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


 

















 


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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TABLE
OF 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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TABLE
OF 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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TABLE
OF CONTENTS


(continued)


 


	
   

  	
   

  	
   

  	
   

  	
  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]

  	
   

  
						



 


iv

















 


FACILITIES LEASE AGREEMENT


 


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


 


RECITALS


 


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


 


B.            Pursuant to the Development Agreement and that certain
Purchase Agreement dated as August 4, 2008, entered by Landlord and WBP
Leasing, Inc., a Delaware corporation (the “Purchase Agreement”), Landlord
acquired 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 and
Tenant 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 that
certain Implementation Agreement dated August 5, 2008 (the “Operating Agreement”) governing certain
operations and services to be provided by Tenant in connection with the housing
and detention of inmates or detainees at the Facility (as defined in the
Development Agreement) to be constructed on the Property.


 


E.            Landlord and Tenant desire to provide for the lease by
Landlord to Tenant of the Facility and the other Leased Property (as defined
below).


 


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


 


NOW, THEREFORE, in
consideration of the foregoing Recitals and the covenants and conditions set
forth in this Lease Agreement, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and intending to be
legally bound hereby, Landlord and Tenant agree as follows:


 


ARTICLE I


DEFINITIONS
AND CONSTRUCTION


 


1.01        Defined
Terms. 
The following terms shall have the respective meanings assigned below:


 


“Additional
Rent” shall have the meaning assigned to such term in Section 3.02
hereof.


 


2

















 


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


 


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


 


“Allocated
Price” shall have the meaning assigned to such term in Section 13.01
hereof.


 


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


 


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


 


“Capital
Additions” shall have the meaning assigned to such term in Section 9.01
hereof.


 


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


 


“Commencement
Date” shall have the meaning assigned to such term in Section 2.02
hereof.


 


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


 


“CPI-U” means the
Consumer Price Index for All Urban Consumers published by the United States
Bureau of Labor Statistics.


 


“Designated
Rate” 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.


 


“Development
Agreement” shall have the meaning assigned to such term in the
recitals.


 


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


 


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


 


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


 


“Expiration
Date” shall have the meaning assigned to such term in Section 2.02
hereof.


 


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


 


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


 


“First
Extension Designated Rate” shall have the meaning
assigned to such term in Section 2.03(c) hereof.


 


3

















 


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


 


“Governmental
Entity” shall have the meaning assigned to such term in the
recitals.


 


“Ground
Lease Agreement” shall have the meaning assigned to such term in the
recitals.


 


“Hazardous
Materials” shall have the meaning assigned to such term in Section 6.04
hereof.


 


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


 


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


 


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


 


“Initial
Term” shall have the meaning assigned to such term in Section 2.02
hereof.


 


“Land” means the
Property, 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 any
land, highway, street, road or avenue, open or proposed, in, on, across, in
front of, abutting or adjoining such real property including, without
limitation, any strips and gores adjacent to or lying between such real
property and any adjacent real property.


 


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


 


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


 


“Landlord
Designee” shall have the meaning assigned to such term in Section 10.02
hereof.


 


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


 


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


 


“Lease
Agreement” shall have the meaning assigned to such term in the
introductory paragraph.


 


“Lease
Agreements” shall have the meaning assigned to such term in the
recitals.


 


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


 


“Leased
Property” shall have the meaning assigned to such term in Section 2.01
hereof.


 


4

















 


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


 


“Monthly
Rental Amount” means, as determined for each Rental Payment Date,
an amount equal to the quotient obtained upon dividing (i) the product
obtained upon multiplying (a) the aggregate amount of Construction Funds
(as defined in the Development Agreement) outstanding under the Development
Agreement 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 is
attached hereto as Schedule C.


 


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


 


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


 


“Notices”
shall have the meaning assigned to such term in Section 16.01 hereof.


 


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


 


“Operating
Agreement” shall have the meaning assigned to such term in the
recitals.


 


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


 


“Permitted
Exceptions” shall have the meaning assigned to such term in Section 2.01
hereof.


 


“Permitted
Transferee” shall have the meaning assigned to such term in Section 14.02
hereof.


 


“Primary
Intended Use” shall have the meaning assigned to such term in
Section 9.01 hereof.


 


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


 


“Purchase
Agreement” shall have the meaning assigned to such term in the
recitals.


 


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


 


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


 


“Rent” shall have the
meaning assigned to such term in Section 3.03 hereof.


 


“Rental
Commencement Date” means the first day of the calendar month that
immediately follows the calendar month during which there occurs the Deemed
Completion Date.


 


5

















 


“Rental
Payment Date” means each date on which Base Rent is payable in
accordance with Section 3.01 hereof.


 


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


 


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


 


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


 


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


 


“Service
Agreements” shall have the meaning assigned to such term in Section 14.04
hereof.


 


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


 


“Sublease
Agreements” shall have the meaning assigned to such term in Section 14.04
hereof.


 


“Substantial
Repairs” shall have the meaning assigned to such term in Section 11.01
hereof.


 


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


 


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


 


“Tenant
Improvement” and “Tenant
Improvements” shall have the meaning assigned to such term in Section 9.01
hereof.


 


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


 


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


 


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


 


1.02        Incorporation
of Defined Terms.  Capitalized
terms not otherwise defined herein and which are defined in the Development
Agreement shall have the respective meanings assigned to such terms in the
Development Agreement.


 


1.03        Rules of
Construction.


 


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


 


(b)           Unless otherwise indicated, any
reference in any agreement or document to any person shall be construed so as
to include such person and any subsequent successors, transferees and assignees
thereof in accordance with the respective interests;


 


6

















 


(c)           Unless otherwise indicated, any
reference in any agreement or document to such agreement or document or any
other agreement or document shall be construed as a reference to each such
agreement 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 or
document to a statute or enactment or order shall be construed as a reference
to such statute, enactment or order as from time to time amended or reenacted;
and


 


(e)           Clause and schedule headings
contained, and any index or table of contents to, any agreement or document or
for ease of reference only and shall be ignored in construing such agreement or
document.


 


ARTICLE II


PREMISES
AND TERM


 


2.01        Leased
Property. 
Landlord hereby leases to Tenant and Tenant leases from Landlord the
Improvements and Fixtures located or to be located on the Land (each as more
particularly described and defined below, and the foregoing shall collectively
be known and referred to as the “Leased
Property”).  Such Leased
Property shall consist of:


 


(a)           All buildings, improvements,
structures and fixtures now located or to be located or to be constructed on
the Land, including, without limitation, the Facility and all landscaping,
parking lots and structures, roads, drainage and all above ground and
underground 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 components
thereof, located in, on or used in connection with, and permanently affixed to
or incorporated into, the Improvements including, without limitation, all
furnaces, boilers, heaters, electrical equipment, electronic security
equipment, heating, plumbing, lighting, ventilating, refrigerating,
incineration, air and water pollution control, waste disposal, air-cooling and
air-conditioning systems and apparatus, sprinkler systems and fire and theft
protection equipment, and similar systems, all of which, to the greatest extent
permitted by law, are hereby deemed to constitute real estate, together with
all replacements, modifications, alterations and additions thereto
(collectively, the “Fixtures”);


 


SUBJECT, HOWEVER, to the
easements, liens, encumbrances, restrictions, agreements, and other title
matters 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 Agreement
shall be for a fixed term commencing on the date hereof (the “Commencement Date”), and ending on
expiration at midnight ten years after the Deemed Completion Date, unless
earlier terminated or extended as provided herein (the “Expiration Date”).


 


7






 












 


2.03        Option to Renew.


 


(a)           Provided that, at the time of such
exercise, (i) this Lease Agreement is in full force and effect, and (ii) no
Event of Default shall have occurred and be continuing (either at the time of
exercise or at the commencement of an Extended Term), Tenant shall have the
exclusive right and option to extend the Term of this Lease Agreement for up to
two (2) additional terms (each an “Extended
Term” and collectively, the “Extended
Terms”) of ten (10) years each by giving written notice to
Landlord 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 of
extension by Tenant shall automatically extend the Term of this Lease Agreement
for the applicable Extended Term, and no instrument of renewal or extension
need be executed, In the event that Tenant fails timely to give such notice to
Landlord, this Lease Agreement shall automatically terminate at the end of the
Term then in effect, and Tenant shall have no further option to extend the Term
of this Lease Agreement, unless Landlord accepts such untimely notice in
writing.  Each Extended Term shall
commence on the day immediately succeeding the expiration date of the Term then
in 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 terms
and conditions of this Lease Agreement, except: (i) during the second
Extended Term, Tenant shall have no further option to extend the Term, and (ii) the
Base 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 applicable
Extended Term.


 


(b)           After receipt by Landlord of a notice
from Tenant electing to extend the Term of this Lease Agreement under
Subsections 2.03(a) above, Landlord and Tenant shall thereafter as soon as
practicable determine and set forth in a written acknowledgement any adjustment
to the Base Rent in accordance with Paragraph (c) below in connection to
such extension.


 


(c)           In the event Tenant elects to extend
the Initial Term, the Designated Rate to be applicable during the initial
Extended Term will be adjusted to reflect the net change in consumer prices
during the period commencing with the Rental Commencement Date and ending on
the expiration of the Initial Term, such net change and resulting adjustment to
be determined by reference to the CPI-U as of the beginning and end of such
period.  The resulting adjusted
Designated Rate (the “First Extension
Designated Rate”) will be used for the first Extended Term.  In the event Tenant elects to extend the Term
for a second ten year period, the First Extension Designated Rate will be
adjusted in the same manner to reflect the net change in consumer prices during
the period commencing with the first day of the initial Extended Term and
ending on the expiration of such initial Extended Term, such net change and
resulting adjustment to be determined by reference to the CPI-U as of the
beginning and end of such period.  The
resulting adjusted First Extension Designated Rate will be used for the second
Extended Term.  In applying the CPI-U for
purposes of calculating the Designated Rate to be applicable during an Extended
Term, the CPI-U for the months in which there occurred the first and last
Rental Payment Dates of the immediately preceding Term shall be used.  Attached as Schedule D is an example
illustrating calculation of an adjustment to the Designated Rate in connection
with 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 “Lease
Year” means each twelve


 


8

















 


(12) month period during the
Term commencing on the Commencement Date or, if the Commencement Date is not
the first day of a calendar month, the first Lease Year shall consist of the
partial calendar month following the Commencement Date and the succeeding
twelve full calendar months, and each successive twelve month period thereafter
during the Term, provided that the last Lease Year shall end on the expiration
or earlier termination of the Term.


 


2.04        Holding
Over.  Should Tenant,
without the express consent of Landlord, continue to hold and occupy the Leased
Property after the expiration of the Term, such holding over beyond the Term
and the acceptance or collection of Rent (as defined below) by Landlord shall
operate and be construed as creating a tenancy from month-to-month and not for
any other term whatsoever.  Tenant shall
be liable for all damages incurred by Landlord as a result of any such holdover
and, in addition to such damages, during any such holdover period, Tenant shall
pay to Landlord for each month (or portion thereof) Tenant remains in the
Leased Property, one hundred and fifty percent (150%) of the Base Rent in
effect on the expiration date and all Additional Rent applicable to such
holdover period.  Such month-to-month
tenancy may be terminated by Landlord by giving Tenant thirty (30) days written
notice, and at any time after such termination, Landlord may re-enter and take
possession of the Leased Property in accordance with applicable law.


 


2.05        Surrender.  Except as a result of (i) Tenant
Improvements and Capital Additions, (ii) normal wear and tear, taking into
consideration the purpose for which the Leased Property is to be used and the
degree of wear and tear on physical plant facilities and systems in other
similar correctional/detention facilities, and (iii) casualty, taking or
other damage and destruction not required to be repaired by Tenant, Tenant
shall surrender and deliver up the Leased Property at the expiration or
termination of the Term (including any Extended Terms), in generally good order
and condition.


 


ARTICLE III


RENT


 


3.01        Base Rent.  Tenant shall pay Landlord
base rent for the Leased Property, without notice, demand, set-off or
counterclaim, in advance, in lawful money of the United States of America in
the amount specified below (the “Base Rent”) for
the Term, in consecutive monthly installments, each in an amount equal to the
Monthly Rental Amount for the Rental Payment Date on which such Monthly Rental
Amount is payable, payable in advance on the Rental Commencement Date and
thereafter on the first calendar day of each succeeding month during the
Term.  No Base Rent shall be payable
prior to the Rental Commencement Date. 
Any Base Rent payable for a portion of a month shall be prorated based
upon the number of days in the applicable month and an appropriate payment or
refund, 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        Additional
Rent.  In addition to
Base Rent, Tenant shall pay all other amounts, liabilities, obligations and
Impositions (as hereinafter defined ) which Tenant assumes or agrees to pay
under this Lease Agreement and any fine, penalty, interest, charge and cost
which may be added for nonpayment or late payment of such items (collectively,
the “Additional Rent”).


 


9

















 


3.03        Place(s) of
Direct Payment of Base Rent and Additional Rent.  The Base Rent and Additional
Rent are hereinafter collectively referred to as “Rent.”  Landlord shall
have all legal, equitable and contractual rights, powers and remedies provided
either in this Lease Agreement or by statute, rule or regulation or
otherwise with respect to nonpayment of the Rent.  Tenant shall make all payments of Base Rent
at Landlord’s principal place of business or as Landlord may otherwise from
time to time direct in writing, and all payments of Additional Rent directly to
the person or persons to whom such amount is owing at the time and times when
such payments are due, and shall give to Landlord such evidence of such direct
payments as Landlord shall request.


 


3.04        Net Lease.  This Lease Agreement shall be deemed and
construed to be an “absolute net lease” or “triple net lease,” and Tenant shall
pay all Rent, Impositions, and other charges and expenses in connection with
the Leased Property throughout the Term, without abatement, deduction or
set-off.


