-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LctUhg9bR2xuLRZTtqjNYxi2NqF9v9r9aKRzkSURe5uXt78aOcNYm3JUyDkxTdlg OzIuRXQEj+F3VgzSLfvlRA== 0000950123-02-010774.txt : 20021113 0000950123-02-010774.hdr.sgml : 20021113 20021113172930 ACCESSION NUMBER: 0000950123-02-010774 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20020929 FILED AS OF DATE: 20021113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALEXANDERS J CORP CENTRAL INDEX KEY: 0000103884 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 620854056 STATE OF INCORPORATION: TN FISCAL YEAR END: 0103 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08766 FILM NUMBER: 02821057 BUSINESS ADDRESS: STREET 1: 3401 WEST END AVE STREET 2: P O BOX 24300 CITY: NASHVILLE STATE: TN ZIP: 37203 BUSINESS PHONE: 6152691900 MAIL ADDRESS: STREET 1: 3401 WEST END AVE STREET 2: SUITE 260 CITY: NASHVILLE STATE: TN ZIP: 37203 FORMER COMPANY: FORMER CONFORMED NAME: WINNERS CORP DATE OF NAME CHANGE: 19890910 FORMER COMPANY: FORMER CONFORMED NAME: VOLUNTEER CAPITAL CORP DATE OF NAME CHANGE: 19820520 FORMER COMPANY: FORMER CONFORMED NAME: VOLUNTEER CAPITAL CORP / TN / DATE OF NAME CHANGE: 19920703 10-Q 1 g79138e10vq.txt J. ALEXANDER'S CORPORATION FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For quarterly period ended September 29, 2002 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to . --------------------------- ----------------- Commission file number 1-8766 J. ALEXANDER'S CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Tennessee 62-0854056 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3401 West End Avenue, Suite 260, P.O. Box 24300, Nashville, Tennessee 37202 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (615) 269-1900 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Common Stock Outstanding - 6,684,735 shares at November 12, 2002. -1- PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS J. ALEXANDER'S CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
SEPTEMBER 29 December 30 2002 2001 ------------ ----------- (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents ..................................... $ 782 $ 1,035 Accounts and notes receivable, including current portion of direct financing leases .................................... 115 174 Inventories ................................................... 737 936 Prepaid expenses and other current assets ..................... 633 835 ------- ------- TOTAL CURRENT ASSETS .......................................... 2,267 2,980 OTHER ASSETS ..................................................... 964 902 PROPERTY AND EQUIPMENT, at cost, less allowances for depreciation and amortization of $25,413 and $22,575 at September 29, 2002, and December 30, 2001, respectively ....... 67,896 66,946 DEFERRED CHARGES, less amortization .............................. 550 475 ------- ------- $71,677 $71,303 ======= =======
-2-
SEPTEMBER 29 December 30 2002 2001 ------------ ----------- (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable ....................................................... $ 2,393 $ 2,598 Accrued expenses and other current liabilities ......................... 4,773 3,956 Unearned revenue ....................................................... 1,771 2,415 Current portion of long-term debt and obligations under capital leases ...................................................... 8,078 2,746 -------- -------- TOTAL CURRENT LIABILITIES ........................................... 17,015 11,715 LONG-TERM DEBT AND OBLIGATIONS UNDER CAPITAL LEASES, net of portion classified as current ........................... 13,438 19,532 OTHER LONG-TERM LIABILITIES ............................................... 2,206 1,886 STOCKHOLDERS' EQUITY Common Stock, par value $.05 per share: Authorized 10,000,000 shares; issued and outstanding 6,705,535 and 6,797,618 shares at September 29, 2002, and December 30, 2001, respectively ............. 335 340 Preferred Stock, no par value: Authorized 1,000,000 shares; none issued .............................................................. -- -- Additional paid-in capital ............................................. 34,464 34,739 Retained earnings ...................................................... 5,637 4,692 -------- -------- 40,436 39,771 Note receivable - Employee Stock Ownership Plan ........................ (688) (688) Employee notes receivable - 1999 Loan Program .......................... (730) (913) -------- -------- TOTAL STOCKHOLDERS' EQUITY .......................................... 39,018 38,170 -------- -------- $ 71,677 $ 71,303 ======== ========
See notes to consolidated condensed financial statements. -3- J. ALEXANDER'S CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Nine Months Ended Quarter Ended ----------------------------- ----------------------------- SEPT. 29 Sept. 30 SEPT. 29 Sept. 30 2002 2001 2002 2001 -------- -------- -------- -------- Net sales .................................. $ 73,680 $ 67,076 $ 23,698 $ 22,188 Costs and expenses: Cost of sales ........................... 23,338 21,922 7,570 7,310 Restaurant labor and related costs ...... 24,644 22,493 8,073 7,607 Depreciation and amortization of restaurant property and equipment .... 3,295 3,148 1,099 1,055 Other operating expenses ................ 13,849 12,370 4,651 4,209 -------- -------- -------- -------- Total restaurant operating expenses .. 65,126 59,933 21,393 20,181 General and administrative expenses ........ 5,936 5,380 1,910 1,945 Pre-opening expense ........................ 42 558 42 453 -------- -------- -------- -------- Operating income (loss) .................... 2,576 1,205 353 (391) Other income (expense): Interest expense, net ................... (829) (975) (247) (300) Gain on purchase of debentures .......... -- 7 -- -- Other, net .............................. (60) (35) (28) 24 -------- -------- -------- -------- Total other expense .................. (889) (1,003) (275) (276) -------- -------- -------- -------- Income (loss) before income taxes .......... 1,687 202 78 (667) Income tax (provision) benefit ............. (742) (242) (34) 393 -------- -------- -------- -------- Net income (loss) .......................... $ 945 $ (40) $ 44 $ (274) ======== ======== ======== ======== Basic earnings (loss) per share ............ $ .14 $ (.01) $ .01 $ (.04) ======== ======== ======== ======== Diluted earnings (loss) per share .......... $ .14 $ (.01) $ .01 $ (.04) ======== ======== ======== ========
See notes to consolidated condensed financial statements. -4- J. ALEXANDER'S CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED IN THOUSANDS)
Nine Months Ended ----------------------------- SEPT. 29 Sept. 30 2002 2001 -------- -------- Net cash provided by operating activities .................. $ 5,098 $ 3,794 Net cash used by investing activities: Purchase of property and equipment ...................... (4,437) (6,107) Other investing activities .............................. (55) (55) -------- -------- (4,492) (6,162) Net cash (used) provided by financing activities: Payments on debt and obligations under capital leases ... (1,723) (1,327) Proceeds under bank line of credit agreement ............ 29,586 30,345 Payments under bank line of credit agreement ............ (28,625) (26,829) Other ................................................... (97) (45) -------- -------- (859) 2,144 Decrease in cash and cash equivalents ...................... (253) (224) Cash and cash equivalents at beginning of period ........... 1,035 1,057 -------- -------- Cash and cash equivalents at end of period ................. $ 782 $ 833 ======== ========
See notes to consolidated condensed financial statements. -5- J. ALEXANDER'S CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) NOTE A - BASIS OF PRESENTATION The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Certain reclassifications have been made in the prior year's consolidated condensed financial statements to conform to the 2002 presentation. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the quarter and nine months ended September 29, 2002, are not necessarily indicative of the results that may be expected for the fiscal year ending December 29, 2002. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the fiscal year ended December 30, 2001. NOTE B - EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share:
(In thousands, except per share amounts) Nine Months Ended Quarter Ended -------------------------- -------------------------- SEPT. 29 Sept. 30 SEPT. 29 Sept. 30 2002 2001 2002 2001 -------- -------- -------- -------- NUMERATOR: Net income (loss) (numerator for basic earnings per share) ...................................... $ 945 $ (40) $ 44 $ (274) Effect of dilutive securities ......................... -- -- -- -- ------ ------- ------ ------- Net income (loss) after assumed conversions (numerator for diluted earnings per share) ...... $ 945 $ (40) $ 44 $ (274) ====== ======= ====== ======= DENOMINATOR: Weighted average shares (denominator for basic earnings per share) ............................. 6,780 6,853 6,764 6,844 Effect of dilutive securities: Employee stock options .......................... 59 -- 61 -- ------ ------- ------ ------- Adjusted weighted average shares and assumed conversions (denominator for diluted earnings per share) ...................................... 6,839 6,853 6,825 6,844 ====== ======= ====== ======= Basic earnings (loss) per share ....................... $ .14 $ (.01) $ .01 $ (.04) ====== ======= ====== ======= Diluted earnings (loss) per share ..................... $ .14 $ (.01) $ .01 $ (.04) ====== ======= ====== =======
-6- In situations where the exercise price of outstanding employee stock options is greater than the average market price of common shares, such options are excluded from the computation of diluted earnings per share because of their anti-dilutive impact. For the quarter ended September 29, 2002, options to purchase 247,000 shares of common stock at prices ranging from $3.44 to $11.69 were excluded from the computation of diluted earnings per share due to their anti-dilutive effect. For the nine months ended September 29, 2002, options to purchase 417,000 shares of common stock at prices ranging from $2.75 to $11.69 were excluded from the diluted earnings per share calculation. Due to the net losses incurred during both the second quarter and nine months ended September 30, 2001, all outstanding options were excluded from the computation of diluted earnings per share for these periods. NOTE C - SUBSEQUENT EVENT On October 29, 2002, the Company completed, through an indirect wholly-owned subsidiary, a mortgage loan transaction in the amount of $25,000,000. The mortgage loan has an effective interest rate of approximately 8.2% per annum and is payable in equal monthly installments of principal and interest of approximately $212,000 over a period of 20 years through November 2022. Net proceeds from the mortgage loan, after deducting fees and expenses associated with the transaction, were approximately $24,275,000. These funds were used to pay off the outstanding balance of $15,470,000 on the Company's bank line of credit as of October 29, 2002. Remaining funds were invested in short term money market funds and are expected to be used primarily for retiring the Company's $6,250,000 of convertible subordinated debentures which are due in June 2003. Provisions of the mortgage loan and related agreements require that a minimum fixed charge coverage ratio be maintained for the restaurants securing the loan and that the Company's leverage ratio not exceed a specified level. The loan is pre-payable without penalty after five years, with a yield maintenance penalty, if applicable, in effect prior to that time. The mortgage loan is secured by the real estate, equipment and other personal property of nine of the Company's restaurant locations with an aggregate book value of $26,988,000 at September 29, 2002. The real property at these locations is owned by JAX Real Estate, LLC, a newly formed entity which is the borrower under the loan agreement and which leases the properties to a wholly-owned subsidiary of the Company as lessee. The Company has guaranteed the obligations of the lessee subsidiary to pay rents under the lease. In addition to JAX Real Estate, LLC, other wholly-owned subsidiaries of the Company, JAX RE Holdings, LLC and JAX Real Estate Management, Inc., were formed in connection with the transaction to act as a holding company and a member of the board of managers of JAX Real Estate, LLC, respectively. While all of these subsidiaries will be included in the Company's consolidated financial statements, each of them was established as a special purpose, bankruptcy remote entity and maintains its own legal existence, ownership of its assets and responsibility for its liabilities separate from the Company and its other affiliates. -7- The September 29, 2002, balance sheet presents long-term debt and obligations under capital leases as to its current or long term portions based on the scheduled maturities of the debt at that time. Borrowings outstanding under the Company's unsecured bank line of credit totaled $15,232,000 at September 29, 2002. Because the credit line, which was scheduled to mature on December 1, 2002, contained a provision allowing the Company to convert borrowings outstanding under the line to a term loan payable in 84 equal monthly installments of principal plus interest, $1,813,000, representing ten months' principal payments if the total credit line balance were converted to a term loan, was reflected as a current liability in the September 29, 2002 balance sheet. The $6,250,000 of convertible subordinated debentures maturing in June 2003 was also reflected as a current liability in the September 29, 2002 balance sheet. The following presentation reflects the classification of long-term debt and obligations under capital leases on a pro forma basis as of September 29, 2002, as if the $25,000,000 mortgage loan had been completed and the outstanding balance of $15,232,000 under the Company's bank line of credit as well as the $6,250,000 of convertible subordinated debentures had been retired at that date:
As Presented Pro Forma ------------ ----------- Current portion of long-term debt and obligations under capital leases $ 8,078,000 $ 530,000 Long-term debt and obligations under capital leases, net of portion classified as current $13,438,000 $24,504,000
This pro forma presentation includes approximately $3,518,000 of debt obligations which were not actually outstanding at September 29, 2002. In addition, on the basis of this presentation, $2,793,000 of additional cash which is not reflected above would have been available to the Company. NOTE D - INCOME TAXES The Company's provisions for income taxes for the first nine months and third quarters of both 2002 and 2001 include the effect of estimated federal alternative minimum tax (AMT) and state income taxes payable. The effective tax rates used in all periods are higher than the federal statutory rate because the AMT rate is applied to the Company's pre-tax accounting income after adding back certain tax preference items as well as certain permanent differences and timing differences in book and tax income. Because the Company maintains a 100% valuation allowance on its deferred tax assets, no benefit is recognized in the current year's income tax provision with respect to the -8- AMT credit carryforward or other tax assets generated for the year. Further, because of the application of AMT, the Company at its current taxable income level is unable to take advantage of certain other tax carryforwards that it has accumulated. NOTE E - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS The Financial Accounting Standards Board issued SFAS No. 142 "Goodwill and Other Intangible Assets" ("SFAS 142") in July 2001. SFAS 142 requires that upon adoption, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be evaluated for impairment on an annual basis. Identifiable intangible assets will continue to be amortized over their useful lives and reviewed for impairment in accordance with SFAS 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". SFAS 142 is effective for fiscal years beginning after December 15, 2001. The Company has applied the new rules on accounting for goodwill and other intangible assets beginning in the first quarter of 2002. As of the date of adoption, the Company had unamortized goodwill of $171,000, which is subject to the transition provisions of SFAS 142. The Company is in the process of completing its assessment of SFAS 142 and until such assessment is finalized, it is not practicable to reasonably estimate the impact of SFAS 142's adoption on the Company's financial statements. Any charge related to the adoption of SFAS 142 would have no effect on the Company's cash position and would be reported as a cumulative effect of change in accounting principle effective as of the beginning of fiscal 2002. In August 2001, the Financial Accounting Standards Board issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (SFAS 144), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes SFAS No. 121, "Accounting for the Impairment or Disposal of Long-Lived Assets and for Long-Lived Assets to be Disposed Of", and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations" for a disposal of a segment of a business. SFAS 144 provides a single framework for evaluating long-lived assets that are to be disposed of by sale and addresses the principal implementation issues. SFAS 144 is effective for fiscal years beginning after December 15, 2001. The Company adopted SFAS 144 as of December 31, 2001 and adoption of the Statement did not have a significant impact on the Company's financial position or results of operations. -9- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, (i) the percentages which the items in the Company's Consolidated Statements of Operations bear to total net sales, and (ii) other selected operating data:
Nine Months Ended Quarter Ended ---------------------------- ---------------------------- SEPT. 29 Sept. 30 SEPT. 29 Sept. 30 2002 2001 2002 2001 --------- --------- --------- --------- Net sales ........................................ 100.0% 100.0% 100.0% 100.0% Costs and expenses: Cost of sales .............................. 31.7 32.7 31.9 32.9 Restaurant labor and related costs ......... 33.4 33.5 34.1 34.3 Depreciation and amortization of restaurant property and equipment .... 4.5 4.7 4.6 4.8 Other operating expenses ................... 18.8 18.4 19.6 19.0 --------- --------- --------- --------- Total restaurant operating expenses .. 88.4 89.4 90.3 91.0 General and administrative expenses .............. 8.1 8.0 8.1 8.8 Pre-opening expense .............................. 0.1 0.8 0.2 2.0 --------- --------- --------- --------- Operating income (loss) .......................... 3.5 1.8 1.5 (1.8) Other income (expense): Interest expense, net ...................... (1.1) (1.5) (1.0) (1.4) Other, net ................................. (0.1) (0.1) (0.1) 0.1 --------- --------- --------- --------- Total other expense .................. (1.2) (1.5) (1.2) (1.2) --------- --------- --------- --------- Income (loss) before income taxes ................ 2.3 0.3 0.3 (3.0) Income tax (provision) benefit ................... (1.0) (0.4) (0.1) 1.8 --------- --------- --------- --------- Net income (loss) ................................ 1.3% (0.1)% 0.2% (1.2)% ========= ========= ========= ========= Restaurants open at end of period ................ 24 23 Weighted average weekly sales per restaurant: All restaurants ............................ $ 78,800 $ 77,800 $ 76,000 $ 76,500 Same store restaurants ..................... $ 78,900 $ 77,800 $ 76,400 $ 76,500
NET SALES Net sales increased by $6,604,000, or 9.8%, and $1,510,000, or 6.8%, for the first nine months and third quarter of 2002, respectively, as compared to the same periods of 2001. These increases were attributable to new restaurants opened during September and December of 2001 and, for the nine month period ended September 29, 2002, to sales increases within the -10- Company's same store restaurant base. Same store sales, which include comparable results for all restaurants open for more than 18 months, averaged $78,900 and $76,400 per week on a base of 22 restaurants during the nine months and third quarter ended September 29, 2002 compared to averages of $77,800 and $76,500 during the corresponding periods of 2001. Management estimates the average check per guest, excluding alcoholic beverage sales, was $15.82 and $15.74 for the first nine months and third quarter of 2002, representing increases of 3.7% and 2.1% compared to $15.25 and $15.42 for the same periods of 2001. Menu prices for the first nine months and third quarter of 2002 increased by an estimated 2.2% and 0.8%, respectively, compared to the same periods in 2001. The Company estimates that customer traffic (guest counts) on a same store basis decreased by approximately 2.4% and 2.1% during the first nine months and third quarter of 2002, respectively, compared to the corresponding periods of 2001. The menu price increases referenced above are primarily attributed to modest price increases implemented by management during August and October of 2001 on selected menu items in order to positively impact both sales performance and profitability. While customer traffic decreased during the first nine months and third quarter of 2002 compared to the corresponding periods of 2001, management anticipates that the effect of menu management and continued emphasis on providing professional service will reverse this trend over time. However, management anticipates that growth in customer traffic may continue to be constrained for the remainder of 2002 as the nation's economy has not recovered as quickly as hoped. COSTS AND EXPENSES Total restaurant operating expenses decreased to 88.4% and 90.3% of sales in the first nine months and third quarter of 2002 compared to 89.4% and 91.0% in the corresponding periods of 2001. These decreases were due primarily to lower cost of sales which decreased to 31.7% and 31.9% of sales in the first nine months and third quarter of 2002 from 32.7% and 32.9% in the corresponding periods of 2001. The decreases in cost of sales were due to the impact of increased menu prices and favorable costs associated with pork, poultry and effective March 1, 2002, beef, which more than offset increased produce costs incurred during the first quarter of 2002 as a result of inclement weather in the western United States and during August and September of 2002 upon expiration of the Company's favorably priced potato contract. Restaurant labor and related costs decreased from 34.3% of sales during the third quarter of 2001 to 34.1% of sales during the same period of 2002. This decrease is attributed to the favorable effect of an increase during January of 2002 in the tip share percentage which servers are required to contribute to each restaurant's tip pool which, in turn, reduced the hourly wage paid by the Company to other employees receiving distributions from the tip pool program. This change more than offset the impact of increased wages associated with kitchen staff, increased payouts related to the Company's restaurant level bonus program, and increases in workers' compensation insurance premiums and other benefit related items. These same factors resulted in restaurant labor and related costs decreasing to 33.4% of sales for the first nine months of 2002 compared to 33.5% of sales during the same period of 2001. -11- Depreciation and amortization of restaurant property and equipment decreased to 4.5% and 4.6% of sales during the first nine months and third quarter of 2002, compared to 4.7% and 4.8% of sales during the corresponding periods of the prior year, primarily due to assets which became fully depreciated subsequent to September 30, 2001. Other operating expenses increased to 18.8% and 19.6% of sales during the first nine months and third quarter of 2002 compared to 18.4% and 19.0% of sales in the corresponding periods of 2001. These increases are primarily related to higher premiums associated with the Company's property and casualty insurance program effective October 1, 2001, additional rent expense, and higher repair and maintenance expenditures. Management expects a generally favorable cost environment for the remainder of 2002 as a result of lower beef prices and other factors. The Company's property and casualty insurance program was renewed effective October 1, 2002 at rates comparable to those for the policy year ended September 30, 2002. Management believes that, based on current sales trends and cost estimates, the Company will post operating results for the fourth quarter generally comparable to those realized during the same period of 2001 and that the full year of 2002 will reflect improved operating results compared to those realized during 2001. Management believes that continuing to increase sales volumes in the Company's restaurants is a significant factor in improving the Company's profitability and intends to maintain a low new restaurant development rate of no more than two new restaurants per year to allow management to focus intently on improving sales and profits in its existing restaurants while maintaining its pursuit of operational excellence. Further, the Company's criteria for new restaurant development target locations with high population densities and high household incomes which management believes provide the best prospects for achieving outstanding financial returns on the Company's investments in new restaurants. GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses, which include supervisory costs as well as management training costs and all other costs above the restaurant level, totaled 8.1% of sales for both the first nine months and third quarter of 2002 compared to 8.0% and 8.8% of sales for the corresponding periods of 2001. For the nine months ended September 29, 2002, general and administrative expenses increased $556,000 compared to the same period in 2001, as the inclusion of bonus accruals, increases in other employee benefit obligations, and higher management trainee salaries more than offset decreases in travel costs and employee procurement and relocation expense. For the third quarter of 2002, general and administrative expenses decreased $35,000 compared to the same period of 2001 as decreases in travel costs and employee procurement and relocation expenses more than offset the impact of increased expenses in other areas. Management anticipates that general and administrative expenses will increase only slightly, if at all, as a percentage of sales for fiscal 2002 when compared to fiscal 2001. -12- OTHER INCOME (EXPENSE) Net interest expense decreased from $975,000 to $829,000 during the first nine months of 2002 compared to the same period of 2001. For the third quarter, net interest expense decreased from $300,000 in 2001 to $247,000 during the corresponding quarter of 2002. These decreases reflect reduced balances associated with the Company's convertible subordinated debentures and lower interest rates on the Company's line of credit, which more than offset increases in the average principal balance outstanding under the line during the 2002 periods. INCOME TAXES The Company's provisions for income taxes for the first nine months and third quarters of both 2002 and 2001 include the effect of estimated federal alternative minimum tax (AMT) and state income taxes payable. The effective tax rates used in all periods are higher than the federal statutory rate because the AMT rate is applied to the Company's pre-tax accounting income after adding back certain tax preference items as well as certain permanent differences and timing differences in book and tax income. Because the Company maintains a 100% valuation allowance on its deferred tax assets, no benefit is recognized in the current year's income tax provision with respect to the AMT credit carryforward or other tax assets generated for the year. Further, because of the application of AMT, the Company at its current taxable income level is unable to take advantage of other tax carryforwards that it has accumulated. LIQUIDITY AND CAPITAL RESOURCES The Company's primary needs for capital in recent years have been for the development and maintenance of its J.Alexander's restaurants and for meeting required debt service obligations. The Company has met these needs and maintained liquidity primarily by use of cash flow from operations and use of a bank line of credit. The Company had cash flow from operations totaling $5,098,000 and $3,794,000 during the first nine months of 2002 and 2001, respectively. Cash and cash equivalents decreased from $1,035,000 at year end 2001 to $782,000 at September 29, 2002. On October 29, 2002, the Company obtained $25,000,000 of long term financing through completion of a mortgage loan transaction. The mortgage loan has an effective interest rate of approximately 8.2% per annum and is payable in equal monthly installments of principal and interest of approximately $212,000 over a period of 20 years through November 2022. Net proceeds from the mortgage loan, after deducting fees and expenses associated with the transaction, were approximately $24,275,000. These funds were used to pay off the outstanding balance of $15,470,000 on the Company's bank line of credit as of October 29, 2002, terminating that facility. Remaining funds were invested in short term money market funds and are expected to be used primarily for retiring the Company's $6,250,000 of convertible subordinated debentures which are due in June 2003. -13- Provisions of the mortgage loan and related agreements require that a minimum fixed charge coverage ratio be maintained for the restaurants securing the loan and that the Company's leverage ratio not exceed a specified level. The loan is pre-payable without penalty after five years, with a yield maintenance penalty, if applicable, in effect prior to that time. The mortgage loan is secured by the real estate, equipment and other personal property of nine of the Company's restaurant locations with an aggregate book value of $26,988,000 at September 29, 2002. The real property at these locations is owned by JAX Real Estate, LLC, the borrower under the loan agreement, which leases them to a wholly-owned subsidiary of the Company as lessee. The Company has guaranteed the obligations of the lessee subsidiary to pay rents under the lease. JAX Real Estate, LLC, while an indirect wholly owned subsidiary of the Company which will be included in the Company's consolidated financial statements, was established as a special purpose, bankruptcy remote entity and maintains its own legal existence, ownership of its assets and responsibility for its liabilities separate from the Company and its other affiliates. The September 29, 2002, balance sheet presents long-term debt and obligations under capital leases as to its current or long term portions based on the scheduled maturities of the debt at that time. Borrowings outstanding under the Company's unsecured bank line of credit totaled $15,232,000 at September 29, 2002. Because the credit line, which was scheduled to mature on December 1, 2002, contained a provision allowing the Company to convert borrowings outstanding under the line to a term loan payable in 84 equal monthly installments of principal plus interest, $1,813,000, representing ten months' principal payments if the total credit line balance were converted to a term loan, was reflected as a current liability in the September 29, 2002 balance sheet. The $6,250,000 of convertible subordinated debentures maturing in June 2003 was also reflected as a current liability in the September 29, 2002 balance sheet. The following presentation reflects the classification of long-term debt and obligations under capital leases on a pro forma basis as of September 29, 2002, as if the $25,000,000 mortgage loan had been completed and the outstanding balance of $15,232,000 under the Company's bank line of credit as well as the $6,250,000 of convertible subordinated debentures had been retired at that date:
As Presented Pro Forma ------------ ----------- Current portion of long-term debt and obligations under capital leases $ 8,078,000 $ 530,000 Long-term debt and obligations under capital leases, net of portion classified as current $13,438,000 $24,504,000
This pro forma presentation includes approximately $3,518,000 of debt obligations which were not actually outstanding at September 29, 2002. In addition, on the basis of this presentation, $2,793,000 of additional cash which is not reflected above would have been available to the Company. -14- The Company's primary need for capital is expected to continue to be for the development and maintenance of its J. Alexander's restaurants, the cost of which management estimates to be approximately $6.7 million for 2002. This amount includes expenditures for improvements to the Company's existing restaurants as well as for a significant portion of the costs of a new restaurant to be opened in early 2003. The Company may also make purchases of up to $1,000,000 of its common stock under a repurchase program authorized by the Company's Board of Directors. From June 2001 through November 7, 2002, the Company has repurchased approximately 233,000 shares at a cost of approximately $636,000. The Company generally does not repurchase shares following the end of its fiscal quarter until after results for the quarter have been publicly announced. While a working capital deficit of $14,748,000 existed as of September 29, 2002, the Company does not believe this deficit impairs the overall financial condition of the Company. A significant portion of the current liabilities reflected in the September 29, 2002 balance sheet relates to debt which was refinanced subsequent to September 29, 2002, as discussed above. Further, certain of the Company's expenses, particularly depreciation and amortization, do not require current outlays of cash, and requirements for funding accounts receivable and inventories are relatively insignificant; thus virtually all cash generated by operations is available to meet current obligations, which include rental expense and other restaurant operating expenses. Management believes that cash and short term investments on hand following the financing transaction described above combined with cash flow from operations will be adequate to meet its financing needs through the upcoming year. However, it also plans to negotiate a new bank line of credit which would provide additional liquidity if needed to meet the Company's development or working capital needs. While management believes that such financing will be available on acceptable terms, there can be no assurance that a satisfactory credit line can be obtained. CRITICAL ACCOUNTING POLICIES The preparation of the Company's consolidated condensed financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. On an ongoing basis, management evaluates its estimates and judgments, including those related to its accounting for income taxes, impairment of long-lived assets, contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. -15- Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and potentially result in materially different results under different assumptions and conditions. Management believes the following critical accounting policies are those which involve the more significant judgments and estimates used in the preparation of its consolidated financial statements. - - Income Taxes - the Company had $5,056,000 of gross deferred tax assets at December 30, 2001, consisting principally of $4,013,000 of tax credit carryforwards and $552,000 of net operating loss carryforwards. Generally accepted accounting principles require that the Company record a valuation allowance against its deferred tax assets unless it is "more likely than not" that such assets will ultimately be realized. Due to losses incurred from 1997 through 1999 and because the Company operates with a high degree of financial and operating leverage, with a significant portion of its costs being fixed or semi-fixed in nature, management has been unable to conclude that it is more likely than not that its existing deferred tax assets will be realized and has maintained a valuation allowance for 100% of its net deferred tax assets, net of deferred tax liabilities, since 1997. As a result, the Company currently provides for income taxes only to the extent that it expects to pay cash taxes (primarily state taxes and the federal alternative minimum tax) on current taxable income. It is possible, however, that the Company could generate profits in the future at levels which would cause management to conclude that it is more likely than not that the Company will realize all or a portion of its various net deferred tax assets. Upon reaching such a conclusion, management would record the estimated net realizable value of the deferred tax assets. Subsequent revisions to the estimated net realizable value of the deferred tax assets could cause the Company's provision for income taxes to vary significantly from period to period, although its cash tax payments would remain unaffected until the benefit of the various carryforwards was fully utilized. - - Impairments of Long-Lived Assets - when events and circumstances indicate that long-lived assets - most typically assets associated with a specific restaurant - might be impaired, management compares the carrying value of such assets to the undiscounted cash flows it expects that restaurant to generate over its remaining useful life. In calculating its estimate of such undiscounted cash flows, management is required to make assumptions relative to the restaurant's future sales performance, cost of sales, labor, operating expenses and occupancy costs, which include property taxes, property and casualty insurance premiums and other similar costs associated with the restaurant's operation. The resulting forecast of undiscounted cash flows represents management's best estimate based on both historical results and management's expectation of future operations for that particular restaurant. To date, all of the Company's long-lived assets have been determined to be recoverable based on management's estimates of future cash flows. The above listing is not intended to be a comprehensive listing of all of the Company's accounting policies. In many cases, the accounting treatment of a particular transaction is -16- specifically dictated by generally accepted accounting principles, with no need for management's judgment in their application. There are also areas in which management's judgment in selecting any available alternative would not produce a materially different result. