Loan Agreement - GE Capital Franchise Finance Corp. and Kona Grill Kansas City Inc.
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is made as of May 19, 2003 (the
"Closing Date"), by and between GE CAPITAL FRANCHISE FINANCE CORPORATION, a
Delaware corporation ("Lender"), and KONA GRILL KANSAS CITY, 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 which directly or indirectly controls, is
under common control with, or is controlled by any other Person. For purposes of
this definition, "controls", "under common control with" and "controlled by"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through
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. Sections 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. Sections 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.
"Change of Control" means a change in control of any of the Borrower
Parties, including, without limitation, a change in control resulting from
direct or indirect transfers of voting stock or partnership, membership or other
ownership interests, whether in one or a series of transactions. For purposes of
this definition, "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of any of
the Borrower Parties, as applicable, and a Change of Control will occur if any
of the following occur: (i) any merger or consolidation by any of the Borrower
Parties, as applicable, with or into any other entity; or (ii) if any "Person"
as defined in Section 3(a)(9) of the Securities and Exchange Act of 1934, as
amended (the "Exchange Act"), and as used in Section 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d) of the Exchange Act, who,
subsequent to the Closing, becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), of securities of any of the Borrower Parties, as
applicable, representing 50% or more of the combined voting power of Borrower's
then outstanding securities (other than indirectly as a result of the redemption
by any of the Borrower Parties, as applicable, of its securities).
"Closing" means the disbursement of the Loan Amount by Title Company as
contemplated by this Agreement.
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"Code" means Title 11 of the United States Code, 11 U.S.C. Sec. 101 et
seq., as amended.
"Default Rate" has the meaning set forth in the Note.
"Entity" means any entity that is not a natural person.
"Environmental Condition" means any condition with respect to soil,
surface waters, groundwaters, land, stream sediments, surface or subsurface
strata, ambient air and any environmental medium comprising or surrounding the
Premises, whether or not yet discovered, which would reasonably be expected to
or does result in any damage, loss, cost, expense, claim, demand, order or
liability to or against any of the Borrower Parties or Lender by any third party
(including, without limitation, any Governmental Authority), including, without
limitation, any condition resulting from the operation of business at the
Premises and/or the operation of the business of any other property owner or
operator in the vicinity of the Premises and/or any activity or operation
formerly conducted by any person or entity on or off the Premises.
"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 Laws" means any present and future federal, state and local
laws, statutes, ordinances, rules, regulations, orders, injunctions and decrees
of Governmental Authorities and common law, relating to Hazardous Materials
and/or the protection of human health or the environment by reason of a Release
or a Threatened Release of Hazardous Materials or relating to liability for or
costs of Remediation or prevention of Releases. "Environmental Laws" includes,
but is not limited to, the following statutes, as amended, any successor
thereto, and any regulations, rulings, orders or decrees promulgated pursuant
thereto, and any state or local statutes, ordinances, rules, regulations,
orders, injunctions and decrees of Governmental Authorities: the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Sections 9601
et seq.; the Emergency Planning and Community Right-to-Know Act, 42 U.S.C.
Sections 11001 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C.
Sections 5101 et seq.; the Resource Conservation and Recovery Act (including but
not limited to Subtitle I relating to underground storage tank systems), 42
U.S.C. Sections 6901 et seq.; the Clean Water Act, 33 U.S.C. Sections 1251 et
seq.; the Clean Air Act, 42 U.S.C. Sections 7401 et seq.; the Toxic Substances
Control Act, 15 U.S.C. Sections 2601 et seq.; the Safe Drinking Water Act, 42
U.S.C. Sections 7401 et seq.; the Occupational Safety and Health Act, 29 U.S.C.
Section 651 et seq.; the Federal Insecticide, Fungicide and Rodenticide Act, 7
U.S.C. Sections 136 et seq.; the Endangered Species Act, 16 U.S.C. Sections 1531
et seq. and the National Environmental Policy Act, 42 U.S.C. Sections 4321 et
seq. "Environmental Laws" also includes, but is not limited to, any present and
future federal, state and local laws, statutes, ordinances, rules, regulations,
orders, injunctions and decrees of Governmental Authorities and common law:
conditioning transfer of property upon a negative declaration or other approval
of a Governmental Authority of the environmental condition of the property;
requiring notification or disclosure of Releases or other environmental
condition of the Premises to any Governmental Authority or other person or
entity, whether or not in connection with transfer of title to or interest in
property; imposing conditions or requirements relating to Hazardous Materials in
connection with permits or other authorizations required by Governmental
Authorities; relating to the handling and disposal of Hazardous Materials;
relating to nuisance, trespass or other causes of action related to Hazardous
Materials; and relating to wrongful death, personal injury, or property or other
damage in connection with the physical condition or use of the Premises by
reason of the presence of Hazardous Materials in, on, under or above the
Premises.
"Environmental Liens" has the meaning set forth in Section 5.K(9).
"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 9.
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"FCCR Amount" has the meaning set forth in Section 9.A(7).
"Fee" means an underwriting, site assessment, valuation, processing and
commitment fee equal to 1% of the Loan Amount.
"Fixed Charge Coverage Ratio" has the meaning set forth in Section 6.J.
"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.
"Guaranty" means the unconditional guaranty of payment and performance
dated as of the date of this Agreement executed by Michael McDermott for the
benefit of Lender with respect to the Loan.
"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, any petroleum
product or additive, any petroleum-based substances or any similar terms
described or defined in any Environmental Laws applicable to or regulating 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,
or any Toxic Mold; (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 trustees
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 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, any current lessee or occupant 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.
"Lease Estoppel Certificate and Consent" has the meaning set forth in
Section 4.H.
"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.
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"Loan Amount" means $993,544.00 or 50% of acceptable documented costs,
whichever is less.
"Loan Documents" means, collectively, this Agreement, the Note, the
Mortgage, the Environmental Indemnity Agreement, the Subordination Agreement,
the UCC-1 Financing Statements, the Guaranty 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 or mortgage dated as of the date of
this Agreement executed by Borrower for the benefit of Lender with respect to
the Premises.
"Note" means the promissory note dated as of the date of this Agreement in
the Loan Amount evidencing the Loan, as the same may be amended, restated and/or
substituted from time to time, including, without limitation, as a result of the
payment of the FCCR Amount pursuant to Section 9.
"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
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.
"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.
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"Permitted Amounts" means, with respect to any given level of Hazardous
Materials, that level or quantity of Hazardous Materials in any form or
combination of forms the presence, use, storage, release or handling of which
does not constitute a violation of any Environmental Laws and is customarily
employed in the ordinary course of, or associated with, similar businesses
located in the state in which the Premises is located.
"Permitted Concept" means a Kona Grill restaurant or such other nationally
or regionally recognized restaurant concept as Lender may approve, which
approval shall not be unreasonably withheld.
"Permitted Exceptions" means those recorded easements, restrictions, liens
and encumbrances set forth as exceptions in the title insurance policy issued by
Title Company to Lender and approved by Lender in its sole discretion in
connection with the closing of the Loan.
"Permitted Lease" means, the lease relating to the Premises and all
modifications, amendments and supplements thereto disclosed in the Lease
Estoppel Certificate and Consent delivered with respect thereto, and all
modifications, amendments and supplements consented to by Lender pursuant to the
terms of the Mortgage.
"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 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.
"Related Premises" means those properties (other than the Premises) which
are the subject of mortgage loans from any of the Lender Entities to any of the
Borrower Parties.
"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.
"Remediation" means any response, remedial, removal, or corrective action,
any activity to clean up, detoxify, decontaminate, contain or otherwise
remediate any Hazardous Materials 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, including, without limitation, all acts
necessary to clean and disinfect any portions of the Premises affected by Toxic
Mold and to eliminate the sources of Toxic Mold in or on the Premises,
including, without limitation, providing any necessary moisture and control
systems at the Premises.
"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
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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.
