LEASE

Exhibit 10.56

 

LEASE

 

THIS LEASE (this “Lease”) is made as of December 30, 2004 (the “Effective Date”), by and between Jameson Inns Financing 01, LP, a Georgia limited partnership (“Lessor”), and Kitchin Hospitality, LLC, a Georgia limited liability company (“Lessee”).

 

Lessor owns the “Property” (as hereinafter defined) which at the date hereof consists of seven operating hotel properties and may, in the future, consist of additional or substituted hotel properties.

 

In furtherance of the purposes described herein, Lessor and Lessee wish to enter into this Lease.

 

Now, therefore, Lessor, in consideration of the payment of rent by Lessee to Lessor, the mutual covenants and agreements to be performed by Lessee, and upon the terms and conditions hereinafter stated, does hereby rent and lease unto Lessee, and Lessee does hereby rent and lease from Lessor, the property, and Lessor and Lessee hereby covenant and agree as follows:

 

1. Certain Defined Terms . The following terms shall have the following meanings for all purposes of this Lease:

 

“ ADA ” means the Americans with Disabilities Act of 1990, as such act may be amended from time to time.

 

“ Additional Rental ” has the meaning set forth in Section 5.C.

 

“ Affiliate ” means any Person which directly or indirectly controls, is under common control with, or is controlled by any other Person. For purposes of this definition, “controls”, “under common control with” and “controlled by” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or otherwise.

 

“ Anti-Money Laundering Laws ” means all applicable BSA laws, regulations and government guidance on BSA compliance and on the prevention and detection of money laundering violations under 18 U.S.C. § § 1956 and 1957, as amended.

 

“ Applicable Regulations ” means all applicable statutes, regulations, rules, ordinances, codes, licenses, permits, orders and approvals of each Governmental Authority having jurisdiction over the Property, including, without limitation, all health, building, fire, safety and other codes, ordinances and requirements, all applicable standards of the National Board of Fire Underwriters and the ADA and all policies or rules of common law, in each case, as amended, and any judicial or administrative interpretation thereof, including any judicial order, consent, decree or judgment applicable to any of the Lessee Parties.

 

“ Applicable Rent Reduction Percentage ” means, with respect to any Property, a fraction, the numerator of which shall be the original principal balance of the Note corresponding to such Property, and the denominator of which shall be the sum of all of the original principal balances of the Note corresponding to the Property then subject to this Lease, including such Property.

 

“ Base Annual Rental ” means the higher of (i) the aggregate amount of the Note Payments on the Property or (i) the Net Operating Income from the Property, less the Capital Expenditures Fee and the Management Fee.

 

“ Base Monthly Rental ” means an amount equal to 1/12 of the applicable Base Annual Rental.

 

“ BSA ” means the Bank Secrecy Act (31 U.S.C. § § 5311 et. seq.), as amended.

 

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“ Business Day ” means any day on which Lender is open for business other than a Saturday, Sunday or a legal holiday, ending at 5:00 P.M. Phoenix, Arizona time.

 

“ Capital Expenditures Fee ” means an amount equal to 4% of the total room revenues for the calendar year for which Base Annual Rental is being calculated.

 

“ Change of Control ” means a change in control of any of the Lessee Parties, including, without limitation, a change in control resulting from direct or indirect transfers of voting stock or partnership, membership or other ownership interests, whether in one or a series of transactions. For purposes of this definition, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of any of the Lessee Parties, as applicable, and a Change of Control will occur if any of the following occur: (i) any merger or consolidation by any of the Lessee Parties, as applicable, with or into any other entity; or (ii) if any “Person” as defined in Section 3(a)(9) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), and as used in Section 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) of the Exchange Act, subsequent to the Closing, becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), of securities of any of the Lessee Parties, as applicable, representing 50% or more of the combined voting power of Lessee’s then outstanding securities (other than indirectly as a result of the redemption by any of the Lessee Parties, as applicable, of its securities).

 

“ Code ” means Title 11 of the United States Code, 11 U.S.C. Sec. 101 et seq., as amended.

 

“ Default Rate ” means the lesser of the highest rate for which the undersigned may legally contract or the rate of 14% per annum.

 

“ Effective Date ” has the meaning set forth in the Preamble.

 

“ Environmental Condition ” means any condition with respect to soil, surface waters, groundwaters, land, stream sediments, surface or subsurface strata, ambient air and any environmental medium comprising or surrounding the Property, whether or not yet discovered, which would reasonably be expected to or does result in any damage, loss, cost, expense, claim, demand, order or liability to or against any of the Lessee Parties, Lessor or Lender by any third party (including, without limitation, any Governmental Authority), including, without limitation, any condition resulting from the operation of business at the Property and/or the operation of the business of any other property owner or operator in the vicinity of the Property and/or any activity or operation formerly conducted by any person or entity on or off the Property.