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the fiscal year ended December 30, 2001, which contain accounting policies and other disclosures required by generally accepted accounting principles. FORWARD-LOOKING STATEMENTS In connection with the safe harbor established under the Private Securities Litigation Reform Act of 1995, the Company cautions investors that certain information contained in this Form 10-Q, particularly information regarding future economic performance and finances, development plans, and objectives of management is forward-looking information that involves risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by forward-looking statements. The Company disclaims any intent or obligation to update these forward-looking statements. Factors which could affect actual results include, but are not limited to, the Company's ability to increase sales in certain of its restaurants; the Company's ability to recruit and train qualified restaurant management personnel; competition within the casual dining industry, which is very intense; changes in business and economic conditions; the terms of financing arrangements; changes in consumer tastes; and government regulations. See "Risk Factors" included in the Company's Annual Report on Form 10-K for the year ended December 30, 2001 and incorporated herein by reference for a description of a number of risks and uncertainties which could affect actual results. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK On October 29, 2002, the Company completed a mortgage loan transaction in the amount of $25,000,000 with net proceeds, after deducting fees and expenses associated with the transaction, totaling approximately $24,275,000. The mortgage loan has an effective interest rate of 8.2% per annum and is payable in equal monthly installments of principal and interest over a period of 20 years. Proceeds from this loan were used to pay off the outstanding balance of $15,470,000 on the Company's bank line of credit as of October 29, 2002, terminating this facility. Remaining funds were invested in short term money market funds and are expected to be used primarily for retiring the Company's $6,250,000 of convertible subordinated debentures which are due in June 2003. The interest rate on borrowings outstanding under the bank line of credit was based on LIBOR plus two to three percent, depending on certain financial ratios achieved by the Company. Thus, while the Company is no longer subject to market risk from exposure to changes in interest rates relative to its bank line of credit facility, market risk does exist with respect to exposure to changes in interest rates affecting the loan proceeds referenced above which have been invested in money market funds. However, the Company does not consider its current exposure to changes in such rates to be material. Aside from the factors noted above, there have been no material changes in the disclosures set forth in Item 7a of the Company's Annual Report on Form 10-K for the year ended December 30, 2001. ITEM 4. CONTROLS AND PROCEDURES (a) Evaluation of disclosure controls and procedures. The Company's principal executive officer and its principal financial officer, after completing the evaluation of the effectiveness of the Company's disclosure controls and procedures (as defined in Exchange Act Rules 13a-14(c) and 15d-14(c)) on November 11, 2002, have concluded that, as of such date, the Company's disclosure controls and procedures were adequate and effective to ensure that material information relating to the Company and its consolidated subsidiaries is communicated to the Company's management, including its principal executive officer and principal financial officer, to allow timely decisions regarding required disclosures. (b) Changes in internal controls. There were no significant changes in the Company's internal controls or in other factors that could significantly affect these controls -17- subsequent to the date of their evaluation, nor were there any significant deficiencies or material weaknesses in the Company's internal controls. As a result, no corrective actions were required or undertaken. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: Exhibit (10)(a) Correspondence dated August 29, 2002, extending maturity date of loan from Bank of America, NA ("Bank"), to J. Alexander's Corporation & J. Alexander's Restaurants, Inc. ("Borrower"), in the original principal amount of $20,000,000. Exhibit (10)(b) Loan Agreement dated October 29, 2002 by and between GE Capital Franchise Finance Corporation and JAX Real Estate, LLC. Exhibit (10)(c) Master Lease dated October 29, 2002 by and between JAX Real Estate, LLC and J. Alexander's Restaurants, Inc. Exhibit (10)(d) Unconditional Guaranty of Payment and Performance dated October 29, 2002 by and between J. Alexander's Corporation and JAX Real Estate, LLC. Exhibit (10)(e) Form of Promissory Note for each premises subject to the Loan Agreement dated October 29, 2002 by and between JAX Real Estate, LLC and GE Capital Franchise Finance Corporation. Exhibit 99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Exhibit 99.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(b) On August 14, 2002, the Company filed a Form 8-K containing Item 9, Regulation FD Disclosure. Certifications of Lonnie J. Stout II and R. Gregory Lewis, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, were attached as exhibits pursuant to Item 7 of Form 8-K. -18- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. J. ALEXANDER'S CORPORATION Date: 11/13/02 /s/ Lonnie J. Stout II ------------------ ------------------------------------------- Lonnie J. Stout II Chairman, President and Chief Executive Officer (Principal Executive Officer) Date: 11/13/02 /s/ R. Gregory Lewis ------------------ ------------------------------------------- R. Gregory Lewis Vice-President and Chief Financial Officer (Principal Financial Officer) CERTIFICATIONS: I, Lonnie J. Stout II, certify that: 1. I have reviewed this quarterly report on Form 10-Q of J. Alexander's Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; -19- b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 13, 2002 By: /s/ Lonnie J. Stout II ------------------------------------------ Lonnie J. Stout II Chairman of the Board, Chief Executive Officer and President -20- I, R. Gregory Lewis, certify that: 1. I have reviewed this quarterly report on Form 10-Q of J. Alexander's Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 13, 2002 By: /s/ R. Gregory Lewis --------------------------------------- R. Gregory Lewis Vice President, Chief Financial Officer and Secretary -21- J. ALEXANDER'S CORPORATION AND SUBSIDIARIES INDEX TO EXHIBITS
Exhibit No. Page No. - ----------- -------- (10)(a) Correspondence dated August 29, 2002, extending maturity date of loan from Bank of America, NA ("Bank"), to J. Alexander's Corporation & J. Alexander's Restaurants, Inc. ("Borrower"), in the original principal amount of $20,000,000. (10)(b) Loan Agreement dated October 29, 2002 by and between GE Capital Franchise Finance Corporation and JAX Real Estate, LLC. (10)(c) Master Lease dated October 29, 2002 by and between JAX Real Estate, LLC and J. Alexander's Restaurants, Inc. (10)(d) Unconditional Guaranty of Payment and Performance dated October 29, 2002 by and between J. Alexander's Corporation and JAX Real Estate, LLC. (10)(e) Form of Promissory Note Agreement dated October 29, 2002 by and between JAX Real Estate, LLC and GE Capital Franchise Finance Corporation. Exhibit 99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Exhibit 99.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
-22- EX-10.A 3 g79138exv10wa.txt CORRESPONDENCE EXTENDING MATURITY DATE Exhibit 10(a) August 29, 2002 By First Class and Certified Mail Return Receipt Requested J. Alexander's Corporation & J. Alexander's Restaurants, Inc. Attention: R. Gregory Lewis, VP and CFO 3401 West End Ave, Suite 260 Nashville, TN 37203 Obligation 681118/315-323 RE: Extension of Maturity Date of Loan From Bank of America, NA ("Bank"), to J. Alexander's Corporation & J. Alexander's Restaurants, Inc. ("Borrower"), in the original principal amount of $20,000,000.00. Dear Mr. Lewis, Bank is owner and holder of the certain Promissory Note dated August 14, 2001, between Borrower and Bank (the "Note"). As of the date of this letter (the "Effective Date"), the outstanding principal balance of the Note is $15,232,776.26. The Note has a maturity date of October 1, 2002, (the "Maturity Date"). The Borrower has requested and Bank has agreed to extend the Maturity Date of the Note. Effective as of the Effective Date, the Maturity Date is extended to December 1, 2002, at which time all outstanding principal and accrued interest under the Note shall be due and payable in full. Monthly interest payments will continue as specified in the Promissory Note. This extension shall not by implication or otherwise limit the rights and remedies of the Bank under the Note and all other loan documents, nor alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Note and all other loan documents, all of which are ratified and affirmed in all respects and shall continue in full force and effect. Bank of America, NA By: /s/ Cheryl Francetic ----------------------------------------- Cheryl Francetic Loan Administrator Cc: William Diehl, Client Manager EX-10.B 4 g79138exv10wb.txt LOAN AGREEMENT Exhibit 10(b) LOAN AGREEMENT THIS LOAN AGREEMENT (this "Agreement") is made as of October 29, 2002 (the "Closing Date"), by and between GE CAPITAL FRANCHISE FINANCE CORPORATION, a Delaware corporation ("Lender"), and JAX REAL ESTATE, LLC, a Delaware limited liability company ("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. ss. ss. 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 Borrower or any of the Lessee Parties. "BSA" means the Bank Secrecy Act (31 U.S.C.ss.ss. 5311 et. seq.), and its implementing regulations, Title 31 Part 103 of the U.S. Code of Federal Regulations. "Business Day" means any day on which Lender is open for business other than a Saturday, Sunday or a legal holiday, ending at 5:00 P.M. Phoenix, Arizona time. "Closing" means the disbursement of the Loan Amounts by Title Company as contemplated by this Agreement. "Code" means Title 11 of the United States Code, 11 U.S.C. Sec. 101 et seq., as amended. "Collateral Assignment" means the Collateral Assignment of License Agreement dated as of the date of this Agreement executed by Borrower for the benefit of Lender, as the same may be amended from time to time. "Default Rate" has the meaning set forth in the Notes. "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 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 Borrower, Lessee 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 any of the Premises and/or any activity or operation formerly conducted by any person or entity on any of 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 or USTs and/or the protection of human health or the environment by reason of a Release or a Threatened Release of Hazardous Materials or USTs or relating to liability for or costs of Remediation or prevention of Releases. "Environmental Laws" includes, but is not limited to, the following statutes, as amended, any successor thereto, and any regulations, rulings, orders or decrees promulgated pursuant thereto, and any state or local statutes, ordinances, rules, regulations, orders, injunctions and decrees of Governmental Authorities: the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.ss.ss. 9601 et seq.; the Emergency Planning and Community Right-to-Know Act, 42 U.S.C.ss. 11001 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C.ss. 5101 et seq.; the Resource Conservation and Recovery Act (including but not limited to Subtitle I relating to USTs), 42 U.S.C.ss.ss. 6901 et seq.; the Clean Water Act, 33 U.S.C.ss.ss. 1251 et seq.; the Clean Air Act, 42 U.S.C.ss.ss. 7401 et seq.; the Toxic Substances Control Act, 15 U.S.C.ss. 2601 et seq.; the Safe Drinking Water Act, 42 U.S.C.ss.ss. 7401 et seq.; the Occupational Safety and Health Act, 29 U.S.C.ss. 651 et seq.; the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C.ss.ss. 136 et seq.; the Endangered Species Act, 16 U.S.C.ss.ss. 1531 et seq. and the National Environmental Policy Act, 42 U.S.C.ss. 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 any 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 or USTs in connection with permits or other authorizations required by Governmental Authorities; relating to the handling and disposal of Hazardous Materials; relating to nuisance, trespass or other causes of action related to Hazardous Materials; and relating to wrongful death, personal injury, or property or other damage in connection with the physical condition or use of any of the Premises by reason of the presence of Hazardous Materials or USTs in, on, under or above any of the Premises. "Environmental Lien" has the meaning set forth in Section 5.K(9). "Environmental Policies" means the environmental insurance policies issued by Environmental Insurer to Lender with respect to the Premises, which Environmental Policies shall be in form and substance satisfactory to Lender in its sole discretion. "Event of Default" has the meaning set forth in Section 9. "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 .50% of the sum of the Loan Amounts for all of the Premises. "Fixed Charge Coverage Ratio" has the meaning set forth in Section 6.J. "GAAP" means generally accepted accounting principles consistently applied. 2 "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 any of the Premises or Borrower. "Guaranty" means the unconditional guaranty of payment and performance dated as of the date of this Agreement executed by J. Alexander's Corporation, a Tennessee corporation, for the benefit of Borrower with respect to the Lease, as the same may be amended from time to time. "Hazardous Materials" means (a) any toxic substance or hazardous waste, substance, solid waste or related material, or any pollutant or contaminant; (b) radon gas, asbestos in any form which is or could become friable, urea formaldehyde foam insulation, transformers or other equipment containing dielectric fluid having levels of polychlorinated biphenyls in excess of applicable standards established by any Governmental Authority, or any petroleum product or additive; (c) any substance, gas, material or chemical which is now or hereafter defined as or included in the definition of "hazardous substances," "toxic substances," "hazardous materials," "hazardous wastes," "regulated substances" or words of similar import under any Environmental Laws; and (d) any other chemical, material, gas or substance the exposure to or release of which is prohibited, limited or regulated by any Governmental Authority that asserts or may assert jurisdiction over any of the Premises or the operations or activity at any of 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 any of the Premises. "Indemnified Parties" means Lender, Environmental Insurer, the trustees under the Mortgages, if applicable, and any person or entity who is or will have been involved in the origination of the Loans, any person or entity who is or will have been involved in the servicing of the Loans, any person or entity in whose name the encumbrance created by any of the Mortgages 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 Loans (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 any of the Loans 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 any of the Loans or any of the Premises, whether during the term of the Loans or as a part of or following a foreclosure of any of the Loans 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 Borrower, any of the Lessee Parties or any prior owner, lessee or occupant of the Premises in connection with Hazardous Materials or USTs, including, without limitation, the right to receive payments under such indemnity agreements. "Lease" means the master lease between Borrower, as lessor, and Lessee, as lessee, with respect to the Premises, together with all amendments, modifications and supplements thereto. "Leased Personal Property" means the Personal Property described on Exhibit B attached hereto. "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). "Lessee" means J. Alexander's Restaurants, Inc., a Tennessee corporation, and its successors. "Lessee Parties" means, collectively, Lessee and any guarantors of the Lease (including, in each case, any predecessors-in-interest). "License Agreement" means the License Agreement dated as of the date of this Agreement between Borrower and Lessee, as the same may be amended from time to time. 3 "Loan" or "Loans" means, as the context may require, the loan for each Premises, or the loans for all of the Premises, described in Section 2. "Loan Amount" or "Loan Amounts" means, as the context may require, the aggregate amount set forth in Section 2 or, with respect to each Premises, the individual amount set forth in Exhibit A. "Loan Documents" means, collectively, this Agreement, the Notes, the Mortgages, the Environmental Indemnity Agreement, the Collateral Assignment, the UCC-1 Financing Statements, any guaranties of the Loans, 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) any of the Premises, including, without limitation, the operation of any of the Premises as a Permitted Concept, or (ii) Borrower's ability to perform its obligations under the Loan Documents. "Member" means JAX RE Holdings, LLC, a Delaware limited liability company and the sole member of Borrower. "Mortgage" or "Mortgages" means, as the context may require, 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 a Premises or the deeds of trust or mortgages dated as of the date of this Agreement executed by Borrower for the benefit of Lender with respect to all of the Premises, as the same may be amended from time to time. A Mortgage has been executed for each Premises. "Note" or "Notes" means, as the context may require, the promissory note dated as of the date of this Agreement executed by Borrower in favor of Lender evidencing a Loan with respect to a Premises or the promissory notes dated as of the date of this Agreement executed by Borrower in favor of Lender evidencing the Loans with respect to all of the Premises, 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. A Note has been executed for each Premises in the Loan Amount corresponding to such Premises. "Obligations" has the meaning set forth in the Mortgages. "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. 4 "Other Agreements" means, collectively, all agreements and instruments between, among or by (1) Borrower and/or any Affiliate of Borrower (including any Affiliate of any predecessor-in-interest to Borrower), 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. "Parent" means J. Alexander's Corporation, a Tennessee corporation and the sole member of Member. "Participation" means one or more grants by Lender or any of the other Lender Entities to a third party of a participating interest in notes evidencing obligations to repay secured or unsecured loans owned by Lender or any of the other Lender Entities or any or all servicing rights with respect thereto. "Permitted Amounts" means, with respect to any given level of Hazardous Materials, that level or quantity of Hazardous Materials in any form or combination of forms the presence, use, storage, release or handling of which does not constitute a violation of any Environmental Laws and is customarily employed in the ordinary course of, or associated with, similar businesses located in the states in which the Premises are located. "Permitted Concept" means a J. Alexander's restaurant. "Permitted Exceptions" means those recorded easements, restrictions, liens and encumbrances set forth as exceptions in the title insurance policies issued by Title Company to Lender and approved by Lender in its sole discretion in connection with the closing of the Loans. "Person" means any individual, corporation, partnership, limited liability company, trust, unincorporated organization, Governmental Authority or any other form of entity. "Personal Property" means all tangible personal property now or at any time hereafter located on or at any of the Premises or used in connection therewith, including, without limitation, all trade fixtures, machinery, appliances, furniture, equipment and inventory; provided, however, the term "Personal Property" shall not include the HVAC, supply fans, exhaust fans, air ducts, hoods, vents, built-in sinks, built-in countertops, plumbing and electrical fixtures, sign poles and lighting poles, all of which items are intended to be fixtures as such term is used within the definition of "Premises". "Premises" means the parcel or parcels of real estate corresponding to the FFC File Numbers and addresses identified on Exhibit A attached hereto (as the same may be modified from time to time add Substitute Premises and delete replaced Premises), 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. As used herein, the term "Premises" shall mean either a singular property or all of the properties collectively, as the context may require. "Prohibited Transfer" means (i) a transfer by Member of its membership interest in Borrower to any party other than JAX Real Estate Management, Inc., or (ii) a transfer by Parent of its membership interest in Member to any party other than JAX Real Estate Management, Inc. "Questionnaires" means the environmental questionnaires completed on behalf of Borrower with respect to the Premises and submitted to Environmental Insurer in connection with the issuance of the Environmental Policies. "Release" means any release, deposit, discharge, emission, leaking, spilling, seeping, migrating, injecting, pumping, pouring, emptying, escaping, dumping, disposing or other movement of Hazardous Materials. 5 "Remediation" means any response, remedial, removal, or corrective action, any activity to clean up, detoxify, decontaminate, contain or otherwise remediate any Hazardous Materials or USTs required by any Environmental Law or any Governmental Authority, any actions to prevent, cure or mitigate any Release, any action to comply with any Environmental Laws or with any permits issued pursuant thereto, any inspection, investigation, study, monitoring, assessment, audit, sampling and testing, laboratory or other analysis, or any evaluation relating to any Hazardous Materials or USTs. "Restoration" has the meaning set forth in the Mortgages. "Securitization" means one or more sales, dispositions, transfers or assignments by Lender or any of the other Lender Entities to a special purpose corporation, trust or other entity identified by Lender or any of the other Lender Entities of notes evidencing obligations to repay secured or unsecured loans owned by Lender or any of the other Lender Entities (and, to the extent applicable, the subsequent sale, transfer or assignment of such notes to another special purpose corporation, trust or other entity identified by Lender or any of the other Lender Entities), and the issuance of bonds, certificates, notes or other instruments evidencing interests in pools of such loans, whether in connection with a permanent asset securitization or a sale of loans in anticipation of a permanent asset securitization. Each Securitization shall be undertaken in accordance with all requirements which may be imposed by the investors or the rating agencies involved in each such sale, disposition, transfer or assignment or which may be imposed by applicable securities, tax or other laws or regulations. "Substitute Documents" has the meaning set forth in Section 11. "Substitute Premises" means one or more parcels of real estate substituted for a Premises in accordance with the requirements of Section 11, together with all rights, privileges and appurtenances associated therewith and all buildings, fixtures and other improvements, equipment, trade fixtures, appliances and other personal property located thereon (whether or not affixed to such real estate). For purposes of clarity, where two or more parcels of real estate comprise a Substitute Premises, such parcels or interests shall be aggregated and deemed to constitute the Substitute Premises for all purposes of this Agreement. "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 any of the Premises which may result from such Release. "Title Company" means Lawyers Title Insurance Corporation. "Transfer" means one or more sales, transfers or assignments by Lender or any of the other Lender Entities to a third party of notes evidencing obligations to repay secured or unsecured loans owned by Lender or any of the other Lender Entities or any or all servicing rights with respect thereto. "UCC-1 Financing Statements" means such UCC-1 Financing Statements as Lender shall file with respect to the transactions contemplated by this Agreement. "U.S. Publicly-Traded Entity" is an Entity whose securities are listed on a national securities exchange or quoted on an automated quotation system in the U.S. or a wholly-owned subsidiary of such an Entity. "USTs" means any one or combination of below or above ground tanks and associated piping systems used in connection with the storage, dispensing and general use of petroleum and petroleum-based substances. 2. TRANSACTION. On the terms and subject to the conditions set forth in the Loan Documents, Lender shall make the Loans. The Loans will be evidenced by the Notes and secured by the Mortgages. Borrower shall repay the outstanding principal amount of the Loans together with interest thereon in the manner and in accordance with the terms and conditions of the Notes and the other Loan Documents. The aggregate Loan Amount shall be $25,000,000.00, allocated among the Premises as set forth on the attached Exhibit A. The Loans shall be advanced at the Closing in cash or otherwise immediately available funds subject to any prorations and adjustments required 6 by this Agreement. The Premises shall be leased to the Lessee pursuant to the Lease and, at Closing, Borrower shall assign the Lease to Lender pursuant to the Mortgages. 3. ESCROW AGENT. Borrower and Lender hereby employ Title Company to act as escrow agent in connection with the transactions described in this Agreement. Borrower and Lender will deliver to Title Company all documents, pay to Title Company all sums and do or cause to be done all other things necessary or required by this Agreement, in the reasonable judgment of Title Company, to enable Title Company to comply herewith and to enable any title insurance policy provided for herein to be issued. Title Company shall not cause the transaction to close unless and until it has received written instructions from Lender and Borrower to do so. Title Company is authorized to pay, from any funds held by it for Lender's or Borrower's respective credit all amounts necessary to procure the delivery of such documents and to pay, on behalf of Lender and Borrower, all charges and obligations payable by them, respectively. Borrower will pay all charges payable by it to Title Company. Title Company is authorized, in the event any conflicting demand is made upon it concerning these instructions or the escrow, at its election, to hold any documents and/or funds deposited hereunder until an action shall be brought in a court of competent jurisdiction to determine the rights of Borrower and Lender or to interplead such documents and/or funds in an action brought in any such court. Deposit by Title Company of such documents and funds, after deducting therefrom its charges and its expenses and attorneys' fees incurred in connection with any such court action, shall relieve Title Company of all further liability and responsibility for such documents and funds. Title Company's receipt of this Agreement and opening of an escrow pursuant to this Agreement shall be deemed to constitute conclusive evidence of Title Company's agreement to be bound by the terms and conditions of this Agreement pertaining to Title Company. Disbursement of any funds shall be made by check, certified check or wire transfer, as directed by Borrower and Lender. Title Company shall be under no obligation to disburse any funds represented by check or draft, and no check or draft shall be payment to Title Company in compliance with any of the requirements hereof, until it is advised by the bank in which such check or draft is deposited that such check or draft has been honored. Title Company is authorized to act upon any statement furnished by the holder or payee, or a collection agent for the holder or payee, of any lien on or charge or assessment in connection with the Premises, concerning the amount of such charge or assessment or the amount secured by such lien, without liability or responsibility for the accuracy of such statement. The employment of Title Company as escrow agent shall not affect any rights of subrogation under the terms of any title insurance policy issued pursuant to the provisions thereof. 4. CLOSING CONDITIONS. The obligation of Lender to consummate the transaction contemplated by this Agreement is subject to the fulfillment or waiver of each of the following conditions: A. Title Insurance Commitments. Lender shall have received for each of the Premises a preliminary title report and irrevocable commitment to insure title in the amount of the Loan relating to such Premises, by means of a mortgagee's, ALTA extended coverage policy of title insurance (or its equivalent, in the event such form is not issued in the jurisdiction where the Premises is located) issued by Title Company showing Borrower vested with good and marketable fee title in the real property comprising such Premises, committing to insure Lender's first priority lien upon and security interest in such real property subject only to Permitted Exceptions, and containing such endorsements as Lender may require. B. Survey. Lender shall have received a current ALTA survey of each 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 each 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 any Premises is in such a flood plain or special flood hazard area, Borrower shall have provided Lender with evidence of flood insurance maintained on such Premises in amounts and on terms and conditions reasonably satisfactory to Lender. C. Environmental. Lender shall have completed such environmental due diligence of each of the Premises as it deems necessary or advisable in its sole discretion, including, without limitation, receiving an Environmental Policy with respect to each of the Premises, and Lender shall have approved the environmental condition of each of the Premises in its sole discretion. 7 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 or affect 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 Policies, 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 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. Lease, Memoranda and License Agreement. Borrower and Lessee shall have executed and delivered the Lease, a memorandum of master lease in recordable form for each of the Premises (the "Memoranda"), and the License Agreement. The Lease, the License Agreement and the Memoranda shall be in form and substance reasonably satisfactory to Lender. Lessee shall have delivered to Borrower an executed Guaranty with respect to the Lease. I. Closing Documents. At or prior to the Closing Date, Lender and/or Borrower, as may be appropriate, shall have executed and delivered or shall have caused to be executed and/or delivered to Lender, or as Lender may otherwise direct, the Loan Documents and such other documents, instruments and certificates, as Lender may reasonably require in form reasonably acceptable to Lender. 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 profit and loss statements for the business conducted at each of the Premises (the "P&L Statements") and consolidated financial statements of the Lessee Parties and their consolidated Affiliates (the "Consolidated Statements"; the P&L Statements and the Consolidated Statements are collectively referred to as, the "Financial Information"). The Consolidated Statements were prepared in accordance with GAAP and fairly present as of the date of such statements the financial condition of the entities to which they pertain. The P&L Statements were prepared from the consolidated financial records of the Lessee Parties and do not include charges or allocations for general and administrative expenses (including management training and relocation costs), interest expense, income taxes, and other income and expense items which are not classified by the Lessee Parties as restaurant-level items. The Financial Information (as prepared 8 above) is true, correct and complete in all material respects; there have been no material 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. No change has occurred with respect to the financial condition of Borrower and/or the Premises which has not been disclosed in writing to Lender and which has had, or could reasonably be expected to result in, a Material Adverse Effect. B. Organization and Authority. Borrower is duly organized or formed, validly existing and in good standing under the laws of its state of incorporation or formation. Borrower is qualified as a foreign corporation, partnership or limited liability company, as applicable, to do business in each state where the 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 Borrower 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. Neither Borrower nor any individual or entity owning directly or indirectly any interest in Borrower, 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 Borrower, this Agreement and the other Loan Documents shall constitute the legal, valid and binding obligations of Borrower, enforceable against Borrower 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 its knowledge, threatened against or involving Borrower or any of 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. Borrower is 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 Borrower is a party or by which Borrower, any of the Premises or any of the property of Borrower 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. None of the Premises are subject to any right of first refusal, right of first offer or option to purchase or lease granted to a third party (other than the Lease and as disclosed in the title commitments delivered to Lender). F. Utilities. Adequate public utilities are available at each of the Premises to permit utilization of each 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. To Borrower's knowledge, (i) each of the Premises is in compliance in all material respects with all applicable zoning requirements, and (ii) the use of each of the Premises as a Permitted Concept does not constitute a nonconforming use under applicable zoning requirements. To Borrower's knowledge, Borrower 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. 9 H. Area Development; Wetlands. No condemnation or eminent domain proceedings affecting any of the Premises have been commenced or, to Borrower's knowledge, are contemplated. None of the Premises and, to Borrower's knowledge, none of the real property bordering any of 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 each of 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 each of the Premises for unrestricted ingress and egress and otherwise to permit utilization of each 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. Each of 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 and properly lighted. K. Environmental. Except as disclosed in the Questionnaires: (1) None of the Premises nor Borrower 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 any of the Premises and known to Borrower; (2) All permits, licenses or similar authorizations required to construct, occupy, operate or use any buildings, improvements, fixtures and equipment forming a part of any 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 by Borrower, the Lessee Parties or, to Borrower's knowledge, any other party, in, on, under, from or about any of the Premises, except in Permitted Amounts; (4) None of the Premises contain Hazardous Materials, except in Permitted Amounts, and all USTs located on or about the Premises, if any, are in full compliance with all Environmental Laws; (5) To Borrower's knowledge, there is no threat of any Release migrating to any of the Premises in excess of Permitted Amounts; (6) There is no past (to Borrower's knowledge) or present non-compliance with Environmental Laws, or with permits issued pursuant thereto, in connection with any of the Premises; (7) Borrower has not received any written or oral notice or other communication from any person or entity (including but not limited to a Governmental Authority) relating to Hazardous Materials or USTs or Remediation thereof in excess of Permitted Amounts, of possible liability of any person or entity pursuant to any Environmental Law, other environmental conditions in connection with any of the Premises, or any actual or potential administrative or judicial proceedings in connection with any of the foregoing; (8) All information known to Borrower or contained in the files of Borrower relating to any Environmental Condition or Releases of Hazardous Materials in, on, under or from any of the Premises, other than in Permitted Amounts, has been provided to Lender, including, without limitation, information relating to all prior Remediation; (9) All of the Premises are free and clear of all liens and other encumbrances imposed pursuant to any Environmental Law (the "Environmental Liens"); and Borrower has not allowed any tenant or other user of any of the Premises to do any act that materially increased the dangers to human health or the environment, posed an 10 unreasonable risk of harm to any person or entity (whether on or off any of the Premises), impaired the value of any 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 any of the Premises; and (10) The information and disclosures in the Questionnaires are true, correct and complete in all material respects, and the person or persons executing the Questionnaires were duly authorized to do so. Lender has charged Borrower a fee for the Environmental Policies. Borrower acknowledges that the Environmental Policies are 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. Fee title to the real property comprising each of the Premises is vested in Borrower, free and clear of all liens, encumbrances, charges and security interests of any nature whatsoever, except the Permitted Exceptions. Lessee is the owner of all Personal Property (other than the Leased Personal Property), free and clear of all liens, encumbrances, charges and 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 the real property comprising each of the Premises pursuant to the Mortgages and the UCC-1 Financing Statements. Upon Closing, Borrower shall have a first priority lien upon and security interest in the Personal Property pursuant to the Lease. 