"Subordination Agreements" means the subordination agreements dated as of
the date of this Agreement executed by Borrower and certain shareholders of
Borrower with respect to the Subordinate Debt.
"Subordinate Debt" means the debt of Borrower to certain shareholders of
Borrower described in the Subordination Agreements.
"Threatened Release" means a substantial likelihood of a Release which
requires action to prevent or mitigate damage to the soil, surface waters,
groundwaters, land, stream sediments, surface or subsurface strata, ambient air
or any other environmental medium comprising or surrounding the Premises which
may result from such Release.
"Title Company" means Lawyers Title Insurance Corporation.
"Toxic Mold" means any toxic mold or fungus of a type which would pose a
risk to human health or the environment or would negatively impact the value of
the Premises.
"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.
2. TRANSACTION. On the terms and subject to the conditions set forth in
the Loan Documents, Lender shall make the Loan. The Loan 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.
3. ESCROW AGENT. Borrower and Lender hereby employ Title Company to act as
escrow agent in connection with the transaction 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
represented by check or draft, and no check or draft shall be payment to Title
Company in compliance with any of the requirements
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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 or leasehold title,
as the case may be, in the real property comprising the 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 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. 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, 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
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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. Permitted Lease. The Permitted Lease shall be in full force and effect
and Borrower shall be entitled to occupy the Premises. Lender shall have
approved the Permitted Lease in its sole discretion and Borrower shall have
delivered to Lender an estoppel certificate and consent from the Permitted
Lessor, the form and substance of which shall be satisfactory to Lender in its
sole discretion (the "Permitted Lease Estoppel Certificate and Consent").
Borrower shall have provided Lender with a recorded copy (or executed original
in recordable form) of a memorandum of lease for the Premises. If any mortgages
or deeds of trust (or other similar security agreements) encumber fee simple
title to the Premises, the holders of such instruments shall have delivered
nondisturbance agreements to Borrower and Lender with respect to the Permitted
Lease in form and substance acceptable to Lender in its reasonable discretion.
I. 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.
J. Subordination Agreements. Borrower shall have delivered to Lender the
Subordination Agreements which shall be in form and substance acceptable to
lender and which shall subordinate the Subordinate Debt to the Loan.
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 5.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 the state where the Premises is
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
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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, 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, 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 Governmental Authority as a wetlands.
I. Licenses and Permits; Access. All required licenses and permits, both
governmental and private, to use and operate the Premises as a Permitted Concept
are in full force and effect, except for such licenses and permits the failure
of which to obtain has not had, and would not reasonably be expected to result
in, a Material Adverse Effect. Adequate rights of access to public roads and
ways are available to the Premises for unrestricted ingress and egress and
otherwise to permit utilization of the Premises for their intended purposes, and
all such public roads and ways have been completed and dedicated to public use.
J. Condition of Premises. The Premises, including the Personal Property,
is in good condition and repair and well-maintained, ordinary wear and tear
excepted, fully equipped and operational, free from structural defects, safe and
properly lighted.
K. Environmental. Except as disclosed in the Questionnaire:
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(1) Neither the Premises nor any of the Borrower Parties are in
violation of, or subject to, any pending or, to Borrower's actual
knowledge, threatened investigation or inquiry by any Governmental
Authority or to any remedial obligations under any Environmental Laws, and
this representation and warranty would continue to be true and correct
following disclosure to the applicable Governmental Authorities of all
relevant facts, conditions and circumstances, if any, pertaining to the
Premises;
(2) All permits, licenses or similar authorizations required to
construct, occupy, operate or use any buildings, improvements, fixtures
and equipment forming a part of the Premises by reason of any
Environmental Laws have been obtained;
(3) No Hazardous Materials have been used, handled, manufactured,
generated, produced, stored, treated, processed, transferred, disposed of
or otherwise Released in, on, under, from or about the Premises, except in
Permitted Amounts;
(4) The Premises does not contain Hazardous Materials, except in
Permitted Amounts;
(5) There is no threat of any Release migrating to the Premises in
excess of Permitted Amounts;
(6) There is no past or present non-compliance with Environmental
Laws, or with permits issued pursuant thereto, in connection with the
Premises;
(7) None of the Borrower Parties has received any written or oral
notice or other communication from any person or entity (including but not
limited to a Governmental Authority) relating to Hazardous Materials or
Remediation thereof in excess of Permitted Amounts, of possible liability
of any person or entity pursuant to any Environmental Law, other
environmental conditions in connection with the Premises, or any actual or
potential administrative or judicial proceedings in connection with any of
the foregoing;
(8) All information known to any of the Borrower Parties or
contained in the files of any of the Borrower Parties relating to any
Environmental Condition or Releases of Hazardous Materials in, on, under
or from the Premises, other than in Permitted Amounts, has been provided
to Lender, including, without limitation, information relating to all
prior Remediation;
(9) The Premises has been kept free and clear of all liens and other
encumbrances imposed pursuant to any Environmental Law (the "Environmental
Liens"); and none of the Borrower Parties has allowed any tenant or other
user of the Premises to do any act that materially increased the dangers
to human health or the environment, posed an unreasonable risk of harm to
any person or entity (whether on or off the Premises), impaired the value
of the Premises in any material respect, is contrary to any requirement of
any insurer, constituted a public or private nuisance, constituted waste,
or violated any covenant, condition, agreement or easement applicable to
the Premises; and
(10) The information and disclosures in the Questionnaire are true,
correct and complete in all material respects, and the person or persons
executing the Questionnaire were duly authorized to do so.
Lender has charged Borrower a fee for the Environmental Policy. Borrower
acknowledges that the Environmental Policy is for the sole protection of Lender
and will not protect Borrower or provide Borrower with any coverage thereunder.
Borrower acknowledges and agrees that Environmental Insurer may rely on the
environmental representations and warranties set forth in this subsection K,
that Environmental Insurer is an intended third-party beneficiary of such
representations and warranties and that Environmental Insurer shall have all
rights and remedies available at law or in equity as a result of a breach of
such representations and warranties, including, to the extent applicable, the
right of subrogation.
L. Title to Premises; First Priority Lien. Borrower is the holder of a
leasehold interest in the Premises. Borrower is the owner of all Personal
Property, free and clear of all liens, encumbrances, charges and
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security interests of any nature whatsoever, and no Affiliate of Borrower owns
any of the Personal Property. Upon Closing, Lender shall have a first priority
lien upon and security interest in Borrower's right, title and interest in and
to the Premises pursuant to the Mortgage and the UCC-1 Financing Statements.
M. No Mechanics' Liens. There are no delinquent accounts payable or
mechanics' liens in favor of any materialman, laborer, or any other person or
entity in connection with labor or materials furnished to or performed on any
portion of the Premises; and no work has been performed or is in progress nor
have materials been supplied to the Premises or agreements entered into for work
to be performed or materials to be supplied to the Premises prior to the date
hereof, which will be delinquent on or before the Closing Date.
N. Permitted Lease. Borrower has delivered to Lender a true, correct and
complete copy of the Permitted Lease. The Permitted Lease is the only lease or
agreement between the Permitted Lessor and Borrower with respect to the
Premises. The Permitted Lease is in full force and effect and constitutes the
legal, valid and binding obligations of Borrower and the Permitted Lessor,
enforceable against Borrower and the Permitted Lessor in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, liquidation, reorganization and other laws affecting the rights of
creditors generally and general principles of equity. None of the Borrower
Parties has assigned, transferred, mortgaged, hypothecated or otherwise
encumbered the Permitted Lease or any rights thereunder or any interest therein,
and none of the Borrower Parties has received any notice that the Permitted
Lessor has made any assignment, pledge or hypothecation of all or any part of
its rights or interest in the Permitted Lease. No notice of default from the
Permitted Lessor has been received under the Permitted Lease which has not been
cured and no notice of default to the Permitted Lessor has been given under the
Permitted Lease which has not been cured. No event has occurred and no condition
exists which, with the giving of notice or the lapse of time or both, would
constitute a default under the Permitted Lease. The Permitted Lease has a term
(including renewal options) which will expire after the fifth anniversary of the
scheduled maturity date of the Note.