 

“ Environmental Laws ” means any present and future federal, state and local laws, statutes, ordinances, rules, regulations, orders, injunctions and decrees of Governmental Authorities and common law, relating to Hazardous Materials or USTs and/or the protection of human health or the environment by reason of a Release or a Threatened Release of Hazardous Materials or USTs or relating to liability for or costs of Remediation or prevention of Releases. “Environmental Laws” includes, but is not limited to, the following statutes, as amended, any successor thereto, and any regulations, rulings, orders or decrees promulgated pursuant thereto, and any state or local statutes, ordinances, rules, regulations, orders, injunctions and decrees of Governmental Authorities: the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. §§ 9601 et seq.; the Emergency Planning and Community Right-to-Know Act, 42 U.S.C. § 11001 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. § 5101 et seq.; the Resource Conservation and Recovery Act (including but not limited to Subtitle I relating to USTs), 42 U.S.C. §§ 6901 et seq.; the Clean Water Act, 33 U.S.C. §§ 1251 et seq.; the Clean Air Act, 42 U.S.C. §§ 7401 et seq.; the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq.; the Safe Drinking Water Act, 42 U.S.C. §§ 7401 et seq.; the Occupational Safety and Health Act, 29 U.S.C. § 651 et seq.; the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. §§ 136 et seq.; the Endangered Species Act, 16 U.S.C. §§ 1531 et seq. and the National Environmental Policy Act, 42 U.S.C. § 4321 et seq. “Environmental Laws” also includes, but is not limited to, any present and future federal, state and local laws, statutes, ordinances, rules, regulations, orders, injunctions and decrees of Governmental Authorities and common law: conditioning transfer of property upon a negative declaration or other

 

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approval of a Governmental Authority of the environmental condition of the property; requiring notification or disclosure of Releases or other environmental condition of the Property to any Governmental Authority or other person or entity, whether or not in connection with transfer of title to or interest in property; imposing conditions or requirements relating to Hazardous Materials or USTs in connection with permits or other authorizations required by Governmental Authorities; relating to the handling and disposal of Hazardous Materials; relating to nuisance, trespass or other causes of action related to Hazardous Materials; and relating to wrongful death, personal injury, or property or other damage in connection with the physical condition or use of the Property by reason of the presence of Hazardous Materials or USTs in, on, under or above the Property.

 

“ Environmental Liens ” has the meaning set forth in Section 6.L(9).

 

“ Event of Default ” has the meaning set forth in Section 24.

 

“ GAAP ” means generally accepted accounting principles consistently applied.

 

“ Governmental Authority ” means any governmental authority, agency, department, commission, bureau, board, instrumentality, court or quasi-governmental authority having jurisdiction or supervisory or regulatory authority over the Property or any of the Lessee Parties.

 

“ Hazardous Materials ” means (a) any toxic substance or hazardous waste, substance, solid waste or related material, or any pollutant or contaminant; (b) radon gas, asbestos in any form which is or could become friable, urea formaldehyde foam insulation, transformers or other equipment containing dielectric fluid having levels of polychlorinated biphenyls in excess of applicable standards established by any Governmental Authority, or any petroleum product or additive; (c) any substance, gas, material or chemical which is now or hereafter defined as or included in the definition of “hazardous substances,” “toxic substances,” “hazardous materials,” “hazardous wastes,” “regulated substances” or words of similar import under any Environmental Laws; and (d) any other chemical, material, gas or substance the exposure to or release of which is prohibited, limited or regulated by any Governmental Authority that asserts or may assert jurisdiction over the Property or the operations or activity at the Property, or any chemical, material, gas or substance that does or is reasonably likely to pose a hazard to the health and/or safety of the occupants of the Property or the owners and/or occupants of property adjacent to or surrounding the Property.

 

“ Indemnified Parties ” means Lessor, Lender, their respective directors, managers, officers, shareholders, trustees, beneficial owners, partners and members, any directors, managers, officers, shareholders, trustees, beneficial owners, partners, members of any shareholders, beneficial owners, partners or members of Lessor, Environmental Insurer or Lender, and all employees, agents, servants, representatives, contractors, subcontractors, affiliates, subsidiaries, participants, successors and assigns of any of the foregoing, including, but not limited to, any successors by merger, consolidation or acquisition of all or a substantial portion of the assets and business of Lessor or Lender, as applicable.

 

“ Lease Term ” shall have the meaning described in Section 4.

 

“ Lender ” means GE Capital Franchise Finance Corporation, a Delaware corporation, its successors and assigns, any successor lender in connection with any loan secured by Lessor’s interest in the Property, and any servicer of any loan secured by Lessor’s interest in the Property.

 

“ Lessee’s Basic Fee ” means an amount equal to 4% of the Gross Hotel Revenues for the month for which Net Operating Income is being calculated.

 

“ Lessee Parties ” means, collectively, Lessee and any guarantors of this Lease (including, in each case, any predecessors-in-interest).

 

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“ Lessor Entities ” means, collectively, Lessor (including any predecessor-in-interest to Lessor) and any Affiliate of Lessor (including any Affiliate of any predecessor-in-interest to Lessor).

 

“ Loan Agreements ” means collectively the Loan Agreements dated as of the Effective Date in effect between Lessor and Lender, as such agreement may be amended, modified or supplemented from time to time and any and all replacements or substitutions thereof.

 

“ Loan Documents ” means, collectively, the Loan Agreements, the Notes, the Mortgages and all other documents, instruments and agreements executed in connection therewith or contemplated thereby, all as amended, modified and supplemented and any and all replacements or substitutions thereof.

 

“ Loan Pool ” means:

 

(i) in the context of a Securitization, any pool or group of loans that are a part of such Securitization;

 

(ii) in the context of a Transfer, all loans which are sold, transferred or assigned to the same transferee; and

 

(iii) in the context of a Participation, all loans as to which participating interests are granted to the same participant.

 

“ Losses ” means any and all claims, suits, liabilities (including, without limitation, strict liabilities), actions, proceedings, obligations, debts, damages, losses, costs, expenses, diminutions in value, fines, penalties, charges, fees, expenses, judgments, awards, amounts paid in settlement and damages of whatever kind or nature (including, without limitation, attorneys’ fees, court costs and other costs of defense).

 

“ Management Fee ” means an amount equal to 4% of total room revenues for the calendar year for which Base Annual Rental is being calculated.