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. Lease. Borrower has delivered to Lender a true, correct and complete copy of the Lease. The Lease is the only lease with respect to the Premises, and is in full force and effect, and constitutes the legal, valid and binding obligations of the parties thereto, enforceable against such parties 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. Borrower has not assigned, transferred, mortgaged, hypothecated or otherwise encumbered the Lease or any rights thereunder or any interest therein, and Borrower has not received any notice that the Lessee has made any assignment, pledge or hypothecation of all or any part of its rights or interest in the Lease. Borrower has not received any notice of default from the Lessee which has not been cured or given any notice of default to the Lessee 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 by the Lessee or Borrower under the Lease. O. Nonconsolidation. (1) Borrower maintains appropriate and complete books and records of account separate from all other Persons. Where necessary or appropriate, Borrower has disclosed the nature of the transaction contemplated by the Loan Documents and Borrower's independent status to its creditors. The Premises and cash capital contributions represent all of the assets owned or leased by Borrower as of the date hereof, and Borrower has not commingled its assets and its liabilities with those of any other Person. (2) Borrower maintains its own checking account or accounts with commercial banking institutions separate from other Persons. (3) To the extent that Borrower shares the same employees with other Persons, the salaries of and the expenses related to providing benefits to such employees have been fairly and nonarbitrarily allocated among such 11 Persons, with the result that each such Person bears its fair share of the salary and benefit costs associated with all such common employees. (4) To the extent that Borrower jointly contracts with other Persons to do business with vendors or service providers or to share overhead expenses, the costs incurred in so doing are, and at all times shall be, fairly and nonarbitrarily allocated among such Persons, with the result that each such Person bears its fair share of such costs. To the extent that Borrower contracts or does business with vendors or service providers where the goods or services provided are or shall be partially for the benefit of other Persons, the costs incurred in so doing are fairly and nonarbitrarily allocated to or among such Persons for whose benefit the goods or services are provided, with the result that each such Person bears its fair share of such costs. (5) To the extent that Borrower or other Persons have offices in the same location, there is a fair, appropriate and nonarbitrary allocation of overhead among them, with the result that each such Person bears its fair share of such expenses. (6) Borrower has not incurred any indebtedness, secured or unsecured, direct or indirect, absolute or contingent, including, without limitation, liability for the debts of any other Person (and Borrower has not held itself out as being liable for the debts of any other Person), other than the Loans and trade and operational debt incurred in the ordinary course of business with trade creditors and in amounts as are normal and reasonable under the circumstances. Borrower is not a guarantor of any obligations. (7) Borrower is not presently a party to a pledge of its assets for the benefit of other Persons. Borrower has not made any loans or advances to any third party (including any Affiliate or constituent party of Borrower). (8) Borrower has conducted its affairs strictly in accordance with its organizational documents and has observed all necessary, appropriate and customary formalities. (9) Borrower does not hold itself out to the public or to any of its individual creditors as being a unified entity with assets and liabilities in common with any other Person. (10) Borrower (a) is solvent, (b) is able to pay its obligations as they become due and (c) is not and shall not be engaged in any business or transaction for which its remaining capital is or may be unreasonably small. (11) Borrower has no actual intent to hinder, delay or defraud creditors in connection with any of the transactions contemplated herein or intent to incur (or belief that it is incurring) debts beyond its ability to pay the same as they mature. (12) Borrower has not, as to itself or as to other Persons, (a) commenced any case, proceeding or other action under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to Borrower or other Persons or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to Borrower or its debts or other Persons or their debts or (b) sought appointment of a receiver, trustee, custodian or other similar official for Borrower or for all or any substantial part of its or other Person's assets or made a general assignment for the benefit of Borrower's creditors. P. 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 Borrower, to assure that funds invested by such holders in Borrower 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 Borrower nor any holder of a direct or indirect interest in Borrower (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 12 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 Borrower is 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 Notes. Borrower shall punctually pay, or cause to be paid, the principal, interest and all other sums to become due in respect of the Notes and the other Loan Documents in accordance with the Notes 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. B. Title. Borrower shall maintain good and marketable fee simple title to the real property comprising each of the Premises, free and clear of all liens, encumbrances, charges and other exceptions to title, except the Permitted Exceptions. Lender shall have valid first liens upon and security interests in the real property comprising each of the Premises pursuant to the Mortgages and the UCC-1 Financing Statements. Borrower shall cause Lessee to maintain title to the Personal Property (other than the Leased Personal Property, which Lessee shall maintain a leasehold interest in during the term of the corresponding equipment lease) in accordance with the terms of the Lease, free and clear of all liens, encumbrances, charges and security interests of any nature whatsoever. Borrower shall have valid first liens upon and security interests in Lessee's right, title and interest in and to the Personal Property pursuant to the Lease. C. Organization and Status of Borrower; Preservation of Existence. Borrower 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 each state 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 Borrower 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 each of the Premises as a Permitted Concept shall be maintained in full force and effect. E. Compliance With Laws Generally. The use and occupation of each of the Premises, and the condition thereof, including, without limitation, any Restoration, shall comply in all material respects with all Applicable Regulations now or hereafter in effect. In addition, Borrower shall comply in all material respects 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 in all material respects with the ADA, and all regulations promulgated thereunder, as it affects each of the Premises. 13 F. Compliance With Environmental Laws. (1) The Premises, Borrower and any other operator or user of any of the Premises shall not be in violation in any material respect of any Environmental Laws or 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 each 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 any of the Premises, except in Permitted Amounts. (4) Borrower shall keep each of the Premises, or cause each of 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 any of the Premises to do any act that (a) materially increases the dangers to human health or the environment, (b) impairs or is reasonably likely to impair the value of any of the Premises in any material respect, (c) is contrary in any material respect to any requirement of any insurer, (d) constitutes a public or private nuisance or constitutes waste, or (e) violates any covenant, condition, agreement or easement applicable to any of the Premises in any material respect. (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 any of the Premises, in excess of Permitted Amounts, including, without limitation, the presence on or under any of the Premises, or the escape, seepage, leakage, spillage, discharge, emission or release from any USTs on, above or under any of the Premises, 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 any of 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 any of 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 any of the Premises; (e) any written or oral notice or other communication of which Borrower becomes aware from any source whatsoever (including but not limited to a Governmental Authority) relating in any way to Hazardous Materials, USTs or Remediation thereof, possible liability of any person or entity pursuant to any Environmental Law, other environmental conditions in connection with any of 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 any of the Premises. (7) Borrower shall, at its sole cost and expense: (a) perform any environmental site assessment (but not more than one per year per Premises) or other investigation of environmental conditions in connection with any of the Premises as may be reasonably requested by Lender (including but not limited to sampling, testing and analysis of soil, water, 14 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. If any USTs are located at any of the Premises, Borrower shall maintain and monitor such USTs in accordance with all Environmental Laws. Borrower shall provide Lender with written certified results of all inspections performed on any of 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 any of 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, 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 any of 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 have the right, but not the obligation, to enter upon any of the Premises (upon reasonable prior notice) during normal business hours or at any time (and without prior notice) 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 Mortgages or the other Loan Documents) to assess any and all aspects of the environmental condition of any 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 any of 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. 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 Borrower including a balance sheet, profit and loss statement, statement of cash flows and all other related schedules for the fiscal period then ended; and (b) 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, except that the financial statements shall reflect the carrying value of the real estate comprising the Premises and related depreciation expense and contributed capital amounts on the basis of J. Alexander's Corporation's historical cost based carrying values, shall reflect lease income on an operating lease basis without evaluation with respect to direct financing lease treatment and shall not include footnote disclosures. The financial statements shall be certified to be accurate and complete in all material respects by Borrower (or the Treasurer or other appropriate officer of Borrower) to the best of its knowledge. The financial statements delivered to Lender need not be audited, but Borrower shall deliver to Lender copies of any audited financial statements of Borrower 15 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 any of the Premises. H. Lost Note. Borrower shall, if any 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 such 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 each of the Premises, all drawings, plans, and specifications for each of the Premises in possession of Borrower, all engineering reports relating to each of the Premises in the possession of Borrower, the files, correspondence and documents relating to each of the Premises, and the financial books and records, including lists of delinquencies, relating to the ownership, operation, and maintenance of each 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). J. Fixed Charge Coverage Ratio. Borrower shall cause to be maintained an aggregate Fixed Charge Coverage Ratio at all of the Premises 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 "Fixed Charge Coverage Ratio" shall mean with respect to the fiscal year immediately preceding the date of determination, the ratio calculated for such period of time of (a) the sum of Net Income, Depreciation and Amortization, Interest Expense and Operating Lease Expense, less a corporate overhead allocation in an amount equal to 5% of Gross Sales, to (b) the sum of the Lender Payments, Operating Lease Expense and the Equipment Payment Amount. For purposes of this Section, the following terms shall be defined as set forth below: "Capital Lease" shall mean any lease of any property (whether real, personal or mixed) with respect to one or more of the Premises which lease would, in conformity with GAAP, be required to be accounted for on a balance sheet as a capital lease. The term "Capital Lease" shall not include any operating lease or the Lease. "Debt" shall mean as directly related to all of the Premises and 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 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 with respect to all of the Premises the depreciation and amortization accruing during any period of determination. "Equipment Payment Amount" shall mean for any period of determination the sum of all amounts payable during such period of determination under all (i) leases for equipment located at one or more of the Premises and (ii) all loans secured by equipment located at one or more of the Premises. "Gross Sales" shall mean the sales or other income arising from all business conducted at all of the Premises during the period of determination, less sales tax. 16 "Interest Expense" shall mean for any period of determination, the sum of all interest accrued in respect of the Notes and all other Debt allocable to one or more of the Premises and all business operations thereon during such period (including interest attributable to Capital Leases), as determined in accordance with GAAP. "Lender Payments" shall mean with respect to the period of determination, the sum of all amounts payable under the Notes. "Net Income" shall mean with respect to the period of determination, the aggregate net income or net loss allocable to all business conducted at all of the Premises. In determining the amount of Net Income, (i) adjustments shall be made for inter-company charges and nonrecurring gains and losses included in the period of determination, (ii) deductions shall be made for Depreciation and Amortization, Interest Expense and Operating Lease Expense allocable to the period of determination, and (iii) no deductions shall be made for (x) income taxes or charges equivalent to income taxes allocable to the period of determination or (y) corporate overhead expense allocable to the period of determination. "Operating Lease Expense" shall mean the sum of all payments and expenses incurred under any operating leases with respect to one or more of the Premises and the business operations thereon during the period of determination, as determined in accordance with GAAP; provided, however, the term "Operating Lease Expense" shall not include any payments and expenses incurred under the Lease. 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 120 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. Nonconsolidation. (1) Borrower shall at all times maintain appropriate and complete books and records of account separate from all other Persons. Where necessary or appropriate, Borrower shall disclose the nature of the transaction contemplated by the Loan Documents and Borrower's independent status to its creditors. Borrower shall not own or lease any assets other than the Premises and cash, nor engage in any business other than owning and leasing the Premises, including financing the Premises with Lender. Borrower shall not commingle its assets and its liabilities with those of any other Person. (2) Borrower shall maintain its own checking account or accounts with commercial banking institutions separate from other Persons. (3) To the extent that Borrower shares the same employees with other Persons, the salaries of and the expenses related to providing benefits to such employees, at all times shall be, fairly and nonarbitrarily allocated among such Persons, with the result that each such Person shall bear its fair share of the salary and benefit costs associated with all such common employees. (4) To the extent that Borrower jointly contracts with other Persons to do business with vendors or service providers or to share overhead expenses, the costs incurred in so doing at all times shall be, fairly and nonarbitrarily allocated among such Persons, with the result that each such Person shall bear its fair share of such costs. To the extent that Borrower contracts or does business with vendors or service providers where the goods or services provided are or shall be partially for the benefit of other Persons, the costs incurred in so doing at all times shall be, fairly and nonarbitrarily allocated to or among such Persons for whose benefit the goods or services are provided, with the result that each such Person shall bear its fair share of such costs. All transactions between Borrower and other Persons shall be only on an arm's-length basis. 17 (5) To the extent that Borrower or other Persons have offices in the same location, there shall be a fair, appropriate and nonarbitrary allocation of overhead among them, with the result that each such Person shall bear its fair share of such expenses. (6) Borrower shall not incur any indebtedness, secured or unsecured, direct or indirect, absolute or contingent (including guaranteeing any obligation or assuming liability for the debts of any other Person and Borrower will not hold itself out as being liable for the debts of any other Person), other than the Loans and trade and operational debt incurred in the ordinary course of business with trade creditors and in amounts as are normal and reasonable under the circumstances. No indebtedness other than the Loans may be secured (subordinate or pari passu) by the Premises or any portion thereof. (7) Borrower shall not enter into any contract or agreement with any Affiliate of Borrower, any constituent party of Borrower or any Affiliate of any constituent party of Borrower except upon terms and conditions that are intrinsically fair and substantially similar to those that would be available on an arms-length basis with third parties other than any such party. (8) Except as contemplated by the Loan Documents, Borrower shall not pledge, grant any security interest in, hypothecate or otherwise encumber its assets for the benefit of any other Persons. (9) Borrower shall issue separate financial statements prepared not less frequently than annually and prepared according to Section 6.G. (10) Borrower shall maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character in light of its contemplated business operations. (11) Borrower shall conduct its affairs strictly in accordance with its organizational documents and shall observe all necessary, appropriate and customary formalities. The books, records and accounts of Borrower shall at all times be maintained in a manner permitting the assets and liabilities of Borrower to be easily separated and readily ascertained from those of any other Person. (12) Borrower shall not hold itself out to the public or to any of its individual creditors as being a unified entity with assets and liabilities in common with any other Person, except that Borrower may be included in Lessee's or its affiliates' reports under the Securities Exchange Act of 1934, as amended, and its and their consolidated financial statements, as appropriate, provided such statements adequately disclose the separate legal existence of Borrower, the separate ownership by Borrower of the Premises and the separate liabilities of Borrower. Borrower shall maintain and utilize separate stationery, invoices and checks. (13) Borrower shall not make any loans or advances to any third party (including any Affiliate of Borrower or constituent party of Borrower). (14) Borrower shall not, as to itself or as to other Persons, (a) commence any case, proceeding or other action under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to Borrower or other Persons or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to Borrower or its debts or other Persons or their debts or (b) seek appointment of a receiver, trustee, custodian or other similar official for Borrower or for all or any substantial part of its or other Person's assets or make a general assignment for the benefit of Borrower's creditors. Borrower shall not take any action in furtherance of, or indicating its consents to, approval of or acquiescence in, any of the acts set forth above. Borrower shall not be unable to, or admit in writing its inability to, pay its debts. N. OFAC Laws and Regulations. Borrower shall immediately notify Lender in writing if any individual or entity owning directly or indirectly any interest in Borrower 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 Authority for, or has been charge with or convicted of, 18 drug trafficking, terrorist-related activities or any violation 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. O. Condominium. Borrower shall promptly pay, perform and comply (or cause the payment, performance and compliance) with all obligations imposed on the owner of the Premises located at 19200 Haggerty Road, Livonia, Michigan (FFC No. 8001-4153; Unit No. 17) (the "Condominium Property") by the applicable condominium declaration, by-laws and related documents (collectively, the "Condominium Documents") and shall provide Lender with copies of any notices received by Borrower from the condominium board, its managing agent or from the owner of any other condominium unit, including, without limitation, notices asserting or claiming a default or breach by Borrower under the Condominium Documents, such copies to be provided to Lender within five (5) days after Borrower's receipt of the applicable notice. Borrower shall indemnify, protect, defend and hold harmless each of the Indemnified Parties from and against any and all Losses (excluding Losses suffered by an Indemnified Party arising out of the gross negligence or willful misconduct of such Indemnified Party; 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 Condominium Property or Lender's failure to act in respect of matters which are or were the obligation of Borrower under this Agreement) caused by, incurred or resulting from Borrower's failure to pay, perform and comply (or cause the payment, performance and compliance) with the terms and conditions of the Condominium Documents or this Section. If Borrower fails to pay, perform or comply (or cause the payment, performance and compliance) with any of its obligations under the Condominium Documents or this Section, Lender may pay or perform such obligations; provided, however, in no event shall Lender be obligated to pay or perform such obligations, and in no event shall payment or performance of such obligations by Lender constitute a cure of any Event of Default arising under this Agreement as a result of Borrower's failure to pay, perform or comply with such obligations. Any amounts disbursed by Lender as a result of Lender's performance of such obligations shall bear interest at the Default Rate from and including the date of such advance to and including the date such advance is repaid. 7. PROHIBITION ON PROHIBITED TRANSFER AND PLEDGE. Without limiting the terms and conditions of Section 3.09 of the Mortgages, 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 Prohibited Transfer shall occur; and (2) no interest in Borrower or Member shall be pledged, encumbered, hypothecated or assigned as collateral for any obligation of Borrower or Member (each, a "Pledge"). In addition, no interest in Borrower, or in any individual or person owning directly or indirectly any interest in Borrower, 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 Prohibited Transfer 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 Prohibited Transfer and/or Pledge having been approved by each of the rating agencies which have issued ratings in connection with any Securitization of the Loans, 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 Notes 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 Prohibited Transfer 19 or Pledge in violation of this Section. The provisions of this Section shall apply to every Prohibited Transfer or Pledge regardless of whether voluntary or not, or whether or not Lender has consented to any previous Prohibited Transfer 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 and that, except as otherwise contemplated by Sections 12.P(4) and (5), the Loan Documents evidence one unitary, unseverable transaction pertaining to all of the Premises. Borrower acknowledges that all of the Loans are cross-defaulted and cross-collateralized, except as otherwise contemplated by Sections 12.P(4) and (5), and that such cross-default and cross-collateralization is a material inducement to Lender making the Loans. 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 Borrower set forth in any of the Loan Documents is false in any material respect, or if Borrower renders any statement or account which is false in any material respect. (2) If any principal, interest or other monetary sum due under the Notes, the Mortgages 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 Borrower 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, the Lease or any of the Other Agreements. 20 (6) If a final, nonappealable judgment is rendered by a court against Borrower which (i) has a material adverse effect on the operation of any 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) with respect to such of the Premises (starting with the Premises with the lowest Fixed Charge Coverage Ratio and proceeding in ascending order to the Premises with the next lowest Fixed Charge Coverage Ratio) as is necessary to cure the breach of the Fixed Charge Coverage Ratio requirement and for which the then Fixed Charge Coverage Ratio (with the definitions in Section 6.J being deemed to be modified as applicable to provide for the calculation of the Fixed Charge Coverage Ratio for each such Premises on an individual basis rather than on an aggregate basis with the other Premises) is below 1.25:1 (each, a "Subject Premises"), (ii) prepay the Note or Notes corresponding to the Subject Premises in whole but not in part (without premium or penalty) or (iii) notify Lender of Borrower's election to substitute a Substitute Premises for each Subject Premises in accordance with the terms of Section 11 (the failure of Borrower to complete such substitution within 60 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 corresponding to a Subject Premises, and assuming the resulting principal balance is reamortized in equal monthly payments over the remaining term of such Note at the rate of interest set forth therein, will result in an adjusted aggregate Fixed Charge Coverage Ratio for all of 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 each such Note in form and substance reasonably acceptable to Lender reducing the principal amount payable to Lender under such Note and reamortizing the principal amount of such Note in equal monthly payments over the then remaining term of such Note at the rate of interest set forth therein. 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 Notes, 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 Mortgages 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 Notes, the Mortgages 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 any of 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 21 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 or USTs in, on, above, or under any of the Premises; (2) any past, present or Threatened Release in, on, above, under or from any of the Premises; (3) any activity by Borrower, any person or entity affiliated with Borrower or any tenant or other user of any 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 any of the Premises of any Hazardous Materials or USTs at any time located in, under, on or above any of the Premises; (4) any activity by Borrower, any person or entity affiliated with Borrower or any tenant or other user of any of the Premises in connection with any actual or proposed Remediation of any Hazardous Materials or USTs at any time located in, under, on or above any of 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 any of 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 any 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 any of 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 any of 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 any of the Premises in arranging for disposal or treatment, or arranging with a transporter for transport for disposal or treatment, of Hazardous Materials or USTs 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 or USTs; (10) any acts of Borrower, any person or entity affiliated with Borrower or any tenant or other user of any of the Premises, in accepting any Hazardous Materials or USTs 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 any 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 any of the Premises; or (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. 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 22 characterized, known or unknown, foreseen or unforeseen, now existing or arising in the future, relating to this Agreement and any Hazardous Materials, USTs, Releases and/or Remediation on, at or affecting any of the Premises (other than those arising out of Lender's or Environmental Insurer'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 Lender or Environmental Insurer solely by reason of Borrower's interest in any of the Premises or Borrower's failure to act in respect of matters which are or were the obligation of Borrower under the Loan Documents). 11. SUBSTITUTION. A. Borrower shall have the right to obtain a release of all liens granted in favor of Lender with respect to a Premises by substituting a Substitute Premises for such Premises if: (i) the terms of Section 9.A(7) permit such substitution; or (ii) Borrower determines for any reason to make a substitution, provided, however, that Borrower may not substitute more than two (2) of the Premises pursuant to the provisions of this subitem (ii). B. Borrower's right to substitute a Substitute Premises for a Premises pursuant to the preceding subsection A shall be subject to the fulfillment of each of the following terms and conditions: (1) Borrower shall provide Lender with notice of its intention to substitute a Substitute Premises. Any notice with respect to a proposed substitution pursuant to the preceding subsection A(i) must be delivered within the applicable 30 day period contemplated by Section 9.A(7) and the closing of the substitution shall take place within the applicable 60 day period contemplated by such subsection. Any substitution pursuant to the preceding subsection A(ii) shall take place within 60 days after delivery to Lender of the substitution notice. (2) Borrower must provide for the substitution of a Substitute Premises, and the proposed Substitute Premises must: (a) be a Permitted Concept, in good condition and repair, ordinary wear and tear excepted; (b) have for the twelve month period preceding the date of the closing of such substitution a Fixed Charge Coverage Ratio (with the definitions of Section 6.J being deemed to be modified if necessary and as applicable to provide for a calculation of the Fixed Charge Coverage Ratio for each of the Premises on an individual basis rather than on an aggregate basis with the other Premises) at least equal to the Fixed Charge Coverage Ratio for the Premises being replaced, provided that, if the substitution is being done pursuant to the preceding subsection A(i), the Fixed Charge Coverage Ratio for the Substitute Premises for the twelve month period preceding the date of the closing of such substitution must also be high enough to result in a cure of the breach of the Fixed Charge Coverage Ratio requirement; (c) be owned in fee simple by Borrower at the closing of the substitution; (d) Borrower's right, title and interest in and to each proposed Substitute Premises shall be free and clear of all liens, restrictions, easements and encumbrances, except such matters as are reasonably acceptable to Lender (the "Substitute Premises Permitted Exceptions"); (e) have a fair market value no less than the greater of (i) the outstanding principal amount of the Note corresponding to the Premises to be replaced or (ii) the then fair market value of the Premises to be replaced, with such fair market values reasonably determined by Lender's in-house inspectors and underwriters; and (f) have a replacement cost no less than the then replacement cost of the Premises to be replaced, all as reasonably determined by Lender's in-house inspectors and underwriters 23 (3) Lender shall have inspected and approved the Substitute Premises utilizing such site inspection and underwriting approval criteria that would be used by a prudent institutional mortgage loan lender. Borrower shall have paid all costs and expenses resulting from such proposed substitution, 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 subsection (6) below, including, without limitation, the cost of environmental insurance, 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). (4) Lender shall have received a preliminary title report and irrevocable commitment to insure title in the amount of the then outstanding principal balance of the Loan relating to the Premises to be replaced 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 proposed Substitute Premises is located) for such proposed Substitute Premises issued by Title Company showing Borrower vested with good and marketable title in the real property comprising the Substitute Premises and committing to insure Lender's first priority lien upon and security interest in the proposed Substitute Premises, subject only to the Substitute Premises Permitted Exceptions and containing endorsements substantially comparable to those required by Lender at the Closing. (5) Lender shall have received a current ALTA survey of such proposed Substitute Premises or its equivalent, the form of which shall be comparable to those received by Lender at the Closing and sufficient to cause the standard survey exceptions set forth in the title policy referred to in the preceding subsection to be deleted, and disclosing no matters other than the Substitute Premises Permitted Exceptions. (6) Lender shall have completed such environmental due diligence of the proposed Substitute Premises as it deems necessary or advisable in its sole discretion, including, without limitation, receiving an environmental insurance policy with respect to such proposed Substitute Premises in a form and substance and issued by such environmental insurance company as is acceptable to Lender, and Lender shall have approved the environmental condition of the Substitute Premises based on such environmental due diligence as Lender deems necessary or advisable in its sole discretion; provided, however, if such proposed substitution shall occur from and after such time as the Loan is included in a Securitization, this subitem (6) shall be modified to read as follows: Lender shall have completed such environmental due diligence of the proposed Substitute Premises as a prudent institutional mortgage loan lender deems necessary or advisable, including, without limitation, receiving an environmental insurance policy with respect to such proposed Substitute Premises in a form and substance and issued by such environmental insurance company as is acceptable to a prudent institutional mortgage loan lender, and Lender shall have approved the environmental condition of the Substitute Premises based on such environmental due diligence as a prudent institutional mortgage loan lender would deem necessary or advisable. (7) Borrower shall deliver, or cause to be delivered, such legal opinions as Lender may reasonably require with respect to the proposed substitution, all in a form and substance which would be satisfactory to a prudent institutional mortgage loan lender and its counsel. If the Loan relating to the Premises to be replaced is part of a Securitization, such opinions shall include, without limitation, an opinion of counsel to the rating agencies which have issued ratings in connection with such Securitization that the substitution does not constitute a "significant modification" of such Loan under Section 1001 of the Internal Revenue Code or otherwise cause a tax to be imposed on a "prohibited transaction" by any REMIC Trust. (8) no Event of Default shall have occurred and be continuing under any of the Loan Documents. (9) Borrower and the Lessee Parties shall have executed such documents as are comparable to the security documents executed and delivered at Closing, as applicable (but with such revisions as may 24 be reasonably required by Lender to address matters unique to the Substitute Premises) or amendments to such documents, including, without limitation, a Mortgage, amendment to the Lease, Memoranda, Guaranty and UCC-1 Financing Statements (the "Substitute Documents"), to provide Lender with a first priority lien on the proposed Substitute Premises, subject only to the Substitute Premises Permitted Exceptions, and all other rights, remedies and benefits with respect to the proposed Substitute Premises which Lender holds in the Premises to be replaced, all of which documents shall be in a form and substance which would be satisfactory to a prudent institutional mortgage loan lender. (10) the representations and warranties set forth in the Substitute Documents and Section 5 of this Agreement applicable to the proposed Substitute Premises shall be true and correct in all material respects as of the date of substitution, and Borrower shall have delivered to Lender an officer's certificate to that effect. (11) Borrower shall have delivered to Lender certificates of insurance and insurance policies showing that all insurance required by the Substitute Documents is in full force and effect. (12) The Personal Property located at the Substitute Premises shall be owned by Lessee, free and clear of all liens, encumbrances, charges and security interests of any nature whatsoever. Upon satisfaction of the foregoing conditions with respect to the release of a Premises: (a) the proposed Substitute Premises shall be deemed substituted for the replaced Premises; (b) the Loan Amount for the Substitute Premises shall be the same as for the replaced Premises; (c) the Substitute Premises shall be referred to herein as a "Premises" and included within the definition of "Premises" and shall secure the same Obligations as were secured by the replaced Premises; (d) the Substitute Documents shall be dated as of the date of the substitution; (e) Lender will release, or cause to be released, the lien of the Mortgage, UCC-1 Financing Statements and any other Loan Documents encumbering the replaced Premises; and (f) at the closing of the substitution, Borrower shall convey without warranty or recourse the replaced Premises to a third party determined by Borrower. 