O. Money Laundering. (1) Borrower has taken all reasonable measures, in
accordance with all applicable Anti-Money Laundering Laws, with respect to each
holder of a direct or indirect interest in the Borrower Parties, to assure that
funds invested by such holders in the Borrower Parties are derived from legal
sources; provided, however, none of the foregoing shall apply to any Person to
the extent that such Person's interest is in or through a U.S. Publicly-Traded
Entity.
(2) To Borrower's knowledge after making due inquiry, neither any of the
Borrower Parties nor any holder of a direct or indirect interest in the Borrower
Parties (a) is under investigation by any Governmental Authority for, or has
been charged with, or convicted of, any violation of any Anti-Money Laundering
Laws, or drug trafficking, terrorist-related activities or other money
laundering predicated crimes or a violation of the BSA, (b) has been assessed
civil penalties under these or related laws, or (c) has had any of its funds
seized or forfeited in an action under these or related laws; provided, however,
none of the foregoing shall apply to any Person to the extent that such Person's
interest is in or through a U.S. Publicly-Traded Entity.
(3) Borrower has taken reasonable steps, consistent with industry practice
for comparable organizations and in any event as required by law, to ensure that
the Borrower Parties are and shall be in compliance with all (i) Anti-Money
Laundering Laws and (ii) OFAC Laws and Regulations.
6. COVENANTS. Borrower covenants to Lender (and Environmental Insurer
solely with respect to Section 6.F) from and after the Closing Date and until
all of the Obligations are satisfied in full, as follows:
A. Payment of the Note. Borrower shall punctually pay, or cause to be
paid, the principal, interest and all other sums to become due in respect of the
Note and the other Loan Documents in accordance with the Note and the other Loan
Documents. Borrower shall authorize Lender to establish arrangements whereby all
scheduled payments made in respect of the Obligations are transferred by
Automated Clearing House Debit initiated by Lender directly from an account at a
U.S. bank in the name of Borrower to such account as Lender may designate or as
Lender may otherwise designate.
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B. Title. Borrower shall maintain a valid leasehold interest in the
Premises, and title to the Personal Property and the remainder of the Premises,
free and clear of all liens, encumbrances, charges and other exceptions to
title, except the Permitted Exceptions. Lender shall have a valid first lien
upon and security interest in the Premises, including the Personal Property,
pursuant to the Mortgage and the UCC-1 Financing Statements.
C. Organization and Status of Borrower; Preservation of Existence. Each of
the Borrower Parties (other than individuals), as applicable, shall be validly
existing and in good standing under the laws of its state of incorporation or
formation. Borrower shall be qualified as a foreign corporation, partnership or
limited liability company to do business in the state where the Premises is
located, and each of the Borrower Parties shall be qualified as a foreign
corporation, partnership or limited liability company in any other jurisdiction
where the failure to be qualified would reasonably be expected to result in a
Material Adverse Effect. Borrower shall preserve its current form of
organization and shall not change its legal name, its state of formation, nor,
in one transaction or a series of related transactions, merge with or into, or
consolidate with, any other entity without providing, in each case, Lender with
30 days' prior written notice and obtaining Lender's prior written consent (to
the extent such consent is required under Section 7 of this Agreement). In
addition, Borrower shall require, and shall take reasonable measures to comply
with the requirement, that 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, however, the covenant contained in this sentence shall
not apply to any Person to the extent that such Person's interest is in or
through a U.S. Publicly-Traded Entity.
D. Licenses and Permits. All required licenses and permits, both
governmental and private, to use and operate the Premises as a Permitted Concept
shall be maintained in full force and effect.
E. Compliance With Laws Generally. The use and occupation of the Premises,
and the condition thereof, including, without limitation, any Restoration, shall
comply with all Applicable Regulations now or hereafter in effect. In addition,
the Borrower Parties shall comply with all Applicable Regulations now or
hereafter in effect, including, without limitation, the OFAC Laws and
Regulations and Anti-Money Laundering Laws. Without limiting the generality of
the other provisions of this Section, Borrower shall comply with the ADA, and
all regulations promulgated thereunder, as it affects the Premises.
F. Compliance With Environmental Laws. (1) The Premises, the Borrower
Parties and any other operator or user of the Premises shall not be in violation
of or subject to any investigation or inquiry by any Governmental Authority or
subject to any Remediation obligations under any Environmental Laws.
(2) All uses and operations on or of the Premises, whether by Borrower or
any other person or entity, shall be in compliance with all Environmental Laws
and permits issued pursuant thereto.
(3) There shall be no Releases or Hazardous Materials in, on, under or
from the Premises, except in Permitted Amounts.
(4) Borrower shall keep the Premises, or cause the Premises to be kept,
free and clear of all Environmental Liens.
(5) Borrower shall not do or allow any tenant or other user of the
Premises to do any act that (a) materially increases the dangers to human health
or the environment, (b) poses an unreasonable risk of harm to any person or
entity (whether on or off the Premises), (c) impairs or is reasonably likely to
impair the value of the Premises, (d) is contrary to any requirement of any
insurer, (e) constitutes a public or private nuisance or constitutes waste, or
(f) violates any covenant, condition, agreement or easement applicable to the
Premises.
(6) Borrower shall immediately notify Lender in writing upon Borrower
obtaining actual knowledge of:
(a) any presence of Releases or Threatened Releases in, on, under,
from or migrating towards the Premises, in excess of Permitted Amounts,
including, without limitation, the presence on or under the
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Premises, or the escape, seepage, leakage, spillage, discharge, emission
or release of any Hazardous Materials, apparent or real, in excess of
Permitted Amounts;
(b) any non-compliance with any Environmental Laws related in any
way to the Premises;
(c) any Environmental Lien or any act or omission which could
reasonably be expected to result in the imposition of an Environmental
Lien;
(d) any required or proposed Remediation of environmental conditions
relating to the Premises, including, without limitation, any and all
enforcement, clean-up, remedial, removal or other governmental or
regulatory actions threatened, instituted or completed pursuant to any of
the Environmental Laws affecting the Premises;
(e) any written or oral notice or other communication of which any
of the Borrower Parties becomes aware from any source whatsoever
(including but not limited to a Governmental Authority) relating in any
way to Hazardous Materials or Remediation thereof, possible liability of
any person or entity pursuant to any Environmental Law, other
environmental conditions in connection with the Premises, or any actual or
potential administrative or judicial proceedings in connection with
anything referred to in this Agreement; or
(f) any investigation or inquiry initiated by any Governmental
Authority relating to the Environmental Condition of the Premises.
(7) Borrower shall, at its sole cost and expense:
(a) perform any environmental site assessment or other investigation
of environmental conditions in connection with the Premises as may be
reasonably requested by Lender (including but not limited to sampling,
testing and analysis of soil, water, air, building materials and other
materials and substances whether solid, liquid or gas), and share with
Lender and Environmental Insurer the reports and other results thereof,
and Lender, Environmental Insurer and other Indemnified Parties shall be
entitled to rely on such reports and other results thereof; and
(b) have the Premises inspected as may be required by any
Environmental Laws for seepage, spillage and other environmental concerns.
Borrower shall provide Lender with written certified results of all
inspections performed on the Premises. All costs and expenses associated
with the inspection, preparation and certification of results, as well as
those associated with any corrective action, shall be paid by Borrower.
All inspections and tests performed on the Premises shall be conducted in
compliance with all Environmental Laws.
(8) Borrower shall, at its sole cost and expense, and without limiting the
rights of Lender under any other provision of this Agreement, including, without
limitation, subsection (10), comply with all reasonable written requests of
Lender to:
(a) reasonably effectuate Remediation of any condition (including
but not limited to a Release) in, on, under or from the Premises;
(b) comply with any Environmental Law;
(c) comply with any directive from any Governmental Authority; and
(d) take any other reasonable action necessary or appropriate for
protection of human health or the environment.
