SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported) April 18, 2000
AEI INCOME & GROWTH FUND 23 LLC
(Exact Name of Registrant as Specified in its Charter)
State of Delaware
(State or other Jurisdiction of Incorporation or Organization)
333-67287 41-1922579
(Commission File Number) (I.R.S. Employer
Identification No.)
1300 Minnesota World Trade Center, St. Paul, Minnesota 55101
(Address of Principal Executive Offices)
(651) 227-7333
(Registrant's telephone number, including area code)
(Former name or former address, if changed since last report)
Item 2. Acquisition or Disposition of Assets.
On April 18, 2000, the Limited Liability Company (LLC)
acquired land in Victoria, Texas from Kona Restaurant Group,
Inc. The purchase price of the land was approximately
$409,500. Kona Restaurant Group, Inc. is not affiliated
with the LLC.
On April 19, 2000, the LLC acquired land in San
Antonio, Texas from Razzoo's, Inc. The purchase price of
the land was approximately $1,558,000. Razzoo's, Inc. is
not affiliated with the LLC.
The cash, used in purchasing the land, was from the
proceeds of sale of Limited Membership Units.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired. -
Not Applicable. Land acquired for
construction of restaurants.
(b) On April 18, 2000, the LLC purchased land for
$409,500. On April 19, 2000, the LLC
purchased land for $1,558,000. The properties
were acquired with cash which was provided
from proceeds of sale of LLC Units. A limited
number of proforma adjustments are required to
illustrate the effects of the transactions on
the balance sheet and income statement. The
following narrative description is furnished
in lieu of the proforma statements:
Assuming the LLC had purchased the properties
on September 30, 1999 (date LLC commenced
operations), the LLC's Investments in Real
Estate would have been increased by $1,967,500
and its Current Assets (cash) would have been
reduced by $1,967,500.
The Total Income for the LLC would have
increased from $25,872 to $69,730 for the
period ended December 31, 1999 if the LLC had
owned the properties during the period. The
increase is attributable to the Rental Income
the LLC would have received from the
properties of $43,858.
The net effect of these proforma adjustments
would have caused Net Income to increase from
$(33,786) to $10,072, which would have
resulted in Net Income of $4.40 per LLC Unit
outstanding for the period ended December 31,
1999.
(c) Exhibits
Exhibit 10.1 - Development Financing Agreement
dated April 18, 2000 between
the LLC and Kona Restaurant
Group, Inc. relating to the
property at 4904 North
Navarro, Victoria, Texas.
Exhibit 10.2 Net Lease Agreement dated April
18, 2000 between the LLC and
Kona Restaurant Group, Inc.
relating to the property at
4904 North Navarro, Victoria,
Texas.
Exhibit 10.3 Development Financing Agreement
dated April 19, 2000 between
the LLC and Razzoo's, Inc.
relating to the property at
14404 U.S. Highway 281 North,
San Antonio, Texas.
Exhibit 10.4 Net Lease Agreement dated April
19, 2000 between the LLC and
Razzoo's, Inc. relating to the
property at 14404 U.S. Highway
281 North, San Antonio, Texas.
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 hereunto duly
authorized.
AEI INCOME & GROWTH FUND 23 LLC
By: AEI Fund Management XXI, Inc.
Its: Managing Member
Date: April 25, 2000 /s/ Mark E Larson
By: Mark E. Larson
Its Chief Financial Officer
(Principal Accounting and
Financial Officer)
DEVELOPMENT FINANCING AGREEMENT
THIS AGREEMENT, made and entered into effective as of
this 18th day of April, 2000, by and between Kona Restaurant
Group, Inc. (hereinafter referred to as "Lessee"), whose
address is 3555 Ranch Road, 620 South, Austin, Texas 78731,
and AEI Private Net Lease Fund 1998 Limited Partnership,
whose principal business address is 1300 Minnesota World
Trade Center, 30 East Seventh Street, St. Paul, Minnesota
55101 (hereinafter referred to as "Lessor") .
W I T N E S S E T H, that:
WHEREAS, Lessee is contemplating building the following
Improvements on the premises described in Exhibit "A"
attached hereto :
Construction of a building and improvements to be used
as a Johnny Carino's Country Italian Restaurant.
WHEREAS, Lessee has made application to Lessor for
development financing to defray the costs of constructing
such Improvements;
WHEREAS, Lessor's Assignor has issued to Lessee its
Development Financing and Leasing Commitment to advance
funds in the amount hereinafter specified, subject to
compliance with the terms and conditions of this Development
Financing Agreement and the Net Lease Agreement (the
"Lease") of even date herewith;
NOW, THEREFORE, in consideration of entering into the
Lease and other good and valuable consideration, the receipt
of which is hereby acknowledged by the parties hereto, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the following terms
shall have the following meanings:
1. "Application" shall mean Lessee's application to
the Lessor for the Development Financing the terms and
conditions of which are incorporated herein by reference.
2. "Architect's Contract" shall mean Lessee's
contract with the Project Architect.
3. "Commitment" shall mean Lessor's Commitment to
Lessee agreeing to provide the Development Financing. (The
"Development Financing and Leasing Commitment" dated of even
date herewith.)
4. "Completion Date" shall mean midnight, September
30, 2000, subject to Force Majeure, as defined herein.
5. "Construction Costs" shall mean actual incurred
land costs, all costs paid to construct and complete the
Improvements, as categorized and estimated as specified on
Exhibit "B" attached hereto and made a part hereof.
6. "Construction Contracts" shall mean the contracts
between Lessee and Contractors for the furnishing of labor,
services or materials to the Leased Premises in connection
with the construction of the Improvements.
7. "Contractors" shall mean those firms directly
engaged by Lessee to construct the Improvements, whether one
or more.
8. "Contract Documents" shall mean the Project
Architect's Contract, Plans and Specifications and the
contract with the Contractor.
9. "Development Financing" shall mean the funds to be
made available pursuant to the Commitment and not to exceed
the lesser of the Construction Costs or the maximum loan
amount of Two Million One Hundred Thirty Five Thousand
Dollars ($2,135,000) as specified in the Commitment.
10. "Development Financing and Carrying Charges" shall
mean all fees, taxes and charges incurred under the
Development Financing and in the construction of the
Improvements including, but not limited to, non-refundable
commitment fees; interest charges, service and inspection
fees, attorney's fees, title insurance fees and charges,
recording fees and insurance premiums.
11. "Development Financing Documents" shall mean this
Agreement, the Lease, Assignment of Architects and
Construction Contracts, Guarantees, and such other documents
given to the Lessor as security for the Development
Financing.
12. "LTIC-CDD" shall mean Lawyers Title Insurance
Corporation, Construction Disbursement Department, the
nationally recognized title insurer, to be LTIC-CDD under
the Development Financing Disbursement Agreement executed by
and between the parties of even date herewith.
13. "Final Disbursement Date" shall mean the date of
the final disbursement of the Development Financing provided
hereunder.
14. "Improvements" shall mean the structures and other
improvements to be constructed on the Leased Premises in
accordance with the Plans and Specifications.
15. "Initial Disbursed Funds" shall mean those funds
disbursed on the Closing Date for land acquisition and
related soft costs upon Lessor's acquisition of the Leased
Premises.
16. "Inspecting Architect" shall mean the architect,
if any, hired by Lessor to perform inspections of the
premises. An Inspecting Architect may only be engaged by
Lessor in the event of a default relating to construction of
the Improvements under the Development Financing Documents.
17. "Leased Premises" shall mean the real property
described in the Exhibit "A" attached to this Agreement,
together with all Improvements, equipment and fixtures
thereon.
18. "Lessee Equity" shall mean the final Construction
Costs less the amount of the Development Financing.
19. "Plans and Specifications" shall mean the plans
and specifications prepared by the Project Architect who
shall be licensed in the jurisdiction of the Leased Premises
and selected by Lessee.
20. "Project" shall mean the construction of the
Improvements on the Leased Premises.
21. "Project Architect" shall mean the architect
retained by Lessee to design and supervise construction of
the Improvements.
22. "Rental Modification Date" shall mean a date one
hundred and fifty days (150) from the date hereof.
23. "Sub-Contractors" shall mean those persons
furnishing labor or materials for the Project pursuant to
the Sub-Contracts.
24. "Sub-Contracts" shall mean the contracts between
the Contractor and its materialmen and mechanics in the
furnishing of labor or materials for the Project.
25. "Title" shall mean Lawyers Title Insurance
Corporation issuing the Lessor's fee owner's title insurance
policy.
ARTICLE II
THE DEVELOPMENT FINANCING
Subject to compliance with the provisions of this
Agreement, Lessor agrees to advance to Lessee, and Lessee
agrees to request from Lessor, the Development Financing.
The Development Financing shall be advanced in stages by
Lessor to LTIC-CDD and disbursed by LTIC-CDD pursuant to the
provisions of Article VIII hereof. The Development
Financing, or so much thereof as has been advanced
hereunder, shall bear interest at the rate and shall be
repaid in accordance with the terms hereof and the Lease.
The proceeds of the Development Financing shall be used
exclusively for the purposes of defraying Construction Costs
and Development Financing and Carrying Charges.
ARTICLE III
N/A
ARTICLE IV
CONSTRUCTION OF IMPROVEMENTS
Lessee agrees to commence construction of the
Improvements within thirty (30) days from the date of this
Agreement. After commencement of construction of any
Improvements, Lessee agrees to diligently pursue said
construction to completion, and to supply such moneys and to
perform such duties as may be necessary to complete the
construction of said Improvements pursuant to the Plans and
Specifications and in full compliance with all terms and
conditions of this Agreement and the Development Financing
Documents, all of which shall be accomplished on or before
the Completion Date, subject to Force Majeure and without
liens, claims or assessments (actual or contingent) asserted
against the Leased Premises for any material, labor or other
items furnished in connection therewith, subject to Lessee's
right to contest such liens, claims, or assessments provided
the same are removed as a lien upon the Leased Premises
prior to foreclosure of such lien, and all in full
compliance with all construction, use, building, zoning and
other similar requirements of any pertinent governmental
jurisdiction. Lessee will provide to Lessor, upon request,
evidence of satisfactory compliance with all the above
requirements.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE LESSEE
Lessee hereby represents and warrants to the Lessor, which
representations and warranties shall be deemed to be
restated by Lessee each time Lessor makes an advance of the
Development Financing, that:
1. VALIDITY OF DEVELOPMENT FINANCING DOCUMENTS - The
Development Financing Documents are in all respects legal,
valid and binding according to their terms.
2. NO PRIOR LIEN ON FIXTURES - No mortgage, bill of sale,
security agreement, financing statement, or other title
retention agreement (except those executed in favor of
Lessor) has been, or will be, executed with respect to any
fixture (except Lessee's trade fixtures not financed with
this Development Financing) used in conjunction with the
construction, operation or maintenance of the improvements.
3. CONFLICTING TRANSACTION OF LESSEE - The consummation of
the transactions hereby contemplated and the performance of
the obligations of Lessee under and by virtue of the
Development Financing Documents will not result in any
breach of, or constitute a default under, any mortgage,
lease, bank loan or credit agreement, corporate charter, by-
laws, partnership agreement, or other instrument to which
Lessee is a party or by which it may be bound or affected,
the breach of which would materially affect Lessee's ability
to perform its obligations hereunder.
4. PENDING LITIGATION - There are no actions, suits or
proceedings pending, or to the knowledge of Lessee
threatened, against or affecting it or the Leased Premises,
or involving the validity or enforceability of any of the
Development Financing Documents, at law or in equity, or
before or by any governmental authority, except actions,
suits and proceedings that are fully covered by insurance or
which, if adversely determined would not substantially
impair the ability of Lessee to perform each and every one
of its obligations under and by virtue of the Development
Financing Documents; and to the Lessee's knowledge it is not
in default with respect to any order, writ, injunction,
decree or demand of any court or any governmental authority.
5. VIOLATIONS OF GOVERNMENTAL LAW, ORDINANCES OR
REGULATIONS - To the best knowledge of Lessee, there are
no violations or notices of violations of any federal or
state law or municipal ordinance or order or requirement of
the State in which the Leased Premises are located or any
municipal department or other governmental authority having
jurisdiction affecting the Leased Premises, which violations
in any way have a material adverse affect on the Leased
Premises and which remain uncured after notice by such
governmental authority or department (if notice is required)
and the expiration of the time within which Lessee may cure
such violation, or if no time limitation is specified,
within a reasonable time after notice to cure such violation
6. COMPLIANCE WITH ZONING ORDINANCES AND SIMILAR LAWS - To
the best knowledge of Lessee, the Plans and Specifications
and construction pursuant thereto and the use of the Leased
Premises contemplated thereby comply and will comply with
all present governmental laws and regulations and
requirements, zoning ordinances, standards, and regulations
of all governmental bodies exercising jurisdiction over the
Leased Premises. Lessee agrees to provide the Project
Architect's certification to such effect prior to the
funding of the first disbursement under the Development
Financing.
7. LESSEE'S STATUS AND AUTHORITY - If the Lessee be a
corporation, limited liability company, trust or a
partnership, Lessee warrants and represents that (i) it is
duly organized, existing and in good standing under the laws
of the state in which it is incorporated or created; (ii) it
is duly qualified to do business and is in good standing in
the state in which the Leased Premises are located; (iii) it
has the corporate or other power, authority and legal right
to carry on the business now being conducted by it and to
engage in the transactions contemplated by this Agreement
and the Development Financing Documents; and (iv) the
execution and delivery of this Agreement and the Development
Financing Documents and the performance and observance of
the provisions hereof and thereof have been (or future acts
will be) duly authorized by all necessary trust,
partnership, or corporate actions of Lessee. Lessee will
furnish such resolutions, affidavits and opinions of counsel
to such effect as Lessor may reasonably require.
8. AVAILABILITY OF UTILITIES - All utility services
necessary for the construction of the Improvements will be
available prior to the commencement of construction, and all
utility services necessary for the proper operation of the
Improvements for their intended purposes are available at
the Leased Premises or will be available at the Leased
Premises prior to the Final Disbursement Date, at
commercially comparable utility rates and hook-up charges
for the vicinity, including water supply, storm and sanitary
sewer facilities, gas, electricity and telephone facilities.
Lessee shall furnish evidence of such availability of
utilities from time to time at Lessor's request.
9. BUILDING PERMITS - All building permits required for
the construction of the Improvements will have been obtained
prior to the commencement of the construction of the
Improvements and copies of same will be delivered to Lessor.
10. CONDITION OF LEASED PREMISES - The Leased Premises are
not now damaged or injured as a result of any fire,
explosion, accident, flood or other casualty, nor to the
best of Lessee's knowledge, subject to any action in eminent
domain.
11. APPROVAL OF PLANS AND SPECIFICATIONS - To the best
knowledge of Lessee in reliance upon the Project Architect's
certification to such effect, the Plans and Specifications
conform to the requirements and conditions set out by
applicable law or any effective restrictive covenant, to all
governmental authorities which exercise jurisdiction over
the Leased Premises or the construction thereon, and no
construction will be commenced upon the Leased Premises
until said Plans and Specifications shall have been approved
by Lessor, which consent shall not be unreasonably withheld
or delayed and shall be given or withheld within ten
business days after written request therefor. Subject to
Article VI, paragraph 14, no material changes are to be made
in the Plans and Specifications as approved without Lessor's
prior consent, which consent shall not be unreasonably
withheld or delayed and shall be given or withheld within
ten business days after written request therefor; except,
after prior written notice to Lessor, provided the
Development Financing shall remain in balance as set forth
in Article VII, paragraph 3 herein, Lessor shall consent to
reallocation among line items or use of the Construction
Contingency in the aggregate of not more than the amount
budgeted as set forth on Exhibit B for Construction
Contingency, unless Lessee shall deposit Lessee Equity with
LTIC-CDD in the amount of such excess over the budgeted
amount.
12. CONSTRUCTION CONTRACTS - Lessee has entered into
contracts with the Contractors or separate contracts with
materialmen and laborers providing for the construction of
the Improvements. Lessee will cause the Contractors to
promptly furnish Lessor with the complete list of all Sub-
contractors or entities as and when under contract, which
Contractors propose to engage to furnish labor and/or
materials in constructing the Improvements (such list
containing the names, addresses, and amounts of such sub-
contracts as written in excess individually of $5,000, and
prior to disbursement of funds to or for the benefit of such
Subcontractors, affidavits of authorized signatory and other
documents commercially reasonably required by Title to
insure that the Leased Premises remain lien free) and will
from time to time furnish Lessor or Title with true copies
of all Contracts entered into by Lessee and with the terms
of all verbal agreements therefor, if any, and as to
subcontractors, letters signed by sub-contractors whose
contracts are in excess of $5,000 setting forth the present
amount of their contract and the amounts remaining to be
paid under that contract, if the same information is not
stated on a lien waiver reflecting the most currently
requested payment to such subcontractor.
13. BROKERAGE COMMISSIONS - No brokerage commissions are
due in connection with the transaction contemplated hereby
or if there are commissions due or payable the same will be
paid by Lessee. Lessee agrees to and shall indemnify Lessor
from any liability, claims or losses arising by reason of
any such brokerage commissions. This provision shall
survive the repayment of the Development Financing and shall
continue in full force and effect so long as the possibility
of such liability, claims or losses exists.
14. NO PRIOR WORK - Except as may have been permitted by
Lessor, no work or construction has been commenced or will
be commenced by or on behalf of Lessee on the Leased
Premises, nor has Lessee entered into any contracts or
agreements for such work or construction which could result
in the imposition of a mechanic's or materialmen's lien on
the Leased Premises or the Improvements prior to or on
parity with the interest of Lessor.
15. ENVIRONMENTAL IMPACT STATEMENT - All required
environmental impact statements as required by any
governmental authority having jurisdiction over the Leased
Premises or the construction of the Improvements have been
duly filed and approved.
16. ACCESS - The Leased Premises front on a publicly
maintained road or street or have access to such a road or
street under an easement or private way, which is not
subject to a reversion in favor of any party.
17. FINANCIAL INFORMATION - Any financial statements
heretofore delivered to Lessor are materially true and
correct in all respects, have been prepared in accordance
with generally accepted accounting practice, and fairly
present the respective financial conditions of the subject
thereof as of the respective dates thereof and no materially
adverse change has occurred in the financial conditions
reflected therein since the respective dates thereof.
ARTICLE VI
COVENANTS OF LESSEE
Lessee hereby covenants and agrees with Lessor as follows:
1. SURVEYS - Prior to execution of any Development
Financing Documents and prior to the initial request for a
Disbursement (as defined in Article VIII hereof), Lessee has
furnished to Lessor three copies of a current perimeter land
survey, in form and substance satisfactory to Lessor,
certified to Lessor, giving a description of the Leased
Premises and showing all encroachments onto or from the
Leased Premises, currently certified by a registered
surveyor and bearing his registry number and showing access
rights, easements, or utilities, rights of way, all setback
requirements upon the Leased Premises, improvements, matters
affecting title and such other items as Lessor may
reasonably request.
2. TITLE INSURANCE - Prior to the initial request for
Disbursement the Lessee has furnished Lessor with an ALTA
(most recent form owner's) policy of title insurance, and
prior to any subsequent request for Disbursement such ALTA
policy of title insurance shall be brought down to the date
of Disbursement by endorsement, all in form and substance
satisfactory to Lessor issued at the Lessee's expense and
written by Title insuring the Leased Premises to be
marketable, free from exceptions for mechanic's and
materialmen's liens and free from other exceptions not
previously approved by the Lessor, naming Lessor as fee
owner insured to the extent of advances made hereunder
subject only to such exceptions as may be reasonably
approved by Lessor.
3. RESTRICTIONS ON CONVEYANCE OR SECONDARY FINANCING -
Lessee will not transfer, sell, convey or encumber the
Leased Premises or subject the Leased Premises to any
secondary financing in any way without the written consent
of the Lessor, except as permitted in Article V, paragraph 2
relating to trade fixture financing sources or suppliers.
4. INSURANCE - To obtain or cause Contractor to obtain and
maintain such insurance or evidence of insurance as Lessor
may reasonably require, including but not limited to the
following:
(a) BUILDER'S RISK INSURANCE - Builder's Risk
Insurance written on the so-called "Builder's Risk-Completed
Value Basis" in an amount equal to the full replacement cost
of the Improvements at the date of completion with coverage
available on the so-called multiple peril form of policy,
including coverage against collapse and water damage, naming
Lessor as additional named insured, such insurance to be in
such amounts and form and written by such companies as shall
be reasonably approved by Lessor, and the originals of such
policies (together with appropriate endorsement thereto,
evidence of payment of premiums thereon and written
agreements by the insurer or insurers therein to give Lessor
ten (10) days' prior written notice of any intention to
cancel) shall be promptly delivered to Lessor, said
insurance coverage to be kept in full force and effect at
all times until the completion of construction of the
Improvements.
(b) HAZARD INSURANCE - Fire and Extended Coverage
Insurance, and such other hazard insurance as are called for
in the Lease in the amounts called for in the Lease naming
Lessor as an additional named insured.
(c) PUBLIC LIABILITY - Comprehensive public liability
insurance (including operations of subcontractors) as set
forth in the Lease.
(d) WORKMEN'S COMPENSATION INSURANCE - Evidence of
compliance with the required coverage under statutory
workmen's compensation requirements.
5. COLLECTION OF INSURANCE PROCEEDS - To cooperate with
Lessor in obtaining for Lessor the benefits of any insurance
or other proceeds lawfully or equitably payable to it in
accordance with the terms of the Lease.
6. APPLICATION OF DEVELOPMENT FINANCING PROCEEDS - To use
the proceeds of the Development Financing solely for the
purpose of paying for Construction Costs and such incidental
costs relative to the construction as may be reasonably
approved from time to time in writing by Lessor, and in no
event to use any of the Development Financing proceeds for
personal, corporate or other purposes.
7. EXPENSES - To pay all costs of closing the Development
Financing and all expenses of Lessor with respect thereto,
including, but not limited to, legal fees by Lessor's
counsel and all other reasonable attorney's fees (limited as
set forth in the Commitment), costs of title insurance,
transfer taxes, license and permit fees, recording expenses,
surveys, intangible taxes, appraisal fees, Inspecting
Architect fees, expenses of retaking possession upon default
by Lessee hereunder or other costs of enforcement (including
reasonable attorney's fees) and similar items.
8. LAWS, ORDINANCES AND ETC. - To comply promptly with any
law, ordinance, order, rule or regulation of all authorities
exercising jurisdiction over the Leased Premises or the
construction thereon, including appropriate supervising
boards of fire underwriters and similar agencies and the
requirements of any insurer issuing coverage on the Project.
9. RIGHT OF LESSOR TO INSPECT LEASED PREMISES - Upon 48
hours notice, except in cases which Lessor reasonably deems
to be an emergency, in which event upon reasonable notice
under the circumstances, to permit Lessor and Title and
their representatives and agents to enter upon the Leased
Premises and to inspect the Improvements and all materials
to be used in construction thereof and to cooperate and
cause Contractor to cooperate with Lessor or Title and their
representatives and agents during such inspections, provided
that such is accomplished without interrupting the
construction process. Provided, further, however, that this
provision shall not be deemed to impose upon Lessor or Title
any duty or obligation whatsoever to undertake such
inspections, to correct any defects in the Improvements or
to notify any person with respect thereto.
10. BOOKS AND RECORDS - To set up and maintain accurate and
complete books, accounts and records pertaining to the
Project including the working drawings in a manner
reasonably acceptable to Lessor. The Lessor, Title and
Inspecting Architect shall have the right at all reasonable
times and upon reasonable prior notice to inspect, examine
and copy all books and records of Lessee relating to the
Project, and to enter and have free access to the Leased
Premises and Improvements and to inspect all work done,
labor performed and material furnished in or about the
Project, provided that such is accomplished without
interrupting the construction process. Notwithstanding the
foregoing, Lessee shall be responsible for making
inspections as to the Improvements during the course of
construction and shall determine to its own satisfaction
that the work done or materials supplied by the Contractors
and all Subcontractors has been properly supplied or done in
accordance with the applicable contracts. Lessee will hold
Lessor and Title harmless from and Lessor and Title shall
have no liability or obligation of any kind to Lessee or
creditors of Lessee in connection with any defective,
improper or inadequate workmanship or materials brought in
or related to the Improvements or the Leased Premises, or
any mechanic's liens arising as a result of such workmanship
or materials. Upon Lessor's request, Lessee shall replace
or cause to be replaced any such work or material found to
be materially deficient by the Project Architect or
Independent Architect. Lessor shall cooperate with Lessee
in obtaining any rights under any applicable warranties to
accomplish such work. Any inspections made by Inspecting
Architect, Title or Lessor are for the sole benefit of
Lessor and neither Lessee nor any creditor, tenant or vendee
of Lessee shall be entitled to rely on such inspection.
Lessee shall obtain for Lessor coincident rights to rely
upon any warranties obtain by Lessee from its Contractors or
subcontractors.
11. CORRECTION OF DEFECTS - To promptly correct any
structural defects in the Improvements or any material
departure from the Plans and Specifications not previously
approved by Lessor. The advance of any Development
Financing proceeds shall not constitute a waiver of Lessor's
right to require compliance with this covenant.
12. SIGN REGARDING DEVELOPMENT FINANCING - To allow Lessor
to erect and maintain at a suitable site on the Leased
Premises, at a location to be chosen by Lessee in its
reasonable discretion, a sign indicating that Development
Financing is being provided by Lessor, to the extent
permitted by law or private covenant, condition, or
agreement affecting the Project.
13. ADDITIONAL DOCUMENTS - To furnish to Lessor all
instruments, documents, initial surveys, footing or
foundation surveys, if conducted, certificates, plans and
specifications, appraisals, financial statements, title and
other insurance reports and agreements and each and every
other document and instrument required to be furnished by
the terms hereof, all at Lessee's expense; to assign and
deliver to Lessor such documents, instruments, assignments
and other writings, and to do such other acts necessary or
desirable to preserve and protect the Leased Premises, as
Lessor may require; and to do and execute all and such
further lawful and reasonable acts, conveyances and
assurances for the carrying out of the intents and purposes
of this Agreement, the Lease, or the Commitment, as Lessor
shall reasonably require from time to time.
14. ARCHITECTS AND CONSTRUCTION CONTRACTS - To commit no
default nor knowingly permit a default under the terms of
the Architects or Construction Contracts; To waive none nor
knowingly permit a waiver of the obligations of the parties
thereunder; To do no act which would relieve such parties
from their obligations thereunder; To make no amendments to
such contracts, without the prior written consent of Lessor;
To enter into no change orders or extras that cause a
reallocation among budgeted line items, or that in the
aggregate or singularly result in a net increase in excess
of 10% of the original contract amount without Lessor's
prior written consent, which consent shall not be
unreasonably withheld or delayed; provided, however, Lessor
shall be given written notice and copies of all change
orders; provided, further, however, with written notice to
Lessor prior to any request for funds subsequent to any such
change order or reallocation, the Lessee shall be allowed to
enter into any change order or extra which is accounted for
by use of any reallocation among line items or any remaining
budgeted Contingency line item, or if the same has been
exhausted, Lessee shall be allowed increases in the original
contract amount without Lessor's consent if Lessee has, upon
the execution of said change order, deposited with Lessor
the amount by which such change order increases the total
Construction Cost; To allow all such contracts to be subject
to the approval of Lessor for its loan purposes; To allow
Lessor to take advantage of all the rights and benefits of
the contracts upon any default by Lessee; and to submit
evidence to Lessor that both the Architect and the
Contractors will permit Lessor to acquire Lessee's interest
under their respective contracts and the Contract Documents
without additional charge or fee should an event of default
occur hereunder, which default is not cured within
applicable notice and cure periods.
15. ENFORCE PERFORMANCE OF SUB-CONTRACTS - To enforce, or
cause to be enforced, the prompt performance of the Sub-
Contracts in accordance with their terms and not to approve
any changes in the same that in the aggregate or singularly
result in a net increase in excess of 10% of the original
General Contractor's contract amount without Lessor's prior
written consent, which consent shall not be unreasonably
withheld or delayed, provided Lessee's right to enter into
any such change order shall be on the same terms set forth
in Section 14 above.
16. COMPLIANCE WITH RULES - To comply with, and to require
the Contractors to comply with, all rules, regulations,
ordinances and laws bearing on the conduct of the work on
the Improvements, including the requirements of any insurer
issuing coverage on the Project and the requirements of any
applicable supervising boards of fire underwriters.
17. OPINIONS OF COUNSEL - To furnish such opinions of
counsel as may be reasonably requested of the Lessee in
connection with the matters contemplated by this Agreement.
18. SOIL TESTS - To provide the Lessor with a soil report
prepared by an acceptable engineer certifying as to the
status of the soil conditions on the Leased Premises, the
need or lack of need for special pilings and foundations and
that either any pilings and foundation necessary to support
the Improvements have been placed in a manner and quantity
sufficient to provide the required support or that no such
pilings and foundations are necessary for the support and
construction of the Improvements.
19. MARKETABLE TITLE - To execute and deliver or cause to
be executed and delivered such instruments as may be
required by the Lessor and Title to provide Lessor with a
marketable, valid title to the Leased Premises subject only
to such exceptions to title as may be reasonably approved by
Lessor.
20. VIOLATIONS OF GOVERNMENTAL LAW, ORDINANCES OR
REGULATIONS - Lessee will permit no violations nor commit
the same, of any federal or state law or municipal ordinance
or order or requirement of the State in which the Leased
Premises are located or any municipal department or other
governmental authority having jurisdiction affecting the
Leased Premises, which violations in any way have a material
adverse affect on the Leased Premises and which remain
uncured after notice by such governmental authority or
department (if notice is required) and the expiration of the
time within which Lessee may cure such violation, or if no
time limitation is specified, within a reasonable time after
notice to cure such violation .
21. COMPLIANCE WITH ZONING ORDINANCES AND SIMILAR LAWS -
The Plans and Specifications and construction pursuant
thereto and the use of the Leased Premises contemplated
thereby will comply with all governmental laws and
regulations and requirements, zoning ordinances, standards,
and regulations of all governmental bodies exercising
jurisdiction over the Leased Premises, including
environmental protection and equal employment regulations,
and appropriate supervising boards of fire underwriters and
similar agencies.
22. APPROVAL OF PLANS AND SPECIFICATIONS - The Plans and
Specifications will conform to the requirements and
conditions set out by applicable law or any effective
restrictive covenant, and to all governmental authorities
which exercise jurisdiction over the Leased Premises or the
construction thereon.
ARTICLE VII
CONDITIONS PRECEDENT TO A DISBURSEMENT
It shall be a condition precedent to each Disbursement under
this Development Financing Agreement that:
1. DEVELOPMENT FINANCING DOCUMENTS - The Development
Financing Documents shall have been duly executed and
delivered to Lessor and shall be in full force and effect.
2. LESSEE EQUITY - Lessee shall have paid all of the
Lessee Equity funds, if any, into the Project before the
first Disbursement (or any subsequent Disbursement if
additional Lessee Equity should be required) and Lessee
shall deliver evidence of such payment reasonably
satisfactory to Lessor.
3. DEVELOPMENT FINANCING BALANCE - As of the date
immediately prior to any Disbursement, the total amount of
unadvanced proceeds of the Development Financing shall be
sufficient, in the commercially reasonable opinion of Lessor
(the opinion of Lessor being based upon affidavit of the
General Contractor, the Project Architect, the Inspecting
Architect, or other reliable licensed third party
contractor) to complete the Improvements free of liens. To
the extent the total of the unadvanced proceeds of the
Development Financing shall be insufficient, at any time, in
Lessor's reasonable opinion, (based upon the affidavit as
set forth above) to complete the Improvements, or be less
than the total Construction Costs not yet paid for or not
yet incurred (including interest accruing for the remainder
of the term or extensions thereof, if any), the Lessee shall
immediately deposit with the Lessor or with Title, as
additional Lessee Equity funds, an amount equal to such
deficiency and such additional Lessee Equity funds shall be
disbursed by LTIC-CDD prior to the Disbursement of any
further advance or advances under this Agreement.
4. NO DEFAULT - No event of default, which remains uncured
after the expiration of applicable cure periods, shall exist
under this Agreement or the Development Financing Documents.
5. REPRESENTATIONS AND WARRANTIES - The representations
and warranties in Article V hereof shall be true and correct
on and as of the date of each Disbursement.
6. COVENANTS - Lessee shall have complied with all of the
covenants made by it in Article VI hereof.
7. SWORN CONSTRUCTION STATEMENT - Prior to the initial
disbursement hereunder, the Lessee shall have submitted to
Lessor and Title a Construction Cost Statement or the
Construction Contract (if such information is contained
therein) sworn to by Lessee and Contractors reflecting all
major Sub-Contractors or materialmen who shall then be
engaged in furnishing labor, materials or supplies for the
Improvements. The list should show the name of each and
every Contractor, Sub-Contractor and materialman (or at
least such entities or individuals whose contract is in
excess of $5,000), its address and an estimate of the dollar
value of the work, labor and materials to be done or
supplied and a general statement of the nature of the work
to be done or materials to be supplied by each Contractor.
Thereafter, if such list should change or new subcontractors
shall execute contracts not reflected on the above list, the
Lessee shall furnish to the Lessor any amendments or
additions to the original statement as so submitted.
8. APPLICATION FOR PAYMENT - Lessor shall have received an
Application for Payment pursuant to Article VIII hereof.
9. TITLE - Title shall issue its endorsement to the title
policy insuring the Lessor as fee owner under the policy in
the aggregate amounts of all prior Disbursements and the
requested Disbursement.
10. WORK IN PLACE - All work or materials for which a
Disbursement is requested shall be in place and incorporated
into the Improvements.
ARTICLE VIII
METHODS OF DISBURSEMENTS OF DEVELOPMENT FINANCING PROCEEDS
The Development Financing shall be disbursed (a
"Disbursement") as follows:
1. PROCEDURE - Not more often than monthly, Lessee may
submit an Application for Payment in the form attached
hereto as Exhibit "C" requesting the Disbursement of
proceeds under the Development Financing ( "Draw Request"),
which request shall be submitted to Lessor and to LTIC-CDD
at least five (5) business days prior to the date on which a
Disbursement is requested. Provided the conditions of this
Development Financing Agreement are met on the date
requested for such advance, Lessor shall advance to LTIC-CDD
amounts certified to be currently payable by Lessee
(excluding the retainage hereinafter specified) for the then
incurred portion of Construction Costs pursuant to the
Application for Payment. All costs shall have been approved
in writing by the Project Architect, Lessee, Contractor, and
if required by Lessor, by the Inspecting Architect. All
interest accruing need not be disbursed to LTIC-CDD, but may
be immediately and automatically credited by Lessor to the
Development Financing account. LTIC-CDD shall disburse all
funds advanced to it by Lessor in accordance with the terms
and provisions of this Agreement and any special escrow
requirements imposed by LTIC-CDD as a condition to its
acting as the disbursing agent hereunder. The disbursed
proceeds of the Development Financing shall bear interest
from and including the date of disbursement to LTIC-CDD or
the date of credit by Lessor provided that in the event LTIC-
CDD shall fail to disburse any advances within five (5)
business days after the date set for an advance, LTIC-CDD
shall return said advance to Lessor and interest on such
advance shall abate from and after the date of such return.
