SUBLEASE AGREEMENT

Exhibit 10.2

 

SUBLEASE AGREEMENT

 

DATED AS OF DECEMBER 22, 2005

 

BY AND BETWEEN

 

CNL GATLINBURG PARTNERSHIP, LP

 

AS LANDLORD,

 

AND

 

GATLINBURG SKYLIFT, LLC

 

AS TENANT

TABLE OF CONTENTS

 

 

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SUBLEASE AGREEMENT

(WITH BUYBACK OPTION)

 

THIS SUBLEASE AGREEMENT (the “ Lease ”) is entered into as of this 22 ^nd day of December 2005, by and between CNL GATLINBURG PARTNERSHIP, LP , a Delaware limited partnership (the “Landlord” ), and GATLINBURG SKYLIFT, LLC, a Michigan limited liability company (the “Tenant” ).

 

RECITALS :

 

A. Landlord is the tenant under the Ground Lease (as defined herein) of the premises being currently operated as the “Gatlinburg Skylift” in Gatlinburg, Tennessee.

 

B. Landlord is the owner of the building ticket office and chairlift and equipment, parking facilities and other improvements within the areas controlled by Landlord under the Ground Lease.

 

C. Landlord has agreed to grant a sublease to Tenant of the Landlord’s rights under the Ground Lease and to lease to Tenant the Improvements and Personal Property (as each is defined herein), all subject to and upon the terms and conditions set forth herein.

 

D. Landlord has granted to Tenant the right and option to buy back from Landlord the Ground Lease Improvements and the Personal Property leased hereunder pursuant to a Buyback Option Agreement of even date herewith entered into by and among, inter alia, Landlord and Tenant.

 

AGREEMENT :

 

In consideration of the Rent payable by Tenant hereunder and the mutual covenants herein contained and other good and valuable consideration, the mutual receipt and legal sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows:

1. DEFINITIONS

 

1.1. Definitions. For all purposes of this Lease, except as otherwise expressly provided or unless the context otherwise requires, (a) the terms defined in this Article shall have the meanings ascribed to them in this Article and include the plural as well as the singular, (b) all accounting terms not otherwise defined herein shall have the meanings ascribed to them in accordance with GAAP, (c) all references in this Lease to designated “ Articles ,” “Sections” and other subdivisions of this Lease and “Exhibits” are to the designated Articles, Sections, other subdivisions of this Lease and Exhibits and (iv) the words “herein”, “hereof” “hereunder” and other words of similar import refer to this Lease as a whole and not to any particular Article, Section or other subdivision.

 

“ Accounting Period ” shall mean each calendar month during the Term, or part thereof where the Term commences on a date other than the first day of a calendar month or ends on the last day of a calendar month, unless otherwise agreed by both parties.

 

“ Accounting Period Statement ” shall have the meaning given such term in Section 16.2.

 

“ Additional Charges ” shall have the meaning given such term in Section 3.4.

 

“ Additional Minimum Rent ” shall mean with respect to any Fiscal Year an amount equal to the aggregate of Additional Minimum Rent applicable to each Landlord Expenditure hereafter made by Landlord. For each Landlord Expenditure hereafter made by Landlord, Additional Minimum Rent shall be paid by Tenant for each Fiscal Year in an amount equal to the product of: (a) the Subsequently Agreed Lease Rate applicable to such additional Landlord Expenditure and (b) the amount of such Landlord Expenditure. Landlord shall notify Tenant in writing as to the Additional Minimum Rent amount, and the calculations thereof at the time of each Landlord Expenditure.

 

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“ Affiliates ” shall have the meaning given such term in Section 1.2.

 

“ Applicable Laws ” shall mean all applicable laws, statutes, regulations, rules, ordinances, codes, licenses, permits and orders, from time to time in existence, of all courts of competent jurisdiction and Government Agencies, and all applicable judicial and administrative and regulatory decrees, judgments and orders, including Environmental Laws.

 

“ Annual Business Plan ” shall mean the annual business plan delivered by Tenant to Landlord pursuant to, and in accordance with, Section 16.4.

 

“ Asset Purchase Agreement ” shall mean that Asset Purchase Agreement entered into by and between Tenant and CBRLP, as sellers, and CNL Income Partners, LP, as purchaser, dated as of the date hereof, as said agreement is amended, extended, supplemented, replaced and renewed from time to time.

 

“ Award ” shall mean all compensation, sums or other consideration, benefit or value awarded, paid to or to the order of or for the benefit of Landlord in respect of total or partial Condemnation of the Landlord’s rights as to any portion of the Premises (after deduction of all reasonable legal fees and other reasonable costs and expenses of Landlord, including, without limitation, expert witness fees, incurred by Landlord, in connection with obtaining any such award).

 

“ Business Day ” shall mean any day other than Saturday, Sunday, or any other day on which banking institutions in the State of Tennessee or State of Florida are authorized by law or executive action to close.

 

“ Buyback Option Agreement ” means the buyback option agreement, dated as of the date hereof, among the Landlord, CNL Income Partners, LP and Boyne USA, Inc., a copy of which is attached hereto as Schedule 1.1A.

 

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“Capital Expenditure” shall mean the expenses and capital lease payments approved by Landlord in accordance with the requirements of this Lease and necessary for alterations, improvements, renewals, replacements, and additions to the Improvements and all related personal property (including all Personal Property) which are classified as “capital expenditures” under GAAP.

 

“Capital Renewals Reserve” shall have the meaning given such term in Section 5.2A.

 

“Capital Reserve Budget” shall have the meaning given such term in Section 5.2C.

 

“CBRLP” means Cypress Bowl Recreations Limited Partnership, a British Columbia limited partnership, and shall include all successors and assigns thereof.

 

“Claim” shall have the meaning given such term in Article 8.

 

“Closing” shall mean the closing of the purchase by Landlord of the Ground Lease, the Improvements and the personal property related thereto as contemplated by the Asset Purchase Agreement, including the execution and delivery of this Lease by the Landlord and the Tenant and all agreements to be entered into on the Commencement Date.

 

“CNL TRS” means CNL CG TRS Corp., a Delaware corporation, or any other entity into which the Personal Property at the Cypress Premises will be transferred, and shall include successors and assigns thereof.

 

“Code” shall mean the Internal Revenue Code of 1986 and, to the extent applicable, the Treasury Regulations promulgated thereunder, each as amended from time to time.

 

“Commencement Date” shall mean December 22, 2005, being the same date as the date of Skylift Closing as defined in the Asset Purchase Agreement.

 

“Condemnation” shall mean (a) the exercise of any governmental power with respect to the Premises, whether by legal proceedings or otherwise, by a Condemner of its power of

 

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condemnation or eminent domain, (b) a voluntary sale or transfer of the Premises by Landlord to any Condemner, either under threat of condemnation or while legal proceedings for condemnation are pending, or (c) a taking or voluntary conveyance of all or part of the Premises, or any interest therein, or right accruing thereto or use thereof, as the result or in settlement of any condemnation proceeding affecting the Premises, whether or not the same shall have actually been commenced.

