SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Under Section 13 or 15(d)
Of The Securities Exchange Act Of 1934
For the Fiscal Year Ended: December 31, 1998
Commission file number: 0-14263
AEI REAL ESTATE FUND 85-A LIMITED PARTNERSHIP
(Name of Small Business Issuer in its Charter)
State of Minnesota 41-1511293
(State or other Jurisdiction of (I.R.S. Employer)
Incorporation or Organization) Identification No.)
1300 Minnesota World Trade Center, St. Paul, Minnesota 55101
(Address of Principal Executive Offices)
(651) 227-7333
(Issuer's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Units
(Title of class)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the past 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [X] No
Check if disclosure of delinquent filers in response to Rule 405
of Regulation S-B is not contained in this Form, and no
disclosure will be contained, to the best of the registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
The Issuer's revenues for year ended December 31, 1998 were
$549,406.
As of February 28, 1999, there were 7,065.128 Units of limited
partnership interest in the registrant outstanding and owned by
nonaffiliates of the registrant, which Units had an aggregate
market value (based solely on the price at which they were sold
since there is no ready market for such Units) of $7,065,128.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant has not incorporated any documents by reference
into this report.
Transitional Small Business Disclosure Format:
Yes No [X]
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
AEI Real Estate Fund 85-A Limited Partnership (the
"Partnership" or the "Registrant") is a limited partnership which
was organized pursuant to the laws of the State of Minnesota on
April 15, 1985. The registrant is comprised of Net Lease
Management 85-A, Inc. (NLM) as Managing General Partner, Robert
P. Johnson as the Individual General Partner, and purchasers of
partnership units as Limited Partners. The Partnership offered
for sale up to $7,500,000 of limited partnership interests (the
"Units") (7,500 Units at $1,000 per Unit) pursuant to a
registration statement effective February 8, 1985. The
Partnership commenced operations on April 15, 1985 when minimum
subscriptions of 1,300 Limited Partnership Units ($1,300,000)
were accepted. The Partnership's offering terminated June 20,
1985 when the maximum subscription limit of 7,500 Limited
Partnership Units ($7,500,000) was reached.
The Partnership was organized to acquire, initially on a
debt-free basis, existing and newly constructed commercial
properties located in the United States, to lease such properties
to tenants under triple net leases, to hold such properties and
to eventually sell such properties. From subscription proceeds,
the Partnership purchased eight properties, including partial
interests in two properties, totaling $6,103,065. The balance of
the subscription proceeds was applied to organization and
syndication costs, working capital reserves and distributions,
which represented a return of capital. The properties are all
commercial, single tenant buildings leased under triple net
leases.
The Partnership will hold its properties until the General
Partners determine that the sale or other disposition of the
properties is advantageous in view of the Partnership's
investment objectives. In deciding whether to sell properties,
the General Partners will consider factors such as potential
appreciation, net cash flow and income tax considerations. In
addition, certain lessees have been granted options to purchase
properties after a specified portion of the lease term has
elapsed. It is anticipated that the Partnership will sell its
properties within twelve years after acquisition. Prior to
commencing the liquidation of the Partnership, the General
Partners may reinvest the proceeds from the sale of properties in
additional properties, provided that sufficient proceeds are
distributed to the Limited Partners to pay federal and state
income taxes related to any taxable gain recognized as a result
of the sale. At any time prior to selling the properties, the
Partnership may mortgage one or more of its properties in amounts
not exceeding 50% of the fair market value of the property.
Leases
Although there are variations in the specific terms of the
leases, the following is a summary of the general terms of the
Partnership's leases. The properties are leased to various
tenants under triple net leases, which are classified as
operating leases. Under a triple net lease, the lessee is
responsible for all real estate taxes, insurance, maintenance,
repairs and operating expenses for the property. The initial
lease terms are for 5 to 20 years. The leases provide for base
annual rental payments, payable in monthly installments, and
contain rent clauses which entitle the Partnership to receive
additional rent in future years based on stated rent increases or
if gross receipts for the property exceed certain specified
amounts, among other conditions. The leases provide for one to
four five-year renewal options subject to the same terms and
conditions as the initial lease.
ITEM 1. DESCRIPTION OF BUSINESS. (Continued)
On February 14, 1996, the Partnership purchased an 80%
interest in a Tractor Supply Company store in Maryville,
Tennessee for $837,058. The property is leased to Tractor Supply
Company under a Lease Agreement with a primary term of 14 years
and annual rental payments of $90,300. The remaining interest in
the property was purchased by AEI Real Estate Fund XV Limited
Partnership, an affiliate of the Partnership.
On July 31, 1998, the Partnership sold 9.1266% of its
interest in the Tractor Supply Company store to an unrelated
third party. The Partnership received net sale proceeds of
$133,251 which resulted in a net gain of $44,686. At the time of
sale, the cost and related accumulated depreciation of the
interest sold was $95,494 and $6,929, respectively.
During 1998, the Partnership sold 37.3518% of its interest
in the Rio Bravo restaurant, in four separate transactions, to
unrelated third parties. The Partnership received total net sale
proceeds of $585,789 which resulted in a total net gain of
$172,422. The total cost and related accumulated depreciation of
the interests sold was $660,597 and $247,230, respectively.
On December 30, 1998, the Partnership sold the Applebee's
restaurant in Harlingen, Texas to the lessee. The Partnership
received net sales proceeds of $1,858,837 which resulted in a net
gain of $580,055. At the time of sale, the cost and related
accumulated depreciation of the property was $1,393,470 and
$114,688, respectively.
On December 17, 1998, the Partnership purchased a 60%
interest in a parcel of land in Hudsonville, Michigan for
$198,600. The land is leased to RTM Mid-America, Inc. (RTM)
under a Lease Agreement with a primary term of 20 years and
annual rental payments of $16,881. Simultaneously with the
purchase of the land, the Partnership entered into a Development
Financing Agreement under which the Partnership will advance
funds to RTM for the construction of an Arby's restaurant on the
site. Through December 31, 1998, the Partnership had advanced
$16,981 for the construction of the property and was charging
interest on the advance at a rate of 8.5%. The Partnership's
share of the total purchase price, including the cost of the
land, will be approximately $714,600. After the construction is
complete, the Lease Agreement will be amended to require annual
rental payments of approximately $46,000. The Partnership has
incurred net costs of $1,885 related to the acquisition of the
property. The costs have been capitalized and will be allocated
to land, building and equipment. The remaining interest in the
property is owned by Net Lease Income & Growth Fund 84-A Limited
Partnership, an affiliate of the Partnership.
Major Tenants
During 1998, five of the Partnership's lessees each
contributed more than ten percent of the Partnership's total
rental revenue. The major tenants in aggregate contributed 100%
of the Partnership's total rental revenue in 1998. It is
anticipated that, based on the minimum rental payments required
under the leases, each major tenant will continue to contribute
more than ten percent of the Partnership's total rental revenue
in 1999 and future years. The exceptions are the tenants in the
Rio Bravo and Applebee's restaurants will not continue to be
major tenants due to property sales in 1998. Any failure of
these major tenants or business concepts could materially affect
the Partnership's net income and cash distributions.
ITEM 1. DESCRIPTION OF BUSINESS. (Continued)
Competition
The Partnership is a minor factor in the commercial real
estate business. There are numerous entities engaged in the
commercial real estate business which have greater financial
resources than the Partnership. At the time the Partnership
elects to dispose of its properties, the Partnership will be in
competition with other persons and entities to find buyers for
its properties.
Employees
The Partnership has no direct employees. Management
services are performed for the Partnership by AEI Fund
Management, Inc., an affiliate of NLM.
Year 2000 Compliance
The Year 2000 issue is the result of computer systems that
use two digits rather than four to define the applicable year,
which may prevent such systems from accurately processing dates
ending in the Year 2000 and beyond. This could result in
computer system failures or disruption of operations, including,
but not limited to, an inability to process transactions, to send
or receive electronic data, or to engage in routine business
activities.
AEI Fund Management, Inc. (AEI) performs all management
services for the Partnership. In 1998, AEI completed an
assessment of its computer hardware and software systems and has
replaced or upgraded certain computer hardware and software using
the assistance of outside vendors. AEI has received written
assurance from the equipment and software manufacturers as to
Year 2000 compliance. The costs associated with Year 2000
compliance have not been, and are not expected to be, material.
The Partnership intends to monitor and communicate with
tenants regarding Year 2000 compliance, although there can be no
assurance that the systems of the various tenants will be Year
2000 compliant.
ITEM 2. DESCRIPTION OF PROPERTIES.
Investment Objectives
The Partnership's investment objectives were to acquire
existing or newly-developed commercial properties throughout the
United States that offer the potential for (i) preservation and
protection of the Partnership's capital; (ii) partially tax-
deferred cash distributions from operations which may increase
through rent participation clauses or mandated rent increases;
and (iii) long-term capital gains through appreciation in value
of the Partnership's properties realized upon sale. The
Partnership does not have a policy, and there is no limitation,
as to the amount or percentage of assets that may be invested in
any one property. However, to the extent possible, the General
Partners attempt to diversify the type and location of the
Partnership's properties.
Description of Properties
The Partnership's properties are all commercial, single
tenant buildings. All the properties were acquired on a debt-
free basis and are leased to various tenants under triple net
leases, which are classified as operating leases. The Partnership
holds an undivided fee simple interest in the properties. At any
time prior to selling the properties, the Partnership may
mortgage one or more of its properties in amounts not exceeding
50% of the fair market value of the property.
ITEM 2. DESCRIPTION OF PROPERTIES. (Continued)
The Partnership's properties are subject to the general
competitive conditions incident to the ownership of single tenant
investment real estate. Since each property is leased under a
long-term lease, there is little competition until the
Partnership decides to sell the property. At this time, the
Partnership will be competing with other real estate owners, on
both a national and local level, in attempting to find buyers for
the properties. In the event of a tenant default, the
Partnership would be competing with other real estate owners, who
have property vacancies, to attract a new tenant to lease the
property. The Partnership's tenants operate in industries that
are very competitive and can be affected by factors such as
changes in regional or local economies, seasonality and changes
in consumer preference.
The following table is a summary of the properties that
the Partnership acquired and owned as of December 31, 1998.
<TABLE>
<CAPTION>
Total Property
Purchase Acquisition Annual Lease Annual Rent
Property Date Costs Lessee Payment Per Sq. Ft.
<S> <C> <C> <C> <C> <C>
Rio Bravo Restaurant Innovative
St. Paul, MN Restaurant
(7.6482%) 12/13/85 $ 135,265 Concepts, Inc. $ 11,168 $ 12.81
Jack-In-The-Box Restaurant CKE
Fort Worth, TX 12/19/85 $ 1,005,586 Restaurants, Inc. $ 135,582 $ 34.71
Hops Grill & Bar Restaurant Hops Grill
Palm Harbor, FL 3/21/86 $ 1,094,373 & Bar, Inc. $ 85,105 $ 16.60
Tractor Supply
Company Store
Maryville, TN Tractor Supply
(70.8734%) 2/14/96 $ 741,564 Company, Inc. $ 81,538 $ 6.04
Arby's Restaurant
Hudsonville, MI
(60%) RTM
(land only) (1) 12/17/98 $ 198,600 Mid-America, Inc. $ 16,881 $ 8.51
(1) Restaurant is under construction as of December 31, 1998.
</TABLE>
The properties listed above with a partial ownership
percentage are owned with affiliates of the Partnership and/or
unrelated third parties. The remaining interests in the Rio
Bravo restaurant are owned by unrelated third parties. The
remaining interests in the Tractor Supply Company store are owned
by AEI Real Estate Fund XV Limited Partnership and an unrelated
third party. The remaining interest in the Arby's restaurant is
owned by Net Lease Income & Growth Fund 84-A Limited Partnership.
The Partnership accounts for properties owned as tenants-
in-common with affiliated Partnerships and/or unrelated third
parties using the proportionate consolidation method. Each
tenant-in-common owns a separate, undivided interest in the
properties. Any tenant-in-common that holds more than a 50%
interest does not control decisions over the other tenant-in-
common interests. The financial statements reflect only this
Partnership's percentage share of the properties' land, building
and equipment, liabilities, revenues and expenses.
ITEM 2. DESCRIPTION OF PROPERTIES. (Continued)
The initial Lease terms are for 20 years, except for the
Hops Grill & Bar restaurant which is 5 years and the Tractor
Supply Company store which is 14 years. The Leases have renewal
options which may extend the Lease term an additional 5 to 20
years. The Hops Grill & Bar Lease has been extended to April 30,
2002.
Pursuant to the Lease Agreements, the tenants are required
to provide proof of adequate insurance coverage on the properties
they occupy. The General Partners believe the properties are
adequately covered by insurance and consider the properties to be
well-maintained and sufficient for the Partnership's operations.
For tax purposes, the Partnership's properties are
depreciated under either the Accelerated Cost Recovery System
(ACRS) or the Modified Accelerated Cost Recovery System (MACRS),
depending on the date when it was placed in service. The largest
depreciable component of a property is the building which is
depreciated, using the straight-line method, over either 19 years
(ACRS) or 31.5 years or 40 years (MACRS) depending on the date
when it was placed in service. The remaining depreciable
components of a property are personal property and land
improvements which are depreciated, using an accelerated method,
over 5 and 15 years, respectively. Since the Partnership has tax-
exempt Partners, the Partnership is subject to the rules of
Section 168(h)(6) of the Internal Revenue Code which requires a
percentage of the properties' depreciable components to be
depreciated over longer lives using the straight-line method. In
general the federal tax basis of the properties for tax
depreciation purposes is the same as the basis for book
depreciation purposes.
During the last five years or since the date of purchase,
if purchased after December 31, 1993, all properties were 100
percent occupied by the lessees.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP UNITS AND
RELATED SECURITY HOLDER MATTERS.
As of December 31, 1998, there were 695 holders of record
of the registrant's Limited Partnership Units. There is no other
class of security outstanding or authorized. The registrant's
Units are not a traded security in any market. However, the
Partnership may purchase Units from Limited Partners who have
tendered their Units to the Partnership. Such Units may be
acquired at a discount. The Partnership is not obligated to
purchase in any year more than 5% of the total number of Units
originally sold. In no event shall the Partnership be obligated
to purchase Units if, in the sole discretion of the Managing
General Partner, such purchase would impair the capital or
operation of the Partnership.
During 1998, the Partnership did not redeem any Units from
the Limited Partners. In prior years, a total of fifty-three
Limited Partners redeemed 420.37 Partnership Units for $315,321.
The redemptions increase the remaining Limited Partners'
ownership interest in the Partnership.
ITEM 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP UNITS AND
RELATED SECURITY HOLDER MATTERS. (Continued)
Cash distributions of $4,212 and $4,025 were made to the
General Partners and $417,001 and $396,299 were made to the
Limited Partners in 1998 and 1997, respectively. The
distributions were made on a quarterly basis and represent Net
Cash Flow, as defined. These distributions should not be
compared with dividends paid on capital stock by corporations.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS.
Results of Operations
For the years ended December 31, 1998 and 1997, the
Partnership recognized rental income of $532,564 and $532,076,
respectively. During the same periods, the Partnership earned
investment income of $16,842 and $7,253, respectively. The
increase in investment income earned was due to interest earned
on the cash generated from the sale of property.
During the years ended December 31, 1998 and 1997, the
Partnership paid Partnership administration expenses to
affiliated parties of $92,895 and $89,979, respectively. These
administration expenses include costs associated with the
management of the properties, processing distributions, reporting
requirements and correspondence to the Limited Partners. During
the same periods, the Partnership incurred Partnership
administration and property management expenses from unrelated
parties of $10,768 and $13,355, respectively. These expenses
represent direct payments to third parties for legal and filing
fees, direct administrative costs, outside audit and accounting
costs, taxes, insurance and other property costs.
As of December 31, 1998, the Partnership's annualized cash
distribution rate was 6.50%, based on the Adjusted Capital
Contribution. Distributions of Net Cash Flow to the General
Partners were subordinated to the Limited Partners as required in
the Partnership Agreement. As a result, 99% of distributions and
income were allocated to Limited Partners and 1% to the General
Partners.
Inflation has had a minimal effect on income from
operations. It is expected that increases in sales volumes of
the tenants, due to inflation and real sales growth, will result
in an increase in rental income over the term of the leases.
Inflation also may cause the Partnership's real estate to
appreciate in value. However, inflation and changing prices may
also have an adverse impact on the operating margins of the
properties' tenants which could impair their ability to pay rent
and subsequently reduce the Partnership's Net Cash Flow available
for distributions.
The Year 2000 issue is the result of computer systems that
use two digits rather than four to define the applicable year,
which may prevent such systems from accurately processing dates
ending in the Year 2000 and beyond. This could result in
computer system failures or disruption of operations, including,
but not limited to, an inability to process transactions, to send
or receive electronic data, or to engage in routine business
activities.
AEI Fund Management, Inc. (AEI) performs all management
services for the Partnership. In 1998, AEI completed an
assessment of its computer hardware and software systems and has
replaced or upgraded certain computer hardware and software using
the assistance of outside vendors. AEI has received written
assurance from the equipment and software manufacturers as to
Year 2000 compliance. The costs associated with Year 2000
compliance have not been, and are not expected to be, material.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
The Partnership intends to monitor and communicate with
tenants regarding Year 2000 compliance, although there can be no
assurance that the systems of the various tenants will be Year
2000 compliant.
Liquidity and Capital Resources
During 1998, the Partnership's cash balances increased
$2,397,566 mainly as a result of cash generated from the sale of
property. Net cash provided by operating activities increased
from $431,734 in 1997 to $456,896 in 1998 as a result of an
increase in income in 1998 and net timing differences in the
collection of payments from the lessees and the payment of
expenses.
The major components of the Partnership's cash flow from
investing activities are investments in real estate and proceeds
from the sale of real estate. In 1998, the Partnership generated
cash flow from the sale of real estate of $2,577,877. During the
same period, the Partnership expended $217,466 to invest in real
properties (inclusive of acquisition expenses) as the Partnership
reinvested the cash generated from the property sales.
On July 31, 1998, the Partnership sold 9.1266% of its
interest in the Tractor Supply Company store to an unrelated
third party. The Partnership received net sale proceeds of
$133,251 which resulted in a net gain of $44,686. At the time of
sale, the cost and related accumulated depreciation of the
interest sold was $95,494 and $6,929, respectively.
During 1998, the Partnership sold 37.3518% of its interest
in the Rio Bravo restaurant, in four separate transactions, to
unrelated third parties. The Partnership received total net sale
proceeds of $585,789 which resulted in a total net gain of
$172,422. The total cost and related accumulated depreciation of
the interests sold was $660,597 and $247,230, respectively.
On December 30, 1998, the Partnership sold the Applebee's
restaurant in Harlingen, Texas to the lessee. The Partnership
received net sales proceeds of $1,858,837 which resulted in a net
gain of $580,055. At the time of sale, the cost and related
accumulated depreciation of the property was $1,393,470 and
$114,688, respectively.
On December 17, 1998, the Partnership purchased a 60%
interest in a parcel of land in Hudsonville, Michigan for
$198,600. The land is leased to RTM Mid-America, Inc. (RTM)
under a Lease Agreement with a primary term of 20 years and
annual rental payments of $16,881. Simultaneously with the
purchase of the land, the Partnership entered into a Development
Financing Agreement under which the Partnership will advance
funds to RTM for the construction of an Arby's restaurant on the
site. Through December 31, 1998, the Partnership had advanced
$16,981 for the construction of the property and was charging
interest on the advance at a rate of 8.5%. The Partnership's
share of the total purchase price, including the cost of the
land, will be approximately $714,600. After the construction is
complete, the Lease Agreement will be amended to require annual
rental payments of approximately $46,000. The Partnership has
incurred net costs of $1,885 related to the acquisition of the
property. The costs have been capitalized and will be allocated
to land, building and equipment. The remaining interest in the
property is owned by Net Lease Income & Growth Fund 84-A Limited
Partnership, an affiliate of the Partnership.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
The Partnership's primary use of cash flow is distribution
and redemption payments to Partners. The Partnership declares
its regular quarterly distributions before the end of each
quarter and pays the distribution in the first week after the end
of each quarter. The Partnership attempts to maintain a stable
distribution rate from quarter to quarter. Redemption payments
are paid to redeeming Partners in the fourth quarter of each
year. Effective July 1, 1997, the Partnership's distribution
rate was increased from 5.85% to 6.50%. As a result,
distributions during 1998 were higher when compared to 1997.
The Partnership may acquire Units from Limited Partners
who have tendered their Units to the Partnership. Such Units may
be acquired at a discount. The Partnership is not obligated to
purchase in any year more than 5% of the total number of Units
originally sold. In no event shall the Partnership be obligated
to purchase Units if, in the sole discretion of the Managing
General Partner, such purchase would impair the capital or
operation of the Partnership.
During 1998, the Partnership did not redeem any Units from
the Limited Partners. In prior years, a total of fifty-three
Limited Partners redeemed 420.37 Partnership Units for $315,321.
The redemptions increase the remaining Limited Partners'
ownership interest in the Partnership.
The continuing rent payments from the properties, together
with cash generated from the property sales, should be adequate
to fund continuing distributions and meet other Partnership
obligations on both a short-term and long-term basis.
Cautionary Statement for Purposes of the "Safe Harbor" Provisions
of the Private Securities Litigation Reform Act of 1995
The foregoing Management's Discussion and Analysis
contains various "forward looking statements" within the meaning
of federal securities laws which represent management's
expectations or beliefs concerning future events, including
statements regarding anticipated application of cash, expected
returns from rental income, growth in revenue, taxation levels,
the sufficiency of cash to meet operating expenses, rates of
distribution, and other matters. These, and other forward
looking statements made by the Partnership, must be evaluated in
the context of a number of factors that may affect the
Partnership's financial condition and results of operations,
including the following:
<BULLET> Market and economic conditions which affect
the value of the properties the Partnership owns and
the cash from rental income such properties generate;
<BULLET> the federal income tax consequences of rental
income, deductions, gain on sales and other items and
the affects of these consequences for investors;
<BULLET> resolution by the General Partners of
conflicts with which they may be confronted;
<BULLET> the success of the General Partners of
locating properties with favorable risk return
characteristics;
<BULLET> the effect of tenant defaults; and
<BULLET> the condition of the industries in which the
tenants of properties owned by the Partnership operate.
ITEM 7. FINANCIAL STATEMENTS.
See accompanying index to financial statements.
AEI REAL ESTATE FUND 85-A LIMITED PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS
Report of Independent Auditors
Balance Sheet as of December 31, 1998 and 1997
Statements for the Years Ended December 31, 1998 and 1997:
Income
Cash Flows
Changes in Partners' Capital
Notes to Financial Statements
REPORT OF INDEPENDENT AUDITORS
To the Partners:
AEI Real Estate Fund 85-A Limited Partnership
St. Paul, Minnesota
We have audited the accompanying balance sheet of AEI REAL
ESTATE FUND 85-A LIMITED PARTNERSHIP (a Minnesota limited
partnership) as of December 31, 1998 and 1997 and the related
statements of income, cash flows and changes in partners' capital
for the years then ended. These financial statements are the
responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of AEI Real Estate Fund 85-A Limited Partnership as of December
31, 1998 and 1997, and the results of its operations and its cash
flows for the years then ended, in conformity with generally
accepted accounting principles.
/s/ Boulay, Heutmaker, Zibell & Co. P.L.L.P.
Minneapolis, Minnesota Boulay, Heutmaker, Zibell & Co. P.L.L.P.
January 27, 1999 Certified Public Accountants
<PAGE>
AEI REAL ESTATE FUND 85-A LIMITED PARTNERSHIP
BALANCE SHEET
DECEMBER 31
ASSETS
1998 1997
CURRENT ASSETS:
Cash and Cash Equivalents $ 2,572,249 $ 174,683
Receivables 12,721 0
----------- -----------
Total Current Assets 2,584,970 174,683
----------- -----------
INVESTMENTS IN REAL ESTATE:
Land 1,367,380 1,877,226
Buildings and Equipment 1,808,008 3,249,122
Construction in Progress 16,981 0
Property Acquisition Costs 1,885 0
Accumulated Depreciation (731,538) (999,929)
----------- -----------
Net Investments in Real Estate 2,462,716 4,126,419
----------- -----------
Total Assets $ 5,047,686 $ 4,301,102
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 36,593 $ 12,719
Distributions Payable 94,365 92,893
----------- -----------
Total Current Liabilities 130,958 105,612
----------- -----------
PARTNERS' CAPITAL (DEFICIT):
General Partners (28,931) (36,144)
Limited Partners, $1,000 Unit value;
7,500 Units authorized and issued;
7,080 outstanding in 1998 and 1997 4,945,659 4,231,634
----------- -----------
Total Partners' Capital 4,916,728 4,195,490
----------- -----------
Total Liabilities and Partners' Capital $ 5,047,686 $ 4,301,102
=========== ===========
The accompanying notes to financial statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI REAL ESTATE FUND 85-A LIMITED PARTNERSHIP
STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31
1998 1997
INCOME:
Rent $ 532,564 $ 532,076
Investment Income 16,842 7,253
----------- -----------
Total Income 549,406 539,329
----------- -----------
EXPENSES:
Partnership Administration - Affiliates 92,895 89,979
Partnership Administration and Property
Management - Unrelated Parties 10,768 13,355
Depreciation 100,455 103,758
----------- -----------
Total Expenses 204,118 207,092
----------- -----------
OPERATING INCOME 345,288 332,237
GAIN ON SALE OF REAL ESTATE 797,163 0
----------- -----------
NET INCOME $ 1,142,451 $ 332,237
=========== ===========
NET INCOME ALLOCATED:
General Partners $ 11,425 $ 3,322
Limited Partners 1,131,026 328,915
----------- -----------
$ 1,142,451 $ 332,237
=========== ===========
NET INCOME PER LIMITED PARTNERSHIP UNIT
(7,080 and 7,083 weighted average Units outstanding
in 1998 and 1997, respectively) $ 159.75 $ 46.44
=========== ===========
The accompanying notes to financial statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI REAL ESTATE FUND 85-A LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,142,451 $ 332,237
Adjustments To Reconcile Net Income
To Net Cash Provided By Operating Activities:
Depreciation 100,455 103,758
Gain on Sale of Real Estate (797,163) 0
Increase in Receivables (12,721) 0
Increase (Decrease) in Payable to
AEI Fund Management, Inc. 23,874 (4,261)
----------- -----------
Total Adjustments (685,555) 99,497
----------- -----------
Net Cash Provided By
Operating Activities 456,896 431,734
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in Real Estate (217,466) 0
Proceeds from Sale of Real Estate 2,577,877 0
----------- -----------
Net Cash Provided By
Investing Activities 2,360,411 0
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in Distributions Payable 1,472 8,331
Distributions to Partners (421,213) (400,302)
Redemption Payments 0 (2,221)
----------- -----------
Net Cash Used For
Financing Activities (419,741) (394,192)
----------- ----------
NET INCREASE IN CASH
AND CASH EQUIVALENTS 2,397,566 37,542
CASH AND CASH EQUIVALENTS, beginning of period 174,683 137,141
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 2,572,249 $ 174,683
=========== ===========
The accompanying notes to financial statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI REAL ESTATE FUND 85-A LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31
Limited
Partnership
General Limited Units
Partners Partners Total Outstanding
BALANCE, December 31, 1996 $ (35,441) $ 4,301,217 $ 4,265,776 7,084.63
Distributions (4,003) (396,299) (400,302)
Redemption Payments (22) (2,199) (2,221) (5.00)
Net Income 3,322 328,915 332,237
--------- ----------- ----------- ----------
BALANCE, December 31, 1997 (36,144) 4,231,634 4,195,490 7,079.63
Distributions (4,212) (417,001) (421,213)
Net Income 11,425 1,131,026 1,142,451
--------- ----------- ----------- ----------
BALANCE, December 31, 1998 $ (28,931) $ 4,945,659 $ 4,916,728 7,079.63
========= =========== =========== ==========
The accompanying notes to financial statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI REAL ESTATE FUND 85-A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(1) Organization -
AEI Real Estate Fund 85-A Limited Partnership (Partnership)
was formed to acquire and lease commercial properties to
operating tenants. The Partnership's operations are managed
by Net Lease Management 85-A, Inc. (NLM), the Managing
General Partner of the Partnership. Robert P. Johnson, the
President and sole shareholder of NLM, serves as the
Individual General Partner of the Partnership. An affiliate
of NLM, AEI Fund Management, Inc. (AEI) performs the
administrative and operating functions for the Partnership.
The terms of the Partnership offering call for a
subscription price of $1,000 per Limited Partnership Unit,
payable on acceptance of the offer. The Partnership
commenced operations on April 15, 1985 when minimum
subscriptions of 1,300 Limited Partnership Units
($1,300,000) were accepted. The Partnership's offering
terminated on June 20, 1985 when the maximum subscription
limit of 7,500 Limited Partnership Units ($7,500,000) was
reached.
Under the terms of the Limited Partnership Agreement, the
Limited Partners and General Partners contributed funds of
$7,500,000 and $1,000, respectively. During the operation
of the Partnership, any Net Cash Flow, as defined, which the
General Partners determine to distribute will be distributed
90% to the Limited Partners and 10% to the General Partners;
provided, however, that such distributions to the General
Partners will be subordinated to the Limited Partners first
receiving an annual, noncumulative distribution of Net Cash
Flow equal to 10% of their Adjusted Capital Contribution, as
defined, and, provided further, that in no event will the
General Partners receive less than 1% of such Net Cash Flow
per annum. Distributions to Limited Partners will be made
pro rata by Units.
Any Net Proceeds of Sale, as defined, from the sale or
financing of the Partnership's properties which the General
Partners determine to distribute will, after provisions for
debts and reserves, be paid in the following manner: (i)
first, 99% to the Limited Partners and 1% to the General
Partners until the Limited Partners receive an amount equal
to: (a) their Adjusted Capital Contribution plus (b) an
amount equal to 6% of their Adjusted Capital Contribution
per annum, cumulative but not compounded, to the extent not
previously distributed from Net Cash Flow; (ii) next, 99% to
the Limited Partners and 1% to the General Partners until
the Limited Partners receive an amount equal to 14% of their
Adjusted Capital Contribution per annum, cumulative but not
compounded, to the extent not previously distributed; (iii)
next, to the General Partners until cumulative distributions
to the General Partners under Items (ii) and (iii) equal 15%
of cumulative distributions to all Partners under Items (ii)
and (iii). Any remaining balance will be distributed 85% to
the Limited Partners and 15% to the General Partners.
Distributions to the Limited Partners will be made pro rata
by Units.
AEI REAL ESTATE FUND 85-A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(1) Organization - (Continued)
For tax purposes, profits from operations, other than
profits attributable to the sale, exchange, financing,
refinancing or other disposition of the Partnership's
property, will be allocated first in the same ratio in
which, and to the extent, Net Cash Flow is distributed to
the Partners for such year. Any additional profits will be
allocated 90% to the Limited Partners and 10% to the General
Partners. In the event no Net Cash Flow is distributed to
the Limited Partners, 90% of each item of Partnership
income, gain or credit for each respective year shall be
allocated to the Limited Partners, and 10% of each such item
shall be allocated to the General Partners. Net losses from
operations will be allocated 98% to the Limited Partners and
2% to the General Partners.
