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, 1997
Commission file number: 0-14089
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
(Name of Small Business Issuer in its Charter)
State of Delaware 93-0926134
(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)
(612) 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, 1997 were
$654,236.
As of February 28, 1998, there were 7,333.55 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 $7,333,550.
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 XV Limited Partnership (the
"Partnership" or the "Registrant") is a limited partnership which
was organized pursuant to the laws of the State of Delaware on
October 3, 1986. The registrant is comprised of AEI Fund
Management 86-A, Inc. (AFM) 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 July 31, 1986. The Partnership
commenced operations on October 3, 1986 when minimum
subscriptions of 1,300 Limited Partnership Units ($1,300,000)
were accepted. The Partnership's offering terminated December
30, 1986 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 three properties, totaling $6,409,650. 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
commending 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 10 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.
Several of the leases provide the lessee with two to three
five-year renewal options subject to the same terms and
conditions as the initial lease. Certain lessees have been
granted options to purchase the property. Depending on the
lease, the purchase price is either determined by a formula, or
is the greater of the fair market value of the property or the
amount determined by a formula. In all cases, if the option were
to be exercised by the lessee, the purchase price would be
greater than the original cost of the property.
ITEM 1. DESCRIPTION OF BUSINESS. (Continued)
The Partnership owns a 44.9042% interest in a restaurant
in Waco, Texas, which was previously closed. In June 1995, the
Partnership re-leased the restaurant to Tex-Mex Cocina of Waco,
L.C. The Lease Agreement had a primary term of eighteen months
with an annual rental payment of $24,248. The Partnership could
also receive additional rent if gross receipts from the property
exceeded certain specified amounts. In December, 1997, the
lessee elected not to exercise the renewal option in the lease.
The restaurant was closed and is listed for sale or lease. While
the property is vacant, the Partnership is responsible for the
real estate taxes and other costs required to maintain the
property.
As of December 31, 1997, based on an analysis of market
conditions in the area, it was determined the fair value of the
Partnership's interest in the Waco property was approximately
$314,400. In the fourth quarter of 1997, a charge to operations
for real estate impairment of $80,300 was recognized, which is
the difference between the book value at December 31, 1997 of
$394,700 and the estimated fair value of $314,400. The charge
was recorded against the cost of the land and building.
On January 10, 1996, the Partnership purchased a Denny's
restaurant in Greenville, Texas for $1,028,432. The property is
leased to Huntington Restaurants Group, Inc. under a Lease
Agreement with a primary term of 20 years and annual rental
payments of $113,625.
On February 14, 1996, the Partnership purchased a 20%
interest in a Tractor Supply Company store in Maryville,
Tennessee for $219,405. The property is leased to Tractor Supply
Company under a Lease Agreement with a primary term of 14 years
and annual rental payments of $22,575. The remaining interest in
the property was purchased by AEI Real Estate Fund 85-A Limited
Partnership, an affiliate of the Partnership.
In July 1995, the lessee of the Super 8 motel in Hot
Springs, Arkansas, exercised an option in the Lease Agreement to
purchase the property. On March 29, 1996, the sale closed with
the Partnership receiving net sale proceeds of $663,386 which
resulted in a net gain of $216,645. The Partnership recognized
$18,534 of this gain in 1995 due to nonrefundable deposits
received from the purchaser. At the time of sale, the cost and
related accumulated depreciation of the property was $581,541 and
$134,800, respectively.
On January 24, 1997, the Partnership sold the Children's
World daycare center in Moreno Valley, California, to an
unrelated third party. The Partnership recognized net sale
proceeds of $1,301,342, which resulted in a net gain of $655,641.
At the time of sale, the cost and related accumulated
depreciation of the property was $963,717 and $318,016,
respectively. As part of the sale proceeds, the Partnership
received a Promissory Note for $1,003,000. The Note bears
interest at a 10% rate. On April 23, 1997, the Partnership
received the principal balance and outstanding accrued interest
on the Note. Investment income earned on the Note was $24,456.
On November 18, 1997, the Partnership purchased a 30.794%
interest in a Timber Lodge Steakhouse in St. Cloud, Minnesota for
$510,635. The property is leased to Timber Lodge Steakhouse,
Inc. under a Lease Agreement with a primary term of 20 years and
annual rental payments of $51,537. The remaining interests in
the property are owned by AEI Real Estate Fund XVII Limited
Partnership and AEI Institutional Net Lease Fund '93 Limited
Partnership, affiliates of the Partnership.
ITEM 1. DESCRIPTION OF BUSINESS. (Continued)
On December 23, 1997, the Partnership purchased a 26.05%
interest in a parcel of land in Troy, Michigan for $393,620. The
land is leased to Champps Entertainment, Inc. (Champps) under a
Lease Agreement with a primary term of 20 years and annual rental
payments of $27,553. Simultaneously with the purchase of the
land, the Partnership entered into a Development Financing
Agreement under which the Partnership will advance funds to
Champps for the construction of a Champps Americana restaurant on
the site. Through December 31, 1997, the Partnership had
advanced $46,997 for the construction of the property and was
charging interest on the advances at a rate of 7%. The
Partnership's share of the total purchase price, including the
cost of the land, will be approximately $1,172,250. After the
construction is complete, the Lease Agreement will be amended to
require annual rental payments of approximately $123,000. The
Partnership has incurred net costs of $67,523 related to the
acquisition of the property. The costs have been capitalized and
will be allocated to land, building and equipment. The remaining
interests in the property are owned by AEI Real Estate Fund XVII
Limited Partnership, AEI Real Estate Fund XVIII Limited
Partnership and AEI Net Lease Income & Growth Fund XIX Limited
Partnership, affiliates of the Partnership.
Major Tenants
During 1997, three of the Partnership's lessees each
contributed more than ten percent of the Partnership's total
rental revenue. The major tenants in aggregate contributed 78%
of the Partnership's total rental revenue in 1997. 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 1998 and future years. Any failure of these major tenants or
business concepts could materially affect the Partnership's net
income and cash distributions.
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 AFM.
Year 2000
AEI Fund Management, Inc. (AEI) performs all management
services for the Partnership. AEI is currently analyzing its
computer hardware and software systems to determine what, if any,
resources need to be dedicated regarding Year 2000 issues. The
Partnership does not anticipate any significant operational
impact or incurring material costs as a result of AEI becoming
Year 2000 compliant.
ITEM 2. DESCRIPTION OF PROPERTIES.
Investment Objectives
The Partnership's investment objectives are 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.
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, 1997.
Total Property Annual
Purchase Acquisition Lease Annual Rent
Property Date Costs Lessee Payment Per Sq. Ft.
Children's World Children's World
Daycare Center Learning
Franconia Hills, VA 3/24/87 $ 962,069 Centers, Inc. $ 142,847 $ 28.85
JEMCARE
Haltom City, TX 4/3/87 $ 417,213 JEMCARE, Inc. $ 27,822 $ 6.62
Arby's Restaurant RTM
Marshall, MI 7/30/87 $ 586,425 Mid-America, Inc. $ 24,000 $ 7.75
Zapata's Cantina & Cafe
Waco, TX
(44.9042%) 12/16/87 $ 548,010 <F1>
ITEM 2. DESCRIPTION OF PROPERTIES. (Continued)
Total Property Annual Annual
Purchase Acquisition Lease Rent Per
Property Date Costs Lessee Payment Sq. Ft.
Fuddruckers Restaurant
St. Louis, MO
(60%) 3/25/88 $1,138,296 Fuddruckers, Inc. $ 138,246 $ 26.40
Huntington
Denny's Restaurant Restaurants
Greenville, TX 1/10/96 $1,028,432 Group, Inc. $ 115,812 $ 23.50
Tractor Supply
Company Store
Maryville, TN Tractor Supply
(20%) 2/14/96 $ 219,405 Company $ 22,575 $ 5.93
Timber Lodge
Steakhouse Restaurant
St. Cloud, MN Timber Lodge
(30.794%) 11/18/97 $ 510,635 Steakhouse, Inc. $ 51,537 $ 23.97
Champps
Americana Restaurant
Troy, MI
(land only) <F2> Champps
(26.05%) 12/23/97 $ 393,620 Entertainment,Inc.$ 27,553 $ .96
<F1> The property is vacant and listed for sale or lease.