Any amounts disbursed to LTIC-CDD and returned by LTIC-CDD
to the Lessor shall not be deemed to be advanced under the
Development Financing Documents. Each Application for
Payment shall clearly set forth the amounts due to Lessee
and to each Contractor out of the requested Development
Financing and shall be accompanied by the following:
a. A Draw Request Certificate in the form attached
hereto as Exhibit "D" certifying that each contractor or
materialman for which payment is requested in the relevant
Application for Payment has satisfactorily completed the
work or furnished the materials for which payment is
requested in accordance with the applicable contract; that
all work for which an Application for Payment is made
substantially conforms to the Contract Documents and any
approved changes, and is in place; and that sufficient funds
remain of the undisbursed Development Financing proceeds to
complete the Project and that all funds previously disbursed
have been applied as per the previous Application for
Payment.
b. Waivers of Mechanics' Liens and Materialmen's
Liens executed by all Contractors for all work done and all
materials furnished to the Leased Premises and included in
such current Application for Payment, or evidence reasonably
required by Title to insure over the same by special
specific endorsement, or such other releases of lien
pursuant to bonding or otherwise to prevent such liens from
attaching to the Leased Premises.
c. Waivers of Mechanics' Liens and Materialmen's
Liens executed by all Sub-Contractors and workmen and
materialmen for all work done and all materials furnished to
the Leased Premises and included in the immediately
preceding Application for Payment, or evidence reasonably
required by Title to insure over the same by special
specific endorsement, or such other releases or lien
pursuant to bonding or otherwise to prevent such liens from
attaching to the Leased Premises.
d. Such other supporting evidence, including invoices
and receipts as may be requested by Lessor or LTIC-CDD to
substantiate all payments which are to be made out of the
Disbursement or to substantiate all payments then made in
respect to the Project.
2. INTEREST ADVANCE - If interest has accrued on the
Development Financing and is unpaid or fees are payable to
the Lessor hereunder, Lessor shall be, and hereby is,
authorized at any time to advance to itself from the
proceeds of the Development Financing the total amount of
such accrued interest and fees, whether or not an
Application for Payment has been submitted by the Lessee and
the same shall be deemed to be an advance of the proceeds of
the Development Financing under this Agreement in the same
manner and with the same effect as if advanced under the
provisions above. It is understood Lessor may establish an
automatic interest reserve whereby Lessor may withdraw from
the Development Financing account on a regular basis the
accrued interest on the Development Financing and credit the
Development Financing balance with the same. Lessor shall
give Lessee prompt written notice of any such advance or
withdrawal.
3. ASSESSMENT AND TAX ADVANCE - As taxes and assessments
become due on the Leased Premises, Lessor shall be, and
hereby is, authorized to advance to itself automatically
from the proceeds of the Development Financing, the total
amount of such taxes and assessments and the same shall be
deemed to be an advance of the proceeds of the Development
Financing under this Agreement in the same manner and with
the same effect as if advances under the provisions above,
if not previously paid before due pursuant to Lessee's
obligations under the Lease. Lessor shall give Lessee
prompt written notice of any such advance or withdrawal.
4. DISBURSE UNDER DEVELOPMENT FINANCING DOCUMENT - All
sums advanced and disbursed hereunder shall be disbursed
under and shall be secured by the Development Financing
Documents.
5. PAYMENTS TO SUBCONTRACTORS - In its reasonable
discretion LTIC-CDD may make payments directly to any
subcontractor or materialman.
6. RETAINAGE - Each Disbursement shall be limited to an
amount equal to ninety percent (90%) of the value, inclusive
of Contractor's profit and overhead, of the materials and
labor furnished to the Leased Premises and the balance
(herein called the Retainage) shall be retained by Lessor,
provided that thirty (30) days after completion by each
subcontractor or materialman of his subcontract Lessor will
disburse to such party, or to the Contractor on behalf of
such party the Retainage withheld from said party, provided
that as a condition to such disbursement the Lessee and
Project Architect and the Inspecting Architect shall certify
to Lessor the date that such party's subcontract has been
fully and satisfactorily completed and the subcontractor or
materialmen shall have supplied Title with satisfactory
final lien waivers, including final lien waivers for any of
its submaterialmen or sub- contractors. Contractor's profit
and overhead (less ten percent of such amount retained as
retainage) shall be disbursed at the time each disbursement
is made based upon and in proportion to the percentage of
completion of the Project, or amounts payable under the
Construction Contract for work actually performed, whichever
is less, as certified by the Project Architect. Any
Retainage due the Contractor for work performed or materials
furnished by the Contractor and the final balance of
Contractor's profit and overhead shall be disbursed on the
Final Disbursement Date pursuant to Article IX hereof.
ARTICLE IX
FINAL DEVELOPMENT FINANCING BALANCE
Unless and until Lessor and Lessee have entered into a
mutually satisfactory escrow holdback and undertaking
agreement to, inter alia, complete the Improvements and
otherwise satisfy the requirements of this Article IX, at no
time and in no event shall Lessor be obligated to disburse
the balance of the proceeds of the Development Financing,
including any Retainage until the date the following have
been satisfied (the "Final Disbursement Date"):
1. Lessor shall have received reasonably satisfactory
evidence of the final completion of the Improvements in
substantial accordance with the Contract Documents and the
Certificate of Final Completion from the Project Architect
accepted by the Contractor and Lessee.
2. Lessor shall have received satisfactory as-built
surveys reflecting the final location of the Improvements as
fully completed on the Leased Premises in accordance with
the Contract Documents, said survey to be prepared by a
registered or licensed surveyor bearing his registry number,
certifying to Lessor as to the legal description of the
Leased Premises and showing all Improvements located on the
Leased Premises and indicating the street address of the
Improvements, absence of any encroachments on the Leased
Premises or from the Leased Premises onto adjacent land,
showing all access points, and showing conformance to all
set back requirements and delineating all utility easements
that are specifically legally described, rights of way and
other matters affecting the Leased Premises, and certifying
as to the total acreage of the land, the exterior dimensions
of the Improvements, and the number of parking spaces, if
any, and such other matters as Lessor may reasonably
request.
3. Lessor shall have received a requisite affidavit of the
Lessee, Contractor and Project Architect, and approved by
the Inspecting Architect certifying as to the final cost of
the Improvements.
4. Title shall have been furnished with such final lien
waivers sufficient in the opinion of Title to dissolve any
possible Mechanic's and Materialman's Liens affecting title
to the Leased Premises or Lessee shall have provided a bond
or other security sufficient to remove the lien as an
encumbrance upon title to the Leased Premises and Title
shall have issued its endorsements to the title policy
increasing the insured coverage to the full amount of all
sums disbursed under this Development Financing Agreement.
5. Lessor shall have received evidence that all of the
terms, provisions and conditions on the part of the Lessee
to be performed or caused to be performed hereunder and
under the Lease, including but not limited to obtaining
insurance in accordance with the Lease, have been fulfilled
to the satisfaction of Lessor.
6. Lessor shall have received a Final Certificate of
Occupancy issued by the appropriate governmental authority
covering the Improvements and a Certificate of Substantial
Completion from the Project Architect indicating that the
Improvements as built comply with all building codes and
zoning ordinances, including any plat requirements or
requirements of recorded operating covenants or agreements
affecting the Leased Premises.
7. All remaining uncompleted "punch list" items shall have
been satisfactorily completed.
8. The requirements of all bonding companies, if any, with
respect to release of retainage shall have been met.
9. An amendment to the Lease shall be executed by Lessee
and Lessor setting forth the date the first Lease Year shall
end and the Rent for the balance of the first Lease Year,
and evidencing the satisfaction and termination of this
Agreement.
ARTICLE X
EVENTS OF DEFAULT
An "event of default" shall be deemed to have occurred
hereunder and under the Lease, if:
1. DEFAULT UNDER DEVELOPMENT FINANCING DOCUMENTS - Any
default or event of default occurs (which remains uncured
after the expiration of any applicable cure period as may be
set forth in any Development Financing Document) under any
of the Development Financing Documents as defined therein;
or
2. FAILURE TO COMPLETE CONSTRUCTION - Lessee shall fail
for any reason, except Lessor's wrongful refusal to fund the
Development Financing pursuant to the terms hereof, to
substantially complete the construction of the Improvements
by the Completion Date; or
3. BREACH OF AGREEMENT - Lessee breaches or fails to
perform, observe or meet any covenant or condition of this
Agreement, provided, however, with respect to non-monetary
defaults hereunder, Lessee shall have twenty days after
notice from Lessor to cure such non-monetary default, or if
such default (but for the payment of monies) cannot be cured
within twenty days, such longer time as may be reasonably
necessary to effect a cure if Lessee is diligently pursuing
a course of conduct reasonably designed to cure the default;
and with respect to monetary defaults, Lessee shall have
five days after notice from Lessor to cure any such monetary
defaults; or
4. BREACH OF WARRANTY - Any warranties made or agreed to
be made in any of the Development Financing Documents or
this Agreement shall be breached by Lessee or shall prove to
be false or misleading in any material respect, and the same
shall not be cured or made to be true and correct within the
applicable cure periods, which for those relating to this
Agreement, the cure periods shall be the same as set forth
in paragraph 3 above; or
5. FILING OF LIENS AGAINST THE LEASED PREMISES - Any lien
for labor, material, taxes or otherwise shall be filed
against the Leased Premises and such lien shall not be
promptly paid, released, contested in an appropriate forum,
or bonded over to Lessor's reasonable satisfaction before
the lien shall materially adversely affect Lessor's interest
in the Premises; or
6. LITIGATION AGAINST LESSEE - Any suit shall be filed
against Lessee, and is not resolved within 120 days and,
which if adversely determined, could substantially impair
the ability of Lessee to perform each and every one of its
obligations under and by virtue of the Development Financing
Documents; or
7. LEVY UPON THE LEASED PREMISES - A levy be made under
any process on the Leased Premises and such levy shall not
be promptly bonded over prior to the execution of such levy;
or
8. TRANSFER OF LEASED PREMISES - Lessee shall without the
prior written consent of Lessor, voluntarily or by operation
of law, sell, transfer, convey or encumber all or any part
of its interest in the Leased Premises or in any of the
personalty located thereon, or used or intended to be used
in connection therewith; or
9. ABANDONMENT - Lessee abandons the project or delays or
ceases work thereon for a period of fifteen consecutive (l5)
days, or delays construction or suffers construction to be
delayed for any period of time for any reason whatsoever so
that completion of Improvements cannot be accomplished in
the judgment of Lessor on or before the Completion Date,
subject to force majeure; or
10. BANKRUPTCY - Lessee shall make an assignment for the
benefit of its creditors or shall admit in writing its
inability to pay its debts as they become due or shall file
a petition in bankruptcy or shall be adjudicated a bankrupt
or insolvent or shall file a petition seeking any
reorganization, dissolution, liquidation, arrangement,
composition, readjustment, or similar relief under any
present or future bankruptcy or insolvency statute, law or
regulation, or shall file an answer admitting to or not
contesting the material allegations of a petition filed
against it in any such proceedings, or shall not have the
same dismissed or vacated, or shall seek or consent or
acquiesce in the appointment of any trustee, receiver or
liquidator of a material part of its properties, or shall
not after the appointment without the consent or
acquiescence of it of a trustee, receiver, or liquidator of
any material part of its properties have such receiver,
liquidator or appointment vacated; or
11. EXECUTION LEVY - Execution shall have been levied
against the Leased Premises or any lien creditors commence
suit to enforce a judgment lien against the Leased Premises
or such action or suit shall have been brought and shall not
be immediately bonded over and shall continue unstayed and
in effect for a period of more than 120 consecutive days; or
12. ATTACHMENT - Any part of the Lessor's commitment to
make the advances hereunder shall at any time be subject or
liable to attachment or levy at the suit of any creditor of
the Lessee or at the suit of any subcontractor or creditor
of the Contractor and shall remain unstayed prior to the
time Lessor shall be obligated to comply with the same.
ARTICLE XI
REMEDIES OF LESSOR
Lessee hereby agrees that the occurrence of any one or more
of the events of default set out in Article X hereof, shall
also constitute an event of default under each of the
Development Financing documents, thereby entitling Lessor,
after the expiration of any applicable cure period, at its
option, to proceed to exercise any or all of the following
remedies:
1. EXERCISE OF REMEDIES - To exercise any of the various
remedies provided in any of the Development Financing
Documents, including the acceleration of the Put described
in Article XIV hereof;
2. CUMULATIVE RIGHTS - Cumulatively to exercise all other
rights, options and privileges provided by law;
3. CEASE MAKING ADVANCES - To refrain from making any
advances under this Agreement but Lessor may make advances
after the happening of any such event without thereby
waiving the right to refrain from making other further
advances or to exercise any of the other rights Lessor may
have.
4. RIGHTS TO ENTER - To require Lessee to vacate the
Leased Premises and permit Lessor (whether prior to the
exercise of the Put or during any period prior to the
closing of the sale pursuant to the Put);
(a) To enter into possession;
(b) To perform or cause to be performed any and all
work and labor necessary to complete the Improvements in
accordance with the Plans and Specifications;
(c) To employ security watchmen to protect the Leased
Premises; and
(d) To disburse that portion of the Development
Financing Proceeds not previously disbursed (including any
Retainage) to the extent necessary to complete the
construction of the Improvements in accordance with the
Contract Documents and if the completion requires a larger
sum than the remaining undisbursed portion of the
Development Financing, to disburse such additional funds,
all of which funds so disbursed by Lessor shall be deemed to
have been disbursed to Lessee. For this purpose, Lessee
hereby consents upon an uncured default by Lessee after the
expiration of any applicable notice and cure period, to the
Lessor taking the following actions, or not, in Lessor's
reasonable discretion: to complete the construction of the
Improvements in the name of the Lessee, and hereby empowers
Lessor to take all actions necessary in connection therewith
including but not limited to using any funds of Lessee
including any balance which may be held in escrow and any
funds which may remain unadvanced hereunder for the purpose
of completing the said portion of the Improvements in the
manner called for by the Contract Documents; to make such
additions and changes and corrections in the Contract
Documents which shall be necessary or desirable to complete
the said portion of the Improvements in substantially the
manner contemplated by the Contract Documents; to employ
such contractors, subcontractors, agents, architects, and
inspectors as shall be required for said purposes; to pay,
settle or compromise all existing or future bills and claims
which are or may be liens against said Leased Premises, or
may be necessary or desirable for the completion of the said
portion of the Improvements or the clearance of title to the
Leased Premises; to execute all applications and
certificates in the name of Lessee which may be required by
any construction contract and to do any and every act with
respect to the construction of the said portion of the
Improvements which Lessee may do in its own behalf. Lessor
shall also have power to prosecute and defend all actions
and proceedings in connection with the construction of the
said portion of the Improvements and to take such action and
require such performance as it deems necessary. In
accordance therewith, Lessee hereby assigns and quitclaims
unto Lessor all sums to be advanced hereunder including
Retainage. Any funds so disbursed or fees or charges so
incurred shall be included in any amount necessary for the
Lessee to pay pursuant to the Put.
(e) To discontinue making advances hereunder to the
Lessee and to terminate Lessor's obligations under this
Agreement.
5. RIGHTS NON CUMULATIVE - No right or remedy by this
Agreement or by any Development Financing Document or
instrument delivered by the Lessee pursuant hereto,
conferred upon or reserved to the Lessor shall be or is
intended to be exclusive of any other right or remedy and
each and every right and remedy shall be cumulative and in
addition to any other right or remedy now or hereafter
arising at a law or in equity or by statute. Except as
Lessor may hereafter otherwise agree in writing, no waiver
by Lessor or any breach by or default of Lessee of any of
its obligations, agreements, or covenants under this
Agreement shall be deemed to be a waiver of any subsequent
breach of the same or any other obligation, agreement or
covenant, nor shall any forbearance by Lessor to seek a
remedy for such breach be deemed a waiver of its rights and
remedies with respect to such a breach, nor shall Lessor be
deemed to have waived any of its rights and remedies unless
it be in writing and executed with the same formality as
this Agreement.
6. EXPENSES - The Development Financing and this Agreement
and the performance by the Lessor or Lessee of their
obligations hereunder shall be without cost and expense to
the Lessor, all of which costs and expenses the Lessee
agrees to pay and hold Lessor harmless of and payment of
which shall be secured by the Development Financing
Documents. Specifically, Lessee agrees to pay all title
charges, surveyor's fees, appraisals, loan fees and
attorney's fees and costs and the like incurred in
connection with this Agreement.
ARTICLE XII
GENERAL CONDITIONS AND MISCELLANEOUS
The following conditions shall be applicable throughout the
term of this Agreement:
1. RIGHTS OF THIRD PARTIES - All conditions of the
obligations of Lessor hereunder, including the obligation to
make disbursements are imposed solely and exclusively for
the benefit of Lessee, and no other person shall have
standing to require satisfaction of such conditions in
accordance with their terms or be entitled to assume that
Lessor will refuse to make advances in the absence of strict
compliance with any or all thereof, and no other person
shall, under any circumstances, be deemed to be a
beneficiary of such conditions, any and all of which may be
freely waived in whole or in part by Lessor at any time if
in its sole discretion it deems it desirable to do so. In
particular, Lessor makes no representations and assumes no
duties or obligations as to third parties concerning the
quality of the construction of the Improvements or the
absence therefrom of defects. In this connection, Lessee
agrees to and shall indemnify Lessor from any liability,
claims or losses resulting from the disbursement of the
Development Financing proceeds or from the condition of the
Leased Premises whether related to the quality of
construction or otherwise and whether arising during or
after the term of the Development Financing made by Lessor
to Lessee in connection therewith, except for Lessor's gross
negligence or willful misconduct. This provision shall
survive the termination of this Agreement and shall continue
in full force and effect so long as the possibility of any
such liability, claims or losses exists.
2. EVIDENCE OF SATISFACTION OF CONDITIONS - Any condition
of this Agreement which requires the submission of evidence
of the existence or non- existence of a specified fact or
facts implies as a condition the existence or non-
existence, as the case may be, of such fact or facts, and
Lessor shall, at all times, be free independently to
establish to its reasonable satisfaction such existence or
non-existence.
3. ASSIGNMENT - Lessee may not assign this Development
Financing Agreement or any of its rights or obligations
hereunder without the prior written consent of Lessor.
4. SUCCESSORS AND ASSIGNS - Whenever in this Agreement one
of the parties hereto is named or referred to, the heirs,
legal representatives, successors and assigns of such
parties shall be included and all covenants and agreements
contained in this Agreement by or on behalf of the Lessee or
by or on behalf of the Lessor shall bind and inure to the
benefit of their respective heirs, legal representatives,
successors and assigns, whether so expressed or not.
5. HEADINGS - The headings of the sections, paragraphs and
subdivisions of this Agreement are for the convenience of
reference only, and are not to be considered a part hereof
and shall not limit or otherwise affect any of the terms
hereof.
6. INVALID PROVISIONS TO AFFECT NO OTHERS - If fulfillment
of any provision hereof, or any transaction related thereto
at the time performance of any such provision shall be due,
shall involve transcending the limit of validity prescribed
by law, then, ipso facto, the obligation to be fulfilled
shall be reduced to the limit of such validity; and such
clause or provision shall be deemed invalid as though not
herein contained, and the remainder of this Agreement shall
remain operative in full force and effect.
7. NUMBER AND GENDER - Whenever the singular or plural
number, masculine or feminine or neuter gender is used
herein, it shall equally include the other.
8. AMENDMENTS - Neither this Agreement nor any provision
hereof may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by the
party against whom enforcement of the change, waiver,
discharge or termination is sought.
9. NOTICES - Any notice which any party hereto may desire
or may be required to give to any of the parties shall be in
writing and the mailing thereof by certified mail, or
equivalent, to the respective parties' addresses set forth
hereinabove or to such other place such party may by notice
in writing designate as its address shall constitute service
of notice hereunder.
10. GOVERNING LAW - This Development Financing Agreement is
made and executed pursuant to and is intended to be governed
by the laws of the State where the Leased Premises are
located.
11. FORCE MAJEURE - Anything in this Agreement to the
contrary notwithstanding, Lessee shall not be deemed in
default with respect to the performance of any of the terms,
provisions, covenants, and conditions of this Agreement
(except for the payment of all other monetary sums payable
hereunder, to which the provisions of this Section shall not
apply), if the same shall be due to any strike, lockout,
civil commotion, warlike operations, invasion, rebellion,
hostilities, sabotage, governmental regulations or controls,
impracticability of obtaining any materials or labor (except
due to the payment of monies), shortage or unavailability of
a source of energy or utility service, Act of God, casualty,
adverse weather conditions, or any cause beyond the
reasonable control of Lessee (except due to the payment of
monies). Provided, however, in order to invoke the
extension of the Completion Date afforded by this section,
Lessee shall notify Lessor in writing within ten days of the
occurrence of such force majeure, and in any event the
Completion Date shall be extended as a result of such
occurrence no more than reasonably necessary and in no event
no more than 90 days.
ARTICLE XIII
DAMAGE, DESTRUCTION, CONDEMNATION, USE OF INSURANCE PROCEEDS
1. DAMAGE OR DESTRUCTION OF THE LEASED PREMISES.
Lessee will give the Lessor prompt notice of any damage to
or destruction of the Leased Premises and in case of loss
covered by policies of insurance the Lessor (whether before
or after the exercise of the Put if Lessee be in default
hereof) is hereby authorized at its option to settle and
adjust any claim arising out of such policies and collect
and receipt for the proceeds payable therefrom, provided,
that the Lessee may itself adjust and collect for any losses
arising out of a single occurrence aggregating not in excess
of $100,000.00. Any expense incurred by the Lessor in the
adjustment and collection of insurance proceeds (including
the cost of any independent appraisal of the loss or damage
on behalf of Lessor) shall be reimbursed to the Lessor first
out of any proceeds. Subject to paragraph 4 hereof, the
proceeds or any part thereof shall be applied to reduction
of the Put Price, which Put may then be exercised by Lessor,
without the application of any prepayment premium, or to the
restoration or repair of the Leased Premises, the choice of
application to be solely at the discretion of Lessor.
2. CONDEMNATION. Lessee will give the Lessor prompt
notice of any action, actual or threatened, in condemnation
or eminent domain affecting the Leased Premises and hereby
assigns, transfers, and sets over to the Lessor the entire
proceeds of any award or claim for damages for all or any
part of the Leased Premises taken or damaged under the power
of eminent domain or condemnation, the Lessor being hereby
authorized to intervene in any such action and to collect
and receive from the condemning authorities and give proper
receipts and acquittances for such proceeds. Lessee will
not enter into any agreements with the condemning authority
permitting or consenting to the taking of the Leased
Premises unless prior written consent of Lessor is obtained.
Any expenses incurred by the Lessor in intervening in such
action or collecting such proceeds shall be reimbursed to
the Lessor first out of the proceeds. Subject to paragraph
4 hereof, the proceeds or any part thereof shall be applied
to reduction of the Put Price, which Put may then be
exercised by Lessor, without the application of any
prepayment premium, or to the restoration or repair of the
Leased Premises, the choice of application to be solely at
the discretion of Lessor.
3. DISBURSEMENT OF INSURANCE AND CONDEMNATION
PROCEEDS. Any restoration or repair shall be done under the
supervision of an architect acceptable to Lessor and
pursuant to plans and specifications approved by the Lessor.
Subject to paragraph 4 below, in any case where Lessor may
elect to apply the proceeds to repair or restoration or
permit the Lessee to so apply the proceeds they shall be
held by Lessor for such purposes and will from time to time
be disbursed by Lessor to defray the costs of such
restoration or repair under such safeguards and controls as
Lessor may reasonably require to assure completion in
accordance with the approved plans and specifications and
free of liens or claims, to be disbursed as if such
disbursements were disbursements of Development Financing.
Lessee shall on demand deposit with Lessor any sums
necessary to make up any deficits between the actual cost of
the work and the proceeds and provide such lien waivers and
completion bonds as Lessor may reasonably require. Any
surplus which may remain after payment of all costs of
restoration or repair shall be applied against the rent
then most remotely to be paid, whether due or not, without
application of any prepayment premium or credit.
4. LESSOR TO MAKE PROCEEDS AVAILABLE. In the event of
insured damage to the improvements or in the event of a
taking by condemnation of only a portion of the improvements
or land area of the Leased Premises, provided, the
Completion Date need not be extended more than 90 days, the
appraised value of the Leased Premises after such
restoration or repair shall not have been reduced, and
provided further, no event of default exists under this
Agreement after the expiration of any applicable cure
periods and Lessee is diligently pursuing a course of
conduct reasonably designed to cure such default, and the
Lessee certifies to Lessor their intention to remain in
possession of the Leased Premises without any abatement or
adjustment of rental payments, the Lessor agrees to make the
proceeds available to the restoration or repair of the
improvements on the Leased Premises in accordance with the
provisions of paragraph 3 hereof.
ARTICLE XIV
MANDATORY PUT UPON DEFAULT
Should Lessee commit an event of Default under this
Agreement or any Development Financing Document (after the
expiration of any applicable notice and cure period)
("Uncured Default"), Lessor shall have the following rights:
Upon an Uncured Default, or damage or destruction or
condemnation of the Leased Premises not addressed by
paragraph XIII (4), if Lessor elects to exercise the
following option within 45 days after the expiration of any
applicable notice and cure period, Lessee shall purchase the
Leased Premises from Lessor subject to the following terms
and conditions:
A. The purchase price at which Lessor shall sell the
Leased Premises to Lessee, shall be the total amount of
Initial Disbursed Funds disbursed by Lessor to acquire the
Leased Premises at the Closing Date (as defined in the
Commitment), plus the total amount of funds disbursed
pursuant to this Agreement, plus all accrued interest and
incurred expenses of Lessor fundable pursuant to this
Agreement, plus all reasonable costs of collection and
enforcement of the terms hereof.
B. At such time as Lessor shall timely elect to sell
the Leased Premises, Lessor shall give Lessee timely written
notice of its intent to exercise its option to sell the
Leased Premises to Lessee, including in such notice Lessor's
calculation of the Purchase Price through the actual closing
of the sale of the Leased Premises to Lessee pursuant to the
terms hereof (the "Sale Date"), which shall be sixty days
from such notice by Lessor. Lessee shall on or before the
Sale Date deliver the purchase price as set forth in
subparagraph (A) of this Article to Lessor. Upon such
delivery, which shall be preceded by ten (10) days notice to
Lessor, Lessor shall deliver to Lessee a warranty deed and
appropriate affidavits evidencing that Lessor transfers the
Leased Premises to Lessee subject to restrictions, easements
or other encumbrances upon title existing as of the date of
delivery, if any, except to the extent, if any, placed of
record or caused by Lessor. The purchase price to be paid
to Lessor shall be a net amount. All expenses in connection
with the transfer of the Leased Premises, including, but not
limited to appraisal fees, title insurance, recording fees,
documentary stamps, conveyance tax, title evidence, and all
other closing costs, shall be paid by the Lessee. The
purchase price shall be paid by Lessee in cash to Lessor
concurrently with the conveyance of the Leased Premises by
the Lessor to the Lessee. If Lessor elects to sell the
Leased Premises to Lessee pursuant to the terms hereof, the
Leased Premises shall be conveyed by the Lessor to the
Lessee "As Is".
If Lessee shall fail to pay the Purchase Price on or
before the Sale Date, Lessor may terminate the Lease, and
sell the Leased Premises to any third party purchaser.
Lessor may then send Lessee notice of the shortfall (the
"Deficiency"), if any, between the amount of the net
proceeds received by Lessor in such sale, and the total
amount of Initial Disbursed Funds disbursed by Lessor to
acquire the Parcel at the Closing Date (as defined in the
Commitment), plus the total amount of funds disbursed
pursuant to this Agreement, plus all accrued interest and
incurred expenses of Lessor fundable pursuant to this
Agreement, plus all reasonable costs of collection and
enforcement of the terms hereof. Lessee shall immediately
upon receipt of such notice of Deficiency remit the amount
of the Deficiency in good funds to Lessor.
Lessor's rights under this Put shall expire on the
Final Disbursement Date when the amendment to the Lease has
been executed by all parties as set forth in Article IX
hereof.
ARTICLE XV
RENT, INTEREST, AND RENTAL MODIFICATION DATE
1. Rent shall be payable by Lessee and calculated as
follows, on the funds advanced by Lessor on the Closing Date
for the purchase of the land and related closing costs (the
"Initial Disbursed Funds"): Rent shall accrue in the amount
of $6,623.75 per month absent an uncured Default by Lessee;
absent an uncured Default, accrued rent during the period of
construction of the Improvements prior to the Rental
Modification Date shall not be payable until the Final
Disbursement Date. Upon the occurrence of an uncured
Default, all accrued rent shall be immediately due and
payable.
On the Rental Modification Date, if not otherwise in
default hereunder, Lessee shall begin paying Rent out of
pocket by the first of each month (prorata for the balance
of any partial month in which the Rental Modification Date
occurs, payable with the first such adjusted Rent payable on
the first day of the first full month following the Rental
Modification Date). On the Final Disbursement Date, absent
an uncured Default, Rent shall be adjusted and documented by
the lease amendment contemplated in Article IX hereof and
paid to Lessor as described in Article F. of the Commitment.
2. Distinct from Rent, disbursed proceeds of the
Development Financing shall accrue interest at a rate of
10.5% per annum, which interest shall accrue unpaid unless
advanced by Lessor to itself, or Lessee shall default
hereunder, which default shall remain uncured after the
expiration of any applicable notice and cure period.
However, one hundred and fifty days (150) from the date
hereof, (the "Rental Modification Date"), Lessee shall begin
making monthly payments of subsequently accruing interest at
the rate of 10.5% per annum out of pocket ("Out of Pocket
Invoiced Interest") within 5 days after invoice from Lessor.
3. Upon the occurrence of an event of default which
remains uncured after the expiration of applicable notice
and cure periods, disbursed proceeds of the Development
Financing shall accrue interest at a rate of Twelve Percent
(12.0%) per annum, or the highest rate allowed by law,
whichever is less, and the rental rate on the Initial
Disbursed funds shall increase to Twelve Percent (12.0%) per
annum, or the highest rental rate allowed by law, whichever
is less.
ARTICLE XVI
COUNTERPART EXECUTION
Counterpart Execution. This Agreement may be executed
in multiple counterparts, each of which shall be deemed an
original and all of which shall constitute one and the same
instrument.
IN WITNESS WHEREOF, Lessee and Lessor have hereunto
caused these presents to be executed on the date first above
written.
Kona Restaurant Group, Inc., a Delaware corporation
By: /s/ Norman
Its: President
[Lessor's Signature appears on following page.]
AEI PRIVATE NET LEASE FUND 1998 LIMITED PARTNERSHIP
By: AEI Fund Management XVIII, Inc.
By: /s/ Robert P Johnson
Robert P. Johnson, President
EXHIBIT A
1.6310 ACRE
(71,046 Square Feet)
THE STATE OF TEXAS
THE COUNTY OF VICTORIA
BEING a 1.6310 acre tract of land situated in Farm Lot 2,
Block 6, Range 3, East Above Town in the Original Four
League Grant to the Town of Victoria, Victoria County, Texas
and being a portion of that certain tract of land described
as 8.759 acres as conveyed from Myrtle Gunn York to Victoria
Hank and Trust Company, as Trustee, by instrument dated
November 10, 1992, and recorded in Volume 0035, Page 477 of
the Official Records of Victoria County, Texas, said 1.6310
acre tract of land being more fully described by metes and
bounds as follows:
COMMENCING at a 5/8 inch diameter iron rebar found for
corner in the east right-of-way line of U.S. Highway No. 77
(also known as N. Navarro Street), said iron rebar marks the
southwest corner of Lot 1, Block 1. of Golden Corral
Subdivision No. 1, and addition to the City of Victoria,
Victoria County, Texas, according to the established map and
plat of said addition recorded in Volume 7, Page 85D of the
Map and Plat Records of said County;
THENCE, South 18 deg. 13' 29" West, along said right-of-way
line, a distance of 221.86 feet to a 5/8 inch diameter iron
rebar found marking the beginning of a curve to the left;
THENCE, in a southwesterly direction along said curve to the
left and continuing along said right-of-way line (internal
angle = 2 deg. 18' 40", radius = 3169.85 feet, chord bears S
16 deg. 30' 57" W, a distance of 152.03 feet) for an arc
distance of 152.04 feet to a 5/8 inch diameter iron rebar
found for the POINT OF BEGINNING of the herein described
tract;
Thence, South 71 deg. 47' 38" East, a distance of 223.07
feet to a 5/8 inch diameter iron rebar found marking the
northeast corner of the herein described tract;
THENCE, South 15 deg. 01' 17" West, along the north line of
said 2.10 acre tract, a distance of 216.11 feet to a
concrete monument found marking the southwest corner of the
herein described tract, in the aforesaid curving east right-
of-way line of U.S. Highway No. 77, same being the northwest
corner of said 2.10 acre tract;
THENCE, in a northeasterly direction along said curving
right-of-way line (internal angle 5 deg. 38' 32", radius =
3769.47 feet, chord bears N 12 deg. 32' 21" E, a distance of
371.05feet) for an arc distance of 371.20 feet to the POINT
OF BEGINNING, CONTAINING, within these metes and bounds
1.6310 acre (71,046 square feet) of land, more or less.
TOGETHER WITH certain rights, benefits, and easements
created by that certain Declaration of Easements,
Restrictions, and Related Agreements of even recording date
with the Special Warranty Deed from Triton Commercial
Properties, Ltd to AEI Net Lease Income & Growth Fund XIX
Limited Partnership, AEI Real Estate Fund XV Limited
Partnership, and AEI Real Estate Fund XVII Limited
Partnership.
