   |
| SCHEDULE A [Description of Property]                                                                   |   |
|                                                                                                   |   |   |                                 |     |
| SCHEDULE B [Permitted Exceptions]                                                                      |   |
|                                                                                                   |   |   |                                 |     |
| SCHEDULE C [Example of Calculation of Monthly Rental  Amount]                                          |   |
|                                                                                                   |   |   |                                 |     |
| SCHEDULE D [Example of Calculation of Adjustment to  Designated Rate in connection with Extended Term] |   |
|                                                                                                        |        |        |                                      |          |  |

 

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FACILITIES LEASE AGREEMENT

 

This Facilities LeaseAgreement (this **“Lease Agreement”)**isentered into and effective as of the 24th day of September, 2008, by andbetween INLAND PPD HUDSON ASSOCIATES, L.L.C., a Delaware limited liability company**(“Landlord”),**and CORNELLCORRECTIONS OF CALIFORNIA, INC., a California corporation **(“Tenant”).**

 

RECITALS

 

A.            Landlord and Tenant are parties to that certainDevelopment Agreement dated as of August 4, 2008 (as amended and in effectfrom time to time, the **“Development Agreement”).**

 

B.            Pursuant to the Development Agreement and that certainPurchase Agreement dated as August 4, 2008, entered by Landlord and WBPLeasing, Inc., a Delaware corporation (the **“Purchase Agreement***”),*Landlordacquired fee title to that certain real property located in the Town of Hudson,County of Weld, State of Colorado, and described in Schedule A, attached hereto(the **“Property”).**

 

C.            Pursuant to the Development Agreement, Landlord andTenant entered into a ground lease agreement of such Property dated as September 24,2008 (the **“Ground Lease Agreement”**and,together with this Lease Agreement, collectively, the **“Lease Agreements”).**

 

D.            Tenant and Colorado Department of Corrections (the **“Governmental Entity”)**have entered into thatcertain Implementation Agreement dated August 5, 2008 (the **“Operating Agreement”)**governing certainoperations and services to be provided by Tenant in connection with the housingand detention of inmates or detainees at the Facility (as defined in theDevelopment Agreement) to be constructed on the Property.

 

E.            Landlord and Tenant desire to provide for the lease byLandlord to Tenant of the Facility and the other Leased Property (as definedbelow).

 

F.             Landlord and Tenant desire to set forth in this LeaseAgreement the terms and conditions applicable to such lease of the Facility andother Leased Property.

 

NOW, THEREFORE, inconsideration of the foregoing Recitals and the covenants and conditions setforth in this Lease Agreement, and other good and valuable consideration, thereceipt and sufficiency of which are hereby acknowledged, and intending to belegally bound hereby, Landlord and Tenant agree as follows:

 

# **ARTICLE I**

# **DEFINITIONSAND CONSTRUCTION**

# ** **

## **1.01       ****DefinedTerms****. **The following terms shall have the respective meanings assigned below:

##  

**“AdditionalRent”**shall have the meaning assigned to such term in Section 3.02hereof.

 

2

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**“Affiliate”**shall have the meaning assigned to such term in Section 14.02(a) hereof.

 

**“AggregateLeased Property”**shall have the meaning assigned to such term in Section 12.01hereof.

 

**“AllocatedPrice”**shall have the meaning assigned to such term in Section 13.01hereof.

 

“**Award”**shall have the meaning assigned to such term in Section 12.02hereof.

 

**“Base Rent”**shall have the meaning assigned to such term in Section 3.01hereof.

 

**“CapitalAdditions”**shall have the meaning assigned to such term in Section 9.01hereof.

 

**“CERCLA”** shall have themeaning assigned to such term in Section 6.04 hereof.

 

**“CommencementDate”**shall have the meaning assigned to such term in Section 2.02hereof.

 

**“Condemnation”**shall have the meaning assigned to such term in Section 12.01hereof.

 

**“CPI-U”**means theConsumer Price Index for All Urban Consumers published by the United StatesBureau of Labor Statistics.

 

**“DesignatedRate”**means a fixed, annual rate equal to ten and one-half percent (10.5%),as such rate may be adjusted in accordance with Section 2.03(c) hereof.

 

**“DevelopmentAgreement”**shall have the meaning assigned to such term in therecitals.

 

**“EnvironmentalLaws”**shall have the meaning assigned to such term in Section 6.03(a) hereof.

 

**“EstoppelCertificate”**shall have the meaning assigned to such term in Section 15.04(a) hereof.

 

**“Event ofDefault”**shall have the meaning assigned to such term in Section 10.01(a) hereof.

 

**“ExpirationDate”**shall have the meaning assigned to such term in Section 2.02hereof.

 

**“ExtendedTerm”**shall have the meaning assigned to such term in Section 2.03(a) hereof.

 

**“FinanciallyResponsible Test”**shall have the meaning assigned to such term in Section 14.02(a) hereof.

 

**“FirstExtension Designated Rate”**shall have the meaningassigned to such term in Section 2.03(c) hereof.

 

3

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**“Fixtures”**shall have themeaning assigned to such term in Section 2.01(b) hereof.

 

**“GovernmentalEntity”**shall have the meaning assigned to such term in therecitals.

 

**“GroundLease Agreement”**shall have the meaning assigned to such term in therecitals.

 

**“HazardousMaterials”**shall have the meaning assigned to such term in Section 6.04hereof.

 

**“HazardousMaterials Law”**shall have the meaning assigned to such term in Section 6.04hereof.

 

**“Impositions”**shall have the meaning assigned to such term in Section 4.02hereof.

 

**“Improvements”**shall have the meaning assigned to such term in Section 2.01(a) hereof.

 

**“InitialTerm”**shall have the meaning assigned to such term in Section 2.02hereof.

 

**“Land”**means theProperty, together with all rights, titles, appurtenant interests, covenants,licenses, privileges and benefits thereto belonging, and any easements,rights-of-way, rights of ingress or egress or other interests in, on, or to anyland, highway, street, road or avenue, open or proposed, in, on, across, infront of, abutting or adjoining such real property including, withoutlimitation, any strips and gores adjacent to or lying between such realproperty and any adjacent real property.

 

**“Landlord”**shall have themeaning assigned to such term in the introductory paragraph.

 

**“LandlordChange of Control”**shall have the meaning assigned to such term in Section 13.01hereof.

 

**“LandlordDesignee”**shall have the meaning assigned to such term in Section 10.02hereof.

 

**“LandlordFinancing Terms”**shall have the meaning assigned to such term in Section 9.09(a) hereof.

 

**“Landlord’sNotice”**shall have the meaning assigned to such term in Section 13.01hereof.

 

**“LeaseAgreement”**shall have the meaning assigned to such term in theintroductory paragraph.

 

**“LeaseAgreements”**shall have the meaning assigned to such term in therecitals.

 

**“Lease Year”**shall have the meaning assigned to such term in Section 2.03(d) hereof.

 

**“LeasedProperty”**shall have the meaning assigned to such term in Section 2.01hereof.

 

4

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**“Letter ofCredit”**shall have the meaning assigned to such term in Section 14.02(a) hereof.

 

**“MonthlyRental Amount”**means, as determined for each Rental Payment Date,an amount equal to the quotient obtained upon dividing (i) the productobtained upon multiplying (a) the aggregate amount of Construction Funds(as defined in the Development Agreement) outstanding under the DevelopmentAgreement on such Rental Payment Date, times (b) the Designated Rate(expressed in decimal form), by (ii) 12. An example illustrating calculation of the Monthly Rental Amount isattached hereto as Schedule C.

 

**“MultipleProperty Transfer”**shall have the meaning assigned to such term in Section 13.01hereof.

 

**“New YorkPrime Rate”**shall have the meaning assigned to such term in Section 10.02(a) hereof.

 

“**Notice**s”shall have the meaning assigned to such term in Section 16.01 hereof.

 

**“Offer”**shall have themeaning assigned to such term in Section 13.01 hereof.

 

**“OperatingAgreement”**shall have the meaning assigned to such term in therecitals.

 

**“Person”**means anynatural person, partnership, corporation, limited liability company,association, trust or other legal entity

 

**“PermittedExceptions”**shall have the meaning assigned to such term in Section 2.01hereof.

 

**“PermittedTransferee”**shall have the meaning assigned to such term in Section 14.02hereof.

 

**“PrimaryIntended**Use” shall have the meaning assigned to such term inSection 9.01 hereof.

 

**“Property”**shall have themeaning assigned to such term in the recitals.

 

**“PurchaseAgreement”**shall have the meaning assigned to such term in therecitals.

 

**“PurchaseRefusal Right”**shall have the meaning assigned to such term in Section 13.01hereof.

 

**“RCRA”**shall have themeaning assigned to such term in Section 6.04 hereof.

 

**“Rent”**shall have themeaning assigned to such term in Section 3.03 hereof.

 

**“RentalCommencement Date”**means the first day of the calendar month thatimmediately follows the calendar month during which there occurs the DeemedCompletion Date.

 

5

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**“RentalPayment Date”**means each date on which Base Rent is payable inaccordance with Section 3.01 hereof.

 

**“ReturnDate”**shall have the meaning assigned to such term in Section 14.02(a) hereof.

 

**“RFP’s”**shall have themeaning assigned to such term in Section 14.04 hereof.

 

**“SARA”**shall have themeaning assigned to such term in Section 6.04 hereof.

 

**“SecurityAmount”**shall have the meaning assigned to such term in Section 14.02(a) hereof.

 

**“ServiceAgreements”**shall have the meaning assigned to such term in Section 14.04hereof.

 

“**SNDA**”shall have the meaning assigned to such term in Section 15.03 hereof.

 

**“SubleaseAgreements”**shall have the meaning assigned to such term in Section 14.04hereof.

 

**“SubstantialRepairs”**shall have the meaning assigned to such term in Section 11.01hereof.

 

**“Tenant”**shall have themeaning assigned to such term in the introductory paragraph.

 

**“TenantParent”**shall have the meaning assigned to such term in Section 7.04(b) hereof.

 

**“TenantImprovement”**and **“TenantImprovements”**shall have the meaning assigned to such term in Section 9.01hereof.

 

**“Term”**shall have themeaning assigned to such term in Section 2.03(d) hereof.

 

**“TestPeriod”**shall have the meaning assigned to such term in Section 14.02(a) hereof.

 

**“Transfer”**shall have themeaning assigned to such term in Section 13.01 hereof.

 

## **1.02        Incorporationof Defined Terms. **Capitalizedterms not otherwise defined herein and which are defined in the DevelopmentAgreement shall have the respective meanings assigned to such terms in theDevelopment Agreement.

##  

## **1.03        Rules ofConstruction**.

##  

### (a)           Words in any agreement or documentimporting the singular shall include the plural and vice versus;

###  

### (b)           Unless otherwise indicated, anyreference in any agreement or document to any person shall be construed so asto include such person and any subsequent successors, transferees and assigneesthereof in accordance with the respective interests;

 

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### (c)           Unless otherwise indicated, anyreference in any agreement or document to such agreement or document or anyother agreement or document shall be construed as a reference to each suchagreement or document or, as the case may be, such other agreement or document,together with any recitals, schedules or annexes thereto, all as amended,supplemented, restated, novated or replaced;

###  

### (d)           Any reference in any agreement ordocument to a statute or enactment or order shall be construed as a referenceto such statute, enactment or order as from time to time amended or reenacted;and

###  

### (e)           Clause and schedule headingscontained, and any index or table of contents to, any agreement or document orfor ease of reference only and shall be ignored in construing such agreement ordocument.

###  

# **ARTICLE II**

# **PREMISESAND TERM**

# ** **

## **2.01       ****LeasedProperty****. **Landlord hereby leases to Tenant and Tenant leases from Landlord theImprovements and Fixtures located or to be located on the Land (each as moreparticularly described and defined below, and the foregoing shall collectivelybe known and referred to as the **“LeasedProperty”). **Such LeasedProperty shall consist of:

##  

### (a)           All buildings, improvements,structures and fixtures now located or to be located or to be constructed onthe Land, including, without limitation, the Facility and all landscaping,parking lots and structures, roads, drainage and all above ground andunderground utility structures, and other so-called “infrastructure”improvements (collectively, the **“Improvements”);**and

###  

### (b)           All equipment, machinery, fixtures,and other items of real and/or personal property, including all componentsthereof, located in, on or used in connection with, and permanently affixed toor incorporated into, the Improvements including, without limitation, allfurnaces, boilers, heaters, electrical equipment, electronic securityequipment, heating, plumbing, lighting, ventilating, refrigerating,incineration, air and water pollution control, waste disposal, air-cooling andair-conditioning systems and apparatus, sprinkler systems and fire and theftprotection equipment, and similar systems, all of which, to the greatest extentpermitted by law, are hereby deemed to constitute real estate, together withall replacements, modifications, alterations and additions thereto(collectively, the **“Fixtures”);**

###  

SUBJECT, HOWEVER, to theeasements, liens, encumbrances, restrictions, agreements, and other titlematters listed or specifically referred to or listed in **Schedule B**hereto (collectively, **“Permitted Exceptions”).**

 

## **2.02        Term. **The initial term (the **“Initial Term”)**of this Lease Agreementshall be for a fixed term commencing on the date hereof (the **“Commencement Date”),**and ending onexpiration at midnight ten years after the Deemed Completion Date, unlessearlier terminated or extended as provided herein (the **“Expiration Date”).**

 

7

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##  

## **2.03        Option to Rene**w.

##  

### (a)           Provided that, at the time of suchexercise, (i) this Lease Agreement is in full force and effect, and (ii) noEvent of Default shall have occurred and be continuing (either at the time ofexercise or at the commencement of an Extended Term), Tenant shall have theexclusive right and option to extend the Term of this Lease Agreement for up totwo (2) additional terms (each an **“ExtendedTerm”**and collectively, the **“ExtendedTerms”)**of ten (10) years each by giving written notice toLandlord not later than three (3) months nor earlier than twelve (12)months prior to the expiration date of the Term then in effect.  The effective giving of such notice ofextension by Tenant shall automatically extend the Term of this Lease Agreementfor the applicable Extended Term, and no instrument of renewal or extensionneed be executed, In the event that Tenant fails timely to give such notice toLandlord, this Lease Agreement shall automatically terminate at the end of theTerm then in effect, and Tenant shall have no further option to extend the Termof this Lease Agreement, unless Landlord accepts such untimely notice inwriting.  Each Extended Term shallcommence on the day immediately succeeding the expiration date of the Term thenin effect, and shall end on the day immediately preceding the tenth (10th)anniversary of the first day of such Extended Term.  Each Extended Term shall be on all the termsand conditions of this Lease Agreement, except: (i) during the secondExtended Term, Tenant shall have no further option to extend the Term, and (ii) theBase Rent for each Extended Term shall be adjusted in accordance with Paragraph(c), below, based on the CPI-U as of the commencement of the applicableExtended Term.

###  

### (b)           After receipt by Landlord of a noticefrom Tenant electing to extend the Term of this Lease Agreement underSubsections 2.03(a) above, Landlord and Tenant shall thereafter as soon aspracticable determine and set forth in a written acknowledgement any adjustmentto the Base Rent in accordance with Paragraph (c) below in connection tosuch extension.

###  

### (c)           In the event Tenant elects to extendthe Initial Term, the Designated Rate to be applicable during the initialExtended Term will be adjusted to reflect the net change in consumer pricesduring the period commencing with the Rental Commencement Date and ending onthe expiration of the Initial Term, such net change and resulting adjustment tobe determined by reference to the CPI-U as of the beginning and end of suchperiod.  The resulting adjustedDesignated Rate (the **“First ExtensionDesignated Rate”)**will be used for the first Extended Term.  In the event Tenant elects to extend the Termfor a second ten year period, the First Extension Designated Rate will beadjusted in the same manner to reflect the net change in consumer prices duringthe period commencing with the first day of the initial Extended Term andending on the expiration of such initial Extended Term, such net change andresulting adjustment to be determined by reference to the CPI-U as of thebeginning and end of such period.  Theresulting adjusted First Extension Designated Rate will be used for the secondExtended Term.  In applying the CPI-U forpurposes of calculating the Designated Rate to be applicable during an ExtendedTerm, the CPI-U for the months in which there occurred the first and lastRental Payment Dates of the immediately preceding Term shall be used.  Attached as Schedule D is an exampleillustrating calculation of an adjustment to the Designated Rate in connectionwith a hypothetical Extended Term.

###  

### (d)           The term **“Term”**used in this Lease Agreement means the Initial Term,and any Extended Term exercised hereunder, as appropriate.  The term **“LeaseYear”**means each twelve

 

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### (12) month period during theTerm commencing on the Commencement Date or, if the Commencement Date is notthe first day of a calendar month, the first Lease Year shall consist of thepartial calendar month following the Commencement Date and the succeedingtwelve full calendar months, and each successive twelve month period thereafterduring the Term, provided that the last Lease Year shall end on the expirationor earlier termination of the Term.

###  

## **2.04        HoldingOver. **Should Tenant,without the express consent of Landlord, continue to hold and occupy the LeasedProperty after the expiration of the Term, such holding over beyond the Termand the acceptance or collection of Rent (as defined below) by Landlord shalloperate and be construed as creating a tenancy from month-to-month and not forany other term whatsoever.  Tenant shallbe liable for all damages incurred by Landlord as a result of any such holdoverand, in addition to such damages, during any such holdover period, Tenant shallpay to Landlord for each month (or portion thereof) Tenant remains in theLeased Property, one hundred and fifty percent (150%) of the Base Rent ineffect on the expiration date and all Additional Rent applicable to suchholdover period.  Such month-to-monthtenancy may be terminated by Landlord by giving Tenant thirty (30) days writtennotice, and at any time after such termination, Landlord may re-enter and takepossession of the Leased Property in accordance with applicable law.

##  

## **2.05        Surrender. **Except as a result of (i) TenantImprovements and Capital Additions, (ii) normal wear and tear, taking intoconsideration the purpose for which the Leased Property is to be used and thedegree of wear and tear on physical plant facilities and systems in othersimilar correctional/detention facilities, and (iii) casualty, taking orother damage and destruction not required to be repaired by Tenant, Tenantshall surrender and deliver up the Leased Property at the expiration ortermination of the Term (including any Extended Terms), in generally good orderand condition.

##  

# **ARTICLE III**

# **RENT**

# ** **

## **3.01        Base Rent. **Tenant shall pay Landlordbase rent for the Leased Property, without notice, demand, set-off orcounterclaim, in advance, in lawful money of the United States of America inthe amount specified below (the **“Base Rent”)**forthe Term, in consecutive monthly installments, each in an amount equal to theMonthly Rental Amount for the Rental Payment Date on which such Monthly RentalAmount is payable, payable in advance on the Rental Commencement Date andthereafter on the first calendar day of each succeeding month during theTerm.  No Base Rent shall be payableprior to the Rental Commencement Date. Any Base Rent payable for a portion of a month shall be prorated basedupon the number of days in the applicable month and an appropriate payment orrefund, as the case may be, shall be made in accordance with the terms herein,so as to charge Tenant only for the fractional month falling within the Term.