<F2> Restaurant is under construction as of December 31, 1997.
The properties listed above with a partial ownership
percentage are owned with an affiliate of the Partnership. AEI
Real Estate Fund XVI Limited Partnership owns the remaining
interest in the Zapata's Cantina & Cafe restaurant and the
Fuddruckers restaurant. AEI Real Estate Fund 85-A Limited
Partnership owns the remaining interest in the Tractor Supply
Company store. AEI Real Estate Fund XVII Limited Partnership and
AEI Institutional Net Lease Fund '93 Limited Partnership own the
remaining interests in the Timber Lodge Steakhouse restaurant.
AEI Real Estate Fund XVII Limited Partnership, AEI Real Estate
Fund XVIII Limited Partnership and AEI Net Lease Income & Growth
Fund XIX Limited Partnership own the remaining interests in the
Champps Americana restaurant.
Each Partnership owns a separate, undivided interest in
the properties. No specific agreement or commitment exists
between the Partnerships as to the management of their respective
interests in the properties, and the Partnership that holds more
than a 50% interest does not control decisions over the other
Partnership's interest.
The initial Lease terms are 20 years except for the
JEMCARE property (10 years), the Tractor Supply Company store (14
years), and the Arby's (15 years). Several of the Leases
contains renewal options which may extend the Lease term an
additional 9 to 15 years.
ITEM 2. DESCRIPTION OF PROPERTIES. (Continued)
The Partnership acquired lease guarantee insurance from
United Guaranty Commercial Insurance Company of Iowa for the
Lease on the daycare center in Haltom City, Texas. The policy
insured approximately 80% of the annual rental payments for a
period of ten years. The rent guarantee began thirty days after
the occurrence of all the following: (1) the lessee was at least
thirty days in default in the payment of rent; (2) the lessee was
removed from the property; (3) the property was listed for rent
with a real estate broker and "For Rent" signs were posted on the
property; and (4) certain other minor conditions. Once these
conditions were satisfied, the Partnership received lease
insurance payments until either the property was re-leased or the
policy expired. On August 31, 1996, the daycare center policy
expired.
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 the Modified Accelerated Cost Recovery System
(MACRS). The largest depreciable component of a property is the
building which is depreciated, using the straight-line method,
over 31.5 or 40 years 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, 1992, all properties were 100
percent occupied by the lessees noted, with the exception of the
Zapata's Cantina & Cafe, which was 100 percent occupied until
January, 1993. The property was re-leased and 100% occupied from
June, 1995 to December, 1997.
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, 1997, there were 660 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 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
outstanding at the beginning of the year. 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.
ITEM 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP UNITS AND
RELATED SECURITY HOLDER MATTERS. (Continued)
During 1997, two Limited Partners redeemed a total of 17
Partnership Units for $8,618 in accordance with the Partnership
Agreement. In prior years, a total of nineteen Limited Partners
redeemed 146.5 Partnership Units for $106,842. The redemptions
increase the remaining Limited Partners' ownership in the
Partnership.
Cash distributions of $7,403 and $6,510 were made to the
General Partners and $724,242 and $638,814 were made to the
Limited Partners in 1997 and 1996, respectively. The
distributions were made on a quarterly basis and represent Net
Cash Flow, as defined, except as discussed below. These
distributions should not be compared with dividends paid on
capital stock by corporations.
As part of the Limited Partner distributions discussed
above, the Partnership distributed $200,000 and $126,000 of
proceeds from property sales in 1997 and 1996, respectively. The
distributions reduced the Limited Partners' Adjusted Capital
Contributions.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS.
Results of Operations
For the years ended December 31, 1997 and 1996, the
Partnership recognized rental income of $540,414 and $692,432,
respectively. During the same periods, the Partnership earned
investment income of $113,822 and $42,480, respectively. In
1997, rental income decreased as a result of the sale of the
Super 8 motel and the Children's World daycare center discussed
below. The decrease in rental income was partially offset by
additional investment income earned on the net proceeds from the
property sales.
The Partnership owns a 44.9042% interest in a restaurant
in Waco, Texas, which was previously closed. In June 1995, the
Partnership re-leased the restaurant to Tex-Mex Cocina of Waco,
L.C. The Lease Agreement had a primary term of eighteen months
with an annual rental payment of $24,248. The Partnership could
also receive additional rent if gross receipts from the property
exceeded certain specified amounts. In December, 1997, the
lessee elected not to exercise the renewal option in the lease.
The restaurant was closed and is listed for sale or lease. While
the property is vacant, the Partnership is responsible for the
real estate taxes and other costs required to maintain the
property.
As of December 31, 1997, based on an analysis of market
conditions in the area, it was determined the fair value of the
Partnership's interest in the Waco property was approximately
$314,400. In the fourth quarter of 1997, a charge to operations
for real estate impairment of $80,300 was recognized, which is
the difference between the book value at December 31, 1997 of
$394,700 and the estimated fair value of $314,400. The charge
was recorded against the cost of the land and building.
During the years ended December 31, 1997 and 1996, the
Partnership paid Partnership administration expenses to
affiliated parties of $103,929 and $97,897, 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 $17,853 and $16,274, 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.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
As of December 3l, 1997, the Partnership's annualized cash
distribution rate was 7.5%, 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.
AEI Fund Management, Inc. (AEI) performs all management
services for the Partnership. AEI is currently analyzing its
computer hardware and software systems to determine what, if any,
resources need to be dedicated regarding Year 2000 issues. The
Partnership does not anticipate any significant operational
impact or incurring material costs as a result of AEI becoming
Year 2000 compliant.
Liquidity and Capital Resources
During 1997, the Partnership's cash balances increased
$55,849 mainly as a result of cash generated from the sale of the
Children's World property, which was partially offset by the
reinvestment of proceeds in two additional properties and
distributions made in excess of cash generated from operating
activities. Net cash provided by operating activities decreased
from $628,957 in 1996 to $517,224 in 1997 mainly as a result of a
decrease in income 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 1997 and 1996, the Partnership
generated cash flow from the sale of real estate of $1,301,342
and $644,852, respectively. During the same periods, the
Partnership expended $1,018,775 and $359,459, respectively, to
invest in real properties (inclusive of acquisition expenses) as
the Partnership reinvested the cash generated from the property
sales.
On January 10, 1996, the Partnership purchased a Denny's
restaurant in Greenville, Texas for $1,028,432. The property is
leased to Huntington Restaurants Group, Inc. under a Lease
Agreement with a primary term of 20 years and annual rental
payments of $113,625.
On February 14, 1996, the Partnership purchased a 20%
interest in a Tractor Supply Company store in Maryville,
Tennessee for $219,405. The property is leased to Tractor Supply
Company under a Lease Agreement with a primary term of 14 years
and annual rental payments of $22,575. The remaining interest in
the property was purchased by AEI Real Estate Fund 85-A Limited
Partnership, an affiliate of the Partnership.
In July 1995, the lessee of the Super 8 motel in Hot
Springs, Arkansas, exercised an option in the Lease Agreement to
purchase the property. On March 29, 1996, the sale closed with
the Partnership receiving net sale proceeds of $663,386 which
resulted in a net gain of $216,645. The Partnership recognized
$18,534 of this gain in 1995 due to nonrefundable deposits
received from the purchaser. At the time of sale, the cost and
related accumulated depreciation of the property was $581,541 and
$134,800, respectively.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
On January 24, 1997, the Partnership sold the Children's
World daycare center in Moreno Valley, California, to an
unrelated third party. The Partnership recognized net sale
proceeds of $1,301,342, which resulted in a net gain of $655,641.