Land and Hard Costs:
Land Acquisition Cost $ 402,500.00
Building/General Construction 1,100,000.00
Sitework (included in Building/General Construction)
Construction Contingency-10.0% 110,000.00
SUBTOTAL HARD COSTS $ 1,612,500.00
Soft Costs:
Landscaping (included in Building/General Construction)
Survey 2,000.00
Architect 40,000.00
Engineer 10,000.00
Site Engineering 16,500.00
Phase I Environmental 2,300.00
Permits & Fees 4,000.00
Impact/Tap Fees 13,000.00
Builders Rist Insurance 1,600.00
Soils Report/Materials Tests 3,000.00
Title Insurance & Closing Costs (Construction and S/L) 8,000.00
Development Interest 30,400.00
Attorney's Fees-Borrower 5,000.00
Attorney's Fees- AEI 10,000.00
AEI 1% Reimbursement 17,825.00
AEI State Qualification Fees 1,200.00
Appraisal 3,500.00
AEI Credit Report Fees (Promesa) 600.00
Miscellaneous 18,575.00
SUBTOTAL SOFT COSTS $ 187,500.00
TOTAL PROJECT COST $ 1,800,000.00
NET LEASE AGREEMENT
THIS LEASE, made and entered effective as of this 18th day
of April, 2000, by and between AEI Income & Growth Fund 23 LLC
("Fund 23"), whose corporate general partner is AEI Fund
Management XXI, Inc., whose address is 1300 Minnesota World Trade
Center, 30 East Seventh Street, St. Paul, Minnesota 55101
("Lessor")(fax #651 227 7705), and Kona Restaurant Group, Inc., a
Texas corporation, whose address is 3555 Ranch Road, 620 South,
Austin, Texas 78734 ("Lessee") (fax # 512 263 8055);
WITNESSETH:
WHEREAS, Lessor is the fee owner of a certain parcel of real
property and improvements located at Victoria, Texas and legally
described in Exhibit "A", which is attached hereto and
incorporated herein by reference; and
WHEREAS, Lessee as owner contracted for the construction of
the building and improvements (together the "Building") on the
real property described in Exhibit "A", which Building is
described in the plans and specifications heretofore submitted to
Lessor; and
WHEREAS, Lessee desires to lease said real property and
Building (said real property and Building hereinafter referred to
as the "Leased Premises"), from Lessor upon the terms and
conditions hereinafter provided;
NOW, THEREFORE, in consideration of the Rents, terms,
covenants, conditions, and agreements hereinafter described to be
paid, kept, and performed by Lessee, Lessor does hereby grant,
demise, lease, and let unto Lessee, and Lessee does hereby take
and hire from Lessor and does hereby covenant, promise, and agree
as follows:
ARTICLE 1. LEASED PREMISES
Lessor hereby leases to Lessee, and Lessee leases and takes
from Lessor, the Leased Premises subject to the conditions of
this Lease.
ARTICLE 2. TERM
(A) The term of this Lease ("Term") shall be Seventeen (17)
consecutive "Lease Years", as hereinafter defined, commencing on
the effective date first listed above, ("Occupancy Date").
(B) The first "Lease Year" of the Term shall be for a period
of twelve (12) consecutive calendar months from the Occupancy
Date. If the Occupancy Date shall be other than the first day of
a calendar month, the first "Lease Year" shall be the period from
the Occupancy Date to the end of the calendar month of the
Occupancy Date, plus the following twelve (12) calendar months.
Each Lease Year after the first Lease Year shall be a successive
period of twelve (12) calendar months.
(C) The parties agree that once the Occupancy Date has been
established, upon the request of either party, a short form or
memorandum of this Lease will be executed for recording purposes.
That short form or memorandum of this Lease will set forth the
actual occupancy and termination dates of the Term and optional
Renewal Terms, as defined in Article 28 hereof, and the existence
of any option to extend, and that said option shall terminate
when the Lessee shall lose right to possession or this Lease is
terminated, whichever occurs first.
ARTICLE 3. CONSTRUCTION OF IMPROVEMENTS
(A) Lessee warrants and agrees that the Building has been
constructed on the Leased Premises, and all other improvements to
the land, including the parking lot, approaches, and service
areas, have been constructed in all material respects by Lessee
in accordance with the plot, plans, and specifications heretofore
submitted to Lessor.
(B) Lessee warrants that as of the date hereof, the Building
and all other improvements to the land do comply with the laws,
ordinances, rules, and regulations of all state and local
governments.
(C) Lessee agrees to pay, if not already paid in full, for
all architectural fees and actual construction costs, in the
past, present or future, which shall include, but not be limited
to, plans and specifications, general construction, carpentry,
electrical, plumbing, heating, ventilating, air conditioning,
decorating, equipment installation, outside lighting, curbing,
landscaping, blacktopping, electrical sign hookup, conduit and
wiring from building, fencing, and parking curbs, builder's risk
insurance (naming Lessor, Lessee, and contractor as co-insured),
and all construction bonds for improvements made by or at the
direction of Lessee, to the extent incurred or authorized by
Lessee.
(D) Opening for business in the Leased Premises by Lessee
shall constitute an acceptance of the Leased Premises and an
acknowledgment by Lessee that the premises are in the condition
described under this Lease.
ARTICLE 4. RENT PAYMENTS
(A) Annual Rent Payable for the first
Lease Year: Lessee shall pay to Lessor an annual Base
Rent of $42,997.50, which amount shall be payable in
advance on the first day of each month in equal monthly
installments of $3,583.13 to Fund 23. If the first day
of the Lease Term is not the first day of a calendar
month, then the monthly Rent payable for that partial
month shall be a prorated portion of the equal monthly
installment of Base Rent.
(B) Annual Rent Payable beginning with
the Third Lease Year and the beginning of each fourth
Lease Year thereafter shall increase by an amount equal
to five Percent (5%) of the Base Rent payable for the
immediately prior Lease Year. Such increased Base Rent
shall be payable in advance of the first day of each
month in equal monthly installments.
(C) Overdue Payments.
Lessee shall pay interest on all overdue payments of Rent or
other monetary amounts due hereunder at the rate of fifteen
percent (15%) per annum or the highest rate allowed by law,
whichever is less, accruing beginning five days after written
notice to Lessee that Rent or other monetary amounts properly due
and payable were not paid.
ARTICLE 5. INSURANCE AND INDEMNITY
(A) Lessee shall, throughout the Term or Renewal Terms, if
any, of this Lease, at its own cost and expense, procure and
maintain insurance which covers the Leased Premises and
improvements against fire, wind, and storm damage (including
flood insurance if the Leased Premises is in a federally
designated flood prone area) and such other risks (including
earthquake insurance, if the Leased Premises is located in a
federally designated earthquake zone or in an ISO high risk
earthquake zone) as may be included in the broadest form of
extended coverage insurance as may, from time to time, be
available in amounts sufficient to prevent Lessor or Lessee from
becoming a co-insurer within the terms of the applicable
policies. In any event, the insurance shall not be less than one
hundred percent (100%) of the then insurable value.
Additionally, replacement cost endorsements, inflation guard
endorsements, vandalism endorsement, malicious mischief
endorsement, waiver of subrogation endorsement, waiver of co-
insurance or agreed amount endorsement (if available), and
Building Ordinance Compliance endorsement and Rent loss
endorsements (for a period of one year) must be obtained.
(B) Lessee agrees to place and maintain throughout the Term
or Renewal Terms, if any, of this Lease, at Lessee's own expense,
public liability insurance with respect to Lessee's use and
occupancy of said premises, including "Dram Shop" or liquor
liability insurance, if the same shall be or become available in
the State of Texas and liquor is sold on the Premises, with
initial limits of at least $3,000,000 per occurrence/$5,000,000
general aggregate, or such additional amounts as Lessor shall
reasonably require from time to time, upon Lessor's good faith
determination that the present insurance coverage is inadequate,
such amounts to be consistent with requirements of other Lessor's
in similar circumstances.
(C) Lessee agrees to notify Lessor in writing if Lessee is
unable to procure all or some part of the aforesaid insurance.
In the event Lessee fails to provide all insurance required under
this Lease, Lessor shall have the right, but not the obligation,
to procure such insurance on Lessee's behalf. Lessee will then,
within five (5) days from receiving written notice, pay Lessor
the amount of the premiums due or paid, together with interest
thereon at the lesser of 12% per annum or the highest rate
allowable by law, which amount shall be considered Rent payable
by Lessee in addition to the Rent defined at Article 4 hereof.
(D) All policies of insurance provided for or contemplated by
this Article can be under Lessee's blanket insurance coverage and
shall name Lessor, Lessor's corporate managing member and Robert
P. Johnson, as the individual managing member of Lessor, and
Lessee as additional named insured, as their respective interests
may appear, and shall provide that the policies cannot be
canceled, terminated, changed, or modified without thirty (30)
days written notice to the parties. In addition, all of such
policies shall contain endorsements by the respective insurance
companies waiving all rights of subrogation, if any, against
Lessor. All insurance companies providing coverages must be
rated "A-" or better by Best's Key Rating Guide (the most current
edition), or similar quality under a successor guide if Best's
Key Rating shall cease to be published. Lessee shall provide
Lessor with legible copies of any and all policies on or before
the Occupancy Date. No less than fifteen (15) business days prior
to expiration of such policies, Lessee shall provide Lessor with
legible copies of any and all renewal Certificates of Insurance,
if the terms of the Policies have not changed, and copies of such
policies if the same have changed. Lessee agrees that it will
not settle any property insurance claims affecting the Leased
Premises in excess of $100,000 without Lessor's prior written
consent, such consent not to be unreasonably withheld or delayed.
Lessor shall consent, where Lessor's consent is required
hereunder, to any settlement of an insurance claim wherein Lessee
shall confirm in writing with evidence reasonably satisfactory to
Lessor that Lessee has sufficient funds available to complete the
rebuilding of the Premises.
(E) Lessee shall defend, indemnify, and hold Lessor harmless
against any and all claims, damages, and lawsuits arising after
the Occupancy Date of this Lease and any orders, decrees or
judgments which may be entered therein, brought for damages or
alleged damages resulting from any injury to person or property
or from loss of life sustained in or about the Leased Premises,
unless such damage or injury results from the intentional
misconduct or the gross negligence of Lessor and Lessee agrees to
save Lessor harmless from, and indemnify Lessor against, any and
all injury, loss, or damage, of whatever nature, to any person or
property caused by, or resulting from any act, omission, or
negligence of Lessee or any employee or agent of Lessee. In
addition, Lessee hereby releases Lessor from any and all
liability for any loss or damage caused by fire or any of the
extended coverage casualties, unless such fire or other casualty
shall be brought about by the intentional misconduct or gross
negligence of Lessor.
(F) Lessor hereby waives any and all rights that it may have
to recover from Lessee damages for any loss occurring to the
Leased Premises by reason of any act or omission of Lessee;
provided, however, that this waiver is limited to those losses
for which Lessor is compensated by insurers, if the insurance
required by this Lease is maintained. Lessee hereby waives any
and all right that it may have to recover from Lessor damages for
any loss occurring to the Leased Premises by reason of any act or
omission of Lessor; provided, however, that this waiver is
limited to those losses for which Lessee is, or should be if the
insurance required herein is maintained, compensated by insurers.
ARTICLE 6. TAXES, ASSESSMENTS AND UTILITIES
(A) Lessee shall be liable and agrees to pay the charges for
all public utility services rendered or furnished to the Leased
Premises, including heat, water, gas, electricity, sewer, sewage
treatment facilities and the like, all personal property taxes,
real estate taxes, special assessments, and municipal or
government charges, general, ordinary and extraordinary, of every
kind and nature whatsoever, which may be levied, imposed, or
assessed against the Leased Premises, or upon any improvements
thereon, at any time after the Occupancy Date of this Lease and
prior to the expiration of the term hereof, or any Renewal Term,
if exercised.
(B) Lessee shall pay all real estate taxes, assessments for
public improvements or benefits, and other governmental
impositions, duties, and charges of every kind and nature
whatsoever which shall or may, during the term of this Lease, be
charged, laid, levied, assessed, or imposed upon, or become a
lien or liens upon the Leased Premises or any part thereof or
upon the Rents payable hereunder (expressly excluding general
income taxes, inheritance taxes and estate taxes imposed upon
Lessor). Such payments shall be considered as Rent paid by Lessee
in addition to the Rent defined at Article 4 hereof. If due to a
change in the method of taxation, a franchise tax or Rent tax.
(expressly excluding general income taxes, inheritance taxes and
estate taxes imposed upon Lessor) shall be levied against Lessor
in substitution for or in lieu of any tax which would otherwise
constitute a real estate tax, such tax shall be deemed a real
estate tax for the purposes herein and shall be paid by Lessee
(C) All real estate taxes, assessments for public
improvements or benefits, water rates and charges, sewer rents,
and other governmental impositions, duties, and charges which
shall become payable for the first and last tax years of the term
hereof shall be apportioned pro rata between Lessor and Lessee in
accordance with the respective number of months during which each
party shall be in possession of the Leased Premises in said
respective tax years. For the purposes of this provision, all
personal property taxes, real estate taxes and special
assessments shall be deemed to have been assessed in the year
that each payment or any installment thereof is due.
(D) Lessee shall have the right to contest or review by legal
proceedings or in such other manner as may be legal (which, if
instituted, shall be conducted solely at Lessee's own expense)
any tax, assessment for public improvements or benefits, or other
governmental imposition aforementioned, upon condition that,
before instituting such proceeding Lessee shall either (i) pay
(under protest) such tax or assessments for public improvements
or benefits, or other governmental imposition, duties and charges
aforementioned, or (ii) post with Lessor alternative security
satisfactory to Lessor, not to exceed 150% of the amount
contested and the potential penalties and interest thereon. All
such proceedings shall be begun as soon as reasonably possible
after the imposition or assessment of any contested items and
shall be prosecuted to final adjudication with reasonable
dispatch. In the event of any reduction, cancellation, or
discharge, Lessee shall pay the amount that shall be finally
levied or assessed against the Leased Premises or adjudicated to
be due and payable, and, if there shall be any refund payable by
the governmental authority with respect thereto, if Lessee has
paid the expenses of Lessor, if any, in such proceeding, Lessee
shall be entitled to receive and retain the same, subject,
however, to apportionment as provided during the first and last
years of the term of this Lease.
(E) Lessor, within sixty (60) days after notice to Lessee if
Lessee fails to commence such proceedings, may, but shall not be
obligated to, contest or review by legal proceedings, or in such
other manner as may be legal, and at Lessor's own expense, any
tax, assessments for public improvements and benefits, or other
governmental imposition aforementioned, which shall not be
contested or reviewed, as aforesaid, by Lessee, and unless Lessee
shall promptly join with Lessor in such contest or review, Lessor
shall be entitled to receive and retain any refund payable by the
governmental authority with respect thereto.
(F) Lessor shall not be required to join in any proceeding
referred to in this Article, unless in Lessee's reasonable
opinion, the provisions of any law, rule, or regulation at the
time in effect shall require that such a proceeding be brought by
and/or in the name of Lessor, in which event Lessor shall upon
written request, join in such proceedings or permit the same to
be brought in its name, all at no cost or expense to Lessor.
ARTICLE 7. PROHIBITION ON ASSIGNMENTS AND SUBLETTING; TAKE-BACK
RIGHTS
(A) Except as otherwise expressly provided in this Article,
Lessee shall not, without obtaining the prior written consent of
Lessor, in each instance:
1. assign or otherwise transfer
this Lease, or any part of Lessee's right, title or
interest therein (except by devise or bequest upon
the death of a shareholder, but in such event, such
recipient shall be bound by the provisions of this
Article);
2. sublet all or any part of the
Leased Premises or allow all or any part of the
Leased Premises to be used or occupied by any other
Persons (herein defined as a Party other than
Lessee, be it a corporation, a partnership, an
individual or other entity); or
3. mortgage, pledge or otherwise
encumber this Lease, or the Leased Premises.
(B) For the purposes of this Article:
1. the transfer of voting control
of any class of capital stock of any corporate
Lessee or sublessee, or the transfer voting control
of the total interest in any other person which is a
Lessee or sublessee, however accomplished, whether
in a single transaction or in a series of related or
unrelated transactions, shall be deemed an
assignment of this Lease, or of such sublease, as
the case may be (provided, however, transfers by
bequest or devise due to the death of a shareholder
shall not trigger the application of these
provisions, provided Lessor is given notice of such
transfer immediately after the disposition of the
decedent's estate);
2. an agreement by any other
Person, directly or indirectly, to assume Lessee's
obligations under this Lease shall be deemed an
assignment;
3. any Person to whom Lessee's
interest under this Lease passes by operation of
law, or otherwise, shall be bound by the provisions
of this Article;
4. each modification, amendment or
extension or any sublease to which Lessor has
previously consented shall be deemed a new sublease;
and
5. Lessee shall present the signed
consent to such assignment and/or subletting from
any guarantors of this Lease, such consent to be in
form and substance satisfactory to Lessor.
Lessee agrees to furnish to Lessor upon demand at any time
such information and assurances as Lessor may reasonably request
that neither Lessee, nor any previously permitted sublessee, has
violated the provisions of this Article.
(C) If Lessee agrees to assign this Lease or to sublet all or
any portion of the Leased Premises, Lessee shall, prior to the
effective date thereof (the "Effective Date"), deliver to Lessor
copies of any such proposed agreement and of all ancillary
agreements with the proposed assignee or sublessee, as
applicable. If Lessor in its sole discretion (except as
otherwise specifically limited herein in paragraph (E) below)
shall not have consented to a proposed sublease or assignment,
and Lessee shall attempt to effect such transfer without Lessor's
consent or in spite of Lessor's decision to not consent to such
transfer, Lessor shall then have all of the following rights, any
of which Lessor may exercise by written notice to Lessee given
within thirty (30) days after Lessor receives the aforementioned
documents:
1. with respect to a proposed
assignment of this Lease, the right to terminate
this Lease on the Effective Date as if it were the
Expiration Date of this Lease;
2. with respect to a proposed
subletting of the entire Leased Premises, the right
to terminate this Lease on the Effective Date as if
it were the Expiration Date; or
3. with respect to a proposed
subletting of less than the entire Leased Premises,
the right to terminate this Lease as to the portion
of the Leased Premises affected by such subletting
on the Effective Date, as if it were the Expiration
Date, in which case Lessee shall promptly execute
and deliver to Lessor an appropriate modification of
this Lease in form satisfactory to Lessor in all
respects.
4. with respect to a proposed
subletting or proposed assignment of this Lease,
impose such conditions upon Lessor's consent as
Lessor shall determine in its sole discretion.
If Lessor exercises any of its options under Article
7(C) above, (and if Lessor shall impose conditions upon
its consent and Lessee shall fail to meet any conditions
Lessor may impose upon its consent), Lessor may then
lease the Leased Premises or any portion thereof to
Lessee's proposed assignee or sublessee, as the case may
be, without liability whatsoever to Lessee.
Notwithstanding the provisions of this Article 7
above, or any other provisions of this Lease to the
contrary, Lessee shall have the right to assign this
Lease, or sublet the Leased Premises or any portion
thereof, without the consent of, but with prior written
notice to Lessor, to any corporation (a) with which
Lessee may merge or consolidate (provided Lessee is the
surviving entity and such transaction does not involve
directly or indirectly, along with all other transfers,
issuance's, or sales, a transfer, issuance or sale of a
majority of the voting stock of Lessee), or (b) which is
on the date hereof a parent or which is a subsidiary of
Lessee; provided, that said assignee assumes, in full,
the obligations of Lessee under this Lease and Lessee
and Guarantors remains primarily liable under this
Lease; and further, if the County or the City where the
Leased Premises are situate become a `dry' county or
city, Lessee may, without the consent of, but with
notice to Lessor, sublet the portion of the Leased
Premises relating to the bar area and the sale of
alcohol to any Texas non-profit corporation or
association of persons wishing to organize a private
club under appropriate Texas statutes and such
corporation or association may jointly occupy the Leased
Premises under a sublease from Lessee and Lessee may
enter into a management agreement with such corporation
or association without further approval from Lessor. In
addition, notwithstanding the provisions of this Article
7 above or any other provisions of this Lease to the
contrary, the following transfers or issuances of shares
of capital stock of Lessee shall not constitute an
assignment of this Lease or require the consent of
Lessor under this Article 7: (i) the issuance and sale
of shares of capital stock of Lessee in connection with
a public offering of such stock (provided such issuance
and sale does not involve the issuance, sale, or
transfer of a majority of the voting stock of Lessee);
(ii) the transfer of outstanding shares to a parent
which is a parent on the date hereof or a subsidiary of
Lessee, provided such entity is or becomes a guarantor
of this Lease; (iii) the acquisition by Creed L. Ford
III or Norman J. Abdallah of additional shares of
capital stock from each other, from other shareholders,
or as a result of new issuances of capital stock of
Lessee; or (iv) the transfer of shares of capital stock
by Creed L. Ford or Norman J. Abdallah to family trusts,
family partnerships, or similar vehicles set up for
either of their benefit or for the benefit of any family
member, or the transfer by them of shares of capital
stock to any corporation, partnership, limited liability
company, or other entity in which they individually, or
in the aggregate, own at least a majority of the
ownership interests, and provided such entities become
guarantors of this Lease under terms identical to those
terms under which Creed L. Ford III or Norman J.
Abdallah are guarantors, if applicable under then
existing guarantees.
ARTICLE 8. REPAIRS AND MAINTENANCE
(A) Lessee covenants and agrees to keep and maintain in good
order, condition and repair the interior and exterior of the
Leased Premises during the term of the Lease, or any renewal
terms, and further agrees that Lessor shall be under no
obligation to make any repairs or perform any maintenance to the
Leased Premises. Lessee covenants and agrees that it shall be
responsible for all repairs, alterations, replacements, or
maintenance of, including but without limitation to or of: The
interior and exterior portions of all doors; door checks and
operators; windows; plate glass; plumbing; water and sewage
facilities; fixtures; electrical equipment; interior walls;
ceilings; signs; roof; structure; interior building appliances
and similar equipment; heating and air conditioning equipment;
and any equipment owned by Lessor and leased to Lessee hereunder,
as itemized on Exhibit B attached hereto and incorporated herein
by reference; and further agrees to replace any of said equipment
when necessary. Lessee further agrees to be responsible for, at
its own expense, snow removal, lawn maintenance, landscaping,
maintenance of the parking lot (including parking lines, seal
coating, and blacktop surfacing), and other similar items.
(B) If Lessee refuses or neglects to commence or complete
repairs promptly and adequately, Lessor may cause such repairs to
be made, but shall not be required to do so, and Lessee shall pay
the cost thereof to Lessor upon demand. It is understood that
Lessee shall pay all expenses and maintenance and repair during
the term of this Lease. If Lessee is not then in default
hereunder, Lessee shall have the right to make repairs and
improvements to the Leased Premises without the consent of Lessor
if such repairs and improvements do not exceed One Hundred
Thousand Dollars ($100,000.00), provided such repairs or
improvements do not affect the structural integrity of the Leased
Premises. Any repairs or improvements in excess of One Hundred
Thousand Dollars ($100,000.00) or affecting the structural
integrity of the Leased Premises may be done only with the prior
written consent of Lessor, such consent not to be unreasonably
withheld or delayed. All alterations and additions to the Leased
Premises shall be made in accordance with all applicable laws and
shall remain for the benefit of Lessor. In the event of making
such alterations as herein provided, Lessee further agrees to
indemnify and save harmless Lessor from all expense, liens,
claims or damages to either persons or property or the Leased
Premises which may arise out of or result from the undertaking or
making of said repairs, improvements, alterations or additions,
or Lessee's failure to make said repairs, improvements,
alterations or additions.
ARTICLE 9. COMPLIANCE WITH LAWS AND REGULATIONS
Lessee will comply with all statutes, ordinances, rules,
orders, regulations and requirements of all federal, state, city
and local governments, and with all rules, orders and
regulations of the applicable Board of Fire Underwriters which
affect the use of the improvements. Lessee will comply with all
easements, restrictions, and covenants of record against or
affecting the Leased Premises and any franchise agreements
required for operation of the Leased Premises in accordance with
Article 14 hereof.
ARTICLE l0. SIGNS
Lessee shall have the right to install and maintain a sign or
signs advertising Lessee's business, provided that the signs
conform to law, and further provided that the sign or signs
conform specifically to the written requirements of the
appropriate governmental authorities.
ARTICLE 11. SUBORDINATION
(A) Lessor reserves the right and privilege to subject and
subordinate this Lease at all times to the lien of any mortgage
or mortgages now or hereafter placed upon Lessor's interest in
the Leased Premises and on the land and buildings of which said
premises are a part, or upon any buildings hereafter placed upon
the land of which the Leased Premises are a part, provided such
mortgagee shall execute its standard form, commercially
reasonable subordination, attornment and non-disturbance
agreement, such form to be consistent with other such forms used
by commercial mortgagees in the industry. Lessor also reserves
the right and privilege to subject and subordinate this Lease at
all times to any and all advances to be made under such
mortgages, and all renewals, modifications, extensions,
consolidations, and replacements thereof, provided such mortgagee
shall execute its standard form, commercially reasonable
subordination, attornment and non-disturbance agreement, such
form to be consistent with other such forms used by commercial
mortgagees in the industry.
(B) Lessee covenants and agrees to execute and deliver, upon
demand, such further commercially reasonable instrument or
instruments subordinating this Lease on the foregoing basis to
the lien of any such mortgage or mortgages as shall be desired by
Lessor and any proposed mortgagee or proposed mortgagees,
provided such mortgagee shall execute its standard form,
commercially reasonable subordination, attornment and non-
disturbance agreement, such form to be consistent with other such
forms used by commercial mortgagees in the industry .
ARTICLE l2. CONDEMNATION OR EMINENT DOMAIN
(A) If the whole of the Leased Premises are taken by any
public authority under the power of eminent domain, or by private
purchase in lieu thereof, then this Lease shall automatically
terminate upon the date possession is surrendered, and Rent shall
be paid up to that day. If any part of the Leased Premises shall
be so taken as to render the remainder thereof materially
unusable in the opinion of a licensed third party contractor or
architect selected by Lessee and approved by Lessor, for the
purposes for which the Leased Premises were leased, then Lessee
shall have the right to terminate this Lease on thirty (30) days
notice to the Lessor given within ninety (90) days after the date
of such taking. In the event that this Lease shall terminate or
be terminated, the Rent shall be paid up to the day that
possession was surrendered.
(B) If any part of the Leased Premises shall be so taken such
that it does not render the remainder thereof materially unusable
for the purposes for which the Leased Premises were leased, in
the opinion of a licensed third party contractor or architect
selected by Lessee and approved by Lessor, then Lessee shall,
with the use of all of the condemnation proceeds (to be made
available by Lessor, immediately if such proceeds are less than
$100,000, or if in excess of $100,000, under a commercially
reasonable construction draw procedure in payment of invoices for
work performed submitted by Lessee or its contractors) but
otherwise at Lessee's own cost and expense, restore the remaining
portion of the Leased Premises to the extent necessary to render
it reasonably suitable for the purposes for which it was leased.
Provided, however, Lessee may elect to replace the Leased
Premises with a different restaurant concept, subject to Lessor's
prior written approval, which approval shall not be unreasonably
withheld or delayed, and further that Lessee shall not be
required (unless Lessee so elects) to repair or restore the
Leased Premises if the Term or any Renewal Term shall expire
within two years of such partial taking. Lessee shall notify
Lessor of Lessee's election to not so restore or repair the
Leased Premises after such a partial taking within 60 days of
notice of such taking. If Lessee elects to not make such repair
or restoration, this Lease shall terminate upon Lessor's receipt
of Lessee's notice of termination. Otherwise, if Lessee so
elects or is required to repair or restore the Leased Premises,
Lessee shall make all repairs to the building in which the Leased
Premises is located to the extent necessary to constitute the
building a complete architectural unit. Provided, however, that
such work shall not exceed the scope of the work required to be
done by Lessee in originally constructing such building unless
Lessee shall demonstrate to Lessor's reasonable satisfaction the
availability of funds to complete such work. Provided, further,
the cost thereof to Lessor shall not exceed the proceeds of its
condemnation award, all to be done without any adjustments in
Rent to be paid by Lessee, except as follows: any condemnation
proceeds remaining after the completion of the repair or
restoration of the Leased Premises shall be paid to Lessor. This
lease shall be deemed amended to reflect the taking in the legal
description of the Leased Premises.
(C) All compensation awarded or paid upon such total or
partial taking of the Leased Premises shall belong to and be the
property of Lessor without any participation by Lessee, whether
such damages shall be awarded as compensation for diminution in
value to the leasehold or to the fee of the premises herein
leased. Nothing contained herein shall be construed to preclude
Lessee from prosecuting any claim directly against the condemning
authority in such proceedings for: Loss of business;
interruption of business; moving expenses; damage to or loss of
value or cost of removal of inventory, trade fixtures, furniture,
and other personal property belonging to Lessee; provided,
however, that no such claim shall diminish or otherwise adversely
affect Lessor's award or the award of any fee mortgagee.
ARTICLE l3. RIGHT TO INSPECT
Lessor reserves the right to enter upon, inspect and examine
the Leased Premises at any time during business hours, after
reasonable notice to Lessee, and Lessee agrees to allow Lessor
free access to the Leased Premises to show the premises. Upon
default by Lessee or at any time within one hundred eighty (180)
days of the expiration or termination of the Lease, Lessee agrees
to allow Lessor to then place "For Sale" or "For Rent" signs on
the Leased Premises.
ARTICLE l4. EXCLUSIVE USE
(A) After the Occupancy Date, Lessee expressly agrees and
warrants that the Leased Premises will be used exclusively as a
Johnny Carino's Country Italian Restaurant (or any derivative of
such name as Lessee may use) or, after obtaining Lessor's prior
written consent, such consent not to be unreasonably withheld or
delayed, other casual dining sit-down restaurant. Lessee
acknowledges and agrees that any other use without the prior
written consent of Lessor will constitute a default under and a
violation and breach of this Lease. Lessee agrees: To open for
business on the first day in respect of which Rent is payable; to
operate all of the Leased Premises during the Term or Renewal
Terms during regular and customary hours for businesses similar
to the permitted exclusive use stated herein, unless prevented
from doing so by causes beyond Lessee's control; and to conduct
its business in a prudent and reputable manner.
ARTICLE l5. DESTRUCTION OF PREMISES
If, during the term of this Lease, the Leased Premises are
totally or partially destroyed by fire or other elements, within
a reasonable time (but in no event longer than one hundred eighty
(180) days and subject to the provisions herein below), Lessee
shall repair and restore the improvements so damaged or destroyed
as nearly as may be practical to their condition immediately
prior to such casualty. All rents payable by Lessee shall be
abated during the period of repair and restoration to the extent
that Lessor shall be compensated by the proceeds of the rent loss
insurance required to be maintained by Lessee hereunder.
Provided Lessee is not in default hereunder (and retains
according to the terms hereof the right to rebuild), then with
the Lessor's prior written consent (if the repairs will exceed
the amounts set forth in Article 8(B)), which consent shall not
be unreasonably withheld or delayed, Lessee shall have the right
to promptly and in good faith settle and adjust any claim under
such insurance policies with the insurance company or companies
on the amounts to be paid upon the loss. The insurance proceeds
shall be used to reimburse Lessee for the cost of rebuilding or
restoration of the Leased Premises. The Leased Premises shall be
so restored or rebuilt so as to be of at least equal value and
substantially the same character as prior to such damage or
destruction. Provided, however, Lessee may elect to replace the
Leased Premises with a different restaurant concept subject to
Lessor's prior written approval, which approval shall not be
unreasonably withheld or delayed. If the insurance proceeds are
less than One Hundred Thousand Dollars ($1000,000), they shall be
paid to Lessee for such repair and restoration. If the insurance
proceeds are greater than or equal to One Hundred Thousand
Dollars ($100,000), they shall be deposited by Lessee and Lessor
into a customary construction escrow at a nationally recognized
title insurance company, or at Lessee's option, with Lessor
("Escrowee") and shall be made available from time to time to
Lessee for such repair and restoration. Such proceeds shall be
disbursed in conformity with the terms and conditions of a
commercially reasonable construction loan agreement. Lessee
shall, in either instance, deliver to Lessor or Escrowee (as the
case may be) satisfactory evidence of the estimated cost of
completion together with such architect's certificates, waivers
of lien, contractor's sworn statements and other evidence of cost
and of payments as the Lessor or Escrowee may reasonably require
and approve. If the estimated cost of the work exceeds Twenty-
Five Percent (25%) of the original cost to Lessor to acquire its
interest in the Lease Premises from Lessee, all plans and
specifications for such rebuilding or restoration shall be
subject to the reasonable approval of Lessor.
Any insurance proceeds remaining with Escrowee after the
completion of the repair or restoration shall be paid to Lessor.
If the proceeds from the insurance are insufficient, after
review of the bids for completion of such improvements, or should
become insufficient during the course of construction, to pay for
the total cost of repair or restoration, Lessee shall, prior to
commencement of work, demonstrate to Escrowee and Lessor's
reasonable satisfaction, the availability of such funds necessary
to complete construction and Lessee shall deposit the same with
Escrowee for disbursement under the construction escrow
agreement. Provided, further, that should the Leased Premises be
damaged or destroyed to the extent of fifty (50%) percent of its
value or such that Lessee cannot carry on business as a casual
dining restaurant without (in Lessor's reasonable opinion) being
closed for more than sixty (60) days (which duration of closure
may be established by Lessee by the affidavit of an independent
third party contractor as to the estimated time of repair) during
the last two years of the remaining term of this Lease or any of
the option terms of this Lease, if any further options to renew
remain, Lessee may elect within 30 days of such damage, to then
exercise at least one (1) option to renew this Lease so that the
remaining term of the Lease is not less than five (5) years in
order to be entitled to such insurance proceeds for restoration
or rebuilding. Absent such election, this Lease shall terminate
upon Lessor's receipt of the insurance proceeds in the amount
estimated to restore or rebuild the Leased Premises.
ARTICLE l6. ACTS OF DEFAULT
(A) Each of the following shall be deemed a default by Lessee
and a breach of this Lease:
1. Failure to pay the Rent or any
monetary obligation herein reserved, or any part
thereof when the same shall be due and payable.
Interest and late charges for failure to pay Rent
when due shall accrue if Lessee shall fail to make
payment within five days after notice to Lessee that
Rent has not been paid. Lessee shall be granted
five days after written notice to cure such failure
to pay the Rent or any other monetary obligation
herein reserved.
2. Failure to do, observe, keep
and perform any of the other terms, covenants,
conditions, agreements and provisions in this Lease
to be done, observed, kept and performed by Lessee;
provided, however, that Lessee shall have Thirty
(30) days after written notice from Lessor within
which to cure such default, or such longer time as
may be reasonably necessary if such default cannot
reasonably be cured within Thirty (30) days, if
Lessee is diligently pursuing a course of conduct
that in Lessor's reasonable opinion is capable of
curing such default, but in any event such longer
time shall not exceed 90 days after written notice
from Lessor of the default hereunder.
3. The abandonment of the premises
by Lessee, the adjudication of Lessee as a bankrupt,
the making by Lessee of a general assignment for the
benefit of creditors, the taking by Lessee of the
benefit of any insolvency act or law, the
appointment of a permanent receiver or trustee in
bankruptcy for Lessee property, or the appointment
of a temporary receiver which is not vacated or set
aside within sixty (60) days from the date of such
appointment.
ARTICLE l7. TERMINATION FOR DEFAULT
In the event of any uncured default by Lessee and at any time
thereafter, Lessor may serve a written notice upon Lessee that
Lessor elects to terminate this Lease. This Lease shall then
terminate on the date so specified as if that date had been
originally fixed as the expiration date of the term herein
granted, provided, however, that Lessee shall have continuing
liability for future rents for the remainder of the original term
and any exercised renewal term as set forth in Article 19,
notwithstanding any earlier termination of the Lease hereunder,
preserving unto Lessor the benefit of its bargained-for rental
payments.
ARTICLE l8. LESSOR'S RIGHT OF RE-ENTRY
In the event that this Lease shall be terminated as
hereinbefore provided, or by summary proceedings or otherwise, or
in the event of an uncured default hereunder by Lessee, or in the
event that the premises or any part thereof, shall be abandoned
by Lessee, then Lessor or its agents, servants or
representatives, may immediately or at any time thereafter, re-
enter and resume possession of the premises or any part thereof,
and remove all persons and property therefrom, either by summary
dispossess proceedings or by a suitable action or proceeding at
law, or by force or otherwise without being liable for any
damages therefor.
