CA » Topics » SECTION 9.5. Alterations .

This excerpt taken from the CA 8-K filed Aug 21, 2006.

SECTION 9.5.  Alterations.

(a)           Except as provided in this Section 9.5, and provided no Event of Default then exists, Lessee may, without the consent of or notice to Lessor, at Lessee’s own cost and expense, make Alterations to the Property.

(b)           If Lessee proposes to make (1) Alterations to the exterior of any of the Main Buildings that would be visible from the public roadways or (2) material changes to (as distinguished from replacements or upgrades of) any of the Main Buildings’ structural, mechanical, plumbing, heating, ventilation and air-conditioning, electrical or engineering systems (e.g., installing a large-scale solar-panel system), Lessee shall notify Lessor and Mortgagee of the same at least thirty (30) days prior to the commencement of the Alterations (a “Notice of Alterations”) and shall concurrently therewith furnish Lessor and Mortgagee with reasonably detailed plans and specifications for such Alterations (but in no event shall plans and specifications be required in excess of those delivered to Governmental Authorities as part of Lessee’s applications for permits and licenses).  If Lessor in good faith determines that such Alterations, either individually or in the aggregate with all other Alterations, upon completion will materially and adversely affect the fair market value of the Property other than in an immaterial manner, Lessor shall give notice of its objection (a “Notice of Objection”) within ten (10) Business Days after Lessor’s receipt of a Notice of Alterations.  If Lessor and Lessee cannot agree whether or not such Alterations would adversely, other than in an immaterial manner, affect the fair market value of the Property within ten (10) Business Days after Lessee’s receipt of a Notice of Objection, such matter shall be resolved by the Appraisal Procedure, wherein the appraiser(s) deciding such matter will value the Property both with and without such Alterations. Each party shall pay its own fees in connection with such appraisal and one-half of the Appraiser’s fees.  If Lessee shall prevail in any such dispute, Lessee shall have the right to make such Alterations,

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subject only to the express limitations contained elsewhere in this Section 9.5 (i.e., other than this subsection (b)).  If Lessor shall prevail in any such dispute (and even prior to the resolution of any such dispute), Lessee nevertheless may proceed to make such Alterations, subject to the express limitations elsewhere in this Section 9.5 and to the following additional conditions:  (1) at the time of initiating such Alterations, Lessee either (x) has a Minimum Rating or (y) posts a bond or other security in a form and from a surety (if applicable) reasonably acceptable to Lessor in an amount equal to the estimated cost of removing such structural Alterations at the end of the Term, repairing any damage to the Property caused by such removal and restoring the affected portion of the Property to substantially the same condition in which it would have been had such Alterations not been made (collectively, the “Removal Cost”, and if Lessor and Lessee shall dispute such estimated cost the matter shall be resolved by the Appraisal Procedure), which bond or other security amount shall be adjusted each January 1 during the balance of the Term commencing on the January 1st first occurring at least 12 months thereafter by the percentage change in the Consumer Price Index from the first of the month in which such bond or securities is first posted, and (2) Lessee shall execute and deliver to Lessor its undertaking (i) to remove by not later than the last day of the stated Term or within thirty (30) days after the earlier termination of this Lease, at Lessee’s own cost and expense, such Alterations, (ii) to repair any damage to the Property caused by such removal, (iii) to restore the affected portion of the Property to substantially the same condition in which it would have been had such Alterations not been made and (iv) in the event Lessee falls below the Minimum Rating, Lessee shall, within thirty (30) days of the same, post a bond or other security as described above in clause (1)(y) of this Section 9.5(b).  If Lessor shall not provide a Notice of Objection within ten (10) Business Days after the giving of a Notice of Alteration, or if Lessor shall have given a Notice of Objection but the resultant dispute shall have been resolved in Lessee’s favor, Lessee shall not be required to restore the Property as provided in the preceding sentence (and if Lessee shall have already delivered any security and the undertaking referred to in clause (1)(y) and (2) above prior to the resolution of any such dispute, then the same shall immediately be returned to Lessee), and Lessee shall have no obligation to remove such Alteration at the end of the Term under this Section 9.5(b) or any other provision of this Lease, notwithstanding any provision hereof to the contrary.

(c)           Lessee shall have the right to seek amendments, variances, special permits and the like in respect of the zoning for the Property (or any portion thereof) and other Applicable Laws and Restrictions, provided that any of the foregoing shall not cause a reduction in the fair market value of the Property (other than to a de minimis extent).  During the Term, Lessee shall have exclusive rights in respect of the foregoing, subject to the proviso contained in the immediately preceding sentence.  Lessor shall cooperate with Lessee at Lessee’s expense in a prompt and timely manner in connection with any such actions on the part of Lessee, and such cooperation shall include execution and delivery of documents reasonably required by any such actions.

(d)           Notwithstanding the terms of Section 9.5(b) or Section 9.5(c), but subject to Sections 9.5(e) and 9.5(f), Lessee shall have the right, without compliance with or otherwise being subject to the terms of Section 9.5(b) or Section 9.5(c), to make the Alterations described on Schedule 9.5(d).

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