LOAN AGREEMENT

 

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                                                                 EXHIBIT 10.7(a)

 

                                 LOAN AGREEMENT

 

      THIS LOAN AGREEMENT (this "Agreement") is made as of April 30, 2004 (the

"Closing Date"), by and between GE CAPITAL Franchise Finance Corporation, a

Delaware corporation ("Lender"), and KONA GRILL LAS VEGAS, INC., a Delaware

corporation ("Borrower").

 

                                   AGREEMENT:

 

      In consideration of the mutual covenants and provisions of this Agreement,

the parties agree as follows:

 

      1. DEFINITIONS. The following terms shall have the following meanings for

all purposes of this Agreement:

 

      "ADA" means the Americans with Disabilities Act of 1990, as such act may

be amended from time to time.

 

      "Affiliate" means any Person that 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"

mean the possession, directly or indirectly, of the power to direct or cause the

direction of the management and policies of such Person, whether through

ownership of voting securities or otherwise.

 

      "Anti-Money Laundering Laws" means all applicable laws, regulations and

government guidance on the prevention and detection of money laundering,

including 18 U.S.C. Section Section 1956 and 1957, and the BSA.

 

      "Applicable Regulations" means all applicable statutes, regulations,

rules, ordinances, codes, licenses, permits, orders and approvals of each

Governmental Authority having jurisdiction over the Premises, 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

Borrower Parties.

 

      "Borrower Parties" means, collectively, Borrower and any guarantors of the

Loan (including, in each case, any predecessors-in-interest).

 

      "BSA" means the Bank Secrecy Act (31 U.S.C. Section Section 5311 et.

seq.), and its implementing regulations, Title 31 Part 103 of the U.S. Code of

Federal Regulations.

 

      "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.

 

      "Closing" means the disbursement of the Loan Amount by Title Company as

contemplated by this Agreement.

 

      "Code" means Title 11 of the United States Code, 11 U.S.C. Sec. 101 et

seq., as amended.

 

      "Corporate Fixed Charge Coverage Ratio" has the meaning set forth in

Section 6.J.

 

      "Default Rate" has the meaning set forth in the Note.

 

      "Entity" means any entity that is not a natural person.

 

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      "Environmental Indemnity Agreement" means the environmental indemnity

agreement dated as of the date of this Agreement executed by Borrower for the

benefit of the Indemnified Parties and such other parties as are identified in

such agreement with respect to the Premises, as the same may be amended from

time to time.

 

      "Environmental Insurer" means American International Specialty Lines

Insurance Company, or such other environmental insurance company as Lender may

select, and its successors and assigns.

 

      "Environmental Policy" means the environmental insurance policy issued by

Environmental Insurer to Lender with respect to the Premises, which

Environmental Policy shall be in form and substance satisfactory to Lender in

its sole discretion.

 

      "Event of Default" has the meaning set forth in Section 7.

 

      "Fee" means an underwriting, site assessment, valuation, processing and

commitment fee equal to 1% of the sum of the Loan Amount for all of the

Premises.

 

      "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 Premises or any of the Borrower Parties.

 

      "Guarantors" means Kona Grill, Inc. and Michael McDermott

 

      "Guaranty" means the unconditional guaranty of payment and performance

dated as of the date of this Agreement executed by Guarantors for the benefit of

Lender with respect to the Loan, as the same may be amended from time to time.

 

      "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 Premises or the operations or activity at

the Premises, 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 Premises or the owners and/or occupants of property adjacent to or

surrounding the Premises.

 

      "Indemnified Parties" means Lender, Environmental Insurer, the trustee

under the Mortgage, if applicable, and any person or entity who is or will have

been involved in the origination of the Loan, any person or entity who is or

will have been involved in the servicing of the Loan, any person or entity in

whose name the encumbrance created by the Mortgage is or will have been

recorded, persons and entities who may hold or acquire or will have held a full

or partial interest in the Loan (including, but not limited to, investors or

prospective investors in any Securitization, Participation or Transfer, as well

as custodians, trustees and other fiduciaries who hold or have held a full or

partial interest in the Loan for the benefits of third parties), as well as the

respective directors, officers, shareholders, partners, members, employees,

lenders, agents, servants, representatives, contractors, subcontractors,

affiliates, subsidiaries, participants, successors and assigns of any and all of

the foregoing (including, but not limited to, any other person or entity who

holds or acquires or will have held a participation or other full or partial

interest in the Loan or the Premises, whether during the term of the Loan or as

a part of or

 

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following a foreclosure of the Loan and including, but not limited to, any

successors by merger, consolidation or acquisition of all or a substantial

portion of Lender's assets and business).