ARTICLE l9. LESSEE'S CONTINUING LIABILITY
(A) Should Lessor elect to re-enter as provided in this Lease
or should it take possession pursuant to legal proceedings or
pursuant to any notice provided for by law, it may either (i)
terminate this Lease or (ii) it may from time to time, without
terminating the contractual obligation of Lessee to pay Rent
under this Lease, make such alterations and repairs as may be
necessary to relet the Leased Premises or any part thereof for
such Term or Renewal Terms, at such Rent or Rents, and upon such
other terms and conditions as Lessor in its sole discretion may
deem advisable. Termination of Lessee's right to possession by
Court Order shall be sufficient evidence of the termination of
Lessee's possessory rights under this Lease, and the filing of
such an Order shall be notice of the termination of Lessee's
Option to Purchase as set forth in any Memorandum of Lease of
record.
(B) Upon each such reletting, without termination of the
contractual obligation of Lessee to pay Rent under this Lease,
all rents received by Lessor from such reletting shall be applied
as follows:
1. First, to the payment of any
indebtedness other than Rent due hereunder from
Lessee to Lessor;
2. Second, to the payment of any
costs and expenses of such reletting, including
brokerage fees and attorney's fees and of costs of
such alterations and repairs;
3. Third, to the payment of Rent
and other monetary obligations due and unpaid
hereunder;
4. Finally, the residue, if any,
shall be held by Lessor and applied in payment of
future Rent as the same may become due and payable
hereunder.
If such rents received from such reletting during any month are
less than that to be paid during that month by Lessee hereunder,
Lessee shall pay any such deficiency to Lessor. Such deficiency
shall be calculated and paid monthly. No such re-entry or taking
possession of such Leased Premises by Lessor shall be construed
as an election on its part to terminate Lessee's contractual
obligations under this Lease respecting the payment of rent and
obligations for the costs of repair and maintenance unless a
written notice of such intention be given to Lessee.
(C) Notwithstanding any such reletting without termination,
Lessor may at any time thereafter elect to terminate this Lease
for any breach.
(D) In addition to any other remedies Lessor may have with
this Article 19, Lessor may recover from Lessee all damages it
may incur by reason of any breach, including: The cost of
recovering and reletting the Leased Premises; reasonable
attorney's fees; and, the present value (discounted at a rate of
10% per annum) of the excess of the amount of Rent and charges
equivalent to Rent reserved in this Lease for the remainder of
the Term over the then reasonable rent value of the Leased
Premises (or the actual rents receivable by Lessor, if relet) for
the remainder of the Term, all of which amounts shall be
immediately due and payable from Lessee to Lessor in full. In
the event that the rent obtained from such alternative or
substitute tenant is more than the Rent which Lessee is obligated
to pay under this Lease, then such excess shall be paid to Lessor
provided that Lessor shall credit such excess against the
outstanding obligations of Lessee due pursuant hereto, if any.
(E) It is the object and purpose of this Article 19 that
Lessor shall be kept whole and shall suffer no damage by way of
non-payment of Rent or by way of diminution in Rent. Lessee
waives and will waive all rights to trial by jury in any summary
proceedings or in any action brought to recover Rent herein which
may hereafter be instituted by Lessor against Lessee in respect
to the Leased Premises. Lessee hereby waives any rights of re-
entry it may have or any rights of redemption or rights to redeem
this Lease upon a termination of this Lease.
ARTICLE 20. PERSONALTY, FIXTURES AND EQUIPMENT
(A) All building fixtures, building machinery, and building
equipment used in connection with the operation of the Leased
Premises including, but not limited to, heating, electrical
wiring, lighting, ventilating, plumbing, air conditioning
systems, and the equipment owned by Lessor and leased to Lessee
hereunder as specifically set forth on Exhibit B attached hereto
and incorporated herein by reference shall be the property of
Lessor. All trade fixtures and all other fixtures and articles
of personal property owned by Lessee shall remain the property of
Lessee.
(B) Lessee shall furnish and pay for any and all equipment,
furniture, trade fixtures, and signs, except for such items, if
any, described in Article 20(A) above, as owned by Lessor.
(C) At the end of the term of this Lease, the property
described at Article 20(B) above, after written notice to Lessor
given at least ten (10) days prior thereto, may be removed from
the Leased Premises by Lessee regardless of whether or not such
property is attached to the Leased Premises so as to constitute a
"fixture" within the meaning of the law; however, all damages and
repairs to the Leased Premises which may be caused by the removal
of such property shall be paid for by Lessee.
ARTICLE 2l. LIENS
Lessee shall not do or cause anything to be done whereby the
Leased Premises may be encumbered by any mechanic's or other
liens. Whenever and as often as any mechanic's or other lien is
filed against said Leased Premises purporting to be for labor or
materials furnished or to be furnished to Lessee, Lessee shall
remove the lien of record by payment or by bonding with a surety
company authorized to do business in the state in which the
property is located, within twenty (20) days from the date of the
filing of said mechanic's or other lien and delivery of notice
thereof to Lessee of Lessee's obligation under this Lease.
Should Lessee fail to take the foregoing steps within said twenty
(20) day period, Lessor shall have the right, among other things,
to pay said lien without inquiring into the validity thereof, and
Lessee shall forthwith reimburse Lessor for the total expense
incurred by it in discharging said lien as additional Rent
hereunder.
ARTICLE 22. NO WAIVER BY LESSOR EXCEPT IN WRITING
No agreement to accept a surrender of the Leased Premises or
termination of this Lease shall be valid unless in writing signed
by Lessor. The delivery of keys to any employee of Lessor or
Lessor's agents shall not operate as a termination of the Lease
or a surrender of the premises. The failure of Lessor to seek
redress for violation of any rule or regulation, shall not
prevent a subsequent act, which would have originally constituted
a violation, from having all the force and effect of an original
violation. Neither payment by Lessee or receipt by Lessor of a
lesser amount than the Rent herein stipulated shall be deemed to
be other than on account of the earliest stipulated Rent. Nor
shall any endorsement or statement on any check nor any letter
accompanying any check or payment as Rent be deemed an accord and
satisfaction. Lessor may accept such check or payment without
prejudice to Lessor's right to recover the balance of such Rent
or pursue any other remedy provided in this Lease. This Lease
contains the entire agreement between the parties, and any
executory agreement hereafter made shall be ineffective to change
it, modify it or discharge it, in whole or in part, unless such
executory agreement is in writing and signed by the party against
whom enforcement of the change, modification or discharge is
sought.
ARTICLE 23. QUIET ENJOYMENT
Lessor covenants that Lessee, upon paying the Rent set forth
in Article 4 and all other sums herein reserved as Rent and upon
the due performance of all the terms, covenants, conditions and
agreements herein contained on Lessee's part to be kept and
performed, shall have, hold and enjoy the Leased Premises free
from molestation, eviction, or disturbance by Lessor, or by any
other person or persons lawfully claiming the same, and that
Lessor has good right to make this Lease for the full term
granted, including renewal periods.
ARTICLE 24. BREACH - PAYMENT OF COSTS AND ATTORNEYS' FEES
Each party agrees to pay and discharge all reasonable costs,
and actual attorneys' fees, including but not limited to
attorney's fees incurred at the trial level and in any appellate
or bankruptcy proceeding, and expenses that shall be incurred by
the prevailing party in enforcing the covenants, conditions and
terms of this Lease or defending against an alleged breach,
including the costs of reletting. Such costs, attorneys fees,
and expenses if incurred by Lessor shall be considered as Rent as
due and owing in addition to any Rent defined in Article 4
hereof.
ARTICLE 25. ESTOPPEL CERTIFICATES
Either party to this Lease will, at any time, upon not less
than ten (10) days prior request by the other party, execute,
acknowledge and deliver to the requesting party a statement in
writing, executed by an executive officer of such party,
certifying that: (a) this Lease is unmodified (or if modified
then disclosure of such modification shall be made); (b) this
Lease is in full force and effect; (c) the date to which the Rent
and other charges have been paid; and (d) to the knowledge of the
signer of such certificate that the other party is not in default
in the performance of any covenant, agreement or condition
contained in this Lease, or if a default does exist, specifying
each such default of which the signer may have knowledge. It is
intended that any such statement delivered pursuant to this
Article may be relied upon by any prospective purchaser or
mortgagee of the Leased Premises or any assignee of such
mortgagee or a purchaser of the leasehold estate.
ARTICLE 26. FINANCIAL STATEMENTS
During the term of this Lease, Lessee will, within one
hundred twenty (120) days after the end of Lessee's fiscal
year, furnish Lessor with Lessee's financial statements (in
SEC Form 10-K, if available). The financial statements
shall be prepared in conformity with generally accepted
accounting principles (GAAP) and shall be certified as true
and correct by the chief financial officer or other
authorized officer of Lessee. Lessee shall also provide
Lessor with financial statements for the Leased Premises
within 120 days after the end of each Lease Year. The
financial statements for the Leased Premises do not need to
be prepared by an independent certified public accountant,
but shall be certified as true and correct by the chief
financial officer or other authorized officer of Lessee.
Additionally, during the term of the Lease, Lessee will
within forty-five (45) days from the end of each quarter of
each fiscal year, furnish Lessor with Lessee's financial
statements (in SEC Form 10-Q if available)and financial
statements of the Leased Premises for such quarter. Lessor
shall have the right to require such financial statements
for the Lessee and the Leased Premises on a monthly basis
after the occurrence of a default in any Lease Year.
Provided, however, if Lessee shall not commit a default for
twelve consecutive months, Lessor's right to require such
monthly financial statements shall terminate until Lessee
shall again commit a default in any given Lease Year. Said
quarterly (or monthly, if required by Lessor) financial
statements do not need to be prepared by an independent
certified public accountant, but shall be certified as true
and correct by the chief financial officer or other
authorized officer of Lessee. The financial statements
shall conform to GAAP, and include a balance sheet and
related statements of operations, statement of cash flows,
statement of changes in shareholder's equity, and related
notes to financial statements, if any.
ARTICLE 27. MORTGAGE
Lessee does hereby agree to make reasonable modifications
of this Lease requested by any Mortgagee of record from time
to time provided such modifications are not substantial and
do not increase any of the Rents or materially modify any of
the elements of this Lease.
ARTICLE 28. OPTION TO RENEW
If this Lease is not previously canceled or terminated and
if Lessee is not then in default, then Lessee shall have the
option to renew this Lease upon the same conditions and
covenants contained in this Lease for Three (3) consecutive
periods of Five (5) years each (singularly "Renewal Term").
Rent during each of the three year period of any Renewal
Term shall increase by 5% of the Rent payable for the
preceding three year period.
The first Renewal Term will commence on the day following
the date the original Term expires and successive Renewal
Terms will commence on the day of following the last day of
the then expiring Renewal Term. Lessee must give one
hundred twenty (120) days written notice to Lessor of its
intent to exercise this option prior to the expiration of
the original Term of this Lease or any Renewal Term, as the
case may be.
ARTICLE 29. MISCELLANEOUS PROVISIONS
(A) All notices, consents, approvals, or other
instruments required or permitted to be given by either
party pursuant to this Lease shall be in writing and given
by (i) hand delivery, (ii) 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)
confirmed 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 State
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 on the first page hereof.
(B) The terms, conditions and covenants contained in
this Lease and any riders and plans attached hereto shall
bind and inure to the benefit of Lessor and Lessee and
their respective successors, heirs, legal representatives,
and assigns.
(B) This Lease shall be governed by and construed
under the laws of the State where the Leased Premises
are situate.
(D) In the event that any provision of this Lease
shall be held invalid or unenforceable, no other provisions
of this Lease shall be affected by such holding, and all of
the remaining provisions of this Lease shall continue in
full force and effect pursuant to the terms hereof.
(E) The Article captions are inserted only for
convenience and reference, and are not intended, in any
way, to define, limit, describe the scope, intent, and
language of this Lease or its provisions.
(F) In the event Lessee remains in possession of the
premises herein leased after the expiration of this Lease
and without the execution of a new lease, it shall be
deemed to be occupying said premises as a tenant from
month-to-month, subject to all the conditions, provisions,
and obligations of this Lease insofar as the same can be
applicable to a month-to-month tenancy except that the
monthly installment of Rent shall be increased 150% of the
amount due on the last month prior to such expiration.
(G) If any installment of Rent (whether lump sum,
monthly installments, or any other monetary amounts
required by this Lease to be paid by Lessee and deemed to
constitute Rent hereunder) shall not be paid when due and
shall remain unpaid for five days after written notice to
Lessee, or financial statements required to be delivered
hereunder by Lessee remain undelivered when due for five
days after written notice to Lessee, Lessor shall have the
right to charge Lessee a late charge of $250.00 per month
for each month (or portion thereof) that any amount of Rent
installment remains unpaid or such financial statements
remain undelivered.
(H) Any part of the Leased Premises (excluding the
Building) may be conveyed by Lessor for private or public
non-exclusive easement purposes at any time, provided such
easement does not interfere with the business of Lessee and
provided Lessor has delivered to Lessee written
notification, together with a description of the location
and reason for such easement, at least 30 days prior to
such conveyance. In such event Lessor shall, at its own
cost and expense, restore the remaining portion of the
Leased Premises to the extent necessary to render it
reasonably suitable for the purposes for which it was
leased, all to be done without adjustments in Rent to be
paid by Lessee. All proceeds from any conveyance of an
easement shall belong solely to Lessor.
(I) For the purpose of this Lease, the term "Rent"
shall be defined as Rent under Article 4, and any other
monetary amounts required by this Lease to be paid by
Lessee.
(J) Lessee agrees to cooperate with Lessor to allow
Lessor to obtain and use at Lessor's expense promotional
photographs of the Leased Premises.
ARTICLE 30. REMEDIES
NON-EXCLUSIVITY. Notwithstanding anything contained herein
it is the intent of the parties that the rights and
remedies contained herein shall not be exclusive but rather
shall be cumulative along with all of the rights and
remedies of the parties which they may have at law or
equity.
ARTICLE 31. HAZARDOUS MATERIALS INDEMNITY
Lessee covenants, represents and warrants to Lessor,
its successors and assigns, (i) that (except for items
normally used by Lessee in the course of restaurant
operations and in such case, such items are used and stored
in accordance with applicable law or regulation) it has not
used or permitted and will not use or permit the Leased
Premises to be used, whether directly or through
contractors, agents or tenants, and to the best of Lessee's
knowledge and except as disclosed to Lessor in writing, the
Leased Premises has not at any time been used for the
generating, transporting, treating, storage, manufacture,
emission of, or disposal of any dangerous, toxic or
hazardous pollutants, chemicals, wastes or substances as
defined in the Federal Comprehensive Environmental Response
Compensation and Liability Act of 1980 ("CERCLA"), the
Federal Resource Conservation and Recovery Act of 1976
("RCRA"), or any other federal, state or local environmental
laws, statutes, regulations, requirements and ordinances
("Hazardous Materials"); (ii) that to the best of Lessee's
knowledge, there have been no investigations or reports
involving Lessee, or the Leased Premises by any governmental
authority which in any way pertain to Hazardous Materials
(iii) that to the best of Lessee's knowledge the operation
of the Leased Premises has not violated and is not currently
violating any federal, state or local law, regulation,
ordinance or requirement governing Hazardous Materials; (iv)
that to the best of Lessee's knowledge the Leased Premises
is not listed in the United States Environmental Protection
Agency's National Priorities List of Hazardous Waste Sites
nor any other list, schedule, log, inventory or record of
Hazardous Materials or hazardous waste sites, whether
maintained by the United States Government or any state or
local agency; and (v) that the Leased Premises will not
contain any formaldehyde, urea or asbestos, except as may
have been disclosed in writing to Lessor by Lessee at the
time of execution and delivery of this Lease. Lessee agrees
to indemnify and reimburse Lessor, its successors and
assigns, for:
(a) any breach of these representations and
warranties, and
(b) any loss, damage, expense or cost arising out of
or incurred by Lessor which is the result of a breach
of, misstatement of or misrepresentation of the above
covenants, representations and warranties, and
(c) any and all liability of any kind whatsoever which
Lessor may, for any cause and at any time, sustain or
incur by reason of Hazardous Materials discovered on
the Leased Premises during the term hereof or placed
or released on the Leased Premises by Lessee;
together with all attorneys' fees, costs and disbursements
incurred in connection with the defense of any action
against Lessor arising out of the above. These covenants,
representations and warranties shall be deemed continuing
covenants, representations and warranties for the benefit of
Lessor, and any successors and assigns of Lessor and shall
survive expiration or sooner termination of this Lease. The
amount of all such indemnified loss, damage, expense or
cost, shall bear interest thereon at twelve percent (12%)
per annum and shall become immediately due and payable in
full on demand of Lessor, its successors and assigns.
Lessee shall not be responsible for any liabilities under
this Article if the liability results from activities of
Lessor or any agent, employee, or contractor of Lessor.
ARTICLE 32. ESCROWS
Upon the occurrence of a third default in any twelve
month period by Lessee, or upon the request of Lessor's
Mortgagee, if any, Lessee shall deposit with Lessor on the
first day of each and every month, an amount equal to
one-twelfth (1/12th) of the estimated annual real estate
taxes, assessments and insurance ("Charges") due on the
Leased Premises, or such higher amounts reasonably
determined by Lessor as necessary to accumulate such amounts
to enable Lessor to pay all charges due and owing at least
thirty (30) days prior to the date such amounts are due and
payable. If Lessee is depositing into such escrow as a
result of its third default in any given twelve month
period, and Lessee shall not commit a default for a period
of 24 months from the commencement of such escrowing, such
escrow shall be discontinued unless renewed according to the
terms hereof for the occurrence of a third default in any
twelve month period, or upon the request of Lessor's
mortgagee.
From time to time out of such deposits Lessor will, upon the
presentation to Lessor by Lessee of the bills therefor, pay
the Charges or will upon presentation of receipted bills
therefor, reimburse Lessee for such payments made by Lessee.
In the event the deposits on hand shall not be sufficient to
pay all of the estimated Charges when the same shall become
due from time to time or the prior payments shall be less
than the currently estimated monthly amounts, then Lessee
shall pay to Lessor on demand any amount necessary to make
up the deficiency. The excess of any such deposits shall be
credited to subsequent payments to be made for such items.
If a default or an event of default shall occur under the
terms of this Lease, Lessor may, at its option, without
being required so to do, apply any Deposit on hand to cure
the default, in such order and manner as Lessor may elect.
ARTICLE 33. NET LEASE
It is the intent of the parties hereto that this Lease
shall be a net lease and that the Rent defined pursuant to
Article 4 should be a net Rent paid to Lessor. Any and all
other expenses including but not limited to, maintenance,
repair, insurance, taxes, and assessments, shall be paid by
Lessee.
ARTICLE 34. RIGHT OF FIRST REFUSAL
Lessor, for itself, its successors and assigns, hereby
gives and grants to Lessee a right of first refusal (the
"Option") to purchase the Leased Premises, subject to the
following terms and conditions:
(A) DURATION OF OPTION. The Option and all rights and
privileges of Lessee hereunder shall be in force for the
term of this Lease until the expiration of Lessee's right to
possession.
(B) MANNER OF EXERCISING OPTION. If Lessor shall
desire to sell the Leased Premises (subject to the terms of
this Lease), Lessor shall give Lessee written notice of
Lessor's intention to sell Lessor's interest in the Leased
Premises. Such notice ("Lessor's Notice") shall state a
price at which (or greater) Lessor intends to sell all or a
portion of its interest. For twenty (20) business days
following the giving of such notice, Lessee shall have the
option to purchase the Lessor's interest at the price in
cash stated in the Lessor's Notice. A written notice in
substantially the following form, addressed to Lessor and
signed by Lessee and given, in accordance with the
provisions of Article 29(A) hereof, within the period for
exercising the Option, submitted with a bank cashier's check
or money order payable to the order of Lessor in the amount
of $25,000.00 (the "Earnest Money") shall be an effective
exercise of Lessee's Option, to wit:
(date)
"We hereby exercise the Option to purchase the property
commonly known as __________________, pursuant to the Right
of First Refusal contained in that certain Net Lease
Agreement between us pertaining to said premises.
(C) TERMS OF SALE IF OPTION EXERCISED. Upon Lessee's
exercise of the Option in accordance with the provisions of
subparagraph (B) hereof, Lessor shall be obligated to sell
and convey by recordable warranty deed, good and marketable
title to the Leased Premises subject only to the matters
affecting title which were of record at the time Lessor came
into title to the Leased Premises and those matters which
Lessee created, suffered or permitted to accrue during the
term hereof, and Lessee shall be obligated to purchase the
Premises upon the following terms and conditions:
(i) PRICE. The price "Purchase Price" at which Lessor
shall sell and Lessee shall purchase the Leased
Premises shall be the price stated in Lessor's Notice.
(ii)CLOSING. Closing shall be thirty (30) days after
the expiration of the twenty days within which Lessee
may exercise its Option, unless the parties mutually
agree otherwise. The Purchase Price less credit for
the Earnest Money shall be tendered in cash or other
certified funds by Lessee at Closing.
(iii) EVIDENCE OF TITLE. Not less
than ten (10) days prior to closing, Lessee shall
obtain a commitment for an ALTA owner's policy of
title insurance dated within thirty (30) days of the
closing date, issued by a nationally recognized title
insurance company selected by Lessor (the "Title
Company") in the amount of the Purchase Price
determined pursuant to subparagraph (C)(i) above,
naming Lessee as the proposed insured, and covering
the fee simple title to the Leased Premises, and
showing Lessor vested with good title to the Leased
Premises subject only to the matters affecting title
which were of record at the time Lessor came into
title to the Leased Premises and those matters which
Lessee created, suffered or permitted to accrue during
the term hereof. Such title commitment shall be
conclusive evidence of good title.
(i) PRORATIONS. Lessor shall pay the cost of the aforesaid
title policy and any and all state and municipal taxes
imposed by law on the transfer of the title to the Leased
Premises, or the transaction pursuant to which such transfer
occurs. Water, sewer and other utility charges, if any,
which are not metered, driveway permit charges, if any,
general real estate taxes, and other similar items, shall be
adjusted ratably as of the Closing, except to the extent
otherwise settled between the parties pursuant to other
provisions of this Lease. No portion of the Base Rent paid
by Lessee shall be credited toward the Purchase Price but
Lessee shall be given a credit for rent prepaid for any
period after the Closing.
(v) ESCROW CLOSING. At the election of Lessor or
Lessee upon notice to the other party not less than
five (5) days prior to the Closing, this sale shall be
closed through an escrow with the Title Company, in
accordance with the general provisions of the usual
form of Deed and Money Escrow Agreement then is use by
said company, with such special provisions inserted in
the escrow agreement as may be required to conform
with this agreement. Upon the creation of such an
escrow, anything herein to the contrary
notwithstanding, paying of the purchase price and
delivery of the deed shall be made through the escrow.
The cost of the escrow shall be divided equally
between the Lessor and Lessee. If for any reason
other than Lessee's default, the transaction fails to
close, the Earnest Money shall be returned to Lessee
forthwith.
(vi)REMEDIES ON DEFAULT. If Lessee defaults under the
provisions of this subparagraph 34(C), Lessor shall
have the right to annul the provisions of this
paragraph 34 by giving Lessee notice of such election,
provided that Lessor has first notified Lessee of such
default and Lessee has failed to cure the same within
ten (10) days after such notice. Upon Lessor's notice
of annulment in accordance herewith, the Earnest Money
shall be forfeited and paid to Lessor as liquidated
damages, which shall be Lessor's sole and exclusive
remedy. If Lessor defaults under the provisions of
this subparagraph 34(C) and fails to cure such default
within ten (10) days after being notified of the same
by Lessee, then in such event, (i) the Earnest Money
at Lessee's election and immediately upon its demand
shall be returned to Lessee, which return shall not,
however, in any way release or absolve Lessor from its
obligations hereunder and (ii) Lessee shall be
entitled to all remedies (both legal and equitable)
the law (both statutory and decisional) of the state
in which the Leased Premises are situated provides
without first having to tender the balance of the
purchase price as a condition precedent thereof and
without having to make any election of such remedies.
(D) EFFECT OF OPTION ON LEASE. If the Option is
exercised, this Lease shall continue in full force and
effect until the Closing hereinabove specified. If for any
reason such Closing fails to occur, this Lease shall
continue in full force and effect, except that if the
provisions of this paragraph 34 are annulled by Lessor, in
accordance with subparagraph 34(C)(vi), by reason of a
default by Lessee, this Lease shall continue but without the
provisions of this paragraph 34 being a part hereof.
(E) If Lessee fails to exercise its Option, Lessor
shall be free to sell all or any portion of its interest in
the Leased Premises for six months following the expiration
of the twenty days within which Lessee may exercise its
Option, provided that Lessor shall sell its interest or any
portion thereof for a price (pro-rata for a partial
interest) equal to or greater than the price set forth in
Lessor's Notice. This Right of First Refusal shall survive
any sale of the Leased Premises and shall apply to any
subsequent sale or potential sale by Lessor or its assigns.
IN WITNESS WHEREOF, Lessor and Lessee have respectively
signed and sealed this Lease as of the day and year first
above written.
LESSEE: KONA RESTAURANT GROUP, INC.
By /s/ Norman J Abdallah
Its:President
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK - LESSOR'S
SIGNATURE ON FOLLOWING PAGE
LESSOR: AEI INCOME & GROWTH FUND 23 LLC
By: AEI FUND MANAGEMENT XXI, INC., a
Minnesota corporation
By: /s/ Robert P Johnson
Robert P. Johnson, President
EXHIBIT A
1.6310 ACRE
(71,046 Square Feet)
THE STATE OF TEXAS
THE COUNTY OF VICTORIA
BEING a 1.6310 acre tract of land situated Farm Lot 2, Block
6, Range 3, East Above Town in the Original Four League
Grant to the Town of Victoria, Victoria County, Texas and
being a portion of that certain tract of land described as
8.759 acres as conveyed from Myrtle Gunn York to Victoria
Hank and Trust Company, as Trustee, by instrument dated
November 10, 1992, and recorded inVolume 0035, Page 477 of
the Official Records of Victoria County, Texas, said 1.6310
acre tract of land being more fully described by metes and
bounds as follows:
COMMENCING at a 5/8 inch diameter iron rebar found for
corner in the east right-of-way line of U.S. Highway No. 77
(also known as N. Navarro Street), said iron rebar marks the
southwest corner of Lot 1, Block 1. of Golden Corral
Subdivision No. 1, as addition to the City of Victoria,
Victoria County, Texas, according to the established map and
plat of said addition recorded in Volume 7, Page 85D of the
Map and Plat Records of said County;
THENCE, South 18 deg. 13' 29" West, along said right-of-way
line, a distance of 221.86 feet to a 5/8 inch diameter iron
rebar found marking the beginning of a curve to the left;
THENCE, ins a southwesterly direction along said curve to
the left and continuing along said right-of-way line
(internal angle = 2 deg. 18' 40", radius =3169.85 feet,
chord bears S 16 deg 30' 57" W, a distance of 152.03 feet)
for an arc distance of 152.04 feet to a 5/8 inch diameter
iron rebar found for the POINT OF BEGINNING of the herein
described tract;
THENCE, South 71 deg 47' 38" East, a distance of 223.07 feet
to a 5/8 inch diameter iron rebar found marking the
northeast corner of the herein described tract;
THENCE, South 15 deg. 44' 31" West, a distance of 284.42
feet to a 5/8 inch diameter iron rebar found marking the
southeast corner of the herein described tract in the north
line of that certain tract of land described as 2.10 acres
as conveyed from Myrtle York to CNB Properties by instrument
recorded in Volume 1040, Page 484 of the Deed Records of
said County;
THENCE, South 85 deg. 01' 17" West, along the north line of
said 2.10 acre tract, a distance of 216.11 feet to a
concrete monument found marking the southwest corner of the
herein described tract, in the aforesaid curving east right-
of-way line of U.S. Highway No. 77, same being the northwest
corner of said 2.10 acre tract;
THENCE, in a northeasterly direction along said curving
right-of-way line (internal angle 5 deg. 38' 32", radius =
3769.47 ffet, chord bears N 12 deg. 32' 21" E, a distance of
371.05 feet) for an arc distance of 371.20 feet to the POINT
OF BEGINNING, CONTAINING, within these metes and bounds
1.6310 acre (71,046 square feet) of land, more or less.
TOGETHER WITH certain rights, benefits, and easements
created by that certain Declaration of Easements,
Restrictions, and Related Agreements of even recording date
with the Special Warranty Deed from Triton Commerical
Properties, Ltd to AEI Net Lease Income & Growth Fund XIX
Limited Partnership, AEI Real Estate Fund XV Limited
Partnership, and AEI Real Estate Fund XVII Limited
Partnership.
DEVELOPMENT FINANCING AGREEMENT
THIS AGREEMENT, made and entered into effective as of this 19th
day of April, 2000, by and between Razzoo's, Inc. (hereinafter
referred to as "Lessee"), whose address is 15950 Dallas Parkway,
Suite 785, North Dallas, TX 75248, and AEI Income & Growth Fund
23 LLC, whose principal business address is 1300 Minnesota World
Trade Center, 30 East Seventh Street, St. Paul, Minnesota 55101
(hereinafter referred to as "Lessor") .
W I T N E S S E T H, that:
WHEREAS, Lessee is contemplating building the following
Improvements on the premises described in Exhibit "A" attached
hereto :
Construction of a building and improvements to be used as a
Razzoo's Cajun Cafe Restaurant.
WHEREAS, Lessee has made application to Lessor for development
financing to defray the costs of constructing such Improvements;
WHEREAS, Lessor's Assignor has issued to Lessee its
Development Financing and Leasing Commitment to advance funds in
the amount hereinafter specified, subject to compliance with the
terms and conditions of this Development Financing Agreement and
the Net Lease Agreement (the "Lease") of even date herewith;
NOW, THEREFORE, in consideration of entering into the Lease
and other good and valuable consideration, the receipt of which
is hereby acknowledged by the parties hereto, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the following terms shall have
the following meanings:
1. "Application" shall mean Lessee's application to the
Lessor for the Development Financing the terms and conditions
of which are incorporated herein by reference.
2. "Architect's Contract" shall mean Lessee's contract with
the Project Architect.
3. "Commitment" shall mean Lessor's Commitment to Lessee
agreeing to provide the Development Financing. (The
"Development Financing and Leasing Commitment" dated of even
date herewith.)
4. "Completion Date" shall mean midnight, September 30,
2000, subject to Force Majeure, as defined herein.
5. "Construction Costs" shall mean land costs, all costs
paid to construct and complete the Improvements, as specified
on Exhibit "B" attached hereto and made a part hereof.
6. "Construction Contracts" shall mean the contracts between
Lessee and Contractors for the furnishing of labor, services
or materials to the Leased Premises in connection with the
construction of the Improvements.
7. "Contractors" shall mean those firms directly engaged by
Lessee to construct the Improvements, whether one or more.
8. "Contract Documents" shall mean the Project Architect's
Contract, Plans and Specifications and the contract with the
Contractor.
9. "Development Financing" shall mean the funds to be made
available pursuant to the Commitment and not to exceed the
lesser of the Construction Costs or the maximum loan amount
of Three Million Five Hundred Ten Thousand Dollars
($3,510,000) as specified in the Commitment.
10. "Development Financing and Carrying Charges" shall mean
all fees, taxes and charges incurred under the Development
Financing and in the construction of the Improvements
including, but not limited to, interest charges, service and
inspection fees, attorney's fees, title insurance fees and
charges, recording fees and insurance premiums.
11. "Development Financing Documents" shall mean this
Agreement, the Lease, Assignment of Architects and
Construction Contracts, Guarantees, and such other documents
given to the Lessor as security for the Development
Financing.
12. "CTIC-CDD" shall mean Chicago Title Insurance Company,
Construction Disbursement Department, the nationally
recognized title insurer, to be CTIC-CDD under the
Development Financing Disbursement Agreement executed by and
between the parties of even date herewith.
13. "Final Disbursement Date" shall mean the date of the
final disbursement of the Development Financing provided
hereunder.
14. "Improvements" shall mean the structures and other
improvements to be constructed on the Leased Premises in
accordance with the Plans and Specifications.
15. "Initial Disbursed Funds" shall mean those funds
disbursed on the Closing Date for land acquisition and
related soft costs upon Lessor's acquisition of the Leased
Premises.
16. "Inspecting Architect" shall mean the architect, if any,
hired by Lessor to perform inspections of the premises. An
Inspecting Architect may only be engaged by Lessor in the
event of a default relating to construction of the
Improvements under the Development Financing Documents.
17. "Leased Premises" shall mean the real property described
in the Exhibit "A" attached to this Agreement, together with
all Improvements, equipment and fixtures thereon.
18. "Lessee Equity" shall mean the final Construction Costs
less the amount of the Development Financing.
19. "Plans and Specifications" shall mean the plans and
specifications prepared by the Project Architect who shall be
licensed in the jurisdiction of the Leased Premises and
selected by Lessee.
20. "Project" shall mean the construction of the Improvements
on the Leased Premises.
21. "Project Architect" shall mean the architect retained by
Lessee to design and supervise construction of the
Improvements.
22. "Rental Modification Date" shall mean a date one hundred
and fifty days (150) from the date hereof.
23. "Sub-Contractors" shall mean those persons furnishing
labor or materials for the Project pursuant to the Sub-
Contracts.
24. "Sub-Contracts" shall mean the contracts between the
Contractor and its materialmen and mechanics in the
furnishing of labor or materials for the Project.
25. "Title" shall mean Chicago Title Insurance Company
issuing the Lessor's fee owner's title insurance policy.
ARTICLE II
THE DEVELOPMENT FINANCING
Subject to compliance with the provisions of this Agreement,
Lessor agrees to advance to Lessee, and Lessee agrees to request
from Lessor, the Development Financing. The Development
Financing shall be advanced in stages by Lessor to CTIC-CDD and
disbursed by CTIC-CDD pursuant to the provisions of Article VIII
hereof. The Development Financing, or so much thereof as has
been advanced hereunder, shall bear interest at the rate and
shall be repaid in accordance with the terms hereof and the
Lease. The proceeds of the Development Financing shall be used
exclusively for the purposes of defraying Construction Costs.
ARTICLE III
N/A
ARTICLE IV
CONSTRUCTION OF IMPROVEMENTS
Lessee agrees to commence construction of the Improvements
within thirty (30) days from the date of this Agreement. After
commencement of construction of any Improvements, Lessee agrees
to diligently pursue said construction to completion, and to
supply such moneys and to perform such duties as may be necessary
to complete the construction of said Improvements pursuant to the
Plans and Specifications and in full compliance with all terms
and conditions of this Agreement and the Development Financing
Documents, all of which shall be accomplished on or before the
Completion Date, subject to Force Majeure and without liens,
claims or assessments (actual or contingent) asserted against the
Leased Premises for any material, labor or other items furnished
in connection therewith, subject to Lessee's right to contest
such liens, claims, or assessments provided the same are removed
as a lien upon the Leased Premises prior to foreclosure of such
lien, and all in full compliance with all construction, use,
building, zoning and other similar requirements of any pertinent
governmental jurisdiction. Lessee will provide to Lessor, upon
request, evidence of satisfactory compliance with all the above
requirements.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE LESSEE
Lessee hereby represents and warrants to the Lessor, which
representations and warranties shall be deemed to be restated by
Lessee each time Lessor makes an advance of the Development
Financing, that:
1. VALIDITY OF DEVELOPMENT FINANCING DOCUMENTS - The Development
Financing Documents are in all respects legal, valid and binding
according to their terms.