 


3.05        No
Termination, Abatement, etc.  Except as
otherwise specifically provided in this Lease Agreement, Tenant shall remain
bound by this Lease Agreement in accordance with its terms.  Except as otherwise specifically provided in
this Lease Agreement, Tenant shall not, without the prior written consent of
Landlord, modify, surrender or terminate this Lease Agreement, nor seek nor be
entitled to any abatement, deduction, deferment or reduction of Rent, or
set-off against the Rent.  Except as
specifically provided in this Lease Agreement, the obligations of Landlord and
Tenant shall not be affected by reason of (i) the lawful or unlawful
prohibition of, or restriction upon, Tenant’s use of the Leased Property, or
any part thereof, the interference with such use by any Person, corporation,
partnership or other entity, or by reason of eviction by paramount title, in
each case not resulting due to actions taken by, or claims asserted against,
Landlord, (ii) any claim which Tenant has or might have against Landlord
or by reason of any default or breach of any warranty by Landlord under this
Lease Agreement or any other agreement between Landlord and Tenant, or to which
Landlord and Tenant are parties; (iii) any bankruptcy, insolvency,
reorganization, composition, readjustment, liquidation, dissolution, winding up
or other proceeding affecting Landlord or any assignee or transferee of
Landlord; (iv) any bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution, winding up or other proceeding
affecting Landlord or any assignee or transferee of Landlord; or (v) any
bankruptcy, insolvency, reorganization, composition, readjustment, liquidation,
dissolution, winding up or other proceeding affecting Tenant, any Affiliate, or
any assignee or transferee of Tenant. 
Except as otherwise specifically provided in this Lease Agreement, and
to the maximum extent permitted by law, Tenant hereby specifically waives all
rights, including, but not limited to, any rights under any statute relating to
rights of tenants in any state in which the Leased Property is located, arising
from any occurrence whatsoever, which may now or hereafter be conferred upon it
by law (a) to modify, surrender or terminate this Lease Agreement or quit
or surrender the Leased Property or any portion thereof; or (b) entitling
Tenant to any abatement, reduction, suspension or deferment of the Rent or
other sums payable by Tenant hereunder. 
The obligations of Landlord and Tenant hereunder shall be separate
agreements, and the Rent and all other sums shall continue to be payable in all
events unless the obligations to pay the same shall be terminated pursuant to
the express provisions of this Lease Agreement or by termination of this Lease
Agreement.


 


10

















 


ARTICLE IV


IMPOSITIONS
AND UTILITIES


 


4.01        Payment of
Impositions.  Subject to the
adjustments set forth herein, Tenant shall pay, as Additional Rent, all
Impositions that may be levied or become a lien on the Leased Property or any
part thereof at any time during the Term, before the same become delinquent.  Tenant shall furnish to Landlord on an annual
basis copies of official receipts or other satisfactory proof evidencing such
payments.  Tenant’s obligation to pay
such Impositions shall be deemed absolutely fixed upon the date such
Impositions are assessed upon the Leased Property or any part thereof.  Tenant, at its expense, shall prepare and
file all tax returns and reports in respect of any Imposition as may be
required by governmental authorities; provided, however, Landlord shall be
responsible for the preparation and filing of any such tax returns or reports
in respect of any real or personal property owned by Landlord.  Tenant shall be entitled to any refund due
from any taxing authority attributable to Impositions for which Tenant has
paid.  Landlord and Tenant shall, upon
request of the other, provide such data as is maintained by the party to whom
the request is made with respect to the Leased Property as may be necessary to
prepare any required returns and reports. 
In the event governmental authorities classify any property covered by
this Lease Agreement as personal property, Landlord and Tenant shall file all
personal property tax returns in such jurisdictions where it may legally so
file with respect to their respective owned personal property.  Landlord, to the extent it possesses the
same, and Tenant, to the extent it possess the same, will provide the other
party, upon request, with cost and depreciation records necessary for filing
returns for any property so classified as personal property.  Where Landlord is legally required to file
personal property tax returns, Tenant will be provided with copies of
assessment notices indicating a value in excess of the reported value in
sufficient time for Tenant to file a protest. 
Tenant may, upon notice to Landlord, at Tenant’s option and at Tenant’s
sole cost and expense, protest, appeal, or institute such other proceedings as
Tenant may deem appropriate to effect a reduction of real estate or personal
property assessments and Landlord, at Tenant’s expense as aforesaid, shall
fully cooperate with Tenant in such protest, appeal, or other action.  Tenant shall provide Landlord copies of all
materials filed or presented in connection with any such proceeding.  Tenant shall promptly reimburse Landlord for
all personal property taxes paid by Landlord upon receipt of billings
accompanied by copies of a bill therefor and payments thereof which identify
the personal property with respect to which such payments are made.  Impositions imposed in respect to the tax-fiscal
period during which the Term commences and terminates shall be adjusted and
prorated between Landlord and Tenant on a per diem basis, with Tenant being
obligated to pay its pro rata share from and including the Commencement Date to
and including the expiration or termination date of the Term, and Tenant’s
obligation to pay its prorated share thereof shall survive such
termination.  Tenant shall have no
obligation to pay any such Imposition that is imposed for periods before or
after such commencement or termination.


 


4.02        Definition
of Impositions.  “Impositions” means, collectively, the
following: (a) taxes (including, without limitation, all real estate and
personal property ad valorem (whether assessed as part of the real estate or
separately assessed as unsecured personal property), sales and use, business or
occupation, single business, gross receipts, transaction, privilege, rent or
similar taxes, but not including income or excise taxes payable with respect to
Landlord’s receipt of Rent), (b) assessments (including without
limitation, all assessments for public improvements or benefits, provided such
assessments are payable during the Term); (c) ground rents, water,


 


11

















 


sewer or other rents, fees
and charges, excises, tax levies, and fees (including, without limitation,
license, permit, inspection, authorization and similar fees); (d) all
taxes imposed on Tenant’s operation of the Leased Property, including, without
limitation, employee withholding taxes, income taxes and intangible taxes,
sales and use taxes; (e) any taxes arising out of or incurred as a result
of any sale, transfer, assignment or other disposition by Tenant of its
interest in the Leased Property or this Lease Agreement, whether or not
permitted under this Lease Agreement; and (f) all other governmental
charges, in each case whether general or special, ordinary or extraordinary, or
foreseen or unforeseen, of every character in respect of the Leased Property or
any part thereof (including all interests and penalties thereon due to any
failure in payment by Tenant), which at any time during or in respect of the
Term hereof may be assessed or imposed on or in respect of or be a lien upon
any of the following: (i) Landlord or Landlord’s interest in the Leased
Property or any part thereof; (ii) the Leased Property or any part thereof
or any rent therefrom or any estate, right, title or interest therein; or (iii) any
occupancy, operation, use or possession of, or sales from, or activity conducted
on, or in connection with the Leased Property or the leasing or use of the
Leased Property or any part thereof. 
Tenant shall not, however, be required to pay (y) any tax based on
net income (whether denominated as a franchise or capital stock or other tax)
imposed on Landlord, or (z) any income, franchise, transfer, documentary
stamp, intangible, gross receipts, inheritance, devolution, gift, estate,
payroll, stamp act, or reassessment or supplemental assessments of ad valorem
real or personal property taxes due to the sale, transfer, assignment or other
disposition of the title, estate or interest of Landlord in the Leased Property
or this Lease Agreement.


 


4.03        Utilities.  Tenant shall be responsible
to procure the supply of any and all utilities necessary for Tenant’s use and
occupation of the Leased Property and Landlord will have absolutely no
responsibility or obligation to provide any utility or other service to the
Leased Property.  Tenant shall contract
for, 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, telephone
service, trash collection, internet access and all other utilities that may be
charged against any occupant or user of the Improvements during the Term.  Tenant shall at all times maintain that
amount of heat necessary to ensure against the freezing of water lines.


 


4.04        Escrow of
Impositions. 
In the event Tenant fails to timely pay any or all of the Impositions
with respect to the Facility two (2) times in any one (1) tax period
or three (3) times in any two (2) consecutive tax periods, then, upon
ten (10) days written notice from Landlord to Tenant, Tenant shall
thereafter deposit with Landlord on the first day of each month during the
remaining 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 be
assessed against such Leased Property during the tax year of the then
applicable Lease Year, which sum shall be used by Landlord toward payment of
such Impositions.  If at the end of any
applicable tax year, any such funds held by Landlord are insufficient to make
full payment of taxes or other Impositions for which such funds are held,
Tenant, on demand, shall pay to Landlord any additional funds necessary to pay
and discharge the obligations of Tenant pursuant to the provisions of this
paragraph.  If, however, at the end of
any applicable tax year, such funds held by Landlord are in excess of the total
payment required to satisfy taxes or other Impositions for which such funds are
held, Landlord shall apply such excess amounts to Tenant’s tax and Imposition
escrow fund for the next tax year.  If
any such excess exists following the expiration or earlier termination of


 


12

















 


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


 


4.05        Discontinuance
of Utilities.  Landlord will
not be liable for damages to person or property or for injury to, or
interruption of, business, whether the business of Tenant or any other Person,
for any failure or interruption in the supply of utilities, or discontinuance
of utilities nor will such failure, interruption or discontinuance in any way
be construed as an eviction of Tenant or cause an abatement of Rent or operate
to release Tenant from any of Tenant’s obligations under this Lease Agreement.


 


4.06        Non-Duplication
of Additional Rent.  Notwithstanding
Tenant’s obligation to pay all Impositions and other Additional Rent in
accordance with the terms hereof, Tenant shall not pay any amount owed that is
duplicative of an obligation that Tenant is required to pay as an Imposition or
other category of Additional Rent under the Ground Lease Agreement.


 


ARTICLE V


INSURANCE


 


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


 


(a)           Loss or damage by fire, vandalism and
malicious mischief, sprinkler leakage and all other physical loss perils
commonly covered by “special perils” or “special form” insurance (formerly
known 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-amount
endorsement in form and amount acceptable to Landlord.  Such policy shall also include endorsements
for contingent liability for ordinance or law coverage with wording provided to
cover the enforcement of operation of building and zoning laws, demolition and
removal costs of undamaged parts of the structure, and increased cost of
repairs or reconstruction.


 


(b)           Loss or damage by explosion of steam
boilers, pressure vessels, or similar apparatus, now or hereafter installed on
the Leased Property, in commercially reasonable amounts reasonably acceptable
to Landlord.


 


(c)           Loss of 100% of the rent payable by
Tenant under a rental value coverage or endorsement to property policy covering
risk of loss for a period of at least the first twelve (12) months of the Term
to compensate Landlord for any rent abatement necessitated by the occurrence of
any hazards described in Sections 5.01(a) or 5.01(b), above, and which
causes an abatement of Rent as provided in Article XI hereof, in an amount
sufficient to prevent Landlord or Tenant from becoming a co-insurer, containing
endorsements for extended period of indemnity and premium adjustment, and
written with an agreed-amount clause.


 


13

















 


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


 


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


 


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


 


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


 


5.02        Liability
Insurance. 
Tenant shall, at Tenant’s expense, maintain during the Term liability
insurance against the following:


 


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


 


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


 


5.03        Insurance
Requirements. 
The following provisions shall apply to all insurance coverage required
under this Lease Agreement, including, but not limited to, the insurance
required under Sections 5.01 and 5.02 above:


 


(a)           The carriers of all policies shall
have a Best’s Rating of “A-” or better and a Best’s Financial Category of VII
or higher and shall be authorized to do business in and licensed to issue
insurance 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 insurance
policy required under Section 5.01, except that if such coverage is under
a blanket policy, Landlord, shall each be designated an “additional insured”
only with respect to the Leased Property covered under any such policy or
policies and the operations and services conducted thereon.  Landlord and any mortgagee of Landlord shall
be designated “loss payee” or “mortgagee loss payee” on each property insurance
policy required under Section 5.01 and the rent loss insurance coverage
required under Section 5.01(c), except that if such coverage is under a
blanket insurance policy, each shall be designated a “loss payee” 


 


14

















 


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


 


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


 


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


 


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


 


(f)            At least five (5) days prior to
the expiration of each policy, Tenant shall deliver to Landlord a certificate
showing renewal of such policy.


 


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


 


(h)           Prior to the annual renewal of
coverage that occurs during the first year of any Extended Term, Landlord shall
have the right to require reasonable adjustments to the minimum insurance
requirements set forth in Section 5.02(a), such adjustments (if any) to be
effective sixty (60) days following Landlord’s written notice to Tenant
specifying the required adjustments.


 


5.04        Replacement
Cost.  The term “full
replacement cost” means the actual replacement cost thereof from time to time,
including increased cost of construction, with no reductions or
deductions.  If, as reasonably determined
by Landlord after consultation with Landlord’s third party professional
insurance advisors, there has been an increase in the replacement cost of the
Improvements, then, upon request of Landlord, Tenant shall, not later than
thirty (30) days after the anniversary of each applicable insurance policy, adjust
the amount of the replacement cost endorsement to reflect any such
increase.  If Tenant makes any permitted
alterations to the Leased Property, Landlord may have such full replacement
cost re-determined at any time after such permitted alterations are made,
regardless of when the full replacement cost was last determined.


 


5.05        Blanket
Policy. 
Tenant may carry the insurance required by this Article under a
blanket policy of insurance, provided that the coverage and limits afforded
Tenant will not be


 


15

















 


reduced or diminished or
otherwise be different from that which would exist under a separate policy
meeting all of the requirements of this Lease Agreement.


 


5.06        No
Separate Insurance.  Tenant shall
not take out separate insurance concurrent in form or contributing in the event
of loss with that required in this Article V, or increase the amounts of
any then existing insurance pertaining to a particular Leased Property by
securing an additional policy or additional policies with respect to such
Leased Property, unless all parties having an insurable interest in the subject
matter of the insurance, including Landlord, are included therein as additional
insureds or loss payees, the loss is payable under such insurance in the same
manner as losses are payable under this Lease Agreement, and such additional
insurance is not prohibited by the existing policies of insurance.  Tenant shall immediately notify Landlord of
the taking out of such separate insurance or the increasing of any of the
amounts of the existing insurance by securing an additional policy or
additional policies.


 


5.07        Waiver of
Subrogation.  Each party
hereto hereby waives any and every claim that arises or may arise in its favor
and against the other party hereto during the Term or any extension or renewal
thereof, for any and all loss of or damage to, any of its property located
within or upon, or constituting a part of, the Leased Property, which loss or
damage is covered (or, under the terms of this Lease Agreement, should have
been covered) by valid and collectible insurance policies, to the extent that
such 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 in
this Lease Agreement with respect to any loss or damage to property of the
parties hereto.  Inasmuch as such waivers
will preclude the assignment of any such claim by way of subrogation (or
otherwise) to an insurance company (or any other person), each party hereto
agrees immediately to give each insurance company which has issued to it
policies of insurance, written notice of the terms of such mutual waivers, and
to have such insurance policies properly endorsed, if necessary, to prevent the
invalidation of such insurance coverage by reason of such waivers.


