-----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, D7XFURn5OgPhSXUugBaqcp218mrdmfn4CSCnD5Me+7r4gEns2EtFXyd/2WKaD7aB f7s7nkBcQBBaKR3eNxyunA== 0000784539-02-000009.txt : 20021118 0000784539-02-000009.hdr.sgml : 20021118 20021115165150 ACCESSION NUMBER: 0000784539-02-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20021002 FILED AS OF DATE: 20021114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FAMILY STEAK HOUSES OF FLORIDA INC CENTRAL INDEX KEY: 0000784539 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 592597349 STATE OF INCORPORATION: FL FISCAL YEAR END: 1230 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14311 FILM NUMBER: 02830304 BUSINESS ADDRESS: STREET 1: 2113 FLORIDA BLVD STREET 2: STE A CITY: NEPTUNE BEACH STATE: FL ZIP: 32266 BUSINESS PHONE: 9042494197 MAIL ADDRESS: STREET 1: 2113 FLORIDA BLVD STE A CITY: NEPTUNE BEACH STATE: FL ZIP: 32266 10-Q 1 ryan10q.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarter ended October 2, 2002 Commission File No. 0-14311 FAMILY STEAK HOUSES OF FLORIDA, INC. Incorporated under the laws of IRS Employer Identification Florida No. 59-2597349 2113 FLORIDA BOULEVARD NEPTUNE BEACH, FLORIDA 32266 Registrant's Telephone No. (904) 249-4197 Indicate by check mark whether the registrant 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_____ Title of each class Number of shares outstanding Common Stock 3,706,200 $.01 par value As of November 8, 2002 Family Steak Houses of Florida, Inc. Condensed Consolidated Results of Operations (Unaudited)
For The Quarters Ended For The Nine Months Ended ---------------------- ------------------------- October 2, October 3, October 2, October 3, 2002 2001 2002 2001 ---------- ----------- ------------ ------------ Revenues: Sales $9,525,900 $10,099,300 $32,855,700 $32,276,500 Vending revenue 47,000 53,100 152,500 163,000 ---------- ----------- ----------- ----------- Total revenues 9,572,900 10,152,400 33,008,200 32,439,500 ---------- ----------- ----------- ----------- Cost and expenses: Food and beverage 3,589,700 3,844,600 12,205,900 12,284,900 Payroll and benefits 2,993,200 3,131,100 9,649,500 9,639,500 Depreciation and amortization 558,500 560,100 1,667,500 1,607,400 Other operating expenses 1,637,300 1,654,700 4,934,300 4,884,100 General and administrative expenses 596,900 674,600 2,032,300 1,938,300 Franchise fees 381,000 302,600 1,313,800 967,300 Asset valuation charge -- -- 260,000 -- Loss on store closings and disposition of equipment 68,800 43,600 207,300 144,000 --------- ----------- ----------- ----------- 9,825,400 10,211,300 32,270,600 31,465,500 --------- ----------- ----------- ----------- (Loss) earnings from operations (252,500) (58,900) 737,600 974,000 Investment (loss) gain (100) 55,300 24,500 (440,900) Interest and other income 56,600 21,700 96,500 76,200 Interest expense (458,200) (415,200) (1,297,700) (1,319,900) --------- ----------- ----------- ----------- Loss before income taxes (654,200) (397,100) (439,100) (710,600) Provision for income taxes -- -- -- -- --------- ----------- ----------- ----------- Net loss ($654,200) ($397,100) ($439,100) ($710,600) ========= =========== =========== =========== Basic loss per share ($0.18) ($0.16) ($0.12) ($0.29) ========= =========== =========== =========== Basic weighted average common shares outstanding 3,706,200 2,432,500 3,521,700 2,425,200 ========= =========== =========== =========== Diluted loss per share ($0.18) ($0.16) ($0.12) ($0.29) ========= =========== =========== =========== Diluted weighted average common shares outstanding 3,706,200 2,432,500 3,521,700 2,425,200 ========= =========== =========== ===========
See accompanying notes to condensed consolidated financial statements. 2 Family Steak Houses of Florida, Inc. Condensed Consolidated Balance Sheets (Unaudited)
October 2, January 2, 2002 2002 ---------- ----------- ASSETS Current assets: Cash and cash equivalents $1,122,500 $183,100 Investments 136,900 2,100 Receivables 106,000 159,800 Current portion of mortgages receivable 345,400 13,400 Inventories 271,500 319,800 Prepaid and other current assets 370,000 284,400 ---------- ----------- Total current assets 2,352,300 962,600 Mortgages receivable -- 342,000 Certificate of deposit 10,000 10,000 Property and equipment: Land 8,231,700 9,317,000 Buildings and improvements 24,241,100 24,661,700 Equipment 12,681,200 12,543,200 Construction in progress 19,400 -- ---------- ----------- 45,173,400 46,521,900 Accumulated depreciation (17,344,400) (16,940,100) ---------- ----------- Net property and equipment 27,829,000 29,581,800 Property held for sale 2,961,700 2,523,700 Other assets, principally deferred charges,net of accumulated amortization 958,100 841,000 ---------- ----------- $34,111,100 $34,261,100 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $1,271,500 $1,571,300 Accounts payable - construction 2,900 715,500 Securities sold, not yet purchased -- 159,500 Accrued liabilities 2,182,000 2,362,800 Investment margin debt 10,200 -- Current portion of long-term debt 667,000 663,400 Current portion of obligations under capital lease 27,200 17,700 ---------- ----------- Total current liabilities 4,160,800 5,490,200 Long-term debt 18,506,600 19,902,500 Obligations under capital lease 2,318,000 1,025,800 Deferred gain 1,328,900 -- Deferred rent 7,900 -- ---------- ----------- Total liabilities 26,322,200 26,418,500 Shareholders' equity: Preferred stock of $.01 par; authorized 10,000,000 shares; none issued -- -- Common stock of $.01 par; authorized 8,000,000 and 4,000,000 shares; outstanding 3,706,200 and 3,251,000 shares 37,100 32,500 Additional paid-in capital 9,877,400 9,466,600 Accumulated deficit (2,096,900) (1,657,800) Accumulated other comprehensive (loss) income (28,700) 1,300 ---------- ----------- Total shareholders' equity 7,788,900 7,842,600 ---------- ----------- $34,111,100 $34,261,100 =========== ============
See accompanying notes to condensed consolidated financial statements. 3 Family Steak Houses of Florida, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited)
For the Nine Months Ended ------------------------- October 2, October 3, 2002 2001 ------------ ------------ Operating activities: Net loss ($439,100) ($710,600) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 1,667,500 1,607,400 Asset valuation charge 260,000 -- Directors' fees in the form of stock options 15,000 4,000 Investment (gain) loss (24,500) 440,900 Amortization of loan fees 56,700 27,100 Amortization of deferred gain (17,700) -- Loss on disposition of equipment 59,900 61,800 Decrease (increase) in: Receivables 53,800 (20,300) Inventories 48,300 (73,300) Prepaids and other current assets (85,600) (92,200) Other assets (30,700) (53,400) (Decrease) increase in: Accounts payable (299,800) (8,000) Accrued liabilities (251,700) (328,300) Deferred Rent 7,900 -- ---------- --------- Net cash provided by operating activities 1,020,000 855,100 ---------- --------- Investing activities: Purchases of investments (303,600) (332,800) Principal receipts on mortgages receivable 10,000 168,800 Proceeds from sale of investments 3,800 797,400 Proceeds from securities sold, not yet purchased -- 500,600 Capital expenditures (1,672,100) (3,565,300) Proceeds from sale of assets held for sale 32,600 -- ---------- ----------- Net cash used in investing activities (1,929,300) (2,431,300) ----------- ----------- Financing activities: Payments on long-term debt and obligations under capital lease (1,619,600) (543,800) Proceeds from issuance of long-term debt 209,000 1,865,800 Proceeds from sale-leaseback 3,000,000 -- Payment of sale-leaseback costs (151,300) -- Proceeds from rights offering -- 817,000 Proceeds from (payments of) investment margin debt 10,200 (165,100) Proceeds from issuance of common stock 400,400 8,300 ---------- ---------- Net cash provided by financing activities 1,848,700 1,982,200 ---------- ---------- Net increase in cash and cash equivalents 939,400 406,000 Cash and cash equivalents - beginning of period 183,100 631,500 ---------- ---------- Cash and cash equivalents - end of period $1,122,500 $1,037,500 ========== ========== Supplemental disclosures of cash flow information: Cash paid during the period for interest $1,253,300 $1,358,300 ========== ========== Cash paid during the period for income taxes -- -- ========== ========== Noncash investing and financing activities: Net change in unrealized gain ($30,000) $515,100 =========== ========= Capital lease entered to acquire building $1,320,000 -- ========== ==========
See accompanying notes to condensed consolidated financial statements 4 FAMILY STEAK HOUSES OF FLORIDA, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS October 2, 2002 (Unaudited) Note 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the interim financial information instructions to Form 10-Q, and do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the results for the interim periods have been included. Operating results for the thirteen and thirty-nine week periods ended October 2, 2002 are not necessarily indicative of the results that may be expected for the fiscal year ending January 1, 2003. For further information, refer to the financial statements and footnotes included in the Company's Annual Report on Form 10-K for the fiscal year ended January 2, 2002. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany profits, transactions and balances have been eliminated. Note 2. Earnings Per Share Basic earnings per share for the quarters and nine months ended October 2, 2002 and October 3, 2001 were computed based on the weighted average number of common shares outstanding. Diluted earnings per share for those periods have been computed based on the weighted average number of common shares outstanding, giving effect to all dilutive potential common shares that were outstanding during the period. Dilutive shares are represented by shares under option and stock warrants. Due to the Company's net losses for the quarters and nine months ended October 2, 2002, and October 3, 2001, all potentially dilutive securities are antidilutive and have been excluded from the computation of diluted earnings per share for those periods. 5 Note 3. Reclassifications Certain items in the prior year financial statements have been reclassified to conform to the 2002 presentation. Note 4. Asset Valuation Charge In accordance with Statement of Financial Accounting Standards ("SFAS") 144, and the Company's policy for impairment review (see Note 1 to the Consolidated Financial Statements for the year ended January 2, 2002), the Company recognized an asset valuation charge of $260,000 in the nine months ended October 2, 2002. Note 5. Sale Leaseback Transaction In July 2002, the Company completed a sale leaseback transaction to refinance one of its restaurants in Tampa, Florida. The Company sold the property for $3 million and paid off its existing mortgage of approximately $1.1 million on the property. Beginning in the third quarter of 2002, the leaseback of the building is accounted for as a capital lease and the leaseback of the land is accounted for as an operating lease, with the deferred gain on the sale being recognized over the twenty-year life of the lease. The lease agreement requires current annual payments of $330,000, with increases of 10% every five years. Note 6. New Accounting Pronouncements In June 2001, the FASB issued SFAS 141, "Business Combinations," SFAS 142, "Goodwill and Other Intangible Assets," and SFAS 143, "Accounting for Asset Retirement Obligations." In August 2001, the FASB issued SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS 141 requires companies to apply the purchase method of accounting for all business combinations initiated after June 30, 2001 and prohibits the use of the pooling-of-interest method. SFAS 142 changes the method by which companies may recognize intangible assets in purchase business combinations and generally requires identifiable intangible assets to be recognized separately from goodwill. In addition, it eliminates the amortization of all existing and newly acquired goodwill on a prospective basis and requires companies to assess goodwill for impairment, at least annually, based on the fair value of the reporting unit associated with the goodwill. SFAS 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS 143 applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, 6 development and/or the normal operation of a long-lived asset, except for certain obligations of lessees. SFAS 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The Company adopted SFAS 141 on July 1, 2001. The adoption of SFAS 141 did not have a material effect on the Company's financial position, results of operations or cash flows. The Company adopted SFAS 142 and SFAS 144 on January 3, 2002. The adoption of SFAS 142 and SFAS 144 did not have a material effect on the Company's financial position, results of operations or cash flows. The Company will adopt SFAS 143 effective January 2, 2003. It does not appear the adoption of SFAS 143 will have a material impact on the Company's financial position, results of operations or cash flows. In April 2002, the FASB issued SFAS 145, "Recession of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections." SFAS 145 amends SFAS 13, "Accounting for Leases," to eliminate an inconsistency between the required accounting for sale- leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale- leaseback transactions. This Statement also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. The provisions of SFAS 145 related to the rescission of SFAS 4 shall be applied in fiscal years beginning after May 15, 2002. Any gain or loss on extinguishment of debt that was classified as an extraordinary item in prior periods presented that does not meet the criteria in Opinion 30 for classification as an extraordinary item shall be reclassified. The provisions related to SFAS 13 shall be effective for transactions occurring after May 15, 2002, with early application encouraged. The Company does not expect the adoption of SFAS 145 to have a material impact on its financial position, results of operations or cash flows. In June 2002, the FASB issued SFAS 146, "Accounting for Costs Associated with Exit or Disposal Activities." This Statement nullifies Emerging Issues Task Force No. 94-3 and requires that a liability for a cost associated with an exit or disposal activity be recognized only when the liability is incurred. SFAS 146 is effective for exit or disposal activities that are initiated after December 31, 2002. The Company will adopt the standard effective January 2, 2003. Note 7. Subsequent Event On October 29, 2002, the Company completed a transaction with GE Capital Franchise Finance Corporation ("GE Capital") that refinanced two existing mortgages on restaurant properties in order to provide funding of approximately $1.1 million. The Company plans to use the proceeds of this transaction and an additional $1.7 million available 7 from a commitment from GE Capital to build a new restaurant expected to open in mid-2003. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Critical Accounting Policies Management believes that the Company's policy regarding asset impairment is the Company's sole critical accounting policy. This policy, which is discussed in Note 1 to the Company's Consolidated Financial Statements for the year ended January 2, 2002, generally applies to the recoverability of a restaurant's carrying amount. Results of Operations Quarter Ended October 2, 2002 versus October 3, 2001 The Company experienced a decrease in sales during the third quarter of 2002 compared to the third quarter of 2001. Total sales decreased 5.7%. Average unit sales per store decreased 1.4% in the third quarter over the same period in 2001. Same-store sales (average unit sales in restaurants that have been open for at least 18 months and operating during comparable weeks during the current and prior year) in the third quarter of 2002 decreased 8.8% from the same period in 2001, compared to a decrease of 2.7% in the third quarter of 2001 as compared to 2000. The decrease in both total sales and same-store sales resulted primarily from significant sales declines at certain restaurants which faced new competition or road construction in their markets compared to 2001, and to a slowing economy. Management is seeking to improve sales trends by focusing on improved restaurant operations, devising competitive strategies to offset the effects of new competition, promoting its restaurants, extensive meal selection, focusing on local store marketing initiatives, continuing television advertising and making capital improvements to certain restaurants. The Company tested television advertising in 2001, and experienced some sales improvements. Management has implemented additional television advertising in the first three quarters of 2002 and continues to evaluate the results. If television advertising proves successful, management will adapt the Company's marketing strategy to place more focus on television advertising. 8 Historically, the third and fourth quarters of each fiscal year are less profitable for the Company than the first and second quarters. Even if the sales trends improve, the Company is likely to incur losses in the fourth quarter. The operating expenses of the Company's restaurants include food and beverage, payroll and benefits, depreciation and amortization, and other operating expenses, which include repairs, maintenance, utilities, supplies, advertising, insurance, property taxes and rents. In total, food and beverage, payroll and benefits, depreciation and amortization and other operating expenses as a percentage of sales increased to 92.2% in the third quarter of 2002 from 91.0% in the same quarter of 2001. Food and beverage costs as a percentage of sales decreased to 37.7% in the third quarter of 2002 from 38.1% in the same period of 2001, primarily due to menu price increases implemented by the Company. Payroll and benefits as a percentage of sales increased to 31.4% in the third quarter of 2002 from 31.0% in the same quarter of 2001, primarily due to increased workers' compensation expenses. Other operating expenses as a percentage of sales increased to 17.2% in the third quarter of 2002 compared from 16.4% in 2001, primarily due to increases in property insurance costs, and to increased rent expense from a refinancing of a restaurant property through a sales leaseback transaction (see "Liquidity and Capital Resources"). Depreciation and amortization as a percentage of sales increased to 5.9% in 2002 from 5.5% in 2001, due to the decline in total sales. General and administrative expenses decreased as a percentage of sales to 6.3% in the third quarter of 2002, from 6.7% in the same quarter of 2001, due to the write-off of costs in 2001 associated with a restaurant that was not developed. Franchise fees increased as a percentage of sales to 4.0% in 2002 from 3.0% in 2001, in accordance with the Company's franchise agreement with Ryan's Properties, Inc. ("Ryan's"). Interest expense increased to $458,200 during the third quarter of 2002 from $415,200 in 2001. The increase was due to an increase in total debt at October 2, 2002 as compared to October 3, 2001. The results of operations for the third quarter of 2002 include net realized losses of $100 from the sale of marketable securities, compared to net realized gains of $55,300 in the third quarter of 2001. 9 The effective income tax rate for the quarters ended October 2, 2002 and October 3, 2001 was 0.0%. Net loss for the third quarter of 2002 was $654,200, compared to net loss of $397,100 in the third quarter of 2001. Net loss per share was $.18 for 2002, compared to net loss per share of $.16 in 2001. Nine Months Ended October 2, 2002 versus October 3, 2001 For the nine months ended October 2, 2002, total sales increased 1.8% compared to the same period of 2001, due to the opening of two new restaurants. Average unit sales increased 3.1% for the nine months. Same-store sales decreased 5.3% for the nine months ended October 2, 2002 from the same period in 2001, for the same reasons mentioned above for the quarter. In total, food and beverage, payroll and benefits, depreciation and amortization and other operating expenses as a percentage of sales decreased to 86.6% for the first nine months of 2002 from 88.0% in the same period of 2001. Food and beverage costs as a percentage of sales for the nine month period ended October 2, 2002 decreased to 37.2% from 38.1% for the same period in 2001, primarily due to menu price increases. Payroll and benefits as a percentage of sales decreased to 29.4% in 2002 from 29.9% in 2001. The decrease was primarily due to reduced group health insurance expense, offset by higher workers' compensation costs. For the nine months ended October 2, 2002, other operating expenses as a percentage of sales decreased to 15.0% from 15.1% in 2001, primarily due to decreased utilities costs and to costs incurred in 2001 associated with the opening of a new restaurant, offset by higher property insurance expenses. Depreciation and amortization as a percentage of sales increased to 5.1% for the nine- month period ended October 2, 2002, compared to 5.0% in 2001. Net loss for the first nine months of 2002 was impacted by an asset valuation charge of $260,000, or 7 cents per share. This charge was based on management's review of the estimated disposal value of two closed restaurants held for sale. General and administrative expenses for the nine-month periods ended October 2, 2002 and October 3, 2001 were 6.2% and 6.0% of sales, respectively. Franchise fees as a percentage of sales increased to 4.0% in 2002 from 3.0% in 2001, in accordance with the Company's franchise agreement with Ryan's. Interest expense 10 decreased for the first nine months of 2002 to $1,297,700 from $1,319,900 for the same period in 2001, due to lower interest rates in 2002, offset by an increase in total debt at October 2, 2002 as compared to October 3, 2001. The results of operations for the nine months ended October 2, 2002 include net realized gains of $24,500 from the sale of marketable securities compared to net realized losses of $440,900 for the same period in 2001. The effective income tax rate for the nine-month periods ended October 2, 2002 and October 3, 2001 was 0.0%. Net loss for the nine months ended October 2, 2002 was $439,100 or $.12 per share, compared to net loss of $710,600, or $.29 per share for the same period in 2001. The Company's operations are subject to some seasonal fluctuations. Revenues per restaurant generally increase from January through April and decline from September through December. Operating results for the quarter or nine months ended October 2, 2002 are not necessarily indicative of the results that may be expected for the fiscal year ending January 1, 2003. Liquidity and Capital Resources Substantially all of the Company's revenues are derived from cash sales. Inventories are purchased on credit and are converted rapidly to cash. Therefore, the Company does not carry significant receivables or inventories. As a result, working capital requirements for continuing operations are not significant. At October 2, 2002, the Company had a working capital deficit of $1,808,500 compared to $4,527,600 at January 2, 2002. The decrease in the working capital deficit during the first nine months of 2002 was due primarily to cash from a private placement stock offering, the change in status of mortgages receivable to a current asset, and cash from the completion of a sale leaseback refinancing of one of its restaurants. Cash provided by operating activities increased to $1,020,000 in the first nine months of 2002 from $855,100 in the same period of 2001. This increase was primarily due to decreased losses and investment gains in 2002. 11 The Company spent approximately $1,672,100 in the first nine months of 2002 for property and equipment. Total capital expenditures for 2002, based on present costs and plans for capital improvements, are estimated to be approximately $2.2 million. This estimate is based on expenditures incurred through September 2002 plus budgeted expenditures for scheduled remodels of three restaurants and normal recurring equipment purchases and minor building improvements ("Capital Maintenance Items"). The Company has raised sufficient capital to fund these expenditures and the construction of two new restaurants expected to open in 2003 through a private placement stock offering (see discussion below), a sale leaseback of an existing restaurant, a twenty-year lease agreement for a new restaurant and a refinancing of debt related to two existing restaurants (see Note 7: "Subsequent Events"). In addition, the Company has a commitment from GE Capital to fund $1.7 million for a new restaurant. Management estimates the cost of opening one new restaurant based on current average costs to be approximately $2,900,000. To the extent the Company decides to open new restaurants in 2004 and beyond, management plans to fund any new restaurant construction either by the GE Capital funding, sales leaseback financing, developer-funded leases, refinancing existing restaurants, or attempting to get additional financing from other lenders. The Company's ability to open new restaurants is also dependent upon its ability to locate suitable locations at acceptable prices, and upon certain other factors beyond its control, such as obtaining building permits from various government agencies. The sufficiency of the Company's cash to fund operations and necessary Capital Maintenance Items will depend primarily on cash provided by operating activities. On October 1, 2001, the Company completed a Rights Offering ("the Offering") for its shareholders of record as of August 10, 2001. The Company raised $838,100 net of offering costs from the Offering, and issued 827,583 shares of common stock to shareholders exercising rights. Glen F. Ceiley, the chairman of the Company's board of directors, Bisco Industries, Inc. ("Bisco"), a company for which Mr. Ceiley is the sole shareholder and president and other affiliates of Mr. Ceiley purchased 822,280 shares in the Offering. In April 2002, the Company completed a private placement with Bisco for 435,000 shares at $0.92 per share, which was based on the average closing price of the Company's common stock on the ten trading days prior to the sale. The Company used the $400,200 proceeds from this sale to fund remodels of several restaurants in 2002. 12 In July 2002, the Company completed a sale leaseback transaction to refinance one of its restaurants in Tampa, Florida. The Company sold the property for $3 million and paid off its existing mortgage of approximately $1.1 million on the property. Beginning in the third quarter of 2002, the leaseback of the building is accounted for as a capital lease and the leaseback of the land is accounted for as an operating lease, with the deferred gain on the sale being recognized over the twenty-year life of the lease. The lease agreement requires current annual payments of $330,000, with increases of 10% every five years. Management plans to use the proceeds of the transaction to fund a portion of the construction of a new restaurant in Orlando, Florida in 2003. On October 29, 2002, the Company completed a transaction with GE Capital Franchise Finance Corporation ("GE Capital") that refinanced two existing mortgages on restaurant properties in order to provide funding of approximately $1.1 million. The Company plans to use the proceeds of this transaction and an additional $1.7 million available from a commitment from GE Capital to build a new restaurant expected to open in mid-2003. The Company has entered into a series of loan agreements with FFCA Mortgage Corporation, which is now known as GE Capital. As of October 2, 2002, the outstanding balance due under the Company's various loans with GE Capital was $19,173,600. The weighted average interest rate for the GE Capital loans is 7.4% at October 2, 2002. In 2001, the Company paid franchise fees of 3% of gross sales. The franchise agreement required that the franchise fee increase to 4% beginning January 3, 2002. The increase cost the Company an additional $328,600 in the first nine months of 2002, and management projects that it will increase the Company's franchise fee expense by more than $400,000 per year. The preceding discussion of liquidity and capital resources contains certain forward-looking statements. Forward-looking statements involve a number of risks and uncertainties, and in addition to the factors discussed herein, among the other factors that could cause actual results to differ materially are the following: failure of facts to conform to necessary management estimates and assumptions; the willingness of GE Capital or other lenders to extend financing commitments; repairs or similar expenditures required for existing restaurants due to weather or acts of God; the Company's ability to identify and secure suitable locations on acceptable terms and open new restaurants in a timely manner; the Company's success in selling restaurants listed for sale; the economic conditions in the new markets into which the Company 13 expands; changes in customer dining patterns; competitive pressure from other national and regional restaurant chains and other food vendors; business conditions, such as inflation or a recession, and growth in the restaurant industry and general economy; and other risks identified from time to time in the Company's SEC reports, registration statements and public announcements. Recent Developments Status of Company's Stock with NASDAQ On August 7, 2002, the Company received notice from NASDAQ that the Company's closing bid price had declined below $1.00 per share. Accordingly, NASDAQ informed the Company that in order to continue the listing of the Company's securities on the Nasdaq SmallCap Market ("SmallCap"), the closing bid price of the Company's common stock must be a minimum of $1.00 per share for ten consecutive trading days on or before February 3, 2003, at which time NASDAQ would determine if the Company meets any of the initial listing criteria for SmallCap. One of these criteria is to have stockholder's equity of $5 million. Considering that the Company's stockholders' equity as of October 2, 2002 was $7,788,900, it is likely that the Company will comply with this criteria. If the Company has not met the $1.00 minimum bid price requirement before February 3, 2003, but does meet the $5 million equity criteria, NASDAQ will allow an additional 180 days for the Company to meet the $1.00 minimum bid price requirements, or until August 2, 2003. If the Company's stock is delisted from NASDAQ, trading in the Common Stock would thereafter be conducted on the over-the-counter markets in the so-called "pink sheets" or the National Association of Securities Dealers, Inc.'s "Electronic Bulleting Board". Consequently, the liquidity of the Company's securities could be impaired, not only in the number of shares that could be bought and sold, but also as a result of delays in the timing of the transactions, the news media's coverage of the Company, lower prices for the Company's securities than might otherwise be attained and a larger spread between the bid and asked prices for the Company's securities. In addition, if the Company's securities were to be delisted from the NASDAQ SmallCap Market, the Company's securities could become subject to Rule 15g-9 under the Securities Exchange Act of 1934 relating to penny stocks, which imposes additional sales practice requirements on broker-dealers which sell such securities to persons other than established customers and "accredited investors" (generally, individuals with net worth in excess of $1,000,000 or 14 annual incomes exceeding $200,000 or $300,000 together with their spouses). SEC regulations define a "penny stock" to be any equity security that is not listed on the NASDAQ Stock Market or a national securities exchange and that has a market price (as therein defined) of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. If the Company's securities were subject to the rules on penny stocks, the market liquidity for the Company's securities could be adversely affected. Item 3. Qualitative and Quantitative Disclosure about Market Risk There have been no significant changes in the Company's exposure to market risk during the first nine months of 2002. For discussion of the Company's exposure to market risk, refer to Item 7A, Quantitative and Qualitative Disclosures about Market Risk, contained in the Company's Annual Report on Form 10-K for the fiscal year ended January 2, 2002. Item 4. CONTROLS AND PROCEDURES (a) Evaluation of disclosure controls and procedures. As required by Rule 13a-15 under the Securities Exchange Act of 1934 (the "Exchange Act"), within the 90 days prior to the filing date of this report, the Company carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of the Company's management, including the Company's Chairman (who serves as the principal executive officer), Chief Financial Officer (who serves as the principal financial and accounting officer), Controller and another member of the Office of the President. Based upon that evaluation, the Company's Chairman, Chief Financial Officer and Controller have concluded that the Company's disclosure controls and procedures are effective in timely alerting them to material information relating to the Company required to be included in the Company's periodic SEC filings. Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in Company reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rule and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in Company reports filed under the Exchange Act is accumulated and communicated to management, include the Company's Chairman, Chief Financial Officer and Controller as appropriate, to allow timely decisions regarding required disclosures. 15 (b) Changes in internal control. There have been no changes in internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is party to, or threatened with, litigation from time to time, in the normal course of its business. Management, after reviewing all pending and threatened legal proceedings, considers that the aggregate liability or loss, if any, resulting from the final outcome of these proceedings will not have a material effect on the financial position or operation of the Company. The Company will, from time to time when appropriate in management's estimation, record adequate reserves in the Company's financial statements for pending litigation. The Company is not party to any litigation as of October 2, 2002. ITEM 2. CHANGES IN SECURITIES None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) The following exhibits are filed as part of the report on Form 10-Q, and the list comprises the Exhibit Index. Exhibit 10.01: Form of Amended and Restated Mortgage Agreement between the Company and GE Capital Franchise Finance Corporation dated October 21, 2002. Exhibit 10.02: Form of Promissory Note between the Company and GE Capital Franchise Finance Corporation dated October 21, 2002. 16 Exhibit 10.03: Form of Loan Agreement between the Company and GE Capital Franchise Finance Corporation dated October 21, 2002. Exhibit 10.04: Lease agreement between the Company and Barnhill's Buffet, Inc. for a restaurant property in Orange Park, Florida. Exhibit 10.05: Lease agreement between the Company and Barnhill's Buffet, Inc. for a restaurant property in Neptune Beach, Florida. Exhibit 11.1 The table below details the number of shares and common stock equivalents used in the computation of basic and diluted earnings per share: Three Months Ended Nine Months Ended 10/02/02 10/03/01 10/02/02 10/03/01 Basic: Weighted average common shares outstanding used in computing basic loss per share 3,706,200 2,432,500 3,521,700 2,425,200 ========= ========= ========= ========= Basic loss per share $ (.18) $ (.16) $ (.12) $ (.29) ========= ========== ========= ========= Diluted: Weighted average common shares outstanding 3,706,200 2,432,500 3,521,700 2,425,200 Effects of dilutive stock options --- --- --- --- --------- ---------- ---------- -------- Shares used in computing diluted loss per share 3,706,200 2,432,500 3,521,700 2,425,200 ========= ========= ========= ========= Diluted loss per share $ (.18) $ (.16) $ (.12) $ (.29) ========= ========= ======== =========
Exhibit 99.1: Certification of Periodic Reports by Chief Executive Officer Exhibit 99.2: Certification of Periodic Reports by Chief Financial Officer 17 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. FAMILY STEAK HOUSES OF FLORIDA, INC. (Registrant) /s/ Glen F. Ceiley Date: November 13, 2002 Glen F. Ceiley Chairman of the Board Principal Executive Officer /s/ Edward B. Alexander Date: November 13, 2002 Edward B. Alexander Executive Vice President / CFO (Principal Financial and Accounting Officer) 18 CERTIFICATIONS I, Glen F. Ceiley, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Family Steak Houses of Florida, Inc. 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 19 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 /s/ Glen F. Ceiley Glen F. Ceiley Chairman of the Board Principal Executive Officer 20 I, Edward B. Alexander, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Family Steak Houses of Florida, Inc. 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 21 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 /s/ Edward B. Alexander Edward B. Alexander Executive Vice President Chief Financial Officer 22 Exhibit 99.1: Certification of Periodic Reports 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 Family Steak Houses of Florida, Inc.'s (the "Company") Quarterly Report on Form 10-Q for the period ending October 2, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Glen F. Ceiley, Principal Executive Officer/Chairman of the Board of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 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, as amended; and (2). The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: November 13, 2002 By: /s/ Glen F. Ceiley Glen F. Ceiley Principal Executive Officer/ Chairman of the Board 23 Exhibit 99.2: Certification of Periodic Reports 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 Family Steak Houses of Florida, Inc.'s (the "Company") Quarterly Report on Form 10-Q for the period ending October 2, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Edward B. Alexander, Executive Vice President/ Chief Financial Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 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, as amended; and (2). The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: November 13, 2002 By: /s/ Edward B. Alexander Edward B. Alexander Executive Vice President/ Chief Financial Officer 24 EX-1 2 ryansex1.txt Exhibit 10.01 THIS DOCUMENT HAS BEEN PREPARED BY: David A. Weill, Esq. Kutak Rock LLP 1650 Farnam Street Omaha, Nebraska 68102 THIS DOCUMENT IS TO BE RETURNED TO: LandAmerica Financial Group 3636 North Central Avenue, Suite 350 Phoenix, Arizona 85012 Attn: Mr. Allen Brown AMENDED AND RESTATED MORTGAGE, ASSIGNMENT OF RENTS AND LEASES, SECURITY AGREEMENT AND FIXTURE FILING STATE OF FLORIDA DOCUMENTARY STAMP TAX AND NONRECURRING INTANGIBLE TAX WERE PREVIOUSLY PAID IN CONNECTION WITH THE ORIGINAL NOTE AND MORTGAGE RECORDED AT OFFICIAL RECORDS VOLUME 864, PAGE 1288 OF THE PUBLIC RECORDS OF COLUMBIA COUNTY, FLORIDA AND ARE NOW DUE ONLY ON THE SUMS EVIDENCED BY THE SANDWICH NOTE (AS DEFINED BELOW) THIS AMENDED AND RESTATED MORTGAGE, ASSIGNMENT OF RENTS AND LEASES, SECURITY AGREEMENT AND FIXTURE FILING (this "Mortgage") is dated as of , 2002, between FAMILY STEAK HOUSES OF FLORIDA, INC., a Florida corporation ("Borrower"), whose address is 2113 Florida Boulevard, Neptune Beach, FL 32266, to and for the benefit of GE CAPITAL FRANCHISE FINANCE CORPORATION, a Delaware corporation ("Lender"), whose address is 17207 North Perimeter Drive, Scottsdale, Arizona 85255. RECITALS: Lender is the holder of a promissory note dated , in the original principal amount of $ (the "Original Note") made by Borrower and payable to the order of Lender. The Original Note is secured by a Mortgage, Assignment of Rents and Leases, Security Agreement and Fixture Filing dated from Borrower to FFCA Mortgage Corporation ("Original Lender") recorded among the Public Records of Columbia County, Florida in Official Record Volume 864, Page 1288 ("Original Mortgage") on certain improved real property located in Columbia County, Florida. The Original Mortgage was assigned by Original Lender to LaSalle Bank National Association, f/k/a LaSalle National Bank, Trustee pursuant 1 to that certain Indenture dated as of April 1, 1999 ("LaSalle") pursuant to an Assignment of Mortgage dated and recorded among the Public Records of Columbia County, Florida in Official Record Volume at Page and assigned by LaSalle to Lender pursuant to an Assignment of Mortgage dated as of the date hereof and recorded among the Public Records of Columbia County, Florida in Official Record Volume , Page . Subsequently, Borrower requested and Lender agreed to make and additional loan to Borrower in the original principal amount of $458,720.94, the repayment of which is evidenced by that certain romissory Note dated of even date herewith (the "Sandwich Note"). Borrower has requested and Lender has agreed to make certain amendments to the Original Note and Sandwich Note, including changing the interest rate and the terms of ayment., and consolidating the Original Note and the Sandwich Note. The Original Note is and the Sandwich Note are being consolidated, amended and restated in their entirety to reflect such amendments. State of Florida Documentary Stamp Tax and Nonrecurring Intangible Tax were paid on the Original Note and are now due only on the amounts evidenced by the Sandwich Note. The Original Note is being consolidated with the Sandwich Note and amended and estated in its entirety in a Consolidated, Amended and Restated Note dated of even date herewith (as consolidated, amended and restated, the "Note") to reflect among other things, a change in the interest rate and terms of payment. The Borrower and the Lender now desire to amend and modify the terms of the Original Mortgage and have agreed, for purposes of convenience, to amend and restate the Original Mortgage, in its entirety. The capitalized terms used in this Mortgage, if not elsewhere defined herein, are defined as indicated in Article I. Borrower holds the fee simple interest in the Premises, subject to the Permitted Exceptions. Borrower is executing this Mortgage for the purpose of granting the interest of Borrower in and to the Mortgaged Property (as defined in the Granting Clauses below) as security for the payment of the Obligations. The Mortgaged Property shall be and remain subject to the lien of this Mortgage and shall constitute security for the Obligations so long as the Obligations shall remain outstanding. GRANTING CLAUSES: Borrower, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, by these presents does hereby create a security interest in, mortgage, grant, bargain, sell, assign, pledge, give, transfer, set over and convey unto Lender and to its successors and assigns WITH POWER OF SALE AND RIGHT OF ENTRY, for the benefit and security of Lender and its successors and assigns, all of Borrower's estate, right, title and interest in, to and under any and all of the following property (the "Mortgaged Property"), whether now owned or hereafter acquired, subject only to the Permitted Exceptions: Premises, Rents and Derivative Interests The Premises, all rents, issues, profits, royalties, income and other benefits derived from the property comprising the Premises and the Personal Property (as defined below) or any portion thereof (collectively, the "Rents"); all leases or subleases covering the Premises and the Personal Property or any portion thereof now or hereafter existing or entered into, (collectively, "Leases" and individually, a "Lease"), including, without limitation, all cash or security deposits, advance rentals and deposits or payments of similar nature and all guaranties relating to the Leases; all options to purchase or lease the Premises and the Personal Property or any portion thereof or interest therein, and any greater estate in the Premises; all interests, estate or other claims, both in law and in equity, with respect to the Premises and the Personal Property or any portion thereof; all easements, rights-of-way and rights used in connection therewith or as a means of access thereto, and all tenements, hereditaments and appurtenances thereof and thereto, and all water rights and shares of stock evidencing the same; all land lying within the right-of-way of any street, open or proposed, adjoining the Premises and any and all sidewalks, alleys and strips and gores of land adjacent to or used in connection with the Premises; Personal Property All tangible personal property now or at any time hereafter located on or at the Premises or used in connection therewith, including, without limitation, all machinery, appliances, furniture, equipment and inventory (the "Personal Property"); 2 Intangibles All existing and future accounts, contract rights, including, without limitation, with respect to equipment leases, general intangibles, files, books of account, agreements, franchise, license and/or area development agreements, distributor agreements, Indemnity Agreements, permits, licenses and certificates necessary or desirable in connection with the acquisition, ownership, leasing, construction, operation, servicing or management of the property comprising the Premises and the Personal Property or any portion thereof, whether now existing or entered into or obtained after the date hereof, all existing and future names under or by which the property comprising the Premises and the Personal Property or any portion thereof may at any time be operated or known, all rights to carry on business under any such names or any variant thereof, and all existing and future telephone numbers and listings, advertising and marketing materials, trademarks and good will in any way relating to the property comprising the Premises and the Personal Property or any portion thereof; and Claims and Awards All the claims or demands with respect to the Premises and the Personal Property or any portion thereof, including, without limitation, claims or demands with respect to the proceeds of insurance in effect with respect thereto, claims under any indemnity agreement, including, without limitation, any indemnity agreement executed for the benefit of the Premises and the Personal Property or any portion thereof with respect to Hazardous Materials or USTs, and any and all awards made for the taking by eminent domain, or by any proceeding or purchase in lieu thereof, of the whole or any part of the Premises and the Personal Property, including, without limitation, any awards resulting from a change of grade of streets and awards for severance damages. The Mortgaged Property shall include all products and proceeds of the foregoing property. TO HAVE AND TO HOLD the Mortgaged Property hereby granted or mortgaged or intended to be granted or mortgaged, unto Lender, and its successors and assigns, upon the terms, provisions and conditions set forth herein. THIS MORTGAGE SHALL SECURE THE FOLLOWING INDEBTEDNESS AND OBLIGATIONS (the "Obligations"): (i) Payment of indebtedness evidenced by the Note together with all extensions, renewals, amendments and modifications thereof; (ii) Payment of all other indebtedness and other sums, with interest thereon, which may be owed under, and performance of all other obligations and covenants contained in, any Loan Document (other than the Environmental Indemnity Agreement), together with any other instrument given to evidence or further secure the payment and performance of any obligation secured hereby or thereby; and (iii) Payment of all indebtedness and other sums, with interest thereon, which may be owed under, and performance of all other obligations and covenants contained in any Other Agreement, together with any other instrument given to evidence or further secure the payment and performance of any obligation secured thereby. It is the intention of the parties hereto that the Mortgaged Property shall secure all of the Obligations presently or hereafter owed, and that the priority of the security interest created by this Mortgage for all such Obligations shall be controlled by the time of proper recording of this Mortgage. In addition, this Mortgage shall also secure unpaid balances of advances made with respect to the Mortgaged Property for the payment of taxes, assessments, insurance premiums, costs or any other advances incurred for the protection of the Mortgaged Property, together with interest thereon until paid at the Default Rate, all as contemplated in this Mortgage, all of which shall constitute a part of the Obligations. This paragraph shall serve as notice to all persons who may seek or obtain a lien on the Mortgaged Property subsequent to the date of recording of this Mortgage, that until this Mortgage is released, any debt owed Lender by Borrower, including advances made subsequent to the recording of this Mortgage, shall be secured with the priority afforded this Mortgage as recorded. 