At the time of sale, the cost and related accumulated
depreciation of the property was $963,717 and $318,016,
respectively. As part of the sale proceeds, the Partnership
received a Promissory Note for $1,003,000. The Note bears
interest at a 10% rate. On April 23, 1997, the Partnership
received the principal balance and outstanding accrued interest
on the Note. Investment income earned on the Note was $24,456.
During 1997 and 1996, the Partnership distributed $202,020
and $127,273 of the net sale proceeds to the Limited and General
Partners, which represented a return of capital of $27.20 and
$17.11 per Limited Partnership Unit, respectively. The majority
of the remaining proceeds will be reinvested in additional
property.
On November 18, 1997, the Partnership purchased a 30.794%
interest in a Timber Lodge Steakhouse in St. Cloud, Minnesota for
$510,635. The property is leased to Timber Lodge Steakhouse,
Inc. under a Lease Agreement with a primary term of 20 years and
annual rental payments of $51,537. The remaining interests in
the property are owned by AEI Real Estate Fund XVII Limited
Partnership and AEI Institutional Net Lease Fund '93 Limited
Partnership, affiliates of the Partnership.
On December 23, 1997, the Partnership purchased a 26.05%
interest in a parcel of land in Troy, Michigan for $393,620. The
land is leased to Champps Entertainment, Inc. (Champps) under a
Lease Agreement with a primary term of 20 years and annual rental
payments of $27,553. Simultaneously with the purchase of the
land, the Partnership entered into a Development Financing
Agreement under which the Partnership will advance funds to
Champps for the construction of a Champps Americana restaurant on
the site. Through December 31, 1997, the Partnership had
advanced $46,997 for the construction of the property and was
charging interest on the advances at a rate of 7%. The
Partnership's share of the total purchase price, including the
cost of the land, will be approximately $1,172,250. After the
construction is complete, the Lease Agreement will be amended to
require annual rental payments of approximately $123,000. The
Partnership has incurred net costs of $67,523 related to the
acquisition of the property. The costs have been capitalized and
will be allocated to land, building and equipment. The remaining
interests in the property are owned by AEI Real Estate Fund XVII
Limited Partnership, AEI Real Estate Fund XVIII Limited
Partnership and AEI Net Lease Income & Growth Fund XIX Limited
Partnership, affiliates of the Partnership.
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 October 1, 1996, the Partnership's distribution
rate was increased from 7.0% to 7.5%. As a result of this and
the larger distribution of net sale proceeds in 1997,
distributions during 1997 were higher than in 1996.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (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
outstanding at the beginning of the year. 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 1997, two Limited Partners redeemed a total of 17
Partnership Units for $8,618 in accordance with the Partnership
Agreement. The Partnership acquired these Units using Net Cash
Flow from operations. In prior years, a total of nineteen
Limited Partners redeemed 146.5 Partnership Units for $106,842.
The redemptions increase the remaining Limited Partners'
ownership 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.
ITEM 7. FINANCIAL STATEMENTS.
See accompanying Index to Financial Statements.
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS
Report of Independent Auditors
Balance Sheet as of December 31, 1997 and 1996
Statements for the Years Ended December 31, 1997 and 1996:
Income
Cash Flows
Changes in Partners' Capital
Notes to Financial Statements
REPORT OF INDEPENDENT AUDITORS
To the Partners:
AEI Real Estate Fund XV Limited Partnership
St. Paul, Minnesota
We have audited the accompanying balance sheet of AEI REAL
ESTATE FUND XV LIMITED PARTNERSHIP (a Delaware limited
partnership) as of December 31, 1997 and 1996 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 XV Limited Partnership as of December 31,
1997 and 1996, and the results of its operations and its cash
flows for the years then ended, in conformity with generally
accepted accounting principles.
Minneapolis, Minnesota Boulay, Heutmaker, Zibell & Co. P.L.L.P.
February 4, 1998 Certified Public Accountants
<PAGE>
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
BALANCE SHEET
DECEMBER 31
ASSETS
1997 1996
CURRENT ASSETS:
Cash and Cash Equivalents $ 939,969 $ 884,120
Receivables 15,446 9,945
----------- -----------
Total Current Assets 955,415 894,065
----------- -----------
INVESTMENTS IN REAL ESTATE:
Land 2,036,860 1,757,210
Buildings and Equipment 3,686,945 4,106,357
Construction in Progress 46,997 0
Property Acquisition Costs 67,523 0
Accumulated Depreciation (1,120,795) (1,312,489)
----------- -----------
Net Investments in Real Estate 4,717,530 4,551,078
----------- -----------
Total Assets $ 5,672,945 $ 5,445,143
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 32,430 $ 26,679
Distributions Payable 116,671 120,350
Deferred Income 15,480 15,480
----------- -----------
Total Current Liabilities 164,581 162,509
----------- -----------
DEFERRED INCOME - Net Of Current Portion 140,617 156,097
PARTNERS' CAPITAL (DEFICIT):
General Partners (9,783) (12,195)
Limited Partners, $1,000 Unit value;
7,500 Units authorized and issued;
7,337 and 7,354 outstanding in 1997
and 1996, respectively 5,377,530 5,138,732
----------- -----------
Total Partners' Capital 5,367,747 5,126,537
----------- -----------
Total Liabilities and Partners' Capital $ 5,672,945 $ 5,445,143
=========== ===========
The accompanying notes to financial statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 3l
1997 1996
INCOME:
Rent $ 540,414 $ 692,432
Investment Income 113,822 42,480
----------- -----------
Total Income 654,236 734,912
----------- -----------
EXPENSES:
Partnership Administration - Affiliates 103,929 97,897
Partnership Administration and Property
Management - Unrelated Parties 17,853 16,274
Depreciation 126,322 169,210
Real Estate Impairment 80,300 0
----------- -----------
Total Expenses 328,404 283,381
----------- -----------
OPERATING INCOME 325,832 451,531
GAIN ON SALE OF REAL ESTATE 655,641 198,111
----------- -----------
NET INCOME $ 981,473 $ 649,642
=========== ===========
NET INCOME ALLOCATED:
General Partners $ 9,815 $ 6,497
Limited Partners 971,658 643,145
----------- -----------
$ 981,473 $ 649,642
=========== ===========
NET INCOME PER LIMITED PARTNERSHIP UNIT
(7,349 and 7,361 weighted average Units outstanding
in 1997 and 1996, respectively) $ 132.22 $ 87.37
=========== ===========
The accompanying notes to financial statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 981,473 $ 649,642
Adjustments To Reconcile Net Income
To Net Cash Provided By Operating Activities:
Depreciation 126,322 169,210
Real Estate Impairment 80,300 0
Gain on Sale of Real Estate (655,641) (198,111)
(Increase) Decrease in Receivables (5,501) 26,467
Increase (Decrease) in Payable to
AEI Fund Management, Inc. 5,751 (2,771)
Decrease in Deferred Income (15,480) (15,480)
----------- -----------
Total Adjustments (464,249) (20,685)
----------- -----------
Net Cash Provided By
Operating Activities 517,224 628,957
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in Real Estate (1,018,775) (359,459)
Proceeds from Sale of Real Estate 298,342 644,852
Payments Received on Note Receivable 1,003,000 0
----------- -----------
Net Cash Provided By
Investing Activities 282,567 285,393
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (Decrease) in Distributions Payable (3,679) 11,174
Distributions to Partners (731,558) (645,267)
Redemption Payments (8,705) (5,760)
----------- -----------
Net Cash Used For
Financing Activities (743,942) (639,853)
----------- -----------
NET INCREASE IN CASH
AND CASH EQUIVALENTS 55,849 274,497
CASH AND CASH EQUIVALENTS, beginning of period 884,120 609,623
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 939,969 $ 884,120
=========== ===========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES:
Note Receivable Acquired in Sale of Property $ 1,003,000 $ 0
=========== ===========
The accompanying notes to financial statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI REAL ESTATE FUND XV 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, 1995 $ (12,182) $ 5,140,104 $ 5,127,922 7,363.55
Distributions (6,453) (638,814) (645,267)
Redemption Payments (57) (5,703) (5,760) (10.00)
Net Income 6,497 643,145 649,642
--------- ----------- ----------- -----------
BALANCE, December 31, 1996 (12,195) 5,138,732 5,126,537 7,353.55
Distributions (7,316) (724,242) (731,558)
Redemption Payments (87) (8,618) (8,705) (17.00)
Net Income 9,815 971,658 981,473
--------- ----------- ----------- -----------
BALANCE, December 31, 1997 $ (9,783) $ 5,377,530 $ 5,367,747 7,336.55
========= =========== =========== ===========
The accompanying notes to financial statements are an integral
part of this statement.