 

“Condemner” shall mean the City of Gatlinburg, Sevier County, the State of Tennessee, or any other public or quasi-public authority, or Person having the power of Condemnation.

 

“Contracts” shall mean all maintenance, service and supply contracts, and all other similar agreements for goods or services in connection with the Premises or the Leased Property other than the Licenses and Permits.

 

“Control” and “Controlled” shall mean, in respect of any Person, (i) the right to exercise, directly or indirectly, a majority of the votes which may be voted at a meeting of (A) the shareholders of such Person, in the case of a corporation, (B) the shareholders of the general partner of such Person, in the case of a limited partnership or (C) the equity holders or other voting participants in the case of a Person that is not a corporation or a limited partnership, or (ii) the right to elect or appoint, directly or indirectly, a majority of (A) the directors of such Person, in the case of a corporation, (B) the directors of the general partner of such Person, in the case of a limited partnership or (C) a majority of the Persons who have the right to manage or supervise the management of the affairs and business of such Person, in the case of a Person that is not a corporation or a limited partnership.

 

“Cypress Jersey Trust” means Cypress Jersey Trust, a trust settled under the laws of the Isle of Jersey, and shall include all successors and assigns thereof.

 

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“Cypress Leases” shall mean (i) that certain Sub-permit and Lease Agreement which is hereafter entered into, pursuant to the Asset Purchase Agreement, by and between Cypress Jersey Trust, as landlord, and CBRLP, as tenant, and (ii) that certain Personal Property Lease Agreement which is hereafter entered into, pursuant to the Asset Purchase Agreement, by and between CNL TRS, as lessor, and CBRLP, as lessee.

 

“Cypress Permit” shall the mean the Permit described in the Cypress Leases.

 

“Date of Taking” shall mean the date the Condemnor has the right to possession of the Premises, or any portion thereof in connection with a Condemnation.

 

“Default” shall mean any event or condition existing which with the giving of notice and/or lapse of time would ripen into an Event of Default.

 

“Emergency Requirements” shall mean any of the following events or circumstances: (a) an emergency threatening the Premises or Improvements, or the life, safety or property of its tenants, subtenants, customers, invitees or employees; (b) a violation of any Legal Requirement or any condition, the continuation of which would subject Tenant or Landlord to civil or criminal liability.

 

“Entity” shall mean any corporation, general or limited partnership, limited liability company, limited liability partnership, stock company or association, joint venture, association, company, trust, bank, trust company, land trust, business trust, cooperative, Governmental Agency or political subdivision thereof or any other association or entity.

 

“Environment” shall mean soil, surface waters, ground waters, land, streams, sediments, surface or subsurface strata and ambient air.

 

“Environmental Claims” means all claims for reimbursement, remediation, abatement, removal, clean up, contribution, personal injury, property damage or damage to natural resources

 

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made by any Government Agencies or other Person arising from or in connection with the (i) presence or actual or potential spill, leak, emission, discharge or release of any Hazardous Materials over, on, in, under or from the Premises, or (ii) violation of any Environmental Laws with respect to the Premises.

 

“ Environmental Laws ” shall mean any Applicable Laws which regulate the manufacture, generation, formulation, processing, use, treatment, handling, storage, disposal, distribution or transportation, or an actual or potential spill, leak, emission, discharge or release of any Hazardous Materials, pollution, contamination or radiation into any water, soil, sediment, air or other environmental media, including, without limitation, the (i) The Comprehensive Environmental Response, Compensation and Liability Act, (ii) the Resource Conservation and Recovery Act, (iii) the Federal Water Pollution Control Act, (iv) the Toxic Substances Control Act, (v) the Clean Water Act, (vi) the Clean Air Act, (vii) the Hazardous Materials Transportation Act, and (viii) similar state and local laws, as amended as of the time in question, and all other federal, state and local laws, as amended as of the time in question.

 

“ Environmental Liabilities ” means all liabilities under any Environmental Laws arising from or in connection with the Premises, including, without limitation, any obligations to manage, control, contain, remove, remedy, respond to, clean up or abate any actual or potential spill, leak, emission, discharge or release of any Hazardous Materials, pollution, contamination or radiation into any water, soil, sediment, air or other environmental media.

 

“ Event of Default ” shall have the meaning given such term in Section 12.1.

 

“ Extension Terms ” shall have the meaning given such term in Section 2.4.

 

“ Financial Indebtedness ” means any indebtedness or liability, direct or indirect, absolute or contingent, for or in respect of any borrowed money, any guarantee of borrowed money or any indemnity or reimbursement obligations with respect to a letter of credit, including indebtedness under a debt instrument given in payment of the purchase price of an investment.

 

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“ Financial Statements ” shall mean a balance sheet, profit and loss statement, statement of shareholders equity, and cash flow statement for the Premises and the operations thereon, all prepared in accordance with GAAP consistently applied.

 

“ Fiscal Year ” shall mean each calendar year ending at midnight on December 31 of each calendar year during the Term, or part thereof.

 

“ Fixed Term ” shall have the meaning given such term in Section 2.3.

 

“ GAAP ” means United States generally accepted accounting principles applied on a consistent basis, as such principles may be duly modified from time to time where appropriate.

 

“ Government Agencies ” shall mean any court, agency, authority, board (including, without limitation, environmental protection, planning and zoning), bureau, commission, department, office or instrumentality of any nature whatsoever of any governmental or quasi-governmental unit of the United States, the State of Tennessee or the local jurisdiction in which the Premises is located or any political subdivision of any of the foregoing, whether now or hereafter in existence, having jurisdiction over Tenant or the Premises or any portion thereof or the Leased Property operated thereon.

 

“ Gross Revenues ” means, subject to the exclusions listed below, all collected, recovered or accrued revenue and income from the operation of the Premises and properly attributable to the Fiscal Year under consideration, determined without duplication and in accordance with GAAP and, for purposes of greater certainty, Gross Revenues shall include, but shall not be limited to:

 

(i)

the revenues and payments received, recovered or accrued from any party, including, without limitation, amounts for parking, chairlift tickets, food and beverage services, rent and fees from subtenants, concessionaires and the like;

 

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(ii)

the net proceeds of use and occupancy or business interruption insurance with respect to the operation of the Premises and Leased Property (after deduction from said proceeds of all necessary expenses incurred in the adjustment or collection thereof); and

 

(iii)

any amounts under the terms of any other shared services agreements, licenses, easements or servitudes relating to the Premises;

 

Gross Revenues shall not include:

 

A.