3 Notwithstanding the foregoing or any other provisions of this Mortgage to the contrary: (x) in the event that the Loan becomes the subject of a Securitization, Participation or Transfer, this Mortgage shall only secure indebtedness and obligations relating to the Loan and any other loans between any of the Borrower Parties on the one hand and any of the Lender Entities on the other hand which are part of the same Loan Pool as the Loan; and (y) in the event that any loans between any of the Borrower Parties on the one hand and any of the Lender Entities on the other hand (other than the Loan) become the subject of a Securitization, Participation or Transfer, this Mortgage shall not secure any indebtedness and obligations relating to such loans unless the Loan is part of the same Loan Pool as such loans. IT IS HEREBY COVENANTED, DECLARED AND AGREED that the Note and the other Loan Documents are to be executed, delivered and secured and that the Mortgaged Property is to be held and disposed of by Lender, upon and subject to the provisions of this Mortgage. ARTICLE I DEFINED TERMS Section 1.01. Incorporation of Definitions. Initially capitalized terms not otherwise defined in this Mortgage shall have the meanings set forth in that certain Loan Agreement dated as of the date of this Mortgage between Borrower and Lender, as the same may be amended from time to time (the "Loan Agreement") Section 1.02. Additional Definitions. Unless the context otherwise specifies or requires, the following terms shall have the meanings specified (such definitions to be applicable equally to singular and plural nouns and verbs of any tense): "Environmental Indemnity Agreement" means that certain Environmental Indemnity Agreement dated as of the date of this Mortgage executed by Borrower for the benefit of Lender 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. "Event of Default" has the meaning set forth in Section 6.01. "Improvements" means all buildings, fixtures and other improvements now or hereafter located on the Land (whether or not affixed to the Land). "Indemnified Parties" means Lender and Environmental Insurer and any person or entity who is or will have been involved in the origination of the Loan, any person or entity who is or will have been involved in the servicing of the Loan, any person or entity in whose name the encumbrance created by this Mortgage is or will have been recorded, persons and entities who may hold or acquire or will have held a full or partial interest in the Loan (including, but not limited to, investors or prospective investors in any Securitization, Participation or Transfer, as well as custodians, trustees and other fiduciaries who hold or have held a full or partial interest in the Loan for the benefit of third parties), as well as the respective directors, officers, shareholders, partners, members, employees, lenders, agents, servants, representatives, contractors, subcontractors, affiliates, subsidiaries, participants, successors and assigns of any and all of the foregoing (including but not limited to any other person or entity who holds or acquires or will have held a participation or other full or partial interest in the Loan or the Mortgaged Property, whether during the term of the Loan or as a part of or following a foreclosure of the Loan and including, but not limited to, any successors by merger, consolidation or acquisition of all or a substantial portion of Lender's assets and business). "Land" means the parcel or parcels of real estate legally described in Exhibit A attached hereto, and all rights, privileges and appurtenances therewith. "Lease" and "Leases" has the meaning set forth in the Granting Clause. 4 "Loan" means the loan made by Lender to Borrower which is evidenced by the Note and secured by this Mortgage. "Loan Agreement" has the meaning set forth in Section 1.01. "Mortgaged Property" has the meaning set forth in the Granting Clause. "Net Award" has the meaning set forth in Section 4.01(b)(v). "Net Insurance Proceeds" has the meaning set forth in Section 4.01(a)(iii) "Note" means the promissory note dated as of even date herewith in the amount of $889,000 executed by Borrower and payable to Lender which is secured by this Mortgage and any amendments, extensions or modifications thereof, including, without limitation, any amendment and restatement of the Note as a result of a prepayment contemplated by Section 9 of the Loan Agreement. "Obligations" has the meaning set forth in the Granting Clause. "Other Agreements" means, collectively, all agreements and instruments between, among or by (1) any of the Borrower Parties, and, or for the benefit of, (2) any of the Lender Entities, including, without limitation, promissory notes and guaranties; provided, however, the term "Other Agreements" shall not include the agreements and instruments defined in the Loan Agreement as the Loan Documents. "Outstanding Obligations" has the meaning set forth in Section 4.01(b)(iv)(x)(aa). "Partial Taking" has the meaning set forth in Section 4.01(b)(ii). "Personal Property" has the meaning set forth in the Granting Clause. "Premises" means the Land and the Improvements. "Rents" has the meaning set forth in the Granting Clause. "Restoration" means the restoration, replacement or rebuilding of the Premises, or any part thereof, as nearly as possible to its value, condition and character immediately prior to any damage, destruction or Taking. "State" means the State in which the Premises is located. "Taking" has the meaning set forth in Section 4.01(b)(i). "Total Taking" has the meaning set forth in Section 4.01(b)(ii). "UCC" has the meaning set forth in Section 6.02(iii). ARTICLE II INCORPORATION OF REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER The representations, warranties and covenants of Borrower set forth in the Loan Agreement are incorporated by reference into this Mortgage as if stated in full in this Mortgage. All representations and warranties as incorporated herein shall be deemed to have been made as of the date of this Mortgage and all representations, warranties and covenants incorporated herein shall survive the execution and delivery of this Mortgage. 5 ARTICLE III COVENANTS OF BORROWER In addition to any covenants of Borrower set forth in the Loan Agreement or any other Loan Document, Borrower hereby covenants to Lender and agrees as follows until the Obligations are satisfied in full: Section 3.01. Recording. Borrower shall, upon the execution and delivery hereof and thereafter from time to time, take such actions as Lender may request to cause this Mortgage, each supplement and amendment to such instrument and financing statements with respect thereto and each instrument of further assurance (collectively, the "Recordable Documents") to be filed, registered and recorded as may be required by law to publish notice and maintain the first lien or security interest, as applicable, hereof upon the Mortgaged Property and to publish notice of and protect the validity of the Recordable Documents. Borrower shall, from time to time, perform or cause to be performed any other act and shall execute or cause to be executed any and all further instruments (including financing statements, continuation statements and similar statements with respect to any of said documents) requested by Lender for carrying out the intention of, or facilitating the performance of, this Mortgage. Lender shall be and is hereby irrevocably appointed the agent and attorney-in-fact of Borrower to comply therewith (including the execution, delivery and filing of such financing statements and other instruments), which appointment is coupled with an interest; provided, however, Lender shall not exercise such power of attorney unless Borrower has first failed to comply with this Section, and provided, further, that this sentence shall not prevent any default in the observance of this Section from constituting an Event of Default. To the extent permitted by law, Borrower shall pay or cause to be paid recording taxes and fees incident thereto and all expenses, taxes and other governmental charges incident to or in connection with the preparation, execution, delivery or acknowledgment of the Recordable Documents, any instruments of further assurance and the Note. Section 3.02. Use; Maintenance and Repair; Leases. (a) The Mortgaged Property shall be used solely for the operation of a Permitted Concept and for no other purpose. Except as set forth below, and except during periods when the Premises is untenantable by reason of fire or other casualty or condemnation provided, however, during all such periods while the Premises is untenantable, Borrower shall strictly comply with the terms and conditions of Section 4.01 of this Mortgage), Borrower shall at all times while this Mortgage is in effect occupy the Mortgaged Property and diligently operate its business on the Mortgaged Property. Borrower may cease diligent operation of business at the Mortgaged Property for a period not to exceed 90 days and may do so only once within any five-year period while this Mortgage is in effect. If Borrower does discontinue operation as permitted by this Section, Borrower shall (i) give written notice to Lender within 10 days after Borrower elects to cease operation, (ii) provide adequate protection and maintenance of the Mortgaged Property during any period of vacancy and (iii) pay all costs necessary to restore the Mortgaged Property to its condition on the day operation of the business ceased at such time as the Mortgaged Property is reopened for Borrower's business operations or other substituted use. Notwithstanding anything herein to the contrary, Borrower shall pay monthly the principal and interest due under the Note during any period in which Borrower discontinues operation. Borrower shall not, and shall not permit any lessee to, by itself or through any lease or other type of transfer, convert the Premises to an alternative use while this Mortgage is in effect without Lender's consent, which consent shall not be unreasonably withheld. Lender may consider any or all of the following in determining whether to grant its consent, without being deemed to be unreasonable: (i) whether the converted use will be consistent with the highest and best use of the Mortgaged Property, and (ii) whether the converted use will increase Lender's risks or decrease the value of the Mortgaged Property. (b) Borrower shall (i) maintain the Mortgaged Property 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 the Mortgaged Property in accordance with those standards adopted from time to time by Franchisor on a system-wide basis for the Permitted Concept, with such remodeling and modernizing being undertaken in accordance with Franchisor's system-wide timing schedules for such activities, and (iii) pay all operating costs of the Premises in the ordinary course of business. (c) Borrower shall not (i) enter into any Leases without Lender's prior written consent; (ii) modify or amend the terms of any Lease without Lender's 6 prior written consent; (iii) grant any consents under any Lease, including, without limitation, any consent to an assignment of any Lease, a mortgaging of the leasehold estate created by any Lease or a subletting by the lessee under any Lease, without Lender's prior written consent; (iv) terminate, cancel, surrender, or accept the surrender of, any Lease, or waive or release any person from the observance or performance of any obligation to be performed under the terms of any Lease or liability on account of any warranty given thereunder, without Lender's prior written consent; or (v) assign, transfer, mortgage, pledge or hypothecate any Lease or any interest therein to any party other than Lender, without Lender's prior written consent. Any lease, modification, amendment, grant, termination, cancellation, surrender, waiver or release in violation of the foregoing provision shall be null and void and of no force and effect. Unless Lender otherwise consents or elects, Borrower's title to the Mortgaged Property and the leasehold interest in the Mortgaged Property created by any Lease shall not merge, but shall always be kept separate and distinct, notwithstanding the union of such estates in Borrower, Lender or any other person by purchase, operation of law, foreclosure of this Mortgage, sale of the Mortgaged Property pursuant to this Mortgage or otherwise. (d) Borrower shall (i) fulfill, perform and observe in all respects each and every condition and covenant of Borrower contained in any Lease; (ii) give prompt notice to Lender of any claim or event of default under any Lease given to or by Borrower, together with a complete copy or statement of any information submitted or referenced in support of such claim or event of default; (iii) at the sole cost and expense of Borrower, enforce the performance and observance of each and every covenant and condition of any Lease to be performed or observed by any other party thereto, unless such enforcement is waived in writing by Lender; (iv) appear in and defend any action challenging the validity, enforceability or priority of the lien created hereby or the validity or enforceability of any Lease; and (v) hold that portion of the Rents which is sufficient to discharge all current sums due under the Note for use in the payment of such sums. Section 3.03. Alterations and Improvements. Borrower shall not alter the exterior, structural, plumbing or electrical elements of the Mortgaged Property in any manner without the consent of Lender, which consent shall not be unreasonably withheld or conditioned; provided, however, Borrower may undertake nonstructural alterations to the Mortgaged Property costing less than $100,000 without Lender's consent. For purposes of this Mortgage, alterations to the exterior, structural, plumbing or electrical elements of the Mortgaged Property shall mean: (i) alterations which affect the foundation or "footprint" of the Improvements; (ii) alterations which involve the structural elements of the Improvements, 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 Lender's consent is required hereunder and Lender consents to the making of any such alterations, the same shall be made by Borrower at Borrower's sole expense by a licensed contractor and according to plans and specifications approved by Lender and subject to such other conditions as Lender shall require. Any work at any time commenced on the Mortgaged Property shall be prosecuted diligently to completion, shall be of good workmanship and materials and shall comply fully with all the terms of this Mortgage. Upon completion of any alterations or any Restoration, Borrower shall promptly provide Lender with (i) evidence of full payment to all laborers and materialmen contributing to the alterations, (ii) an architect's certificate certifying the alterations to have been completed in conformity with the plans and specifications, (iii) a certificate of occupancy (if the alterations are of such a nature as would require the issuance of a certificate of occupancy), and (iv) any other documents or information reasonably requested by Lender. Section 3.04. After-Acquired Property. All right, title and interest of Borrower in and to all improvements, alterations, substitutions, restorations and replacements of, and all additions and appurtenances to, the Mortgaged Property, hereafter acquired by or released to Borrower, immediately upon such acquisition or release and without any further granting by Borrower, shall become part of the Mortgaged Property and shall be subject to the lien hereof fully, completely and with the same effect as though now owned by Borrower and specifically described in the Granting Clauses hereof. Borrower shall execute and deliver to Lender any further assurances, mortgages, grants, conveyances or assignments thereof as the Lender may reasonably require to subject the same to the lien hereof. 7 Section 3.05. Taxes, Assessments, Charges and Other Impositions. (a) Borrower shall do or cause to be done everything necessary to preserve the lien hereof without expense to Lender, including, without limitation, paying and discharging or causing to be paid and discharged, whether or not payable directly by Borrower or subject to withholding at the source, (i) all taxes, assessments, levies, fees, water and sewer rents and charges and all other governmental charges, general, special, ordinary or extraordinary, and all charges for utility or communications services, which may at any time be assessed, levied or imposed upon Borrower, the Mortgaged Property, this Mortgage, the Obligations or the Rents or which may arise in respect of the occupancy, use, possession or operation thereof, (ii) all income, excess profits, sales, gross receipts and other taxes, duties or imposts, whether similar or not in nature, assessed, levied or imposed by any Governmental Authority on Borrower, the Mortgaged Property or the Rents, and (iii) all lawful claims and demands of mechanics, laborers, materialmen and others which, if unpaid, might create a lien on the Mortgaged Property, or on the Rents, unless Borrower shall contest the amount or validity thereof in accordance with subsection (b). (b) Borrower 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 subsection (a) or lien therefor, provided that (i) Borrower shall provide written notice to Lender of any contest involving more than $10,000.00, (ii) such proceeding shall suspend the collection thereof from the Mortgaged Property or any interest therein, (iii) neither the Mortgaged Property nor any interest therein would be in any danger of being sold, forfeited or lost by reason of such proceedings, (iv) no Event of Default has occurred and is continuing, and (v) Borrower shall have deposited with Lender adequate reserves for the payment of the taxes, together with all interest and penalties thereon, unless paid in full under protest, or Borrower shall have furnished the security as may be required in the proceeding or as may be required by Lender to insure payment of any contested taxes. Section 3.06. Insurance. (a) Borrower shall maintain, with respect to the Mortgaged Property, at its sole expense, the following types and amounts of insurance (which may be included under a blanket insurance policy if all the other terms hereof are satisfied), in addition to such other insurance as Lender may reasonably require from time to time: (i) Insurance against loss, damage or destruction by fire and other casualty, including theft, vandalism and malicious mischief, flood (if the Premises is in a location designated by the Federal Emergency Management Administration as a Special Flood Hazard Area), earthquake (if the Premises is in an area subject to destructive earthquakes within recorded history), boiler explosion (if there is any boiler upon the Premises), plate glass breakage, sprinkler damage (if the Premises have a sprinkler system), all matters covered by a standard extended coverage endorsement, special coverage endorsement commonly known as an "all risk" endorsement and such other risks as Lender may reasonably require, insuring the Mortgaged Property for not less than 100% of their full insurable replacement cost. (ii) Commercial general liability and property damage insurance, including a products liability clause, covering Lender and Borrower 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 Mortgaged Property or adjoining ways, streets or sidewalks and, if applicable, insurance covering Lender, against liability arising from the sale of liquor, beer or wine on the Premises. Such insurance policy or policies shall contain a broad form contractual liability endorsement under which the insurer agrees to insure Borrower's obligations under Section 7.09 hereof to the extent insurable, and a "severability of interest" clause or endorsement which precludes the insurer from denying the claim of either Borrower or Lender 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 Lender may reasonably require from time to time, and shall be of form and substance reasonably satisfactory to Lender. (iii) Business income insurance equal to 100% of the principal and interest payable under the Note for a period of not less than six months. 8 (iv) 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 Lender may from time to time require and such other insurance as may be necessary to comply with applicable laws. (b) All insurance policies shall: (i) Provide for a waiver of subrogation by the insurer as to claims against Lender, its employees and agents and provide that such insurance cannot be unreasonably cancelled, invalidated or suspended on account of the conduct of Borrower, 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 Lender and that the insurance policy shall not be brought into contribution with insurance maintained by 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 lender designated by Lender; (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 Lender and to any lender covered by any standard mortgage clause endorsement; (v) Provide that the insurer shall not have the option to restore the Premises if Lender elects to terminate this Mortgage in accordance with the terms hereof; (vi) Be issued by insurance companies licensed to do business in the state in which the Premises is located and which are rated A:VI or better by Best's Insurance Guide or otherwise approved by Lender; and (vii) Provide that the insurer shall not deny a claim because of the negligence of Borrower, anyone acting for Borrower or any tenant or other occupant of the Mortgaged Property. It is expressly understood and agreed that the foregoing minimum limits of insurance coverage shall not limit the liability of Borrower for its acts or missions as provided in this Mortgage. All liability insurance policies (with the exception of worker's compensation insurance to the extent not available under statutory law) shall designate Lender and its successors and assigns as additional insureds as their interests may appear and shall be payable as set forth in Article IV 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 Lender, shall serve as excess coverage. Borrower shall procure policies for all insurance for periods of not less than one year and shall provide to Lender certificates of insurance or, upon Lender's request, duplicate originals of insurance policies evidencing that insurance satisfying the requirements of this Mortgage is in effect at all times. Section 3.07. Impound Account. Upon the occurrence of an Event of Default under this Mortgage or any other Loan Document, Lender may require Borrower to pay to Lender 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. Upon such requirement, Lender will estimate the amounts needed for such purposes and will notify Borrower to pay the same to Lender in equal monthly installments, as nearly as practicable, in addition to all other sums due under this Mortgage. Should additional funds be required at any time, Borrower shall pay the same to Lender on demand. Borrower shall advise Lender of all taxes and insurance bills which are due and shall cooperate fully with Lender in assuring that the same are paid. Lender 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 Lender. Interest or other gains from such funds, if any, shall be the sole property of Lender. If an Event of Default shall occur subsequent to Lender requiring the establishment of an impound account pursuant to this Section, Lender may apply all impounded funds against any sums due from Borrower to Lender. Lender shall give to Borrower an annual accounting showing all credits and debits to and from such impounded funds received from Borrower. 9 Section 3.08. Advances by Lender. Lender may make advances to perform any of the covenants contained in this Mortgage on Borrower's behalf and all sums so advanced (and all sums advanced pursuant to any other provision hereof) by Lender shall be secured hereby. Borrower shall repay on demand all sums so advanced with interest thereon at the Default Rate, such interest to be computed from and including the date of the making of such advance to and including the date of such repayment, and at Lender's election, Lender may add the amount of such advance to the principal balance of the Loan. Section 3.09. Negative Covenants. Without limiting the terms and conditions of Section 8 of the Loan Agreement, Borrower agrees that Borrower shall not, without the prior written consent of Lender, sell, convey, mortgage, grant, bargain, encumber, pledge, assign, or otherwise transfer the Mortgaged Property or any part thereof or permit the Mortgaged Property or any part thereof to be sold, conveyed, mortgaged, granted, bargained, encumbered, pledged, assigned, or otherwise transferred (each, a "Prohibited Transaction"), other than sales from inventory in the ordinary course of business and the replacement of obsolete Personal Property. A sale, conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer within the meaning of this Section shall be deemed to include, but not limited to, (a) an installment sales agreement wherein Borrower agrees to sell the Mortgaged Property or any part thereof for a price to be paid in installments; and (b) an agreement by Borrower leasing all or any part of the Mortgaged Property or a sale, assignment or other transfer of, or the grant of a security interest in, Borrower's right, title and interest in and to any Lease or any Rents. Lender's consent to a Prohibited Transaction shall be subject to the satisfaction of such conditions as Lender shall determine in its sole discretion, including, without limitation, (i) Borrower having executed and delivered such modifications to the terms of this Mortgage and the other Loan Documents as Lender shall request, (ii) the Prohibited Transaction having been approved by each of the rating agencies which have issued ratings in connection with any Securitization of the Loan as well as any other rating agency selected by Lender, and (iii) the proposed transferee having assumed the Note, this Mortgage and the other Loan Documents (as modified pursuant to clause (i) above). In addition, any such consent shall be conditioned upon the payment by Borrower to Lender of (x) a fee equal to one percent (1%) of the then outstanding principal balance of the Note and (y) all out-of-pocket costs and expenses incurred by Lender in connection with such consent, including, without limitation, reasonable attorneys' fees. Lender shall not be required to demonstrate any actual impairment of its security or any increased risk of default hereunder in order to declare the Obligations immediately due and payable upon Borrower's sale, conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer of the Mortgaged Property without Lender's consent, as required hereunder. The provisions of this Section shall apply to every sale, conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer of the Mortgaged Property regardless of whether voluntary or not, or whether or not Lender has consented to any previous sale, conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer of the Mortgaged Property. ARTICLE IV POSSESSION, USE AND RELEASE OF THE MORTGAGED PROPERTY Section 4.01. Casualty or Condemnation. Borrower, immediately upon obtaining knowledge of any casualty to any portion of the Mortgaged Property or of any proceeding or negotiation for the taking of all or any portion of the Mortgaged Property in condemnation or other eminent domain proceedings, shall notify Lender of such casualty, proceeding or negotiation. Any award, compensation or other payment resulting from such casualty or condemnation or eminent domain proceeding, as applicable, shall be applied as set forth below (the "Proceeds"). Lender may participate in any condemnation or eminent domain proceeding, and Borrower will deliver or cause to be delivered to Lender all instruments reasonably requested by Lender to permit such participation. (a) Casualty. (i) In the event of any material damage to or destruction of the Mortgaged Property or any part thereof, Borrower will promptly give written notice to Lender, generally describing the nature and extent of such damage or destruction. No damage to or destruction of the Mortgaged Property shall relieve Borrower of its obligation to pay any monetary sum due under the Loan Documents at the time and in the manner provided in the Loan Documents. 10 (ii) In the event of any damage to or destruction of the Mortgaged Property or any part thereof, Borrower, whether or not the Proceeds, if any, on account of such damage or destruction shall be sufficient for the purpose, at its expense, shall promptly cause the Restoration to be commenced and completed. (iii) Proceeds received by Lender and Borrower on account of any occurrence of damage to or destruction of the Mortgaged Property or any part thereof, less the costs, fees and expenses incurred by Lender and Borrower in the collection thereof, including, without limitation, adjuster's fees and expenses and attorneys' fees and expenses (the "Net Insurance Proceeds"), shall be paid to (1) Borrower, if the amount of such Net Insurance Proceeds is less than $100,000 and applied by Borrower toward the cost of the Restoration, and (2) Lender, if the amount of such Net Insurance Proceeds is $100,000 or greater. Net Insurance Proceeds paid to Lender shall be held and disbursed by Lender, or as Lender may from time to time direct, as the Restoration progresses, to pay or reimburse Borrower for the cost of the Restoration, upon written request of Borrower accompanied by evidence, reasonably satisfactory to Lender, that (aa) the Restoration is in full compliance with all Applicable Regulations and all private restrictions and requirements, (bb) the amount requested has been paid or is then due and payable and is properly a part of such cost, (cc) there are no mechanics' or similar liens for labor or materials theretofore supplied in connection with the Restoration, (dd) if the estimated cost of the Restoration exceeds the Net Insurance Proceeds (exclusive of Proceeds received from Borrower's business income insurance), Borrower has deposited into an escrow satisfactory to Lender such excess amount, which sum will be disbursed pursuant to escrow instructions satisfactory to Lender, and (ee) the balance of such Net Insurance Proceeds, together with the funds deposited into escrow, if any, pursuant to the preceding subsection (dd), after making the payment requested will be sufficient to pay the balance of the cost of the Restoration. Upon receipt by Lender of evidence reasonably satisfactory to it that the Restoration has been completed and the cost thereof paid in full, and that there are no mechanics' or similar liens for labor or materials supplied in connection therewith, the balance, if any, of such Net Insurance Proceeds shall be paid to Borrower. If at the time of the damage or destruction to the Mortgaged Property or at any time thereafter an Event of Default shall have occurred and be continuing under the Loan Documents, all Net Insurance Proceeds shall be paid to Lender, and Lender may retain and apply the Net Insurance Proceeds toward the Obligations whether or not then due and payable, in such order, priority and proportions as Lender in its discretion shall deem proper, or to cure such Event of Default, or, in Lender's discretion, Lender may pay such Net Insurance Proceeds in whole or in part to Borrower to be applied toward the cost of the Restoration. If Lender shall receive and retain Net Insurance Proceeds, the lien of this Mortgage shall be reduced only by the amount received and retained by Lender and actually applied by Lender in reduction of the Obligations. (b) Condemnation. (i) In case of a taking of all or any part of the Mortgaged Property or the commencement of any proceedings or negotiations which might result in a taking, 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 Lender, Borrower and those authorized to exercise such right ("Taking"), Borrower will promptly give written notice thereof to Lender, generally describing the nature and extent of such Taking. Lender shall file and prosecute on behalf of Lender and Borrower any and all claims for Proceeds, and all Proceeds on account of a Taking shall be paid to Lender. (ii) In case of a Taking of the whole of the Mortgaged Property, other than for temporary use ("Total Taking"), or in case of a Taking of less than all of the Mortgaged Property ("Partial Taking"), the Loan Documents shall remain in full force and effect. In the case of a Partial Taking, Borrower, whether or not the Proceeds, if any, on account of such Partial Taking shall be sufficient for the purpose (but provided they are made available by Lender for such purpose), at its own cost and expense, will promptly commence and complete the Restoration. In case of a Partial Taking, other than a temporary use, of such a substantial part of the Mortgaged Property as shall result in the Mortgaged Property remaining after such Partial Taking being unsuitable for use, such Taking shall be deemed a Total Taking. (iii) In case of a temporary use of the whole or any part of the Mortgaged Property by a Taking, the Loan Documents shall remain in full force and effect without any reduction of any monetary sum payable under the Loan Documents. In any proceeding for such Taking, Lender shall have the right to intervene and participate; provided that, if such intervention shall not be 11 permitted, Borrower shall consult with Lender, its attorneys and experts, and make all reasonable efforts to cooperate with Lender in the prosecution or defense of such proceeding. At the termination of any such use or occupation of the Mortgaged Property, Borrower will, at its own cost and expense, promptly commence and complete the Restoration. (iv) Proceeds on account of a Taking, less the costs, fees and expenses incurred by Lender and Borrower in connection with the collection thereof, including, without limitation, attorneys' fees and expenses, shall be applied in the following order: (x) Proceeds received on account of a Total Taking shall be allocated as follows: (aa) There shall be paid to the Lender an amount up to the sum of the outstanding principal, including all sums advanced by Lender hereunder, and interest under the Note, all as of the date on which such payment is made, such amount shall be applied first against all sums advanced by Lender under this Mortgage, second against the accrued but unpaid interest on the Note, and third to the remaining unpaid principal amount of the Note. If the Proceeds received on account of a Total Taking are not sufficient to satisfy the outstanding principal balance of the Note, all accrued but unpaid interest on the Note, all other sums due under the Note, all sums advanced by Lender under this Mortgage and all other sums due and payable under this Mortgage and the other Loan Documents corresponding to the Premises (collectively, the "Outstanding Obligations"), Borrower shall pay to Lender simultaneously with the payment of such Proceeds to Lender the difference between the amount of such Proceeds and the amount of the Outstanding Obligations. (bb) Any remaining balance shall be paid to Borrower. (y) Proceeds received on account of a Partial Taking shall be held and allocated as follows: (i) first, toward the cost of the Restoration, such application of net awards and other payments to be made substantially in the manner provided in Section 4.01(a)(iii) of this Mortgage; and (ii) then, all or any portion of the balance of such proceeds shall, in Lender's sole discretion, either be paid to: (1) Lender, as the holder of this Mortgage, and applied toward the Outstanding Obligations in such order, priority and proportion, and at such time on or prior to the Maturity Date (as defined in the Note), as Lender shall determine; or (2) Borrower; provided, however, in Lender's sole discretion, such proceeds shall be pledged to Lender to secure the Outstanding Obligations pursuant to a security agreement reasonably satisfactory to Lender, or, with Lender's consent, Borrower shall provide Lender with alternative security satisfactory to Lender in its sole discretion. Lender may deposit any funds held by it in accounts insured by any federal or state agency and may commingle such funds with other funds and accounts of Lender. Interest or gains from such funds, if any, shall be the sole property of Lender. (z) Proceeds received on account of a Taking for temporary use shall be held by Lender and applied to the payment of the monthly installments of combined interest and principal becoming due under the Note, until such Taking for temporary use is terminated and the Restoration, if any, has been completed; provided, however, that, if any portion of any such award or payment is made by reason of any damage to or destruction of the Mortgaged Property, such portion shall be held and applied as provided in Section 4.01(a)(iii) hereof. The balance, if any, of such awards and payments shall be paid to Borrower. (v) Notwithstanding the foregoing, if at the time of any Taking or at any time thereafter an Event of Default shall have occurred and be continuing 12 under the Loan Documents, Lender is hereby authorized and empowered, in the name and on behalf of Borrower and otherwise, to file and prosecute Borrower's claim, if any, for an award on account of any Taking and to collect such award and apply the same, after deducting all costs, fees and expenses incident to the collection thereof (the "Net Award"), toward the Obligations whether or not then due and payable, in such order, priority and proportions as Lender in its discretion shall deem proper, or to cure such Event of Default, or, in Lender's discretion, Lender may pay the Net Award in whole or in part to Borrower to be applied toward the cost of the Restoration. If Lender shall receive and retain the Net Award, the lien of this Mortgage shall be reduced only by the amount received and retained by Lender and actually applied by Lender in reduction of the Obligations. Section 4.02. Conveyance in Anticipation of Condemnation, Granting of Easements, Etc. If no Event of Default shall have occurred and be continuing, Borrower may, from time to time with respect to its interest in the Mortgaged Property, and with Lender's prior written consent, (i) sell, assign, convey or otherwise transfer any interest therein to any person legally empowered to take such interest under the power of eminent domain, (ii) grant easements and other rights in the nature of easements, (iii) release existing easements or other rights in the nature of easements which are for the benefit of the Mortgaged Property, (iv) dedicate or transfer unimproved portions of the Mortgaged Property for road, highway or other public purposes, (v) execute petitions to have the Mortgaged Property annexed to any municipal corporation or utility district, and (vi) execute and deliver to any person any instrument appropriate to confirm or effect such grants, releases, dedications and transfers. Section 4.03. Lender's Power. At any time, or from time to time, without liability therefor, Lender, without affecting the personal liability of any person for payment of the Obligations or the effect of this Mortgage upon the remainder of said Mortgaged Property, may from time to time without notice (i) release any part of said Mortgaged Property, (ii) consent in writing to the making of any map or plat thereof, (iii) join in granting any easement thereon, (iv) join in any extension agreement or any agreement subordinating the lien or charge hereof, (v) release any person so liable, (vi) extend the maturity or alter any of the terms of any Obligations, (vii) grant other indulgences, (viii) take or release any other or additional security for any Obligations, (ix) make compositions or other arrangements with debtors in relation thereto, or (x) advance additional funds to protect the security hereof or to pay or discharge the Obligations in the event Borrower fails to do so, and all amounts so advanced shall be secured hereby and shall be due and payable upon demand by Lender. ARTICLE V SECURITY INTEREST Section 5.01. Security Agreement. With respect to the Personal Property or any portion of the Mortgaged Property which constitutes fixtures or other property governed by the UCC, this Mortgage shall constitute a security agreement between Borrower, as the debtor, and Lender, as the secured party, and Borrower hereby grants to Lender a security interest in such portion of the Mortgaged Property. Cumulative of all other rights of Lender hereunder, Lender shall have all of the rights conferred upon secured parties by the UCC. Borrower authorizes Lender to file financing statements with respect to the security interest of Lender, 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 Section 6.C of the Loan Agreement. Furthermore, at any time, and from time to time, Borrower will execute and deliver to Lender all financing statements that may from time to time be required by Lender to establish and maintain the validity and priority of the security interest of Lender, or any modification thereof. Lender may exercise any or all of the remedies of a secured party available to it under the UCC with respect to such property. If, upon the occurrence and during the continuance of an Event of Default, Lender proceeds to dispose of such property in accordance with the provisions of the UCC, 10 days' notice by Lender to Borrower shall be deemed to be reasonable notice under any provision of the UCC requiring such notice; provided, however, that Lender may at its option dispose of such property in accordance with Lender's rights and remedies with respect to the real property pursuant to the provisions of this Mortgage, in lieu of proceeding under the UCC. Borrower represents that its exact legal name and state of formation or organization are as set forth in the first paragraph of this Mortgage. Borrower agrees that, notwithstanding any provision in the UCC to the contrary, Borrower shall not file a termination statement of any financing statement filed by Lender in connection with any security interest granted under this Mortgage if Lender reasonably objects to the filing of such termination statement. 