2. NO PRIOR LIEN ON FIXTURES - No mortgage, bill of sale,
security agreement, financing statement, or other title retention
agreement (except those executed in favor of Lessor) has been, or
will be, executed with respect to any fixture (except Lessee's
trade fixtures not financed with this Development Financing) used
in conjunction with the construction, operation or maintenance of
the improvements.
3. CONFLICTING TRANSACTION OF LESSEE - The consummation of the
transactions hereby contemplated and the performance of the
obligations of Lessee under and by virtue of the Development
Financing Documents will not result in any breach of, or
constitute a default under, any mortgage, lease, bank loan or
credit agreement, corporate charter, by-laws, partnership
agreement, or other instrument to which Lessee is a party or by
which it may be bound or affected, the breach of which would
materially affect Lessee's ability to perform its obligations
hereunder.
4. PENDING LITIGATION - There are no actions, suits or
proceedings pending, or to the knowledge of Lessee threatened,
against or affecting it or the Leased Premises, or involving the
validity or enforceability of any of the Development Financing
Documents, at law or in equity, or before or by any governmental
authority, except actions, suits and proceedings that are fully
covered by insurance or which, if adversely determined would not
substantially impair the ability of Lessee to perform each and
every one of its obligations under and by virtue of the
Development Financing Documents; and to the Lessee's knowledge it
is not in default with respect to any order, writ, injunction,
decree or demand of any court or any governmental authority.
5. VIOLATIONS OF GOVERNMENTAL LAW, ORDINANCES OR REGULATIONS -
To the best knowledge of Lessee, there are no violations or
notices of violations of any federal or state law or municipal
ordinance or order or requirement of the State in which the
Leased Premises are located or any municipal department or other
governmental authority having jurisdiction affecting the Leased
Premises, which violations in any way have a material adverse
affect on the Leased Premises and which remain uncured after
notice by such governmental authority or department (if notice is
required) and the expiration of the time within which Lessee may
cure such violation, or if no time limitation is specified,
within a reasonable time after notice to cure such violation .
6. COMPLIANCE WITH ZONING ORDINANCES AND SIMILAR LAWS - To the
best knowledge of Lessee, the Plans and Specifications and
construction pursuant thereto and the use of the Leased Premises
contemplated thereby comply and will comply with all present
governmental laws and regulations and requirements, zoning
ordinances, standards, and regulations of all governmental bodies
exercising jurisdiction over the Leased Premises. Lessee agrees
to provide the Project Architect's certification to such effect
prior to the funding of the first disbursement under the
Development Financing.
7. LESSEE'S STATUS AND AUTHORITY - If the Lessee be a
corporation, limited liability company, trust or a partnership,
Lessee warrants and represents that (i) it is duly organized,
existing and in good standing under the laws of the state in
which it is incorporated or created; (ii) it is duly qualified to
do business and is in good standing in the state in which the
Leased Premises are located; (iii) it has the corporate or other
power, authority and legal right to carry on the business now
being conducted by it and to engage in the transactions
contemplated by this Agreement and the Development Financing
Documents; and (iv) the execution and delivery of this Agreement
and the Development Financing Documents and the performance and
observance of the provisions hereof and thereof have been (or
future acts will be) duly authorized by all necessary trust,
partnership, or corporate actions of Lessee. Lessee will furnish
such resolutions, affidavits and opinions of counsel to such
effect as Lessor may reasonably require.
8. AVAILABILITY OF UTILITIES - All utility services necessary for
the construction of the Improvements will be available prior to
the commencement of construction, and all utility services
necessary for the proper operation of the Improvements for their
intended purposes are available at the Leased Premises or will be
available at the Leased Premises prior to the Final Disbursement
Date, at commercially comparable utility rates and hook-up
charges for the vicinity, including water supply, storm and
sanitary sewer facilities, gas, electricity and telephone
facilities. Lessee shall furnish evidence of such availability
of utilities from time to time at Lessor's request.
9. BUILDING PERMITS - All building permits required for the
construction of the Improvements have been obtained prior to the
commencement of the construction of the Improvements and copies
of same will be delivered to Lessor.
10. CONDITION OF LEASED PREMISES - The Leased Premises are
not now damaged or injured as a result of any fire, explosion,
accident, flood or other casualty, nor to the best of Lessee's
knowledge, subject to any action in eminent domain.
11. APPROVAL OF PLANS AND SPECIFICATIONS - To the best
knowledge of Lessee in reliance upon the Project Architect's
certification to such effect, the Plans and Specifications
conform to the requirements and conditions set out by applicable
law or any effective restrictive covenant, to all governmental
authorities which exercise jurisdiction over the Leased Premises
or the construction thereon, and no construction will be
commenced upon the Leased Premises until said Plans and
Specifications shall have been approved by Lessor, which consent
shall not be unreasonably withheld or delayed and shall be given
or withheld within ten business days after written request
therefor. Subject to Article VI, paragraph 14, no material
changes are to be made in the Plans and Specifications as
approved without Lessor's prior consent, which consent shall not
be unreasonably withheld or delayed and shall be given or
withheld within ten business days after written request therefor;
except, after prior written notice to Lessor, provided the
Development Financing shall remain in balance as set forth in
Article VII, paragraph 3 herein, Lessor shall consent to
reallocation among line items or use of the Construction
Contingency in the aggregate of not more than the amount budgeted
as set forth on Exhibit B for Construction Contingency, unless
Lessee shall deposit Owner Equity with CTIC-CDD in the amount of
such excess over the budgeted amount.
12. CONSTRUCTION CONTRACTS - Lessee has entered into
contracts with the Contractors or separate contracts with
materialmen and laborers providing for the construction of the
Improvements. Lessee will cause the Contractors to promptly
furnish Lessor with the complete list of all Sub-contractors or
entities as and when under contract, which Contractors propose to
engage to furnish labor and/or materials in constructing the
Improvements (such list containing the names, addresses, and
amounts of such sub-contracts as written in excess individually
of $5,000, and prior to disbursement of funds to or for the
benefit of such Subcontractors, affidavits of authorized
signatory and other documents commercially reasonably required by
Title to insure that the Leased Premises remain lien free) and
will from time to time furnish Lessor or Title with true copies
of all Contracts entered into by Lessee and with the terms of all
verbal agreements therefor, if any, and as to subcontractors,
letters signed by sub-contractors whose contracts are in excess
of $5,000 setting forth the present amount of their contract and
the amounts remaining to be paid under that contract, if the same
information is not stated on a lien waiver reflecting the most
currently requested payment to such subcontractor.
13. BROKERAGE COMMISSIONS - No brokerage commissions are due
in connection with the transaction contemplated hereby or if
there are commissions due or payable the same will be paid by
Lessee. Lessee agrees to and shall indemnify Lessor from any
liability, claims or losses arising by reason of any such
brokerage commissions. This provision shall survive the
repayment of the Development Financing and shall continue in full
force and effect so long as the possibility of such liability,
claims or losses exists.
14. NO PRIOR WORK - Except as may have been permitted by
Lessor, no work or construction has been commenced or will be
commenced by or on behalf of Lessee on the Leased Premises, nor
has Lessee entered into any contracts or agreements for such work
or construction which could result in the imposition of a
mechanic's or materialmen's lien on the Leased Premises or the
Improvements prior to or on parity with the interest of Lessor.
15. ENVIRONMENTAL IMPACT STATEMENT - All required
environmental impact statements as required by any governmental
authority having jurisdiction over the Leased Premises or the
construction of the Improvements have been duly filed and
approved.
16. ACCESS - The Leased Premises front on a publicly
maintained road or street or have access to such a road or street
under an easement or private way, which is not subject to a
reversion in favor of any party.
17. FINANCIAL INFORMATION - Any financial statements
heretofore delivered to Lessor are true and correct in all
respects, have been prepared in accordance with generally
accepted accounting practice, and fairly present the respective
financial conditions of the subject thereof as of the respective
dates thereof and no materially adverse change has occurred in
the financial conditions reflected therein since the respective
dates thereof.
ARTICLE VI
COVENANTS OF LESSEE
Lessee hereby covenants and agrees with Lessor as follows:
1. SURVEYS - Prior to execution of any Development Financing
Documents and prior to the initial request for a Disbursement (as
defined in ARTICLE VIII hereof), Lessee has furnished to Lessor
three copies of a current perimeter land survey, in form and
substance satisfactory to Lessor, certified to Lessor, giving a
description of the Leased Premises and showing all encroachments
onto or from the Leased Premises, currently certified by a
registered surveyor and bearing his registry number and showing
access rights, easements, or utilities, rights of way, all
setback requirements upon the Leased Premises, improvements,
matters affecting title and such other items as Lessor may
reasonably request.
2. TITLE INSURANCE - Prior to the initial request for
Disbursement the Lessee has furnished Lessor with an ALTA policy
of title insurance, and prior to any subsequent request for
Disbursement such ALTA policy of title insurance shall be brought
down to the date of Disbursement by endorsement, all in form and
substance satisfactory to Lessor issued at the Lessee's expense
and written by Title insuring the Leased Premises to be
marketable, free from exceptions for mechanic's and materialmen's
liens and free from other exceptions not previously approved by
the Lessor, naming Lessor as fee owner insured to the extent of
advances made hereunder subject only to such exceptions as may be
reasonably approved by Lessor.
3. RESTRICTIONS ON CONVEYANCE OR SECONDARY FINANCING - Lessee
will not transfer, sell, convey or encumber the Leased Premises
or subject the Leased Premises to any secondary financing in any
way without the written consent of the Lessor, except as
permitted in Article V, paragraph 2 relating to trade fixture
financing sources or suppliers.
4. INSURANCE - To obtain or cause Contractor to obtain and
maintain such insurance or evidence of insurance as Lessor may
reasonably require, including but not limited to the following:
(a) BUILDER'S RISK INSURANCE - Builder's Risk Insurance
written on the so-called "Builder's Risk-Completed Value
Basis" in an amount equal to the full replacement cost of the
Improvements at the date of completion with coverage
available on the so-called multiple peril form of policy,
including coverage against collapse and water damage, naming
Lessor as additional named insured, such insurance to be in
such amounts and form and written by such companies as shall
be reasonably approved by Lessor, and the originals of such
policies (together with appropriate endorsement thereto,
evidence of payment of premiums thereon and written
agreements by the insurer or insurers therein to give Lessor
ten (10) days' prior written notice of any intention to
cancel) shall be promptly delivered to Lessor, said insurance
coverage to be kept in full force and effect at all times
until the completion of construction of the Improvements.
(b) HAZARD INSURANCE - Fire and Extended Coverage Insurance,
and such other hazard insurance as Lessor may require and as
called for in the Lease in an amount equal to the full
replacement cost of the Improvements naming Lessor as an
additional named insured, such insurance to be in such
amounts and form and written by such companies as shall be
reasonably approved by Lessor, and the originals of such
policies (together with appropriate endorsements thereto,
evidence of payment of premiums thereon and written agreement
by the insurer or insurers therein to give Lessor ten (10)
days' prior written notice of any intention to cancel) shall
be promptly obtained and delivered to Lessor immediately upon
completion of the construction of the Improvements and before
any portion is occupied by Lessee or any tenant of Lessee
with such insurance to be kept in full force and effect at
all times thereafter.
(c) PUBLIC LIABILITY - Comprehensive public liability
insurance (including operations, contingent liability
operations, operations of sub- contractors, completed
operations and contractual liability insurance) in limits of
coverage as set forth in the Lease.
(d) WORKMEN'S COMPENSATION INSURANCE - Evidence of compliance
with the required coverage under statutory workmen's
compensation requirements.
5. COLLECTION OF INSURANCE PROCEEDS - To cooperate with Lessor in
obtaining for Lessor the benefits of any insurance or other
proceeds lawfully or equitably payable to it in connection with
the transaction contemplated hereby and the collection of any
indebtedness or obligation of the Lessee to Lessor incurred
hereunder (including the payment by Lessee of the expense of an
independent appraisal on behalf of Lessor in case of a fire or
other casualty affecting the Leased Premises).
6. APPLICATION OF DEVELOPMENT FINANCING PROCEEDS - To use the
proceeds of the Development Financing solely for the purpose of
paying for Construction Costs and such incidental costs relative
to the construction as may be reasonably approved from time to
time in writing by Lessor, and in no event to use any of the
Development Financing proceeds for personal, corporate or other
purposes.
7. EXPENSES - To pay all costs of closing the Development
Financing and all expenses of Lessor with respect thereto,
including, but not limited to, legal fees by Lessor's counsel and
all other reasonable attorney's fees (limited as set forth in the
Commitment), costs of title insurance, transfer taxes, license
and permit fees, recording expenses, surveys, intangible taxes,
appraisal fees, Inspecting Architect fees, expenses of retaking
possession upon default by Lessee hereunder or other costs of
enforcement (including reasonable attorney's fees) and similar
items.
8. LAWS, ORDINANCES AND ETC. - To comply promptly with any law,
ordinance, order, rule or regulation of all authorities
exercising jurisdiction over the Leased Premises or the
construction thereon, including appropriate supervising boards of
fire underwriters and similar agencies and the requirements of
any insurer issuing coverage on the Project.
9. RIGHT OF LESSOR TO INSPECT LEASED PREMISES - Upon 48 hours
notice, except in cases which Lessor reasonably deems to be an
emergency, in which event upon reasonable notice under the
circumstances, to permit Lessor and Title and their
representatives and agents to enter upon the Leased Premises and
to inspect the Improvements and all materials to be used in
construction thereof and to cooperate and cause Contractor to
cooperate with Lessor or Title and their representatives and
agents during such inspections, provided that such is
accomplished without interrupting the construction process.
Provided, further, however, that this provision shall not be
deemed to impose upon Lessor or Title any duty or obligation
whatsoever to undertake such inspections, to correct any defects
in the Improvements or to notify any person with respect thereto.
10. BOOKS AND RECORDS - To set up and maintain accurate and
complete books, accounts and records pertaining to the Project
including the working drawings in a manner reasonably acceptable
to Lessor. The Lessor, Title and Inspecting Architect shall have
the right at all reasonable times and upon reasonable prior
notice to inspect, examine and copy all books and records of
Lessee relating to the Project, and to enter and have free access
to the Leased Premises and Improvements and to inspect all work
done, labor performed and material furnished in or about the
Project, provided that such is accomplished without interrupting
the construction process. Notwithstanding the foregoing, Lessee
shall be responsible for making inspections as to the
Improvements during the course of construction and shall
determine to its own satisfaction that the work done or materials
supplied by the Contractors and all Subcontractors has been
properly supplied or done in accordance with the applicable
contracts. Lessee will hold Lessor and Title harmless from and
Lessor and Title shall have and have no liability or obligation
of any kind to Lessee or creditors of Lessee in connection with
any defective, improper or inadequate workmanship or materials
brought in or related to the Improvements or the Leased Premises,
or any mechanic's liens arising as a result of such workmanship
or materials. Upon Lessor's request, Lessee shall replace or
cause to be replaced any such work or material found to be
materially deficient by the Project Architect or Independent
Architect. Lessor shall cooperate with Lessee in obtaining any
rights under any applicable warranties to accomplish such work.
Any inspections made by Inspecting Architect, Title or Lessor are
for the sole benefit of Lessor and neither Lessee nor any
creditor, tenant or vendee of Lessee shall be entitled to rely on
such inspection. Lessee shall obtain for Lessor coincident
rights to rely upon any warranties obtain by Lessee from its
Contractors or subcontractors.
11. CORRECTION OF DEFECTS - To promptly correct any
structural defects in the Improvements or any material departure
from the Plans and Specifications not previously approved by
Lessor. The advance of any Development Financing proceeds shall
not constitute a waiver of Lessor's right to require compliance
with this covenant.
12. SIGN REGARDING DEVELOPMENT FINANCING - To allow Lessor to
erect and maintain at a suitable site on the Leased Premises, at
a location to be chosen by Lessee in its reasonable discretion, a
sign indicating that Development Financing is being provided by
Lessor, to the extent permitted by law or private covenant,
condition, or agreement affecting the Project.
13. ADDITIONAL DOCUMENTS - To furnish to Lessor all
instruments, documents, initial surveys, footing or foundation
surveys, if conducted, certificates, plans and specifications,
appraisals, financial statements, title and other insurance
reports and agreements and each and every other document and
instrument required to be furnished by the terms hereof, all at
Lessee's expense; to assign and deliver to Lessor such documents,
instruments, assignments and other writings, and to do such other
acts necessary or desirable to preserve and protect the Leased
Premises, as Lessor may require; and to do and execute all and
such further lawful and reasonable acts, conveyances and
assurances for the carrying out of the intents and purposes of
this Agreement, the Lease, or the Commitment, as Lessor shall
reasonably require from time to time.
14. ARCHITECTS AND CONSTRUCTION CONTRACTS - To commit no
default nor knowingly permit a default under the terms of the
Architects or Construction Contracts; To waive none nor knowingly
permit a waiver of the obligations of the parties thereunder; To
do no act which would relieve such parties from their obligations
thereunder; To make no amendments to such contracts, without the
prior written consent of Lessor; To enter into no change orders
or extras that cause a reallocation among budgeted line items, or
that in the aggregate or singularly result in a net increase in
excess of 10% of the original contract amount without Lessor's
prior written consent, which consent shall not be unreasonably
withheld or delayed; provided, however, Lessor shall be given
written notice and copies of all change orders; provided,
further, however, with written notice to Lessor prior to any
request for funds subsequent to any such change order or
reallocation, the Lessee shall be allowed to enter into any
change order or extra which is accounted for by use of any
reallocation among line items or any remaining budgeted
Contingency line item, or if the same has been exhausted, Lessee
shall be allowed increases in the original contract amount
without Lessor's consent if Lessee has, upon the execution of
said change order, deposited with Lessor the amount by which such
change order increases the total Construction Cost; To allow all
such contracts to be subject to the approval of Lessor for its
loan purposes; To allow Lessor to take advantage of all the
rights and benefits of the contracts upon any default by Lessee;
and to submit evidence to Lessor that both the Architect and the
Contractors will permit Lessor to acquire Lessee's interest under
their respective contracts and the Contract Documents without
additional charge or fee should an event of default occur
hereunder, which default is not cured within applicable notice
and cure periods.
15. ENFORCE PERFORMANCE OF SUB-CONTRACTS - To enforce, or
cause to be enforced, the prompt performance of the Sub-Contracts
in accordance with their terms and not to approve any changes in
the same that in the aggregate or singularly result in a net
increase in excess of 10% of the original General Contractor's
contract amount without Lessor's prior written consent, which
consent shall not be unreasonably withheld or delayed, provided
Lessee's right to enter into any such change order shall be on
the same terms set forth in Section 14 above.
16. COMPLIANCE WITH RULES - To comply with, and to require
the Contractors to comply with, all rules, regulations,
ordinances and laws bearing on the conduct of the work on the
Improvements, including the requirements of any insurer issuing
coverage on the Project and the requirements of any applicable
supervising boards of fire underwriters.
17. OPINIONS OF COUNSEL - To furnish such opinions of counsel
as may be reasonably requested of the Lessee in connection with
the matters contemplated by this Agreement.
18. SOIL TESTS - To provide the Lessor with a soil report
prepared by an acceptable engineer certifying as to the status of
the soil conditions on the Leased Premises, the need or lack of
need for special pilings and foundations and that either any
pilings and foundation necessary to support the Improvements have
been placed in a manner and quantity sufficient to provide the
required support or that no such pilings and foundations are
necessary for the support and construction of the Improvements.
19. MARKETABLE TITLE - To execute and deliver or cause to be
executed and delivered such instruments as may be required by the
Lessor and Title to provide Lessor with a marketable, valid title
to the Leased Premises subject only to such exceptions to title
as may be reasonably approved by Lessor.
20. VIOLATIONS OF GOVERNMENTAL LAW, ORDINANCES OR REGULATIONS
- - Lessee will permit no violations nor commit the same, of any
federal or state law or municipal ordinance or order or
requirement of the State in which the Leased Premises are located
or any municipal department or other governmental authority
having jurisdiction affecting the Leased Premises, which
violations in any way have a material adverse affect on the
Leased Premises and which remain uncured after notice by such
governmental authority or department (if notice is required) and
the expiration of the time within which Lessee may cure such
violation, or if no time limitation is specified, within a
reasonable time after notice to cure such violation .
21. COMPLIANCE WITH ZONING ORDINANCES AND SIMILAR LAWS - The
Plans and Specifications and construction pursuant thereto and
the use of the Leased Premises contemplated thereby will comply
with all governmental laws and regulations and requirements,
zoning ordinances, standards, and regulations of all governmental
bodies exercising jurisdiction over the Leased Premises,
including environmental protection and equal employment
regulations, and appropriate supervising boards of fire
underwriters and similar agencies.
22. APPROVAL OF PLANS AND SPECIFICATIONS - The Plans and
Specifications will conform to the requirements and conditions
set out by applicable law or any effective restrictive covenant,
and to all governmental authorities which exercise jurisdiction
over the Leased Premises or the construction thereon.
ARTICLE VII
CONDITIONS PRECEDENT TO A DISBURSEMENT
It shall be a condition precedent to each Disbursement under this
Development Financing Agreement that:
1. DEVELOPMENT FINANCING DOCUMENTS - The Development Financing
Documents shall have been duly executed and delivered to Lessor
and shall be in full force and effect.
2. LESSEE EQUITY - Lessee shall have paid all of the Lessee
Equity funds into the Project before the first Disbursement (or
any subsequent Disbursement if additional Lessee Equity should be
required) and Lessee shall deliver evidence of such payment
reasonably satisfactory to Lessor.
3. DEVELOPMENT FINANCING BALANCE - As of the date immediately
prior to any Disbursement, the total amount of unadvanced
proceeds of the Development Financing shall be sufficient, in the
commercially reasonable opinion of Lessor (the opinion of Lessor
being based upon affidavit of the General Contractor, the Project
Architect, the Inspecting Architect, or other reliable licensed
third party contractor) to complete the Improvements free of
liens. To the extent the total of the unadvanced proceeds of the
Development Financing shall be insufficient, at any time, in
Lessor's reasonable opinion, (based upon the affidavit as set
forth above) to complete the Improvements, or be less than the
total Construction Costs not yet paid for or not yet incurred
(including interest accruing for the remainder of the term or
extensions thereof, if any), the Lessee shall immediately deposit
with the Lessor or with Title, as additional Lessee Equity funds,
an amount equal to such deficiency and such additional Lessee
Equity funds shall be disbursed by CTIC-CDD prior to the
Disbursement of any further advance or advances under this
Agreement.
4. NO DEFAULT - No event of default, which remains uncured after
the expiration of applicable cure periods, shall exist under this
Agreement or the Development Financing Documents.
5. REPRESENTATIONS AND WARRANTIES - The representations and
warranties in Article V hereof shall be true and correct on and
as of the date of each Disbursement.
6. COVENANTS - Lessee shall have complied with all of the
covenants made by it in Article VI hereof.
7. SWORN CONSTRUCTION STATEMENT - Prior to the initial
disbursement hereunder, the Lessee shall have submitted to Lessor
and Title a Construction Cost Statement or the Construction
Contract (if such information is contained therein) sworn to by
Lessee and Contractors reflecting all major Sub-Contractors or
materialmen who shall then be engaged in furnishing labor,
materials or supplies for the Improvements. The list should show
the name of each and every Contractor, Sub-Contractor and
materialman (or at least such entities or individuals whose
contract is in excess of $5,000), its address and an estimate of
the dollar value of the work, labor and materials to be done or
supplied and a general statement of the nature of the work to be
done or materials to be supplied by each Contractor. Thereafter,
if such list should change or new subcontractors shall execute
contracts not reflected on the above list, the Lessee shall
furnish to the Lessor any amendments or additions to the original
statement as so submitted.
8. APPLICATION FOR PAYMENT - Lessor shall have received an
Application for Payment pursuant to Article VIII hereof.
9. TITLE - Title shall issue its endorsement to the title policy
insuring the Lessor as fee owner under the policy in the
aggregate amounts of all prior Disbursements and the requested
Disbursement.
10. WORK IN PLACE - All work or materials for which a
Disbursement is requested shall be in place and incorporated into
the Improvements.
ARTICLE VIII
METHODS OF DISBURSEMENTS OF DEVELOPMENT FINANCING PROCEEDS
The Development Financing shall be disbursed (a "Disbursement")
as follows:
1. PROCEDURE - Not more often than monthly, Lessee may submit an
Application for Payment in the form attached hereto as Exhibit
"C" requesting the Disbursement of proceeds under the Development
Financing (a "Draw Request"), which request shall be submitted to
Lessor and to CTIC-CDD at least five (5) business days prior to
the date on which a Disbursement is requested. Provided the
conditions of this Development Financing Agreement are met on the
date requested for such advance, Lessor shall advance to CTIC-CDD
amounts certified to be currently payable by Lessee (excluding
the retainage hereinafter specified) for the then incurred
portion of Total Construction Costs pursuant to the Application
for Payment. All costs shall have been approved in writing by
the Project Architect, Lessee, Contractor, and if required by
Lessor, by the Inspecting Architect. All interest accruing need
not be disbursed to CTIC-CDD, but may be immediately and
automatically credited by Lessor to the Development Financing
account. CTIC-CDD shall disburse all funds advanced to it by
Lessor in accordance with the terms and provisions of this
Agreement and any special escrow requirements imposed by CTIC-CDD
as a condition to its acting as the disbursing agent hereunder.
The disbursed proceeds of the Development Financing shall bear
interest from and including the date of disbursement to CTIC-CDD
or the date of credit by Lessor provided that in the event CTIC-
CDD shall fail to disburse any advances within five (5) business
days after the date set for an advance, CTIC-CDD shall return
said advance to Lessor and interest on such advance shall abate
from and after the date of such return. Any amounts disbursed to
CTIC-CDD and returned by CTIC-CDD to the Lessor shall not be
deemed to be advanced under the Development Financing Documents.
Each Application for Payment shall clearly set forth the amounts
due to Lessee and to each Contractor out of the requested
Development Financing and shall be accompanied by the following:
a. A Draw Request Certificate in the form attached hereto as
Exhibit "D" certifying that each contractor or materialman
for which payment is requested in the relevant Application
for Payment has satisfactorily completed the work or
furnished the materials for which payment is requested in
accordance with the applicable contract; that all work for
which an Application for Payment is made substantially
conforms to the Contract Documents and any approved changes,
and is in place; and that sufficient funds remain of the
undisbursed Development Financing proceeds to complete the
Project and that all funds previously disbursed have been
applied as per the previous Application for Payment.
b. Waivers of Mechanics' Liens and Materialmen's Liens
executed by all Contractors for all work done and all
materials furnished to the Leased Premises and included in
such current Application for Payment, or evidence reasonably
required by Title to insure over the same by special specific
endorsement, or such other releases of lien pursuant to
bonding or otherwise to prevent such liens from attaching to
the Leased Premises.
c. Waivers of Mechanics' Liens and Materialmen's Liens
executed by all Sub-Contractors and workmen and materialmen
for all work done and all materials furnished to the Leased
Premises and included in the immediately preceding
Application for Payment, or evidence reasonably required by
Title to insure over the same by special specific
endorsement, or such other releases or lien pursuant to
bonding or otherwise to prevent such liens from attaching to
the Leased Premises.
d. Such other supporting evidence, including invoices and
receipts as may be requested by Lessor or CTIC-CDD to
substantiate all payments which are to be made out of the
Disbursement or to substantiate all payments then made in
respect to the Project.
2. INTEREST ADVANCE - If interest has accrued on the Development
Financing and is unpaid or fees are payable to the Lessor
hereunder, Lessor shall be, and hereby is, authorized at any time
to advance to itself from the proceeds of the Development
Financing the total amount of such accrued interest and fees,
whether or not an Application for Payment has been submitted by
the Lessee and the same shall be deemed to be an advance of the
proceeds of the Development Financing under this Agreement in the
same manner and with the same effect as if advanced under the
provisions above. It is understood Lessor may establish an
automatic interest reserve whereby Lessor may withdraw from the
Development Financing account on a regular basis the accrued
interest on the Development Financing and credit the Development
Financing balance with the same.
ASSESSMENT AND TAX ADVANCE - As taxes and assessments become due
on the Leased Premises, Lessor shall be, and hereby is,
authorized to advance to itself automatically from the proceeds
of the Development Financing, the total amount of such taxes and
assessments and the same shall be deemed to be an advance of the
proceeds of the Development Financing under this Agreement in the
same manner and with the same effect as if advances under the
provisions above, if not previously paid before due pursuant to
Lessee's obligations under the Lease.
4. DISBURSE UNDER DEVELOPMENT FINANCING DOCUMENT - All sums
advanced and disbursed hereunder shall be disbursed under and
shall be secured by the Development Financing Documents.
5. PAYMENTS TO SUBCONTRACTORS - In its reasonable discretion CTIC-
CDD may make payments directly to any subcontractor or
materialman.
6. RETAINAGE - Each Disbursement shall be limited to an amount
equal to ninety percent (90%) of the value, exclusive of
Contractor's profit and overhead, of the materials and labor
furnished to the Leased Premises and the balance (herein called
the Retainage) shall be retained by Lessor, provided that thirty
(30) days after completion by each subcontractor or materialman
of his subcontract Lessor will disburse to such party, or to the
Contractor on behalf of such party the Retainage withheld from
said party, provided that as a condition to such disbursement the
Lessee and Project Architect and the Inspecting Architect shall
certify to Lessor the date that such Party's subcontract has been
fully and satisfactorily completed and the subcontractor or
materialmen shall have supplied Title with satisfactory final
lien waivers, including final lien waivers for any of its
submaterialmen or sub- contractors and the requirements of any
bonding company issuing the Bonds shall have been fulfilled. Any
Retainage due the Contractor for work performed or materials
furnished by the Contractor and the final balance of Contractor's
profit and overhead shall be disbursed on the Final Disbursement
Date pursuant to Article IX hereof. Contractor's profit and
overhead shall be disbursed based upon and in proportion to the
percentage of completion of the Project, or amounts payable under
the Construction Contract for work actually performed, whichever
is less, as certified by the Project Architect.
ARTICLE IX
FINAL DEVELOPMENT FINANCING BALANCE
Unless and until Lessor and Lessee have entered into a mutually
satisfactory escrow holdback and undertaking agreement to, inter
alia, complete the Improvements and otherwise satisfy the
requirements of this Article IX, at no time and in no event shall
Lessor be obligated to disburse the balance of the proceeds of
the Development Financing, including any Retainage until the date
the following have been satisfied (the "Final Disbursement
Date"):
1. Lessor shall have received reasonably satisfactory evidence of
the final completion of the Improvements in substantial
accordance with the Contract Documents and the Certificate of
Final Completion from the Project Architect accepted by the
Contractor and Lessee.
2. Lessor shall have received satisfactory as-built surveys
reflecting the final location of the Improvements as fully
completed on the Leased Premises in accordance with the Contract
Documents, said survey to be prepared by a registered or licensed
surveyor bearing his registry number, certifying to Lessor as to
the legal description of the Leased Premises and showing all
Improvements located on the Leased Premises and indicating the
street address of the Improvements, absence of any encroachments
on the Leased Premises or from the Leased Premises onto adjacent
land, showing all access points, and showing conformance to all
set back requirements and delineating all utility easements that
are specifically legally described, rights of way and other
matters affecting the Leased Premises, and certifying as to the
total acreage of the land, the exterior dimensions of the
Improvements, and the number of parking spaces, if any, and such
other matters as Lessor may reasonably request.
3. Lessor shall have received a requisite affidavit of the
Lessee, Contractor and Project Architect, and approved by the
Inspecting Architect certifying as to the final cost of the
Improvements.
4. Title shall have been furnished with such final lien waivers
sufficient in the opinion of Title to dissolve any possible
Mechanic's and Materialman's Liens affecting title to the Leased
Premises or Lessee shall have provided a bond or other security
sufficient to remove the lien as an encumbrance upon title to the
Leased Premises and Title shall have issued its endorsements to
the title policy increasing the insured coverage to the full
amount of all sums disbursed under this Development Financing
Agreement.
5. Lessor shall have received evidence that all of the terms,
provisions and conditions on the part of the Lessee to be
performed or caused to be performed hereunder and under the
Lease, including but not limited to obtaining casualty insurance
for the full insurable value of the Improvements, have been
fulfilled to the satisfaction of Lessor.
6. Lessor shall have received a Final Certificate of Occupancy
issued by the appropriate governmental authority covering the
Improvements and a Certificate of Substantial Completion from the
Project Architect indicating that the Improvements as built
comply with all building codes and zoning ordinances, including
any plat requirements or requirements of recorded operating
covenants or agreements affecting the Leased Premises.
7. All remaining uncompleted "punch list" items shall have been
satisfactorily completed.
8. The requirements of all bonding companies, if any, with
respect to release of retainage shall have been met.
9. An amendment to the Lease shall be executed by Lessee and
Lessor setting forth the date the first Lease Year shall end and
the Rent for the balance of the first Lease Year, and evidencing
the satisfaction and termination of this Agreement.