(9) Lender, Environmental Insurer and any other person or entity
designated by Lender, including but not limited to any receiver, any
representative of a Governmental Authority, and any environmental consultant,
shall
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have the right, but not the obligation, to enter upon the Premises during normal
business hours or at any time in the event of an emergency (including without
limitation in connection with any Securitization, Participation or Transfer
contemplated by this Agreement or in connection with the exercise of any
remedies set forth in the Mortgage or the other Loan Documents) to assess any
and all aspects of the environmental condition of the Premises and its use,
including but not limited to conducting any environmental assessment or audit
(the scope of which shall be determined in Lender's sole and absolute
discretion) and taking samples of soil, groundwater or other water, air, or
building materials, and conducting other invasive testing. Borrower shall
cooperate with and provide access to Lender, Environmental Insurer and any such
person or entity designated by Lender. Any such assessment and investigation
shall be at Borrower's sole cost and expense if, at the time Lender undertakes
such assessment or investigation, Lender has a reasonable basis for believing
that a Release has occurred at the Premises in excess of Permitted Amounts or if
an Event of Default has occurred and is continuing. Otherwise, any such
assessment and investigation shall be at Lender's sole cost and expense.
(10) Upon any Release, on, above or under the Premises, Borrower shall
immediately remedy such situation in accordance with all Environmental Laws and
any request of Lender. Should Borrower fail to remedy or cause the remedy of
such situation in accordance with all Environmental Laws, Lender shall be
permitted to take such actions in its sole discretion to remedy such situation
and any costs and expenses incurred in connection therewith will be paid by
Borrower.
G. Financial Statements. Within 45 days after the end of each fiscal
quarter and within 120 days after the end of each fiscal year of Borrower,
Borrower shall deliver to Lender (a) complete financial statements of the
Borrower Parties including a balance sheet, profit and loss statement, statement
of cash flows and all other related schedules for the fiscal period then ended;
(b) income statements for the business at the Premises; and (c) such other
financial information as Lender may reasonably request in order to establish
compliance with the financial covenants in the Loan Documents, including,
without limitation, Section 6.J of this Agreement. All such financial statements
shall be prepared in accordance with GAAP from period to period, and shall be
certified to be accurate and complete by Borrower (or the Treasurer or other
appropriate officer of Borrower). In the event the property and business at the
Premises is ordinarily consolidated with other business for financial statement
purposes, such financial statements shall be prepared on a consolidated basis
showing separately the sales, profits and losses, assets and liabilities
pertaining to the Premises with the basis for allocation of overhead of other
charges being clearly set forth. The financial statements delivered to Lender
need not be audited, but Borrower shall deliver to Lender copies of any audited
financial statements of Borrower which may be prepared, as soon as they are
available. Borrower shall also cause to be delivered to Lender copies of any
financial statements required to be delivered to Borrower by any tenants of the
Premises.
H. Lost Note. Borrower shall, if the Note is mutilated, destroyed, lost or
stolen (a "Lost Note"), promptly deliver to Lender, upon receipt from Lender of
an affidavit and indemnity in a form reasonably acceptable to Lender and
Borrower stipulating that the Note has been mutilated, destroyed, lost or
stolen, in substitution therefor, a new promissory note containing the same
terms and conditions as such Lost Note with a notation thereon of the unpaid
principal and accrued and unpaid interest. Borrower shall provide fifteen (15)
days' prior notice to Lender before making any payments to third parties in
connection with a Lost Note.
I. Inspections. Borrower shall, during normal business hours (or at any
time in the event of an emergency), (1) provide Lender and Lender's officers,
employees, agents, advisors, attorneys, accountants, architects, and engineers
with access to the Premises, all drawings, plans, and specifications for the
Premises in possession of the Borrower Parties, all engineering reports relating
to the Premises in the possession of the Borrower Parties, the files,
correspondence and documents relating to the Premises, and the financial books
and records, including lists of delinquencies, relating to the ownership,
operation, and maintenance of the Premises (including, without limitation, any
of the foregoing information stored in any computer files), (2) allow such
persons to make such inspections, tests, copies, and verifications as Lender
considers necessary, and (3) if Borrower is in breach of the Fixed Charge
Coverage Ratio requirement set forth in the following subsection J, pay expenses
reasonably incurred by Lender from time to time in conducting such inspections,
tests, copies and verifications upon demand (such amounts to bear interest at
the Default Rate if not paid upon demand until paid).
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J. Corporate Fixed Charge Coverage Ratio. Borrower shall maintain a
Corporate Fixed Charge Coverage Ratio of at least 1.25:1, determined as of the
last day of each fiscal year of Borrower. For purposes of this Section, the term
"Corporate Fixed Charge Coverage Ratio" shall mean with respect to the twelve
month period of time immediately preceding the date of determination (the first
such period being the first full fiscal year of Borrower after the date hereof),
the ratio calculated for such period of time, each as determined in accordance
with GAAP, of (a) the sum of Net Income, Depreciation and Amortization, Interest
Expense and Operating Lease Expense, minus income taxes or charges equivalent to
income taxes allocable to the period of determination, to (b) the sum of
Operating Lease Expense, scheduled principal payments of long term Debt,
scheduled maturities of all Capital Leases and Interest Expense (excluding
non-cash interest expense and amortization of non-cash financing expenses).
For purposes of this Section, the following terms shall be defined as set
forth below:
"Capital Lease" shall mean all leases of any property, whether real,
personal or mixed, by Borrower or any of the other Borrower Parties, as
applicable, which lease would, in conformity with GAAP, be required to be
accounted for as a capital lease on the balance sheet of Borrower. The
term "Capital Lease" shall not include any operating lease.
"Debt" shall mean with respect to Borrower and the other Borrower
Parties, collectively, and for the period of determination (i)
indebtedness for borrowed money, (ii) obligations evidenced by bonds,
indentures, notes or similar instruments, (iii) obligations to pay the
deferred purchase price of property or services, (iv) obligations under
leases which should be, in accordance with GAAP, recorded as Capital
Leases, and (v) obligations under direct or indirect guarantees in respect
of, and obligations (contingent or otherwise) to purchase or otherwise
acquire, or otherwise to assure a creditor against loss in respect of,
indebtedness or obligations of others of the kinds referred to in clauses
(i) through (iv) above.
"Depreciation and Amortization" shall mean the depreciation and
amortization accruing during any period of determination with respect to
Borrower and the other Borrower Parties, collectively, as determined in
accordance with GAAP.
"Interest Expense" shall mean for any period of determination, the
sum of all interest accrued or which should be accrued in respect of all
Debt of Borrower and the other Borrower Parties, collectively, as
determined in accordance with GAAP.
"Net Income" shall mean with respect to the period of determination,
the net income or net loss of Borrower and the other Borrower Parties,
collectively. In determining the amount of Net Income, (i) adjustments
shall be made for nonrecurring gains and losses or non-cash items
allocable to the period of determination, (ii) deductions shall be made
for, among other things, Depreciation and Amortization, Interest Expense,
Operating Lease Expense and actual corporate overhead expense allocable to
the period of determination, and (iii) no deductions shall be made for
income taxes or charges equivalent to income taxes allocable to the period
of determination, as determined in accordance with GAAP.
"Operating Lease Expense" shall mean the sum of all payments and
expenses incurred by Borrower and the other Borrower Parties,
collectively, under any operating leases during the period of
determination including, without limitation, the Permitted Lease, as
determined in accordance with GAAP.