13 Section 5.02. Effective as a Financing Statement and Fixture Filing. This Mortgage shall be effective as a financing statement filed as a fixture filing with respect to all fixtures included within the Mortgaged Property and is to be filed for record in the real estate records of each county where any part of the Mortgaged Property (including said fixtures) is situated. This Mortgage shall also be effective as a financing statement covering any other portion of the Mortgaged Property and may be filed in any other appropriate filing or recording office. The mailing address of Borrower is the address of Borrower set forth in the introductory paragraph of this Mortgage, and the address of the Lender from which information concerning the security interests hereunder may be obtained is the address of Lender as set forth in the introductory paragraph of this Mortgage. A carbon, photographic or other reproduction of this Mortgage or of any financing statement relating to this Mortgage shall be sufficient as a financing statement for any of the purposes referred to in this Section. ARTICLE VI EVENTS OF DEFAULT AND REMEDIES Section 6.01. Events of Default. Each of the following shall be an event of default under this Mortgage (each an "Event of Default"): (i) Subject to the provisions of Section 3.05(b) of this Mortgage, if Borrower 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 the Mortgaged Property pursuant to Applicable Regulations. (ii) If Borrower shall fail to maintain insurance in accordance with the requirements of Section 3.06 of this Mortgage. (iii) If Borrower fails to observe or perform any of the covenants, conditions, or obligations of this Mortgage, provided, however, if any such failure does not involve the payment of any principal, interest or other monetary sum due under the Note, 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 in no event 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. (iv) If there is an "Event of Default" under the Loan Agreement. Section 6.02. Remedies. Upon the occurrence and during the continuance of an Event of Default subject to the limitations set forth in Section 6.01, Lender may declare all or any part of the Obligations to be due and payable, and the same shall thereupon become due and payable without any presentment, demand, protest or notice (including notice of intent to accelerate and notice of acceleration) of any kind except as otherwise expressly provided herein. Furthermore, upon the occurrence and during the continuance of an Event of Default, Lender may: (i) Either in person or by agent, with or without bringing any action or proceeding, or by a receiver appointed by a court, and without regard to the adequacy of its security, enter upon and take possession of the Mortgaged Property or any part thereof and do any acts which it deems necessary or desirable to preserve the value, marketability or rentability of the Mortgaged Property, or part thereof or interest therein, increase 14 the income therefrom or protect the security hereof and, with or without taking possession of the Mortgaged Property, take any action described herein, sue for or otherwise collect the Rents, including those past due and unpaid, and apply the same, less costs and expenses of operation and collection including reasonable attorneys' fees, upon any Obligations, all in such order as Lender may determine and pursue any remedy available under Chapter 697.07, Florida Statutes as amended, supplemented or superceded from time to time. The entering upon and taking possession of the Mortgaged Property, the taking of any action described herein, the collection of such Rents, and the application thereof as aforesaid, shall not cure or waive any Event of Default or notice of default or invalidate any act done in response to such Event of Default or pursuant to such notice of default and, notwithstanding the continuance in possession of the Mortgaged Property or the collection, receipt and application of Rents, Lender shall be entitled to exercise every right provided for in any of the Loan Documents or by law upon any Event of Default, including the right to exercise the power of sale herein conferred; (ii) Commence an action to foreclose this Mortgage in a single parcel or in several parcels, appoint a receiver or specifically enforce any of the covenants hereof; (iii) Exercise any or all of the remedies available to a secured party under the Uniform Commercial Code as adopted in the State ("UCC"), including, without limitation: (1) Either personally or by means of a court appointed receiver, commissioner or other officer, take possession of all or any of the Personal Property and exclude therefrom Borrower and all others claiming under Borrower, and thereafter hold, store, use, operate, manage, maintain and control, make repairs, replacements, alterations, additions and improvements to and exercise all rights and powers of Borrower in respect of the Personal Property or any part thereof. In the event Lender demands or attempts to take possession of the Personal Property in the exercise of any rights under any of the Loan Documents, Borrower promises and agrees to promptly turn over and deliver complete possession thereof to Lender; (2) Without notice to or demand upon Borrower, make such payments and do such acts as Lender may deem necessary to protect its security interest in the Personal Property, including, without limitation, paying, purchasing, contesting or compromising any encumbrance, charge or lien which is prior to or superior to the security interest granted hereunder and, in exercising any such powers or authority, to pay all expenses incurred in connection therewith; (3) Require Borrower to assemble the Personal Property or any portion thereof, at the Premises, and promptly to deliver such Personal Property to Lender, or an agent or representative designated by it. Lender, and its agents and representatives, shall have the right to enter upon any or all of Borrower's premises and property to exercise Lender's rights hereunder; (4) Sell, lease or otherwise dispose of the Personal Property at public sale, with or without having the Personal Property at the place of sale, and upon such terms and in such manner as Lender may determine. Lender may be a purchaser at any such sale; (5) Unless the Personal Property is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, Lender shall give Borrower at least 10 days' prior written notice of the time and place of any public sale of the Personal Property or other intended disposition thereof. Such notice may be delivered to Borrower at the address set forth at the beginning of this Mortgage and shall be deemed to be given as provided herein; and (6) Any sale made pursuant to the provisions of this subsection shall be deemed to have been a public sale conducted in a commercially reasonable manner if held contemporaneously with the sale of all or a portion of the other Mortgaged Property under power of sale as provided herein upon giving the same notice with respect to the sale of the Personal Property hereunder as is required for such sale of the other Mortgaged Property under power of sale, and such sale shall be deemed to be pursuant to a security agreement covering both real and personal property under the UCC. (iv) Exercise all of Borrower's rights and remedies under the Indemnity Agreements, including, without limitation, making demands and 15 claims and receiving payments under the Indemnity Agreements. Borrower hereby grants Lender a power of attorney (which grant shall be deemed irrevocable and coupled with an interest) to exercise such rights and remedies; (v) Apply any sums then deposited in the impound account described in Section 3.07 toward payment of the taxes, assessment and insurance premiums for the Mortgaged Property and/or as a credit on the Obligations in such priority and proportion as Lender may determine in its sole discretion; (vi) If held by Lender, surrender the insurance policies maintained pursuant to Section 3.06, collect the unearned insurance premiums and apply such sums as a credit on the Obligations in such priority and proportion as Lender in its sole discretion shall deem proper, and in connection therewith, Borrower hereby appoints Lender as agent and attorney-in-fact (which is coupled with an interest and is therefore irrevocable) for Lender to collect such insurance premiums; and (vii) Sell Borrower's interest in the Mortgaged Property pursuant to the power of sale herein conferred. If Lender elects to sell Borrower's interest in the Mortgaged Property by exercise of such power of sale, Lender shall cause such sale to be performed in the manner then required by law. (aa) Lender shall cause to be recorded, published and delivered such notices of default and notices of sale as may then be required by law and by this Mortgage. Thereafter, Lender shall sell Borrower's interest in the Mortgaged Property at the time and place of sale fixed by it, either as a whole, or in separate lots or parcels or items as Lender shall deem expedient, and in such order as it may determine, at public auction to the highest bidder for cash in lawful money of the United States payable at the time of sale, or as otherwise may then be required by law. Lender shall deliver to such purchaser or purchasers thereof its good and sufficient deed or deeds conveying the property so sold, without any covenant or warranty, express or implied. The recitals in such deed of any matters or facts shall be conclusive proof of the truthfulness thereof. Any person, including, without limitation, Borrower or Lender, may purchase at such sale. Lender may sell not only the real property but also the Personal Property and other interests which are a part of the Mortgaged Property, or any part thereof, as a unit and as a part of a single sale, or may sell any part of the Mortgaged Property separately from the remainder of the Mortgaged Property. Lender shall not be required to take possession of any part of the Mortgaged Property or to have any of the Personal Property present at any sale of the Mortgaged Property. Lender may appoint or delegate any one or more persons as agent to perform any act or acts necessary or incident to any sale held by Lender, including the posting of notices and the conduct of sale, but in the name and on behalf of Lender. In the event any sale hereunder is not completed or is defective in the opinion of Lender, such sale shall not exhaust the power of sale hereunder, and Lender shall have the right to cause a subsequent sale or sales to be made hereunder. (bb) As may be permitted by law, Lender shall apply the proceeds of sale (i) first, to payment of all costs, fees and expenses, including attorneys' fees and expenses incurred by the Lender in exercising the power of sale or foreclosing this Mortgage, (ii) second, to the payment of the Obligations (including, without limitation, the principal, accrued interest and other sums due and owing under the Note and the amounts due and owing to Lender under this Mortgage) in such manner and order as Lender may elect, and (iii) third, the remainder, if any, shall be paid to Borrower, or to Borrower's heirs, devisees, representatives, successors or assigns, or such other persons as may be entitled thereto. (cc) Lender may in the manner provided by law postpone sale of all or any portion of the Mortgaged Property. Section 6.03. Appointment of Receiver. If an Event of Default shall have occurred and be continuing, Lender, as a matter of right and without notice to Borrower or anyone claiming under Borrower, and without regard to the then value of the Mortgaged Property or the interest of Borrower therein, or the insolvency of Borrower or the then-owner of the Mortgaged Property, may seek the appointment of a receiver for the Mortgaged Property upon ex parte application to any court of the competent jurisdiction. Borrower waives any right to any 16 hearing or notice of hearing prior to the appointment of a receiver. Such receiver shall be empowered (a) to take possession of the Mortgaged Property and any businesses conducted by Borrower thereon and any business assets used in connection therewith, (b) to exclude Borrower and Borrower's agents, servants and employees from the Mortgaged Property, or, at the option of the receiver, in lieu of such exclusion, to collect a fair market rental from any such persons occupying any part of the Mortgaged Property, (c) to collect the Rents, (d) to complete any construction that may be in progress, (e) to continue the development, marketing and sale of the Mortgaged Property, (f) to do such maintenance and make such repairs and alterations as the receiver deems necessary, (g) to use all stores of materials, supplies and maintenance equipment on the Mortgaged Property and replace such items at the expense of the receivership estate, (h) to pay all taxes and assessments against the Mortgaged Property, all premiums for insurance thereon, all utility and other operating expenses, and all sums due under any prior or subsequent encumbrance, (i) to request that Lender advance such funds as may reasonably be necessary to the effective exercise of the receiver's powers, on such terms as may be agreed upon by the receiver and Lender, but not in excess of the Default Rate, and (j) generally to do anything that Borrower could legally do if Borrower were in possession of the Mortgaged Property. All expenses incurred by the receiver or his agents, including obligations to repay funds borrowed by the receiver, shall constitute a part of the Obligations. Any revenues collected by the receiver shall be applied first to the expenses of the receivership, including reasonable attorneys' fees incurred by the receiver and by Lender, together with interest thereon at the highest rate of interest applicable in the Note from the date incurred until repaid, and the balance shall be applied toward the Obligations or in such other manner as the court may direct. Section 6.04. Remedies Not Exclusive. Lender shall be entitled to enforce payment and performance of any Obligations and to exercise all rights and powers under this Mortgage or under any Loan Documents or other agreement or any laws now or hereafter in force, notwithstanding some or all of the Obligations may now or hereafter be otherwise secured, whether by mortgage, deed of trust, pledge, lien, assignment or otherwise. Neither the acceptance of this Mortgage nor its enforcement, whether by court action or pursuant to the power of sale or other powers herein contained, 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 Mortgage 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. Lender may pursue inconsistent remedies. The acceptance by Lender of any sum after the same is due shall not constitute a waiver of the right either to require prompt payment, when due, of all other sums hereby secured or to declare a subsequent Event of Default as herein provided. The acceptance by Lender of any sum in an amount less than the sum then due shall be deemed an acceptance on account only and upon condition that it shall not constitute a waiver of the obligation of Borrower to pay the entire sum then due, and failure of Borrower to pay such entire sum then due shall be an Event of Default, notwithstanding such acceptance of such amount on account, as aforesaid. Lender shall be, at all times thereafter and until the entire sum then due as contemplated by the Loan Documents shall have been paid, and notwithstanding the acceptance by Lender thereafter of further sums on account, or otherwise, entitled to exercise all rights in this instrument conferred upon them or either of them, and the right to proceed with a sale under any notice of default, or an election to sell, or the right to exercise any other rights or remedies hereunder, shall in no way be impaired, whether any of such amounts are received prior or subsequent to such proceeding, election or exercise. Consent by Lender to any action or inaction of Borrower which is subject to consent or approval of Lender hereunder shall not be deemed a waiver of the right to require such consent or approval to future or successive actions or inactions. Section 6.05. Possession of Mortgaged Property. In the event of a trustee's sale or foreclosure sale hereunder and after the time of such sale, Borrower occupies the portion of the Mortgaged Property so sold, or any part thereof, Borrower shall immediately become the tenant of the purchaser at such sale, which tenancy shall be a tenancy from day to day, terminable at the will of either tenant or landlord, at a reasonable rental per day based upon the value of the portion of the Mortgaged Property so occupied, such rental to be due and payable daily to the purchaser. An action of unlawful detainer shall lie if the tenant holds over after a demand in writing for possession of such Mortgaged Property; and this Mortgage and a trustee's or sheriff's deed shall constitute a lease and agreement under which the tenant's possession arose and continued. Nothing contained in this Mortgage shall be construed to constitute Lender as a "mortgagee in possession" in the absence of its taking actual possession of the Mortgaged Property pursuant to the powers granted herein. 17 Section 6.06. Waiver of Rights. Borrower waives the benefit of all laws now existing or that hereafter may be enacted (i) providing for any appraisement before sale of any portion of the Mortgaged Property, or (ii) in any way extending the time for the enforcement of the collection of the Obligations or creating or extending a period of redemption from any sale made in collecting the Obligations. Borrower agrees that Borrower will not at any time insist upon, plea, claim or take the benefit or advantage of any law now or hereafter in force providing for any appraisement, valuation, stay, extension, redemption or homestead exemption, and Borrower, for Borrower, Borrower's representatives, successors and assigns, and for any and all persons ever claiming any interest in the Mortgaged Property, hereby waives and releases all rights of redemption, valuation, appraisement, stay of execution, homestead exemption, notice of election to mature or declare due the whole of the Obligations and marshaling in the event of foreclosure of the liens hereby created. If any law referred to in this Section and now in force, of which Borrower, Borrower's heirs, devisees, representatives, successors and assigns or other person might take advantage despite this Section, shall hereafter be repealed or cease to be in force, such law shall not thereafter be deemed to preclude the application of this Section. Borrower expressly waives and relinquishes any and all rights, remedies and defenses that Borrower may have or be able to assert by reason of the laws of the State pertaining to the rights, remedies and defenses of sureties. Section 6.07. Relief From Stay. In the event that Borrower commences a case under the Code or is the subject of an involuntary case that results in an order for relief under the Code, subject to court approval, Lender shall thereupon be entitled and Borrower irrevocably consents to relief from any stay imposed by Section 362 of the Code on or against the exercise of the rights and remedies otherwise available to Lender as provided in the Loan Documents and Borrower hereby irrevocably waives its rights to object to such relief. In the event Borrower shall commence a case under the Code or is the subject of an involuntary case that results in an order for relief under the Code, Borrower hereby agrees that no injunctive relief against Lender shall be sought under Section 105 or other provisions of the Code by Borrower or other person or entity claiming through Borrower, nor shall any extension be sought of the stay provided by Section 362 of the Code. Section 6.08. Cash Collateral. Borrower hereby acknowledges and agrees that in the event that Borrower commences a case under the Code or is the subject of an involuntary case that results in an order for relief under the Code: (i) that all of the Rents are, and shall for purposes be deemed to be, "proceeds, product, offspring, rents, or profits" of the Premises covered by the lien of this Mortgage, as such quoted terms are used in Section 552(b) of the Code; (ii) that in no event shall Borrower assert, claim or contend that any portion of the Rents are, or should be deemed to be, "accounts" or "accounts receivable" within the meaning of the Code and/or applicable state law; (iii) that the Rents are and shall be deemed to be in any such bankruptcy proceeding "cash collateral" of Lender as that term is defined in Section 363 of the Code; and (iv) that Lender has valid, effective, perfected, enforceable and "choate" rights in and to the Rents without any further action required on the part of Lender to enforce or perfect its rights in and to such cash collateral, including, without limitation, providing notice to Borrower under Section 546(b) of the Code. Section 6.09. Assignment of Rents and Leases. (a) Borrower hereby assigns, transfers, conveys and sets over to Lender all of Borrower's estate, right, title and interest in, to and under the Leases, whether existing on the date hereof or hereafter entered into, together with any changes, extensions, revisions or modifications thereof and all rights, powers, privileges, options and other benefits of Borrower as the lessor under the Leases regarding the current tenants and any future tenants, and all the Rents from the Leases, including those now due, past due or to become due. Borrower irrevocably appoints Lender its true and lawful attorney-in-fact, at the option of Lender, at any time and from time to time upon the occurrence and during the continuance of an Event of Default, to take possession and control of the Premises, pursuant to Borrower's rights under the Leases, to exercise any of Borrower's rights under the Leases, and to demand, receive and enforce payment, to give receipts, releases and satisfaction and to sue, in the name of Borrower or Lender, for all of the Rents. The power of attorney granted hereby shall be irrevocable and coupled with an interest and shall terminate only upon the payment of all sums due Lender for all losses, costs, damages, fees and expenses whatsoever associated with the exercise of this power of attorney, and Borrower hereby releases Lender from all liability (other than as a result of the gross negligence or willful misconduct of Lender) whatsoever for the exercise of the foregoing power of attorney and all actions taken pursuant thereto. The consideration received by Borrower to execute and deliver this assignment and the liens and security interests created herein is legally sufficient and will provide a direct economic benefit to Borrower. It is intended by Borrower and Lender that the assignment set forth herein constitutes an absolute assignment 18 and not merely an assignment for additional security. Notwithstanding the foregoing, this assignment shall not be construed to bind Lender to the performance of any of the covenants, conditions or provisions of Borrower contained in the Leases or otherwise to impose any obligation upon Lender, and, so long as no Event of Default shall have occurred and be continuing, Borrower shall have a license, revocable upon an Event of Default, to possess and control the Premises and collect and receive all Rents. Upon an Event of Default, such license shall be automatically revoked. The assignment of Rents and Leases contained in this Mortgage are intended to provide Lender with all rights and remedies of mortgagees pursuant to Section 697.07, Florida Statutes, as may be amended, supplemented or superceded from time to time. However, in no event shall this reference diminish, alter, impair or affect any other rights or remedies of Lender (b) Upon the occurrence and during the continuance of an Event of Default, Lender may, at any time without notice (except if required by applicable law), either in person, by agent or by a court-appointed receiver, regardless of the adequacy of Lender's security, and at its sole election (without any obligation to do so), enter upon and take possession and control of the Premises, or any part thereof, to perform all acts necessary and appropriate to operate and maintain the Premises, including, but not limited to, execute, cancel or modify the Leases, make repairs to the Premises, execute or terminate contracts providing for the management or maintenance of the Premises, all on such terms as are deemed best to protect the security of this assignment, and in Lender's or Borrower's name, sue for or otherwise collect such Rents as specified in this Mortgage as the same become due and payable, including, but not limited to, Rents then due and unpaid. Lender may so sue for or otherwise collect such Rents with or without taking possession of the Premises. Borrower agrees that upon the occurrence and during the continuance of an Event of Default, each tenant of the Premises shall make its rent payable to and pay such rent to Lender (or Lender's agents) on Lender's written demand therefor, delivered to such tenant personally, by mail, or by delivering such demand to each rental unit, without any liability on the part of said tenant to inquire further as to the existence of an Event of Default by Borrower. (c) Rents collected subsequent to any Event of Default shall be applied at the direction of, and in such order as determined by, Lender to the costs, if any, of taking possession and control of and managing the Premises and collecting such amounts, including, but not limited to, reasonable attorney's fees, receiver's fees, premiums on receiver's bonds, costs of repairs to the Premises, premiums on insurance policies, taxes, assessments and other charges on the Premises, and the costs of discharging any obligation or liability of Borrower with respect to the Leases and to the sums secured by this Mortgage. Lender or the receiver shall have access to the books and records used in the operation and maintenance of the Premises and shall be liable to account only for those Rents actually received. (d) Lender shall not be liable to Borrower, anyone claiming under or through Borrower or anyone having an interest in the Premises by reason of anything done or left undone by Lender hereunder, except to the extent of Lender's gross negligence or willful misconduct. (e) Any entering upon and taking possession and control of the Premises by Lender or the receiver and any application of Rents as provided herein shall not cure or waive any Event of Default hereunder or invalidate any other right or remedy of Lender under applicable law or provided therein. ARTICLE VII MISCELLANEOUS Section 7.01. Satisfaction. If and when the Obligations shall have become due and payable (whether by lapse of time or by acceleration or by the exercise of the privilege of prepayment), and Borrower shall pay or cause to be paid (provided such payment is permitted or required by the Note) the full amount thereof and shall also pay or cause to be paid all other sums payable by the Borrower Parties to the Lender Entities with respect to the Obligations, then this Mortgage shall be void (otherwise it shall remain in full force and effect in law and equity forever) and Lender agrees to execute an instrument evidencing the satisfaction of all obligations under this Mortgage and releasing this Mortgage which shall be prepared and recorded at Borrower's sole expense. 19 Section 7.02. Limitation of Rights of Others. Nothing in this Mortgage is intended or shall be construed to give to any person, other than Borrower, Environmental Insurer and the holder of the Note, any legal or equitable right, remedy or claim under or in respect of this Mortgage or any covenant, condition or provision herein contained. Section 7.03. Severability. In case any one or more of the provisions contained herein or in the Note shall be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof, and this Mortgage shall be construed as if such provision had never been contained herein or therein. Section 7.04. Notices; Amendments; Waiver. All notices, demands, designations, certificates, requests, offers, consents, approvals, appointments and other instruments given pursuant to this Mortgage (collectively called "Notices") shall be in writing and given by (i) hand delivery, (ii) facsimile, (iii) express overnight delivery service or (iv) certified or registered mail, return receipt requested and shall be deemed to have been delivered upon (a) receipt, if hand delivered, (b) transmission, if delivered by facsimile, (c) the next Business Day, if delivered by express overnight delivery service, or (d) the third Business Day following the day of deposit of such notice with the United States Postal Service, if sent by certified or registered mail, return receipt requested. Notices shall be provided to the parties and addresses (or facsimile numbers, as applicable) specified below: If to Borrower: Family Steak Houses of Florida, Inc. 2113 Florida Boulevard Neptune Beach, FL 32266 Attention: Edward B. Alexander Telephone: (904) 249-4197 Telecopy: (904) 249-1466 If to Lender: GE Capital Franchise Finance Corporation 17207 North Perimeter Drive Scottsdale, AZ 85255 Attention: General Counsel Telephone: (480) 585-4500 Telecopy: (480) 585-2226 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. Whenever in this Mortgage the giving of Notice is required, the giving thereof may be waived in writing at any time by the person or persons entitled to receive such Notice. Except as in this Mortgage otherwise expressly provided, (i) this Mortgage may not be modified except by an instrument in writing executed by Borrower and Lender and (ii) no requirement hereof may be waived at any time except by a writing signed by the party against whom such waiver is sought to be enforced, nor shall any waiver be deemed a waiver of any subsequent breach or default. Section 7.05. Successors and Assigns. All of the provisions herein contained shall be binding upon and inure to the benefit of the respective successors and assigns of the parties hereto, to the same extent as if each such successor and assign were in each case named as a party to this Mortgage. Wherever used, the singular shall include the plural, the plural shall include the singular and the use of any gender shall include all genders. Section 7.06. Headings. The headings appearing in this Mortgage have been inserted for convenient reference only and shall not modify, define, limit or expand the express provisions of this Mortgage. Section 7.07. Time of the Essence. Time is of the essence in the performance of each and every obligation under this Mortgage. Section 7.08. Forum Selection; Jurisdiction; Venue; Choice of Law. Borrower acknowledges that this Mortgage was substantially negotiated in the State of Arizona, this Mortgage was delivered in the State of Arizona, all payments under the Loan Documents will be delivered in the State of Arizona and there are substantial contacts between the parties and the transactions 20 contemplated herein and the State of Arizona. For purposes of any action or proceeding arising out of this Mortgage, the parties hereto expressly submit to the jurisdiction of all federal and state courts located in the State of Arizona. 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. The creation of this Mortgage and the rights and remedies of Lender with respect to the Mortgaged Property, as provided herein and by the laws of the State, shall be governed by and construed in accordance with the internal laws of the State without regard to its principles of conflicts of law. With respect to other provisions of this Mortgage, this Mortgage shall be governed by the internal laws of the State of Arizona, without regard to its principles of conflicts of law. Nothing in this Section shall limit or restrict the right of Lender to commence any proceeding in the federal or state courts located in the State to the extent Lender deems such proceeding necessary or advisable to exercise remedies available under the Mortgage or the other Loan Documents. Section 7.09. Indemnification. Borrower shall indemnify 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 arising out of such Indemnified Party's gross negligence or willful misconduct; provided, however, that the term "gross negligence" shall not include gross negligence imputed as a matter of law to any of the Indemnified Parties solely by reason of Borrower's interest in the Mortgaged Property or Borrower's failure to act in respect of matters which are or were the obligation of Borrower under the Loan Documents) caused by, incurred or resulting from Borrower's operations of, or relating in any manner to, the Mortgaged Property, whether relating to its original design or construction, latent defects, alteration, maintenance, use by Borrower or any person thereon, supervision or otherwise, or from any breach of, default under or failure to perform any term or provision of this Mortgage by Borrower, its officers, employees, agents or other persons. It is expressly understood and agreed that Borrower's obligations under this Section shall survive the expiration or earlier termination of this Mortgage for any reason. Section 7.10. Waiver of Jury Trial and Punitive, Consequential, Special and Indirect Damages. LENDER, BY ACCEPTING THIS MORTGAGE, AND BORROWER 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 MORTGAGE, THE RELATIONSHIP OF LENDER AND BORROWER, BORROWER'S USE OR OCCUPANCY OF THE MORTGAGED PROPERTY, 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, BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY 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 MORTGAGE 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. 21 IN WITNESS WHEREOF, Borrower has executed and delivered this Mortgage as of the day and year first above written. BORROWER: FAMILY STEAK HOUSES OF FLORIDA, INC., a Florida corporation By ________________________________ Printed Name ______________________ Title _____________________________ U.S. Federal Tax Identification Number: _______________________________________ Organization Identification Number: _______________________________________ __________________________ Witness __________________________ Printed Name __________________________ Witness __________________________ Printed Name STATE OF ) ) SS. COUNTY OF ) The foregoing instrument was acknowledged before me on , 2002 by , of Family Steak Houses of Florida, Inc., a Florida corporation, on behalf of the corporation. He/She is personally known to me or has produced a driver's license as identification and did not take an oath. ______________________________ Notary Public My Commission Expires: ________________________________ 22 EXHIBIT A LEGAL DESCRIPTION OF PREMISES 23 EX-2 3 ryansex2.txt Exhibit 10.02 STATE OF FLORIDA DOCUMENTARY STAMP TAX AND NON-RECURRING INTANGIBLE TAX THAT IS DUE ON THIS CONSOLIDATED, AMENDED AND RESTATED PROMISSORY NOTE HAS BEEN PAID AND EVIDENCE OF SAID PAYMENT APPEARS ON THE MORTGAGE CONSOLIDATED, AMENDED AND RESTATED PROMISSORY NOTE THIS CONSOLIDATED, AMENDED AND RESTATED PROMISSORY NOTE is made and entered into as of the day of October, 2002, by and between FAMILY STEAK HOUSES OF FLORIDA, INC., a Florida corporation ("Borrower") and GE CAPITAL FRANCHISE FINANCE CORPORATION, a Delaware corporation ("Lender"). A loan was made by FFCA Mortgage Corporation, a Delaware corporation ("Original Lender") to Borrower in the original principal amount of $______, the repayment of which is evidenced by a Promissory Note dated ______ (the "Original Note"). The Original Note is secured by a Mortgage, Assignment of Rents And Leases, Security Agreement and Fixture Filing dated _________ and recorded among the Public Records of Volusia County, Florida in Official Record Book 864, Page 1288 (the "Original Mortgage"), on certain improved real property located in Daytona, Florida, such Original Mortgage and Original Note was assigned by Original Lender to LaSalle Bank National Association, f/k/a LaSalle National Bank, Trustee pursuant to that certain Indenture dated as of April 1, 1999 ("LaSalle") and subsequently assigned by LaSalle to Lender. Subsequently, Borrower requested and Lender agreed to make an additional loan to Borrower in the original principal amount of $458,720.94, the repayment of which is evidenced by that certain Promissory Note dated of even date herewith (the "Sandwich Note"). Borrower has requested and Lender has agreed to make certain amendments to the Original Note and Sandwich Note, including changing the interest rate and the terms of payment, and consolidating the Original Note and the Sandwich Note. The Original Note and the Sandwich Note are being consolidated, amended and restated in their entirety to reflect such amendments State of Florida Documentary Stamp Tax and Nonrecurring Intangible Tax were paid on the Original Note and Sandwich Note. The Original Mortgage is concurrently being amended and restated pursuant to the terms of that certain Amended and Restated Mortgage, Assignment of Rents And Leases, Security Agreement and Fixture Filing of even date herewith (as so amended and restated, the "Mortgage"). NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrower and Lender agree that the Original Note is hereby amended and restated in its entirety as follows (as amended and restated, the "Note"): PROMISSORY NOTE Dated as of ______, 2002 $889,000.00 Scottsdale, Arizona FAMILY STEAK HOUSES OF FLORIDA, INC., a Florida corporation ("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 _______ , 2017 (the "Maturity Date"), the principal sum of $889,000.00, as herein provided. 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"). In addition, the following terms shall have the following meanings for all purposes of this Note: 1 "Adjustable Rate" means an annual interest rate equal to the sum of the Adjustable Rate Basis plus 3.75%; provided, however, the Adjustable Rate shall in no event ever be less than 7.34%. "Adjustable Rate Basis" means, for any Interest Period, the annual interest rate (rounded upwards, if necessary, to the nearest 1/100th of one percent) equal to the one month London Interbank Offered Rate ("LIBOR") on the Adjustable Rate Reset Date as published in The Wall Street Journal. If for any reason such rate is no longer published in The Wall Street Journal, Lender shall select such replacement index as Lender in its sole discretion determines most closely approximates such rate. "Adjustable Rate Reset Date" means the last Business Day of each calendar month, prior to the next Interest Period. "First Payment Date" means . "Interest Period" means (i) initially, the period beginning on the date of this Note and ending on the last day of the calendar month in which such date occurs, and (ii) thereafter, the period beginning on the first day of the calendar month and ending on the last day of such calendar month. "Payment Period" means (i) initially, the twelve month period beginning on the First Payment Date and ending on the day immediately prior to the first Payment Reset Date, and (ii) thereafter, the twelve month period beginning on each Payment Reset Date and ending on the day immediately prior to the next Payment Reset Date. "Payment Reset Calculation" means the level monthly payment calculated by the full amortization of the outstanding principal amount of this Note on the Payment Reset Date at the Adjustable Rate (with the definition of "Adjustable Rate Reset Date" defined to mean the last Business Day of the calendar month two months prior to the next Payment Reset Date) over the remaining originally scheduled term of this Note. "Payment Reset Date" means each anniversary of the First Payment Date. Borrower shall pay interest on the outstanding principal amount of this Note at the Adjustable Rate, determined monthly as described above, on the basis of a 360-day year for the actual number of days elapsed, in arrears, provided, that, 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. Commencing on the First Payment Date, Borrower shall pay consecutive monthly installments on the first day of each calendar month during the term of this Note prior to the Maturity Date. The monthly installments shall be level during a Payment Period. The initial level monthly payments for the first Payment Period shall be equal to $____________ until the first Payment Reset Date, at which time, and on each succeeding Payment Reset Date thereafter, the level monthly payment to be paid by Borrower shall be adjusted for the next succeeding Payment Period based on the Payment Reset Calculation. All outstanding principal and unpaid accrued interest shall be paid on the Maturity Date. 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 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 at the Adjustable Rate, 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 shall be applied as Lender in its sole discretion may determine. After application of any monthly payment in the above manner, in the event that the outstanding principal amount of this Note exceeds 110% of the original principal balance of this Note, Borrower shall prepay, without premium or penalty, on the first day of the next succeeding calendar month after each such occurrence, a principal amount equal to the difference between the outstanding principal balance of this Note and the original principal balance of this Note 2 (the "Negative Amortization Amount"). Lender shall notify Borrower in writing on or before the twenty-fifth day of each calendar month during the term of this Note of Lender's determination of the Negative Amortization Amount, if any, payable on the first day of the next succeeding calendar month. Lender shall also notify Borrower in writing on or before the twenty-fifth day of the calendar month prior to the next Payment Reset Date during the term of this Note of Lender's determination of the level monthly payment to be paid by Borrower based on the Payment Reset Calculation for the next Payment Period. 