For tax purposes, profits arising from the sale, financing,
or other disposition of the Partnership's property will be
allocated in accordance with the Partnership Agreement as
follows: (i) first, to those Partners with deficit balances
in their capital accounts in an amount equal to the sum of
such deficit balances; (ii) second, 99% to the Limited
Partners and 1% to the General Partners until the aggregate
balance in the Limited Partners' capital accounts equals the
sum of the Limited Partners' Adjusted Capital Contributions
plus an amount equal to 14% of their Adjusted Capital
Contributions per annum, cumulative but not compounded, to
the extent not previously allocated; (iii) third, to the
General Partners until cumulative allocations to the General
Partners equal 15% of cumulative allocations. Any remaining
balance will be allocated 85% to the Limited Partners and
15% to the General Partners. Losses will be allocated 98%
to the Limited Partners and 2% to the General Partners.
The General Partners are not required to currently fund a
deficit capital balance. Upon liquidation of the
Partnership or withdrawal by a General Partner, the General
Partners will contribute to the Partnership an amount equal
to the lesser of the deficit balances in their capital
accounts or 1% of total Limited Partners' and General
Partners' capital contributions.
(2) Summary of Significant Accounting Policies -
Financial Statement Presentation
The accounts of the Partnership are maintained on the
accrual basis of accounting for both federal income tax
purposes and financial reporting purposes.
Accounting Estimates
Management uses estimates and assumptions in preparing
these financial statements in accordance with generally
accepted accounting principles. Those estimates and
assumptions may affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and
liabilities, and the reported revenues and expenses.
Actual results could differ from those estimates.
AEI REAL ESTATE FUND 85-A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(2) Summary of Significant Accounting Policies - (Continued)
The Partnership regularly assesses whether market events
and conditions indicate that it is reasonably possible to
recover the carrying amounts of its investments in real
estate from future operations and sales. A change in
those market events and conditions could have a material
effect on the carrying amount of its real estate
Cash Concentrations of Credit Risk
At times throughout the year, the Partnership's cash
deposited in financial institutions may exceed FDIC
insurance limits.
Statement of Cash Flows
For purposes of reporting cash flows, cash and cash
equivalents may include cash in checking, cash invested
in money market accounts, certificates of deposit,
federal agency notes and commercial paper with a term of
three months or less.
Income Taxes
The income or loss of the Partnership for federal income
tax reporting purposes is includable in the income tax
returns of the partners. Accordingly, no recognition has
been given to income taxes in the accompanying financial
statements.
The tax return, the qualification of the Partnership as
such for tax purposes, and the amount of distributable
Partnership income or loss are subject to examination by
federal and state taxing authorities. If such an
examination results in changes with respect to the
Partnership qualification or in changes to distributable
Partnership income or loss, the taxable income of the
partners would be adjusted accordingly.
Real Estate
The Partnership's real estate is leased under triple net
leases classified as operating leases. The Partnership
recognizes rental revenue on the accrual basis according
to the terms of the individual leases. For leases which
contain cost of living increases, the increases are
recognized in the year in which they are effective.
AEI REAL ESTATE FUND 85-A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(2) Summary of Significant Accounting Policies - (Continued)
Real estate is recorded at the lower of cost or estimated
net realizable value. The Partnership compares the
carrying amount of its properties to the estimated future
cash flows expected to result from the property and its
eventual disposition. If the sum of the expected future
cash flows is less than the carrying amount of the
property, the Partnership recognizes an impairment loss
by the amount by which the carrying amount of the
property exceeds the fair value of the property.
The Partnership has capitalized as Investments in Real
Estate certain costs incurred in the review and
acquisition of the properties. The costs were allocated
to the land, buildings and equipment.
The buildings and equipment of the Partnership are
depreciated using the straight-line method for financial
reporting purposes based on estimated useful lives of 30
years and 10 years respectively.
The Partnership accounts for properties owned as tenants-
in-common with affiliated Partnerships and/or unrelated
third parties using the proportionate consolidation
method. Each tenant-in-common owns a separate, undivided
interest in the properties. Any tenant-in-common that
holds more than a 50% interest does not control decisions
over the other tenant-in-common interests. The financial
statements reflect only this Partnership's percentage
share of the properties' land, building and equipment,
liabilities, revenues and expenses.
(3) Related Party Transactions -
As of December 31, 1998, the Partnership owns a 7.6482%
interest in the Rio Bravo restaurant. The remaining
interests in this property are owned by unrelated third
parties. Net Lease Income & Growth Fund 84-A Limited
Partnership, an affiliate of the Partnership, owned a 55%
interest in this property until the interest was sold in a
series of transactions in 1997 and 1998. As of December 31,
1998, the Partnership owns a 70.8734% interest in the
Tractor Supply Company store. The remaining interests in
this property are owned by AEI Real Estate Fund XV Limited
Partnership, an affiliate of the Partnership and an
unrelated third party. The Partnership owns a 60% interest
in the Arby's restaurant. The remaining interest in this
property is owned by Net Lease Income & Growth Fund 84-A
Limited Partnership.
AEI REAL ESTATE FUND 85-A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(3) Related Party Transactions - (Continued)
AEI and NLM received the following compensation and
reimbursements for costs and expenses from the Partnership:
Total Incurred by the Partnership
for the Years Ended December 31
1998 1997
a.AEI and NLM are reimbursed for all costs
incurred in connection with managing the
Partnership's operations, maintaining the
Partnership's books and communicating
the results of operations to the Limited
Partners. $ 92,895 $ 89,979
======== ========
b.AEI and NLM are reimbursed for all direct
expenses they have paid on the Partnership's
behalf to third parties. These expenses
included printing costs, interest, legal
and filing fees, direct administrative costs,
outside audit and accounting costs, taxes,
insurance and other property costs. $ 10,768 $ 13,355
======== ========
c.AEI is reimbursed for all property acquisition
costs incurred by it in acquiring properties on
behalf of the Partnership. The amounts are net
of financing and commitment fees and expense
reimbursements received by the Partnership
from the lessees in the amount of $13,292
for 1998. $ 1,885 $ 0
======== ========
The payable to AEI Fund Management, Inc. represents the
balance due for the services described in 3a, b and c. This
balance is non-interest bearing and unsecured and is to be
paid in the normal course of business.
AEI REAL ESTATE FUND 85-A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(4) Investments in Real Estate -
The Partnership leases its properties to various tenants
through triple net leases, which have been classified as
operating leases. Under a triple net lease, the lessee is
responsible for all real estate taxes, insurance,
maintenance, repairs and operating expenses of the property.
The initial Lease terms are for 20 years, except for the
Hops Grill & Bar restaurant which is 5 years and the Tractor
Supply Company store which is 14 years. The Leases have
renewal options which may extend the Lease term an
additional 5 to 20 years. The Hops Grill & Bar Lease has
been extended to April 30, 2002. The Leases contain clauses
which entitle the Partnership to receive additional rent in
future years, based on stated rent increases or if gross
receipts for the property exceed certain specified amounts,
among other conditions.
The Partnership's properties are all commercial, single-
tenant buildings. The Rio Bravo was constructed in 1984 and
acquired in 1985. The Jack-In-The-Box was constructed and
acquired in 1985. The Hops Grill & Bar restaurant was
constructed and acquired in 1986. The Tractor Supply
Company store was constructed and acquired in 1996. The
land for the Arby's restaurant was acquired in 1998 and
construction of the restaurant will be completed in 1999.
There have been no costs capitalized as improvements
subsequent to the acquisitions.
The cost of the properties and the related accumulated
depreciation at December 31, 1998 are as follows:
Buildings and Accumulated
Property Land Equipment Total Depreciation
Rio Bravo, St. Paul, MN $ 49,251 $ 86,014 $ 135,265 $ 51,059
Jack-In-The-Box,
Fort Worth, TX 498,862 506,724 1,005,586 280,580
Hops Grill & Bar,
Palm Harbor, FL 484,570 609,803 1,094,373 336,969
Tractor Supply Company,
Maryville, TN 136,097 605,467 741,564 62,930
Arby's Restaurant,
Hudsonville, MI 198,600 0 198,600 0
----------- ----------- ----------- -----------
$ 1,367,380 $ 1,808,008 $ 3,175,388 $ 731,538
=========== =========== =========== ===========
AEI REAL ESTATE FUND 85-A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(4) Investments in Real Estate - (Continued)
On July 31, 1998, the Partnership sold 9.1266% of its
interest in the Tractor Supply Company store to an unrelated
third party. The Partnership received net sale proceeds of
$133,251 which resulted in a net gain of $44,686. At the
time of the sale, the cost and related accumulated
depreciation of the interest sold was $95,494 and $6,929,
respectively.
During 1998, the Partnership sold 37.3518% of its interest
in the Rio Bravo restaurant, in four separate transactions,
to unrelated third parties. The Partnership received total
net sale proceeds of $585,789 which resulted in a total net
gain of $172,422. The total cost and related accumulated
depreciation of the interests sold was $660,597 and
$247,230, respectively.
On December 30, 1998, the Partnership sold the Applebee's
restaurant in Harlingen, Texas to the lessee. The
Partnership received net sales proceeds of $1,858,837 which
resulted in a net gain of $580,055. At the time of sale,
the cost and related accumulated depreciation of the
property was $1,393,470 and $114,688, respectively.
On December 17, 1998, the Partnership purchased a 60%
interest in a parcel of land in Hudsonville, Michigan for
$198,600. The land is leased to RTM Mid-America, Inc. (RTM)
under a Lease Agreement with a primary term of 20 years and
annual rental payments of $16,881. Simultaneously with the
purchase of the land, the Partnership entered into a
Development Financing Agreement under which the Partnership
will advance funds to RTM for the construction of an Arby's
restaurant on the site. Through December 31, 1998, the
Partnership had advanced $16,981 for the construction of the
property and was charging interest on the advance at a rate
of 8.5%. The Partnership's share of the total purchase
price, including the cost of the land, will be approximately
$714,600. After the construction is complete, the Lease
Agreement will be amended to require annual rental payments
of approximately $46,000. The Partnership has incurred net
costs of $1,885 related to the acquisition of the property.
The costs have been capitalized and will be allocated to
land, building and equipment.
The minimum future rentals on the Leases for years
subsequent to December 31, 1998 are as follows:
1999 $ 331,976
2000 336,151
2001 340,433
2002 282,087
2003 252,749
Thereafter 1,284,631
-----------
$ 2,828,027
===========
In 1998 and 1997, the Partnership recognized contingent
rents of $14,896 and $2,259, respectively.
AEI REAL ESTATE FUND 85-A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(5) Major Tenants -
The following schedule presents rent revenue from individual
tenants, or affiliated groups of tenants, who each
contributed more than ten percent of the Partnership's total
rent revenue for the years ended December 31:
1998 1997
Tenants Industry
Renaissant Development Corp. Restaurant $ 155,979 $ 156,400
CKE Restaurants, Inc. Restaurant 150,478 137,841
Tractor Supply Company, Inc. Retail 87,345 90,300
Hops Grill & Bar, Inc. Restaurant 84,279 81,824
Innovative Restaurant
Concepts, Inc. Restaurant 53,802 65,711
---------- ----------
Aggregate rent revenue of major tenants $ 531,883 $ 532,076
========== ==========
Aggregate rent revenue of major tenants as
a percentage of total rent revenue 100% 100%
========== ==========
(6) Partners' Capital-
Cash distributions of $4,212 and $4,025 were made to the
General Partners and $417,001 and $396,299 were made to the
Limited Partners for the years ended December 31, 1998 and
1997, respectively. The Limited Partners' distributions
represent $58.90 and $55.95 per Limited Partnership Unit
outstanding using 7,080 and 7,083 weighted average Units in
1998 and 1997, respectively. The distributions represent
$58.90 and $46.13 per Unit of Net Income and $-0- and $9.82
per Unit of return of contributed capital in 1998 and 1997,
respectively.
Distributions of Net Cash Flow to the General Partners
during 1998 and 1997 were subordinated to the Limited
Partners as required in the Partnership Agreement. As a
result, 99% of distributions and income were allocated to
the Limited Partners and 1% to the General Partners.
AEI REAL ESTATE FUND 85-A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(6) Partners' Capital- (Continued)
The Partnership may acquire Units from Limited Partners who
have tendered their Units to the Partnership. Such Units
may be acquired at a discount. The Partnership is not
obligated to purchase in any year more than 5% of the total
number of Units originally sold. In no event shall the
Partnership be obligated to purchase Units if, in the sole
discretion of the Managing General Partner, such purchase
would impair the capital or operation of the Partnership.
During 1998, the Partnership did not redeem any Units from
the Limited Partners. In 1997, one Limited Partner redeemed
a total of 5 Partnership Units for $2,199. The Partnership
acquired these Units using Net Cash Flow from operations.
The redemptions increase the remaining Limited Partners'
ownership interest in the Partnership.
After the effect of redemptions and the return of capital
from the sale of property, the Adjusted Capital
Contribution, as defined in the Partnership Agreement, is
$905.95 per original $1,000 invested.
(7) Income Taxes -
The following is a reconciliation of net income for
financial reporting purposes to income reported for federal
income tax purposes for the years ended December 31:
1998 1997
Net Income For Financial
Reporting Purposes $1,142,451 $ 332,237
Depreciation for Tax Purposes
Over Depreciation For Financial
Reporting Purposes (10,467) (25,844)
Gain on Sale of Real Estate For
Tax Purposes Over Gain For
Financial Reporting Purposes 52,969 0
---------- ----------
Taxable Income to Partners $1,184,953 $ 306,393
========== ==========
AEI REAL ESTATE FUND 85-A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(7) Income Taxes - (Continued)
The following is a reconciliation of Partners' capital for
financial reporting purposes to Partners' capital reported
for federal income tax purposes for the years ended December
31:
1998 1997
Partners' Capital For
Financial Reporting Purposes $4,916,728 $4,195,490
Adjusted Tax Basis of Investments
In Real Estate Under Net Investments
In Real Estate for Financial
Reporting Purposes (138,883) (181,386)
Syndication Costs Treated as
Reduction of Capital For
Financial Reporting Purposes 978,377 978,377
---------- ----------
Partners' Capital For
Tax Reporting Purposes $5,756,222 $4,992,481
========== ==========
(8) Fair Value of Financial Instruments -
The estimated fair values of the financial instruments, none
of which are held for trading purposes, are as follows at
December 31:
1998 1997
Carrying Fair Carrying Fair
Amount Value Amount Value
Cash $ 317 $ 317 $ 171 $ 171
Money Market Funds 2,571,932 2,571,932 174,512 174,512
---------- ---------- --------- ---------
Total Cash and
Cash Equivalents $2,572,249 $2,572,249 $ 174,683 $ 174,683
========== ========== ========= =========
ITEM 8.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 9.DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT.
The registrant is a limited partnership and has no
officers, directors, or direct employees. The General Partners
of the registrant are Robert P. Johnson and NLM. The General
Partners manage and control the Partnership's affairs and have
general responsibility and the ultimate authority in all matters
affecting the Partnership's business. The director and officers
of NLM are as follows:
Robert P. Johnson, age 54, is Chief Executive Officer,
President and Director and has held these positions since the
formation of NLM in November, 1984, and has been elected to
continue in these positions until December, 1999. From 1970 to
the present, he has been employed exclusively in the investment
industry, specializing in tax-advantaged limited partnership
investments. In that capacity, he has been involved in the
development, analysis, marketing and management of public and
private investment programs investing in net lease properties as
well as public and private investment programs investing in
energy development. Since 1971, Mr. Johnson has been the
president, a director and a registered principal of AEI
Securities, Inc. (formerly AEI Incorporated), which is registered
with the Securities and Exchange Commission as a securities
broker-dealer, is a member of the National Association of
Securities Dealers, Inc. (NASD) and is a member of the Security
Investors Protection Corporation (SIPC). Mr. Johnson has been
president, a director and the principal shareholder of AEI Fund
Management, Inc., a real estate management company founded by
him, since 1978. Mr. Johnson is currently a general partner or
principal of the general partner in seventeen other limited
partnerships.
Mark E. Larson, age 46, is Executive Vice President,
Treasurer and Chief Financial Officer and has been elected to
continue in these positions until December, 1999. Mr. Larson has
been Treasurer and Executive Vice President since December, 1987
and Chief Financial Officer since January, 1990. In January,
1993, Mr. Larson was elected to serve as Secretary of NLM and
will continue to serve until December, 1999. Mr. Larson has been
employed by AEI Fund Management, Inc. and affiliated entities
since 1985. From 1979 to 1985, Mr. Larson was with Apache
Corporation as manager of Program Accounting responsible for the
accounting and reports for approximately 45 public partnerships.
Mr. Larson is responsible for supervising the accounting
functions of NLM and the registrant.
ITEM 10. EXECUTIVE COMPENSATION.
The General Partner and affiliates are reimbursed at cost
for all services performed on behalf of the registrant and for
all third party expenses paid on behalf of the registrant. The
cost for services performed on behalf of the registrant is actual
time spent performing such services plus an overhead burden.
These services include organizing the registrant and arranging
for the offer and sale of Units, reviewing properties for
acquisition and rendering administrative and management services.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth information pertaining to
the ownership of the Units by each person known by the
Partnership to beneficially own 5% or more of the Units, by each
General Partner, and by each officer or director of the Managing
General Partner as of February 28, 1999:
Name and Address Number of Percent
of Beneficial Owner Units Held of Class
Net Lease Management 85-A, Inc. 14.5 *
1300 Minnesota World Trade Center
30 East 7th Street, St. Paul, Minnesota 55101
Robert P. Johnson 0 0%
1300 Minnesota World Trade Center
30 East 7th Street, St. Paul, Minnesota 55101
Mark E. Larson 0 0%
1300 Minnesota World Trade Center
30 East 7th Street, St. Paul, Minnesota 55101
* Less than 1%
The persons set forth in the preceding table hold sole voting
power and power of disposition with respect to all of the Units
set forth opposite their names. The General Partners know of no
holders of more than 5% of the outstanding Units.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The registrant, NLM and its affiliates have common
management and utilize the same facilities. As a result, certain
administrative expenses are allocated among these related
entities. All of such activities and any other transactions
involving the affiliates of the General Partner of the registrant
are governed by, and are conducted in conformity with, the
limitations set forth in the Limited Partnership Agreement of the
registrant. Reference is made to Note 3 on Page 19 and 20, and
is incorporated herein by reference, for details of Related Party
Transactions.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND 8-K/A.
A. Exhibits -
Description
10.1 Purchase Agreement dated September 9,
1998 between the Partnership and Tom S.
Obata, Trustee of That Certain "Living
Trust" relating to the property at 389 N.
Hamline Avenue, St. Paul, Minnesota.
PART II - OTHER INFORMATION
(Continued)
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K (Continued)
A. Exhibits -
Description
10.2 Purchase Agreement dated September 10,
1998 between the Partnership and Jack S.
Obata and Atsuko Obata, Trustee of the Jack
S. and Atsuko Obata Revocable Trust dated
12/30/74 relating to the property at 389 N.
Hamline Avenue, St. Paul, Minnesota.
10.3 Property Co-Tenancy Ownership
Agreement dated September 16, 1998 between
the Partnership and Tom S. Obata, Trustee
of That Certain "Living Trust" relating to
the property at 389 N. Hamline Avenue, St.
Paul, Minnesota.
10.4 Property Co-Tenancy Ownership
Agreement dated September 16, 1998 between
the Partnership and Jack S. Obata and
Atsuko Obata, Trustee of the Jack S. and
Atsuko Obata Revocable Trust dated 12/30/74
relating to the property at 389 N. Hamline
Avenue, St. Paul, Minnesota.
10.5 Purchase Agreement dated
October 27, 1998 between the Partnership
and Jean Ann Morrison, Trustee of The Jean
Morrison Trust, dated 4/26/85 relating to
the property at 389 N. Hamline Avenue, St.
Paul, Minnesota.
10.6 Property Co-Tenancy
Ownership Agreement dated October 29, 1998
between the Partnership and Jean Ann
Morrison, Trustee of The Jean Morrison
Trust, dated 4/26/85 relating to the
property at 389 N. Hamline Avenue, St.
Paul, Minnesota.
10.7 Purchase Agreement dated November 10,
1998 between the Partnership and Renaissant
Development Corporation relating to the
property at 1519 W. Harrison, Harlingen,
Texas (incorporated by reference to Exhibit
10.1 of Form 8-K filed with the Commission
on January 5, 1999).
10.8 Purchase Agreement dated
November 19, 1998 between the Partnership
and Joan G. Cairns relating to the property
at 389 N. Hamline Avenue, St. Paul,
Minnesota.
10.9 Property Co-Tenancy
Ownership Agreement dated November 25, 1998
between the Partnership and Joan G. Cairns
relating to the property at 389 N. Hamline
Avenue, St. Paul, Minnesota.
10.10 Development Financing
Agreement dated December 17, 1998 between
the Partnership, Net Lease Income & Growth
Fund 84-A Limited Partnership and RTM Mid-
America, Inc. relating to the property at
4633 32nd Avenue, Hudsonville, Michigan.
PART II - OTHER INFORMATION
(Continued)
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K (Continued)
A. Exhibits -
Description
10.11 Net Lease Agreement
dated December 17, 1998 between the
Partnership, Net Lease Income & Growth Fund
84-A Limited Partnership and RTM Mid-
America, Inc. relating to the property at
4633 32nd Avenue, Hudsonville, Michigan.
27 Financial Data Schedule for
year ended December 31, 1998.
B. Reports on Form 8-K and 8-K/A - None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
AEI REAL ESTATE FUND 85-A
Limited Partnership
By: Net Lease Management 85-A, Inc.
Its Managing General Partner
March 12, 1999 By: /s/ Robert P. Johnson
Robert P. Johnson, President and Director
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.
Name Title Date
/s/ Robert P. Johnson President (Principal Executive Officer) March 12, 1999
Robert P. Johnson and Sole Director of Managing General
Partner
/s/ Mark E. Larson Executive Vice President, Treasurer March 12, 1999
Mark E. Larson and Chief Financial Officer
(Principal Accounting Officer)
PURCHASE AGREEMENT
Rio Bravo Cantina - St. Paul, MN
This AGREEMENT, entered into effective as of the 9th of Sept,
1998.
l. PARTIES. Seller is Net Lease Income & Growth Fund 84-A Limited
Partnership which owns an undivided 13.8274% interest and AEI
Real Estate Fund 85-A Limited Partnership which owns an undivided
45.00% interest in the fee title to that certain real property
legally described in the attached Exhibit "A" (the "Entire
Property") Buyer is Tom S. Obata, Trustee of That Certain
"Living Trust", dated 12/30/74 ("Buyer"). Seller wishes to sell
and Buyer wishes to buy a portion as Tenant in Common of Seller's
interest in the Entire Property.
2. PROPERTY. The Property to be sold to Buyer in this transaction
consists of an undivided 16.0589 percentage interest (Fund 84-A
selling 13.8274% and Fund 85-A selling 2.2315%) (hereinafter,
simply the "Property") as Tenant in Common in the Entire
Property.
3. PURCHASE PRICE . The purchase price for this percentage
interest in the Entire Property is $280,000 all cash. (241,092.00
payable to Fund 84-A and 38,908.00 payable to Fund 85-A)
4. TERMS. The purchase price for the Property will be paid by
Buyer as follows:
(a) When this agreement is executed, Buyer will pay $5,000
to Seller (which shall be deposited into escrow according to
the terms hereof) (the "First Payment"). The First Payment
will be credited against the purchase price when and if
escrow closes and the sale is completed.
(b) Buyer will deposit the balance of the purchase price,
$275,000 (the "Second Payment") into escrow in sufficient
time to allow escrow to close on the closing date.
5. CLOSING DATE. Escrow shall close on or before September 30,
1998.
6. DUE DILIGENCE. Buyer will have until the expiration of the
fifth business day (The "Review Period") after delivery of each
of following items, to be supplied by Seller, to conduct all of
its inspections and due diligence and satisfy itself regarding
each item, the Property, and this transaction. Buyer agrees to
indemnify and hold Seller harmless for any loss or damage to the
Entire Property or persons caused by Buyer or its agents arising
out of such physical inspections of the Entire Property.
(a) The original and one copy of a title insurance
commitment for an Owner's Title insurance policy (see
paragraph 8 below).
(b) A copy of a Certificate of Occupancy or other such
document certifying completion and granting permission to
permanently occupy the improvements on the Entire Property
as are in Seller's possession.
(c) A copy of an "as built" survey of the Entire Property
done concurrent with Seller's acquisition of the Property.
(d) Lease (as further set forth in paragraph 11(a) below) of
the Entire Property showing occupancy date, lease expiration
date, rent, and Guarantys, if any, accompanied by such
tenant financial statements as may have been provided most
recently to Seller by the Tenant and/or Guarantors.
Buyer Initial: /s/ TSO
Purchase Agreement for Rio Bravo-St. Paul, MN
It is a contingency upon Seller's obligations hereunder that
two (2) copies of Co-Tenancy Agreement in the form attached
hereto duly executed by Buyer and AEI Real Estate Fund 85-A
Limited Partnership and dated on escrow closing date be delivered
to the Seller on the closing date.
Buyer may cancel this agreement for ANY REASON in its sole
discretion by delivering a cancellation notice, return receipt
requested, to Seller and escrow holder before the expiration of
the Review Period. Such notice shall be deemed effective only
upon receipt by Seller. If this Agreement is not cancelled as
set forth above, the First Payment shall be non-refundable unless
Seller shall default hereunder.
If Buyer cancels this Agreement as permitted under this
Section, except for any escrow cancellation fees and any
liabilities under sections 15(a) of this agreement (which will
survive), Buyer (after execution of such documents reasonably
requested by Seller to evidence the termination hereof) shall be
returned its First Payment, and Buyer will have absolutely no
rights, claims or interest of any type in connection with the
Property or this transaction, regardless of any alleged conduct
by Seller or anyone else.
Unless this Agreement is canceled by Buyer pursuant to the
terms hereof, if Buyer fails to make the Second Payment, Seller
shall be entitled to retain the First Payment and Buyer
irrevocably will be deemed to be in default under this Agreement.
Seller may, at its option, retain the First Payment and declare
this Agreement null and void, in which event Buyer will be deemed
to have canceled this Agreement and relinquish all rights in and
to the Property or Seller may exercise its rights under Section
14 hereof. If this Agreement is not canceled and the Second
Payment is made when required, all of Buyer's conditions and
contingencies will be deemed satisfied.
7. ESCROW. Escrow shall be opened by Seller and funds deposited
in escrow upon acceptance of this agreement by both parties. The
escrow holder will be a nationally-recognized escrow company
selected by Seller. A copy of this Agreement will be delivered to
the escrow holder and will serve as escrow instructions together
with the escrow holder's standard instructions and any additional
instructions required by the escrow holder to clarify its rights
and duties (and the parties agree to sign these additional
instructions). If there is any conflict between these other
instructions and this Agreement, this Agreement will control.
8. TITLE. Closing will be conditioned on the agreement of a
title company selected by Seller to issue an Owner's policy of
title insurance, dated as of the close of escrow, in an amount
equal to the purchase price, insuring that Buyer will own
insurable title to the Property subject only to: the title
company's standard exceptions; current real property taxes and
assessments; survey exceptions; the rights of parties in
possession pursuant to the lease defined in paragraph 11 below;
and other items of record disclosed to Buyer during the Review
Period.
Buyer shall be allowed five (5) days after receipt of said
commitment for examination and the making of any objections to
marketability thereto, said objections to be made in writing or
deemed waived. If any objections are so made, the Seller shall
be allowed eighty (80) days to make such title marketable or in
the alternative to obtain a commitment for insurable title
insuring over Buyer's objections. If Seller shall decide to make
no efforts to make title marketable, or is unable to make title
marketable or obtain insurable title, (after execution by Buyer
of such documents reasonably requested by Seller to evidence the
termination hereof) Buyer's First Payment shall be returned and
this Agreement shall be null and void and of no further force and
effect. Seller has no obligation to spend any funds or make any
effort to satisfy Buyer's objections, if any.
Pending satisfaction of Buyer's objections, the payments
hereunder required shall be postponed, but upon satisfaction of
Buyer's objections, and within ten (10) days after written
Buyer Initial: /s/ TSO
Purchase Agreement for Rio Bravo-St. Paul, MN
notice of satisfaction of Buyer's objections to the Buyer, the
parties shall perform this Agreement according to its terms.
9. CLOSING COSTS. Seller will pay one-half of escrow fees, the
cost of the title commitment and any brokerage commissions
payable. The Buyer will pay the cost of issuing a Standard
Owners Title Insurance Policy in the full amount of the purchase
price, if Buyer shall decide to purchase the same. Buyer will
pay all recording fees, one-half of the escrow fees, and the cost
of an update to the Survey in Sellers possession (if an update is
required by Buyer.) Each party will pay its own attorney's fees
and costs to document and close this transaction.
10. REAL ESTATE TAXES, SPECIAL ASSESSMENTS AND PRORATIONS.
(a) Because the Entire Property (of which the Property is a
part) is subject to a triple net lease (as further set forth
in paragraph 11(a)(i), the parties acknowledge that there
shall be no need for a real estate tax proration. However,
Seller represents that to the best of its knowledge, all
real estate taxes and installments of special assessments
due and payable in all years prior to the year of Closing
have been paid in full. Unpaid real estate taxes and unpaid
levied and pending special assessments existing on the date
of Closing shall be the responsibility of Buyer and Seller
in proportion to their respective Tenant in Common
interests, pro-rated, however, to the date of closing for
the period prior to closing, which shall be the
responsibility of Seller if Tenant shall not pay the same.
Seller and Buyer shall likewise pay all taxes due and
payable in the year after Closing and any unpaid
installments of special assessments payable therewith and
thereafter, if such unpaid levied and pending special
assessments and real estate taxes are not paid by any tenant
of the Entire Property.
(b) All income and all operating expenses from the Entire
Property shall be prorated between the parties and adjusted
by them as of the date of Closing. Seller shall be entitled
to all income earned and shall be responsible for all
expenses incurred prior to the date of Closing, and Buyer
shall be entitled to its proportionate share of all income
earned and shall be responsible for its proportionate share
of all operating expenses of the Entire Property incurred on
and after the date of closing.
11. SELLER'S REPRESENTATION AND AGREEMENTS.
(a) Seller represents and warrants as of this date that:
(i) Except for the Lease Modification and Extension
Agreement in existence between Net Lease Income & Growth
Fund 84-A Limited Partnership and AEI Real Estate Fund 85-A
Limited Partnership (as "Landlord") and Innovative
Restaurant Concepts, Inc.("Tenant"), dated May 8, 1996,
Seller is not aware of any leases of the Property. The
above referenced lease agreement has an option to purchase
in favor of the Tenant as set forth in paragraph 13 of said
lease agreement.
(ii) It is not aware of any pending litigation or
condemnation proceedings against the Property or Seller's
interest in the Property.
(iii) Except as previously disclosed to Buyer and as
permitted in paragraph (b) below, Seller is not aware of any
contracts Seller has executed that would be binding on Buyer
after the closing date.