</PAGE>
AEI REAL ESTATE FUND XV LIMITED PARTNERSHlP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(1) Organization -
AEI Real Estate Fund XV Limited Partnership (Partnership)
was formed to acquire and lease commercial properties to
operating tenants. The Partnership's operations are managed
by AEI Fund Management 86-A, Inc. (AFM), the Managing
General Partner of the Partnership. Robert P. Johnson, the
President and sole shareholder of AFM, serves as the
Individual General Partner of the Partnership. An affiliate
of AFM, AEI Fund Management, Inc. (AEI), performs the
administrative and operating functions for the Partnership.
The terms of the Partnership offering called for a
subscription price of $1,000 per limited partnership unit,
payable on acceptance of the offer. The Partnership
commenced operations on October 3, 1986 when minimum
subscriptions of 1,300 Limited Partnership Units
($1,300,000) were accepted. On December 30, 1986, the
Partnership's offering terminated 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 the 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 XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(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 -
Newly Issued Accounting Standards
In June, 1997, Statement of Financial Accounting
Standards No. 130 "Reporting Comprehensive Income" was
approved for issuance for fiscal years beginning after
December 15, 1997. The Partnership adopted this
Statement in the fourth quarter of 1997. The effect of
this Statement has been determined that net income/loss
for financial statements and comprehensive income/loss is
primarily the same in all material respects.
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.
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(2) Summary of Significant Accounting Policies - (Continued)
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.
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 XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(2) Summary of Significant Accounting Policies - (Continued)
Real estate is recorded at the lower of cost or estimated
net realizable value. The Financial Accounting Standards
Board issued Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of" which was effective for the
Partnership's fiscal year ended December 31, 1996. This
standard requires the Partnership to compare 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 Statement requires the Partnership to
recognize 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.
(3) Related Party Transactions -
The Partnership owns a 44.9042% interest in the restaurant
in Waco, Texas and a 60% interest in the Fuddruckers
restaurant. In addition, the Partnership owned a 50%
interest in a Super 8 motel. The remaining interests in
these properties are or were owned by AEI Real Estate Fund
XVI Limited Partnership, an affiliate of the Partnership.
The Partnership owns a 20% interest in the Tractor Supply
Company store. The remaining interest in this property is
owned by AEI Real Estate Fund 85-A Limited Partnership, an
affiliate of the Partnership. The Partnership owns a
30.794% interest in the Timber Lodge Steakhouse. The
remaining interests in this property are owned by AEI Real
Estate Fund XVII Limited Partnership and AEI Institutional
Net Lease Fund '93 Limited Partnership, affiliates of the
Partnership. The Partnership owns a 26.05% interest in the
Champps Americana restaurant. The remaining interests in
this property are owned by AEI Real Estate Fund XVII Limited
Partnership, AEI Real Estate Fund XVIII Limited Partnership
and AEI Net Lease Income & Growth Fund XIX Limited
Partnership, affiliates of the Partnership.
Each Partnership owns a separate, undivided interest in the
properties. No specific agreement or commitment exists
between the Partnerships as to the management of their
respective interests in the properties, and the Partnership
that holds more than a 50% interest does not control
decisions over the other Partnership's interest. The
financial statements reflect only this Partnership's
percentage share of the properties' land, building and
equipment, liabilities, revenues and expenses.
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(3) Related Party Transactions - (Continued)
AEI and AFM received the following compensation and
reimbursements for costs and expenses from the Partnership:
Total Incurred by the Partnership
for the Years Ended December 3l
1997 1996
a.AEI and AFM 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. $ 103,929 $ 97,897
========== ==========
b.AEI and AFM are reimbursed for all direct
expenses they have paid on the Partnership's
behalf to third parties. These expenses included
printing costs, legal and filing fees, direct
administrative costs, outside audit and
accounting costs, taxes, insurance and
other property costs. $ 17,853 $ 16,274
========== ==========
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 $6,927 and $29,768
for 1997 and 1996, respectively. $ 93,152 $ (16,996)
========== ==========
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 XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(4) Investments in Real Estate -
The Partnership leases its properties to various tenants
through 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 of the property. The initial Lease
terms are 20 years except for the JEMCARE property (10
years), the Tractor Supply Company store (14 years), and the
Arby's (15 years). Several of the Leases have renewal
options which may extend the lease term an additional 9 to
15 years. The Leases 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. Certain lessees have been granted options to
purchase the property. Depending on the lease, the purchase
price is either determined by a formula, or is the greater
of the fair market value of the property or the amount
determined by a formula. In all cases, if the option were
to be exercised by the lessee, the purchase price would be
greater than the original cost of the property.
The Partnership's properties are all commercial, single-
tenant properties. The Arby's restaurant was built in 1972
and extensively remodeled in 1987. The restaurant in Waco,
Texas was constructed in 1980 and enlarged in 1982 and 1983.
The JEMCARE Learning Center was constructed in 1986. The
Children's World Daycare Center and the Fuddruckers
restaurant were newly-constructed in 1987. The Partnership
acquired all of these properties during 1987 and 1988. The
Denny's restaurant and Tractor Supply Company store were
newly-constructed in 1995 and acquired in 1996. The Timber
Lodge Steakhouse was newly-constructed and acquired in 1997.
The Champps Americana restaurant land was acquired in 1997.
There have been no costs capitalized as improvements
subsequent to the acquisitions.
The cost of the properties and related accumulated
depreciation at December 31, 1997 are as follows:
Buildings and Accumulated
Property Land Equipment Total Depreciation
Children's World,
Franconia Hills, VA $ 165,952 $ 796,117 $ 962,069 $ 323,840
JEMCARE Learning Center,
Haltom City, TX 132,925 284,288 417,213 141,175
Arby's, Marshall, MI 120,499 465,926 586,425 201,883
Zapata's, Waco, TX 146,506 321,204 467,710 153,350
Fuddruckers, St. Louis, MO 593,703 544,593 1,138,296 239,054
Denny's, Greenville, TX 332,077 696,355 1,028,432 47,617
Tractor Supply Company,
Maryville, TN 40,267 179,138 219,405 12,143
Timber Lodge Steakhouse,
St. Cloud, MN 111,311 399,324 510,635 1,733
Champps Americana, Troy, MI 393,620 0 393,620 0
---------- ---------- ---------- ----------
$2,036,860 $3,686,945 $5,723,805 $1,120,795
========== ========== ========== ==========
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(4) Investments in Real Estate - (Continued)
On January 10, 1996, the Partnership purchased a Denny's
restaurant in Greenville, Texas for $1,028,432. The
property is leased to Huntington Restaurants Group, Inc.
under a Lease Agreement with a primary term of 20 years and
annual rental payments of $113,625.
On February 14, 1996, the Partnership purchased a 20%
interest in a Tractor Supply Company store in Maryville,
Tennessee for $219,405. The property is leased to Tractor
Supply Company under a Lease Agreement with a primary term
of 14 years and annual rental payments of $22,575.
In July 1995, the lessee of the Super 8 motel in Hot
Springs, Arkansas, exercised an option in the Lease
Agreement to purchase the property. On March 29, 1996, the
sale closed with the Partnership receiving net sale proceeds
of $663,386 which resulted in a net gain of $216,645. The
Partnership recognized $18,534 of this gain in 1995 due to
nonrefundable deposits received from the purchaser. At the
time of sale, the cost and related accumulated depreciation
of the property was $581,541 and $134,800, respectively.