Sales tax or similar charges which are required by law to be collected directly from sublessees, if any, or as part of the sale price of any goods or services or displays and which must be remitted to competent governmental taxing authorities;

 

B.

proceeds or awards arising from an condemnation, taking or condemnation of capital property other than an award for temporary use;

 

C.

receipts or credits for settlement of claims for loss or damage to personal property or furnishings;

 

D.

proceeds from any insurance policy except for the net proceeds of use and occupancy or business interruption insurance;

 

E.

receipts of a capital nature;

 

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F.

receipts collected by Tenant on behalf of, and which are remitted to another person, and not properly recordable as “revenues” according to GAAP; and

 

G.

amounts received for the sale of goods or services by subtenants and concessionaires, unaffiliated with Tenant, who pay rent or fees to Landlord for the privilege of such subtenancy or concession.

 

“Ground Lease” shall mean that certain lease agreement dated September 1, 1953, as amended, by and between the Landlord, as “Lessee” (as successor in interest to Gatlinburg Skylift, LLC, which in turn was successor by various conveyances to the original Lessee, Kircher Motor Sales, Inc.), and the Residuary Trust of Rellie Louis Maples, under trust agreement created pursuant to the terms and provisions of the Will of Rellie Louis Maples dated May 5, 1983, as “Lessor” (as successor in interest by various conveyances to the original Lessor, Electrical Appliance Company), as now or hereafter amended from time to time.

 

“ Ground Lessor ” shall mean the fee simple owner from time to time of the Premises.

 

“ Guarantor ” shall mean Boyne USA, Inc., a Michigan corporation, its successors and permitted assigns.

 

“ Guaranty ” shall mean the Guaranty Agreement, dated as of the date hereof, executed by the Guarantor in favor of the Landlord with respect to the Minimum Rent payable under this Lease, as such Guaranty may be amended from time to time.

 

“ Hazardous Materials ” shall mean and include any substance or material containing one or more of any of the following: “hazardous material,” “hazardous waste,” “hazardous substance,” “regulated substance,” “petroleum,” “pollutant,” “contaminant,” “polychlorinated biphenyls,” “lead or lead-based paint” or “asbestos” as such terms are defined in any applicable

 

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Environmental Law in such concentration(s) or amount(s) as may impose clean-up, removal, monitoring or other responsibility under the Environmental Laws, as the same may be amended from time to time, and any other substance or material (including, without limitation, mould) which may present a significant risk of harm to customers, invitees or employees.

 

“ Improvements ” shall mean those buildings, chairlifts, parking facilities, and other improvements within the Premises that constitute real property or fixtures under Applicable Law, over which Landlord has rights of use, occupancy, or control under the terms of the Ground Lease.

 

“ Impositions ” shall mean collectively, all fees and other amounts payable under or pursuant to the Ground Lease, and all taxes (including, without limitation, all taxes imposed under the laws of the State of Tennessee and the local jurisdiction in which the Premises is located, as such laws or regulations may be amended from time to time, and all ad valorem, sales and use, single business, gross receipts, transaction privilege, rent or similar taxes as the same relate to or are imposed upon Landlord, Tenant or the businesses conducted upon the Premises), surtaxes, assessments (including, without limitation, all assessments for public improvements or benefit, whether or not commenced or completed prior to the date hereof), all assessments, water, sewer or other rents and charges, excises, tax levies, fees (including, without limitation, license, permit, inspection, authorization and similar fees), and all other governmental charges, in each case whether general or special, ordinary or extraordinary, or foreseen or unforeseen, of every character in respect of the Premises, the Leased Property, or the businesses conducted thereon by Tenant or any subtenants (including all interest and penalties thereon due to any failure in payment by Tenant or any subtenants), which at any time prior to, during or in respect of the Term hereof may be assessed or imposed on or in respect of or be a lien or hypothecation upon

 

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(a) Landlord’s interest in the Premises, (b) the Premises or any part thereof or any rent or fees therefrom or any estate, right, title or interest therein, or (c) any occupancy, operation, use or possession of, or sales from, or activity conducted on, or in connection with the Premises or Leased Property or the leasing or use of the Premises or Leased Property or any part thereof by Tenant or any subtenants, if any; provided, however, that nothing contained herein shall be construed to require Tenant to pay: (i) any income tax of Landlord, (ii) any transfer fee or other tax imposed with respect to the sale, exchange or other disposition by Landlord of the Ground Lease, the Leased Property or the proceeds thereof, (iii) any single business, gross receipts tax (from any source other than the rent received by Landlord from Tenant), or similar taxes as the same relate to or are imposed upon Landlord, except to the extent that any tax, assessment, tax levy or charge that would otherwise be an Imposition under this definition which is in effect at any time during the Term hereof is totally or partially repealed, and a tax, assessment, tax levy or charge set forth in clause (i) or (ii) preceding is levied, assessed or imposed expressly in lieu thereof, (iv) any interest or penalties imposed on Landlord as a result of the failure of Landlord to file any return or report timely and in the form prescribed by law or to pay any tax or imposition, except to the extent such failure is a result of a breach by Tenant of its obligations pursuant to this Lease, (v) any Impositions that are enacted or adopted by their express terms as a substitute for any tax that would not have been payable by Tenant pursuant to the terms of this Lease, or (vi) any Impositions imposed as a result of a breach of covenant or representation by Landlord in any agreement entered into by Landlord governing Landlord’s conduct or operation or as a result of the negligence or willful misconduct of Landlord.

 

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“ Initial Landlord Expenditure ” is US $20,274,339.92 , which is the agreed amount allocated to Landlord’s Expenditures in connection with the acquisition of the Leased Property, including all Landlord acquisition costs.

 

“ Initial Minimum Rent ” shall mean with respect to any Fiscal Year an amount equal to the product of: (a) the Initial Landlord Expenditure; and (b) the Originally Agreed Lease Rate for such Fiscal Year. Initial Minimum Rent, on an annual basis, shall be US $2,078,119.84 from the date of this Lease until December 31, 2006 (10.25% times the Initial Landlord Expenditure).

 

“ Insurance Requirements ” shall mean all terms of any insurance policy required by this Lease and all requirements of the issuer of any such policy and all orders, rules and regulations and any other requirements of the National Board of Fire Underwriters as well as any such demand under the Secured Loan Documents or any other body exercising similar functions binding upon Landlord, Tenant or the Premises.

 

“ Insurance Retention ” shall have the meaning given such term in Section 9.3B.

 

“ Interest Rate ” shall mean an annual rate of interest equal to, as of the date of determination, the Originally Agreed Lease Rate plus two hundred (200) basis points.

 

“ Landlord Expenditure ” shall mean any expenditure made by Landlord in connection with the Landlord’s investment in the Leased Property, including without limitation each amount expended by Landlord to fund the cost of any excess Capital Expenditure pursuant to Section 5.3 of the Lease. Landlord and Tenant agree and confirm upon execution of this Lease that the Landlord’s Expenditure in connection with Landlord’s acceptance of the Leased Property is the Initial Landlord Expenditure. Landlord shall notify Tenant in writing of each Additional Landlord Expenditure subsequent to the date of this Lease, which amount shall be final and conclusive in the absence of manifest error.