(b) Provided that Buyer performs its obligations when
required, Seller agrees that it will not enter into any new
contracts that would materially affect the Property and be
binding on Buyer after the Closing Date without Buyer's
prior consent, which will not be unreasonably withheld.
However, Buyer acknowledges that Seller retains the right
both
Buyer Initial: /s/ TSO
Purchase Agreement for Rio Bravo-St. Paul, MN
prior to and after the Closing Date to freely transfer all
or a portion of Seller's remaining undivided interest in the
Entire Property, provided such sale shall not encumber the
Property being purchased by Buyer in violation of the terms
hereof or the contemplated Co-Tenancy Agreement.
12. DISCLOSURES.
(a) Seller has received no notice that there are now, and
at the Closing there will be, no material, physical or
mechanical defects of the Property, including, without
limitation, the plumbing, heating, air conditioning,
ventilating, electrical systems, and all such items are in
good operating condition and repair and in compliance with
all applicable governmental , zoning and land use laws,
ordinances, regulations and requirements.
(b) Seller has received no notice that the use and
operation of the Property now is, and at the time of Closing
will be, in full compliance with applicable building codes,
safety, fire, zoning, and land use laws, and other
applicable local, state and federal laws, ordinances,
regulations and requirements.
(c) Seller knows of no facts nor has Seller failed to
disclose to Buyer any fact known to Seller which would
prevent the Tenant from using and operating the Property
after the Closing in the manner in which the Property has
been used and operated prior to the date of this Agreement.
(d) Seller has received no notice that the Property is not,
and as of the Closing will not be, in violation of any
federal, state or local law, ordinance or regulations
relating to industrial hygiene or to the environmental
conditions on, under, or about the Property including, but
not limited to, soil and groundwater conditions. To the
best of Seller's knowledge: there is no proceeding or
inquiry by any governmental authority with respect to the
presence of Hazardous Materials on the Property or the
migration of Hazardous Materials from or to other property.
Buyer agrees that Seller will have no liability of any type
to Buyer or Buyer's successors, assigns, or affiliates in
connection with any Hazardous Materials on or in connection
with the Property either before or after the Closing Date,
except such Hazardous Materials on or in connection with the
Property arising out of Seller's negligence or intentional
misconduct in violation of applicable state or federal law
or regulation.
(e) Buyer agrees that it shall be purchasing the Property
in its then present condition, as is, where is, and Seller
has no obligations to construct or repair any improvements
thereon or to perform any other act regarding the Property,
except as expressly provided herein.
(f) Buyer acknowledges that, having been given the
opportunity to inspect the Property and such financial
information on the Lessee and Guarantors of the Lease as
Buyer or its advisors shall request if in Seller's
possession, Buyer is relying solely on its own investigation
of the Property and not on any information provided by
Seller or to be provided except as set forth herein. Buyer
further acknowledges that the information provided and to be
provided by Seller with respect to the Property and to the
Lessee and Guarantors of Lease was obtained from a variety
of sources and Seller neither (a) has made independent
investigation or verification of such information, or (b)
makes any representations as to the accuracy or completeness
of such information. The sale of the Property as provided
for herein is made on an "AS IS" basis, and Buyer expressly
acknowledges that, in consideration of the agreements of
Seller herein, except as otherwise specified herein in
paragraph 11(a) and (b) above, Seller makes no Warranty or
representation, Express or Implied, or arising by operation
of law, including, but not
Buyer Initial: /s/ TSO
Purchase Agreement for Rio Bravo-St. Paul, MN
limited to, any warranty or condition, habitability,
tenantability, suitability for commercial purposes,
merchantability, or fitness for a particular purpose, in
respect of the Property.
The representations of Seller above shall survive Closing
for a period of one year after Closing. Similarly, the
representations and agreements of Buyer in provision (d) -
(f) above shall survive Closing for a period of one year.
13. CLOSING.
(a) Before the closing date, Seller will deposit into
escrow an executed special warranty deed warranting title
against lawful claims by, through, or under a conveyance
from Seller, but not further or otherwise, conveying
insurable title of the Property to Buyer, subject to the
exceptions contained in paragraph 8 above.
(b) On or before the closing date, Buyer will deposit into
escrow: the balance of the purchase price when required
under Section 4; any additional funds required of Buyer,
(pursuant to this agreement or any other agreement executed
by Buyer) to close escrow. Both parties will sign and
deliver to the escrow holder any other documents reasonably
required by the escrow holder to close escrow.
(c) On the closing date, if escrow is in a position to
close, the escrow holder will: record the deed in the
official records of the county where the Property is
located; cause the title company to commit to issue the
title policy; immediately deliver to Seller the portion of
the purchase price deposited into escrow by cashier's check
or wire transfer (less debits and prorations, if any);
deliver to Seller and Buyer a signed counterpart of the
escrow holder's certified closing statement and take all
other actions necessary to close escrow.
14. DEFAULTS. If Buyer defaults, Buyer will forfeit all rights
and claims and Seller will be relieved of all obligations and
will be entitled to retain all monies heretofore paid by the
Buyer. In addition, Seller shall retain all remedies available
to Seller at law or in equity.
If Seller shall default, Buyer irrevocably waives any rights
to file a lis pendens, a specific performance action or any other
claim, action or proceeding of any type in connection with the
Property or this or any other transaction involving the Property,
and will not do anything to affect title to the Property or
hinder, delay or prevent any other sale, lease or other
transaction involving the Property (any and all of which will be
null and void), unless: it has paid the First Payment, deposited
the balance of the Second Payment for the purchase price into
escrow, performed all of its other obligations and satisfied all
conditions under this Agreement, and unconditionally notified
Seller that it stands ready to tender full performance, purchase
the Property and close escrow as per this Agreement, regardless
of any alleged default or misconduct by Seller. Provided,
however, that in no event shall Seller be liable for any actual,
punitive, consequential or speculative damages arising out of any
default by Seller hereunder.
15. BUYER'S REPRESENTATIONS AND WARRANTIES.
a. Buyer represents and warrants to Seller as follows:
(i) In addition to the acts and deeds recited herein and
contemplated to be performed, executed, and delivered by
Buyer, Buyer shall perform, execute and deliver or cause to
be performed, executed, and delivered at the Closing or
after the Closing, any and all further acts, deeds and
assurances as Seller or the Title Company may require and be
reasonable in order to consummate the transactions
contemplated herein.
Buyer Initial: /s/ TSO
Purchase Agreement for Rio Bravo-St. Paul, MN
(ii) Buyer has all requisite power and authority to
consummate the transaction contemplated by this Agreement
and has by proper proceedings duly authorized the execution
and delivery of this Agreement and the consummation of the
transaction contemplated hereby.
(iii) To Buyer's knowledge, neither the execution and
delivery of this Agreement nor the consummation of the
transaction contemplated hereby will violate or be in
conflict with (a) any applicable provisions of law, (b) any
order of any court or other agency of government having
jurisdiction hereof, or (c) any agreement or instrument to
which Buyer is a party or by which Buyer is bound.
16. DAMAGES, DESTRUCTION AND EMINENT DOMAIN.
(a) If, prior to closing, the Property or any part thereof
be destroyed or further damaged by fire, the elements, or
any cause, due to events occurring subsequent to the date of
this Agreement to the extent that the cost of repair exceeds
$10,000.00, this Agreement shall become null and void, at
Buyer's option exercised, if at all, by written notice to
Seller within ten (10) days after Buyer has received written
notice from Seller of said destruction or damage. Seller,
however, shall have the right to adjust or settle any
insured loss until (i) all contingencies set forth in
Paragraph 6 hereof have been satisfied, or waived; and (ii)
any ten-day period provided for above in this Subparagraph
16a for Buyer to elect to terminate this Agreement has
expired or Buyer has, by written notice to Seller, waived
Buyer's right to terminate this Agreement. If Buyer elects
to proceed and to consummate the purchase despite said
damage or destruction, there shall be no reduction in or
abatement of the purchase price, and Seller shall assign to
Buyer the Seller's right, title, and interest in and to all
insurance proceeds (pro-rata in relation to the Entire
Property) resulting from said damage or destruction to the
extent that the same are payable with respect to damage to
the Property, subject to rights of any Tenant of the Entire
Property.
If the cost of repair is less than $10,000.00, Buyer shall
be obligated to otherwise perform hereinunder with no
adjustment to the Purchase Price, reduction or abatement,
and Seller shall assign Seller's right, title and interest
in and to all insurance proceeds pro-rata in relation to the
Entire Property, subject to rights of any Tenant of the
Entire Property.
(b) If, prior to closing, the Property, or any part
thereof, is taken by eminent domain, this Agreement shall
become null and void, at Buyer's option. If Buyer elects to
proceed and to consummate the purchase despite said taking,
there shall be no reduction in, or abatement of, the
purchase price, and Seller shall assign to Buyer the
Seller's right, title, and interest in and to any award
made, or to be made, in the condemnation proceeding pro-rata
in relation to the Entire Property, subject to rights of any
Tenant of the Entire Property.
In the event that this Agreement is terminated by Buyer as
provided above in Subparagraph 16a or 16b, the First Payment
shall be immediately returned to Buyer (after execution by Buyer
of such documents reasonably requested by Seller to evidence the
termination hereof).
17. BUYER'S 1031 TAX FREE EXCHANGE.
While Seller acknowledges that Buyer is purchasing the
Property as "replacement property" to accomplish a tax-deferred
exchange, Buyer acknowledges that Seller has made no
representations, warranties, or agreements to Buyer or Buyer's
agents that the transaction contemplated by the Agreement will
qualify for such tax treatment, nor has there been any reliance
thereon by Buyer respecting the legal or tax implications of the
transactions contemplated hereby. Buyer further represents that
it has sought and obtained such third party advice and counsel as
it deems necessary in regards to the tax implications of this
transaction.
Buyer Initial: /s/ TSO
Purchase Agreement for Rio Bravo-St. Paul, MN
Buyer intends that this transaction qualify as an exchange
under Section 1031 of the Internal Revenue Code of 1986 and
regulations thereunder. Buyer intends to perfect the 1031
exchange by way of a simultaneous exchange of properties through
concurrently conditional closing escrows conducted under escrow
instruction that will qualify the transaction under Section 1031.
18. CANCELLATION
If any party elects to cancel this Contract because of any
breach by another party or because escrow fails to close by
the agreed date, the party electing to cancel shall deliver
to escrow agent a notice containing the address of the party
in breach and stating that this Contract shall be cancelled
unless the breach is cured within 13 days following the
delivery of the notice to the escrow agent. Within three
days after receipt of such notice, the escrow agent shall
send it by United States Mail to the party in breach at the
address contained in the Notice and no further notice shall
be required. If the breach is not cured within the 13 days
following the delivery of the notice to the escrow agent,
this Contract shall be cancelled.
19. MISCELLANEOUS.
(a) This Agreement may be amended only by written agreement
signed by both Seller and Buyer, and all waivers must be in
writing and signed by the waiving party. Time is of the
essence. This Agreement will not be construed for or
against a party whether or not that party has drafted this
Agreement. If there is any action or proceeding between the
parties relating to this Agreement the prevailing party will
be entitled to recover attorney's fees and costs. This is
an integrated agreement containing all agreements of the
parties about the Property and the other matters described,
and it supersedes any other agreements or understandings.
Exhibits attached to this Agreement are incorporated into
this Agreement.
(b) If this escrow has not closed by September 30, 1998,
through no fault of Seller, Seller may either, at its
election, extend the closing date or exercise any remedy
available to it by law, including terminating this
Agreement.
(c) Funds to be deposited or paid by Buyer must be good and
clear funds in the form of cash, cashier's checks or wire
transfers.
(d) All notices from either of the parties hereto to the
other shall be in writing and shall be considered to have
been duly given or served if sent by first class certified
mail, return receipt requested, postage prepaid, or by a
nationally recognized courier service guaranteeing overnight
delivery to the party at his or its address set forth below,
or to such other address as such party may hereafter
designate by written notice to the other party.
Buyer Initial: /s/ TSO
Purchase Agreement for Rio Bravo-St. Paul, MN
If to Seller:
Attention: Robert P. Johnson
Net Lease Income & Growth Fund 84-A Limited Partnership
1300 Minnesota World Trade Center
30 E. 7th Street
St. Paul, MN 55101
and
Attention: Robert P. Johnson
AEI Real Estate Fund 85-A Limited Partnership
1300 Minnesota World Trade Center
30 E. 7th Street
St. Paul, MN 55101
If to Buyer:
Tom S. Obata, Trustee
2395 Ric Drive
Unit B
Gilroy, CA 95020
When accepted, this offer will be a binding agreement for
valid and sufficient consideration which will bind and benefit
Buyer, Seller and their respective successors and assigns. Buyer
is submitting this offer by signing a copy of this offer and
delivering it to Seller. Seller has five (5) business days from
receipt within which to accept this offer.
IN WITNESS WHEREOF, the Seller and Buyer have executed this
Agreement effective as of the day and year above first written.
BUYER: TOM S. OBATA, TRUSTEE OF THAT CERTAIN "LIVING TRUST"
DATED 12/30/74
By: /s/ Tom S. Obata, Trustee
Tom S. Obata, Trustee
Buyer Initial: /s/ TSO
Purchase Agreement for Rio Bravo-St. Paul, MN
SELLER: NET LEASE INCOME & GROWTH FUND 84-A LIMITED PARTNERSHIP,
a Minnesota limited partnership
By: Net Lease Management 84-A Inc.,
its corporate general partner
By:/s/ Robert P Johnson
Robert P. Johnson, President
and:
AEI REAL ESTATE FUND 85-A LIMITED PARTNERSHIP,
a Minnesota limited partnership
By: Net Lease Management 85-A Inc.,
its corporate general partner
By:/s/ Robert P Johnson
Robert P. Johnson, President
Buyer Initial: /s/ TSO
Purchase Agreement for Rio Bravo-St. Paul, MN
EXHIBIT "A"
Those parts of Lots 5,6 and 7 and Lots B, I and J, all in
Bohn's Rearrangement, St. Paul, Minn., according to the
recorded Partnership thereof, Ramsey County, Minnesota,
described as beginning at the Northwest corner of the East
10.00 feet of said Lot 5; thence on an assumed bearing of
South, along the West line of said East 10.00 feet of Lot 5,
a distance of 336.83 feet, thence on a bearing of West a
distance of 281.00 feet; thence on a bearing of South a
distance of 178.96 feet to the Northerly right-of-way line
of Interstate Highway No. 94; thence South 89 degrees 53
minutes 38 seconds West along said Northerly right-of-way
line of Interstate Highway No. 94 a distance of 20.00 feet;
thence on a bearing of North a distance of 153.00 feet;
thence on a bearing of West a distance of 182.64 feet to a
line of 135.00 feet Easterly of and parallel with the most
Westerly line of said Lot 6 and its Northerly extension;
thence North 0 degrees 02 minutes 00 seconds East along said
parallel line a distance of 79.54 feet, to the Northwesterly
line of said Lot 65; thence Northeasterly, along the
Northwesterly lines of said Lots 6, I, J and 5 to the point
of beginning.
Except the following described parcel:
That part of Lot 5, Bohn's Rearrangement, St. Paul, Minn.,
according to the plat thereof described as follows:
Beginning at the Northeast corner of said Lot 5; thence
on an assumed bearing of South 0 degrees 06 minutes 40
seconds East, along the East line of said Lot 5, a distance
of 13.16 feet; thence South 89 degrees 53 minutes 20 seconds
West a distance of 26.46 feet, to the Northwesterly line of
said Lot 5; thence Northeasterly, along said Northwesterly
line a distance of 29.55 feet to the point of beginning
except the East 10 feet thereof.
PURCHASE AGREEMENT
Rio Bravo Cantina - St. Paul, MN
This AGREEMENT, entered into effective as of the 10 of Sept,
1998.
l. PARTIES. Seller is AEI Real Estate Fund 85-A Limited
Partnership which owns an undivided 45.00% interest in the fee
title to that certain real property legally described in the
attached Exhibit "A" (the "Entire Property") Buyer is Jack S.
Obata and Atsuko Obata, Trustees of The Jack S. and Atsuko Obata
Revocable Trust, dated 12/30/74 ("Buyer"). Seller wishes to sell
and Buyer wishes to buy a portion as Tenant in Common of Seller's
interest in the Entire Property.
2. PROPERTY. The Property to be sold to Buyer in this transaction
consists of an undivided 16.0589 percentage interest
(hereinafter, simply the "Property") as Tenant in Common in the
Entire Property.
3. PURCHASE PRICE . The purchase price for this percentage
interest in the Entire Property is $280,000 all cash.
4. TERMS. The purchase price for the Property will be paid by
Buyer as follows:
(a) When this agreement is executed, Buyer will pay $5,000
to Seller (which shall be deposited into escrow according to
the terms hereof) (the "First Payment"). The First Payment
will be credited against the purchase price when and if
escrow closes and the sale is completed.
(b) Buyer will deposit the balance of the purchase price,
$275,000 (the "Second Payment") into escrow in sufficient
time to allow escrow to close on the closing date.
5. CLOSING DATE. Escrow shall close on or before September 30,
1998.
6. DUE DILIGENCE. Buyer will have until the expiration of the
fifth business day (The "Review Period") after delivery of each
of following items, to be supplied by Seller, to conduct all of
its inspections and due diligence and satisfy itself regarding
each item, the Property, and this transaction. Buyer agrees to
indemnify and hold Seller harmless for any loss or damage to the
Entire Property or persons caused by Buyer or its agents arising
out of such physical inspections of the Entire Property.
(a) The original and one copy of a title insurance
commitment for an Owner's Title insurance policy (see
paragraph 8 below).
(b) A copy of a Certificate of Occupancy or other such
document certifying completion and granting permission to
permanently occupy the improvements on the Entire Property
as are in Seller's possession.
(c) A copy of an "as built" survey of the Entire Property
done concurrent with Seller's acquisition of the Property.
(d) Lease (as further set forth in paragraph 11(a) below) of
the Entire Property showing occupancy date, lease expiration
date, rent, and Guarantys, if any, accompanied by such
tenant financial statements as may have been provided most
recently to Seller by the Tenant and/or Guarantors.
Buyer Initial:
Purchase Agreement for Rio Bravo-St. Paul, MN
It is a contingency upon Seller's obligations hereunder that
two (2) copies of Co-Tenancy Agreement in the form attached
hereto duly executed by Buyer and AEI Real Estate Fund 85-A
Limited Partnership and dated on escrow closing date be delivered
to the Seller on the closing date.
Buyer may cancel this agreement for ANY REASON in its sole
discretion by delivering a cancellation notice, return receipt
requested, to Seller and escrow holder before the expiration of
the Review Period. Such notice shall be deemed effective only
upon receipt by Seller. If this Agreement is not cancelled as
set forth above, the First Payment shall be non-refundable unless
Seller shall default hereunder.
If Buyer cancels this Agreement as permitted under this
Section, except for any escrow cancellation fees and any
liabilities under sections 15(a) of this agreement (which will
survive), Buyer (after execution of such documents reasonably
requested by Seller to evidence the termination hereof) shall be
returned its First Payment, and Buyer will have absolutely no
rights, claims or interest of any type in connection with the
Property or this transaction, regardless of any alleged conduct
by Seller or anyone else.
Unless this Agreement is canceled by Buyer pursuant to the
terms hereof, if Buyer fails to make the Second Payment, Seller
shall be entitled to retain the First Payment and Buyer
irrevocably will be deemed to be in default under this Agreement.
Seller may, at its option, retain the First Payment and declare
this Agreement null and void, in which event Buyer will be deemed
to have canceled this Agreement and relinquish all rights in and
to the Property or Seller may exercise its rights under Section
14 hereof. If this Agreement is not canceled and the Second
Payment is made when required, all of Buyer's conditions and
contingencies will be deemed satisfied.
7. ESCROW. Escrow shall be opened by Seller and funds deposited
in escrow upon acceptance of this agreement by both parties. The
escrow holder will be a nationally-recognized escrow company
selected by Seller. A copy of this Agreement will be delivered to
the escrow holder and will serve as escrow instructions together
with the escrow holder's standard instructions and any additional
instructions required by the escrow holder to clarify its rights
and duties (and the parties agree to sign these additional
instructions). If there is any conflict between these other
instructions and this Agreement, this Agreement will control.
8. TITLE. Closing will be conditioned on the agreement of a
title company selected by Seller to issue an Owner's policy of
title insurance, dated as of the close of escrow, in an amount
equal to the purchase price, insuring that Buyer will own
insurable title to the Property subject only to: the title
company's standard exceptions; current real property taxes and
assessments; survey exceptions; the rights of parties in
possession pursuant to the lease defined in paragraph 11 below;
and other items of record disclosed to Buyer during the Review
Period.
Buyer shall be allowed five (5) days after receipt of said
commitment for examination and the making of any objections to
marketability thereto, said objections to be made in writing or
deemed waived. If any objections are so made, the Seller shall
be allowed eighty (80) days to make such title marketable or in
the alternative to obtain a commitment for insurable title
insuring over Buyer's objections. If Seller shall decide to make
no efforts to make title marketable, or is unable to make title
marketable or obtain insurable title, (after execution by Buyer
of such documents reasonably requested by Seller to evidence the
termination hereof) Buyer's First Payment shall be returned and
this Agreement shall be null and void and of no further force and
effect. Seller has no obligation to spend any funds or make any
effort to satisfy Buyer's objections, if any.
Pending satisfaction of Buyer's objections, the payments
hereunder required shall be postponed, but upon satisfaction of
Buyer's objections, and within ten (10) days after written
Buyer Initial: /s/ JSO /s/ AO
Purchase Agreement for Rio Bravo-St. Paul, MN
notice of satisfaction of Buyer's objections to the Buyer, the
parties shall perform this Agreement according to its terms.
9. CLOSING COSTS. Seller will pay one-half of escrow fees, the
cost of the title commitment and any brokerage commissions
payable. The Buyer will pay the cost of issuing a Standard
Owners Title Insurance Policy in the full amount of the purchase
price, if Buyer shall decide to purchase the same. Buyer will
pay all recording fees, one-half of the escrow fees, and the cost
of an update to the Survey in Sellers possession (if an update is
required by Buyer.) Each party will pay its own attorney's fees
and costs to document and close this transaction.
10. REAL ESTATE TAXES, SPECIAL ASSESSMENTS AND PRORATIONS
(a) Because the Entire Property (of which the Property is a
part) is subject to a triple net lease (as further set forth
in paragraph 11(a)(i), the parties acknowledge that there
shall be no need for a real estate tax proration. However,
Seller represents that to the best of its knowledge, all
real estate taxes and installments of special assessments
due and payable in all years prior to the year of Closing
have been paid in full. Unpaid real estate taxes and unpaid
levied and pending special assessments existing on the date
of Closing shall be the responsibility of Buyer and Seller
in proportion to their respective Tenant in Common
interests, pro-rated, however, to the date of closing for
the period prior to closing, which shall be the
responsibility of Seller if Tenant shall not pay the same.
Seller and Buyer shall likewise pay all taxes due and
payable in the year after Closing and any unpaid
installments of special assessments payable therewith and
thereafter, if such unpaid levied and pending special
assessments and real estate taxes are not paid by any tenant
of the Entire Property.
(b) All income and all operating expenses from the Entire
Property shall be prorated between the parties and adjusted
by them as of the date of Closing. Seller shall be entitled
to all income earned and shall be responsible for all
expenses incurred prior to the date of Closing, and Buyer
shall be entitled to its proportionate share of all income
earned and shall be responsible for its proportionate share
of all operating expenses of the Entire Property incurred on
and after the date of closing.
11. SELLER'S REPRESENTATION AND AGREEMENTS.
(a) Seller represents and warrants as of this date that:
(i) Except for the Lease Modification and Extension
Agreement in existence between Net Lease Income & Growth
Fund 84-A Limited Partnership and AEI Real Estate Fund 85-A
Limited Partnership (as "Landlord") and Innovative
Restaurant Concepts, Inc.("Tenant"), dated May 8, 1996,
Seller is not aware of any leases of the Property. The
above referenced lease agreement has an option to purchase
in favor of the Tenant as set forth in paragraph 13 of said
lease agreement.
(ii) It is not aware of any pending litigation or
condemnation proceedings against the Property or Seller's
interest in the Property.
(iii) Except as previously disclosed to Buyer and as
permitted in paragraph (b) below, Seller is not aware of any
contracts Seller has executed that would be binding on Buyer
after the closing date.
(b) Provided that Buyer performs its obligations when
required, Seller agrees that it will not enter into any new
contracts that would materially affect the Property and be
binding on Buyer after the Closing Date without Buyer's
prior consent, which will not be unreasonably withheld.
However, Buyer acknowledges that Seller retains the right
both
Buyer Initial: /s/ JSO /s/ AO
Purchase Agreement for Rio Bravo-St. Paul, MN
prior to and after the Closing Date to freely transfer all
or a portion of Seller's remaining undivided interest in the
Entire Property, provided such sale shall not encumber the
Property being purchased by Buyer in violation of the terms
hereof or the contemplated Co-Tenancy Agreement.
12. DISCLOSURES.
(a) Seller has received no notice that there are now, and
at the Closing there will be, no material, physical or
mechanical defects of the Property, including, without
limitation, the plumbing, heating, air conditioning,
ventilating, electrical systems, and all such items are in
good operating condition and repair and in compliance with
all applicable governmental , zoning and land use laws,
ordinances, regulations and requirements.
(b) Seller has received no notice that the use and
operation of the Property now is, and at the time of Closing
will be, in full compliance with applicable building codes,
safety, fire, zoning, and land use laws, and other
applicable local, state and federal laws, ordinances,
regulations and requirements.
(c) Seller knows of no facts nor has Seller failed to
disclose to Buyer any fact known to Seller which would
prevent the Tenant from using and operating the Property
after the Closing in the manner in which the Property has
been used and operated prior to the date of this Agreement.
(d) Seller has received no notice that the Property is not,
and as of the Closing will not be, in violation of any
federal, state or local law, ordinance or regulations
relating to industrial hygiene or to the environmental
conditions on, under, or about the Property including, but
not limited to, soil and groundwater conditions. To the
best of Seller's knowledge: there is no proceeding or
inquiry by any governmental authority with respect to the
presence of Hazardous Materials on the Property or the
migration of Hazardous Materials from or to other property.
Buyer agrees that Seller will have no liability of any type
to Buyer or Buyer's successors, assigns, or affiliates in
connection with any Hazardous Materials on or in connection
with the Property either before or after the Closing Date,
except such Hazardous Materials on or in connection with the
Property arising out of Seller's negligence or intentional
misconduct in violation of applicable state or federal law
or regulation.
(e) Buyer agrees that it shall be purchasing the Property
in its then present condition, as is, where is, and Seller
has no obligations to construct or repair any improvements
thereon or to perform any other act regarding the Property,
except as expressly provided herein.
(f) Buyer acknowledges that, having been given the
opportunity to inspect the Property and such financial
information on the Lessee and Guarantors of the Lease as
Buyer or its advisors shall request if in Seller's
possession, Buyer is relying solely on its own investigation
of the Property and not on any information provided by
Seller or to be provided except as set forth herein. Buyer
further acknowledges that the information provided and to be
provided by Seller with respect to the Property and to the
Lessee and Guarantors of Lease was obtained from a variety
of sources and Seller neither (a) has made independent
investigation or verification of such information, or (b)
makes any representations as to the accuracy or completeness
of such information. The sale of the Property as provided
for herein is made on an "AS IS" basis, and Buyer expressly
acknowledges that, in consideration of the agreements of
Seller herein, except as otherwise specified herein in
paragraph 11(a) and (b) above, Seller makes no Warranty or
representation, Express or Implied, or arising by operation
of law, including, but not
Buyer Initial: /s/ JSO /s/ AO
Purchase Agreement for Rio Bravo-St. Paul, MN
limited to, any warranty or condition, habitability,
tenantability, suitability for commercial purposes,
merchantability, or fitness for a particular purpose, in
respect of the Property.
The representations of Seller above shall survive Closing
for a period of one year after Closing. Similarly, the
representations and agreements of Buyer in provision (d) -
(f) above shall survive Closing for a period of one year.
13. CLOSING.
(a) Before the closing date, Seller will deposit into
escrow an executed special warranty deed warranting title
against lawful claims by, through, or under a conveyance
from Seller, but not further or otherwise, conveying
insurable title of the Property to Buyer, subject to the
exceptions contained in paragraph 8 above.
(b) On or before the closing date, Buyer will deposit into
escrow: the balance of the purchase price when required
under Section 4; any additional funds required of Buyer,
(pursuant to this agreement or any other agreement executed
by Buyer) to close escrow. Both parties will sign and
deliver to the escrow holder any other documents reasonably
required by the escrow holder to close escrow.
(c) On the closing date, if escrow is in a position to
close, the escrow holder will: record the deed in the
official records of the county where the Property is
located; cause the title company to commit to issue the
title policy; immediately deliver to Seller the portion of
the purchase price deposited into escrow by cashier's check
or wire transfer (less debits and prorations, if any);
deliver to Seller and Buyer a signed counterpart of the
escrow holder's certified closing statement and take all
other actions necessary to close escrow.
14. DEFAULTS. If Buyer defaults, Buyer will forfeit all rights
and claims and Seller will be relieved of all obligations and
will be entitled to retain all monies heretofore paid by the
Buyer. In addition, Seller shall retain all remedies available
to Seller at law or in equity.
If Seller shall default, Buyer irrevocably waives any rights
to file a lis pendens, a specific performance action or any other
claim, action or proceeding of any type in connection with the
Property or this or any other transaction involving the Property,
and will not do anything to affect title to the Property or
hinder, delay or prevent any other sale, lease or other
transaction involving the Property (any and all of which will be
null and void), unless: it has paid the First Payment, deposited
the balance of the Second Payment for the purchase price into
escrow, performed all of its other obligations and satisfied all
conditions under this Agreement, and unconditionally notified
Seller that it stands ready to tender full performance, purchase
the Property and close escrow as per this Agreement, regardless
of any alleged default or misconduct by Seller. Provided,
however, that in no event shall Seller be liable for any actual,
punitive, consequential or speculative damages arising out of any
default by Seller hereunder.
15. BUYER'S REPRESENTATIONS AND WARRANTIES.
a. Buyer represents and warrants to Seller as follows:
(i) In addition to the acts and deeds recited herein and
contemplated to be performed, executed, and delivered by
Buyer, Buyer shall perform, execute and deliver or cause to
be performed, executed, and delivered at the Closing or
after the Closing, any and all further acts, deeds and
assurances as Seller or the Title Company may require and be
reasonable in order to consummate the transactions
contemplated herein.
Buyer Initial: /s/ JSO /s/ AO
Purchase Agreement for Rio Bravo-St. Paul, MN
(ii) Buyer has all requisite power and authority to
consummate the transaction contemplated by this Agreement
and has by proper proceedings duly authorized the execution
and delivery of this Agreement and the consummation of the
transaction contemplated hereby.
(iii) To Buyer's knowledge, neither the execution and
delivery of this Agreement nor the consummation of the
transaction contemplated hereby will violate or be in
conflict with (a) any applicable provisions of law, (b) any
order of any court or other agency of government having
jurisdiction hereof, or (c) any agreement or instrument to
which Buyer is a party or by which Buyer is bound.