##  

## **3.02        AdditionalRent. **In addition toBase Rent, Tenant shall pay all other amounts, liabilities, obligations andImpositions (as hereinafter defined ) which Tenant assumes or agrees to payunder this Lease Agreement and any fine, penalty, interest, charge and costwhich may be added for nonpayment or late payment of such items (collectively,the **“Additional Rent”).**

 

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## **3.03       ****Place(s) ofDirect Payment of Base Rent and Additional Rent****. **The Base Rent and AdditionalRent are hereinafter collectively referred to as **“Rent.” **Landlord shallhave all legal, equitable and contractual rights, powers and remedies providedeither in this Lease Agreement or by statute, rule or regulation orotherwise with respect to nonpayment of the Rent.  Tenant shall make all payments of Base Rentat Landlord’s principal place of business or as Landlord may otherwise fromtime to time direct in writing, and all payments of Additional Rent directly tothe person or persons to whom such amount is owing at the time and times whensuch payments are due, and shall give to Landlord such evidence of such directpayments as Landlord shall request.

##  

## **3.04        Net****Lease**.  This Lease Agreement shall be deemed andconstrued to be an “absolute net lease” or “triple net lease,” and Tenant shallpay all Rent, Impositions, and other charges and expenses in connection withthe Leased Property throughout the Term, without abatement, deduction orset-off.

##  

## **3.05        NoTermination, Abatement, etc. **Except asotherwise specifically provided in this Lease Agreement, Tenant shall remainbound by this Lease Agreement in accordance with its terms.  Except as otherwise specifically provided inthis Lease Agreement, Tenant shall not, without the prior written consent ofLandlord, modify, surrender or terminate this Lease Agreement, nor seek nor beentitled to any abatement, deduction, deferment or reduction of Rent, orset-off against the Rent.  Except asspecifically provided in this Lease Agreement, the obligations of Landlord andTenant shall not be affected by reason of (i) the lawful or unlawfulprohibition of, or restriction upon, Tenant’s use of the Leased Property, orany part thereof, the interference with such use by any Person, corporation,partnership or other entity, or by reason of eviction by paramount title, ineach case not resulting due to actions taken by, or claims asserted against,Landlord, (ii) any claim which Tenant has or might have against Landlordor by reason of any default or breach of any warranty by Landlord under thisLease Agreement or any other agreement between Landlord and Tenant, or to whichLandlord and Tenant are parties; (iii) any bankruptcy, insolvency,reorganization, composition, readjustment, liquidation, dissolution, winding upor other proceeding affecting Landlord or any assignee or transferee ofLandlord; (iv) any bankruptcy, insolvency, reorganization, composition,readjustment, liquidation, dissolution, winding up or other proceedingaffecting Landlord or any assignee or transferee of Landlord; or (v) anybankruptcy, insolvency, reorganization, composition, readjustment, liquidation,dissolution, winding up or other proceeding affecting Tenant, any Affiliate, orany assignee or transferee of Tenant. Except as otherwise specifically provided in this Lease Agreement, andto the maximum extent permitted by law, Tenant hereby specifically waives allrights, including, but not limited to, any rights under any statute relating torights of tenants in any state in which the Leased Property is located, arisingfrom any occurrence whatsoever, which may now or hereafter be conferred upon itby law (a) to modify, surrender or terminate this Lease Agreement or quitor surrender the Leased Property or any portion thereof; or (b) entitlingTenant to any abatement, reduction, suspension or deferment of the Rent orother sums payable by Tenant hereunder. The obligations of Landlord and Tenant hereunder shall be separateagreements, and the Rent and all other sums shall continue to be payable in allevents unless the obligations to pay the same shall be terminated pursuant tothe express provisions of this Lease Agreement or by termination of this LeaseAgreement.

 

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# **ARTICLE IV**

# **IMPOSITIONSAND UTILITIES**

# ** **

## **4.01        Payment ofImpositions. **Subject to theadjustments set forth herein, Tenant shall pay, as Additional Rent, allImpositions that may be levied or become a lien on the Leased Property or anypart thereof at any time during the Term, before the same become delinquent.  Tenant shall furnish to Landlord on an annualbasis copies of official receipts or other satisfactory proof evidencing suchpayments.  Tenant’s obligation to paysuch Impositions shall be deemed absolutely fixed upon the date suchImpositions are assessed upon the Leased Property or any part thereof.  Tenant, at its expense, shall prepare andfile all tax returns and reports in respect of any Imposition as may berequired by governmental authorities; provided, however, Landlord shall beresponsible for the preparation and filing of any such tax returns or reportsin respect of any real or personal property owned by Landlord.  Tenant shall be entitled to any refund duefrom any taxing authority attributable to Impositions for which Tenant haspaid.  Landlord and Tenant shall, uponrequest of the other, provide such data as is maintained by the party to whomthe request is made with respect to the Leased Property as may be necessary toprepare any required returns and reports. In the event governmental authorities classify any property covered bythis Lease Agreement as personal property, Landlord and Tenant shall file allpersonal property tax returns in such jurisdictions where it may legally sofile with respect to their respective owned personal property.  Landlord, to the extent it possesses thesame, and Tenant, to the extent it possess the same, will provide the otherparty, upon request, with cost and depreciation records necessary for filingreturns for any property so classified as personal property.  Where Landlord is legally required to filepersonal property tax returns, Tenant will be provided with copies ofassessment notices indicating a value in excess of the reported value insufficient time for Tenant to file a protest. Tenant may, upon notice to Landlord, at Tenant’s option and at Tenant’ssole cost and expense, protest, appeal, or institute such other proceedings asTenant may deem appropriate to effect a reduction of real estate or personalproperty assessments and Landlord, at Tenant’s expense as aforesaid, shallfully cooperate with Tenant in such protest, appeal, or other action.  Tenant shall provide Landlord copies of allmaterials filed or presented in connection with any such proceeding.  Tenant shall promptly reimburse Landlord forall personal property taxes paid by Landlord upon receipt of billingsaccompanied by copies of a bill therefor and payments thereof which identifythe personal property with respect to which such payments are made.  Impositions imposed in respect to the tax-fiscalperiod during which the Term commences and terminates shall be adjusted andprorated between Landlord and Tenant on a per diem basis, with Tenant beingobligated to pay its pro rata share from and including the Commencement Date toand including the expiration or termination date of the Term, and Tenant’sobligation to pay its prorated share thereof shall survive suchtermination.  Tenant shall have noobligation to pay any such Imposition that is imposed for periods before orafter such commencement or termination.

##  

## **4.02       ****Definitionof Impositions****.  “Impositions”**means, collectively, thefollowing: (a) taxes (including, without limitation, all real estate andpersonal property ad valorem (whether assessed as part of the real estate orseparately assessed as unsecured personal property), sales and use, business oroccupation, single business, gross receipts, transaction, privilege, rent orsimilar taxes, but not including income or excise taxes payable with respect toLandlord’s receipt of Rent), (b) assessments (including withoutlimitation, all assessments for public improvements or benefits, provided suchassessments are payable during the Term); (c) ground rents, water,

 

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## sewer or other rents, feesand charges, excises, tax levies, and fees (including, without limitation,license, permit, inspection, authorization and similar fees); (d) alltaxes imposed on Tenant’s operation of the Leased Property, including, withoutlimitation, employee withholding taxes, income taxes and intangible taxes,sales and use taxes; (e) any taxes arising out of or incurred as a resultof any sale, transfer, assignment or other disposition by Tenant of itsinterest in the Leased Property or this Lease Agreement, whether or notpermitted under this Lease Agreement; and (f) all other governmentalcharges, in each case whether general or special, ordinary or extraordinary, orforeseen or unforeseen, of every character in respect of the Leased Property orany part thereof (including all interests and penalties thereon due to anyfailure in payment by Tenant), which at any time during or in respect of theTerm hereof may be assessed or imposed on or in respect of or be a lien uponany of the following: (i) Landlord or Landlord’s interest in the LeasedProperty or any part thereof; (ii) the Leased Property or any part thereofor any rent therefrom or any estate, right, title or interest therein; or (iii) anyoccupancy, operation, use or possession of, or sales from, or activity conductedon, or in connection with the Leased Property or the leasing or use of theLeased Property or any part thereof. Tenant shall not, however, be required to pay (y) any tax based onnet income (whether denominated as a franchise or capital stock or other tax)imposed on Landlord, or (z) any income, franchise, transfer, documentarystamp, intangible, gross receipts, inheritance, devolution, gift, estate,payroll, stamp act, or reassessment or supplemental assessments of ad valoremreal or personal property taxes due to the sale, transfer, assignment or otherdisposition of the title, estate or interest of Landlord in the Leased Propertyor this Lease Agreement.

##  

## **4.03        Utilities. **Tenant shall be responsibleto procure the supply of any and all utilities necessary for Tenant’s use andoccupation of the Leased Property and Landlord will have absolutely noresponsibility or obligation to provide any utility or other service to theLeased Property.  Tenant shall contractfor, in its own name, and will pay, as Additional Rent all taxes, assessments,charges/deposits, fees and bills for utilities including, without limitation,charges for water, gas, oil, sanitary and storm sewer, electricity, telephoneservice, trash collection, internet access and all other utilities that may becharged against any occupant or user of the Improvements during the Term.  Tenant shall at all times maintain thatamount of heat necessary to ensure against the freezing of water lines.

##  

## **4.04       ****Escrow ofImpositions****. **In the event Tenant fails to timely pay any or all of the Impositionswith respect to the Facility two (2) times in any one (1) tax periodor three (3) times in any two (2) consecutive tax periods, then, uponten (10) days written notice from Landlord to Tenant, Tenant shallthereafter deposit with Landlord on the first day of each month during theremaining Term hereof and any extended Term, a sum equal to one-twelfth(l/12th) of Landlord’s reasonable estimate of the Impositions assessed or to beassessed against such Leased Property during the tax year of the thenapplicable Lease Year, which sum shall be used by Landlord toward payment ofsuch Impositions.  If at the end of anyapplicable tax year, any such funds held by Landlord are insufficient to makefull payment of taxes or other Impositions for which such funds are held,Tenant, on demand, shall pay to Landlord any additional funds necessary to payand discharge the obligations of Tenant pursuant to the provisions of thisparagraph.  If, however, at the end ofany applicable tax year, such funds held by Landlord are in excess of the totalpayment required to satisfy taxes or other Impositions for which such funds areheld, Landlord shall apply such excess amounts to Tenant’s tax and Impositionescrow fund for the next tax year.  Ifany such excess exists following the expiration or earlier termination of

 

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## this Lease Agreement,Landlord shall promptly refund such excess amounts to Tenant.  The receipt by Landlord of the payment ofsuch Impositions by and from Tenant shall only be as an accommodation to Tenantand the taxing authorities, and shall not be construed as rent or income toLandlord, and shall not be deemed as the assumption by Landlord to pay suchImpositions or be deemed a waiver by Landlord of Tenant’s obligation to paysuch Impositions, Landlord serving, if at all, only as a conduit for deliverypurposes.

##  

## **4.05        Discontinuanceof Utilities. **Landlord willnot be liable for damages to person or property or for injury to, orinterruption of, business, whether the business of Tenant or any other Person,for any failure or interruption in the supply of utilities, or discontinuanceof utilities nor will such failure, interruption or discontinuance in any waybe construed as an eviction of Tenant or cause an abatement of Rent or operateto release Tenant from any of Tenant’s obligations under this Lease Agreement.

##  

## **4.06        Non-Duplicationof Additional Rent. **NotwithstandingTenant’s obligation to pay all Impositions and other Additional Rent inaccordance with the terms hereof, Tenant shall not pay any amount owed that isduplicative of an obligation that Tenant is required to pay as an Imposition orother category of Additional Rent under the Ground Lease Agreement.

##  

# **ARTICLE V**

# **INSURANCE**

# ** **

## **5.01       ****PropertyInsurance****. **Tenant, at Tenant’s expense, shall keep, or cause there to be kept, theLeased Property, including the Improvements, Fixtures, and other components ofthe Leased Property insured against the following risks:

##  

### (a)           Loss or damage by fire, vandalism andmalicious mischief, sprinkler leakage and all other physical loss perilscommonly covered by “special perils” or “special form” insurance (formerlyknown as “All Risk” insurance) in an amount not less than one hundred percent(100%) of the then full replacement cost thereof (as hereinafter defined).  Such policy shall include an agreed-amountendorsement in form and amount acceptable to Landlord.  Such policy shall also include endorsementsfor contingent liability for ordinance or law coverage with wording provided tocover the enforcement of operation of building and zoning laws, demolition andremoval costs of undamaged parts of the structure, and increased cost ofrepairs or reconstruction.

###  

### (b)           Loss or damage by explosion of steamboilers, pressure vessels, or similar apparatus, now or hereafter installed onthe Leased Property, in commercially reasonable amounts reasonably acceptableto Landlord.

###  

### (c)           Loss of 100% of the rent payable byTenant under a rental value coverage or endorsement to property policy coveringrisk of loss for a period of at least the first twelve (12) months of the Termto compensate Landlord for any rent abatement necessitated by the occurrence ofany hazards described in Sections 5.01(a) or 5.01(b), above, and whichcauses an abatement of Rent as provided in Article XI hereof, in an amountsufficient to prevent Landlord or Tenant from becoming a co-insurer, containingendorsements for extended period of indemnity and premium adjustment, andwritten with an agreed-amount clause.

 

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### (d)           If the Land is located in whole or inpart within a designated flood plain area, loss or damage caused by flood incommercially reasonable amounts acceptable to Landlord.

###  

### (e)           If the Land is located in whole or inpart within an earthquake zone area, loss or damage caused by earthquake incommercially reasonably amounts acceptable to Landlord.

###  

### (f)            Loss or damage commonly covered byblanket crime insurance including employee dishonesty, loss of money orders orpaper currency, depositor’s forgery, and loss of property accepted by Tenantfor safekeeping, in commercially reasonable amounts acceptable to Landlord.

###  

### (g)           In connection with any repairs orrebuilding by Tenant under Article XI hereof, Tenant shall maintain (orcause its contractor to maintain) appropriate builder’s risk insurance orequivalent policy form covering any loss or casualty to the subjectImprovements during the course of such repairs or rebuilding.

###  

## **5.02       ****LiabilityInsurance****. **Tenant shall, at Tenant’s expense, maintain during the Term liabilityinsurance against the following:

##  

### (a)           Claims for personal injury orproperty damage commonly covered by comprehensive general liability insurancewith endorsements for blanket, contractual, personal injury, owner’s protectiveliability, real property, fire damage, legal liability, broad form propertydamage, and extended bodily injury, with commercially reasonable amounts forbodily injury and property damage acceptable to Landlord, but with a combinedsingle limit of not less than Five Million Dollars ($5,000,000) per occurrenceand Ten Million Dollars ($10,000,000) in the aggregate.

###  

### (b)           Claims commonly covered by worker’scompensation and employers liability insurance for all persons employed byTenant on the Leased Property.  Suchworker’s compensation insurance shall be in accordance with the requirements ofall applicable local, state, and federal law.

###  

## **5.03       ****InsuranceRequirements****. **The following provisions shall apply to all insurance coverage requiredunder this Lease Agreement, including, but not limited to, the insurancerequired under Sections 5.01 and 5.02 above:

##  

### (a)           The carriers of all policies shallhave a Best’s Rating of “A-” or better and a Best’s Financial Category of VIIor higher and shall be authorized to do business in and licensed to issueinsurance policies of the type so issued to Tenant in the State of Colorado.

###  

### (b)           Tenant shall be the “named insured”and Landlord shall be an “additional insured” on each liability insurancepolicy required under Section 5.01, except that if such coverage is undera blanket policy, Landlord, shall each be designated an “additional insured”only with respect to the Leased Property covered under any such policy orpolicies and the operations and services conducted thereon.  Landlord and any mortgagee of Landlord shallbe designated “loss payee” or “mortgagee loss payee” on each property insurancepolicy required under Section 5.01 and the rent loss insurance coveragerequired under Section 5.01(c), except that if such coverage is under ablanket insurance policy, each shall be designated a “loss payee” 

 

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### or “mortgagee loss payee”only with respect to the Leased Property subject to this Lease Agreement.

###  

### (c)           Tenant shall deliver to Landlordcertificates showing the required coverage and endorsements.  The certificates of insurance shall providethat the policy may not be canceled or not renewed, and no material change orreduction in coverage may be made, without at least thirty (30) days’ priorwritten notice to Landlord.

###  

### (d)           The policies shall contain aseverability of interest and/or cross-liability endorsement, providing that theacts or omissions of Tenant will not invalidate the Landlord’s coverage, andproviding that Landlord shall not be responsible for payment of premiums.

###  

### (e)           All loss adjustment shall require thewritten consent of Landlord and Tenant, as their interests may appear, exceptthat if this Lease Agreement is terminated pursuant to the exercise of anyrights of the parties set forth in Article X of this Lease Agreement,Landlord shall be entitled to disbursement of all property insurance coveragesrequired under Section 5.01 and rent loss insurance proceeds, if any,under Section 5.01(c), without any need for the consent or authorizationof Tenant.

###  

### (f)            At least five (5) days prior tothe expiration of each policy, Tenant shall deliver to Landlord a certificateshowing renewal of such policy.

###  

### (g)           Landlord shall have the right toreview the insurance coverage required hereunder with Tenant from time to timewith respect to such insurance coverage required hereunder from time to time,to obtain the input of third party professional insurance advisors (at Landlord’sexpense except if an Event of Default shall have occurred and then becontinuing) with respect to such insurance coverage, and to provide input toTenant in Tenant’s annual review and renewal of such insurance coverage.  All insurance coverage hereunder shall be insuch form, substance and amounts as are customary or standard in Tenant’sindustry.

###  

### (h)           Prior to the annual renewal ofcoverage that occurs during the first year of any Extended Term, Landlord shallhave the right to require reasonable adjustments to the minimum insurancerequirements set forth in Section 5.02(a), such adjustments (if any) to beeffective sixty (60) days following Landlord’s written notice to Tenantspecifying the required adjustments.

###  

## **5.04        ReplacementCost. **The term “fullreplacement cost” means the actual replacement cost thereof from time to time,including increased cost of construction, with no reductions ordeductions.  If, as reasonably determinedby Landlord after consultation with Landlord’s third party professionalinsurance advisors, there has been an increase in the replacement cost of theImprovements, then, upon request of Landlord, Tenant shall, not later thanthirty (30) days after the anniversary of each applicable insurance policy, adjustthe amount of the replacement cost endorsement to reflect any suchincrease.  If Tenant makes any permittedalterations to the Leased Property, Landlord may have such full replacementcost re-determined at any time after such permitted alterations are made,regardless of when the full replacement cost was last determined.