12. 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) express overnight delivery service or (iii) certified or registered mail, return receipt requested, and shall be deemed to have been delivered upon (a) receipt, if hand delivered, (b) the next Business Day, if delivered by express overnight delivery service, or (c) 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 specified below: If to Borrower: JAX Real Estate, LLC 3401 West End Avenue, Suite 260 Nashville, TN 37203 Attention: R. Gregory Lewis If to Lender: GE Capital Franchise Finance Corporation 17207 North Perimeter Drive Scottsdale, AZ 85255 Attention: General Counsel 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, except Borrower's engagement of Banc of America Securities LLC, whose fees shall be paid by Borrower. 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. 25 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. 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 reasonable 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 26 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 Notes 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 non-exclusive 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 Notes 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 Notes, then, as to those provisions only, the laws of the states where the Premises are 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 states in which the Premises are located to the extent Lender deems such proceeding necessary or advisable to exercise remedies available under this Agreement or the other Loan Documents. 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, 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, 27 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 any Note, Mortgage and/or any of the other Loan Documents or any or all servicing rights with respect thereto; provided, however, without the prior written consent of Borrower, Lender shall not make a Transfer or grant a Participation to a competitor of Borrower in the casual dining industry. (2) Borrower agrees to cooperate in good faith with Lender in connection with any such Transfer, Participation and/or Securitization of any 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 Borrower or the Lessee Parties by a purchaser, transferee, assignee, servicer, participant, investor or rating agency involved with respect to such Transfer, Participation and/or Securitization, as applicable; provided, however, Borrower and the Lessee Parties shall not be required to make Disclosures of any confidential information or any information which has not previously been made public unless required by applicable federal or state securities laws; and (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 Borrower, the Lessee 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). (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 Borrower or the Lessee 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; provided, however, in no event shall Borrower be required to incur out-of-pocket expenses in excess of $10,000 pursuant to 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 Borrower 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 Borrower contained in any Loan Document or Other Agreement which does correspond to a loan in such Loan Pool. (5) In the event that at least one, but not all, of the Loans are included in a Loan Pool, Borrower, at the request of Lender, shall execute (i) a separate Loan Agreement with respect to those Loans included in such Loan 28 Pool, which Loan Agreement shall be in substantially the same form and substance as this Agreement but shall only apply with respect to those Premises corresponding to such Loans (the "Other Loan Agreement"), and (ii) an amendment to this Agreement that shall modify the term "Premises" to delete those Premises corresponding to the Other Loan Agreement from this Agreement. Lender shall prepare, at Lender's expense, the documents contemplated by the preceding sentence. If Borrower shall fail to execute and deliver any of the documents contemplated by this subsection (5) within twenty (20) days after Lender's written request, Lender shall be and is hereby irrevocably appointed the agent and attorney-in-fact of Borrower to execute and deliver such documents, which appointment is coupled with an interest and is irrevocable and binding. 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. 29 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/ Stephen Y. Schwanz -------------------------------------------- Stephen Y. Schwanz Its Senior Vice President BORROWER: JAX REAL ESTATE, LLC, a Delaware limited liability company By /s/ R. Gregory Lewis -------------------------------------------- R. Gregory Lewis Its Vice President and Treasurer U.S. Federal Tax Identification Number: 55-0801619 Organization Identification Number: 3580306 Principal Place of Business: Nashville, Tennessee STATE OF ARIZONA ) ) SS. COUNTY OF MARICOPA ) The foregoing instrument was acknowledged before me on October 29, 2002 by Stephen Y. Schwanz, Senior Vice President of GE Capital Franchise Finance Corporation, a Delaware corporation, on behalf of the corporation. /s/ Notary Public --------------------------------- Notary Public My Commission Expires: December 12, 2004 - --------------------------------------- STATE OF ARIZONA ) ) SS. COUNTY OF MARICOPA ) The foregoing instrument was acknowledged before me on October 29, 2002 by R. Gregory Lewis, Vice President and Treasurer of JAX Real Estate, LLC, a Delaware limited liability company, on behalf of the limited liability company. /s/ Notary Public --------------------------------- Notary Public My Commission Expires: December 12, 2004 - --------------------------------------- POWER OF ATTORNEY Lender may act as attorney-in-fact or otherwise on behalf of Borrower pursuant to Section 12.P(5) of this Agreement. This power of attorney is coupled with an interest, is durable and is not affected by subsequent disability or incapacity of the principal or lapse of time. /s/ SH /s/ RGL - --------------- -------------------- Witness Borrower WITNESS In accordance with the requirements of Arizona Revised Statutes Section 14-5506 and other applicable law, the undersigned has executed this Agreement for the purpose of witnessing the grant of the powers of attorney by Borrower to Lender. /s/ Susan Hvidsten --------------------------------------- EXHIBIT A DESCRIPTION OF PREMISES; ALLOCATED LOAN AMOUNT
- ---------------------------------------------------------------------------------------------- PROPERTY - ---------------------------------------------------------------------------------------------- ADDRESS CITY COUNTY STATE INSURANCE AMOUNT - ---------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------- 1721 Galleria Boulevard Franklin Williamson TN 3,150,000.00 - ---------------------------------------------------------------------------------------------- 7970 Washington Village Dr. Dayton Montgomery OH 2,100,000.00 - ---------------------------------------------------------------------------------------------- 7550 Vantage Drive Columbus Franklin OH 2,100,000.00 - ---------------------------------------------------------------------------------------------- 1410 16th Street Oak Brook Du Page IL 3,575,000.00 - ---------------------------------------------------------------------------------------------- 3320 Galleria Circle Hoover Jefferson AL 3,100,000.00 - ---------------------------------------------------------------------------------------------- 11471 Metcalf Avenue Overland Park Johnson KS 3,150,000.00 - ---------------------------------------------------------------------------------------------- 2215 Hamilton Place Blvd. Chattanooga Hamilton TN 1,425,000.00 - ---------------------------------------------------------------------------------------------- 2670 North Germantown Pkwy. Memphis Shelby TN 3,400,000.00 - ---------------------------------------------------------------------------------------------- 19200 Haggerty Road Livonia Wayne MI 3,000,000.00 - ---------------------------------------------------------------------------------------------- TOTAL $25,000,000.00 - ----------------------------------------------------------------------------------------------
EXHIBIT B LEASED PERSONAL PROPERTY Lessee occasionally leases the following items of Personal Property: trash dumpsters, CO2 canisters. EX-10.C 5 g79138exv10wc.txt MASTER LEASE Exhibit 10(c) MASTER LEASE THIS MASTER LEASE (this "Lease") is made as of October 29, 2002 (the "Effective Date"), by and between JAX REAL ESTATE, LLC, a Delaware limited liability company ("Lessor"), and J. ALEXANDER'S RESTAURANTS, INC., a Tennessee corporation ("Lessee"). W I T N E S S E T H: THAT, in consideration of the mutual covenants and agreements herein contained, Lessor and Lessee hereby covenant and agree as follows: 1. CERTAIN DEFINED TERMS. The following terms shall have the following meanings for all purposes of this Lease: "ADA" means the Americans with Disabilities Act of 1990, as such act may be amended from time to time. "Additional Rental" has the meaning set forth in Section 5.B. "Affiliate" means any Person which directly or indirectly controls, is under common control with, or is controlled by any other Person. For purposes of this definition, "controls", "under common control with" and "controlled by" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or otherwise. "Anti-Money Laundering Laws" means all applicable laws, regulations and government guidance on the prevention and detection of money laundering, including 18 U.S.C. ss. ss. 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 any of the Properties, including, without limitation, all health, building, fire, safety and other codes, ordinances and requirements, all applicable standards of the National Board of Fire Underwriters and the ADA and all policies or rules of common law, in each case, as amended, and any judicial or administrative interpretation thereof, including any judicial order, consent, decree or judgment applicable to any of the Lessee Parties. "Applicable Rent Reduction Percentage" means, with respect to any Property, a fraction, the numerator of which shall be the original principal balance of the Note corresponding to such Property, and the denominator of which shall be the sum of all of the original principal balances of the Notes corresponding to all of the Properties then subject to this Lease, including such Property. "Base Annual Rental" means $2,566,025.64. "Base Monthly Rental" means an amount equal to 1/12 of the applicable Base Annual Rental. "BSA" means the Bank Secrecy Act (31 U.S.C.ss.ss. 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. "Code" means Title 11 of the United States Code, 11 U.S.C. Sec. 101 et seq., as amended. "Default Rate" means the lesser of the highest rate for which the undersigned may legally contract or the rate of 14% per annum. "Effective Date" has the meaning set forth in the Preamble. "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 any of the Properties, whether or not yet discovered, which would reasonably be expected to or does result in any damage, loss, cost, expense, claim, demand, order or liability to or against any of the Lessee Parties, Lessor or Lender by any third party (including, without limitation, any Governmental Authority), including, without limitation, any condition resulting from the operation of business at any of the Properties and/or any activity or operation formerly conducted by any person or entity on any of the Properties. "Environmental Insurer" means American International Specialty Lines Insurance Company, or such other environmental insurance company as Lessor 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 or USTs and/or the protection of human health or the environment by reason of a Release or a Threatened Release of Hazardous Materials or USTs or relating to liability for or costs of Remediation or prevention of Releases. "Environmental Laws" includes, but is not limited to, the following statutes, as amended, any successor thereto, and any regulations, rulings, orders or decrees promulgated pursuant thereto, and any state or local statutes, ordinances, rules, regulations, orders, injunctions and decrees of Governmental Authorities: the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.ss.ss. 9601 et seq.; the Emergency Planning and Community Right-to-Know Act, 42 U.S.C.ss. 11001 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C.ss. 5101 et seq.; the Resource Conservation and Recovery Act (including but not limited to Subtitle I relating to USTs), 42 U.S.C.ss.ss. 6901 et seq.; the Clean Water Act, 33 U.S.C.ss.ss. 1251 et seq.; the Clean Air Act, 42 U.S.C.ss.ss. 7401 et seq.; the Toxic Substances Control Act, 15 U.S.C.ss. 2601 et seq.; the Safe Drinking Water Act, 42 U.S.C.ss.ss. 7401 et seq.; the Occupational Safety and Health Act, 29 U.S.C.ss. 651 et seq.; the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C.ss.ss. 136 et seq.; the Endangered Species Act, 16 U.S.C.ss.ss. 1531 et seq. and the National Environmental Policy Act, 42 U.S.C.ss. 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 any of the Properties to any Governmental Authority or other person or entity, whether or not in connection with transfer of title to or interest in property; imposing conditions or requirements relating to Hazardous Materials or USTs in connection with permits or other authorizations required by Governmental Authorities; relating to the handling and disposal of Hazardous Materials; relating to nuisance, trespass or other causes of action related to Hazardous Materials; and relating to wrongful death, personal injury, or property or other damage in connection with the physical condition or use of any of the Properties by reason of the presence of Hazardous Materials or USTs in, on, under or above any of the Properties. "Environmental Liens" has the meaning set forth in Section 6.L(9). "Environmental Policies" means the environmental insurance policies issued by Environmental Insurer to Lender with respect to the Properties, which Environmental Policies shall be in form and substance satisfactory to Lender in its sole discretion. "Event of Default" has the meaning set forth in Section 24. "GAAP" means generally accepted accounting principles consistently applied. "Governmental Authority" means any governmental authority, agency, department, commission, bureau, board, instrumentality, court or quasi-governmental authority having jurisdiction or supervisory or regulatory authority over any of the Properties or any of the Lessee Parties. "Guarantor" means J. Alexander's Corporation, a Tennessee corporation. 2 "Guaranty" means the unconditional guaranty of payment and performance dated as of the Effective Date executed by Guarantor for the benefit of Lessor with respect to Lessee's obligations under this Lease, as the same may be amended from time to time. "Hazardous Materials" means (a) any toxic substance or hazardous waste, substance, solid waste or related material, or any pollutant or contaminant; (b) radon gas, asbestos in any form which is or could become friable, urea formaldehyde foam insulation, transformers or other equipment containing dielectric fluid having levels of polychlorinated biphenyls in excess of applicable standards established by any Governmental Authority, or any petroleum product or additive; (c) any substance, gas, material or chemical which is now or hereafter defined as or included in the definition of "hazardous substances," "toxic substances," "hazardous materials," "hazardous wastes," "regulated substances" or words of similar import under any Environmental Laws; and (d) any other chemical, material, gas or substance the exposure to or release of which is prohibited, limited or regulated by any Governmental Authority that asserts or may assert jurisdiction over any of the Properties or the operations or activity at any of the Properties, 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 any of the Properties. "Indemnified Parties" means Lessor, Environmental Insurer, Lender, their respective directors, officers, shareholders, trustees, beneficial owners, partners and members, any directors, officers, shareholders, trustees, beneficial owners, partners, members of any shareholders, beneficial owners, partners or members of Lessor, Environmental Insurer or Lender, and all employees, agents, servants, representatives, contractors, subcontractors, affiliates, subsidiaries, participants, successors and assigns of any of the foregoing, including, but not limited to, any successors by merger, consolidation or acquisition of all or a substantial portion of the assets and business of Lessor, Environmental Insurer or Lender, as applicable. "Lease Term" shall have the meaning described in Section 4. "Leased Personal Property" means the Personal Property described on Exhibit B attached hereto. "Lender" means GE Capital Franchise Finance Corporation, a Delaware corporation, its successors and assigns, any successor lender in connection with any loan secured by Lessor's interest in any of the Properties, and any servicer of any loan secured by Lessor's interest in any of the Properties. "Lessee Parties" means, collectively, Lessee and any guarantors of this Lease (including, in each case, any predecessors-in-interest). "Lessor Parties" means, collectively, Lessor (including any predecessor-in-interest to Lessor) and any Affiliate of Lessor (including any Affiliate of any predecessor-in-interest to Lessor). "License Agreement" means the license agreement dated as of the date of this Lease between Lessor and Guarantor, as the same may be amended from time to time. "Loan Agreement" means the Loan Agreement dated as of the Effective Date in effect between Lessor and Lender, as such agreement may be amended, modified or supplemented from time to time and any and all replacements or substitutions thereof. "Loan Documents" means, collectively, the Loan Agreement, the Notes, the Mortgages and all other documents, instruments and agreements executed in connection therewith or contemplated thereby, all as amended, modified and supplemented and any and all replacements or substitutions thereof. "Loan Pool" means: (i) in the context of a Securitization, any pool or group of loans that are a part of such Securitization; 3 (ii) in the context of a Transfer, all loans which are sold, transferred or assigned to the same transferee; and (iii) in the context of a Participation, all loans as to which participating interests are granted to the same participant. "Losses" means any and all claims, suits, liabilities (including, without limitation, strict liabilities), actions, proceedings, obligations, debts, damages, losses, costs, expenses, diminutions in value, fines, penalties, charges, fees, expenses, judgments, awards, amounts paid in settlement and damages of whatever kind or nature (including, without limitation, attorneys' fees, court costs and other costs of defense). "Material Adverse Effect" means a material adverse effect on (i) any of the Properties, including, without limitation, the operation of any of the Properties as a Permitted Concept, or (ii) Lessee's ability to perform its obligations under this Lease. "Memorandum" means the memorandum of master lease dated as of the Effective Date between Lessor and Lessee with respect to the Properties. A duplicate original Memorandum will be executed and recorded in the applicable real property records for each Property. Each Memorandum will contain exhibits with the addresses and store identification numbers for all of the Properties and the legal description for the applicable Property. "Mortgages" means, collectively, the mortgages, deeds of trust or deeds to secure debt, assignments of rents and leases, security agreements and fixture filings dated as of the Effective Date executed by Lessor for the benefit of Lender with respect to the Properties, as such instruments may be amended, modified, restated and/or supplemented from time to time and any and all replacements or substitutions thereof. "Notes" means, collectively, the promissory notes dated as of the Effective Date executed by Lessor and payable to Lender with respect to the Properties, as such notes may be amended, modified, restated and/or substituted from time to time. "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 now or hereafter entered into between, among or by (1) any of the Lessee Parties and/or any Affiliate of any of the Lessee Parties (including any Affiliate of any predecessor-in-interest to any of the Lessee Parties), and, or for the benefit of, (2) any of the Lessor Parties, including, without limitation, the License Agreement; provided, however, the term Other Agreements shall not include this Lease. "Participation" means one or more grants by Lender or any Affiliate of Lender to a third party of a participating interest in notes evidencing obligations to repay secured or unsecured loans owned by Lender or any Affiliate of Lender or any or all servicing rights with respect thereto. "Permitted Amounts" means, with respect to any given level of Hazardous Materials, that level or quantity of Hazardous Materials in any form or combination of forms the presence, use, storage, release or handling of which 4 does not constitute a violation of any Environmental Laws and is customarily employed in the ordinary course of, or associated with, similar businesses located in the states in which the Properties are located. "Permitted Concept" means a J. Alexander's restaurant. "Person" means any individual, corporation, partnership, limited liability company, trust, unincorporated organization, Governmental Authority or any other form of entity. "Personal Property" means all tangible personal property now or at any time hereafter located on or at any of the Properties or used in connection therewith, including, without limitation, all trade fixtures, machinery, appliances, furniture, equipment and inventory; provided, however, the term "Personal Property" shall not include the HVAC, supply fans, exhaust fans, air ducts, hoods, vents, built-in sinks, built-in countertops, plumbing and electrical fixtures, sign poles and lighting poles, all of which items are intended to be fixtures as such term is used within the definition of "Properties". "Prohibited Transaction" has the meaning set forth in Section 27.B. "Properties" means, collectively, the parcels of real estate described by address, FFC Number and Unit Number in Exhibit A attached hereto and legally described in Exhibit A-1 attached hereto, all rights, privileges and appurtenances associated therewith, and all buildings, fixtures and other improvements now or hereafter located on such real estate (whether or not affixed to such real estate). "Property" means any one of the Properties. "Questionnaires" means the environmental questionnaires completed on behalf of Lessor with respect to the Properties and submitted to Environmental Insurer in connection with the issuance of the Environmental Policies. "Release" means any 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 or USTs required by any Environmental Law or any Governmental Authority, any actions to prevent, cure or mitigate any Release, any action to comply with any Environmental Laws or with any permits issued pursuant thereto, any inspection, investigation, study, monitoring, assessment, audit, sampling and testing, laboratory or other analysis, or any evaluation relating to any Hazardous Materials or USTs. "Securitization" means one or more sales, dispositions, transfers or assignments by Lender or any Affiliate of Lender to a special purpose corporation, trust or other entity identified by Lender or any Affiliate of Lender of notes evidencing obligations to repay secured or unsecured loans owned by Lender or any Affiliate of Lender (and, to the extent applicable, the subsequent sale, transfer or assignment of such notes to another special purpose corporation, trust or other entity identified by Lender or any Affiliate of Lender), and the issuance of bonds, certificates, notes or other instruments evidencing interests in pools of such loans, whether in connection with a permanent asset securitization or a sale of loans in anticipation of a permanent asset securitization. Each Securitization shall be undertaken in accordance with all requirements which may be imposed by the investors or the rating agencies involved in each such sale, disposition, transfer or assignment or which may be imposed by applicable securities, tax or other laws or regulations. "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 any of the Properties which may result from such Release. 5 "Transfer" means one or more sales, transfers or assignments by Lender or any Affiliate of Lender to a third party of notes evidencing obligations to repay secured or unsecured loans owned by Lender or any Affiliate of Lender or any or all servicing rights with respect thereto. "UCC" shall have the meaning described in Section 30. "U.S. Publicly-Traded Entity" is an Entity whose securities are listed on a national securities exchange or quoted on an automated quotation system in the U.S. or a wholly-owned subsidiary of such an Entity. "USTs" means any one or combination of below or above ground tanks and associated piping systems used in connection with the storage, dispensing and general use of petroleum and petroleum-based substances. 2. DEMISE OF PROPERTIES. In consideration of the rentals and other sums to be paid by Lessee and of the other terms, covenants and conditions on Lessee's part to be kept and performed, Lessor hereby leases to Lessee, and Lessee hereby takes and hires, the Properties. The Properties are leased to Lessee "AS IS" and "WHERE IS" without representation or warranty by Lessor and subject to the rights of parties in possession, to the existing state of title, any state of facts which an accurate survey or physical inspection might reveal, and all Applicable Regulations now or hereafter in effect. Lessee has examined each of the Properties and title to each of the Properties and has found all of the same satisfactory for all of Lessee's purposes. 3. MASTER LEASE CHARACTERIZATION. A. Lessor and Lessee intend that: (i) this Lease constitutes a single master lease of all, but not less than all, of the Properties and that Lessor and Lessee have executed and delivered this Lease with the understanding that this Lease constitutes a unitary, unseverable instrument pertaining to all, but not less than all, of the Properties, and that neither this Lease nor the duties, obligations or rights of Lessee may be allocated or otherwise divided among the Properties by Lessee; (ii) this Lease is a "true lease" and not a financing lease, capital lease, mortgage, equitable mortgage, deed of trust, trust agreement, security agreement or other financing or trust arrangement, and the economic realities of this Lease are those of a true lease; and (iii) the business relationship created by this Lease and any related documents is solely that of a long-term commercial lease between landlord and tenant and has been entered into by both parties in reliance upon the economic and legal bargains contained herein. B. Lessor and Lessee acknowledge and agree that the Lease Term, including any term extensions provided for in this Lease, is less than the remaining economic life of each of the Properties. C. Lessee waives any claim or defense based upon the characterization of this Lease as anything other than a true lease and irrevocably waives any claim or defense which asserts that this Lease is anything other than a true lease. Lessee covenants and agrees that it will not assert that this Lease is anything but a true lease. Lessee stipulates and agrees not to challenge the validity, enforceability or characterization of the lease of the Properties as a true lease and further stipulates and agrees that nothing contained in this Lease creates or is intended to create a joint venture, partnership (either de jure or de facto), equitable mortgage, trust, financing device or arrangement, security interest or the like. Lessee shall support the intent of the parties that the lease of the Properties pursuant to this Lease is a true lease and does not create a joint venture, partnership (either de jure or de facto), equitable mortgage, trust, financing device or arrangement, security interest or the like, if, and to the extent that, any challenge occurs. D. Lessee waives any claim or defense based upon the characterization of this Lease as anything other than a master lease of all of the Properties and irrevocably waives any claim or defense which asserts that this Lease is anything other than a master lease. Lessee covenants and agrees that it will not assert that this Lease is anything but a unitary, unseverable instrument pertaining to the lease of all, but not less than all, of the Properties. Lessee stipulates and agrees not to challenge the validity, enforceability or characterization of the lease of the 6 Properties as a unitary, unseverable instrument pertaining to the lease of all, but not less than all, of the Properties. Lessee shall support the intent of the parties that this Lease is a unitary, unseverable instrument pertaining to the lease of all, but not less than all, of the Properties, if, and to the extent that, any challenge occurs. E. Lessor and Lessee stipulate and agree that (i) the Base Annual Rental is the fair market rent for the use of the Properties and was agreed to by Lessor and Lessee on that basis, and (ii) the execution, delivery and performance by Lessee of this Lease does not constitute a transfer of all or any part of the Properties. F. The expressions of intent, the waivers, the representations and warranties, the covenants, the agreements and the stipulations set forth in this Section are a material inducement to Lessor entering into this Lease. 4. LEASE TERM. The Lease Term for all of the Properties shall commence as of the Effective Date and shall expire on April 30, 2023, unless terminated sooner as provided in this Lease. The time period during which this Lease shall actually be in effect is referred to herein as the "Lease Term." 5. RENTAL AND OTHER PAYMENTS. A. If the Effective Date is a date other than the first day of the month, Lessee shall pay Lessor on the Effective Date the Base Monthly Rental prorated on the basis of the ratio that the number of days from the Effective Date through the last day in the month containing the Effective Date bears to the number of days in such month. Thereafter, on or before the first day of each succeeding calendar month, Lessee shall pay Lessor in advance the Base Monthly Rental. B. All sums of money required to be paid by Lessee under this Lease which are not specifically referred to as rent ("Additional Rental") shall be considered rent although not specifically designated as such. Lessor shall have the same remedies for nonpayment of Additional Rental as those provided herein for the nonpayment of Base Annual Rental. 6. REPRESENTATIONS AND WARRANTIES OF LESSEE. The representations and warranties of Lessee contained in this Section are being made to induce Lessor to enter into this Lease and Lessor has relied, and will continue to rely, upon such representations and warranties. Lessee represents and warrants to Lessor as of the Effective Date as follows: A. Organization, Authority and Status. (i) Each of the Lessee Parties (other than individuals), as applicable, is duly organized or formed, validly existing and in good standing under the laws of its state of incorporation or formation. Lessee is qualified as a foreign corporation, partnership or limited liability company, as applicable, to do business in each state where the Properties are located, and each of the Lessee Parties is qualified as a foreign corporation, partnership or limited liability company, as applicable, to do business in any other jurisdiction where the failure to be qualified would reasonably be expected to result in a Material Adverse Effect. All necessary action has been taken to authorize the execution, delivery and performance by Lessee of this Lease and of the other documents, instruments and agreements provided for herein. The person(s) who have executed this Lease on behalf of Lessee are duly authorized to do so. Lessee is not a "foreign corporation", "foreign partnership", "foreign trust", "foreign estate" or "foreign person" (as those terms are defined in the Internal Revenue Code of 1986, as amended). Lessee's U.S. Federal Tax Identification number, Organization Identification number and principal place of business are correctly set forth on the signature page of this Lease. None of the Lessee Parties, and no individual or entity owning directly or indirectly any interest in any of the Lessee Parties, is an individual or entity whose property or interests are subject to being blocked under any of the 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. B. Enforceability. Upon execution by Lessee, this Lease shall constitute the legal, valid and binding obligation of Lessee, enforceable against Lessee in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, liquidation, reorganization and other laws affecting the rights of creditors generally and general principles of equity. 7 C. Litigation. There are no suits, actions, proceedings or investigations pending or, to its knowledge, threatened against or involving the Lessee Parties or any of the Properties before any arbitrator or Governmental Authority, except for such suits, actions, proceedings or investigations which, individually or in the aggregate, have not had, and would not reasonably be expected to result in, a Material Adverse Effect. D. Absence of Breaches or Defaults. The Lessee Parties are not, and the authorization, execution, delivery and performance of this Lease and the documents, instruments and agreements provided for herein will not result in, any breach or default under any document, instrument or agreement to which any of the Lessee Parties is a party or by which any of the Lessee Parties, any of the Properties or any of the property of any of the Lessee Parties is subject or bound, except for such breaches or defaults which, individually or in the aggregate, have not had, and would not reasonably be expected to result in, a Material Adverse Effect. The authorization, execution, delivery and performance of this Lease and the documents, instruments and agreements provided for herein will not violate any applicable law, statute, regulation, rule, ordinance, code, rule or order. None of the Properties are subject to any right of first refusal, right of first offer or option to purchase or lease granted to a third party. Lessee has not assigned, transferred, mortgaged, hypothecated or otherwise encumbered this Lease or any rights hereunder or interest herein. E. Liabilities of Lessor. Lessee is not liable for any indebtedness for money borrowed by Lessor and has not guaranteed any of the debts or obligations of Lessor. F. Licenses and Permits; Access. All required licenses and permits, both governmental and private, to use and operate each of the Properties 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 each of the Properties for unrestricted ingress and egress and otherwise to permit utilization of each of the Properties for their intended purposes, and all such public roads and ways have been completed and dedicated to public use. G. Condition of Properties. Each of the Properties, 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 and properly lighted. H. Utilities. Adequate public utilities are available at each of the Properties to permit utilization of each of the Properties as a Permitted Concept and all utility connection fees and use charges will have been paid in full. I. Area Development; Wetlands. No condemnation or eminent domain proceedings affecting any of the Properties have been commenced or, to Lessee's knowledge, are contemplated. None of the Properties and, to Lessee's knowledge, none of the real property bordering any of the Properties are designated by any Governmental Authority as a wetlands. J. Financial Information. Lessee has delivered to Lessor and/or Lender profit and loss statements for the business conducted at each of the Properties (the "P&L Statements") and consolidated financial statements of the Lessee Parties and their consolidated Affiliates (the "Consolidated Statements"; the P&L Statements and the Consolidated Statements are collectively referred to as, the "Financial Information"). The Consolidated Statements were prepared in accordance with GAAP and fairly present as of the date of such statements the financial condition of the entities to which they pertain. The P&L Statements were prepared from the consolidated financial records of the Lessee Parties and do not include charges or allocations for general and administrative expenses (including management training and relocation costs), interest expense, income taxes, and other income and expense items which are not classified by the Lessee Parties as restaurant-level items. The Financial Information (as prepared above) is true, correct and complete in all material respects; there have been no material amendments to the Financial Information since the date such Financial Information was prepared or delivered to Lessor and/or Lender. Lessee understands that Lessor is relying upon the Financial Information and Lessee represents that such reliance is reasonable. No change has occurred with respect to the financial condition of Lessee and/or the Properties which has not been disclosed in writing to Lessor and Lender and which has had, or could reasonably be expected to result in, a Material Adverse Effect. 