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 any of the Loan Documents or any Other Agreements and (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. This Note is secured by the Mortgage 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 (i) the highest rate for which the undersigned may legally contract, or (ii) the greater of 14% and the rate which is 6% per annum above the Adjustable Rate (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, Borrower shall pay to Lender, in addition to any other sum due Lender under this Note or any other Loan Document, a 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. 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 3 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. This obligation shall bind Borrower and its successors and assigns, and the benefits hereof shall inure to Lender and its successors and assigns. 4 IN WITNESS WHEREOF, Borrower has executed and delivered this Note effective as of the date first set forth above. BORROWER: FAMILY STEAK HOUSES OF FLORIDA, INC., a Florida corporation By __________________________ Name ________________________ Title _______________________ 5 EX-3 4 ryansex3.txt Exhibit 10.03 LOAN AGREEMENT THIS LOAN AGREEMENT (this "Agreement") is made as of , 2002 (the "Closing Date"), by and between GE CAPITAL FRANCHISE FINANCE CORPORATION, a Delaware corporation ("Lender"), FAMILY STEAK HOUSES OF FLORIDA, INC., a Florida corporation ("Borrower"). AGREEMENT: In consideration of the mutual covenants and provisions of this Agreement, the parties agree as follows: 1. Definitions. The following terms shall have the following meanings for all purposes of this Agreement: "ADA" means the Americans with Disabilities Act of 1990, as such act may be amended from time to time. "Affiliate" means any Person which directly or indirectly controls, is under common control with, or is controlled by any other Person. For purposes of this definition, "controls", "under common control with" and "controlled by" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities or otherwise. "Anti-Money Laundering Laws" means all applicable BSA laws, regulations and government guidance on BSA compliance and on the prevention and detection of money laundering violations under 18 U.S.C. ss ss 1956 and 1957, as amended. "Applicable Regulations" means all applicable statutes, regulations, rules, ordinances, codes, licenses, permits, orders and approvals of each Governmental Authority having jurisdiction over the Premises, including, without limitation, all health, building, fire, safety and other codes, ordinances and requirements, all applicable standards of the National Board of Fire Underwriters and the ADA and all policies or rules of common law, in each case, as amended, and any judicial or administrative interpretation thereof, including any judicial order, consent, decree or judgment applicable to any of the Borrower Parties. "Borrower Parties" means, collectively, Borrower and any guarantors of the Loans (including, in each case, any predecessors-in-interest). "BSA" means the Bank Secrecy Act (31 U.S.C. ss ss 5311 et. seq.), as amended. "Business Day" means any day on which Lender is open for business other than a Saturday, Sunday or a legal holiday, ending at 5:00 P.M. Phoenix, Arizona time. "Change of Control" means a change in control of any of the Borrower Parties, including, without limitation, a change in control resulting from direct or indirect transfers of voting stock or partnership, membership or other ownership interests, whether in one or a series of transactions. For purposes of this definition, "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of any of the Borrower Parties, as applicable, and a Change of Control will occur if any of the following occur: (i) any merger or consolidation by any of the Borrower Parties, as applicable, with or into any other entity; or (ii) if any "Person" as defined in Section 3(a)(9) of the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), and as used in Section 13(d) and 14(d) thereof, including a "group" as defined in Section 13(d) of the Exchange Act, who, subsequent to the Closing, becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), of securities of any of the Borrower Parties, as applicable, representing 50% or more of the combined voting power of Borrower's then outstanding securities (other than indirectly as a result of the redemption by any of the Borrower Parties, as applicable, of its securities). 1 "Closing" means the disbursement of the Loan Amount by Title Company as contemplated by this Agreement. "Code" means Title 11 of the United States Code, 11 U.S.C. Sec. 101 et seq., as amended. "Commitment" means that certain Commitment Letter dated August 19, 2002 between Lender and Borrower and any amendments or supplements thereto. "Default Rate" has the meaning set forth in the Note. "Environmental Condition" means any condition with respect to soil, surface waters, groundwaters, land, stream sediments, surface or subsurface strata, ambient air and any environmental medium comprising or surrounding the Premises, whether or not yet discovered, which would reasonably be expected to or does result in any damage, loss, cost, expense, claim, demand, order or liability to or against any of the Borrower Parties or Lender by any third party (including, without limitation, any Governmental Authority), including, without limitation, any condition resulting from the operation of business at the Premises and/or the operation of the business of any other property owner or operator in the vicinity of the Premises and/or any activity or operation formerly conducted by any person or entity on or off the Premises. "Environmental Indemnity Agreement" means the environmental indemnity agreement dated as of the date of this Agreement executed by Borrower for the benefit of the Indemnified Parties and such other parties as are identified in such agreement with respect to the Premises, as the same may be amended from time to time. "Environmental Insurer" means American International Specialty Lines Insurance Company, or such other environmental insurance company as Lender may select, and its successors and assigns. "Environmental Laws" means any present and future federal, state and local laws, statutes, ordinances, rules, regulations, orders, injunctions and decrees of Governmental Authorities and common law, relating to Hazardous Materials 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. ssss 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. ssss 6901 et seq.; the Clean Water Act, 33 U.S.C. ssss 1251 et seq.; the Clean Air Act, 42 U.S.C. ssss 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 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 the Premises by reason of the presence of Hazardous Materials or USTs in, on, under or above the Premises. "Environmental Lien" has the meaning set forth in Section 5.K(9). 2 "Environmental Policy" means the environmental insurance policy issued by Environmental Insurer to Lender with respect to the Premises, which Environmental Policy shall be in form and substance satisfactory to Lender in its sole discretion. "Event of Default" has the meaning set forth in Section 9. "FCCR Amount" has the meaning set forth in Section 9.A(7). "Fee" means an underwriting, site assessment, valuation, processing and commitment fee equal to 1% of the Loan Amount. "Fixed Charge Coverage Ratio" has the meaning set forth in Section 6.J. "Franchise Agreement" means the franchise, license and/or area development agreement with Franchisor for the conduct of business at the Premises as a Permitted Concept, together with all amendments, modifications and supplements thereto. "Franchisor" means Ryan's Properties, Inc. a Delaware corporation, and its successors. "Franchisor Certificate" has the meaning set forth in Section 4.H. "GAAP" means generally accepted accounting principles consistently applied. "Governmental Authority" means any governmental authority, agency, department, commission, bureau, board, instrumentality, court or quasi- governmental authority having jurisdiction or supervisory or regulatory authority over the Premises or any of the Borrower Parties. "Hazardous Materials" means (a) any toxic substance or hazardous waste, substance, solid waste or related material, or any pollutant or contaminant; (b) radon gas, asbestos in any form which is or could become friable, urea formaldehyde foam insulation, transformers or other equipment containing dielectric fluid having levels of polychlorinated biphenyls in excess of applicable standards established by any Governmental Authority, or any petroleum product or additive; (c) any substance, gas, material or chemical which is now or hereafter defined as or included in the definition of "hazardous substances," "toxic substances," "hazardous materials," "hazardous wastes," "regulated substances" or words of similar import under any Environmental Laws; and (d) any other chemical, material, gas or substance the exposure to or release of which is prohibited, limited or regulated by any Governmental Authority that asserts or may assert jurisdiction over the Premises or the operations or activity at the Premises, or any chemical, material, gas or substance that does or is reasonably likely to pose a hazard to the health and/or safety of the occupants of the Premises or the owners and/or occupants of property adjacent to or surrounding the Premises. "Indemnified Parties" means Lender, Environmental Insurer, the trustees under the Mortgage, if applicable, and any person or entity who is or will have been involved in the origination of the Loan, any person or entity who is or will have been involved in the servicing of the Loan, any person or entity in whose name the encumbrance created by the Mortgage is or will have been recorded, persons and entities who may hold or acquire or will have held a full or partial interest in the Loan (including, but not limited to, investors or prospective investors in any Securitization, Participation or Transfer, as well as custodians, trustees and other fiduciaries who hold or have held a full or partial interest in the Loan for the benefits of third parties), as well as the respective directors, officers, shareholders, partners, members, employees, lenders, agents, servants, representatives, contractors, subcontractors, affiliates, subsidiaries, participants, successors and assigns of any and all of the foregoing (including, but not limited to, any other person or entity who holds or acquires or will have held a participation or other full or partial interest in the Loan or the Premises, whether during the term of the Loan or as a part of or following a foreclosure of the Loan and including, but not limited to, any successors by merger, consolidation or acquisition of all or a substantial portion of Lender's assets and business). 3 "Indemnity Agreements" means all indemnity agreements executed for the benefit of any of the Borrower Parties or any prior owner, lessee or occupant of the Premises in connection with Hazardous Materials or USTs, including, without limitation, the right to receive payments under such indemnity agreements. "Lender Entities" means, collectively, Lender (including any predecessor- in-interest to Lender) and any Affiliate of Lender (including any Affiliate of any predecessor-in-interest to Lender). "Loan" means the loan for the Premises, described in Section 2. "Loan Amount" means $889,000. "Loan Documents" means, collectively, this Agreement, the Note, the Mortgage, the Environmental Indemnity Agreement, the UCC-1 Financing Statements and all other documents, instruments and agreements executed in connection therewith or contemplated thereby, as the same may be amended from time to time. "Loan Pool" means: (i) in the context of a Securitization, any pool or group of loans that are a part of such Securitization; (ii) in the context of a Transfer, all loans which are sold, transferred or assigned to the same transferee; and (iii) in the context of a Participation, all loans as to which participating interests are granted to the same participant. "Material Adverse Effect" means a material adverse effect on (i) the Premises, including, without limitation, the operation of the Premises as a Permitted Concept, or (ii) Borrower's ability to perform its obligations under the Loan Documents. "Mortgage" means the amended and restated mortgage dated as of the date of this Agreement executed by Borrower for the benefit of Lender with respect to the Premises. "Note" means the amended and restated promissory note dated as of the date of this Agreement in the Loan Amount evidencing the Loan, as the same may be amended, restated and/or substituted from time to time, including, without limitation, as a result of the payment of the FCCR Amount pursuant to Section 9. "Obligations" has the meaning set forth in the Mortgage. "Other Agreements" means, collectively, all agreements and instruments between, among or by (1) any of the Borrower Parties and/or any Affiliate of any of the Borrower Parties (including any Affiliate of any predecessor-in-interest to any of the Borrower Parties), and, or for the benefit of, (2) any of the Lender Entities, including, without limitation, promissory notes and guaranties; provided, however, the term "Other Agreements" shall not include the agreements and instruments defined as the Loan Documents. "Participation" means one or more grants by Lender or any of the other Lender Entities to a third party of a participating interest in notes evidencing obligations to repay secured or unsecured loans owned by Lender or any of the other Lender Entities or any or all servicing rights with respect thereto. "Permitted Amounts" means, with respect to any given level of Hazardous Materials, that level or quantity of Hazardous Materials in any form or combination of forms the presence, use, storage, release or handling of which does not constitute a violation of any Environmental Laws and is customarily employed in the ordinary course of, or associated with, similar businesses located in the state in which the Premises is located. 4 "Permitted Concept" means a Ryan's Steakhouse restaurant. "Permitted Exceptions" means those recorded easements, restrictions, liens and encumbrances set forth as exceptions in the title insurance policy issued by Title Company to Lender and approved by Lender in its sole discretion in connection with the closing of the Loan. "Person" means any individual, corporation, partnership, limited liability company, trust, unincorporated organization, Governmental Authority or any other form of entity. "Personal Property" has the meaning set forth in the Mortgage. "Premises" means the parcel or parcels of real estate described on Exhibit A attached hereto, together with all rights, privileges and appurtenances associated therewith and all buildings, fixtures and other improvements now or hereafter located thereon (whether or not affixed to such real estate) and the Personal Property. "Related Premises" means collectively, the Premises and, following such financings, all other premises financed by Lender pursuant to the Commitment. "Questionnaire" means the environmental questionnaire completed on behalf of the Borrower Parties with respect to the Premises and submitted to Environmental Insurer in connection with the issuance of the Environmental Policy. "Related Premises" means those properties (other than the Premises) which are the subject of mortgage loans from any of the Lender Entities to any of the Borrower Parties. "Release" means any presence, release, deposit, discharge, emission, leaking, spilling, seeping, migrating, injecting, pumping, pouring, emptying, escaping, dumping, disposing or other movement of Hazardous Materials or USTs. "Remediation" means any response, remedial, removal, or corrective action, any activity to clean up, detoxify, decontaminate, contain or otherwise remediate any Hazardous Materials or USTs required by any Environmental Law or any Governmental Authority, any actions to prevent, cure or mitigate any Release, any action to comply with any Environmental Laws or with any permits issued pursuant thereto, any inspection, investigation, study, monitoring, assessment, audit, sampling and testing, laboratory or other analysis, or any evaluation relating to any Hazardous Materials or USTs. "Restoration" has the meaning set forth in the Mortgage. "Securitization" means one or more sales, dispositions, transfers or assignments by Lender or any of the other Lender Entities to a special purpose corporation, trust or other entity identified by Lender or any of the other Lender Entities of notes evidencing obligations to repay secured or unsecured loans owned by Lender or any of the other Lender Entities (and, to the extent applicable, the subsequent sale, transfer or assignment of such notes to another special purpose corporation, trust or other entity identified by Lender or any of the other Lender Entities), and the issuance of bonds, certificates, notes or other instruments evidencing interests in pools of such loans, whether in connection with a permanent asset securitization or a sale of loans in anticipation of a permanent asset securitization. Each Securitization shall be undertaken in accordance with all requirements which may be imposed by the investors or the rating agencies involved in each such sale, disposition, transfer or assignment or which may be imposed by applicable securities, tax or other laws or regulations. "Substitute Documents" has the meaning set forth in Section 11. "Substitute Premises" means one or more parcels of real estate substituted for the Premises in accordance with the requirements of Section 11, together 5 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. "Terrorism Laws" means Executive Order 13224 issued by the President of the United States of America, the Terrorism Sanctions Regulations (Title 31 Part 595 of the U.S. Code of Federal Regulations), the Terrorism List Governments Sanctions Regulations (Title 31 Part 596 of the U.S. Code of Federal Regulations), the Foreign Terrorist Organizations Sanctions Regulations (Title 31 Part 597 of the U.S. Code of Federal Regulations), and the Cuban Assets Control Regulations (Title 31 Part 515 of the U.S. Code of Federal Regulations), and all other present and future federal, state and local laws, ordinances, regulations, policies, lists and any other requirements of any Governmental Authority (including, without limitation, the United States Department of the Treasury Office of Foreign Assets Control) addressing, relating to, or attempting to eliminate, terrorist acts and acts of war, each as hereafter supplemented, amended or modified from time to time, and the present and future rules, regulations and guidance documents promulgated under any of the foregoing, or under similar laws, ordinances, regulations, policies or requirements of other states or localities. "Threatened Release" means a substantial likelihood of a Release which requires action to prevent or mitigate damage to the soil, surface waters, groundwaters, land, stream sediments, surface or subsurface strata, ambient air or any other environmental medium comprising or surrounding the 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. "USTs" means any one or combination of below or above ground tanks and associated piping systems used in connection with the storage, dispensing and general use of petroleum and petroleum-based substances. 2. Transaction. On the terms and subject to the conditions set forth in the Loan Documents, Lender shall make the Loan. The Loan will be evidenced by the Note and secured by the Mortgage. Borrower shall repay the outstanding principal amount of the Loan together with interest thereon in the manner and in accordance with the terms and conditions of the Note and the other Loan Documents. The Loan shall be advanced at the Closing in cash or otherwise immediately available funds subject to any prorations and adjustments required by this Agreement. 3. Escrow Agent. Borrower and Lender hereby employ Title Company to act as escrow agent in connection with the transaction described in this Agreement. Borrower and Lender will deliver to Title Company all documents, pay to Title Company all sums and do or cause to be done all other things necessary or required by this Agreement, in the reasonable judgment of Title Company, to enable Title Company to comply herewith and to enable any title insurance policy provided for herein to be issued. Title Company shall not cause the transaction to close unless and until it has received written instructions from Lender and Borrower to do so. Title Company is authorized to pay, from any funds held by it for Lender's or Borrower's respective credit all amounts necessary to procure the delivery of such documents and to pay, on behalf of Lender and Borrower, all charges and obligations payable by them, respectively. Borrower will pay all charges payable by it to Title Company. Title Company is authorized, in the event any conflicting demand is made upon it concerning these instructions or the escrow, at its election, to hold any documents and/or funds deposited hereunder until an action shall be brought in a court of competent jurisdiction to determine the rights of Borrower and Lender or to interplead such documents and/or funds in an action brought in any such court. Deposit by Title Company 6 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 the Premises a preliminary title report and irrevocable commitment to insure title in the amount of the Loan, by means of a mortgagee's ALTA extended coverage policy of title insurance (or its equivalent, in the event such form is not issued in the jurisdiction where the Premises is located) issued by Title Company showing Borrower vested with good and marketable fee title in the real property comprising the Premises, committing to insure Lender's first priority lien upon and security interest in such real property subject only to Permitted Exceptions, and containing such endorsements as Lender may require. B. Survey. Lender acknowledges that it is in possession of a current ALTA survey of the Premises or its equivalent, the form and substance of which is satisfactory to Lender. Lender shall have obtained a flood certificate indicating that the location of the Premises is not within the 100-year flood plain or identified as a special flood hazard area as defined by the Federal Emergency Management Agency, or if the Premises is in such a flood plain or special flood hazard area, Borrower shall have provided Lender with evidence of flood insurance maintained on the Premises in an amount and on terms and conditions reasonably satisfactory to Lender. C. Environmental. Lender shall have completed such environmental due diligence of the Premises as it deems necessary or advisable in its sole discretion, including, without limitation, receiving an Environmental Policy with respect to the Premises, and Lender shall have approved the environmental condition of the Premises in its sole discretion. D. Compliance With Representations, Warranties and Covenants. All of the representations and warranties set forth in Section 5 shall be true, correct and complete as of the Closing Date, and Borrower shall be in compliance with each of the covenants set forth in Section 6 as of the Closing Date. No event shall have occurred or condition shall exist or information shall have been disclosed by Borrower or discovered by Lender which has had or would be reasonably likely to have a material adverse effect on the Premises, any of the Borrower Parties or Lender's willingness to consummate the transaction contemplated by this Agreement, as determined by Lender in its sole and absolute discretion. E. Proof of Insurance. Borrower shall have delivered to Lender certificates of insurance and copies of insurance policies showing that all insurance required by the Loan Documents and providing coverage and limits satisfactory to Lender are in full force and effect. F. Legal Opinions. Borrower shall have delivered to Lender such legal opinions as Lender may reasonably require all in form and substance reasonably satisfactory to Lender and its counsel. 7 G. Fee and Closing Costs. Borrower shall have paid the Fee to Lender and shall have paid all costs of the transactions described in this Agreement, including, without limitation, the cost of title insurance premiums and all endorsements required by Lender, survey charges, UCC and litigation search charges, the attorneys' fees of Borrower, reasonable attorneys' fees and expenses of Lender, the cost of the environmental due diligence undertaken pursuant to Section 4.C, including, without limitation, the cost of the Environmental Policy, Lender's site inspection costs and fees, stamp taxes, mortgage taxes, transfer fees, escrow, filing and recording fees and UCC filing and recording fees (including preparation, filing and recording fees for UCC continuation statements). Borrower shall have also paid all real and personal property and other applicable taxes and assessments and other charges relating to the Premises which are due and payable on or prior to the Closing Date as well as taxes and 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. Franchise Agreement. Lender shall have received a certificate (the "Franchisor Certificate") from Franchisor in form and substance acceptable to Lender which provides that the Franchise Agreement is valid, binding and in full force and effect and no events have occurred which could constitute a default thereunder, and, to the extent Franchisor has a right of first refusal in the Franchise Agreement that extends to the sale, transfer or conveyance of the Premises, Franchisor waives all such rights of first refusal set forth in the Franchise Agreement as to Lender and its successors and assigns. I. Closing Documents. At or prior to the Closing Date, Lender and/or the Borrower Parties, as may be appropriate, shall have executed and delivered or shall have caused to be executed and delivered to Lender, or as Lender may otherwise direct, the Loan Documents and such other documents, payments, instruments and certificates, as Lender may require in form acceptable to Lender.Upon fulfillment or waiver of all of the above conditions, Lender shall deposit funds necessary to close this transaction with the Title Company and this transaction shall close in accordance with the terms and conditions of this Agreement. 5. Representations and Warranties of Borrower. The representations and warranties of Borrower contained in this Section are being made by Borrower as of the Closing Date to induce Lender to enter into this Agreement and consummate the transactions contemplated herein and shall survive the Closing. Borrower represents and warrants to Lender (and Environmental Insurer solely with respect to Section 5.K) as follows: A. Financial Information. Borrower has delivered to Lender certain financial statements and other information concerning the Borrower Parties in connection with the transaction described in this Agreement (collectively, the "Financial Information"). The Financial Information is true, correct and complete in all material respects; there have been no amendments to the Financial Information since the date such Financial Information was prepared or delivered to Lender. Borrower understands that Lender is relying upon the Financial Information and Borrower represents that such reliance is reasonable. All financial statements included in the Financial Information were prepared in accordance with GAAP and fairly present as of the date of such financial statements the financial condition of each individual or entity to which they pertain. No change has occurred with respect to the financial condition of any of the Borrower Parties and/or the Premises as reflected in the Financial Information which has not been disclosed in writing to Lender or has had, or could reasonably be expected to result in, a Material Adverse Effect. B. Organization and Authority. Each of the Borrower Parties (other than individuals), as applicable, is duly organized or formed, validly existing and in good standing under the laws of its state of incorporation or formation. Borrower is qualified as a foreign corporation, partnership or limited liability company, as applicable, to do business in the state where the Premises is located and each of the Borrower Parties is qualified as a foreign corporation, partnership or limited liability company, as applicable, to do business in any other jurisdiction where the failure to be qualified would reasonably be expected to result in a Material Adverse Effect. All necessary action has been taken to authorize the execution, delivery and performance by the Borrower Parties of this Agreement and the other Loan Documents. The person(s) who have executed this Agreement on behalf of Borrower are duly authorized so to do. 8 Borrower is not a "foreign corporation", "foreign partnership", "foreign trust", "foreign estate" or "foreign person" (as those terms are defined by the Internal Revenue Code of 1986, as amended). Borrower's U.S. Federal Tax Identification number, Organization Identification number and principal place of business are correctly set forth on the signature page of this Agreement. None of the Borrower Parties, and no individual or entity owning directly or indirectly any interest in any of the Borrower Parties, is an individual or entity whose property or interests are subject to being "blocked" under any of the Terrorism Laws or is otherwise in violation of any of the Terrorism Laws. C. Enforceability of Documents. Upon execution by the Borrower Parties, this Agreement and the other Loan Documents shall constitute the legal, valid and binding obligations of the Borrower Parties, enforceable against the Borrower Parties in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, liquidation, reorganization and other laws affecting the rights of creditors generally and general principles of equity. D. Litigation. There are no suits, actions, proceedings or investigations pending, or to the best of its knowledge, threatened against or involving the Borrower Parties or the Premises before any arbitrator or Governmental Authority, except for such suits, actions, proceedings or investigations which, individually or in the aggregate, have not had, and would not reasonably be expected to result in, a Material Adverse Effect. E. Absence of Breaches or Defaults. The Borrower Parties are not, and the authorization, execution, delivery and performance of this Agreement and the other Loan Documents will not result, in any breach or default under any other document, instrument or agreement to which any of the Borrower Parties is a party or by which any of the Borrower Parties, the Premises or any of the property of any of the Borrower Parties is subject or bound, except for such breaches or defaults which, individually or in the aggregate, have not had, and would not reasonably be expected to result in, a Material Adverse Effect. The authorization, execution, delivery and performance of this Agreement and the other Loan Documents will not violate any applicable law, statute, regulation, rule, ordinance, code, rule or order. The Premises is not subject to any right of first refusal, right of first offer or option to purchase or lease granted to a third party. F. Utilities. Adequate public utilities are available at the Premises to permit utilization of the Premises as a Permitted Concept and all utility connection fees and use charges will have been paid in full prior to delinquency. G. Zoning; Compliance With Laws. The Premises is in compliance with all applicable zoning requirements, and the use of the Premises as a Permitted Concept does not constitute a nonconforming use under applicable zoning requirements. The Borrower Parties and the Premises are in compliance with all Applicable Regulations except for such noncompliance, which has not had, and would not reasonably be expected to result in, a Material Adverse Effect. H. Area Development; Wetlands. No condemnation or eminent domain proceedings affecting the Premises have been commenced or, to the best of Borrower's knowledge, are contemplated. Neither the Premises nor, to the best of Borrower's knowledge, the real property bordering the Premises are designated by any Governmental Authority as a wetlands. I. Licenses and Permits; Access. All required licenses and permits, both governmental and private, to use and operate the Premises as a Permitted Concept are in full force and effect, except for such licenses and permits the failure of which to obtain has not had, and would not reasonably be expected to result in, a Material Adverse Effect. Adequate rights of access to public roads and ways are available to the Premises for unrestricted ingress and egress and otherwise to permit utilization of the Premises for their intended purposes, and all such public roads and ways have been completed and dedicated to public use. J. Condition of Premises. The Premises, including the Personal Property, is in good condition and repair and well-maintained, ordinary wear and tear excepted, fully equipped and operational, free from structural defects, safe and properly lighted. 9 K. Environmental. Except as disclosed in the Questionnaire: (1) Neither the Premises nor any of the Borrower Parties are in violation of, or subject to, any pending or, to Borrower's actual knowledge, threatened investigation or inquiry by any Governmental Authority or to any remedial obligations under any Environmental Laws, and this representation and warranty would continue to be true and correct following disclosure to the applicable Governmental Authorities of all relevant facts, conditions and circumstances, if any, pertaining to the Premises; (2) All permits, licenses or similar authorizations required to construct, occupy, operate or use any buildings, improvements, fixtures and equipment forming a part of the Premises by reason of any Environmental Laws have been obtained; (3) No Hazardous Materials have been used, handled, manufactured, generated, produced, stored, treated, processed, transferred, disposed of or otherwise Released in, on, under, from or about the Premises, except in Permitted Amounts; (4) The Premises does not contain Hazardous Materials, except in Permitted Amounts, and all USTs located on or about the Premises, if any, are in full compliance with all Environmental Laws; (5) There is no threat of any Release migrating to the Premises in excess of Permitted Amounts; (6) There is no past or present non-compliance with Environmental Laws, or with permits issued pursuant thereto, in connection with the Premises; (7) None of the Borrower Parties has received any written or oral notice or other communication from any person or entity (including but not limited to a Governmental Authority) relating to Hazardous Materials or 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 the Premises, or any actual or potential administrative or judicial proceedings in connection with any of the foregoing; (8) All information known to any of the Borrower Parties or contained in the files of any of the Borrower Parties relating to any Environmental Condition or Releases of Hazardous Materials in, on, under or from the Premises, other than in Permitted Amounts, has been provided to Lender, including, without limitation, information relating to all prior Remediation; (9) The Premises has been kept free and clear of all liens and other encumbrances imposed pursuant to any Environmental Law (the "Environmental Liens"); and none of the Borrower Parties has allowed any tenant or other user of the Premises to do any act that materially increased the dangers to human health or the environment, posed an unreasonable risk of harm to any person or entity (whether on or off the Premises), impaired the value of the Premises in any material respect, is contrary to any requirement of any insurer, constituted a public or private nuisance, constituted waste, or violated any covenant, condition, agreement or easement applicable to the Premises; (10) The information and disclosures in the Questionnaire are true, correct and complete in all material respects, and the person or persons executing the Questionnaire were duly authorized to do so. Lender has charged Borrower a fee for the Environmental Policy. Borrower acknowledges that the Environmental Policy is for the sole protection of Lender and will not protect Borrower or provide Borrower with any coverage thereunder. Borrower acknowledges and agrees that Environmental Insurer may rely on the environmental representations and warranties set forth in this subsection K, that Environmental Insurer is an intended third-party beneficiary of such representations and warranties and that Environmental Insurer shall have all 10 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 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. Borrower is the owner of all 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 Premises pursuant to the Mortgage and the UCC-1 Financing Statements. M. No Mechanics' Liens. There are no delinquent accounts payable or mechanics' liens in favor of any materialman, laborer, or any other person or entity in connection with labor or materials furnished to or performed on any portion of the Premises; and no work has been performed or is in progress nor have materials been supplied to the Premises or agreements entered into for work to be performed or materials to be supplied to the Premises prior to the date hereof, which will be delinquent on or before the Closing Date. N. Franchisor Provisions. Borrower has delivered to Lender a true, correct and complete copy of the Franchise Agreement. The Franchise Agreement is the only agreement in effect with Franchisor with respect to the Premises. The Franchise Agreement is in full force and effect and constitutes the legal, valid and binding obligations of the parties to the Franchise Agreement enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, liquidation, reorganization and other laws affecting the rights of creditors generally and general principles of equity. None of the Borrower Parties has assigned, transferred, mortgaged, hypothecated or otherwise encumbered the Franchise Agreement or any rights thereunder or any interest therein, and none of the Borrower Parties has received any notice that Franchisor has made any assignment, pledge or hypothecation of all or any part of its rights or interest in the Franchise Agreement. No notice of default from Franchisor has been received under the Franchise Agreement which has not been cured and no notice of default to Franchisor has been given under the Franchise Agreement, which has not been cured. No event has occurred and no condition exists which, with the giving of notice or the lapse of time or both, would constitute a default under the Franchise Agreement. O. Money Laundering. (1) Borrower has taken all reasonable measures, in accordance with all applicable Anti-Money Laundering Laws, with respect to each holder of a direct or indirect interest in the Borrower Parties, to assure the funds invested by such holders in the Borrower Parties are derived from legal sources. (2) To Borrower's knowledge after making due inquiry, neither any of the Borrower Parties nor any holder of a direct or indirect interest in the Borrower Parties (a) is under investigation by any Governmental Authority for, or has been charged with or convicted of, any violation of any Anti-Money Laundering Laws, or drug trafficking, terrorist-related activities or other money laundering predicated crimes or a violation of the BSA, (b) has been assessed civil penalties under these or related laws, or (c) has had any of its funds seized or forfeited in an action under these or related laws. (3) Borrower has taken reasonable steps, consistent with industry practice for comparable organizations and in any event as required by law, to ensure that the Borrower Parties are and shall be in compliance with all Anti- Money Laundering Laws and laws, regulations, and government guidance for the prevention of terrorism, terrorist financing and drug trafficking. 6. Covenants. Borrower covenants to Lender (and Environmental Insurer solely with respect to Section 6.F) from and after the Closing Date and until all of the Obligations are satisfied in full, as follows: A. Payment of the Note. Borrower shall punctually pay, or cause to be paid, the principal, interest and all other sums to become due in respect of the Note and the other Loan Documents in accordance with the Note and the other Loan Documents. Borrower shall authorize Lender to establish arrangements whereby 11 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 the Premises and title to the Personal Property and the remainder of the Premises, free and clear of all liens, encumbrances, charges and other exceptions to title, except the Permitted Exceptions. Lender shall have a valid first lien upon and security interest in the Premises, including the Personal Property, pursuant to the Mortgage and the UCC-1 Financing Statements. C. Organization and Status of Borrower; Preservation of Existence. Each of the Borrower Parties (other than individuals), as applicable, shall be validly existing and in good standing under the laws of its state of incorporation or formation. Borrower shall be qualified as a foreign corporation, partnership or limited liability company to do business in the state where the Premises is located, and each of the Borrower Parties shall be qualified as a foreign corporation, partnership or limited liability company in any other jurisdiction where the failure to be qualified would reasonably be expected to result in a Material Adverse Effect. Borrower shall preserve its current form of organization and shall not change its legal name, its state of formation, nor, in one transaction or a series of related transactions, merge with or into, or consolidate with, any other entity without providing, in each case, Lender with 30 days' prior written notice and obtaining Lender's prior written consent (to the extent such consent is required under Section 7 of this Agreement). In addition, Borrower shall require, and shall take reasonable measures to comply with the requirement, that no individual or entity owning directly or indirectly any interest in any of the Borrower Parties is an individual or entity whose property or interests are subject to being blocked under any of the Terrorism Laws or is otherwise in violation of any of the Terrorism Laws. D. Licenses and Permits. All required licenses and permits, both governmental and private, to use and operate the Premises as a Permitted Concept shall be maintained in full force and effect. E. Compliance With Laws Generally. The use and occupation of the Premises, and the condition thereof, including, without limitation, any Restoration, shall comply with all Applicable Regulations now or hereafter in effect. In addition, the Borrower Parties shall comply with all Applicable Regulations now or hereafter in effect, including, without limitation, the Terrorism Laws and Anti-Money Laundering Laws. Without limiting the generality of the other provisions of this Section, Borrower shall comply with the ADA, and all regulations promulgated thereunder, as it affects the Premises. F. Compliance With Environmental Laws. (1) The Premises, the Borrower Parties and any other operator or user of the Premises shall not be in violation of or subject to any investigation or inquiry by any Governmental Authority or subject to any Remediation obligations under any Environmental Laws. (2) All uses and operations on or of the Premises, whether by Borrower or any other person or entity, shall be in compliance with all Environmental Laws and permits issued pursuant thereto. (3) There shall be no Releases or Hazardous Materials in, on, under or from the Premises, except in Permitted Amounts. (4) Borrower shall keep the Premises, or cause the Premises to be kept, free and clear of all Environmental Liens. (5) Borrower shall not do or allow any tenant or other user of the Premises to do any act that (a) materially increases the dangers to human health or the environment, (b) poses an unreasonable risk of harm to any person or entity (whether on or off the Premises), (c) impairs or is reasonably likely to impair the value of the Premises, (d) is contrary to any requirement of any insurer, (e) constitutes a public or private nuisance or constitutes waste, or (f) violates any covenant, condition, agreement or easement applicable to the Premises. 