##  

## **5.05       ****BlanketPolicy****. **Tenant may carry the insurance required by this Article under ablanket policy of insurance, provided that the coverage and limits affordedTenant will not be

 

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## reduced or diminished orotherwise be different from that which would exist under a separate policymeeting all of the requirements of this Lease Agreement.

##  

## **5.06        NoSeparate Insurance. **Tenant shallnot take out separate insurance concurrent in form or contributing in the eventof loss with that required in this Article V, or increase the amounts ofany then existing insurance pertaining to a particular Leased Property bysecuring an additional policy or additional policies with respect to suchLeased Property, unless all parties having an insurable interest in the subjectmatter of the insurance, including Landlord, are included therein as additionalinsureds or loss payees, the loss is payable under such insurance in the samemanner as losses are payable under this Lease Agreement, and such additionalinsurance is not prohibited by the existing policies of insurance.  Tenant shall immediately notify Landlord ofthe taking out of such separate insurance or the increasing of any of theamounts of the existing insurance by securing an additional policy oradditional policies.

##  

## **5.07        Waiver ofSubrogation. **Each partyhereto hereby waives any and every claim that arises or may arise in its favorand against the other party hereto during the Term or any extension or renewalthereof, for any and all loss of or damage to, any of its property locatedwithin or upon, or constituting a part of, the Leased Property, which loss ordamage is covered (or, under the terms of this Lease Agreement, should havebeen covered) by valid and collectible insurance policies, to the extent thatsuch loss or damage is recoverable under such policies.  This mutual waiver shall be in addition to,and not in limitation or derogation of any other waiver or release contained inthis Lease Agreement with respect to any loss or damage to property of theparties hereto.  Inasmuch as such waiverswill preclude the assignment of any such claim by way of subrogation (orotherwise) to an insurance company (or any other person), each party heretoagrees immediately to give each insurance company which has issued to itpolicies of insurance, written notice of the terms of such mutual waivers, andto have such insurance policies properly endorsed, if necessary, to prevent theinvalidation of such insurance coverage by reason of such waivers.

##  

## **5.08        Mortgages. **The following provisionsshall apply if Landlord now or hereafter places a mortgage on the LeasedProperty or any part thereof and if requested by Landlord in writing: (i) Tenantshall obtain a standard form of mortgagee clause insuring the interest of themortgagee; (ii) Tenant shall deliver evidence of insurance to suchmortgagee; and (iii) Tenant shall provide such other information anddocuments as may be reasonably required by the mortgagee.

##  

# **ARTICLE VI**

# **INDEMNITY;HAZARDOUS SUBSTANCES; DANGEROUS CONDITIONS**

# ** **

## **6.01       ****Tenant’sIndemnification****. **Subject to Section 5.07and other than for circumstances involving Landlord’s gross negligence orwillful misconduct, Tenant shall indemnify, defend, save and hold harmlessLandlord, its agents, partners, managers and employees of, from and against anyand all demands, claims, causes of action, fines, penalties, damages, losses,liabilities (including, but not limited to, strict liability), judgments, andexpenses (including, without limitation, reasonable attorneys’ fees andexpenses, court costs, and the costs set forth in Section 10.06 incurredin connection with or arising from any of the following: (a) the use,condition, operation or occupancy of the Leased Property; (b) anyactivity,

 

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## work, or thing done, orpermitted or suffered by or through Tenant in or about the Leased Property; (c) anyacts, omissions, or negligence of Tenant or any person claiming under Tenant,or the contractors, agents, employees, invitees or visitors of Tenant or anysuch Person; (d) any claim of any person incarcerated, held or detained inthe Leased Property, including claims alleging breach or violation of suchPerson’s civil or legal rights; (e) any breach, violation, ornonperformance by Tenant or any Person claiming under Tenant or the employees,agents, contractors, invitees or visitors of Tenant or of any such Person, of anyterm, covenant, or provision of this Lease Agreement or any law, ordinance,rule, regulation or governmental requirement of any kind; (f) any injuryor damage to the person, property or business of Tenant, its employees, agents,contractors, invitees, or visitors, or any other person entering upon theLeased Property under the express or implied invitation of Tenant; and (g) andany accident, injury to or death of persons or loss or damage to any item ofproperty occurring at the Leased Property. If any action or proceeding is brought against Landlord, its employees,partners, managers or agents by reason of any such claim, Tenant, upon noticefrom Landlord, will defend the claim at Tenant’s sole cost and expense withcounsel selected by Tenant and reasonably satisfactory to Landlord.  In the event Landlord reasonably determinesthat its or its employees’, partners’, managers’ or agents’ interests and theinterests of Tenant in any such action or proceeding are in material conflictand that Tenant’s counsel cannot adequately represent the interests of Landlordor such persons therein, Landlord shall have the right to hire separate counselin any such action or proceeding and the reasonable costs and expenses thereof,including all reasonable attorneys’ fees and expenses, shall be paid for byTenant.

##  

## **6.02        HazardousMaterials. **Tenant, subjectto the facts disclosed in any Phase I environmental report obtained by Landlordwith respect to the acquisition of the Leased Property, warrants and representsto Landlord as of the date of this Lease Agreement the following: (a) noactivity has been undertaken with respect to the Leased Property to Tenant’sknowledge which would cause a violation under any Hazardous Materials Law; (b) toTenant’s knowledge, no investigation, administrative order, litigation orsettlement with respect to any Hazardous Materials is in existence with respectto the Leased Property, nor, to Tenant’s knowledge, is any of the foregoingthreatened; and (c) to Tenant’s knowledge, no notice has been received byTenant from any Person claiming any violation of any Hazardous Materials Law,or requiring compliance with any Hazardous Materials Law, or demanding paymentor contribution for environmental damage or injury to natural resources withrespect to the Leased Property.

##  

## **6.03        Tenant’sCompliance/Indemnitie**s.

##  

### (a)           During the Term, Tenant will notstore, use, or dispose of any Hazardous Materials, except in such quantities asallowed and in such containers as permitted under and only in material accordancewith all applicable Hazardous Materials Laws. Notwithstanding the foregoing, Tenant anticipates using, storing anddisposing of certain Hazardous Materials in connection with the operation ofcorrectional or detention facilities on the Leased Property, which activitiesare not in violation of Hazardous Materials Laws.  Such substances include, but are not limitedto the following: medical wastes, diesel fuel, maintenance and janitorialsupplies, and waste from reprographic activities.  During the Term, Tenant shall not allow thestorage or use of Hazardous Materials on the Leased Property in any manner notpermitted by law and by the standards prevailing in the industry for thestorage and use of such substances or materials.

 

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### Upon request by Landlord,Tenant shall submit to Landlord annual reports regarding Tenant’s use, storage,and disposal of any of the Hazardous Materials, such reports to includeinformation regarding continued Hazardous Materials inspections, personalinterviews, and federal, state and local agency listings.  In addition, Tenant shall execute affidavits,representations and the like from time to time at Landlord’s request concerningTenant’s best knowledge and belief regarding the presence or absence ofHazardous Materials on the Leased Property. Unless caused by the negligence or willful misconduct of Landlord,Tenant shall indemnify, defend, save and hold Landlord harmless of, from andagainst any and all claims, costs, and liabilities, including, but not limitedto, reasonable attorneys’ fees and expenses and costs of litigation, incurredas a result of a release or threatened release on the Leased Property ofHazardous Materials or the violation, or the alleged violation, by Tenant ofany law, ordinance, regulation, order, permit, decree or similar items,including, but not limited to any Hazardous Materials Laws, relating tohazardous substances, human health or the environment (collectively, **“Environmental Laws”)**(irrespective ofwhether there has occurred any violation of any Environmental Law ), in respectof the Leased Property, including, but not limited to, the following: (a) liabilityfor response costs and for costs of removal and remedial action incurred by theUnited States Government, any state or local governmental or quasi-governmentalbody, agency, board or unit or any other person or entity, or damages frominjury to or destruction or loss of natural resources, including the reasonablecosts of assessing such injury, destruction or loss, incurred pursuant to anyEnvironmental Law, (b) liability for costs and expenses of abatement,investigation, removal, remediation, correction or clean-up, fines, damages,response costs or penalties which arise from the provisions of anyEnvironmental Law, (c) liability for personal injury or property damagearising under any statutory or common-law tort theory, including damagesassessed for the maintenance of a public or private nuisance or for carrying onof a dangerous activity or (d) by reason of a breach of an environmentalrepresentation or warranty given by Tenant to Landlord.  The foregoing indemnification of Landlord byTenant includes, without limitation, all costs incurred by or imposed uponLandlord in connection with any judgments, damages, penalties, fines,liabilities or losses (including, without limitation, damages for the loss orrestriction on use of any space or of any amenity in or around the LeasedProperty, and sums paid in settlement of claims, reasonable attorneys’ fees andcosts, reasonable consultant fees and reasonable expert fees) or in connectionwith the investigation of site conditions or any clean up, or remedial removalor restoration work required by any Federal, state or local governmental agencyor political subdivision occurring as a result of the presence of any HazardousMaterial in, on or under the Leased Property caused by Tenant or for whichTenant is legally liable.  Tenant’sobligations under this Section 6.02 will survive the termination(including the early expiration) of this Lease Agreement.

###  

### (b)           Subject to the provisions of Section 16.03,Landlord or any representatives, contractors or agents of Landlord may inspect,including, but not limited to, if Landlord determines the same is warranted,causing a Phase I and/or Phase II environmental assessment to be performed at,the Leased Property from time to time to determine compliance by Tenant withthe environmental representations and covenants set forth in this Section 6.02,and Tenant will cooperate with such inspections, which must be conducted byLandlord in accordance with all applicable rules and regulations andsubject to the approval of all federal, state and local correctional and otherauthorities with inmates incarcerated at, or supervisory responsibility over,the Leased Property.  Such inspectionsshall be performed at Landlord’s expense unless an Event of Default hasoccurred or Landlord has a reasonable basis to contend that Tenant has violatedits

 

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### representations or covenantsunder this Article VI and such inspection is reasonably necessary todetermine whether such violation is in existence.  Landlord shall provide Tenant not less thanthirty (30) days prior notice of the date and time of any Phase IIenvironmental drilling, sampling or testing involving intrusive procedures andcoordinate with Tenant such procedures so that they do not unreasonablyinterfere with Tenant’s operations at the Facility.  All such inspections shall be performed inaccordance with all Environmental Laws.

###  

## **6.04****       ****Definitions****. **Without limitation, **“Hazardous Materials”**for the purpose ofthis Article VI shall include any substances regulated by any local, stateor federal law relating to environmental conditions and industrial hygiene,including, without limitation, the Resource Conservation and Recovery Act of1976 (“RCRA”), the Comprehensive Environmental Response, Compensation andLiability Act of 1980 (“CERCLA”), as amended by the Superfund Amendments andReauthorization Act of 1986 (“SARA”), the Hazardous Materials TransportationAct, the Federal Water Pollution Control Act, the Clean Air Act, the CleanWater Act, the Toxic Substances Control Act, the Safe Drinking Water Act, andall similar federal, state and local environmental statutes, ordinances and theregulations, orders, or decrees now or hereafter promulgated thereunder(collectively, **“Hazardous Materials Law”).**

##  

## **6.05****       ****Tenant’s Risk: Limitation of Landlord’s Liability****. **Tenant agrees that theLeased Property and all furnishings, fixtures, equipment, effects and propertyof every kind, nature and description of Tenant and of all persons claiming by,through or under Tenant which, during the continuance of this Lease Agreementor any occupancy of the Leased Property by Tenant or anyone claiming underTenant, may be on the Leased Property, shall, unless caused by the grossnegligence or willful misconduct of Landlord, be at the sole risk and hazard ofTenant, and, subject to the foregoing, if the whole or any part thereof shallbe destroyed or damaged by fire, water or otherwise, or by the leakage orbursting of water pipes, steam pipes, or other pipes, by theft or from anyother cause, no part of said loss or damage is to be charged to or be borne byLandlord, except that Landlord shall in no event be exonerated from anyliability to Tenant or to any person, for any injury, loss, damage or liabilityto the extent such exoneration is prohibited by law.  Landlord shall not be responsible or liableto Tenant, or to those claiming by, through or under Tenant, for any loss ordamage that may be occasioned by or through the acts or omissions of personsoccupying or owning property adjoining or adjacent to the Leased Property.  Landlord, its agents, partners, managers andemployees, will not be liable for any loss, injury, death, or damage (includingconsequential damages) to persons, property, or Tenant’s business occasioned bytheft, act of God, public enemy, terroristic threat or act, injunction, riot,strike, insurrection, war, court order, requisition, order of governmental bodyor authority, fire, explosion, falling objects, steam, water, rain or snow,leak or flow of water (including water from the elevator system), rain or snowfrom the Leased Property or into the Leased Property or from the roof, street,subsurface or from any other place, or by dampness or from the breakage,leakage, obstruction, or other defects of the pipes, sprinklers, wires,appliances, plumbing, air conditioning, or lighting fixtures of the Leased Property,or from construction, repair, or alteration of the Leased Property or from anyacts or omissions of any other occupant or visitor of the Leased Property, orfrom the presence or release of any hazardous substance or material on or fromthe Leased Property or from any other cause beyond Landlord’s reasonablecontrol.

##  

## **6.06****       ****Dangerous Condition****. **Tenant shall usecommercially reasonable efforts in accordance with industry standards to keepthe Leased Property free from mold, mildew, lead

 

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## based paint and any and allother bacteria, fungi, substances and materials in quantities or concentrationsthat could be reasonably expected to be harmful to the health or safety of anyoccupants or inmates at the Facility or any employees or other invitees ofTenant or any other person coming onto or in the Facility.

##  

# **ARTICLE VII**

# **USEAND ACCEPTANCE OF LEASED PROPERTY**

# ** **

## **7.01****       ****Use of Leased Property****. **The Leased Property shall beused and occupied exclusively as a correctional or detention facility togetherwith uses related or incidental to the operation of a correctional or detentionfacility or required pursuant to the Operating Agreement or any othergovernmental operating agreement, support agreement or sublease, including, butnot limited to, any Service Agreements (as defined below), or any other purposefor which the Leased Property is being used at the Commencement Date of theTerm or the Rental Commencement Date, and for no other purpose without theprior written consent of the Landlord, which shall not be unreasonablywithheld, delayed or conditioned.  Tenantshall obtain and maintain all approvals, licenses, and consents needed to useand operate each Leased Property for such purposes.  If requested by Landlord, Tenant shallpromptly deliver to Landlord complete copies of surveys, examinations,certification and licensure inspections, compliance certificates, and othersimilar reports issued to Tenant by any governmental agency for the use andoccupancy of the Leased Property.

##  

## **7.02****       ****Acceptance of Leased Property****. **Except as otherwisespecifically provided in this Lease Agreement, Tenant acknowledges that (i) Tenantand its agents have had an opportunity to inspect the Leased Property, (ii) Tenanthas found the Leased Property fit for Tenant’s use, (iii) delivery of theLeased Property to Tenant is in an “as-is” condition, (iv) except forLandlord’s obligations under the Development Agreement with respect toproviding funds to finance the development of the Project, Landlord is notobligated to make any improvements or repairs to the Leased Property and (v) asof the Rental Commencement Date, the roof, walls, foundation, heating,ventilating, air conditioning, telephone, sewer, electrical, mechanical,utility, plumbing, Fixtures, Improvements and other portions of the LeasedProperty will be in good working order. Tenant waives any claim or action against Landlord with respect to thecondition of the Leased Property.

##  

LANDLORD MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, INRESPECT OF THE LEASED PROPERTY OR ANY PART THEREOF, EITHER AS TO ITSFITNESS FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OROTHERWISE, AS TO QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, OR THEPRESENCE OR ABSENCE OF ANY DEFECT THEREIN, LATENT OR PATENT, IT BEING AGREEDTHAT ALL SUCH RISKS ARE TO BE BORNE BY TENANT.

 

## **7.03****       ****Conditions of Use and Occupancy****. **During the Term, Tenantshall use and keep the Leased Property in a careful, safe and proper manner;not injure, physically overload, deface, damage or otherwise commit nuisance orsuffer waste thereon; not use or occupy the Leased Property for any unlawfulpurposes; not use or occupy the Leased Property or permit the same to

 

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## be used or occupied, for anypurpose or business deemed extra hazardous on account of fire or potential fireor other hazard or otherwise; keep the Leased Property in such repair andcondition as may be required by the local board of health, fire marshal, orother city, state or federal authorities, free of all cost to Landlord; and notpermit any acts to be done that will cause the cancellation, invalidation, orsuspension of any insurance policy, provided that the foregoing shall be subjectto the normal wear and tear contemplated in Section 2.05.

##  

## **7.04****       ****FinancialReports**.

##  

### (a)           Within ten (10) businessdays following Landlord’s request, Tenant shall deliver to Landlord thequarterly and annual average occupancy rates for the Leased Property.

###  

### (b)           If at any timeduring the Term, the financial statements of Cornell Companies, Inc. **(“Tenant Parent”)**cease to be publiclyavailable or Tenant Parent ceases to be a public company required to file itsfinancial statements with the Securities and Exchange Commission, Tenant shalldeliver to Landlord (to the extent not previously delivered or available toLandlord), within ten (10) business days following receipt of a request byLandlord, copies of Tenant Parent’s audited annual financial statement for itstwo (2) most recent fiscal years for which audited financials haveotherwise been prepared, if any.  Inaddition, if requested by Landlord in connection with any existing or proposedfinancing or sale of the Leased Property, Tenant shall deliver to Landlord,within ten (10) business days of a request from Landlord, copies of TenantParent’s quarterly financial statements for its most recent fiscal quarter forwhich such statements have been prepared and are available.  Such financial statements of Tenant Parentshall include, if available, a balance sheet, an income statement, and astatement of change in financial position or sources and uses of cash, togetherwith any accompanying notes.  In theevent that Tenant Parent’s most recent quarterly or annual financialstatements, as applicable, have not been completed and filed publicly as of thedate of Landlord’s request therefore, Tenant Parent shall deliver to Landlordcopies of the most recent financial statements then prepared and completed byor on behalf of Tenant Parent within ten (10) business days followingLandlord’s request and shall deliver updated financial statements when filedpublicly.