Lender shall have the right to elect at any time to convert the Fixed
Charge Coverage Ratio requirement from a requirement which is applicable to the
Premises individually to an aggregate Fixed Charge Coverage Ratio requirement
which is applicable to the Premises and such of the Related Premises as may be
selected by Lender (collectively, the "FCCR Premises"). To the extent that an
aggregate Fixed Charge Coverage Ratio requirement is imposed by Lender, the
definitions relating to the Fixed Charge Coverage Ratio shall be deemed to be
modified as applicable to provide for the calculation of the aggregate Fixed
Charge Coverage Ratio.
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K. Affiliate Transactions. Unless otherwise approved by Lender, all
transactions between Borrower and any of its Affiliates shall be on terms
substantially as advantageous to Borrower as those which could be obtained by
Borrower in a comparable arm's length transaction with a non-Affiliate of
Borrower.
L. Compliance Certificates. Within 60 days after the end of each fiscal
year of Borrower, Borrower shall deliver a compliance certificate to Lender in a
form to be provided by Lender in order to establish that Borrower is in
compliance in all material respects with all of its obligations, duties and
covenants under the Loan Documents.
M. OFAC Laws and Regulations. Borrower shall immediately notify Lender in
writing if any individual or entity owning directly or indirectly any interest
in any of the Borrower Parties or any director, officer, member, manager or
partner of any of such holders 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, or is under investigation by any governmental entity for, or has
been charged with, or convicted of, drug trafficking, terrorist-related
activities or any violation of Anti-Money Laundering Laws, has been assessed
civil penalties under these or related laws, or has had funds seized or
forfeited in an action under these or related laws; provided, however, the
covenant contained in this sentence shall not apply to any Person to the extent
that such Person's interest is in or through a U.S. Publicly-Traded Entity.
7. PROHIBITION ON CHANGE OF CONTROL AND PLEDGE. Without limiting the terms
and conditions of Section 3.09 of the Mortgage, Borrower agrees that, from and
after the Closing Date and until all of the Obligations are satisfied in full,
without the prior written consent of Lender: (1) no Change of Control shall
occur; and (2) no interest in any of the Borrower Parties shall be pledged,
encumbered, hypothecated or assigned as collateral for any obligation of any of
the Borrower Parties (each, a "Pledge"). In addition, no interest in any of the
Borrower Parties, or in any individual or person owning directly or indirectly
any interest in any of the Borrower Parties, shall be transferred, assigned or
conveyed to any individual or person whose property or interests are subject to
being blocked under any of the OFAC Laws and Regulations and/or who is in
violation of any of the OFAC Laws and Regulations, and any such transfer,
assignment or conveyance shall not be effective until the transferee has
provided written certification to Borrower and Lender that (A) the transferee or
any person who owns directly or indirectly any interest in transferee, is not 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 the
OFAC Laws and Regulations, and (B) the transferee has taken reasonable measures
to assure than any individual or entity who owns directly or indirectly any
interest in transferee, is not 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 the OFAC Laws and Regulations;
provided, however, the covenant contained in this sentence shall not apply to
any Person to the extent that such Person's interest is in or through a U.S.
Publicly-Traded Entity. Lender's consent to a Change of Control and/or Pledge
shall be subject to the satisfaction of such conditions as Lender shall
determine in its sole discretion, including, without limitation, (i) the
execution and delivery of such modifications to the terms of the Loan Documents
as Lender shall request, (ii) the proposed Change of Control and/or Pledge
having been approved by each of the rating agencies which have issued ratings in
connection with any Securitization of the Loan as well as any other rating
agency selected by Lender, and (iii) the proposed transferee having agreed to
comply with all of the terms and conditions of the Loan Documents (including any
modifications requested by Lender pursuant to clause (i) above). In addition,
any such consent shall be conditioned upon payment by Borrower to Lender of (x)
a fee equal to one percent (1%) of the then outstanding principal balance of the
Note and (y) all out-of-pocket costs and expenses incurred by Lender in
connection with such consent, including, without limitation, reasonable
attorneys' fees. Lender shall not be required to demonstrate any actual
impairment of its security or any increased risk of default hereunder in order
to declare the Obligations immediately due and payable upon a Change of Control
or Pledge in violation of this Section. The provisions of this Section shall
apply to every Change of Control or Pledge regardless of whether voluntary or
not, or whether or not Lender has consented to any previous Change of Control or
Pledge.
8. TRANSACTION CHARACTERIZATION. A. It is the intent of the parties hereto
that this Agreement and the other Loan Documents are a contract to extend a
financial accommodation (as such term is used in the Code) for the benefit of
Borrower.
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B. It is the intent of the parties hereto that the business relationship
created by the Loan Documents is solely that of creditor and debtor and has been
entered into by both parties in reliance upon the economic and legal bargains
contained in the Loan Documents. None of the agreements contained in the Loan
Documents is intended, nor shall the same be deemed or construed, to create a
partnership (either de jure or de facto) between Borrower and Lender, to make
them joint venturers, to make Borrower an agent, legal representative, partner,
subsidiary or employee of Lender, nor to make Lender in any way responsible for
the debts, obligations or losses of Borrower.
9. DEFAULT AND REMEDIES. A. Each of the following shall be deemed an event
of default by Borrower (each, an "Event of Default"):
(1) If any representation or warranty of any of the Borrower Parties set
forth in any of the Loan Documents is false in any material respect, or if any
of the Borrower Parties renders any statement or account which is false in any
material respect.
(2) If any principal, interest or other monetary sum due under the Note,
the Mortgage or any other Loan Document is not paid within five days after the
date when due; provided, however, notwithstanding the occurrence of such an
Event of Default, Lender shall not be entitled to exercise its rights and
remedies set forth below unless and until Lender shall have given Borrower
notice thereof and a period of five days from the delivery of such notice shall
have elapsed without such Event of Default being cured.
(3) If Borrower fails to observe or perform any of the other covenants
(except with respect to a breach of the Fixed Charge Coverage Ratio, which
breach is addressed in subitem (7) below), conditions, or obligations of this
Agreement; provided, however, if any such failure does not involve the payment
of any monetary sum, is not willful or intentional, does not place any rights or
interest in collateral of Lender in immediate jeopardy, and is within the
reasonable power of Borrower to promptly cure after receipt of notice thereof,
all as determined by Lender in its reasonable discretion, then such failure
shall not constitute an Event of Default hereunder, unless otherwise expressly
provided herein, unless and until Lender shall have given Borrower notice
thereof and a period of 30 days shall have elapsed, during which period Borrower
may correct or cure such failure, upon failure of which an Event of Default
shall be deemed to have occurred hereunder without further notice or demand of
any kind being required. If such failure cannot reasonably be cured within such
30-day period, as determined by Lender in its reasonable discretion, and
Borrower is diligently pursuing a cure of such failure, then Borrower shall have
a reasonable period to cure such failure beyond such 30-day period, which shall
not exceed 90 days after receiving notice of the failure from Lender. If
Borrower shall fail to correct or cure such failure within such 90-day period,
an Event of Default shall be deemed to have occurred hereunder without further
notice or demand of any kind being required.
(4) If any of the Borrower Parties becomes insolvent within the meaning of
the Code, files or notifies Lender that it intends to file a petition under the
Code, initiates a proceeding under any similar law or statute relating to
bankruptcy, insolvency, reorganization, winding up or adjustment of debts
(collectively, an "Action"), becomes the subject of either a petition under the
Code or an Action, or is not generally paying its debts as the same become due.
(5) If there is an "Event of Default" or a breach or default, after the
passage of all applicable notice and cure or grace periods, under any other Loan
Document or any of the Other Agreements.
(6) If a final, nonappealable judgment is rendered by a court against any
of the Borrower Parties which (i) has a material adverse effect on the operation
of the Premises as a Permitted Concept, or (ii) is in an amount greater than
$100,000.00 and not covered by insurance, and, in either case, is not discharged
or provision made for such discharge within 60 days from the date of entry of
such judgment.