 


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


 


ARTICLE VI


INDEMNITY;
HAZARDOUS SUBSTANCES; DANGEROUS CONDITIONS


 


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


 


16

















 


work, or thing done, or
permitted or suffered by or through Tenant in or about the Leased Property; (c) any
acts, omissions, or negligence of Tenant or any person claiming under Tenant,
or the contractors, agents, employees, invitees or visitors of Tenant or any
such Person; (d) any claim of any person incarcerated, held or detained in
the Leased Property, including claims alleging breach or violation of such
Person’s civil or legal rights; (e) any breach, violation, or
nonperformance by Tenant or any Person claiming under Tenant or the employees,
agents, contractors, invitees or visitors of Tenant or of any such Person, of any
term, covenant, or provision of this Lease Agreement or any law, ordinance,
rule, regulation or governmental requirement of any kind; (f) any injury
or damage to the person, property or business of Tenant, its employees, agents,
contractors, invitees, or visitors, or any other person entering upon the
Leased Property under the express or implied invitation of Tenant; and (g) and
any accident, injury to or death of persons or loss or damage to any item of
property 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 notice
from Landlord, will defend the claim at Tenant’s sole cost and expense with
counsel selected by Tenant and reasonably satisfactory to Landlord.  In the event Landlord reasonably determines
that its or its employees’, partners’, managers’ or agents’ interests and the
interests of Tenant in any such action or proceeding are in material conflict
and that Tenant’s counsel cannot adequately represent the interests of Landlord
or such persons therein, Landlord shall have the right to hire separate counsel
in any such action or proceeding and the reasonable costs and expenses thereof,
including all reasonable attorneys’ fees and expenses, shall be paid for by
Tenant.


 


6.02        Hazardous
Materials.  Tenant, subject
to the facts disclosed in any Phase I environmental report obtained by Landlord
with respect to the acquisition of the Leased Property, warrants and represents
to Landlord as of the date of this Lease Agreement the following: (a) no
activity has been undertaken with respect to the Leased Property to Tenant’s
knowledge which would cause a violation under any Hazardous Materials Law; (b) to
Tenant’s knowledge, no investigation, administrative order, litigation or
settlement with respect to any Hazardous Materials is in existence with respect
to the Leased Property, nor, to Tenant’s knowledge, is any of the foregoing
threatened; and (c) to Tenant’s knowledge, no notice has been received by
Tenant from any Person claiming any violation of any Hazardous Materials Law,
or requiring compliance with any Hazardous Materials Law, or demanding payment
or contribution for environmental damage or injury to natural resources with
respect to the Leased Property.


 


6.03        Tenant’s
Compliance/Indemnities.


 


(a)           During the Term, Tenant will not
store, use, or dispose of any Hazardous Materials, except in such quantities as
allowed and in such containers as permitted under and only in material accordance
with all applicable Hazardous Materials Laws. 
Notwithstanding the foregoing, Tenant anticipates using, storing and
disposing of certain Hazardous Materials in connection with the operation of
correctional or detention facilities on the Leased Property, which activities
are not in violation of Hazardous Materials Laws.  Such substances include, but are not limited
to the following: medical wastes, diesel fuel, maintenance and janitorial
supplies, and waste from reprographic activities.  During the Term, Tenant shall not allow the
storage or use of Hazardous Materials on the Leased Property in any manner not
permitted by law and by the standards prevailing in the industry for the
storage and use of such substances or materials.


 


17

















 


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 include
information regarding continued Hazardous Materials inspections, personal
interviews, 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 concerning
Tenant’s best knowledge and belief regarding the presence or absence of
Hazardous 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 and
against any and all claims, costs, and liabilities, including, but not limited
to, reasonable attorneys’ fees and expenses and costs of litigation, incurred
as a result of a release or threatened release on the Leased Property of
Hazardous Materials or the violation, or the alleged violation, by Tenant of
any law, ordinance, regulation, order, permit, decree or similar items,
including, but not limited to any Hazardous Materials Laws, relating to
hazardous substances, human health or the environment (collectively, “Environmental Laws”) (irrespective of
whether there has occurred any violation of any Environmental Law ), in respect
of the Leased Property, including, but not limited to, the following: (a) liability
for response costs and for costs of removal and remedial action incurred by the
United States Government, any state or local governmental or quasi-governmental
body, agency, board or unit or any other person or entity, or damages from
injury to or destruction or loss of natural resources, including the reasonable
costs of assessing such injury, destruction or loss, incurred pursuant to any
Environmental 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 any
Environmental Law, (c) liability for personal injury or property damage
arising under any statutory or common-law tort theory, including damages
assessed for the maintenance of a public or private nuisance or for carrying on
of a dangerous activity or (d) by reason of a breach of an environmental
representation or warranty given by Tenant to Landlord.  The foregoing indemnification of Landlord by
Tenant includes, without limitation, all costs incurred by or imposed upon
Landlord in connection with any judgments, damages, penalties, fines,
liabilities or losses (including, without limitation, damages for the loss or
restriction on use of any space or of any amenity in or around the Leased
Property, and sums paid in settlement of claims, reasonable attorneys’ fees and
costs, reasonable consultant fees and reasonable expert fees) or in connection
with the investigation of site conditions or any clean up, or remedial removal
or restoration work required by any Federal, state or local governmental agency
or political subdivision occurring as a result of the presence of any Hazardous
Material in, on or under the Leased Property caused by Tenant or for which
Tenant is legally liable.  Tenant’s
obligations 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 with
the environmental representations and covenants set forth in this Section 6.02,
and Tenant will cooperate with such inspections, which must be conducted by
Landlord in accordance with all applicable rules and regulations and
subject to the approval of all federal, state and local correctional and other
authorities with inmates incarcerated at, or supervisory responsibility over,
the Leased Property.  Such inspections
shall be performed at Landlord’s expense unless an Event of Default has
occurred or Landlord has a reasonable basis to contend that Tenant has violated
its


 


18






 












 


representations or covenants
under this Article VI and such inspection is reasonably necessary to
determine whether such violation is in existence.  Landlord shall provide Tenant not less than
thirty (30) days prior notice of the date and time of any Phase II
environmental drilling, sampling or testing involving intrusive procedures and
coordinate with Tenant such procedures so that they do not unreasonably
interfere with Tenant’s operations at the Facility.  All such inspections shall be performed in
accordance with all Environmental Laws.


 


6.04        Definitions.  Without limitation, “Hazardous Materials” for the purpose of
this Article VI shall include any substances regulated by any local, state
or federal law relating to environmental conditions and industrial hygiene,
including, without limitation, the Resource Conservation and Recovery Act of
1976 (“RCRA”), the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (“CERCLA”), as amended by the Superfund Amendments and
Reauthorization Act of 1986 (“SARA”), the Hazardous Materials Transportation
Act, the Federal Water Pollution Control Act, the Clean Air Act, the Clean
Water Act, the Toxic Substances Control Act, the Safe Drinking Water Act, and
all similar federal, state and local environmental statutes, ordinances and the
regulations, 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 the
Leased Property and all furnishings, fixtures, equipment, effects and property
of every kind, nature and description of Tenant and of all persons claiming by,
through or under Tenant which, during the continuance of this Lease Agreement
or any occupancy of the Leased Property by Tenant or anyone claiming under
Tenant, may be on the Leased Property, shall, unless caused by the gross
negligence or willful misconduct of Landlord, be at the sole risk and hazard of
Tenant, and, subject to the foregoing, if the whole or any part thereof shall
be destroyed or damaged by fire, water or otherwise, or by the leakage or
bursting of water pipes, steam pipes, or other pipes, by theft or from any
other cause, no part of said loss or damage is to be charged to or be borne by
Landlord, except that Landlord shall in no event be exonerated from any
liability to Tenant or to any person, for any injury, loss, damage or liability
to the extent such exoneration is prohibited by law.  Landlord shall not be responsible or liable
to Tenant, or to those claiming by, through or under Tenant, for any loss or
damage that may be occasioned by or through the acts or omissions of persons
occupying or owning property adjoining or adjacent to the Leased Property.  Landlord, its agents, partners, managers and
employees, will not be liable for any loss, injury, death, or damage (including
consequential damages) to persons, property, or Tenant’s business occasioned by
theft, act of God, public enemy, terroristic threat or act, injunction, riot,
strike, insurrection, war, court order, requisition, order of governmental body
or authority, fire, explosion, falling objects, steam, water, rain or snow,
leak or flow of water (including water from the elevator system), rain or snow
from 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 any
acts or omissions of any other occupant or visitor of the Leased Property, or
from the presence or release of any hazardous substance or material on or from
the Leased Property or from any other cause beyond Landlord’s reasonable
control.


 


6.06        Dangerous Condition.  Tenant shall use
commercially reasonable efforts in accordance with industry standards to keep
the Leased Property free from mold, mildew, lead


 


19

















 


based paint and any and all
other bacteria, fungi, substances and materials in quantities or concentrations
that could be reasonably expected to be harmful to the health or safety of any
occupants or inmates at the Facility or any employees or other invitees of
Tenant or any other person coming onto or in the Facility.


 


ARTICLE VII


USE
AND ACCEPTANCE OF LEASED PROPERTY


 


7.01        Use of Leased Property.  The Leased Property shall be
used and occupied exclusively as a correctional or detention facility together
with uses related or incidental to the operation of a correctional or detention
facility or required pursuant to the Operating Agreement or any other
governmental operating agreement, support agreement or sublease, including, but
not limited to, any Service Agreements (as defined below), or any other purpose
for which the Leased Property is being used at the Commencement Date of the
Term or the Rental Commencement Date, and for no other purpose without the
prior written consent of the Landlord, which shall not be unreasonably
withheld, delayed or conditioned.  Tenant
shall obtain and maintain all approvals, licenses, and consents needed to use
and operate each Leased Property for such purposes.  If requested by Landlord, Tenant shall
promptly deliver to Landlord complete copies of surveys, examinations,
certification and licensure inspections, compliance certificates, and other
similar reports issued to Tenant by any governmental agency for the use and
occupancy of the Leased Property.


 


7.02        Acceptance of Leased Property.  Except as otherwise
specifically provided in this Lease Agreement, Tenant acknowledges that (i) Tenant
and its agents have had an opportunity to inspect the Leased Property, (ii) Tenant
has found the Leased Property fit for Tenant’s use, (iii) delivery of the
Leased Property to Tenant is in an “as-is” condition, (iv) except for
Landlord’s obligations under the Development Agreement with respect to
providing funds to finance the development of the Project, Landlord is not
obligated to make any improvements or repairs to the Leased Property and (v) as
of 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 Leased
Property will be in good working order. 
Tenant waives any claim or action against Landlord with respect to the
condition of the Leased Property.


 


LANDLORD MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN
RESPECT OF THE LEASED PROPERTY OR ANY PART THEREOF, EITHER AS TO ITS
FITNESS FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR
OTHERWISE, AS TO QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, OR THE
PRESENCE OR ABSENCE OF ANY DEFECT THEREIN, LATENT OR PATENT, IT BEING AGREED
THAT ALL SUCH RISKS ARE TO BE BORNE BY TENANT.


 


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


 


20

















 


be used or occupied, for any
purpose or business deemed extra hazardous on account of fire or potential fire
or other hazard or otherwise; keep the Leased Property in such repair and
condition as may be required by the local board of health, fire marshal, or
other city, state or federal authorities, free of all cost to Landlord; and not
permit any acts to be done that will cause the cancellation, invalidation, or
suspension of any insurance policy, provided that the foregoing shall be subject
to the normal wear and tear contemplated in Section 2.05.


 


7.04        Financial
Reports.


 


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


 


(b)           If at any time
during the Term, the financial statements of Cornell Companies, Inc. (“Tenant Parent”) cease to be publicly
available or Tenant Parent ceases to be a public company required to file its
financial statements with the Securities and Exchange Commission, Tenant shall
deliver to Landlord (to the extent not previously delivered or available to
Landlord), within ten (10) business days following receipt of a request by
Landlord, copies of Tenant Parent’s audited annual financial statement for its
two (2) most recent fiscal years for which audited financials have
otherwise been prepared, if any.  In
addition, if requested by Landlord in connection with any existing or proposed
financing or sale of the Leased Property, Tenant shall deliver to Landlord,
within ten (10) business days of a request from Landlord, copies of Tenant
Parent’s quarterly financial statements for its most recent fiscal quarter for
which such statements have been prepared and are available.  Such financial statements of Tenant Parent
shall include, if available, a balance sheet, an income statement, and a
statement of change in financial position or sources and uses of cash, together
with any accompanying notes.  In the
event that Tenant Parent’s most recent quarterly or annual financial
statements, as applicable, have not been completed and filed publicly as of the
date of Landlord’s request therefore, Tenant Parent shall deliver to Landlord
copies of the most recent financial statements then prepared and completed by
or on behalf of Tenant Parent within ten (10) business days following
Landlord’s request and shall deliver updated financial statements when filed
publicly.


 


ARTICLE VIII


REPAIR:
COMPLIANCE WITH LAWS:


MECHANICS’
OR CONSTRUCTION LIENS: MAINTENANCE OF SERVICE


CONTRACTS


 


8.01        Repair and Maintenance.  Tenant shall, at Tenant’s
sole cost and expense, maintain the Leased Property in good order, repair and
appearance, and repair the Leased Property, including without limitation, all
interior and exterior, structural and nonstructural repairs and replacements to
the roof, foundations, exterior walls, building systems, HVAC systems, parking
areas, sidewalks, water, sewer and gas connections, pipes, and mains.  In determining Tenant’s obligations to
maintain the Leased Property hereunder, the parties shall take into
consideration the purpose of the Leased Property as a correctional/detention
Facility and any maintenance requirements or standard contained in any
Operating Agreement.  Tenant shall pay as
Additional Rent, in accordance with Section 3.02, the full cost of
maintenance, repairs, and replacements to the Leased Property and all Fixtures
and Improvements.  Tenant shall maintain
all drives, sidewalks, parking areas, and lawns on or about the Leased Property
in


 


21

















 


a clean and orderly
condition, free of accumulations of dirt, rubbish, snow and ice.  Tenant shall permit Landlord or any
representatives or agents of Landlord to inspect the Leased Property as
provided in Section 16.03. 
Notwithstanding the foregoing, Landlord has no obligation to inspect the
Leased Property, and Landlord will have no liability to Tenant or any other
party with respect to the condition of the Leased Property whether or not
Landlord inspects the same.


 


8.02        [Intentionally Omitted.]