On January 24, 1997, the Partnership sold the Children's
World daycare center in Moreno Valley, California, to an
unrelated third party. The Partnership recognized net sale
proceeds of $1,301,342, which resulted in a net gain of
$655,641. At the time of sale, the cost and related
accumulated depreciation of the property was $963,717 and
$318,016, respectively. As part of the sale proceeds, the
Partnership received a Promissory Note for $1,003,000. The
Note bears interest at a 10% rate. On April 23, 1997, the
Partnership received the principal balance and outstanding
accrued interest on the Note. Investment income earned on
the Note was $24,456.
During 1997 and 1996, the Partnership distributed $202,020
and $127,273 of the net sale proceeds to the Limited and
General Partners which represented a return of capital of
$27.20 and $17.11 per Limited Partnership Unit,
respectively. The majority of the remaining proceeds will
be reinvested in additional property.
On November 18, 1997, the Partnership purchased a 30.794%
interest in a Timber Lodge Steakhouse in St. Cloud,
Minnesota for $510,635. The property is leased to Timber
Lodge Steakhouse, Inc. under a Lease Agreement with a
primary term of 20 years and annual rental payments of
$51,537.
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(4) Investments in Real Estate - (Continued)
On December 23, 1997, the Partnership purchased a 26.05%
interest in a parcel of land in Troy, Michigan for $393,620.
The land is leased to Champps Entertainment, Inc. (Champps)
under a Lease Agreement with a primary term of 20 years and
annual rental payments of $27,553. Simultaneously with the
purchase of the land, the Partnership entered into a
Development Financing Agreement under which the Partnership
will advance funds to Champps for the construction of a
Champps Americana restaurant on the site. Through December
31, 1997, the Partnership had advanced $46,997 for the
construction of the property and was charging interest on
the advances at a rate of 7%. The Partnership's share of
the total purchase price, including the cost of the land,
will be approximately $1,172,250. After the construction is
complete, the Lease Agreement will be amended to require
annual rental payments of approximately $123,000. The
Partnership has incurred net costs of $67,523 related to the
acquisition of the property. The costs have been
capitalized and will be allocated to land, building and
equipment.
The Partnership owns a 44.9042% interest in a restaurant in
Waco, Texas, which was previously closed. In June 1995, the
Partnership re-leased the restaurant to Tex-Mex Cocina of
Waco, L.C. The Lease Agreement had a primary term of
eighteen months with an annual rental payment of $24,248.
The Partnership could also receive additional rent if gross
receipts from the property exceeded certain specified
amounts. In December, 1997, the lessee elected not to
exercise the renewal option in the lease. The restaurant
was closed and is listed for sale or lease. While the
property is vacant, the Partnership is responsible for the
real estate taxes and other costs required to maintain the
property.
As of December 31, 1997, based on an analysis of market
conditions in the area, it was determined the fair value of
the Partnership's interest in the Waco property was
approximately $314,400. In the fourth quarter of 1997, a
charge to operations for real estate impairment of $80,300
was recognized, which is the difference between the book
value at December 31, 1997 of $394,700 and the estimated
fair value of $314,400. The charge was recorded against the
cost of the land and building.
The minimum future rental on the Leases for years subsequent
to December 31, 1997 are as follows:
1998 $ 569,114
1999 572,768
2000 577,409
2001 550,836
2002 554,738
Thereafter 4,961,976
-----------
$ 7,786,841
===========
In 1997 and 1996, the Partnership recognized contingent
rents of $14,697 and $18,925, respectively.
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(5 Deferred Income -
In June, 1994, Fuddruckers, Inc., the restaurant concept's
franchisor, acquired the operations of the Fuddruckers
restaurant in St. Louis, Missouri, and assumed the lease
obligations from the original lessee. As part of the
agreement, the Partnership amended the Lease to reduce the
base rent from the current annual rent of $163,550 to
$138,246. The Partnership could receive additional rent in
the future if 10% of gross receipts from the property exceed
the base rent. In consideration for the lease assumption
and amendment, the Partnership received a lump sum payment
from the original lessee of $210,277. The lump sum payment
will be recognized as income over the remainder of the Lease
term, which expires January 31, 2008, using the straight
line method. As of December 31, 1997 and 1996, the
Partnership has recognized $54,180 and $38,700,
respectively, of this payment as income.
(6) 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:
1997 1996
Tenants Industry
Children's World
Learning Centers, Inc. Child Care $ 150,892 $ 277,177
Fuddruckers Inc. Restaurant 153,726 153,727
Huntington Restaurants
Group, Inc. Restaurant 115,630 110,876
----------- ----------
Aggregate rent revenue of major tenants $ 420,248 $ 541,780
=========== ==========
Aggregate rent revenue of major tenants as
a percentage of total rent revenue 78% 78%
=========== ==========
(7) Partners' Capital -
Cash distributions of $7,403 and $6,510 were made to the
General Partners and $724,242 and $638,814 were made to the
Limited Partners for the years ended December 31, 1997 and
1996, respectively. The Limited Partners' distributions
represent $98.55 and $86.78 per Limited Partnership Unit
outstanding using 7,349 and 7,361 weighted average Units in
1997 and 1996, respectively. The distributions represent
$98.55 and $86.59 per Unit of Net Income and $-0- and $.19
per Unit of return of contributed capital in 1997 and 1996,
respectively.
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(7) Partners' Capital - (Continued)
As part of the Limited Partner distributions discussed
above, the Partnership distributed $200,000 and $126,000 of
proceeds from property sales in 1997 and 1996, respectively.
The distributions reduced the Limited Partners' Adjusted
Capital Contributions.
Distributions of Net Cash Flow to the General Partners
during 1997 and 1996 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.
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 number of Units
outstanding at the beginning of the year. 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 1997, two Limited Partners redeemed a total of 17
Partnership Units for $8,618 in accordance with the
Partnership Agreement. The Partnership acquired these Units
using Net Cash Flow from operations. In 1996, one Limited
Partner redeemed a total of 10 Partnership Units for $5,703.
The redemptions increase the remaining Limited Partners'
ownership 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
$938.68 per original $1,000 invested.
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(8) 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:
1997 1996
Net Income for Financial
Reporting Purposes $ 981,473 $ 649,642
Depreciation for Tax Purposes
Under Depreciation for Financial
Reporting Purposes 17,656 43,688
Income Accrued for Tax Purposes
Under Income for Financial
Reporting Purposes (15,480) (15,480)
Real Estate Impairment Loss
Not Recognized for
Tax Purposes 80,300 0
Gain on Sale of Real Estate for Tax Purposes
Under Gain for Financial Reporting Purposes (3,377) (15,419)
---------- ----------
Taxable Income to Partners $1,060,572 $ 662,431
========== ==========
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(8) 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:
1997 1996
Partners' Capital for
Financial Reporting Purposes $ 5,367,747 $ 5,126,537
Adjusted Tax Basis of Investments
in Real Estate Over Net Investments
in Real Estate for Financial
Reporting Purposes 233,846 139,266
Capitalized Start-Up Costs
Under Section 195 152,848 152,848
Amortization of Start-Up and
Organization Costs (165,254) (165,254)
Income Accrued for Tax Purposes
Over Income for Financial
Reporting Purposes 156,097 171,577
Organization and Syndication Costs
Treated as Reduction of Capital
for Financial Reporting Purposes 1,067,225 1,067,225
----------- -----------
Partners' Capital for
Tax Reporting Purposes $ 6,812,509 $ 6,492,199
=========== ===========
(9) 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:
1997 1996
Carrying Fair Carrying Fair
Amount Value Amount Value
Cash $ 205 $ 205 $ 257 $ 257
Money Market Funds 939,764 939,764 888,863 888,863
--------- --------- --------- ---------
Total Cash and
Cash Equivalents $ 939,969 $ 939,969 $ 884,120 $ 884,120
========= ========= ========= =========
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 AFM. 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 AFM are as follows:
Robert P. Johnson, age 53, is Chief Executive Officer,
President and Director and has held these positions since the
formation of AFM in December, 1985, and has been elected to
continue in these positions until March, 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 sixteen other limited
partnerships.