(7) If there is a breach of the Fixed Charge Coverage Ratio requirement
and Lender shall have given Borrower notice thereof and Borrower shall have
failed within a period of 30 days from the delivery of such notice to (i) pay to
Lender the FCCR Amount (without premium or penalty), (ii) prepay the Note in
whole but not in part (without premium or penalty) or (iii) notify Lender of
Borrower's election to substitute a Substitute Premises for the Premises in
accordance with the terms of Section 11 (the failure of Borrower to complete
such substitution within 60
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days after Lender shall have given the notice discussed above shall be deemed to
be an Event of Default without further notice or demand of any kind being
required). For purposes of the preceding sentence, "FCCR Amount" means that sum
of money which, when subtracted from the outstanding principal amount of the
Note, and assuming the resulting principal balance is reamortized in equal
monthly payments over the remaining term of the Note at the rate of interest set
forth therein, will result in an adjusted Fixed Charge Coverage Ratio for the
Premises of at least 1.25:1 based on the prior year's operations. Promptly after
Borrower's payment of the FCCR Amount, Borrower and Lender shall execute an
amendment to the Note in form and substance reasonably acceptable to Lender
reducing the principal amount payable to Lender under the Note and reamortizing
the principal amount of the Note in equal monthly payments over the then
remaining term of the Note at the rate of interest set forth therein.
(8) If there is a breach or default, after the passage of any applicable
notice and grace period, under the Permitted Lease, or if the Permitted Lease
terminates or expires prior to the scheduled maturity date of the Note.
B. Upon the occurrence and during the continuance of an Event of Default,
subject to the limitations set forth in subsection A, Lender may declare all or
any part of the obligations of Borrower under the Note, this Agreement and any
other Loan Document to be due and payable, and the same shall thereupon become
due and payable without any presentment, demand, protest or notice of any kind
except as otherwise expressly provided herein, and Borrower hereby waives notice
of intent to accelerate the obligations secured by the Mortgage and notice of
acceleration. Thereafter, Lender may exercise, at its option, concurrently,
successively or in any combination, all remedies available at law or in equity,
including without limitation any one or more of the remedies available under the
Note, the Mortgage or any other Loan Document. Neither the acceptance of this
Agreement nor its enforcement shall prejudice or in any manner affect Lender's
right to realize upon or enforce any other security now or hereafter held by
Lender, it being agreed that Lender shall be entitled to enforce this Agreement
and any other security now or hereafter held by Lender in such order and manner
as it may in its absolute discretion determine. No remedy herein conferred upon
or reserved to Lender is intended to be exclusive of any other remedy given
hereunder or now or hereafter existing at law or in equity or by statute. Every
power or remedy given by any of the Loan Documents to Lender, or to which Lender
may be otherwise entitled, may be exercised, concurrently or independently, from
time to time and as often as may be deemed expedient by Lender.
10. INDEMNITY; RELEASE. A. Borrower shall, at its sole cost and expense,
protect, defend, indemnify, release and hold harmless each of the Indemnified
Parties for, from and against any and all claims, suits, liabilities (including,
without limitation, strict liabilities), actions, proceedings, obligations,
debts, damages, losses, costs, expenses, diminutions in value, fines, penalties,
charges, fees, expenses, judgments, awards, amounts paid in settlement and
damages of whatever kind or nature (including, without limitation, attorneys'
fees, court costs and other costs of defense) (collectively, "Losses) (excluding
Losses suffered by an Indemnified Party directly arising out of such Indemnified
Party's gross negligence or willful misconduct; provided, however, that the term
"gross negligence" shall not include gross negligence imputed as a matter of law
to any of the Indemnified Parties solely by reason of Borrower's interest in the
Premises or Borrower's failure to act in respect of matters which are or were
the obligation of Borrower under the Loan Documents), and costs of Remediation
(whether or not performed voluntarily), engineers' fees, environmental
consultants' fees, and costs of investigation (including but not limited to
sampling, testing, and analysis of soil, water, air, building materials and
other materials and substances whether solid, liquid or gas) imposed upon or
incurred by or asserted against any Indemnified Parties, and directly or
indirectly arising out of or in any way relating to any one or more of the
following:
(1) any presence of any Hazardous Materials in, on, above, or under the
Premises;
(2) any past, present or Threatened Release in, on, above, under or from
the Premises;
(3) any activity by Borrower, any person or entity affiliated with
Borrower or any tenant or other user of the Premises in connection with any
actual, proposed or threatened use, treatment, storage, holding, existence,
disposition or other Release, generation, production, manufacturing, processing,
refining, control, management, abatement, removal, handling, transfer or
transportation to or from the Premises of any Hazardous Materials at any time
located in, under, on or above the Premises;
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(4) any activity by Borrower, any person or entity affiliated with
Borrower or any tenant or other user of the Premises in connection with any
actual or proposed Remediation of any Hazardous Materials at any time located
in, under, on or above the Premises, whether or not such Remediation is
voluntary or pursuant to court or administrative order, including but not
limited to any removal, remedial or corrective action;
(5) any past, present or threatened non-compliance or violations of any
Environmental Laws (or permits issued pursuant to any Environmental Law) in
connection with the Premises or operations thereon, including but not limited to
any failure by Borrower, any person or entity affiliated with Borrower or any
tenant or other user of the Premises to comply with any order of any
Governmental Authority in connection with any Environmental Laws;
(6) the imposition, recording or filing or the threatened imposition,
recording or filing of any Environmental Lien encumbering the Premises;
(7) any administrative processes or proceedings or judicial proceedings in
any way connected with any matter addressed in this Agreement;
(8) any past, present or threatened injury to, destruction of or loss of
natural resources in any way connected with the Premises, including but not
limited to costs to investigate and assess such injury, destruction or loss;
(9) any acts of Borrower, any person or entity affiliated with Borrower or
any tenant or other user of the Premises in arranging for disposal or treatment,
or arranging with a transporter for transport for disposal or treatment, of
Hazardous Materials owned or possessed by Borrower, any person or entity
affiliated with Borrower or any tenant or other user, at any facility or
incineration vessel owned or operated by another person or entity and containing
such or similar Hazardous Materials;
(10) any acts of Borrower, any person or entity affiliated with Borrower
or any tenant or other user of the Premises, in accepting any Hazardous
Materials for transport to disposal or treatment facilities, incineration
vessels or sites selected by Borrower, any person or entity affiliated with
Borrower or any tenant or other user of the Premises, from which there is a
Release, or a Threatened Release of any Hazardous Materials which causes the
incurrence of costs for Remediation;
(11) any personal injury, wrongful death, or property damage arising under
any statutory or common law or tort law theory, including but not limited to
damages assessed for the maintenance of a private or public nuisance or for the
conducting of an abnormally dangerous activity on or near the Premises;
(12) any misrepresentation or inaccuracy in any representation or warranty
or material breach or failure to perform any covenants or other obligations
pursuant to this Agreement; or
(13) any failure by Borrower to comply with any of the terms and
conditions of the Permitted Lease, including, without limitation, any costs and
expenses incurred by any of the Indemnified Parties to cure any such failure.
B. Borrower fully and completely releases, waives and covenants not to
assert any claims, liabilities, actions, defenses, challenges, contests or other
opposition against Lender and Environmental Insurer, however characterized,
known or unknown, foreseen or unforeseen, now existing or arising in the future,
relating to this Agreement and any Hazardous Materials, Releases and/or
Remediation on, at or affecting the Premises.
11. MISCELLANEOUS PROVISIONS.
A. Notices. All notices, consents, approvals or other instruments required
or permitted to be given by either party pursuant to this Agreement or any of
the other Loan Documents shall be in writing and given by (i) hand delivery,
(ii) facsimile, (iii) express overnight delivery service or (iv) certified or
registered mail, return receipt requested, and shall be deemed to have been
delivered upon (a) receipt, if hand delivered, (b) transmission, if
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delivered by facsimile, (c) the next Business Day, if delivered by express
overnight delivery service, or (d) the third Business Day following the day of
deposit of such notice with the United States Postal Service, if sent by
certified or registered mail, return receipt requested. Notices shall be
provided to the parties and addresses (or facsimile numbers, as applicable)
specified below:
If to Borrower: Kona Grill Kansas City, Inc.