 


8.03        Compliance with Laws.  Tenant shall, at Tenant’s
sole cost and expense, comply in all material respects, and shall cause the
Leased Property to comply in all material respects, with all laws, codes,
ordinances, orders, rules, regulations, and other governmental requirements
relating to the use, condition, or occupancy of the Leased Property, whether
now or hereafter enacted and in force including without limitation, (a) licensure
requirements for operation as a correctional or detention facility or any other
use permitted hereunder, (b) requirements of any board of casualty
insurance underwriters or insurance service office or any other similar body
having jurisdiction over the Leased Property, and (c) all zoning and building
codes and Environmental Laws.  At
Landlord’s request, from time to time, Tenant shall deliver to Landlord copies
of 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 from
any governmental authority alleging any non-compliance by Tenant or the Leased
Property with any of the foregoing requirements and such evidence as Landlord
may reasonably require with respect to Tenant’s remediation thereof.


 


8.04        Required Alterations.  Tenant shall, at Tenant’s
sole cost and expense, make any additions, changes, improvements or alterations
to the Leased Property, including structural alterations, which may be required
by any governmental authorities, including those required to continue licensure
of the Improvements as a correctional or detention facility and all alterations
and additions necessary to make the Leased Properties compliant in all material
respects under the Americans with Disabilities Act and all applicable state and
local laws, ordinances and regulations governing the accessibility of the
Leased Properties to persons with disabilities, whether such changes are
required by Tenant’s use, changes in the law, ordinances, or governmental
regulations, defects existing as of the date of this Lease, or any other cause
whatsoever.  Tenant shall provide prior
written notice to Landlord of any changes to the Leased Property pursuant to
this Section 8.04 which involve changes to the structural integrity of
such Leased Property or materially affect the operational capabilities or rated
capacity of the Leased Property.  All
such additions, changes, improvements or alterations shall be deemed to be a
Tenant Improvement (as defined below) and shall comply in all material respects
with 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 all
mechanics’ or construction liens filed against the Leased Property by reason of
work, labor services or materials supplied or claimed to have been supplied on
or to the Leased Property.  Tenant shall
cause to be removed, bonded-off, or otherwise released any mechanics’ or
construction lien filed against the Leased Property within forty-five (45) days
of the date of filing of such lien.  If
Tenant shall fail to discharge any such lien, Landlord may, at its option,
after ten (10) business days notice to Tenant of its intent to 


 


22

















 


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


 


8.06        Replacements of Fixtures.  Tenant shall not remove
Fixtures from the Leased Property except to replace the Fixtures by other
similar items of comparable quality and functionality.  Items being replaced by Tenant may be removed
and shall become the property of Tenant, and items replacing the same shall be and
remain the property of the Landlord. 
Tenant shall execute, upon written request from Landlord, any and all
documents necessary to evidence Landlord’s ownership of the Fixtures and
replacements therefor.  Tenant may
finance replacements for the Fixtures by equipment lease or by a security
agreement and financing statement; provided, however, that for any item of
Fixtures 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 financing
that is proposed within the last thirty-six (36) months of a Term), Tenant may
not finance replacements by security agreement or equipment lease unless (a) Landlord
has consented to the terms and conditions of the equipment lease or security
agreement, including, without limitation, the amount to be financed and the
amortization schedule regarding the principal amount of any such financing, (b) the
equipment lessor or lender has entered into a non-disturbance agreement with
the Landlord upon terms and conditions acceptable to Landlord, including
without limitation, the following: (i) Landlord shall have the right (but
not the obligation) to assume such security agreement or equipment lease upon
the occurrence of an Event of Default by Tenant under this Lease Agreement, (ii) the
equipment lessor or lender shall notify Landlord of any default by Tenant under
the equipment lease or security agreement and give Landlord a reasonable
opportunity to cure such default, and (iii) Landlord shall have the right
to assign its rights under the equipment lease, security agreement, or
non-disturbance agreement, and (c) Tenant shall, within thirty (30) days
after receipt of an invoice from Landlord, reimburse Landlord for all
reasonable costs and expenses incurred in reviewing and approving the equipment
lease, security agreement, and non-disturbance agreement, including without
limitation, attorneys’ fees, expenses and costs.


 


8.07        Maintenance of Service Agreements.  Tenant shall keep in full
force and effect and shall perform all material obligations required to be
performed by Tenant under, any and all material contracts, agreements, leases,
or commitments or documents applicable to the Leased Property or the operation
of the Facility, including but not limited to, Service Agreements (as defined
below).  Tenant shall immediately notify
Landlord in writing if Tenant or any other party to any such material contract,
agreement, lease, or commitment or document applicable to the Leased Property
or the operation of the Facility, including, but not limited to, the Service
Agreements, is in material default thereunder, or if any Service Agreement has
been terminated by any party thereto.


 


23

















 


ARTICLE IX


ALTERATIONS;
TENANT’S PROPERTY;


CAPITAL
ADDITIONS TO THE LEASED PROPERTY


 


9.01        Tenant’s Right to Construct.  Tenant shall have the
exclusive right and access to construct, or cause there to be constructed, the
Facility and to otherwise develop, construct and equip the Project, and to
implement the Development Plan.  Tenant
shall also have the exclusive right and access to make Capital Additions, or
other alterations, additions, changes and/or improvements to the Leased
Property or the Land as deemed necessary or useful by Tenant to operate the
Leased Property as a correctional or detention facility or other use approved
by Landlord (the “Primary Intended Use”)
(excluding any such alterations, additions, changes and/or improvements in
connection with the Project or that are contemplated by the Development Plan,
individually, a “Tenant Improvement,” or
collectively, “Tenant Improvements”).  “Capital Additions” shall mean a
Tenant Improvement consisting of the construction of one or more new buildings
or one or more additional structures annexed to any portion of any of the
Improvements on the Leased Property, which are constructed on any parcel of
Land or portion of the Leased Property or the Land during the Term of this
Lease Agreement, including the construction of a new floor, which in each case
are not constructed pursuant to or in connection with the Project or
contemplated by the Development Plan. 
Except as otherwise agreed to by Landlord in writing pursuant to Section 9.09
below, any Tenant Improvement shall be made at Tenant’s sole expense and shall
become the property of Landlord upon termination of this Lease Agreement.  Unless made on an emergency basis to prevent
injury to person or property, Tenant will submit plans to Landlord for Landlord’s
review prior approval, such approval not to be unreasonably withheld or
delayed, for any Tenant Improvement which is not a Capital Addition and which
has a cost of more than Five Hundred Thousand Dollars ($500,000) or a cost
which, when aggregated with the costs of all such Tenant Improvements for the
Leased Facility in the same Lease Year, would cause the total costs of all such
Tenant Improvements to exceed One Million Dollars ($1,000,000).  Such $500,000 and $1,000,000 amounts shall be
increased by three percent (3%) per annum, cumulatively for each subsequent
Lease Year.  Additionally, in connection
with any Tenant Improvement, including any Capital Addition, Tenant shall
provide Landlord with copies of any plans and specification therefor, Tenant’s
budget relating thereto, any required government permits or approvals, any
construction contracts or agreements relating thereto, and any other
information relating to such Tenant Improvement as Landlord shall reasonably
request.


 


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


 


(a)           seek any
governmental approvals, including building permits, licenses, conditional use
permits and any certificates of need that Tenant requires to construct any
Tenant Improvement;


 


(b)           erect upon the
Leased Property or the Land such Tenant Improvements as Tenant deems desirable
including but not limited to new facilities or expansions to existing
facilities;


 


24

















 


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


 


(d)           engage in any
other lawful activities that Tenant determines are necessary or desirable for
the development of the Leased Property or the Land in accordance with its
Primary Intended Use;


 


provided, however, Tenant
shall not make any Tenant Improvement which would impair the value or Primary
Intended Use of the Leased Property or the Land without Landlord’s prior
written consent.


 


9.03        Cooperation of Landlord.  Landlord shall cooperate
with Tenant and take such actions, including the execution and delivery to
Tenant of any applications or other documents, reasonably requested by Tenant
in order to obtain any governmental approvals sought by Tenant that have either
been approved by Landlord or for which Landlord’s approval is not required to
construct any Tenant Improvement within ten (10) business days following
the later of (a) the date Landlord receives Tenant’s request together with
all information reasonably requested by Landlord regarding the Tenant
Improvements, or (b) the date of delivery of any such application or
document to Landlord together with all information reasonably requested by
Landlord regarding the Tenant Improvements, so long as the taking of such
action, including the execution of such applications or documents, shall be
without cost to Landlord (or if there is a cost to Landlord, such cost shall be
reimbursed by Tenant), and will not cause Landlord to be in violation of any
law, ordinance, rule or regulation.


 


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


 


(a)           Tenant shall
diligently seek all governmental approvals relating to the construction of any
Tenant Improvement;


 


(b)           Once Tenant
begins the construction of any Tenant Improvement, Tenant shall diligently
prosecute any such construction to completion materially in accordance with
applicable insurance requirements, the requirements of any governmental
approval or permit relating thereto and the laws, rules and regulations of
all governmental bodies or agencies having jurisdiction over the Leased
Property;


 


(c)           Permit Landlord
at any time and from time to time to post and maintain upon the Leased Property
or the Land such notices as may be necessary to protect Landlord’s interest
from mechanics’ liens, materialmen’s liens, construction liens, or liens of a
similar nature;


 


(d)           Tenant shall
not suffer or permit any mechanics’ or construction liens or any other claims
or demands arising from the work or construction of any Tenant Improvement to
be enforced against the Leased Property or the Land or any part thereof and
Tenant shall indemnify, defend, save and hold Landlord harmless of, from and
against any and all liability from any such liens, claims or demands, together
with all reasonable costs and expenses in connection therewith, including, but
not limited to, reasonable attorneys’ fees and expenses;


 


25

















 


(e)           All work shall
be performed in a good and workmanlike manner consistent with generally
accepted construction standards in the industry; and


 


(f)            Subject to Section 9.09
in the case of Capital Additions, Tenant shall not be permitted to obtain
construction or other financing for the Tenant Improvements secured by Tenant’s
leasehold interest therein without Landlord’s prior written consent, such
consent not to be unreasonably withheld, delayed or conditioned, and any such
financing (i) shall not exceed the cost of the Tenant Improvements, (ii) shall
be subordinate to any mortgage or encumbrance now existing or hereinafter
created by Landlord with respect to the Leased Property, and (iii) shall
be limited solely to Tenant’s interest in the Leased Property or the Land that
is the subject of the improvements.


 


9.05        Rights in Tenant Improvements.  Notwithstanding anything to
the contrary in this Lease, all Tenant Improvements constructed pursuant to Section 9.01,
any and all subsequent additions thereto and alterations and replacements
thereof, shall be the sole and absolute property of Landlord upon the
expiration or early termination of this Lease Agreement.  Tenant shall be entitled to all federal and
state income tax benefits associated with any Tenant Improvement (other than a
Capital Addition purchased or financed by Landlord) during the Term of this
Lease Agreement.


 


9.06        [Intentionally
Omitted.]


 


9.07        Requirements for Personal Property.  Tenant shall comply with all
of the following requirements in connection with personal property:


 


(a)           Tenant shall
remove any of Tenant’s personal property, upon the termination or expiration of
this Lease Agreement and shall repair any damage to the Leased Property
resulting from the removal of Tenant’s personal property.  If Tenant fails to remove Tenant’s personal
property within thirty (30) days after the termination or expiration of the
Lease Agreement, then Tenant shall be deemed to have abandoned Tenant’s
personal property, Tenant’s personal property shall become the property of
Landlord (at no cost to Landlord), and Landlord may remove, store and dispose
of Tenant’s personal property.  In such
event, Tenant shall have no claim or right against Landlord for such property
or the value thereof regardless of the disposition thereof by Landlord.  Tenant shall pay Landlord, upon demand, all
reasonable expenses incurred by Landlord in removing and disposing of Tenant’s
personal property and repairing any damage to the Leased Property caused by
such removal.  Tenant’s obligations
hereunder shall survive the termination or expiration of this Lease Agreement.


 


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


 


26

















 


9.09        Financings of Capital Additions
to a Leased Property.


 


(a)           Prior to
seeking construction, permanent or other financing from a third party for a
Capital Addition proposed to be made by Tenant to the Leased Property or the
Land, Tenant shall submit to Landlord a written request for such financing.  Landlord may, but shall be under no
obligation to, offer to provide or arrange such financing.  Within thirty (30) days after receipt of such
a request from Tenant, Landlord shall notify Tenant in writing as to whether it
will finance the proposed Capital Addition and, if so, the terms and conditions
(“Landlord Financing Terms”) upon which it would be willing to do so, including
the terms of any amendment to this Lease Agreement for such proposed Capital
Addition.


 


(b)           If Landlord
agrees to finance the proposed Capital Addition of Tenant on terms satisfactory
to Tenant, Tenant shall provide Landlord, unless Landlord waives any of the
clauses below, with the following:


 


(i)            all customary
or other required loan documentation which may be required;


 


(ii)           any
information, certificates, licenses, permits or documents requested by either
Landlord or any lender with whom Landlord has agreed or may agree to provide
financing, which are necessary to confirm that Tenant will be able to use the
Capital Addition upon completion thereof in accordance with the Primary
Intended Use, including all required, federal, state or local government
licenses, permits and approvals;


 


(iii)          a certificate
from Tenant’s architect, setting forth in reasonable detail the projected (or
actual, if available) cost of the proposed Capital Addition;


 


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


 


(v)           a deed
conveying title to Landlord to any land acquired for the purpose of
constructing the Capital Addition, free and clear of any liens or encumbrances
except those approved by Landlord and, both prior to and following completion
of the Capital Addition, an as-built survey thereof satisfactory to Landlord;


 


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


 


(vii)         if required by
Landlord, (A) an owner’s policy of title insurance insuring fee simple
title 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 Landlord
and (B) a lender’s policy of title


 


27

















 


insurance satisfactory in
form and substance to Landlord and any lending institution advancing a portion
of the cost of the Capital Addition;


 


(viii)        if required by
Landlord, upon completion of the Capital Addition; an MAI appraisal of the
Leased Property and the Land indicating that the value of the Leased Property
and the Land upon completion of the Capital Addition exceeds the fair market
value of the Leased Property and the Land prior thereto by an amount not less
than ninety-five percent (95%) of the cost of such Capital Addition; and


 


(ix)          such other
certificates (including, but not limited to, endorsements, increasing the
insurance coverage, if any, at the time required), documents, opinions of
counsel, appraisals, surveys, certified copies of duly adopted resolutions of
the board of directors of Tenant authorizing the execution and delivery of all
loan documents and any amendment to an this Lease Agreement and any other
instruments as may be reasonably required by Landlord and any lending
institution advancing any portion of the cost of the Capital Addition.