16. DAMAGES, DESTRUCTION AND EMINENT DOMAIN.
(a) If, prior to closing, the Property or any part thereof
be destroyed or further damaged by fire, the elements, or
any cause, due to events occurring subsequent to the date of
this Agreement to the extent that the cost of repair exceeds
$10,000.00, this Agreement shall become null and void, at
Buyer's option exercised, if at all, by written notice to
Seller within ten (10) days after Buyer has received written
notice from Seller of said destruction or damage. Seller,
however, shall have the right to adjust or settle any
insured loss until (i) all contingencies set forth in
Paragraph 6 hereof have been satisfied, or waived; and (ii)
any ten-day period provided for above in this Subparagraph
16a for Buyer to elect to terminate this Agreement has
expired or Buyer has, by written notice to Seller, waived
Buyer's right to terminate this Agreement. If Buyer elects
to proceed and to consummate the purchase despite said
damage or destruction, there shall be no reduction in or
abatement of the purchase price, and Seller shall assign to
Buyer the Seller's right, title, and interest in and to all
insurance proceeds (pro-rata in relation to the Entire
Property) resulting from said damage or destruction to the
extent that the same are payable with respect to damage to
the Property, subject to rights of any Tenant of the Entire
Property.
If the cost of repair is less than $10,000.00, Buyer shall
be obligated to otherwise perform hereinunder with no
adjustment to the Purchase Price, reduction or abatement,
and Seller shall assign Seller's right, title and interest
in and to all insurance proceeds pro-rata in relation to the
Entire Property, subject to rights of any Tenant of the
Entire Property.
(b) If, prior to closing, the Property, or any part
thereof, is taken by eminent domain, this Agreement shall
become null and void, at Buyer's option. If Buyer elects to
proceed and to consummate the purchase despite said taking,
there shall be no reduction in, or abatement of, the
purchase price, and Seller shall assign to Buyer the
Seller's right, title, and interest in and to any award
made, or to be made, in the condemnation proceeding pro-rata
in relation to the Entire Property, subject to rights of any
Tenant of the Entire Property.
In the event that this Agreement is terminated by Buyer as
provided above in Subparagraph 16a or 16b, the First Payment
shall be immediately returned to Buyer (after execution by Buyer
of such documents reasonably requested by Seller to evidence the
termination hereof).
17. BUYER'S 1031 TAX FREE EXCHANGE.
While Seller acknowledges that Buyer is purchasing the
Property as "replacement property" to accomplish a tax-deferred
exchange, Buyer acknowledges that Seller has made no
representations, warranties, or agreements to Buyer or Buyer's
agents that the transaction contemplated by the Agreement will
qualify for such tax treatment, nor has there been any reliance
thereon by Buyer respecting the legal or tax implications of the
transactions contemplated hereby. Buyer further represents that
it has sought and obtained such third party advice and counsel as
it deems necessary in regards to the tax implications of this
transaction.
Buyer Initial: /s/ JSO /s/ AO
Purchase Agreement for Rio Bravo-St. Paul, MN
Buyer intends that this transaction qualify as an exchange
under Section 1031 of the Internal Revenue Code of 1986 and
regulations thereunder. Buyer intends to perfect the 1031
exchange by way of a simultaneous exchange of properties through
concurrently conditional closing escrows conducted under escrow
instruction that will qualify the transaction under Section 1031.
18. CANCELLATION
If any party elects to cancel this Contract because of any
breach by another party or because escrow fails to close by
the agreed date, the party electing to cancel shall deliver
to escrow agent a notice containing the address of the party
in breach and stating that this Contract shall be cancelled
unless the breach is cured within 13 days following the
delivery of the notice to the escrow agent. Within three
days after receipt of such notice, the escrow agent shall
send it by United States Mail to the party in breach at the
address contained in the Notice and no further notice shall
be required. If the breach is not cured within the 13 days
following the delivery of the notice to the escrow agent,
this Contract shall be cancelled.
19. MISCELLANEOUS.
(a) This Agreement may be amended only by written agreement
signed by both Seller and Buyer, and all waivers must be in
writing and signed by the waiving party. Time is of the
essence. This Agreement will not be construed for or
against a party whether or not that party has drafted this
Agreement. If there is any action or proceeding between the
parties relating to this Agreement the prevailing party will
be entitled to recover attorney's fees and costs. This is
an integrated agreement containing all agreements of the
parties about the Property and the other matters described,
and it supersedes any other agreements or understandings.
Exhibits attached to this Agreement are incorporated into
this Agreement.
(b) If this escrow has not closed by September 30, 1998,
through no fault of Seller, Seller may either, at its
election, extend the closing date or exercise any remedy
available to it by law, including terminating this
Agreement.
(c) Funds to be deposited or paid by Buyer must be good and
clear funds in the form of cash, cashier's checks or wire
transfers.
(d) All notices from either of the parties hereto to the
other shall be in writing and shall be considered to have
been duly given or served if sent by first class certified
mail, return receipt requested, postage prepaid, or by a
nationally recognized courier service guaranteeing overnight
delivery to the party at his or its address set forth below,
or to such other address as such party may hereafter
designate by written notice to the other party.
Buyer Initial: /s/ JSO /s/ AO
Purchase Agreement for Rio Bravo-St. Paul, MN
If to Seller:
Attention: Robert P. Johnson
Net Lease Income & Growth Fund 84-A Limited Partnership
1300 Minnesota World Trade Center
30 E. 7th Street
St. Paul, MN 55101
and
Attention: Robert P. Johnson
AEI Real Estate Fund 85-A Limited Partnership
1300 Minnesota World Trade Center
30 E. 7th Street
St. Paul, MN 55101
If to Buyer:
Jack S. Obata and Atsuko Obata, Trustees
740 Eschenburg Drive
Gilroy, CA 95020
When accepted, this offer will be a binding agreement for
valid and sufficient consideration which will bind and benefit
Buyer, Seller and their respective successors and assigns. Buyer
is submitting this offer by signing a copy of this offer and
delivering it to Seller. Seller has five (5) business days from
receipt within which to accept this offer.
IN WITNESS WHEREOF, the Seller and Buyer have executed this
Agreement effective as of the day and year above first written.
BUYER: JACK S. OBATA AND ATSUKO OBATA, TRUSTEES OF THE JACK S.
AND ATSUKO OBATA TRUST DATED 12/30/74
By: /s/ Jack S. Obata, Trustee
Jack S. Obata, Trustee
By:/s/ Atsuko Obata, Trustee
Atsuko Obata, Trustee
Buyer Initial: /s/ JSO /s/ AO
Purchase Agreement for Rio Bravo-St. Paul, MN
SELLER: AEI REAL ESTATE FUND 85-A LIMITED PARTNERSHIP,
a Minnesota limited partnership
By: Net Lease Management 85-A Inc.,
its corporate general partner
By: /s/ Robert P Johnson
Robert P. Johnson, President
Buyer Initial: /s/ JSO /s/ AO
Purchase Agreement for Rio Bravo-St. Paul, MN
EXHIBIT "A"
Those parts of Lots 5,6 and 7 and Lots B, I and J, all in
Bohn's Rearrangement, St. Paul, Minn., according to the
recorded Partnership thereof, Ramsey County, Minnesota,
described as beginning at the Northwest corner of the East
10.00 feet of said Lot 5; thence on an assumed bearing of
South, along the West line of said East 10.00 feet of Lot 5,
a distance of 336.83 feet, thence on a bearing of West a
distance of 281.00 feet; thence on a bearing of South a
distance of 178.96 feet to the Northerly right-of-way line
of Interstate Highway No. 94; thence South 89 degrees 53
minutes 38 seconds West along said Northerly right-of-way
line of Interstate Highway No. 94 a distance of 20.00 feet;
thence on a bearing of North a distance of 153.00 feet;
thence on a bearing of West a distance of 182.64 feet to a
line of 135.00 feet Easterly of and parallel with the most
Westerly line of said Lot 6 and its Northerly extension;
thence North 0 degrees 02 minutes 00 seconds East along said
parallel line a distance of 79.54 feet, to the Northwesterly
line of said Lot 65; thence Northeasterly, along the
Northwesterly lines of said Lots 6, I, J and 5 to the point
of beginning.
Except the following described parcel:
That part of Lot 5, Bohn's Rearrangement, St. Paul, Minn.,
according to the plat thereof described as follows:
Beginning at the Northeast corner of said Lot 5; thence
on an assumed bearing of South 0 degrees 06 minutes 40
seconds East, along the East line of said Lot 5, a distance
of 13.16 feet; thence South 89 degrees 53 minutes 20 seconds
West a distance of 26.46 feet, to the Northwesterly line of
said Lot 5; thence Northeasterly, along said Northwesterly
line a distance of 29.55 feet to the point of beginning
except the East 10 feet thereof.
PROPERTY CO-TENANCY
OWNERSHIP AGREEMENT
(Rio Bravo-St. Paul, MN)
THIS CO-TENANCY AGREEMENT,
Made and entered into as of the 16th day of Sept, 1998, by and
between Tom S. Obata, Trustee of That Certain "Living Trust",
dated 12/30/74 (hereinafter called "Obata"), and AEI Real Estate
Fund 85-A Limited Partnership (hereinafter called "Fund 85-A")
(Obata, Fund 85-A (and any other Owner in Fee where the context
so indicates) being hereinafter sometimes collectively called "Co-
Tenants" and referred to in the neuter gender).
WITNESSETH:
WHEREAS, Fund 85-A presently owns an undivided 42.7685% interest
in and to, and Obata presently owns an undivided 16.0589%
interest in and to, and W.E. Mason and Hazel Mason, Trustees of
the Mason Living Trust presently owns an undivided 12.5821%
interest in and to, and Marvin L. Webb Family Trust presently
owns an undivided 17.1199% interest in and to, and Nick DeVito,
Inc. presently owns an undivided 11.4706% interest in and to the
land, situated in the City of St. Paul, County of Ramsey, and
State of MN, (legally described upon Exhibit A attached hereto
and hereby made a part hereof) and in and to the improvements
located thereon (hereinafter called "Premises");
WHEREAS, The parties hereto wish to provide for the orderly
operation and management of the Premises and Obata's interest by
Fund 85-A; the continued leasing of space within the Premises;
for the distribution of income from and the pro-rata sharing in
expenses of the Premises.
NOW THEREFORE, in consideration of the purchase by Obata of an
undivided interest in and to the Premises, for at least One
Dollar ($1.00) and other good and valuable consideration by the
parties hereto to one another in hand paid, the receipt and
sufficiency of which are hereby acknowledged, and of the mutual
covenants and agreements herein contained, it is hereby agreed by
and between the parties hereto, as follows:
1. The operation and management of the Premises shall be
delegated to Fund 85-A, or its designated agent, successors or
assigns. Provided, however, if Fund 85-A shall sell all of its
interest in the Premises, the duties and obligations of Fund 85-A
respecting management of the Premises as set forth herein,
including but not limited to paragraphs 2, 3, and 4 hereof, shall
be exercised by the holder or holders of a majority undivided co-
tenancy interest in the Premises. Except as hereinafter expressly
provided to the contrary, each of the parties hereto agrees to be
bound by the decisions of Fund 85-A with respect to all
administrative, operational and management matters of the
property comprising the Premises, including but not limited to
the management of the net lease agreement for the Premises. The
parties hereto hereby designate Fund 85-A as their sole and
exclusive agent to deal with, and Fund 85-A retains the sole
right to deal with, any property agent or tenant and to negotiate
and enter into, on terms and provisions satisfactory to Fund 85-
A, monitor, execute and enforce the terms of leases of space
within the Premises, including but not limited to any amendments,
consents to assignment, sublet, releases or modifications to
leases or guarantees of lease or easements affecting the
Premises, on behalf of Obata. As long as Fund 85-A owns an
interest in the Premises, only Fund 85-A may obligate Obata with
respect to any expense for the Premises.
As further set forth in paragraph 2 hereof, Fund 85-A agrees to
require any lessee of the Premises to name Obata as an insured or
additional insured in all insurance policies provided for, or
Co-Tenant Initial: /s/ TSO
Co-Tenancy Agreement for Rio Bravo-St. Paul, MN
contemplated by, any lease on the Premises. Fund 85-A shall use
its best efforts to obtain endorsements adding Co-Tenants to said
policies from lessee within 30 days of commencement of this
agreement. In any event, Fund 85-A shall distribute any insurance
proceeds it may receive, to the extent consistent with any lease
on the Premises, to the Co-Tenants in proportion to their
respective ownership of the Premises.
2. Income and expenses shall be allocated among the Co-Tenants
in proportion to their respective share(s) of ownership. Shares
of net income shall be pro-rated for any partial calendar years
included within the term of this Agreement. Fund 85-A may offset
against, pay to itself and deduct from any payment due to Obata
under this Agreement, and may pay to itself the amount of Obata's
share of any reasonable expenses of the Premises which are not
paid by Obata to Fund 85-A or its assigns, within ten (10) days
after demand by Fund 85-A. In the event there is insufficient
operating income from which to deduct Obata's unpaid share of
operating expenses, Fund 85-A may pursue any and all legal
remedies for collection.
Operating Expenses shall include all normal operating expense,
including but not limited to: maintenance, utilities, supplies,
labor, management, advertising and promotional expenses, salaries
and wages of rental and management personnel, leasing commissions
to third parties, a monthly accrual to pay insurance premiums,
real estate taxes, installments of special assessments and for
structural repairs and replacements, management fees, legal fees
and accounting fees, but excluding all operating expenses paid by
tenant under terms of any lease agreement of the Premises.
Obata has no requirement to, but has, nonetheless elected to
retain, and agrees to annually reimburse, Fund 85-A in the amount
of $821 for the expenses, direct and indirect, incurred by Fund
85-A in providing Obata with quarterly accounting and
distributions of Obata's share of net income and for tracking,
reporting and assessing the calculation of Obata's share of
operating expenses incurred from the Premises. This invoice
amount shall be pro-rated for partial years and Obata authorizes
Fund 85-A to deduct such amount from Obata's share of revenue
from the Premises. Obata may terminate this agreement in this
paragraph respecting accounting and distributions at any time and
attempt to collect its share of rental income directly from the
tenant; however, enforcement of all other provisions of the lease
remains the sole right of Fund 85-A pursuant to Section 1 hereof.
Fund 85-A may terminate its obligation under this paragraph upon
30 days notice to Obata prior to the end of each anniversary
hereof, unless agreed in writing to the contrary.
3. Full, accurate and complete books of account shall be kept
in accordance with generally accepted accounting principles at
Fund 85-A's principal office, and each Co-Tenant shall have
access to such books and may inspect and copy any part thereof
during normal business hours. Within ninety (90) days after the
end of each calendar year during the term hereof, Fund 85-A shall
prepare an accurate income statement for the ownership of the
Premises for said calendar year and shall furnish copies of the
same to all Co-Tenants. Quarterly, as its share, Obata shall be
entitled to receive 16.0589% of all items of income and expense
generated by the Premises. Upon receipt of said accounting, if
the payments received by each Co-Tenant pursuant to this
Paragraph 3 do not equal, in the aggregate, the amounts which
each are entitled to receive proportional to its share of
ownership with respect to said calendar year pursuant to
Paragraph 2 hereof, an appropriate adjustment shall be made so
that each Co-Tenant receives the amount to which it is entitled.
4. If Net Income from the Premises is less than $0.00 (i.e.,
the Premises operates at a loss), or if capital improvements,
repairs, and/or replacements, for which adequate reserves do not
exist, need to be made to the Premises, the Co-Tenants, upon
receipt of a written request therefor from Fund 85-A, shall,
within fifteen (15) business days after receipt of notice, make
payment to Fund 85-A sufficient to pay said net operating losses
and to provide necessary operating capital
Co-Tenant Initial: /s/ TSO
Co-Tenancy Agreement for Rio Bravo-St. Paul, MN
for the premises and to pay for said capital improvements,
repairs and/or replacements, all in proportion to their undivided
interests in and to the Premises.
5. Co-Tenants may, at any time, sell, finance, or otherwise
create a lien upon their interest in the Premises but only upon
their interest and not upon any part of the interest held, or
owned, by any other Co-Tenant. All Co-Tenants reserve the right
to escrow proceeds from a sale of their interests in the Premises
to obtain tax deferral by the purchase of replacement property.
6. If any Co-Tenant shall be in default with respect to any of
its obligations hereunder, and if said default is not corrected
within thirty (30) days after receipt by said defaulting Co-
Tenant of written notice of said default, or within a reasonable
period if said default does not consist solely of a failure to
pay money, the remaining Co-Tenant(s) may resort to any available
remedy to cure said default at law, in equity, or by statute.
7. This Co-Tenancy agreement shall continue in full force and
effect and shall bind and inure to the benefit of the Co-Tenant
and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns until December
31, 2026 or upon the sale of the entire Premises in accordance
with the terms hereof and proper disbursement of the proceeds
thereof, whichever shall first occur. Unless specifically
identified as a personal contract right or obligation herein,
this agreement shall run with any interest in the Property and
with the title thereto. Once any person, party or entity has
ceased to have an interest in fee in any portion of the Entire
Property, it shall not be bound by, subject to or benefit from
the terms hereof; but its heirs, executors, administrators,
personal representatives, successors or assigns, as the case may
be, shall be substituted for it hereunder.
8. Any notice or election required or permitted to be given or
served by any party hereto to, or upon any other, shall be given
to all known Co-Tenants and deemed given or served in accordance
with the provisions of this Agreement, if said notice or
elections addressed as follows;
If to Fund 85-A:
AEI Real Estate Fund 85-A Limited Partnership
1300 Minnesota World Trade Center
30 E. Seventh Street
St. Paul, Minnesota 55101
If to Obata:
Tom S. Obata, Trustee
2395 Ric Drive
Unit B
Gilroy, CA 95020
If to Mason:
Mason Living Trust
136 Baltusrol Road
Franklin, TN 37069
Co-Tenant Initial: /s/ TSO
Co-Tenancy Agreement for Rio Bravo-St. Paul, MN
If to Webb
Marvin L. Webb Family Trust
3306 Palmetto Trail
Amarillo, TX 79109-1738
If to DeVito:
Vito DeVito Francesco
P.O. Box 591
Ontario, CA 91762
Each mailed notice or election shall be deemed to have been given
to, or served upon, the party to which addressed on the date the
same is deposited in the United States certified mail, return
receipt requested, postage prepaid, or given to a nationally
recognized courier service guaranteeing overnight delivery as
properly addressed in the manner above provided. Any party hereto
may change its address for the service of notice hereunder by
delivering written notice of said change to the other parties
hereunder, in the manner above specified, at least ten (10) days
prior to the effective date of said change.
9. This Agreement shall not create any partnership or joint
venture among or between the Co-Tenants or any of them, and the
only relationship among and between the Co-Tenants hereunder
shall be that of owners of the premises as tenants in common
subject to the terms hereof.
10. The unenforceability or invalidity of any provision or
provisions of this Agreement as to any person or circumstances
shall not render that provision, nor any other provision hereof,
unenforceable or invalid as to any other person or circumstances,
and all provisions hereof, in all other respects, shall remain
valid and enforceable.
11. In the event any litigation arises between the parties
hereto relating to this Agreement, or any of the provisions
hereof, the party prevailing in such action shall be entitled to
receive from the losing party, in addition to all other relief,
remedies and damages to which it is otherwise entitled, all
reasonable costs and expenses, including reasonable attorneys'
fees, incurred by the prevailing party in connection with said
litigation.
Co-Tenant Initial: /s/ TSO
Co-Tenancy Agreement for Rio Bravo-St. Paul, MN
IN WITNESS WHEREOF, The parties hereto have caused this Agreement
to be executed and delivered, as of the day and year first above
written.
OBATA TOM S. OBATA, TRUSTEE OF THAT CERTAIN "LIVING TRUST",
DATED 12/30/74
By:/s/ Tom S Obata, Trustee
Tom S. Obata, Trustee
STATE OF CALIFORNIA)
) ss
COUNTY OF SANTA CLARA)
I, a Notary Public in and for the state and county of aforesaid,
hereby certify there appeared before me this 9th day of
September, 1998, Tom S. Obata, Trustee, who executed the
foregoing instrument in said capacity.
/s/ A Monk
Notary Public
[notary seal]
Co-Tenant Initial: /s/ TSO
Co-Tenancy Agreement for Rio Bravo-St. Paul, MN
Fund 85-A AEI REAL ESTATE FUND 85-A LIMITED PARTNERSHIP, a Minnesota
limited partnership
By: Net Lease Management 85-A, Inc.,
its corporate general partner
By:/s/ Robert P Johnson
Robert P. Johnson, President
State of Minnesota )
) ss.
County of Ramsey )
I, a Notary Public in and for the state and county of aforesaid,
hereby certify there appeared before me this 16th day of Sept,
1998, Robert P. Johnson, President of Net Lease Management 85-A,
Inc., corporate general partner of AEI Real Estate Fund 85-A
Limited Partnership who executed the foregoing instrument in said
capacity and on behalf of the corporation in its capacity as
corporate general partner, on behalf of said limited partnership.
/s/ Laura M Steidl
Notary Public
[notary seal]
Co-Tenant Initial: /s/ TSO
Co-Tenancy Agreement for Rio Bravo-St. Paul, MN
EXHIBIT "A"
Those parts of Lots 5,6 and 7 and Lots B, I and J, all in
Bohn's Rearrangement, St. Paul, Minn., according to the
recorded Partnership thereof, Ramsey County, Minnesota,
described as beginning at the Northwest corner of the East
10.00 feet of said Lot 5; thence on an assumed bearing of
South, along the West line of said East 10.00 feet of Lot 5,
a distance of 336.83 feet, thence on a bearing of West a
distance of 281.00 feet; thence on a bearing of South a
distance of 178.96 feet to the Northerly right-of-way line
of Interstate Highway No. 94; thence South 89 degrees 53
minutes 38 seconds West along said Northerly right-of-way
line of Interstate Highway No. 94 a distance of 20.00 feet;
thence on a bearing of North a distance of 153.00 feet;
thence on a bearing of West a distance of 182.64 feet to a
line of 135.00 feet Easterly of and parallel with the most
Westerly line of said Lot 6 and its Northerly extension;
thence North 0 degrees 02 minutes 00 seconds East along said
parallel line a distance of 79.54 feet, to the Northwesterly
line of said Lot 65; thence Northeasterly, along the
Northwesterly lines of said Lots 6, I, J and 5 to the point
of beginning.
Except the following described parcel:
That part of Lot 5, Bohn's Rearrangement, St. Paul, Minn.,
according to the plat thereof described as follows:
Beginning at the Northeast corner of said Lot 5; thence
on an assumed bearing of South 0 degrees 06 minutes 40
seconds East, along the East line of said Lot 5, a distance
of 13.16 feet; thence South 89 degrees 53 minutes 20 seconds
West a distance of 26.46 feet, to the Northwesterly line of
said Lot 5; thence Northeasterly, along said Northwesterly
line a distance of 29.55 feet to the point of beginning
except the East 10 feet thereof.
PROPERTY CO-TENANCY
OWNERSHIP AGREEMENT
(Rio Bravo-St. Paul, MN)
THIS CO-TENANCY AGREEMENT,
Made and entered into as of the 16th day of Sept, 1998, by and
between Jack S. Obata and Atsuko Obata, Trustees of The Jack S.
and Atsuko Revocable Trust, dated 12/30/74 (hereinafter called
"Obata"), and AEI Real Estate Fund 85-A Limited Partnership
(hereinafter called "Fund 85-A") (Obata, Fund 85-A (and any other
Owner in Fee where the context so indicates) being hereinafter
sometimes collectively called "Co-Tenants" and referred to in the
neuter gender).
WITNESSETH:
WHEREAS, Fund 85-A presently owns an undivided 26.7096% interest
in and to, and Obata presently owns an undivided 16.0589%
interest in and to, and Tom S. Obata, Trustee of That Certain
"Living Trust" presently owns an undivided 16.0589% interest in
and to, and W.E. Mason and Hazel Mason, Trustees of the Mason
Living Trust presently owns an undivided 12.5821% interest in and
to, and Marvin L. Webb Family Trust presently owns an undivided
17.1199% interest in and to, and Nick DeVito, Inc. presently owns
an undivided 11.4706% interest in and to the land, situated in
the City of St. Paul, County of Ramsey, and State of MN, (legally
described upon Exhibit A attached hereto and hereby made a part
hereof) and in and to the improvements located thereon
(hereinafter called "Premises");
WHEREAS, The parties hereto wish to provide for the orderly
operation and management of the Premises and Obata's interest by
Fund 85-A; the continued leasing of space within the Premises;
for the distribution of income from and the pro-rata sharing in
expenses of the Premises.
NOW THEREFORE, in consideration of the purchase by Obata of an
undivided interest in and to the Premises, for at least One
Dollar ($1.00) and other good and valuable consideration by the
parties hereto to one another in hand paid, the receipt and
sufficiency of which are hereby acknowledged, and of the mutual
covenants and agreements herein contained, it is hereby agreed by
and between the parties hereto, as follows:
1. The operation and management of the Premises shall be
delegated to Fund 85-A, or its designated agent, successors or
assigns. Provided, however, if Fund 85-A shall sell all of its
interest in the Premises, the duties and obligations of Fund 85-A
respecting management of the Premises as set forth herein,
including but not limited to paragraphs 2, 3, and 4 hereof, shall
be exercised by the holder or holders of a majority undivided co-
tenancy interest in the Premises. Except as hereinafter expressly
provided to the contrary, each of the parties hereto agrees to be
bound by the decisions of Fund 85-A with respect to all
administrative, operational and management matters of the
property comprising the Premises, including but not limited to
the management of the net lease agreement for the Premises. The
parties hereto hereby designate Fund 85-A as their sole and
exclusive agent to deal with, and Fund 85-A retains the sole
right to deal with, any property agent or tenant and to negotiate
and enter into, on terms and provisions satisfactory to Fund 85-
A, monitor, execute and enforce the terms of leases of space
within the Premises, including but not limited to any amendments,
consents to assignment, sublet, releases or modifications to
leases or guarantees of lease or easements affecting the
Premises, on behalf of Obata. As long as Fund 85-A owns an
interest in the Premises, only Fund 85-A may obligate Obata with
respect to any expense for the Premises.
Co-Tenant Initial: /s/ JSO /s/ AO
Co-Tenancy Agreement for Rio Bravo-St. Paul, MN
As further set forth in paragraph 2 hereof, Fund 85-A agrees to
require any lessee of the Premises to name Obata as an insured or
additional insured in all insurance policies provided for, or
contemplated by, any lease on the Premises. Fund 85-A shall use
its best efforts to obtain endorsements adding Co-Tenants to said
policies from lessee within 30 days of commencement of this
agreement. In any event, Fund 85-A shall distribute any insurance
proceeds it may receive, to the extent consistent with any lease
on the Premises, to the Co-Tenants in proportion to their
respective ownership of the Premises.
2. Income and expenses shall be allocated among the Co-Tenants
in proportion to their respective share(s) of ownership. Shares
of net income shall be pro-rated for any partial calendar years
included within the term of this Agreement. Fund 85-A may offset
against, pay to itself and deduct from any payment due to Obata
under this Agreement, and may pay to itself the amount of Obata's
share of any reasonable expenses of the Premises which are not
paid by Obata to Fund 85-A or its assigns, within ten (10) days
after demand by Fund 85-A. In the event there is insufficient
operating income from which to deduct Obata's unpaid share of
operating expenses, Fund 85-A may pursue any and all legal
remedies for collection.
Operating Expenses shall include all normal operating expense,
including but not limited to: maintenance, utilities, supplies,
labor, management, advertising and promotional expenses, salaries
and wages of rental and management personnel, leasing commissions
to third parties, a monthly accrual to pay insurance premiums,
real estate taxes, installments of special assessments and for
structural repairs and replacements, management fees, legal fees
and accounting fees, but excluding all operating expenses paid by
tenant under terms of any lease agreement of the Premises.
Obata has no requirement to, but has, nonetheless elected to
retain, and agrees to annually reimburse, Fund 85-A in the amount
of $821 for the expenses, direct and indirect, incurred by Fund
85-A in providing Obata with quarterly accounting and
distributions of Obata's share of net income and for tracking,
reporting and assessing the calculation of Obata's share of
operating expenses incurred from the Premises. This invoice
amount shall be pro-rated for partial years and Obata authorizes
Fund 85-A to deduct such amount from Obata's share of revenue
from the Premises. Obata may terminate this agreement in this
paragraph respecting accounting and distributions at any time and
attempt to collect its share of rental income directly from the
tenant; however, enforcement of all other provisions of the lease
remains the sole right of Fund 85-A pursuant to Section 1 hereof.
Fund 85-A may terminate its obligation under this paragraph upon
30 days notice to Obata prior to the end of each anniversary
hereof, unless agreed in writing to the contrary.
3. Full, accurate and complete books of account shall be kept
in accordance with generally accepted accounting principles at
Fund 85-A's principal office, and each Co-Tenant shall have
access to such books and may inspect and copy any part thereof
during normal business hours. Within ninety (90) days after the
end of each calendar year during the term hereof, Fund 85-A shall
prepare an accurate income statement for the ownership of the
Premises for said calendar year and shall furnish copies of the
same to all Co-Tenants. Quarterly, as its share, Obata shall be
entitled to receive 16.0589% of all items of income and expense
generated by the Premises. Upon receipt of said accounting, if
the payments received by each Co-Tenant pursuant to this
Paragraph 3 do not equal, in the aggregate, the amounts which
each are entitled to receive proportional to its share of
ownership with respect to said calendar year pursuant to
Paragraph 2 hereof, an appropriate adjustment shall be made so
that each Co-Tenant receives the amount to which it is entitled.
4. If Net Income from the Premises is less than $0.00 (i.e.,
the Premises operates at a loss), or if capital improvements,
repairs, and/or replacements, for which adequate reserves do not
exist, need to be made to the Premises, the Co-Tenants, upon
receipt of a written request therefor
Co-Tenant Initial: /s/ JSO /s/ AO
Co-Tenancy Agreement for Rio Bravo-St. Paul, MN
from Fund 85-A, shall, within fifteen (15) business days after
receipt of notice, make payment to Fund 85-A sufficient to pay
said net operating losses and to provide necessary operating
capital for the premises and to pay for said capital
improvements, repairs and/or replacements, all in proportion to
their undivided interests in and to the Premises.
5. Co-Tenants may, at any time, sell, finance, or otherwise
create a lien upon their interest in the Premises but only upon
their interest and not upon any part of the interest held, or
owned, by any other Co-Tenant. All Co-Tenants reserve the right
to escrow proceeds from a sale of their interests in the Premises
to obtain tax deferral by the purchase of replacement property.
6. If any Co-Tenant shall be in default with respect to any of
its obligations hereunder, and if said default is not corrected
within thirty (30) days after receipt by said defaulting Co-
Tenant of written notice of said default, or within a reasonable
period if said default does not consist solely of a failure to
pay money, the remaining Co-Tenant(s) may resort to any available
remedy to cure said default at law, in equity, or by statute.