 

      "Indemnity Agreements" means all indemnity agreements executed for the

benefit of any of the Borrower Parties or any prior owner, lessee or occupant of

the Premises in connection with Hazardous Materials, including, without

limitation, the right to receive payments under such indemnity agreements.

 

      "Lender Entities" means, collectively, Lender (including any

predecessor-in-interest to Lender) and any Affiliate of Lender (including any

Affiliate of any predecessor-in-interest to Lender).

 

      "Loan" means the loan for the Premises described in Section 2.

 

      "Loan Amount" means $1,000,000.00.

 

      "Loan Documents" means, collectively, this Agreement, the Note, the

Mortgage, the Environmental Indemnity Agreement, the UCC-1 Financing Statements,

all guaranties of the Loan, if any, and all other documents, instruments and

agreements executed in connection therewith or contemplated thereby, as the same

may be amended from time to time.

 

      "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.

 

      "Material Adverse Effect" means a material adverse effect on (i) the

Premises, including, without limitation, the operation of the Premises as a

Permitted Concept, or (ii) Borrower's ability to perform its obligations under

the Loan Documents.

 

      "Mortgage" means the deed of trust, deed to secure debt or mortgage dated

as of the date of this Agreement executed by Borrower for the benefit of Lender

with respect to the Premises, as the same may be amended from time to time.

 

      "Note" means the promissory note dated as of the date of this Agreement

executed by Borrower in favor of Lender evidencing the Loan with respect to the

Premises, as the same may be amended, restated and/or substituted from time to

time

 

      "Obligations" has the meaning set forth in the Mortgage.

 

      "OFAC Laws and Regulations" 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 (including, without limitation, the Specially

Designated Nationals and Blocked Persons List) 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.

 

      "Other Agreements" means, collectively, all agreements and instruments

between, among or by (1) any of the Borrower Parties and/or any Affiliate of any

of the Borrower Parties (including any Affiliate of any predecessor-in-interest

to any of the Borrower Parties), and, or for the benefit of, (2) any of the

 

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Lender Entities, including, without limitation, promissory notes and guaranties;

provided, however, the term "Other Agreements" shall not include the agreements

and instruments defined as the Loan Documents.

 

      "Parent Company" means Kona Grill, Inc., a Delaware corporation.

 

      "Participation" means one or more grants by Lender or any of the other

Lender Entities to a third party of a participating interest in notes evidencing

obligations to repay secured or unsecured loans owned by Lender or any of the

other Lender Entities or any or all servicing rights with respect thereto.

 

      "Permitted Concept" means a Kona Grill restaurant.

 

      "Permitted Exceptions" means those recorded easements, restrictions, liens

and encumbrances set forth as exceptions in the title insurance policies issued

by Title Company to Lender and approved by Lender in its sole discretion in

connection with the closing of the Loan.

 

      "Person" means any individual, corporation, partnership, limited liability

company, trust, unincorporated organization, Governmental Authority or any other

form of entity.

 

       "Personal Property" has the meaning set forth in the Mortgage.

 

      "Premises" means the parcel or parcels of real estate legally described on

Exhibit A attached hereto, together with all rights, privileges and

appurtenances associated therewith and all buildings, fixtures and other

improvements now or hereafter located thereon (whether or not affixed to such

real estate) and the Personal Property."Questionnaire" means the environmental

questionnaire completed on behalf of the Borrower Parties with respect to the

Premises and submitted to Environmental Insurer in connection with the issuance

of the Environmental Policy.

 

      "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.

 

      "Restoration" has the meaning set forth in the Mortgage.