 


(c)           Upon making a
request to finance a Capital Addition, whether or not such financing is
actually consummated, Tenant shall pay or agree to pay, upon demand, all reasonable
costs and expenses of Landlord paid or incurred by it in connection with the
financing of the Capital Addition, including, but not limited to, (i) the
reasonable fees and expenses of its counsel, (ii) all printing expenses, (iii) the
amount of any filing, registration and recording taxes and fees, (iv), (v) appraisal
fees, if any, and (vi) costs of obtaining regulator and governmental
approvals for the construction, operation, use or occupancy of the Capital
Addition.


 


(d)           (i)  If
Landlord and Tenant are unable to agree on the terms of the financing by
Landlord 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 not
use financing for such Capital Addition obtained from such other sources unless
the terms and conditions of such financing from other sources are offered by
such third party within ninety (90) days after the date Tenant is notified of
the Landlord Financing Terms, and the terms and conditions of such other
financing provide overall financial terms that are more favorable to the Tenant
than those provided by the Landlord Financing Terms (as reasonably determined
by 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 a
Capital Addition from a third party, Tenant shall provide a copy to Landlord of
the final set of terms agreed upon by Tenant with such third party.  Landlord shall cooperate with Tenant in
obtaining all necessary approvals for such Capital Addition, at no cost or
expense to Landlord.


 


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


 


28

















 


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


 


9.10        Financings of Capital Additions
to Adjacent Land of Leased Property.  Notwithstanding any provision herein
contained to the contrary, Tenant shall have the right to independently conduct
additional development (including, but without limitation, development that
includes the construction and operation of projects or facilities that are
competitive with the Project and the Facility) on property adjacent to or near
the Land if it should so elect, without any obligation on the part of Tenant to
notify Landlord of such development or to provide any right to Landlord to
participate in such development.


 


ARTICLE X


DEFAULTS
AND REMEDIES


 


10.01      Events of Default.


 


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


 


(i)            Tenant fails to
make payment when due of any installment of Rent payable by Tenant to Landlord
under this Lease Agreement and such failure shall continue for ten (10) calendar
days 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 payment
when due of any installment of Rent payable by Tenant to Landlord under this
Lease Agreement;


 


(iii)          Tenant fails to
observe 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 Lease
Agreement) that is not cured within thirty (30) days following receipt of
written notice from Landlord; provided, however, that if such default cannot be
cured within such thirty (30) day period through the use of diligent efforts,
such period shall be extended for so long as Tenant continues to exercise
diligent efforts to cure such default;


 


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


 


29






 












 


arrangement under the
federal bankruptcy laws or any other applicable law or statute of the United
States of America or any state thereof;


 


(v)           If Tenant, on a
petition in bankruptcy filed against it, is adjudicated as bankrupt or a court
of competent jurisdiction enters an order or decree appointing, without the
consent of Tenant, a receiver of Tenant of the whole or substantially all of
its property, or approving a petition filed against it seeking reorganization
or arrangement of Tenant under the federal bankruptcy laws or any other
applicable 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 within
sixty (60) days from the date of the entry thereof;


 


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


 


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


 


10.02      Remedies.  Landlord, in its own name or
through a designee or assignee including, but not limited to, Landlord’s
mortgagee (the “Landlord Designee”), may
exercise any one or more of the following remedies upon the occurrence of an
Event of Default and while it is continuing:


 


(a)           Landlord may
terminate this Lease Agreement, exclude Tenant from possession of the Leased
Property and use reasonable efforts to lease such Leased Property to others,
including any Landlord Designee.  If this
Lease 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 the
Rent and other sums which would have been owing by Tenant under the Lease
Agreement for the balance of the Term if the Lease Agreement had not been
terminated, less the net proceeds, if any, received on any re-letting of the
Leased Property by Landlord subsequent to such termination, and any other
income or other proceeds of any nature realized from the sale, lease or other
disposition or utilization of the Leased Property by Landlord, in each case
after deducting all of Landlord’s expenses in connection with such
re-letting.  Landlord will be entitled to
collect such damages from Tenant monthly on the days on which the Rent and
other amounts would have been payable under this Lease Agreement if it had not
been terminated and Landlord will be entitled to receive such damages from
Tenant on each such day.  Alternatively,
at the option of Landlord, if this Lease Agreement is terminated, and at any
time thereafter, Landlord will be entitled, in lieu of proceeding to collect
damages on a monthly basis as set forth in the preceding sentence, to recover
from Tenant (i) all accrued unpaid Rent then due and payable, and (ii) the
worth at the time of the award (as hereafter defined) of the future Rent which
would have been due and payable from the date of termination through the
Expiration Date as if this Lease Agreement had not been terminated.  The “worth
at the time of award” of the amount referred to in clause (ii) means
the “present value”, discounted
using the New York Prime Rate (as defined below), of the future Rent that would
have been due and payable in the absence of such termination.  For purposes of this Lease Agreement, the “New


 


30

















 


York Prime
Rate” shall mean the lesser of (a) that rate of interest identified as
prime or national prime by the Wall Street Journal, as of the applicable date
of termination of this Lease Agreement, or if not published or found, then the
average 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, lawful
rate 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 Rent
computed pursuant to Section 3.01; and (B) the Additional Rent
computed pursuant to Section 3.02. 
Such computation of Additional Rent shall be based on the Additional
Rent paid for the Lease Year preceding the date of termination, increased by
four (4%) percent per year thereafter. 
Following payments by Tenant of the foregoing amounts, Landlord shall
deliver and pay over to Tenant all rent, income, and other proceeds of any
nature realized from the sale, lease or other disposition or utilization of the
Leased Property, if any, actually received by Landlord, less Landlord’s
reasonably incurred costs and expenses of maintaining and re-leasing or selling
the Leased Property.


 


(b)           (i)            Without demand
or notice, Landlord or any Landlord Designee may re-enter and take possession
of the applicable Leased Property; and repossess such Leased Property as of the
Landlord’s former estate; and, to the extent permitted by law with respect to a
correctional or detention facility, expel Tenant and those claiming through or
under Tenant from such Leased Property; and, remove the effects of both or
either, without being deemed guilty of any manner of trespass and without
prejudice to any remedies for arrears of Rent or preceding breach of covenants
or conditions.  If Landlord or Landlord’s
Designee elects to re-enter the Leased Property as provided in this Section 10.02(b) or
if Landlord or Landlord’s Designee takes possession of such Leased Property
pursuant to legal proceedings or pursuant to any notice provided by law,
Landlord or Landlord’s Designee, from time to time, without terminating this
Lease Agreement, may re-let such Leased Property or any part of such Leased
Property, either alone or in conjunction with other portions of the
Improvements of which such Leased Property are a part, in Landlord’s or
Landlord’s Designee’s name but for the account of Tenant, for such term or
terms (which may be greater or less than the period which would otherwise have
constituted the balance of the Term of this Lease Agreement) and on such terms
and conditions (which may include concessions of free rent, and the alteration
and repair of such Leased Property) as Landlord or Landlord’s Designee, in its
discretion, 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 for
any failure to re-let such Leased Property, or any part of such Leased
Property, or for any failure to collect any rent, including the Rent, due upon
such re-letting.  No such re-entry or
taking possession of such Leased Property by Landlord or Landlord’s Designee
will be construed as an election on Landlord’s or Landlord’s Designee’s part to
terminate this Lease Agreement unless a written notice of such intention is
given to Tenant.  No notice from Landlord
or Landlord’s Designee under this Lease Agreement or under a forcible entry and
detainer statute or similar law will constitute an election by Landlord to
terminate this Lease Agreement unless such notice specifically so states.  Landlord and/or Landlord’s Designee reserves
the right following any such re-entry or re-letting, or both, to exercise its
right to terminate this Lease Agreement by giving Tenant such written notice,
and, in that event this Lease Agreement will terminate as specified in such
notice.


 


31

















 


(ii)           If Landlord or
Landlord’s Designee elects to take possession of such Leased Property according
to this Section 10.02(b) without terminating this Lease Agreement,
Tenant will pay Landlord (A) the Rent, Additional Rent and other sums
which would be payable under this Lease Agreement if such repossession had not
occurred, less (B) the net proceeds, if any, of any re-letting of such
Leased Property after deducting all of Landlord’s or Landlord’s Designee’s
expenses incurred in connection with such re-letting, including without
limitation, all reasonable and customary repossession costs, brokerage
commissions, legal expense, attorneys’ fees and expenses, expense of employees,
alteration, remodeling and repair costs, and expenses of preparation for such
re-letting.  If, in connection with any
re-letting, the new lease term extends beyond the existing Term or such Leased
Property covered by such re-letting includes areas which are not part of such
Leased Property, a fair apportionment of the rent received from such re-letting
and the expenses incurred in connection with such re-letting will be made in
determining the net proceeds received from such re-letting.  In addition, in determining the net proceeds
from such re-letting over the term of this Lease Agreement, any rent
concessions will be apportioned over the term of the new lease.  Tenant will pay such amounts to Landlord
monthly on the days on which the Rent and all other amounts owing under this
Lease Agreement would have been payable if possession had not been retaken, and
Landlord or Landlord’s Designee will be entitled to receive the Rent and other
amounts from Tenant on each such day.


 


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


 


(d)           Landlord may
exercise any remedy with respect to any collateral given by Tenant or its
affiliates in connection with this Lease Agreement.


 


(e)           Landlord or
Landlord’s Designee may take whatever action at law or in equity as may appear
necessary or desirable to collect the Rent and other amounts payable under this
Lease Agreement then due and thereafter to become due, or to enforce
performance and observance of any obligations, agreements or covenants of
Tenant under this Lease Agreement.


 


(f)            Landlord or
Landlord’s Designee may exercise any remedy specifically provided for in this
Lease Agreement.


 


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


 


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


 


32

















 


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


 


10.05      Interest on past Due Payments.  Any payment not made by Tenant
for more than five (5) days after the same is due shall bear interest at
the New York Prime Rate from the due date thereof through the date such payment
is actually received by Landlord, provided that in the event Tenant fails to
make three or more payments when due during any single calendar year, such
third or any subsequent payments not paid when due during such year shall bear
interest from the due date thereof until payment is received by Landlord
without regard to whether such payment is made within five (5) days of
such due date.


 


10.06      Litigation; Attorneys’ Fees.  Within ten (10) days
after Tenant has knowledge of any material litigation or other proceeding that
may be instituted against Tenant, in relation to the Leased Property or to
secure or recover possession thereof, or that may affect the title to or the
interest of Landlord in the Leased Property, Tenant shall give written notice
thereof to Landlord.  Within thirty (30)
business days after Landlord’s presentation of an invoice, Tenant shall pay all
reasonable costs and expenses incurred by Landlord in enforcing or presenting
Landlord’s rights under this Lease Agreement, whether or not an Event of
Default has actually occurred or has been declared and thereafter cured,
including without limitation, (i) the reasonable fees, expenses, and costs
of any litigation, receivership, administrative, bankruptcy, insolvency or
other similar proceeding; (ii) reasonable attorney, paralegal, consulting
and witness fees and disbursements incurred by Landlord whether or not any suit
or proceeding has commenced; and (iii) the reasonable expenses, including
without limitation, lodging, meals, and transportation, of Landlord and its
employees, 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 incurred
shall be deemed to be Additional Rent under this Lease Agreement.


 


10.07      Remedies Cumulative.  The respective remedies of
Landlord and Tenant under this Lease Agreement are cumulative to and not in
lieu of any other remedies available to Landlord or Tenant, at law or in
equity.  The use of any one remedy shall
not be taken to exclude or waive the right to use any other remedy.


 


10.08      Escrows and Application of Payments.  As security for the
performance of its obligations hereunder, Tenant hereby assigns to Landlord all
its right, title and interest in and to all monies escrowed with Landlord under
this Lease Agreement and all deposits with utility companies, taxing
authorities, and insurance companies; provided, however, that Landlord shall
not exercise its rights hereunder unless an Event of Default has occurred and
is continuing.  Any payments received by
Landlord under any provisions of this Lease Agreement during the existence, or
continuance of an Event of Default shall be applied to Tenant’s obligations in
the order that Landlord may determine.


 


10.09      Power of Attorney.  Tenant hereby irrevocably
and 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 


 


33

















 


name, place, and stead, and
for Tenant’s and Landlord’s use and benefit, to execute, deliver and file all
applications and any and all other necessary documents or things, to effect a
transfer, reinstatement, renewal and/or extension of any and all licenses and
other governmental authorizations issued to Tenant in connection with Tenant’s
operation of the Leased Property, and to do any and all other acts incidental
to any of the foregoing.  Tenant
irrevocably and unconditionally grants to Landlord as its attorney-in-fact full
power 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 the
foregoing powers as fully as Tenant might or could do if personally present or
acting, with full power of substitution, hereby ratifying and confirming all
that such attorney shall lawfully do or cause to be done by virtue hereof.  This power of attorney is coupled with an
interest and is irrevocable prior to the full performance of the Tenant’s
obligations under this Lease Agreement.