###  

# **ARTICLE VIII**

# **REPAIR:COMPLIANCE WITH LAWS:**

# **MECHANICS’OR CONSTRUCTION LIENS: MAINTENANCE OF SERVICE**

# **CONTRACTS**

# ** **

## **8.01****       ****Repair and Maintenance****. **Tenant shall, at Tenant’ssole cost and expense, maintain the Leased Property in good order, repair andappearance, and repair the Leased Property, including without limitation, allinterior and exterior, structural and nonstructural repairs and replacements tothe roof, foundations, exterior walls, building systems, HVAC systems, parkingareas, sidewalks, water, sewer and gas connections, pipes, and mains.  In determining Tenant’s obligations tomaintain the Leased Property hereunder, the parties shall take intoconsideration the purpose of the Leased Property as a correctional/detentionFacility and any maintenance requirements or standard contained in anyOperating Agreement.  Tenant shall pay asAdditional Rent, in accordance with Section 3.02, the full cost ofmaintenance, repairs, and replacements to the Leased Property and all Fixturesand Improvements.  Tenant shall maintainall drives, sidewalks, parking areas, and lawns on or about the Leased Propertyin

 

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## a clean and orderlycondition, free of accumulations of dirt, rubbish, snow and ice.  Tenant shall permit Landlord or anyrepresentatives or agents of Landlord to inspect the Leased Property asprovided in Section 16.03. Notwithstanding the foregoing, Landlord has no obligation to inspect theLeased Property, and Landlord will have no liability to Tenant or any otherparty with respect to the condition of the Leased Property whether or notLandlord inspects the same.

##  

## **8.02****       ****[Intentionally Omitted.]**

##  

## **8.03****       ****Compliance with Laws****. **Tenant shall, at Tenant’ssole cost and expense, comply in all material respects, and shall cause theLeased Property to comply in all material respects, with all laws, codes,ordinances, orders, rules, regulations, and other governmental requirementsrelating to the use, condition, or occupancy of the Leased Property, whethernow or hereafter enacted and in force including without limitation, (a) licensurerequirements for operation as a correctional or detention facility or any otheruse permitted hereunder, (b) requirements of any board of casualtyinsurance underwriters or insurance service office or any other similar bodyhaving jurisdiction over the Leased Property, and (c) all zoning and buildingcodes and Environmental Laws.  AtLandlord’s request, from time to time, Tenant shall deliver to Landlord copiesof certificates or permits evidencing compliance with such laws including,without limitation, copies of the correctional or detention facility licenses,certificates of occupancy and building permits. Tenant shall promptly provide Landlord with copies of any notice fromany governmental authority alleging any non-compliance by Tenant or the LeasedProperty with any of the foregoing requirements and such evidence as Landlordmay reasonably require with respect to Tenant’s remediation thereof.

##  

## **8.04****       ****Required Alterations****. **Tenant shall, at Tenant’ssole cost and expense, make any additions, changes, improvements or alterationsto the Leased Property, including structural alterations, which may be requiredby any governmental authorities, including those required to continue licensureof the Improvements as a correctional or detention facility and all alterationsand additions necessary to make the Leased Properties compliant in all materialrespects under the Americans with Disabilities Act and all applicable state andlocal laws, ordinances and regulations governing the accessibility of theLeased Properties to persons with disabilities, whether such changes arerequired by Tenant’s use, changes in the law, ordinances, or governmentalregulations, defects existing as of the date of this Lease, or any other causewhatsoever.  Tenant shall provide priorwritten notice to Landlord of any changes to the Leased Property pursuant tothis Section 8.04 which involve changes to the structural integrity ofsuch Leased Property or materially affect the operational capabilities or ratedcapacity of the Leased Property.  Allsuch additions, changes, improvements or alterations shall be deemed to be aTenant Improvement (as defined below) and shall comply in all material respectswith all laws requiring such alterations and with the provisions of Section 9.01.

##  

## **8.05****       ****Mechanics’ or Construction Liens****. **Tenant shall indemnify,defend, save and hold Landlord harmless of, from and against any and allmechanics’ or construction liens filed against the Leased Property by reason ofwork, labor services or materials supplied or claimed to have been supplied onor to the Leased Property.  Tenant shallcause to be removed, bonded-off, or otherwise released any mechanics’ orconstruction lien filed against the Leased Property within forty-five (45) daysof the date of filing of such lien.  IfTenant shall fail to discharge any such lien, Landlord may, at its option,after ten (10) business days notice to Tenant of its intent to 

 

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## do so, discharge such lienand treat the cost thereof (including reasonable attorneys’ fees incurred inconnection therewith) as Additional Rent payable upon demand, it beingexpressly agreed that such discharge by Landlord shall not be deemed to waiveor release the Event of Default in not discharging such lien.  Tenant shall pay all cost and expenses inconnection with the removal of such liens, whether incurred by Landlord orTenant, including, without limitation, damages, interest, court costs andreasonable attorneys’ fees and expenses.

##  

## **8.06****       ****Replacements of Fixtures****. **Tenant shall not removeFixtures from the Leased Property except to replace the Fixtures by othersimilar items of comparable quality and functionality.  Items being replaced by Tenant may be removedand shall become the property of Tenant, and items replacing the same shall be andremain the property of the Landlord. Tenant shall execute, upon written request from Landlord, any and alldocuments necessary to evidence Landlord’s ownership of the Fixtures andreplacements therefor.  Tenant mayfinance replacements for the Fixtures by equipment lease or by a securityagreement and financing statement; provided, however, that for any item ofFixtures having a cost greater than or equal to One Hundred Thousand Dollars($100,000) (or Thirty Thousand Dollars ($30,000) in the case of a financingthat is proposed within the last thirty-six (36) months of a Term), Tenant maynot finance replacements by security agreement or equipment lease unless (a) Landlordhas consented to the terms and conditions of the equipment lease or securityagreement, including, without limitation, the amount to be financed and theamortization schedule regarding the principal amount of any such financing, (b) theequipment lessor or lender has entered into a non-disturbance agreement withthe Landlord upon terms and conditions acceptable to Landlord, includingwithout limitation, the following: (i) Landlord shall have the right (butnot the obligation) to assume such security agreement or equipment lease uponthe occurrence of an Event of Default by Tenant under this Lease Agreement, (ii) theequipment lessor or lender shall notify Landlord of any default by Tenant underthe equipment lease or security agreement and give Landlord a reasonableopportunity to cure such default, and (iii) Landlord shall have the rightto assign its rights under the equipment lease, security agreement, ornon-disturbance agreement, and (c) Tenant shall, within thirty (30) daysafter receipt of an invoice from Landlord, reimburse Landlord for allreasonable costs and expenses incurred in reviewing and approving the equipmentlease, security agreement, and non-disturbance agreement, including withoutlimitation, attorneys’ fees, expenses and costs.

##  

## **8.07****       ****Maintenance of Service Agreements****. **Tenant shall keep in fullforce and effect and shall perform all material obligations required to beperformed by Tenant under, any and all material contracts, agreements, leases,or commitments or documents applicable to the Leased Property or the operationof the Facility, including but not limited to, Service Agreements (as definedbelow).  Tenant shall immediately notifyLandlord in writing if Tenant or any other party to any such material contract,agreement, lease, or commitment or document applicable to the Leased Propertyor the operation of the Facility, including, but not limited to, the ServiceAgreements, is in material default thereunder, or if any Service Agreement hasbeen terminated by any party thereto.

 

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# **ARTICLE IX**

# **ALTERATIONS;TENANT’S PROPERTY;**

# **CAPITALADDITIONS TO THE LEASED PROPERTY**

# ** **

## **9.01****       ****Tenant’s Right to Construct****. **Tenant shall have theexclusive right and access to construct, or cause there to be constructed, theFacility and to otherwise develop, construct and equip the Project, and toimplement the Development Plan.  Tenantshall also have the exclusive right and access to make Capital Additions, orother alterations, additions, changes and/or improvements to the LeasedProperty or the Land as deemed necessary or useful by Tenant to operate theLeased Property as a correctional or detention facility or other use approvedby Landlord (the **“Primary Intended**Use”)(excluding any such alterations, additions, changes and/or improvements inconnection with the Project or that are contemplated by the Development Plan,individually, a **“Tenant Improvement,”**orcollectively, **“Tenant Improvements”).  “Capital Additions”**shall mean aTenant Improvement consisting of the construction of one or more new buildingsor one or more additional structures annexed to any portion of any of theImprovements on the Leased Property, which are constructed on any parcel ofLand or portion of the Leased Property or the Land during the Term of thisLease Agreement, including the construction of a new floor, which in each caseare not constructed pursuant to or in connection with the Project orcontemplated by the Development Plan. Except as otherwise agreed to by Landlord in writing pursuant to Section 9.09below, any Tenant Improvement shall be made at Tenant’s sole expense and shallbecome the property of Landlord upon termination of this Lease Agreement.  Unless made on an emergency basis to preventinjury to person or property, Tenant will submit plans to Landlord for Landlord’sreview prior approval, such approval not to be unreasonably withheld ordelayed, for any Tenant Improvement which is not a Capital Addition and whichhas a cost of more than Five Hundred Thousand Dollars ($500,000) or a costwhich, when aggregated with the costs of all such Tenant Improvements for theLeased Facility in the same Lease Year, would cause the total costs of all suchTenant Improvements to exceed One Million Dollars ($1,000,000).  Such $500,000 and $1,000,000 amounts shall beincreased by three percent (3%) per annum, cumulatively for each subsequentLease Year.  Additionally, in connectionwith any Tenant Improvement, including any Capital Addition, Tenant shallprovide Landlord with copies of any plans and specification therefor, Tenant’sbudget relating thereto, any required government permits or approvals, anyconstruction contracts or agreements relating thereto, and any otherinformation relating to such Tenant Improvement as Landlord shall reasonablyrequest.

##  

## **9.02****       ****Scope of Right****. **Subject to Section 9.01herein and Section 8.04 concerning required alterations, at Tenant’s costand expense, Tenant shall have the exclusive right to do the following:

##  

### (a)           seek anygovernmental approvals, including building permits, licenses, conditional usepermits and any certificates of need that Tenant requires to construct anyTenant Improvement;

###  

### (b)           erect upon theLeased Property or the Land such Tenant Improvements as Tenant deems desirableincluding but not limited to new facilities or expansions to existingfacilities;

 

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### (c)           make additions,alterations, changes and improvements in any Tenant Improvement so erected; and

###  

### (d)           engage in anyother lawful activities that Tenant determines are necessary or desirable forthe development of the Leased Property or the Land in accordance with itsPrimary Intended Use;

###  

provided, however, Tenantshall not make any Tenant Improvement which would impair the value or PrimaryIntended Use of the Leased Property or the Land without Landlord’s priorwritten consent.

 

## **9.03****       ****Cooperation of Landlord****. **Landlord shall cooperatewith Tenant and take such actions, including the execution and delivery toTenant of any applications or other documents, reasonably requested by Tenantin order to obtain any governmental approvals sought by Tenant that have eitherbeen approved by Landlord or for which Landlord’s approval is not required toconstruct any Tenant Improvement within ten (10) business days followingthe later of (a) the date Landlord receives Tenant’s request together withall information reasonably requested by Landlord regarding the TenantImprovements, or (b) the date of delivery of any such application ordocument to Landlord together with all information reasonably requested byLandlord regarding the Tenant Improvements, so long as the taking of suchaction, including the execution of such applications or documents, shall bewithout cost to Landlord (or if there is a cost to Landlord, such cost shall bereimbursed by Tenant), and will not cause Landlord to be in violation of anylaw, ordinance, rule or regulation.

##  

## **9.04****       ****Commencement of Construction****. **Tenant shall perform all ofthe following in connection with the Tenant Improvements:

##  

### (a)           Tenant shalldiligently seek all governmental approvals relating to the construction of anyTenant Improvement;

###  

### (b)           Once Tenantbegins the construction of any Tenant Improvement, Tenant shall diligentlyprosecute any such construction to completion materially in accordance withapplicable insurance requirements, the requirements of any governmentalapproval or permit relating thereto and the laws, rules and regulations ofall governmental bodies or agencies having jurisdiction over the LeasedProperty;

###  

### (c)           Permit Landlordat any time and from time to time to post and maintain upon the Leased Propertyor the Land such notices as may be necessary to protect Landlord’s interestfrom mechanics’ liens, materialmen’s liens, construction liens, or liens of asimilar nature;

###  

### (d)           Tenant shallnot suffer or permit any mechanics’ or construction liens or any other claimsor demands arising from the work or construction of any Tenant Improvement tobe enforced against the Leased Property or the Land or any part thereof andTenant shall indemnify, defend, save and hold Landlord harmless of, from andagainst any and all liability from any such liens, claims or demands, togetherwith all reasonable costs and expenses in connection therewith, including, butnot limited to, reasonable attorneys’ fees and expenses;

 

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### (e)           All work shallbe performed in a good and workmanlike manner consistent with generallyaccepted construction standards in the industry; and

###  

### (f)            Subject to Section 9.09in the case of Capital Additions, Tenant shall not be permitted to obtainconstruction or other financing for the Tenant Improvements secured by Tenant’sleasehold interest therein without Landlord’s prior written consent, suchconsent not to be unreasonably withheld, delayed or conditioned, and any suchfinancing (i) shall not exceed the cost of the Tenant Improvements, (ii) shallbe subordinate to any mortgage or encumbrance now existing or hereinaftercreated by Landlord with respect to the Leased Property, and (iii) shallbe limited solely to Tenant’s interest in the Leased Property or the Land thatis the subject of the improvements.

###  

## **9.05****       ****Rights in Tenant Improvements****. **Notwithstanding anything tothe contrary in this Lease, all Tenant Improvements constructed pursuant to Section 9.01,any and all subsequent additions thereto and alterations and replacementsthereof, shall be the sole and absolute property of Landlord upon theexpiration or early termination of this Lease Agreement.  Tenant shall be entitled to all federal andstate income tax benefits associated with any Tenant Improvement (other than aCapital Addition purchased or financed by Landlord) during the Term of thisLease Agreement.

##  

## **9.06****       ****[IntentionallyOmitted.]**

##  

## **9.07****       ****Requirements for Personal Property****. **Tenant shall comply with allof the following requirements in connection with personal property:

##  

### (a)           Tenant shallremove any of Tenant’s personal property, upon the termination or expiration ofthis Lease Agreement and shall repair any damage to the Leased Propertyresulting from the removal of Tenant’s personal property.  If Tenant fails to remove Tenant’s personalproperty within thirty (30) days after the termination or expiration of theLease Agreement, then Tenant shall be deemed to have abandoned Tenant’spersonal property, Tenant’s personal property shall become the property ofLandlord (at no cost to Landlord), and Landlord may remove, store and disposeof Tenant’s personal property.  In suchevent, Tenant shall have no claim or right against Landlord for such propertyor the value thereof regardless of the disposition thereof by Landlord.  Tenant shall pay Landlord, upon demand, allreasonable expenses incurred by Landlord in removing and disposing of Tenant’spersonal property and repairing any damage to the Leased Property caused bysuch removal.  Tenant’s obligationshereunder shall survive the termination or expiration of this Lease Agreement.

###  

## **9.08****       ****Signs**.  Tenant may, at its own expense, erect andmaintain identification signs at the Leased Property, provided such signscomply in all material respects with all laws, ordinances, rules, permits,approvals and regulations.  On thetermination or expiration of this Lease Agreement, Tenant, within thirty (30)days after notice from Landlord, shall remove the signs and repair any damageto the Leased Property or the Land resulting from such removal, whichobligation shall survive the expiration or termination hereof.

 

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## **9.09****       ****Financings of Capital Additionsto a Leased Property**.

##  

### (a)           Prior toseeking construction, permanent or other financing from a third party for aCapital Addition proposed to be made by Tenant to the Leased Property or theLand, Tenant shall submit to Landlord a written request for such financing.  Landlord may, but shall be under noobligation to, offer to provide or arrange such financing.  Within thirty (30) days after receipt of sucha request from Tenant, Landlord shall notify Tenant in writing as to whether itwill finance the proposed Capital Addition and, if so, the terms and conditions(“Landlord Financing Terms”) upon which it would be willing to do so, includingthe terms of any amendment to this Lease Agreement for such proposed CapitalAddition.

###  

### (b)           If Landlordagrees to finance the proposed Capital Addition of Tenant on terms satisfactoryto Tenant, Tenant shall provide Landlord, unless Landlord waives any of theclauses below, with the following:

###  

#### (i)            all customaryor other required loan documentation which may be required;

####  

#### (ii)           anyinformation, certificates, licenses, permits or documents requested by eitherLandlord or any lender with whom Landlord has agreed or may agree to providefinancing, which are necessary to confirm that Tenant will be able to use theCapital Addition upon completion thereof in accordance with the PrimaryIntended Use, including all required, federal, state or local governmentlicenses, permits and approvals;

####  

#### (iii)          a certificatefrom Tenant’s architect, setting forth in reasonable detail the projected (oractual, if available) cost of the proposed Capital Addition;

####  

#### (iv)          an amendment tothis Lease Agreement, or a new lease agreement, duly executed and acknowledged,in form and substance reasonably satisfactory to Landlord, and containing suchprovisions as may be necessary or appropriate, including without limitation,any appropriate changes in the legal description of the Land, the Rent, anysecurity deposit or other escrow required hereunder and other changes withrespect to the Capital Addition;

####  

#### (v)           a deedconveying title to Landlord to any land acquired for the purpose ofconstructing the Capital Addition, free and clear of any liens or encumbrancesexcept those approved by Landlord and, both prior to and following completionof the Capital Addition, an as-built survey thereof satisfactory to Landlord;

####  

#### (vi)          endorsements toany outstanding policy of title insurance covering the Leased Property or theLand or a supplemental policy of title insurance covering the Leased Propertyor the Land satisfactory in form and substance to Landlord (A) updatingthe same without any additional exceptions, except as may be permitted byLandlord; and (B) increasing the coverage thereof by an amount equal tothe fair market value of the Capital Addition;

####  

#### (vii)         if required byLandlord, (A) an owner’s policy of title insurance insuring fee simpletitle to any land conveyed to Landlord pursuant to Section 9.09(b)(v),free and clear of all liens and encumbrances except those approved by Landlordand (B) a lender’s policy of title

 

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#### insurance satisfactory inform and substance to Landlord and any lending institution advancing a portionof the cost of the Capital Addition;

####  

#### (viii)        if required byLandlord, upon completion of the Capital Addition; an MAI appraisal of theLeased Property and the Land indicating that the value of the Leased Propertyand the Land upon completion of the Capital Addition exceeds the fair marketvalue of the Leased Property and the Land prior thereto by an amount not lessthan ninety-five percent (95%) of the cost of such Capital Addition; and

####  

#### (ix)          such othercertificates (including, but not limited to, endorsements, increasing theinsurance coverage, if any, at the time required), documents, opinions ofcounsel, appraisals, surveys, certified copies of duly adopted resolutions ofthe board of directors of Tenant authorizing the execution and delivery of allloan documents and any amendment to an this Lease Agreement and any otherinstruments as may be reasonably required by Landlord and any lendinginstitution advancing any portion of the cost of the Capital Addition.