 

“ Material Adverse Effect ” means a material adverse effect on (i) the Property, including, without limitation, the operation of the Property as a Permitted Concept, or (ii) Lessee’s ability to perform its obligations under this Lease.

 

“ Memorandum ” means each memorandum of lease dated as of the Effective Date between Lessor and Lessee with respect to any of the Property. A duplicate original Memorandum will be executed and recorded in the applicable real property records for each Property.

 

“ Mortgages ” means, collectively, the mortgages, deeds of trust or deeds to secure debt, assignments of rents and leases, security agreements and fixture filings dated as of the Effective Date executed by Lessor for the benefit of Lender with respect to the Property, as such instrument may be amended, modified, restated and/or supplemented from time to time and any and all replacements or substitutions thereof.

 

“ Net Operating Income ” means the net operating income from the Property calculated according to the Uniform System of Accounts for Hotels and in accordance with GAAP.

 

“ Notes ” means, collectively, the promissory notes dated as of the Effective Date executed by Lessor and payable to Lender with respect to the Property, as such notes may be amended, modified, restated and/or substituted from time to time.

 

“ Note Payment ” means the aggregate monthly payments due under Notes from time to time.

 

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“ Other Agreements ” means, collectively, all agreements and instruments now or hereafter entered into between, among or by (1) any of the Lessee Parties and/or any Affiliate of any of the Lessee Parties (including any Affiliate of any predecessor-in-interest to any of the Lessee Parties), and, or for the benefit of, (2) any of the Lessor Entities; provided, however, the term Other Agreements shall not include this Lease.

 

“ Participation ” means one or more grants by Lender or any Affiliate of Lender to a third party of a participating interest in notes evidencing obligations to repay secured or unsecured loans owned by Lender or any Affiliate of Lender or any or all servicing rights with respect thereto.

 

“ Permitted Amounts ” means, with respect to any given level of Hazardous Materials, that level or quantity of Hazardous Materials in any form or combination of forms the presence, use, storage, release or handling of which does not constitute a violation of any Environmental Laws and is customarily employed in the ordinary course of, or associated with, similar businesses located in the states in which the Property is located.

 

“ Permitted Concept ” means a limited service hotel.

 

“ Person ” means any individual, corporation, partnership, limited liability company, trust, unincorporated organization, Governmental Authority or any other form of entity.

 

“ Personal Property ” means all tangible personal property now or at any time hereafter located on or at the Property or used in connection therewith, including, without limitation, all machinery, appliances, furniture, equipment and inventory; provided, however, the term “Personal Property” shall not include the HVAC, walk-in coolers, walk-in freezers, supply fans, exhaust fans, air ducts, hoods, vents, built-in sinks, built-in countertops, plumbing and electrical fixtures, sign poles and lighting poles, all of which items are intended to be fixtures as such term is used within the definition of “Property”.

 

“ Property ” means the parcel or parcels of real estate legally described in Exhibits A-1 through A-7 attached hereto, all rights, privileges and appurtenances associated therewith, and all buildings, fixtures and other improvements now or hereafter located on such real estate (whether or not affixed to such real estate).

 

“ Release ” means any presence, release, deposit, discharge, emission, leaking, spilling, seeping, migrating, injecting, pumping, pouring, emptying, escaping, dumping, disposing or other movement of Hazardous Materials or USTs.

 

“ Remediation ” means any response, remedial, removal, or corrective action, any activity to clean up, detoxify, decontaminate, contain or otherwise remediate any Hazardous Materials or USTs required by any Environmental Law or any Governmental Authority, any actions to prevent, cure or mitigate any Release, any action to comply with any Environmental Laws or with any permits issued pursuant thereto, any inspection, investigation, study, monitoring, assessment, audit, sampling and testing, laboratory or other analysis, or any evaluation relating to any Hazardous Materials or USTs.

 

“ Securitization ” means one or more sales, dispositions, transfers or assignments by Lender or any Affiliate of Lender to a special purpose corporation, trust or other entity identified by Lender or any Affiliate of Lender of notes evidencing obligations to repay secured or unsecured loans owned by Lender or any Affiliate of Lender (and, to the extent applicable, the subsequent sale, transfer or assignment of such notes to another special purpose corporation, trust or other entity identified by Lender or any Affiliate of Lender), and the issuance of bonds, certificates, notes or other instruments evidencing interests in pools of such loans, whether in connection with a permanent asset securitization or a sale of loans in anticipation of a permanent asset securitization. Each Securitization shall be undertaken in accordance with all requirements which may be imposed by the investors or the rating agencies involved in each such sale, disposition, transfer or assignment or which may be imposed by applicable securities, tax or other laws or regulations.

 

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“ Terrorism Laws ” means Executive Order 13224 issued by the President of the United States of America, the Terrorism Sanctions Regulations (Title 31 Part 595 of the U.S. Code of Federal Regulations), the Terrorism List Governments Sanctions Regulations (Title 31 Part 596 of the U.S. Code of Federal Regulations), the Foreign Terrorist Organizations Sanctions Regulations (Title 31 Part 597 of the U.S. Code of Federal Regulations), and the Cuban Assets Control Regulations (Title 31 Part 515 of the U.S. Code of Federal Regulations), and all other present and future federal, state and local laws, ordinances, regulations, policies, lists and any other requirements of any Governmental Authority (including, without limitation, the United States Department of the Treasury Office of Foreign Assets Control) addressing, relating to, or attempting to eliminate, terrorist acts and acts of war, each as hereafter supplemented, amended or modified from time to time, and the present and future rules, regulations and guidance documents promulgated under any of the foregoing, or under similar laws, ordinances, regulations, policies or requirements of other states or localities.