8 K. Zoning; Compliance With Laws. To the Lessee Parties' knowledge, each of the Properties is in compliance in all material respects with all applicable zoning requirements, and the use of each of the Properties as a Permitted Concept does not constitute a nonconforming use under applicable zoning requirements. To the Lessee Parties' knowledge, the Lessee Parties and the Properties 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. L. Environmental. Except as disclosed in the Questionnaires: (1) None of the Properties nor any of the Lessee Parties are in violation of, or subject to, any pending or, to Lessee's actual knowledge, threatened investigation or inquiry by any Governmental Authority or to any remedial obligations under any Environmental Laws, and this representation and warranty would continue to be true and correct following disclosure to the applicable Governmental Authorities of all relevant facts, conditions and circumstances, if any, pertaining to any of the Properties and known to the Lessee Parties; (2) All permits, licenses or similar authorizations required to construct, occupy, operate or use any buildings, improvements, fixtures and equipment forming a part of any of the Properties 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 by the Lessee Parties or, to the Lessee Parties' knowledge, any other party, in, on, under, from or about any of the Properties, except in Permitted Amounts; (4) None of the Properties contain Hazardous Materials, except in Permitted Amounts, and all USTs located on or about the Properties, if any, are in full compliance with all Environmental Laws; (5) To the Lessee Parties' knowledge, there is no threat of any Release migrating to any of the Properties in excess of Permitted Amounts; (6) There is no past (to the Lessee Parties' knowledge) or present non-compliance with Environmental Laws, or with permits issued pursuant thereto, in connection with any of the Properties; (7) None of the Lessee Parties has received any written or oral notice or other communication from any person or entity (including but not limited to a Governmental Authority) relating to Hazardous Materials or USTs or Remediation thereof in excess of Permitted Amounts, of possible liability of any person or entity pursuant to any Environmental Law, other environmental conditions in connection with any of the Properties, or any actual or potential administrative or judicial proceedings in connection with any of the foregoing; (8) All information known to any of the Lessee Parties or contained in the files of any of the Lessee Parties relating to any Environmental Condition or Releases of Hazardous Materials in, on, under or from any of the Properties, other than in Permitted Amounts, has been provided to Lessor, including, without limitation, information relating to all prior Remediation; (9) All of the Properties are free and clear of all liens and other encumbrances imposed pursuant to any Environmental Law (the "Environmental Liens"); and none of the Lessee Parties has allowed any tenant or other user of any of the Properties 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 any of the Properties), impaired the value of any of the Properties 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 any of the Properties; and (10) The information and disclosures in the Questionnaires are true, correct and complete in all material respects, and the person or persons executing the Questionnaires were duly authorized to do so. 9 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 Properties; and no work has been performed or is in progress nor have materials been supplied to the Properties or agreements entered into for work to be performed or materials to be supplied to the Properties prior to the Effective Date, which will be delinquent on or before the Effective Date. N. Title to Personal Property. Lessee is the owner of all Personal Property (other than the Leased Personal Property), free and clear of all liens, encumbrances, charges and security interests of any nature whatsoever, except the liens created by the Lease, and no Affiliate of Lessee owns any of the Personal Property. Upon the execution and delivery of this Lease, Lessor shall have a first priority lien upon and security interest in the Personal Property. O. Money Laundering. (1) Lessee has taken all reasonable measures, in accordance with all applicable Anti-Money Laundering Laws, with respect to each holder of a direct or indirect interest in the Lessee Parties, to assure that funds invested by such holders in the Lessee Parties are derived from legal sources; 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 Lessee's knowledge after making due inquiry, neither any of the Lessee Parties nor any holder of a direct or indirect interest in the Lessee Parties (a) is under investigation by any Governmental Authority for, or has been charged with or convicted of, any violation of any Anti-Money Laundering Laws, or drug trafficking, terrorist-related activities or other money laundering predicated crimes or a violation of the BSA, (b) has been assessed civil penalties under these or related laws, or (c) has had any of its funds seized or forfeited in an action under these or related laws; 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) Lessee has taken reasonable steps, consistent with industry practice for comparable organizations and in any event as required by law, to ensure that the Lessee Parties are and shall be in compliance with all (i) Anti-Money Laundering Laws and (ii) OFAC Laws and Regulations. 7. NONCONSOLIDATION; TRANSFER, PARTICIPATION AND SECURITIZATION; COMPLIANCE CERTIFICATES. Lessee covenants to Lessor for so long as this Lease is in effect as follows: A. Nonconsolidation Covenants. (i) The annual financial statements of Lessee, including consolidated financial statements, if any, shall contain notes stating that (a) all of Lessor's assets are owned by Lessor and (b) Lessor is a separate entity with its own separate creditors which will be entitled to be satisfied out of Lessor's assets. (ii) Lessee will not assume liability for any indebtedness for money borrowed by Lessor and does not, and will not, guarantee any of the debts or obligations of Lessor. Lessee will not hold itself out as being liable for any obligations or indebtedness of Lessor. (iii) Lessee shall not and shall use its best efforts to cause its affiliates not to hold Lessor out to the public or to any individual creditors as being a unified entity with assets and liabilities in common with Lessee except that Lessor may be included in Lessee's or its affiliates' reports under the Securities Exchange Act of 1934, as amended, and its and their consolidated financial statements, as appropriate, provided such statements adequately disclose the separate legal existence of Lessor, the separate ownership by Lessor of the Properties and the separate liabilities of Lessor. (iv) Lessee shall conduct its business so as not to mislead others as to the separate identity of Lessor, and particularly will avoid the appearance of conducting business on behalf of Lessor. Without limiting the generality of the foregoing, no oral and written communications of Lessee, including, without limitation, letters, invoices, purchase orders, contracts, statements and loan applications, will be made in the name of Lessor which to the extent that to do otherwise would materially bear upon the maintenance of Lessor's separate identity. 10 (v) Lessee will not act in Lessor's name. (vi) Where necessary and appropriate, Lessee shall disclose the independent business status of Lessor to creditors of Lessee, if any. (vii) The resolutions, agreements and other instruments of Lessee, if any, underlying the transactions described in this Lease will be maintained by Lessee. (viii) All transactions between Lessee and Lessor will be no less fair to each party than they could obtain on an arm's-length basis. (ix) The books, records and accounts of Lessee shall at all times be maintained in a manner permitting the assets and liabilities of Lessor to be easily separated and readily ascertained from those of Lessee. (x) Lessee will not direct, or otherwise control, the ongoing business decisions of Lessor. (xi) Lessee will not file or cause to be filed a voluntary or involuntary petition in bankruptcy on behalf of or against Lessor, nor seek substantive consolidation of the assets and liabilities of Lessor and Lessee in any bankruptcy or insolvency proceeding during the Lease Term and for a period of 91 days after the Lease Term. B. Transfer, Participation and/or Securitization Covenants. (i) Lessee agrees to cooperate in good faith with Lessor and Lender in connection with any Transfer, Participation and/or Securitization of any of the Notes, Mortgages and/or any of the Loan Documents, or any or all servicing rights with respect thereto, including, without limitation, (X) providing such documents, financial and other data, and other information and materials (the "Disclosures") which would typically be required with respect to the Lessee Parties by a purchaser, transferee, assignee, servicer, participant, investor or rating agency involved with respect to such Transfer, Participation and/or Securitization, as applicable; provided, however, the Lessee Parties shall not be required to make Disclosures of any confidential information or any information which has not previously been made public unless required by applicable federal or state securities laws; and (Y) amending the terms of this Lease to the extent necessary so as to satisfy the requirements of purchasers, transferees, assignees, servicers, participants, investors or selected rating agencies involved in any such Transfer, Participation or Securitization, so long as such amendments would not have a material adverse effect upon the Lessee Parties or the transactions contemplated by this Lease. Lessor shall be responsible for causing Lender to prepare at Lender's expense any documents evidencing the amendments referred to in the preceding subitem (Y). (ii) Lessee consents to Lessor and Lender providing the Disclosures, as well as any other information which Lessor and Lender may now have or hereafter acquire with respect to the Properties or the financial condition of the Lessee Parties to each purchaser, transferee, assignee, servicer, participant, investor or rating agency involved with respect to such Transfer, Participation and/or Securitization, as applicable; provided that, to the extent any of the Disclosures have been designated by Lessee upon their delivery as containing confidential information, Lessor or Lender, as applicable, shall advise each such recipient of the confidential nature of such information. Lessee shall pay its own attorney fees and other out-of-pocket expenses incurred in connection with the performance of its obligations under this Section 7.B; provided, however, in no event shall Lessee be required to incur out-of-pocket expenses in excess of $10,000 pursuant to this Section. C. Compliance Certificate. Within 90 days after the end of each fiscal year of Lessee, Lessee shall deliver a compliance certificate to Lessor in a form to be provided by Lessor in order to establish that Lessee is in compliance in all material respects with all of its obligations, duties and covenants under this Lease. 8. RENTALS TO BE NET TO LESSOR. The Base Annual Rental payable hereunder shall be net to Lessor, so that this Lease shall yield to Lessor the rentals specified during the Lease Term, and that all costs, expenses and obligations of every kind and nature whatsoever relating to the Properties shall be performed and paid by Lessee. 9. TAXES AND ASSESSMENTS. Lessee shall pay, prior to the earlier of delinquency or the accrual of interest on the unpaid balance, all taxes and assessments of every type or nature assessed against, imposed upon or 11 arising with respect to Lessor, any of the Properties, this Lease, the rental or other payments due under this Lease or Lessee during the Lease Term which affect in any manner the net return realized by Lessor under this Lease, including, without limitation, the following: A. All taxes and assessments upon any of the Properties or any part thereof and upon any Personal Property, whether belonging to Lessor or Lessee, or any tax or charge levied in lieu of such taxes and assessments; B. All taxes, charges, license fees and or similar fees imposed by reason of the use of any of the Properties by Lessee; and C. All excise, transaction, privilege, license, sales, use and other taxes upon the rental or other payments due under this Lease, the leasehold estate of either party or the activities of either party pursuant to this Lease. Notwithstanding the foregoing, but without limiting the preceding obligation of Lessee to pay all taxes which are imposed on the rental or other payments due under this Lease, in no event will Lessee be required to pay (i) any net income taxes (i.e., taxes which are determined taking into account deductions for depreciation, interest, taxes and ordinary and necessary business expenses) or franchise taxes (unless imposed in lieu of other taxes that would otherwise be the obligation of Lessee under this Lease, including, without limitation, any "gross receipts tax" or any similar tax based upon gross income or receipts of Lessor which does not take into account deductions from depreciation, interest, taxes and/or ordinary or necessary business expenses) of Lessor, (ii) any transfer taxes of Lessor, (iii) any tax imposed with respect to the sale, exchange or other disposition by Lessor, in whole or in part, of any of the Properties or Lessor's interest in this Lease (other than transfer or recordation taxes imposed in connection with the transfer of any of the Properties to Lessee or the termination of this Lease pursuant to the provisions of this Lease), or (iv) any taxes or assessments imposed upon Lessor that are not related to the Properties, the Personal Property, this Lease, the rental or other payments due under this Lease, the leasehold estate of either party or the activities of either party pursuant to this Lease. All taxing authorities shall be instructed to send all tax and assessment invoices to Lessee and Lessee shall promptly provide Lessor and Lender with copies of all tax and assessment invoices received by Lessee. Upon request, Lessee shall also provide Lessor and Lender with evidence that such invoices were paid in a timely fashion. Lessee may, at its own expense, contest or cause to be contested, by appropriate legal proceedings conducted in good faith and with due diligence, the amount or validity or application, in whole or in part, of any item specified in this Section or lien therefor, provided that (i) Lessee shall provide written notice to Lessor of any contest involving more than $10,000.00, (ii) such proceeding shall suspend the collection thereof from the applicable Properties or any interest therein, (iii) neither such Properties nor any interest therein would be in any danger of being sold, forfeited or lost by reason of such proceedings, (iv) no Event of Default has occurred and is continuing, and (v) if requested by Lessor or Lender, Lessee shall have deposited with Lessor adequate reserves for the payment of the taxes, together with all interest and penalties thereon, unless paid in full under protest, or Lessee shall have furnished the security as may be required in the proceeding or as may be required by Lessor to insure payment of any contested taxes. 10. UTILITIES. Lessee shall contract, in its own name, for and pay when due all charges for the connection and use of water, gas, electricity, telephone, garbage collection, sewer use and other utility services supplied to the Properties during the Lease Term. Under no circumstances shall Lessor be responsible for any interruption of any utility service. 11. INSURANCE. Throughout the Lease Term, Lessee shall maintain with respect to each of the Properties, at its sole expense, the following types and amounts of insurance (which may be included under a blanket insurance policy if all the other terms hereof are satisfied): A. Insurance against loss, damage or destruction by fire and other casualty, including theft, vandalism and malicious mischief, flood (for each of the Properties which is in a location designated by the Federal Emergency Management Administration as a Special Flood Hazard Area), earthquake (for each of the Properties which is in an area subject to destructive earthquakes within recorded history), boiler explosion (for each of the Properties with a boiler), plate glass breakage, sprinkler damage (for each of the Properties which has a sprinkler system), all matters 12 covered by a standard extended coverage endorsement, special coverage endorsement commonly known as an "all-risk" endorsement and such other risks as Lessor may reasonably require, insuring each of the Properties for not less than 100% of their full insurable replacement cost. B. Commercial general liability insurance, including a products liability clause, covering Lessor and Lessee against bodily injury liability, property damage liability and automobile bodily injury and property damage liability, including without limitation any liability arising out of the ownership, maintenance, repair, condition or operation of the Properties or adjoining ways, streets or sidewalks and, if applicable, insurance covering Lessor and Lessee against liability arising from the sale of liquor, beer or wine on the Properties. Such insurance policy or policies shall contain a broad form contractual liability endorsement under which the insurer agrees to insure Lessee's obligations under Section 19 hereof to the extent insurable, and a "severability of interest" clause or endorsement which precludes the insurer from denying the claim of Lessee or Lessor because of the negligence or other acts of the other, shall be in amounts of not less than $1,000,000.00 per injury and occurrence with respect to any insured liability, whether for personal injury or property damage, or such higher limits as Lessor may reasonably require from time to time, and shall be of form and substance satisfactory to Lessor. C. Business income insurance or rental interruption insurance, as requested by Lessor, equal to 100% of the Base Annual Rental for a period of not less than six months. D. State Worker's compensation insurance in the statutorily mandated limits, employer's liability insurance with limits not less than $500,000 or such greater amount as Lessor may from time to time require and such other insurance as may be necessary to comply with applicable laws. E. Such other insurance as may from time to time be reasonably required by Lessor or Lender in order to protect their respective interests with respect to the Properties. All insurance policies shall: (i) Provide for a waiver of subrogation by the insurer as to claims against Lessor, Lender and their respective employees and agents and provide that such insurance cannot be unreasonably cancelled, invalidated or suspended on account of the conduct of Lessee, its officers, directors, employees or agents; (ii) Provide that any "no other insurance" clause in the insurance policy shall exclude any policies of insurance maintained by Lessor or Lender and that the insurance policy shall not be brought into contribution with insurance maintained by Lessor or Lender; (iii) Contain a standard without contribution mortgage clause endorsement in favor of Lender and its successors and assigns as their interests may appear and any other party designated by Lessor; (iv) Provide that the policy of insurance shall not be terminated, cancelled or substantially modified without at least thirty (30) days' prior written notice to Lessor, Lender and to any other party covered by any standard mortgage clause endorsement; (v) Provide that the insurer shall not have the option to restore the applicable Properties if Lessor or Lessee elects to terminate this Lease in accordance with the terms hereof; (vi) Be issued by insurance companies licensed to do business in the states in which the Properties are located and which are rated A-:VI or better by Best's Insurance Guide or are otherwise approved by Lessor; and (vii) Provide that the insurer shall not deny a claim because of the negligence of Lessee, anyone acting for Lessee or any tenant or other occupant of any of the Properties. It is expressly understood and agreed that the foregoing minimum limits of insurance coverage shall not limit the liability of Lessee for its acts or omissions as provided in this Lease. All liability insurance policies (with the exception of worker's compensation insurance to the extent not available under statutory law), shall designate 13 Lessor and Lender and their respective successors and assigns as additional insureds as their interests may appear and shall be payable as set forth in Section 21 hereof. All such policies shall be written as primary policies, with deductibles not to exceed 10% of the amount of coverage. Any other policies, including any policy now or hereafter carried by Lessor or Lender, shall serve as excess coverage. Lessee shall procure policies for all insurance for periods of not less than one year and shall provide to Lessor and Lender certificates of insurance or, upon the request of Lessor or Lender, duplicate originals of insurance policies evidencing that insurance satisfying the requirements of this Lease is in effect at all times. In the event of any transfer by Lessor of Lessor's interest in any of the Properties or any financing or refinancing of Lessor's interest in any of the Properties, Lessee shall, upon not less than ten (10) days' prior written notice, deliver to Lessor or any Lender providing such financing or refinancing, as the case may be, certificates of all insurance required to be maintained by Lessee hereunder naming such transferee or such Lender, as the case may be, as an additional named insured to the extent required herein effective as of the date of such transfer, financing or refinancing. 12. TAX AND INSURANCE IMPOUND. Upon the occurrence of an Event of Default, Lessor may require Lessee to pay to Lessor sums which will provide an impound account (which shall not be deemed a trust fund) for paying up to the next one year of taxes, assessments and/or insurance premiums for each of the Properties (as such amounts become due). Upon such requirement, Lessor will estimate the amounts needed for such purposes and will notify Lessee to pay the same to Lessor in equal monthly installments, as nearly as practicable, in addition to all other sums due under this Lease. Should additional funds be required at any time, Lessee shall pay the same to Lessor on demand. Lessee shall advise Lessor of all taxes and insurance bills which are due and shall cooperate fully with Lessor in assuring that the same are paid. Lessor may deposit all impounded funds in accounts insured by any federal or state agency and may commingle such funds with other funds and accounts of Lessor. Interest or other gains from such funds, if any, shall be added to the impound account. If an Event of Default shall occur subsequent to Lessor requiring the establishment of an impound account pursuant to this Section, Lessor may apply all impounded funds (including any interest) against any sums due from Lessee to Lessor. Lessor shall give to Lessee an annual accounting showing all credits and debits to and from such impounded funds received from Lessee. Upon the expiration or termination of this Lease and provided that all amounts due and owing to Lessor under this Lease have been paid in full, the remaining balance of the impound account will be returned to Lessee. 13. PAYMENT OF RENTAL AND OTHER SUMS. All rental and other sums which Lessee is required to pay hereunder shall be the unconditional obligation of Lessee and shall be payable in full when due without any setoff, abatement, deferment, deduction or counterclaim whatsoever. Upon execution of this Lease, Lessee shall authorize Lessor to establish arrangements whereby payments of the Base Monthly Rental and impound payments, if any, are transferred by Automated Clearing House Debit initiated by Lessor or its designee directly from an account at a U.S. bank in the name of Lessee to such account as Lessor may designate or as Lessor may otherwise designate; provided, however, upon notice from Lender to Lessee and Lessor delivered in the manner set forth in Section 28, Lessee shall deliver all payments of Base Monthly Rental as specified in such notice from Lender. Any delinquent payment (that is, any payment not made within five calendar days after the date when due) shall, in addition to any other remedy of Lessor, incur a late charge of 5% (which late charge is intended to compensate Lessor for the cost of handling and processing such delinquent payment and should not be considered interest) and bear interest at the Default Rate, such interest to be computed from and including the date such payment was due through and including the date of the payment; provided, however, in no event shall Lessee be obligated to pay a sum of late charge and interest higher than the maximum legal rate then in effect. 14. USE. Except as set forth below, each of the Properties shall be used solely for the operation of a Permitted Concept and for no other purpose. Lessee shall occupy the Properties commencing on the Effective Date and, except as set forth below and except during periods when any of the Properties is untenantable by reason of fire or other casualty or condemnation (provided, however, during all such periods while any of the Properties is untenantable, Lessee shall strictly comply with the terms and conditions of Section 21 of this Lease), Lessee shall at all times during the Lease Term occupy each of the Properties and diligently operate its business on each of the Properties. Lessee may cease diligent operation of business at any of the Properties for a period not to exceed 90 days and may do so only once with respect to each Property within any five-year period during the Lease Term. If Lessee does discontinue operation as permitted by this Section, Lessee shall (i) give written notice to Lessor within 10 days after Lessee elects to cease operation, (ii) provide adequate protection and maintenance of any such Properties during any period of vacancy, (iii) comply with all Applicable Regulations and otherwise comply with the terms and conditions of this Lease other than the continuous use covenant set forth in this Section, and (iv) pay all 14 costs necessary to restore such Properties to their condition on the day operation of the business ceased at such time as such Properties are reopened for Lessee's business operations or other substituted use approved by Lessor as contemplated below. Notwithstanding anything herein to the contrary, Lessee shall pay the Base Monthly Rental on the first day of each month during any period in which Lessee discontinues operation. Lessee shall not, by itself or through any assignment, sublease or other type of transfer, convert any of the Properties to an alternative use during the Lease Term without Lessor's consent, which consent shall not be unreasonably withheld or delayed. Lessor may consider any or all of the following in determining whether to grant its consent, without being deemed to be unreasonable: (i) whether the rental paid to Lessor would be equal to or greater than the anticipated rental assuming continued existing use, (ii) whether the proposed rental to be paid to Lessor is reasonable considering the converted use of the Properties and the customary rental prevailing in the community for such use, (iii) whether the converted use will be consistent with the highest and best use of the Properties, and (iv) whether the converted use will increase Lessor's risks or decrease the value of the Properties. 15. COMPLIANCE WITH LAWS GENERALLY. A. Lessee's use and occupation of each of the Properties, and the condition thereof, shall, at Lessee's sole cost and expense, comply in all material respects with all Applicable Regulations now or hereafter in effect and all restrictions, covenants and encumbrances of record with respect to each of the Properties. In addition, the Lessee Parties shall comply in all material respects 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, Lessee shall comply in all material respects with the ADA, and all regulations promulgated thereunder, as it affects each of the Properties. B. Lessee will not permit any act or condition to exist on or about any of the Properties which will increase any insurance rate thereon, except when such acts are required in the normal course of its business and Lessee shall pay for such increase. C. Lessee shall maintain in full force and effect all licenses and permits, both governmental and private, required to use and operate the Properties as a Permitted Concept. 16. COMPLIANCE WITH ENVIRONMENTAL LAWS. Lessee covenants to Lessor and Environmental Insurer for so long as this Lease is in effect that: (1) The Properties, the Lessee Parties and any other operator or user of any of the Properties shall not be in violation in any material respect of any Environmental Laws or 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 each of the Properties, whether by Lessee 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 any of the Properties, except in Permitted Amounts. (4) Lessee shall keep each of the Properties, or cause each of the Properties to be kept, free and clear of all Environmental Liens. (5) Lessee shall not do or allow any tenant or other user of any of the Properties to do any act that (a) materially increases the dangers to human health or the environment, (b) impairs or is reasonably likely to impair the value of any of the Properties in any material respect, (c) is contrary in any material respect to any requirement of any insurer, (d) constitutes a public or private nuisance or constitutes waste, or (e) violates any covenant, condition, agreement or easement applicable to any of the Properties in any material respect. (6) Lessee shall immediately notify Lessor in writing upon Lessee obtaining actual knowledge of: 15 (a) any presence of Releases or Threatened Releases in, on, under, from or migrating towards any of the Properties, in excess of Permitted Amounts, including, without limitation, the presence on or under any of the Properties, or the escape, seepage, leakage, spillage, discharge, emission or release from any USTs on, above or under any of the Properties, 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 any of the Properties; (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 any of the Properties, 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 any of the Properties; (e) any written or oral notice or other communication of which any of the Lessee Parties becomes aware from any source whatsoever (including but not limited to a Governmental Authority) relating in any way to Hazardous Materials, USTs or Remediation thereof, possible liability of any person or entity pursuant to any Environmental Law, other environmental conditions in connection with any of the Properties, or any actual or potential administrative or judicial proceedings in connection with anything referred to in this Lease; or (f) any investigation or inquiry initiated by any Governmental Authority relating to the Environmental Condition of any of the Properties. (7) Lessee shall, at its sole cost and expense: (a) perform any environmental site assessment (but not more than one per year per Property) or other investigation of environmental conditions in connection with any of the Properties as may be reasonably requested by Lessor (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 Lessor and Environmental Insurer the reports and other results thereof, and Lessor, Environmental Insurer and other Indemnified Parties shall be entitled to rely on such reports and other results thereof; and (b) have the Properties inspected as may be required by any Environmental Laws for seepage, spillage and other environmental concerns. If any USTs are located at any of the Properties, Lessee shall maintain and monitor such USTs in accordance with all Environmental Laws. Lessee shall provide Lessor with written certified results of all inspections performed on any of the Properties. 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 Lessee. All inspections and tests performed on any of the Properties shall be conducted in compliance with all Environmental Laws. (8) Lessee shall, at its sole cost and expense, and without limiting the rights of Lessor under any other provision of this Lease, comply with all reasonable written requests of Lessor to: (a) reasonably effectuate Remediation of any condition (including but not limited to a Release) in, on, under or from any of the Properties; (b) comply with any Environmental Law; (c) comply with any directive from any Governmental Authority; and 16 (d) take any other reasonable action necessary or appropriate for protection of human health or the environment. (9) Lessor, Lender, Environmental Insurer and any other person or entity designated by Lessor, including but not limited to any receiver, any representative of a Governmental Authority, and any environmental consultant, shall have the right, but not the obligation, to enter upon any of the Properties (upon reasonable prior notice) during normal business hours or at any time (and without prior notice) in the event of an emergency (including without limitation in connection with any Securitization, Participation or Transfer or in connection with a proposed sale or conveyance of any of the Properties or a proposed financing or refinancing secured by any of the Properties or in connection with the exercise of any remedies set forth in this Lease, the Mortgages or the other Loan Documents, as applicable) to assess any and all aspects of the environmental condition of any of the Properties and its use, including but not limited to conducting any environmental assessment or audit (the scope of which shall be determined in the sole and absolute discretion of the party conducting the assessment) and taking samples of soil, groundwater or other water, air, or building materials, and conducting other invasive testing. Lessee shall cooperate with and provide access to Lessor, Lender, Environmental Insurer and any other person or entity designated by Lessor. Any such assessment and investigation shall be at Lessee's sole cost and expense if, at the time such assessment or investigation is undertaken, the party conducting the assessment or investigation has a reasonable basis for believing that a Release has occurred at any of the Properties 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 the sole cost and expense of the party conducting such assessment and investigation. The obligations of Lessee and the rights and remedies of Lessor under this Section shall survive the termination, expiration and/or release of this Lease. 17. CONDITION OF PROPERTIES; MAINTENANCE. Lessee shall (i) maintain each of the Properties in good condition and repair, subject to reasonable and ordinary wear and tear, free from actual or constructive waste, (ii) operate, remodel, update and modernize each of the Properties in accordance with those standards adopted from time to time by Lessee on a system-wide basis for Permitted Concepts, with such remodeling and modernizing being undertaken in accordance with Lessee's system-wide timing schedules for such activities, and (iii) pay all operating costs of the Properties in the ordinary course of business. Lessee waives any right to (i) require Lessor to maintain, repair or rebuild all or any part of any of the Properties or (ii) make repairs at the expense of Lessor, pursuant to any Applicable Regulations at any time in effect. 18. ALTERATIONS AND IMPROVEMENTS. Lessee shall not alter the exterior, structural, plumbing or electrical elements of any of the Properties in any manner without the consent of Lessor, which consent shall not be unreasonably withheld or conditioned; provided, however, without Lessor's consent, Lessee may undertake such alterations to any of the Properties which (i) cost less than $250,000 per Property for any related series of alterations and (ii) do not affect the foundation or "footprint" of the improvements at the Properties. For purposes of this Lease, alterations to the exterior, structural, plumbing or electrical elements of the Properties shall mean: (i) alterations which affect the foundation or "footprint" of the improvements at the Properties; (ii) alterations which involve the structural elements of the improvements at the Properties, such as a load-bearing wall, structural beams, columns, supports or roof; or (iii) alterations which materially affect any of the building systems, including, without limitation, the electrical systems, plumbing, HVAC and fire and safety systems. If Lessor's consent is required hereunder and Lessor consents to the making of any such alterations, the same shall be made by Lessee at Lessee's sole expense by a licensed contractor and according to plans and specifications approved by Lessor (such approval not to be unreasonably withheld or delayed) and subject to such other conditions as Lessor shall reasonably require. Any work at any time commenced by Lessee on any of the Properties shall be prosecuted diligently to completion, shall be of good workmanship and materials and shall comply fully with all the terms of this Lease. Upon completion of any alterations for which Lessor's consent is required hereunder, Lessee shall promptly provide Lessor with (i) evidence of full payment to all laborers and materialmen contributing to the alterations, (ii) a certificate of occupancy (if the alterations are of such a nature as would require the issuance of a 17 certificate of occupancy), and (iii) any other documents or information reasonably requested by Lessor. Any addition to or alteration of any of the Properties shall automatically be deemed a part of the Properties and belong to Lessor, and Lessee shall execute and deliver to Lessor such instruments as Lessor may require to evidence the ownership by Lessor of such addition or alteration. Lessee shall execute and file or record, as appropriate, a "Notice of Non-Responsibility," or any equivalent notice permitted under applicable law in the states where the applicable Properties are located. 