 

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“ Landlord Liens ” shall mean Liens on or against the Ground Lease, the Premises or any payment of Rent (a) which result from any act of, or any claim against, Landlord to the State of Tennessee which result from any violation by Landlord of any terms of this Lease, or (b) which result from Liens in favor of any taxing authority by reason of any tax owed by Landlord to the State of Tennessee; provided, however, that “Landlord Lien” shall not include any Lien resulting from any tax for which Tenant is obligated to pay or indemnify Landlord against until such time as Tenant shall have already paid to or on behalf of Landlord the tax or the required indemnity with respect to the same.

 

“ Lease ” shall mean this Sublease Agreement, including all Exhibits hereto, as it and they may be amended from time to time as herein provided.

 

“ Lease Rate ” shall mean that percentage rate agreed by Landlord and Tenant to be applicable to a given Landlord Expenditure for the calculation of Minimum Rent. The Lease Rate applicable to the Initial Landlord Expenditures on or prior to the date of this Lease shall be the Originally Agreed Lease Rate. The Lease Rate applicable to each Landlord Expenditure subsequent to the date of this Lease shall be the Subsequently Agreed Lease Rate.

 

“ Lease Year ” shall mean any Fiscal Year during the Term and any partial Fiscal Year at the beginning or end of the Term.

 

“ Leased Property ” shall mean all of the Improvements and Personal Property now existing, and all future additions to and replacements thereof, and the exclusive right to use and occupy the Premises pursuant to the Ground Lease.

 

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“ Legal Requirements ” shall mean all federal, state, local and other governmental statutes, laws, rules, orders, regulations, safety standards, ordinances, judgments, decrees and injunctions affecting the Premises or the maintenance, construction, alteration or operation thereof, whether now or hereafter enacted or in existence, including, without limitation, (a) all Environmental Laws, and (b) all applicable safety code requirements imposed by Government Agencies, and (d) all permits, licenses, authorizations, certificates and regulations necessary to operate the Premises and Leased Property for its Permitted Use, and (e) all covenants, agreements, declarations, restrictions and encumbrances contained in any instruments at any time in force affecting the Premises or the Leased Property as of the date hereof, or to which Tenant has consented or required to be granted pursuant to Applicable Laws, including those which may (i) require material repairs, modifications or alterations in or to the Premises or Leased Property or (ii) in any way materially and adversely affect the use and enjoyment thereof, but excluding any requirements arising as a result of Landlord’s or any Affiliated Person of Landlord’s status as a real estate investment trust.

 

“ Licenses and Permits ” shall mean all licenses, permits, consents, authorizations, approvals, registrations and certificates issued by any Governmental Agency which are held by Landlord with respect to the Premises or the Leased Property, including, without limitation, those necessary for the construction, use or occupancy of the Premises or the Leased Property, to the extent that the same are transferable, together with any deposits made by Landlord thereunder to the extent that they are transferable.

 

“ Lien ” shall mean any mortgage, hypothecation, security interest, pledge, collateral assignment, or other encumbrance, lien or charge of any kind, or any transfer of property or assets for the purpose of subjecting the same to the payment of Financial Indebtedness or performance of any other obligation in priority to payment of its general creditors.

 

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“Major Destruction” shall mean damage to the Improvements resulting in a cost of repair, replacement or rebuilding of such damaged portion of the Leased Property, as reasonably estimated by Landlord, that will exceed One Million Dollars ($1,000,000) as valued at the initial Lease Year (with such $1,000,000 threshold to be increased by three percent (3%), on a compounded basis, for each succeeding Lease Year thereafter), and at the time of such damage there remain less than two (2) years to the expiration of the Term of this Lease; provided, however, that if the Tenant is entitled to an Extension Term and agrees in writing that this Lease shall not be terminated at the end of the Term but shall be extended through the next Extension Term, then such damage shall not be deemed a “Major Destruction.”

 

“Management Agreement” shall have the meaning set forth in Section 5.7 of this Lease.

 

“Minimum Rent” shall mean with respect to any Fiscal Year an amount equal to the sum of: (a) the Initial Minimum Rent; and (b) the Additional Minimum Rent.

 

“Notice” shall mean a notice given in accordance with Section 19.10.

 

“Officer’s Certificate” shall have the meaning given such term in Section 3.1B

 

“Originally Agreed Lease Rate” shall mean the Lease Rate noted below with respect to each of the following Fiscal Years:

 

10.25% from the date of this Lease until December 31, 2006;

 

10.50% from January 1, 2007 through December 31, 2007;

 

10.75% from January 1, 2008 through December 31, 2008;

 

11.00% from January 1, 2009 through December 31, 2009;

 

11.25% from January 1, 2010 through December 31, 2010;

 

11.50% from January 1, 2011 through December 31, 2011;

 

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11.75% from January 1, 2012 through December 31, 2012;

 

12.00% from January 1, 2013 through December 31, 2013;

 

12.25% from January 1, 2014 through December 31, 2014;

 

12.50% from January 1, 2015 through December 31, 2015;

 

12.75% from January 1, 2016 through December 31, 2016; and

 

13.00% from January 1, 2016 through the remainder of the Lease Term and any Extension Term.

 

“ Partial Destruction ” shall mean any damage to a portion of the Leased Property which is not a Major Destruction.

 

“ Percentage Rent ” shall have the meaning given such term in Section 3.1B.

 

“ Permitted Encumbrances ” shall mean all rights, restrictions, easements, and agreements affecting the Premises on the date of this Lease, or hereafter imposed thereon pursuant to the Ground Lease, or with the written consent of Landlord and Tenant.

 

“ Permitted Use ” shall mean only such use of the Premises permitted pursuant to Section 4.1A.

 

“ Person ” shall mean any individual or Entity, and the heirs, executors, administrators, legal representatives, successors and assigns of such Person where the context so admits.

 

“ Personal Property ” shall mean all of those items of furniture, equipment and other tangible personal property owned by Landlord and located at or used or usable in connection with the Premises, including without limitation all items of personal property described in the Personal Property Schedule attached hereto as Exhibit “A” , as such items of personal property are modified, replaced, altered and added to. Personal Property shall include, but is not limited to, all items of personal property hereafter purchased with funds from the Capital Renewals Reserve. For greater certainty, Personal Property does not include any property that is, or may become, a Retained Business Asset under the terms of the Turnover Agreement.

 

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“ Premises ” shall mean all of those lands to which Landlord has been granted rights of use pursuant to the Ground Lease.

 

“ Re-letting Expenses ” shall have the meaning given such term in Section 12.2.

 

“ Rent ” shall mean, collectively, the Minimum Rent, Percentage Rent and Additional Charges.