 

“ Threatened Release ” means a substantial likelihood of a Release which requires action to prevent or mitigate damage to the soil, surface waters, groundwaters, land, stream sediments, surface or subsurface strata, ambient air or any other environmental medium comprising or surrounding the Property which may result from such Release.

 

“ Title Company ” means First American Title Insurance Corporation.

 

“Trademark” means The Jameson Inn ^®

 

“ Transfer ” means one or more sales, transfers or assignments by Lender or any Affiliate of Lender to a third party of notes evidencing obligations to repay secured or unsecured loans owned by Lender or any Affiliate of Lender or any or all servicing rights with respect thereto.

 

“ UCC ” shall have the meaning described in Section 31.

 

“ USTs ” means any one or combination of below or above ground tanks and associated piping systems used in connection with the storage, dispensing and general use of petroleum and petroleum-based substances.

 

2. Demise of Property . In consideration of the rentals and other sums to be paid by Lessee and of the other terms, covenants and conditions on Lessee’s part to be kept and performed, Lessor hereby leases to Lessee, and Lessee hereby takes and hires, the Property. The Property is leased to Lessee “AS IS” and “WHERE IS” without representation or warranty by Lessor and subject to the rights of parties in possession, to the existing state of title, any state of facts which an accurate survey or physical inspection might reveal, and all Applicable Regulations now or hereafter in effect. Lessee has examined the Property and title to the Property and has found all of the same satisfactory for all of Lessee’s purposes.

 

3. Lease Characterization . A. Lessor and Lessee intend that:

 

(i) this Lease constitutes a lease of all, but not less than all, of the Property and that Lessor and Lessee have executed and delivered this Lease with the understanding that this Lease constitutes a unitary, unseverable instrument pertaining to all, but not less than all, of the Property;

 

(ii) this Lease is a “true lease” and not a financing lease, capital lease, mortgage, equitable mortgage, deed of trust, trust agreement, security agreement or other financing or trust arrangement, and the economic realities of this Lease are those of a true lease; and

 

(iii) the business relationship created by this Lease and any related documents is solely that of a long-term commercial lease between landlord and tenant and has been entered into by both parties in reliance upon the economic and legal bargains contained herein.

 

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B. Lessor and Lessee acknowledge and agree that the Lease Term, including any term extensions provided for in this Lease, is less than the remaining economic life of the Property.

 

C. Lessee waives any claim or defense based upon the characterization of this Lease as anything other than a true lease and irrevocably waives any claim or defense which asserts that this Lease is anything other than a true lease. Lessee covenants and agrees that it will not assert that this Lease is anything but a true lease. Lessee stipulates and agrees not to challenge the validity, enforceability or characterization of the lease of the Property as a true lease and further stipulates and agrees that nothing contained in this Lease creates or is intended to create a joint venture, partnership (either de jure or de facto), equitable mortgage, trust, financing device or arrangement, security interest or the like. Lessee shall support the intent of the parties that the lease of the Property pursuant to this Lease is a true lease and does not create a joint venture, partnership (either de jure or de facto), equitable mortgage, trust, financing device or arrangement, security interest or the like, if, and to the extent that, any challenge occurs.

 

D. Lessee waives any claim or defense based upon the characterization of this Lease as anything other than a lease of the Property and irrevocably waives any claim or defense which asserts that this Lease is anything other than a lease. Lessee covenants and agrees that it will not assert that this Lease is anything but a unitary, unseverable instrument pertaining to the lease of all, but not less than all, of the Property. Lessee stipulates and agrees not to challenge the validity, enforceability or characterization of the lease of the Property as a unitary, unseverable instrument pertaining to the lease of all, but not less than all, of the Property. Lessee shall support the intent of the parties that this Lease is a unitary, unseverable instrument pertaining to the lease of all, but not less than all, of the Property, if, and to the extent that, any challenge occurs.

 

E. Lessee represents and warrants to Lessor that (i) the Base Annual Rental is the fair market value for the use of the Property and was agreed to by Lessor and Lessee on that basis, and (ii) the execution, delivery and performance by Lessee of this Lease does not constitute a transfer of all or any part of the Property.

 

F. The expressions of intent, the waivers, the representations and warranties, the covenants, the agreements and the stipulations set forth in this Section are a material inducement to Lessor entering into this Lease.

 

4. Lease Term . The Lease Term for the Property shall commence as of the Effective Date and shall expire on January 1, 2015. The time period during which this Lease shall actually be in effect is referred to herein as the “Lease Term.”

 

5. Rental and Other Payments . A. Base Monthly Rental shall commence on January 1, 2005 and Lessee shall the first month’s Base Monthly Rental on such date or the next business day. Thereafter, on or before the first day of each succeeding calendar month, Lessee shall pay Lessor in advance the Base Monthly Rental.

 

B. All sums of money required to be paid by Lessee under this Lease which are not specifically referred to as rent (“Additional Rental”) shall be considered rent although not specifically designated as such. Lessor shall have the same remedies for nonpayment of Additional Rental as those provided herein for the nonpayment of Base Annual Rental.