 


ARTICLE XI


DAMAGE
AND DESTRUCTION


 


11.01      General. 
Tenant shall notify Landlord if the Leased Property is damaged or
destroyed by reason of fire or any other casualty or cause.  Tenant shall use available insurance proceeds
to promptly repair, rebuild, or restore the Leased Property so as to make the
Leased Property as nearly similar in character and functionality to the Leased
Property existing prior to such occurrence as is practicable and
reasonable.  Tenant will begin such
repairs or rebuilding and will prosecute the repairs and rebuilding to
completion with diligence, subject, however, to strikes, lockouts, acts of God,
embargoes, governmental restrictions, and other causes beyond Tenant’s
reasonable control.  Landlord will make
available to Tenant the net proceeds of any fire or other casualty insurance
received by Landlord for any such repair or rebuilding after deduction of any
costs 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 are
estimated to exceed in the aggregate $5,000,000 (which amount shall be
increased by three percent (3%) per annum cumulatively for each subsequent
Lease Year (“Substantial Repairs”), Tenant
will submit for Landlord’s approval, which approval Landlord will not
unreasonably withhold or delay, complete and detailed plans and specifications
for such Substantial Repairs and the proposed construction contract for such
restoration work.  Payment on account of
Substantial Repairs will be made out of available insurance proceeds, as work
satisfactorily progresses, against properly certified vouchers of the contractors
responsible for the work.  Prior to
commencing Substantial Repairs, Tenant shall deliver to Landlord for Landlord’s
approval a schedule setting forth the estimated monthly draws for such
work.  Upon the completion of rebuilding
or repairing and the furnishing of such proof, the balance of the net proceeds
of such insurance payable to Tenant on account of such repairing or rebuilding
will be paid to Tenant.  Tenant will
obtain and deliver to Landlord a temporary or final certificate of occupancy
before the Leased Property is reoccupied for any purpose.  Tenant shall complete all such repairs or
rebuilding free and clear of mechanic’s, construction or other liens, and in
accordance with the building codes and all applicable laws, ordinances, rules,
regulations, or orders of any state, municipal, or other public authority
affecting or with jurisdiction over the Leased Property and such repairs or
rebuilding, and also in accordance with all requirements of the insurance
rating organization, or similar body, affecting the Leased Property.  Any remaining proceeds of insurance after
such restoration will be Tenant’s property. 
Notwithstanding the foregoing provisions of this Section 11.01, in
the case of damage to or destruction of the Leased


 


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


 


11.02      Landlord’s Inspection.  During the progress of
Substantial Repairs, Landlord and its architects and engineers, from time to
time, may inspect the Leased Property and will be furnished, if required by
them, with copies of all plans, shop drawings, and specifications relating to
such repairs or rebuilding.  Tenant will
keep all plans, shop drawings, and specifications available, and Landlord and
its architects and engineers may examine them at all reasonable times, at the
Leased 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 repairs
or rebuilding are not being done in accordance with the approved plans and
specifications, Landlord will give prompt notice in writing to Tenant,
specifying in detail the particular deficiency, omission, or other respect in
which Landlord claims such repairs or rebuilding do not accord with the
approved plans and specifications.  Upon
the receipt of any such notice, Tenant will cause corrections to be made to any
deficiencies, 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 review
any plans and specifications and to supervise and approve any construction, or
for any services rendered by such architect or engineer to Landlord as
contemplated by any of the provisions of this Lease Agreement, or for any
services performed by Landlord’s attorneys in connection therewith; provided,
however, that Landlord will consult with Tenant and notify Tenant of the
estimated amount of such expenses.


 


11.04      Rent Abatement.  In the event that the
provisions of Section 11.01 above shall become applicable, the Rent,
including Additional Rent consisting of real estate taxes and other Impositions
shall be abated or reduced proportionately during any period in which, by
reason of such damage or destruction, there is substantial interference with
the operation of the business of Tenant in the Leased Property, having regard
to the extent to which Tenant may be required to discontinue its business in
the Leased Property, and such abatement or reduction shall continue for the
period commencing with such destruction or damage and ending with the
substantial completion (as defined below) by Tenant of such work or repair
and/or reconstruction.  In the event that
only a portion of the Leased Property is rendered untenantable or incapable of
such use, the Base Rent and all real estate taxes and other Impositions payable
hereunder shall be reduced on a pro rata basis in the same proportion as the
square footage contained in the Leased Property after the damage or destruction
bears to the square footage contained in the Leased Property immediately prior
thereto.  For purposes of this Section 11.04,
“substantial completion” shall
occur upon the issuance of a certificate of occupancy for the Substantial


 


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Repairs to the Leased
Property.  Notwithstanding the foregoing,
such rental abatement shall be limited to the amount of any rental or business
interruption insurance proceeds actually received by Landlord.


 


11.05      Substantial Damage During Lease Term.  Provided Tenant has complied
with Section 5.01 hereof (including actually maintaining in effect rental
value insurance or business interruption insurance provided for in clause (c) of
Section 5.01), if at any time the Leased Property is so damaged by fire or
other casualty that more than fifty percent (50%) of the square footage
contained in the Leased Property are rendered unusable, and such Leased
Property will not be rendered usable within nine (9) months after the date
the restoration work will commence, Tenant may, within sixty (60) days after
receipt of Landlord’s notice of the anticipated restoration period, give notice
of its election to terminate this Lease Agreement and, subject to the further
provisions of this Section 11.05, this Lease Agreement will cease on the
tenth (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 Leased
Property, but will have the obligation to pay to Landlord upon demand the
amount of any deductible arising in connection therewith and the entire
insurance proceeds (up to the amount of damages suffered by Landlord as a
result 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 in
accordance with Section 11.01.


 


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


 


11.07      Assignment of Insurance Proceeds.  In the event of termination
pursuant to this Article XI, Landlord shall be entitled to and Tenant
hereby unconditionally assigns all of Tenant’s right, title and interest in all
proceeds of insurance and rights of recovery (up to the amount of damages
suffered by Landlord as a result of such termination) against insurers on
policies covering the Leased Property, and all Improvements, Fixtures, Tenant
Improvements (including without limitation, any Capital Additions) from such
destruction, except for such insurance proceeds that Tenant is entitled to
receive for out-of-pocket expenses such as repairs for which Tenant has not
been reimbursed, and this assignment shall survive the termination of this
Lease.  Notwithstanding anything herein
to the contrary, it shall be a condition to Tenant’s right to terminate this
Lease Agreement pursuant to this Article XI that Tenant first execute and
deliver to Landlord any and all necessary documents required by Tenant’s
property insurance carrier to assign in accordance with the foregoing all of
Tenant’s rights to the proceeds of insurance and rights of recovery against
insurers on policies covering the Leased Property, and


 


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all Improvements, Fixtures,
personal property and Tenant Improvements (including without limitation, any
Capital Additions).


 


ARTICLE XII


CONDEMNATION


 


12.01      Definition.  For purposes of this Lease
Agreement: (i) the term “Condemnation” shall
mean the permanent or temporary taking of the Leased Property or the Land, or
any portion thereof, by right of eminent domain, or by conveyance made in
response to a threat of the exercise of such right, or by conveyance in
settlement of eminent domain litigation, in each case after the occurrence of
Substantial Completion (as defined in the Development Agreement), and (ii) the
term “Aggregate Leased Property” shall
mean collectively the Leased Property and the Land.


 


12.02      Apportionment of Compensation.  In the event of Condemnation
of the Aggregate Leased Property, or any part thereof, except as otherwise provided
in this Article XII, Landlord shall be entitled to all compensation
payable by the condemning authority under applicable law (hereinafter referred
to as an “Award”) for (a) the
real property, or part thereof taken, (b) the value of Tenant’s leasehold
estate, (c) for all improvements thereto which are taken (except Tenant
Improvements which are not Capital Additions purchased or financed by Landlord
and then, only the portion of any award therefor allocable to the remaining
Term of this Lease Agreement), (d) for all severance damages to the
remainder property caused by the Condemnation, including severance damages to
the 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 condemning
authority under applicable law, if any, by a separate award for (w) personal
property of Tenant; trade fixtures of Tenant and Tenant Improvements taken
(subject to the limitations set forth above), (x) business damages
suffered by Tenant, and (y) attorneys fees and expenses, expert fees and
costs of Tenant.  The foregoing
notwithstanding, in the event of a temporary taking by Condemnation for a
period of six (6) months or less, compensation payable by the condemning
authority shall be payable solely to the Tenant, subject to Tenant having paid
to Landlord all Rent and other charges payable under the Lease Agreements for
the period of the temporary taking.  In
the event the condemning authority is not required under applicable law to pay
compensation for an element of damage or loss suffered by a party hereto, that
party, to that extent, shall be without a remedy, unless otherwise expressly
and specifically provided herein, it being the intent of the parties that, in
the absence of an express and specific agreement to the contrary, no party
hereto shall be obligated to compensate the other for any damage or loss
suffered as a consequence of Condemnation that is not compensable by the
condemning authority under applicable law. 
No party shall have the right to negotiate a settlement of any claim for
compensation made or possessed by another party, nor may any party enter into
an agreement with a condemning authority which waives or limits, expressly or
implicitly, the entitlement of another party to full compensation in accordance
with the provisions hereof.


 


12.03      Effect on Lease Obligations.


 


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


 


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with the condemning
authority taking the Aggregate Leased Property subject to the Lease Agreements,
unless the condemning authority also shall have condemned the leasehold
interests of Tenant.  In the event of
condemnation of the entire Aggregate Leased Property and the leasehold
interests of Tenant, the parties shall be relieved from continuing performance
under the Lease Agreements and Tenant shall be relieved from payment of Rent
under the Lease Agreements or other charges as of the date of change of
ownership and termination of such leasehold estate due to Condemnation.  The parties shall perform those obligations
accruing under the Lease Agreements prior to the change in ownership, including
such payment of Rent and other charges which become payable prior to the change
in ownership and shall remain liable for all obligations (including indemnity
obligations) which expressly survive the date of the Condemnation.  To the extent Rent has been paid under a
Lease Agreement or has been paid in advance under a Lease Agreement, Landlord
shall refund to the Tenant a prorated portion thereof based on the number of
days of Tenant’s occupancy under the Lease Agreements for the rental period in
question, compared to the number of days in the rental period for which such
Rent was paid in advance.


 


(b)           Partial Taking.  In the event the Condemnation is of a portion
of the Aggregate Leased Property, or of an easement or similar interest in the
Aggregate Leased Property, the obligations of the parties under the Lease
Agreements shall be unaffected unless the effect of the Condemnation is to
render 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 affected
by the Condemnation that, in the good faith judgment of Tenant, reasonably
exercised, the Aggregate Leased Property cannot be operated on a commercially
practicable basis (taking into account the economic terms of the Lease
Agreements) as a correctional or detention facility.  If Condemnation renders the Aggregate Leased
Property unsuitable for its Primary Intended Use, Tenant may terminate the
Lease Agreements as of the date of the taking, or as of the date of loss of
occupancy of the condemned portion (if the date for vacating the Aggregate
Leased 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 of
the condemned portion.  Termination of
the Lease Agreements shall not affect the apportionment of compensation as
otherwise agreed hereinabove.


 


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


 


12.04      [Intentionally
Omitted.]


 


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


 


38

















 


order for Tenant to
accomplish all necessary restoration as reasonably determined by Tenant in
consultation with Landlord.  If Tenant
receives an Award, Tenant shall repair or restore any Tenant Improvements up to
but not exceeding the amount of the Award payable to Tenant therefor.  Before beginning such restoration, or letting
any contracts in connection with such restoration, Tenant will submit for
Landlord’s approval, which approval Landlord will not unreasonably withhold or
delay, complete and detailed plans and specifications for such
restoration.  Promptly after receiving
Landlord’s approval of the plans and specifications, Tenant will begin such
restoration and will prosecute the repairs and rebuilding to completion with
diligence, subject, however, to strikes, lockouts, acts of God, embargoes,
governmental restrictions, terroristic threats or actions, and other causes
beyond Tenant’s reasonable control. 
Landlord will make available to Tenant the net proceeds of any Award
paid to Landlord for such restoration, after deduction of any costs of
collection, including attorneys’ fees and expenses.  Payment will be made against properly
certified vouchers of a competent architect in charge of the work and approved
by Landlord.  Prior to commencing the
restoration, Tenant shall deliver to Landlord for Landlord’s approval a
schedule setting forth the estimated monthly draws for such work.  Upon the completion of restoration and the
furnishing of such proof, the balance of the Award will be paid to Tenant.  Tenant will obtain and deliver to Landlord a
temporary or final certificate of occupancy before the Aggregate Leased
Property 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 all
applicable laws, ordinances, rules, regulations, permits, approvals or orders
of any state, municipal, or other public authority affecting the restoration,
and also in accordance with all requirements of the insurance rating
organization, or similar body applicable to the Aggregate Leased Property.  Any remaining proceeds of the Award otherwise
payable after such restoration is completed will be Tenant’s property.


 


12.06      Landlord’s Inspection.  During the progress of such
restoration, Landlord and its architects and engineers may, from time to time,
inspect the Aggregate Leased Property and will be furnished, if required by
them, with copies of all plans, shop drawings, and specifications relating to
such restoration.  Tenant will keep all
plans, shop drawings, and specifications available, and Landlord and its architects
and engineers may examine them at all reasonable times.  If, during such restoration, Landlord and its
architects and engineers determine that the restoration is not being done in
accordance with the approved plans and specifications, Landlord will give
prompt notice in writing to Tenant, specifying in detail the particular
deficiency, omission, or other respect in which Landlord claims such
restoration does not accord with the approved plans and specifications.  Upon the receipt of any such notice, Tenant
will cause corrections to be made to any deficiencies, omissions, or such other
respect.  Tenant’s obligations to supply
insurance, according to Article V, will be applicable to any restoration
under this Article XII.  Tenant
shall be responsible to pay the costs for all such architects and engineers
pursuant to Section 11.03.