ARTICLE X
EVENTS OF DEFAULT
An "event of default" shall be deemed to have occurred hereunder
and under the Lease, if:
1. DEFAULT UNDER DEVELOPMENT FINANCING DOCUMENTS - Any default or
event of default occurs (which remains uncured after the
expiration of any applicable cure period as may be set forth in
any Development Financing Document) under any of the Development
Financing Documents as defined therein; or
2. FAILURE TO COMPLETE CONSTRUCTION - Lessee shall fail for any
reason, except Lessor's wrongful refusal to fund the Development
Financing pursuant to the terms hereof, to substantially complete
the construction of the Improvements by the Completion Date; or
3. BREACH OF AGREEMENT - Lessee breaches or fails to perform,
observe or meet any covenant or condition of this Agreement,
provided, however, with respect to non-monetary defaults
hereunder, Lessee shall have twenty days after notice from Lessor
to cure such non-monetary default, or if such default (but for
the payment of monies) cannot be cured within twenty days, such
longer time as may be reasonably necessary to effect a cure if
Lessee is diligently pursuing a course of conduct reasonably
designed to cure the default.; or
4. BREACH OF WARRANTY - Any warranties made or agreed to be made
in any of the Development Financing Documents or this Agreement
shall be breached by Lessee or shall prove to be false or
misleading, and the same shall not be cured or made to be true
and correct within the applicable cure periods; or
5. FILING OF LIENS AGAINST THE LEASED PREMISES - Any lien for
labor, material, taxes or otherwise shall be filed against the
Leased Premises and such lien shall not be promptly paid,
released, contested in an appropriate forum, or bonded over to
Lessor's reasonable satisfaction before the lien shall materially
adversely affect Lessor's interest in the Premises; or
6. LITIGATION AGAINST LESSEE - Any suit shall be filed against
Lessee, and is not resolved within 120 days and, which if
adversely determined, could substantially impair the ability of
Lessee to perform each and every one of its obligations under and
by virtue of the Development Financing Documents; or
7. LEVY UPON THE LEASED PREMISES - A levy be made under any
process on the Leased Premises and such levy shall not be
promptly Bonded over prior to the execution of such levy; or
8. TRANSFER OF LEASED PREMISES - Lessee shall without the prior
written consent of Lessor, voluntarily or by operation of law,
sell, transfer, convey or encumber all or any part of its
interest in the Leased Premises or in any of the personalty
located thereon, or used or intended to be used in connection
therewith; or
9. ABANDONMENT - Lessee abandons the project or delays or ceases
work thereon for a period of fifteen consecutive (l5) days, or
delays construction or suffers construction to be delayed for any
period of time for any reason whatsoever so that completion of
Improvements cannot be accomplished in the judgment of Lessor on
or before the Completion Date, subject to force majeure; or
10. BANKRUPTCY - Lessee shall make an assignment for the
benefit of its creditors or shall admit in writing its inability
to pay its debts as they become due or shall file a petition in
bankruptcy or shall be adjudicated a bankrupt or insolvent or
shall file a petition seeking any reorganization, dissolution,
liquidation, arrangement, composition, readjustment, or similar
relief under any present or future bankruptcy or insolvency
statute, law or regulation, or shall file an answer admitting to
or not contesting the material allegations of a petition filed
against it in any such proceedings, or shall not have the same
dismissed or vacated, or shall seek or consent or acquiesce in
the appointment of any trustee, receiver or liquidator of a
material part of its properties, or shall not after the
appointment without the consent or acquiescence of it of a
trustee, receiver, or liquidator of any material part of its
properties have such receiver, liquidator or appointment vacated;
or
11. EXECUTION LEVY - Execution shall have been levied against
the Leased Premises or any lien creditors commence suit to
enforce a judgment lien against the Leased Premises or such
action or suit shall have been brought and shall not be
immediately bonded over and shall continue unstayed and in effect
for a period of more than 120 consecutive days; or
12. ATTACHMENT - Any part of the Lessor's commitment to make
the advances hereunder shall at any time be subject or liable to
attachment or levy at the suit of any creditor of the Lessee or
at the suit of any subcontractor or creditor of the Contractor
and shall remain unstayed prior to the time Lessor shall be
obligated to comply with the same.
ARTICLE XI
REMEDIES OF LESSOR
Lessee hereby agrees that the occurrence of any one or more of
the events of default set out in Article X hereof, shall also
constitute an event of default under each of the Development
Financing documents, thereby entitling Lessor, after the
expiration of any applicable cure period, at its option, to
proceed to exercise any or all of the following remedies:
1. EXERCISE OF REMEDIES - To exercise any of the various remedies
provided in any of the Development Financing Documents, including
the acceleration of the Put described in Articles XIV hereof;
2. CUMULATIVE RIGHTS - Cumulatively to exercise all other rights,
options and privileges provided by law;
3. CEASE MAKING ADVANCES - To refrain from making any advances
under this Agreement but Lessor may make advances after the
happening of any such event without thereby waiving the right to
refrain from making other further advances or to exercise any of
the other rights Lessor may have.
4. RIGHTS TO ENTER - To require Lessee to vacate the Leased
Premises and permit Lessor (whether prior to the exercise of the
Put or during any period prior to the closing of the sale
pursuant to the Put;
(a) To enter into possession;
(b) To perform or cause to be performed any and all work and
labor necessary to complete the Improvements in accordance
with the Plans and Specifications;
(c) To employ security watchmen to protect the Leased
Premises; and
(d) To disburse that portion of the Development Financing
Proceeds not previously disbursed (including any Retainage)
to the extent necessary to complete the construction of the
Improvements in accordance with the Contract Documents and if
the completion requires a larger sum than the remaining
undisbursed portion of the Development Financing, to disburse
such additional funds, all of which funds so disbursed by
Lessor shall be deemed to have been disbursed to Lessee. For
this purpose, Lessee hereby consents upon an uncured default
by Lessee after the expiration of any applicable notice and
cure period, to the Lessor taking the following actions, or
not, in Lessor's reasonable discretion: to complete the
construction of the Improvements in the name of the Lessee,
and hereby empowers Lessor to take all actions necessary in
connection therewith including but not limited to using any
funds of Lessee including any balance which may be held in
escrow and any funds which may remain unadvanced hereunder
for the purpose of completing the said portion of the
Improvements in the manner called for by the Contract
Documents; to make such additions and changes and corrections
in the Contract Documents which shall be necessary or
desirable to complete the said portion of the Improvements in
substantially the manner contemplated by the Contract
Documents; to employ such contractors, subcontractors,
agents, architects, and inspectors as shall be required for
said purposes; to pay, settle or compromise all existing or
future bills and claims which are or may be liens against
said Leased Premises, or may be necessary or desirable for
the completion of the said portion of the Improvements or the
clearance of title to the Leased Premises; to execute all
applications and certificates in the name of Lessee which may
be required by any construction contract and to do any and
every act with respect to the construction of the said
portion of the Improvements which Lessee may do in its own
behalf. Lessor shall also have power to prosecute and defend
all actions and proceedings in connection with the
construction of the said portion of the Improvements and to
take such action and require such performance as it deems
necessary. In accordance therewith, Lessee hereby assigns
and quitclaims unto Lessor all sums to be advanced hereunder
including Retainage. Any funds so disbursed or fees or
charges so incurred shall be included in any amount necessary
for the Lessee to pay pursuant to the Put.
(e) To discontinue making advances hereunder to the Lessee
and to terminate Lessor's obligations under this Agreement.
5. RIGHTS NON CUMULATIVE - No right or remedy by this Agreement
or by any Development Financing Document or instrument delivered
by the Lessee pursuant hereto, conferred upon or reserved to the
Lessor shall be or is intended to be exclusive of any other right
or remedy and each and every right and remedy shall be cumulative
and in addition to any other right or remedy or now or hereafter
arising at a law or in equity or by statute. Except as Lessor
may hereafter otherwise agree in writing, no waiver by Lessor or
any breach by or default of Lessee of any of its obligations,
agreements, or covenants under this Agreement shall be deemed to
be a waiver of any subsequent breach of the same or any other
obligation, agreement or covenant, nor shall any forbearance by
Lessor to seek a remedy for such breach be deemed a waiver of its
rights and remedies with respect to such a breach, nor shall
Lessor be deemed to have waived any of its rights and remedies
unless it be in writing and executed with the same formality as
this Agreement.
6. EXPENSES - The Development Financing and this Agreement and
the performance by the Lessor or Lessee of their obligations
hereunder shall be without cost and expense to the Lessor, all of
which costs and expenses the Lessee agrees to pay and hold Lessor
harmless of and payment of which shall be secured by the
Development Financing Documents. Specifically, Lessee agrees to
pay all title charges, surveyor's fees, appraisals, loan fees and
attorney's fees and costs and the like incurred in connection
with this Agreement.
ARTICLE XII
GENERAL CONDITIONS AND MISCELLANEOUS
The following conditions shall be applicable throughout the term
of this Agreement:
1. RIGHTS OF THIRD PARTIES - All conditions of the obligations of
Lessor hereunder, including the obligation to make disbursements
are imposed solely and exclusively for the benefit of Lessee, and
no other person shall have standing to require satisfaction of
such conditions in accordance with their terms or be entitled to
assume that Lessor will refuse to make advances in the absence of
strict compliance with any or all thereof, and no other person
shall, under any circumstances, be deemed to be a beneficiary of
such conditions, any and all of which may be freely waived in
whole or in part by Lessor at any time if in its sole discretion
it deems it desirable to do so. In particular, Lessor makes no
representations and assumes no duties or obligations as to third
parties concerning the quality of the construction of the
Improvements or the absence therefrom of defects. In this
connection, Lessee agrees to and shall indemnify Lessor from any
liability, claims or losses resulting from the disbursement of
the Development Financing proceeds or from the condition of the
Leased Premises whether related to the quality of construction or
otherwise and whether arising during or after the term of the
Development Financing made by Lessor to Lessee in connection
therewith, except for Lessor's gross negligence or willful
misconduct. This provision shall survive the termination of this
Agreement and shall continue in full force and effect so long as
the possibility of any such liability, claims or losses exists.
2. EVIDENCE OF SATISFACTION OF CONDITIONS - Any condition of this
Agreement which requires the submission of evidence of the
existence or non- existence of a specified fact or facts implies
as a condition the existence or non- existence, as the case may
be, of such fact or facts, and Lessor shall, at all times, be
free independently to establish to its reasonable satisfaction
such existence or non-existence.
3. ASSIGNMENT - Lessee may not assign this Development Financing
Agreement or any of its rights or obligations hereunder without
the prior written consent of Lessor.
4. SUCCESSORS AND ASSIGNS - Whenever in this Agreement one of the
parties hereto is named or referred to, the heirs, legal
representatives, successors and assigns of such parties shall be
included and all covenants and agreements contained in this
Agreement by or on behalf of the Lessee or by or on behalf of the
Lessor shall bind and inure to the benefit of their respective
heirs, legal representatives, successors and assigns, whether so
expressed or not.
5. HEADINGS - The headings of the sections, paragraphs and
subdivisions of this Agreement are for the convenience of
reference only, and are not to be considered a part hereof and
shall not limit or otherwise affect any of the terms hereof.
6. INVALID PROVISIONS TO AFFECT NO OTHERS - If fulfillment of any
provision hereof, or any transaction related thereto at the time
performance of any such provision shall be due, shall involve
transcending the limit of validity prescribed by law, then, ipso
facto, the obligation to be fulfilled shall be reduced to the
limit of such validity; and such clause or provision shall be
deemed invalid as though not herein contained, and the remainder
of this Agreement shall remain operative in full force and
effect.
7. NUMBER AND GENDER - Whenever the singular or plural number,
masculine or feminine or neuter gender is used herein, it shall
equally include the other.
8. AMENDMENTS - Neither this Agreement nor any provision hereof
may be changed, waived, discharged or terminated orally, but only
by an instrument in writing signed by the party against whom
enforcement of the change, waiver, discharge or termination is
sought.
9. NOTICES - Any notice which any party hereto may desire or may
be required to give to any of the parties shall be in writing and
the mailing thereof by certified mail, or equivalent, to the
respective parties' addresses set forth hereinabove or to such
other place such party may by notice in writing designate as its
address shall constitute service of notice hereunder.
10. GOVERNING LAW - This Development Financing Agreement is
made and executed pursuant to and is intended to be governed by
the laws of the State where the Leased Premises are located.
11. FORCE MAJEURE - Anything in this Agreement to the contrary
notwithstanding, Lessee shall not be deemed in default with
respect to the performance of any of the terms, provisions,
covenants, and conditions of this Agreement (except for the
payment of all other monetary sums payable hereunder, to which
the provisions of this Section shall not apply), if the same
shall be due to any strike, lockout, civil commotion, warlike
operations, invasion, rebellion, hostilities, sabotage,
governmental regulations or controls, impracticability of
obtaining any materials or labor (except due to the payment of
monies), shortage or unavailability of a source of energy or
utility service, Act of God, casualty, adverse weather
conditions, or any cause beyond the reasonable control of Lessee
(except due to the payment of monies). Provided, however, in
order to invoke the extension of the Completion Date afforded by
this section, Lessee shall notify Lessor in writing within five
days of the occurrence of such force majeure, and in any event
the Completion Date shall be extended as a result of such
occurrence no more than reasonably necessary and in no event no
more than 90 days.
ARTICLE XIII
DAMAGE, DESTRUCTION, CONDEMNATION, USE OF INSURANCE PROCEEDS
1. DAMAGE OR DESTRUCTION OF THE LEASED PREMISES. Lessee will
give the Lessor prompt notice of any damage to or destruction of
the Leased Premises and in case of loss covered by policies of
insurance the Lessor (whether before or after the exercise of the
Put if Lessee be in default hereof) is hereby authorized at its
option to settle and adjust any claim arising out of such
policies and collect and receipt for the proceeds payable
therefrom, provided, that the Lessee may itself adjust and
collect for any losses arising out of a single occurrence
aggregating not in excess of $100,000.00. Any expense incurred
by the Lessor in the adjustment and collection of insurance
proceeds (including the cost of any independent appraisal of the
loss or damage on behalf of Lessor) shall be reimbursed to the
Lessor first out of any proceeds. Subject to paragraph 4 hereof,
the proceeds or any part thereof shall be applied to reduction of
the Put Price, which Put may then be exercised by Lessor, without
the application of any prepayment premium, or to the restoration
or repair of the Leased Premises, the choice of application to be
solely at the discretion of Lessor.
2. CONDEMNATION. Lessee will give the Lessor prompt notice
of any action, actual or threatened, in condemnation or eminent
domain affecting the Leased Premises and hereby assigns,
transfers, and sets over to the Lessor the entire proceeds of any
award or claim for damages for all or any part of the Leased
Premises taken or damaged under the power of eminent domain or
condemnation, the Lessor being hereby authorized to intervene in
any such action and to collect and receive from the condemning
authorities and give proper receipts and acquittances for such
proceeds. Lessee will not enter into any agreements with the
condemning authority permitting or consenting to the taking of
the Leased Premises unless prior written consent of Lessor is
obtained. Any expenses incurred by the Lessor in intervening in
such action or collecting such proceeds shall be reimbursed to
the Lessor first out of the proceeds. Subject to paragraph 4
hereof, the proceeds or any part thereof shall be applied to
reduction of the Put Price, which Put may then be exercised by
Lessor, without the application of any prepayment premium, or to
the restoration or repair of the Leased Premises, the choice of
application to be solely at the discretion of Lessor.
3. DISBURSEMENT OF INSURANCE AND CONDEMNATION PROCEEDS. Any
restoration or repair shall be done under the supervision of an
architect acceptable to Lessor and pursuant to plans and
specifications approved by the Lessor. Subject to paragraph 4
below, in any case where Lessor may elect to apply the proceeds
to repair or restoration or permit the Lessee to so apply the
proceeds they shall be held by Lessor for such purposes and will
from time to time be disbursed by Lessor to defray the costs of
such restoration or repair under such safeguards and controls as
Lessor may reasonably require to assure completion in accordance
with the approved plans and specifications and free of liens or
claims, to be disbursed as if such disbursements were
disbursements of Development Financing. Lessee shall on demand
deposit with Lessor any sums necessary to make up any deficits
between the actual cost of the work and the proceeds and provide
such lien waivers and completion bonds as Lessor may reasonably
require. Any surplus which may remain after payment of all costs
of restoration or repair shall be applied against the rent then
most remotely to be paid, whether due or not, without application
of any prepayment premium or credit.
4. LESSOR TO MAKE PROCEEDS AVAILABLE. In the event of
insured damage to the improvements or in the event of a taking by
condemnation of only a portion of the improvements or land area
of the Leased Premises, provided, the Completion Date need not be
extended more than 90 days, the appraised value of the Leased
Premises after such restoration or repair shall not have been
reduced, and provided further, no event of default exists under
this Agreement after the expiration of any applicable cure
periods and Lessee is diligently pursuing a course of conduct
reasonably designed to cure such default, and the Lessee
certifies to Lessor their intention to remain in possession of
the Leased Premises without any abatement or adjustment of rental
payments, the Lessor agrees to make the proceeds available to the
restoration or repair of the improvements on the Leased Premises
in accordance with the provisions of paragraph 3 hereof.
ARTICLE XIV
MANDATORY PUT UPON DEFAULT
Should Lessee commit an event of Default under this Agreement
or any Development Financing Document (after the expiration of
any applicable notice and cure period) ("Uncured Default"),
Lessor shall have the following rights:
Upon an Uncured Default, or damage or destruction or
condemnation of the Leased Premises not addressed by paragraph
XIII (4), if Lessor elects to exercise the following option,
Lessee shall purchase the Leased Premises from Lessor subject to
the following terms and conditions:
A. The purchase price at which Lessor
shall sell the Leased Premises to Lessee, shall be the
total amount of Initial Disbursed Funds disbursed by
Lessor to acquire the Leased Premises at the Closing
Date (as defined in the Commitment), plus the total
amount of funds disbursed pursuant to this Agreement,
plus all accrued interest and incurred expenses of
Lessor fundable pursuant to this Agreement, plus all
reasonable costs of collection and enforcement of the
terms hereof.
B. At such time as Lessor shall elect
to sell the Leased Premises, Lessor shall give Lessee
written notice of its intent to exercise its option to
sell the Leased Premises to Lessee, including in such
notice Lessor's calculation of the Purchase Price
through the actual closing of the sale of the Leased
Premises to Lessee pursuant to the terms hereof (the
"Sale Date"), which shall be sixty days from such notice
by Lessor. Lessee shall on or before the Sale Date
deliver the purchase price as set forth in subparagraph
(A) of this Article to Lessor. Upon such delivery,
which shall be preceded by ten (10) days notice to
Lessor, Lessor shall deliver to Lessee a warranty deed
and appropriate affidavits evidencing that Lessor
transfers the Leased Premises to Lessee subject to
restrictions, easements or other encumbrances upon title
existing as of the date of delivery, if any, except to
the extent, if any, placed of record or caused by
Lessor. The purchase price to be paid to Lessor shall
be a net amount. All expenses in connection with the
transfer of the Leased Premises, including, but not
limited to appraisal fees, title insurance, recording
fees, documentary stamps, conveyance tax, title
evidence, and all other closing costs, shall be paid by
the Lessee. The purchase price shall be paid by Lessee
in cash to Lessor concurrently with the conveyance of
the Leased Premises by the Lessor to the Lessee. If
Lessor elects to sell the Leased Premises to Lessee
pursuant to the terms hereof, the Leased Premises shall
be conveyed by the Lessor to the Lessee "As Is".
If Lessee shall fail to pay the Purchase Price on or before
the Sale Date, Lessor may terminate the Lease, and sell the
Leased Premises to any third party purchaser. Lessor may then
send Lessee notice of the shortfall (the "Deficiency"), if any,
between the amount of the net proceeds received by Lessor in such
sale, and the total amount of Initial Disbursed Funds disbursed
by Lessor to acquire the Parcel at the Closing Date (as defined
in the Commitment), plus the total amount of funds disbursed
pursuant to this Agreement, plus all accrued interest and
incurred expenses of Lessor fundable pursuant to this Agreement,
plus all reasonable costs of collection and enforcement of the
terms hereof. Lessee shall immediately upon receipt of such
notice of Deficiency remit the amount of the Deficiency in good
funds to Lessor.
Lessor's rights under this Mandatory Put shall expire on the
Final Disbursement Date when the amendment to the Lease has been
executed by all parties as set forth in Article IX hereof.
ARTICLE XV
RENT, INTEREST, AND RENTAL MODIFICATION DATE
1. Rent shall be payable by Lessee and calculated as follows, on
the funds advanced by Lessor on the Closing Date for the purchase
of the land and related closing costs (the "Initial Disbursed
Funds"): Rent shall accrue in the amount of $11,035.83 per month
absent an uncured Default by Lessee; absent an uncured Default,
accrued rent during the period of construction of the
Improvements prior to the Rental Modification Date shall not be
payable until the Final Disbursement Date. Upon the occurrence
of an uncured Default, all accrued rent shall be immediately due
and payable.
On the Rental Modification Date, if not otherwise in default
hereunder, Lessee shall begin paying Rent by the first of each
month (prorata for the balance of any partial month in which the
Rental Modification Date occurs, payable with the first such
adjusted Rent payable on the first day of the first full month
following the Rental Modification Date) in the amount of $
12,658.75 per month out of pocket. On the Final Disbursement
Date, absent an Uncured Default, Rent shall be adjusted and
documented by the lease amendment contemplated in ARTICLE IX
hereof and paid to Lessor as described in ARTICLE F. of the
Commitment.
2. Disbursed proceeds of the Development Financing shall
accrue interest at a rate of Eight and one-half percent (8.5%)
per annum, which interest shall accrue unpaid unless advanced by
Lessor to itself, or Lessee shall default hereunder, which
default shall remain uncured after the expiration of any
applicable notice and cure period. However, one hundred and
fifty days (150) from the date hereof, (the "Rental Modification
Date"), Lessee shall begin making monthly payments of
subsequently accruing interest at the rate of 9.75% per annum out
of pocket ("Out of Pocket Invoiced Interest") within 5 days after
invoice from Lessor.
3. Upon the occurrence of an event of default which remains
uncured after the expiration of applicable notice and cure
periods, disbursed proceeds of the Development Financing shall
accrue interest at a rate of Fifteen Percent (15.0%) per annum,
or the highest rate allowed by law, whichever is less, and the
rental rate on the Initial Disbursed funds shall increase to
Fifteen Percent (15.0%) per annum, or the highest rental rate
allowed by law, whichever is less.
ARTICLE XVI
COUNTERPART EXECUTION
Counterpart Execution. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original
and all of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, Lessee and Lessor have hereunto caused
these presents to be executed on the date first above written.
Razzoo's, Inc., a Texas corporation
By:/s/ D Fricke
Its:Director of Finance & Accounting
[Lessor's Signature appears on following page.]
AEI INCOME & GROWTH FUND 23 LLC
By: AEI Fund Management XXI, Inc.
By: /s/ Robert P Johnson
Robert P. Johnson, President
Exhibit A
Lot 10, Block 1, New City Block (NCB) 17115, Brookhollow
Subdivision, Unit-1, of the City of San Antonio, of Bexar County,
Texas.
RAZZOO'S
SAN ANTONIO, TEXAS
PRELIMINARY PROJECT COST BUDGET
REVISED: APRIL 12, 2000
Land and Hard Costs:
Land Acquisition Cost $ 1,550,000.00
Building/General Construction 1,432,792.00
Sitework 199,608.00
Construction Contingency-10.0% 17,600.00
SUBTOTAL HARD COSTS $ 3,200,000.00
Soft Costs:
Landscaping -vendor contract 100,000.00
Survey 1,500.00
Architect 33,500.00
Engineer-civil 11,500.00
Site Engineering 0
Phase I Environmental 0
Permits & Fees 4,500.00
Architect Development Services 10,000.00
Builders Risk Insurance 1,600.00
Soils Report/Materials Tests 0
Title Insurance & Closing Costs (Construction and S/L) 10,000.00
Development Interest 34,566.00
Attorney's Fees-Borrower 5,000.00
Attorney's Fees- AEI 12,000.00
AEI 1% Reimbursement 34,752.00
AEI State Qualification Fees 1,000.00
Appraisal 3,500.00
AEI Credit Report Fees (Promesa) 600.00
Miscellaneous 45,983.00
SUBTOTAL SOFT COSTS $ 310,000.00
TOTAL PROJECT COST $ 3,510,000.00
NET LEASE AGREEMENT
THIS LEASE, made and entered into effective as of the 19th
day of April, 2000, by and among AEI Income & Growth Fund 23 LLC,
a Minnesota limited liability company, whose corporate managing
member is AEI Fund Management XXI, Inc., a Minnesota corporation
("Fund 23"), whose principal business address is 1300 Minnesota
World Trade Center, 30 East Seventh Street, St. Paul, Minnesota
55101 (hereinafter referred to as "Lessor"), and Razzoo's, Inc.,
a Texas corporation (hereinafter referred to as "Lessee"), whose
principal business address is 15950 Dallas Parkway, Suite 785,
North Dallas, TX 75248.
WITNESSETH:
WHEREAS, Lessor is the fee owner of a certain parcel of real
property located at San Antonio, Texas, and legally described in
Exhibit "A", which is attached hereto and incorporated herein by
reference; and
WHEREAS, Lessee will be constructing the building and
improvements (together the "Building") on the real property
described in Exhibit "A", which Building is described in the
plans and specifications heretofore submitted to Lessor; and
WHEREAS, Lessee desires to lease said real property and
Building (said real property and Building hereinafter
collectively referred to as the "Leased Premises"), from Lessor
upon the terms and conditions hereinafter provided;
NOW, THEREFORE, in consideration of the Rents (defined
below), terms, covenants, conditions, and agreements hereinafter
described to be paid, kept, and performed by Lessee, Lessor does
hereby grant, demise, lease, and let unto Lessee, and Lessee does
hereby take and hire from Lessor and does hereby covenant,
promise, and agree as follows:
ARTICLE 1. LEASED PREMISES
Lessor hereby leases to Lessee, and Lessee leases and takes
from Lessor, the Leased Premises subject to the conditions of
this Lease.
ARTICLE 2. TERM
(A) The term of this Lease ("Term") shall be Fifteen (15)
consecutive "Lease Years", as hereinafter defined, commencing on
April 19th, 2000 ("Occupancy Date"), plus the period between the
date hereof and the end of the month in which the First Amendment
hereto is executed as contemplated under the Development
Financing Agreement described in Article 34 hereof. This Lease
may be renewed and extended pursuant to the provisions hereof and
the Term shall be deemed to include any Renewal Term(s) (defined
below) so exercised.
(B) The first "Lease Year" of the Term shall be for a
period of twelve (12) consecutive calendar months from the
Occupancy Date, plus the period between the date hereof and the
end of the month in which the First Amendment hereto is executed
as contemplated under the Development Financing Agreement
described in Article 34 hereof. Each Lease Year after the first
Lease Year shall be a successive period of twelve (12) full
calendar months.
(C) The parties agree that once the Occupancy Date has been
established, or upon the request of either party, a short form or
memorandum of this Lease will be executed for recording purposes.
That short form or memorandum of this Lease will set forth the
actual occupancy and termination dates of the Term and optional
Renewal Terms, as defined in Article 28 hereof, and the existence
of any right of renewal or first option to purchase, and that
said right(s) shall terminate when the Lessee shall lose right to
possession or this Lease is terminated, whichever occurs first.
The provisions of this Lease shall control, however, in regard to
any omissions from such memorandum of lease or any provisions
hereof which may be in conflict with the memorandum of lease.
ARTICLE 3. CONSTRUCTION OF IMPROVEMENTS
(A) Lessee warrants and agrees that the Building will be
constructed on the Leased Premises, and all other improvements to
the land, including the parking lot, approaches, and service
areas, will be constructed in all material respects by Lessee
substantially in accordance with the plot, plans, and
specifications heretofore submitted to Lessor.
(B) Lessee warrants that the Building and all other
improvements to the land contemplated will during and upon
completion of construction and at all times during Lessee's
occupancy of the Leased Premises shall comply with the laws,
ordinances, rules, and regulations of all state and local
governments.
(C) Lessee agrees to pay, if not already paid in full, for
all architectural fees and actual construction costs relating to
the Building and other related improvements on the Leased
Premises, in the past, present or future, which shall include,
but not be limited to, plans and specifications, general
construction, carpentry, electrical, plumbing, heating,
ventilating, air conditioning, decorating, equipment
installation, outside lighting, curbing, landscaping,
blacktopping, electrical sign hookup, conduit and wiring from
building, fencing, and parking curbs, builder's risk insurance
(naming Lessor, Lessee, and contractor as co-insured), and all
construction bonds for improvements made by or at the direction
of Lessee.
(D) Opening for business in the Leased Premises by Lessee
shall constitute an acceptance of the Leased Premises and an
acknowledgment by Lessee that the Leased Premises are in the
condition described under this Lease.
ARTICLE 4. RENT PAYMENTS
(A) Annual Rent Payable for the part of the first Lease Year
until execution of the First Amendment hereto or adjusted as
contemplated under the Development Financing Agreement:
Lessee shall pay to Lessor an annual Base Rent of $132,430,
which amount shall be payable in advance on the first day of each
month in equal monthly installments of $11,035.83 to Lessor Fund
23. If the first day of the Lease Term is not the first day of a
calendar month, then the monthly Rent payable for that partial
month shall be a prorated portion of the equal monthly
installment of Base Rent.
(B) Annual Rent Payable beginning in the third full Lease Year
(after the execution of the First Amendment hereto as
contemplated under the Development Financing Agreement) and each
Lease Year thereafter:
In the third and each Lease Year thereafter, the annual Base
Rent due and payable shall increase by an amount equal to One
Percent (1%) of the Base Rent payable for the immediately prior
Lease Year.
(C) Percentage Rent
Commencing with the Fourth (4th) full Lease Year, and for
each subsequent Lease Year, Lessee shall also pay within 90 days
after the end of such Lease Year annually, as Percentage Rent, an
amount equal to Two percent (2.0%) of the amount, if any, by
which Gross Receipts (defined below) for such Lease Year exceed
the average of the Gross Receipts of the first three full Lease
Years (commencing as of the beginning of the first full month of
the first full Lease Year commencing at the date of the First
Amendment to Lease contemplated in Article 34 herein).
(D) Provision of Financial Statements.
Lessee shall also provide financial statements (certified as
true and correct by an appropriate officer of the Lessee) to
support Lessee's calculation of such Percentage Rent due, if any.
If Lessee shall fail to provide the financial statements as
required by Lessor for the purposes of calculating Percentage
Rent for a prior Lease Year, Lessor may make a good faith
estimate of the same and that estimate shall be binding on
Lessee. When the required financial statements are provided to
Lessor, Lessor shall adjust such estimated increases within a
reasonable time thereafter. However, until such adjustment has
been made, Lessee shall continue to be obligated to pay the
estimated Percentage Rent and Base Rent. If any required
financial statements reflect that the calculation or estimate of
Percentage Rent and/or Base Rent has been understated, Lessor
shall give notice of the understatement to Lessee. Within five
(5) days after Lessor gives such notice, Lessee shall pay the
correct Rent amounts and arrearage.
(E) Overdue Payments.
Lessee shall pay interest on all overdue payments of Rent or
other monetary amounts due hereunder at the rate of twelve
percent (12%) per annum or the highest rate allowed by law,
whichever is less, accruing from the expiration of the applicable
notice and cure period after the date such Rent or other monetary
amounts were properly due and payable.
(F) Gross Receipts.
"Gross Receipts" as used herein is hereby defined to mean
gross sales of Lessee, or any assignee or sublessee of Lessee,
and of all licensees, concessionaires, from all business
conducted upon or from the Leased Premises, whether such business
be conducted by Lessee or by licensees, concessionaires, or
tenants of Lessee and whether such sales be evidenced by check,
credit, charge account, exchange, or otherwise, and shall
include, but not be limited to, the amounts received from the
sale of goods, services, foods, etc., performed on or at the
Leased Premises, whether such orders be filled from the Leased
Premises or elsewhere, whether such sales be by means of food,
services, or other vending devices, in the Leased Premises.
Gross Receipts shall not include sales for which cash has been
refunded, or allowances made on food or services claimed to be
defective or unsatisfactory. Gross Receipts shall not include
promotional discounts whether coupons or otherwise, nor the value
or cost of meals provided to employees or meals provided to
others for promotional purposes from whom no payment is received.
Gross Receipts shall not include the amount of any sales, use, or
gross receipts tax imposed by any federal, state, municipal, or
governmental authority directly on sales and collected from
customers. No franchise or capital stock tax and no income or
similar tax based upon income or profits as such shall be
deducted from Gross Receipts in any event whatsoever.
Additionally, Gross Receipts shall not include (1) tips paid to
employees; (ii) bad debts charged off by Lessee, (iii) delivery
charges, if applicable, (iv) any penalties or charges imposed by
Lessee on its customers for returns of checks, (v) interest,
service or sales carrying charges, or other charges, however
denominated, paid by customers for extension of credit on sales
and where not included in the sales price, (vi) returns to
suppliers for credit, and (vii) sums and claims received in
settlement of claims for loss or damage to supplies.
(A) Audit Rights.
Proper annual and quarterly statements, as set forth in
Article 26, shall be prepared and certified by Lessee to Lessor
in conjunction with such Gross Receipts. Lessor may, at its
option, cause an audit to be made of Lessee's business affairs
and records relating to the Leased Premises for the period
covered by any such statements issued by Lessee; provided such
audit is conducted pursuant to the following terms and
conditions: (a) Lessor may audit only Lessee's non-consolidated
books and records, (b) such audit must be conducted by Lessor's
employees or an independent nationally recognized accounting firm
that is not being compensated by Lessor on a contingency fee
basis; (c) such audit must be commenced within six (6) months
after Lessee delivers to Lessor Lessee's annual accounting of
Gross Receipts and once commenced, such audit shall be completed
in a diligent and expeditious manner; (d) Lessor shall supply
Lessee with a copy of the result of the audit within thirty (30)
days after Lessor's receipt of same; (e) no audit shall be
conducted if Lessor has previously conducted an audit for the
same time period; (f) such audit shall be conducted during normal
business hours, at a mutually agreed upon time, at Lessee's main
accounting office; (g) such audit shall be at Lessor's sole cost
and expense and any costs or expenses incurred by Lessee in
providing Lessor with the information required to perform such
audit, including, but not limited to, copying costs and delivery
fees shall be paid by Lessor to Lessee upon demand; and, (h) any
information obtained by Lessor as a result of such audit shall be
held in strict confidence by Lessor and shall not be disseminated
further except to Lessor's accountants, attorneys and lenders.
As used herein the term "non-consolidated" shall mean only such
of Lessee's books and records as reflect its sales solely at the
Leased Premises. Notwithstanding any provision of this Lease,
Lessor shall have no right under any circumstances or pursuant to
any provisions of this Lease to inspect or audit any of Lessee's
operations at any other location. Lessor shall not have the
right to audit Lessee's records more than once per Lease Year.
Once audited, a Lease Year may not again be audited.
Notwithstanding anything in the foregoing to the contrary, Lessee
shall have the right, to be exercised, if at all, within thirty
(30) days after Lessee's receipt of the audit report, to contest
such audit report, and in such case Lessor and Lessee shall work
together to resolve such differences (and Lessor's auditor's
report shall not be binding and conclusive upon Lessee until such
differences are resolved [if Lessee exercises such rights]).
Lessee shall maintain its books and records for at least three
years from the end of any Lease Year. If such audit shall
disclose a liability for Rent to the extent of three percent (3%)
or more in excess of the Rents theretofore computed and paid by
Lessee for such period, Lessee shall pay for the cost of any such
audit. Lessee shall also pay interest on the amount of such
liability at the lesser of the rate of twelve percent (12%) per
annum or the highest rate allowed by law accruing from the date
said liability would have been due and properly paid by Lessee
hereunder.
(H) If Lessee shall cease or suspend operation in violation
of this lease, resulting in operation for less than a full Lease
Year, Gross Receipts for the partial Lease Year shall be
annualized for purposes of calculating Percentage Rent due and
payable for such partial Lease Year.
ARTICLE 5. INSURANCE AND INDEMNITY
(A) Lessee shall, throughout the Term or Renewal Terms, if
any, of this Lease, at its own cost and expense, procure and
maintain insurance which covers the Leased Premises and
improvements against fire, wind, and storm damage (including
flood insurance if the Leased Premises is in a federally
designated flood prone area) and such other risks (including
earthquake insurance, if the Leased Premises is located in a
federally designated earthquake zone or in an ISO high risk
earthquake zone) as may be included in the broadest form of all
risk, extended coverage insurance as may, from time to time, be
available in amounts sufficient to prevent Lessor or Lessee from
becoming a co-insurer within the terms of the applicable
policies. In any event, the insurance shall not be less than one
hundred percent (100%) of the then insurable value, with such
commercially reasonable deductibles as Lessor may reasonably
require from time to time. Additionally, replacement cost
endorsements, vandalism endorsement, malicious mischief
endorsement, waiver of subrogation endorsement, waiver of co-
insurance or agreed amount endorsement (if available), and
Building Ordinance Compliance endorsement and Rent loss
endorsements (for a period of twelve months) must be obtained.