12 (6) Borrower shall immediately notify Lender in writing upon Borrower obtaining actual knowledge of: (a) any presence of Releases or Threatened Releases in, on, under, from or migrating towards the Premises, in excess of Permitted Amounts, including, without limitation, the presence on or under the 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 the Premises; (c) any Environmental Lien or any act or omission which could reasonably be expected to result in the imposition of an Environmental Lien; (d) any required or proposed Remediation of environmental conditions relating to the Premises, including, without limitation, any and all enforcement, clean-up, remedial, removal or other governmental or regulatory actions threatened, instituted or completed pursuant to any of the Environmental Laws affecting the Premises; (e) any written or oral notice or other communication of which any of the Borrower Parties becomes aware from any source whatsoever (including but not limited to a Governmental Authority) relating in any way to Hazardous Materials, USTs or Remediation thereof, possible liability of any person or entity pursuant to any Environmental Law, other environmental conditions in connection with the Premises, or any actual or potential administrative or judicial proceedings in connection with anything referred to in this Agreement; or (f) any investigation or inquiry initiated by any Governmental Authority relating to the Environmental Condition of the Premises. (7) If required by any Environmental Law or upon any reasonable suspicion by Borrower or Lender of a Release, a Threatened Release or a violation of any Environmental Law, Borrower shall, at its sole cost and expense: (a) perform any environmental site assessment or other investigation of environmental conditions in connection with the Premises as may be reasonably requested by Lender (including but not limited to sampling, testing and analysis of soil, water, air, building materials and other materials and substances whether solid, liquid or gas), and share with Lender and Environmental Insurer the reports and other results thereof, and Lender, Environmental Insurer and other Indemnified Parties shall be entitled to rely on such reports and other results thereof; and (b) have the Premises inspected as may be required by any Environmental Laws for seepage, spillage and other environmental concerns. (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 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. 13 (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 the Premises during normal business hours or at any time in the event of an emergency (including without limitation in connection with any Securitization, Participation or Transfer contemplated by this Agreement or in connection with the exercise of any remedies set forth in the Mortgage or the other Loan Documents) to assess any and all aspects of the environmental condition of the Premises and its use, including but not limited to conducting any environmental assessment or audit (the scope of which shall be determined in Lender's sole and absolute discretion) and taking samples of soil, groundwater or other water, air, or building materials, and conducting other invasive testing. Borrower shall cooperate with and provide access to Lender, Environmental Insurer and any such person or entity designated by Lender. Any such assessment and investigation shall be at Borrower's sole cost and expense if, at the time Lender undertakes such assessment or investigation, Lender has a reasonable basis for believing that a Release has occurred at the Premises in excess of Permitted Amounts or if an Event of Default has occurred and is continuing. Otherwise, any such assessment and investigation shall be at Lender's sole cost and expense. G. Financial Statements. Within 45 days after the end of each fiscal quarter and within 120 days after the end of each fiscal year of Borrower, Borrower shall deliver to Lender (a) complete financial statements of the Borrower Parties including a balance sheet, profit and loss statement, statement of cash flows and all other related schedules for the fiscal period then ended; (b) income statements for the business at the Premises; and (c) such other financial information as Lender may reasonably request in order to establish compliance with the financial covenants in the Loan Documents, including, without limitation, Section 6.J of this Agreement. All such financial statements shall be prepared in accordance with GAAP from period to period, and shall be certified to be accurate and complete by Borrower (or the Treasurer or other appropriate officer of Borrower). In the event the property and business at the Premises is ordinarily consolidated with other business for financial statement purposes, such financial statements shall be prepared on a consolidated basis showing separately the sales, profits and losses, pertaining to the Premises with the basis for allocation of overhead of other charges being clearly set forth. The financial statements delivered to Lender need not be audited, but Borrower shall deliver to Lender copies of any audited financial statements of Borrower which may be prepared, as soon as they are available. Borrower shall also cause to be delivered to Lender copies of any financial statements required to be delivered to Borrower by any tenants of the Premises. H. Lost Note. Borrower shall, if the Note is mutilated, destroyed, lost or stolen (a "Lost Note"), promptly deliver to Lender, upon receipt from Lender of an affidavit and indemnity in a form reasonably acceptable to Lender and Borrower stipulating that the Note has been mutilated, destroyed, lost or stolen, in substitution therefor, a new promissory note containing the same terms and conditions as such Lost Note with a notation thereon of the unpaid principal and accrued and unpaid interest. Borrower shall provide fifteen (15) days' prior notice to Lender before making any payments to third parties in connection with a Lost Note. I. Inspections. Borrower shall, during normal business hours (or at any time in the event of an emergency), (1) provide Lender and Lender's officers, employees, agents, advisors, attorneys, accountants, architects, and engineers with access to the Premises, all drawings, plans, and specifications for the Premises in possession of the Borrower Parties, all engineering reports relating to the Premises in the possession of the Borrower Parties, the files, correspondence and documents relating to the Premises, and the financial books and records, including lists of delinquencies, relating to the ownership, operation, and maintenance of the Premises (including, without limitation, any of the foregoing information stored in any computer files), (2) allow such persons to make such inspections, tests, copies, and verifications as Lender considers necessary, and (3) if Borrower is in breach of the Fixed Charge Coverage Ratio requirement set forth in the following subsection J, pay expenses reasonably incurred by Lender from time to time in conducting such inspections, tests, copies and verifications upon demand (such amounts to bear interest at the Default Rate if not paid upon demand until paid). J. Fixed Charge Coverage Ratio. Commencing on January 1, 2003, Borrower shall maintain an aggregate Fixed Charge Coverage Ratio at all of the Related 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 14 Coverage Ratio" shall mean with respect to the twelve month period of time immediately preceding the date of determination, the ratio calculated for such period of time, each as determined in accordance with GAAP, of (a) the sum of Net Income, Depreciation and Amortization, Interest Expense and Operating Lease Expense, less a corporate overhead allocation in an amount equal to 5% of Gross Sales (or, with respect to the Related Premises located in Neptune Beach, Florida (the "Neptune Premises"), $0), 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 Related 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. "Debt" shall mean as directly related to all of the Related 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 leases which should be, in accordance with GAAP, accounted for 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 with respect to all of the Related Premises the depreciation and amortization accruing during any period of determination with respect to Borrower as determined in accordance with GAAP. "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 Related Premises and (ii) all loans secured by equipment located at one or more of the Related Premises. "Gross Sales" shall mean the sales or other income arising from all business conducted at all of the Related Premises during the period of determination, less sales tax and any amounts received from not-for-profit sales of all non-food items approved for use in connection with promotional campaigns, if any, pursuant to the applicable franchise agreements. "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 allocable to one or more of the Related 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 in favor of Lender with respect to the Related Premises. "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 Related Premises. In determining the amount of Net Income, (i) adjustments shall be made for nonrecurring gains and losses allocable to 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, as determined in accordance with GAAP, or (y) corporate overhead expense allocable to the period of determination. 15 "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 Related Premises and the business operations thereon during the period of determination, as determined in accordance with GAAP. 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. Corporate Fixed Charge Coverage Ratio. Borrower shall maintain a Corporate Fixed Charge Coverage Ratio of at least 1.25:1, determined as of the last day of each fiscal year of Borrower. For purposes of this Section, the term "Corporate Fixed Charge Coverage Ratio" shall mean with respect to the twelve month period of time immediately preceding the date of determination, the ratio calculated for such period of time, each as determined in accordance with GAAP, of (a) the sum of Net Income, Depreciation and Amortization, Interest Expense and Operating Lease Expense, minus income taxes or charges equivalent to income taxes allocable to the period of determination, to (b) the sum of Operating Lease Expense, scheduled principal payments of long term Debt, scheduled maturities of all Capital Leases and Interest Expense (excluding non- cash interest expense and amortization of non-cash financing expenses). For purposes of this Section, the following terms shall be defined as set forth below: "Capital Lease" shall mean all leases of any property, whether real, personal or mixed, by Borrower or any of the other Borrower Parties, as applicable, which lease would, in conformity with GAAP, be required to be accounted for as a capital lease on the balance sheet of Borrower. The term "Capital Lease" shall not include any operating lease. "Debt" shall mean with respect to Borrower and the other Borrower Parties, collectively, and for the period of determination (i) indebtedness for borrowed money, (ii) obligations evidenced by bonds, indentures, notes or similar instruments, (iii) obligations to pay the deferred purchase price of property or services, (iv) obligations under leases which should be, in accordance with GAAP, recorded as Capital Leases, and (v) obligations under direct or indirect guarantees in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (i) through (iv) above. "Depreciation and Amortization" shall mean the depreciation and amortization accruing during any period of determination with respect to Borrower and the other Borrower Parties, collectively, as determined in accordance with GAAP. "Interest Expense" shall mean for any period of determination, the sum of all interest accrued or which should be accrued in respect of all Debt of Borrower and the other Borrower Parties, collectively, as determined in accordance with GAAP. "Net Income" shall mean with respect to the period of determination, the net income or net loss of Borrower and the other Borrower Parties, collectively. In determining the amount of Net Income, (i) adjustments shall be made for nonrecurring gains and losses or non-cash items allocable to the period of determination, (ii) deductions shall be made for, among other things, Depreciation and Amortization, Interest Expense, Operating Lease Expense and actual corporate overhead expense allocable to the period of determination, and (iii) no deductions shall be made for income taxes or charges equivalent to income taxes allocable to the period of determination, as determined in accordance with GAAP. 16 "Operating Lease Expense" shall mean the sum of all payments and expenses incurred by Borrower and the other Borrower Parties, collectively, under any operating leases during the period of determination, as determined in accordance with GAAP. N. Franchise Agreement. The Franchise Agreement shall be maintained in full force and effect. No event shall occur nor shall any condition exist which, with the giving of notice or the lapse of time or both, would constitute a breach or default under the Franchise Agreement. Borrower shall give prompt notice to Lender of any claim of default by or to the franchisee under the Franchise Agreement and shall provide Lender with a copy of any default notice given or received by the franchisee under the Franchise Agreement and any information submitted or referenced in support of such claim of default. Borrower shall also give prompt notice to Lender of any extensions or renewals of the Franchise Agreement and the expiration or termination of the Franchise Agreement. O. Terrorism Law Policies. Borrower shall adopt and maintain adequate policies, procedures and controls to ensure that the Borrower Parties are in compliance with all Terrorism Laws ("Borrower Terrorism Laws Policies"), which Borrower Terrorism Laws Policies shall be satisfactory to Lender in its reasonable discretion. Borrower shall immediately notify Lender in writing if any individual or entity owning directly or indirectly any interest in any of the Borrower Parties or any director, officer, member, manager or partner of any such holders is an individual or entity whose property or interests are subject to being blocked under any of the Terrorism Laws or is otherwise in violation of any of the Terrorism Laws, or is under investigation by any Governmental Authority 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. Borrower further agrees to make the Borrower Terrorism Laws Policies, together with the information collected thereby concerning the Borrower Parties or any individual or entity owning directly or indirectly any interest in any of the Borrower Parties, available to Lender upon request. 7. Prohibition on Change of Control and Pledge. Without limiting the terms and conditions of Section 3.09 of the Mortgage, Borrower agrees that, from and after the Closing Date and until all of the Obligations are satisfied in full, without the prior written consent of Lender: (1) no Change of Control shall occur; and (2) no interest in any of the Borrower Parties shall be pledged, encumbered, hypothecated or assigned as collateral for any obligation of any of the Borrower Parties (each, a "Pledge"). In addition, no interest in any of the Borrower Parties, or in any individual or person owning directly or indirectly any interest in any of the Borrower Parties, shall be transferred, assigned or conveyed to any individual or person whose property or interests are subject to being blocked under any of the Terrorism Laws and/or who is in violation of any of the Terrorism Laws, 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 Terrorism Laws or is otherwise in violation of the Terrorism Laws, and (B) the transferee has taken reasonable measures to assure that any individual or entity who owns directly or indirectly an interest in transferee, is not an individual or entity whose property or interests are subject to being blocked under any of the Terrorism Laws or is otherwise in violation of the Terrorism Laws. Lender's consent to a Change of Control and/or Pledge shall be subject to the satisfaction of such conditions as Lender shall determine in its sole discretion, including, without limitation, (i) the execution and delivery of such modifications to the terms of the Loan Documents as Lender shall request, (ii) the proposed Change of Control and/or Pledge having been approved by each of the rating agencies which have issued ratings in connection with any Securitization of the Loan as well as any other rating agency selected by Lender, and (iii) the proposed transferee having agreed to comply with all of the terms and conditions of the Loan Documents (including any modifications requested by Lender pursuant to clause (i) above). In addition, any such consent shall be conditioned upon payment by Borrower to Lender of (x) a fee equal to one percent (1%) of the then outstanding principal balance of the Note and (y) all out-of-pocket costs and expenses incurred by Lender in connection with such consent, including, without limitation, reasonable attorneys' fees. Lender shall not be required to demonstrate any actual impairment of its security or any increased risk of default hereunder in order to declare the Obligations immediately due and payable upon a Change of Control or Pledge in violation of this Section. The provisions of this Section shall apply to every Change of Control or Pledge regardless of whether voluntary or not, or whether or not Lender has consented to any previous Change of Control or Pledge. 17 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. B. It is the intent of the parties hereto that the business relationship created by the Loan Documents is solely that of creditor and debtor and has been entered into by both parties in reliance upon the economic and legal bargains contained in the Loan Documents. None of the agreements contained in the Loan Documents is intended, nor shall the same be deemed or construed, to create a partnership (either de jure or de facto) between Borrower and Lender, to make them joint venturers, to make Borrower an agent, legal representative, partner, subsidiary or employee of Lender, nor to make Lender in any way responsible for the debts, obligations or losses of Borrower. 9. Default and Remedies. A. Each of the following shall be deemed an event of default by Borrower (each, an "Event of Default"): (1) If any representation or warranty of any of the Borrower Parties set forth in any of the Loan Documents is false in any material respect, or if any of the Borrower Parties renders any statement or account which is false in any material respect. (2) If any principal, interest or other monetary sum due under the Note, the Mortgage or any other Loan Document is not paid within five days after the date when due; provided, however, notwithstanding the occurrence of such an Event of Default, Lender shall not be entitled to exercise its rights and remedies set forth below unless and until Lender shall have given Borrower notice thereof and a period of five days from the delivery of such notice shall have elapsed without such Event of Default being cured. (3) If Borrower fails to observe or perform any of the other covenants (except with respect to a breach of the Fixed Charge Coverage Ratio, which breach is addressed in subitem (7) below), conditions, or obligations of this Agreement; provided, however, if any such failure does not involve the payment of any monetary sum, is not willful or intentional, does not place any rights or interest in collateral of Lender in immediate jeopardy, and is within the reasonable power of Borrower to promptly cure after receipt of notice thereof, all as determined by Lender in its reasonable discretion, then such failure shall not constitute an Event of Default hereunder, unless otherwise expressly provided herein, unless and until Lender shall have given Borrower notice thereof and a period of 30 days shall have elapsed, during which period Borrower may correct or cure such failure, upon failure of which an Event of Default shall be deemed to have occurred hereunder without further notice or demand of any kind being required. If such failure cannot reasonably be cured within such 30-day period, as determined by Lender in its reasonable discretion, and Borrower is diligently pursuing a cure of such failure, then Borrower shall have a reasonable period to cure such failure beyond such 30-day period, which shall not exceed 90 days after receiving notice of the failure from Lender. If Borrower shall fail to correct or cure such failure within such 90-day period, an Event of Default shall be deemed to have occurred hereunder without further notice or demand of any kind being required. (4) If any of the Borrower Parties becomes insolvent within the meaning of the Code, files or notifies Lender that it intends to file a petition under the Code, initiates a proceeding under any similar law or statute relating to bankruptcy, insolvency, reorganization, winding up or adjustment of debts (collectively, an "Action"), becomes the subject of either a petition under the Code or an Action, or is not generally paying its debts as the same become due. (5) If there is an "Event of Default" or a breach or default, after the passage of all applicable notice and cure or grace periods, under any other Loan Document or any of the Other Agreements. (6) If a final, nonappealable judgment is rendered by a court against any of the Borrower Parties which (i) has a material adverse effect on the operation of the Premises as a Permitted Concept, or (ii) is in an amount greater than $100,000.00 and not covered by insurance, and, in either case, is not discharged or provision made for such discharge within 60 days from the date of entry of such judgment. 18 (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 Related Premises with the lowest Fixed Charge Coverage Ratio and proceeding in ascending order to the Related 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 respect to the Related 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. Notwithstanding the foregoing, in the event of a breach of the Fixed Charge Coverage Ratio that would not have been a breach had the Neptune Premises not have been included in the calculation of such Fixed Charge Coverage Ratio, it shall not be an Event of Default so long the 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 the Neptune Premises on an individual basis rather than on an aggregate basis with the Related Premises) for the Premises be greater than 1.0:1. (8) If there is a breach or default, after the passage of all applicable notice and cure or grace periods, under the Franchise Agreement, or if the Franchise Agreement terminates or expires prior to the payment in full of the Note in accordance with its terms and a substitute agreement for the terminated or expired agreement is not entered into with Franchisor prior to such expiration or termination, which substitute agreement shall be in form and substance reasonably satisfactory to Lender and shall expire after the scheduled maturity date of the Note. B. Upon the occurrence and during the continuance of an Event of Default, subject to the limitations set forth in subsection A, Lender may declare all or any part of the obligations of Borrower under the Note, this Agreement and any other Loan Document to be due and payable, and the same shall thereupon become due and payable without any presentment, demand, protest or notice of any kind except as otherwise expressly provided herein, and Borrower hereby waives notice of intent to accelerate the obligations secured by the Mortgage and notice of acceleration. Thereafter, Lender may exercise, at its option, concurrently, successively or in any combination, all remedies available at law or in equity, including without limitation any one or more of the remedies available under the Note, the Mortgage or any other Loan Document. Neither the acceptance of this Agreement nor its enforcement shall prejudice or in any manner affect Lender's right to realize upon or enforce any other security now or hereafter held by Lender, it being agreed that Lender shall be entitled to enforce this Agreement and any other security now or hereafter held by Lender in such order and manner as it may in its absolute discretion determine. No remedy herein conferred upon or reserved to Lender is intended to be exclusive of any other remedy given hereunder or now or hereafter existing at law or in equity or by statute. Every power or remedy given by any of the Loan Documents to Lender, or to which Lender may be otherwise entitled, may be exercised, concurrently or independently, from time to time and as often as may be deemed expedient by Lender. 10. Indemnity; Release. A. Borrower shall, at its sole cost and expense, protect, defend, indemnify, release and hold harmless each of the Indemnified Parties for, from and against any and all claims, suits, liabilities (including, without limitation, strict liabilities), actions, proceedings, 19 obligations, debts, damages, losses, costs, expenses, diminutions in value, fines, penalties, charges, fees, expenses, judgments, awards, amounts paid in settlement and damages of whatever kind or nature (including, without limitation, attorneys' fees, court costs and other costs of defense) (collectively, "Losses) (excluding Losses suffered by an Indemnified Party directly arising out of such Indemnified Party's gross negligence or willful misconduct; provided, however, that the term "gross negligence" shall not include gross negligence imputed as a matter of law to any of the Indemnified Parties solely by reason of Borrower's interest in the Premises or Borrower's failure to act in respect of matters which are or were the obligation of Borrower under the Loan Documents), and costs of Remediation (whether or not performed voluntarily), engineers' fees, environmental consultants' fees, and costs of investigation (including but not limited to sampling, testing, and analysis of soil, water, air, building materials and other materials and substances whether solid, liquid or gas) imposed upon or incurred by or asserted against any Indemnified Parties, and directly or indirectly arising out of or in any way relating to any one or more of the following: (1) any presence of any Hazardous Materials or USTs in, on, above, or under the Premises; (2) any past, present or Threatened Release in, on, above, under or from the Premises; (3) any activity by Borrower, any person or entity affiliated with Borrower or any tenant or other user of the Premises in connection with any actual, proposed or threatened use, treatment, storage, holding, existence, disposition or other Release, generation, production, manufacturing, processing, refining, control, management, abatement, removal, handling, transfer or transportation to or from the Premises of any Hazardous Materials or USTs at any time located in, under, on or above the Premises; (4) any activity by Borrower, any person or entity affiliated with Borrower or any tenant or other user of the Premises in connection with any actual or proposed Remediation of any Hazardous Materials or USTs at any time located in, under, on or above the Premises, whether or not such Remediation is voluntary or pursuant to court or administrative order, including but not limited to any removal, remedial or corrective action; (5) any past, present or threatened non-compliance or violations of any Environmental Laws (or permits issued pursuant to any Environmental Law) in connection with the Premises or operations thereon, including but not limited to any failure by Borrower, any person or entity affiliated with Borrower or any tenant or other user of the Premises to comply with any order of any Governmental Authority in connection with any Environmental Laws; (6) the imposition, recording or filing or the threatened imposition, recording or filing of any Environmental Lien encumbering the Premises; (7) any administrative processes or proceedings or judicial proceedings in any way connected with any matter addressed in this Agreement; (8) any past, present or threatened injury to, destruction of or loss of natural resources in any way connected with the Premises, including but not limited to costs to investigate and assess such injury, destruction or loss; (9) any acts of Borrower, any person or entity affiliated with Borrower or any tenant or other user of the Premises in arranging for disposal or treatment, or arranging with a transporter for transport for disposal or treatment, of Hazardous Materials 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 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 the Premises, from which there is a Release, or a Threatened Release of any Hazardous Materials which causes the incurrence of costs for Remediation; 20 (11) any personal injury, wrongful death, or property damage arising under any statutory or common law or tort law theory, including but not limited to damages assessed for the maintenance of a private or public nuisance or for the conducting of an abnormally dangerous activity on or near the Premises; 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 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 the Premises. 11. Substitution. Borrower shall have the right to obtain a release of all liens granted in favor of Lender with respect to the Premises by substituting a Substitute Premises for the Premises if permitted by the terms of Section 9.A(7), subject to fulfillment of the following conditions: (1) Borrower shall provide Lender with notice of its intention to substitute a Substitute Premises 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. (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 at least equal to the Fixed Charge Coverage Ratio for the Premises being replaced and the substitution must cure the breach of the Fixed Charge Coverage Ratio requirement; (c) be owned in fee simple by Borrower; (d) Borrower's right, title and interest in and to the proposed Substitute Premises shall be free and clear of all liens, restrictions, easements and encumbrances, except such matters as are acceptable to Lender (the "Substitute Premises Permitted Exceptions"); (e) have a fair market value no less than the greater of the then fair market value of the Premises or the fair market value of the Premises as of the Closing, all as reasonably determined by Lender's in-house inspectors and underwriters. (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 by means of a mortgagee's ALTA extended coverage policy of title insurance (or its equivalent, in the event such form is not 21 issued in the jurisdiction where the proposed Substitute Premises is located) for the 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 the 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 the 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 the 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 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) The Borrower 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 be reasonably required by Lender to address matters unique to the Substitute Premises) or amendments to such documents, including, without limitation, a Mortgage 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, 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 6 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. Upon satisfaction of the foregoing conditions with respect to the release of the Premises: (a) the proposed Substitute Premises shall be deemed substituted for the Premises; (b) the Loan Amount for the Substitute Premises shall be the 22 same as for the Premises; (c) the Substitute Premises shall be referred to herein as the "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; and (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. 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) facsimile, (iii) express overnight delivery service or (iv) certified or registered mail, return receipt requested, and shall be deemed to have been delivered upon (a) receipt, if hand delivered, (b) transmission, if delivered by facsimile, (c) the next Business Day, if delivered by express overnight delivery service, or (d) the third Business Day following the day of deposit of such notice with the United States Postal Service, if sent by certified or registered mail, return receipt requested. Notices shall be provided to the parties and addresses (or facsimile numbers, as applicable) specified below: If to Borrower: Family Steak Houses of Florida, Inc. 2113 Florida Boulevard Neptune Beach, FL 32266 Attention: Edward B. Alexander Telephone: (904) 249-4197 Telecopy: (904) 249-1466 If to Lender: GE Capital Franchise Finance Corporation 17207 North Perimeter Drive Scottsdale, AZ 85255 Attention: General Counsel Telephone: (480) 585-4500 Telecopy: (480) 585-2226 B. Real Estate Commission. Lender and Borrower represent and warrant to each other that they have dealt with no real estate or mortgage broker, agent, finder or other intermediary in connection with the transactions contemplated by this Agreement or the other Loan Documents. Lender and Borrower shall indemnify and hold each other harmless from and against any costs, claims or expenses, including attorneys' fees, arising out of the breach of their respective representations and warranties contained within this Section. C. Waiver and Amendment; Document Review. (1) No provisions of this Agreement or the other Loan Documents shall be deemed waived or amended except by a written instrument unambiguously setting forth the matter waived or amended and signed by the party against which enforcement of such waiver or amendment is sought. Waiver of any matter shall not be deemed a waiver of the same or any other matter on any future occasion. (2) In the event Borrower makes any request upon Lender requiring Lender or Lender's attorneys to review and/or prepare (or cause to be reviewed and/or prepared) any documents, plans, specifications or other submissions in connection with or arising out of this Agreement or any of the other Loan Documents, then Borrower shall (x) reimburse Lender promptly upon Lender's demand for all out-of-pocket costs and expenses incurred by Lender in connection with such review and/or preparation, including, without limitation, reasonable attorneys' fees, and (y) pay Lender a reasonable processing and review fee. D. Captions. Captions are used throughout this Agreement and the other Loan Documents for convenience of reference only and shall not be considered in any manner in the construction or interpretation hereof. E. Lender's Liability. Notwithstanding anything to the contrary provided in this Agreement or the other Loan Documents, it is specifically understood and agreed, such agreement being a primary consideration for the 23 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 attorneys' fees and other costs in addition to any other relief to which it may be entitled. J. Entire Agreement. This Agreement and the other Loan Documents, together with any other certificates, instruments or agreements to be delivered in connection therewith, constitute the entire agreement between the parties with respect to the subject matter hereof, and there are no other representations, warranties or agreements, written or oral, between Borrower and Lender with respect to the subject matter of this Agreement and the other Loan Documents. Notwithstanding anything in this Agreement and the other Loan Documents to the contrary, with respect to the Premises, upon the execution and delivery of this Agreement by Borrower and Lender, any bid proposals or loan commitments with respect to the transactions contemplated by this Agreement shall be deemed null and void and of no further force and effect and the terms and conditions of this Agreement shall control notwithstanding that such terms and conditions may be inconsistent with or vary from those set forth in such bid proposals or loan commitments. K. Forum Selection; Jurisdiction; Venue; Choice of Law. Borrower acknowledges that this Agreement and the other Loan Documents were substantially negotiated in the State of Arizona, this Agreement and the other Loan Documents were executed by Lender in the State of Arizona and delivered by Borrower in the State of Arizona, all payments under the Note will be delivered in the State of Arizona and there are substantial contacts between the parties and the transactions contemplated herein and the State of Arizona. For purposes of any action or proceeding arising out of this Agreement or any of the other Loan Documents, the parties hereto hereby expressly submit to the jurisdiction of all federal and state courts located in the State of Arizona and Borrower consents 24 that it may be served with any process or paper by registered mail or by personal service within or without the State of Arizona in accordance with applicable law. Furthermore, Borrower waives and agrees not to assert in any such action, suit or proceeding that it is not personally subject to the jurisdiction of such courts, that the action, suit or proceeding is brought in an inconvenient forum or that venue of the action, suit or proceeding is improper. It is the intent of the parties hereto that all provisions of this Agreement and the Note shall be governed by and construed under the laws of the State of Arizona, without giving effect to its principles of conflicts of law. To the extent that a court of competent jurisdiction finds Arizona law inapplicable with respect to any provisions of this Agreement or the Note, then, as to those provisions only, the laws of the state where the Premises is located shall be deemed to apply. Nothing in this Section shall limit or restrict the right of Lender to commence any proceeding in the federal or state courts located in the state in which the Premises is located to the extent Lender deems such proceeding necessary or advisable to exercise remedies available under this Agreement or the other Loan Documents. L. Counterparts. This Agreement and the other Loan Documents may be executed in one or more counterparts, each of which shall be deemed an original. M. Assignments by Lender; Binding Effect. Lender may assign in whole or in part its rights under this Agreement, including, without limitation, in connection with any Transfer, Participation and/or Securitization. Upon any unconditional assignment of Lender's entire right and interest hereunder, Lender shall automatically be relieved, from and after the date of such assignment, of liability for the performance of any obligation of Lender contained herein. This Agreement and the other Loan Documents shall be binding upon and inure to the benefit of Borrower and Lender and their respective successors and permitted assigns, including, without limitation, any United States trustee, any debtor in possession or any trustee appointed from a private panel. N. Survival. Except for the conditions of Closing set forth in Section 4, which shall be satisfied or waived as of the Closing Date, all representations, warranties, agreements, obligations and indemnities of Borrower and Lender set forth in this Agreement and the other Loan Documents shall survive the Closing. O. Waiver of Jury Trial and Punitive, Consequential, Special and Indirect Damages. BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY AND ALL ISSUES PRESENTED IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER OR ITS SUCCESSORS WITH RESPECT TO ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS OR ANY DOCUMENT CONTEMPLATED HEREIN OR RELATED HERETO. THIS WAIVER BY THE PARTIES HERETO OF ANY RIGHT EITHER MAY HAVE TO A TRIAL BY JURY HAS BEEN NEGOTIATED AND IS AN ESSENTIAL ASPECT OF THEIR BARGAIN. FURTHERMORE, BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL AND INDIRECT DAMAGES FROM THE OTHER AND ANY OF THE OTHER'S AFFILIATES, OFFICERS, DIRECTORS OR EMPLOYEES OR ANY OF THEIR SUCCESSORS WITH RESPECT TO ANY AND ALL ISSUES PRESENTED IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY EITHER PARTY AGAINST THE OTHER OR ANY OF THE OTHER'S AFFILIATES, OFFICERS, DIRECTORS OR EMPLOYEES OR ANY OF THEIR SUCCESSORS WITH RESPECT TO ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS OR ANY DOCUMENT CONTEMPLATED HEREIN OR RELATED HERETO. THE WAIVER BY BORROWER AND LENDER OF ANY RIGHT THEY MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL AND INDIRECT DAMAGES HAS BEEN NEGOTIATED BY THE PARTIES HERETO AND IS AN ESSENTIAL ASPECT OF THEIR BARGAIN. P. Transfers, Participations and Securitizations. (1) A material inducement to Lender's willingness to complete the transactions contemplated by the Loan Documents is Borrower's agreement that Lender may, at any time, complete a Transfer, Participation or Securitization with respect to the Note, Mortgage and/or any of the other Loan Documents or any or all servicing rights with respect thereto. (2) Borrower agrees to cooperate in good faith with Lender in connection with any such Transfer, Participation and/or Securitization of the Note, Mortgage and/or any of the other Loan Documents, or any or all 25 servicing rights with respect thereto, including, without limitation (i) providing such documents, financial and other data, and other information and materials (the "Disclosures") which would typically be required with respect to the Borrower Parties by a purchaser, transferee, assignee, servicer, participant, investor or rating agency involved with respect to such Transfer, Participation and/or Securitization, as applicable; provided, however, the Borrower Parties shall not be required to make Disclosures of any confidential information or any information which has not previously been made public unless required by applicable federal or state securities laws; and (ii) amending the terms of the transactions evidenced by the Loan Documents to the extent necessary so as to satisfy the requirements of purchasers, transferees, assignees, servicers, participants, investors or selected rating agencies involved in any such Transfer, Participation or Securitization, so long as such amendments would not have a material adverse effect upon the Borrower Parties or the transactions contemplated hereunder. Lender shall be responsible for preparing at its expense any documents evidencing the amendments referred to in the preceding subitem (ii). (3) Borrower consents to Lender providing the Disclosures, as well as any other information which Lender may now have or hereafter acquire with respect to the Premises or the financial condition of the Borrower Parties to each purchaser, transferee, assignee, servicer, participant, investor or rating agency involved with respect to each Transfer, Participation and/or Securitization, as applicable. Lender and Borrower (and their respective Affiliates) shall each pay their own attorneys' fees and other out-of-pocket expenses incurred in connection with the performance of their respective obligations under this Section. (4) Notwithstanding anything to the contrary contained in this Agreement or the other Loan Documents: (a) an Event of Default or a breach or default, after the passage of all applicable notice and cure or grace periods, under any Loan Document or Other Agreement which relates to a loan or sale/leaseback transaction which has not been the subject of a Securitization, Participation or Transfer shall not constitute an Event of Default or a breach or default, as applicable, under any Loan Document or Other Agreement which relates to a loan which has been the subject of a Securitization, Participation or Transfer; (b) an Event of Default or a breach or default, after the passage of all applicable notice and cure or grace periods, under any Loan Document or Other Agreement which relates to a loan which is included in any Loan Pool shall not constitute an Event of Default or a breach or default, as applicable, under any Loan Document or Other Agreement which relates to a loan which is included in any other Loan Pool; (c) the Loan Documents and Other Agreements corresponding to the loans in any Loan Pool shall not secure the obligations of any of the Borrower Parties contained in any Loan Document or Other Agreement which does not correspond to a loan in such Loan Pool; and (d) the Loan Documents and Other Agreements which do not correspond to a loan in any Loan Pool shall not secure the obligations of any of the Borrower Parties contained in any Loan Document or Other Agreement which does correspond to a loan in such Loan Pool. Q. Estoppel Certificate. At any time, and from time to time, each party agrees, promptly and in no event later than fifteen (15) days after a request from the other party, to execute, acknowledge and deliver to the other party a certificate in the form supplied by the other party, certifying: (a) to its knowledge, whether there are then any existing defaults by it or the other party in the performance of their respective obligations under this Agreement or any of the other Loan Documents, and, if there are any such defaults, specifying the nature and extent thereof; (b) that no notice of default has been given or received by it under this Agreement or any of the other Loan Documents which has not been cured, except as to defaults specified in the certificate; (c) the capacity of the person executing such certificate, and that such person is duly authorized to execute the same on behalf of it; and (d) any other information reasonably requested by the other party in connection with this Agreement and the other Loan Documents. 