 


ARTICLE XIII


TENANT’S
RIGHT OF FIRST REFUSAL


 


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


 


39

















 


exercise or at the
expiration of this Lease Agreement, Tenant shall have a right of first refusal
(the “Purchase Refusal Right”) to
purchase the Leased Property (including any Leased Property owned by an
Affiliate of Landlord).  So long as no
Event of Default under Sections 10.01(a)(i), (iii), (iv), (v), or (vi) with
respect to the subject Leased Property has occurred and is continuing at the
time of such exercise or at the expiration of this Lease Agreement), if, during
the Term or any Renewal Term and for a period of thirty (30) days following
termination of this Lease Agreement (other than as a result of the exercise by
Landlord of its remedies under this Lease Agreement), Landlord or any Affiliate
of Landlord receives a bona fide third party offer to transfer the Leased
Property (the “Offer”), including,
without limitation, a transfer consisting of a proposed Landlord Change of
Control, then, prior to accepting such Offer, Landlord shall send written
notice and a copy thereof to Tenant and to any other party so designated by
Tenant (“Landlord’s Notice”), which
Notice shall contain the identity of the third party purchaser or survivor, as
the case may be, the price and other material terms of the proposed
transaction.  In the case of a proposed
transfer of the Leased Property as a part of a larger transaction involving the
transfer of other properties of Landlord (“Multiple
Property Transfer”), Landlord shall include with the Landlord’s
Notice an indication of that portion of the aggregate purchase price to be paid
in such Multiple Property Transfer that Landlord reasonably allocates to the
Leased Property (the “Allocated Price”), which
Allocated Price shall be supported by written analysis and documentation
included with such Landlord’s Notice demonstrating a reasonable basis for such
allocation.  Tenant shall have thirty
(30) days after receipt of Landlord’s Notice to exercise Tenant’s Purchase
Refusal Right, by giving Landlord written notice thereof.  Failure of Tenant to exercise the Purchase
Refusal Right within such time period set forth above shall be deemed to
extinguish the Purchase Refusal Right with respect to that particular Offer and
thereafter, Landlord or its Affiliates may transfer such Leased Property;
provided, however, that the transfer of the Leased Property is at a price equal
to or greater than the price contained in the Landlord’s Notice, and otherwise
consistent in all material respects with the terms and conditions set forth in
Landlord’s Notice (including the third party purchaser).  Tenant’s Purchase Refusal Right shall revive
in the event that Landlord fails to transfer the Leased Property pursuant to
the Offer within one year following the date of Landlord’s Notice; it being
understood that the Refusal Right shall at all times remain in existence with
respect to any other offer for which the Refusal Right has not been deemed extinguished
hereunder.  In the event that Tenant
elects to exercise the Purchase Refusal Right and to acquire the Leased
Property thereby, (a) Tenant shall acquire such Leased Property on the
same terms and conditions and subject to all time periods and other limitations
as provided in Landlord’s Notice ,provided, however, (X) Tenant shall in
all events have not less than one hundred twenty (120) days to close its
acquisition of the Leased Property following its written notice exercising its
Purchase 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 the
Allocated Price, and (Z) in the case of a Landlord Change of Control, the
purchase price to be paid by Tenant for the Leased Property shall be the fair
market value of the Leased Property, as determined by the appraisal procedures
set forth in Section 16.21 hereof, and Tenant shall have thirty (30) days
following the determination of a final appraised value pursuant to such Section 16.21
to close its acquisition of the Leased Property, and (b) concurrently with
such acquisition, this Lease Agreement shall terminate (but Tenant shall remain
liable to pay any accrued Rent due and payable on the closing date with respect
to such Leased Property and all indemnifications and other provisions that
survive the expiration of this Lease Agreement shall continue in effect).  Notwithstanding the foregoing provisions, the
Purchase Refusal Right shall


 


40






 












 


not be applicable to (i) any
transfer of Leased Property to (A) any Affiliate of Landlord or (B) any
joint venture in which Landlord (or an Affiliate of Landlord) at all times
maintains management control and an equity interest of at least ten percent (10%),
so long as such Affiliate or joint venture acquires such Leased Property
subject to the Purchase Refusal Right, or (ii) any transfer (directly or
indirectly, including a transfer by means of a Landlord Change of Control), in
a 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 the
fair market value of the Aggregate Leased Property represents no more than
fifty percent (50%) of the total fair market value at the time of
transfer.  A “transfer” shall mean either (i) any conveyance of fee
simple title (other than conditional assignments for security or mortgage
purposes) or any lease which has a term in excess of one (1) year or (ii) a
Landlord Change of Control.  A “Landlord Change of Control” shall mean the
acquisition 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 (as
constituted immediately prior to such transaction) is the surviving or
acquiring Person and such Affiliate acquires such Leased Property subject to
the Purchase Refusal Right.


 


ARTICLE XIV


ASSIGNMENT
AND SUBLETTING: ATTORNMENT


 


14.01      [Intentionally
Omitted.]


 


14.02      Permitted Transfers.


 


(a)           Landlord’s
consent will not be required in connection with an assignment of this Lease
Agreement or sublet of all or any part of the Leased Property to (i) an
Affiliate 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 Tenant
as a result of consolidation or merger, or (iii) any entity to which all
or substantially all of Tenant’s stock or assets have been sold or transferred,
or (iv) any other transferee experienced in the business of the management
and operation of correctional facilities (each, a “Permitted Transferee”); provided, however, that no such
assignment or subletting shall result in Tenant being released or discharged
from any liability under this Lease Agreement, unless (1) the Permitted
Transferee agrees directly with Landlord, by written instrument in form
satisfactory to Landlord in its reasonable discretion, to be bound by all the
obligations of Tenant hereunder, including, without limitation, the covenant
against further assignment and subletting, and (2) in the case of a
Permitted Transferee that is not an Affiliate of Tenant, either (X) Tenant
demonstrates to Landlord’s reasonable satisfaction that the Permitted
Transferee 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 of
Credit”) in form and substance satisfactory to Landlord and
satisfying the requirements of this Lease Agreement in a face amount equal to
twenty-four (24) months (or such lesser amount as Landlord may approve in
Landlord’s sole discretion) of the Base Rent then payable under this Lease
Agreement (such amount referred to as the “Security
Amount”) and proof reasonably satisfactory to Landlord that such
Permitted Transferee satisfies the Financially Responsible Test or the Letter
of Credit shall have been delivered to Landlord at least fifteen (15) days
prior to the effective date of any such transaction.  For purposes of this Lease 


 


41

















 


Agreement, an “Affiliate” of an entity means any entity
that controls, is controlled by, or is under common control with such
entity.  For the purposes of the
foregoing 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 more
than fifty percent (50%) of the voting interest in the ordinary direction of
the entity’s affairs.  For purposes of
this Lease Agreement, the term “Financially
Responsible Test” shall mean that the Permitted Transferee has a
shareholders’ equity, determined in accordance with generally accepted
accounting principles consistently applied, at least equal to
$100,000,000.  Notwithstanding the
foregoing but provided that there is no Event of Default is in existence under
this Lease Agreement at any time during the Test Period (as hereinafter
defined) or as of the Return Date (as hereinafter defined) and Landlord has not
delivered to Tenant or the Permitted Transferee any notice of any uncured
default under this Lease Agreement for which the cure period has not expired as
of the Return Date, in the event that following the deposit of the Letter of
Credit with Landlord as required by this Section 14.02(a), the Permitted
Transferee satisfies the Financially Responsible Test set forth above for four (4) consecutive
fiscal quarters of such Permitted Transferee (the “Test Period”) and proof reasonably satisfactory to Landlord
that such Permitted Transferee has satisfied such Financially Responsible Test
during the Test Period is delivered to Landlord, Landlord will release the
Letter of Credit within thirty (30) days after Landlord determines that such
Financially Responsible Test has been satisfied by the Permitted Transferee
during the Test Period (the “Return Date”).


 


(b)           The Letter of
Credit shall have a stated duration of and shall be effective for at least one
year, with provision for automatic successive annual one-year extensions, and
shall include the right of Landlord to draw thereon if the issuer of the Letter
of Credit at any time notifies Landlord that the Letter of Credit will not be
automatically renewed.  The Letter of
Credit shall (i) be at all times in the amount of the Security Amount, (ii) shall
permit multiple and partial draws, (iii) shall be made payable to Landlord
and be expressly transferable by and assignable at no charge to Landlord, to
its successors or assigns of this Lease Agreement; and (iv) shall be
payable at sight upon presentment to the issuer of a simple sight draft signed
by Landlord accompanied by a certificate stating that Landlord is permitted to
draw upon the Letter of Credit pursuant to the terms of this Lease Agreement
and setting forth the amount that Landlord is permitted to draw.  The Letter of Credit shall be kept in force
throughout 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, the
Letter of Credit shall be kept in force until sixty (60) days after the date
when the Term would have expired had this Lease Agreement not been earlier
terminated.  A renewal Letter of Credit
shall be provided no later than thirty (30) days prior to the expiration date
of any Letter of Credit issued hereunder, and if not so provided, Landlord may
draw the entire amount of the expiring Letter of Credit and hold the proceeds
in a segregated account in cash for the same purposes as the Letter of Credit.  The Letter of Credit shall be issued by a
commercial bank reasonably satisfactory to and approved by Landlord in writing
which has capital assets of at least $1,000,000,000 and capital reserves of at
least $100,000,000, and which is a member of the Federal Reserve System.


 


(c)           Landlord shall
hold the Letter of Credit throughout the then remaining Term of this Lease
Agreement as security for the performance by the Permitted Transferee of all
obligations hereunder.  If there is an
Event of Default, Landlord shall have the right from time to


 


42

















 


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


 


14.03      [Intentionally Omitted.]


 


14.04      Permitted Subleases.  Landlord acknowledges that
from time to time Tenant may respond to requests for proposals (“RFP’s”) from
governmental entities seeking (a) government operating agreements, support
agreements and/or service agreements (or amendments thereto) in connection with
the housing or detention of inmates or detainees at all of any portions of the
Leased Property including, but not limited to, the Operating Agreement
(collectively, the “Service Agreements”) or
(b) agreements with licensees in connection with Tenant’s operation of
correctional or detention facilities as is customarily associates with or
incidental to the operation of such Leased Property, which agreements may be in
the nature of a sublease agreement (collectively, “Sublease Agreements”) for the housing or detention of inmates
or detainees at the Leased Property. 
Tenant agrees to deliver to Landlord copies of all Service Agreements or
Sublease Agreements in effect with respect to the Leased Property, together
with any amendments thereof and any notices of termination or default received
from the relevant contracting governmental entities, regardless of whether any
such Service Agreement or Sublease Agreement is deemed a sublease
hereunder.  Notwithstanding any provision
hereunder contained to the contrary, Landlord shall have no right to approve or
reject a Service Agreement or Sublease Agreement, and each Service Agreement and
Sublease Agreement shall be deemed permitted hereunder, provided that the term thereof does not
extend 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 impair
the continuing primary liability of Tenant hereunder.  Any assignment shall be limited to Tenant’s
interest in this Lease Agreement.  Any
assignment, sublease or other transfer of all or any portion of Tenant’s
interest herein in contravention of this Article XIV shall be voidable at
Landlord’s option.


 


ARTICLE XV


QUIET
ENJOYMENT; SUBORDINATION,


ATTORNMENT
AND ESTOPPEL CERTIFICATES


 


15.01      Quiet Enjoyment.  So long as Tenant performs
all of its obligations under this Lease Agreement, Tenant’s possession of the
Leased Property will not be disturbed by or through Landlord.


 


43

















 


15.02      Landlord Mortgages: Subordination.  Without the consent of
Tenant, but subject to Section 15.03, and provided that Landlord obtains
an SNDA in accordance with Section 15.03, that provides that in the event
any party succeeds to Landlord’s interest under this Lease Agreement when no
Event of Default exists, such party will not disturb Tenant’s possession, use
or occupancy of the Leased Property in accordance with the provisions of this
Lease Agreement and will otherwise honor this Lease Agreement unchanged,
Landlord may, from time to time, directly or indirectly, create or otherwise
cause to exist any lien, encumbrances or title retention agreement on the
Leased Property, or any portion thereof or any interest therein, whether to
secure any borrowing or other means of financing or refinancing.  Tenant’s rights under this Lease Agreement
shall be subordinate to any ground lease or underlying lease, first mortgage,
first deed of trust, or other first lien against any Leased Property, together
with any renewal, consolidation, extension, modification or replacement
thereof, which now or at any subsequent time affects any Leased Property or any
interest of Landlord in any Leased Property, except to the extent that any such
instrument expressly provides that this Lease Agreement is superior.  This provision will be self-operative, and no
further instrument or subordination will be required in order to effect
it.  However, Tenant shall execute,
acknowledge and deliver to Landlord, at any time and from time to time upon
demand by Landlord, such documents as may be requested by Landlord or any mortgagee
or any holder of any mortgage or other instrument described in this Section, to
confirm or effect any such subordination. 
If Tenant fails or refuses to execute, acknowledge, and deliver any such
document within twenty (20) days after written demand, and Landlord is not in
breach of this Lease Agreement, Landlord may execute, acknowledge and deliver
any such document on behalf of Tenant as Tenant’s attorney-in-fact, Tenant
hereby constitutes and irrevocably appoints Landlord, its successors 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 an interest and is irrevocable.


 


15.03      Attornment: Non-Disturbance.  If any holder of any
mortgage, indenture, deed of trust, or other similar instrument described in Section 15.02
succeeds to Landlord’s interest in the Leased Property, Tenant will pay to such
holder all Rent subsequently payable under this Lease Agreement.  Tenant, upon request of any Person succeeding
to the interest of Landlord, including any Landlord’s Designee, shall
automatically become the tenant of, and attorn to, such successor in interest
without changing this Lease Agreement. 
Upon request by Landlord, Landlord’s Designee or such successor in
interest, Tenant will execute, acknowledge and deliver a subordination,
non-disturbance and attornment agreement (“SNDA”)
in a commercially reasonable form required by the mortgagee or
holder, provided that the form of SNDA Tenant is required to execute does not
amend or modify the terms of this Lease Agreement and provides that in the
event any party succeeds to Landlord’s interest under this Lease Agreement when
no Event of Default exists, such party will not disturb Tenant’s possession,
use or occupancy of the Leased Property in accordance with the provisions of
this Lease Agreement and will otherwise honor this Lease Agreement
unchanged.  If Tenant fails or refuses to
execute, acknowledge, and deliver any such document within twenty (20) days
after written demand, and Landlord is not in breach of this Lease Agreement,
Landlord may execute, acknowledge and deliver any such document on behalf of
Tenant as Tenant’s attorney-in-fact. 
Tenant hereby constitutes and irrevocably appoints Landlord, its
successors 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 an
interest and is irrevocable.


 


44

















 


15.04      Estoppel Certificate.


 


(a)           At the request
of Tenant or Landlord, the other party shall execute, acknowledge and deliver
an estoppel certificate (“Estoppel
Certificate”), in recordable form, in favor of the requesting party
and, if applicable, such requesting party’s lender, mortgagee or purchaser, as
the case may be, pertaining to matters reasonably and customarily requested in
such certificates, including, but not limited to, the following:


 


(i)            that this Lease
Agreement is unmodified and in full force and effect, or if there have been
modifications that the same is in full force and effect as modified and stating
the modifications;


 


(ii)           the date to
which Rent and other charges have been paid;


 


(iii)          that the
requesting 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 be
the 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 counterclaims
against 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 other
information as may be reasonably requested.


 


Neither
party will be required to execute an Estoppel Certificate that materially
amends or materially modifies the terms of this Lease Agreement.


 


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


 


(c)           If Tenant fails
to deliver an Estoppel Certificate to Landlord within ten (10) days after
the request of the Landlord, then Tenant shall be deemed to have certified that
the facts set forth in the certificate are true and correct.  Further, if Tenant fails or refuses to
execute, acknowledge, and deliver any such document within twenty (20) days
after written demand, and Landlord is not in breach of this Lease Agreement,
Landlord may execute, acknowledge and deliver any such document on behalf of
Tenant as Tenant’s attorney-in-fact, Tenant hereby constitutes and irrevocably
appoints Landlord, Landlord’s Designee and each of their respective successors
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 an
interest and is irrevocable.