7373 E. Doubletree Ranch Road
Suite 210
Scottsdale, AZ 85258
Attention: Larry Folk
Telephone: (480) 922-8100
Telecopy: (480) 991-6811
If to Lender: GE Capital Franchise Finance Corporation
17207 North Perimeter Drive
Scottsdale, AZ 85255
Attention: General Counsel
Telephone: (480) 585-4500
Telecopy: (480) 585-2226
B. Real Estate Commission. Lender and Borrower represent and warrant to
each other that they have dealt with no real estate or mortgage broker, agent,
finder or other intermediary in connection with the transactions contemplated by
this Agreement or the other Loan Documents. Lender and Borrower shall indemnify
and hold each other harmless from and against any costs, claims or expenses,
including attorneys' fees, arising out of the breach of their respective
representations and warranties contained within this Section.
C. Waiver and Amendment; Document Review. (1) No provisions of this
Agreement or the other Loan Documents shall be deemed waived or amended except
by a written instrument unambiguously setting forth the matter waived or amended
and signed by the party against which enforcement of such waiver or amendment is
sought. Waiver of any matter shall not be deemed a waiver of the same or any
other matter on any future occasion.
(2) In the event Borrower makes any request upon Lender requiring Lender
or Lender's attorneys to review and/or prepare (or cause to be reviewed and/or
prepared) any documents, plans, specifications or other submissions in
connection with or arising out of this Agreement or any of the other Loan
Documents, then Borrower shall (x) reimburse Lender promptly upon Lender's
demand for all out-of-pocket costs and expenses incurred by Lender in connection
with such review and/or preparation, including, without limitation, reasonable
attorneys' fees, and (y) pay Lender a reasonable processing and review fee.
D. Captions. Captions are used throughout this Agreement and the other
Loan Documents for convenience of reference only and shall not be considered in
any manner in the construction or interpretation hereof.
E. Lender's Liability. Notwithstanding anything to the contrary provided
in this Agreement or the other Loan Documents, it is specifically understood and
agreed, such agreement being a primary consideration for the execution of this
Agreement and the other Loan Documents by Lender, that (1) there shall be
absolutely no personal liability on the part of any shareholder, director,
officer or employee of Lender, with respect to any of the terms, covenants and
conditions of this Agreement or the other Loan Documents, (2) Borrower waives
all claims, demands and causes of action against Lender's officers, directors,
employees and agents in the event of any breach by Lender of any of the terms,
covenants and conditions of this Agreement or the other Loan Documents to be
performed by Lender and (3) Borrower shall look solely to the assets of Lender
for the satisfaction of each and every remedy of Borrower in the event of any
breach by Lender of any of the terms, covenants and conditions of this Agreement
or the other Loan Documents to be performed by Lender, such exculpation of
liability to be absolute and without any exception whatsoever.
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F. Severability. The provisions of this Agreement and the other Loan
Documents shall be deemed severable. If any part of this Agreement or the other
Loan Documents shall be held invalid, illegal or unenforceable, the remainder
shall remain in full force and effect, and such invalid, illegal or
unenforceable provision shall be reformed by such court so as to give maximum
legal effect to the intention of the parties as expressed therein.
G. Construction Generally. This Agreement and the other Loan Documents
have been entered into by parties who are experienced in sophisticated and
complex matters similar to the transaction contemplated by this Agreement and
the other Loan Documents and are entered into by both parties in reliance upon
the economic and legal bargains contained therein and shall be interpreted and
construed in a fair and impartial manner without regard to such factors as the
party which prepared the instrument, the relative bargaining powers of the
parties or the domicile of any party. Borrower and Lender were each represented
by legal counsel competent in advising them of their obligations and liabilities
hereunder.
H. Further Assurances. Borrower will, at its sole cost and expense, do,
execute, acknowledge and deliver or cause to be done, executed, acknowledged and
delivered all such further acts, documents, conveyances, notes, mortgages, deeds
of trust, assignments, security agreements, financing statements and assurances
as Lender shall from time to time reasonably require or deem advisable to carry
into effect the purposes of this Agreement and the other Loan Documents, to
perfect any lien or security interest granted in any of the Loan Documents and
for the better assuring and confirming of all of Lender's rights, powers and
remedies under the Loan Documents.
I. Attorneys' Fees. In the event of any judicial or other adversarial
proceeding between the parties concerning this Agreement or the other Loan
Documents, the prevailing party shall be entitled to recover its attorneys' fees
and other costs in addition to any other relief to which it may be entitled.
J. Entire Agreement. This Agreement and the other Loan Documents, together
with any other certificates, instruments or agreements to be delivered in
connection therewith, constitute the entire agreement between the parties with
respect to the subject matter hereof, and there are no other representations,
warranties or agreements, written or oral, between Borrower and Lender with
respect to the subject matter of this Agreement and the other Loan Documents.
Notwithstanding anything in this Agreement and the other Loan Documents to the
contrary, with respect to the Premises, upon the execution and delivery of this
Agreement by Borrower and Lender, any bid proposals or loan commitments with
respect to the transactions contemplated by this Agreement shall be deemed null
and void and of no further force and effect and the terms and conditions of this
Agreement shall control notwithstanding that such terms and conditions may be
inconsistent with or vary from those set forth in such bid proposals or loan
commitments.
K. Forum Selection; Jurisdiction; Venue; Choice of Law. Borrower
acknowledges that this Agreement and the other Loan Documents were substantially
negotiated in the State of Arizona, this Agreement and the other Loan Documents
were executed by Lender in the State of Arizona and executed and delivered by
Borrower in the State of Arizona, all payments under the Note will be delivered
in the State of Arizona and there are substantial contacts between the parties
and the transactions contemplated herein and the State of Arizona. For purposes
of any action or proceeding arising out of this Agreement or any of the other
Loan Documents, the parties hereto hereby expressly submit to the jurisdiction
of all federal and state courts located in the State of Arizona and Borrower
consents that it may be served with any process or paper by registered mail or
by personal service within or without the State of Arizona in accordance with
applicable law. Furthermore, Borrower waives and agrees not to assert in any
such action, suit or proceeding that it is not personally subject to the
jurisdiction of such courts, that the action, suit or proceeding is brought in
an inconvenient forum or that venue of the action, suit or proceeding is
improper. It is the intent of the parties hereto that all provisions of this
Agreement and the Note shall be governed by and construed under the laws of the
State of Arizona, without giving effect to its principles of conflicts of law.
To the extent that a court of competent jurisdiction finds Arizona law
inapplicable with respect to any provisions of this Agreement or the Note, then,
as to those provisions only, the laws of the state where the Premises is located
shall be deemed to apply. Nothing in this Section shall limit or restrict the
right of Lender to commence any proceeding in the federal or state courts
located in the state in which the Premises is located to the extent Lender deems
such proceeding necessary or advisable to exercise remedies available under this
Agreement or the other Loan Documents.
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L. Counterparts. This Agreement and the other Loan Documents may be
executed in one or more counterparts, each of which shall be deemed an original.
M. Assignments by Lender; Binding Effect. Lender may assign in whole or in
part its rights under this Agreement, including, without limitation, in
connection with any Transfer, Participation and/or Securitization. Upon any
unconditional assignment of Lender's entire right and interest hereunder, Lender
shall automatically be relieved, from and after the date of such assignment, of
liability for the performance of any obligation of Lender contained herein. This
Agreement and the other Loan Documents shall be binding upon and inure to the
benefit of Borrower and Lender and their respective successors and permitted
assigns, including, without limitation, any United States trustee, any debtor in
possession or any trustee appointed from a private panel.