 

      "Securitization" means one or more sales, dispositions, transfers or

assignments by Lender or any of the other Lender Entities to a special purpose

corporation, trust or other entity identified by Lender or any of the other

Lender Entities of notes evidencing obligations to repay secured or unsecured

loans owned by Lender or any of the other Lender Entities (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

of the other Lender Entities), 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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      "Subordination Agreements" means the Subordination Agreements executed by

certain shareholders and Affiliates of Borrower for the benefit of Lender,

subordinating the Subordinate Debt to the Loan.

 

      "Subordinate Debt" means the debt of Borrower to certain shareholders and

Affiliates of Borrower described in the Subordination Agreements.

 

      "Title Company" means Lawyers Title Insurance Corporation.

 

      "Transfer" means one or more sales, transfers or assignments by Lender or

any of the other Lender Entities to a third party of notes evidencing

obligations to repay secured or unsecured loans owned by Lender or any of the

other Lender Entities or any or all servicing rights with respect thereto.

 

      "UCC-1 Financing Statements" means such UCC-1 Financing Statements as

Lender shall file with respect to the transactions contemplated by this

Agreement.

 

      "U.S. Publicly-Traded Entity" is an Entity whose securities are listed on

a national securities exchange or quoted on an automated quotation system in the

U.S. or a wholly-owned subsidiary of such an Entity.

 

      "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.     TRANSACTION. On the terms and subject to the conditions set forth in

the Loan Documents, Lender shall make the Loan. The Loans will be evidenced by

the Note and secured by the Mortgage. Borrower shall repay the outstanding

principal amount of the Loan together with interest thereon in the manner and in

accordance with the terms and conditions of the Note and the other Loan

Documents. The Loan shall be advanced at the Closing in cash or otherwise

immediately available funds subject to any prorations and adjustments required

by this Agreement. The obligation of Lender to consummate the transaction

contemplated by this Agreement is subject to the fulfillment or waiver of each

of the conditions contained in the loan commitment issued by Lender to Borrower

with respect to the Loan and the "Loan Closing Checklist" prepared by Lender

with respect to the Loan.

 

      3.     ESCROW AGENT; CLOSING COSTS. Borrower and Lender hereby employ Title

Company to act as escrow agent in connection with the transactions described in

this Agreement. Borrower and Lender will deliver to Title Company all documents,

pay to Title Company all sums and do or cause to be done all other things

necessary or required by this Agreement, in the reasonable judgment of Title

Company, to enable Title Company to comply herewith and to enable any title

insurance policy provided for herein to be issued. Title Company shall not cause

the transaction to close unless and until it has received written instructions

from Lender and Borrower to do so. Title Company is authorized to pay, from any

funds held by it for Lender's or Borrower's respective credit all amounts

necessary to procure the delivery of such documents and to pay, on behalf of

Lender and Borrower, all charges and obligations payable by them, respectively.

Borrower will pay all charges payable by it to Title Company. Title Company is

authorized, in the event any conflicting demand is made upon it concerning these

instructions or the escrow, at its election, to hold any documents and/or funds

deposited hereunder until an action shall be brought in a court of competent

jurisdiction to determine the rights of Borrower and Lender or to interplead

such documents and/or funds in an action brought in any such court. Deposit by

Title Company of such documents and funds, after deducting therefrom its charges

and its expenses and attorneys' fees incurred in connection with any such court

action, shall relieve Title Company of all further liability and responsibility

for such documents and funds. Title Company's receipt of this Agreement and

opening of an escrow pursuant to this Agreement shall be deemed to constitute

conclusive evidence of Title Company's agreement to be bound by the terms and

conditions of this Agreement pertaining to Title Company. Disbursement of any

funds shall be made by check, certified check or wire transfer, as directed by

Borrower and Lender. Title Company shall be under no obligation to disburse any

funds

 

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represented by check or draft, and no check or draft shall be payment to Title

Company in compliance with any of the requirements hereof, until it is advised

by the bank in which such check or draft is deposited that such check or draft

has been honored. Title Company is authorized to act upon any statement

furnished by the holder or payee, or a collection agent for the holder or payee,

of any lien on or charge or assessment in connection with the Premises,

concerning the amount of such charge or assessment or the amount secured by such

lien, without liability or responsibility for the accuracy of such statement.