 


(d)           If Landlord
fails to deliver the estoppel certificates to Tenant within ten (10) days
after the request of the Tenant, then Landlord shall be deemed to have
certified that the facts set forth in the certificate are true and
correct.  Further, if Landlord fails or
refuses to execute,


 


45

















 


acknowledge, and deliver any
such document within twenty (20) days after written demand, and Tenant is not
in breach of this Lease Agreement, Tenant may execute, acknowledge and deliver
any such document on behalf of Landlord as Landlord’s attorney-in-fact.  Landlord hereby constitutes and irrevocably
appoints Tenant as Landlord’s attorney-in-fact solely for the limited and
exclusive purpose to execute, acknowledge, and deliver on behalf of Landlord
the estoppel certificate described in this Section 15.04.  This power of attorney is coupled with an
interest and is irrevocable.


 


ARTICLE XVI


MISCELLANEOUS


 


16.01      Notices. 
Landlord and Tenant hereby agree that all notices, demands, requests,
and consents (hereinafter “Notices”) required
to be given pursuant to the terms of this Lease shall be in writing and shall
be 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) personal
delivery, (ii) certified mail, return receipt requested, postage prepaid, (iii) nationally
recognized overnight courier, or (iv) by facsimile.  All Notices shall be deemed to be given upon
the earlier of actual receipt or three (3) days after mailing, one (1) business
day after deposit with the overnight courier or by a facsimile receipt.  Any Notices meeting the requirements of this Section shall
be effective, regardless of whether or not actually received.  Landlord or Tenant may change its notice
address at any time by giving the other party notice of such charge.


 


16.02      Advertisement of Leased Property.  In the event the parties
hereto 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 given
notice of extension of the Term under Section 2.03(a), then Landlord or
its agent shall have the right to enter such Leased Property at all 


 


46

















 


reasonable times and in
accordance with Section 16.03 for the purpose of exhibiting such Leased
Property to others.


 


16.03      Landlord’s Access.  Landlord shall have the
right to enter upon the Leased Property, upon reasonable prior notice to Tenant
and at reasonable times so as not to interrupt Tenant’s operation of the Leased
Property, for purposes of inspecting the same and assuring Tenant’s compliance
with this Lease Agreement; provided, any such entry by Landlord shall be
subject to all reasonable rules, guidelines and procedures prescribed by Tenant
or 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 completed
through an agent or contractor of Landlord, Landlord shall require such agent
or contractor to obtain and maintain general liability insurance in an amount
not less than $1,000,000 per occurrence, naming Landlord and Tenant as
additional insureds at all times while such inspections are conducted.  Landlord shall deliver evidence of such
insurance to Tenant prior to commencing such inspections.  So long as no Event of Default is continuing
under this Lease Agreement and except in the event of an emergency, Landlord
shall not be allowed entry to the Leased Property unless accompanied by such of
Tenant’s personnel as Tenant shall require provided Tenant makes such personnel
available to Landlord at reasonable times.


 


16.04      Entire Agreement.  This Lease Agreement, the
Development Agreement and the Purchase Agreement constitute the entire
agreement between Landlord and Tenant with respect to the subject matter hereof
and thereof.


 


16.05      Severability.  If any term or provision of
this Lease Agreement is held to be invalid or unenforceable, such holding shall
not affect the remainder of this Lease Agreement and the same shall remain in
full force and effect, unless such holding substantially deprives Tenant of the
use of the Leased Property or Landlord of the Rents therefor, in which event
this Lease Agreement shall forthwith terminate as if by expiration of the Term.


 


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


 


16.07      Governing Law.  This Lease Agreement shall
be governed by and construed in accordance with the internal laws of the State
of Colorado.


 


16.08      Waiver. 
No waiver by either party of any condition or covenant herein
contained, or of any breach of any such condition or covenant, shall be held or
taken to be a waiver of any subsequent breach of such covenant or condition, or
to permit or excuse its continuance or any future breach thereof or of any
condition or covenant, nor shall the acceptance of Rent by Landlord at any time
when Tenant is in default in the performance or observance of any condition or
covenant herein be construed as a waiver of such default, or of Landlord’s
right to terminate this Lease Agreement or exercise any other remedy granted
herein on account of such existing default.


 


47

















 


16.09      Binding Effect.  This Lease Agreement will be
binding upon and inure to the benefit of the heirs, successors, personal
representatives, and permitted assigns of Landlord and Tenant.


 


16.10      Authority.  The persons executing this
Lease 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) each
is qualified to do business in the state in which the Leased Property is
located; and (c) each of such persons is authorized to execute this Lease
Agreement on behalf of Landlord or Tenant, as applicable.  Landlord and Tenant shall each, upon request,
provide evidence satisfactory to the other confirming these representations.


 


16.11      Transfer of Permits, Etc.  Upon the expiration or
earlier termination of the Term of this Lease Agreement, Tenant shall, at the
option of Landlord, use reasonable efforts to transfer to and relinquish to
Landlord or Landlord’s Designee and cooperate with Landlord or Landlord’s
Designee in connection with the processing by Landlord or Landlord’s Designee
of all licenses, operating permits, and other governmental authorization and
all contracts, including without limitation, the correctional or detention
facility license, all Service Agreements and Sublease Agreements and any other
contracts with governmental or quasi-governmental entities, in each case which
may be transferred and which may be necessary or appropriate for the operation
by Landlord or Landlord’s Designee of the subject Leased Property for the
purposes of operating a correctional or detention facility; provided that the
costs and expenses of any such transfer or the processing of any such
application shall be paid by Landlord or Landlord’s Designee.  Any such permits, licenses, certificates and
contracts which are held in Landlord’s name now or at the termination of this
Lease Agreement shall remain the property of Landlord or Landlord’s
Designee.  To the extent permitted by
law, Tenant hereby irrevocably appoints Landlord, its successors and assigns
and any nominee or nominees specifically designated by Landlord or any
successor or assign as Tenant’s attorney in fact to execute, acknowledge,
deliver and file all documents appropriate to such transfer or processing of
any such application on behalf of Tenant. This power of attorney is coupled
with an interest and is irrevocable.


 


16.12      Modification.  This Lease Agreement may
only be modified by a writing signed by both Landlord and Tenant.


 


16.13      Incorporation by Reference.  All schedules and exhibits
referred to in this Lease Agreement are incorporated into this Lease Agreement.


 


16.14      [Intentionally
Omitted.]


 


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


 


16.16      Permitted Contests.  Tenant, on its own or on
Landlord’s behalf (or in Landlord’s name), but at Tenant’s expense, may
contest, by appropriate legal proceedings conducted in good faith and with due
diligence, the amount or validity or application, in whole or in part, of any
Imposition or any legal requirement or insurance requirement or any lien,
attachment, levy, encumbrance, charge or claim provided that, (a) in the
case of an unpaid


 


48

















 


Imposition, lien,
attachment, levy, encumbrance, charge or claim, the commencement and
continuation of such proceedings shall suspend the collection thereof from
Landlord and from the Leased Property, (b) neither the Leased Property nor
any Rent therefrom nor any part thereof or interest therein would be in any
immediate danger of being sold, forfeited, attached or lost, (c) in the
case of a legal requirement, Landlord would not be susceptible to possible
civil or criminal liability for failure to comply therewith pending the outcome
of such proceedings, (d) in the event that any such contest shall involve
a 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 of
Tenant’s counsel to the effect set forth in clauses (a), (b) and (c), to
the extent applicable, (e) in the case of a legal requirement and/or an
Imposition, lien, encumbrance, or charge, Tenant shall give such reasonable
security as may be demanded by Landlord to insure ultimate payment of the same
and to prevent any sale or forfeiture of the affected Leased Property or the
Rent by reason of such nonpayment or noncompliance; provided, however, the
provisions of this Section shall not be construed to permit Tenant to
contest the payment of Rent (except as to contests concerning the method of
computation or the basis of levy of any Imposition) or any other sums payable
by Tenant to Landlord hereunder, (f) in the case of an insurance
requirement, the coverage required by Article V shall be maintained, (g) no
contest may extend beyond the expiration or earlier termination of this Lease
Agreement and (h) if such contest be finally resolved against Tenant,
Tenant, as Additional Rent due hereunder, shall promptly pay the amount
required 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 execute
and deliver to Tenant such authorizations and other documents as may be
reasonably required in any such contest, and, if reasonably requested by Tenant
or if Landlord so desires, Landlord shall join as a party therein.  Tenant shall indemnify, defend, save and hold
Landlord harmless of, from and against any and all liability, cost or expense
of any kind, including, but not limited to, attorneys’ fees and expenses, that
may be imposed upon Landlord in connection with any such contest and any loss
resulting therefrom.


 


16.17      Construction of Lease.  This Lease Agreement has
been reviewed by Landlord and Tenant and their respective professional
advisors.  Landlord, Tenant, and their
advisors believe that this Lease Agreement is the product of all their efforts,
that they express their agreement, and agree that they shall not be interpreted
in favor of either Landlord or Tenant or against either Landlord or Tenant
merely because of any party’s efforts in preparing such documents.


 


16.18      Counterparts.  This Lease Agreement may be
executed in duplicate counterparts, each of which shall be deemed an original
and all of which, when taken together, shall be deemed one and the same
instrument.


 


16.19      Relationship of Landlord and Tenant.  The relationship of Landlord
and Tenant is the relationship of landlord and lessee.  Landlord and Tenant are not partners, joint
venturers, or associates.


 


16.20      Submission to Jurisdiction.


 


(a)           ANY LEGAL
ACTION OR PROCEEDING WITH RESPECT TO THIS LEASE AGREEMENT AND THE OTHER
ANCILLARY DOCUMENTS MAY BE BROUGHT IN 


 


49

















 


THE COURTS SITUATED IN
HARRIS COUNTY, TEXAS OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF TEXAS
AND, BY EXECUTION AND DELIVERY OF THIS LEASE AGREEMENT, EACH PARTY HEREBY
IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, UNCONDITIONALLY,
THE NON EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS WITH RESPECT TO ANY SUCH
ACTION OR PROCEEDING.  EACH PARTY FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS PROVIDED IN
SECTION 16.01, SUCH SERVICE TO BECOME EFFECTIVE THIRTY DAYS AFTER SUCH
MAILING.  NOTHING HEREIN SHALL AFFECT THE
RIGHT OF THE AGENT OR ANY BANK TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY LOAN
PARTY IN ANY OTHER JURISDICTION.


 


(b)           EACH OF THE
LOAN PARTIES HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR
PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS LEASE AGREEMENT BROUGHT
IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY FURTHER
IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY
SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.


 


16.21      Appraisal.  If it becomes
necessary to determine the fair market value of the Leased Property in
connection with the exercise of an option to purchase with respect thereto, the
Landlord and Tenant shall attempt to agree upon a single appraiser to make such
determination within thirty (30) days after a demand for an appraisal has been
made by either the Landlord or Tenant in accordance with this Section 16.21.  If the Landlord and Tenant are unable to
agree upon a single appraiser within thirty (30) days thereafter, then the
party giving the notice of demand for appraisal shall give notice to the other
of 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 (or
Landlord, as the case may be) appoint a second person as appraiser on its
behalf.  The appraisers thus appointed,
each of whom must be a member of the American Institute of Real Estate
Appraisers (or any successor organization thereto) and have had prior
experience in appraising correctional and detention facilities (or reasonably
similar facilities), shall, within forty five (45) days after the date of the
notice appointing the first appraiser, proceed to appraise the Leased Property
to determine the fair market value thereof as of the relevant date (giving effect
to the impact, if any, of inflation from the date of their decision to the
relevant date); provided, however, that if only one appraiser has been so
appointed, or if two appraisers have been so appointed but only one such
appraiser has made such determination within the later to occur of 10 business
days following delivery of such appraisal to the other party or fifty (50) days
after the making of Tenant’s or Landlord’s request, then the determination of
such appraiser shall be final and binding upon the parties.  If two appraisers have been appointed and
have made their determinations within the respective requisite periods set
forth above and if the difference between the amounts so determined does not
exceed ten percent (10%) of the lesser of such amounts, then the fair market
value shall be an amount equal


 


50

















 


to fifty percent (50%) of
the sum of the amounts so determined.  If
the difference between the amounts so determined exceeds ten percent (10%) of
the lesser of such amounts, then such two appraisers shall have twenty (20)
days to appoint a third appraiser.  If no
such 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 having
jurisdiction to have such appointment made by such court.  Any appraiser appointed by the original
appraisers or by such court shall be instructed to determine the fair market
value within forty five (45) days after appointment of such appraiser.  The determination of the appraiser which
differs most in terms of dollar amount from the determinations of the other two
appraisers shall be excluded, and the average of the sum of the remaining two
determinations shall be final and binding upon Landlord and Tenant as the fair
market value of the Leased Property. 
This provision for determining by appraisal shall be specifically
enforceable to the extent such remedy is available under applicable law, and
any determination hereunder shall be final and binding upon the parties and
judgment may be entered upon such determination in any court having
jurisdiction of the matter.  Landlord and
Tenant shall each pay the fees and expenses of the appraiser appointed by it
and each shall pay one half (1⁄2) of
the fees and expenses of the third appraiser and one half (1⁄2) of all other costs and expenses incurred
in connection with each appraisal.


 


16.22      Brokers. 
Landlord and Tenant each represent and warrant one to the other that
neither of them has employed or dealt with any broker, agent or finder in
carrying on the negotiations relating to this Lease Agreement.  Tenant shall indemnify and hold Landlord
harmless from and against any claim or claims for brokerage or other
commissions asserted by any broker, agent or finder engaged by Tenant or with
whom Tenant has dealt in connection with this Lease Agreement.  Landlord shall indemnify and hold Tenant
harmless from and against any claim or claims for brokerage or other
commissions asserted by any broker, agent or finder engaged by Landlord or with
whom Landlord has dealt in connection with this Lease Agreement.


 


16.23      Warranties.  Notwithstanding the
assignment to Landlord of the construction and manufacturers’ warranties with
respect to the Leased Property or any Capital Addition in connection with the
acquisition thereof from Tenant, Landlord shall cooperate with Tenant in Tenant’s
enforcement, at Tenant’s sole cost and expense, of any express or implied
warranties or guaranties of workmanship or materials given by contractors,
subcontractors, architects, draftsmen, materialmen or manufacturers that
guarantee or warrant against defective design, workmanship or materials in
connection with the construction of, or any alteration or improvement to, the
Leased Property.  Landlord will execute
such documents as Tenant may reasonably require in order to evidence the
authority of Tenant to enforce such guaranties and warranties in Landlord’s name
or on Landlord’s behalf.


 


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IN
WITNESS WHEREOF, the parties hereto have executed this Lease Agreement or
caused the same to be executed by their respective duly authorized officers as
of 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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