7. This Co-Tenancy agreement shall continue in full force and
effect and shall bind and inure to the benefit of the Co-Tenant
and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns until December
31, 2026 or upon the sale of the entire Premises in accordance
with the terms hereof and proper disbursement of the proceeds
thereof, whichever shall first occur. Unless specifically
identified as a personal contract right or obligation herein,
this agreement shall run with any interest in the Property and
with the title thereto. Once any person, party or entity has
ceased to have an interest in fee in any portion of the Entire
Property, it shall not be bound by, subject to or benefit from
the terms hereof; but its heirs, executors, administrators,
personal representatives, successors or assigns, as the case may
be, shall be substituted for it hereunder.
8. Any notice or election required or permitted to be given or
served by any party hereto to, or upon any other, shall be given
to all known Co-Tenants and deemed given or served in accordance
with the provisions of this Agreement, if said notice or
elections addressed as follows;
If to Fund 85-A:
AEI Real Estate Fund 85-A Limited Partnership
1300 Minnesota World Trade Center
30 E. Seventh Street
St. Paul, Minnesota 55101
If to Obata:
Jack S. and Atsuko Obata, Trustees
740 Eschenburg
Gilroy, CA 95020
If to Obata:
Tom S. Obata, Trustee
2395 Ric Drive
Unit B
Gilroy, CA 95020
Co-Tenant Initial: /s/ JSO /s/ AO
Co-Tenancy Agreement for Rio Bravo-St. Paul, MN
If to Mason:
Mason Living Trust
136 Baltusrol Road
Franklin, TN 37069
If to Webb
Marvin L. Webb Family Trust
3306 Palmetto Trail
Amarillo, TX 79109-1738
If to DeVito:
Vito DeVito Francesco
P.O. Box 591
Ontario, CA 91762
Each mailed notice or election shall be deemed to have been given
to, or served upon, the party to which addressed on the date the
same is deposited in the United States certified mail, return
receipt requested, postage prepaid, or given to a nationally
recognized courier service guaranteeing overnight delivery as
properly addressed in the manner above provided. Any party hereto
may change its address for the service of notice hereunder by
delivering written notice of said change to the other parties
hereunder, in the manner above specified, at least ten (10) days
prior to the effective date of said change.
9. This Agreement shall not create any partnership or joint
venture among or between the Co-Tenants or any of them, and the
only relationship among and between the Co-Tenants hereunder
shall be that of owners of the premises as tenants in common
subject to the terms hereof.
10. The unenforceability or invalidity of any provision or
provisions of this Agreement as to any person or circumstances
shall not render that provision, nor any other provision hereof,
unenforceable or invalid as to any other person or circumstances,
and all provisions hereof, in all other respects, shall remain
valid and enforceable.
11. In the event any litigation arises between the parties
hereto relating to this Agreement, or any of the provisions
hereof, the party prevailing in such action shall be entitled to
receive from the losing party, in addition to all other relief,
remedies and damages to which it is otherwise entitled, all
reasonable costs and expenses, including reasonable attorneys'
fees, incurred by the prevailing party in connection with said
litigation.
Co-Tenant Initial: /s/ JSO /s/ AO
Co-Tenancy Agreement for Rio Bravo-St. Paul, MN
IN WITNESS WHEREOF, The parties hereto have caused this Agreement
to be executed and delivered, as of the day and year first above
written.
OBATA JACK S OBATA AND ATSUKO OBATA, TRUSTEES OF THE JACK S.
AND ATSUKO OBATA REVOCABLE TRUST, DATED 12/30/74
By:/s/ Jack S. Obata Trustee
Jack S. Obata, Trustee
By:/s/ Atsuko Obata Trustee
Atsuko Obata, Trustee
STATE OF CA)
) ss
COUNTY OF SANTA CLARA)
I, a Notary Public in and for the state and county of aforesaid,
hereby certify there appeared before me this 10 day of September,
1998, Jack S.Obata and Atsuko Obata, Trustees, who executed the
foregoing instrument in said capacity.
/s/ A Monk
Notary Public
[notary seal]
Co-Tenant Initial: /s/ JSO /s/ AO
Co-Tenancy Agreement for Rio Bravo-St. Paul, MN
Fund 85-A AEI REAL ESTATE FUND 85-A LIMITED PARTNERSHIP, a Minnesota
limited partnership
By: Net Lease Management 85-A, Inc.,
its corporate general partner
By:/s/ Robert P Johnson
Robert P. Johnson, President
State of Minnesota )
) ss.
County of Ramsey )
I, a Notary Public in and for the state and county of aforesaid,
hereby certify there appeared before me this 16th day of Sept,
1998, Robert P. Johnson, President of Net Lease Management 85-A,
Inc., corporate general partner of AEI Real Estate Fund 85-A
Limited Partnership who executed the foregoing instrument in said
capacity and on behalf of the corporation in its capacity as
corporate general partner, on behalf of said limited partnership.
/s/ Laura M Steidl
Notary Public
[notary seal]
Co-Tenant Initial: /s/ JSO /s/ AO
Co-Tenancy Agreement for Rio Bravo-St. Paul, MN
EXHIBIT "A"
Those parts of Lots 5,6 and 7 and Lots B, I and J, all in
Bohn's Rearrangement, St. Paul, Minn., according to the
recorded Partnership thereof, Ramsey County, Minnesota,
described as beginning at the Northwest corner of the East
10.00 feet of said Lot 5; thence on an assumed bearing of
South, along the West line of said East 10.00 feet of Lot 5,
a distance of 336.83 feet, thence on a bearing of West a
distance of 281.00 feet; thence on a bearing of South a
distance of 178.96 feet to the Northerly right-of-way line
of Interstate Highway No. 94; thence South 89 degrees 53
minutes 38 seconds West along said Northerly right-of-way
line of Interstate Highway No. 94 a distance of 20.00 feet;
thence on a bearing of North a distance of 153.00 feet;
thence on a bearing of West a distance of 182.64 feet to a
line of 135.00 feet Easterly of and parallel with the most
Westerly line of said Lot 6 and its Northerly extension;
thence North 0 degrees 02 minutes 00 seconds East along said
parallel line a distance of 79.54 feet, to the Northwesterly
line of said Lot 65; thence Northeasterly, along the
Northwesterly lines of said Lots 6, I, J and 5 to the point
of beginning.
Except the following described parcel:
That part of Lot 5, Bohn's Rearrangement, St. Paul, Minn.,
according to the plat thereof described as follows:
Beginning at the Northeast corner of said Lot 5; thence
on an assumed bearing of South 0 degrees 06 minutes 40
seconds East, along the East line of said Lot 5, a distance
of 13.16 feet; thence South 89 degrees 53 minutes 20 seconds
West a distance of 26.46 feet, to the Northwesterly line of
said Lot 5; thence Northeasterly, along said Northwesterly
line a distance of 29.55 feet to the point of beginning
except the East 10 feet thereof.
PURCHASE AGREEMENT
Rio Bravo Cantina - St. Paul, MN
This AGREEMENT, entered into effective as of the 27th of Oct,
1998.
l. PARTIES. Seller is AEI Real Estate Fund 85-A Limited
Partnership which owns an undivided 26.7096% interest in the fee
title to that certain real property legally described in the
attached Exhibit "A" (the "Entire Property") Buyer is Jean Ann
Morrison, Trustee of The Jean Morrison Trust, dated 4/26/85
("Buyer"). Seller wishes to sell and Buyer wishes to buy a
portion as Tenant in Common of Seller's interest in the Entire
Property.
2. PROPERTY. The Property to be sold to Buyer in this transaction
consists of an undivided 11.5653 percentage interest
(hereinafter, simply the "Property") as Tenant in Common in the
Entire Property.
3. PURCHASE PRICE . The purchase price for this percentage
interest in the Entire Property is $201,650 all cash.
4. TERMS. The purchase price for the Property will be paid by
Buyer as follows:
(a) When this agreement is executed, Buyer will pay $5,000
to Seller (which shall be deposited into escrow according to
the terms hereof) (the "First Payment"). The First Payment
will be credited against the purchase price when and if
escrow closes and the sale is completed.
(b) Buyer will deposit the balance of the purchase price,
$196,650 (the "Second Payment") into escrow in sufficient
time to allow escrow to close on the closing date.
5. CLOSING DATE. Escrow shall close on or before October 30,
1998.
6. DUE DILIGENCE. Buyer will have until the expiration of the
fifth business day (The "Review Period") after delivery of each
of following items, to be supplied by Seller, to conduct all of
its inspections and due diligence and satisfy itself regarding
each item, the Property, and this transaction. Buyer agrees to
indemnify and hold Seller harmless for any loss or damage to the
Entire Property or persons caused by Buyer or its agents arising
out of such physical inspections of the Entire Property.
(a) The original and one copy of a title insurance
commitment for an Owner's Title insurance policy (see
paragraph 8 below).
(b) A copy of a Certificate of Occupancy or other such
document certifying completion and granting permission to
permanently occupy the improvements on the Entire Property
as are in Seller's possession.
(c) A copy of an "as built" survey of the Entire Property
done concurrent with Seller's acquisition of the Property.
(d) Lease (as further set forth in paragraph 11(a) below) of
the Entire Property showing occupancy date, lease expiration
date, rent, and Guarantys, if any, accompanied by such
tenant financial statements as may have been provided most
recently to Seller by the Tenant and/or Guarantors.
Buyer Initial: /s/ JAM
Purchase Agreement for Rio Bravo-St. Paul, MN
It is a contingency upon Seller's obligations hereunder that
two (2) copies of Co-Tenancy Agreement in the form attached
hereto duly executed by Buyer and AEI Real Estate Fund 85-A
Limited Partnership and dated on escrow closing date be delivered
to the Seller on the closing date.
Buyer may cancel this agreement for ANY REASON in its sole
discretion by delivering a cancellation notice, return receipt
requested, to Seller and escrow holder before the expiration of
the Review Period. Such notice shall be deemed effective only
upon receipt by Seller. If this Agreement is not cancelled as
set forth above, the First Payment shall be non-refundable unless
Seller shall default hereunder.
If Buyer cancels this Agreement as permitted under this
Section, except for any escrow cancellation fees and any
liabilities under sections 15(a) of this agreement (which will
survive), Buyer (after execution of such documents reasonably
requested by Seller to evidence the termination hereof) shall be
returned its First Payment, and Buyer will have absolutely no
rights, claims or interest of any type in connection with the
Property or this transaction, regardless of any alleged conduct
by Seller or anyone else.
Unless this Agreement is canceled by Buyer pursuant to the
terms hereof, if Buyer fails to make the Second Payment, Seller
shall be entitled to retain the First Payment and Buyer
irrevocably will be deemed to be in default under this Agreement.
Seller may, at its option, retain the First Payment and declare
this Agreement null and void, in which event Buyer will be deemed
to have canceled this Agreement and relinquish all rights in and
to the Property or Seller may exercise its rights under Section
14 hereof. If this Agreement is not canceled and the Second
Payment is made when required, all of Buyer's conditions and
contingencies will be deemed satisfied.
7. ESCROW. Escrow shall be opened by Seller and funds deposited
in escrow upon acceptance of this agreement by both parties. The
escrow holder will be a nationally-recognized escrow company
selected by Seller. A copy of this Agreement will be delivered to
the escrow holder and will serve as escrow instructions together
with the escrow holder's standard instructions and any additional
instructions required by the escrow holder to clarify its rights
and duties (and the parties agree to sign these additional
instructions). If there is any conflict between these other
instructions and this Agreement, this Agreement will control.
8. TITLE. Closing will be conditioned on the agreement of a
title company selected by Seller to issue an Owner's policy of
title insurance, dated as of the close of escrow, in an amount
equal to the purchase price, insuring that Buyer will own
insurable title to the Property subject only to: the title
company's standard exceptions; current real property taxes and
assessments; survey exceptions; the rights of parties in
possession pursuant to the lease defined in paragraph 11 below;
and other items of record disclosed to Buyer during the Review
Period.
Buyer shall be allowed five (5) days after receipt of said
commitment for examination and the making of any objections to
marketability thereto, said objections to be made in writing or
deemed waived. If any objections are so made, the Seller shall
be allowed eighty (80) days to make such title marketable or in
the alternative to obtain a commitment for insurable title
insuring over Buyer's objections. If Seller shall decide to make
no efforts to make title marketable, or is unable to make title
marketable or obtain insurable title, (after execution by Buyer
of such documents reasonably requested by Seller to evidence the
termination hereof) Buyer's First Payment shall be returned and
this Agreement shall be null and void and of no further force and
effect. Seller has no obligation to spend any funds or make any
effort to satisfy Buyer's objections, if any.
Pending satisfaction of Buyer's objections, the payments
hereunder required shall be postponed, but upon satisfaction of
Buyer's objections, and within ten (10) days after written notice
of satisfaction of Buyer's objections to the Buyer, the parties
shall perform this Agreement according to its terms.
Buyer Initial: /s/ JAM
Purchase Agreement for Rio Bravo-St. Paul, MN
9. CLOSING COSTS. Seller will pay one-half of escrow fees, the
cost of the title commitment and any brokerage commissions
payable. The Buyer will pay the cost of issuing a Standard
Owners Title Insurance Policy in the full amount of the purchase
price, if Buyer shall decide to purchase the same. Buyer will
pay all recording fees, one-half of the escrow fees, and the cost
of an update to the Survey in Sellers possession (if an update is
required by Buyer.) Each party will pay its own attorney's fees
and costs to document and close this transaction.
10. REAL ESTATE TAXES, SPECIAL ASSESSMENTS AND PRORATIONS.
(a) Because the Entire Property (of which the Property is a
part) is subject to a triple net lease (as further set forth
in paragraph 11(a)(i), the parties acknowledge that there
shall be no need for a real estate tax proration. However,
Seller represents that to the best of its knowledge, all
real estate taxes and installments of special assessments
due and payable in all years prior to the year of Closing
have been paid in full. Unpaid real estate taxes and unpaid
levied and pending special assessments existing on the date
of Closing shall be the responsibility of Buyer and Seller
in proportion to their respective Tenant in Common
interests, pro-rated, however, to the date of closing for
the period prior to closing, which shall be the
responsibility of Seller if Tenant shall not pay the same.
Seller and Buyer shall likewise pay all taxes due and
payable in the year after Closing and any unpaid
installments of special assessments payable therewith and
thereafter, if such unpaid levied and pending special
assessments and real estate taxes are not paid by any tenant
of the Entire Property.
(b) All income and all operating expenses from the Entire
Property shall be prorated between the parties and adjusted
by them as of the date of Closing. Seller shall be entitled
to all income earned and shall be responsible for all
expenses incurred prior to the date of Closing, and Buyer
shall be entitled to its proportionate share of all income
earned and shall be responsible for its proportionate share
of all operating expenses of the Entire Property incurred on
and after the date of closing.
11. SELLER'S REPRESENTATION AND AGREEMENTS.
(a) Seller represents and warrants as of this date that:
(i) Except for the Lease Modification and Extension
Agreement in existence between Net Lease Income & Growth
Fund 84-A Limited Partnership and AEI Real Estate Fund 85-A
Limited Partnership (as "Landlord") and Innovative
Restaurant Concepts, Inc.("Tenant"), dated May 8, 1996,
Seller is not aware of any leases of the Property. The
above referenced lease agreement has an option to purchase
in favor of the Tenant as set forth in paragraph 13 of said
lease agreement.
(ii) It is not aware of any pending litigation or
condemnation proceedings against the Property or Seller's
interest in the Property.
(iii) Except as previously disclosed to Buyer and as
permitted in paragraph (b) below, Seller is not aware of any
contracts Seller has executed that would be binding on Buyer
after the closing date.
(b) Provided that Buyer performs its obligations when
required, Seller agrees that it will not enter into any new
contracts that would materially affect the Property and be
binding on Buyer after the Closing Date without Buyer's
prior consent, which will not be unreasonably withheld.
However, Buyer acknowledges that Seller retains the right
both prior to and after the Closing Date to freely transfer
all or a portion of Seller's remaining undivided interest in
the Entire Property, provided such sale shall not encumber
the
Buyer Initial: /s/ JAM
Purchase Agreement for Rio Bravo-St. Paul, MN
Property being purchased by Buyer in violation of the terms
hereof or the contemplated Co-Tenancy Agreement.
12. DISCLOSURES.
(a) Seller has received no notice that there are now, and
at the Closing there will be, no material, physical or
mechanical defects of the Property, including, without
limitation, the plumbing, heating, air conditioning,
ventilating, electrical systems, and all such items are in
good operating condition and repair and in compliance with
all applicable governmental , zoning and land use laws,
ordinances, regulations and requirements.
(b) Seller has received no notice that the use and
operation of the Property now is, and at the time of Closing
will be, in full compliance with applicable building codes,
safety, fire, zoning, and land use laws, and other
applicable local, state and federal laws, ordinances,
regulations and requirements.
(c) Seller knows of no facts nor has Seller failed to
disclose to Buyer any fact known to Seller which would
prevent the Tenant from using and operating the Property
after the Closing in the manner in which the Property has
been used and operated prior to the date of this Agreement.
(d) Seller has received no notice that the Property is not,
and as of the Closing will not be, in violation of any
federal, state or local law, ordinance or regulations
relating to industrial hygiene or to the environmental
conditions on, under, or about the Property including, but
not limited to, soil and groundwater conditions. To the
best of Seller's knowledge: there is no proceeding or
inquiry by any governmental authority with respect to the
presence of Hazardous Materials on the Property or the
migration of Hazardous Materials from or to other property.
Buyer agrees that Seller will have no liability of any type
to Buyer or Buyer's successors, assigns, or affiliates in
connection with any Hazardous Materials on or in connection
with the Property either before or after the Closing Date,
except such Hazardous Materials on or in connection with the
Property arising out of Seller's negligence or intentional
misconduct in violation of applicable state or federal law
or regulation.
(e) Buyer agrees that it shall be purchasing the Property
in its then present condition, as is, where is, and Seller
has no obligations to construct or repair any improvements
thereon or to perform any other act regarding the Property,
except as expressly provided herein.
(f) Buyer acknowledges that, having been given the
opportunity to inspect the Property and such financial
information on the Lessee and Guarantors of the Lease as
Buyer or its advisors shall request if in Seller's
possession, Buyer is relying solely on its own investigation
of the Property and not on any information provided by
Seller or to be provided except as set forth herein. Buyer
further acknowledges that the information provided and to be
provided by Seller with respect to the Property and to the
Lessee and Guarantors of Lease was obtained from a variety
of sources and Seller neither (a) has made independent
investigation or verification of such information, or (b)
makes any representations as to the accuracy or completeness
of such information. The sale of the Property as provided
for herein is made on an "AS IS" basis, and Buyer expressly
acknowledges that, in consideration of the agreements of
Seller herein, except as otherwise specified herein in
paragraph 11(a) and (b) above, Seller makes no Warranty or
representation, Express or Implied, or arising by operation
of law, including, but not limited to, any warranty or
condition, habitability, tenantability, suitability for
commercial purposes, merchantability, or fitness for a
particular purpose, in respect of the Property.
Buyer Initial: /s/ JAM
Purchase Agreement for Rio Bravo-St. Paul, MN
The provisions (d) - (f) above shall survive Closing.
13. CLOSING.
(a) Before the closing date, Seller will deposit into
escrow an executed special warranty deed warranting title
against lawful claims by, through, or under a conveyance
from Seller, but not further or otherwise, conveying
insurable title of the Property to Buyer, subject to the
exceptions contained in paragraph 8 above.
(b) On or before the closing date, Buyer will deposit into
escrow: the balance of the purchase price when required
under Section 4; any additional funds required of Buyer,
(pursuant to this agreement or any other agreement executed
by Buyer) to close escrow. Both parties will sign and
deliver to the escrow holder any other documents reasonably
required by the escrow holder to close escrow.
(c) On the closing date, if escrow is in a position to
close, the escrow holder will: record the deed in the
official records of the county where the Property is
located; cause the title company to commit to issue the
title policy; immediately deliver to Seller the portion of
the purchase price deposited into escrow by cashier's check
or wire transfer (less debits and prorations, if any);
deliver to Seller and Buyer a signed counterpart of the
escrow holder's certified closing statement and take all
other actions necessary to close escrow.
14. DEFAULTS. If Buyer defaults, Buyer will forfeit all rights
and claims and Seller will be relieved of all obligations and
will be entitled to retain all monies heretofore paid by the
Buyer. In addition, Seller shall retain all remedies available
to Seller at law or in equity.
If Seller shall default, Buyer irrevocably waives any rights
to file a lis pendens, a specific performance action or any other
claim, action or proceeding of any type in connection with the
Property or this or any other transaction involving the Property,
and will not do anything to affect title to the Property or
hinder, delay or prevent any other sale, lease or other
transaction involving the Property (any and all of which will be
null and void), unless: it has paid the First Payment, deposited
the balance of the Second Payment for the purchase price into
escrow, performed all of its other obligations and satisfied all
conditions under this Agreement, and unconditionally notified
Seller that it stands ready to tender full performance, purchase
the Property and close escrow as per this Agreement, regardless
of any alleged default or misconduct by Seller. Provided,
however, that in no event shall Seller be liable for any actual,
punitive, consequential or speculative damages arising out of any
default by Seller hereunder.
15. BUYER'S REPRESENTATIONS AND WARRANTIES.
a. Buyer represents and warrants to Seller as follows:
(i) In addition to the acts and deeds recited herein and
contemplated to be performed, executed, and delivered by
Buyer, Buyer shall perform, execute and deliver or cause to
be performed, executed, and delivered at the Closing or
after the Closing, any and all further acts, deeds and
assurances as Seller or the Title Company may require and be
reasonable in order to consummate the transactions
contemplated herein.
(ii) Buyer has all requisite power and authority to
consummate the transaction contemplated by this Agreement
and has by proper proceedings duly authorized the execution
and delivery of this Agreement and the consummation of the
transaction contemplated hereby.
Buyer Initial: /s/ JAM
Purchase Agreement for Rio Bravo-St. Paul, MN
(iii) To Buyer's knowledge, neither the execution and
delivery of this Agreement nor the consummation of the
transaction contemplated hereby will violate or be in
conflict with (a) any applicable provisions of law, (b) any
order of any court or other agency of government having
jurisdiction hereof, or (c) any agreement or instrument to
which Buyer is a party or by which Buyer is bound.
16. DAMAGES, DESTRUCTION AND EMINENT DOMAIN.
(a) If, prior to closing, the Property or any part thereof
be destroyed or further damaged by fire, the elements, or
any cause, due to events occurring subsequent to the date of
this Agreement to the extent that the cost of repair exceeds
$10,000.00, this Agreement shall become null and void, at
Buyer's option exercised, if at all, by written notice to
Seller within ten (10) days after Buyer has received written
notice from Seller of said destruction or damage. Seller,
however, shall have the right to adjust or settle any
insured loss until (i) all contingencies set forth in
Paragraph 6 hereof have been satisfied, or waived; and (ii)
any ten-day period provided for above in this Subparagraph
16a for Buyer to elect to terminate this Agreement has
expired or Buyer has, by written notice to Seller, waived
Buyer's right to terminate this Agreement. If Buyer elects
to proceed and to consummate the purchase despite said
damage or destruction, there shall be no reduction in or
abatement of the purchase price, and Seller shall assign to
Buyer the Seller's right, title, and interest in and to all
insurance proceeds (pro-rata in relation to the Entire
Property) resulting from said damage or destruction to the
extent that the same are payable with respect to damage to
the Property, subject to rights of any Tenant of the Entire
Property.
If the cost of repair is less than $10,000.00, Buyer shall
be obligated to otherwise perform hereinunder with no
adjustment to the Purchase Price, reduction or abatement,
and Seller shall assign Seller's right, title and interest
in and to all insurance proceeds pro-rata in relation to the
Entire Property, subject to rights of any Tenant of the
Entire Property.
(b) If, prior to closing, the Property, or any part
thereof, is taken by eminent domain, this Agreement shall
become null and void, at Buyer's option. If Buyer elects to
proceed and to consummate the purchase despite said taking,
there shall be no reduction in, or abatement of, the
purchase price, and Seller shall assign to Buyer the
Seller's right, title, and interest in and to any award
made, or to be made, in the condemnation proceeding pro-rata
in relation to the Entire Property, subject to rights of any
Tenant of the Entire Property.
In the event that this Agreement is terminated by Buyer as
provided above in Subparagraph 16a or 16b, the First Payment
shall be immediately returned to Buyer (after execution by Buyer
of such documents reasonably requested by Seller to evidence the
termination hereof).
17. BUYER'S 1031 TAX FREE EXCHANGE.
While Seller acknowledges that Buyer is purchasing the
Property as "replacement property" to accomplish a tax free
exchange, Buyer acknowledges that Seller has made no
representations, warranties, or agreements to Buyer or Buyer's
agents that the transaction contemplated by the Agreement will
qualify for such tax treatment, nor has there been any reliance
thereon by Buyer respecting the legal or tax implications of the
transactions contemplated hereby. Buyer further represents that
it has sought and obtained such third party advice and counsel as
it deems necessary in regards to the tax implications of this
transaction.
Buyer intends that this transaction qualify as an exchange
under Section 1031 of the Internal Revenue Code of 1986 and
regulations thereunder. Buyer intends to perfect the 1031
exchange by way of a simultaneous exchange of properties through
concurrently conditional
Buyer Initial: /s/ JAM
Purchase Agreement for Rio Bravo-St. Paul, MN
closing escrows conducted under escrow instruction that will
qualify the transaction under Section 1031.
18. CANCELLATION
If any party elects to cancel this Contract because of any
breach by another party or because escrow fails to close by
the agreed date, the party electing to cancel shall deliver
to escrow agent a notice containing the address of the party
in breach and stating that this Contract shall be cancelled
unless the breach is cured within 13 days following the
delivery of the notice to the escrow agent. Within three
days after receipt of such notice, the escrow agent shall
send it by United States Mail to the party in breach at the
address contained in the Notice and no further notice shall
be required. If the breach is not cured within the 13 days
following the delivery of the notice to the escrow agent,
this Contract shall be cancelled.
19. MISCELLANEOUS.
(a) This Agreement may be amended only by written agreement
signed by both Seller and Buyer, and all waivers must be in
writing and signed by the waiving party. Time is of the
essence. This Agreement will not be construed for or
against a party whether or not that party has drafted this
Agreement. If there is any action or proceeding between the
parties relating to this Agreement the prevailing party will
be entitled to recover attorney's fees and costs. This is
an integrated agreement containing all agreements of the
parties about the Property and the other matters described,
and it supersedes any other agreements or understandings.
Exhibits attached to this Agreement are incorporated into
this Agreement.
(b) If this escrow has not closed by October 15, 1998,
through no fault of Seller, Seller may either, at its
election, extend the closing date or exercise any remedy
available to it by law, including terminating this
Agreement.
(c) Funds to be deposited or paid by Buyer must be good and
clear funds in the form of cash, cashier's checks or wire
transfers.
(d) All notices from either of the parties hereto to the
other shall be in writing and shall be considered to have
been duly given or served if sent by first class certified
mail, return receipt requested, postage prepaid, or by a
nationally recognized courier service guaranteeing overnight
delivery to the party at his or its address set forth below,
or to such other address as such party may hereafter
designate by written notice to the other party.
Buyer Initial: /s/ JAM
Purchase Agreement for Rio Bravo-St. Paul, MN
If to Seller:
Attention: Robert P. Johnson
AEI Real Estate Fund 85-A Limited Partnership
1300 Minnesota World Trade Center
30 E. 7th Street
St. Paul, MN 55101
If to Buyer:
Jean Ann Morrison
11368 Thurston Place
Los Angeles, CA 90049
When accepted, this offer will be a binding agreement for
valid and sufficient consideration which will bind and benefit
Buyer, Seller and their respective successors and assigns. Buyer
is submitting this offer by signing a copy of this offer and
delivering it to Seller. Seller has five (5) business days from
receipt within which to accept this offer.
IN WITNESS WHEREOF, the Seller and Buyer have executed this
Agreement effective as of the day and year above first written.
BUYER: JEAN ANN MORRISON, TRUSTEE OF THE JEAN MORRISON TRUST
DATED 4/26/85
By:/s/ Jean Ann Morrison, Trustee
Jean Ann Morrison, Trustee
Buyer Initial: /s/ JAM
Purchase Agreement for Rio Bravo-St. Paul, MN
SELLER: AEI REAL ESTATE FUND 85-A LIMITED PARTNERSHIP,
a Minnesota limited partnership
By: Net Lease Management 85-A Inc.,
its corporate general partner
By:/s/ Robert P Johnson
Robert P. Johnson, President
Buyer Initial: /s/ JAM
Purchase Agreement for Rio Bravo-St. Paul, MN
EXHIBIT "A"
Those parts of Lots 5,6 and 7 and Lots B, I and J, all in
Bohn's Rearrangement, St. Paul, Minn., according to the
recorded Partnership thereof, Ramsey County, Minnesota,
described as beginning at the Northwest corner of the East
10.00 feet of said Lot 5; thence on an assumed bearing of
South, along the West line of said East 10.00 feet of Lot 5,
a distance of 336.83 feet, thence on a bearing of West a
distance of 281.00 feet; thence on a bearing of South a
distance of 178.96 feet to the Northerly right-of-way line
of Interstate Highway No. 94; thence South 89 degrees 53
minutes 38 seconds West along said Northerly right-of-way
line of Interstate Highway No. 94 a distance of 20.00 feet;
thence on a bearing of North a distance of 153.00 feet;
thence on a bearing of West a distance of 182.64 feet to a
line of 135.00 feet Easterly of and parallel with the most
Westerly line of said Lot 6 and its Northerly extension;
thence North 0 degrees 02 minutes 00 seconds East along said
parallel line a distance of 79.54 feet, to the Northwesterly
line of said Lot 65; thence Northeasterly, along the
Northwesterly lines of said Lots 6, I, J and 5 to the point
of beginning.
Except the following described parcel:
That part of Lot 5, Bohn's Rearrangement, St. Paul, Minn.,
according to the plat thereof described as follows:
Beginning at the Northeast corner of said Lot 5; thence
on an assumed bearing of South 0 degrees 06 minutes 40
seconds East, along the East line of said Lot 5, a distance
of 13.16 feet; thence South 89 degrees 53 minutes 20 seconds
West a distance of 26.46 feet, to the Northwesterly line of
said Lot 5; thence Northeasterly, along said Northwesterly
line a distance of 29.55 feet to the point of beginning
except the East 10 feet thereof.
PROPERTY CO-TENANCY
OWNERSHIP AGREEMENT
(Rio Bravo-St. Paul, MN)
THIS CO-TENANCY AGREEMENT,
Made and entered into as of the 29th day of Oct, 1998, by and
between Jean Ann Morrison, Trustee of The Jean Morrison Trust,
dated 4/26/85 (hereinafter called "Morrison"), and AEI Real
Estate Fund 85-A Limited Partnership (hereinafter called "Fund 85-
A") (Morrison, Fund 85-A (and any other Owner in Fee where the
context so indicates) being hereinafter sometimes collectively
called "Co-Tenants" and referred to in the neuter gender).