19. INDEMNIFICATION. A. Lessee 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 Losses (excluding Losses suffered by an Indemnified Party arising out of the gross negligence or willful misconduct of such Indemnified Party; 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 the Lessor's interest in any of the Properties or Lessor's failure to act in respect of matters which are or were the obligation of Lessee under this Lease) caused by, incurred or resulting from Lessee's operations of or relating in any manner to any of the Properties, whether relating to their original design or construction, latent defects, alteration, maintenance, use by Lessee or any person thereon, supervision or otherwise, or from any breach of, default under, or failure to perform, any term or provision of this Lease by Lessee, its officers, employees, agents or other persons, or to which any Indemnified Party is subject because of Lessor's interest in any of the Properties, including, without limitation, Losses arising from (1) any accident, injury to or death of any person or loss of or damage to property occurring in, on or about any of the Properties or portion thereof or on the adjoining sidewalks, curbs, parking areas, streets or ways, (2) any use, non-use or condition in, on or about, or possession, alteration, repair, operation, maintenance or management of, any of the Properties or any portion thereof or on the adjoining sidewalks, curbs, parking areas, streets or ways, (3) any representation or warranty made herein by Lessee, in any certificate delivered in connection herewith or in any other agreement to which Lessee is a party or pursuant thereto being false or misleading in any material respect as of the date of such representation or warranty was made, (4) performance of any labor or services or the furnishing of any materials or other property in respect to any of the Properties or any portion thereof, (5) any taxes, assessments or other charges which Lessee is required to pay under Section 9, (6) any lien, encumbrance or claim arising on or against any of the Properties or any portion thereof under any Applicable Regulation or otherwise which Lessee is obligated hereunder to remove and discharge, or the failure to comply with any Applicable Regulation, (7) the claims of any invitees, patrons, licensees or subtenants of all or any portion of any of the Properties or any Person acting through or under Lessee or otherwise acting under or as a consequence of this Lease or any sublease, (8) any act or omission of Lessee or its agents, contractors, licensees, subtenants or invitees, (9) any contest referred to in Section 9, and (10) the sale of liquor, beer or wine on any of the Properties. B. Lessee 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 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 the Lessor's interest in any of the Properties or Lessor's failure to act in respect of matters which are or were the obligation of Lessee under this Lease) 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 or USTs in, on, above, or under any of the Properties; (2) any past, present or Threatened Release in, on, above, under or from any of the Properties; (3) any activity by Lessee, any person or entity affiliated with Lessee or any tenant or other user of any of the Properties 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 any of the Properties of any Hazardous Materials or USTs at any time located in, under, on or above any of the Properties; 18 (4) any activity by Lessee, any person or entity affiliated with Lessee or any tenant or other user of any of the Properties in connection with any actual or proposed Remediation of any Hazardous Materials or USTs at any time located in, under, on or above any of the Properties, 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 any of the Properties or operations thereon, including but not limited to any failure by Lessee, any person or entity affiliated with Lessee or any tenant or other user of any of the Properties 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 any of the Properties; (7) any administrative processes or proceedings or judicial proceedings in any way connected with any matter addressed in this Lease; (8) any past, present or threatened injury to, destruction of or loss of natural resources in any way connected with any of the Properties, including but not limited to costs to investigate and assess such injury, destruction or loss; (9) any acts of Lessee, any person or entity affiliated with Lessee or any tenant or other user of any of the Properties in arranging for disposal or treatment, or arranging with a transporter for transport for disposal or treatment, of Hazardous Materials or USTs owned or possessed by Lessee, any person or entity affiliated with Lessee 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 or USTs; (10) any acts of Lessee, any person or entity affiliated with Lessee or any tenant or other user of any of the Properties, in accepting any Hazardous Materials or USTs for transport to disposal or treatment facilities, incineration vessels or sites selected by Lessee, any person or entity affiliated with Lessee or any tenant or other user of any of the Properties, 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 any of the Properties; or (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 Lease. C. It is expressly understood and agreed that Lessee's obligations under this Section shall survive the expiration or earlier termination of this Lease for any reason. 20. QUIET ENJOYMENT. So long as Lessee shall pay the rental and other sums herein provided and shall keep and perform all of the terms, covenants and conditions on its part herein contained, Lessee shall have, subject and subordinate to Lessor's rights herein, the right to the peaceful and quiet occupancy of the Properties. Notwithstanding the foregoing, however, in no event shall Lessee be entitled to bring any action against Lessor to enforce its rights hereunder if an Event of Default shall have occurred and be continuing. 21. CONDEMNATION OR DESTRUCTION. A. In the event of a taking of all or any part of any of the Properties for any public or quasi-public purpose by any lawful power or authority by exercise of the right of condemnation or eminent domain or by agreement between Lessor, Lessee and those authorized to exercise such right ("Taking") or the commencement of any proceedings or negotiations which might result in a Taking or any material damage to or destruction of any of the Properties or any part thereof ("Casualty"), Lessee will promptly give written notice thereof to Lessor, generally describing the nature and extent of such Taking, proceedings, 19 negotiations or Casualty and including copies of any documents or notices received in connection therewith. Thereafter, Lessee shall promptly send Lessor copies of all correspondence and pleadings relating to any such Taking, proceedings, negotiations or Casualty. During all periods of time following a Casualty, Lessee shall ensure that the subject Property is secure and does not pose any risk of harm to adjoining property owners or occupants or third-parties. B. In the event of (i) a Taking of the whole of any of the Properties, other than for temporary use, or (ii) a Taking of a substantial portion of any of the Properties (other than for temporary use) that results in Lessee making a good faith determination that the restoration and continued use of the remainder of such Property as a Permitted Concept would be uneconomic (each of (i) and (ii), a "Total Taking"), the obligations of Lessee with respect to such Property only shall terminate as of the date of the Total Taking, but this Lease shall otherwise continue in full force and effect with respect to the remaining Properties. From and after the date of a Total Taking, the Base Annual Rental shall be reduced by an amount equal to the product of (i) the Applicable Rent Reduction Percentage for the Property subject to the Total Taking, and (ii) the Base Annual Rental in effect as of the date of such Total Taking (the "Adjustment"). If the date of such Total Taking is other than the first day of a month, the Base Annual Rental payable for the month in which such Total Taking occurs shall be apportioned based on such Adjustment as of the date of the Total Taking. Lessee's obligations to Lessor under Section 19 of this Lease with respect to such Property and Lessee's obligation to pay all other sums of money under this Lease (whether payable to Lessor or to a third-party) which accrue prior to the date of such Total Taking shall survive the partial termination of this Lease with respect to such Property. A Total Taking shall include a Taking, other than for a temporary use, of such a substantial part of any Property as shall result in the portion of such Property remaining after such Taking being unsuitable for use as a Permitted Concept. Lessor shall be entitled to receive the entire award or payment in connection with a Total Taking without deduction for any estate vested in Lessee by this Lease. Lessee hereby expressly assigns to Lessor all of its right, title and interest in and to every such award or payment and agrees that Lessee shall not be entitled to any award or payment for the value of Lessee's leasehold interest in this Lease. Notwithstanding the foregoing, Lessee shall be entitled to claim and receive any award or payment from the condemning authority expressly granted for the taking of Personal Property, the interruption of its business and moving expenses, but only if such claim or award does not adversely affect or interfere with the prosecution of Lessor's claim for the Total Taking or otherwise reduce the amount recoverable by Lessor for the Total Taking. C. In the event of a Taking of all or any part of any of the Properties for a temporary use ("Temporary Taking"), this Lease shall remain in full force and effect without any reduction of Base Annual Rental, Additional Rental or any other sum payable hereunder. Except as provided below and subject to the terms and provisions of the Mortgages, Lessee shall be entitled to the entire award for a Temporary Taking, whether paid by damages, rent or otherwise, unless the period of occupation and use by the condemning authorities shall extend beyond the date of expiration of this Lease, in which case the award made for such Taking shall be apportioned between Lessor and Lessee as of the date of such expiration. At the termination of any such Temporary Taking, Lessee will, at its own cost and expense and pursuant to the terms of Section 18 above, promptly commence and complete the restoration of the Property affected by such Temporary Taking. D. In the event of a Taking which is not a Total Taking or a Temporary Taking ("Partial Taking") or of a Casualty, all awards, compensation or damages shall be paid to Lessor, and Lessor shall have the option to (i) terminate this Lease with respect to the Property affected, provided that Lessor shall have obtained Lender's prior written consent, by notifying Lessee within 60 days after Lessee gives Lessor notice of such Casualty or that title has vested in the taking authority or (ii) continue this Lease in effect, which election may be evidenced by either a notice from Lessor to Lessee or Lessor's failure to notify Lessee that Lessor has elected to terminate this Lease with respect to such Property within such 60-day period. Lessee shall have a period of 60 days after Lessor's notice that it has elected to terminate this Lease with respect to such Property during which to elect to continue this Lease with respect to such Property on the terms herein provided. If Lessor elects to terminate this Lease with respect to such Property and Lessee does not elect to continue this Lease with respect to such Property or shall fail during such 60-day period to notify Lessor of Lessee's intent to continue this Lease with respect to such Property, then this Lease shall terminate with respect to such Property as of the last day of the month during which such period expired. Lessee shall then immediately vacate and surrender such Property, all obligations of either party hereunder with respect to such Property shall cease as of the date of termination (provided, however, Lessee's obligations to Lessor under any indemnification provisions of this Lease with respect to such Property (including, without limitation, Section 19) and Lessee's obligations to pay Base Annual Rental, Additional Rental and all other sums (whether 20 payable to Lessor or a third party) accruing under this Lease with respect to such Property prior to the date of termination shall survive such termination), the Base Annual Rental shall be reduced by an amount equal to the product of (i) the Applicable Rent Reduction Percentage for such Property and (ii) the Base Annual Rental in effect as of the date of such Partial Taking or Casualty, and Lessor may retain all such awards, compensation or damages. This Lease shall continue in full force and effect with respect to all other Properties. If Lessor elects not to terminate this Lease with respect to such Property, or if Lessor elects to terminate this Lease with respect to such Property but Lessee elects to continue this Lease with respect to such Property, then this Lease shall continue in full force and effect on the following terms: (i) all Base Annual Rental, Additional Rental and other sums and obligations due under this Lease shall continue unabated, and (ii) Lessee shall promptly commence and diligently prosecute restoration of such Property to the same condition, as nearly as practicable, as prior to such Partial Taking or Casualty as approved by Lessor. Subject to the terms and provisions of the Mortgages, Lessor shall promptly make available in installments as restoration progresses an amount up to but not exceeding the amount of any award, compensation or damages received by Lessor after deducting all costs, fees and expenses incident to the collection thereof, including all costs and expenses incurred by Lessor and Lender in connection therewith (the "Net Restoration Amount"), upon request of Lessee accompanied by evidence reasonably satisfactory to Lessor that such amount has been paid or is due and payable and is properly a part of such costs and that Lessee has complied with the terms of Section 18 above in connection with the restoration. Prior to the disbursement of any portion of the Net Restoration Amount with respect to a Casualty, Lessee shall provide evidence reasonably satisfactory to Lessor of the payment of restoration expenses by Lessee up to the amount of the insurance deductible applicable to such Casualty. Lessor shall be entitled to keep any portion of the Net Restoration Amount which may be in excess of the cost of restoration, and Lessee shall bear all additional costs, fees and expenses of such restoration in excess of the Net Restoration Amount. If this Lease is terminated with respect to any Property as a result of a Casualty, simultaneously with such termination Lessee shall pay Lessor an amount equal to the insurance deductible applicable to such Casualty. E. Any loss under any property damage insurance required to be maintained by Lessee shall be adjusted by Lessor and Lessee. Subject to the terms and provisions of the Mortgages, any award relating to a Total Taking or a Partial Taking shall be adjusted by Lessor and Lessee. Notwithstanding the foregoing or any other provisions of this Section to the contrary but subject to the terms and provisions of the Mortgages, if at the time of any Taking or any Casualty or at any time thereafter an Event of Default shall have occurred and be continuing under this Lease, Lessor is hereby authorized and empowered but shall not be obligated, in the name and on behalf of Lessee and otherwise, to file and prosecute Lessee's claim, if any, for an award on account of such Taking or for insurance proceeds on account of such Casualty and to collect such award or proceeds and apply the same, after deducting all costs, fees and expenses incident to the collection thereof, to the curing of such default and any other then existing default under this Lease and/or to the payment of any amounts owed by Lessee to Lessor under this Lease, in such order, priority and proportions as Lessor in its discretion shall deem proper. F. Notwithstanding the foregoing, nothing in this Section 21 shall be construed as limiting or otherwise adversely affecting the representations, warranties, covenants and characterizations set forth in Lease, including, without limitation, those provisions set forth in Section 3 of this Lease. 22. INSPECTION. Lessor and its authorized representatives shall have the right, upon reasonable prior notice, during normal business hours (or at any time in the event of an emergency) to enter any of the Properties or any part thereof at reasonable times in order to inspect the same and make photographic or other evidence concerning Lessee's compliance with the terms of this Lease or in order to show the Properties to prospective purchasers and lenders. Lessee hereby waives any claim for damages for any injury or inconvenience to or interference with Lessee's business, any loss of occupancy or quiet enjoyment of any of the Properties and any other loss occasioned by such entry so long as Lessor shall have used reasonable efforts not to unreasonably interrupt Lessee's normal business operations. Lessee shall keep and maintain at the Properties or Lessee's corporate headquarters full, complete and appropriate books of account and records of Lessee's business relating to the Properties. Lessee's books and records shall at all times be open for inspection by Lessor, Lender and their respective auditors or other authorized representatives and shall show such information as is reasonably necessary to determine compliance with Lessor's obligations under the Loan Documents. 21 23. FUNDED DEBT/EBIDTA RATIO. Lessee covenants to Lessor for so long as this Lease is in effect that Lessee and its consolidated Affiliates (collectively, the "Lessee Entities") shall maintain a Funded Debt to EBITDA ratio not to exceed 6.00 to 1.0, determined as of the last day of each fiscal year of Lessee. 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 Lessee or any of the other Lessee Entities, as applicable, which lease would, in conformity with GAAP, be required to be accounted for as a capital lease on the balance sheet of Lessee or any of the other Lessee Entities, as applicable. The term "Capital Lease" shall not include any operating lease. "Debt" shall mean with respect to Lessee and the other Lessee Entities, 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 Lessee and the other Lessee Entities, collectively, as determined in accordance with GAAP. "EBITDA" shall mean the sum of Net Income, Interest Expense and Depreciation and Amortization. "Funded Debt" shall mean all non-contingent debts of Lessee and the other Lessee Entities, collectively, for borrowed money for which consideration then has been received. "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 Lessee and the other Lessee Entities, 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 Lessee and the other Lessee Entities, collectively. In determining the amount of Net Income, (i) adjustments shall be made for material nonrecurring gains and losses allocable to the period of determination, (ii) deductions shall be made for, among other things, Depreciation and Amortization, Interest 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. 24. DEFAULT, REMEDIES AND MEASURE OF DAMAGES. A. Each of the following shall be an event of default under this Lease (each, an "Event of Default"): (i) If any representation or warranty of Lessee set forth in this Lease is false in any material respect, or if Lessee renders any statement or account which is false in any material respect; (ii) If any rent or other monetary sum due under this Lease is not paid within five days after the date when due; provided, however, notwithstanding the occurrence of such an Event of Default, Lessor shall not be entitled to exercise its remedies set forth below unless and until Lessor shall have given Lessee notice thereof and a period of five days from the delivery of such notice shall have elapsed without such Event of Default being cured; (iii) Subject to the provisions of Section 9, if Lessee fails to pay, prior to delinquency, any taxes, assessments or other charges the failure of which to pay will result in the imposition of a lien against any of the Properties pursuant to Applicable Regulations; provided, however, notwithstanding the occurrence of such an Event of Default, Lessor shall not be entitled to exercise its rights and remedies set forth below unless and until Lessor 22 shall have given Lessee notice thereof and a period of five days from the delivery of such notice shall have elapsed without such Event of Default being cured; (iv) If any of the Lessee Parties becomes insolvent within the meaning of the Code, files or notifies Lessor 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 which is not stayed or dismissed within 90 days after filing, or is not generally paying its debts as the same become due; (v) If Lessee vacates or abandons any of the Properties other than in accordance with the provisions of Section 14 of this Lease; (vi) If Lessee shall fail to maintain insurance in accordance with the requirements of Section 11 of this Lease; provided, however, notwithstanding the occurrence of such an Event of Default, Lessor shall not be entitled to exercise its rights and remedies set forth below unless and until Lessor shall have given Lessee notice thereof and a period of five days from the delivery of such notice shall have elapsed without such Event of Default being cured; (vii) If Lessee fails to observe or perform any of the other covenants, conditions, or obligations of this Lease; 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 property of Lessor in immediate jeopardy, and is within the reasonable power of Lessee to promptly cure after receipt of notice thereof, all as determined by Lessor in its reasonable discretion, then such failure shall not constitute an Event of Default hereunder, unless otherwise expressly provided herein, unless and until Lessor shall have given Lessee notice thereof and a period of 30 days shall have elapsed, during which period Lessee 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 Lessor in its reasonable discretion, and Lessee is diligently pursuing a cure of such failure, then Lessee shall have a reasonable period to cure such failure beyond such 30-day period, which shall in no event exceed 90 days after receiving notice of such failure from Lessor. If Lessee 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; (viii) 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 of the Other Agreements; or (ix) If a final, nonappealable judgment is rendered by a court against any of the Lessee Parties which (i) has a material adverse effect on the operation of any of the Properties 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. B. Upon the occurrence of an Event of Default, with or without notice or demand, except the notice prior to default required under certain circumstances by subsection A. above or such other notice as may be required by statute and cannot be waived by Lessee (all other notices being hereby waived), Lessor shall be entitled to 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 following: (i) To terminate this Lease, whereupon Lessee's right to possession of the Properties shall cease and this Lease, except as to Lessee's liability, shall be terminated. (ii) To reenter and take possession of any or all of the Properties, any or all Personal Property located on or at any or all of the Properties in which Lessor shall have a landlord's lien and/or security interest, and, to the extent permissible, all franchises, licenses, area development agreements, permits and other rights or privileges of Lessee pertaining to the use and operation of any or all of the Properties and to expel Lessee and those claiming under or through Lessee, without being deemed guilty in any manner of trespass or becoming liable for any loss or damage resulting therefrom, without resort to legal or judicial process, procedure or action. No notice from Lessor hereunder or under a forcible entry and detainer statute or similar law shall constitute an election by Lessor to 23 terminate this Lease unless such notice specifically so states. If Lessee shall, after default, voluntarily give up possession of any of the Properties to Lessor, deliver to Lessor or its agents the keys to any of the Properties, or both, such actions shall be deemed to be in compliance with Lessor's rights and the acceptance thereof by Lessor or its agents shall not be deemed to constitute a termination of this Lease. Lessor reserves the right following any reentry and/or reletting to exercise its right to terminate this Lease by giving Lessee written notice thereof, in which event this Lease will terminate as specified in said notice. (iii) To seize all Personal Property located on or at any or all of the Properties, in which Lessor shall have a landlord's lien and/or security interest, and to dispose thereof in accordance with the laws prevailing at the time and place of such seizure or to remove all or any portion of the Personal Property and cause the same to be stored in a public warehouse or elsewhere at Lessee's sole expense, without becoming liable for any loss or damage resulting therefrom and without resorting to legal or judicial process, procedure or action. (iv) To bring an action against Lessee for any damages sustained by Lessor or any equitable relief available to Lessor. (v) To relet any or all of the Properties or any part thereof for such term or terms (including a term which extends beyond the original Lease Term), at such rentals and upon such other terms as Lessor, in its sole discretion, may determine, with all proceeds received from such reletting being applied to the rental and other sums due from Lessee in such order as Lessor may, in it sole discretion, determine, which other sums include, without limitation, all repossession costs, brokerage commissions, attorneys' fees and expenses, employee expenses, alteration, remodeling and repair costs and expenses of preparing for such reletting. Except to the extent required by applicable law, Lessor shall have no obligation to relet any of the Properties or any part thereof and shall in no event be liable for refusal or failure to relet any of the Properties or any part thereof, or, in the event of any such reletting, for refusal or failure to collect any rent due upon such reletting, and no such refusal or failure shall operate to relieve Lessee of any liability under this Lease or otherwise to affect any such liability. Lessor reserves the right following any reentry and/or reletting to exercise its right to terminate this Lease by giving Lessee written notice thereof, in which event this Lease will terminate as specified in said notice. (vi) To recover from Lessee all rent and other monetary sums then due and owing under this Lease. (vii) To accelerate and recover from Lessee all rent and other monetary sums scheduled to become due and owing under this Lease after the date of such breach for the entire original scheduled Lease Term less any proceeds received from any reletting of any of the Properties pursuant to clause (v) above. (viii) To recover from Lessee all costs and expenses, including attorneys' fees, court costs, expert witness fees, costs of tests and analyses, travel and accommodation expenses, deposition and trial transcripts, copies and other similar costs and fees, paid or incurred by Lessor as a result of such breach, regardless of whether or not legal proceedings are actually commenced. (ix) To immediately or at any time thereafter, and with or without notice, at Lessor's sole option but without any obligation to do so, correct such breach or default and charge Lessee all costs and expenses incurred by Lessor therein. Any sum or sums so paid by Lessor, together with interest at the Default Rate, shall be deemed to be Additional Rental hereunder and shall be immediately due from Lessee to Lessor. Any such acts by Lessor in correcting Lessee's breaches or defaults hereunder shall not be deemed to cure said breaches or defaults or constitute any waiver of Lessor's right to exercise any or all remedies set forth herein. (x) To immediately or at any time thereafter, and with or without notice, except as required herein, set off any money of Lessee held by Lessor under this Lease against any sum owing by Lessee hereunder. (xi) To exercise its rights under the License Agreement. (xii) To seek any equitable relief available to Lessor, including, without limitation, the right of specific performance. 24 All powers and remedies given by this Section to Lessor, subject to applicable law, shall be cumulative and not exclusive of one another or of any other right or remedy or of any other powers and remedies available to Lessor under this Lease, by judicial proceedings or otherwise, to enforce the performance or observance of the covenants and agreements of Lessee contained in this Lease, and no delay or omission of Lessor to exercise any right or power accruing upon the occurrence of any Event of Default shall impair any other or subsequent Event of Default or impair any rights or remedies consequent thereto. Every power and remedy given by this Section or by law to Lessor may be exercised from time to time, and as often as may be deemed expedient, by Lessor, subject at all times to Lessor's right in its sole judgment to discontinue any work commenced by Lessor or change any course of action undertaken by Lessor. If Lessee shall fail to observe or perform any of its obligations under this Lease or in the event of an emergency, then, without waiving any Event of Default which may result from such failure or emergency, Lessor may, but without any obligation to do so, take all actions, including, without limitation, entry upon any or all of the Properties to perform Lessee's obligations, immediately and without notice in the case of an emergency and upon five days written notice to Lessee in all other cases. All expenses incurred by Lessor in connection with performing such obligations, including, without limitation, reasonable attorneys' fees and expenses, together with interest at the Default Rate from the date any such expenses were incurred by Lessor until the date of payment by Lessee, shall constitute Additional Rental and shall be paid by Lessee to Lessor upon demand. 25. LIENS; MORTGAGES, SUBORDINATION AND ATTORNMENT. Lessor's interest in this Lease and/or any of the Properties shall not be subordinate to any liens or encumbrances placed upon any of the Properties by or resulting from any act of Lessee, and nothing herein contained shall be construed to require such subordination by Lessor. Lessee shall keep the Properties free from any liens for work performed, materials furnished or obligations incurred by Lessee. NOTICE IS HEREBY GIVEN THAT, UNLESS LESSOR'S PRIOR WRITTEN CONSENT IS OBTAINED, LESSEE IS NOT AUTHORIZED TO PLACE OR ALLOW TO BE PLACED ANY LIEN, MORTGAGE, DEED OF TRUST, DEED TO SECURE DEBT, SECURITY INTEREST OR ENCUMBRANCE OF ANY KIND UPON ALL OR ANY PART OF ANY OF THE PROPERTIES, THE PERSONAL PROPERTY OR LESSEE'S LEASEHOLD INTEREST IN THE PROPERTIES, AND ANY SUCH PURPORTED TRANSACTION SHALL BE VOID. FURTHERMORE, ANY SUCH PURPORTED TRANSACTION SHALL BE DEEMED A TORTIOUS INTERFERENCE WITH LESSOR'S RELATIONSHIP WITH LESSEE AND LESSOR'S OWNERSHIP OF THE PROPERTIES. This Lease at all times shall automatically be subordinate to the Mortgages and to the lien of any and all ground leases, mortgages, deeds to secure debt and trust deeds now or hereafter placed upon any of the Properties by Lessor, and Lessee covenants and agrees to execute and deliver, upon demand, such further instruments subordinating this Lease to the lien of the Mortgages and any or all such ground leases, mortgages, deeds to secure debt or trust deeds as shall be desired by Lessor, or any present or proposed mortgagees or lenders under deeds to secure debt or trust deeds. If any landlord, mortgagee, receiver, Lender or other secured party validly exercises its right to elect to have this Lease and the interest of Lessee hereunder be superior to any of the Mortgages or any such ground lease, mortgage, deed to secure debt or trust deed and evidences such election by written notice given to Lessee, then this Lease and the interest of Lessee hereunder shall be deemed superior to any such Mortgage, ground lease, mortgage, deed to secure debt or trust deed, whether this Lease was executed before or after such Mortgage, ground lease, mortgage, deed to secure debt or trust deed and in that event such landlord, mortgagee, receiver, Lender or other secured party shall have the same rights with respect to this Lease as if it had been executed and delivered prior to the execution and delivery of such Mortgage, ground lease, mortgage, deed to secure debt or trust deed and had been assigned to such landlord, mortgagee, receiver, Lender or other secured party. Although the foregoing provisions shall be self-operative and no future instrument of subordination shall be required, upon request by Lessor, Lessee shall execute and deliver whatever instruments may be required for such purposes, and in the event Lessee fails so to do within 10 days after demand, Lessee does hereby make, constitute and irrevocably appoint Lessor as its agent and attorney-in-fact and in its name, place and stead so to do, which appointment shall be deemed coupled with an interest. 25 In the event any purchaser or assignee of Lender at a foreclosure sale acquires title to any of the Properties, or in the event Lender or any assignee otherwise succeeds to the rights of Lessor as landlord under this Lease, Lessee shall attorn to Lender or such purchaser or assignee, as the case may be (a "Successor Lessor"), and recognize the Successor Lessor as lessor under this Lease, and, if the Successor Lessor in its sole discretion elects to recognize Lessee's tenancy under this Lease, this Lease shall continue in full force and effect as a direct lease between the Successor Lessor and Lessee, provided that the Successor Lessor shall only be liable for any obligations of the lessor under this Lease which accrue after the date that such Successor Lessor acquires title. The foregoing provision shall be self operative and effective without the execution of any further instruments. Lessee shall give written notice to any lender of Lessor having a recorded lien upon any of the Properties or any part thereof of which Lessee has been notified of any breach or default by Lessor of any of its obligations under this Lease simultaneously with the giving of such notice to Lessor, and Lessee shall give such lender at least 60 days from the date such notice is given before Lessee may exercise any remedy with respect thereto. Upon request by Lessor, Lessee shall also provide the most recent consolidated financial statements of the Lessee Entities to Lessor or any such lender and certify the continuing accuracy of such financial statements in such manner as Lessor or such lender may reasonably request. 26. ESTOPPEL CERTIFICATE. A. At any time, and from time to time, Lessee shall, promptly and in no event later than fifteen (15) days after a request from Lessor or Lender, execute, acknowledge and deliver to Lessor or Lender a certificate in the form supplied by Lessor, Lender or any present or proposed mortgagee or purchaser designated by Lessor, certifying: (i) that Lessee has accepted the Properties (or, if Lessee has not done so, that Lessee has not accepted the Properties, and specifying the reasons therefor); (ii) that this Lease is in full force and effect and has not been modified (or if modified, setting forth all modifications), or, if this Lease is not in full force and effect, the certificate shall so specify the reasons therefor; (iii) the commencement and expiration dates of the Lease Term, including the terms of any extension options of Lessee; (iv) the date to which the rentals have been paid under this Lease and the amount thereof then payable; (v) whether there are then any existing defaults by Lessor in the performance of its obligations under this Lease, and, if there are any such defaults, specifying the nature and extent thereof; (vi) that no notice has been received by Lessee of any default under this Lease which has not been cured, except as to defaults specified in the certificate; (vii) the capacity of the person executing such certificate, and that such person is duly authorized to execute the same on behalf of Lessee; (viii) that neither Lessor nor Lender has actual involvement in the management or control of decision making related to the operational aspects or the day-to-day operations of the Properties; and (ix) any other information reasonably requested by Lessor, Lender or such present or proposed mortgagee or purchaser. B. If Lessee shall fail or refuse to sign a certificate in accordance with the provisions of this Section within fifteen (15) days following a request by Lessor, Lessee irrevocably constitutes and appoints Lessor as its attorney-in-fact to execute and deliver the certificate to any such third party, it being stipulated that such power of attorney is coupled with an interest and is irrevocable and binding; provided, however, that Lessor's execution and delivery of such certificate on behalf of Lessee shall not cure any default arising by reason of Lessee's failure to execute and deliver such certificate. 