26 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 __________________________________ Printed Name ________________________ Its _________________________________ BORROWER: FAMILY STEAK HOUSES OF FLORIDA, INC., a Florida corporation By __________________________________ Printed Name ________________________ Its _________________________________ U.S. Federal Tax Identification Number: _______________________________________ Organization Identification Number: _______________________________________ Principal Place of Business: Neptune Beach, FL 27 STATE OF ARIZONA ) ) SS. COUNTY OF MARICOPA ) The foregoing instrument was acknowledged before me on _________________, 2002 by ___________________________________, _______________________________ of GE Capital Franchise Finance Corporation, a Delaware corporation, on behalf of the corporation. ______________________________ Notary Public My Commission Expires: ___________________________________ STATE OF ) ) SS. COUNTY OF ) The foregoing instrument was acknowledged before me on ______________, 2002 by _______________________, ________________________ of Family Steak Houses of Florida, Inc., a Florida corporation, on behalf of the corporation. ______________________________ Notary Public My Commission Expires: ___________________________________ 28 EXHIBIT A DESCRIPTION OF PREMISES 29 EX-4 5 ryansex4.txt Exhibit 10.04 LEASE AGREEMENT by and between FAMILY STEAK HOUSES OF FLORIDA, INC. and BARNHILL'S BUFFET, INC. Dated June 6, 2002 475 Blanding Boulevard Orange Park, Florida 1 LEASE AGREEMENT This Lease Agreement (this "Lease") is made as of June 6, 2002 ("Effective Date") by and between FAMILY STEAK HOUSES OF FLORIDA, INC., ("Landlord"), whose address for purposes hereof is 2113 Florida Boulevard, Neptune Beach, Florida 32266, and BARNHILL'S BUFFET, INC., a Tennessee corporation doing business in Florida as Barnhill's Buffet of Tennessee, Inc. ("Tenant"), whose address for purposes hereof is 226 Palafox Place, 5th Floor, Pensacola, Florida 32501. 1. Description of Premises. Landlord leases to Tenant that certain parcel of land located at 475 Blanding Boulevard, Orange Park, Florida, together with all improvements and furniture, fixtures and equipment located thereon as of the Commencement Date, said land being more particularly described in Exhibit "A" attached hereto (the "Premises"). 2. Lease Term. The term of this Lease shall be for a period of ten (10) years (the "Term") or until such Term shall sooner cease and expire or shall be extended or renewed as hereinafter provided. The Term shall commence on the earlier to occur of: (i) the date upon which Tenant takes possession of the Premises, or (ii) July 1, 2002 (the "Commencement Date") and shall expire at midnight on June 30, 2012. 3. Use. The Premises may be used for the operation of a buffet or full service restaurant offering seated dining and uses ancillary thereto which may include take-out and drive-through service, and for no other purpose. Landlord represents and warrants that, and Tenant's obligations under this Lease are conditioned upon the current zoning of the Premises permitting Tenant to operate the Premises as a buffet restaurant with no fewer seats than permitted for the Ryan's Family Steak House restaurant that most recently operated in the Premises. 4. Rent. The "Rent Commencement Date" shall be the Commencement Date. Subject to adjustments as set forth herein, Tenant agrees to pay, as base annual rent for the use of the Leased Premises, each year during the first five years of the term hereof, the sum of $93,000.00 ("Rent" or "Base Rent"), which shall be payable in twelve (12) equal monthly installments of $7,750.00, plus applicable sales tax, as set forth on the Rent Schedule attached hereto as Exhibit B. All payments due under this Lease shall be paid monthly in advance on or before the first (1st) day of each month (the "Due Date") without reduction, abatement or set-off, and shall be mailed or delivered to Landlord's office at the address above (or at such other address for the payment of rent that Landlord may give notice of to Tenant). Any payment due and not paid within seven (7) business days after receipt of written notice of nonpayment shall bear interest 2 retroactive from the Due Date at a rate of ten percent (10%) per annum until paid. If the Rent Commencement Date is other than the first day of a calendar month, the rent for the portion of said month shall be prorated at a daily rate based upon the base monthly rent, and shall be payable on the Rent Commencement Date. Within five (5) business days after the full execution of this Lease, Tenant shall pay to Landlord the first month's rent. 5. Net Lease / Other Charges. Tenant acknowledges and agrees that it is the purpose and intent of Landlord and Tenant that this Lease be a so-called "Net Lease" that is completely carefree to Landlord and therefore, except as may otherwise be expressly set out in this Lease, Tenant shall be responsible to pay, or promptly reimburse Landlord for paying, all costs, charges, expenses and outlays of any nature whatsoever arising from or relating to the Premises which arise or become due during the term of this Lease (herein, "Other Charges"), specifically including without limitation (i) all general property taxes and assessments, special improvement taxes or assessments, privilege taxes, excise taxes, business and occupation taxes, taxes upon or measured by rent, assessments for public improvements or otherwise, levies, fees, water and sewer charges, and all other governmental impositions and charges of every kind and character which are now or may hereafter be levied upon or assessed against the Premises; (ii) all taxes levied against any equipment, inventory, trade fixtures or other personal property located in the Premises, without regard to whether Landlord or Tenant shall own title to same; (iii) expenses incurred by Landlord in correction of any violation of any covenant or other obligation of Tenant to be performed under this Lease; and (iv) all applicable federal, state or local sales taxes which may, at any time during the term of this Lease, be imposed on the Base Rent or any other monetary charges which Tenant is required to pay to Landlord under this Lease; provided, however, in no event shall Tenant be responsible for paying any payments of principal or interest required under any mortgage encumbering the Premises or any income or similar taxes imposed upon Landlord. At the request of Landlord, Tenant shall pay any Other Charges directly to any governmental authority or other third party to whom such charges are due, on or before the later of (i) ten (10) days following Tenant's receipt of notice of such outstanding charges, or (ii) ten (10) days prior to the due date of such charges. Tenant shall pay any Other Charges payable to Landlord (in reimbursement for costs and expenses incurred by Landlord) on or before the later of (a) ten (10) days following Tenant's receipt of notice of such charges, or (b) with Tenant's next monthly installment of Base Rent due on the first day of the first calendar month following Tenant's receipt of such notice. 6. Late Fees / Interest. The term "Rent" or "rent" as used in this lease shall mean and refer to collectively to the Base Rent plus all Other Charges, and in the event of any non-payment of any of the Other Charges by Tenant, Landlord shall have in addition to all other rights and remedies, all of the rights and remedies provided for herein or by law with respect to non-payment of Base Rent. Without waiver, limitation or prejudice to the foregoing, as a material inducement for Landlord's entry into this Lease, Tenant agrees that if any payment of Rent is not received by Landlord within ten (10) days following the due date therefor, or Tenant's check for same shall not be honored for any reason, then, because the actual damages resulting from late payments and 3 dishonored checks are difficult to fix, Tenant shall pay Landlord as liquidated damages for each such late payment or dishonored check a late fee in an amount equal to five percent (5%) of the amount of the overdue payment. In addition, beginning three (3) business days following Tenant's receipt of written notice of any past due Rent, Landlord may charge interest on the said past due Rent until paid at a rate equal to the lesser of eighteen percent (18%) or the maximum rate allowed by law (herein, the "Default Rate"). 7. Rent Escalation. The annual Rent to be paid to Landlord by Tenant shall be increased as described in Exhibit B. 8. Services. Tenant shall pay before delinquency, at its sole cost and expense, all charges for water, gas, heat, electricity, power, telephone service, sewer service charges, and sewer rentals charged or attributable to the Premises, and all other services or utilities used in, upon, or about the Premises by Tenant or any of its subtenants, licensees, or concessionaires from the Commencement Date and throughout the lease term hereof. 9. Taxes. Tenant shall be responsible for the payment of all ad valorem taxes and assessments levied against the Premises during the Lease term. The Landlord shall forward a copy of the ad valorem tax bill and any bill for any assessment levied against the Premises to the Tenant for payment. The Tenant shall pay the same before delinquency, and shall furnish the Landlord with a copy of its check in payment of said bill. In the event any bill for ad valorem taxes or assessments is not paid before delinquency at any time during the Lease term, the Landlord may pay the same and shall be entitled to recover the cost thereof from the Tenant as Other Charges hereunder. In addition, on January 31 of the final year of the Lease term, or any Renewal Term, as the case may be, the Tenant shall pay to the Landlord on demand the Tenant's prorata share of the ad valorem taxes and any outstanding and unpaid assessments for that calendar year as Other Charges hereunder. 10. Care and Maintenance of Premises. Tenant shall be solely responsible for the maintenance, repair, and replacement of the Premises throughout the term of this Lease, including, but not limited to, the maintenance, repair, and replacement of all improvements located on the Premises, including the roof and structural components thereof, all plumbing, electrical, heating, ventilation and air conditioning systems therein, and all other improvements to the Premises, such as the asphalt paving and concrete curbing of the parking areas and driveways, and the landscaping located on the Premises. Landlord shall have no responsibility whatsoever for any maintenance, repair, replacement of the Premises or any improvements located thereon unless such is made necessary due to the gross negligence or willful act of the Landlord. Without limitation, the foregoing shall apply with respect to any modifications or replacements required to be made to the Premises at any time during the term in order to comply with any ADA or other governmental requirements. Tenant shall maintain the Premises in good condition and repair at all times, and Tenant shall allow only licensed and insured contractors to perform any electrical repairs, repairs to the roof 4 or structural components of the Premises or any repairs to any portion of the heating, ventilating and air conditioning system. Tenant shall plan and perform all substantial repairs in accordance with the requirements of Section 13 hereof. 11. Signage. (a) Signs. Landlord and Tenant agree that throughout the Term and any Renewal Terms of this Lease, Tenant and its permitted subtenants, and assignees may erect, maintain, repair and replace any and all signs which the Tenant and its permitted subtenants, and assignees may desire from time-to-time on the Premises including, without limitation, building, pylon and monument signs, so long as (i) such signs comply in all respects and at all times with applicable codes, ordinances, laws and statutes concerning the same, and (ii) the Tenant and its permitted subtenants, and assignees has at its expense obtained all necessary governmental licenses, permits, and approvals for such signs. All such signs shall be maintained in good condition and repair at all times. 12. Renewal Option. This Lease may be renewed by Tenant for two (2) successive, five (5) year terms (the "Renewal Term(s)"), if Tenant shall give written notice of renewal to Landlord at least 90 days prior to the end of the then-current term. Each Renewal Term shall be subject to the same terms and conditions as the initial Term, except that Tenant shall pay to Landlord the Base Rent provided for in Exhibit "B" of this Lease. 13. Sublease and Assignment. Tenant shall not assign, sublease, transfer, pledge, or encumber this Lease or any interest therein without Landlord's prior written consent. For purposes hereof the transfer of all or a controlling interest in Tenant shall not constitute an assignment of this Lease. Any attempt at assignment, sublease, or other transfer or encumbrance by Tenant in violation of the terms and covenants of this paragraph shall be void. Landlord's consent to a particular assignment, subletting, transfer, pledge, or encumbrance shall not obviate the necessity of Landlord's consent to any future assignment, subletting, transfer, pledge, or encumbrance, Landlord retaining the right to consent to each and every of same. 14. Alterations by Tenant. It is understood and agreed that Tenant, at its expense, will alter and remodel the premises to Tenant's standards to convert the building to a Barnhill's Buffet restaurant. Tenant shall submit to the Landlord for the Landlord's consent plans and specifications for Tenant's alterations and improvements (the "Plans"), such consent not to be unreasonably conditioned, delayed, or withheld. Landlord shall respond to the Plans within ten (10) days following receipt. If Landlord fails to respond within said ten (10) day period, the Plans shall be deemed approved by Landlord. After completion of Tenant's initial alterations and remodeling, all additions, alterations, improvements and fixtures (except Tenant's merchandise, personal property, furniture, equipment, movable trade fixtures and signage) in or upon the Premises, whether placed there by Tenant or by Landlord, shall become Landlord's property and shall remain upon the Premises at the termination of 5 this Lease by lapse of time, or otherwise, without compensation or allowance or credit to Tenant. After the Commencement Date, Tenant shall not make additions, changes, alterations or improvements to the Premises costing more than $10,000.00 in the aggregate, without the prior written consent of Landlord. Even if Landlord's consent is not required, Tenant shall give Landlord prior written notice specifying any work to be done. If Landlord grants its consent, Landlord may impose reasonable requirements as a condition of such consent including without limitation the submission of plans and specifications for Landlord's prior written approval, obtaining necessary permits, obtaining insurance, prior approval of contractor (not to be unreasonably withheld) and reasonable requirements as to the manner and times in which such work shall be done. All work shall be performed in a good and workmanlike manner and shall be in accordance with plans and specifications (approved by Landlord if approval is required by the above provisions). If any of such work may affect the structure of the Building or interfere with Building systems or operation, Landlord may require that such work be performed under Landlord's supervision (but at no additional cost to Tenant for such supervision). Notwithstanding the foregoing, upon expiration of the Term or earlier termination of the Lease, Tenant may remove all of its personal property, furniture and fixtures from the Premises, repairing any damage caused to the Premises by such removal. 15. Construction Lien. In no event shall Tenant have the right or authority to create, or permit there to be established, any contractor's, mechanic's, materialmen's or other lien or encumbrance of any nature against Landlord's interest in the Premises or the Building for improvements made or caused to be performed by and at the request of Tenant. Any lien filed by any contractor, materialman or supplier performing work requested by and for Tenant shall attach only to Tenant's interest in the Premises for work claimed to have been furnished for Tenant. Tenant shall, within 20 business days after Tenant receives notice of the filing of any lien for such work, duly discharge the lien or contest such lien by posting a bond equal to the amount of the disputed claim with companies reasonably satisfactory to Landlord. In the event that such lien is not released and removed or bonded within 20 business days after Tenant has received notice thereof, Landlord, at its sole option, may take all action necessary to release and remove or bond such lien (without any duty to investigate the validity thereof) and Tenant shall promptly upon notice reimburse Landlord for all reasonable sums, costs and expenses (including reasonable attorneys' fees) incurred by Landlord in connection with such lien. 16. Hazardous Substances. Tenant shall not bring upon or permit to be brought upon the Premises any Hazardous Substances, except normal office and restaurant supplies. Tenant shall not use the Premises for the manufacture, storage, disposal or handling of any Hazardous Substances, except normal office and restaurant supplies, and Tenant shall indemnify and hold harmless Landlord from and against any and all loss, claim, damages, liability, cost or expense, including reasonable attorney's fees actually incurred at customary hourly rates, court costs and remediation costs and expenses incurred by Landlord arising from or relating to Tenant's violation of the terms of this paragraph. 6 17. Quiet Enjoyment. Landlord covenants and agrees, provided Tenant pays all Rent and performs the terms and conditions of this Lease as and when required, to take all necessary steps to secure to Tenant and to maintain for the benefit of Tenant the quiet and peaceful possession and enjoyment of the Premises and all rights appurtenant thereto, for the term hereof, without disturbance, hindrance or molestation by Landlord or any other person claiming title to the Premises or any part thereof, and Landlord warrants and forever agrees to defend Tenant's interest under this Lease against the claims of any and all persons other than those claiming by, through or under Tenant. 18. Insurance. At all times during the Term of this Lease and any renewals thereof Tenant shall obtain and thereafter keep in full force and effect, (i) commercial general liability insurance, such insurance to insure against liability for bodily injury and death and for property damage occurring on, in or about the Premises in an amount not less than Three Million Dollars ($3,000,000.00) combined single limit on a per occurrence basis, (ii) workmen's compensation as required by law providing statutory benefits for all persons employed by Tenant in connection with the Premises, (iii) builder's risk insurance during all periods in which Tenant is constructing alterations or additions to or within the Premises, in reasonable amounts, (iv) fire, windstorm and extended risk casualty insurance coverage on the improvements located on the Premises for the full replacement cost thereof and with replacement cost endorsement, and with a deductible of not more than Ten Thousand Dollars ($10,000.00); and (iv) at all times that Tenant is selling alcoholic beverages for consumption within the Premises, liquor liability insurance in the minimum amount of One Million Dollars ($1,000,000.00) covering the Premises and Tenant's use thereof. All insurance that Tenant is required to maintain pursuant to this Section shall (a) name Landlord as an additional insured; (b) be underwritten by insurance companies maintaining an A.M. Best Company rating of "A-VIII" or better and that are licensed or authorized to do business in and shall be in good standing with the State of Florida; (c) be issued for terms of not less than one year; and (d) shall contain a provision that they shall not be subject to cancellation, non-renewal or material reduction in coverage as to the Premises unless Landlord shall be served with a written notice not later than thirty (30) days prior to cancellation, non-renewal or material reduction in coverage (for purposes of the foregoing, "material reduction in coverage" shall include without limitation any change from "all-risk" casualty insurance coverage, or a material increase in deductible). Tenant shall deliver Landlord certificates evidencing it has the required insurance coverages prior to the Commencement Date, and Tenant shall deliver renewal certificates thereof to Landlord prior to the expiration of each such policy. The insurance coverages required to be maintained by Tenant shall be subject to increase by Landlord from time to time as necessary in order to maintain a prudent level of insurance coverage as evidenced by the prevailing practices of landlords and tenants of similarly situated commercial properties and/or to comply with reasonable insurance requirements that may hereafter be imposed by any existing or hereafter arising mortgagee of Landlord's interest in the Premises. In the event Tenant shall fail to maintain any of the insurance coverages required hereby, then, without prejudice to any other rights or remedies available to Landlord under this Lease, at law or in equity, Landlord shall have the right, but no obligation, to immediately obtain such insurance on behalf of Tenant and 7 Tenant shall promptly reimburse Landlord for all costs Landlord shall incur in connection therewith. Further, Tenant hereby agrees to indemnify and hold harmless Landlord from all loss, cost or expenses which Landlord shall suffer or incur as a result of any failure by Tenant to maintain the minimum amounts of insurance coverages required under this Section. 19. Indemnification/Hold Harmless. Landlord, its partners, representatives, agents, and their respective officers and employees, shall not be liable to Tenant, or to Tenant's officers, directors, shareholders, agents, servants, employees, customers or invitees, for any damage to person or property in or about the Premises caused by any act, omission or neglect of Tenant and its agents and their respective officers, directors, shareholders, and employees, and Tenant agrees to indemnify and hold harmless Landlord from all claims for any such damage. Tenant and its agents and their respective officers, directors and shareholders and employees shall not be liable to Landlord or to Landlord's partners, representatives, agents, servants, customers, or invitees and their respective officers and employees for any damage to person or property caused by any act, omission or neglect of Landlord, its partners, representatives and agents and their respective officers and employees and Landlord agrees to indemnify and hold harmless Tenant from all claims for any such damage. 20. Damage By Fire Or Other Casualty. (a) Reparable Damage. If fire or other casualty insurable under a standard fire and extended risk policy of insurance required to be carried by Tenant covering the Premises shall render the whole or any material portion of the Premises untenantable, and if the Premises can reasonably be expected to be reparable within one hundred eighty (180) days from the date of such event, subject to the Landlord's lender's right to apply the proceeds of Tenant's insurance to its mortgage encumbering the Premises, the Tenant shall repair and restore the Premises to their condition prior to the fire or other casualty within such one hundred eighty (180) day period (subject to delays for causes beyond Tenant's reasonable control such as delays due to issuance of building permits or obtaining of insurance proceeds provided Tenant diligently pursues the same) and notify Landlord in writing that it will be doing so, such notice to be mailed within thirty (30) days from the date of such damage or destruction, and this Lease shall remain in full force and effect, but the Minimum Rent, Additional Rent and other costs for the period during which the Premises are untenantable shall be abated. (b) Irreparable Damage. If fire or other casualty insurable under a standard fire and extended risk policy of insurance required to be carried by Tenant covering the Premises shall render the whole or any material portion of the Premises untenantable and the Premises cannot reasonably be expected to be reparable within one hundred eighty (180) days from the date of such event, or if an uninsurable casualty shall render the whole or any portion of the Premises untenantable, then Landlord or Tenant, by notice in writing to the other, mailed within thirty (30) days from the date of such damage or destruction, may terminate this Lease effective upon a date within thirty (30) days from the date 8 of such notice. The Minimum Rent, Additional Rent, and all other costs shall be abated for the period during which the Premises are untenantable. Upon termination, all prepaid rents and/or deposits shall be returned to Tenant, any and all insurance proceeds payable on account of such casualty shall be paid over or assigned to the Landlord (subject to the right of Landlord's lender to any such proceeds), and neither Landlord nor Tenant shall have any other future obligations or responsibilities under this Lease. (c) Repair and Restore. If Landlord or Tenant does not terminate this Lease pursuant to its rights herein, subject to the Landlord's lender's right to apply any insurance proceeds to its mortgage encumbering the Premises, then Tenant shall repair and restore the Premises as the case may be to its condition prior to the damage or destruction within that time period reasonably necessary for such repair and restoration (subject to delays for causes beyond Tenant's reasonable control such as delays due to issuance of building permits or obtaining of insurance proceeds provided Tenant diligently pursues the same) and the Minimum Rent, Additional Rent and other costs shall be abated during the period of such restoration and/or repair. Notwithstanding anything set forth herein to the contrary, in no event shall any rent or other payments be due to Landlord until such time as Tenant can conduct its business from the Premises in a reasonable, prudent and businesslike manner, without any interference resulting from reconstruction activities or the condition of the Premises. At its option, the Landlord may notify the Tenant that it has elected to perform all work repairing and restoring the Premises following a casualty, such notice to be given within thirty (30) days from the date the damage or destruction to the Premises occurred. Should the Landlord give the Tenant notice of its election to perform such work, the Tenant shall promptly pay over or assign to the Landlord all insurance proceeds payable on account of the casualty or destruction, and the Landlord shall apply such proceeds to the repair and restoration of the Premises performed by it. 21. Condemnation .. (a) Total Taking. If all the Premises are taken by the power of eminent domain exercised by any governmental or quasi-governmental authority, this Lease shall terminate as of the earlier of (i) the date Tenant is required to vacate the Premises, or (ii) the date title passes to the condemning authority, and upon either such date of termination, all Minimum Rent, Additional Rent, and other costs due hereunder shall be paid to that date. The term "eminent domain" shall include the taking or damaging of property by, through, or under any governmental or quasi-governmental authority, and any purchase or acquisition in lieu thereof, whether or not the damaging or taking is by the government or any other person. (b) Partial Taking. Tenant may terminate this Lease upon written notice to Landlord for any of the following events of Partial Taking: (i) If more than five percent (5 %) of the Rentable Square Feet of Floor Area of the Premises shall be taken or appropriated; 9 (ii) The Premises, after the taking, would no longer satisfy the requirements for a restaurant offering seated dining (based on Tenant's standard restaurant requirements in Tenant's reasonable business judgment); (iii) The access to the Premises is adversely affected; (iv) The visibility of the Premises is adversely affected; (v) The parking available to the Premises is adversely affected, whether modified or reduced; or (vi) If Tenant's business will otherwise be adversely affected. If tenant does not elect to terminate the Lease in the event of a Partial Taking, the parties agree that rental due under the Lease shall be equitably reduced in consideration of the Partial Taking. Landlord is obligated to make Tenant whole (including, but not limited to, parking, access and visibility) during and after the construction period. (c) Damages. Landlord reserves all rights to the entire damage award or payment for any taking by eminent domain. Tenant shall, however, have the right to claim from the condemning authority all compensation that may be recoverable by Tenant on account of any loss incurred by Tenant, including, but not limited to, loss due to removing Tenant's merchandise, furniture, trade fixtures, and equipment or for damage to Tenant's business, loss of business, and/or loss of leasehold interest; provided, however, that Tenant may claim such damages only if they are awarded separately in the eminent domain proceeding and not as part of Landlord's damages. 22. Force Majeure. If either Landlord or Tenant is delayed or prevented from completing the performance of any obligation under this Lease by reason of accident, fire, act of God, public enemy, injunction, riot, strike, lockout, insurrection, war, court order, requisition or order of governmental body or authority, inability to procure labor or materials from normally available sources, or by any other cause without its fault and beyond its reasonable control (financial inability excepted), completion will be excused for the period of such delay and the date for completion will be extended for the period of such delay provided notice of the occurrence or encountering of such cause is given to the other party within 10 days after such occurrence or encounter and notice of the duration of such cause is given with 10 days after the cessation of such cause. However, in no event shall the provisions of this paragraph be applicable to extend or delay the ultimate date for the completion of construction of the Premises or the date for delivery of possession of the Premises to Tenant, as specified herein. 23. Subordination. This Lease is and shall be subject and subordinate to any mortgage, deed of trust, or other lien created by Landlord whether presently 10 existing or hereafter arising upon the Premises, and to any renewals, refinancings, and extensions thereof, but Tenant agrees that any such mortgagee shall have the right at any time to subordinate such mortgage, deed of trust, or other lien to this Lease on such terms and subject to such conditions as such mortgagee may deem appropriate in its discretion. Tenant agrees that it will from time to time upon request by Landlord execute and deliver to such persons as Landlord shall request a statement in recordable form certifying that this Lease is unmodified and in full force and effect (or if there have been modifications, that the Lease is in full force and effect as modified) stating the dates to which Rent and other charges payable under this Lease have been paid, stating that Landlord is under default hereunder (or if Tenant alleges a default, stating the nature of such alleged default) and further stating such other matters as Landlord or its mortgagee shall reasonably require. Tenant agrees that it shall attorn to any purchaser or mortgagee of the Premises from and after the acquisition thereof by purchaser or mortgagee. Provided, however, the said subordinations and attornment shall be subject to and conditioned upon the agreement that Tenant's rights as Tenant hereunder shall not be disturbed so long as no Event of Default has occurred and is continuing under the terms of the Lease. Provided further, and notwithstanding the foregoing, Landlord agrees that its rights under this Lease, including without limitation any contractual or statutory landlord's lien on any property of Tenant, shall be subordinate to the lien(s) of any lender(s) that may attach to or may hereafter be placed upon Tenant's furniture, trade fixtures and equipment, which subordination shall apply to any and all advances of funds made by such lender(s) and all renewals, replacements and extensions thereof; and Landlord agrees that the lien of any such lender as to the Tenant's furniture, trade fixtures, and equipment shall be deemed to be prior and superior to any contractual or statutory landlord's lien regardless of the dates or the record priority of any applicable documents or instruments. 24. Estoppel Certificate. Landlord and Tenant agree that they will from time to time upon request from each other, within 15 business days after notice from the other, execute and deliver to such persons as the requesting party shall request, a statement certifying that this Lease is unmodified and in full force and effect (or if there have been modifications, that the same is in full force and effect as so modified), stating the dates which rent and other charges payable under this Lease have been paid, stating the commencement and termination dates of the current term of the Lease and stating whatever options to extend there may be in the Lease, stating that Landlord or Tenant, as applicable, is not in default hereunder to the best of such party's knowledge after due inquiry (or if Landlord or Tenant, as applicable, have alleged a default, stating the nature of such alleged default), and further stating such other matters relating to the Lease as the requesting party shall reasonably require. 25. Landlord's Default. Landlord's failure to perform any of its obligations under this Lease for a period of twenty (20) days after receiving notice from Tenant specifying in reasonable detail the nature and extent of such default, or if the default so specified shall be of such a nature that the same cannot reasonably be cured or remedied within said twenty (20) day period and 11 Landlord shall fail to promptly commence and thereafter continuously and diligently prosecute the cure or remedy of such default to completion. then Landlord shall be in "Default" hereunder. If Landlord commits a Default, Tenant, in addition to any remedies available under the law, may, without being obligated and without waiving the Default, with additional five (5) business day notice to Landlord, cure the Default on behalf of Landlord. Landlord shall pay Tenant, upon demand, all costs, expenses, and disbursements incurred by Tenant to cure the Default. If such payment is not rendered within thirty (30) days of demand, Tenant may deduct all such costs and expenses from the rent next coming due. If Tenant elects not to cure the Default by Landlord, Landlord shall remain responsible to cure the Default and liable to Tenant for any direct damages suffered by Tenant as a consequence of Landlord's failure to cure the Default. It is understood and agreed that Tenant's exercise of any right or remedy to a default or breach by Landlord shall not be deemed a waiver of or to alter, affect, or prejudice any right or remedy which Tenant may have under this Lease or by law or in equity. Neither the payment of rent nor any other act or omission of Tenant at any time or times after the happening of any Default shall operate as a waiver of any past or future violation, breach, or failure to keep or perform any covenant, agreement, term, or condition hereof, or to deprive Tenant of its right to pursue or exercise at any time any option, right or remedy that Tenant may have under any term or provision of this Lease, at law or in equity. 26. Tenant Default. It shall be a default ("Event of Default") hereunder if (i) Tenant shall fail to pay any rent or any other sums of money within ten (10) business days after receipt of written notice that the same is due; (ii) Tenant shall fail to comply with any other provision of this Lease and after receipt of written notice, fail to promptly commence and thereafter continue with diligence to correct any default within thirty (30) days after written notice or the additional time, if any, that is reasonably necessary; (iii) the Premises shall be taken on execution or other process of law in any action against Tenant; (iv) Tenant shall become insolvent or unable to pay its debts as they become due, or Tenant notifies Landlord in writing that it anticipates either condition; (v) Tenant takes any action, or notifies Landlord in writing that Tenant intends, to file a petition under any section or chapter of the Bankruptcy Code as amended, or under any similar law or statute of the United States or any State thereof; or a petition shall be filed against Tenant under any such statute which is not dismissed within 60 days after the filing thereof; or (vi) a receiver or trustee shall be appointed for Tenant's leasehold interest in the Premises or for all or a substantial part of the assets of Tenant and not discharged within 60 days after the appointment of a receiver or trustee. On the occurrence of any Event of Default and after the applicable notice and cure period, and subject to terms and conditions provided herein, Landlord may; (i) without terminating this Lease and without entering into possession of the Premises, continue this Lease in effect and enforce all rights of Landlord 12 and obligations of Tenant hereunder, including the filing of suit for the collection of monthly rent, Other Charges, and all other sums due hereunder as they accrue (including attorneys' fees and other damages). Acts of maintenance or preservation, efforts to relet the Premises, or the appointment of a receiver upon Landlord's initiative to protect its interest under this Lease shall not constitute a termination of this Lease or Tenant's right to possession hereunder; (ii) re-enter and repossess the Premises and remove all persons and property therefrom either by summary dispossess proceedings or by a suitable action or proceeding at law or in equity, or by force or otherwise, without being liable for any damage therefor. No re-entry by Landlord shall be deemed a termination or an acceptance of a surrender of this Lease; (iii) Terminate this Lease and sue Tenant for damages hereunder which damages shall be an amount equal to (A) the sum of all amounts due hereunder to the date of termination; plus (B) the aggregate rent remaining over the unexpired portion of the Term plus the reasonable cost to Landlord for any repairs and other costs of reletting, all reduced to present value using a discount rate equal to the interest rate of a governmental security having a maturity closest to the then current expiration of the Term; less (C) the aggregate fair net rental value of the Premises over the remaining portion of the Term provided, however, a reasonable period of time, not to exceed six (6) months, may be considered as a leasing period by which the Premises would not be leased and therefor no income would be realized for such period reduced to present value; plus (D) Landlord's costs and expenses incurred in the enforcement hereof including reasonable attorneys fees as herein provided; (iv) relet any or all of the Premises for Tenant's account for any or all of the remainder of the Term or for a period exceeding such remainder, in which event Tenant shall pay to Landlord, at the times and in the manner specified by the provisions herein the rent accruing during such remainder, less any rent received by Landlord, with respect to such remainder, from such reletting, as well as the cost to Landlord of any reasonable attorney's fees actually incurred at customary hourly rates, or for any repairs or cost of reletting or other action (including those taken in exercising Landlord's rights under any provision of this Lease ) taken by Landlord on account of such Event of Default, but in no event shall Landlord be liable in any respect for failure to relet the Premises after good faith efforts to do so or in the event of such reletting, for failure to collect the rent thereunder. Any sums received by Landlord on a reletting in excess of the rent reserved for this Lease shall belong to Landlord; (v) cure such Event of Default in any other manner (after giving Tenant written notice of Landlord's intention to do so except in the case of emergency), in which event Tenant shall reimburse Landlord for all expenses reasonably incurred by Landlord in doing so, plus interest at the Default Rate, which expenses and interest shall be additional rent and shall be payable by Tenant immediately on demand therefor by Landlord; and/or 13 (vi) pursue any combination of such remedies and/or any other remedy available to Landlord on account of such Event of Default at law or in equity. If legal proceedings are instituted hereunder, and a compromise or settlement thereof shall be made, it shall not be constituted as a waiver of any subsequent breach of any covenant, condition or agreement herein contained. All such remedies of Landlord shall be cumulative, and in addition, Landlord may pursue any other remedies that may be permitted by law or in equity. Forbearance by Landlord to enforce one or more of the remedies herein provided upon an event of default shall not be deemed or construed to constitute a waiver of such default. 