WITNESSETH:
WHEREAS, Fund 85-A presently owns an undivided 15.1443% interest
in and to, and Morrison presently owns an undivided 11.5653%
interest in and to, and Jack S. Obata and Atsuka Obata, Trustees
of the Jack S. and Atsuka Obata Revocable Trust presently owns an
undivided 16.0589% interest in and to, and Tom S. Obata, Trustee
of That Certain "Living Trust" presently owns an undivided
16.0589% interest in and to, and W.E. Mason and Hazel Mason,
Trustees of the Mason Living Trust presently owns an undivided
12.5821% interest in and to, and Marvin L. Webb Family Trust
presently owns an undivided 17.1199% interest in and to, and Nick
DeVito, Inc. presently owns an undivided 11.4706% interest in and
to the land, situated in the City of St. Paul, County of Ramsey,
and State of MN, (legally described upon Exhibit A attached
hereto and hereby made a part hereof) and in and to the
improvements located thereon (hereinafter called "Premises");
WHEREAS, The parties hereto wish to provide for the orderly
operation and management of the Premises and Morrison's interest
by Fund 85-A; the continued leasing of space within the Premises;
for the distribution of income from and the pro-rata sharing in
expenses of the Premises.
NOW THEREFORE, in consideration of the purchase by Morrison of an
undivided interest in and to the Premises, for at least One
Dollar ($1.00) and other good and valuable consideration by the
parties hereto to one another in hand paid, the receipt and
sufficiency of which are hereby acknowledged, and of the mutual
covenants and agreements herein contained, it is hereby agreed by
and between the parties hereto, as follows:
1. The operation and management of the Premises shall be
delegated to Fund 85-A, or its designated agent, successors or
assigns. Provided, however, if Fund 85-A shall sell all of its
interest in the Premises, the duties and obligations of Fund 85-A
respecting management of the Premises as set forth herein,
including but not limited to paragraphs 2, 3, and 4 hereof, shall
be exercised by the holder or holders of a majority undivided co-
tenancy interest in the Premises. Except as hereinafter expressly
provided to the contrary, each of the parties hereto agrees to be
bound by the decisions of Fund 85-A with respect to all
administrative, operational and management matters of the
property comprising the Premises, including but not limited to
the management of the net lease agreement for the Premises. The
parties hereto hereby designate Fund 85-A as their sole and
exclusive agent to deal with, and Fund 85-A retains the sole
right to deal with, any property agent or tenant and to negotiate
and enter into, on terms and provisions satisfactory to Fund 85-
A, monitor, execute and enforce the terms of leases of space
within the Premises, including but not limited to any amendments,
consents to assignment, sublet, releases or modifications to
leases or guarantees of lease or easements affecting the
Premises, on behalf of Morrison. As long as Fund 85-A owns an
interest in the Premises, only Fund 85-A may obligate Morrison
with respect to any expense for the Premises.
Co-Tenanct Initial: /s/ JAM
Co-Tenancy Agreement for Rio Bravo-St. Paul, MN
As further set forth in paragraph 2 hereof, Fund 85-A agrees to
require any lessee of the Premises to name Morrison as an insured
or additional insured in all insurance policies provided for, or
contemplated by, any lease on the Premises. Fund 85-A shall use
its best efforts to obtain endorsements adding Co-Tenants to said
policies from lessee within 30 days of commencement of this
agreement. In any event, Fund 85-A shall distribute any insurance
proceeds it may receive, to the extent consistent with any lease
on the Premises, to the Co-Tenants in proportion to their
respective ownership of the Premises.
2. Income and expenses shall be allocated among the Co-Tenants
in proportion to their respective share(s) of ownership. Shares
of net income shall be pro-rated for any partial calendar years
included within the term of this Agreement. Fund 85-A may offset
against, pay to itself and deduct from any payment due to
Morrison under this Agreement, and may pay to itself the amount
of Morrison's share of any reasonable expenses of the Premises
which are not paid by Morrison to Fund 85-A or its assigns,
within ten (10) days after demand by Fund 85-A. In the event
there is insufficient operating income from which to deduct
Morrison's unpaid share of operating expenses, Fund 85-A may
pursue any and all legal remedies for collection.
Operating Expenses shall include all normal operating expense,
including but not limited to: maintenance, utilities, supplies,
labor, management, advertising and promotional expenses, salaries
and wages of rental and management personnel, leasing commissions
to third parties, a monthly accrual to pay insurance premiums,
real estate taxes, installments of special assessments and for
structural repairs and replacements, management fees, legal fees
and accounting fees, but excluding all operating expenses paid by
tenant under terms of any lease agreement of the Premises.
Morrison has no requirement to, but has, nonetheless elected to
retain, and agrees to annually reimburse, Fund 85-A in the amount
of $591 for the expenses, direct and indirect, incurred by Fund
85-A in providing Morrison with quarterly accounting and
distributions of Morrison's share of net income and for tracking,
reporting and assessing the calculation of Morrison's share of
operating expenses incurred from the Premises. This invoice
amount shall be pro-rated for partial years and Morrison
authorizes Fund 85-A to deduct such amount from Morrison's share
of revenue from the Premises. Morrison may terminate this
agreement in this paragraph respecting accounting and
distributions at any time and attempt to collect its share of
rental income directly from the tenant; however, enforcement of
all other provisions of the lease remains the sole right of Fund
85-A pursuant to Section 1 hereof. Fund 85-A may terminate its
obligation under this paragraph upon 30 days notice to Morrison
prior to the end of each anniversary hereof, unless agreed in
writing to the contrary.
3. Full, accurate and complete books of account shall be kept
in accordance with generally accepted accounting principles at
Fund 85-A's principal office, and each Co-Tenant shall have
access to such books and may inspect and copy any part thereof
during normal business hours. Within ninety (90) days after the
end of each calendar year during the term hereof, Fund 85-A shall
prepare an accurate income statement for the ownership of the
Premises for said calendar year and shall furnish copies of the
same to all Co-Tenants. Quarterly, as its share, Morrison shall
be entitled to receive 11.5653% of all items of income and
expense generated by the Premises. Upon receipt of said
accounting, if the payments received by each Co-Tenant pursuant
to this Paragraph 3 do not equal, in the aggregate, the amounts
which each are entitled to receive proportional to its share of
ownership with respect to said calendar year pursuant to
Paragraph 2 hereof, an appropriate adjustment shall be made so
that each Co-Tenant receives the amount to which it is entitled.
4. If Net Income from the Premises is less than $0.00 (i.e.,
the Premises operates at a loss), or if capital improvements,
repairs, and/or replacements, for which adequate reserves do not
Co-Tenanct Initial: /s/ JAM
Co-Tenancy Agreement for Rio Bravo-St. Paul, MN
exist, need to be made to the Premises, the Co-Tenants, upon
receipt of a written request therefor from Fund 85-A, shall,
within fifteen (15) business days after receipt of notice, make
payment to Fund 85-A sufficient to pay said net operating losses
and to provide necessary operating capital for the premises and
to pay for said capital improvements, repairs and/or
replacements, all in proportion to their undivided interests in
and to the Premises.
5. Co-Tenants may, at any time, sell, finance, or otherwise
create a lien upon their interest in the Premises but only upon
their interest and not upon any part of the interest held, or
owned, by any other Co-Tenant. All Co-Tenants reserve the right
to escrow proceeds from a sale of their interests in the Premises
to obtain tax deferral by the purchase of replacement property.
6. If any Co-Tenant shall be in default with respect to any of
its obligations hereunder, and if said default is not corrected
within thirty (30) days after receipt by said defaulting Co-
Tenant of written notice of said default, or within a reasonable
period if said default does not consist solely of a failure to
pay money, the remaining Co-Tenant(s) may resort to any available
remedy to cure said default at law, in equity, or by statute.
7. This Co-Tenancy agreement shall continue in full force and
effect and shall bind and inure to the benefit of the Co-Tenant
and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns until December
31, 2026 or upon the sale of the entire Premises in accordance
with the terms hereof and proper disbursement of the proceeds
thereof, whichever shall first occur. Unless specifically
identified as a personal contract right or obligation herein,
this agreement shall run with any interest in the Property and
with the title thereto. Once any person, party or entity has
ceased to have an interest in fee in any portion of the Entire
Property, it shall not be bound by, subject to or benefit from
the terms hereof; but its heirs, executors, administrators,
personal representatives, successors or assigns, as the case may
be, shall be substituted for it hereunder. Morrison agrees to
notify Fund 85-A upon the appointment of any successor trustee,
or any amendment of the Morrison Trust affecting the powers of
the Trustees to manage or dispose of the Morrison Trust's
interest in the Premises.
8. Any notice or election required or permitted to be given or
served by any party hereto to, or upon any other, shall be given
to all known Co-Tenants and deemed given or served in accordance
with the provisions of this Agreement, if said notice or
elections addressed as follows;
If to Fund 85-A:
AEI Real Estate Fund 85-A Limited Partnership
1300 Minnesota World Trade Center
30 E. Seventh Street
St. Paul, Minnesota 55101
If to Morrison:
Jean Ann Morrison
11368 Thurston Place
Los Angeles, CA 90049
If to Obata:
Jack S. and Atsuko Obata, Trustees
740 Eschenburg
Gilroy, CA 95020
Co-Tenanct Initial: /s/ JAM
Co-Tenancy Agreement for Rio Bravo-St. Paul, MN
If to Obata:
Tom S. Obata, Trustee
2395 Ric Drive
Unit B
Gilroy, CA 95020
If to Mason:
Mason Living Trust
136 Baltusrol Road
Franklin, TN 37069
If to Webb
Marvin L. Webb Family Trust
3306 Palmetto Trail
Amarillo, TX 79106
If to DeVito:
Vito DeVito Francesco
P.O. Box 591
Ontario, CA 91762
Each mailed notice or election shall be deemed to have been given
to, or served upon, the party to which addressed on the date the
same is deposited in the United States certified mail, return
receipt requested, postage prepaid, or given to a nationally
recognized courier service guaranteeing overnight delivery as
properly addressed in the manner above provided. Any party hereto
may change its address for the service of notice hereunder by
delivering written notice of said change to the other parties
hereunder, in the manner above specified, at least ten (10) days
prior to the effective date of said change.
9. This Agreement shall not create any partnership or joint
venture among or between the Co-Tenants or any of them, and the
only relationship among and between the Co-Tenants hereunder
shall be that of owners of the premises as tenants in common
subject to the terms hereof.
10. The unenforceability or invalidity of any provision or
provisions of this Agreement as to any person or circumstances
shall not render that provision, nor any other provision hereof,
unenforceable or invalid as to any other person or circumstances,
and all provisions hereof, in all other respects, shall remain
valid and enforceable.
11. In the event any litigation arises between the parties
hereto relating to this Agreement, or any of the provisions
hereof, the party prevailing in such action shall be entitled to
receive from the losing party, in addition to all other relief,
remedies and damages to which it is otherwise entitled, all
reasonable costs and expenses, including reasonable attorneys'
fees, incurred by the prevailing party in connection with said
litigation.
Co-Tenanct Initial: /s/ JAM
Co-Tenancy Agreement for Rio Bravo-St. Paul, MN
IN WITNESS WHEREOF, The parties hereto have caused this Agreement
to be executed and delivered, as of the day and year first above
written.
MORRISON JEAN ANN MORRISON, TRUSTEE OF THE JEAN MORRISON TRUST,
DATED 4/26/85
By:/s/ Jean Ann Morrison
Jean Ann Morrison, Trustee
STATE OF CALIFORNIA)
) ss
COUNTY OF LOS ANGELES)
I, a Notary Public in and for the state and county of aforesaid,
hereby certify there appeared before me this 27th day of October,
1998, Jean Ann Morrison, Trustee of The Jean Morrison Trust, who
executed the foregoing instrument in said capacity.
/s/ Donna Schiller
Notary Public
[notary seal]
Co-Tenanct Initial: /s/ JAM
Co-Tenancy Agreement for Rio Bravo-St. Paul, MN
Fund 85-A AEI REAL ESTATE FUND 85-A LIMITED PARTNERSHIP, a Minnesota
limited partnership
By: Net Lease Management 85-A, Inc.,
its corporate general partner
By: /s/ Robert P Johnson
Robert P. Johnson, President
State of Minnesota )
) ss.
County of Ramsey )
I, a Notary Public in and for the state and county of aforesaid,
hereby certify there appeared before me this 29th day of October,
1998, Robert P. Johnson, President of Net Lease Management 85-A,
Inc., corporate general partner of AEI Real Estate Fund 85-A
Limited Partnership who executed the foregoing instrument in said
capacity and on behalf of the corporation in its capacity as
corporate general partner, on behalf of said limited partnership.
/s/ Laura M Steidl
Notary Public
[notary seal]
Co-Tenanct Initial: /s/ JAM
Co-Tenancy Agreement for Rio Bravo-St. Paul, MN
EXHIBIT "A"
Those parts of Lots 5,6 and 7 and Lots B, I and J, all in
Bohn's Rearrangement, St. Paul, Minn., according to the
recorded Partnership thereof, Ramsey County, Minnesota,
described as beginning at the Northwest corner of the East
10.00 feet of said Lot 5; thence on an assumed bearing of
South, along the West line of said East 10.00 feet of Lot 5,
a distance of 336.83 feet, thence on a bearing of West a
distance of 281.00 feet; thence on a bearing of South a
distance of 178.96 feet to the Northerly right-of-way line
of Interstate Highway No. 94; thence South 89 degrees 53
minutes 38 seconds West along said Northerly right-of-way
line of Interstate Highway No. 94 a distance of 20.00 feet;
thence on a bearing of North a distance of 153.00 feet;
thence on a bearing of West a distance of 182.64 feet to a
line of 135.00 feet Easterly of and parallel with the most
Westerly line of said Lot 6 and its Northerly extension;
thence North 0 degrees 02 minutes 00 seconds East along said
parallel line a distance of 79.54 feet, to the Northwesterly
line of said Lot 65; thence Northeasterly, along the
Northwesterly lines of said Lots 6, I, J and 5 to the point
of beginning.
Except the following described parcel:
That part of Lot 5, Bohn's Rearrangement, St. Paul, Minn.,
according to the plat thereof described as follows:
Beginning at the Northeast corner of said Lot 5; thence
on an assumed bearing of South 0 degrees 06 minutes 40
seconds East, along the East line of said Lot 5, a distance
of 13.16 feet; thence South 89 degrees 53 minutes 20 seconds
West a distance of 26.46 feet, to the Northwesterly line of
said Lot 5; thence Northeasterly, along said Northwesterly
line a distance of 29.55 feet to the point of beginning
except the East 10 feet thereof.
PURCHASE AGREEMENT
Rio Bravo Cantina - St. Paul, MN
This AGREEMENT, entered into effective as of the 19th of Nov,
1998.
l. PARTIES. Seller is AEI Real Estate Fund 85-A Limited
Partnership which owns an undivided 15.239% interest in the fee
title to that certain real property legally described in the
attached Exhibit "A" (the "Entire Property") Buyer is Joan G.
Cairns, Individually ("Buyer"). Seller wishes to sell and Buyer
wishes to buy a portion as Tenant in Common of Seller's interest
in the Entire Property.
2. PROPERTY. The Property to be sold to Buyer in this transaction
consists of an undivided 7.4961 percentage interest (hereinafter,
simply the "Property") as Tenant in Common in the Entire
Property.
3. PURCHASE PRICE . The purchase price for this percentage
interest in the Entire Property is $124,165 all cash.
4. TERMS. The purchase price for the Property will be paid by
Buyer as follows:
(a) When this agreement is executed, Buyer will pay $5,000
to Seller (which shall be deposited into escrow according to
the terms hereof) (the "First Payment"). The First Payment
will be credited against the purchase price when and if
escrow closes and the sale is completed.
(b) Buyer will deposit the balance of the purchase price,
$119,165 (the "Second Payment") into escrow in sufficient
time to allow escrow to close on the closing date.
5. CLOSING DATE. Escrow shall close on or before November 30,
1998.
6. DUE DILIGENCE. Buyer will have until the expiration of the
tenth business day (The "Review Period") after delivery of each
of following items, to be supplied by Seller, to conduct all of
its inspections and due diligence and satisfy itself regarding
each item, the Property, and this transaction. Buyer agrees to
indemnify and hold Seller harmless for any loss or damage to the
Entire Property or persons caused by Buyer or its agents arising
out of such physical inspections of the Entire Property.
(a) The original and one copy of a title insurance
commitment for an Owner's Title insurance policy (see
paragraph 8 below).
(b) A copy of a Certificate of Occupancy or other such
document certifying completion and granting permission to
permanently occupy the improvements on the Entire Property
as are in Seller's possession.
(c) A copy of an "as built" survey of the Entire Property
done concurrent with Seller's acquisition of the Property.
(d) Lease (as further set forth in paragraph 11(a) below) of
the Entire Property showing occupancy date, lease expiration
date, rent, and Guarantys, if any, accompanied by such
tenant financial statements as may have been provided most
recently to Seller by the Tenant and/or Guarantors.
It is a contingency upon Seller's obligations hereunder that
two (2) copies of Co-Tenancy Agreement in the form attached
hereto duly executed by Buyer and AEI Real Estate Fund 85-A
Limited Partnership and dated on escrow closing date be delivered
to the Seller on the closing date.
Buyer Initial: /s/ JC
Purchase Agreement for Rio Bravo-St. Paul, MN
Buyer may cancel this agreement for ANY REASON in its sole
discretion by delivering a cancellation notice, return receipt
requested, to Seller and escrow holder before the expiration of
the Review Period. Such notice shall be deemed effective only
upon receipt by Seller. If this Agreement is not cancelled as
set forth above, the First Payment shall be non-refundable unless
Seller shall default hereunder.
If Buyer cancels this Agreement as permitted under this
Section, Buyer (after execution of such documents reasonably
requested by Seller to evidence the termination hereof) shall be
returned its First Payment, and Buyer will have absolutely no
rights, claims or interest of any type in connection with the
Property or this transaction, regardless of any alleged conduct
by Seller or anyone else.
Unless this Agreement is canceled by Buyer pursuant to the
terms hereof, if Buyer fails to make the Second Payment, Seller
shall be entitled to retain the First Payment and Buyer
irrevocably will be deemed to be in default under this Agreement.
Seller may, at its option, retain the First Payment and declare
this Agreement null and void, in which event Buyer will be deemed
to have canceled this Agreement and relinquish all rights in and
to the Property or Seller may exercise its rights under Section
14 hereof. If this Agreement is not canceled and the Second
Payment is made when required, all of Buyer's conditions and
contingencies will be deemed satisfied.
7. ESCROW. Escrow shall be opened by Seller and funds deposited
in escrow upon acceptance of this agreement by both parties. The
escrow holder will be a nationally-recognized escrow company
selected by Seller. A copy of this Agreement will be delivered to
the escrow holder and will serve as escrow instructions together
with the escrow holder's standard instructions and any additional
instructions required by the escrow holder to clarify its rights
and duties (and the parties agree to sign these additional
instructions). If there is any conflict between these other
instructions and this Agreement, this Agreement will control.
8. TITLE. Closing will be conditioned on the agreement of a
title company selected by Seller to issue an Owner's policy of
title insurance, dated as of the close of escrow, in an amount
equal to the purchase price, insuring that Buyer will own
insurable title to the Property subject only to: the title
company's standard exceptions; current real property taxes and
assessments; the rights of parties in possession pursuant to the
lease defined in paragraph 11 below; and other items of record
disclosed to Buyer during the Review Period.
Buyer shall be allowed five (5) days after receipt of said
commitment for examination and the making of any objections to
marketability thereto, said objections to be made in writing or
deemed waived. If any objections are so made, the Seller shall
be allowed eighty (80) days to make such title marketable or in
the alternative to obtain a commitment for insurable title
insuring over Buyer's objections. If Seller shall decide to make
no efforts to make title marketable, or is unable to make title
marketable or obtain insurable title, (after execution by Buyer
of such documents reasonably requested by Seller to evidence the
termination hereof) Buyer's First Payment shall be returned and
this Agreement shall be null and void and of no further force and
effect. Seller has no obligation to spend any funds or make any
effort to satisfy Buyer's objections, if any.
Pending satisfaction of Buyer's objections, the payments
hereunder required shall be postponed, but upon satisfaction of
Buyer's objections, and within ten (10) days after written notice
of satisfaction of Buyer's objections to the Buyer, the parties
shall perform this Agreement according to its terms.
Buyer Initial: /s/ JC
Purchase Agreement for Rio Bravo-St. Paul, MN
9. CLOSING COSTS. Seller will pay one-half of escrow fees, the
cost of the title commitment and any brokerage commissions
payable. The Buyer will pay the cost of issuing a Standard
Owners Title Insurance Policy in the full amount of the purchase
price, if Buyer shall decide to purchase the same. Buyer will
pay all recording fees, one-half of the escrow fees, and the cost
of an update to the Survey in Sellers possession (if an update is
required by Buyer.) Each party will pay its own attorney's fees
and costs to document and close this transaction.
10. REAL ESTATE TAXES, SPECIAL ASSESSMENTS AND PRORATIONS.
(a) Because the Entire Property (of which the Property is a
part) is subject to a triple net lease (as further set forth
in paragraph 11(a)(i), the parties acknowledge that there
shall be no need for a real estate tax proration. However,
Seller represents that to the best of its knowledge, all
real estate taxes and installments of special assessments
due and payable in all years prior to the year of Closing
have been paid in full. Unpaid real estate taxes and unpaid
levied and pending special assessments existing on the date
of Closing shall be the responsibility of Buyer and Seller
in proportion to their respective Tenant in Common
interests, pro-rated, however, to the date of closing for
the period prior to closing, which shall be the
responsibility of Seller if Tenant shall not pay the same.
Seller and Buyer shall likewise pay all taxes due and
payable in the year after Closing and any unpaid
installments of special assessments payable therewith and
thereafter, if such unpaid levied and pending special
assessments and real estate taxes are not paid by any tenant
of the Entire Property.
(b) All income and all operating expenses from the Entire
Property shall be prorated between the parties and adjusted
by them as of the date of Closing. Seller shall be entitled
to all income earned and shall be responsible for all
expenses incurred prior to the date of Closing, and Buyer
shall be entitled to its proportionate share of all income
earned and shall be responsible for its proportionate share
of all operating expenses of the Entire Property incurred on
and after the date of closing.
11. SELLER'S REPRESENTATION AND AGREEMENTS.
(a) Seller represents and warrants as of this date that:
(i) Except for the Lease Modification and Extension
Agreement in existence between Net Lease Income & Growth
Fund 84-A Limited Partnership and AEI Real Estate Fund 85-A
Limited Partnership (as "Landlord") and Innovative
Restaurant Concepts, Inc.("Tenant"), dated May 8, 1996,
Seller is not aware of any leases of the Property. The
above referenced lease agreement has an option to purchase
in favor of the Tenant as set forth in paragraph 13 of said
lease agreement.
(ii) It is not aware of any pending litigation or
condemnation proceedings against the Property or Seller's
interest in the Property.
(iii) Except as previously disclosed to Buyer and as
permitted in paragraph (b) below, Seller is not aware of any
contracts Seller has executed that would be binding on Buyer
after the closing date.
(iv) Seller is not aware of any circumstances or claims
which would have an adverse impact upon the Survey in
Seller's possession.
(v) Seller is not aware of any unpaid, levied and pending
special assessments against the Property except, none.
(b) Provided that Buyer performs its obligations when
required, Seller agrees that it will not enter into any new
contracts that would materially affect the Property and be
binding on Buyer after the Closing Date without Buyer's
prior consent, which will not be unreasonably withheld.
However, Buyer acknowledges that Seller retains the right
both prior to and after the Closing Date to freely transfer
all or a portion of Seller's remaining undivided interest in
the Entire Property, provided such sale shall not encumber
the Property being purchased by Buyer in violation of the
terms hereof or the contemplated Co-Tenancy Agreement.
Buyer Initial: /s/ JC
Purchase Agreement for Rio Bravo-St. Paul, MN
12. DISCLOSURES.
(a) Seller has received no notice that there are now, and
at the Closing there will be, no material, physical or
mechanical defects of the Property, including, without
limitation, the plumbing, heating, air conditioning,
ventilating, electrical systems, and all such items are in
good operating condition and repair and in compliance with
all applicable governmental , zoning and land use laws,
ordinances, regulations and requirements.
(b) Seller has received no notice that the use and
operation of the Property now is, and at the time of Closing
will not be, in full compliance with applicable building
codes, safety, fire, zoning, and land use laws, and other
applicable local, state and federal laws, ordinances,
regulations and requirements.
(c) Seller knows of no facts nor has Seller failed to
disclose to Buyer any fact known to Seller which would
prevent the Tenant from using and operating the Property
after the Closing in the manner in which the Property has
been used and operated prior to the date of this Agreement.
(d) Seller has received no notice that the Property is not,
and as of the Closing will not be, in violation of any
federal, state or local law, ordinance or regulations
relating to industrial hygiene or to the environmental
conditions on, under, or about the Property including, but
not limited to, soil and groundwater conditions. To the
best of Seller's knowledge: there is no proceeding or
inquiry by any governmental authority with respect to the
presence of Hazardous Materials on the Property or the
migration of Hazardous Materials from or to other property.
Buyer agrees that Seller will have no liability of any type
to Buyer or Buyer's successors, assigns, or affiliates in
connection with any Hazardous Materials on or in connection
with the Property either before or after the Closing Date,
except such Hazardous Materials on or in connection with the
Property arising out of Seller's negligence or intentional
misconduct in violation of applicable state or federal law
or regulation.
(e) Buyer agrees that it shall be purchasing the Property
in its then present condition, as is, where is, and Seller
has no obligations to construct or repair any improvements
thereon or to perform any other act regarding the Property,
except as expressly provided herein.
(f) Buyer acknowledges that, having been given the
opportunity to inspect the Property and such financial
information on the Lessee and Guarantors of the Lease as
Buyer or its advisors shall request if in Seller's
possession, Buyer is relying solely on its own investigation
of the Property and not on any information provided by
Seller or to be provided except as set forth herein. Buyer
further acknowledges that the information provided and to be
provided by Seller with respect to the Property and to the
Lessee and Guarantors of Lease was obtained from a variety
of sources and Seller neither (a) has made independent
investigation or verification of such information, or (b)
makes any representations as to the accuracy or completeness
of such information. The sale of the Property as provided
for herein is made on an "AS IS"
Buyer Initial: /s/ JC
Purchase Agreement for Rio Bravo-St. Paul, MN
basis, and Buyer expressly acknowledges that, in
consideration of the agreements of Seller herein, except as
otherwise specified herein in paragraph 11(a) and (b) above,
Seller makes no Warranty or representation, Express or
Implied, or arising by operation of law, including, but not
limited to, any warranty or condition, habitability,
tenantability, suitability for commercial purposes,
merchantability, or fitness for a particular purpose, in
respect of the Property.
The provisions (d) - (f) above shall survive Closing.
13. CLOSING.
(a) Before the closing date, Seller will deposit into
escrow an executed special warranty deed warranting title
against lawful claims by, through, or under a conveyance
from Seller, but not further or otherwise, conveying
insurable title of the Property to Buyer, subject to the
exceptions contained in paragraph 8 above.
(b) On or before the closing date, Buyer will deposit into
escrow: the balance of the purchase price when required
under Section 4; any additional funds required of Buyer,
(pursuant to this agreement or any other agreement executed
by Buyer) to close escrow. Both parties will sign and
deliver to the escrow holder any other documents reasonably
required by the escrow holder to close escrow.
(c) On the closing date, if escrow is in a position to
close, the escrow holder will: record the deed in the
official records of the county where the Property is
located; cause the title company to commit to issue the
title policy; immediately deliver to Seller the portion of
the purchase price deposited into escrow by cashier's check
or wire transfer (less debits and prorations, if any);
deliver to Seller and Buyer a signed counterpart of the
escrow holder's certified closing statement and take all
other actions necessary to close escrow.
14. DEFAULTS. If Buyer defaults, Buyer will forfeit all rights
and claims and Seller will be relieved of all obligations and
will be entitled to retain all monies heretofore paid by the
Buyer as liquidated damages in full satisfaction of all Seller's
claims.
If Seller shall default, Buyer irrevocably waives any rights
to file a lis pendens, a specific performance action or any other
claim, action or proceeding of any type in connection with the
Property or this or any other transaction involving the Property,
and will not do anything to affect title to the Property or
hinder, delay or prevent any other sale, lease or other
transaction involving the Property (any and all of which will be
null and void), unless: it has paid the First Payment, deposited
the balance of the Second Payment for the purchase price into
escrow, performed all of its other obligations and satisfied all
conditions under this Agreement, and unconditionally notified
Seller that it stands ready to tender full performance, purchase
the Property and close escrow as per this Agreement. Provided,
however, that in no event shall Seller be liable for any
punitive, consequential or speculative damages arising out of any
default by Seller hereunder.
15. BUYER'S REPRESENTATIONS AND WARRANTIES.
a. Buyer represents and warrants to Seller as follows:
(i) In addition to the acts and deeds recited herein and
contemplated to be performed, executed, and delivered by
Buyer, Buyer shall perform, execute and deliver or cause to
be performed, executed, and delivered at the Closing or
after the Closing, any and all further acts, deeds and
assurances as Seller or the Title Company may require and be
reasonable in order to consummate the transactions
contemplated herein.
Buyer Initial:
Purchase Agreement for Rio Bravo-St. Paul, MN
(ii) Buyer has all requisite power and authority to
consummate the transaction contemplated by this Agreement
and has by proper proceedings duly authorized the execution
and delivery of this Agreement and the consummation of the
transaction contemplated hereby.
(iii) To Buyer's knowledge, neither the execution and
delivery of this Agreement nor the consummation of the
transaction contemplated hereby will violate or be in
conflict with (a) any applicable provisions of law, (b) any
order of any court or other agency of government having
jurisdiction hereof, or (c) any agreement or instrument to
which Buyer is a party or by which Buyer is bound.
16. DAMAGES, DESTRUCTION AND EMINENT DOMAIN.
(a) If, prior to closing, the Property or any part thereof
be destroyed or further damaged by fire, the elements, or
any cause, due to events occurring subsequent to the date of
this Agreement to the extent that the cost of repair exceeds
$10,000.00, this Agreement shall become null and void, at
Buyer's option exercised, if at all, by written notice to
Seller within ten (10) days after Buyer has received written
notice from Seller of said destruction or damage. Seller,
however, shall have the right to adjust or settle any
insured loss until (i) all contingencies set forth in
Paragraph 6 hereof have been satisfied, or waived; and (ii)
any ten-day period provided for above in this Subparagraph
16a for Buyer to elect to terminate this Agreement has
expired or Buyer has, by written notice to Seller, waived
Buyer's right to terminate this Agreement. If Buyer elects
to proceed and to consummate the purchase despite said
damage or destruction, there shall be no reduction in or
abatement of the purchase price, and Seller shall assign to
Buyer the Seller's right, title, and interest in and to all
insurance proceeds (pro-rata in relation to the Entire
Property) resulting from said damage or destruction to the
extent that the same are payable with respect to damage to
the Property, subject to rights of any Tenant of the Entire
Property.
If the cost of repair is less than $10,000.00, Buyer shall
be obligated to otherwise perform hereinunder with no
adjustment to the Purchase Price, reduction or abatement,
and Seller shall assign Seller's right, title and interest
in and to all insurance proceeds pro-rata in relation to the
Entire Property, subject to rights of any Tenant of the
Entire Property.