 

6. Representations and Warranties of Lessee . The representations and warranties of Lessee contained in this Section are being made to induce Lessor to enter into this Lease and Lessor has relied, and will continue to rely, upon such representations and warranties. Lessee represents and warrants to Lessor as of the Effective Date as follows:

 

A. Organization, Authority and Status . (i) Each of the Lessee Parties (other than individuals), as applicable, is duly organized or formed, validly existing and in good standing under the

 

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laws of its state of incorporation or formation. Lessee is qualified as a foreign corporation, partnership or limited liability company, as applicable, to do business in each state where the Property is located, and each of the Lessee Parties is qualified as a foreign corporation, partnership or limited liability company, as applicable, to do business in any other jurisdiction where the failure to be qualified would reasonably be expected to result in a Material Adverse Effect. All necessary action has been taken to authorize the execution, delivery and performance by Lessee of this Lease and of the other documents, instruments and agreements provided for herein. Lessee is not a “foreign corporation”, “foreign partnership”, “foreign trust”, “foreign limited liability company” or “foreign estate”, as those terms are defined in the Internal Revenue Code and the regulations promulgated thereunder. Lessee’s U.S. Federal Tax Identification number, Organization Identification number and principal place of business are correctly set forth on the signature page of this Lease. The person(s) who have executed this Lease on behalf of Lessee are duly authorized to do so. None of the Lessee Parties, and no individual or entity owning directly or indirectly any interest in any of the Lessee Parties, is an individual or entity whose property or interests are subject to being blocked under any of the Terrorism Laws or who is otherwise in violation of any of the Terrorism Laws.

 

B. Enforceability . Upon execution by Lessee, this Lease shall constitute the legal, valid and binding obligation of Lessee, enforceable against Lessee in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, liquidation, reorganization and other laws affecting the rights of creditors generally and general principles of equity.

 

C. Litigation . There are no suits, actions, proceedings or investigations pending, or, to the best of its knowledge, threatened against or involving the Lessee Parties or the Property before any arbitrator or Governmental Authority, except for such suits, actions, proceedings or investigations which, individually or in the aggregate, have not had, and would not reasonably be expected to result in, a Material Adverse Effect.

 

D. Absence of Breaches or Defaults . The Lessee Parties are not, and the authorization, execution, delivery and performance of this Lease and the documents, instruments and agreements provided for herein will not result in, any breach or default under any document, instrument or agreement to which any of the Lessee Parties is a party or by which any of the Lessee Parties, the Property or any of the property of any of the Lessee Parties is subject or bound, except for such breaches or defaults which, individually or in the aggregate, have not had, and would not reasonably be expected to result in, a Material Adverse Effect. The authorization, execution, delivery and performance of this Lease and the documents, instruments and agreements provided for herein will not violate any applicable law, statute, regulation, rule, ordinance, code, rule or order. The Property is not subject to any right of first refusal, right of first offer or option to purchase or lease granted to a third party. Lessee has not assigned, transferred, mortgaged, hypothecated or otherwise encumbered this Lease or any rights hereunder or interest herein.

 

E. Intentionally omitted.

 

F. Licenses and Permits; Access . All required licenses and permits, both governmental and private, to use and operate the Property as a Permitted Concept are in full force and effect, except for such licenses and permits the failure of which to obtain has not had, and would not reasonably be expected to result in, a Material Adverse Effect. Adequate rights of access to public roads and ways are available to the Property for unrestricted ingress and egress and otherwise to permit utilization of the Property for their intended purposes, and all such public roads and ways have been completed and dedicated to public use.

 

G. Condition of Property . The Property, including the Personal Property, is in good condition and repair and well maintained, ordinary wear and tear excepted, fully equipped and operational, free from structural defects, safe and properly lighted.

 

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H. Utilities . Adequate public utilities are available at the Property to permit utilization of the Property as a Permitted Concept and all utility connection fees and use charges will have been paid in full.

 

I. Area Development; Wetlands . No condemnation or eminent domain proceedings affecting the Property have been commenced or, to the best of Lessee’s knowledge, are contemplated. The Property is not and, to the best of Lessee’s knowledge, the real property bordering the Property is not designated by any Governmental Authority as a wetlands.

 

J. Financial Information . Lessee has delivered to Lessor certain financial statements and other information concerning the Lessee Parties in connection with this Lease (collectively, the “Financial Information”). The Financial Information is true, correct and complete in all material respects; there have been no amendments to the Financial Information since the date such Financial Information was prepared or delivered to Lessor. Lessee understands that Lessor is relying upon the Financial Information and Lessee represents that such reliance is reasonable. All financial statements included in the Financial Information were prepared in accordance with GAAP and fairly present as of the date of such financial statements the financial condition of each individual or entity to which they pertain. No change has occurred with respect to the financial condition of any of the Lessee Parties and/or the Property as reflected in the Financial Information which has not been disclosed in writing to Lessor or has had, or could reasonably be expected to result in, a Material Adverse Effect.

 

K. Zoning; Compliance With Laws . The Property is in compliance with all applicable zoning requirements, and the use of the Property as a Permitted Concept does not constitute a nonconforming use under applicable zoning requirements. The Lessee Parties and the Property is in compliance with all Applicable Regulations except for such noncompliance which has not had, and would not reasonably be expected to result in, a Material Adverse Effect.

 

L. Environmental . Except as disclosed in the Questionnaires:

 

(1) The Property and the Lessee Parties are not in violation of, or subject to, any pending or, to Lessee’s actual knowledge, threatened investigation or inquiry by any Governmental Authority or to any remedial obligations under any Environmental Laws, and this representation and warranty would continue to be true and correct following disclosure to the applicable Governmental Authorities of all relevant facts, conditions and circumstances, if any, pertaining to the Property;

 

(2) All permits, licenses or similar authorizations required to construct, occupy, operate or use any buildings, improvements, fixtures and equipment forming a part of the Property by reason of any Environmental Laws have been obtained;

 

(3) No Hazardous Materials have been used, handled, manufactured, generated, produced, stored, treated, processed, transferred, disposed of or otherwise Released in, on, under, from or about the Property, except in Permitted Amounts;

 

(4) The Property does not contain Hazardous Materials, except in Permitted Amounts, and all USTs located on or about the Property, if any, are in full compliance with all Environmental Laws;