 

“ Replacement Value ” shall mean the costs of repairing, replacing or reinstating any item of property with materials of like kind and quality on the same or similar site without deduction for physical, accounting or any other depreciation.

 

“ Revenue Audit ” shall have the meaning given such term in Section 3.2.

 

“ Sales Tax ” means all goods and services taxes, sales taxes, multi-stage sales taxes, use or consumption taxes, business transfer taxes, value added or transaction taxes and any other existing or future tax imposed with respect to any amount payable by Tenant to Landlord under this Lease.

 

“ Secured Loan ” shall mean any loan made by the Secured Party to Landlord secured by a mortgage or collateral assignment against the Ground Lease or Leased Property, in whole or in part, from time to time as said Secured Loan is amended, extended, renewed, supplemented and/or replaced from time to time.

 

“ Secured Loan Agreement ” shall mean any loan agreement evidencing and/or governing any Secured Loan made by a Secured Party to Landlord from time to time as said agreement is amended, extended, renewed, supplemented and/or replaced from time to time.

 

“ Secured Loan Documents ” shall mean the Security Instrument, the Secured Loan Agreement and any note or notes evidencing the Secured Loan secured by the Security Instrument as well as all guarantees and/or indemnities executed and/or delivered in connection

 

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therewith and any and all other documents evidencing, securing, governing or otherwise entered into in connection with the Secured Loan as such agreements, guarantees and/or indemnities may be amended, extended, renewed, supplemented and/or replaced from time to time.

 

“ Secured Party ” shall mean an institutional lender which is the holder of any Security Instrument and its successors and assigns.

 

“ Security Instrument ” shall mean any mortgage, debenture, charge, hypothecation, deed of trust, or security document encumbering Landlord’s interest in the Ground Lease, the Leased Property, and/or this Lease from time to time as said instrument is amended, extended, renewed, supplemented and/or replaced from time to time.

 

“ Sole Discretion ” shall mean, in each instance, discretion exercised by the relevant party in its sole subjective and unfettered discretion which discretion may be exercised unreasonably and/or arbitrarily.

 

“ State ” shall mean the State of Tennessee.

 

“ Subsequently Agreed Lease Rate ” shall mean the Lease Rate agreed by Landlord and Tenant as applicable to each Landlord Expenditure made by Landlord subsequent to the Initial Landlord Expenditure, for purposes of calculating Additional Minimum Rent. In the absence of written agreement by Landlord and Tenant as to the amount of the Subsequently Agreed Lease Rate, Landlord and Tenant agree that the Subsequently Agreed Lease Rate applicable to a given Landlord Expenditure shall be the Originally Agreed Lease Rate.

 

“ Subsidiary ” shall mean, with respect to any Person: (i) any corporation of which more than 50% of the outstanding capital stock having ordinary voting power to elect the majority of the board of directors of such corporation is at the time directly or indirectly owned by (A) such Person, (B) such Person and one or more corporations each of which is Controlled by such

 

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Person or (C) one or more corporations each of which is Controlled by such Person, or (ii) any limited or general partnership, joint venture, limited liability company, trust or other Entity as to which (A) such Person, (B) such Person and one or more Persons referred to in clause (i) above or (C) one or more Persons referred to in clause (i) above owns more than a 50% ownership, equity or similar interest or has power to direct or cause the direction of management and policies, or the power to elect the general partner or managing partner (or equivalent thereof) of such limited or general partnership, joint venture, limited liability company, trust or other Entity, as the case may be.

 

“ Term ” shall mean, collectively, the Fixed Term and the Extension Terms, to the extent properly exercised pursuant to the provisions of Section 2.4, unless sooner terminated pursuant to the provisions of this Lease.

 

“ Turnover Agreement ” shall mean that certain “Turnover Agreement” by, inter alia, Landlord and Tenant with respect to the turnover by Tenant to Landlord of certain items of personal property upon the expiration or termination of this Lease, as such agreement may be amended, modified and/or supplemented from time to time.

 

1.2. Affiliates . In this Lease, two entities are “ Affiliates ” if (i) one of the entities is a Subsidiary of the other Entity, (ii) both of the entities are Subsidiaries of the same Entity, (iii) both of the entities are Controlled by the same Person or Entity, (iv) one of the entities is a partnership and the other Entity is its general partner, or (v) one of the entities is a trust and the other Entity is its beneficiary, and where a Person is an Affiliate of two entities each of those entities will be Affiliates of each other (for greater certainty, a partnership and a trust shall be deemed to be entities for the purpose of the foregoing).

 

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2. SUBLEASE AND TERM

 

2.1. Sublease . Upon and subject to the terms and conditions hereinafter set forth, Landlord hereby subleases to and in favor of Tenant, and grants to Tenant the right to use and occupy, the Premises for the purposes and subject to the limitations and conditions set forth in this Lease. Tenant hereby covenants and agrees to pay and perform all obligations of the “Lessee” as provided for in the Ground Lease. Tenant is not entitled to, and shall not agree to, any modification of its obligations under the Ground Lease, or any other modification of the Ground Lease, without the prior written consent of the Landlord.

 

2.2. Lease of Improvements and Personal Property . Landlord hereby leases to Tenant, and grants to Tenant the right to use and occupy the Improvements located at the Premises, and the Personal Property subject to the limitations and conditions set forth in the Ground Lease and in this Lease. Tenant confirms that Tenant has inspected the Premises and the Leased Property and has reviewed the Permitted Encumbrances, and all related agreements and documentation. In that regard, Tenant acknowledges and agrees that it is leasing and/or assuming Landlord’s relevant interests in the Permitted Encumbrances, the Premises and the Leased Property “AS IS/WHERE IS.” LANDLORD MAKES ABSOLUTELY NO WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. Tenant agrees to indemnify and hold Landlord and Landlord’s agents, employees, officers, and directors harmless from and against, any and all Claims, including any and all attorneys’ fees and legal expenses, arising from or caused directly or indirectly by any actual or alleged use, possession, maintenance, condition (whether or not latent or discoverable), operation, location, delivery or transportation of any of the Leased Property. This indemnity remains in full force notwithstanding the termination or expiration of this Lease, but will be released as to the original Tenant at the time of any Transferee’s assumption of this Lease and release of original Tenant if provided pursuant to Section 15.1C.

 

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2.3. Fixed Term . The initial term of this Lease (the “ Fixed Term ”) shall commence on the Commencement Date and shall expire on March 31, 2026 unless sooner terminated in accordance with the provisions hereof.