Mark E. Larson, age 45, is Executive Vice President,
Treasurer and Chief Financial Officer and has been elected to
continue in these positions until March, 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 AFM and
will continue to serve until March, 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 AFM 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, 1998:
Name and Address Number of Percent
of Beneficial Owner Units Held of Class
AEI Fund Management 86-A, Inc. 3 *
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, AFM 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 Pages 21 and 22 and
is incorporated herein by reference, for details of related party
transactions.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND FORM 8-K/A.
A. Exhibits -
Description
10.1 Net Lease Agreement dated
January 10, 1996, between the Partnership
and Huntington Restaurants Group, Inc.
relating to the property at 3103 W. I-30,
Greenville, Texas (incorporated by
reference to Exhibit 10.1 of Form 8-K
filed with the Commission on January 17,
1996).
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND FORM 8-K/A.
(Continued)
A. Exhibits -
Description
10.2 Purchase Agreement dated
December 30, 1996 between the
Partnership, AEI Real Estate Fund XV
Limited Partnership and Joseph Schoepp
and Juliann Schoepp relating to the
property at 24693 Ironwood Avenue, Moreno
Valley, California (incorporated by
reference to Exhibit 10.1 on Form 8-K
filed with the Commission on February 3,
1997).
10.3 Secured Purchase Money
Promissory Note dated January 24, 1997
between the Partnership, AEI Real Estate
Fund XV Limited Partnership and Joseph
Schoepp and Juliann Schoepp relating to
the property at 24693 Ironwood Avenue,
Moreno Valley, California (incorporated
by reference to Exhibit 10.2 on Form 8-K
filed with the Commission on February 3,
1997).
10.4 Assignment of Lease dated
January 24, 1997 between the Partnership,
AEI Real Estate Fund XV Limited
Partnership and Joseph Schoepp and
Juliann Schoepp relating to the property
at 24693 Ironwood Avenue, Moreno Valley,
California (incorporated by reference to
Exhibit 10.3 on Form 8-K filed with the
Commission on February 3, 1997).
10.5 Deed of Trust With
Assignment of Rents dated January 24,
1997 between the Partnership, AEI Real
Estate Fund XV Limited Partnership and
Joseph Schoepp and Juliann Schoepp
relating to the property at 24693
Ironwood Avenue, Moreno Valley,
California (incorporated by reference to
Exhibit 10.4 on Form 8-K filed with the
Commission on February 3, 1997).
10.6 Assignment of Sale and
Leaseback Financing Commitment dated
November 17, 1997 between the Partnership
and AEI Fund Management, Inc. relating to
the sale and leaseback of a Timber Lodge
Steakhouse restaurant at 3590 Second
Street South, St. Cloud, Minnesota.
10.7 Net Lease Agreement dated
November 18, 1997 between the
Partnership, AEI Real Estate Fund XVII
Limited Partnership, AEI Institutional
Net Lease Fund '93 Limited Partnership
and Timber Lodge Steakhouse, Inc.
relating to the property at 3590 Second
Street South, St. Cloud, Minnesota.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND FORM 8-K/A.
(Continued)
A. Exhibits -
Description
10.8 Development Financing
Agreement dated December 23, 1997 between
the Partnership, AEI Net Lease Income &
Growth Fund XIX Limited Partnership, AEI
Real Estate Fund XVIII Limited
Partnership, AEI Real Estate Fund XVII
Limited Partnership and Champps
Entertainment, Inc. relating to the
property at 301 West Big Beaver Road,
Troy, Michigan.
10.9 Net Lease Agreement
dated December 23, 1997 between the
Partnership, AEI Net Lease Income &
Growth Fund XIX Limited Partnership, AEI
Real Estate Fund XVIII Limited
Partnership, AEI Real Estate Fund XVII
Limited Partnership and Champps
Entertainment, Inc. relating to the
property at 301 West Big Beaver Road,
Troy, Michigan.
27 Financial Data Schedule
for year ended December 31, 1997.
B. Reports on Form 8-K and Form 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 XV
Limited Partnership
By: AEI Fund Management 86-A, Inc.
Its Managing General Partner
March 9, 1998 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 9, 1998
Robert P. Johnson and Sole Director of Managing General
Partner
/s/ Mark E. Larson Executive Vice President, Treasurer March 9, 1998
Mark E. Larson and Chief Financial Officer
(Principal Accounting Officer)
ASSIGNMENT
OF
SALE AND LEASEBACK FINANCING COMMITMENT
THIS ASSIGNMENT made and entered into this 17th day of
November, 1997, by and between AEI FUND MANAGEMENT, INC., a
Minnesota corporation, ("Assignor") and AEI REAL ESTATE FUND
XV LIMITED PARTNERSHIP, a Minnesota limited partnership
("Assignee");
WITNESSETH, that:
WHEREAS, on the 23rd day of September, 1997, Assignor
entered into a Sale and Leaseback Financing Commitment ("the
Commitment") for that certain property located at 3590
Second Street South, St. Cloud, MN (the "Property") with
Timber Lodge Steakhouse, Inc., as Seller/Lessee; and
WHEREAS, Assignor desires to assign an undivided thirty
and seven hundred ninety-four thousandths percent (30.794%)
of its rights, title and interest in, to and under the
Commitment to Assignee as hereinafter provided;
NOW, THEREFORE, for One Dollar ($1.00) and other good
and valuable consideration, receipt of which is hereby
acknowledged, it is hereby agreed between the parties as
follows:
1. Assignor assigns all of its rights, title and
interest in, to and under the Commitment to Assignee,
to have and to hold the same unto the Assignee, its
successors and assigns;
2. Assignee hereby assumes all rights, promises,
covenants, conditions and obligations under the
Commitment to be performed by the Assignor thereunder,
and agrees to be bound for all of the obligations of
Assignor under the Commitment.
All other terms and conditions of the Commitment shall
remain unchanged and continue in full force and effect.
AEI FUND MANAGEMENT, INC.
("Assignor")
By: /s/ Robert P Johnson
Robert P. Johnson, its President
AEI REAL ESTATE FUND XV
LIMITED PARTNERSHIP (OAssigneeO)
BY: AEI FUND MANAGEMENT 86-A, INC..
By: /s/ Robert P Johnson
Robert P. Johnson, its President
NET LEASE AGREEMENT
THIS LEASE, made and entered into effective as of the
18 day of November, 1997, by and between AEI REAL ESTATE
FUND XV LIMITED PARTNERSHIP ("Fund XV"), a Delaware limited
partnership, whose corporate general partner is AEI Fund
Management 86-A,Inc., AEI REAL ESTATE FUND XVII LIMITED
PARTNERSHIP ("Fund XVII"), a Minnesota limited partnership,
whose corporate general partner is AEI Fund Management XVII,
Inc., and AEI INSTITUTIONAL NET LEASE FUND '93 LIMITED
PARTNERSHIP ("Fund '93"), a Minnesota limited partnership,
whose corporate general partner is AEI Fund Management
XVIII, Inc., all of whose principal business address is
1300 Minnesota World Trade Center, 30 East Seventh Street,
St. Paul, Minnesota 55101 ("Lessor"), and TIMBER LODGE
STEAKHOUSE, INC., a Minnesota corporation ("Lessee"), whose
principal business address is 4021 Vernon Avenue, St. Louis
Park, Minnesota 55416;
WITNESSETH:
WHEREAS, Lessor is the fee owner of a certain parcel of
real property and improvements located in St. Cloud,
Minnesota, 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 ("Term") shall be Twenty
(20) consecutive "Lease Years", as hereinafter defined,
commencing on November , 1997 ("Occupancy Date").
(B) The first "Lease Year" of the Term shall be for a
period of twelve (12) consecutive calendar months from the
Occupancy Date. If the Occupancy Date shall be other than
the first day of a calendar month, the first "Lease Year"
shall be the period from the Occupancy Date to the end of
the calendar month of the Occupancy Date, plus the following
twelve (12) calendar months. Each Lease Year after the
first Lease Year shall be a successive period of twelve
(12) calendar months.