(B) Lessee agrees to place and maintain throughout the Term
or Renewal Terms, if any, of this Lease, at Lessee's own expense,
public liability insurance with respect to Lessee's use and
occupancy of said Leased Premises, including "Dram Shop" or
liquor liability insurance, if the same shall be or become
available in the State of Texas, with initial limits of at least
$2,000,000 per occurrence/$5,000,000 general aggregate (inclusive
of umbrella coverage), or such additional amounts as Lessor shall
reasonably require from time to time.
(C) Lessee agrees to notify Lessor in writing if Lessee is
unable to procure all or some part of the aforesaid insurance.
In the event Lessee fails to provide all insurance required under
this Lease, Lessor shall have the right, but not the obligation,
to procure such insurance on Lessee's behalf, following five (5)
business days written notice to Lessee of Lessor's intent to do
so (unless insurance then in place would during such period, or
already has, lapsed, in which case no notice need be given) and
Lessee may obtain such insurance during said five day period and
not then be in default hereunder. If Lessor shall obtain such
insurance, Lessee will then, within five (5) business days from
receiving written notice, pay Lessor the amount of the premiums
due or paid, together with interest thereon at the lesser of 12%
per annum or the highest rate allowable by law, which amount
shall be considered Rent payable by Lessee in addition to the
Rent payable pursuant to Article 4 hereof.
(D) All policies of insurance provided for or contemplated
by this Article may be satisfied under Lessee's blanket insurance
coverage. All policies required hereunder shall name Lessor,
Lessor's corporate general partners, and Lessor's individual
General Partner, Robert P. Johnson, and Lessee as additional
insured and loss payee, as their respective may appear, and shall
provide that the policies cannot be canceled, terminated,
changed, or modified without thirty (30) days written notice to
the parties. In addition, all of such policies shall be in place
on or before the Occupancy Date and contain endorsements by the
respective insurance companies waiving (to the extent allowed by
applicable law) all rights of subrogation, if any, against
Lessor. All insurance companies providing coverages must be
rated "A" or better by Best's Key Rating Guide (the most current
edition), or similar quality under a successor guide if Best's
Key Rating shall cease to be published. Lessee shall maintain
legible copies of any and all policies and endorsements required
herein, to be made available for Lessor's review and photocopy
upon Lessor's reasonable request from time to time. On the
Occupancy Date and no less than fifteen (15) business days prior
to expiration of such policies, Lessee shall provide Lessor with
legible copies of any and all renewal certificates of insurance
reflecting the above terms of the Policies (including
endorsements). Lessee agrees that it will not settle any
property insurance claims affecting the Leased Premises in excess
of $100,000 without Lessor's prior written consent, such consent
not to be unreasonably withheld or delayed. Lessor shall consent
to any settlement of an insurance claim wherein Lessee shall
confirm in writing with evidence reasonably satisfactory to
Lessor that Lessee has sufficient funds available to complete the
rebuilding of the Leased Premises.
(E) Lessee shall defend, indemnify, and hold Lessor
harmless against any and all claims, damages, and lawsuits
arising after the Occupancy Date of this Lease and any orders,
decrees or judgments which may be entered therein, brought for
damages or alleged damages resulting from any injury to person or
property or from loss of life sustained in or about the Leased
Premises, unless such damage or injury results from the
intentional misconduct or the gross negligence of Lessor and
Lessee agrees to save Lessor harmless from, and indemnify Lessor
against, any and all injury, loss, or damage, of whatever nature,
to any person or property caused by, or resulting from any act,
omission, or negligence of Lessee or any employee or agent of
Lessee acting in such capacity. In addition, Lessee hereby
releases Lessor from any and all liability for any loss or damage
caused by fire or any of the extended coverage casualties, unless
such fire or other casualty shall be brought about by the
intentional misconduct or gross negligence of Lessor. In the
event of any loss, damage, or injury caused by the joint
negligence or willful misconduct of Lessor and Lessee, they shall
be liable therefor in accordance with their respective degrees of
fault.
(F) Lessor hereby waives any and all rights that it may
have to recover from Lessee damages for any loss occurring to the
Leased Premises by reason of any act or omission of Lessee;
provided, however, that this waiver is limited to those losses
for which Lessor is compensated by its insurers, if the insurance
required by this Lease is maintained. Lessee hereby waives any
and all right that it may have to recover from Lessor damages for
any loss occurring to the Leased Premises by reason of any act or
omission of Lessor; provided, however, that this waiver is
limited to those losses for which Lessee is, or should be if the
insurance required herein is maintained, compensated by its
insurers.
ARTICLE 6. TAXES, ASSESSMENTS AND UTILITIES
(A) Lessee shall be liable and agrees to pay before delinquency
all charges for all public utility services rendered or
furnished to the Leased Premises, including heat, water, gas,
electricity, sewer, sewage treatment facilities and the like
("Utility Charges");
(B) Lessee shall pay all personal property taxes attributable
to its personalty on the Leased Premises, all real estate
taxes, special assessments, and municipal or other
governmental impositions, duties, and charges, general,
ordinary and extraordinary, of every kind and nature
whatsoever, which may be levied, imposed, or assessed against
the Leased Premises, or upon any improvements thereon, at any
time after the Occupancy Date of this Lease for the period
prior to the expiration of the Term hereof, or any Renewal
Term, if exercised, or which shall or may, during the Term of
this Lease, be charged, laid, levied, assessed, or imposed
upon, or become a lien or liens upon the Leased Premises or
any part thereof ("Taxes"). Such payments shall be considered
as Rent paid by Lessee in addition to the Rent defined at
Article 4 hereof. Nothing contained in this Lease, however,
shall be deemed or construed to include within Taxes: (i) any
transfer, documentary or stamp tax; (ii) any tax upon the
income, profits or business of Lessor (other than any sales
or other such tax that may be imposed on the Rent itself or
any additional rent); (iii) any personal property taxes,
capital levy, or franchise taxes which are imposed on any
property other than the Leased Premises; or (iv) payroll taxes,
inheritance or estate taxes Imposed on Lessor even though such
taxes may become a lien against the Leased Premises; provided,
however, if due to a change in the method of taxation, a
franchise tax, Rent tax, or income or profit tax shall be
levied against Lessor in substitution for or in lieu of any tax
which would otherwise constitute a real estate tax, such tax
shall be deemed a real estate tax for the purposes herein and
shall be paid by Lessee; otherwise Lessee shall not be liable
for any such tax levied against Lessor. Lessee shall make any
payments of Taxes on or before the later of (i) the due date
thereof or (ii) thirty (30) days after Lessor provides Lessee
with a copy of the tax bill therefor (if sent directly to Lessor
by the taxing authority). Lessor shall be responsible for any
interest or penalties caused by its delay in forwarding any tax
bills to Lessee. The Leased Premises shall be separately
assessed and a tax bill issued to Lessee separate from any other
property if permitted under applicable law. Lessor and Lessee
shall cooperate in providing to the taxing authority all
necessary documentation to request that such tax bill be issued
directly to Lessee.
(C) All Taxes which shall become payable for the first and last
tax years of the Term hereof shall be apportioned pro rata
between Lessor and Lessee in accordance with the respective
number of months during which each party shall be in
possession of the Leased Premises (or through the expiration
of the Term hereof, if longer) in said respective tax years.
Lessee shall pay within 60 days of the expiration of the
Term hereof Lessor's reasonable estimate of Lessee's pro-
rata share of real estate taxes for the last tax year of the
Term hereof, based upon the last available tax bill. Lessor
shall give Lessee notice of such estimated pro-rata real
estate taxes no later than 75 days prior to the end of the
Term hereof. Upon receipt of the actual statement of real
estate taxes for such prorated period, Lessor shall either
refund to Lessee any over payment of the pro-rata Lessee
obligation, or shall assess and Lessee shall pay promptly
upon notice any remaining portion of the Lessee's pro-rata
obligation for such real estate taxes.
(D) Lessee shall have the right to contest or review by legal
proceedings or in such other manner as may be legal (which,
if instituted, shall be conducted solely at Lessee's own
expense) any tax, assessment for public improvements or
benefits, or other governmental imposition aforementioned,
upon condition that, before instituting such proceeding
Lessee shall pay (under protest) such tax or assessments for
public improvements or benefits, or other governmental
imposition, duties and charges aforementioned, unless such
payment would act as a bar to such contest or interfere
materially with the prosecution thereof and in such event
Lessee shall post with Lessor alternative security
reasonably satisfactory to Lessor. All such proceedings
shall be begun as soon as reasonably possible after the
imposition or assessment of any contested items and shall
be prosecuted to final adjudication with reasonable
dispatch. In the event of any reduction, cancellation, or
discharge, Lessee shall pay the amount that shall be finally
levied or assessed against the Leased Premises or
adjudicated to be due and payable, and, if there shall be
any refund payable by the governmental authority with
respect thereto, if Lessee has paid the expense of Lessor in
such proceedings, Lessee shall be entitled to receive and
retain the refund, subject, however, to apportionment as
provided during the first and last years of the Term of this
Lease. If any general or special assessment is assessed
against the Leased Premises, Lessor shall elect to pay the
assessment in installments over the longest period of time
allowed by applicable law, and only those installments (or
partial installments) attributable to the Term of this Lease
shall be considered in determining Lessee's tax liability
for such assessment.
(E) Lessor, within sixty (60) days after notice to Lessee if
Lessee fails to commence such proceedings, may, but shall
not be obligated to, contest or review by legal proceedings,
or in such other manner as may be legal, and at Lessor's own
expense, any tax, assessments for public improvements and
benefits, or other governmental imposition aforementioned,
which shall not be contested or reviewed, as aforesaid, by
Lessee, and unless Lessee shall promptly join with Lessor in
such contest or review, Lessor shall be entitled to receive
and retain any refund payable by the governmental authority
with respect thereto.
(F) Lessor shall not be required to join in any proceeding
referred to in this Article, unless in Lessee's reasonable
opinion, the provisions of any law, rule, or regulation at
the time in effect shall require that such a proceeding be
brought by and/or in the name of Lessor, in which event
Lessor shall upon written request, join in such proceedings
or permit the same to be brought in its name, all at no cost
or expense to Lessor.
(A) In the event Lessee fails to pay such taxes, within thirty
(30) days after Lessor notifies Lessee in writing that Lessor has
paid such amount, Lessee shall also pay to Lessor, as additional
Rent, the amount of any sales tax, franchise tax, excise tax, on
Rents imposed by the State where the Leased Premises are located.
At Lessor's option, Lessee shall deposit with Lessor on the first
day of each and every month during the Term hereof, an amount
equal to one-twelfth (1/12) of any estimated sales tax payable to
the State in which the property is situated for Rent received by
Lessor hereunder ("Deposit"). From time to time out of such
Deposit Lessor will pay the sales tax to the State in which the
property is situated as required by law. In the event the
Deposit on hand shall not be sufficient to pay said tax when the
same shall become due from time to time, or the prior payments
shall be less than the current estimated monthly amounts, then
Lessee shall pay to Lessor on demand any amount necessary to make
up the deficiency. The excess of any such Deposit shall be
credited to subsequent payments to be made for such items. If a
default or an event of default shall occur under the terms of
this Lease, Lessor may, at its option, without being required so
to do, apply any Deposit on hand to cure such default, in such
order and manner as Lessor may elect.
(H) Lessor shall provide Lessee with a copy of any increased tax
assessment within thirty (30) days of its receipt. Lessee
shall have the right to contest any assessment or the
validity of any tax, provided that Lessee shall indemnify,
defend and hold Lessor and the Leased Premises harmless from
any cost, expense, liability, lien or damage arising out of
such contest.
ARTICLE 7. PROHIBITION ON ASSIGNMENTS AND SUBLETTING; TAKE-BACK
RIGHTS
(A) Except as otherwise expressly provided in this Article,
Lessee shall not:
1. assign or otherwise transfer this Lease, or any part of
Lessee's right, title or interest therein, except in the event
the Lease is assigned by Lessee to a successor publicly held
entity in the event of a public offering of Lessee's capital
stock or to any other entity controlled by or under common
control with Lessee or such successor of Lessee, provided Lessee
shall not be released from liability hereunder and Lessee and
Guarantor shall confirm in writing their continuing liability
hereunder; or
2. sublet all or any part of the Leased Premises or allow all
or any part of the Leased Premises to be used or occupied by any
other Persons (herein defined as a Party other than Lessee,
whether a corporation, a partnership, an individual, or other
entity); or
3. mortgage, pledge or otherwise encumber this Lease, or the
Leased Premises.
(B) For the purposes of this Article:
1. the transfer of voting control of any class of capital stock
of any corporate Lessee or sublessee, or the transfer of voting
control of the total interest in any other person which is a
Lessee or sublessee, however accomplished, whether in a single
transaction or in a series of related or unrelated transactions,
shall be deemed an assignment of this Lease, or of such sublease,
as the case may be;
2. an agreement by any other Person, directly or indirectly, to
assume Lessee's obligations under this Lease shall be deemed an
assignment;
3. any Person to whom Lessee's interest under this Lease passes
by operation of law, or otherwise, shall be bound by the
provisions of this Article;
4. each material modification, amendment or extension of any
sublease to which Lessor has previously consented shall be deemed
a new sublease;
Lessee agrees to furnish to Lessor, within five (5) business days
following demand at any time, such information and assurances as
Lessor may reasonably request that neither Lessee, nor any
previously permitted sublessee or assignee, has violated the
provisions of this Article.
(C) Except as permitted under Section (A)(1) above, if Lessee
agrees to assign this Lease or to sublet all or any portion of
the Leased Premises, Lessee shall, prior to the effective date
thereof (the "Effective Date"), deliver to Lessor executed
counterparts of any such agreement and of all ancillary
agreements with the proposed assignee or sublessee, as
applicable. If Lessee shall fail to comply with the terms
hereof, and shall have surrendered possession of the Leased
Premises in violation of its duty of prior notice and failed to
obtain Lessor's prior consent (if and where required herein),
and, if in such event, Lessor in its sole discretion (except as
otherwise specifically limited herein) shall not consent to a
proposed sublease or assignment, Lessor shall then have all of
the following rights (in addition to any rights Lessor may
possess occasioned by Lessee's default hereunder), any of which
Lessor may exercise by written notice to Lessee given within
thirty (30) days after Lessor receives the aforementioned
documents or becomes aware of Lessee's failure to comply with the
terms hereof:
1. with respect to a proposed assignment of this Lease, the
right to terminate this Lease on the Effective Date as if it were
the Expiration Date of this Lease;
2. with respect to a proposed subletting of the entire Leased
Premises, the right to terminate this Lease on the Effective Date
as if it were the Expiration Date; or
3. with respect to a proposed subletting of less than the
entire Leased Premises, the right to terminate this Lease as to
the portion of the Leased Premises affected by such subletting on
the Effective Date, as if it were the Expiration Date, in which
case Lessee shall promptly execute and deliver to Lessor an
appropriate modification of this Lease in form satisfactory to
Lessor in all respects.
4. with respect to a proposed subletting or proposed assignment
of this Lease, impose such conditions upon Lessor's consent as
Lessor shall determine in its sole discretion.
(D) If Lessor exercises any of its options under Article 7(C)
above, (or if Lessor shall impose conditions upon its consent and
Lessee shall fail to meet any conditions Lessor may impose upon
its consent), Lessor may then lease the Leased Premises or any
portion thereof to Lessee's proposed assignee or sublessee, as
the case may be, without liability whatsoever to Lessee.
(A) Notwithstanding anything above to the contrary, Lessor
agrees to consent to any assignment or sublease of all or any
portion of the Lessee's interests herein, provided Lessee passes
the Lessee Net Worth Test as defined below and Lessor is given
prior written notice of Lessee's intent to enter into such
sublease or assignment, accompanied by a copy of such sublease or
assignment, and the consents of Lessee and any guarantor of this
Lease (such consent to be in form and substance satisfactory to
Lessor) to such assignment or sublet, affirming their continuing
liability hereunder. Such proposed assignnee shall pass the
Lessee Net Worth Test if (a) the net worth of the proposed
assignee or sublessee (determined in accordance with GAAP) at the
time of such proposed assignment or sublet equals or exceeds the
net worth, similarly determined, for Lessee as of the effective
date of this Lease or at the time of such proposed assignment,
whichever is greater, or (b) such proposed assignee or sublessee
has at least 5 similar type restaurants under management and has
had such restaurants operating profitably for at least 5 years
prior to the date of such proposed assignment or sublease hereof.
(F) Separately, Lessor agrees that its consent to any other
proposed assignment or sublet shall not be unreasonably withheld
or delayed, provided Lessor is given prior written notice of
Lessee's intent to enter into such sublease or assignment,
accompanied by a copy of such sublease or assignment, and the
consents of Lessee and Guarantor (such consent to be in form and
substance satisfactory to Lessor) to such assignment or sublet,
affirming their continuing liability hereunder, and the proposed
assignee or sublessee meets Lessor's then current standards
("Tenant Standards") for new tenants in leasing agreements for
similar properties entered into by Lessor, such standards to
include but not be limited to such tenant's creditworthiness,
business experience, and reputation, consistently applied.
Lessee shall provide Lessor with reasonable evidence of such
proposed assignee's or sublessee's creditworthiness, business
experience, and reputation. If Lessor shall reasonably determine
that such proposed assignee or sublessee does not meet Lessor's
then current Tenant Standards, Lessor may withhold its consent to
such proposed assignment or sublet in Lessor's sole and absolute
discretion.
(G) Notwithstanding anything above to the contrary, Lessee's
interest herein shall not be assignable in any manner in
accordance with the terms hereof unless and until the termination
of the Development Financing Agreement as set forth in Article 35
hereof.
ARTICLE 8. REPAIRS AND MAINTENANCE
(A) Subject to the provisions of Articles 12 and 15 hereof,
Lessee covenants and agrees to keep and maintain in good order,
condition and repair the interior and exterior of the Leased
Premises during the Term of the Lease, or any Renewal Terms, and
further agrees that Lessor shall be under no obligation to make
any repairs or perform any maintenance to the Leased Premises.
Lessee covenants and agrees that it shall be responsible for all
repairs, alterations, replacements, or maintenance of, including
but without limitation to or of: The interior and exterior
portions of all doors; door checks and operators; windows; plate
glass; plumbing; water and sewage facilities; fixtures;
electrical equipment; interior walls; ceilings; signs; roof;
structure; interior building appliances and similar equipment;
heating and air conditioning equipment; and any equipment owned
by Lessor and leased to Lessee hereunder, as itemized on Exhibit
B attached hereto (if any) and incorporated herein by reference;
and further agrees to replace any of said equipment when
necessary. Lessee further agrees to be responsible for, at its
own expense, snow removal, lawn maintenance, landscaping,
maintenance of the parking lot (including parking lines, seal
coating, and blacktop surfacing), and other similar items.
(B) If Lessee refuses or neglects to commence or complete
repairs promptly and adequately, after prior written notice as
required under Article 16(B) (except in cases of emergency to
prevent waste or preserve the safety and integrity of the Leased
Premises, in which case no notice need be given), Lessor may
cause such repairs to be made, but shall not be required to do
so, and Lessee shall pay the cost thereof to Lessor within five
(5) business days following demand. It is understood that Lessee
shall pay all expenses and maintenance and repair during the Term
of this Lease. If Lessee is not then in default hereunder,
Lessee shall have the right to make repairs and improvements to
the Leased Premises without the consent of Lessor if such repairs
and improvements do not exceed One Hundred Thousand Dollars
($100,000.00), provided such repairs or improvements do not
affect the structural integrity of the Leased Premises. Any
repairs or improvements in excess of One Hundred Thousand Dollars
($100,000.00) or affecting the structural integrity of the Leased
Premises may be done only with the prior written consent of
Lessor, such consent not to be unreasonably withheld or delayed.
All alterations and additions to the Leased Premises shall be
made in accordance with all applicable laws and shall remain for
the benefit of Lessor, except for Lessee's moveable trade
fixtures. In the event of making such alterations as herein
provided, Lessee further agrees to indemnify and save harmless
Lessor from all expense, liens, claims or damages to either
persons or property or the Leased Premises which may arise out of
or result from the undertaking or making of said repairs,
improvements, alterations or additions, or Lessee's failure to
make said repairs, improvements, alterations or additions.
ARTICLE 9. COMPLIANCE WITH LAWS AND REGULATIONS
Lessee will comply with all statutes, ordinances, rules,
orders, regulations and requirements of all federal, state, city
and local governments, and with all rules, orders and
regulations of the applicable Board of Fire Underwriters which
affect the use of the improvements. Lessee will comply with all
easements, restrictions, and covenants of record against or
affecting the Leased Premises and any franchise or license
agreements required for operation of the Leased Premises in
accordance with Article 14 hereof.
ARTICLE 10. SIGNS
Lessee shall have the right to install and maintain on the
Building and elsewhere on the Leased Premises a sign or signs
advertising Lessee's business (including, without limitation,
pylon and/or monument signs), provided that the signs conform to
law, and further provided that the sign or signs conform
specifically to the written requirements of the appropriate
governmental authorities.
ARTICLE 11. SUBORDINATION
(A) Lessor reserves the right and privilege to subject and
subordinate this Lease at all times to the lien of any mortgage
or mortgages now or hereafter placed upon Lessor's interest in
the Leased Premises and on the land and buildings of which said
Leased Premises are a part, or upon any buildings hereafter
placed upon the land of which the Leased Premises are a part,
provided such mortgagee shall execute its standard form,
commercially reasonable subordination, attornment and non-
disturbance agreement, which shall provide, inter alia, that
Lessee shall remain in possession of the Leased Premises and be
afforded all the rights granted to Lessee hereunder provided
Lessee is not in default hereunder. Lessor also reserves the
right and privilege to subject and subordinate this Lease at all
times to any and all advances to be made under such mortgages,
and all renewals, modifications, extensions, consolidations, and
replacements thereof, provided such mortgagee shall execute its
standard form, commercially reasonable subordination, attornment
and non-disturbance agreement, which shall provide, inter alia,
that Lessee shall remain in possession of the Leased Premises and
be afforded all the rights granted to Lessee hereunder provided
Lessee is not in default hereunder.
(B) Lessee covenants and agrees to execute and deliver, upon
demand, such further instrument or instruments subordinating this
Lease on the foregoing basis to the lien of any such mortgage or
mortgages as shall be desired by Lessor and any proposed
mortgagee or proposed mortgagees, provided such mortgagee shall
execute its standard form, commercially reasonable subordination,
attornment and non-disturbance agreement. If Lessor defaults in
making payment under any mortgage or deed of trust encumbering
all or any part of the Leased Premises, or if Lessor is in breach
or in default of any such mortgage or deed of trust in any
respect, and the holder thereof shall have declared a default
thereunder, Lessee shall have the right, but not the duty, after
written notice to Lessor, to make all payments of Rent and other
charges thereafter becoming due under this Lease to the mortgagee
or beneficiary thereunder in lieu of Lessor, and payments so made
shall discharge the obligation of Lessee hereunder with respect
to such payments.
ARTICLE l2. CONDEMNATION OR EMINENT DOMAIN
(A) If the whole of the Leased Premises are taken by any public
authority under the power of eminent domain, or by private
purchase in lieu thereof, then this Lease shall automatically
terminate upon the date possession is surrendered, and Rent shall
be paid up to that day. If any part of the Leased Premises shall
be so taken as to render the remainder thereof materially
unusable in the opinion of a licensed third party arbitrator
reasonably approved by Lessor and Lessee, for the purposes for
which the Leased Premises were leased, then Lessor and Lessee
shall each have the right to terminate this Lease on thirty (30)
days notice to the other given within ninety (90) days after the
date of such taking. In the event that this Lease shall
terminate or be terminated, the Rent shall, if and as necessary,
be paid up to the day that possession was surrendered.
(B) If any part of the Leased Premises shall be so taken such
that it does not materially interfere with the business of
Lessee, then Lessee shall, with the use of the condemnation
proceeds to be made available by Lessor, but otherwise at
Lessee's own cost and expense, restore the remaining portion of
the Leased Premises to the extent necessary to render it
reasonably suitable for the purposes for which it was leased.
Lessee shall make all repairs to the building on the Leased
Premises to the extent necessary to constitute the building a
complete architectural unit. Provided, however, that such work
shall not exceed the scope of the work required to be done by
Lessee in originally constructing such building unless Lessee
shall demonstrate to Lessor's reasonable satisfaction the
availability of funds to complete such work. Provided, further,
the cost thereof to Lessor shall not exceed the proceeds of its
condemnation award, all to be done without any adjustments in
Rent to be paid by Lessee. This lease shall be deemed amended to
reflect the taking in the legal description of the Leased
Premises.
(A) Termination of this Lease because of condemnation shall be
without prejudice to the rights of either Lessor or Lessee to
recover from the condemning authority compensation and damages
for the injury or loss sustained by them as a result of the
taking. All compensation awarded or paid upon such total or
partial taking of the Leased Premises shall belong to and be the
property of Lessor without any participation by Lessee, whether
such damages shall be awarded as compensation for diminution in
value to the leasehold or to the fee of the premises herein
leased. Nothing contained herein shall be construed to preclude
Lessee from prosecuting any claim directly against the condemning
authority in such proceedings for: Loss of business; damage to
or loss of value or cost of removal of inventory, trade fixtures,
furniture, and other personal property belonging to Lessee;
provided, however, that no such claim shall diminish or otherwise
adversely affect Lessor's award or the award of any fee
mortgagee.
ARTICLE 13. RIGHT TO INSPECT
Lessor reserves the right to enter upon, inspect and examine
the Leased Premises at any time during Lessee's normal business
hours, after reasonable notice to Lessee, and Lessee agrees to
allow Lessor free access to the Leased Premises to show the
Leased Premises to any prospective purchaser or mortgagee. If
requested by Lessee, such entry by Lessor shall be under the
supervision of Lessee. Lessor shall not interfere with or create
a hazard to Lessee's normal business operations during such
entry. Upon default by Lessee (after the expiration of any
applicable notice and cure periods provided for herein) or at any
time within ninety (90) days of the expiration or termination of
the Lease, Lessee agrees to allow Lessor to then place "For Sale"
or "For Rent" signs on the Leased Premises. Lessor and Lessor's
representatives shall at all times while upon or about the Leased
Premises observe and comply with Lessee's reasonable health and
safety rules, regulations, policies and procedures. Lessor
agrees to indemnify and hold Lessee, its successors, assigns,
agents and employees from and against any liability, claims,
demands, cause of action, suits and other litigation or
judgements of every kind and character, including injury to or
death of any person or persons, or trespass to, or damage to, or
loss or destruction of, any property, whether real or personal,
to the extent resulting from the negligence or willful misconduct
or Lessor or Lessor's representatives while upon or about the
Leased Premises.
ARTICLE 14. EXCLUSIVE USE
After the Occupancy Date, Lessee expressly agrees and
warrants that the Leased Premises will be used exclusively as a
Razzoo's Restaurant or any other casual dining sit-down
restaurant. In any other such case, after obtaining Lessor's
prior written consent, such consent not to be unreasonably
withheld or delayed, Lessee may conduct any lawful business from
the Leased Premises. Lessee acknowledges and agrees that any
other use without the prior written consent of Lessor will
constitute a default under and a violation and breach of this
Lease. If Lessee should cease business operations at the Leased
Premises, Lessee shall continue to abide by all terms of this
Lease and shall continue to pay Base Rent according the to the
terms hereof (including scheduled rental increases in Article 4
and any renewal term(s)), and shall continue to pay annually the
same amount of annual percentage rent that may have been payable,
if any, for the last full Lease Year of operation prior to such
cessation of business operations at the Leased Premises.
ARTICLE 15. DESTRUCTION OF PREMISES
If, during the Term of this Lease, the Leased Premises are
totally or partially destroyed by fire or other elements, within
a reasonable time (but in no event longer than one hundred eighty
(180) days after such damage or destruction and subject to the
provisions herein below), Lessee shall repair and restore the
improvements so damaged or destroyed as nearly as may be
practical to their condition immediately prior to such casualty.
All rents payable by Lessee shall be abated during the period of
repair and restoration to the extent that Lessor shall be
compensated by the proceeds of the rent loss insurance required
to be maintained by Lessee hereunder.
Provided Lessee is not in default hereunder (and retains
according to the terms hereof the right to rebuild) with the
Lessor's prior written consent, which consent shall not be
unreasonably withheld or delayed, Lessee shall have the right to
promptly and in good faith settle and adjust any claim under such
insurance policies with the insurance company or companies on the
amounts to be paid upon the loss. The insurance proceeds shall
be used to reimburse Lessee for the cost of rebuilding or
restoration of the Leased Premises. Risk that the insurance
company shall be insolvent or shall refuse to make insurance
proceeds available shall be with Lessee. The Leased Premises
shall be so restored or rebuilt so as to be of at least equal
value and substantially the same character as prior to such
damage or destruction. If the insurance proceeds are less than
One Hundred Thousand Dollars ($100,000), they shall be paid to
Lessee for such repair and restoration. If the insurance proceeds
are greater than or equal to One Hundred Thousand Dollars
($100,000), they shall be deposited by Lessee and Lessor into a
customary construction escrow at a nationally recognized title
insurance company, or at Lessee's option, with Lessor
("Escrowee") and shall be made available from time to time to
Lessee for such repair and restoration. Such proceeds shall be
disbursed in conformity with the terms and conditions of a
commercially reasonable construction loan agreement. Lessee
shall, in either instance, deliver to Lessor or Escrowee (as the
case may be) satisfactory evidence of the estimated cost of
completion together with such architect's certificates, waivers
of lien, contractor's sworn statements and other evidence of cost
and of payments as the Lessor or Escrowee may reasonably require
and approve. If the estimated cost of the work exceeds One
Hundred Thousand Dollars ($100,000), all plans and specifications
for such rebuilding or restoration shall be subject to the
reasonable approval of Lessor.
Any insurance proceeds remaining with Escrowee after the
completion of the repair or restoration shall be paid to Lessor.
If the proceeds from the insurance are insufficient, after
review of the bids for completion of such improvements, or should
become insufficient during the course of construction, to pay for
the total cost of repair or restoration, Lessee shall, prior to
commencement of work, demonstrate to Escrowee and Lessor's
reasonable satisfaction, the availability of such funds necessary
to completion construction and Lessee shall deposit the same with
Escrowee for disbursement under the construction escrow
agreement.
Provided, further, that should the Leased Premises be
damaged or destroyed to the extent of fifty (50%) percent of its
value or such that Lessee cannot carry on business as a casual
dining restaurant without (in the opinion of a licensed third
party architect reasonably approved by Lessor and Lessee) being
closed for more than sixty (60) days (which duration of closure
may be established by Lessee by the affidavit of the approved
independent third party architect as to the estimated time of
repair) during the last three (3) years of the remaining Term of
this Lease or any of the option terms of this Lease, if any
further options to renew remain, Lessee may elect within 30 days
of such damage, to then exercise at least one (1) option to renew
this Lease so that the remaining Term of the Lease is not less
than five (5) years in order to be entitled to such insurance
proceeds for restoration or rebuilding. Absent such election,
this Lease shall terminate upon Lessor's receipt of insurance
proceeds (and the deductible thereunder) payable under policies
maintained pursuant to this Lease.
ARTICLE 16. ACTS OF DEFAULT
Each of the following shall be deemed a default by Lessee
and a breach of this Lease:
(A) Failure to pay the Rent or any monetary
obligation herein reserved, or any part thereof
when the same shall be due and payable, provided,
however, Lessee shall have five (5) business days
after written notice from Lessor within which to
cure the failure to pay the Rent or any monetary
obligation herein reserved.
(B) Failure to do, observe, keep and perform
any of the other terms, covenants, conditions,
agreements and provisions in this Lease to be
done, observed, kept and performed by Lessee;
provided, however, that Lessee shall have Thirty
(30) days after written notice from Lessor within
which to cure such default, or such longer time as
may be reasonably necessary if such default cannot
reasonably be cured within Thirty (30) days, if
Lessee is diligently pursuing a course of conduct
that in Lessor's reasonable opinion is capable of
curing such default, but in any event such longer
time shall not exceed 120 days after written
notice from Lessor of the default hereunder.
(C) The abandonment of the Leased Premises
by Lessee, the adjudication of Lessee as a
bankrupt, the making by Lessee of a general
assignment for the benefit of creditors, the
taking by Lessee of the benefit of any insolvency
act or law, the appointment of a permanent
receiver or trustee in bankruptcy for Lessee
property, or the appointment of a temporary
receiver which is not vacated or set aside within
sixty (60) days from the date of such appointment;
provided, however, that the foregoing shall not
constitute events of default so long as Lessee
continues to otherwise satisfy its obligations
(including but not limited to the payment of Rent)
hereunder.
ARTICLE 17. TERMINATION FOR DEFAULT
In the event of any uncured default by Lessee and at any
time thereafter, Lessor may serve a written notice upon Lessee
that Lessor elects to terminate this Lease. This Lease shall
then terminate on the date so specified as if that date had been
originally fixed as the expiration date of the term herein
granted, provided, however, that Lessee shall have continuing
liability for future rents for the remainder of the original Term
and any exercised Renewal Term as set forth in Article 19,
notwithstanding any earlier termination of the Lease hereunder
(except where Lessee has exercised a right to terminate where
granted herein), preserving unto Lessor the benefit of its
bargained-for rental payments.
ARTICLE 18. LESSOR'S RIGHT OF RE-ENTRY
In the event that this Lease shall be terminated as
hereinbefore provided, or by summary proceedings or otherwise, or
in the event of an uncured default hereunder by Lessee, or in the
event that the Leased Premises or any part thereof, shall be
abandoned by Lessee and Rent shall not be paid or other
obligations (including but not limited to repair and maintenance
obligations) of Lessee hereunder shall not be met, then Lessor or
its agents, servants or representatives, may immediately or at
any time thereafter, re-enter and resume possession of the Leased
Premises or any part thereof, and remove all persons and property
therefrom, either by summary dispossess proceedings or by a
suitable action or proceeding at law, or by force or otherwise
without being liable for any damages therefor, except for damages
resulting from Lessor's negligence or willful misconduct.
Notwithstanding anything above to the contrary, if Lessee is
still in possession of the Leased Premises, Lessor agrees to use
such legal proceedings (summary or otherwise) prescribed by law
to regain possession of the Leased Premises.