(b) If, prior to closing, the Property, or any part
thereof, is taken by eminent domain, this Agreement shall
become null and void, at Buyer's option. If Buyer elects to
proceed and to consummate the purchase despite said taking,
there shall be no reduction in, or abatement of, the
purchase price, and Seller shall assign to Buyer the
Seller's right, title, and interest in and to any award
made, or to be made, in the condemnation proceeding pro-rata
in relation to the Entire Property, subject to rights of any
Tenant of the Entire Property.
In the event that this Agreement is terminated by Buyer as
provided above in Subparagraph 16a or 16b, the First Payment
shall be immediately returned to Buyer (after execution by Buyer
of such documents reasonably requested by Seller to evidence the
termination hereof).
17. BUYER'S 1031 TAX FREE EXCHANGE.
While Seller acknowledges that Buyer is purchasing the
Property as "replacement property" to accomplish a tax free
exchange, Buyer acknowledges that Seller has made no
representations, warranties, or agreements to Buyer or Buyer's
agents that the transaction contemplated by the Agreement will
qualify for such tax treatment, nor has there been any reliance
thereon by Buyer respecting the legal or tax implications of the
transactions contemplated hereby. Buyer further represents that
it has sought and obtained such third party advice and counsel as
it deems necessary in regards to the tax implications of this
transaction.
Buyer Initial: /s/ JC
Purchase Agreement for Rio Bravo-St. Paul, MN
Buyer wishes to novate/assign the ownership rights and
interest of this Purchase Agreement to Eagle Exchange Corp. who
will act as Accommodator to perfect the 1031 exchange by
preparing an agreement of exchange of Real Property whereby Eagle
Exchange Corp. will be an independent third party purchasing the
ownership interest in subject property from Seller and selling
the ownership interest in subject property to Buyer under the
same terms and conditions as documented in this Purchase
Agreement. Buyer asks the Seller, and Seller agrees to cooperate
in the perfection of such an exchange if at no additional cost or
expense to Seller or delay in time. Buyer hereby indemnifies and
holds Seller harmless from any claims and/or actions resulting
from said exchange. Pursuant to the direction of Eagle Exchange
Corp., Seller will deed the property to Buyer.
18. CANCELLATION
If any party elects to cancel this Contract because of any
breach by another party or because escrow fails to close by
the agreed date, the party electing to cancel shall deliver
to escrow agent a notice containing the address of the party
in breach and stating that this Contract shall be cancelled
unless the breach is cured within 13 days following the
delivery of the notice to the escrow agent. Within three
days after receipt of such notice, the escrow agent shall
send it by United States Mail to the party in breach at the
address contained in the Notice and no further notice shall
be required. If the breach is not cured within the 13 days
following the delivery of the notice to the escrow agent,
this Contract shall be cancelled.
19. MISCELLANEOUS.
(a) This Agreement may be amended only by written agreement
signed by both Seller and Buyer, and all waivers must be in
writing and signed by the waiving party. Time is of the
essence. This Agreement will not be construed for or
against a party whether or not that party has drafted this
Agreement. If there is any action or proceeding between the
parties relating to this Agreement the prevailing party will
be entitled to recover attorney's fees and costs. This is
an integrated agreement containing all agreements of the
parties about the Property and the other matters described,
and it supersedes any other agreements or understandings.
Exhibits attached to this Agreement are incorporated into
this Agreement.
(b) If this escrow has not closed by November 30, 1998,
through no fault of Seller, Seller may either, at its
election, extend the closing date or exercise any remedy
available to it by law, including terminating this
Agreement.
(c) Funds to be deposited or paid by Buyer must be good and
clear funds in the form of cash, cashier's checks or wire
transfers.
(d) All notices from either of the parties hereto to the
other shall be in writing and shall be considered to have
been duly given or served if sent by first class certified
mail, return receipt requested, postage prepaid, or by a
nationally recognized courier service guaranteeing overnight
delivery to the party at his or its address set forth below,
or to such other address as such party may hereafter
designate by written notice to the other party.
Buyer Initial: /s/ JC
Purchase Agreement for Rio Bravo-St. Paul, MN
If to Seller:
Attention: Robert P. Johnson
AEI Real Estate Fund 85-A Limited Partnership
1300 Minnesota World Trade Center
30 E. 7th Street
St. Paul, MN 55101
If to Buyer:
Joan G. Cairns
24600 SW Ladd Hill Road
Sherwood, OR 97140
When accepted, this offer will be a binding agreement for
valid and sufficient consideration which will bind and benefit
Buyer, Seller and their respective successors and assigns. Buyer
is submitting this offer by signing a copy of this offer and
delivering it to Seller. Seller has five (5) business days from
receipt within which to accept this offer.
IN WITNESS WHEREOF, the Seller and Buyer have executed this
Agreement effective as of the day and year above first written.
BUYER: JOAN G. CAIRNS
By: /s/ Joan G Cairns
Joan G. Cairns
Buyer Initial: /s/ JC
Purchase Agreement for Rio Bravo-St. Paul, MN
SELLER: AEI REAL ESTATE FUND 85-A LIMITED PARTNERSHIP, a
Minnesota limited partnership
By: Net Lease Management 85-A Inc.,
its corporate general partner
By: /s/ Robert P Johnson
Robert P. Johnson, President
Buyer Initial: /s/ JC
Purchase Agreement for Rio Bravo-St. Paul, MN
EXHIBIT "A"
Those parts of Lots 5,6 and 7 and Lots B, I and J, all in
Bohn's Rearrangement, St. Paul, Minn., according to the
recorded Partnership thereof, Ramsey County, Minnesota,
described as beginning at the Northwest corner of the East
10.00 feet of said Lot 5; thence on an assumed bearing of
South, along the West line of said East 10.00 feet of Lot 5,
a distance of 336.83 feet, thence on a bearing of West a
distance of 281.00 feet; thence on a bearing of South a
distance of 178.96 feet to the Northerly right-of-way line
of Interstate Highway No. 94; thence South 89 degrees 53
minutes 38 seconds West along said Northerly right-of-way
line of Interstate Highway No. 94 a distance of 20.00 feet;
thence on a bearing of North a distance of 153.00 feet;
thence on a bearing of West a distance of 182.64 feet to a
line of 135.00 feet Easterly of and parallel with the most
Westerly line of said Lot 6 and its Northerly extension;
thence North 0 degrees 02 minutes 00 seconds East along said
parallel line a distance of 79.54 feet, to the Northwesterly
line of said Lot 65; thence Northeasterly, along the
Northwesterly lines of said Lots 6, I, J and 5 to the point
of beginning.
Except the following described parcel:
That part of Lot 5, Bohn's Rearrangement, St. Paul, Minn.,
according to the plat thereof described as follows:
Beginning at the Northeast corner of said Lot 5; thence
on an assumed bearing of South 0 degrees 06 minutes 40
seconds East, along the East line of said Lot 5, a distance
of 13.16 feet; thence South 89 degrees 53 minutes 20 seconds
West a distance of 26.46 feet, to the Northwesterly line of
said Lot 5; thence Northeasterly, along said Northwesterly
line a distance of 29.55 feet to the point of beginning
except the East 10 feet thereof.
PROPERTY CO-TENANCY
OWNERSHIP AGREEMENT
(Rio Bravo-St. Paul, MN)
THIS CO-TENANCY AGREEMENT,
Made and entered into as of the 25th day of Nov, 1998, by and
between Joan G. Cairns (hereinafter called "Cairns"), and AEI
Real Estate Fund 85-A Limited Partnership (hereinafter called
"Fund 85-A") (Cairns, Fund 85-A (and any other Owner in Fee where
the context so indicates) being hereinafter sometimes
collectively called "Co-Tenants" and referred to in the neuter
gender).
WITNESSETH:
WHEREAS, Fund 85-A presently owns an undivided 7.6482% interest
in and to, and Cairns presently owns an undivided 7.4961%
interest in and to, and Jean A. Morrison presently owns an
undivided 11.5653% interest in and to, and Jack S. Obata and
Atsuka Obata, Trustees of the Jack S. and Atsuka Obata Revocable
Trust presently owns an undivided 16.0589% interest in and to,
and Tom S. Obata, Trustee of That Certain "Living Trust"
presently owns an undivided 16.0589% interest in and to, and W.E.
Mason and Hazel Mason, Trustees of the Mason Living Trust
presently owns an undivided 12.5821% interest in and to, and
Marvin L. Webb Family Trust presently owns an undivided 17.1199%
interest in and to, and Nick DeVito, Inc. presently owns an
undivided 11.4706% interest in and to the land, situated in the
City of St. Paul, County of Ramsey, and State of MN, (legally
described upon Exhibit A attached hereto and hereby made a part
hereof) and in and to the improvements located thereon
(hereinafter called "Premises");
WHEREAS, The parties hereto wish to provide for the orderly
operation and management of the Premises and Cairn's interest by
Fund 85-A; the continued leasing of space within the Premises;
for the distribution of income from and the pro-rata sharing in
expenses of the Premises.
NOW THEREFORE, in consideration of the purchase by Cairns of an
undivided interest in and to the Premises, for at least One
Dollar ($1.00) and other good and valuable consideration by the
parties hereto to one another in hand paid, the receipt and
sufficiency of which are hereby acknowledged, and of the mutual
covenants and agreements herein contained, it is hereby agreed by
and between the parties hereto, as follows:
1. The operation and management of the Premises shall be
delegated to Fund 85-A, or its designated agent, successors or
assigns. Provided, however, if Fund 85-A shall sell all of its
interest in the Premises, the duties and obligations of Fund 85-A
respecting management of the Premises as set forth herein,
including but not limited to paragraphs 2, 3, and 4 hereof, shall
be exercised by the holder or holders of a majority undivided co-
tenancy interest in the Premises. Except as hereinafter expressly
provided to the contrary, each of the parties hereto agrees to be
bound by the decisions of Fund 85-A with respect to all
administrative, operational and management matters of the
property comprising the Premises, including but not limited to
the management of the net lease agreement for the Premises. The
parties hereto hereby designate Fund 85-A as their sole and
exclusive agent to deal with, and Fund 85-A retains the sole
right to deal with, any property agent or tenant and to negotiate
and enter into, on terms and provisions satisfactory to Fund 85-
A, monitor, execute and enforce the terms of leases of space
within the Premises, including but not limited to any amendments,
consents to assignment, sublet, releases or modifications to
leases or guarantees of lease or easements affecting the
Premises, on behalf of Cairns. As long as Fund 85-A owns an
interest in the Premises, only Fund 85-A may obligate Cairns with
respect to any expense for the Premises.
Co-Tenant Initial:
Co-Tenancy Agreement for Rio-Bravo-St. Paul, MN
As further set forth in paragraph 2 hereof, Fund 85-A agrees to
require any lessee of the Premises to name Cairns as an insured
or additional insured in all insurance policies provided for, or
contemplated by, any lease on the Premises. Fund 85-A shall use
its best efforts to obtain endorsements adding Co-Tenants to said
policies from lessee within 30 days of commencement of this
agreement. In any event, Fund 85-A shall distribute any insurance
proceeds it may receive, to the extent consistent with any lease
on the Premises, to the Co-Tenants in proportion to their
respective ownership of the Premises.
2. Income and expenses shall be allocated among the Co-Tenants
in proportion to their respective share(s) of ownership. Shares
of net income shall be pro-rated for any partial calendar years
included within the term of this Agreement. Fund 85-A may offset
against, pay to itself and deduct from any payment due to Cairns
under this Agreement, and may pay to itself the amount of
Cairns's share of any reasonable expenses of the Premises which
are not paid by Cairns to Fund 85-A or its assigns, within ten
(10) days after demand by Fund 85-A. In the event there is
insufficient operating income from which to deduct Cairns's
unpaid share of operating expenses, Fund 85-A may pursue any and
all legal remedies for collection.
Operating Expenses shall include all normal operating expense,
including but not limited to: maintenance, utilities, supplies,
labor, management, advertising and promotional expenses, salaries
and wages of rental and management personnel, leasing commissions
to third parties, a monthly accrual to pay insurance premiums,
real estate taxes, installments of special assessments and for
structural repairs and replacements, management fees, legal fees
and accounting fees, but excluding all operating expenses paid by
tenant under terms of any lease agreement of the Premises.
Cairns has no requirement to, but has, nonetheless elected to
retain, and agrees to annually reimburse, Fund 85-A in the amount
of $383 for the expenses, direct and indirect, incurred by Fund
85-A in providing Cairns with quarterly accounting and
distributions of Cairns's share of net income and for tracking,
reporting and assessing the calculation of Cairns's share of
operating expenses incurred from the Premises. This invoice
amount shall be pro-rated for partial years and Cairns authorizes
Fund 85-A to deduct such amount from Cairns's share of revenue
from the Premises. Cairns may terminate this agreement in this
paragraph respecting accounting and distributions at any time and
attempt to collect its share of rental income directly from the
tenant; however, enforcement of all other provisions of the lease
remains the sole right of Fund 85-A pursuant to Section 1 hereof.
Fund 85-A may terminate its obligation under this paragraph upon
30 days notice to Cairns prior to the end of each anniversary
hereof, unless agreed in writing to the contrary.
3. Full, accurate and complete books of account shall be kept
in accordance with generally accepted accounting principles at
Fund 85-A's principal office, and each Co-Tenant shall have
access to such books and may inspect and copy any part thereof
during normal business hours. Within ninety (90) days after the
end of each calendar year during the term hereof, Fund 85-A shall
prepare an accurate income statement for the ownership of the
Premises for said calendar year and shall furnish copies of the
same to all Co-Tenants. Quarterly, as its share, Cairns shall be
entitled to receive 7.4961% of all items of income and expense
generated by the Premises. Upon receipt of said accounting, if
the payments received by each Co-Tenant pursuant to this
Paragraph 3 do not equal, in the aggregate, the amounts which
each are entitled to receive proportional to its share of
ownership with respect to said calendar year pursuant to
Paragraph 2 hereof, an appropriate adjustment shall be made so
that each Co-Tenant receives the amount to which it is entitled.
4. If Net Income from the Premises is less than $0.00 (i.e.,
the Premises operates at a loss), or if capital improvements,
repairs, and/or replacements, for which adequate reserves do not
Co-Tenant Initial: /s/ JC
Co-Tenancy Agreement for Rio-Bravo-St. Paul, MN
exist, need to be made to the Premises, the Co-Tenants, upon
receipt of a written request therefor from Fund 85-A, shall,
within fifteen (15) business days after receipt of notice, make
payment to Fund 85-A sufficient to pay said net operating losses
and to provide necessary operating capital for the premises and
to pay for said capital improvements, repairs and/or
replacements, all in proportion to their undivided interests in
and to the Premises.
5. Co-Tenants may, at any time, sell, finance, or otherwise
create a lien upon their interest in the Premises but only upon
their interest and not upon any part of the interest held, or
owned, by any other Co-Tenant. All Co-Tenants reserve the right
to escrow proceeds from a sale of their interests in the Premises
to obtain tax deferral by the purchase of replacement property.
6. If any Co-Tenant shall be in default with respect to any of
its obligations hereunder, and if said default is not corrected
within thirty (30) days after receipt by said defaulting Co-
Tenant of written notice of said default, or within a reasonable
period if said default does not consist solely of a failure to
pay money, the remaining Co-Tenant(s) may resort to any available
remedy to cure said default at law, in equity, or by statute.
7. This Co-Tenancy agreement shall continue in full force and
effect and shall bind and inure to the benefit of the Co-Tenant
and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns until December
31, 2026 or upon the sale of the entire Premises in accordance
with the terms hereof and proper disbursement of the proceeds
thereof, whichever shall first occur. Unless specifically
identified as a personal contract right or obligation herein,
this agreement shall run with any interest in the Property and
with the title thereto. Once any person, party or entity has
ceased to have an interest in fee in any portion of the Entire
Property, it shall not be bound by, subject to or benefit from
the terms hereof; but its heirs, executors, administrators,
personal representatives, successors or assigns, as the case may
be, shall be substituted for it hereunder.
8. Any notice or election required or permitted to be given or
served by any party hereto to, or upon any other, shall be given
to all known Co-Tenants and deemed given or served in accordance
with the provisions of this Agreement, if said notice or
elections addressed as follows;
If to Fund 85-A:
AEI Real Estate Fund 85-A Limited Partnership
1300 Minnesota World Trade Center
30 E. Seventh Street
St. Paul, Minnesota 55101
If to Cairns:
Joan G. Cairns
24600 SW Ladd Hill Road
Sherwood, OR 97140
If to Morrison:
Jean A. Morrison
11368 Thurston Place
Los Angeles, CA 90049
Co-Tenant Initial: /s/ JC
Co-Tenancy Agreement for Rio-Bravo-St. Paul, MN
If to Obata:
Jack S. and Atsuko Obata, Trustees
740 Eschenburg
Gilroy, CA 95020
If to Obata:
Tom S. Obata, Trustee
2395 Ric Drive
Unit B
Gilroy, CA 95020
If to Mason:
Mason Living Trust
136 Baltusrol Road
Franklin, TN 37069
If to Webb
Marvin L. Webb Family Trust
3306 Palmetto Trail
Amarillo, TX 79106
If to DeVito:
Vito DeVito Francesco
P.O. Box 591
Ontario, CA 91762
Each mailed notice or election shall be deemed to have been given
to, or served upon, the party to which addressed on the date the
same is deposited in the United States certified mail, return
receipt requested, postage prepaid, or given to a nationally
recognized courier service guaranteeing overnight delivery as
properly addressed in the manner above provided. Any party hereto
may change its address for the service of notice hereunder by
delivering written notice of said change to the other parties
hereunder, in the manner above specified, at least ten (10) days
prior to the effective date of said change.
9. This Agreement shall not create any partnership or joint
venture among or between the Co-Tenants or any of them, and the
only relationship among and between the Co-Tenants hereunder
shall be that of owners of the premises as tenants in common
subject to the terms hereof.
10. The unenforceability or invalidity of any provision or
provisions of this Agreement as to any person or circumstances
shall not render that provision, nor any other provision hereof,
unenforceable or invalid as to any other person or circumstances,
and all provisions hereof, in all other respects, shall remain
valid and enforceable.
11. In the event any litigation arises between the parties
hereto relating to this Agreement, or any of the provisions
hereof, the party prevailing in such action shall be entitled to
receive from the losing party, in addition to all other relief,
remedies and damages to which it is otherwise entitled, all
reasonable costs and expenses, including reasonable attorneys'
fees, incurred by the prevailing party in connection with said
litigation.
Co-Tenant Initial: /s/ JC
Co-Tenancy Agreement for Rio-Bravo-St. Paul, MN
IN WITNESS WHEREOF, The parties hereto have caused this Agreement
to be executed and delivered, as of the day and year first above
written.
CAIRNS JOAN G. CAIRNS
By: /s/ Joan G Carins
Joan G. Cairns
STATE OF OREGON)
) ss
COUNTY OF MULTNOMAH)
I, a Notary Public in and for the state and county of aforesaid,
hereby certify there appeared before me this 19 day of November,
1998, Joan G. Cairns, who executed the foregoing instrument in
said capacity.
[Notary seal]
/S/ Fred C Scheller
Notary Public
Co-Tenant Initial: /s /JC
Co-Tenancy Agreement for Rio Bravo-St. Paul, MN
Fund 85-A AEI REAL ESTATE FUND 85-A LIMITED PARTNERSHIP,
a Minnesota limited partnership
By: Net Lease Management 85-A, Inc.,
its corporate general partner
By: /s/ Robert P Johnson
Robert P. Johnson, President
State of Minnesota )
) ss.
County of Ramsey )
I, a Notary Public in and for the state and county of aforesaid,
hereby certify there appeared before me this 25th day of Nov,
1998, Robert P. Johnson, President of Net Lease Management 85-A,
Inc., corporate general partner of AEI Real Estate Fund 85-A
Limited Partnership who executed the foregoing instrument in said
capacity and on behalf of the corporation in its capacity as
corporate general partner, on behalf of said limited partnership.
/s/ Laura M Steidl
Notary Public
[notary seal]
Co-Tenant Initial: /s /JC
Co-Tenancy Agreement for Rio Bravo-St. Paul, MN
EXHIBIT "A"
Those parts of Lots 5,6 and 7 and Lots B, I and J, all in
Bohn's Rearrangement, St. Paul, Minn., according to the
recorded Partnership thereof, Ramsey County, Minnesota,
described as beginning at the Northwest corner of the East
10.00 feet of said Lot 5; thence on an assumed bearing of
South, along the West line of said East 10.00 feet of Lot 5,
a distance of 336.83 feet, thence on a bearing of West a
distance of 281.00 feet; thence on a bearing of South a
distance of 178.96 feet to the Northerly right-of-way line
of Interstate Highway No. 94; thence South 89 degrees 53
minutes 38 seconds West along said Northerly right-of-way
line of Interstate Highway No. 94 a distance of 20.00 feet;
thence on a bearing of North a distance of 153.00 feet;
thence on a bearing of West a distance of 182.64 feet to a
line of 135.00 feet Easterly of and parallel with the most
Westerly line of said Lot 6 and its Northerly extension;
thence North 0 degrees 02 minutes 00 seconds East along said
parallel line a distance of 79.54 feet, to the Northwesterly
line of said Lot 65; thence Northeasterly, along the
Northwesterly lines of said Lots 6, I, J and 5 to the point
of beginning.
Except the following described parcel:
That part of Lot 5, Bohn's Rearrangement, St. Paul, Minn.,
according to the plat thereof described as follows:
Beginning at the Northeast corner of said Lot 5; thence
on an assumed bearing of South 0 degrees 06 minutes 40
seconds East, along the East line of said Lot 5, a distance
of 13.16 feet; thence South 89 degrees 53 minutes 20 seconds
West a distance of 26.46 feet, to the Northwesterly line of
said Lot 5; thence Northeasterly, along said Northwesterly
line a distance of 29.55 feet to the point of beginning
except the East 10 feet thereof.
DEVELOPMENT FINANCING AGREEMENT
THIS AGREEMENT, made and entered into effective as of this
17th day of December, 1998, by and between RTM Mid-America,
Inc. ("Lessee"), whose address is 5995 Barfield Road,
Atlanta, Georgia 30328, and AEI Real Estate Fund 85-A
Limited Partnership and Net Lease Income & Growth Fund 84-A
Limited Partnership (together, "Lessor"), whose address is
Suite 1300, World Trade Center, Saint Paul, Minnesota 55102.
W I T N E S E T H, that:
WHEREAS, Lessee is contemplating building on the premises
described in Exhibit "A" attached hereto the following
Improvements :
Construction of a building and improvements to be used as a
Arby's 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 for the modification of the
prototype Plans and Specifications to meet jurisdictional
requirements, but shall not include the requirement of
interim inspections of the Project by such Architect.
3. "Commitment" shall mean Lessor's Commitment to Lessee
agreeing to provide the Development Financing. (The
"Development Financing and Leasing Commitment" dated
December 17th , 1998.)
4. "Completion Date" shall mean the earlier of 60 days
after the issuance of the Certificate of Occupancy for
contemplated Improvements on the Leased Premises or
midnight, November 15, 1999, 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 the Budget shown 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 One Million One Hundred Fifty Five Thousand Dollars
($1,155,000) 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,
Lessee's 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, or other
nationally recognized title insurer approved by Lessor in
its reasonable discretion, 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 conform to applicable jurisdictional
requirements the prototype Plans and Specifications for the
construction of the Improvements.
22. "Sub-Contractors" shall mean those persons furnishing
labor or materials for the Project pursuant to the Sub-
Contracts.
23. "Sub-Contracts" shall mean the contracts between the
Contractor and its materialmen and mechanics in the
furnishing of labor or materials for the Project.
24. "Title" shall mean the title 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 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.
ARTICLE III
N/A
ARTICLE IV
CONSTRUCTION OF IMPROVEMENTS
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 enforce ability 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. 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. Otherwise, Lessee shall demonstrate to
Lessor's reasonable satisfaction the application of or
Lessee's reasonable access to sufficient Owner Equity 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, (if Lessee shall default
hereunder, legal fees by Lessor's counsel and all other
reasonable attorney's fees incurred in connection with
enforcement of the terms hereof (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
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.
23. NOTICE OF COMMENCEMENT\FURNISHING - To provide Lessor
prior to the initial request for a Disbursement, with a copy
of the Notice of Commencement and any amendments thereto
prepared in accordance with Michigan Statute and to be
recorded with the County Recorder's Office where the Leased
Premises are situate immediately following the recording of
the Memorandum of Lease between the parties hereto. Lessee
represents and warrants that a Notice of Commencement has
not been and will not be recorded prior to the recording of
the Memorandum of Lease. Lessee shall post and keep posted
the Notice of Commencement and all amendments thereto in a
conspicuous place on the Leased Premises during the course
of construction of the Project. Lessee further represents
and warrants to timely comply with all provisions of
Michigan Statute respecting keeping the Leased Premises free
of mechanic's liens and failure to do so shall be deemed an
Event of Default as defined under the Net Lease Agreement
and this Agreement. Lessee shall provide Lessor with a copy
of each Notice of Furnishing (as defined in Michigan
Statute) received by Lessee during the course of
construction of any Improvements on the Leased Premises.
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 shall then be required or known
to be required prior to the First Disbursement, 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, Lessee=s acceptance
of such Disbursement shall be deemed to be certification
that the total amount of unadvanced proceeds of the
Development Financing shall be sufficient 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 the commercially reasonable
opinion of Lessor (the opinion of Lessor being based upon
affidavit of the General Contractor, the Inspecting
Architect (if applicable), or other reliable licensed third
party contractor) 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
demonstrate to Lessor's reasonable satisfaction the
application of or Lessee's reasonable access to sufficient
Owner Equity in the amount of such excess over the budgeted
amount..
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.
11. AMENDED NOTICE OF COMMENCEMENT - Lessee shall provide
Lessor with any amended Notice of Commencement filed in
accordance with Michigan Statute, and any Notice of
Furnishing (as defined in Michigan Statute) received by
Lessee during the course of construction of any Improvements
on the Leased Premises.
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, 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
Total Construction Costs pursuant to the Application for
Payment. All costs shall have been approved in writing by
the Lessee, Contractor, and if required by Lessor, by the
Inspecting Architect, if any. 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. An Application for Payment in the form attached hereto
as Exhibit "C" 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 or 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.
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.
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, 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 the
Inspecting Architect (if applicable) 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 Lessor.
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 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 and Contractor, and approved by the Inspecting
Architect (if applicable) 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 Lessee and Contractor 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 (the "First Lease Amendment") to the Lease
shall be executed by Lessee and Lessor setting forth the
date the first Lease Year and the initial term of the Lease
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 monetary
defaults hereunder Lessee shall have five (5) days after
notice from Lessor to cure such monetary defaults, and 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 owned by Lessor located thereon; 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; or
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, except as otherwise set forth herein or in the
Commitment, 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, and costs and the like incurred
in connection with this Agreement, and Lessor=s attorney=s
fees and costs incurred in connection with the enforcement
hereof, if necessary.
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.
12. BROKERAGE COMMISSIONS - Lessor represents to Lessee
that on account of or through Lessor no brokerage
commissions are due in connection with the transaction
contemplated hereby or if there are such commissions due or
payable on account of or through Lessor the same will be
paid by Lessor. Lessor agrees to and shall indemnify Lessee
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
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 $50,000.00. 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. 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. 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. 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, and provided, the
portion remaining can with restoration or repair continue to
be operated for the purposes utilized immediately prior to
such damage or taking, and if 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 certified 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 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 FINAL DISBURSEMENT
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 until and including April
15th, 1999 shall accrue in the amount of $2,344.58 per month
(prorata for the period of April 1st through April 15th) and
be payable in advance on the first day of the month. After
and including April 16th, 1999, through the date of the
First Lease Amendment, Rent shall accrue in the amount of
$1,861.88 per month (prorata for the period of April 15th
through April 30th) and be payable in advance on the first
day of the month .
On the Final Disbursement Date, absent an Uncured Default,
Rent shall be adjusted as set forth in Article IV of the
Lease and documented by the First Lease Amendment
contemplated in Article IX hereof.
2. Disbursed proceeds of the Development Financing shall
accrue interest at a rate of Eight and One-Half percent
(8.5%) per annum until April 15, 1999, and at a rate of
Seven percent (7%) from and including April 16, 1999 until
the Final Disbursement Date, and shall be paid out of pocket
by Lessee, within 5 days after invoice from Lessor. On the
Final Disbursement Date, Lessee shall be reimbursed for such
interest paid up to the amount of construction interest set
forth in the attached Budget shown on Exhibit C attached
hereto.
3. Upon the occurrence of an event of default which
remains uncured after the expiration of applicable notice
and cure periods, or the Completion Date, 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.
4. On the Final Disbursement Date, Lessee shall be
entitled to receive the Parcel Development Fee of $5,800.
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.
RTM, Inc., a Georgia corporation
By: /s/ Philip G Skinner
Its: Senior Vice President
By: /s/ Robert S Stallings
Its: V.P. Asst. Secretary
[Lessor's Signature appears on following page.]
NET LEASE INCOME & GROWTH FUND 84-A LIMITED PARTNERSHIP
By: Net Lease Management 84-A, Inc.
By: /s/ Robert P Johnson
Robert P. Johnson, President
AEI REAL ESTATE FUND 85-A LIMITED PARTNERSHIP
By: Net Lease Management 85-A, Inc.
By: /s/ Robert P Johnson
Robert P. Johnson, President
Development Financing Agreement
Hudsonville, Michigan Arby's
EXHIBIT A
Hudsonville, Michigan
Part of the Northeast fractional 1/4 of Section 5, Town 5
North, Range 13 West, City of Hudsonville, Michigan,
described as:
COMMENCING at the Northeast corner of said Section, thence
south 02 degrees 21 minutes 30 seconds West 995.20 feet
along the East line of said Section; thence North 89
degrees 26 minutes 38 seconds West 33.02 feet; thence South
02 degrees 21 minutes 30 seconds West 28.51 feet; thence
North 87 degrees 28 minutes 30 seconds West 17.00 feet to
the PLACE OF BEGINNING; thence South 02 degrees 21 minutes
30 seconds West 147.02 feet along the West right-of-way line
of 32nd Avenue; thence North 89 degrees 26 minutes 38
seconds West 250.00 feet; thence North 02 degrees 21 minutes
30 seconds East 175.00 feet; thence South 89 degrees 26
minutes 28 seconds East 250.00 feet; thence south 02 degrees
21 minutes 30 seconds West 27.908 feet to the PLACE OF
BEGINNING.