(C) The parties agree that once the Occupancy Date has
been established, upon the request of either party, a short
form or memorandum of this Lease will be executed for
recording purposes. That short form or memorandum of this
Lease will set forth the actual occupancy and termination
dates of the Term and optional Renewal Terms, as defined in
Article 28 hereof, and that said right of renewal shall
terminate when the Lessee shall lose right to possession or
this Lease is terminated, whichever occurs first.
ARTICLE 3. CONSTRUCTION OF IMPROVEMENTS
(A) Lessee warrants and agrees that the Building has
been constructed on the Leased Premises, and all other
improvements to the land, including the parking lot,
approaches, and service areas, have been constructed in all
material respects by Lessee 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 do comply with the laws,
ordinances, rules, and regulations of all state and local
governments.
(C) Lessee agrees to pay, if not already paid in full,
for all architectural fees and actual construction costs
relating to the Building and other related improvements on
the Leased Premises, in the past, present or future, which
shall include, but not be limited to, plans and
specifications, general construction, carpentry, electrical,
plumbing, heating, ventilating, air conditioning,
decorating, equipment installation, outside lighting,
curbing, landscaping, blacktopping, electrical sign hookup,
conduit and wiring from building, fencing, and parking
curbs, builder's risk insurance (naming Lessor, Lessee, and
contractor as co-insured), and all construction bonds for
improvements made by or at the direction of Lessee. All
future improvements shall not commence until the Leased
Premises has been posted in accordance with Minnesota
Statutes to prohibit the attachment to Lessor's interest in
the Leased Premises of any lien for work performed at the
request 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 premises are in the
condition described under this Lease.
ARTICLE 4. RENT PAYMENTS
(A) Annual Rent Payable for the first and second Lease
Years: Lessee shall pay to Lessor an annual Base Rent of
$167,361.96, which amount shall be payable in advance on the
first day of each month in equal monthly installments of
$4,294.79 to Fund XV, $4,294.79 to Fund XVII, and $5,357.25
to Fund '93. If the first day of the Lease Term is not the
first day of a calendar month, then the monthly Rent payable
for that partial month shall be a prorated portion of the
equal monthly installment of Base Rent.
(B) Annual Rent Payable beginning in the third and
each Lease Year thereafter:
1. In the third and every Lease Year thereafter,
the annual Base Rent due and payable shall increase by an
amount equal to One and Nine Hundred Twenty Five Thousandths
Percent (1.925%) of the Base Rent payable for the
immediately prior Lease Year.
(C) Overdue Payments.
Lessee shall pay interest on all overdue payments of
Rent or other monetary amounts due hereunder at the rate of
fifteen percent (15%) per annum or the highest rate allowed
by law, whichever is less, accruing from the date such Rent
or other monetary amounts were properly due
and payable.
ARTICLE 5. INSURANCE AND INDEMNITY
(A) Lessee shall, throughout the Term or Renewal
Terms, if any, of this Lease, at its own cost and expense,
procure and maintain insurance which covers the Leased
Premises and improvements against fire, wind, and storm
damage (including flood insurance if the Leased Premises is
in a federally designated flood prone area) and such other
risks (including earthquake insurance, if the Leased
Premises is located in a federally designated earthquake
zone or in an ISO high risk earthquake zone) as may be
included in the broadest form of all risk, extended coverage
insurance as may, from time to time, be available in amounts
sufficient to prevent Lessor or Lessee from becoming a co-
insurer within the terms of the applicable policies. In any
event, the insurance shall not be less than one hundred
percent (100%) of the then insurable value, with such
commercially reasonable deductibles as Lessor may reasonably
require from time to time. Additionally, replacement cost
endorsements, vandalism endorsement, malicious mischief
endorsement, waiver of subrogation endorsement, waiver of co-
insurance or agreed amount endorsement (if available), and
Building Ordinance Compliance endorsement and Rent loss
endorsements (for a period of twelve months) must be
obtained.
(B) Lessee agrees to place and maintain throughout the
Term or Renewal Terms, if any, of this Lease, at Lessee's
own expense, public liability insurance with respect to
Lessee's use and occupancy of said premises, with initial
limits of at least $3,000,000 per occurrence/$4,000,000
general aggregate (inclusive of umbrella coverage), and
including "Dram Shop" or liquor liability insurance, if the
same shall be or become available in the State of Minnesota,
with coverage written in the statutory amount if Minnesota
shall pass a maximum recovery statute, or otherwise, with
limits of $2,000,000 per occurrence and $5,000,000
aggregate; or, as to all of the foregoing policy limits,
such additional amounts as Lessor shall reasonably require
from time to time.
(C) Lessee agrees to notify Lessor in writing if
Lessee is unable to procure all or some part of the
aforesaid insurance. In the event Lessee fails to provide
all insurance required under this Lease, Lessor shall have
the right, but not the obligation, to procure such insurance
on Lessee's behalf, following five (5) business days written
notice to Lessee of Lessor's intent to do so (unless
insurance then in place would during such period, or already
has, lapsed, in which case no notice need be given) and
Lessee may obtain such insurance during said five day period
and not then be in default hereunder. If Lessor shall
obtain such insurance, Lessee will then, within five (5)
business days from receiving written notice, pay Lessor the
amount of the premiums due
or paid, together with interest thereon at the lesser of 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.
(D) All policies of insurance provided for or
contemplated by this Article can be under Lessee's blanket
insurance coverage and shall name Lessor, and their
respective corporate general partners, and Robert P.
Johnson, individual general partner of Lessor, and Lessee as
additional insured and loss payee, as their respective
interests (as landlord and lessee, respectively) may
appear, and shall provide that the policies cannot be
canceled, terminated, changed, or modified without thirty
(30) days written notice to the parties. In addition,
all of such policies shall be in place on or before the
Occupancy Date and contain endorsements by the respective
insurance companies waiving all rights of subrogation, if
any, against Lessor. All insurance companies providing
coverages must be rated "A" or better by Best's Key Rating
Guide (the most current edition), or similar quality under
a successor guide if Best's Key Rating shall cease to be
published. Lessee shall maintain legible copies of any
and all policies and endorsements required herein, to be
made available for Lessor's review and photocopy upon
Lessor's reasonable request from time to time. On the
Occupancy Date and no less than fifteen (15) business
days prior to expiration of such policies, Lessee shall
provide Lessor with legible copies of any and all renewal
Certificates of Insurance reflecting the above terms of
the Policies (including endorsements). Lessee agrees
that it will not settle any property insurance claims
affecting the Leased Premises in excess of $25,000
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 Premises.
(E) Lessee shall defend, indemnify, and hold Lessor
harmless against any and all claims, damages, and lawsuits
arising after the Occupancy Date of this Lease and any
orders, decrees or judgments which may be entered therein,
brought for damages or alleged damages resulting from any
injury to person or property or from loss of life sustained
in or about the Leased Premises, unless such damage or
injury results from the intentional misconduct or the gross
negligence of Lessor and Lessee agrees to save Lessor
harmless from, and indemnify Lessor against, any and all
injury, loss, or damage, of whatever nature, to any person
or property caused by, or resulting from any act, omission,
or negligence of Lessee or any employee or agent of Lessee.
In addition, Lessee hereby releases Lessor from any and all
liability for any loss or damage caused by fire or any of
the extended coverage casualties, unless such fire or other
casualty shall be brought about by the intentional
misconduct or negligence of Lessor. In the event of any
loss, damage, or injury caused by the joint negligence or
willful misconduct of Lessor and Lessee, they shall be
liable therefor in accordance with their respective degrees
of fault.
(F) Lessor hereby waives any and all rights that it
may have to recover from Lessee damages for any loss
occurring to the Leased Premises by reason of any act or
omission of Lessee; provided, however, that this waiver is
limited to those losses for which Lessor is compensated by
its insurers, if the insurance required by this Lease is
maintained. Lessee hereby waives any and all right that it
may have to recover from Lessor damages for any loss
occurring to the Leased Premises by reason of any act or
omission of Lessor; provided, however, that this waiver is
limited to those losses for which Lessee is, or should be if
the insurance required herein is maintained, compensated by
its insurers.