####  

### (c)           Upon making arequest to finance a Capital Addition, whether or not such financing isactually consummated, Tenant shall pay or agree to pay, upon demand, all reasonablecosts and expenses of Landlord paid or incurred by it in connection with thefinancing of the Capital Addition, including, but not limited to, (i) thereasonable fees and expenses of its counsel, (ii) all printing expenses, (iii) theamount of any filing, registration and recording taxes and fees, (iv), (v) appraisalfees, if any, and (vi) costs of obtaining regulator and governmentalapprovals for the construction, operation, use or occupancy of the CapitalAddition.

###  

### (d)           (i)  IfLandlord and Tenant are unable to agree on the terms of the financing byLandlord of a Capital Addition, Tenant may, subject to the terms of this Section 9.09,undertake the cost of any such Capital Addition and seek construction,permanent or other financing from other sources, provided that Tenant shall notuse financing for such Capital Addition obtained from such other sources unlessthe terms and conditions of such financing from other sources are offered bysuch third party within ninety (90) days after the date Tenant is notified ofthe Landlord Financing Terms, and the terms and conditions of such otherfinancing provide overall financial terms that are more favorable to the Tenantthan those provided by the Landlord Financing Terms (as reasonably determinedby Tenant after comparison of the true interest or capitalization rates,amortization and other material factors). In the event Tenant shall reach an agreement to obtain financing for aCapital Addition from a third party, Tenant shall provide a copy to Landlord ofthe final set of terms agreed upon by Tenant with such third party.  Landlord shall cooperate with Tenant inobtaining all necessary approvals for such Capital Addition, at no cost orexpense to Landlord.

###  

#### (ii)           If Tenantobtains any construction, permanent or other financing in connection with anyCapital Addition, such financing may be secured by Tenant’s leasehold interestsin this Lease Agreement and the Ground Lease Agreement and by Tenant’sleasehold interest in the Leased Property and the Land and/or the CapitalAddition, provided that Tenant may not finance any Capital Addition with anysuch lien or encumbrance on Tenant’s leasehold interest under this LeaseAgreement or the Ground Lease Agreement or on Tenant’s leasehold interest inthe Leased Property or the Land or Capital Addition, unless (a) theleasehold mortgagee or lender has entered into a non-disturbance agreement withthe Landlord upon terms 

 

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#### and conditions reasonablyacceptable to Landlord and Tenant including, without limitation, the following:(i) Landlord shall have the right (but not the obligation) to assume suchfinancing or security agreement upon the occurrence of an Event of Default byTenant under this Lease Agreement, (ii) the leasehold mortgagee or lendershall notify Landlord of any default by Tenant under the leasehold mortgage orsecurity agreement and give Landlord a reasonable opportunity to cure suchdefault, and (iii) Landlord shall have the right to assign its rights underthe leasehold mortgage, security agreement, or non-disturbance agreement, and (b) Tenantshall, within thirty (30) days after receipt of an invoice from Landlord,reimburse Landlord for all reasonable costs and expenses incurred in reviewingthe leasehold mortgage, security agreement, and non-disturbance agreementincluding, without limitation, attorneys’ fees, expenses and costs.

####  

## **9.10****       ****Financings of Capital Additionsto Adjacent Land of Leased Property**.  Notwithstanding any provision hereincontained to the contrary, Tenant shall have the right to independently conductadditional development (including, but without limitation, development thatincludes the construction and operation of projects or facilities that arecompetitive with the Project and the Facility) on property adjacent to or nearthe Land if it should so elect, without any obligation on the part of Tenant tonotify Landlord of such development or to provide any right to Landlord toparticipate in such development.

##  

# **ARTICLE X**

# **DEFAULTSAND REMEDIES**

# ** **

## **10.01****     ****Events of Default**.

##  

### (a)           **Tenant Defaults. **The occurrenceof any one or more of the following shall be an event of default (each, an **“Event of Default”)**hereunder:

###  

#### (i)            Tenant fails tomake payment when due of any installment of Rent payable by Tenant to Landlordunder this Lease Agreement and such failure shall continue for ten (10) calendardays after written notice of such failure is given to Tenant by Landlord;

####  

#### (ii)           Tenant fails,for the third or subsequent time within a given calendar year, to make paymentwhen due of any installment of Rent payable by Tenant to Landlord under thisLease Agreement;

####  

#### (iii)          Tenant fails toobserve and perform, in any material respect, any other material covenant,condition or agreement under this Lease Agreement to be performed by Tenant(except those described in Section 10.01(a)(i) of this LeaseAgreement) that is not cured within thirty (30) days following receipt ofwritten notice from Landlord; provided, however, that if such default cannot becured within such thirty (30) day period through the use of diligent efforts,such period shall be extended for so long as Tenant continues to exercisediligent efforts to cure such default;

####  

#### (iv)          If Tenant: (a) admitsin writing its inability to pay its debts generally as they become due, (b) filesa petition in bankruptcy or a petition to take advantage of any insolvency act,(c) makes an assignment for the benefit of its creditors, (d) isunable to pay its debts as they mature, (e) consents to the appointment ofa receiver of itself or of the whole or any substantial part of its property,or (f) files a petition or answer seeking reorganization or

 

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#### arrangement under thefederal bankruptcy laws or any other applicable law or statute of the UnitedStates of America or any state thereof;

####  

#### (v)           If Tenant, on apetition in bankruptcy filed against it, is adjudicated as bankrupt or a courtof competent jurisdiction enters an order or decree appointing, without theconsent of Tenant, a receiver of Tenant of the whole or substantially all ofits property, or approving a petition filed against it seeking reorganizationor arrangement of Tenant under the federal bankruptcy laws or any otherapplicable law or statute of the United States of America or any state thereof,and such judgment, order or decree is not vacated or set aside or stayed withinsixty (60) days from the date of the entry thereof;

####  

#### (vi)          If the estateor interest of Tenant in any material portion of the Leased Property is leviedupon or attached in any proceeding and the same is not vacated or dischargedwithin the earlier of sixty (60) days after commencement thereof or thirty (30)days after receipt by Tenant of notice thereof from Landlord (unless Tenant isdiligently contesting such lien or attachment in good faith); or

####  

#### (vii)         An Event ofDefault, as defined in the Ground Lease Agreement, shall have occurred.

####  

## **10.02****     ****Remedies****. **Landlord, in its own name orthrough a designee or assignee including, but not limited to, Landlord’smortgagee (the **“Landlord Designee”),**mayexercise any one or more of the following remedies upon the occurrence of anEvent of Default and while it is continuing:

##  

### (a)           Landlord mayterminate this Lease Agreement, exclude Tenant from possession of the LeasedProperty and use reasonable efforts to lease such Leased Property to others,including any Landlord Designee.  If thisLease Agreement is terminated pursuant to the provisions of this Section 10.02(a),Tenant will remain liable to Landlord for damages in an amount equal to theRent and other sums which would have been owing by Tenant under the LeaseAgreement for the balance of the Term if the Lease Agreement had not beenterminated, less the net proceeds, if any, received on any re-letting of theLeased Property by Landlord subsequent to such termination, and any otherincome or other proceeds of any nature realized from the sale, lease or otherdisposition or utilization of the Leased Property by Landlord, in each caseafter deducting all of Landlord’s expenses in connection with suchre-letting.  Landlord will be entitled tocollect such damages from Tenant monthly on the days on which the Rent andother amounts would have been payable under this Lease Agreement if it had notbeen terminated and Landlord will be entitled to receive such damages fromTenant on each such day.  Alternatively,at the option of Landlord, if this Lease Agreement is terminated, and at anytime thereafter, Landlord will be entitled, in lieu of proceeding to collectdamages on a monthly basis as set forth in the preceding sentence, to recoverfrom Tenant (i) all accrued unpaid Rent then due and payable, and (ii) theworth at the time of the award (as hereafter defined) of the future Rent whichwould have been due and payable from the date of termination through theExpiration Date as if this Lease Agreement had not been terminated.  The **“worthat the time of award”**of the amount referred to in clause (ii) meansthe **“present value”,**discountedusing the New York Prime Rate (as defined below), of the future Rent that wouldhave been due and payable in the absence of such termination.  For purposes of this Lease Agreement, the “**New**

 

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### **York PrimeRate”**shall mean the lesser of (a) that rate of interest identified asprime or national prime by the Wall Street Journal, as of the applicable dateof termination of this Lease Agreement, or if not published or found, then theaverage rate of interest then charged by JPMorgan Chase Bank, N.A. on ninety(90) day unsecured notes to its preferred customers and (b)the maximum, lawfulrate of interest allowed by applicable law. For the purpose of determining unpaid future Rent under clause (ii),such Rent will be deemed to be the sum of the following: (A) the Base Rentcomputed pursuant to Section 3.01; and (B) the Additional Rentcomputed pursuant to Section 3.02. Such computation of Additional Rent shall be based on the AdditionalRent paid for the Lease Year preceding the date of termination, increased byfour (4%) percent per year thereafter. Following payments by Tenant of the foregoing amounts, Landlord shalldeliver and pay over to Tenant all rent, income, and other proceeds of anynature realized from the sale, lease or other disposition or utilization of theLeased Property, if any, actually received by Landlord, less Landlord’sreasonably incurred costs and expenses of maintaining and re-leasing or sellingthe Leased Property.

###  

### (b)           (i)            Without demandor notice, Landlord or any Landlord Designee may re-enter and take possessionof the applicable Leased Property; and repossess such Leased Property as of theLandlord’s former estate; and, to the extent permitted by law with respect to acorrectional or detention facility, expel Tenant and those claiming through orunder Tenant from such Leased Property; and, remove the effects of both oreither, without being deemed guilty of any manner of trespass and withoutprejudice to any remedies for arrears of Rent or preceding breach of covenantsor conditions.  If Landlord or Landlord’sDesignee elects to re-enter the Leased Property as provided in this Section 10.02(b) orif Landlord or Landlord’s Designee takes possession of such Leased Propertypursuant to legal proceedings or pursuant to any notice provided by law,Landlord or Landlord’s Designee, from time to time, without terminating thisLease Agreement, may re-let such Leased Property or any part of such LeasedProperty, either alone or in conjunction with other portions of theImprovements of which such Leased Property are a part, in Landlord’s orLandlord’s Designee’s name but for the account of Tenant, for such term orterms (which may be greater or less than the period which would otherwise haveconstituted the balance of the Term of this Lease Agreement) and on such termsand conditions (which may include concessions of free rent, and the alterationand repair of such Leased Property) as Landlord or Landlord’s Designee, in itsdiscretion, may reasonably determine. Landlord or Landlord’s Designee may collect and receive the rents,including the Rent, for such Leased Property. Landlord or Landlord’s Designee will not be responsible or liable forany failure to re-let such Leased Property, or any part of such LeasedProperty, or for any failure to collect any rent, including the Rent, due uponsuch re-letting.  No such re-entry ortaking possession of such Leased Property by Landlord or Landlord’s Designeewill be construed as an election on Landlord’s or Landlord’s Designee’s part toterminate this Lease Agreement unless a written notice of such intention isgiven to Tenant.  No notice from Landlordor Landlord’s Designee under this Lease Agreement or under a forcible entry anddetainer statute or similar law will constitute an election by Landlord toterminate this Lease Agreement unless such notice specifically so states.  Landlord and/or Landlord’s Designee reservesthe right following any such re-entry or re-letting, or both, to exercise itsright to terminate this Lease Agreement by giving Tenant such written notice,and, in that event this Lease Agreement will terminate as specified in suchnotice.

 

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#### (ii)           If Landlord orLandlord’s Designee elects to take possession of such Leased Property accordingto this Section 10.02(b) without terminating this Lease Agreement,Tenant will pay Landlord (A) the Rent, Additional Rent and other sumswhich would be payable under this Lease Agreement if such repossession had notoccurred, less (B) the net proceeds, if any, of any re-letting of suchLeased Property after deducting all of Landlord’s or Landlord’s Designee’sexpenses incurred in connection with such re-letting, including withoutlimitation, all reasonable and customary repossession costs, brokeragecommissions, legal expense, attorneys’ fees and expenses, expense of employees,alteration, remodeling and repair costs, and expenses of preparation for suchre-letting.  If, in connection with anyre-letting, the new lease term extends beyond the existing Term or such LeasedProperty covered by such re-letting includes areas which are not part of suchLeased Property, a fair apportionment of the rent received from such re-lettingand the expenses incurred in connection with such re-letting will be made indetermining the net proceeds received from such re-letting.  In addition, in determining the net proceedsfrom such re-letting over the term of this Lease Agreement, any rentconcessions will be apportioned over the term of the new lease.  Tenant will pay such amounts to Landlordmonthly on the days on which the Rent and all other amounts owing under thisLease Agreement would have been payable if possession had not been retaken, andLandlord or Landlord’s Designee will be entitled to receive the Rent and otheramounts from Tenant on each such day.

####  

### (c)           Landlord orLandlord’s Designee may re-enter the applicable Leased Property and have,repossess and enjoy the Leased Property as if such Lease Agreement had not beenmade, and in such event, Tenant and its successors and assigns shall remainliable for any contingent or unliquidated obligations or sums owing at the timeof such repossession.

###  

### (d)           Landlord mayexercise any remedy with respect to any collateral given by Tenant or itsaffiliates in connection with this Lease Agreement.

###  

### (e)           Landlord orLandlord’s Designee may take whatever action at law or in equity as may appearnecessary or desirable to collect the Rent and other amounts payable under thisLease Agreement then due and thereafter to become due, or to enforceperformance and observance of any obligations, agreements or covenants ofTenant under this Lease Agreement.

###  

### (f)            Landlord orLandlord’s Designee may exercise any remedy specifically provided for in thisLease Agreement.

###  

## **10.03****     ****Right of Set-Off****. **While an Event of Default iscontinuing, Landlord may, and is hereby authorized by Tenant, at any time andfrom time to time, after ten (10) business days prior written notice toTenant, to set-off and apply any and all sums held by Landlord, including allsums held in any escrow for Impositions, any indebtedness of Landlord toTenant, and any claims by Tenant against Landlord, against any obligations ofTenant under this Lease Agreement and against any claims by Landlord againstTenant, whether or not Landlord has exercised any other remedieshereunder.  The rights of Landlord underthis Section 10.03 are in addition to any other rights and remediesLandlord may have against Tenant.

##  

## **10.04****     ****Performance of Tenant’s Covenants****. **Except in cases ofemergency, in which event Landlord may proceed without notice, Landlord may,but is not obligated to, perform any obligation of Tenant which Tenant hasfailed to perform within thirty (30) business days after 

 

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## Landlord has sent a writtennotice to Tenant informing it of its specific failure (provided no such noticeshall be required if such failure is covered under the provisions of Section 10.01).  Tenant shall reimburse Landlord on demand, asAdditional Rent, for any expenditures thus incurred by Landlord and shall payinterest thereon at the New York Prime Rate.

##  

## **10.05****     ****Interest on past Due Payments****. **Any payment not made by Tenantfor more than five (5) days after the same is due shall bear interest atthe New York Prime Rate from the due date thereof through the date such paymentis actually received by Landlord, provided that in the event Tenant fails tomake three or more payments when due during any single calendar year, suchthird or any subsequent payments not paid when due during such year shall bearinterest from the due date thereof until payment is received by Landlordwithout regard to whether such payment is made within five (5) days ofsuch due date.

##  

## **10.06****     ****Litigation; Attorneys’ Fees****. **Within ten (10) daysafter Tenant has knowledge of any material litigation or other proceeding thatmay be instituted against Tenant, in relation to the Leased Property or tosecure or recover possession thereof, or that may affect the title to or theinterest of Landlord in the Leased Property, Tenant shall give written noticethereof to Landlord.  Within thirty (30)business days after Landlord’s presentation of an invoice, Tenant shall pay allreasonable costs and expenses incurred by Landlord in enforcing or presentingLandlord’s rights under this Lease Agreement, whether or not an Event ofDefault has actually occurred or has been declared and thereafter cured,including without limitation, (i) the reasonable fees, expenses, and costsof any litigation, receivership, administrative, bankruptcy, insolvency orother similar proceeding; (ii) reasonable attorney, paralegal, consultingand witness fees and disbursements incurred by Landlord whether or not any suitor proceeding has commenced; and (iii) the reasonable expenses, includingwithout limitation, lodging, meals, and transportation, of Landlord and itsemployees, agents, attorneys, and witnesses in preparing for litigation, administrative,bankruptcy, insolvency or other similar proceedings and attendance at hearings,depositions, and trials in connection therewith.  All such costs, charges and fees as incurredshall be deemed to be Additional Rent under this Lease Agreement.

##  

## **10.07****     ****Remedies Cumulative****. **The respective remedies ofLandlord and Tenant under this Lease Agreement are cumulative to and not inlieu of any other remedies available to Landlord or Tenant, at law or inequity.  The use of any one remedy shallnot be taken to exclude or waive the right to use any other remedy.

##  

## **10.08****     ****Escrows and Application of Payments****. **As security for theperformance of its obligations hereunder, Tenant hereby assigns to Landlord allits right, title and interest in and to all monies escrowed with Landlord underthis Lease Agreement and all deposits with utility companies, taxingauthorities, and insurance companies; provided, however, that Landlord shallnot exercise its rights hereunder unless an Event of Default has occurred andis continuing.  Any payments received byLandlord under any provisions of this Lease Agreement during the existence, orcontinuance of an Event of Default shall be applied to Tenant’s obligations inthe order that Landlord may determine.

##  

## **10.09****     ****Power of Attorney****. **Tenant hereby irrevocablyand unconditionally appoints Landlord, or Landlord’s authorized officer, agent,employee or designee, as Tenant’s true and lawful attorney-in-fact, to act,while an Event of Default is continuing, for Tenant in Tenant’s 

 

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## name, place, and stead, andfor Tenant’s and Landlord’s use and benefit, to execute, deliver and file allapplications and any and all other necessary documents or things, to effect atransfer, reinstatement, renewal and/or extension of any and all licenses andother governmental authorizations issued to Tenant in connection with Tenant’soperation of the Leased Property, and to do any and all other acts incidentalto any of the foregoing.  Tenantirrevocably and unconditionally grants to Landlord as its attorney-in-fact fullpower and authority to do and perform, while an Event of Default is continuing,every act necessary and proper to be done in the exercise of any of theforegoing powers as fully as Tenant might or could do if personally present oracting, with full power of substitution, hereby ratifying and confirming allthat such attorney shall lawfully do or cause to be done by virtue hereof.  This power of attorney is coupled with aninterest and is irrevocable prior to the full performance of the Tenant’sobligations under this Lease Agreement.