 

(5) There is no threat of any Release migrating to the Property in excess of Permitted Amounts;

 

(6) There is no past or present non-compliance with Environmental Laws, or with permits issued pursuant thereto, in connection with the Property;

 

(7) None of the Lessee Parties has received any written or oral notice or other communication from any person or entity (including but not limited to a Governmental Authority) relating to Hazardous Materials or USTs or Remediation thereof in excess of Permitted Amounts, of possible

 

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liability of any person or entity pursuant to any Environmental Law, other environmental conditions in connection with the Property, or any actual or potential administrative or judicial proceedings in connection with any of the foregoing;

 

(8) All information known to any of the Lessee Parties or contained in the files of any of the Lessee Parties relating to any Environmental Condition or Releases of Hazardous Materials in, on, under or from the Property, other than in Permitted Amounts, has been provided to Lessor, including, without limitation, information relating to all prior Remediation;

 

(9) The Property has been kept free and clear of all liens and other encumbrances imposed pursuant to any Environmental Law (the “Environmental Liens”); and none of the Lessee Parties has allowed any tenant or other user of the Property to do any act that materially increased the dangers to human health or the environment, posed an unreasonable risk of harm to any person or entity (whether on or off the Property), impaired the value of the Property in any material respect, is contrary to any requirement of any insurer, constituted a public or private nuisance, constituted waste, or violated any covenant, condition, agreement or easement applicable to the Property;

 

(10) The information and disclosures in the Questionnaires are true, correct and complete in all material respects, and the person or persons executing the Questionnaires were duly authorized to do so; and

 

M. No Mechanics’ Liens . There are no delinquent accounts payable or mechanics’ liens in favor of any materialman, laborer, or any other person or entity in connection with labor or materials furnished to or performed on any portion of the Property; and no work has been performed or is in progress nor have materials been supplied to the Property or agreements entered into for work to be performed or materials to be supplied to the Property prior to the Effective Date, which will be delinquent on or before the Effective Date.

 

N. Title to Personal Property . Lessee is the owner of all Personal Property, free and clear of all liens, encumbrances, charges and security interests of any nature whatsoever, except the liens created by the Lease and except the liens created by a loan from Lender, and no Affiliate of Lessee owns any of the Personal Property.

 

O. Reserved.

 

Q. Money Laundering . (1) Lessee has taken all reasonable measures, in accordance with all applicable Anti-Money Laundering Laws, with respect to each holder of a direct or indirect interest in the Lessee Parties, to assure that funds invested by such holders in the Lessee Parties are derived from legal sources.

 

(2) To Lessee’s knowledge after making due inquiry, neither any of the Lessee Parties nor any holder of a direct or indirect interest in the Lessee Parties (a) is under investigation by any Governmental Authority for, or has been charged with or convicted of, any violation of any Anti-Money Laundering Laws, or drug trafficking, terrorist-related activities or other money laundering predicated crimes or a violation of the BSA, (b) has been assessed civil penalties under these or related laws, or (c) has had any of its funds seized or forfeited in an action under these or related laws.

 

(3) Lessee has taken reasonable steps, consistent with industry practice for comparable organizations and in any event as required by law, to ensure that the Lessee Parties are and shall be in compliance with all Anti-Money Laundering Laws and laws, regulations, and governmental guidance for the prevention of terrorism, terrorist financing and drug trafficking.

 

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7. Transfer, Participation and Securitization; Compliance Certificates . Lessee covenants to Lessor for so long as this Lease is in effect as follows:

 

A. Transfer, Participation and/or Securitization Covenants . (i) Lessee agrees to cooperate in good faith with Lessor and Lender in connection with any Transfer, Participation and/or Securitization of any of the Note, Mortgage and/or any of the Loan Documents, or any or all servicing rights with respect thereto, including, without limitation, (X) providing such documents, financial and other data, and other information and materials (the “Disclosures”) which would typically be required with respect to the Lessee Parties by a purchaser, transferee, assignee, servicer, participant, investor or rating agency involved with respect to such Transfer, Participation and/or Securitization, as applicable; provided, however, the Lessee Parties shall not be required to make Disclosures of any confidential information or any information which has not previously been made public unless required by applicable federal or state securities laws; and (Y) amending the terms of this Lease to the extent necessary so as to satisfy the requirements of purchasers, transferees, assignees, servicers, participants, investors or selected rating agencies involved in any such Transfer, Participation or Securitization, so long as such amendments would not have a material adverse effect upon the Lessee Parties or the transactions contemplated by this Lease. Lessor shall be responsible for causing Lender to prepare at Lender’s expense any documents evidencing the amendments referred to in the preceding subitem (Y).

 

(ii) Lessee consents to Lessor and Lender providing the Disclosures, as well as any other information which Lessor and Lender may now have or hereafter acquire with respect to the Property or the financial condition of the Lessee Parties to each purchaser, transferee, assignee, servicer, participant, investor or rating agency involved with respect to such Transfer, Participation and/or Securitization, as applicable. Lessee shall pay its own attorney fees and other out-of-pocket expenses incurred in connection with the performance of its obligations under this Section 7.B.

 

B. Compliance Certificate . Within 60 days after the end of each fiscal year of Lessee, Lessee shall deliver a compliance certificate to Lessor in a form to be provided by Lessor in order to establish that Lessee is in compliance in all material respects with all of its obligations, duties and covenants under this Lease.

 

8. Rentals To Be Net to Lessor . The Base Annual Rental payable hereunder shall be net to Lessor, so that this Lease shall yield to Lessor the rentals specified during the Lease Term, and that all costs, expenses and obligations of every kind and nature whatsoever relating to the Property shall be performed and paid by Lessee.

