VIII - 4.02 PROCEDURES FOR LEASING OF REAL PROPERTY (Approved by the Board of Regents on February 9, 2001) A. General 1. These Procedures are intended to implement portions of USM Policy VIII-4.00 Policy on Acquisition, Disposition, and Leasing of Real Property ("the Policy") and shall be interpreted consistent with the provisions of that Policy including the definitions therein. In case of any inconsistency, the Policy shall govern. 2. These Procedures shall govern the negotiation and execution of Leases. 3. Leases not requiring Board approval may be approved and signed by the president of the Institution involved or a president's designee. 4. Every Lease requiring approval by the Board shall be approved for form and legal sufficiency by the Office of the Attorney General (OAG) prior to execution. All other Leases shall be reviewed and approved for form and legal sufficiency prior to execution in accordance with such procedures as the OAG shall establish. B. Proposal When an Institution or the Office seeks to enter into a Lease that requires approval by the Board, its president or the VCAF shall submit to the Chancellor for review a proposal that includes the following: 1. Description (including improvements) and location of the property; 2. Location map; 3. Anticipated cost (where Institution is lessee) based on comparable leased properties or other available information, including utility, build-out, furnishing, and other additional rent charges or costs; 4. Anticipated revenue (where Institution is lessor) based on comparable leased properties and other available information; 5. Amount, nature, and source of consideration for the leased premises; 6. If external financing or other form of borrowing is to be used, the expected terms and source for paying the debt service; 7. Purpose of the Lease. Review shall include as appropriate VCAF, OAG, and officials of the Institution that submitted the proposal. C. Approvals If the Chancellor approves a submitted proposal under Section B above, it shall be submitted it to the Finance Committee of the Board ("Committee") for its consideration. If the Committee's action is favorable, it shall recommend approval by the Board. Leases shall be considered by the Committee and the Board in executive session unless otherwise decided by the Board. If the Board approves a Lease, it may delegate to the Chancellor authority to negotiate and execute all required documents. However, if during negotiation, the terms of the Lease change materially to the detriment of the System or Institution from those approved by the Board, the Chancellor shall return the matter to the Committee and the Board for further consideration. D. Due Diligence Appropriate due diligence shall be undertaken with respect to the leasing of real property and shall be conducted by the institution involved, or, if Board approval of the Lease is required, collaboratively by staff of the System, the OAG, and the proposing institution. Where Board approval is required, all elements of due diligence need not be completed before submission of the proposal to the Chancellor, the Committee, or the Board. At the discretion of the VCAF, and with the agreement of the Board, completion of due diligence may follow Board approval, but shall occur before closing of the transaction. The due diligence practices to be applied shall be consistent with those established by the Chancellor pursuant to paragraph 17 of the Policy on Acquisition, Disposition and Leasing of Real Property. E. These Procedures are effective upon their approval by the Board.