 

# **ARTICLE XI**

# **DAMAGEAND DESTRUCTION**

# ** **

## **11.01****     ****General****. **Tenant shall notify Landlord if the Leased Property is damaged ordestroyed by reason of fire or any other casualty or cause.  Tenant shall use available insurance proceedsto promptly repair, rebuild, or restore the Leased Property so as to make theLeased Property as nearly similar in character and functionality to the LeasedProperty existing prior to such occurrence as is practicable andreasonable.  Tenant will begin suchrepairs or rebuilding and will prosecute the repairs and rebuilding tocompletion with diligence, subject, however, to strikes, lockouts, acts of God,embargoes, governmental restrictions, and other causes beyond Tenant’sreasonable control.  Landlord will makeavailable to Tenant the net proceeds of any fire or other casualty insurancereceived by Landlord for any such repair or rebuilding after deduction of anycosts of collection, including attorneys’ fees and expenses.  Before beginning such repairs or rebuilding,or letting any contracts in connection with such repairs or rebuilding that areestimated to exceed in the aggregate $5,000,000 (which amount shall beincreased by three percent (3%) per annum cumulatively for each subsequentLease Year **(“Substantial Repairs”),**Tenantwill submit for Landlord’s approval, which approval Landlord will notunreasonably withhold or delay, complete and detailed plans and specificationsfor such Substantial Repairs and the proposed construction contract for suchrestoration work.  Payment on account ofSubstantial Repairs will be made out of available insurance proceeds, as worksatisfactorily progresses, against properly certified vouchers of the contractorsresponsible for the work.  Prior tocommencing Substantial Repairs, Tenant shall deliver to Landlord for Landlord’sapproval a schedule setting forth the estimated monthly draws for suchwork.  Upon the completion of rebuildingor repairing and the furnishing of such proof, the balance of the net proceedsof such insurance payable to Tenant on account of such repairing or rebuildingwill be paid to Tenant.  Tenant willobtain and deliver to Landlord a temporary or final certificate of occupancybefore the Leased Property is reoccupied for any purpose.  Tenant shall complete all such repairs orrebuilding free and clear of mechanic’s, construction or other liens, and inaccordance with the building codes and all applicable laws, ordinances, rules,regulations, or orders of any state, municipal, or other public authorityaffecting or with jurisdiction over the Leased Property and such repairs orrebuilding, and also in accordance with all requirements of the insurancerating organization, or similar body, affecting the Leased Property.  Any remaining proceeds of insurance aftersuch restoration will be Tenant’s property. Notwithstanding the foregoing provisions of this Section 11.01, inthe case of damage to or destruction of the Leased

 

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## Property that occurs priorto the occurrence of Substantial Completion (as defined in the DevelopmentAgreement), (i) the entire amount of net available insurance proceedsshall be deposited in the Loss Proceeds Account (or held for deposit therein inthe event the Loss Proceeds Account has not yet been established), (ii) therepairs and renovations to be conducted as a result of such damage ordestruction and the timeline therefor shall be deemed a supplement to, and apart of, the Development Plan, and each cost in respect thereof shall be deemeda Project Cost and (iii) Tenant shall be entitled to use funds depositedin the Loss Proceeds Account in accordance with Article 9 of theDevelopment Agreement to pay such costs incurred in connection to such repairsand restoration.

##  

## **11.02****     ****Landlord’s Inspection****. **During the progress ofSubstantial Repairs, Landlord and its architects and engineers, from time totime, may inspect the Leased Property and will be furnished, if required bythem, with copies of all plans, shop drawings, and specifications relating tosuch repairs or rebuilding.  Tenant willkeep all plans, shop drawings, and specifications available, and Landlord andits architects and engineers may examine them at all reasonable times, at theLeased Property or such other location as Landlord and Tenant shall agree.  If, during such repairs or rebuilding,Landlord and its architects and engineers reasonably determine that the repairsor rebuilding are not being done in accordance with the approved plans andspecifications, Landlord will give prompt notice in writing to Tenant,specifying in detail the particular deficiency, omission, or other respect inwhich Landlord claims such repairs or rebuilding do not accord with theapproved plans and specifications.  Uponthe receipt of any such notice, Tenant will cause corrections to be made to anydeficiencies, omissions, or such other respect. Tenant’s obligations to supply builder’s risk insurance, according to Article V,will be applicable to any repairs or rebuilding under this Article XI.

##  

## **11.03****     ****Landlord’s Costs****. **Tenant shall, within thirty(30) days after receipt of an invoice from Landlord, pay the reasonable costs,expenses, and fees of any architect or engineer employed by Landlord to reviewany plans and specifications and to supervise and approve any construction, orfor any services rendered by such architect or engineer to Landlord ascontemplated by any of the provisions of this Lease Agreement, or for anyservices performed by Landlord’s attorneys in connection therewith; provided,however, that Landlord will consult with Tenant and notify Tenant of theestimated amount of such expenses.

##  

## **11.04****     ****Rent Abatement****. **In the event that theprovisions of Section 11.01 above shall become applicable, the Rent,including Additional Rent consisting of real estate taxes and other Impositionsshall be abated or reduced proportionately during any period in which, byreason of such damage or destruction, there is substantial interference withthe operation of the business of Tenant in the Leased Property, having regardto the extent to which Tenant may be required to discontinue its business inthe Leased Property, and such abatement or reduction shall continue for theperiod commencing with such destruction or damage and ending with thesubstantial completion (as defined below) by Tenant of such work or repairand/or reconstruction.  In the event thatonly a portion of the Leased Property is rendered untenantable or incapable ofsuch use, the Base Rent and all real estate taxes and other Impositions payablehereunder shall be reduced on a pro rata basis in the same proportion as thesquare footage contained in the Leased Property after the damage or destructionbears to the square footage contained in the Leased Property immediately priorthereto.  For purposes of this Section 11.04,**“substantial completion”**shalloccur upon the issuance of a certificate of occupancy for the Substantial

 

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## Repairs to the LeasedProperty.  Notwithstanding the foregoing,such rental abatement shall be limited to the amount of any rental or businessinterruption insurance proceeds actually received by Landlord.

##  

## **11.05****     ****Substantial Damage During Lease Term****.  **Provided Tenant has compliedwith Section 5.01 hereof (including actually maintaining in effect rentalvalue insurance or business interruption insurance provided for in clause (c) ofSection 5.01), if at any time the Leased Property is so damaged by fire orother casualty that more than fifty percent (50%) of the square footagecontained in the Leased Property are rendered unusable, and such LeasedProperty will not be rendered usable within nine (9) months after the datethe restoration work will commence, Tenant may, within sixty (60) days afterreceipt of Landlord’s notice of the anticipated restoration period, give noticeof its election to terminate this Lease Agreement and, subject to the furtherprovisions of this Section 11.05, this Lease Agreement will cease on thetenth (10th) day after the delivery of such notice.  If this Lease Agreement is so terminated,Tenant will have no obligation to repair, rebuild or replace the LeasedProperty, but will have the obligation to pay to Landlord upon demand theamount of any deductible arising in connection therewith and the entireinsurance proceeds (up to the amount of damages suffered by Landlord as aresult of such termination) will belong to Landlord.  If this Lease Agreement is not so terminated,Tenant shall use the insurance proceeds to rebuild the Leased Property inaccordance with Section 11.01.

##  

## **11.06****     ****Damage Near End of Term****. **Notwithstanding anyprovisions of Section 11.01 to the contrary, if substantial damage to ordestruction of the Leased Property occurs during the last twenty-four (24)months of the Term, and if such damage or destruction cannot be fully repairedand restored within six (6) months immediately following the date of loss,Tenant shall have the right to terminate this Lease Agreement by giving noticeto the other within thirty (30) days after the date of damage or destruction,in which event Landlord shall be entitled to retain the entire insuranceproceeds (up to the amount of damages suffered by Landlord as a result of suchtermination) and Tenant shall pay to Landlord on demand the amount of anydeductible arising in connection therewith; provided, however, that any suchnotice given by Landlord shall be void and of no force and effect if Tenantbinds itself in writing to timely exercise a future available option to extendthe Term pursuant to provisions of this Lease Agreement within thirty (30) daysfollowing receipt of such termination notice.

##  

## **11.07****     ****Assignment of Insurance Proceeds****. **In the event of terminationpursuant to this Article XI, Landlord shall be entitled to and Tenanthereby unconditionally assigns all of Tenant’s right, title and interest in allproceeds of insurance and rights of recovery (up to the amount of damagessuffered by Landlord as a result of such termination) against insurers onpolicies covering the Leased Property, and all Improvements, Fixtures, TenantImprovements (including without limitation, any Capital Additions) from suchdestruction, except for such insurance proceeds that Tenant is entitled toreceive for out-of-pocket expenses such as repairs for which Tenant has notbeen reimbursed, and this assignment shall survive the termination of thisLease.  Notwithstanding anything hereinto the contrary, it shall be a condition to Tenant’s right to terminate thisLease Agreement pursuant to this Article XI that Tenant first execute anddeliver to Landlord any and all necessary documents required by Tenant’sproperty insurance carrier to assign in accordance with the foregoing all ofTenant’s rights to the proceeds of insurance and rights of recovery againstinsurers on policies covering the Leased Property, and

 

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## all Improvements, Fixtures,personal property and Tenant Improvements (including without limitation, anyCapital Additions).

##  

# **ARTICLE XII**

# **CONDEMNATION**

# ** **

## **12.01****     ****Definition****. **For purposes of this LeaseAgreement: (i) the term **“Condemnation”**shallmean the permanent or temporary taking of the Leased Property or the Land, orany portion thereof, by right of eminent domain, or by conveyance made inresponse to a threat of the exercise of such right, or by conveyance insettlement of eminent domain litigation, in each case after the occurrence ofSubstantial Completion (as defined in the Development Agreement), and (ii) theterm **“Aggregate Leased Property”**shallmean collectively the Leased Property and the Land.

##  

## **12.02****     ****Apportionment of Compensation****. **In the event of Condemnationof the Aggregate Leased Property, or any part thereof, except as otherwise providedin this Article XII, Landlord shall be entitled to all compensationpayable by the condemning authority under applicable law (hereinafter referredto as an **“Award”)**for (a) thereal property, or part thereof taken, (b) the value of Tenant’s leaseholdestate, (c) for all improvements thereto which are taken (except TenantImprovements which are not Capital Additions purchased or financed by Landlordand then, only the portion of any award therefor allocable to the remainingTerm of this Lease Agreement), (d) for all severance damages to theremainder property caused by the Condemnation, including severance damages tothe Fixtures and personal property, and (e) attorneys fees and expenses,expert fees and costs of Landlord. Tenant shall be entitled to all compensation payable by the condemningauthority under applicable law, if any, by a separate award for (w) personalproperty of Tenant; trade fixtures of Tenant and Tenant Improvements taken(subject to the limitations set forth above), (x) business damagessuffered by Tenant, and (y) attorneys fees and expenses, expert fees andcosts of Tenant.  The foregoingnotwithstanding, in the event of a temporary taking by Condemnation for aperiod of six (6) months or less, compensation payable by the condemningauthority shall be payable solely to the Tenant, subject to Tenant having paidto Landlord all Rent and other charges payable under the Lease Agreements forthe period of the temporary taking.  Inthe event the condemning authority is not required under applicable law to paycompensation for an element of damage or loss suffered by a party hereto, thatparty, to that extent, shall be without a remedy, unless otherwise expresslyand specifically provided herein, it being the intent of the parties that, inthe absence of an express and specific agreement to the contrary, no partyhereto shall be obligated to compensate the other for any damage or losssuffered as a consequence of Condemnation that is not compensable by thecondemning authority under applicable law. No party shall have the right to negotiate a settlement of any claim forcompensation made or possessed by another party, nor may any party enter intoan agreement with a condemning authority which waives or limits, expressly orimplicitly, the entitlement of another party to full compensation in accordancewith the provisions hereof.

##  

## **12.03****     ****Effect on Lease Obligations**.

##  

### (a)           Total Taking.  In the event of Condemnation of the entireAggregate Leased Property (but subject to the Lease Agreements), the LeaseAgreements shall remain in effect,

 

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### with the condemningauthority taking the Aggregate Leased Property subject to the Lease Agreements,unless the condemning authority also shall have condemned the leaseholdinterests of Tenant.  In the event ofcondemnation of the entire Aggregate Leased Property and the leaseholdinterests of Tenant, the parties shall be relieved from continuing performanceunder the Lease Agreements and Tenant shall be relieved from payment of Rentunder the Lease Agreements or other charges as of the date of change ofownership and termination of such leasehold estate due to Condemnation.  The parties shall perform those obligationsaccruing under the Lease Agreements prior to the change in ownership, includingsuch payment of Rent and other charges which become payable prior to the changein ownership and shall remain liable for all obligations (including indemnityobligations) which expressly survive the date of the Condemnation.  To the extent Rent has been paid under aLease Agreement or has been paid in advance under a Lease Agreement, Landlordshall refund to the Tenant a prorated portion thereof based on the number ofdays of Tenant’s occupancy under the Lease Agreements for the rental period inquestion, compared to the number of days in the rental period for which suchRent was paid in advance.

###  

### (b)           Partial Taking.  In the event the Condemnation is of a portionof the Aggregate Leased Property, or of an easement or similar interest in theAggregate Leased Property, the obligations of the parties under the LeaseAgreements shall be unaffected unless the effect of the Condemnation is torender the Aggregate Leased Property unsuitable for its Primary Intended Use.  The Aggregate Leased Property shall be deemed**“unsuitable for its Primary Intended**Use”if the state or condition of the Aggregate Leased Property has been so affectedby the Condemnation that, in the good faith judgment of Tenant, reasonablyexercised, the Aggregate Leased Property cannot be operated on a commerciallypracticable basis (taking into account the economic terms of the LeaseAgreements) as a correctional or detention facility.  If Condemnation renders the Aggregate LeasedProperty unsuitable for its Primary Intended Use, Tenant may terminate theLease Agreements as of the date of the taking, or as of the date of loss ofoccupancy of the condemned portion (if the date for vacating the AggregateLeased Property is different from the date of taking), or within thirty (30)days following either the date of taking or the date of loss of occupancy ofthe condemned portion.  Termination ofthe Lease Agreements shall not affect the apportionment of compensation asotherwise agreed hereinabove.

###  

### (c)           Temporary Taking.  In the event of a Condemnation of all or anypart of the Aggregate Leased Property for a period of six (6) months orless, the parties shall be relieved from their obligations under the LeaseAgreements only to the extent performance is rendered impracticable orimpossible and Tenant shall remain obligated to pay Rent and other charges dueunder the Lease Agreements to Landlord for the period of such temporarytaking.  In the event of such a temporarytaking, the entire amount of compensation payable for the temporary taking,whether paid by the condemning authority as damages, rent or otherwise, shallbe payable to Tenant, subject to Tenant having paid to Landlord all Rent andother charges payable under the Lease Agreements for the period of such temporarytaking.

###  

## **12.04****     ****[IntentionallyOmitted.]**

##  

## **12.05****     ****Restoration of Premises****. **If there is a Condemnationof the Aggregate Leased Property and the Lease Agreements remain in full forceand effect in accordance herewith, Landlord shall furnish to Tenant the amountof the Award actually received by Landlord, in

 

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## order for Tenant toaccomplish all necessary restoration as reasonably determined by Tenant inconsultation with Landlord.  If Tenantreceives an Award, Tenant shall repair or restore any Tenant Improvements up tobut not exceeding the amount of the Award payable to Tenant therefor.  Before beginning such restoration, or lettingany contracts in connection with such restoration, Tenant will submit forLandlord’s approval, which approval Landlord will not unreasonably withhold ordelay, complete and detailed plans and specifications for suchrestoration.  Promptly after receivingLandlord’s approval of the plans and specifications, Tenant will begin suchrestoration and will prosecute the repairs and rebuilding to completion withdiligence, subject, however, to strikes, lockouts, acts of God, embargoes,governmental restrictions, terroristic threats or actions, and other causesbeyond Tenant’s reasonable control. Landlord will make available to Tenant the net proceeds of any Awardpaid to Landlord for such restoration, after deduction of any costs ofcollection, including attorneys’ fees and expenses.  Payment will be made against properlycertified vouchers of a competent architect in charge of the work and approvedby Landlord.  Prior to commencing therestoration, Tenant shall deliver to Landlord for Landlord’s approval aschedule setting forth the estimated monthly draws for such work.  Upon the completion of restoration and thefurnishing of such proof, the balance of the Award will be paid to Tenant.  Tenant will obtain and deliver to Landlord atemporary or final certificate of occupancy before the Aggregate LeasedProperty is reoccupied for any purpose. Tenant shall complete such restoration free and clear of mechanic’s,construction or other liens, and in accordance with the building codes and allapplicable laws, ordinances, rules, regulations, permits, approvals or ordersof any state, municipal, or other public authority affecting the restoration,and also in accordance with all requirements of the insurance ratingorganization, or similar body applicable to the Aggregate Leased Property.  Any remaining proceeds of the Award otherwisepayable after such restoration is completed will be Tenant’s property.

##  

## **12.06****     ****Landlord’s Inspection****. **During the progress of suchrestoration, Landlord and its architects and engineers may, from time to time,inspect the Aggregate Leased Property and will be furnished, if required bythem, with copies of all plans, shop drawings, and specifications relating tosuch restoration.  Tenant will keep allplans, shop drawings, and specifications available, and Landlord and its architectsand engineers may examine them at all reasonable times.  If, during such restoration, Landlord and itsarchitects and engineers determine that the restoration is not being done inaccordance with the approved plans and specifications, Landlord will giveprompt notice in writing to Tenant, specifying in detail the particulardeficiency, omission, or other respect in which Landlord claims suchrestoration does not accord with the approved plans and specifications.  Upon the receipt of any such notice, Tenantwill cause corrections to be made to any deficiencies, omissions, or such otherrespect.  Tenant’s obligations to supplyinsurance, according to Article V, will be applicable to any restorationunder this Article XII.  Tenantshall be responsible to pay the costs for all such architects and engineerspursuant to Section 11.03.