N. Survival. Except for the conditions of Closing set forth in Section 4,
which shall be satisfied or waived as of the Closing Date, all representations,
warranties, agreements, obligations and indemnities of Borrower and Lender set
forth in this Agreement and the other Loan Documents shall survive the Closing.
O. Waiver of Jury Trial and Punitive, Consequential, Special and Indirect
Damages. BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY AND ALL
ISSUES PRESENTED IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY
EITHER OF THE PARTIES HERETO AGAINST THE OTHER OR ITS SUCCESSORS WITH RESPECT TO
ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, ANY OF THE OTHER
LOAN DOCUMENTS OR ANY DOCUMENT CONTEMPLATED HEREIN OR RELATED HERETO. THIS
WAIVER BY THE PARTIES HERETO OF ANY RIGHT EITHER MAY HAVE TO A TRIAL BY JURY HAS
BEEN NEGOTIATED AND IS AN ESSENTIAL ASPECT OF THEIR BARGAIN. FURTHERMORE,
BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE
RIGHT EITHER MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL AND INDIRECT
DAMAGES FROM THE OTHER AND ANY OF THE OTHER'S AFFILIATES, OFFICERS, DIRECTORS OR
EMPLOYEES OR ANY OF THEIR SUCCESSORS WITH RESPECT TO ANY AND ALL ISSUES
PRESENTED IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY EITHER
PARTY AGAINST THE OTHER OR ANY OF THE OTHER'S AFFILIATES, OFFICERS, DIRECTORS OR
EMPLOYEES OR ANY OF THEIR SUCCESSORS WITH RESPECT TO ANY MATTER ARISING OUT OF
OR IN CONNECTION WITH THIS AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS OR ANY
DOCUMENT CONTEMPLATED HEREIN OR RELATED HERETO. THE WAIVER BY BORROWER AND
LENDER OF ANY RIGHT THEY MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL AND
INDIRECT DAMAGES HAS BEEN NEGOTIATED BY THE PARTIES HERETO AND IS AN ESSENTIAL
ASPECT OF THEIR BARGAIN.
P. Transfers, Participations and Securitizations. (1) A material
inducement to Lender's willingness to complete the transactions contemplated by
the Loan Documents is Borrower's agreement that Lender may, at any time,
complete a Transfer, Participation or Securitization with respect to the Note,
Mortgage and/or any of the other Loan Documents or any or all servicing rights
with respect thereto.
(2) Borrower agrees to cooperate in good faith with Lender in connection
with any such Transfer, Participation and/or Securitization of the Note,
Mortgage and/or any of the other Loan Documents, or any or all servicing rights
with respect thereto, including, without limitation (i) providing such
documents, financial and other data, and other information and materials (the
"Disclosures") which would typically be required with respect to the Borrower
Parties by a purchaser, transferee, assignee, servicer, participant, investor or
rating agency involved with respect to such Transfer, Participation and/or
Securitization, as applicable; provided, however, the Borrower Parties shall not
be required to make Disclosures of any confidential information or any
information which has not previously been made public unless required by
applicable federal or state securities laws; and (ii) amending the terms of the
transactions evidenced by the Loan Documents to the extent necessary so as to
satisfy the requirements of purchasers, transferees, assignees, servicers,
participants, investors or selected rating agencies involved in any such
Transfer, Participation or Securitization, so long as such amendments would not
have a material adverse effect upon the Borrower Parties or the transactions
contemplated hereunder. Lender shall be responsible for preparing at its expense
any documents evidencing the amendments referred to in the preceding subitem
(ii).
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(3) Borrower consents to Lender providing the Disclosures, as well as any
other information which Lender may now have or hereafter acquire with respect to
the Premises or the financial condition of the Borrower Parties to each
purchaser, transferee, assignee, servicer, participant, investor or rating
agency involved with respect to each Transfer, Participation and/or
Securitization, as applicable. Lender and Borrower (and their respective
Affiliates) shall each pay their own attorneys' fees and other out-of-pocket
expenses incurred in connection with the performance of their respective
obligations under this Section.
(4) Notwithstanding anything to the contrary contained in this Agreement
or the other Loan Documents: (a) an Event of Default or a breach or default,
after the passage of all applicable notice and cure or grace periods, under any
Loan Document or Other Agreement which relates to a loan or sale/leaseback
transaction which has not been the subject of a Securitization, Participation or
Transfer shall not constitute an Event of Default or a breach or default, as
applicable, under any Loan Document or Other Agreement which relates to a loan
which has been the subject of a Securitization, Participation or Transfer; (b)
an Event of Default or a breach or default, after the passage of all applicable
notice and cure or grace periods, under any Loan Document or Other Agreement
which relates to a loan which is included in any Loan Pool shall not constitute
an Event of Default or a breach or default, as applicable, under any Loan
Document or Other Agreement which relates to a loan which is included in any
other Loan Pool; (c) the Loan Documents and Other Agreements corresponding to
the loans in any Loan Pool shall not secure the obligations of any of the
Borrower Parties contained in any Loan Document or Other Agreement which does
not correspond to a loan in such Loan Pool; and (d) the Loan Documents and Other
Agreements which do not correspond to a loan in any Loan Pool shall not secure
the obligations of any of the Borrower Parties contained in any Loan Document or
Other Agreement which does correspond to a loan in such Loan Pool.
Q. Estoppel Certificate. At any time, and from time to time, each party
agrees, promptly and in no event later than fifteen (15) days after a request
from the other party, to execute, acknowledge and deliver to the other party a
certificate in the form supplied by the other party, certifying: (a) to its
knowledge, whether there are then any existing defaults by it or the other party
in the performance of their respective obligations under this Agreement or any
of the other Loan Documents, and, if there are any such defaults, specifying the
nature and extent thereof; (b) that no notice of default has been given or
received by it under this Agreement or any of the other Loan Documents which has
not been cured, except as to defaults specified in the certificate; (c) the
capacity of the person executing such certificate, and that such person is duly
authorized to execute the same on behalf of it; and (d) any other information
reasonably requested by the other party in connection with this Agreement and
the other Loan Documents.
R. Substitute Guarantor. Borrower shall have the one-time right to
substitute an approved, replacement guarantor (the "Replacement Guarantor") for
Michael McDermott as a guarantor of the Loan pursuant to the Guaranty, provided
that the Replacement Guarantor shall (i) have a net worth at least equal to the
net worth of Michael McDermott at the time the Loan was approved by Lender, (ii)
have provided such documentation
23
<PAGE>
IN WITNESS WHEREOF, Borrower and Lender have entered into this Agreement
as of the date first above written.
LENDER:
GE CAPITAL FRANCHISE FINANCE CORPORATION,
a Delaware corporation
By /s/ Kelly A. Hallford
---------------------------------------
Printed Name Kelly A. Hallford
-----------------------------
Its Vice President
--------------------------------------
BORROWER:
KONA GRILL KANSAS CITY, INC.,
a Delaware corporation
By /s/ Jason Merritt
---------------------------------------
Printed Name Jason Merritt
-----------------------------
Its Vice President
--------------------------------------
U.S. Federal Tax Identification Number:
---------------------------------------
Organization Identification Number:
---------------------------------------
Principal Place of Business:
----------------------, ----------------
<PAGE>
STATE OF ARIZONA )
) SS.
COUNTY OF MARICOPA )
The foregoing instrument was acknowledged before me on May 19, 2003 by
Kelly A. Hallford, Vice President of GE Capital Franchise Finance Corporation, a
Delaware corporation, on behalf of the corporation.
/s/ Ann Halpern
Notary Public
My Commission Expires:
August 2, 2005
STATE OF ARIZONA )
) SS.
COUNTY OF MARICOPA )
The foregoing instrument was acknowledged before me on May 15, 2003 by
Jason Merritt, Vice President of Kona Grill Kansas City, Inc., an Delaware
corporation, on behalf of the corporation.
/s/ Joy Cravens, /s/ Joy Capella
Notary Public
My Commission Expires:
February 5, 2005