 

9. Taxes and Assessments . Lessee shall pay, prior to the earlier of delinquency or the accrual of interest on the unpaid balance, all taxes and assessments of every type or nature assessed against, imposed upon or arising with respect to Lessor, the Property, this Lease, the rental or other payments due under this Lease or Lessee during the Lease Term which affect in any manner the net return realized by Lessor under this Lease, including, without limitation, the following:

 

A. All taxes and assessments upon the Property or any part thereof and upon any Personal Property, whether belonging to Lessor or Lessee, or any tax or charge levied in lieu of such taxes and assessments;

 

B. All taxes, charges, license fees and or similar fees imposed by reason of the use of the Property by Lessee; and

 

C. All excise, transaction, privilege, license, sales, use and other taxes upon the rental or other payments due under this Lease, the leasehold estate of either party or the activities of either party pursuant to this Lease.

 

Notwithstanding the foregoing, but without limiting the preceding obligation of Lessee to pay all taxes which are imposed on the rental or other payments due under this Lease, in no event will Lessee be required to pay any net income taxes (i.e., taxes which are determined taking into account deductions for depreciation, interest, taxes and ordinary and necessary business expenses) or franchise taxes (unless imposed in lieu of other taxes that would otherwise be the obligation of Lessee under this Lease, including, without limitation, any “gross receipts tax” or any similar tax based upon gross income or

 

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receipts of Lessor which does not take into account deductions from depreciation, interest, taxes and/or ordinary or necessary business expenses) of Lessor, any transfer taxes of Lessor, or any tax imposed with respect to the sale, exchange or other disposition by Lessor, in whole or in part, of the Property or Lessor’s interest in this Lease (other than transfer or recordation taxes imposed in connection with the transfer of the Property to Lessee or the termination of this Lease pursuant to the provisions of this Lease).

 

All taxing authorities shall be instructed to send all tax and assessment invoices to Lessee and Lessee shall promptly provide Lessor and Lender with copies of all tax and assessment invoices received by Lessee. Upon request, Lessee shall also provide Lessor and Lender with evidence that such invoices were paid in a timely fashion. Lessee may, at its own expense, contest or cause to be contested, 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 item specified in this Section or lien therefor, provided that (i) Lessee shall provide written notice to Lessor of any contest involving more than $10,000.00, (ii) such proceeding shall suspend the collection thereof from the Property or any interest therein, (iii) neither the Property nor any interest therein would be in any danger of being sold, forfeited or lost by reason of such proceedings, (iv) no Event of Default has occurred and is continuing, and (v) Lessee shall have deposited with Lessor adequate reserves for the payment of the taxes, together with all interest and penalties thereon, unless paid in full under protest, or Lessee shall have furnished the security as may be required in the proceeding or as may be required by Lessor to insure payment of any contested taxes.

 

10. Utilities . Lessee shall contract, in its own name, for and pay when due all charges for the connection and use of water, gas, electricity, telephone, garbage collection, sewer use and other utility services supplied to the Property during the Lease Term. Under no circumstances shall Lessor be responsible for any interruption of any utility service.

 

11. Insurance . Throughout the Lease Term, Lessee shall maintain with respect to the Property, at its sole expense, the following types and amounts of insurance (which may be included under a blanket insurance policy if all the other terms hereof are satisfied):

 

A. Insurance against loss, damage or destruction by fire and other casualty, including theft, vandalism and malicious mischief, flood (for the Property which is in a location designated by the Federal Emergency Management Administration as a Special Flood Hazard Area), earthquake (for the Property which is in an area subject to destructive earthquakes within recorded history), boiler explosion (for the Property with a boiler), plate glass breakage, sprinkler damage (for the Property which has a sprinkler system), all matters covered by a standard extended coverage endorsement, special coverage endorsement commonly known as an “all-risk” endorsement and such other risks as Lessor may reasonably require, insuring the Property for not less than 100% of their full insurable replacement cost.

 

B. Commercial general liability and property damage insurance, including a products liability clause, covering Lessor and Lessee against bodily injury liability, property damage liability and automobile bodily injury and property damage liability, including without limitation any liability arising out of the ownership, maintenance, repair, condition or operation of the Property or adjoining ways, streets or sidewalks and, if applicable, insurance covering Lessor and Lessee against liability arising from the sale of liquor, beer or wine on the Property. Such insurance policy or policies shall contain a broad form contractual liability endorsement under which the insurer agrees to insure Lessee’s obligations under Section 19 hereof to the extent insurable, and a “severability of interest” clause or endorsement which precludes the insurer from denying the claim of Lessee or Lessor because of the negligence or other acts of the other, shall be in amounts of not less than $1,000,000.00 per injury and occurrence with respect to any insured liability, whether for personal injury or property damage, or such higher limits as Lessor may reasonably require from time to time, and shall be of form and substance satisfactory to Lessor.

 

C. Business income insurance or rental interruption insurance, as requested by Lessor, equal to 100% of the Base Annual Rental for a period of not less than six months.

 

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D. State Worker’s compensation insurance in the statutorily mandated limits, employer’s liability insurance with limits not less than $500,000 or such greater amount as Lessor may from time to time require and such other insurance as may be necessary to comply with applicable laws.

 

E. Such other insurance as may from time to time be reasonably required by Lessor or Lender in order to protect their respective interests with respect to the Property.