##  

# **ARTICLE XIII**

# **TENANT’SRIGHT OF FIRST REFUSAL**

# ** **

## **13.01****     ****Rights of First Refusal****. **Subject to the terms andconditions set forth in this Section 13.01 and provided that no Event ofDefault under Sections 10.01(a)(i), (iii), (iv), (v), or (vi) with respectto the Leased Property has occurred and is continuing at the time of such

 

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## exercise or at theexpiration of this Lease Agreement, Tenant shall have a right of first refusal(the **“Purchase Refusal Right”)**topurchase the Leased Property (including any Leased Property owned by anAffiliate of Landlord).  So long as noEvent of Default under Sections 10.01(a)(i), (iii), (iv), (v), or (vi) withrespect to the subject Leased Property has occurred and is continuing at thetime of such exercise or at the expiration of this Lease Agreement), if, duringthe Term or any Renewal Term and for a period of thirty (30) days followingtermination of this Lease Agreement (other than as a result of the exercise byLandlord of its remedies under this Lease Agreement), Landlord or any Affiliateof Landlord receives a bona fide third party offer to transfer the LeasedProperty (the **“Offer”),**including,without limitation, a transfer consisting of a proposed Landlord Change ofControl, then, prior to accepting such Offer, Landlord shall send writtennotice and a copy thereof to Tenant and to any other party so designated byTenant **(“Landlord’s Notice”),**whichNotice shall contain the identity of the third party purchaser or survivor, asthe case may be, the price and other material terms of the proposedtransaction.  In the case of a proposedtransfer of the Leased Property as a part of a larger transaction involving thetransfer of other properties of Landlord **(“MultipleProperty Transfer”),**Landlord shall include with the Landlord’sNotice an indication of that portion of the aggregate purchase price to be paidin such Multiple Property Transfer that Landlord reasonably allocates to theLeased Property (the **“Allocated Price”),**whichAllocated Price shall be supported by written analysis and documentationincluded with such Landlord’s Notice demonstrating a reasonable basis for suchallocation.  Tenant shall have thirty(30) days after receipt of Landlord’s Notice to exercise Tenant’s PurchaseRefusal Right, by giving Landlord written notice thereof.  Failure of Tenant to exercise the PurchaseRefusal Right within such time period set forth above shall be deemed toextinguish the Purchase Refusal Right with respect to that particular Offer andthereafter, Landlord or its Affiliates may transfer such Leased Property;provided, however, that the transfer of the Leased Property is at a price equalto or greater than the price contained in the Landlord’s Notice, and otherwiseconsistent in all material respects with the terms and conditions set forth inLandlord’s Notice (including the third party purchaser).  Tenant’s Purchase Refusal Right shall revivein the event that Landlord fails to transfer the Leased Property pursuant tothe Offer within one year following the date of Landlord’s Notice; it beingunderstood that the Refusal Right shall at all times remain in existence withrespect to any other offer for which the Refusal Right has not been deemed extinguishedhereunder.  In the event that Tenantelects to exercise the Purchase Refusal Right and to acquire the LeasedProperty thereby, (a) Tenant shall acquire such Leased Property on thesame terms and conditions and subject to all time periods and other limitationsas provided in Landlord’s Notice ,provided, however, (X) Tenant shall inall events have not less than one hundred twenty (120) days to close itsacquisition of the Leased Property following its written notice exercising itsPurchase Refusal Right), (Y) in the case of a Multiple Property Transfer,the purchase price to be paid by Tenant for the Leased Property shall be theAllocated Price, and (Z) in the case of a Landlord Change of Control, thepurchase price to be paid by Tenant for the Leased Property shall be the fairmarket value of the Leased Property, as determined by the appraisal proceduresset forth in Section 16.21 hereof, and Tenant shall have thirty (30) daysfollowing the determination of a final appraised value pursuant to such Section 16.21to close its acquisition of the Leased Property, and (b) concurrently withsuch acquisition, this Lease Agreement shall terminate (but Tenant shall remainliable to pay any accrued Rent due and payable on the closing date with respectto such Leased Property and all indemnifications and other provisions thatsurvive the expiration of this Lease Agreement shall continue in effect).  Notwithstanding the foregoing provisions, thePurchase Refusal Right shall

 

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## not be applicable to (i) anytransfer of Leased Property to (A) any Affiliate of Landlord or (B) anyjoint venture in which Landlord (or an Affiliate of Landlord) at all timesmaintains management control and an equity interest of at least ten percent (10%),so long as such Affiliate or joint venture acquires such Leased Propertysubject to the Purchase Refusal Right, or (ii) any transfer (directly orindirectly, including a transfer by means of a Landlord Change of Control), ina single transaction or series of related transactions, of multiple properties(including the Aggregate Leased Property) having an aggregate fair market value(including the fair market value of the Aggregate Leased Property) of which thefair market value of the Aggregate Leased Property represents no more thanfifty percent (50%) of the total fair market value at the time oftransfer.  A **“transfer”**shall mean either (i) any conveyance of feesimple title (other than conditional assignments for security or mortgagepurposes) or any lease which has a term in excess of one (1) year or (ii) aLandlord Change of Control.  A **“Landlord Change of Control”**shall mean theacquisition by any Person of the beneficial ownership (directly or indirectly)of the voting membership interests in the Landlord, whether through purchase,merger, consolidation or otherwise, unless an Affiliate of the Landlord (asconstituted immediately prior to such transaction) is the surviving oracquiring Person and such Affiliate acquires such Leased Property subject tothe Purchase Refusal Right.

##  

# **ARTICLE XIV**

# **ASSIGNMENTAND SUBLETTING: ATTORNMENT**

# ** **

## **14.01****     ****[IntentionallyOmitted.]**

##  

## **14.02****     ****Permitted Transfers**.

##  

### (a)           Landlord’sconsent will not be required in connection with an assignment of this LeaseAgreement or sublet of all or any part of the Leased Property to (i) anAffiliate of Tenant for so long as such entity remains an Affiliate of Tenant,or (ii) any entity succeeding to substantially all of the assets of Tenantas a result of consolidation or merger, or (iii) any entity to which allor substantially all of Tenant’s stock or assets have been sold or transferred,or (iv) any other transferee experienced in the business of the managementand operation of correctional facilities (each, a **“Permitted Transferee”);**provided, however, that no suchassignment or subletting shall result in Tenant being released or dischargedfrom any liability under this Lease Agreement, unless (1) the PermittedTransferee agrees directly with Landlord, by written instrument in formsatisfactory to Landlord in its reasonable discretion, to be bound by all theobligations of Tenant hereunder, including, without limitation, the covenantagainst further assignment and subletting, and (2) in the case of aPermitted Transferee that is not an Affiliate of Tenant, either (X) Tenantdemonstrates to Landlord’s reasonable satisfaction that the PermittedTransferee satisfies the Financially Responsible Test (as hereinafter defined)or (Y) Tenant or the Permitted Transferee deposits with Landlord an unconditional,irrevocable letter of credit (the **“Letter ofCredit”)**in form and substance satisfactory to Landlord andsatisfying the requirements of this Lease Agreement in a face amount equal totwenty-four (24) months (or such lesser amount as Landlord may approve inLandlord’s sole discretion) of the Base Rent then payable under this LeaseAgreement (such amount referred to as the **“SecurityAmount”)**and proof reasonably satisfactory to Landlord that suchPermitted Transferee satisfies the Financially Responsible Test or the Letterof Credit shall have been delivered to Landlord at least fifteen (15) daysprior to the effective date of any such transaction.  For purposes of this Lease 

 

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### Agreement, an **“Affiliate”**of an entity means any entitythat controls, is controlled by, or is under common control with suchentity.  For the purposes of theforegoing definition of an Affiliate, **“control”**means the direct or indirect ownership of more than fifty percent (50%)of the voting securities of an entity or possession of the right to vote morethan fifty percent (50%) of the voting interest in the ordinary direction ofthe entity’s affairs.  For purposes ofthis Lease Agreement, the term **“FinanciallyResponsible Test”**shall mean that the Permitted Transferee has ashareholders’ equity, determined in accordance with generally acceptedaccounting principles consistently applied, at least equal to$100,000,000.  Notwithstanding theforegoing but provided that there is no Event of Default is in existence underthis Lease Agreement at any time during the Test Period (as hereinafterdefined) or as of the Return Date (as hereinafter defined) and Landlord has notdelivered to Tenant or the Permitted Transferee any notice of any uncureddefault under this Lease Agreement for which the cure period has not expired asof the Return Date, in the event that following the deposit of the Letter ofCredit with Landlord as required by this Section 14.02(a), the PermittedTransferee satisfies the Financially Responsible Test set forth above for four (4) consecutivefiscal quarters of such Permitted Transferee (the **“Test Period”)**and proof reasonably satisfactory to Landlordthat such Permitted Transferee has satisfied such Financially Responsible Testduring the Test Period is delivered to Landlord, Landlord will release theLetter of Credit within thirty (30) days after Landlord determines that suchFinancially Responsible Test has been satisfied by the Permitted Transfereeduring the Test Period (the **“Return Date”).**

###  

### (b)           The Letter ofCredit shall have a stated duration of and shall be effective for at least oneyear, with provision for automatic successive annual one-year extensions, andshall include the right of Landlord to draw thereon if the issuer of the Letterof Credit at any time notifies Landlord that the Letter of Credit will not beautomatically renewed.  The Letter ofCredit shall (i) be at all times in the amount of the Security Amount, (ii) shallpermit multiple and partial draws, (iii) shall be made payable to Landlordand be expressly transferable by and assignable at no charge to Landlord, toits successors or assigns of this Lease Agreement; and (iv) shall bepayable at sight upon presentment to the issuer of a simple sight draft signedby Landlord accompanied by a certificate stating that Landlord is permitted todraw upon the Letter of Credit pursuant to the terms of this Lease Agreementand setting forth the amount that Landlord is permitted to draw.  The Letter of Credit shall be kept in forcethroughout the then remaining term of this Lease Agreement and for sixty (60)days following the expiration of this Lease Agreement, as it may be extended,except that if such earlier termination is based on Tenant’s default, theLetter of Credit shall be kept in force until sixty (60) days after the datewhen the Term would have expired had this Lease Agreement not been earlierterminated.  A renewal Letter of Creditshall be provided no later than thirty (30) days prior to the expiration dateof any Letter of Credit issued hereunder, and if not so provided, Landlord maydraw the entire amount of the expiring Letter of Credit and hold the proceedsin a segregated account in cash for the same purposes as the Letter of Credit.  The Letter of Credit shall be issued by acommercial bank reasonably satisfactory to and approved by Landlord in writingwhich has capital assets of at least $1,000,000,000 and capital reserves of atleast $100,000,000, and which is a member of the Federal Reserve System.

###  

### (c)           Landlord shallhold the Letter of Credit throughout the then remaining Term of this LeaseAgreement as security for the performance by the Permitted Transferee of allobligations hereunder.  If there is anEvent of Default, Landlord shall have the right from time to

 

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### time, without prejudice toany other remedy Landlord may have on account thereof and whether before orafter enforcing its remedies to draw upon the Letter of Credit or any partthereof and retain, use or apply the proceeds to Landlord’s damages arisingfrom, or to cure, any Event of Default. The application of any proceeds of the Letter of Credit is not aprerequisite to Landlord’s right to resort to its remedies hereunder or at lawor in equity.  Landlord shall return thebalance of the Security Amount, or so much thereof as shall have theretoforenot been applied or released in accordance with the terms of this Section 14.02to Tenant within thirty (30) days of the expiration or earlier termination ofthe Term of this Lease Agreement and surrender of possession of the Property byTenant to Landlord at such time, provided that there is then existing no Eventof Default (nor any circumstance which, with the passage of time or the givingof notice, or both, would constitute an Event of Default).

###  

## **14.03****     ****[Intentionally Omitted.]**

##  

## **14.04****     ****Permitted Subleases****. **Landlord acknowledges thatfrom time to time Tenant may respond to requests for proposals (“RFP’s”) fromgovernmental entities seeking (a) government operating agreements, supportagreements and/or service agreements (or amendments thereto) in connection withthe housing or detention of inmates or detainees at all of any portions of theLeased Property including, but not limited to, the Operating Agreement(collectively, the **“Service Agreements”)**or(b) agreements with licensees in connection with Tenant’s operation ofcorrectional or detention facilities as is customarily associates with orincidental to the operation of such Leased Property, which agreements may be inthe nature of a sublease agreement (collectively, **“Sublease Agreements”)**for the housing or detention of inmatesor detainees at the Leased Property. Tenant agrees to deliver to Landlord copies of all Service Agreements orSublease Agreements in effect with respect to the Leased Property, togetherwith any amendments thereof and any notices of termination or default receivedfrom the relevant contracting governmental entities, regardless of whether anysuch Service Agreement or Sublease Agreement is deemed a subleasehereunder.  Notwithstanding any provisionhereunder contained to the contrary, Landlord shall have no right to approve orreject a Service Agreement or Sublease Agreement, and each Service Agreement andSublease Agreement shall be deemed permitted hereunder, *provided*that the term thereof does notextend beyond the Term (including all Renewals Terms) of this Lease Agreement.

##  

## **14.05****     ****Effect of Assignment****. **No assignment or sublease,including without limitation, any Sublease Agreement, shall in any way impairthe continuing primary liability of Tenant hereunder.  Any assignment shall be limited to Tenant’sinterest in this Lease Agreement.  Anyassignment, sublease or other transfer of all or any portion of Tenant’sinterest herein in contravention of this Article XIV shall be voidable atLandlord’s option.

##  

# **ARTICLE XV**

# **QUIETENJOYMENT; SUBORDINATION,**

# **ATTORNMENTAND ESTOPPEL CERTIFICATES**

# ** **

## **15.01****     ****Quiet Enjoyment****. **So long as Tenant performsall of its obligations under this Lease Agreement, Tenant’s possession of theLeased Property will not be disturbed by or through Landlord.

 

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## **15.02****     ****Landlord Mortgages: Subordination****. **Without the consent ofTenant, but subject to Section 15.03, and provided that Landlord obtainsan SNDA in accordance with Section 15.03, that provides that in the eventany party succeeds to Landlord’s interest under this Lease Agreement when noEvent of Default exists, such party will not disturb Tenant’s possession, useor occupancy of the Leased Property in accordance with the provisions of thisLease Agreement and will otherwise honor this Lease Agreement unchanged,Landlord may, from time to time, directly or indirectly, create or otherwisecause to exist any lien, encumbrances or title retention agreement on theLeased Property, or any portion thereof or any interest therein, whether tosecure any borrowing or other means of financing or refinancing.  Tenant’s rights under this Lease Agreementshall be subordinate to any ground lease or underlying lease, first mortgage,first deed of trust, or other first lien against any Leased Property, togetherwith any renewal, consolidation, extension, modification or replacementthereof, which now or at any subsequent time affects any Leased Property or anyinterest of Landlord in any Leased Property, except to the extent that any suchinstrument expressly provides that this Lease Agreement is superior.  This provision will be self-operative, and nofurther instrument or subordination will be required in order to effectit.  However, Tenant shall execute,acknowledge and deliver to Landlord, at any time and from time to time upondemand by Landlord, such documents as may be requested by Landlord or any mortgageeor any holder of any mortgage or other instrument described in this Section, toconfirm or effect any such subordination. If Tenant fails or refuses to execute, acknowledge, and deliver any suchdocument within twenty (20) days after written demand, and Landlord is not inbreach of this Lease Agreement, Landlord may execute, acknowledge and deliverany such document on behalf of Tenant as Tenant’s attorney-in-fact, Tenanthereby constitutes and irrevocably appoints Landlord, its successors and assigns,as Tenant’s attorney-in-fact to execute, acknowledge, and deliver on behalf ofTenant any documents described in this Section. This power of attorney is coupled with an interest and is irrevocable.

##  

## **15.03****     ****Attornment: Non-Disturbance****. **If any holder of anymortgage, indenture, deed of trust, or other similar instrument described in Section 15.02succeeds to Landlord’s interest in the Leased Property, Tenant will pay to suchholder all Rent subsequently payable under this Lease Agreement.  Tenant, upon request of any Person succeedingto the interest of Landlord, including any Landlord’s Designee, shallautomatically become the tenant of, and attorn to, such successor in interestwithout changing this Lease Agreement. Upon request by Landlord, Landlord’s Designee or such successor ininterest, Tenant will execute, acknowledge and deliver a subordination,non-disturbance and attornment agreement **(“SNDA”)**in a commercially reasonable form required by the mortgagee orholder, provided that the form of SNDA Tenant is required to execute does notamend or modify the terms of this Lease Agreement and provides that in theevent any party succeeds to Landlord’s interest under this Lease Agreement whenno Event of Default exists, such party will not disturb Tenant’s possession,use or occupancy of the Leased Property in accordance with the provisions ofthis Lease Agreement and will otherwise honor this Lease Agreementunchanged.  If Tenant fails or refuses toexecute, acknowledge, and deliver any such document within twenty (20) daysafter written demand, and Landlord is not in breach of this Lease Agreement,Landlord may execute, acknowledge and deliver any such document on behalf ofTenant as Tenant’s attorney-in-fact. Tenant hereby constitutes and irrevocably appoints Landlord, itssuccessors and assigns, as Tenant’s attorney-in-fact to execute, acknowledge,and deliver on behalf of Tenant any documents described in this Section.  This power of attorney is coupled with aninterest and is irrevocable.

 

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## **15.04****     ****Estoppel Certificate**.

##  

### (a)           At the requestof Tenant or Landlord, the other party shall execute, acknowledge and deliveran estoppel certificate **(“EstoppelCertificate”),**in recordable form, in favor of the requesting partyand, if applicable, such requesting party’s lender, mortgagee or purchaser, asthe case may be, pertaining to matters reasonably and customarily requested insuch certificates, including, but not limited to, the following:

###  

#### (i)            that this LeaseAgreement is unmodified and in full force and effect, or if there have beenmodifications that the same is in full force and effect as modified and statingthe modifications;

####  

#### (ii)           the date towhich Rent and other charges have been paid;

####  

#### (iii)          that therequesting party is not in default nor is there any fact or condition which,with notice or lapse of time, or both, would constitute a default, if that bethe case, or specifying any existing default;

####  

#### (iv)          if applicable,that the Tenant has accepted and occupies such Leased Property;

####  

#### (v)           if applicable,that Tenant has no defenses, set-off’s, deductions, credits, or counterclaimsagainst Landlord, if that be the case, or specifying such that exist;

####  

#### (vi)          if applicable,that the Landlord has no outstanding construction or repair obligations; and

####  

#### (vii)         such otherinformation as may be reasonably requested.

####  

Neitherparty will be required to execute an Estoppel Certificate that materiallyamends or materially modifies the terms of this Lease Agreement.

 

### (b)           Any purchaser,lender or mortgagee may rely on the Estoppel Certificate.

###  

### (c)           If Tenant failsto deliver an Estoppel Certificate to Landlord within ten (10) days afterthe request of the Landlord, then Tenant shall be deemed to have certified thatthe facts set forth in the certificate are true and correct.  Further, if Tenant fails or refuses toexecute, acknowledge, and deliver any such document within twenty (20) daysafter written demand, and Landlord is not in breach of this Lease Agreement,Landlord may execute, acknowledge and deliver any such document on behalf ofTenant as Tenant’s attorney-in-fact, Tenant hereby constitutes and irrevocablyappoints Landlord, Landlord’s Designee and each of their respective successorsand assigns, as Tenant’s attorney-in-fact to execute, acknowledge, and deliveron behalf of Tenant any documents described in this Section.  This power of attorney is coupled with aninterest and is irrevocable.