ARTICLE 19. LESSEE'S CONTINUING LIABILITY
(A) Should Lessor elect to re-enter as provided in this
Lease or should it take possession pursuant to legal proceedings
or pursuant to any notice provided for by law, Lessor shall
undertake commercially reasonable efforts to mitigate Lessee's
continuing liability hereunder as such efforts may be prescribed
by law or statute (which shall include listing the Leased
Premises with a licensed commercial real estate broker and
securing the property against waste, but shall not otherwise
include the expenditure of Lessor's funds, unless the same be
required by law or statute and cannot be waived as provided for
herein), and in addition, Lessor may either (i) terminate this
Lease or (ii) it may from time to time, without terminating the
contractual obligation of Lessee to pay Rent under this Lease,
make such alterations and repairs as may be necessary to relet
the Leased Premises or any part thereof for the remainder of the
original Term or any exercised Renewal Terms, at such Rent or
Rents, and upon such other terms and conditions as Lessor in its
sole discretion may deem advisable. Termination of Lessee's
right to possession by Court Order shall be sufficient evidence
of the termination of Lessee's possessory rights under this
Lease, and the filing of such an Order shall be notice of the
termination of Lessee's renewal rights as set forth in any
Memorandum of Lease of record.
(B) Upon each such reletting, without termination of the
contractual obligation of Lessee to pay Rent under this Lease,
all Rents received by Lessor shall be applied as follows:
1. First, to the payment of any
indebtedness other than Rent due hereunder from
Lessee to Lessor;
2. Second, to the payment of any costs and
expenses of such reletting, including brokerage
fees and attorney's fees and of costs of such
alterations and repairs;
3. Third, to the payment of Rent and other
monetary obligations due and unpaid hereunder;
4. Finally, the residue, if any, shall be
held by Lessor and applied in payment of future
Rent as the same may become due and payable
hereunder.
If such Rents received from such reletting during any month are
less than that to be paid during that month by Lessee hereunder,
Lessee shall pay any such deficiency to Lessor. Such deficiency
shall be calculated and paid monthly. No such re-entry or taking
possession of such Leased Premises by Lessor shall be construed
as an election on its part to terminate Lessee's contractual
obligations under this Lease respecting the payment of rent and
obligations for the costs of repair and maintenance unless a
written notice of such intention be given to Lessee.
(C) Notwithstanding any such reletting without termination,
Lessor may at any time thereafter elect to terminate this Lease
for any uncured breach.
(D) In addition to any other remedies Lessor may have with
this Article 19, Lessor may recover from Lessee all damages it
may incur by reason of any uncured breach, including: The cost
of recovering and reletting the Leased Premises; reasonable
attorney's fees; and, the present value (discounted at a rate of
8% per annum) of the excess of the amount of Rent and charges
equivalent to Rent reserved in this Lease for the remainder of
the Term over the then reasonable Rent value of the Leased
Premises (or the actual Rents receivable by Lessor, if relet),
(the Lessee bearing the burden of proof to demonstrate the amount
of rental loss for the same period, that through reasonable
efforts to mitigate damages, could have been avoided) for the
remainder of the Term, all of which amounts shall be immediately
due and payable from Lessee to Lessor in full. In the event that
the Rent obtained from such alternative or substitute tenant is
more than the Rent which Lessee is obligated to pay under this
Lease, then such excess shall be paid to Lessor provided that
Lessor shall credit such excess against the outstanding
obligations of Lessee due pursuant hereto, if any.
(E) It is the object and purpose of this Article 19 that
Lessor shall be kept whole and shall suffer no damage by way of
non-payment of Rent or by way of diminution in Rent. Lessee
waives and will waive all rights to trial by jury in any summary
proceedings or in any action brought to recover Rent herein which
may hereafter be instituted by Lessor against Lessee in respect
to the Leased Premises. Lessee hereby waives any rights of re-
entry it may have or any rights of redemption or rights to redeem
this Lease upon a termination of this Lease.
ARTICLE 20. PERSONALTY, FIXTURES AND EQUIPMENT
(A) All building fixtures, building machinery, and building
equipment used in connection with the operation of the Leased
Premises including, but not limited to, heating, electrical
wiring, lighting, ventilating, plumbing, walk-in
refrigerators/coolers, walk-in freezers, air conditioning
systems, and the equipment owned by Lessor and leased to Lessee
hereunder as specifically set forth on Exhibit B attached hereto,
if any, and incorporated herein by reference shall be the
property of Lessor. All other trade fixtures and all other
articles of personal property owned by Lessee shall remain the
property of Lessee.
(B) Lessee shall furnish and pay for any and all equipment,
furniture, trade fixtures, and signs, except for such items, if
any, described in Article 20(A) above, as owned by Lessor.
Lessee agrees that Lessor shall have a lien on all Lessee's
equipment, furniture, trade fixtures, furnishings, and signs as
security for the performance of and compliance with this Lease,
subject to the rights of any bona fide third party's security
interest in such property. Provided Lessee is not in default
hereunder, Lessor will agree that its interest in the personal
property of Lessee will be subordinated to financing which may
exist or which Lessee may cause to exist in the future on that
same personal property.
(C) At the end of the Term of this Lease, the property
described at Article 20(B) above, after written notice to Lessor
given at least ten (10) business days prior to any proposed
removal, may be removed from the Leased Premises by Lessee
regardless of whether or not such property is attached to the
Leased Premises so as to constitute a "fixture" within the
meaning of the law; however, all damages and repairs to the
Leased Premises which may be caused by the removal of such
property shall be paid for by Lessee.
ARTICLE 21. LIENS
Lessee shall not do or cause anything to be done whereby the
Leased Premises may be encumbered by any mechanic's or other
liens. Whenever and as often as any mechanic's or other lien is
filed against said Leased Premises purporting to be for labor or
materials furnished or to be furnished to Lessee, Lessee shall
remove the lien of record by payment or by bonding with a surety
company authorized to do business in the state in which the
property is located, within forty-five (45) days from the date of
the filing of said mechanic's or other lien and delivery of
notice thereof to Lessee. Should Lessee fail to take the
foregoing steps within said forty-five (45) day period (or in any
event, prior to the expiration of the time within which Lessee
may bond over such lien to remove it as a lien upon the Leased
Premises), Lessor shall have the right, among other things, to
pay said lien without inquiring into the validity thereof, and
Lessee shall forthwith reimburse Lessor for the total expense
incurred by it in discharging said lien as additional Rent
hereunder.
ARTICLE 22. NO WAIVER EXCEPT IN WRITING
No agreement to accept a surrender of the Leased Premises or
termination of this Lease shall be valid unless in writing signed
by Lessor. The delivery of keys to any employee of Lessor or
Lessor's agents shall not operate as a termination of the Lease
or a surrender of the Leased Premises. The failure of Lessor to
seek redress for violation of any rule or regulation, shall not
prevent a subsequent act, which would have originally constituted
a violation, from having all the force and effect of an original
violation. Neither payment by Lessee or receipt by Lessor of a
lesser amount than the Rent herein stipulated shall be deemed to
be other than on account of the earliest stipulated Rent. Nor
shall any endorsement or statement on any check nor any letter
accompanying any check or payment as Rent be deemed an accord and
satisfaction. Lessor may accept such check or payment without
prejudice to Lessor's right to recover the balance of such Rent
or pursue any other remedy provided in this Lease. This Lease
contains the entire agreement between the parties, and any
executory agreement hereafter made shall be ineffective to change
it, modify it or discharge it, in whole or in part, unless such
executory agreement is in writing and signed by the party against
whom enforcement of the change, modification or discharge is
sought. The failure of Lessee to insist upon prompt and strict
performance of any of the terms, conditions or undertakings of
this Lease, or to exercise any right herein conferred, in any one
or more instances, shall not be construed as a waiver of the same
or any other term, condition, undertaking, right or option.
ARTICLE 23. QUIET ENJOYMENT
Lessor covenants that Lessee, upon paying the Rent set forth
in Article 4 and all other sums herein reserved as Rent and upon
the due performance of all the terms, covenants, conditions and
agreements herein contained on Lessee's part to be kept and
performed, so long as Lessee is not in default hereof beyond any
applicable notice and cure periods, Lessee shall have, hold and
enjoy the Leased Premises free from molestation, eviction, or
disturbance by Lessor, or by any other person or persons lawfully
claiming the same, and that Lessor has good right to make this
Lease for the full Term granted, including renewal periods.
ARTICLE 24. BREACH - PAYMENT OF COSTS AND ATTORNEYS' FEES
Each party agrees to pay and discharge all reasonable costs,
and actual attorneys' fees, including but not limited to
attorney's fees incurred at the trial level and in any appellate
or bankruptcy proceeding, and expenses that shall be incurred by
the prevailing party in enforcing the covenants, conditions and
terms of this Lease or defending against an alleged breach,
including the costs of reletting. Such costs, attorneys fees,
and expenses if incurred by Lessor shall be considered as Rent as
due and owing in addition to any Rent defined in Article 4
hereof.
ARTICLE 25. ESTOPPEL CERTIFICATES
Either party to this Lease will, at any time, upon not less
than ten (10) business days prior request by the other party,
execute, acknowledge and deliver to the requesting party a
statement in writing, executed by an executive officer of such
party, certifying that: (a) this Lease is unmodified (or if
modified then disclosure of such modification shall be made); (b)
this Lease is in full force and effect; (c) the date to which the
Rent and other charges have been paid; and (d) to the knowledge
of the signer of such certificate that the other party is not in
default in the performance of any covenant, agreement or
condition contained in this Lease, or if a default does exist,
specifying each such default of which the signer may have
knowledge. It is intended that any such statement delivered
pursuant to this Article may be relied upon by any prospective
purchaser or mortgagee of the Leased Premises or any assignee of
such mortgagee or a purchaser of the leasehold estate.
ARTICLE 26. FINANCIAL STATEMENTS
During the Term of this Lease, Lessee will, within ninety
(120)[changed to conform to the facts /s/DF] days after the end
of Lessee's fiscal year, furnish Lessor with Lessee=s financial
statements (in SEC Form 10-K, if available). The financial
statements shall be audited, at the Lessee's expense, by a
nationally recognized independent certified public accounting
firm reasonably acceptable to Lessor and shall be prepared in
conformity with generally accepted accounting principles (GAAP).
Lessee shall also provide Lessor with financial statements for
the Leased Premises within 90 days after the end of each Lease
Year. The financial statements for the Leased Premises do not
need to be prepared by an independent certified public
accountant, but shall be certified as true and correct by the
chief financial officer or other authorized officer of Lessee.
Additionally, during the Term of the Lease, Lessee will within
forty-five (45) days from the end of each quarter of each fiscal
year, furnish Lessor with Lessee's financial statements (in SEC
Form 10-Q if available) and financial statements of the Leased
Premises for such quarter. Lessor shall have the right to
require such financial statements for the Lessee and the Leased
Premises on a monthly basis after the occurrence of a default in
any Lease Year. Provided, however, if Lessee shall not commit a
default for twelve consecutive months, Lessor's right to require
such monthly financial statements shall terminate until Lessee
shall again commit a default in any given Lease Year. Said
quarterly (or monthly, if required by Lessor) financial
statements do not need to be prepared by an independent certified
public accountant, but shall be certified as true and correct by
the chief financial officer or other authorized officer of
Lessee. The financial statements shall conform to GAAP, and
include a balance sheet and related statements of operations,
statement of cash flows, statement of changes in shareholder's
equity, and related notes to financial statements, if any.
ARTICLE 27. MORTGAGE
Lessee does hereby agree to make reasonable modifications of
this Lease requested by any Mortgagee of record from time to
time, provided such modifications are not substantial and do not
increase any of the Rents or obligations of Lessee under this
Lease or substantially modify any of the business elements of
this Lease.
ARTICLE 28. OPTION TO RENEW
If this Lease is not previously canceled or terminated and
so long as Lessee is not in default hereof beyond any applicable
notice and cure periods, then Lessee shall have the option to
renew this Lease upon the same conditions and covenants contained
in this Lease for Two (2) consecutive periods of Five (5) years
each (singularly "Renewal Term"). Rent during the Renewal Term
shall increase each Lease Year by One Percent (1%) of the Rent
payable for the preceding Lease Year.
If exercised by Lessee, the first Renewal Term will commence
on the day following the date the original Term expires and
successive Renewal Terms, if exercised by Lessee, shall commence
on the day following the last day of the then expiring Renewal
Term. Except as otherwise provided in Article 15 hereof, Lessee
must give ninety (90) days written notice to Lessor of its intent
to exercise this option prior to the expiration of the original
Term of this Lease or any Renewal Term, as the case may be.
ARTICLE 29. MISCELLANEOUS PROVISIONS
(A) All written notices shall be given to Lessor or Lessee
by certified mail or nationally recognized overnight mail.
Notices to either party shall be addressed to the person and
address given on the first page hereof. Lessor and Lessee may,
from time to time, change these addresses by notifying each other
of this change in writing. Notices of overdue Rent may be sent
to Lessee by regular, special delivery, or nationally recognized
overnight mail.
(B) The terms, conditions and covenants contained in this
Lease and any riders and plans attached hereto shall bind and
inure to the benefit of Lessor and Lessee and their respective
successors, heirs, legal representatives, and assigns.
(C) This Lease shall be governed by and construed under the
laws of the State where the Leased Premises are situate.
(D) In the event that any provision of this Lease shall be
held invalid or unenforceable, no other provisions of this Lease
shall be affected by such holding, and all of the remaining
provisions of this Lease shall continue in full force and effect
pursuant to the terms hereof.
(E) The Article captions are inserted only for convenience
and reference, and are not intended, in any way, to define,
limit, describe the scope, intent, and language of this Lease or
its provisions.
(F) In the event Lessee remains in possession of the Leased
Premises herein leased after the expiration of this Lease and
without the execution of a new lease and without Lessor's written
permission, Lessee shall be deemed to be occupying said Leased
Premises as a tenant from month-to-month, subject to all the
conditions, provisions, and obligations of this Lease insofar as
the same can be applicable to a month-to-month tenancy except
that the monthly installment of Rent shall be One Hundred Fifty
percent (150%) the amount due on the last month prior to such
expiration.
(G) If any installment of Rent (whether lump sum, monthly
installments, or any other monetary amounts required by this
Lease to be paid by Lessee and deemed to constitute Rent
hereunder) shall not be paid when due, or a third non-monetary
default in any given twelve month period shall remain uncured
after the expiration of any applicable cure period, Lessor shall
have the right to charge Lessee a late charge of $250.00 per
month for each month that any amount of Rent installment remains
unpaid or non-monetary default shall go uncured after the first
such occurrence in any 12 month period. Said late charge shall
commence after such installment is due or non-monetary default
goes uncured after the expiration of any applicable cure period
and continue until said installment, interest and all accrued
late charges are paid in full or such non-monetary default is
cured.
(H) Any part of the Leased Premises may be conveyed by
Lessor for private or public non-exclusive easement purposes at
any time, provided Lessor obtains Lessee's prior written consent,
not to be unreasonably withheld or delayed. Such consent shall
not be deemed to be unreasonably withheld in the event the
proposed easement shall interfere with Lessee's access,
visibility, or business operations. In such event Lessor shall,
at its own cost and expense, restore the remaining portion of the
Leased Premises to the extent necessary to render it reasonably
suitable for the purposes for which it was leased, all to be done
without adjustments in Rent to be paid by Lessee. All proceeds
from any conveyance of an easement shall belong solely to Lessor.
In an effort to enhance Lessee's operations in the Leased
Premises, Lessee may, from time to time, desire to allow a third
party to encumber the Leased Premises with an easement,
restrictive covenant or other title exception, or have an
existing restriction or other title exception modified. Lessor
covenants with Lessee that, upon written request by Lessee for
Lessor's cooperation and/or action (e.g., execution of any such
instrument) in connection with such matters, Lessor shall
promptly accommodate such request, so long as such request is
reasonable and will not unduly adversely affect Lessor's ability
to lease, sell or finance the Leased Premises. In such event
Lessee shall, at its own cost and expense, restore the remaining
portion of the Leased Premises to the extent necessary to render
it reasonably suitable for the purposes for which it was leased,
all to be done without adjustments in Rent to be paid by Lessee.
(I) For the purpose of this Lease, the term "Rent" shall be
defined as Base Rent and Percentage Rent under Article 4, and any
other monetary amounts required by this Lease to be paid by
Lessee.
(J) Lessee agrees to cooperate with Lessor to allow Lessor
to obtain and use at Lessor's expense promotional photographs of
the Leased Premises, to the extent permitted by Lessee's
franchisor or licensor.
ARTICLE 30. REMEDIES
NON-EXCLUSIVITY. Notwithstanding anything contained herein
it is the intent of the parties that the rights and remedies
contained herein shall not be exclusive but rather shall be
cumulative along with all of the rights and remedies of the
parties which they may have at law or equity. In the event of a
breach by Lessor, Lessee shall be entitled to all remedies at law
or equity, to be cumulatively enforced.
ARTICLE 31. HAZARDOUS MATERIALS INDEMNITY
Lessee covenants, represents and warrants to Lessor, its
successors and assigns, (i) that it has not used or permitted and
will not use or permit the Leased Premises to be used in
violation of any federal, state or municipal law, decision,
statute, rule, ordinance or regulation currently in existence or
hereafter enacted or rendered, and then only to the extent
necessary to the operation of the Leased Premises as a
restaurant, whether directly or through contractors, agents or
tenants, and to the best of Lessee's knowledge and except as
disclosed to Lessor in writing, the Leased Premises has not at
any time been used for the generating, transporting, treating,
storage, manufacture, emission of, or disposal of any dangerous,
toxic or hazardous pollutants, chemicals, wastes or substances as
defined in the Federal Comprehensive Environmental Response
Compensation and Liability Act of 1980 ("CERCLA"), the Federal
Resource Conservation and Recovery Act of 1976 ("RCRA"), or any
other federal, state or local environmental laws, statutes,
regulations, requirements and ordinances ("Hazardous Materials");
(ii) that to the best of Lessee's knowledge there have been no
investigations or reports involving Lessee, or the Leased
Premises by any governmental authority which in any way pertain
to Hazardous Materials (iii) that to the best of Lessee's
knowledge the operation of the Leased Premises has not violated
and is not currently violating any federal, state or local law,
regulation, ordinance or requirement governing Hazardous
Materials; (iv) that to the best of Lessee's knowledge the Leased
Premises is not listed in the United States Environmental
Protection Agency's National Priorities List of Hazardous Waste
Sites nor any other list, schedule, log, inventory or record of
Hazardous Materials or hazardous waste sites, whether maintained
by the United States Government or any state or local agency; and
(v) that the Leased Premises will not contain any formaldehyde,
urea or asbestos, except as may have been disclosed in writing to
Lessor by Lessee at the time of execution and delivery of this
Lease. Lessee agrees to indemnify and reimburse Lessor, its
successors and assigns, for:
(a) any breach of these representations and warranties, and
(b) any loss, damage, expense or cost arising out of
or incurred by Lessor which is the result of a breach
of, misstatement of or misrepresentation of the above
covenants, representations and warranties, and
(c) any and all liability of any kind whatsoever which
Lessor may, for any cause and at any time, sustain or
incur by reason of Hazardous Materials discovered on
the Leased Premises during the Term hereof or placed or
released on the Leased Premises by Lessee;
together with all attorneys' fees, costs and disbursements
incurred in connection with the defense of any action against
Lessor arising out of the above. These covenants,
representations and warranties shall be deemed continuing
covenants, representations and warranties for the benefit of
Lessor, and any successors and assigns of Lessor and shall
survive expiration or sooner termination of this Lease. The
amount of all such indemnified loss, damage, expense or cost,
shall bear interest thereon at the lesser of 15% or the highest
rate of interest allowed by law and shall become immediately due
and payable in full on demand of Lessor, its successors and
assigns.
Notwithstanding any other provision of this Lease, Lessor shall
and hereby does agree to indemnify, protect, defend and hold
harmless Lessee, and its partners, directors, officers,
employees, shareholders, agents, contractors, and each of their
respective successors and assigns, from and against any and all
costs, claims, judgments, damages, penalties, fines, taxes,
costs, liabilities, losses and expenses arising at any time
during or after the term of this Lease as a result of or in
connection with (a) the presence of any Hazardous Materials on
the Leased Premises as the direct result of Lessor's activities
on or in the Leased Premises; (b) any contamination by Lessor, or
by its employees, agents, invitees, customers, licensees or
contractors, of the Leased Premises, or the groundwaters thereof,
and occasioned by the use, transportation, storage, spillage or
discharge thereon, therein or therefrom of any toxic or hazardous
chemicals, compounds, materials or substances, by Lessor, or by
its employees, agents, invitees, customers, licensees or
contractors; or (c) any discharge of toxic or hazardous sewage or
waste materials from the Leased Premises into any septic facility
or sanitary sewer system serving the Leased Premises, by Lessor
or by its employees, agents, invitees, customers, licensees or
contractors.
ARTICLE 32. ESCROWS
Upon the occurrence of a third default in any twelve month
period by Lessee, or upon the request of Lessor's mortgagee, if
any, Lessee shall deposit with Lessor on the first day of each
and every month, an amount equal to one-twelfth (1/12th) of the
estimated annual real estate taxes, assessments and insurance (if
the insurance is to be purchased by Lessor) ("Charges") due on
the Leased Premises, or such higher amounts reasonably determined
by Lessor as necessary to accumulate such amounts to enable
Lessor to pay all charges due and owing at least thirty (30) days
prior to the date such amounts are due and payable. If Lessee is
depositing into such escrow as a result of its third default in
any given twelve month period, and Lessee shall not commit a
default for a period of 24 months from the commencement of such
escrowing, such escrow shall be discontinued unless renewed
according to the terms hereof for the occurrence of a third
default in any twelve month period, or upon the request of
Lessor's mortgagee.
From time to time out of such deposits Lessor will, upon the
presentation to Lessor by Lessee of the bills therefor, pay the
Charges or at Lessee's option, will upon presentation of
receipted bills therefor, reimburse Lessee for such payments made
by Lessee. In the event the deposits on hand shall not be
sufficient to pay all of the estimated Charges when the same
shall become due from time to time or the prior payments shall be
less than the currently estimated monthly amounts, then Lessee
shall pay to Lessor on demand any amount necessary to make up the
deficiency. The excess of any such deposits shall be credited to
subsequent payments to be made for such items. If a default or
an event of default shall occur under the terms of this Lease,
Lessor may, at its option, without being required so to do, apply
any Deposit on hand to cure the default, in such order and manner
as Lessor may elect.
ARTICLE 33. NET LEASE
Notwithstanding anything contained herein to the contrary it
is the intent of the parties hereto that this Lease shall be a
net lease and that the Rent defined pursuant to Article 4 should
be a net Rent paid to Lessor. Any and all other expenses
including but not limited to, maintenance, repair, insurance,
taxes, and assessments, shall be paid by Lessee.
ARTICLE 34. DEVELOPMENT FINANCING AGREEMENT
The parties hereto hereby acknowledge that the terms hereof
are subject to and shall in the event of conflicts be controlled
by that certain Development Financing Agreement of even date
herewith (the "Development Financing Agreement"), until such
Agreement is terminated in accordance with its terms.
ARTICLE 35. RIGHT TO PURCHASE
Lessor, for itself, its successors and assigns, hereby gives and
grants to Lessee a right of first refusal (the "Right of First
Refusal") to purchase the Leased Premises, subject to the
following terms and conditions:
(A) DURATION OF RIGHT OF FIRST REFUSAL. The Right of First
Refusal and all rights and privileges of Lessee hereunder shall
be in force for the Term of this Lease until the expiration of
Lessee's right to possession.
(B) MANNER OF EXERCISING RIGHT OF FIRST REFUSAL. If Lessor
("Selling Lessor") shall desire to sell all or any portion of its
interest in the Leased Premises (subject to the terms of this
Lease), Selling Lessor shall give Lessee written notice of
Selling Lessor's intention to sell Selling Lessor's interest
(partial or whole) in the Leased Premises. Such notice
("Lessor's Notice") shall give Selling Lessor's name and address
and state a price at which Selling Lessor intends to sell and
will sell a specified portion or all of its interest in the fee
simple to the Leased Premises. If Lessee shall fail to exercise
its Right of First Refusal as set forth herein, the terms of
Article 35(E) shall apply. For twenty (20) business days
following the giving of such notice, Lessee shall have the option
to purchase such portion of the fee interest of the Selling
Lessor as set forth in Lessor's Notice at the price in cash
stated in the Lessor's Notice. A written notice in substantially
the following form, addressed to Selling Lessor and signed by
Lessee and given, in accordance with the provisions of Article
29(A) hereof, within the period for exercising the Right of First
Refusal, submitted with a bank cashier's check or money order
payable to the order of Selling Lessor in the amount of $5,000.00
(the "Earnest Money") shall be an effective exercise of Lessee's
Right of First Refusal, to wit:
(date)
"We hereby exercise the Right of First Refusal to purchase such
portion of the fee interest of the Selling Lessor (as set forth
in Lessor's Notice) in the property commonly known as Razzoo's,
San Antonio, Texas, pursuant to the Right of First Refusal
contained in that certain Net Lease Agreement between us
pertaining to said Leased Premises."
(C) TERMS OF SALE IF RIGHT OF FIRST REFUSAL EXERCISED.
Upon Lessee's exercise of the Right of First Refusal in
accordance with the provisions of subparagraph (B) hereof,
Selling Lessor shall be obligated to sell and convey by
recordable general warranty deed, good and indefeasible title to
its interest in the Leased Premises (or such portion thereof as
set forth in Lessor's Notice) subject only to the matters
affecting title which were of record at the time Selling Lessor
came into title to the Leased Premises and those matters which
Lessee created, suffered or permitted to accrue during the Term
hereof (except any mortgages, liens or other monetary
encumbrances created by Lessor, which in all events Selling
Lessor shall be required to have released of record), and Lessee
shall be obligated to purchase such Lessor's interest upon the
following terms and conditions:
(i) PRICE. The price "Purchase Price" at which
Selling Lessor shall sell and Lessee shall purchase the
Leased Premises shall be the price stated in Lessor's
Notice.
(ii) CLOSING. Closing shall be sixty (60) days after
the expiration of the twenty days within which Lessee
may exercise its Right of First Refusal, unless the
parties mutually agree otherwise. The Purchase Price
less credit for the Earnest Money and any other credits
to which Lessee is entitled hereunder shall be tendered
in cash or other certified funds by Lessee at Closing.
(iii) EVIDENCE OF TITLE. Not less than ten (10)
days after Lessee exercises its rights hereunder,
Selling Lessor shall obtain a commitment for an ALTA
owner's policy of title insurance dated within thirty
(30) days of the closing date, issued by a nationally
recognized title insurance company selected by Selling
Lessor (the "Title Company") in the amount of the
Purchase Price determined pursuant to subparagraph
(C)(i) above, naming Lessee as the proposed insured,
and covering the fee simple title to the Leased
Premises, and showing Selling Lessor vested with good
title to portion of the Leased Premises being sold,
subject only to the matters affecting title which were
of record at the time Selling Lessor came into title to
the Leased Premises and those matters which Lessee
created, suffered or permitted to accrue during the
Term hereof (except any mortgages, liens or other
monetary encumbrances created by Lessor, which in all
events Selling Lessor shall be required to have
released of record). Such title commitment shall be
conclusive evidence of good title. If Lessee shall
make objection to the marketability of title, Selling
Lessor shall have no obligation to make title
marketable, but in lieu thereof, may withdraw Lessor's
notice of intent to market the Leased Premises.
(iv) PRORATIONS. Selling Lessor shall pay the cost of
the aforesaid title policy and any and all state and
municipal taxes imposed by law on the transfer of the
title to the Leased Premises, or the transaction
pursuant to which such transfer occurs. Water, sewer
and other utility charges, if any, which are not
metered, driveway permit charges, if any, general real
estate taxes, and other similar items, shall be
adjusted ratably as of the Closing, except to the
extent otherwise settled between the parties pursuant
to other provisions of this Lease. A prorated portion
of the Rent prepaid by Lessee for the month of closing
shall be credited toward the Purchase Price and Lessee
shall be given a credit for rent prepaid for any period
after the month in which the Closing occurs.
Otherwise, Lessee shall not receive a credit against
the Purchase Price for Rent paid hereunder.
(v) ESCROW CLOSING. At the election of Selling Lessor
or Lessee upon notice to the other party not less than
five (5) days prior to the Closing, this sale shall be
closed through an escrow with the Title Company, in
accordance with the general provisions of the usual
form of Deed and Money Escrow Agreement then is use by
said company, with such special provisions inserted in
the escrow agreement as may be required to conform with
this agreement. Upon the creation of such an escrow,
anything herein to the contrary notwithstanding, paying
of the purchase price and delivery of the deed shall be
made through the escrow. The cost of the escrow shall
be divided equally between the Selling Lessor and
Lessee. If for any reason other than Lessee's default,
the transaction fails to close, the Earnest Money shall
be returned to Lessee forthwith.
(vi) REMEDIES ON DEFAULT. If Lessee defaults under the
provisions of this subparagraph 35(C), Selling Lessor
shall have the right to annul the provisions of this
paragraph 35 by giving Lessee notice of such election,
provided that Selling Lessor has first notified Lessee
of such default and Lessee has failed to cure the same
within ten (10) days after such notice. Upon Selling
Lessor's notice of annulment in accordance herewith,
the Earnest Money shall be forfeited and paid to
Selling Lessor as liquidated damages, which shall be
Selling Lessor's sole and exclusive remedy. If Selling
Lessor defaults under the provisions of this
subparagraph 35(C) and fails to cure such default
within ten (10) days after being notified of the same
by Lessee, then in such event, (i) the Earnest Money at
Lessee's election and immediately upon its demand shall
be returned to Lessee, which return shall not, however,
in any way release or absolve Selling Lessor from its
obligations hereunder and (ii) Lessee shall be entitled
to all remedies (both legal and equitable) the law
(both statutory and decisional) of the state in which
the Leased Premises are situated provides without first
having to tender the balance of the purchase price as a
condition precedent thereof and without having to make
any election of such remedies.
(D) EFFECT OF RIGHT OF FIRST REFUSAL ON LEASE. If the
Right of First Refusal is exercised by Lessee and is exercisable
in Lessor's Notice as to the entire fee simple, this Lease shall
continue in full force and effect until the Closing hereinabove
specified. If the Right of First Refusal is exercised only as to
all of an undivided portion of the fee simple to the Leased
Premises, the Lease shall remain in full force and effect without
merger or termination of this Lease because of such purchase. If
for any reason such Closing fails to occur, this Lease shall
continue in full force and effect, except that if the provisions
of this paragraph 35 are annulled by Selling Lessor, in
accordance with subparagraph 35(C)(vi), by reason of a default by
Lessee, this Lease shall continue but without the provisions of
this paragraph 35 being a part hereof.
(E) If Lessee fails to exercise its Right of First Refusal,
Selling Lessor shall be free to sell all or any portion of its
interest in the Leased Premises for six months following the
expiration of the twenty days within which Lessee may exercise
its Right of First Refusal, provided that the Selling Lessor
giving such Lessor's Notice shall sell its interest (or a portion
thereof) for a price equal to or greater than the price (or the
pro-rata portion thereof if a portion of the Selling Lessor's
interest in the Leased Premises is sold) set forth in Lessor's
Notice. This Right of First Refusal shall survive any sale of
the Leased Premises and shall apply to any subsequent sale or
potential sale by Lessor or its successors and assigns.
ARTICLE 36. PARKING
Lessee and its employees, customers and other invitees shall
have the exclusive use of all driveways and parking spaces within
the Leased Premises in accordance with all matters of public
record as of the Occupancy Date or subsequently approved in
writing by Lessee.
ARTICLE 37. VISIBILITY AND ACCESS
Lessor agrees that, except as set forth in the following
sentence, during the Term, it will not construct or consent to
the construction of any building, sign, tower or other structure
or improvement, or plant any tree or other growing plant, or make
any other change whatsoever in or on the Leased Premises, or add
or change any restrictions or other rights, encumbrances (other
than a mortgage and related loan documents in connection with
Lessor's financing of the Leased Premises, with all obligations
set forth in such mortgage and related loan documents being
Lessor's only and not being assumed or otherwise passed through
to Lessee) or appurtenances relating to the Leased Premises. In
the event that Lessor violates the terms of this Article 37 and
fails to cure such violation within thirty (30) days (or such
longer period, not to exceed ninety [90] days, in the event such
violation cannot be cured within the aforementioned 30-day period
and Lessor commences such cure within the 30-day period and
thereafter diligently pursues the same to completion) after its
receipt of Lessee's written notice of such violation, in addition
to all other available rights and remedies at law or in equity,
including, without limitation, the right of Lessee to remove such
item(s) at Lessor's cost, Lessee, at its option, may terminate
this Lease upon written notice to the Lessor.
ARTICLE 38. FORCE MAJEURE
Lessor and Lessee shall be excused for the period of any
delay in performance of any obligations hereunder when prevented
from doing so by the wrongful or negligent acts or omissions of
the other party or by causes beyond either party's control, which
shall include all labor disputes, civil disturbance, war,
war-like operations, invasions, rebellion, hostilities, military
or usurped power, sabotage, governmental regulations or controls,
fires or other casualty, inability to obtain any material or
service or acts of God. Notwithstanding the foregoing, nothing
contained in this Article 38 shall excuse either party from
paying in a timely fashion any payments due under the terms of
this Lease.
ARTICLE 39. BROKERS
Lessee and Lessor represent and warrant to each other that
such party has not had any dealings with any realtor, broker or
agent in connection with this Lease or the negotiation hereof,
and each party agrees to defend, indemnify and hold the other
party harmless from any cost, expense or liability, including
reasonable attorney's fees, for any breach of this
representation.
ARTICLE 40. LESSOR'S SUBORDINATION
Within thirty (30) days after request from Lessee, Lessor
shall execute a lien waiver required by Lessee's lender in
connection with the installation in the Leased Premises of
Lessee's personal property or trade fixtures pursuant to which
Lessor waives any rights (contractual, statutory or otherwise) it
may have with respect to such personal property or trade
fixtures.
ARTICLE 41. COUNTERPART EXECUTION
This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original and all of which shall
constitute one and the same instrument.
IN WITNESS WHEREOF, Lessor and Lessee have respectively
signed and sealed this Lease as of the day and year first above
written.
LESSEE: Razzoo's, Inc.
By:/s/ D Fricke
Its: Director of Finance & Accounting
STATE OF TEXAS)
)SS.
COUNTY OF DALLAS)
The foregoing instrument was acknowledged before me this
18th day of April, 2000, by Dana Fricke and n/a, as Director of
Finance & Acct'g and n/a , respectively, of Razzoo's, Inc. on
behalf of said corporation.
/s/ Dianne Slaight
Notary Public
[notary seal]
LESSOR: AEIINCOME & GROWTH FUND 23 LLC
By: AEI Fund Management XXI, Inc.
By: /s/ Robert P Johnson
Robert P. Johnson, President
STATE OF MINNESOTA )
)SS.
COUNTY OF RAMSEY )
The foregoing instrument was acknowledged before me the 14th
day of April, 2000, by Robert P. Johnson, the President of AEI
Fund Management XXI, Inc., a Minnesota corporation, corporate
managing member of AEI Income & Growth Fund 23 LLC, on behalf of
said limited company.
/s/ Barbara J Kochevar
Notary Public
[notary seal]
Exhibita A
Lot 10, Block 1, New City Block (NCB) 17115, Brookhollows
Subdivision, Unit-1, of the City of San Antonio, of Bexar County,
Texas.
