What is the purpose of the Mrcool Collateral Assignment of Lease (Exhibit 5)?
Mrcool Franchise · 2025 FDDAnswer from 2025 FDD Document
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Franchise Agreement – Exhibit 5 Collateral Assignment of Lease
COLLATERAL ASSIGNMENT OF LEASE
(for the benefit of MRCOOL Franchising, LLC and its assigns)
| For Value Received, the undersigned ("Assignor") hereby assigns and transfers to MRCOOL Franchising, |
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| LLC ("Assignee"), all of Assignor's right, title and interest as tenant in, to and under a certain lease, a copy |
| of which is attached hereto as $\underline{\text{Exhibit A}}$ (the "Lease") for the following premises (the "Leased Premises"): |
This Assignment is for collateral purposes only and except as may be otherwise expressly stated and specified herein under no circumstance shall Assignee have any liability or obligation under the Lease and/or Leased Premises, unless: (a) Assignee provides an express written statement that is addressed to Assignor and the landlord for the Leased Premises, is delivered by Assignee to Assignor and the landlord for the Leased Premises, is signed by an officer of Assignee, and that expressly states that Assignee is assuming all rights and interests in and to the Lease pursuant to this Assignment; and (b) Assignee takes possession of the Leased Premises pursuant to the terms hereof, and Assignee assumes the obligations of Assignor under the Lease.
Assignor represents that Assignor possesses full power and authority to enter into this Assignment and that at no time prior to executing this Assignment has Assignor assigned and/or transferred Assignor's interests and/or rights in or to the Lease and/or the Leased Premises.
Assignee has the right and possesses full power and authority to take possession of the Leased Premises, to eject and expel Assignor from possession and occupancy of the Leased Premises and to terminate Assignor's right, title and interest in and to the Lease in the event of: (a) a default by Assignor under the terms of the Lease and Assignor's failure to timely cure such default, assuming that such default is capable of curing; (b) a default by Assignor (in Assignor's capacity as a MRCOOL Center franchisee) under the terms and conditions of the MRCOOL Center Franchise Agreement between Assignor, as franchisee, and Assignee, as franchisor (the "Franchise Agreement"), and Assignor's failure to timely cure such default, assuming that such default is capable of curing; (c) upon default of any agreement supporting or guaranteeing the Franchise Agreement; or (d) the expiration or termination of the Franchise Agreement.
Assignor agrees that Assignor will not and shall not permit, grant or suffer any termination, surrender or modification of the Lease without the prior written consent of Assignee. Throughout the term of the Franchise Agreement, Assignor shall elect and exercise all options to extend the terms of or renew the Lease
not less than 120 days prior to the last day that the option must be exercised unless Assignee otherwise agrees in writing. Should Assignor fail to comply with the foregoing, Assignor does hereby appoint Assignee (subject to Assignees acceptance and invocation of such right) to act on behalf of Assignor for the purpose of effectuating extensions and renewals of the Lease.
Source: Item 23 — RECEIPTS (FDD pages 55–263)
What This Means (2025 FDD)
According to the 2025 Mrcool Franchise Disclosure Document, the Collateral Assignment of Lease, outlined in Exhibit 5, serves as a security measure for Mrcool Franchising, LLC. The franchisee (Assignor) assigns their rights and interests in their lease to Mrcool (Assignee). This assignment is for collateral purposes, meaning Mrcool does not assume any liability or obligation under the lease unless Mrcool provides a written statement to the Assignor and landlord that it is assuming all rights and interests in the lease and takes possession of the leased premises.
This agreement allows Mrcool to take possession of the leased premises and terminate the franchisee's rights to the lease under specific conditions. These conditions include a default by the franchisee under the terms of the lease and failure to cure the default, a default by the franchisee under the Mrcool Center Franchise Agreement and failure to cure, default of any agreement supporting or guaranteeing the Franchise Agreement, or the expiration or termination of the Franchise Agreement. The franchisee cannot terminate, surrender, or modify the lease without Mrcool's written consent and must elect to extend or renew the lease throughout the term of the Franchise Agreement.
Mrcool has the option, but not the obligation, to assume or renew the lease and occupy the leased premises, including subleasing to another Mrcool franchisee. If Mrcool assumes the lease, it will not be obligated to pay the landlord more than two months of past due rent, real estate taxes, and common area maintenance charges. The landlord's consent is not required for Mrcool to assume the lease, and no assignment fee or rent increase will result from such an action. This arrangement ensures that Mrcool can maintain control over the location of the franchise and continue operations, even if the original franchisee defaults or the franchise agreement is terminated.