###  

### (d)           If Landlordfails to deliver the estoppel certificates to Tenant within ten (10) daysafter the request of the Tenant, then Landlord shall be deemed to havecertified that the facts set forth in the certificate are true andcorrect.  Further, if Landlord fails orrefuses to execute,

 

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### acknowledge, and deliver anysuch document within twenty (20) days after written demand, and Tenant is notin breach of this Lease Agreement, Tenant may execute, acknowledge and deliverany such document on behalf of Landlord as Landlord’s attorney-in-fact.  Landlord hereby constitutes and irrevocablyappoints Tenant as Landlord’s attorney-in-fact solely for the limited andexclusive purpose to execute, acknowledge, and deliver on behalf of Landlordthe estoppel certificate described in this Section 15.04.  This power of attorney is coupled with aninterest and is irrevocable.

###  

# **ARTICLE XVI**

# **MISCELLANEOUS**

# ** **

## **16.01****     ****Notices****. **Landlord and Tenant hereby agree that all notices, demands, requests,and consents (hereinafter **“Notices”)**requiredto be given pursuant to the terms of this Lease shall be in writing and shallbe addressed as follows:

##  

| If  to Tenant:   |   | Cornell  Corrections of California, Inc.        |
|------------------|--------|------------------------------------------------------|
|             |   | c/o  Cornell Companies, Inc.                    |
|             |   | 1700  W. Loop South, Suite 1500                 |
|             |   | Houston,  Texas 77027                                |
|             |   | Fax:  (713)622-2853                                  |
|             |   | Attention:  General Counsel                          |
|             |   |                                                 |
| If  to Landlord: |   | Inland  PPD Hudson Associates, L.L.C.                |
|             |   | c/o  Inland Public Properties Development, Inc. |
|             |   | 211  E. 7th Street, Suite 1120             |
|             |   | Austin,  TX 78701 Fax: (512)236-9701                 |
|             |   | Attn:  Charles R. Jones                              |
|             |   |                                                 |
| With  a copy to: |   | Inland  Public Properties Development, Inc.     |
|             |   | 2901  Butterfield Road                               |
|             |   | Oak  Brook, IL 60181                                 |
|             |   | Fax:(630)218-4900                                    |
|             |   | Attn:  General Counsel                               |

 

and shall be served by (i) personaldelivery, (ii) certified mail, return receipt requested, postage prepaid, (iii) nationallyrecognized overnight courier, or (iv) by facsimile.  All Notices shall be deemed to be given uponthe earlier of actual receipt or three (3) days after mailing, one (1) businessday after deposit with the overnight courier or by a facsimile receipt.  Any Notices meeting the requirements of this Section shallbe effective, regardless of whether or not actually received.  Landlord or Tenant may change its noticeaddress at any time by giving the other party notice of such charge.

 

## **16.02****     ****Advertisement of Leased Property****. **In the event the partieshereto have not executed a renewal lease of the Leased Property within twelve(12) months prior to the expiration of the Term, and Tenant has not givennotice of extension of the Term under Section 2.03(a), then Landlord orits agent shall have the right to enter such Leased Property at all 

 

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## reasonable times and inaccordance with Section 16.03 for the purpose of exhibiting such LeasedProperty to others.

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## **16.03****     ****Landlord’s Access****. **Landlord shall have theright to enter upon the Leased Property, upon reasonable prior notice to Tenantand at reasonable times so as not to interrupt Tenant’s operation of the LeasedProperty, for purposes of inspecting the same and assuring Tenant’s compliancewith this Lease Agreement; provided, any such entry by Landlord shall besubject to all reasonable rules, guidelines and procedures prescribed by Tenantor otherwise required by law or any applicable Government Authority.  So long as no Event of Default has occurred,all such inspections shall be at Landlord’s sole cost and expense.  So long as no Event of Default has occurred,if, pursuant to this Section 16.03, Landlord’s inspections are completedthrough an agent or contractor of Landlord, Landlord shall require such agentor contractor to obtain and maintain general liability insurance in an amountnot less than $1,000,000 per occurrence, naming Landlord and Tenant asadditional insureds at all times while such inspections are conducted.  Landlord shall deliver evidence of suchinsurance to Tenant prior to commencing such inspections.  So long as no Event of Default is continuingunder this Lease Agreement and except in the event of an emergency, Landlordshall not be allowed entry to the Leased Property unless accompanied by such ofTenant’s personnel as Tenant shall require provided Tenant makes such personnelavailable to Landlord at reasonable times.

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## **16.04****     ****Entire Agreement****. **This Lease Agreement, theDevelopment Agreement and the Purchase Agreement constitute the entireagreement between Landlord and Tenant with respect to the subject matter hereofand thereof.

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## **16.05****     ****Severability****. **If any term or provision ofthis Lease Agreement is held to be invalid or unenforceable, such holding shallnot affect the remainder of this Lease Agreement and the same shall remain infull force and effect, unless such holding substantially deprives Tenant of theuse of the Leased Property or Landlord of the Rents therefor, in which eventthis Lease Agreement shall forthwith terminate as if by expiration of the Term.

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## **16.06****     ****Captions and Headings. **The captionsand headings are inserted only as a matter of convenience and for reference andin no way define, limit or describe the scope of this Lease Agreement or theintent of any provision hereof.

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## **16.07****     ****Governing Law****. **This Lease Agreement shallbe governed by and construed in accordance with the internal laws of the Stateof Colorado.

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## **16.08****     ****Waiver****. **No waiver by either party of any condition or covenant hereincontained, or of any breach of any such condition or covenant, shall be held ortaken to be a waiver of any subsequent breach of such covenant or condition, orto permit or excuse its continuance or any future breach thereof or of anycondition or covenant, nor shall the acceptance of Rent by Landlord at any timewhen Tenant is in default in the performance or observance of any condition orcovenant herein be construed as a waiver of such default, or of Landlord’sright to terminate this Lease Agreement or exercise any other remedy grantedherein on account of such existing default.

 

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## **16.09****     ****Binding Effect****. **This Lease Agreement will bebinding upon and inure to the benefit of the heirs, successors, personalrepresentatives, and permitted assigns of Landlord and Tenant.

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## **16.10****     ****Authority****. **The persons executing thisLease Agreement on behalf of Landlord and Tenant each warrant to the other that(a) each has the power and authority to enter into this Lease Agreement; (b) eachis qualified to do business in the state in which the Leased Property islocated; and (c) each of such persons is authorized to execute this LeaseAgreement on behalf of Landlord or Tenant, as applicable.  Landlord and Tenant shall each, upon request,provide evidence satisfactory to the other confirming these representations.

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## **16.11****     ****Transfer of Permits, Etc****. **Upon the expiration orearlier termination of the Term of this Lease Agreement, Tenant shall, at theoption of Landlord, use reasonable efforts to transfer to and relinquish toLandlord or Landlord’s Designee and cooperate with Landlord or Landlord’sDesignee in connection with the processing by Landlord or Landlord’s Designeeof all licenses, operating permits, and other governmental authorization andall contracts, including without limitation, the correctional or detentionfacility license, all Service Agreements and Sublease Agreements and any othercontracts with governmental or quasi-governmental entities, in each case whichmay be transferred and which may be necessary or appropriate for the operationby Landlord or Landlord’s Designee of the subject Leased Property for thepurposes of operating a correctional or detention facility; provided that thecosts and expenses of any such transfer or the processing of any suchapplication shall be paid by Landlord or Landlord’s Designee.  Any such permits, licenses, certificates andcontracts which are held in Landlord’s name now or at the termination of thisLease Agreement shall remain the property of Landlord or Landlord’sDesignee.  To the extent permitted bylaw, Tenant hereby irrevocably appoints Landlord, its successors and assignsand any nominee or nominees specifically designated by Landlord or anysuccessor or assign as Tenant’s attorney in fact to execute, acknowledge,deliver and file all documents appropriate to such transfer or processing ofany such application on behalf of Tenant. This power of attorney is coupledwith an interest and is irrevocable.

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## **16.12****     ****Modification****. **This Lease Agreement mayonly be modified by a writing signed by both Landlord and Tenant.

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## **16.13****     ****Incorporation by Reference****. **All schedules and exhibitsreferred to in this Lease Agreement are incorporated into this Lease Agreement.

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## **16.14****     ****[IntentionallyOmitted.]**

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## **16.15****     ****Laches****. **No delay or omission by either party hereto to exercise any right orpower accruing upon any noncompliance or default by the other party withrespect to any of the terms hereof shall impair any such right or power or beconstrued to be a waiver thereof.

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## **16.16****     ****Permitted Contests****. **Tenant, on its own or onLandlord’s behalf (or in Landlord’s name), but at Tenant’s expense, maycontest, by appropriate legal proceedings conducted in good faith and with duediligence, the amount or validity or application, in whole or in part, of anyImposition or any legal requirement or insurance requirement or any lien,attachment, levy, encumbrance, charge or claim provided that, (a) in thecase of an unpaid

 

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## Imposition, lien,attachment, levy, encumbrance, charge or claim, the commencement andcontinuation of such proceedings shall suspend the collection thereof fromLandlord and from the Leased Property, (b) neither the Leased Property norany Rent therefrom nor any part thereof or interest therein would be in anyimmediate danger of being sold, forfeited, attached or lost, (c) in thecase of a legal requirement, Landlord would not be susceptible to possiblecivil or criminal liability for failure to comply therewith pending the outcomeof such proceedings, (d) in the event that any such contest shall involvea sum of money or potential loss in excess of Five Hundred Thousand Dollars($500,000), Tenant shall deliver to Landlord and its counsel an opinion ofTenant’s counsel to the effect set forth in clauses (a), (b) and (c), tothe extent applicable, (e) in the case of a legal requirement and/or anImposition, lien, encumbrance, or charge, Tenant shall give such reasonablesecurity as may be demanded by Landlord to insure ultimate payment of the sameand to prevent any sale or forfeiture of the affected Leased Property or theRent by reason of such nonpayment or noncompliance; provided, however, theprovisions of this Section shall not be construed to permit Tenant tocontest the payment of Rent (except as to contests concerning the method ofcomputation or the basis of levy of any Imposition) or any other sums payableby Tenant to Landlord hereunder, (f) in the case of an insurancerequirement, the coverage required by Article V shall be maintained, (g) nocontest may extend beyond the expiration or earlier termination of this LeaseAgreement and (h) if such contest be finally resolved against Tenant,Tenant, as Additional Rent due hereunder, shall promptly pay the amountrequired to be paid, together with all interest and penalties accrued thereon,or comply with the applicable legal requirement or insurance requirement.  Landlord, at Tenant’s expense, shall executeand deliver to Tenant such authorizations and other documents as may bereasonably required in any such contest, and, if reasonably requested by Tenantor if Landlord so desires, Landlord shall join as a party therein.  Tenant shall indemnify, defend, save and holdLandlord harmless of, from and against any and all liability, cost or expenseof any kind, including, but not limited to, attorneys’ fees and expenses, thatmay be imposed upon Landlord in connection with any such contest and any lossresulting therefrom.

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## **16.17****     ****Construction of Lease****. **This Lease Agreement hasbeen reviewed by Landlord and Tenant and their respective professionaladvisors.  Landlord, Tenant, and theiradvisors believe that this Lease Agreement is the product of all their efforts,that they express their agreement, and agree that they shall not be interpretedin favor of either Landlord or Tenant or against either Landlord or Tenantmerely because of any party’s efforts in preparing such documents.

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## **16.18****     ****Counterparts****. **This Lease Agreement may beexecuted in duplicate counterparts, each of which shall be deemed an originaland all of which, when taken together, shall be deemed one and the sameinstrument.

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## **16.19****     ****Relationship of Landlord and Tenant****. **The relationship of Landlordand Tenant is the relationship of landlord and lessee.  Landlord and Tenant are not partners, jointventurers, or associates.

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## **16.20****     ****Submission to Jurisdiction**.

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### (a)           ANY LEGALACTION OR PROCEEDING WITH RESPECT TO THIS LEASE AGREEMENT AND THE OTHERANCILLARY DOCUMENTS MAY BE BROUGHT IN 

 

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### THE COURTS SITUATED INHARRIS COUNTY, TEXAS OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF TEXASAND, BY EXECUTION AND DELIVERY OF THIS LEASE AGREEMENT, EACH PARTY HEREBYIRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, UNCONDITIONALLY,THE NON EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS WITH RESPECT TO ANY SUCHACTION OR PROCEEDING.  EACH PARTY FURTHERIRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONEDCOURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BYREGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS PROVIDED INSECTION 16.01, SUCH SERVICE TO BECOME EFFECTIVE THIRTY DAYS AFTER SUCHMAILING.  NOTHING HEREIN SHALL AFFECT THERIGHT OF THE AGENT OR ANY BANK TO SERVE PROCESS IN ANY OTHER MANNER PERMITTEDBY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY LOANPARTY IN ANY OTHER JURISDICTION.

###  

### (b)           EACH OF THELOAN PARTIES HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW ORHEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS ORPROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS LEASE AGREEMENT BROUGHTIN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY FURTHERIRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANYSUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN ANINCONVENIENT FORUM.

###  

## **16.21****     ****Appraisal. **If it becomesnecessary to determine the fair market value of the Leased Property inconnection with the exercise of an option to purchase with respect thereto, theLandlord and Tenant shall attempt to agree upon a single appraiser to make suchdetermination within thirty (30) days after a demand for an appraisal has beenmade by either the Landlord or Tenant in accordance with this Section 16.21.  If the Landlord and Tenant are unable toagree upon a single appraiser within thirty (30) days thereafter, then theparty giving the notice of demand for appraisal shall give notice to the otherof a person selected to act as appraiser on its behalf.  Within ten (10) days after such notice,Landlord (or Tenant, as the case may be) shall by notice to the Tenant (orLandlord, as the case may be) appoint a second person as appraiser on itsbehalf.  The appraisers thus appointed,each of whom must be a member of the American Institute of Real EstateAppraisers (or any successor organization thereto) and have had priorexperience in appraising correctional and detention facilities (or reasonablysimilar facilities), shall, within forty five (45) days after the date of thenotice appointing the first appraiser, proceed to appraise the Leased Propertyto determine the fair market value thereof as of the relevant date (giving effectto the impact, if any, of inflation from the date of their decision to therelevant date); provided, however, that if only one appraiser has been soappointed, or if two appraisers have been so appointed but only one suchappraiser has made such determination within the later to occur of 10 businessdays following delivery of such appraisal to the other party or fifty (50) daysafter the making of Tenant’s or Landlord’s request, then the determination ofsuch appraiser shall be final and binding upon the parties.  If two appraisers have been appointed andhave made their determinations within the respective requisite periods setforth above and if the difference between the amounts so determined does notexceed ten percent (10%) of the lesser of such amounts, then the fair marketvalue shall be an amount equal

 

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## to fifty percent (50%) ofthe sum of the amounts so determined.  Ifthe difference between the amounts so determined exceeds ten percent (10%) ofthe lesser of such amounts, then such two appraisers shall have twenty (20)days to appoint a third appraiser.  If nosuch appraiser has been appointed within such twenty (20) days or within ninety(90) days of the original request for a determination of fair market value,whichever is earlier, either Landlord or Tenant may apply to any court havingjurisdiction to have such appointment made by such court.  Any appraiser appointed by the originalappraisers or by such court shall be instructed to determine the fair marketvalue within forty five (45) days after appointment of such appraiser.  The determination of the appraiser whichdiffers most in terms of dollar amount from the determinations of the other twoappraisers shall be excluded, and the average of the sum of the remaining twodeterminations shall be final and binding upon Landlord and Tenant as the fairmarket value of the Leased Property. This provision for determining by appraisal shall be specificallyenforceable to the extent such remedy is available under applicable law, andany determination hereunder shall be final and binding upon the parties andjudgment may be entered upon such determination in any court havingjurisdiction of the matter.  Landlord andTenant shall each pay the fees and expenses of the appraiser appointed by itand each shall pay one half *(1⁄2)*ofthe fees and expenses of the third appraiser and one half (1⁄2*)*of all other costs and expenses incurredin connection with each appraisal.

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## **16.22****     ****Brokers****. **Landlord and Tenant each represent and warrant one to the other thatneither of them has employed or dealt with any broker, agent or finder incarrying on the negotiations relating to this Lease Agreement.  Tenant shall indemnify and hold Landlordharmless from and against any claim or claims for brokerage or othercommissions asserted by any broker, agent or finder engaged by Tenant or withwhom Tenant has dealt in connection with this Lease Agreement.  Landlord shall indemnify and hold Tenantharmless from and against any claim or claims for brokerage or othercommissions asserted by any broker, agent or finder engaged by Landlord or withwhom Landlord has dealt in connection with this Lease Agreement.

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## **16.23****     ****Warranties****. **Notwithstanding theassignment to Landlord of the construction and manufacturers’ warranties withrespect to the Leased Property or any Capital Addition in connection with theacquisition thereof from Tenant, Landlord shall cooperate with Tenant in Tenant’senforcement, at Tenant’s sole cost and expense, of any express or impliedwarranties or guaranties of workmanship or materials given by contractors,subcontractors, architects, draftsmen, materialmen or manufacturers thatguarantee or warrant against defective design, workmanship or materials inconnection with the construction of, or any alteration or improvement to, theLeased Property.  Landlord will executesuch documents as Tenant may reasonably require in order to evidence theauthority of Tenant to enforce such guaranties and warranties in Landlord’s nameor on Landlord’s behalf.

 

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INWITNESS WHEREOF, the parties hereto have executed this Lease Agreement orcaused the same to be executed by their respective duly authorized officers asof the date first set forth above.

 

 
| ** ** | **TENANT:**                                                                                    |
|------------|------------------------------------------------------------------------------------------------|
|       | ** **                                                                                     |
|       | **CORNELL CORRECTIONS OF CALIFORNIA, INC., a California  corporation**                         |
|       |                                                                                           |
|       |                                                                                           |
|       | By:                                                                                            | /s/  William Turcotte |
|       |                                                                                           | Name:  William Turcotte |
|       |                                                                                           | Title:  Vice President |
| ** ** | ** **                                                                                     |
| ** ** | ** **                                                                                     |
| ** ** | **LANDLORD:**                                                                                  |
| ** ** | ** **                                                                                     |
| ** ** | **INLAND PPD HUDSON ASSOCIATES, L.L.C., a Delaware limited  liability company**                |
|       |                                                                                           |
|       | By:  Inland Public Properties Development, Inc., a Delaware corporation, its  sole member |
| ** ** | ** **                                                                                     |
| ** ** | ** **                                                                                     |
| ** ** | **By:**                                                                                        | /s/ Charles R. Jones |
|       |                                                                                           | Charles R. Jones, President and Chief Executive  Officer |

 

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