27. Security Deposit. Tenant shall deliver to Landlord the sum of $7,750.00 (the "Security Deposit") to be held by the Landlord without interest as security for Tenant's faithful performance of this Lease. Landlord may co-mingle the Security Deposit with Landlord's other funds, and Landlord may from time to time without prejudice to any other remedy use the Security Deposit to the extent necessary to make good any arrearages of Rent or to satisfy any other covenant or obligation of Tenant hereunder. Following any such application of the Security Deposit, Tenant shall pay to Landlord on demand the amount so applied in order to restore the Security Deposit from its original amount. If Tenant is not in default at the expiration or sooner termination of this Lease, the balance of the Security Deposit remaining after any such application shall be returned by Landlord to Tenant. If Landlord transfers its interest in the Premises during the term of this Lease, Landlord shall assign the Security Deposit to the transferee and thereafter Landlord shall have no further liability for the return of such deposit. 28. Holding Over. In the event Tenant or anyone claiming under Tenant shall remain in possession of the Premises after the expiration or earlier termination of the Lease term, Tenant shall liable for all damages suffered by Landlord as a consequence of Tenant's failure to timely surrender possession of the Premises to Landlord, including without limitation, any loss of a new tenant or damages required to be paid to a new tenant in connection with Landlord's failure to timely deliver possession of the Premises to such new tenant as a result of Tenant's failure to timely surrender possession of the Premises to Landlord. Without limitation on the foregoing, and not as liquidated damages in any way, in the event of such holding over by Tenant without Landlord's written consent, Tenant shall be deemed to be occupying the Premises subject to all of the terms of this Lease which may be applicable to such continued occupancy and at a monthly Base Rent equal to one hundred fifty percent (150%) of the Base Rent in effect during the last full calendar month of the Lease term plus other sums due from time to time hereunder. 29. No Offer. The submission of this Lease by either party to the other for review shall not be considered an offer to enter into this Lease and such 14 submission shall not bind either party in any way until both Landlord and Tenant have each executed and delivered duplicate originals of this Lease. 30. No Construction Against Drafting Party. Landlord and Tenant acknowledge that each of them and their respective counsel have had an opportunity to review this Lease and that this Lease shall not be construed for or against either party merely because such party prepared or drafted this Lease or any particular provision thereof. 31. Severability. If any provision of this Lease or the application thereof to any person or circumstance shall to any extent be or become illegal, invalid or unenforceable, the remaining provisions of this Lease, or the application of such provision to other persons or circumstances, shall not be affected thereby and each remaining provision of this Lease shall be valid and enforceable to the fullest extent permitted by law. 32. Time of the Essence. Except as otherwise expressly provided herein, time is of the essence with respect to all required acts of Tenant and Landlord and each provision of this Lease. 33. Brokerage Commissions. Landlord and Tenant warrant and represent that they have not dealt with any real estate broker or salesman in connection with this Lease except Gittings, Schueth & Grunthal Real Estate Services, Inc. and Landlord shall be solely responsible for the payment of any fees or commissions due. Landlord and Tenant further represent they have dealt with no other person which would create any liability for the payment of a commission by the other party. The party who breaches this warranty shall defend, hold harmless, and indemnify the non-breaching party from any claims or liability arising from the breach. 34. Authority to Execute Lease. Tenant represents and warrants that this Lease has been duly authorized, executed and delivered by and on behalf of Tenant and constitutes the valid, binding, and enforceable agreement of Tenant in accordance with the terms hereof. Landlord represents and warrants that Landlord is the owner of fee simple title to the property on which the Premises is located, this Lease has been duly authorized, executed and delivered by and on behalf of Tenant, and constitutes the valid, binding and enforceable agreement of Landlord in accordance with the terms hereof. 35. Notices. All notices, demands, consents and approvals which may be or are required to be given by either party to the other hereunder shall be in writing and shall be deemed to have been fully given and received upon actual delivery (or refusal to accept delivery) to the address of all parties designated to receive notice as set forth below or to such other place as the party to be notified may from time to time designate by at least 10 business days notice to the other parties. Notices, demands, consents and approvals shall be deemed properly given only by: (a) personal delivery; or (b) sent by Federal Express or other nationally-recognized overnight delivery 15 service; or (c) deposit in the United States mail certified, return receipt requested with postage prepaid. Until changed in the manner set forth above, the addresses for notice are as follows: If to Tenant: Barnhill's Buffet, Inc. 226 Palafox Place, 5th Floor Pensacola, Florida 32501 Telephone: (850) 435-9914 Telecopier: (850) 435-9229 with copy to: Armstrong Allen, PLLC Attention: Michael D. Kaplan 80 Monroe Avenue, Suite 700 Memphis, Tennessee 38103 Telephone: (901) 523-8211 Telecopier: (901) 524-4936 If to Landlord: Family Steak Houses of Florida, Inc. Attention: Mr. Edward B. Alexander 2113 Florida Boulevard Neptune Beach, Florida 32266 Telephone: 904-249-4197 Telecopier: 904-249-1466 With a copy to Hughes & Lane, P.A. Attention: Edward W. Lane, III, Esquire 4190 Belfort Road, Suite 351 Jacksonville, Florida 32216 Telephone: 904-296-2200 Telecopier: 904-296-2270 If to Mortgagee: GE Capital Corporation Attention: Annette Walsh 17207 North Perimeter Drive Scottsdale, Arizona 85255-5402 Telephone: 480-563-6696 Telecopier: 480-585-2227 36. Entire Agreement. This Lease contains the entire agreement between the parties hereto with respect to its subject matter and negotiations relating thereto, and supersedes all previous letter agreements. This Lease may be amended only by subsequent written agreement between the parties. Except for those that are set forth in this Lease, no representations, prior written or oral promises, warranties or agreements made by Landlord or Tenant shall be applicable to this Lease. 16 37. Governing Law. This Lease shall be governed by and shall be construed and interpreted in accordance with the laws of the State of Florida. 38. Attorney's Fees. In the event Tenant or Landlord defaults in the performance of any of the terms, covenants, agreements or conditions contained in this Lease or in the event Landlord places the enforcement of this Lease for the collection of any Rent due or to become due, or the recovery of possession of the Premises in the hands of an attorney, or in the event either party files suit against the other, with respect to the enforcement of its rights under this Lease, Tenant and Landlord agree that the prevailing party shall be entitled to be reimbursed by the non-prevailing party for all reasonable attorney's fees, expert witness fees, paralegal fees and court costs incurred by the prevailing party or as otherwise may be determined by arbitration under Section 55 hereof. 39. Arbitration. If a dispute arises under this Lease relative to an issue which this Lease provides should be arbitrated, including but not limited to apportionment, valuation, rental rates for options or extension periods and set- off provisions, and the parties to this Lease are unable to reach a mutually acceptable resolution, the parties shall proceed to resolve the dispute in the manner herein provided. Either party shall notify the other in writing of its position, and in the case of a monetary dispute, the amount acceptable to it. Such notification shall also include the names and addresses of three (3) persons residing in the State of Florida with experience in commercial real estate matters, who have agreed to serve as arbitrator in accordance with the provisions of this Arbitration section, any one of which is acceptable to the notifying party to serve as arbitrator. Within ten (10) business days following such notifications, the party notified shall advise the other party, in writing, of its position, and in the case of a monetary dispute, the amount acceptable to it. Such notification shall also include the names and addresses of three (3) persons residing in the of Florida with experience in commercial real estate matters, who have agreed to serve as arbitrator in accordance with the provisions of this Arbitration section, any one of which is acceptable to the notifying party to serve as arbitrator. Once the parties have notified each other as provided, the written position submitted by each party cannot subsequently be revised by the submitting party, nor can substitutions be made to the lists of names accompanying the notifications. If within ten (10) days after both parties have been notified of their respective positions, the parties are unable to reach a mutually acceptable resolution, then the parties shall select one person from all of the names submitted who shall be appointed as the arbitrator. If, within the time specified, the parties are unable to mutually agree on the person to serve as arbitrator, either party may apply to the presiding judge of the District Court of Duval County, Florida to select the arbitrator from the list of names initially submitted by both parties. Within five (5) days following selection of the arbitrator each party shall furnish the arbitrator with its written position as set forth in the notification originally furnished. Each party may also include at this time any information, data and/or reports, supportive of its position. The arbitrator may request additional information, data or reports from the parties or others if the arbitrator so desires. Within ten (10) business days following appointment, the 17 arbitrator shall notify both parties in writing of the arbitrator's decision which shall be the position of one of the parties. Such decision shall not deviate in any way from the position initially stated by the party whose position has been selected by the arbitrator, it being the intent that the arbitrator shall select the position of one of the parties. If either of the parties shall fail to furnish the arbitrator its position within the time and in the manner as herein specified, the arbitrator shall consider such party's position to be identical to the position of the other. The decision of the arbitrator shall be final and shall be binding upon the parties and effective as of the date of notification to the parties of the arbitrator's decision. The party whose position is not selected by the arbitrator as the decision shall promptly pay to the arbitrator the total fees and expenses of the arbitrator. Notwithstanding the foregoing, this Section shall not apply for instances of the non-payment of Rent or disputes with respect to Rent. 40. Radon Gas. Radon is a naturally occurring radioactive gas that, when it has accumulated in a building in sufficient quantities, may present health risk to persons who are exposed to it over time. Levels of radon that exceed Federal and State Guidelines have been found in buildings in Florida. Additional information regarding radon and radon testing may be obtained from your county public health unit. 41. Confidentiality. Each party hereto agrees not to disclose the economic terms of this Lease except as each party respectively determines to be necessary for the conduct of its business or as may be required by a court of law or governmental authority. Neither party shall issue any press releases pertaining to this Lease or containing the economic terms of this Lease without the prior written consent of the other party. 42. Number of Execution Copies. This Lease may be executed in any number of counterparts, each of which shall be an original, but all of which shall constitute one instrument. 43. Memorandum of Lease. Neither Landlord nor Tenant shall permit, allow or cause this Lease, or any amendment hereto, to be recorded in any public registry or office of register of deeds; however, at the request of either party, Landlord and Tenant agree to execute a recordable memorandum of this Lease setting forth the names and addresses of the parties, a reference to the lease with its date of execution, a specific legal description of the Premises, the actual Commencement Date of the Lease, the term of the Lease, and any renewal Terms, which memorandum may be recorded by Tenant at Tenant's expense or by Landlord at Landlord's expense in the appropriate public records of the county or counties in which the Premises is situated. 44. Waiver of the Right to Trial by Jury. Landlord and Tenant hereby knowingly and intentionally waive the right to trial by jury in any action or proceeding that Landlord or Tenant may hereinafter institute against each other with respect to any matter arising out of or related to this Lease or the Premises. 18 45. Discontinued Operations. In the event Tenant shall at any time during the term of this Lease discontinue its business operations in the Premises Building for a period of sixty (60) days or longer, and the reason for Tenant's discontinuation of business is not due to (a) the repairing or remodeling of the Premises Building, (b) a casualty loss, (c) union or labor difficulties, or (d) any other reason beyond the reasonable control of Tenant [financial ability excluded], then Landlord may (but shall not be obligated to) terminate this Lease by giving Tenant written notice of Landlord's election to so terminate the Lease (a "Termination Notice"). Any such Termination Notice shall set forth a date (the "Termination Date") not less than thirty (30) days nor more than one hundred twenty (120) days after the date of the Termination Notice. Tenant may void the Termination Notice by (A) within ten (10) days following Tenant's receipt of the Termination Notice, notifying Landlord in writing of Tenant's intent to promptly recommence its business operations in the Premises Building, and (B) recommencing its business operations in the Premises Building within thirty (30) days following its receipt of Landlord's Termination Notice. Unless Tenant shall so effectively void the Termination Notice, this Lease shall terminate as of the Termination Date as if such date were the date originally fixed herein for the termination of this Lease. 46. Transfer of Title. In the event Landlord shall hereafter sell, convey, assign, transfer or exchange Landlord's interest in the Premises, including a transfer pursuant to a foreclosure or delivery of deed in lieu of foreclosure or a transfer by operation of law (herein, a "Transfer"), (i) such Transfer of Landlord's interest in the Premises shall be subject to the terms and conditions of this Lease, (ii) Tenant's tenancy hereunder shall not be disturbed so long as Tenant shall not be in default under this Lease beyond any applicable grace or cure period, (iii) Tenant shall recognize and attorn to such purchaser, assignee or transferee, (iv) Landlord shall be, without further agreement between Landlord and Tenant, or between Landlord or Tenant and the transferee, released and relieved of all covenants and obligations of Landlord under this Lease arising or to be performed after the date of such Transfer, and (v) Tenant shall look solely to such successor in interest of Landlord for performance of such obligations. 47. Not a Partnership. The provisions of this Lease are not intended to create, nor shall they be interpreted in any way to create, a joint venture, a partnership or any similar relationship between Landlord and Tenant. In particular, Landlord does not, in any way or for any purpose, become a partner of Tenant in the conduct of Tenant's business, or otherwise. 48. Financial Statement. Forty-five (45) days after the end of each fiscal quarter, Tenant shall deliver to the Landlord's mortgagee (the "Lender"), a profit and loss statement for its business conducted at the Premises, and within one hundred twenty (120) days after the end of the Tenant's fiscal year, the Tenant shall deliver to the Lender, a balance sheet and profit and loss statement for the fiscal period then ended. All such financial statements shall be prepared in accordance with generally accepted accounting principals consistently applied from period to period and shall be certified to be accurate 19 and complete by the chief financial officer or other appropriate officer of the Tenant. The Lender shall use commercially reasonable efforts to ensure that such financial information supplied by the Tenant remain confidential. IN WITNESS WHEREOF, the parties hereto have duly executed multiple counterparts of this Lease in their respective names by their respective authorized representatives, effective as of the date set forth above. LANDLORD: FAMILY STEAK HOUSES OF FLORIDA, INC. _______________________________ By:___________________________ _______________________________ Name:_________________________ Title:________________________ [CORPORATE SEAL] TENANT: BARNHILL'S BUFFET, INC., doing business as Barnhill's Buffet of Tennessee ________________________________ By:__________________________ Name:________________________ ________________________________ Title:_______________________ [CORPORATE SEAL] 20 STATE OF ______________ COUNTY OF _____________ The foregoing instrument was acknowledged before me this _____ day of _________, 2002 by____________________ as _____________________________, FAMILY STEAK HOUSES OF FLORIDA, INC., on behalf of the corporation. He is personally known to me or has produced ____________ as identification. Name:__________________________ NOTARY PUBLIC, State and County Aforesaid Commission No. My Commission Expires: STATE OF ______________ COUNTY OF ____________ The foregoing instrument was acknowledged before me this _____ day of _________, 2002, by ____________________ as _____________________________, of BARNHILL'S BUFFET, INC. on behalf of the corporation. He is personally known to me or has produced ____________ as identification. Name:__________________________ NOTARY PUBLIC, State and County Aforesaid Commission No. My Commission Expires: 21 EXHIBITS Paragraph Exhibit A Legal Description of Premises B Rent Schedule 22 EXHIBIT A LEGAL DESCRIPTION OF PREMISES A portion of Tract F, PARK WEST, UNIT TWO, according to plat thereof as recorded in Plat Book 13, pages 46, 47 and 48 of the public records of Clay County, Florida, being more particularly described as follows: For a point of beginning, commence at the Northwest corner of said Tract F, run thence North 89deg 11min 00sec East along the North line of said Park West, Unit Two, a distance of 360.0 feet; thence South 01deg 19min 06sec East, a distance of 225.00 feet to a point in the Northerly right of way line of Belmont Boulevard, (a 90 foot right of way, as now established); run thence South 89deg 11min 10sec West, along said right of way line, a distance of 360.00 feet to its intersection with the Easterly right of way line of Blanding Boulevard, (a 100 foot right of way, as now established); run thence North 01deg 19min 06sec West along said Easterly right of way, a distance of 255.00 feet to the point of beginning. Less and Except the following described parcel: A portion of Tract F Park West Unit Two, as recorded in Plat Book 13, pages 46, 47 and 48 of the public records of Clay County, Florida, being more particularly described as follows: For a point of beginning, commence at the Northwest corner of said Tract F, run thence North 89deg 11min 00sec East along the North line of said Park West Unit Two, a distance of 200.0 feet; run thence South 01deg 19min 06sec East, a distance of 120.00 feet; run thence South 89deg 11min 00sec West, 200.00 feet to the East line of Blanding Boulevard (State Road No. 21) as now established, for a width of 100 feet; run thence North 01deg 19min 06sec West along said line, 120.00 feet to the point of beginning. 23 EXHIBIT B RENT SCHEDULE (Initial Term) Years Monthly Annually 1-5 $7,750.00 $93,000.00 6-10 $8,525.00 $102,300.00 (Renewal Term) 11-15 $9,377.50 $112,530.00 16-20 $10,315.25 $123,783.00 NOTE: The above amounts do not include applicable Florida sales tax. Tenant shall pay such sales tax with each installment of rent. 24 EX-5 6 ryansex5.txt Exhibit 10.05 LEASE AGREEMENT by and between FAMILY STEAK HOUSES OF FLORIDA, INC. and BARNHILL'S BUFFET, INC. Dated September 27, 2002 1415 Atlantic Boulevard Neptune Beach, Florida 1 LEASE AGREEMENT This Lease Agreement (this "Lease") is made as of September 27, 2002 ("Effective Date") by and between FAMILY STEAK HOUSES OF FLORIDA, INC., ("Landlord"), whose address for purposes hereof is 2113 Florida Boulevard, Neptune Beach, Florida 32266, and BARNHILL'S BUFFET, INC., a Tennessee corporation doing business in Florida as Barnhill's Buffet of Tennessee, Inc. ("Tenant"), whose address for purposes hereof is 226 Palafox Place, 5th Floor, Pensacola, Florida 32501. 1. Description of Premises. Landlord leases to Tenant that certain parcel of land located at 1415 Atlantic Boulevard, Neptune Beach, Florida, together with all improvements and furniture, fixtures and equipment located thereon as of the Commencement Date, said land being more particularly described in Exhibit "A" attached hereto (the "Premises"). 2. Lease Term. The term of this Lease shall be for a period of ten (10) years (the "Term") or until such Term shall sooner cease and expire or shall be extended or renewed as hereinafter provided. The Term shall commence on the earlier to occur of: (i) the date upon which Tenant takes possession of the Premises, or (ii) the later of (a) 30 days after Tenant's construction plans are approved or deemed to be approved by Landlord and Landlord's lender of (b) November 1, 2002 (the "Commencement Date") and shall expire at midnight on October 31, 2012. Notwithstanding the foregoing, however, the obligations of the Tenant hereunder are contingent upon receipt of a non-disturbance agreement (the "NDA") from GE Capital Franchise Finance Corporation, the lender holding an existing mortgage upon the Premises, in form reasonably satisfactory to Tenant. In the event the NDA is not received by Tenant on or before the Commencement Date, Tenant may, at its option, (i) elect to terminate this Lease by giving written notice to Landlord within five (5) days after the Commencement Date, whereupon this Lease shall terminate, the security deposit and first month's rent shall be returned to the Tenant, and the parties shall be relieved from further rights, duties, and obligations hereunder, or (ii) elect to extend the time for receipt of the NDA for an additional thirty (30) days upon written notice to Landlord given within five (5) days after the Commencement Date, retaining the right to terminate this Lease for failure to obtain the NDA at the end of such thirty (30) day period in the same manner as aforesaid. 3. Use. The Premises may be used for the operation of a buffet or full service restaurant offering seated dining and uses ancillary thereto which may include take-out and drive-through service, and for no other purpose. Landlord represents and warrants that, and Tenant's obligations under this Lease are conditioned upon the current zoning of the Premises permitting Tenant to operate 2 the Premises as a buffet restaurant with no fewer seats than permitted for the Ryan's Family Steak House restaurant that most recently operated in the Premises. 4. Rent. The "Rent Commencement Date" shall be the Commencement Date. Subject to adjustments as set forth herein, Tenant agrees to pay, as base annual rent for the use of the Leased Premises, each year during the first five years of the term hereof, the sum of $84,000.00 ("Rent" or "Base Rent"), which shall be payable in twelve (12) equal monthly installments of $7,000.00, plus applicable sales tax, as set forth on the Rent Schedule attached hereto as Exhibit B. All payments due under this Lease shall be paid monthly in advance on or before the first (1st) day of each month (the "Due Date") without reduction, abatement or set-off, and shall be mailed or delivered to Landlord's office at the address above (or at such other address for the payment of rent that Landlord may give notice of to Tenant). Any payment due and not paid within seven (7) business days after receipt of written notice of nonpayment shall bear interest retroactive from the Due Date at a rate of ten percent (10%) per annum until paid. If the Rent Commencement Date is other than the first day of a calendar month, the rent for the portion of said month shall be prorated at a daily rate based upon the base monthly rent, and shall be payable on the Rent Commencement Date. If the Rent Commencement Date is later than November 1, the first "year" of the Term shall be reduced accordingly and still have an ending date of October 31. Within five (5) business days after the full execution of this Lease, Tenant shall pay to Landlord the amount of one month's rent, which shall be applied as the first month's rent; and any excess payment attributable to a Rent Commencement Date other than the first day of the month shall be credited against the second month's rent. 5. Net Lease / Other Charges. Tenant acknowledges and agrees that it is the purpose and intent of Landlord and Tenant that this Lease be a so-called "Net Lease" that is completely carefree to Landlord and therefore, except as may otherwise be expressly set out in this Lease, Tenant shall be responsible to pay, or promptly reimburse Landlord for paying, all costs, charges, expenses and outlays of any nature whatsoever arising from or relating to the Premises which arise or become due during the term of this Lease (herein, "Other Charges"), specifically including without limitation (i) all general property taxes and assessments, special improvement taxes or assessments, privilege taxes, excise taxes, business and occupation taxes, taxes upon or measured by rent, assessments for public improvements or otherwise, levies, fees, water and sewer charges, and all other governmental impositions and charges of every kind and character which are now or may hereafter be levied upon or assessed against the Premises; (ii) all taxes levied against any equipment, inventory, trade fixtures or other personal property located in the Premises, without regard to whether Landlord or Tenant shall own title to same; (iii) expenses incurred by Landlord in correction of any violation of any covenant or other obligation of Tenant to be performed under this Lease; and (iv) all applicable federal, state or local sales taxes which may, at any time during the term of this Lease, be imposed on the Base Rent or any other monetary charges which Tenant is required to pay to Landlord under this Lease; provided, however, in no event shall Tenant be responsible for paying any payments of principal or interest required under any 3 mortgage encumbering the Premises or any income or similar taxes imposed upon Landlord. At the request of Landlord, Tenant shall pay any Other Charges directly to any governmental authority or other third party to whom such charges are due, on or before the later of (i) ten (10) days following Tenant's receipt of notice of such outstanding charges, or (ii) ten (10) days prior to the due date of such charges. Tenant shall pay any Other Charges payable to Landlord (in reimbursement for costs and expenses incurred by Landlord) on or before the later of (a) ten (10) days following Tenant's receipt of notice of such charges, or (b) with Tenant's next monthly installment of Base Rent due on the first day of the first calendar month following Tenant's receipt of such notice. 6. Late Fees / Interest. The term "Rent" or "rent" as used in this lease shall mean and refer to collectively to the Base Rent plus all Other Charges, and in the event of any non-payment of any of the Other Charges by Tenant, Landlord shall have in addition to all other rights and remedies, all of the rights and remedies provided for herein or by law with respect to non-payment of Base Rent. Without waiver, limitation or prejudice to the foregoing, as a material inducement for Landlord's entry into this Lease, Tenant agrees that if any payment of Rent is not received by Landlord within ten (10) days following the due date therefor, or Tenant's check for same shall not be honored for any reason, then, because the actual damages resulting from late payments and dishonored checks are difficult to fix, Tenant shall pay Landlord as liquidated damages for each such late payment or dishonored check a late fee in an amount equal to five percent (5%) of the amount of the overdue payment. In addition, beginning three (3) business days following Tenant's receipt of written notice of any past due Rent, Landlord may charge interest on the said past due Rent until paid at a rate equal to the lesser of eighteen percent (18%) or the maximum rate allowed by law (herein, the "Default Rate"). 7. Rent Escalation .. The annual Rent to be paid to Landlord by Tenant shall be increased as described in Exhibit B. 8. Services. Tenant shall pay before delinquency, at its sole cost and expense, all charges for water, gas, heat, electricity, power, telephone service, sewer service charges, and sewer rentals charged or attributable to the Premises, and all other services or utilities used in, upon, or about the Premises by Tenant or any of its subtenants, licensees, or concessionaires from the Commencement Date and throughout the lease term hereof. 9. Taxes. Tenant shall be responsible for the payment of all ad valorem taxes and assessments levied against the Premises during the Lease term. The Landlord shall forward a copy of the ad valorem tax bill and any bill for any assessment levied against the Premises to the Tenant for payment. The Tenant shall pay the same before delinquency, and shall furnish the Landlord with a copy of its check in payment of said bill. In the event any bill for ad valorem taxes or assessments is not paid before delinquency at any time during the Lease term, the Landlord may pay the same and shall be entitled to recover the cost thereof from the Tenant as Other Charges hereunder. In addition, on January 31 4 of the final year of the Lease term, or any Renewal Term, as the case may be, the Tenant shall pay to the Landlord on demand the Tenant's prorata share of the ad valorem taxes and any outstanding and unpaid assessments for that calendar year as Other Charges hereunder. 10. Care and Maintenance of Premises. Tenant shall be solely responsible for the maintenance, repair, and replacement of the Premises throughout the term of this Lease, including, but not limited to, the maintenance, repair, and replacement of all improvements located on the Premises, including the roof and structural components thereof, all plumbing, electrical, heating, ventilation and air conditioning systems therein, and all other improvements to the Premises, such as the asphalt paving and concrete curbing of the parking areas and driveways, and the landscaping located on the Premises. Landlord shall have no responsibility whatsoever for any maintenance, repair, replacement of the Premises or any improvements located thereon unless such is made necessary due to the gross negligence or willful act of the Landlord. Without limitation, the foregoing shall apply with respect to any modifications or replacements required to be made to the Premises at any time during the term in order to comply with any ADA or other governmental requirements. Tenant shall maintain the Premises in good condition and repair at all times, and Tenant shall allow only licensed and insured contractors to perform any electrical repairs, repairs to the roof or structural components of the Premises or any repairs to any portion of the heating, ventilating and air conditioning system. Tenant shall plan and perform all substantial repairs in accordance with the requirements of Section 13 hereof. 11. Signage. Landlord and Tenant agree that throughout the Term and any Renewal Terms of this Lease, Tenant and its permitted subtenants, and assignees may erect, maintain, repair and replace any and all signs which the Tenant and its permitted subtenants, and assignees may desire from time-to-time on the Premises including, without limitation, building, pylon and monument signs, so long as such signs comply in all respects and at all times with applicable codes, ordinances, laws and statutes concerning the same, and (ii) the Tenant and its permitted subtenants, and assignees has at its expense obtained all necessary governmental licenses, permits, and approvals for such signs. All such signs shall be maintained in good condition and repair at all times. 12. Renewal Option. So long as no default then exists hereunder, this Lease may be renewed by Tenant for two (2) successive, five (5) year terms (the "Renewal Term(s)"), if Tenant shall give written notice of renewal to Landlord at least 90 days prior to the end of the then-current term, provided that no Event of Default exists at the time of such Notice or occurs prior to the commencement of the Subject Renewal Term. Each Renewal Term shall be subject to the same terms and conditions as the initial Term, except that Tenant shall pay to Landlord the Base Rent provided for in Exhibit "B" of this Lease. 13. Sublease and Assignment. Tenant shall not assign, sublease, transfer, pledge, or encumber this Lease or any interest therein without Landlord's prior written consent. For purposes hereof the transfer of all or a controlling 5 interest in Tenant shall not constitute an assignment of this Lease. Any attempt at assignment, sublease, or other transfer or encumbrance by Tenant in violation of the terms and covenants of this paragraph shall be void. Landlord's consent to a particular assignment, subletting, transfer, pledge, or encumbrance shall not obviate the necessity of Landlord's consent to any future assignment, subletting, transfer, pledge, or encumbrance, Landlord retaining the right to consent to each and every of same. 14. Alterations by Tenant. It is understood and agreed that Tenant, at its expense, will alter and remodel the premises to Tenant's standards to convert the building to a Barnhill's Buffet restaurant. Prior to the construction of any improvements, Tenant shall submit to the Landlord for the Landlord's consent and for the consent of Landlord's lender plans and specifications for Tenant's alterations and improvements (the "Plans"), such consent not to be unreasonably conditioned, delayed, or withheld. Landlord shall respond to the Plans within twenty (20) days following receipt. If Landlord fails to respond within said twenty (20) day period, the Plans shall be deemed approved by Landlord. Tenant acknowledges that the Landlord has no control over the timing of the approval or disapproval of the Plans by Landlord's lender. In the event the lender disapproves the Plans, or in the event the lender fails to respond to the plans within forty-five (45) days following receipt, the Tenant may at its option elect to terminate this Lease and receive a refund of all deposits and rent that may have been paid to Landlord. After completion of Tenant's initial alterations and remodeling, all additions, alterations, improvements and fixtures (except Tenant's merchandise, personal property, furniture, equipment, movable trade fixtures and signage) in or upon the Premises, whether placed there by Tenant or by Landlord, shall become Landlord's property and shall remain upon the Premises at the termination of this Lease by lapse of time, or otherwise, without compensation or allowance or credit to Tenant. After the Commencement Date, Tenant shall not make additions, changes, alterations or improvements to the Premises costing more than $10,000.00 in the aggregate, without the prior written consent of Landlord. Even if Landlord's consent is not required, Tenant shall give Landlord prior written notice specifying any work to be done. If Landlord grants its consent, Landlord may impose reasonable requirements as a condition of such consent including without limitation the submission of plans and specifications for Landlord's prior written approval, obtaining necessary permits, obtaining insurance, prior approval of contractor (not to be unreasonably withheld) and reasonable requirements as to the manner and times in which such work shall be done. All work shall be performed in a good and workmanlike manner and shall be in accordance with plans and specifications (approved by Landlord if approval is required by the above provisions). If any of such work may affect the structure of the Building or interfere with Building systems or operation, Landlord may require that such work be performed under Landlord's supervision (but at no additional cost to Tenant for such supervision). Notwithstanding the foregoing, upon expiration of the Term or earlier termination of the Lease, Tenant may remove all of its personal property, furniture and fixtures from the Premises, repairing any damage caused to the Premises by such removal. 6 15. Construction Lien. In no event shall Tenant have the right or authority to create, or permit there to be established, any contractor's, mechanic's, materialmen's or other lien or encumbrance of any nature against Landlord's interest in the Premises or the Building for improvements made or caused to be performed by and at the request of Tenant. Any lien filed by any contractor, materialman or supplier performing work requested by and for Tenant shall attach only to Tenant's interest in the Premises for work claimed to have been furnished for Tenant. Tenant shall, within 20 business days after Tenant receives notice of the filing of any lien for such work, duly discharge the lien or contest such lien by posting a bond equal to the amount of the disputed claim with companies reasonably satisfactory to Landlord. In the event that such lien is not released and removed or bonded within 20 business days after Tenant has received notice thereof, Landlord, at its sole option, may take all action necessary to release and remove or bond such lien (without any duty to investigate the validity thereof) and Tenant shall promptly upon notice reimburse Landlord for all reasonable sums, costs and expenses (including reasonable attorneys' fees) incurred by Landlord in connection with such lien. 16. Hazardous Substances. Tenant shall not bring upon or permit to be brought upon the Premises any Hazardous Substances, except normal office and restaurant supplies. Tenant shall not use the Premises for the manufacture, storage, disposal or handling of any Hazardous Substances, except normal office and restaurant supplies, and Tenant shall indemnify and hold harmless Landlord from and against any and all loss, claim, damages, liability, cost or expense, including reasonable attorney's fees actually incurred at customary hourly rates, court costs and remediation costs and expenses incurred by Landlord arising from or relating to Tenant's violation of the terms of this paragraph. 17. Quiet Enjoyment. Landlord covenants and agrees, provided Tenant pays all Rent and performs the terms and conditions of this Lease as and when required, to take all necessary steps to secure to Tenant and to maintain for the benefit of Tenant the quiet and peaceful possession and enjoyment of the Premises and all rights appurtenant thereto, for the term hereof, without disturbance, hindrance or molestation by Landlord or any other person claiming title to the Premises or any part thereof, and Landlord warrants and forever agrees to defend Tenant's interest under this Lease against the claims of any and all persons other than those claiming by, through or under Tenant. 18. Insurance. At all times during the Term of this Lease and any renewals thereof Tenant shall obtain and thereafter keep in full force and effect, (i) commercial general liability insurance, such insurance to insure against liability for bodily injury and death and for property damage occurring on, in or about the Premises in an amount not less than Three Million Dollars ($3,000,000.00) combined single limit on a per occurrence basis, (ii) workmen's compensation as required by law providing statutory benefits for all persons employed by Tenant in connection with the Premises, (iii) builder's risk insurance during all periods in which Tenant is constructing alterations or 7 additions to or within the Premises, in reasonable amounts, (iv) fire, windstorm and extended risk casualty insurance coverage on the improvements located on the Premises for the full replacement cost thereof and with replacement cost endorsement, and with a deductible of not more than Ten Thousand Dollars ($10,000.00); and (iv) at all times that Tenant is selling alcoholic beverages for consumption within the Premises, liquor liability insurance in the minimum amount of One Million Dollars ($1,000,000.00) covering the Premises and Tenant's use thereof. All insurance that Tenant is required to maintain pursuant to this Section shall (a) name Landlord as an additional insured; (b) be underwritten by insurance companies maintaining an A.M. Best Company rating of "A-VIII" or better and that are licensed or authorized to do business in and shall be in good standing with the State of Florida; (c) be issued for terms of not less than one year; and (d) shall contain a provision that they shall not be subject to cancellation, non-renewal or material reduction in coverage as to the Premises unless Landlord shall be served with a written notice not later than thirty (30) days prior to cancellation, non-renewal or material reduction in coverage (for purposes of the foregoing, "material reduction in coverage" shall include without limitation any change from "all-risk" casualty insurance coverage, or a material increase in deductible). Tenant shall deliver Landlord certificates evidencing it has the required insurance coverages prior to the Commencement Date, and Tenant shall deliver renewal certificates thereof to Landlord prior to the expiration of each such policy. The insurance coverages required to be maintained by Tenant shall be subject to increase by Landlord from time to time as necessary in order to maintain a prudent level of insurance coverage as evidenced by the prevailing practices of landlords and tenants of similarly situated commercial properties and/or to comply with reasonable insurance requirements that may hereafter be imposed by any existing or hereafter arising mortgagee of Landlord's interest in the Premises. In the event Tenant shall fail to maintain any of the insurance coverages required hereby, then, without prejudice to any other rights or remedies available to Landlord under this Lease, at law or in equity, Landlord shall have the right, but no obligation, to immediately obtain such insurance on behalf of Tenant and Tenant shall promptly reimburse Landlord for all costs Landlord shall incur in connection therewith. Further, Tenant hereby agrees to indemnify and hold harmless Landlord from all loss, cost or expenses which Landlord shall suffer or incur as a result of any failure by Tenant to maintain the minimum amounts of insurance coverages required under this Section. 19. Indemnification/Hold Harmless. Landlord, its partners, representatives, agents, and their respective officers and employees, shall not be liable to Tenant, or to Tenant's officers, directors, shareholders, agents, servants, employees, customers or invitees, for any damage to person or property in or about the Premises caused by any act, omission or neglect of Tenant and its agents and their respective officers, directors, shareholders, and employees, and Tenant agrees to indemnify and hold harmless Landlord from all claims for any such damage. Tenant and its agents and their respective officers, directors and shareholders and employees shall not be liable to Landlord or to Landlord's partners, representatives, agents, servants, customers, or invitees and their respective officers and employees for any damage to person or property caused by any act, omission or neglect of Landlord, its partners, representatives and agents and their respective officers and employees and Landlord agrees to indemnify and hold harmless Tenant from all claims for any such damage. 