27. ASSIGNMENT. A. If Lender shall succeed to the rights of Lessor as landlord under this Lease, whether through foreclosure of the liens of the Mortgages, deeds-in-lieu of foreclosure or otherwise, Lender, as lessor, shall have the right to sell or convey all, but not less than all, of the Properties or to assign its right, title and interest as Lessor under this Lease in whole, but not in part. In the event of any such sale or assignment other than a security assignment, Lessee shall attorn to such purchaser or assignee and Lessor shall be relieved, from and after the date of such transfer or conveyance, of liability for the performance of any obligation of Lessor contained herein, except for obligations or liabilities accrued prior to such assignment or sale (provided, however, nothing in this Section 27 shall impose liability on Lender or such purchaser or assignee, as lessor, for the obligations of Lessor accruing under this Lease prior to the time Lender or such purchaser or assignee, as the case may be, succeeds to Lessor's rights as lessor under this Lease). Otherwise, and except as permitted pursuant to the Loan Documents, Lessor shall not have the right to sell or convey the Properties or to assign its right, title and interest as lessor under this Lease in whole or in part. B. Lessee acknowledges that Lessor has relied both on the business experience and creditworthiness of Lessee and upon the particular purposes for which Lessee intends to use the Properties in entering into this Lease. 26 Without the prior written consent of Lessor: (i) Lessee shall not assign, transfer, convey, pledge or mortgage this Lease or any interest therein, whether by operation of law or otherwise; (ii) a majority of the voting stock of Lessee shall not be transferred; and (iii) except as provided below, Lessee shall not sublet all or any part of any of the Properties (each of items (i) through (iii) are hereinafter referred to as a "Prohibited Transaction"). In addition, no interest in any of the Lessee Parties, or in any individual or person owning directly or indirectly any interest in any of the Lessee 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 Lessor 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 that 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. Lessor's consent to a Prohibited Transaction shall be subject to the satisfaction of such conditions as Lessor shall determine in its sole discretion, including, without limitation, (i) Lessor having obtained the consent of Lender to the Prohibited Transaction, (ii) Lessee having executed and delivered such modifications to the terms of this Lease as Lessor shall request, (iii) the Prohibited Transaction having been approved by each of the rating agencies which have issued ratings in connection with any Securitization, (iv) the proposed transferee, as applicable, having assumed this Lease (as modified pursuant to clause (ii) above), (v) payment to Lessor of any rentals owing under a sublease which are in excess of any rentals owing under this Lease, and (vi) the proposed transferee having satisfactory creditworthiness and satisfactory experience operating a Permitted Concept. In addition, any such consent shall be conditioned upon the payment by Lessee to Lessor of (x) a fee equal to one percent (1%) of the then outstanding principal balance of the Notes and (y) all out-of-pocket costs and expenses incurred by Lessor in connection with such consent, including, without limitation, reasonable attorneys' fees. The provisions of this Section shall apply to every Prohibited Transaction regardless of whether voluntary or not, or whether or not Lessor has consented to any previous Prohibited Transaction. No assignment of this Lease or subletting of any of the Properties shall relieve Lessee of its obligations under this Lease or any guarantor of this Lease of any of its obligations under its guaranty. Any Prohibited Transaction in violation of this Section shall be voidable at the sole option of Lessor. C. Notwithstanding the provisions of Section 27.B, Lessee shall have the right to sublease any of the Properties to an Affiliate of Lessee, without the prior written consent of Lessor or Lender, if each of the following conditions are satisfied: (1) no Event of Default shall have occurred and be continuing under this Lease as of the effective date of the applicable sublease; (2) any such sublease shall be subordinate to this Lease and the Mortgage corresponding to the Property to which such sublease relates; (3) Lessee shall remain liable under this Lease notwithstanding such subleases; (4) the Properties subject to such subleases shall be used as a Permitted Concept and shall otherwise be operated and maintained in accordance with the terms and conditions of this Lease; and (5) the form of sublease is reasonably acceptable to Lessor and Lender. Within 10 days after the execution of each sublease, Lessee shall provide Lessor and Lender with a notice of such sublease and a photocopy of the fully executed sublease. 27 28. NOTICES. All notices, consents, approvals or other instruments required or permitted to be given by either party pursuant to this Lease shall be in writing and given by (i) hand delivery, (ii) express overnight delivery service or (iii) certified or registered mail, return receipt requested, and shall be deemed to have been delivered upon (a) receipt, if hand delivered, (b) the next Business Day, if delivered by express overnight delivery service, or (c) 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 Lessee: J. Alexander's Restaurants, Inc. 3401 West End Avenue, Suite 260 Nashville, TN 37203 Attention: R. Gregory Lewis If to Lessor: JAX Real Estate, LLC 3401 West End Avenue, Suite 260 Nashville, TN 37203 Attention: R. Gregory Lewis or to such other address or such other person as either party may from time to time hereafter specify to the other party in a notice delivered in the manner provided above. No such notices, consents, approvals or other communications shall be valid unless Lender receives a duplicate original thereof at the following address: GE Capital Franchise Finance Corporation 17207 North Perimeter Drive Scottsdale, AZ 85255 Attention: General Counsel or to such other address or such other person as Lender may from time to time specify to Lessor and Lessee in a notice delivered in the manner provided above. 29. HOLDING OVER. If Lessee remains in possession of any of the Properties after the expiration of the term hereof, Lessee, at Lessor's option and within Lessor's sole discretion, may be deemed a tenant on a month-to-month basis and shall continue to pay rentals and other sums in the amounts herein provided, except that the Base Monthly Rental shall be automatically doubled, and comply with all the terms of this Lease; provided that nothing herein nor the acceptance of rent by Lessor shall be deemed a consent to such holding over. Lessee shall defend, indemnify, protect and hold the Indemnified Parties harmless from and against any and all Losses resulting from Lessee's failure to surrender possession upon the expiration of the Lease Term, including, without limitation, any claims made by any succeeding lessee. 30. LANDLORD'S LIEN/SECURITY INTEREST. (a) Lessee agrees that Lessor shall have a landlord's lien, and additionally hereby separately grants to Lessor a first and prior security interest, in, on and against Lessee's right, title and interest in and to the Personal Property, which lien and security interest shall secure the payment of all rental and other charges payable by Lessee to Lessor under the terms hereof and all other obligations of Lessee to Lessor under this Lease. Except as contemplated by paragraph (b) below, Lessee shall maintain title to the Personal Property (other than the Leased Personal Property, which Lessee shall maintain a leasehold interest in during the term of the corresponding equipment lease), free and clear of all liens, encumbrances, charges and security interests of any nature whatsoever. Lessee authorizes Lessor to file financing statements with respect to the Personal Property, continuation statements with respect thereto, and any amendments to such financing statements which may be necessitated by reason of any of the changes described in the last sentence of this Section. Furthermore, at any time, and from time to time, Lessee shall, promptly and in no event later than fifteen (15) days after a request from Lessor, execute, acknowledge and deliver to Lessor such financing statements and other documents as Lessor may then deem appropriate or necessary to perfect and maintain said lien and security interest. Lessee expressly acknowledges and agrees that, in addition to any and all other rights and remedies of Lessor whether hereunder or at law or in equity, in the event of any default of Lessee hereunder, Lessor shall have any and all rights and remedies granted a secured party under the Uniform Commercial Code then in effect in the state of Arizona and in the states 28 where the Properties are located (the "UCC"). Lessee represents that its exact legal name and state of incorporation is as set forth in the first paragraph of this Lease. Lessee 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, Lessor with thirty (30) days' prior written notice and obtaining Lessor's prior written consent (to the extent such consent is required under Section 27 of this Lease). Lessee agrees that, notwithstanding any provision in the UCC to the contrary, Lessee shall not file a termination statement of any financing statement filed by Lessor in connection with any security interest granted under this Lease if Lessor reasonably objects to the filing of such termination statement. (b) Lessee shall not remove or allow to be removed from the Properties the Personal Property, or any part thereof, without the prior written consent of Lessor; provided that, Lessor's prior written consent shall not be required with respect to (i) Lessee selling inventory in the ordinary course of its business, (ii) Lessee removing items of Personal Property from the Properties to the extent they are no longer necessary, in Lessee's reasonable business judgment, for the operation of a Permitted Concept, and (iii) Lessee removing items of Personal Property from the Properties for purposes of replacement with like property of equal or greater value and repair in the ordinary course of business. Lessee shall at all times keep and maintain the Personal Property in good order, repair and condition, ordinary wear and tear excepted, and will promptly replace any part thereof that from time to time may become obsolete, badly worn or in a state of disrepair or, if supplies, be consumed in the normal course of Lessee's business operations. Lessor shall have a lien on and security interest in all replacements and all replacements shall be free of any other lien, security interest or encumbrance of any nature, including any purchase money lien or security interest. Lessee shall not transfer or permit any transfer of any part of the Personal Property to be made or any interest therein to be created by way of a sale (except as permitted below), by way of a grant of a security interest, or by way of a levy or other judicial process. Lessee may sell or dispose of only that part of the Personal Property that either (i) is inventory, (ii) will be replaced by Lessee like property of equal or greater value, or (iii) is no longer necessary, in Lessee's reasonable business judgment, for the operation of a Permitted Concept. (c) Lessee hereby assigns to Lessor any landlord's liens and/or security interests granted to Lessee or afforded by statute or common law against any Personal Property of any subtenant of the Properties. 31. REMOVAL OF PERSONAL PROPERTY. At the expiration of the Lease Term, and if Lessee is not then in breach hereof, Lessee may remove all Personal Property from the Properties. Lessee shall repair any damage caused by such removal and shall leave the Properties broom clean and in good and working condition and repair inside and out. Any property of Lessee left on the Properties on the tenth day following the expiration of the Lease Term shall, at Lessor's option, automatically and immediately become the property of Lessor. 32. FINANCIAL STATEMENTS. Within 45 days after the end of each fiscal quarter and within 120 days after the end of each fiscal year of Lessee, Lessee shall deliver to Lessor and Lender (i) complete consolidated financial statements of the Lessee Parties and their consolidated Affiliates including a balance sheet, profit and loss statement, statement of cash flows and all other related schedules for the fiscal period then ended; and (ii) income statements for the business at each of the Properties. All such financial statements shall be prepared in accordance with GAAP from period to period (other than the income statements for the business at each of the Properties), and shall be certified to be accurate and complete in all material respects by Lessee (or the Treasurer or other appropriate officer of Lessee) to the best of its knowledge. Lessee understands that Lessor and Lender will rely upon such financial statements and Lessee represents that such reliance is reasonable. In the event the property and business at the Properties 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 pertaining to each of the Properties with the basis for allocation of overhead of other charges being clearly set forth. The financial statements delivered to Lessor and Lender need not be audited, but Lessee shall deliver to Lessor and Lender copies of any audited consolidated financial statements of the Lessee Parties which may be prepared, as soon as they are available. 33. FORCE MAJEURE. Any prevention, delay or stoppage due to strikes, lockouts, acts of God, enemy or hostile governmental action, civil commotion, fire or other casualty beyond the control of the party obligated to perform shall excuse the performance by such party for a period equal to any such prevention, delay or stoppage, except the obligations imposed with regard to rental and other monies to be paid by Lessee pursuant to this Lease and any indemnification obligations imposed upon Lessee under this Lease. 29 34. TIME IS OF THE ESSENCE. Time is of the essence with respect to each and every provision of this Lease in which time is a factor. 35. LESSOR'S LIABILITY. Notwithstanding anything to the contrary provided in this Lease, it is specifically understood and agreed, such agreement being a primary consideration for the execution of this Lease by Lessor, that (i) there shall be absolutely no personal liability on the part of Lessor, its successors or assigns and the trustees, members, partners, shareholders, officers, directors, employees and agents of Lessor and its successors or assigns, to Lessee with respect to any of the terms, covenants and conditions of this Lease, (ii) Lessee waives all claims, demands and causes of action against the trustees, members, partners, shareholders, officers, directors, employees and agents of Lessor and its successors or assigns in the event of any breach by Lessor of any of the terms, covenants and conditions of this Lease to be performed by Lessor, and (iii) Lessee shall look solely to the Properties for the satisfaction of each and every remedy of Lessee in the event of any breach by Lessor of any of the terms, covenants and conditions of this Lease to be performed by Lessor, or any other matter in connection with this Lease or the Properties, such exculpation of liability to be absolute and without any exception whatsoever. 36. CONSENT OF LESSOR. (a) Unless specified otherwise herein, Lessor's consent to any request of Lessee may be conditioned or withheld in Lessor's sole discretion. Lessor shall have no liability for damages resulting from Lessor's failure to give any consent, approval or instruction reserved to Lessor, Lessee's sole remedy in any such event being an action for injunctive relief. (b) It is understood and agreed that to the extent Lessor is required to obtain the consent, approval, agreement or waiver of Lender with respect to a matter for which Lessor's approval has been requested under this Lease, Lessor shall in no event be deemed to have unreasonably withheld Lessor's consent, approval, agreement or waiver thereof if Lender shall not have given its approval if required. 37. WAIVER AND AMENDMENT. No provision of this Lease 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. No acceptance by Lessor of an amount less than the monthly rent and other payments stipulated to be due under this Lease shall be deemed to be other than a payment on account of the earliest such rent or other payments then due or in arrears nor shall any endorsement or statement on any check or letter accompanying any such payment be deemed a waiver of Lessor's right to collect any unpaid amounts or an accord and satisfaction. 38. SUCCESSORS BOUND. Except as otherwise specifically provided herein, the terms, covenants and conditions contained in this Lease shall bind and inure to the benefit of the respective heirs, successors, executors, administrators and assigns of each of the parties hereto. 39. NO MERGER. The voluntary or other surrender of this Lease by Lessee, or a mutual cancellation thereof, shall not result in a merger of Lessor's and Lessee's estates, and shall, at the option of Lessor, either terminate any or all existing subleases or subtenancies, or operate as an assignment to Lessor of any or all of such subleases or subtenancies. 40. CAPTIONS. Captions are used throughout this Lease for convenience of reference only and shall not be considered in any manner in the construction or interpretation hereof. 41. SEVERABILITY. The provisions of this Lease shall be deemed severable. If any part of this Lease shall be held unenforceable by any court of competent jurisdiction, the remainder shall remain in full force and effect, and such unenforceable provision shall be reformed by such court so as to give maximum legal effect to the intention of the parties as expressed therein. 42. CHARACTERIZATION. A. It is the intent of the parties hereto that the business relationship created by this Lease and any related documents is solely that of a long-term commercial lease between landlord and tenant and has been entered into by both parties in reliance upon the economic and legal bargains contained herein. None of the agreements contained herein, is intended, nor shall the same be deemed or construed, to create a partnership 30 between Lessor and Lessee, to make them joint venturers, to make Lessee an agent, legal representative, partner, subsidiary or employee of Lessor, nor to make Lessor in any way responsible for the debts, obligations or losses of Lessee. B. Lessor and Lessee acknowledge and warrant to each other that each has been represented by independent counsel and has executed this Lease after being fully advised by said counsel as to its effect and significance. This Lease 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. Whenever in this Lease any words of obligation or duty are used, such words or expressions shall have the same force and effect as though made in the form of a covenant. 43. EASEMENTS. During the Lease Term, Lessor agrees to grant such utility, access or other similar easements on, over, under and above any of the Properties as Lessee may request, provided that such easements are reasonably required for the operation of such Property as a Permitted Concept and will not decrease the value of such Property. During the Lease Term, Lessor shall also have the right to grant any utility, access or other similar easements on, over, under and above any of the Properties which are not requested by Lessee, provided that Lessee's prior written consent is obtained, such consent not to be unreasonably withheld or delayed. 44. BANKRUPTCY. A. As a material inducement to Lessor executing this Lease, Lessee acknowledges and agrees that Lessor is relying upon (i) the financial condition and specific operating experience of Lessee and Lessee's obligation to use each of the Properties specifically in accordance with system-wide requirements imposed from time to time on Permitted Concepts, (ii) Lessee's timely performance of all of its obligations under this Lease as to all Properties notwithstanding the entry of an order for relief under the Code for Lessee and (iii) all defaults under this Lease as to all Properties being cured promptly and this Lease being assumed within 60 days of any order for relief entered under the Code for Lessee, or this Lease being rejected within such 60 day period and the Properties surrendered to Lessor. Accordingly, in consideration of the mutual covenants contained in this Lease and for other good and valuable consideration, Lessee hereby agrees that: (i) All obligations that accrue or become due under this Lease (including the obligation to pay rent), from and after the date that an Action is commenced shall be timely performed exactly as provided in this Lease and any failure to so perform shall be harmful and prejudicial to Lessor; (ii) Any and all obligations under this Lease that accrue or become due from and after the date that an Action is commenced and that are not paid as required by this Lease shall, in the amount of such rents, constitute administrative expense claims allowable under the Code with priority of payment at least equal to that of any other actual and necessary expenses incurred after the commencement of the Action; (iii) Any extension of the time period within which Lessee may assume or reject this Lease without an obligation to cause all obligations accruing or coming due under this Lease from and after the date that an Action is commenced to be performed as and when required under this Lease shall be harmful and prejudicial to Lessor; (iv) Any time period designated as the period within which Lessee must cure all defaults and compensate Lessor for all pecuniary losses which extends beyond the date of assumption of this Lease shall be harmful and prejudicial to Lessor; (v) Any assignment of this Lease must result in all terms and conditions of this Lease being assumed by the assignee without alteration or amendment, and any assignment which results in an amendment or alteration of the terms and conditions of this Lease without the express written consent of Lessor shall be harmful and prejudicial to Lessor; (vi) Any proposed assignment of this Lease to an assignee: (a) that will not use the Properties specifically as a Permitted Concept, or (b) that does not possess financial condition, operating performance and 31 experience characteristics equal to or better than the financial condition, operating performance and experience of the Lessee Parties as of the Effective Date, shall be harmful and prejudicial to Lessor; (vii) The rejection (or deemed rejection) of this Lease for any reason whatsoever shall constitute cause for immediate relief from the automatic stay provisions of the Code, and Lessee stipulates that such automatic stay shall be lifted immediately and possession of the Properties will be delivered to Lessor immediately without the necessity of any further action by Lessor; and (viii) This Lease shall at all times be treated as consistent with the specific characterizations set forth in Section 3 of this Lease, and assumption or rejection of this Lease shall be (a) in its entirety, (b) for all of the Properties, and (c) in strict accordance with the specific terms and conditions of this Lease. B. No provision of this Lease shall be deemed a waiver of Lessor's rights or remedies under the Code or applicable law to oppose any assumption and/or assignment of this Lease, to require timely performance of Lessee's obligations under this Lease, or to regain possession of the Properties as a result of the failure of Lessee to comply with the terms and conditions of this Lease or the Code. C. Notwithstanding anything in this Lease to the contrary, all amounts payable by Lessee to or on behalf of Lessor under this Lease, whether or not expressly denominated as such, shall constitute "rent" for the purposes of the Code. D. For purposes of this Section addressing the rights and obligations of Lessor and Lessee in the event that an Action is commenced, the term "Lessee" shall include Lessee's successor in bankruptcy, whether a trustee, Lessee as debtor in possession or other responsible person. 45. NO OFFER. No contractual or other rights shall exist between Lessor and Lessee with respect to the Properties until both have executed and delivered this Lease, notwithstanding that deposits may have been received by Lessor and notwithstanding that Lessor may have delivered to Lessee an unexecuted copy of this Lease. The submission of this Lease to Lessee shall be for examination purposes only, and does not and shall not constitute a reservation of or an option for Lessee to lease or otherwise create any interest on the part of Lessee in the Properties. 46. OTHER DOCUMENTS. Each of the parties agrees to do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered all such further acts, documents and assurances as may be reasonably required or deemed advisable to carry into effect the purposes of this Lease, to perfect any lien or security interest granted in this Lease and for the better assuring and confirming of all of Lessor's rights, powers and remedies under this Lease. 47. ATTORNEYS' FEES. In the event of any judicial or other adversarial proceeding between the parties concerning this Lease, to the extent permitted by law, the prevailing party shall be entitled to recover all of its reasonable attorneys' fees and other costs in addition to any other relief to which it may be entitled. In addition, Lessor shall, upon demand, be entitled to all attorneys' fees and all other costs incurred in the preparation and service of any notice or demand hereunder, whether or not a legal action is subsequently commenced. 48. ENTIRE AGREEMENT. This Lease and any other instruments or agreements referred to herein constitute the entire agreement between the parties with respect to the subject matter hereof, and there are no other representations, warranties or agreements except as herein provided. Without limiting the foregoing, Lessee specifically acknowledges that neither Lessor nor any agent, officer, employee or representative of Lessor has made any representation or warranty regarding the projected profitability of the business to be conducted on the Properties. Furthermore, Lessee acknowledges that Lessor did not prepare or assist in the preparation of any of the projected figures used by Lessee in analyzing the economic viability and feasibility of the business to be conducted by Lessee at the Properties. 49. FORUM SELECTION; JURISDICTION; VENUE; CHOICE OF LAW. Lessee acknowledges that this Lease was substantially negotiated in the State of Arizona, the Lease was executed and delivered in the State of Arizona, all payments under this Lease will be delivered in the State of Arizona (unless otherwise directed by Lessor or its 32 successors) 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 Lease, the parties hereto expressly submit to the non-exclusive jurisdiction of all federal and state courts located in the State of Arizona. Lessee and Lessor consent that they 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, Lessee and Lessor waive and agree not to assert in any such action, suit or proceeding that they are 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. The creation of this Lease, the creation and perfection of the liens and security interests granted herein and the rights and remedies of Lessor with respect to the Properties, as provided herein and by the laws of the states in which the Properties are located, as applicable, shall be governed by and construed in accordance with the internal laws of the states in which the Properties are located, as applicable, without regard to principles of conflicts of law. With respect to other provisions of this Lease, this Lease shall be governed by the internal laws of the State of Arizona, without regard to its principles of conflicts of law. Nothing contained in this Section shall limit or restrict the right of Lessor or Lessee to commence any proceeding in the federal or state courts located in the states in which the Properties are located to the extent Lessor or Lessee deems such proceeding necessary or advisable to exercise remedies available under this Lease. 50. COUNTERPARTS. This Lease may be executed in one or more counterparts, each of which shall be deemed an original. 51. MEMORANDUM OF MASTER LEASE. Concurrently with the execution of this Lease, Lessor and Lessee are executing the Memorandum to be recorded in the applicable real property records with respect to each of the Properties. Further, upon Lessor's request, Lessee agrees to execute and acknowledge a termination of lease and/or quit claim deed in recordable form with respect to each of the Properties to be held by Lessor until the expiration or sooner termination of the Lease Term. 52. NO BROKERAGE. Lessor and Lessee represent and warrant to each other that they have had no conversation or negotiations with any broker concerning the leasing of the Properties. Each of Lessor and Lessee agrees to protect, indemnify, save and keep harmless the other, against and from all liabilities, claims, losses, costs, damages and expenses, including attorneys' fees, arising out of, resulting from or in connection with their breach of the foregoing warranty and representation. 53. WAIVER OF JURY TRIAL AND PUNITIVE, CONSEQUENTIAL, SPECIAL AND INDIRECT DAMAGES. LESSOR AND LESSEE 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 LEASE, THE RELATIONSHIP OF LESSOR AND LESSEE, LESSEE'S USE OR OCCUPANCY OF ANY OF THE PROPERTIES, AND/OR ANY CLAIM FOR INJURY OR DAMAGE, OR ANY EMERGENCY OR STATUTORY REMEDY. 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, LESSEE AND LESSOR 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 LEASE OR ANY DOCUMENT CONTEMPLATED HEREIN OR RELATED HERETO. THE WAIVER BY LESSEE AND LESSOR 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. 54. RELIANCE BY ENVIRONMENTAL INSURER. Lessee acknowledges and agrees that Environmental Insurer may rely on the representations, warranties and covenants set forth in Sections 6.L, 16 and 19.B of this 33 Lease, that Environmental Insurer is an intended third-party beneficiary of such representations, warranties and covenants 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, warranties and covenants, including to the extent applicable, the right of subrogation. 55. LENDER'S RIGHTS. A. Lessee acknowledges and agrees that (i) Lessor has collaterally assigned all of its right, title and interest under this Lease to Lender pursuant to the Loan Documents and (ii) upon the exercise of Lender's remedies set forth in such Loan Documents, all of the rights, powers and privileges of Lessor shall be deemed the rights, powers and privileges of Lender and Lender shall be entitled to exercise all of the rights and remedies of "Lessor" under this Lease. Lessee hereby consents to, and no further consent by Lessee shall be required for, any further assignment of rights of Lessor hereunder or in connection with any transfer by Lender. All notices, certificates, reports or other information required to be delivered to Lessor under this Lease shall be delivered simultaneously to Lender in accordance with the provisions of Section 28. Notwithstanding any provision herein to the contrary, the collateral assignment of this Lease to Lender shall not be deemed to create any obligation of or liability for Lender. B. Lessee acknowledges and agrees that Lender may rely on all of the representations, warranties and covenants set forth in this Lease, that Lender is an intended third-party beneficiary of such representations, warranties and covenants and that Lender shall have all rights and remedies available at law or in equity as a result of a breach of such representations, warranties and covenants, including to the extent applicable, the right of subrogation. C. Lessee agrees that any consent, approval, agreement or waiver provided by Lessor pursuant to this Lease shall not be valid unless consented to in writing by Lender. 56. DOCUMENT REVIEW. In the event Lessee makes any request upon Lessor requiring Lessor or the attorneys of Lessor 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 Lease, then Lessee shall (x) reimburse Lessor upon demand therefor for all out-of-pocket costs and expenses incurred by Lessor in connection with such review and/or preparation, including, without limitation, reasonable attorneys' fees, and (y) pay Lessor a reasonable processing and review fee. 57. OFAC LAWS AND REGULATIONS. Lessee shall immediately notify Lessor in writing if any individual or entity owning directly or indirectly any interest in any of the Lessee 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. 58. CONDOMINIUM. Lessee acknowledges that the Property located at 19200 Haggerty Road, Livonia, Michigan (FFC No. 8001-4153; Unit No. 17) (the "Condominium Property") is a condominium unit. During the Lease Term, Lessee shall promptly pay, perform and comply with all obligations imposed on the owner of the Condominium Property by the applicable condominium declaration, by-laws and related documents (collectively, the "Condominium Documents") and shall provide Lessor with copies of any notices received by Lessee from the condominium board, its managing agent or from the owner of any other condominium unit, including, without limitation, notices asserting or claiming a default or breach by Lessee under the Condominium Documents, such copies to be provided to Lessor within five (5) days after Lessee's receipt of the applicable notice. Lessee shall indemnify, protect, defend and hold harmless each of the Indemnified Parties from and against any and all Losses (excluding Losses suffered by an Indemnified Party arising out of the gross negligence or willful misconduct of such Indemnified Party; 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 Lessor's interest in the Condominium Property or Lessor's failure to act in respect of matters which are or were the obligation of Lessee under this Lease) caused by, incurred or resulting from Lessee's failure to pay, perform and comply with the terms and 34 conditions of the Condominium Documents or this Section. If Lessee fails to pay, perform or comply with any of its obligations under the Condominium Documents or this Section, Lessor may pay or perform such obligations; provided, however, in no event shall Lessor be obligated to pay or perform such obligations, and in no event shall payment or performance of such obligations by Lessor constitute a cure of any Event of Default arising under this Lease as a result of Lessee's failure to pay, perform or comply with such obligations. Any amounts disbursed by Lessor as a result of Lessor's performance of such obligations shall bear interest at the Default Rate from and including the date of such advance to and including the date such advance is repaid. 35 IN WITNESS WHEREOF, Lessor and Lessee have entered into this Lease as of the Effective Date. LESSOR: JAX REAL ESTATE, LLC, a Delaware limited liability company By /s/ R. Gregory Lewis -------------------------------------------- R. Gregory Lewis Its Vice President and Treasurer LESSEE: J. ALEXANDER'S RESTAURANTS, INC., a Tennessee corporation By /s/ R. Gregory Lewis -------------------------------------------- R. Gregory Lewis Its Vice President -- Finance U.S. Federal Tax Identification Number: 62-1156278 Organization Identification Number: 0124773 Principal Place of Business: Nashville, Tennessee POWER OF ATTORNEY Lessor may act as attorney-in-fact or otherwise on behalf of Lessee pursuant to Sections 25 and 26 of this Lease. This power of attorney is coupled with an interest, is durable and is not affected by subsequent disability or incapacity of the principal or lapse of time. /s/ JSB /s/ RGY ------- ------- Witness Lessee WITNESS In accordance with the requirements of Arizona Revised Statutes Section 14-5506 and other applicable law, the undersigned has executed this Lease for the purpose of witnessing the grant of the powers of attorney by Lessee to Lessor. /s/ Janice S. Bott ----------------------------------- STATE OF ARIZONA ) ) SS. COUNTY OF MARICOPA ) Before me, a notary public in and for said county and state, appeared R. Gregory Lewis, Vice President and Treasurer of JAX Real Estate, LLC, a Delaware limited liability company, who acknowledged to me that he/she did execute the foregoing instrument and the same is his/her free act and deed, personally and on behalf of said limited liability company. In testimony whereof, I have hereunto subscribed my name, and affixed my official seal at Scottsdale, Arizona this 29th day of October, 2002. /s/ Notary Public ----------------------------------- Notary Public My Commission Expires February 29, 2004 - ----------------------------------- STATE OF ARIZONA ) ) SS. COUNTY OF MARICOPA ) Before me, a notary public in and for said county and state, appeared R. Gregory Lewis, Vice President -- Finance of J. Alexander's Restaurants, Inc., a Tennessee corporation, who acknowledged to me that he/she did execute the foregoing instrument and the same is his/her free act and deed, personally and on behalf of said corporation. In testimony whereof, I have hereunto subscribed my name, and affixed my official seal at Scottsdale, Arizona this _______ day of October, 2002. /s/ Notary Public ----------------------------------- Notary Public My Commission Expires February 29, 2004 - ----------------------------------- Prepared by: Mitchell S. Padover, Esq. KUTAK ROCK LLP Suite 300 8601 North Scottsdale Road Scottsdale, Arizona 85253 Telephone: (480) 429-5000 Facsimile: (480) 429-5001 EXHIBIT A PROPERTIES ADDRESS