The employment of Title Company as escrow agent shall not affect any rights of

subrogation under the terms of any title insurance policy issued pursuant to the

provisions thereof.

 

      4. CLOSING CONDITIONS. The obligation of Lender to consummate the

transaction contemplated by this Agreement is subject to the fulfillment or

waiver of each of the following conditions:

 

      A. Title Insurance Commitments. Lender shall have received for the

Premises a preliminary title report and irrevocable commitment to insure title

in the amount of the Loan, by means of a mortgagee's, ALTA extended coverage

policy of title insurance (or its equivalent, in the event such form is not

issued in the jurisdiction where the Premises is located) issued by Title

Company showing Borrower vested with good and marketable fee title in the real

property comprising such Premises, committing to insure Lender's first priority

lien upon and security interest in such real property subject only to Permitted

Exceptions, and containing such endorsements as Lender may require.

 

      B. Survey. Lender shall have received (i) a current ALTA survey of the

Premises or its equivalent, the form and substance of which shall be

satisfactory to Lender in its reasonable discretion and (ii) the Site and

Utility Plans. Lender shall have obtained a flood certificate indicating that

the location of the Premises is not within the 100-year flood plain or

identified as a special flood hazard area as defined by the Federal Emergency

Management Agency, or if the Premises is in such a flood plain or special flood

hazard area, Borrower shall have provided Lender with evidence of flood

insurance maintained on the Premises in an amount and on terms and conditions

reasonably satisfactory to Lender.

 

      C. Environmental. Lender shall have completed such environmental due

diligence of the Premises as it deems necessary or advisable in its sole

discretion, including, without limitation, receiving an Environmental Policy

with respect to the Premises, and Lender shall have approved the environmental

condition of the Premises in its sole discretion.

 

      D. Compliance With Representations, Warranties and Covenants. All of the

representations and warranties set forth in Section 5 shall be true, correct and

complete as of the Closing Date, and Borrower shall be in compliance with each

of the covenants set forth in Section 6 as of the Closing Date. No event shall

have occurred or condition shall exist or information shall have been disclosed

by Borrower or discovered by Lender which has had or would be reasonably likely

to have a material adverse effect on the Premises, any of the Borrower Parties

or Lender's willingness to consummate the transaction contemplated by this

Agreement, as determined by Lender in its sole and absolute discretion.

 

      E. Proof of Insurance. Borrower shall have delivered to Lender

certificates of insurance and copies of insurance policies showing that all

insurance required by the Loan Documents and providing coverage and limits

satisfactory to Lender are in full force and effect.

 

      F. Legal Opinions. Borrower shall have delivered to Lender such legal

opinions as Lender may reasonably require all in form and substance reasonably

satisfactory to Lender and its counsel.

 

      G. Fee and Closing Costs. Borrower shall have paid the Fee to Lender and

shall have paid all costs of the transactions described in this Agreement,

including, without limitation, the cost of title insurance premiums and all

endorsements required by Lender, survey charges, UCC and litigation search

charges, the attorneys' fees of Borrower, reasonable attorneys' fees and

expenses of Lender, the cost of the environmental due diligence undertaken

pursuant to Section 4.C, including, without limitation, the cost of the

Environmental Policy, Lender's site inspection costs and fees, stamp taxes,

mortgage taxes, transfer fees, escrow, filing and recording fees and UCC filing

and recording fees (including preparation,

 

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filing and recording fees for UCC continuation statements). Borrower shall have

also paid all real and personal property and other applicable taxes and

assessments and other charges relating to the Premises which are due and payable

on or prior to the Closing Date as well as taxes and assessments due and payable

subsequent to the Closing Date but which Title Company requires to be paid at

Closing as a condition to the issuance of the title insurance policy described

in Section 4.A.

 

      H      Closing Documents. At or prior to the Closing Date, Lender and/or

the Borrower Parties, as may be appropriate, shall have executed and delivered

or shall have caused to be executed and delivered to Lender, or as Lender may

otherwise direct, the Loan Documents and such other documents, payments,

instruments and certificates, as Lender may require in form acceptable to

Lender.