8 20. Damage By Fire Or Other Casualty. (a) Reparable Damage. If fire or other casualty insurable under a standard fire and extended risk policy of insurance required to be carried by Tenant covering the Premises shall render the whole or any material portion of the Premises untenantable, and if the Premises can reasonably be expected to be reparable within one hundred eighty (180) days from the date of such event, subject to the Landlord's lender's right to apply the proceeds of Tenant's insurance to its mortgage encumbering the Premises, the Tenant shall repair and restore the Premises to their condition prior to the fire or other casualty within such one hundred eighty (180) day period (subject to delays for causes beyond Tenant's reasonable control such as delays due to issuance of building permits or obtaining of insurance proceeds provided Tenant diligently pursues the same) and notify Landlord in writing that it will be doing so, such notice to be mailed within thirty (30) days from the date of such damage or destruction, and this Lease shall remain in full force and effect, but the Minimum Rent, Additional Rent and other costs for the period during which the Premises are untenantable shall be abated. (b) Irreparable Damage. If fire or other casualty insurable under a standard fire and extended risk policy of insurance required to be carried by Tenant covering the Premises shall render the whole or any material portion of the Premises untenantable and the Premises cannot reasonably be expected to be reparable within one hundred eighty (180) days from the date of such event, or if an uninsurable casualty shall render the whole or any portion of the Premises untenantable, then Landlord or Tenant, by notice in writing to the other, mailed within thirty (30) days from the date of such damage or destruction, may terminate this Lease effective upon a date within thirty (30) days from the date of such notice. The Minimum Rent, Additional Rent, and all other costs shall be abated for the period during which the Premises are untenantable. Upon termination, all prepaid rents and/or deposits shall be returned to Tenant, any and all insurance proceeds payable on account of such casualty shall be paid over or assigned to the Landlord (subject to the right of Landlord's lender to any such proceeds), and neither Landlord nor Tenant shall have any other future obligations or responsibilities under this Lease. (c) Repair and Restore. If Landlord or Tenant does not terminate this Lease pursuant to its rights herein, subject to the Landlord's lender's right to apply any insurance proceeds to its mortgage encumbering the Premises, then Tenant shall repair and restore the Premises as the case may be to its condition prior to the damage or destruction within that time period reasonably necessary for such repair and restoration (subject to delays for causes beyond Tenant's reasonable control such as delays due to issuance of building permits or obtaining of insurance proceeds provided Tenant diligently pursues the same) and the Minimum Rent, Additional Rent and other costs shall be abated during the period of such restoration and/or repair. Notwithstanding anything set forth herein to the contrary, in no event shall any rent or other payments be due to Landlord until such time as Tenant can conduct its business from the Premises in a reasonable, prudent and businesslike manner, without any interference 9 resulting from reconstruction activities or the condition of the Premises. At its option, the Landlord may notify the Tenant that it has elected to perform all work repairing and restoring the Premises following a casualty, such notice to be given within thirty (30) days from the date the damage or destruction to the Premises occurred. Should the Landlord give the Tenant notice of its election to perform such work, the Tenant shall promptly pay over or assign to the Landlord all insurance proceeds payable on account of the casualty or destruction, and the Landlord shall apply such proceeds to the repair and restoration of the Premises performed by it. 21. Condemnation. (a) Total Taking. If all the Premises are taken by the power of eminent domain exercised by any governmental or quasi-governmental authority, this Lease shall terminate as of the earlier of (i) the date Tenant is required to vacate the Premises, or (ii) the date title passes to the condemning authority, and upon either such date of termination, all Minimum Rent, Additional Rent, and other costs due hereunder shall be paid to that date. The term "eminent domain" shall include the taking or damaging of property by, through, or under any governmental or quasi-governmental authority, and any purchase or acquisition in lieu thereof, whether or not the damaging or taking is by the government or any other person. (b) Partial Taking. Tenant may terminate this Lease upon written notice to Landlord for any of the following events of Partial Taking: (i) If more than five percent (5 %) of the Rentable Square Feet of Floor Area of the Premises shall be taken or appropriated; (ii) The Premises, after the taking, would no longer satisfy the requirements for a restaurant offering seated dining (based on Tenant's standard restaurant requirements in Tenant's reasonable business judgment); (iii) The access to the Premises is adversely affected; (iv) The visibility of the Premises is adversely affected; (v) The parking available to the Premises is adversely affected, whether modified or reduced; or (vi) If Tenant's business will otherwise be adversely affected. If tenant does not elect to terminate the Lease in the event of a Partial Taking, the parties agree that rental due under the Lease shall be equitably reduced in consideration of the Partial Taking. Landlord is obligated to make Tenant whole (including, but not limited to, parking, access and visibility) during and after the construction period. 10 (c) Damages. Landlord reserves all rights to the entire damage award or payment for any taking by eminent domain. Tenant shall, however, have the right to claim from the condemning authority all compensation that may be recoverable by Tenant on account of any loss incurred by Tenant, including, but not limited to, loss due to removing Tenant's merchandise, furniture, trade fixtures, and equipment or for damage to Tenant's business, loss of business, and/or loss of leasehold interest; provided, however, that Tenant may claim such damages only if they are awarded separately in the eminent domain proceeding and not as part of Landlord's damages. 22. Force Majeure. If either Landlord or Tenant is delayed or prevented from completing the performance of any obligation under this Lease by reason of accident, fire, act of God, public enemy, injunction, riot, strike, lockout, insurrection, war, court order, requisition or order of governmental body or authority, inability to procure labor or materials from normally available sources, or by any other cause without its fault and beyond its reasonable control (financial inability excepted), completion will be excused for the period of such delay and the date for completion will be extended for the period of such delay provided notice of the occurrence or encountering of such cause is given to the other party within 10 days after such occurrence or encounter and notice of the duration of such cause is given with 10 days after the cessation of such cause. However, in no event shall the provisions of this paragraph be applicable to extend or delay the ultimate date for the completion of construction of the Premises or the date for delivery of possession of the Premises to Tenant, as specified herein. 23. Subordination. This Lease is and shall be subject and subordinate to any mortgage, deed of trust, or other lien created by Landlord whether presently existing or hereafter arising upon the Premises, and to any renewals, refinancings, and extensions thereof, but Tenant agrees that any such mortgagee shall have the right at any time to subordinate such mortgage, deed of trust, or other lien to this Lease on such terms and subject to such conditions as such mortgagee may deem appropriate in its discretion. Tenant agrees that it will from time to time upon request by Landlord execute and deliver to such persons as Landlord shall request a statement in recordable form certifying that this Lease is unmodified and in full force and effect (or if there have been modifications, that the Lease is in full force and effect as modified) stating the dates to which Rent and other charges payable under this Lease have been paid, stating that Landlord is under default hereunder (or if Tenant alleges a default, stating the nature of such alleged default) and further stating such other matters as Landlord or its mortgagee shall reasonably require. Tenant agrees that it shall attorn to any purchaser or mortgagee of the Premises from and after the acquisition thereof by purchaser or mortgagee. Provided, however, the said subordinations and attornment shall be subject to and conditioned upon the agreement that Tenant's rights as Tenant hereunder shall not be disturbed so long as no Event of Default has occurred and is continuing under the terms of the Lease. Provided further, and notwithstanding the foregoing, Landlord agrees that its rights under this Lease, including without limitation any contractual or statutory landlord's lien on any property of Tenant, shall be subordinate to the lien(s) of any lender(s) that may attach to or may hereafter be placed upon 11 Tenant's furniture, trade fixtures and equipment, which subordination shall apply to any and all advances of funds made by such lender(s) and all renewals, replacements and extensions thereof; and Landlord agrees that the lien of any such lender as to the Tenant's furniture, trade fixtures, and equipment shall be deemed to be prior and superior to any contractual or statutory landlord's lien regardless of the dates or the record priority of any applicable documents or instruments. 24. Estoppel Certificate. Landlord and Tenant agree that they will from time to time upon request from each other, within 15 business days after notice from the other, execute and deliver to such persons as the requesting party shall request, a statement certifying that this Lease is unmodified and in full force and effect (or if there have been modifications, that the same is in full force and effect as so modified), stating the dates which rent and other charges payable under this Lease have been paid, stating the commencement and termination dates of the current term of the Lease and stating whatever options to extend there may be in the Lease, stating that Landlord or Tenant, as applicable, is not in default hereunder to the best of such party's knowledge after due inquiry (or if Landlord or Tenant, as applicable, have alleged a default, stating the nature of such alleged default), and further stating such other matters relating to the Lease as the requesting party shall reasonably require. 25. Landlord's Default. Landlord's failure to perform any of its obligations under this Lease for a period of twenty (20) days after receiving notice from Tenant specifying in reasonable detail the nature and extent of such default, or if the default so specified shall be of such a nature that the same cannot reasonably be cured or remedied within said twenty (20) day period and Landlord shall fail to promptly commence and thereafter continuously and diligently prosecute the cure or remedy of such default to completion. then Landlord shall be in "Default" hereunder. If Landlord commits a Default, Tenant, in addition to any remedies available under the law, may, without being obligated and without waiving the Default, with additional five (5) business day notice to Landlord, cure the Default on behalf of Landlord. Landlord shall pay Tenant, upon demand, all costs, expenses, and disbursements incurred by Tenant to cure the Default. If such payment is not rendered within thirty (30) days of demand, Tenant may deduct all such costs and expenses from the rent next coming due. If Tenant elects not to cure the Default by Landlord, Landlord shall remain responsible to cure the Default and liable to Tenant for any direct damages suffered by Tenant as a consequence of Landlord's failure to cure the Default. It is understood and agreed that Tenant's exercise of any right or remedy to a default or breach by Landlord shall not be deemed a waiver of or to alter, affect, or prejudice any right or remedy which Tenant may have under this Lease or by law or in equity. Neither the payment of rent nor any other act or omission of Tenant at any time or times after the happening of any Default shall operate as a waiver of any past or future violation, breach, or failure to keep or perform any covenant, agreement, term, or condition hereof, or to deprive Tenant of its right to pursue or exercise at any time any option, right or 12 remedy that Tenant may have under any term or provision of this Lease, at law or in equity. 26. Tenant Default. It shall be a default ("Event of Default") hereunder if (i) Tenant shall fail to pay any rent or any other sums of money within ten (10) business days after receipt of written notice that the same is due; (ii) Tenant shall fail to comply with any other provision of this Lease and after receipt of written notice, fail to promptly commence and thereafter continue with diligence to correct any default within thirty (30) days after written notice or the additional time, if any, that is reasonably necessary; (iii) the Premises shall be taken on execution or other process of law in any action against Tenant; (iv) Tenant shall become insolvent or unable to pay its debts as they become due, or Tenant notifies Landlord in writing that it anticipates either condition; (v) Tenant takes any action, or notifies Landlord in writing that Tenant intends, to file a petition under any section or chapter of the Bankruptcy Code as amended, or under any similar law or statute of the United States or any State thereof; or a petition shall be filed against Tenant under any such statute which is not dismissed within 60 days after the filing thereof; or (vi) a receiver or trustee shall be appointed for Tenant's leasehold interest in the Premises or for all or a substantial part of the assets of Tenant and not discharged within 60 days after the appointment of a receiver or trustee. On the occurrence of any Event of Default and after the applicable notice and cure period, and subject to terms and conditions provided herein, Landlord may; (i) without terminating this Lease and without entering into possession of the Premises, continue this Lease in effect and enforce all rights of Landlord and obligations of Tenant hereunder, including the filing of suit for the collection of monthly rent, Other Charges, and all other sums due hereunder as they accrue (including attorneys' fees and other damages). Acts of maintenance or preservation, efforts to relet the Premises, or the appointment of a receiver upon Landlord's initiative to protect its interest under this Lease shall not constitute a termination of this Lease or Tenant's right to possession hereunder; (ii) re-enter and repossess the Premises and remove all persons and property therefrom either by summary dispossess proceedings or by a suitable action or proceeding at law or in equity, or by force or otherwise, without being liable for any damage therefor. No re-entry by Landlord shall be deemed a termination or an acceptance of a surrender of this Lease; (iii) Terminate this Lease and sue Tenant for damages hereunder which damages shall be an amount equal to (A) the sum of all amounts due hereunder to the date of termination; plus (B) the aggregate rent remaining over the unexpired portion of the Term plus the reasonable cost to Landlord for any repairs and other costs of reletting, all reduced to present value using a discount rate equal to the interest rate of a governmental security having a maturity closest to the then current expiration of the Term; less (C) the 13 aggregate fair net rental value of the Premises over the remaining portion of the Term provided, however, a reasonable period of time, not to exceed six (6) months, may be considered as a leasing period by which the Premises would not be leased and therefor no income would be realized for such period reduced to present value; plus (D) Landlord's costs and expenses incurred in the enforcement hereof including reasonable attorneys fees as herein provided; (iv) relet any or all of the Premises for Tenant's account for any or all of the remainder of the Term or for a period exceeding such remainder, in which event Tenant shall pay to Landlord, at the times and in the manner specified by the provisions herein the rent accruing during such remainder, less any rent received by Landlord, with respect to such remainder, from such reletting, as well as the cost to Landlord of any reasonable attorney's fees actually incurred at customary hourly rates, or for any repairs or cost of reletting or other action (including those taken in exercising Landlord's rights under any provision of this Lease ) taken by Landlord on account of such Event of Default, but in no event shall Landlord be liable in any respect for failure to relet the Premises after good faith efforts to do so or in the event of such reletting, for failure to collect the rent thereunder. Any sums received by Landlord on a reletting in excess of the rent reserved for this Lease shall belong to Landlord; (v) cure such Event of Default in any other manner (after giving Tenant written notice of Landlord's intention to do so except in the case of emergency), in which event Tenant shall reimburse Landlord for all expenses reasonably incurred by Landlord in doing so, plus interest at the Default Rate, which expenses and interest shall be additional rent and shall be payable by Tenant immediately on demand therefor by Landlord; and/or (vi) pursue any combination of such remedies and/or any other remedy available to Landlord on account of such Event of Default at law or in equity. If legal proceedings are instituted hereunder, and a compromise or settlement thereof shall be made, it shall not be constituted as a waiver of any subsequent breach of any covenant, condition or agreement herein contained. All such remedies of Landlord shall be cumulative, and in addition, Landlord may pursue any other remedies that may be permitted by law or in equity. Forbearance by Landlord to enforce one or more of the remedies herein provided upon an event of default shall not be deemed or construed to constitute a waiver of such default. 27. Security Deposit. Tenant shall deliver to Landlord the sum of $7,000.00 (the "Security Deposit") to be held by the Landlord without interest as security for Tenant's faithful performance of this Lease. Landlord may co-mingle the Security Deposit with Landlord's other funds, and Landlord may from time to time without prejudice to any other remedy use the Security Deposit to the extent necessary to make good any arrearages of Rent or to satisfy any other covenant or obligation of Tenant hereunder. Following any such application of the 14 Security Deposit, Tenant shall pay to Landlord on demand the amount so applied in order to restore the Security Deposit from its original amount. If Tenant is not in default at the expiration or sooner termination of this Lease, the balance of the Security Deposit remaining after any such application shall be returned by Landlord to Tenant. If Landlord transfers its interest in the Premises during the term of this Lease, Landlord shall assign the Security Deposit to the transferee and thereafter Landlord shall have no further liability for the return of such deposit. 28. Holding Over. In the event Tenant or anyone claiming under Tenant shall remain in possession of the Premises after the expiration or earlier termination of the Lease term, Tenant shall liable for all damages suffered by Landlord as a consequence of Tenant's failure to timely surrender possession of the Premises to Landlord, including without limitation, any loss of a new tenant or damages required to be paid to a new tenant in connection with Landlord's failure to timely deliver possession of the Premises to such new tenant as a result of Tenant's failure to timely surrender possession of the Premises to Landlord. Without limitation on the foregoing, and not as liquidated damages in any way, in the event of such holding over by Tenant without Landlord's written consent, Tenant shall be deemed to be occupying the Premises subject to all of the terms of this Lease which may be applicable to such continued occupancy and at a monthly Base Rent equal to one hundred fifty percent (150%) of the Base Rent in effect during the last full calendar month of the Lease term plus other sums due from time to time hereunder. 29. No Offer. The submission of this Lease by either party to the other for review shall not be considered an offer to enter into this Lease and such submission shall not bind either party in any way until both Landlord and Tenant have each executed and delivered duplicate originals of this Lease. 30. No Construction Against Drafting Party. Landlord and Tenant acknowledge that each of them and their respective counsel have had an opportunity to review this Lease and that this Lease shall not be construed for or against either party merely because such party prepared or drafted this Lease or any particular provision thereof. 31. Severability. If any provision of this Lease or the application thereof to any person or circumstance shall to any extent be or become illegal, invalid or unenforceable, the remaining provisions of this Lease, or the application of such provision to other persons or circumstances, shall not be affected thereby and each remaining provision of this Lease shall be valid and enforceable to the fullest extent permitted by law. 32. Time of the Essence. Except as otherwise expressly provided herein, time is of the essence with respect to all required acts of Tenant and Landlord and each provision of this Lease. 15 33. Brokerage Commissions. Landlord and Tenant warrant and represent that they have not dealt with any real estate broker or salesman in connection with this Lease except Gittings, Schueth & Grunthal Real Estate Services, Inc. and Landlord shall be solely responsible for the payment of any fees or commissions due. Landlord and Tenant further represent they have dealt with no other person which would create any liability for the payment of a commission by the other party. The party who breaches this warranty shall defend, hold harmless, and indemnify the non-breaching party from any claims or liability arising from the breach. 34. Authority to Execute Lease. Tenant represents and warrants that this Lease has been duly authorized, executed and delivered by and on behalf of Tenant and constitutes the valid, binding, and enforceable agreement of Tenant in accordance with the terms hereof. Landlord represents and warrants that Landlord is the owner of fee simple title to the property on which the Premises is located, this Lease has been duly authorized, executed and delivered by and on behalf of Tenant, and constitutes the valid, binding and enforceable agreement of Landlord in accordance with the terms hereof. 35. Notices. All notices, demands, consents and approvals which may be or are required to be given by either party to the other hereunder shall be in writing and shall be deemed to have been fully given and received upon actual delivery (or refusal to accept delivery) to the address of all parties designated to receive notice as set forth below or to such other place as the party to be notified may from time to time designate by at least 10 business days notice to the other parties. Notices, demands, consents and approvals shall be deemed properly given only by: (a) personal delivery; or (b) sent by Federal Express or other nationally-recognized overnight delivery service; or (c) deposit in the United States mail certified, return receipt requested with postage prepaid. Until changed in the manner set forth above, the addresses for notice are as follows: If to Tenant: Barnhill's Buffet, Inc. 226 Palafox Place, 5th Floor Pensacola, Florida 32501 Telephone: (850) 435-9914 Telecopier: (850) 435-9229 with copy to: Armstrong Allen, PLLC Attention: Michael D. Kaplan, Esquire 80 Monroe Avenue, Suite 700 Memphis, Tennessee 38103 Telephone: (901) 523-8211 Telecopier: (901) 524-4936 If to Landlord: Family Steak Houses of Florida, Inc. Attention: Mr. Edward B. Alexander 2113 Florida Boulevard Neptune Beach, Florida 32266 16 Telephone: 904-249-4197 Telecopier: 904-249-1466 With a copy to Hughes & Lane, P.A. Attention: Edward W. Lane, III, Esquire 4190 Belfort Road, Suite 351 Jacksonville, Florida 32216 Telephone: 904-296-2200 Telecopier: 904-296-2270 If to Mortgagee: GE Capital Corporation Attention: Annette Walsh 17207 North Perimeter Drive Scottsdale, Arizona 85255-5402 Telephone: 480-563-6696 Telecopier: 480-585-2227 36. Entire Agreement. This Lease contains the entire agreement between the parties hereto with respect to its subject matter and negotiations relating thereto, and supersedes all previous letter agreements. This Lease may be amended only by subsequent written agreement between the parties. Except for those that are set forth in this Lease, no representations, prior written or oral promises, warranties or agreements made by Landlord or Tenant shall be applicable to this Lease. 37. Governing Law. This Lease shall be governed by and shall be construed and interpreted in accordance with the laws of the State of Florida. 38. Attorney's Fees. In the event Tenant or Landlord defaults in the performance of any of the terms, covenants, agreements or conditions contained in this Lease or in the event Landlord places the enforcement of this Lease for the collection of any Rent due or to become due, or the recovery of possession of the Premises in the hands of an attorney, or in the event either party files suit against the other, with respect to the enforcement of its rights under this Lease, Tenant and Landlord agree that the prevailing party shall be entitled to be reimbursed by the non-prevailing party for all reasonable attorney's fees, expert witness fees, paralegal fees and court costs incurred by the prevailing party or as otherwise may be determined by arbitration under Section 55 hereof. 39. Arbitration. If a dispute arises under this Lease relative to an issue which this Lease provides should be arbitrated, including but not limited to apportionment, valuation, rental rates for options or extension periods and set- off provisions, and the parties to this Lease are unable to reach a mutually acceptable resolution, the parties shall proceed to resolve the dispute in the manner herein provided. Either party shall notify the other in writing of its position, and in the case of a monetary dispute, the amount acceptable to it. Such notification shall also include the names and addresses of three (3) 17 persons residing in the State of Florida with experience in commercial real estate matters, who have agreed to serve as arbitrator in accordance with the provisions of this Arbitration section, any one of which is acceptable to the notifying party to serve as arbitrator. Within ten (10) business days following such notifications, the party notified shall advise the other party, in writing, of its position, and in the case of a monetary dispute, the amount acceptable to it. Such notification shall also include the names and addresses of three (3) persons residing in the of Florida with experience in commercial real estate matters, who have agreed to serve as arbitrator in accordance with the provisions of this Arbitration section, any one of which is acceptable to the notifying party to serve as arbitrator. Once the parties have notified each other as provided, the written position submitted by each party cannot subsequently be revised by the submitting party, nor can substitutions be made to the lists of names accompanying the notifications. If within ten (10) days after both parties have been notified of their respective positions, the parties are unable to reach a mutually acceptable resolution, then the parties shall select one person from all of the names submitted who shall be appointed as the arbitrator. If, within the time specified, the parties are unable to mutually agree on the person to serve as arbitrator, either party may apply to the presiding judge of the District Court of Duval County, Florida to select the arbitrator from the list of names initially submitted by both parties. Within five (5) days following selection of the arbitrator each party shall furnish the arbitrator with its written position as set forth in the notification originally furnished. Each party may also include at this time any information, data and/or reports, supportive of its position. The arbitrator may request additional information, data or reports from the parties or others if the arbitrator so desires. Within ten (10) business days following appointment, the arbitrator shall notify both parties in writing of the arbitrator's decision which shall be the position of one of the parties. Such decision shall not deviate in any way from the position initially stated by the party whose position has been selected by the arbitrator, it being the intent that the arbitrator shall select the position of one of the parties. If either of the parties shall fail to furnish the arbitrator its position within the time and in the manner as herein specified, the arbitrator shall consider such party's position to be identical to the position of the other. The decision of the arbitrator shall be final and shall be binding upon the parties and effective as of the date of notification to the parties of the arbitrator's decision. The party whose position is not selected by the arbitrator as the decision shall promptly pay to the arbitrator the total fees and expenses of the arbitrator. Notwithstanding the foregoing, this Section shall not apply for instances of the non-payment of Rent or disputes with respect to Rent. 40. Radon Gas. Radon is a naturally occurring radioactive gas that, when it has accumulated in a building in sufficient quantities, may present health risk to persons who are exposed to it over time. Levels of radon that exceed Federal and State Guidelines have been found in buildings in Florida. Additional information regarding radon and radon testing may be obtained from your county public health unit. 41. Confidentiality. Each party hereto agrees not to disclose the economic terms of this Lease except as each party respectively determines to be necessary 18 for the conduct of its business or as may be required by a court of law or governmental authority. Neither party shall issue any press releases pertaining to this Lease or containing the economic terms of this Lease without the prior written consent of the other party. 42. Number of Execution Copies. This Lease may be executed in any number of counterparts, each of which shall be an original, but all of which shall constitute one instrument. 43. Memorandum of Lease. Neither Landlord nor Tenant shall permit, allow or cause this Lease, or any amendment hereto, to be recorded in any public registry or office of register of deeds; however, at the request of either party, Landlord and Tenant agree to execute a recordable memorandum of this Lease setting forth the names and addresses of the parties, a reference to the lease with its date of execution, a specific legal description of the Premises, the actual Commencement Date of the Lease, the term of the Lease, and any renewal Terms, which memorandum may be recorded by Tenant at Tenant's expense or by Landlord at Landlord's expense in the appropriate public records of the county or counties in which the Premises is situated. 44. Waiver of the Right to Trial by Jury. Landlord and Tenant hereby knowingly and intentionally waive the right to trial by jury in any action or proceeding that Landlord or Tenant may hereinafter institute against each other with respect to any matter arising out of or related to this Lease or the Premises. 45. Discontinued Operations. In the event Tenant shall at any time during the term of this Lease discontinue its business operations in the Premises Building for a period of sixty (60) days or longer, and the reason for Tenant's discontinuation of business is not due to (a) the repairing or remodeling of the Premises Building, (b) a casualty loss, (c) union or labor difficulties, or (d) any other reason beyond the reasonable control of Tenant [financial ability excluded], then Landlord may (but shall not be obligated to) terminate this Lease by giving Tenant written notice of Landlord's election to so terminate the Lease (a "Termination Notice"). Any such Termination Notice shall set forth a date (the "Termination Date") not less than thirty (30) days nor more than one hundred twenty (120) days after the date of the Termination Notice. Tenant may void the Termination Notice by (A) within ten (10) days following Tenant's receipt of the Termination Notice, notifying Landlord in writing of Tenant's intent to promptly recommence its business operations in the Premises Building, and (B) recommencing its business operations in the Premises Building within thirty (30) days following its receipt of Landlord's Termination Notice. Unless Tenant shall so effectively void the Termination Notice, this Lease shall terminate as of the Termination Date as if such date were the date originally fixed herein for the termination of this Lease. 46. Transfer of Title. In the event Landlord shall hereafter sell, convey, assign, transfer or exchange Landlord's interest in the Premises, including a transfer pursuant to a foreclosure or delivery of deed in lieu of foreclosure or a transfer by operation of law (herein, a "Transfer"), (i) such Transfer of 19 Landlord's interest in the Premises shall be subject to the terms and conditions of this Lease, (ii) Tenant's tenancy hereunder shall not be disturbed so long as Tenant shall not be in default under this Lease beyond any applicable grace or cure period, (iii) Tenant shall recognize and attorn to such purchaser, assignee or transferee, (iv) Landlord shall be, without further agreement between Landlord and Tenant, or between Landlord or Tenant and the transferee, released and relieved of all covenants and obligations of Landlord under this Lease arising or to be performed after the date of such Transfer, and (v) Tenant shall look solely to such successor in interest of Landlord for performance of such obligations. 47. Not a Partnership. The provisions of this Lease are not intended to create, nor shall they be interpreted in any way to create, a joint venture, a partnership or any similar relationship between Landlord and Tenant. In particular, Landlord does not, in any way or for any purpose, become a partner of Tenant in the conduct of Tenant's business, or otherwise. 48. Financial Statement. Forty-five (45) days after the end of each fiscal quarter, Tenant shall deliver to the Landlord's mortgagee (the "Lender"), a profit and loss statement for its business conducted at the Premises, and within one hundred twenty (120) days after the end of the Tenant's fiscal year, the Tenant shall deliver to the Lender, a balance sheet and profit and loss statement for the fiscal period then ended. All such financial statements shall be prepared in accordance with generally accepted accounting principals consistently applied from period to period and shall be certified to be accurate and complete by the chief financial officer or other appropriate officer of the Tenant. The Lender shall use commercially reasonable efforts to ensure that such financial information supplied by the Tenant remain confidential. IN WITNESS WHEREOF, the parties hereto have duly executed multiple counterparts of this Lease in their respective names by their respective authorized representatives, effective as of the date set forth above. LANDLORD: FAMILY STEAK HOUSES OF FLORIDA, INC. _______________________________ By:___________________________ _______________________________ Name:_________________________ Title:________________________ [CORPORATE SEAL] 20 TENANT: BARNHILL'S BUFFET, INC., doing business in Florida as Barnhill's Buffet of Tennessee, Inc. ________________________________ By:________________________________ Name:______________________________ ________________________________ Title:______________________________ [CORPORATE SEAL] 21 STATE OF ______________ COUNTY OF ____________ The foregoing instrument was acknowledged before me this _____ day of _________, 2002 by ____________________ as _____________________________, FAMILY STEAK HOUSES OF FLORIDA, INC., on behalf of the corporation. He is personally known to me or has produced ____________ as identification. Name:_________________________ NOTARY PUBLIC, State and County Aforesaid Commission No. My Commission Expires: STATE OF ______________ COUNTY OF ____________ The foregoing instrument was acknowledged before me this _____ day of _________, 2002, by ____________________ as _____________________________, of BARNHILL'S BUFFET, INC. on behalf of the corporation. He is personally known to me or has produced ____________ as identification. Name:__________________________ NOTARY PUBLIC, State and County Aforesaid Commission No. My Commission Expires: 22 EXHIBITS Paragraph Exhibit A Legal Description of Premises B Rent Schedule 23 EXHIBIT A LEGAL DESCRIPTION OF PREMISES A portion of the Castro Y Ferrer Grant, Section 38, Township 2 South, Range 29 East, Duval County, Florida being more particularly described as follows: Commence at the Southwest corner of Lot 15, Block 15, as shown on the Prado Ferrar Plat No. 2 of Florida Beach, as recorded in Plat Book 11, Page 61 of the current public records of Duval County, Florida; thence North 89 deg 29 min 50 sec East, along the Northerly line of the 20 foot alley as shown on said plat and its Easterly prolongation and the Southerly line of those lands described in Official records Volume 1659, Page 53, of the Current public records of said County, a distance of 714.22 feet to the Southeast corner of Lot 24, Block 16 as shown on said plat; thence North 00 deg 30 min 10 sec West along the Easterly line of said Lot 24, a distance of 82.00 feet to the Southerly right of way line of Atlantic Boulevard, County Road No. 10 (as per J.T.A. Right of Way Map Project No 72100-3178, dated 7/29/66 and as described and recorded in Official Record Volume 2668, Page 781 of the current public records of said County); thence along said Southerly right of way line, run the following three courses and distances: Course No. 1: North 89 deg 29 min 50 sec East, 80.00 feet; Course No. 2: North 85 deg 12 min 29 sec East, 240.67 feet; Course No. 3: North 89 deg 29 min 50 sec East, 315.00 feet to the centerline of Castro Trail as shown on the Plat of Prado Ferrar Plat No. 2 of Florida Beach; and the Point of Beginning; thence Southerly along said centerline, also being the Easterly boundary of said Prado Ferrar Plat No. 2 of Florida Beach, run the following two courses and distances: Course No. 1: South 00 deg 30 min 10 sec East, 133.48 feet to the point of curvature of a curve to the left; Course No. 2: Southerly along the arc of said curve being concave Easterly and having a radius of 1796.05 feet, an arc distance of 258.37 feet, said are being subtended by a chord bearing and distance of South 04 deg 37 min 26 sec East, 258.15 feet; thence North 80 deg 00 min 18 sec East, 127.11 feet; thence North 87 deg 08 min 51 sec East, 100.00 feet; thence South 83 deg 03 min 09 sec East, 24.43 feet to the Westerly line of those lands described and recorded in Official Records Volum 4454, Page 62 of said current public records; thence Northerly along said Westerly line of last said lands and along the arc of a curve concave Easterly and having a radius of 1546.05 feet, an arc distance of 236.51 feet, said arc being subtended by a chord bearing and distance of North 04 deg 53 min 07 sec West, 236.28 feet to the point of tangency of said curve; thence North 00 deg 30 min 10 sec West and continuing along the Westerly line of last mentioned lands, 133.48 feet to the aforementioned Southerly right of way line of Atlantic Boulevard; thence South 89 deg 29 min 50 sec West, along last said line, 250.00 feet to the Point of Beginning. 24 Together with the rights and privileges set forth in Non-exclusive Mutually Reciprocal Roadway Easement for Ingress and Egress and Parking Easement recorded in Official Records Volume6220, page 1086 as amended in Official Records Volume 6269, page 1436, current public records of Duval County, Florida, more particularly described as follows: A portion of the Castro Y. Ferrer Grant, Section 38, Township 2 South, Range 29 East, Duval County, Florida, being more particularly described as follows: COMMENCE at the Southwest corner of Lot 15, Block 15, as shown on the plat of Prado Ferrer Plat No. 2, of Florida Beach, as recorded in Plat Book 11, Page 61, of the Current Public Records of Duval County, Florida; thence North 89 deg 29 min 50 sec East, along the Northerly line of the 20 foot alley as shown on said plat and its Easterly prolongation and the Southerly line of those lands described in Official Records Volume 1659, Page 53, of the Current Public Records of said County, a distance of 714.22 feet to the Southeast corner of Lot 24, Block 16, as shown on said plat; thence North 00 deg 30 min 10 sec West along the Easterly line of said Lot 24, a distance of 82.00 feet to the Southerly right of way line of Atlantic Boulevard, County Road No. 10 (as per J.T.A. Right of Way Map Project No. 72100-3178, dated 7/29/66 and as described and recorded in Official Records Volume 2668, Page 781 of the Current Public Records of said County); thence along said Southerly right of way line run the following three courses and distances: Course No 1: North 89 deg 29 min 50 sec East, 80.00 feet; Course No. 2: North 85 deg 12 min 29 sec East, 240.67 feet; Course No 3: North 89 deg 29 min 50 sec East, 315.00 feet to the centerline of Castro Trail as shown on the plat of Prado Ferrer Plat No. 2 of Florida Beach; thence Southerly along said centerline, also being the Easterly boundary of said Prado Ferrer Plat No. 2 of Florida Beach; run the following two courses and distances: Course No. 1: South 00 deg 30 min 10 sec East, 133.48 feet to the point of curvature of a curve to the left; Course No. 2: Southerly along the arc of said curve being concave Easterly and having a radius of 1796.05 feet, an arc distance of 258.37 feet, said arc being subtended by a chord bearing and distance of Fouth 04 deg 37 min 26 sec East, 258.15 feet for a POINT OF BEGINNING; thence North 80 deg 00 min 18 sec East, 127.11 feet; thence North 87 deg 08 min 51 sec East, 100.00 feet; thence South 83 deg 03 min 09 sec East, 24.42 feet to the Westerly line of those lands described and recorded in Official Records Volume 4454, Page 62 of said Current Public Records; thence Southerly along said Westerly line of last said lands and along the arc of a curve concave Easterly and having a radius of 1546.05 feet, an arc distance of 58.46 feet, said arc being subtended by a chord bearing and distance of South 10 deg 21 min 03 sec East, 58.45 feet; thence South 89 deg 29 min 50 sec West, parallel to said Southerly right of way line of Atlantic Boulevard, a distance of 242.00 feet; thence North 37 deg 55 min 39 sec West, a distance of 24.87 feet to said curved Easterly boundary and the arc of said curve, a distance of 16.12 feet, said arc being subtended by a chord bearing and distance of North 09 deg 00 min 08 sec West, 16.12 feet to the POINT OF BEGINNING. 25 EXHIBIT B RENT SCHEDULE (Initial Term) Years Monthly Annually 1-5 $7,000.00 $84,000.00 6-10 $7,700.00 $92,400.00 (Renewal Term) 11-15 $8,470.00 $101,640.00 16-20 $9,317.00 $111,804.00 NOTE: The above amounts do not include applicable Florida sales tax. Tenant shall pay such sales tax with each installment of rent. 26 -----END PRIVACY-ENHANCED MESSAGE-----