 

2.4. Extension Terms . Provided that no Event of Default shall have occurred and be continuing, this Lease shall automatically extend for four (4) consecutive extension terms of five (5) years each (each being an “ Extension Term ”) unless Tenant elects, by providing Notice to Landlord not sooner than thirty (30) months and no later than twenty-four (24) months prior to the scheduled expiration of the Fixed Term or the current Extension Term, as applicable, to not extend and to terminate this Lease upon the expiration of the then fixed Term or the current Extension Term as the case may be. Any such Notice of non-extension and termination shall, if given, be irrevocable, but Tenant’s failure to give any such notice of non-extension and termination shall not preclude Landlord from exercising any of its rights to terminate this Lease in accordance with the terms hereof. Each Extension Term shall commence on the day succeeding the expiration of the Fixed Term or the preceding Extension Term, as the case may be. All of the terms, covenants and provisions of this Lease shall apply to each such Extension Term providing Tenant shall have no right to extend the Term beyond the expiration of the fourth and final Extension Term.

 

3. RENT

 

3.1. Rent . Tenant shall pay to Landlord or to any other Person designated in writing to Tenant by Landlord, by wire transfer of immediately available federal funds or by other means acceptable to Landlord, acting reasonably, in lawful money of the United States which shall be legal tender

 

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for the payment of public and private debts, without offset, abatement, demand or deduction, Rent during the Term of this Lease as follows:

 

A. Tenant shall pay to Landlord monthly Minimum Rent in advance equal to one-twelfth (1/12 ^th ) of the annual amount of Minimum Rent applicable for a Lease Year beginning on the Commencement Date and continuing on the first (1st) day of each calendar month thereafter; provided, however, that Minimum Rent shall be prorated as to any Lease Year which is less than twelve (12) calendar months and as to any partial calendar months and Additional Minimum Rent shall be prorated to the extent that a Landlord Expenditure is made on a date other than the first day of a Lease Year or the first day of a calendar month.

 

B. Tenant shall pay to Landlord percentage rent (“ Percentage Rent ”) calculated for each calendar quarter at three percent (3%) of Gross Revenues for the calendar quarter, which amount shall be payable quarterly in arrears commencing on or before the thirtieth (30th) day after the end of the first full calendar quarter after the Commencement Date and continuing on the thirtieth (30 ^th ) day after the end of each calendar quarter during the term hereof. Landlord and Tenant expressly acknowledge and agree that the applicable percentage under this Section 3.1B, beginning with the eleventh (11 ^th ) calendar year following the Commencement Date shall be reset by Landlord to achieve an equivalent yield (which shall in any event not be less than the aggregate amount of Percentage Rent received by Landlord in the Lease Year preceding such reset), adjusted to reflect changes in Gross Revenues and in non-controllable expenses (including, without limit, real estate taxes, and insurance and utility costs) and each on the tenth (10 ^th ) anniversary and each fifth (5 ^th ) anniversary thereafter through the end of the Lease Term and any Extension Term. Tenant shall deliver to Landlord a Certificate from a senior officer of Tenant (an “ Officer’s Certificate ”) with each Percentage Rent payment (or, if no Percentage

 

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Rent is then payable, on the due date therefore) setting forth the calculation of the Percentage Rent payment for the most recently completed calendar quarter of each Lease Year in the Term, and the Percentage Rent due year-to-date through such recently completed calendar quarter. Percentage Rent shall be subject to confirmation and adjustment, if applicable, as set forth in Section 3.2.

 

3.2. Confirmation of Percentage Rent . Tenant shall utilize, or cause to be utilized, an accounting system for the Tenant’s operations at the Premises in accordance with customary industry practices, and in accordance with GAAP, that will accurately record all data necessary to compute Percentage Rent, and Tenant shall retain, for at least five (5) years after the expiration of each Lease Year, reasonably adequate records conforming to such accounting system showing all data necessary to conduct Landlord’s Audit and to compute Percentage Rent for the applicable Lease Year. Landlord shall have the right, for a period of two (2) years following each Lease Year, from time to time, by its accountants or representatives at its cost, to audit such information in connection with Landlord’s Audit, and to examine all Tenant’s records (including supporting data and sales and excise tax returns) reasonably required to complete Landlord’s Audit and to verify Percentage Rent, subject to any prohibitions or limitations on disclosure of any such data under Legal Requirements. Tenant shall produce all such Tenant records at a single location in Gatlinburg, Tennessee. If any Landlord’s Audit discloses a deficiency in the payment of Percentage Rent, and either Tenant agrees with the results of Landlord’s Audit or the matter is otherwise determined or compromised, Tenant shall forthwith pay to Landlord the amount of the deficiency, as finally agreed or determined, together with interest at the Interest Rate from the date when said payment should have been made to the date of payment thereof. If any Landlord’s Audit discloses a deficiency in the determination or

 

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reporting of Gross Revenue, which, as finally agreed or determined, exceeds five percent (5%), Tenant shall pay the costs of the portion of Landlord’s Audit allocable to the determination of such Revenues (the “Revenue Audit”). Any proprietary information obtained by Landlord pursuant to the provisions of this Section shall be treated as confidential, except that such information may be used, subject to appropriate confidentiality safeguards, in any litigation or arbitration between the parties and except further that Landlord may disclose such information to prospective lenders, investors and underwriters and to any other persons to whom disclosure is necessary to comply with applicable laws, regulations and government requirements. The obligations of Tenant contained in this Section shall survive the expiration or earlier termination of this Lease. Any dispute as to the existence or amount of any deficiency in the payment of Percentage Rent as disclosed by Landlord’s Audit shall, if not otherwise settled by the parties, be submitted to arbitration.

 

3.3. Personal Property .

 

A. Landlord and Tenant agree that a portion of the Minimum Rent payable under this Agreement shall be paid for, and allocable to, the rental of the Personal Property included in the Leased Property, and described on Exhibit “A” attached hereto. The portion of the Rent allocable to the Personal Property shall be that amount calculated by multiplying the total Minimum Rent payable in a calendar year by a “fraction” the numerator of which is the average of the aggregate fair market values of all leased Personal Property at the beginning and the aggregate fair market values at the end of the taxable year, and the denominator of which is the average of the aggregate fair market values of all Personal Property at the beginning and the aggregate fair market values of all of the Leased Property at the end of the taxable year. “Fair market values” shall be determined by reference to the amount of Landlord’s original investment

 

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in such Leased Property, adjusted from time to time to take account of economic appreciation and depreciation as well as Capital Expenditures made with respect to the Leased Property and additional amounts invested in Personal Property.

 

B. If (A) any amount of Rent otherwise accruing or payable to the Landlord under this Agreement with respect to a calendar year would fail to qualify as “rents from real property” within the meaning of Section 856(d) of the Internal Revenue Code of 1986 if received or accrued by CNL Income Properties, Inc., with respect to such calendar year (such amount of “non-qualifying” gross income otherwise accruing or payable under this Agreement hereinafter referred to as “ Excess Rent ”), and (B) such Excess Rent, when aggregated with all other “non-qualifying” gross income of CNL Income Properties, Inc., with respect to such calendar year within the meaning of Sections 856(c)(2) or 856(c)(3) of the Code (the “ Gross Income Tests ”) would cause CNL Income Properties, Inc., to fail to satisfy either of the Gross Income Tests (determined without regard to the provisions of this Real Estate Investment Trust (“ REIT ”) gross income compliance threshold provision or a similar REIT gross income compliance threshold provision contained in any other rental or contractual agreement (collectively, the “ Compliance Threshold Provisions ”)), then the portion of such Excess Rent equal to the product of (1) the Excess Rent, multiplied by (2) the “Limitation Ratio,” as defined below, shall be deemed accrued and otherwise be payable as Rent for Personal Property payable to CNL TRS for all purposes of this Agreement, or otherwise.