 

All insurance policies shall:

 

(i) Provide for a waiver of subrogation by the insurer as to claims against Lessor, Lender and their respective employees and agents and provide that such insurance cannot be unreasonably cancelled, invalidated or suspended on account of the conduct of Lessee, its officers, directors, employees or agents;

 

(ii) Provide that any “no other insurance” clause in the insurance policy shall exclude any policies of insurance maintained by Lessor or Lender and that the insurance policy shall not be brought into contribution with insurance maintained by Lessor or Lender;

 

(iii) Contain a standard without contribution mortgage clause endorsement in favor of Lender and its successors and assigns as their interests may appear and any other party designated by Lessor;

 

(iv) Provide that the policy of insurance shall not be terminated, cancelled or substantially modified without at least thirty (30) days’ prior written notice to Lessor, Lender and to any other party covered by any standard mortgage clause endorsement;

 

(v) Provide that the insurer shall not have the option to restore the Property if Lessor or Lessee elects to terminate this Lease in accordance with the terms hereof;

 

(vi) Be issued by insurance companies licensed to do business in the states in which the Property is located and which are rated A:VI or better by Best’s Insurance Guide or are otherwise approved by Lessor; and

 

(vii) Provide that the insurer shall not deny a claim because of the negligence of Lessee, anyone acting for Lessee or any tenant or other occupant of the Property.

 

It is expressly understood and agreed that the foregoing minimum limits of insurance coverage shall not limit the liability of Lessee for its acts or omissions as provided in this Lease. All liability insurance policies (with the exception of worker’s compensation insurance to the extent not available under statutory law), shall designate Lessor and Lender and their respective successors and assigns as additional insureds as their interests may appear and shall be payable as set forth in Section 21 hereof. All such policies shall be written as primary policies, with deductibles not to exceed 10% of the amount of coverage. Any other policies, including any policy now or hereafter carried by Lessor or Lender, shall serve as excess coverage. Lessee shall procure policies for all insurance for periods of not less than one year and shall provide to Lessor and Lender certificates of insurance or, upon the request of Lessor or Lender, duplicate originals of insurance policies evidencing that insurance satisfying the requirements of this Lease is in effect at all times. In the event of any transfer by Lessor of Lessor’s interest in the Property or any financing or refinancing of Lessor’s interest in the Property, Lessee shall, upon not less than ten (10) days’ prior written notice, deliver to Lessor or any Lender providing such financing or refinancing, as the case may be, certificates of all insurance required to be maintained by Lessee hereunder naming such transferee or such Lender, as the case may be, as an additional named insured to the extent required herein effective as of the date of such transfer, financing or refinancing.

 

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12. Tax and Insurance Impound . Upon the occurrence of an Event of Default, Lessor may require Lessee to pay to Lessor sums which will provide an impound account (which shall not be deemed a trust fund) for paying up to the next one year of taxes, assessments and/or insurance premiums for the Property. Upon such requirement, Lessor will estimate the amounts needed for such purposes and will notify Lessee to pay the same to Lessor in equal monthly installments, as nearly as practicable, in addition to all other sums due under this Lease. Should additional funds be required at any time, Lessee shall pay the same to Lessor on demand. Lessee shall advise Lessor of all taxes and insurance bills which are due and shall cooperate fully with Lessor in assuring that the same are paid. Lessor may deposit all impounded funds in accounts insured by any federal or state agency and may commingle such funds with other funds and accounts of Lessor. Interest or other gains from such funds, if any, shall be the sole property of Lessor. If an Event of Default shall occur subsequent to Lessor requiring the establishment of an impound account pursuant to this Section, Lessor may apply all impounded funds against any sums due from Lessee to Lessor. Lessor shall give to Lessee an annual accounting showing all credits and debits to and from such impounded funds received from Lessee.

 

13. Payment of Rental and Other Sums . All rental and other sums which Lessee is required to pay hereunder shall be the unconditional obligation of Lessee and shall be payable in full when due without any setoff, abatement, deferment, deduction or counterclaim whatsoever Any delinquent payment (that is, any payment not made within five calendar days after the date when due) shall, in addition to any other remedy of Lessor, incur a late charge of 5% (which late charge is intended to compensate Lessor for the cost of handling and processing such delinquent payment and should not be considered interest) and bear interest at the Default Rate, such interest to be computed from and including the date such payment was due through and including the date of the payment; provided, however, in no event shall Lessee be obligated to pay a sum of late charge and interest higher than the maximum legal rate then in effect.

 

14. Use . Except as set forth below, the Property shall be used solely for the operation of a Permitted Concept and for no other purpose. Lessee shall occupy the Property commencing on the Effective Date and, except as set forth below and except during periods when the Property is untenantable by reason of fire or other casualty or condemnation (provided, however, during all such periods while the Property is untenantable, Lessee shall strictly comply with the terms and conditions of Section 21 of this Lease), Lessee shall at all times during the Lease Term occupy the Property and diligently operate its business on the Property. Lessee may cease diligent operation of business at the Property for a period not to exceed 90 days and may do so only once with respect to the Property within any five-year period during the Lease Term. If Lessee does discontinue operation as permitted by this Section, Lessee shall (i) give written notice to Lessor within 10 days after Lessee elects to cease operation, (ii) provide adequate protection and maintenance of the Property during any period of vacancy, (iii) comply with all Applicable Regulations and otherwise comply with the terms and conditions of this Lease other than the continuous use covenant set forth in this Section, and (iv) pay all costs necessary to restore the Property to its condition on the day operation of the business ceased at such time as the Property is reopened for Lessee’s business operations or other substituted use approved by Lessor as contemplated below. Notwithstanding anything herein to the contrary, Lessee shall pay the Base Monthly Rental on the first day of each month during any period in which Lessee discontinues operation.

 

Lessee shall not, by itself or through any assignment, sublease or oth