 

      I.     Subordination Agreements. Borrower shall have caused the

Subordination Agreements to be delivered to Lender, all in form and substance

acceptable to Lender in its sole discretion.

 

      Upon fulfillment or waiver of all of the above conditions, Lender shall

deposit funds necessary to close this transaction with the Title Company and

this transaction shall close in accordance with the terms and conditions of this

Agreement.

 

      5.     REPRESENTATIONS AND WARRANTIES OF BORROWER. The representations and

warranties of Borrower contained in this Section are being made by Borrower as

of the Closing Date to induce Lender to enter into this Agreement and consummate

the transactions contemplated herein and shall survive the Closing. Borrower

represents and warrants to Lender (and Environmental Insurer solely with respect

to Section 3.K) as follows:

 

      A.     Financial Information. Borrower has delivered to Lender certain

financial statements and other information concerning the Borrower Parties in

connection with the transaction described in this Agreement (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 Lender. Borrower understands that Lender is relying upon the

Financial Information and Borrower 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 Borrower Parties and/or the Premises as reflected in the Financial

Information, which has not been disclosed in writing to Lender or has had, or

could reasonably be expected to result in, a Material Adverse Effect.

 

      B.     Organization and Authority. Each of the Borrower Parties (other than

individuals), as applicable, is duly organized or formed, validly existing and

in good standing under the laws of its state of incorporation or formation.

Borrower is qualified as a foreign corporation, partnership or limited liability

company, as applicable, to do business in each state where the Premises are

located, and each of the Borrower 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 the Borrower

Parties of this Agreement and the other Loan Documents. The person(s) who have

executed this Agreement on behalf of Borrower are duly authorized so to do.

Borrower is not a "foreign corporation", "foreign partnership", "foreign trust",

"foreign estate" or "foreign person" (as those terms are defined by the Internal

Revenue Code of 1986, as amended). Borrower'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 Agreement. None of the

Borrower Parties, and no individual or entity owning directly or indirectly any

interest in any of the Borrower Parties, is an individual or entity whose

property or interests are subject to being blocked under any of the OFAC Laws

and Regulations or is otherwise in violation of any of the OFAC Laws and

Regulations; provided,

 

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however, the representation contained in this sentence shall not apply to any

Person to the extent such Person's interest is in or through a U.S.

Publicly-Traded Entity.

 

      C. Enforceability of Documents. Upon execution by the Borrower Parties,

this Agreement and the other Loan Documents shall constitute the legal, valid

and binding obligations of the Borrower Parties, respectively, enforceable

against the Borrower Parties in accordance with their respective 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.

 

      D. Litigation. There are no suits, actions, proceedings or investigations

pending, or to the best of its knowledge, threatened against or involving the

Borrower Parties or the Premises 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.

 

      E. Absence of Breaches or Defaults. The Borrower Parties are not, and the

authorization, execution, delivery and performance of this Agreement and the

other Loan Documents will not result, in any breach or default under any other

document, instrument or agreement to which any of the Borrower Parties is a

party or by which any of the Borrower Parties, the Premises or any of the

property of any of the Borrower 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 Agreement and the

other Loan Documents will not violate any applicable law, statute, regulation,

rule, ordinance, code, rule or order. The Premises is not subject to any right

of first refusal, right of first offer or option to purchase or lease granted to

a third party.

 

      F. Utilities. Adequate public utilities are available at the Premises to

permit utilization of the Premises as a Permitted Concept and all utility

connection fees and use charges will have been paid in full prior to

delinquency.

 

      G. Zoning; Compliance With Laws. The Premises is in compliance with all

applicable zoning requirements, and the use of the Premises as a Permitted

Concept does not constitute a nonconforming use under applicable zoning

requirements. The Borrower Parties and the Premises are 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.

 

      H. Area Development; Wetlands. No condemnation or eminent domain

proceedings affecting the Premises have been commenced or, to the best of

Borrower's knowledge, are contemplated. Neither the Premises, nor to the best of

Borrower's knowledge, the real property bordering the Premises, are designated

by any Go