- ----------------------------------------------------------------------------- PROPERTY - ----------------------------------------------------------------------------- ADDRESS CITY COUNTY STATE - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- 1721 Galleria Boulevard Franklin Williamson TN - ----------------------------------------------------------------------------- 7970 Washington Village Dr. Dayton Montgomery OH - ----------------------------------------------------------------------------- 7550 Vantage Drive Columbus Franklin OH - ----------------------------------------------------------------------------- 1410 16th Street Oak Brook Du Page IL - ----------------------------------------------------------------------------- 3320 Galleria Circle Hoover Jefferson AL - ----------------------------------------------------------------------------- 11471 Metcalf Avenue Overland Park Johnson KS - ----------------------------------------------------------------------------- 2215 Hamilton Place Blvd. Chattanooga Hamilton TN - ----------------------------------------------------------------------------- 2670 North Germantown Pkwy. Memphis Shelby TN - ----------------------------------------------------------------------------- 19200 Haggerty Road Livonia Wayne MI - ----------------------------------------------------------------------------- TOTAL - -----------------------------------------------------------------------------
EXHIBIT B LEASED PERSONAL PROPERTY Lessee occasionally leases the following items of Personal Property: trash dumpsters, CO2 canisters. EX-10.D 6 g79138exv10wd.txt UNCONDITIONAL GUARANTY OF PAYMENT Exhibit 10(d) UNCONDITIONAL GUARANTY OF PAYMENT AND PERFORMANCE THIS UNCONDITIONAL GUARANTY OF PAYMENT AND PERFORMANCE (this "Guaranty") is made as of October 29, 2002, by J. ALEXANDER'S CORPORATION, a Tennessee corporation ("Guarantor"), for the benefit of JAX REAL ESTATE, LLC, a Delaware limited liability company (together with its successors and assigns under the Lease (as defined below), "Lessor"). 1. For valuable consideration, the receipt of which is hereby acknowledged, Guarantor unconditionally, absolutely and irrevocably guarantees and promises to pay Lessor, or order, any and all amounts, including, without limitation, Base Annual Rental, Base Monthly Rental, taxes, insurance premiums, impounds, reimbursements, late charges, default interest, damages, indemnity obligations and all other amounts, costs, fees, expenses and charges of any kind or type whatsoever, which may or at any time be due to Lessor pursuant to the following agreements (collectively, the "Documents"): A. Master Lease (the "Lease"), dated as of the date hereof, between Lessor and J. Alexander's Restaurants, Inc., a Tennessee corporation ("Lessee"), by which Lessor leases the properties corresponding to the FFC File Numbers and addresses identified on Exhibit A attached hereto (collectively, the "Premises") to Lessee; B. Any other document, agreement, instrument or certificate contemplated by the Lease, or any other documents, agreements, instruments or certificates now or hereafter entered into between Lessor and Lessee with respect to the Lease; and C. Any amendment of the foregoing documents, agreements, instruments or certificates now or hereafter entered into between Lessor and Lessee. 2. Guarantor also unconditionally guarantees the truthfulness and accuracy of all representations, warranties and certifications of Lessee, the satisfaction of all conditions by Lessee and the full and timely performance of all obligations to be performed by Lessee, under or pursuant to the Documents (the matters which are guaranteed pursuant to Sections 1 and 2 are hereinafter collectively referred to as the "Obligations"). The obligations of Guarantor under this Guaranty are primary, joint and several and independent of the obligations of Lessee and any and every other guarantor of the Obligations, and a separate action or actions may be brought and executed against Guarantor or any other such guarantor, whether or not such action is brought against Lessee or any other such guarantor and whether or not Lessee or any other such guarantor be joined in such action or actions. 3. This is an absolute and unconditional guaranty of payment and performance and not of collection and Guarantor unconditionally (a) waives any requirement that Lessor first make demand upon, or seek to enforce or exhaust remedies against, Lessee or any other person or entity (including any other guarantor) or any of the collateral or property of Lessee or such other person or entity before demanding payment from, or seeking to enforce this Guaranty against, Guarantor; (b) waives and agrees not to assert any and all rights, benefits and defenses which might otherwise be available under the provisions of Ariz. Rev. Stat. ss. 12-1641 and ss.12 -1642 et seq., 44-141, 44-142 or 47-3605, Arizona Rules of Civil Procedure Rule 17(f), or any other Arizona statutes or rules (including any statutes or rules amending, supplementing or supplanting same) which might operate, contrary to Guarantor's agreements in this Guaranty, to limit Guarantor's liability under, or the enforcement of, this Guaranty; (c) covenants that this Guaranty will not be discharged until all of the Obligations are fully satisfied; and (d) agrees that this Guaranty shall remain in full effect without regard to, and shall not be affected or impaired by, any invalidity, irregularity or unenforceability in whole or in part of any of the Documents, or any limitation of the liability of Lessee or Guarantor thereunder, or any limitation on the method or terms of payment thereunder which may now or hereafter be caused or imposed in any manner whatsoever. 4. This Guaranty is a continuing guaranty, and the obligations, undertakings and conditions to be performed or observed by Guarantor under this Guaranty shall not be affected or impaired by reason of the happening from time to time of the following with respect to the Documents, all without notice to, or the further consent of, Guarantor: (a) the waiver by Lessor of the observance or performance by Lessee or Guarantor of any of the obligations, undertakings, conditions or other provisions contained in any of the Documents, except to the extent of such waiver; (b) the extension, in whole or in part, of the time for payment of any amount owing or payable under the Documents; (c) the modification or amendment (whether material or otherwise) of any of the obligations of Lessee under, or any other provisions of, any of the Documents, except to the extent of such modification or amendment; (d) the taking or the omission of any of the actions referred to in any of the Documents (including, without limitation, the giving of any consent referred to therein); (e) any failure, omission, delay or lack on the part of Lessor to enforce, assert or exercise any provision of the Documents, including any right, power or remedy conferred on Lessor in any of the Documents or any action on the part of Lessor granting indulgence or extension in any form; (f) the assignment to or assumption by any third party of any or all of the rights or obligations of Lessee under all or any of the Documents; (g) the release or discharge of Lessee from the performance or observance of any obligation, undertaking or condition to be performed by Lessee under any of the Documents by operation of law, including any rejection or disaffirmance of any of the Documents in any bankruptcy or similar proceedings; (h) the receipt and acceptance by Lessor or any other person or entity of notes, checks or other instruments for the payment of money and extensions and renewals thereof; (i) any action, inaction or election of remedies by Lessor which results in any impairment or destruction of any subrogation rights of Guarantor, or any rights of Guarantor to proceed against any other person or entity for reimbursement; (j) any setoff, defense, counterclaim, abatement, recoupment, reduction, change in law or any other event or circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor, indemnitor or surety under the laws of the State of Arizona, the state in which the Premises are located or any other jurisdiction; and (k) the termination or renewal of any of the Obligations or any other provision thereof. 5. Guarantor represents and warrants to Lessor that: (a) neither the execution nor delivery of this Guaranty nor fulfillment of nor compliance with the terms and provisions hereof will conflict with, or result in a breach of the terms or conditions of, or constitute a default under, any agreement or instrument to which Guarantor is now a party or by which Guarantor may be bound, or result in the creation of any lien, charge or encumbrance upon any property or assets of Guarantor, which conflict, breach, default, lien, charge or encumbrance could result in a material adverse change in the financial condition of Guarantor; (b) no further consents, approvals or authorizations are required for the execution and delivery of this Guaranty by Guarantor or for Guarantor's compliance with the terms and provisions of this Guaranty; (c) this Guaranty is the legal, valid and binding agreement of Guarantor and is enforceable against Guarantor 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 subject to general principles of equity; (d) Guarantor has the full power, authority, capacity and legal right to execute and deliver this Guaranty, and, to the extent Guarantor is a corporation, partnership, limited liability company or other form of entity, the parties executing this Guaranty on behalf of Guarantor are fully authorized and directed to execute the same to bind Guarantor; (e) Guarantor is not a "foreign individual," "foreign corporation," "foreign partnership," "foreign limited liability company," "foreign trust," or "foreign estate," as those terms are defined in the U.S. Internal Revenue Code and the regulations promulgated thereunder; Guarantor's Social Security Number or Federal Tax Identification Number is accurately set forth herein next to the signature of Guarantor; (f) Guarantor has delivered to Lessor either audited consolidated financial statements of Guarantor and its affiliates or, if Guarantor does not have audited financial statements, certified financial statements; such financial statements and other information relating to Guarantor heretofore delivered to Lessor are true, correct and complete in all material respects as of the date of this Guaranty; Guarantor understands that Lessor is relying upon such information, and Guarantor represents that such reliance is reasonable; and the financial statements of Guarantor delivered by Lessee to Lessor pursuant to the Lease have been prepared in accordance with generally accepted accounting principles consistently applied and accurately reflect, as of the date of this Guaranty, the financial condition of Guarantor; (g) during the term of this Guaranty, Guarantor will not transfer or dispose of any material part of its assets except for reasonably equivalent value; furthermore, Guarantor will furnish Lessor annually, within ninety (90) days after the close of each calendar year, a financial statement consisting of a balance sheet and such other financial information as Lessor may reasonably request; and (h) the Documents are conclusively presumed to have been signed in reliance on this Guaranty, and the assumption by Guarantor of its obligations under this Guaranty results in direct financial benefit to Guarantor. 6. This Guaranty shall commence upon execution and delivery of any of the Documents and shall continue in full force and effect until all of the Obligations are duly, finally and permanently paid, performed and 2 discharged and are not subject to any right of reborrowing or extension by Lessee, and Lessor gives Guarantor written notice of the full and final satisfaction of the Obligations. The Obligations shall not be considered fully paid, performed and discharged unless and until all payments by Lessee to Lessor are no longer subject to any right on the part of any person whomsoever, including but not limited to Lessee, Lessee as a debtor-in-possession and/or any trustee in bankruptcy, to disgorge such payments or seek to recoup the amount of such payments or any part thereof. This Guaranty shall remain in full force and effect and continue to be effective in the event that (i) any petition is filed by or against Lessee or Guarantor for liquidation or reorganization, including, without limitation, under Title 11 of the United States Code, 11 U.S.C. Sec. 101 et seq. (the "Code"), (ii) Lessee or Guarantor becomes insolvent or makes an assignment for the benefit of creditors or (iii) a receiver or trustee is appointed for all or any significant part of Lessee's or Guarantor's assets. This Guaranty shall continue to be effective or be reinstated, as applicable, if at any time payment and performance of the Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by Lessor, whether as a "voidable preference", "fraudulent conveyance" or otherwise, all as though such payment or performance had not been made. In the event that any payment of the Obligations, or any part thereof, is rescinded, reduced, restored or returned, the Obligations shall be reinstated and deemed reduced only by such amount paid to Lessor and not so rescinded, reduced, restored or returned. 7. Until the Obligations have been satisfied in full, Guarantor shall neither have any right of subrogation, indemnity or reimbursement nor hold any other claim against Lessee with respect to this Guaranty and, until the Obligations have been satisfied in full, Guarantor shall not have the right to enforce any and all claims by Guarantor now or hereafter arising against Lessee. Furthermore, Guarantor hereby unconditionally and irrevocably waives (a) any right to participate in any security now or hereafter held by Lessor or in any claim or remedy of Lessor or any other person against Lessee with respect to the Obligations, (b) any statute of limitations affecting Guarantor's liability hereunder, (c) all principles and provisions of law which conflict with the terms of this Guaranty, and (d) diligence, presentment, protest, demand for performance, notice of nonperformance, notice of intent to accelerate, notice of acceleration, notice of protest, notice of dishonor, notice of execution of any Documents, notice of extension, renewal, alteration or amendment, notice of acceptance of this Guaranty, notice of defaults under any of the Documents and all other notices whatsoever. 8. Notwithstanding the preceding Section 7, in the event that Guarantor shall have any claims against Lessee, any indebtedness of Lessee now or hereafter held by Guarantor is hereby subordinated to the indebtedness of Lessee to Lessor. Any such indebtedness of Lessee to Guarantor, if Lessor so requests, shall be collected, enforced and received by Guarantor as trustee for Lessor and be paid over to Lessor on account of the Obligations, but without reducing or affecting in any manner the liability of Guarantor under the other provisions of this Guaranty. 9. It is not necessary for Lessor to inquire into the powers of Lessee or its officers, directors, partners or agents acting or purporting to act on its behalf, and Guarantor shall be liable for the Obligations in accordance with their terms notwithstanding any lack of authorization or defect in execution or delivery by Lessee. 10. In addition to the amounts guaranteed under this Guaranty, Guarantor agrees to pay (i) all of Lessor's reasonable attorneys' fees and other reasonable costs and expenses which may be incurred by Lessor in the enforcement of this Guaranty and (ii) interest (including postpetition interest to the extent a petition is filed by or against Lessee under the Code) at the Default Rate (as defined in the Lease) on any Obligations not paid within five (5) days of when due. Guarantor hereby agrees to indemnify and hold harmless Lessor for, from and against any loss, cause of action, claim, cost, expense or fee, including but not limited to reasonable attorney's fees and court costs, suffered or occasioned by the failure of Lessee to satisfy its obligations under the Documents. The agreement to indemnify Lessor contained in this paragraph shall be enforceable notwithstanding the invalidity or unenforceability of the Documents or any of them or the invalidity or unenforceability of any other paragraph contained in this Guaranty. All moneys available to Lessor for application in payment or reduction of the liabilities of Lessee under the Documents may be applied by Lessor to the payment or reduction of such liabilities of Lessee, in such manner, in such amounts and at such time or times as Lessor may elect. 11. All notices, demands, requests, consents, approvals or other instruments required or permitted to be given pursuant to this Guaranty shall be in writing and given by (i) hand delivery, (ii) express overnight delivery service or (iii) certified or registered mail, return receipt requested, and shall be deemed to have been delivered upon 3 (a) receipt, if hand delivered, (b) the next Business Day (as defined in the Lease), if delivered by express overnight delivery service or (c) 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 addresses (or facsimile numbers, as applicable) specified below: If to Guarantor: J. Alexander's Corporation 3401 West End Avenue, Suite 260 Nashville, TN 37203 Attention: R. Gregory Lewis With a copy to: GE Capital Franchise Finance Corporation 17207 North Perimeter Drive Scottsdale, AZ 85255 Attention: General Counsel If to Lessor: JAX Real Estate, LLC 3401 West End Avenue, Suite 260 Nashville, TN 37203 Attention: R. Gregory Lewis or to such other address or such other person as either Guarantor or Lessor may from time to time hereafter specify to the other party in a notice delivered in the manner provided above. 12. This Guaranty is delivered in the State of Arizona, and it is the intent of Guarantor and Lessor that this Guaranty shall be deemed to be a contract made under and governed by the internal laws of the State of Arizona, without regard to its principles of conflicts of law. For purposes of any action or proceeding involving this Guaranty, Guarantor submits to the jurisdiction of all federal and state courts located in the State of Arizona and 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, Guarantor 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. Nothing contained in this section shall limit or restrict the right of Lessor to commence any proceeding in the federal or state courts located in the state in which the Premises are located and/or where Guarantor maintains its chief executive office to the extent Lessor deems such proceeding necessary or advisable to exercise remedies available under the Documents. 13. Guarantor intends for the Lease to be a "true lease" and not a financing lease, capital lease, mortgage, equitable mortgage, deed of trust, security agreement or other financing or trust arrangement, and the economic realities of the Lease are those of a true lease. Guarantor shall not challenge the validity, enforceability or characterization of the transactions contemplated by the Lease, and Guarantor shall support the intent of Guarantor, Lessee and Lessor that the Lease is a "true lease" and does not create a joint venture, partnership, equitable mortgage, trust, financing device or arrangement, trust agreement, security interest or the like. Guarantor acknowledges that Lessor did not prepare or assist in the preparation of any of the projected financial figures used by Lessee in analyzing the economic viability and feasibility of the transactions contemplated by the Lease. 14. All of Lessor's rights and remedies under the Documents and this Guaranty are intended to be distinct, separate and cumulative and no such right and remedy is intended to be in exclusion of or a waiver of any of the others. 15. This Guaranty and all obligations of Guarantor hereunder shall be binding upon the successors and assigns of Guarantor (including, a debtor-in-possession on behalf of Guarantor) and shall, together with the rights and remedies of Lessor, hereunder, inure to the benefit of Lessor, all future holders of any instrument evidencing any of the Obligations and its successors and assigns. No sales, participations, assignments, transfers or other dispositions of any agreement governing or instrument evidencing the Obligations or any portion thereof or interest 4 therein shall in any manner affect the rights of Lessor or its successors and assigns hereunder. Guarantor may not assign, sell, hypothecate or otherwise transfer any interest in or obligation under this Guaranty. 16. If any provision of this Guaranty is unenforceable, the enforceability of the other provisions shall not be affected and they shall remain in full force and effect. Guarantor agrees to take such action and to sign such other documents as may be appropriate to carry out the intent of this Guaranty. This Guaranty may be executed in one or more counterparts, each of which shall be deemed an original. 17. LESSOR, BY ACCEPTING THIS GUARANTY, AND GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT THEY MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY AND ALL ISSUES PRESENTED IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY LESSOR OR GUARANTOR AGAINST THE OTHER OR THEIR SUCCESSORS WITH RESPECT TO ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS GUARANTY, THE RELATIONSHIP OF LESSOR, LESSEE AND/OR GUARANTOR, LESSEE'S USE OR OCCUPANCY OF THE PREMISES, AND/OR ANY CLAIM FOR INJURY OR DAMAGE, OR ANY EMERGENCY OR STATUTORY REMEDY. THIS WAIVER BY LESSOR AND GUARANTOR OF ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY HAS BEEN NEGOTIATED AND IS A MATERIAL INDUCEMENT FOR LESSOR ACCEPTING THIS GUARANTY. FURTHERMORE, EACH OF LESSOR AND GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT IT MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL AND INDIRECT DAMAGES FROM THE OTHER OR 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 GUARANTY OR ANY DOCUMENTS CONTEMPLATED HEREIN OR RELATED HERETO. THE WAIVER BY GUARANTOR OF ANY RIGHT THEY MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL AND INDIRECT DAMAGES HAS BEEN NEGOTIATED AND IS AN ESSENTIAL ASPECT OF THEIR BARGAIN. 18. Guarantor shall be liable under this Guaranty for the maximum amount of such liability that can be incurred hereby without rendering this Guaranty, as it relates to Guarantor, voidable under applicable laws relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount. Guarantor agrees that the Obligations may at any time and from time to time exceed the amount of the liability of Guarantor hereunder without impairing this Guaranty or affecting the rights and remedies of Lessor hereunder. 19. This Guaranty is executed and delivered to induce Lessor to enter into the Lease and is solely for the benefit of Lessor and its successors and assigns, including, without limitation, GE Capital Franchise Finance Corporation, a Delaware corporation ("Lender"), and its successors and assigns under the Loan Documents (as defined in the Lease), and is not intended to nor shall it be deemed to be for the benefit of any other third party, including, without limitation, Lessee. This Guaranty is a continuing Guaranty and shall be binding upon Guarantor and its successors and assigns; provided, however, without the prior written consent of Lender, Guarantor shall not assign this Guaranty or any of the rights or obligations of Guarantor hereunder. 20. Guarantor acknowledges and agrees that (i) Lessor intends to collaterally assign all of its right, title and interest under the Lease and this Guaranty to Lender pursuant to the Loan Documents and (ii) upon the exercise of Lender's remedies set forth in such Loan Documents, all of the rights, powers and privileges of Lessor shall be deemed the rights, powers and privileges of Lender and Lender shall be entitled to exercise all of the rights and remedies of "Lessor" under this Guaranty, the Lease and the Loan Documents. Guarantor hereby consents to, and no further consent by Guarantor shall be required for, any further assignment of rights of Lessor hereunder or in connection with any transfer by Lessor. All notices, certificates, reports or other information required to be delivered to Lessor under this Guaranty shall be delivered simultaneously to Lender. Notwithstanding any provision herein to the contrary, this Guaranty shall not be deemed to create any obligation of or liability for Lender. Guarantor intends that Lender shall be an intended third party beneficiary of this Guaranty but without any corresponding responsibility, liability or obligation to Guarantor. 5 IN WITNESS WHEREOF, the undersigned Guarantor has executed this Guaranty effective as of the date set forth in the introductory paragraph of this Guaranty. GUARANTOR: Social Security or Federal Tax I.D. Number: J. ALEXANDER'S CORPORATION, a Tennessee corporation 62-0854056 By: /s/ R. Gregory Lewis ----------------------------------- R. Gregory Lewis Its Vice President, Chief Financial Officer and Secretary STATE OF ARIZONA ) ) SS. COUNTY OF MARICOPA ) The foregoing instrument was acknowledged before me on this _____ day of October 29, 2002 by R. Gregory Lewis, Vice President, Chief Financial Officer and Secretary of J. Alexander's Corporation, a Tennessee corporation, on behalf of the corporation. /s/ Notary Public -------------------------------------- Notary Public My Commission Expires: February 29, 2004 - ------------------------------------ EXHIBIT A DESCRIPTION OF PREMISES
FFC NO. UNIT NO. ADDRESS CITY COUNTY STATE - -------- -------- ------- ---- ------ ----- 8001-4145 2 1721 Galleria Boulevard Franklin Williamson TN 8001-4146 3 7970 Washington Village Dr. Dayton Montgomery OH 8001-4147 4 7550 Vantage Drive Columbus Franklin OH 8001-4148 5 1410 16th Street Oak Brook Du Page IL 8001-4149 7 3320 Galleria Circle Hoover Jefferson AL 8001-4150 9 11471 Metcalf Avenue Overland Park Johnson KS 8001-4151 13 2215 Hamilton Place Blvd. Chattanooga Hamilton TN 8001-4152 14 2670 North Germantown Pkwy. Memphis Shelby TN 8001-4153 17 19200 Haggerty Road Livonia Wayne MI
EX-10.E 7 g79138exv10we.txt FORM OF PROMISSORY NOTE Exhibit 10(e) PROMISSORY NOTE Dated as of October ___, 2002 $____________ Scottsdale, Arizona JAX REAL ESTATE, LLC, a Delaware limited liability company ("Borrower"), for value received, hereby promises to pay to GE CAPITAL FRANCHISE FINANCE CORPORATION, a Delaware corporation ("Lender"), whose address is 17207 North Perimeter Drive, Scottsdale, Arizona 85255, or order, on or before November 1, 2022 (the "Maturity Date"), as herein provided, the principal sum of $____________, and to pay interest on the unpaid principal amount of this Note from the date hereof to the Maturity Date at the rate of 8.09% per annum on the basis of a 360-day year for the actual number of days elapsed, such principal and interest to be paid in immediately available funds and in lawful money of the United States. Initially capitalized terms which are not otherwise defined in this Note shall have the meanings set forth in that certain Loan Agreement dated as of the date of this Note between Borrower and Lender, as such agreement may be amended, restated and/or supplemented from time to time (the "Loan Agreement"). Interest on the principal amount of this Note for the period commencing with the date such principal amount is advanced by Lender through the last day in the month in which this Note is dated shall be due and payable upon delivery of this Note. Thereafter, principal and interest shall be payable in consecutive monthly installments of $_________ commencing on December 1, 2002, and continuing on the first day of each month thereafter until the Maturity Date, at which time the outstanding principal and unpaid accrued interest shall be due and payable. Borrower may prepay this Note in full, but not in part (except as otherwise set forth below), including all accrued but unpaid interest hereunder and all sums advanced by Lender pursuant to the Loan Documents and any Other Agreements, provided that (i) no Event of Default has occurred under this Note or any of the other Loan Documents or any Other Agreements, (ii) any such prepayment shall only be made on a regularly scheduled payment date upon not less than 30 days prior written notice from Borrower to Lender, and (iii) except as otherwise set forth below, any such prepayment shall be made together with payment of a Yield Maintenance Amount if such prepayment is made prior to the fifth anniversary of the date of this Note. The term "Yield Maintenance Amount" means an amount equal to the difference between (i) the present value computed at the Reinvestment Rate of the stream of monthly principal and interest payments due under this Note from the date of such prepayment through the scheduled Maturity Date, and (ii) the unpaid principal amount of this Note; provided, however, if such difference is a negative number, the Yield Maintenance Amount shall be zero. The term "Reinvestment Rate" means an interest rate equal to the then current yield of U.S. Treasury securities having a weighted average life to maturity closest to the scheduled Maturity Date of this Note. If this Note is prepaid on or following the fifth anniversary of the date of this Note, Borrower shall not be required to pay a Yield Maintenance Amount. The foregoing Yield Maintenance Amount shall be due and payable if this Note is prepaid prior to the fifth anniversary of this Note regardless of whether such prepayment is the result of a voluntary prepayment by Borrower or as a result of Lender declaring the unpaid principal balance of this Note, accrued interest and all other sums due under this Note, the Mortgage encumbering the Premises corresponding to this Note, the other Loan Documents and any Other Agreements, due and payable following an Event of Default as contemplated below (the "Acceleration"); provided, however, the prohibition on a partial prepayment and the Yield Maintenance Amount shall not be applicable with respect to a prepayment of this Note in connection with an application of condemnation proceeds as contemplated by the Mortgage encumbering the Premises corresponding to this Note or as contemplated by the Loan Agreement as a result of a breach and subsequent cure by Borrower of the Fixed Charge Coverage Ratio required by the Loan Agreement. Upon execution of this Note, Borrower shall authorize Lender to establish arrangements whereby all payments of principal and interest hereunder 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 05-120052.03 FFC No. 8001-4145 Unit No. __ Lender may otherwise designate. Each payment of principal and interest hereunder shall be applied first toward any past due payments under this Note (including payment of all Costs (as herein defined)), then to accrued interest, and the balance, after the payment of such accrued interest, if any, shall be applied to the unpaid principal balance of this Note; provided, however, each payment hereunder after an Event of Default has occurred under this Note shall be applied towards the Obligations as Lender in its sole discretion may determine. This Note is secured by the Mortgages and the other Loan Documents. Upon the occurrence of an Event of Default, Lender may declare the entire unpaid principal balance of this Note, accrued interest, if any, and all other sums due under this Note and any Loan Documents or Other Agreements due and payable at once without notice to Borrower. All past-due principal and/or interest shall bear interest from the due date to the date of actual payment at the lesser of the highest rate for which the undersigned may legally contract or the rate of 14% per annum (the "Default Rate"), and such Default Rate shall continue to apply following a judgment in favor of Lender under this Note. If Borrower fails to make any payment or installment due under this Note within five days of its due date (except as a result of Lender failing to initiate the applicable Automated Clearing House Debit), Borrower shall pay to Lender, in addition to any other sum due Lender under this Note or any other Loan Document, a single late charge equal to 5% of such past-due payment or installment (the "Late Charge"), which Late Charge is a reasonable estimate of the loss that may be sustained by Lender due to the failure of Borrower to make timely payments. All payments of principal and interest due hereunder shall be made (i) without deduction of any present and future taxes, levies, imposts, deductions, charges or withholdings, which amounts shall be paid by Borrower, and (ii) without any other right of abatement, reduction, setoff, defense, counterclaim, interruption, deferment or recoupment for any reason whatsoever. Borrower will pay the amounts necessary such that the gross amount of the principal and interest received by Lender is not less than that required by this Note. No delay or omission on the part of Lender in exercising any remedy, right or option under this Note shall operate as a waiver of such remedy, right or option. In any event, a waiver on any one occasion shall not be construed as a waiver or bar to any such remedy, right or option on a future occasion. Except as otherwise expressly set forth herein or in the Loan Agreement, Borrower hereby waives presentment, demand for payment, notice of dishonor, notice of protest, and protest, notice of intent to accelerate, notice of acceleration and all other notices or demands in connection with delivery, acceptance, performance, default or endorsement of this Note. All notices, consents, approvals or other instruments required or permitted to be given by either party pursuant to this Note shall be given in accordance with the notice provisions in the Loan Agreement. Should any indebtedness represented by this Note be collected at law or in equity, or in bankruptcy or other proceedings, or should this Note be placed in the hands of attorneys for collection after default, Borrower shall pay, in addition to the principal and interest due and payable hereon, all costs of collecting or attempting to collect this Note (the "Costs"), including reasonable attorneys' fees and expenses of Lender (including those fees and expenses incurred in connection with any appeal) and court costs whether or not a judicial action is commenced by Lender. This Note may not be amended or modified except by a written agreement duly executed by the party against whom enforcement of this Note is sought. In the event that any one or more of the provisions contained in this Note shall be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Note, and this Note shall be construed as if such provision had never been contained herein or therein. Time is of the essence in the performance of each and every obligation under this Note. Notwithstanding anything to the contrary contained in any of the Loan Documents, the obligations of Borrower to Lender under this Note and any other Loan Documents are subject to the limitation that payments of interest and late charges to Lender shall not be required to the extent that receipt of any such payment by Lender would be contrary to provisions of applicable law limiting the maximum rate of interest that may be charged or collected by Lender. The portion of any such payment received by Lender that is in excess of the maximum interest permitted by such provisions of law shall be credited to the principal balance of this Note or if such excess portion exceeds the outstanding principal balance of this Note, then such excess portion shall be refunded to Borrower. All interest paid or agreed to be paid to Lender shall, to the extent permitted by applicable law, be amortized, prorated, allocated and/or spread throughout the full term of this Note (including, without limitation, the period of any renewal or extension thereof) so that interest for such full term shall not exceed the maximum amount permitted by applicable law. 05-120052.03 FFC No. _________ Unit No. __ 2 This obligation shall bind Borrower and its successors and assigns, and the benefits hereof shall inure to Lender and its successors and assigns. IN WITNESS WHEREOF, Borrower has executed and delivered this Note effective as of the date first set forth above. BORROWER: JAX REAL ESTATE, LLC, a Delaware limited liability company By ------------------------------------------ R. Gregory Lewis Its Vice President and Treasurer 05-120052.03 FFC No. 8001-4145 Unit No. __ __________________ __________________ Schedule to Exhibit 10(e) The Company has executed nine (9) Promissory Notes substantially identical in all material respects to the form of the Promissory Note differing only with respect to the premises and amount of the Note as indicated below:
- -------------------------------------------------------------------------------- Premises Principal Sum Due Under Note - -------------------------------------------------------------------------------- 1721 Galleria Boulevard $3,150,000.00 Franklin, TN - -------------------------------------------------------------------------------- 7970 Washington Village Drive $2,100,000.00 Dayton, OH - -------------------------------------------------------------------------------- 7550 Vantage Drive $2,100,000.00 Columbus, OH - -------------------------------------------------------------------------------- 1410 16th Street $3,575,000.00 Oak Brook, IL - -------------------------------------------------------------------------------- 3320 Galleria Circle $3,100,000.00 Hoover, AL - -------------------------------------------------------------------------------- 11471 Metcalf Avenue $3,150,000.00 Overland Park, KS - -------------------------------------------------------------------------------- 2215 Hamilton Place Boulevard $1,425,000.00 Chattanooga, TN - -------------------------------------------------------------------------------- 2670 N. Germantown Parkway $3,400,000.00 Memphis, TN - -------------------------------------------------------------------------------- 19200 Haggerty Road $3,000,000.00 Livonia, MI - --------------------------------------------------------------------------------
EX-99.1 8 g79138exv99w1.txt SECTION 906 CERTIFICATION OF CEO EXHIBIT 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of J. Alexander's Corporation (the "Company") on Form 10-Q for the period ending September 29, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Lonnie J. Stout II, Chairman, President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Lonnie J. Stout II - ------------------------- Lonnie J. Stout II Chairman, President and Chief Executive Officer November 13, 2002 EX-99.2 9 g79138exv99w2.txt SECTION 906 CERTIFICATION OF CFO EXHIBIT 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of J. Alexander's Corporation (the "Company") on Form 10-Q for the period ending September 29, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, R. Gregory Lewis, Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ R. Gregory Lewis - ------------------------- R. Gregory Lewis Vice President and Chief Financial Officer November 13, 2002 -----END PRIVACY-ENHANCED MESSAGE-----