 

C. For purposes of the foregoing paragraph, the “ Limitation Ratio ” shall be a fraction (x) the numerator of which is the excess of (I) the aggregate amount of “non-qualifying” gross income CNL Income Properties, Inc., would receive or accrue for such calendar year, determined without the limitation provisions of any Compliance Threshold Provisions, over (II)

 

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the aggregate amount of “non-qualifying” gross income CNL Income Properties, Inc., would be permitted to receive for such calendar year without failing to satisfy either of the Gross Income Tests, and (y) the denominator of which is the aggregate of all amounts described as “Excess Rent” (or other similar term) pursuant to any of the Compliance Threshold Provisions with respect to such calendar year.

 

3.4. Additional Charges . In addition to the Minimum Rent, Tenant also will pay and discharge as and when due and payable all other amounts, liabilities, obligations and Impositions, including without limitation all Ground Lease rent and all fees and charges due from time to time under the Ground Lease. In the event of any failure on the part of Tenant to pay any of those amounts, liabilities, obligations and Impositions, Tenant also will promptly pay and discharge every fine, penalty, interest and cost that may be added for non-payment or late payment of such items (all of the foregoing amounts, liabilities, obligations and Impositions referred to in this Section 3.3 shall be deemed to be additional rent payable by Tenant hereunder and being referred to herein collectively as the “ Additional Charges ”), and Landlord shall have all legal and contractual rights, powers and remedies provided either in this Lease or by statute or otherwise in the case of non-payment of the Additional Charges as in the case of non-payment of the Minimum Rent. If any installment of Minimum Rent or on Additional Charges (but only as to those Additional Charges that are payable directly to Landlord) shall not be paid on its due date, Tenant will pay Landlord within fifteen (15) days of demand, as Additional Charges, an amount equal to the interest computed at the Interest Rate on the amount of such installment, from the due date of such installment to the date of payment thereof. If Tenant fails to timely pay any Additional Charges due to any third party Entity (e.g. payment of rent to the lessor under

 

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the Ground Lease), Landlord may pay such third party Entity and will be reimbursed by Tenant on demand the amount paid by Landlord, plus interest at the Interest Rate from the date of such payment by Landlord until reimbursement by Tenant. To the extent that Tenant pays any Additional Charges to Landlord pursuant to the requirements of this Lease, Tenant shall be relieved of its obligation to pay such Additional Charges to the Entity to which they would otherwise be due and Landlord shall promptly pay the same from monies received from Tenant and any interest or penalties resulting from late payment thereof that is the responsibility of the Landlord shall be borne by the Landlord.

 

3.5. Payment of Impositions .

 

A. Subject to Article 8 hereof relating to permitted contests, Tenant shall pay, or cause to be paid, all Impositions before any fine, penalty, interest or cost (other than any opportunity cost as a result of a failure to take advantage of any discount for early payment) may be added for non-payment, such payments to be made directly to the State and other taxing authorities where feasible, and shall promptly, upon request, furnish to Landlord copies of official receipts or other reasonably satisfactory proof evidencing such payments. If any such Imposition may, at the option of the taxpayer, lawfully be paid in installments (whether or not interest shall accrue on the unpaid balance of such Imposition), Tenant may exercise the option to pay the same (and any accrued interest on the unpaid balance of such Imposition) in installments and, in such event, shall pay such installments during the Term as the same become due and before any fine, penalty, premium, further interest or cost may be added thereto. Landlord, at its expense, shall, to the extent required or permitted by Applicable Law, prepare and file all tax returns and pay all taxes due in respect of Landlord’s net income, gross receipts (from any source other than the Rent received by Landlord from Tenant), sales and use, single

 

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business, ad valorem, franchise taxes and taxes on its capital stock, and Tenant, at its expense, shall, to the extent required or permitted by Applicable Laws, prepare and file all other tax returns and reports in respect of any Imposition as may be required by Government Agencies. If any refund shall be due from any taxing authority in respect of any Imposition paid by Tenant, the same shall be paid over to or retained by Tenant if no Event of Default shall have occurred hereunder and be continuing. If an Event of Default shall have been declared by Landlord and be continuing, any such refund shall be paid over to or retained by Landlord to be held by Landlord subject to a resolution of any dispute of same between Landlord and Tenant. Landlord and Tenant shall, upon request of the other, provide such data as is maintained by the party to whom the request is made with respect to the Premises as may be necessary to prepare any required returns and reports. It is Landlord and Tenant’s intent that none of the Leased Property be personal property for any purpose, and in the event Government Agencies classify any property covered by this Lease as personal property, such personal property shall be deemed to be leased personal property. Landlord shall provide Tenant with copies of assessment notices in sufficient time for Tenant to prepare a protest, which Landlord shall file upon the Tenant’s request. Landlord may, upon notice to Tenant, at Landlord’s option and at Landlord’s sole expense, appeal, protest, or institute such other proceedings (in its or Tenant’s name) as Landlord may deem appropriate to effect a reduction of assessments and Tenant shall fully cooperate with Landlord in such protest, appeal or other action.

 

B. Landlord shall give prompt Notice to Tenant of all Impositions payable by Tenant hereunder of which Landlord at any time has received notice and as to which Tenant has received no other notice; provided, however, that Landlord’s failure to give any such notice shall in no way diminish Tenant’s obligation hereunder to pay such Impositions (except that Landlord shall be responsible for any interest or penalties incurred as a result of Landlord’s failure promptly to forward the same).

 

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C. In addition, Tenant shall timely pay at or before the time such become due and payable without duplication, the following with respect to the period from and after the Commencement Date (while remaining solely liable and paying for such during the period prior to the Commencement Date pursuant to the Asset Purchase Agreement):

 

(i) Utility Charges . All charges for electricity, power, gas, oil, water and other utilities used in connection with the Premises that are not included within the definition of “Impositions”.

 

(ii) Insurance Premiums . All premiums for the insurance coverage required to be maintained pursuant to Article 9;

 

(iii) Other Charges . All other amounts, liabilities and obligations arising in connection with the Premises, the Leased Property and Tenant’s obligations in connection herewith not already covered by the definition of Impositions, except those obligations expressly assumed by Landlord pursuant to the provisions of this Lease or expressly stated not to be an obligation of Tenant pursuant to this Lease.