SUBJECT TO AND TOGETHER WITH an easement for ingress and
egress over part of the Northeast fractional 1/4, Section 5,
Town 5 North, Range 13 West, City of Hudsonville, Ottawa
County, Michigan, described as:
COMMENCING at the Northeast corner of said Section, thence
South 02 degrees 21 minutes 30 seconds West 1170.20 feet
along the East line of said Section; thence North 89 degrees
26 minutes 38 seconds West 93.88 feet to the POINT OF
BEGINNING; thence South 00 degrees, 33 minutes 22 seconds
West 10.52 feet; thence South 88 degrees 27 minutes 06
seconds East 43.52 feet; thence South 02 degrees 21 minutes
30 seconds West 26.00 feet along the West Right-of Way line
of 32nd Avenue; thence North 88 degrees 27 minutes 06
seconds West 42.86 feet; thence South 02 degrees 21 minutes
20 seconds West 136.00 feet; thence North 87 degrees 38
minutes 05 seconds West 76.54 feet; thence south 47 degrees
38 minutes 40 seconds West 14.21 feet; thence south 02
degrees 55 minutes 25 seconds West 20.20 feet; thence North
89 degrees 26 minutes 38 seconds West 16.01 feet along the
North Right-of-Way line of Highland Drive; thence North 02
degrees 55 minutes 25 seconds East 30.70 feet; thence North
87 degrees 38 minutes 05 seconds West 9.00 feet; thence
south 47 degrees 38 minutes 40 seconds West 7.11 feet;
thence South 02 degrees 55 minutes 25 seconds East 55.65
feet; thence South 87 degrees 38 minutes 05 seconds East
106.31 feet; thence North 02 degrees 21 minutes 20 seconds
East 116.81 feet; thence North 00 degrees 33 minutes 22
seconds East 30.90 feet; thence South 89 degrees 26 minutes
38 seconds East 26.00 feet to the POINT OF BEGINNING.
SUBJECT TO AND TOGETHER WITH an easement over part of the
Northeast fractional 1/4 of Section 5, town 5 North, Range
13 West, City of Hudsonville, Ottawa County, Michigan,
described as: COMMENCING at the Northeast corner of said
Section; thence South 02 degrees 21 minutes 30 seconds West
929.17 feet along the East line of said Section; thence
North 89 degrees 26 minutes 38 seconds West 50.03 feet to
the POINT OF BEGINNING; thence North 89 degrees 26 minutes
38 seconds West 115.00 feet; thence South 02 degrees 21
minutes 30 seconds East 66.03 feet; thence South 89 degrees
26 minutes 38 seconds East 115.00 feet; thence North 02
degrees 21 minutes 30 seconds East 66.03 feet to the POINT
OF BEGINNING.
NET LEASE AGREEMENT
THIS LEASE, made and entered into effective as of this
17th day of December, 1998, by and between NET LEASE INCOME
& GROWTH FUND 84-A LIMITED PARTNERSHIP ("Fund 84-A"), a
Minnesota limited partnership whose corporate general
partner is Net Lease Management 84-A, Inc., a Minnesota
corporation, and AEI REAL ESTATE FUND 85-A LIMITED
PARTNERSHIP ("Fund 85-A"), a Minnesota limited partnership
whose corporate general partner is Net Lease Management 85-
A, Inc., a Minnesota corporation, both of whose address is
1300 Minnesota World Trade Center, 30 East Seventh Street,
St. Paul, Minnesota 55101 ("Lessor"), and RTM Mid-America,
Inc., an Indiana corporation, whose address is 5995 Barfield
Road, Atlanta, Georgia 30328 ("Lessee");
WITNESSETH:
WHEREAS, Lessor is the fee owner of a certain parcel of
real property and improvements located at Hudsonville,
Michigan, and legally described in Exhibit "A", which is
attached hereto and incorporated herein by reference; and
WHEREAS, Lessee constructed 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 shall commence on December
17th, 1998 ("Occupancy Date"), and shall include the period
from the Occupancy Date until the date of the First Lease
Amendment contemplated under the Development Financing
Agreement between Lessor and Lessee of even date herewith as
further set forth in Article 35 hereof. Thereafter, the
Lease shall continue for a period of Twenty consecutive
Lease Years, as hereinafter defined.
(B) If the date the First Lease Amendment is executed shall
not be the first day of a calendar month, the first full
"Lease Year" shall be the period from the date the First
Lease Amendment is fully executed to the end of the calendar
month in which the First Lease Amendment is fully executed,
plus the following twelve (l2) calendar months. Each Lease
Year after the first Lease Year shall be each successive
period of twelve (l2) calendar months thereafter.
(C) The parties agree that upon the request of either
party, a short form or memorandum of this Lease (prepared
and recorded at the expense of the requesting party) will be
executed for recording purposes. That short form or
memorandum of this Lease will be amended as of the date of
the First Lease Amendment to set forth the termination dates
of the Term and optional Renewal Terms, as defined in
Article 28 hereof, and the existence of any option to
purchase or right of first refusal, and that said option or
right of first refusal 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 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 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, and builder's risk insurance (naming Lessor, Lessee,
and contractor as co-insured), 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 from the Occupancy Date until
execution of the First Lease Amendment (wherein the Lease
shall be amended as contemplated under the Development
Financing Agreement as defined in Article 35 hereof): Rent
until and including April 15th, 1999 (unless this provision
shall be superceded by the First Lease Amendment) shall
accrue in the amount of $2,344.58 per month (prorata for the
period of April 1st through April 15th) and be payable in
advance on the first day of the month in equal monthly
installments of $1,406.75 to Fund 85-A, and shall be payable
in advance on the first day of each month in equal monthly
installments of $937.83 to Fund 84-A. 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.
After and including April 16th, 1999,(unless this provision
shall be superceded by the First Lease Amendment) through
the date of the First Lease Amendment, Rent shall accrue in
the amount of $1,861.88 per month (prorata for the period of
April 16th through April 30th) and be payable in advance on
the first day of the month in equal monthly installments of
$1,117.13 to Fund 85-A, and shall be payable in advance on
the first day of each month in equal monthly installments of
$744.75 to Fund 84-A.
(B) Rent for the first six months of the first full
Lease Year after the execution of the First Lease Amendment
(which includes any stub period from the end of the calendar
month in which the First Lease Amendment is executed) shall
be Six and One-Half Percent and in the next six months of
the first full Lease Year, Rent shall increase to Nine
Percent of the Total Project Cost, as defined in the
Development Financing Agreement of even date herewith
between Lessor and Lessee to be set forth pursuant to the
First Lease Amendment, and shall remain at such level until
the beginning of the Third Lease Year.
(C) Annual Rent Payable beginning with the Third and
subsequent Lease Years:
The annual Base Rent due and payable shall increase in
each of the Lease Years beginning with the Third Lease Year
by an amount equal to One and One-Eighth Percent (1.125%) of
the Base Rent payable for the prior Lease Year. Such
increased Base Rent shall be payable in advance of the first
day of each month in equal monthly installments.
(D) Overdue Payments.
Lessee shall pay interest on all overdue payments of Rent or
other monetary amounts due hereunder at lesser of the rate
of fifteen percent (15%) per annum or the highest rate
allowed by law accruing after the expiration of any
applicable cure period.
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 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,
with such commercially reasonable deductibles as Lessor may
reasonably require from time to time. 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. Business Interruption
Insurance endorsement (for a period covering at least three
months of interruption) 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, with
initial limits of at least $1,000,000 per
occurrence/$3,000,000 general aggregate, or such additional
amounts as Lessor shall reasonably require from time to time
with limits in amounts acceptable to Lessor.
(C) N/A
(D) 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, either provide proof
that such coverages are in full force and effect or pay
Lessor the amount of the premiums due or paid, together with
interest thereon at the lesser of 15% 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.
(E) All policies of insurance provided for or
contemplated by this Article can be under Lessee's blanket
insurance coverage and shall cover Lessor(s), Net Lease
Management 84-A, Inc., Net Lease Management 85-A, Inc., and
Robert P. Johnson, as the general partners of Lessor, as
additional insured and loss payee, as their respective
interests (as landlord and lessee, respectively) may appear,
and Lessee as insured. The policies shall provide that the
policies cannot be canceled, terminated, changed, or
modified without thirty (30) days written notice to the
insured and additional insured 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 certificates of
insurance 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. Lessee
agrees that it will not settle any property insurance claims
affecting the Leased Premises (exclusive of any claims by
Lessee for damages to Personalty or Lessee's loss or
interruption of business) in excess of $50,000 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. Any
insurance proceeds for the Personalty or Trade Fixtures of
Lessee or its equipment lessors or lenders shall be paid to
the Lessee and shall not be considered part of the insurance
for the building and improvements to the Leased Premises.
(F) 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, except if 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.
(G) 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 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.
(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. 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, 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. In no event shall
Lessee be liable for any payment required of Lessor to
qualify to do business in the state where the Leased
Premises are situate.
(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 (or through the expiration
of the term hereof, if longer) 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 the first
payment or any installment thereof is due (presumed to be
paid in arrears for purposes of such proration).
(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
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, 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.
(G) 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 imposed on Rent by the then current sales tax
law, 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 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. Lessee shall be entitled upon
written request to copies of sales tax returns of Lessor
showing such tax was paid.
ARTICLE 7.PROHIBITION ON ASSIGNMENTS AND SUBLETTING; TAKE-
BACK
RIGHTS
(A) Lessee, without the consent of Lessor, but after
prior written notice to Lessor, and at any time during the
term of this Lease, or any renewal or extension hereof,
shall have the right to assign this Lease, or its rights
hereunder, and/or to sublet all or any part of the Leased
Premises to RTM, Inc, or any RTM subsidiary or affiliate or
any other licensed and approved Arby's or Arby's\Mrs.
Winner's (dual concept) operator, or Lee's Famous Recipe
operator. Lessee and Guarantor(s), if any, will remain
liable for Rent, performance of the terms, covenants, and
conditions of Lessee hereunder, and shall sign a consent and
estoppel evidencing their continued liability in form and
substance satisfactory to Lessor, concurrent with the
effective date of any such assignment or sublet. Any other
assignment or sublease to an entity other than those set
forth in the preceding sentence shall require the prior
written consent of Lessor, which consent is conditioned upon
Lessee and any guarantor signing a consent and estoppel
evidencing their continued liability in form and substance
satisfactory to Lessor, concurrent with the effective date
of any such assignment or sublet, and Lessor's approval,
which approval shall not be unreasonably withheld or
delayed.
(B) Except as otherwise expressly provided in this
Article, Lessee shall not, without obtaining the prior
written consent of Lessor, which consent shall not be
unreasonably withheld or delayed, in each instance:
1.assign or otherwise transfer this Lease, or any part of
Lessee's right, title or interest therein;
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.
(C) For the purposes of this Article:
1.an agreement by any other Person, directly or indirectly,
to assume Lessee's obligations under this Lease shall be
deemed an assignment;
2.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;
3.each modification, amendment or extension or any sublease
to which Lessor has previously consented shall be deemed a
new sublease; and
4.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.
(D) Except as set forth in subparagraph (A) 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.
(E) If Lessee shall fail to comply with the terms of
subparagraph (A) or (B) above, 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.
(F) If Lessor exercises any of its options under
Article 7(E) above, 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.
(G) Notwithstanding anything above to the contrary,
the 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) 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: 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
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 receipt of
five (5 ) days prior written notice (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 receipt of written 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 Fifty Thousand Dollars ($50,000.00), provided such
repairs or improvements do not affect the structural
integrity of the Leased Premises. Any repairs or
improvements in excess of Fifty Thousand Dollars
($50,000.00) 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. The term
"Trade Fixtures" shall not include oven hoods, Walk-in
coolers or freezers, or the Leased Premises exterior
lighting, which shall be owned by Lessor and leased from
Lessor by Lessee according to the terms hereof, but the term
shall otherwise mean all other Trade Fixtures, equipment,
supplies, books, records, or other personalty, including but
not limited to those items set forth on Exhibit C attached
hereto (hereinafter referred to as "Trade Fixtures" or
"Personalty") placed on the Leased Premises by Lessee.
Lessor shall execute any instrument that any lien holder or
party with a security interest in Lessee's Trade Fixtures
may request acknowledging that (a) the Lessee has a right to
install such Personalty on the Leased Premises; (b) the lien
holder or secured party may maintain an interest in the
Personalty superior to any interest in the same by Lessor;
and (c) such lien holder or secured party shall have the
right to remove any and all such Personalty in the event of
a default in any instrument establishing such lien or
security interest, subject to 10 days advance notice to
Lessor and making reasonable repairs to the Leased Premises
for any injury caused to the Leased Premises caused by the
removal of the Personalty, except diminution in value caused
by the absence of the Personalty, nor shall the lien holder
or secured party have to replace the Personalty. 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
or 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 ll. 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.
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, however, that such mortgagee shall
execute an appropriate subordination, attornment and non-
disturbance agreement respecting Lessee's rights to
possession under this Lease if Lessee shall not be 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.
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. Any
such termination of this Lease shall not preclude or
restrict Lessee's rights to any claim or award for claims it
may have as set forth in Article 12, paragraph (C) below.
If any part of the Leased Premises shall be so taken as to
render the remainder thereof materially unusable 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 interfere with the business of
Lessee, then Lessee shall, at Lessor's cost and expense (and
Lessor hereby covenants to make condemnation proceeds
available to Lessee consistent with the terms hereof),
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 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..
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.
(C) All compensation awarded or paid upon such total
or partial taking of the Leased Premises (expressly
excluding any Lessee's Award as hereinafter defined) 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 Leased 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 and or destruction of its business; damage to or
loss of value or cost of removal of inventory, Trade
Fixtures, furniture, Personalty, and other personal property
belonging to Lessee (any and all such award collectively
referred to supra and hereinafter as "Lessee's Award");
provided, however, that no such claim shall diminish or
otherwise adversely affect Lessor's award or the award of
any fee mortgagee. Lessor and Lessee agree to cooperate to
maximize the amount of any such claim or award and agree to
minimize the interference with the other party's prosecution
of its claims.
ARTICLE l3. RIGHT TO INSPECT
Lessor reserves the right to enter the Leased Premises
on a non emergency basis and to inspect and examine the
Leased Premises after reasonable 48 hours written notice to
Lessee at any time during business hours. and Lessee agrees
to allow Lessor free access to the Leased Premises to show
the Leased Premises upon an uncured event of default by
Lessee. 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 and to show the Leased Premises after
reasonable 48 hours written notice to Lessee at any time
during non peak business hours, and Lessor agrees to cause
minimal disruption to Lessee's business during such showings
of 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 restaurant and other ancillary uses.
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 conduct its business in a first class and
reputable manner consistent with its operation of other
restaurants in the same market area. If Lessee closes the
Leased Premises and it remains closed for ninety days,
Lessor may terminate this Lease and release Lessee and
Guarantor of all liability. However, so long as the Lessor
does not terminate the Lease, Lessee must continue to pay
rent and perform all covenants under the Lease.
ARTICLE l5. DESTRUCTION OF PREMISES
(A) If, during the term of this Lease, the Leased
Premises are totally or partially destroyed by fire or the
elements, so as to render the Leased Premises wholly unfit
for occupancy, or make it impossible to conduct the business
of Lessee thereon, and if in the opinion of a third party
arbitrator reasonably acceptable to Lessee and Lessor the
Leased Premises cannot be repaired within one hundred eighty
(l80) days from the date of the damage, then Lessor or
Lessee in the last two years of the Lease Term shall have
the right to terminate this Lease from the date of such
damage or destruction by giving Lessee written notice.
Lessor's option to so terminate shall not apply if Lessee,
within 30 days after receipt of the notice of termination,
exercises any remaining Option to Renew the Lease Term.
Upon the giving of such termination notice by Lessor, if
Lessee shall not so extend the term hereof, Lessee shall
immediately surrender the Leased Premises and all interest
therein to Lessor, and in case of any such termination,
Lessor may re-enter and repossess the Leased Premises and
may dispossess all parties then in possession thereof.
Otherwise, the Leased Premises shall be repaired, restored,
and rebuilt by Lessee out of any insurance proceeds
received, within one hundred eighty (180) days from the date
of destruction. The insurance proceeds designated for
building and improvements or the items of personalty owned
by the Lessor and leased to Lessee hereunder under shall be
used to reimburse Lessee for the cost of rebuilding or
restoration of the Leased Premises and replacement of such
personalty leased to Lessee from Lessor. Insurance proceeds
designated for the loss or damage of Lessee's Personalty or
Trade Fixtures shall not belong to the Lessor. Rents
payable by Lessee shall not be abated during the period of
repair and restoration. Except as otherwise provided
herein, Lessee shall be required to repair, rebuild and
restore the Leased Premises, but Lessor shall only be
obligated to contribute the net proceeds of monies received
from insurance policy or policies covering such loss or
damages. Lessee shall repair the Leased Premises with all
reasonable speed. If the insurance proceeds are less than
Fifty Thousand Dollars ($50,000), they shall be paid to
Lessee for such repair and restoration. If the insurance
proceeds are greater than or equal to Fifty Thousand Dollars
($50,000), 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.
Notwithstanding anything above to the contrary, except in
the last year of the Lease Term as aforesaid, whether in the
event of a partial or total destruction of the Leased
Premises, Lessor shall make insurance proceeds available to
Lessee to rebuild the Leased Premises, provided Lessee
shall, either through Business Interruption Insurance or
otherwise, continue to pay Rent during the period of repair
and restoration, and Lessee and any guarantor confirm in
writing their continued liability for the obligations of
Lessee hereunder.
(B) If the damage does not render the Leased Premises
unfit for occupancy, then Lessor and Lessee agree that the
damage shall be repaired by Lessee as soon as practicable
out of insurance proceeds when received. All Rents payable
by Lessee shall not be abated during the period of
restoration and repair. All repairs shall be paid for by
Lessor out of any insurance proceeds received, but if the
insurance proceeds are insufficient to rebuild or repair the
Leased Premises according to the original plans and
specifications, whether repair or restoration is commenced
pursuant to Article 15(A) or (B) hereof, then Lessee agrees
to pay all additional amounts that are required to rebuild
the building in accordance with the original plans and
specifications. 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. All improvements or betterments placed by Lessee
on the demised Leased Premises shall, however, in any event,
be repaired and replaced by Lessee at its own expense and
not at the expense of Lessor. The purpose of this Article
is to require Lessee to carry insurance coverage on the
Leased Premises sufficient to rebuild the improvements in
the event of damage or destruction. Lessor shall be under
no obligation to make insurance proceeds available during
the last year of the Lease Term, and this Lease shall
terminate upon notice of Lessor's intent to not make
insurance proceeds available, unless Lessee shall, within 30
days of notice of Lessor's intent not to make insurance
proceeds available in the last year of the Lease Term,
exercise any remaining Option to Renew the Lease Term.
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 and which failure continues for a period of
five business days after Lessee has received written notice
of said failure. Interest and late charges for failure to
pay Rent when due shall accrue from the date after the
expiration of the five day cure period.
2.Failure to do, observe, keep and perform any of the
terms, covenants, conditions, agreements and provisions in
this Lease to be done, observed, kept and performed by
Lessee and which failure continues for a period of thirty
(30) days after Lessee has received said notice of failure,
or if such default is incapable of cure within 30 days
(except for the payment of monies, which shall not excuse
failure to cure within the 30 day period), and Lessee is
diligently pursuing a course of conduct reasonably designed
to cure the default, then Lessee shall have up to 120 days
after receipt of said notice to cure said default.
3.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 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 upon a
specified date not less than thirty (30) days after the date
of serving such notice of termination, and 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. Lessor shall
undertake reasonable efforts to mitigate Lessee's damages,
but the parties agree that Lessor shall be under no
obligation to expend its own funds for refurbishing or
remodeling in connection with any attempts to relet the
Leased Premises.
ARTICLE 18. LESSOR'S RIGHT OF RE-ENTRY
In the event that this Lease shall be terminated as
hereinbefore provided, or if possession of the Leased
Premises shall be obtained by Lessor 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,
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.
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,
it may either (i) terminate this Lease or (ii) it may from
time to time (but shall be under not obligation to do so),
without terminating the contractual obligation of Lessee to
pay Rent under this Lease, terminate Lessee's rights to
possession, 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.
(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 continuing contractual
obligation to pay rent under this Lease 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) If Lessee, after the expiration of any applicable
notice and cure period, is in default under a monetary
obligation under this Lease, then and only then may Lessor,
in addition to any other remedies Lessor may have with this
Article 19, 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 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) 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, and air
conditioning systems shall be the property of Lessor. All
Trade Fixtures and Personalty (as defined in Article 8(B)
above) owned by Lessee shall remain the property of Lessee,
including but not limited to those items set forth on
Exhibit C attached hereto.
(B) Lessee shall furnish and pay for any and all
Personalty, except for such items, if any, described in
Article 8(B) above, as owned by Lessor. Lessor acknowledges
that it does not have a lien on all Lessee's equipment,
furniture, Trade Fixtures, furnishings, and agrees to sign
an equipment lien waiver subject to the rights of any bona-
fide third party security interest in such property in a
form substantially similar to Exhibit D attached hereto or
its commercially reasonable equivalent. Provided Lessee is
not in default hereunder, Lessor will agree that its
interest, if any, 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) 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 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.
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 (l0) days after receipt of written 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 to Lessor its financial statements including a
profit and loss statement and a store level operating profit
and loss statement for the Leased Premises. Lessee shall
furnish to the Lessor throughout the term of the Lease,
including any option periods, its balance sheet upon the
reasonable request of Lessor but in no event not more than
twice during any Lease Year. Lessee shall within forty-five
(45) days after the end of each fiscal quarter and within
one hundred twenty (120) days after the end of Lessee's
fiscal year, furnish financial statements including a
balance sheet, profit and loss statement, statement of
changes in financial conditions and all other related
schedules of the Guarantor. All financial statements shall
be prepared in accordance with generally accepted accounting
principles consistently applied from period to period.
Financial statements submitted by Lessee, on behalf of
Lessee, shall be certified to be true and correct and
complete by Lessee or Lessee's Treasurer, or other
appropriate officer, and if audited by an independent
certified public accountant. Financial statements submitted
by Lessee on behalf of Guarantor shall be certified to be
true and correct and complete by Guarantor or guarantor's
Treasurer, or other appropriate officer, and if audited by
an independent certified public accountant.
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
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 if Lessee is not in uncured default under any of the
covenants and conditions in this Lease, 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 be as
set forth in Article 4 hereof. Lessee must give one hundred
eighty (l80) 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 by
certified 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 nationally
recognized overnight mail. Notice shall be deemed received
upon actual signed receipt or rejection of the said notice.
(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 in which the Leased Premises are
located.
(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, it 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 increased 200% from 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, Lessor shall
have the right to charge Lessee a late charge of $250.00 per
month for unpaid Rent for each month that any amount of Rent
installment remains unpaid. Said late charge shall commence
after the expiration of any applicable cure period and
continue until said installment, interest and all accrued
late charges are paid in full.
(H) Any part of the Leased Premises may be conveyed by
Lessor for private easement purposes at any time, provided
such easement does not interfere with the business of
Lessee. 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 a private 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.
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 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 there have been no investigations or reports involving
Lessee, or to the best of Lessee's knowledge, 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 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 on the Leased Premises, if
such liability shall arise during Lessee's occupancy of the
Leased Premises or as a result of a release of Hazardous
Materials on the Leased Premises during Lessee's occupancy
of the Leased Premises. Lessor agrees to assign to Lessor
and to subrogate Lessor's claims against any and all third
parties for damages, costs, expenses, or liability incurred
by Lessor for which Lessee is required to indemnify Lessor.
Lessee's liability hereunder shall expire five years after
the termination of this Lease.
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 highest rate of
interest allowed by law and shall become immediately due and
payable in full on demand of Lessor, its successors and
assigns.
ARTICLE 32. ESCROWS
Upon written request of Lessor, after two or more
occurrences during any Lease Year, of a monetary or other
material event of default, cured or uncured, 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. 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
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. RIGHT OF FIRST REFUSAL
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
to a bona fide third party purchaser. 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 to a bona
fide third party purchaser. If Lessee shall fail to
exercise its Right of First Refusal as set forth herein, the
terms of Article 34(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 Arby's, Hudsonville, Michigan, 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, 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 prior to closing, 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. 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 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 34(C), Selling Lessor shall
have the right to annul the provisions of this paragraph 34
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 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 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 herein above 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 34 are annulled by Selling
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 Right of First
Refusal, Selling Lessor shall be free to sell all or any
portion of its interest in the Leased Premises to bona fide
third party purchasers 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.
Nothing herein shall give Lessee the right of first refusal
over transfers between affiliates of Lessor at Lessor's
cost.
ARTICLE 35. 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, until such Agreement is terminated in
accordance with its terms.
ARTICLE 36. 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: RTM MID-AMERICA, INC.
By: /s/ Philip G Skinner
Its: Senior Vice President
By: /s/ Robert S Stallings
Its: V.P. Asst. Secretary
STATE OF GEORGIA}
}
COUNTY OF FULTON}
I, the undersigned authority, a Notary Public in and
for said County in said State, hereby certify that Philip G
Skinner and Robert S Stallings, whose name as Senior V.P.
and Asst. Secretary, respectively, of RTM MID-AMERICA, Inc.,
are signed to the foregoing instrument, and who are known to
me, acknowledged before me on this day that being informed
of the contents of said instrument, they as such officers
and with full authority executed the same voluntarily for
and as the Sr. V.P. and Asst. Secretary of said corporation.
Given under my hand and official seal this 23rd day of
November, 1998.
/S/ Jeryl M McIntyre
Notary Public
My Commission expires:
[notary seal]
LESSOR: NET LEASE INCOME & GROWTH FUND 84-A
LIMITED PARTNERSHIP, a Minnesota limited partnership
By: NET LEASE MANAGEMENT 84-A, INC., a Minnesota
corporation
By: /s/ Robert P Johnson
Robert P. Johnson, President
STATE OF MINNESOTA}
}
COUNTY OF RAMSEY}
I, the undersigned authority, a Notary Public in and
for said County in said State, hereby certify that Robert P.
Johnson, whose name as President of Net Lease Management 84-
A, Inc., as corporate general partner of Net Lease Income &
Growth Fund 84-A Limited Partnership is signed to the
foregoing instrument, and who is known to me, acknowledged
before me on this day that being informed of the contents of
said instrument, he as such officer and with full authority
executed the same voluntarily for and as the President of
Net Lease Management 84-A, Inc., for and as the corporate
general partner of Net Lease Income & Growth Fund 84-A
Limited Partnership.
Given under my hand and official seal this 17 day of
December, 1998.
/S/ Ann McCrea
Notary Public
[notary seal] My Commission expires:1-31-00
LESSOR: AEI REAL ESTATE FUND 85-A LIMITED
PARTNERSHIP, a Minnesota limited partnership
By: NET LEASE MANAGEMENT 85-A, INC., a Minnesota
corporation
By: /s/ Robert P Johnson
Robert P. Johnson, President
STATE OF MINNESOTA}
}
COUNTY OF RAMSEY}
I, the undersigned authority, a Notary Public in and
for said County in said State, hereby certify that Robert P.
Johnson, whose name as President of Net Lease Management 85-
A, Inc., as corporate general partner of AEI Real Estate
Fund 85-A Limited Partnership is signed to the foregoing
instrument, and who is known to me, acknowledged before me
on this day that being informed of the contents of said
instrument, he as such officer and with full authority
executed the same voluntarily for and as the President of
Net Lease Management 85-A, Inc., for and as the corporate
general partner of AEI Real Estate Fund 85-A Limited
Partnership.
Given under my hand and official seal this 17 day of
December, 1998.
/S/ Ann M McCrea
Notary Public
[notary seal]
My Commission expires:1-31-00
EXHIBIT A
Hudsonville, Michigan
Part of the Northeast fractional 1/4 of Section 5, Town 5
North, Range 13 West, City of Hudsonville, Michigan,
described as:
COMMENCING at the Northeast corner of said Section, thence
south 02 degrees 21 minutes 30 seconds West 995.20 feet
along the East line of said Section; thence North 89
degrees 26 minutes 38 seconds West 33.02 feet; thence South
02 degrees 21 minutes 30 seconds West 28.51 feet; thence
North 87 degrees 28 minutes 30 seconds West 17.00 feet to
the PLACE OF BEGINNING; thence South 02 degrees 21 minutes
30 seconds West 147.02 feet along the West right-of-way line
of 32nd Avenue; thence North 89 degrees 26 minutes 38
seconds West 250.00 feet; thence North 02 degrees 21 minutes
30 seconds East 175.00 feet; thence South 89 degrees 26
minutes 28 seconds East 250.00 feet; thence south 02 degrees
21 minutes 30 seconds West 27.908 feet to the PLACE OF
BEGINNING.
SUBJECT TO AND TOGETHER WITH an easement for ingress and
egress over part of the Northeast fractional 1/4, Section 5,
Town 5 North, Range 13 West, City of Hudsonville, Ottawa
County, Michigan, described as:
COMMENCING at the Northeast corner of said Section, thence
South 02 degrees 21 minutes 30 seconds West 1170.20 feet
along the East line of said Section; thence North 89 degrees
26 minutes 38 seconds West 93.88 feet to the POINT OF
BEGINNING; thence South 00 degrees, 33 minutes 22 seconds
West 10.52 feet; thence South 88 degrees 27 minutes 06
seconds East 43.52 feet; thence South 02 degrees 21 minutes
30 seconds West 26.00 feet along the West Right-of Way line
of 32nd Avenue; thence North 88 degrees 27 minutes 06
seconds West 42.86 feet; thence South 02 degrees 21 minutes
20 seconds West 136.00 feet; thence North 87 degrees 38
minutes 05 seconds West 76.54 feet; thence south 47 degrees
38 minutes 40 seconds West 14.21 feet; thence south 02
degrees 55 minutes 25 seconds West 20.20 feet; thence North
89 degrees 26 minutes 38 seconds West 16.01 feet along the
North Right-of-Way line of Highland Drive; thence North 02
degrees 55 minutes 25 seconds East 30.70 feet; thence North
87 degrees 38 minutes 05 seconds West 9.00 feet; thence
south 47 degrees 38 minutes 40 seconds West 7.11 feet;
thence South 02 degrees 55 minutes 25 seconds East 55.65
feet; thence South 87 degrees 38 minutes 05 seconds East
106.31 feet; thence North 02 degrees 21 minutes 20 seconds
East 116.81 feet; thence North 00 degrees 33 minutes 22
seconds East 30.90 feet; thence South 89 degrees 26 minutes
38 seconds East 26.00 feet to the POINT OF BEGINNING.
SUBJECT TO AND TOGETHER WITH an easement over part of the
Northeast fractional 1/4 of Section 5, town 5 North, Range
13 West, City of Hudsonville, Ottawa County, Michigan,
described as: COMMENCING at the Northeast corner of said
Section; thence South 02 degrees 21 minutes 30 seconds West
929.17 feet along the East line of said Section; thence
North 89 degrees 26 minutes 38 seconds West 50.03 feet to
the POINT OF BEGINNING; thence North 89 degrees 26 minutes
38 seconds West 115.00 feet; thence South 02 degrees 21
minutes 30 seconds East 66.03 feet; thence South 89 degrees
26 minutes 38 seconds East 115.00 feet; thence North 02
degrees 21 minutes 30 seconds East 66.03 feet to the POINT
OF BEGINNING.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000759641
<NAME> AEI REAL ESTATE FUND 85-A LTD PARTNERSHIP
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 2,572,249
<SECURITIES> 0
<RECEIVABLES> 12,721
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,584,970
<PP&E> 3,194,254
<DEPRECIATION> (731,538)
<TOTAL-ASSETS> 5,047,686
<CURRENT-LIABILITIES> 130,958
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 4,916,728
<TOTAL-LIABILITY-AND-EQUITY> 5,047,686
<SALES> 0
<TOTAL-REVENUES> 549,406
<CGS> 0
<TOTAL-COSTS> 204,118
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,142,451
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,142,451
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,142,451
<EPS-PRIMARY> 159.75
<EPS-DILUTED> 159.75
</TABLE>