 

D. If Tenant pays or causes to be paid any Additional Charges attributable to periods after the end of the Term, whether upon expiration or sooner termination of this Lease, Tenant may, within a reasonable time after the end of the Term, provide Notice to Landlord of its estimate of such amounts. Landlord shall promptly reimburse Tenant for all payments of such Additional Charges that are attributable to any period after the Term to the extent not offset by amounts due from Tenant to Landlord.

 

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3.6. Late Payment of Rent, Etc . If any installment of Minimum Rent or Additional Charges shall not be paid within five (5) days after its due date, Tenant shall pay Landlord, within five (5) days after Landlord’s written demand therefore, as Additional Charges, a late charge (to the extent permitted by law) computed at the Interest Rate on the amount of such installment, from the due date of such installment to the date of payment thereof. To the extent that Tenant pays any Additional Charges directly to Landlord or any Secured Party pursuant to any requirement of this Lease, Tenant shall be relieved of its obligation to pay such Additional Charges to the Entity to which they would otherwise be due and Landlord shall pay when due, or cause the applicable Secured Party to pay when due, such Additional Charges to the Entity to which they are due. In the event of any failure by Tenant to pay any Additional Charges when due, except as expressly provided in Section 3.3 with respect to permitted contests pursuant to Article 8, Tenant shall promptly pay (unless payment thereof is in good faith being contested and enforcement thereof is stayed) and discharge, as Additional Charges, every fine, penalty, interest and cost which may be added for non-payment or late payment of such items. Landlord shall have all legal and contractual rights, powers and remedies provided either in this Lease or by statute or otherwise in the case of non-payment of the Additional Charges as in the case of non-payment of the Minimum Rent.

 

3.7. Triple Net Lease . The Rent shall be absolutely net to Landlord so that this Lease shall yield to Landlord the full amount of the installments or amounts of the Rent throughout the Term, subject to any other provisions of this Lease which expressly provide otherwise. This Lease is a net Lease and, except to the extent otherwise expressly specified in this Lease, it is agreed and intended that Rent payable hereunder by Tenant shall be paid without notice, demand, counterclaim, setoff, deduction or defense and without abatement, suspension,

 

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deferment, diminution or reduction and that Tenant’s obligation to pay all such amounts, throughout the Term and all applicable Extension Terms is absolute and unconditional and except to the extent otherwise expressly specified in this Lease, the respective obligations and liabilities of Tenant and Landlord hereunder shall in no way be released, discharged or otherwise affected for any reason, including without limitation: (a) any defect in the condition, merchantability, design, quality or fitness for use of the Premises, the Leased Property or any part thereof; or the failure of the Premises or Leased Property to comply with any Applicable Laws, including any inability to occupy or use the Premises by reason of such non-compliance; (b) any damage to, removal, abandonment, salvage, loss, condemnation, theft, scrapping or destruction of or any requisition or taking of the Premises, the Leased Property or any part thereof, or any environmental conditions on the Premises or any property in the vicinity of the Premises; (c) any restriction, prevention or curtailment of or interference with any use of the Premises, the Leased Property, or any part thereof; (d) any defect in title to or rights to the Premises or Leased Property or any Lien on such title or rights to the Premises or Leased Property; (e) any change, waiver, extension, indulgence or other action or omission or breach in respect of any obligation or liability of or by any Person; (f) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceedings relating to Tenant or any other Person, or any action taken with respect to this Lease by any trustee or receiver of Tenant or any other Person, or by any court, in any such proceeding; (g) any right or claim that Tenant has or might have against any Person, including without limitation Landlord (other than a monetary default) or any vendor, manufacturer, contractor of or for the Premises or the Leased Property; (h) any failure on the part of Landlord or any other Person to perform or comply with any of the terms of this Lease, or of any other agreement; (i) any

 

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invalidity, unenforceability, rejection or disaffirmance of this Lease by operation of law or otherwise against or by Tenant or any provision hereof; (j) the impossibility of performance by Tenant or Landlord, or both; (k) any action by any court, administrative agency or other Government Agencies; (l) any interference, interruption or cessation in the use, possession or quiet enjoyment of the Premises or otherwise; or (m) any other occurrence whatsoever, whether similar or dissimilar to the foregoing, whether foreseeable or unforeseeable, and whether or not Tenant shall have notice or knowledge of any of the foregoing; provided, however, that the foregoing shall not apply or be construed to restrict Tenant’s rights in the event of any act or omission by Landlord constituting gross negligence or willful misconduct for which the Tenant is not insured or required to be insured hereunder. Except as specifically set forth in this Lease, this Lease shall be noncancellable by Tenant for any reason whatsoever and, except as expressly provided in this Lease, Tenant, to the extent now or hereafter permitted by Applicable Laws, waives all rights now or hereafter conferred by statute or otherwise to quit, terminate or surrender this Lease or to any diminution, abatement or reduction of Rent payable hereunder. Except as specifically set forth in this Lease, under no circumstances or conditions shall Landlord be expected or required to make any payment of any kind hereunder or have any obligations with respect to the use, possession, control, maintenance, alteration, rebuilding, replacing, repair, restoration or operation of all or any part of the Premises, and Tenant expressly waives the right to require any such action at the expense of Landlord pursuant to any law, except as otherwise expressly set forth in this Lease.

 

3.8. Sales Tax . Tenant shall pay to Landlord all Sales Tax, it being the intention of the parties that Landlord shall be fully reimbursed by Tenant with respect to any and all Sales Tax payable by Landlord with respect to this Lease or any amounts payable by Tenant to

 

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Landlord hereunder or the use and occupancy by Tenant or any of its subtenants of the Premises or any part thereof. Sales Tax shall be payable by Tenant at the same time as the amounts to which the Sales Tax relate are payable to Landlord under this Lease, or on demand at such other time or times as Landlord from time to time determines.

 

3.9. Deposit of Prepaid Minimum Rent . If Tenant at Tenant’s option delivers to Landlord one month’s prepaid Minimum Rent with written direction that the amount is to be held and applied pursuant to the provisions of this Section 3.9 as a Deposit for payment of Minimum Rent( the “Deposit”), Landlord will put such Deposit in a separate interest bearing account, with interest, subject to this Section 3.9, accruing to the benefit of the Tenant and Landlord will not commingle such funds. The Deposit amount will be applied by Landlord to the payment of Minimum Rent in the event that : (i) Tenant is delinquent in the payment of any installment of Minimum Rent, and (ii) Tenant has been delivered a written notice of nonpayment of such installment, and (iii) Tenant has failed to cure the payment default within the cure period allowed in this Lease. Tenant will not be deemed in default for failing to pay any single installment of Minimum Rent so long as Landlord has in its possession an unapplied Deposit in an amount sufficient to pay in full such delinquent installment. Landlord will notify Tenant in writing of any such application of the Deposit upon such application. At the expiry of this Lease or earlier termination pursuant to the exerci