ARTICLE 6. TAXES, ASSESSMENTS AND UTILITIES
(A) Lessee shall be liable and agrees to pay 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
for the period prior to the expiration of the term hereof,
or any Renewal Term, if exercised.
(B) Lessee shall pay all real estate taxes,
assessments for public improvements or benefits, and other
governmental impositions, duties, and charges of every kind
and nature whatsoever which shall or may, during the term of
this Lease, be charged, laid, levied, assessed, or imposed
upon, or become a lien or liens upon the Leased Premises or
any part thereof. Such payments shall be considered as Rent
paid by Lessee in addition to the Rent described 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.
(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.
Lessee shall pay within 60 days of the expiration of the
term hereof Lessor's reasonable estimate of Lessee's pro-
rata share of real estate taxes for the last tax year of the
term hereof, based upon the last available tax bill. Lessor
shall give Lessee notice of such estimated pro-rata real
estate taxes no later than 75 days from the end of the term
hereof. Upon receipt of the actual statement of real estate
taxes for such prorated period, Lessor shall either refund
to Lessee any over payment of the pro-rata Lessee
obligation, or shall assess and Lessee shall pay promptly
upon notice any remaining portion of the Lessee's pro-rata
obligation for such real estate taxes.
(D) Lessee shall have the right to contest or review
by legal proceedings or in such other manner as may be legal
(which, if instituted, shall be conducted solely at Lessee's
own expense) any tax, assessment for public improvements or
benefits, or other governmental imposition aforementioned,
upon condition that, before instituting such proceeding
Lessee shall pay (under protest) such tax or assessments for
public improvements or benefits, or other governmental
imposition, duties and charges aforementioned, unless such
payment would act as a bar to such contest or interfere
materially with the prosecution thereof and in such event
Lessee shall post with Lessor alternative security
reasonably satisfactory to Lessor. All such proceedings
shall be begun as soon as reasonably possible after the
imposition or assessment of any contested items and shall
be prosecuted to final adjudication with reasonable
dispatch. In the event of any reduction, cancellation, or
discharge, Lessee shall pay the amount that shall be finally
levied or assessed against the Leased Premises or
adjudicated to be due and payable, and, if there shall be
any refund payable by the governmental authority with
respect thereto, if Lessee has paid the expense of Lessor in
such proceedings, Lessee shall be entitled to receive and
retain the refund, subject, however, to apportionment as
provided during the first and last years of the term of this
Lease.
(E) Lessor, within sixty (60) days after notice to
Lessee if Lessee fails to commence such proceedings, may,
but shall not be obligated to, contest or review by legal
proceedings, or in such other manner as may be legal, and at
Lessor's own expense, any tax, assessments for public
improvements and benefits, or other governmental imposition
aforementioned, which shall not be contested or reviewed, as
aforesaid, by Lessee, and unless Lessee shall promptly join
with Lessor in such contest or review, Lessor shall be
entitled to receive and retain any refund payable by the
governmental authority with respect thereto.
(F) Lessor shall not be required to join in any
proceeding referred to in this Article, unless in Lessee's
reasonable opinion, the provisions of any law, rule, or
regulation at the time in effect shall require that such a
proceeding be brought by and/or in the name of Lessor, in
which event Lessor shall upon written request, join in such
proceedings or permit the same to be brought in its name,
all at no cost or expense to Lessor.
(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, franchise tax, excise tax, on Rents imposed
by the State where the Leased Premises are located. At
Lessor's option, Lessee shall deposit with Lessor on the
first day of each and every month during the term hereof, an
amount equal to one-twelfth (1/12) of any estimated sales
tax payable to the State in which the property is situated
for Rent received by Lessor hereunder ("Deposit"). From
time to time out of such Deposit Lessor will pay the sales
tax to the State in which the property is situated as
required by law. In the event the Deposit on hand shall not
be sufficient to pay said tax when the same shall become due
from time to time, or the prior payments shall be less than
the current estimated monthly amounts, then Lessee shall pay
to Lessor on demand any amount necessary to make up the
deficiency. The excess of any such Deposit shall be
credited to subsequent payments to be made for such items.
If a default or an event of default shall occur under the
terms of this Lease, Lessor may, at its option, without
being required so to do, apply any Deposit on hand to cure
such default, in such order and manner as Lessor may elect.
ARTICLE 7. PROHIBITION ON ASSIGNMENTS AND SUBLETTING;
TAKE-BACK RIGHTS
(A) Except as otherwise expressly provided in this
Article, Lessee shall not, without obtaining the prior
written consent of Lessor, in each instance:
1. assign or otherwise transfer this Lease, or
any part of Lessee's right, title or interest therein;
2. sublet all or any part of the Leased Premises
or allow all or any part of the Leased Premises to be used
or occupied by any other Persons (herein defined as a Party
other than Lessee, be it a corporation, a partnership, an
individual or other entity); or
3. mortgage, pledge or otherwise encumber this
Lease, or the Leased Premises.
(B) For the purposes of this Article:
1. the transfer of voting control of any class
of capital stock of any corporate Lessee or sublessee, or
the transfer voting control of the total interest in any
other person which is a Lessee or sublessee, however
accomplished, whether in a single transaction or in a series
of related or unrelated transactions, shall be deemed an
assignment of this Lease, or of such sublease, as the case
may be;
2. an agreement by any other Person, directly or
indirectly, to assume Lessee's obligations under this Lease
shall be deemed an assignment;
3. any Person to whom Lessee's interest under
this Lease passes by operation of law, or otherwise, shall
be bound by the provisions of this Article;
4. each material modification, amendment or
extension or any sublease to which Lessor has previously
consented shall be deemed a new sublease; and
5. Lessee shall present the signed consent to
such assignment and/or subletting from any guarantors of
this Lease, such consent to be in form and substance
reasonably satisfactory to Lessor.
Lessee agrees to furnish to Lessor within five (5)
business days following demand at any time such information
and assurances as Lessor may reasonably request that neither
Lessee, nor any previously permitted sublessee or assignee,
has violated the provisions of this Article.
(C) If Lessee agrees to assign this Lease or to sublet
all or any portion of the Leased Premises, Lessee shall,
prior to the effective date thereof (the "Effective Date"),
deliver to Lessor executed counterparts of any such
agreement and of all ancillary agreements with the proposed
assignee or sublessee, as applicable. If Lessee shall fail
to do so, and shall have surrendered possession of the
Leased Premises in violation of its duty of prior notice and
failed to obtain Lessor's prior consent (if and where
required herein), and, if in such event, Lessor in its sole
discretion (except as otherwise specifically limited herein)
shall not consent to a proposed sublease or assignment,
Lessor shall then have all of the following rights, any of
which Lessor may exercise by written notice to Lessee given
within thirty (30) days after Lessor receives the
aforementioned documents:
1. with respect to a proposed assignment of this
Lease, the right to terminate this Lease on the Effective
Date as if it were the Expiration Date of this Lease;
2. with respect to a proposed subletting of the
entire Leased Premises, the right to terminate this Lease on
the Effective Date as if it were the Expiration Date; or
3. with respect to a proposed subletting of less
than the entire Leased Premises, the right to terminate this
Lease as to the portion of the Leased Premises affected by
such subletting on the Effective Date, as if it were the
Expiration Date, in which case Lessee shall promptly execute
and deliver to Lessor an appropriate modification of this
Lease in form satisfactory to Lessor in all respects.
4. with respect to a proposed subletting or
proposed assignment of this Lease, impose such conditions
upon Lessor's consent as Lessor shall determine in its sole
discretion.
(D) If Lessor exercises any of its options under
Article 7(C) above, (and if Lessor shall impose conditions
upon its consent and Lessee shall fail to meet any
conditions Lessor may impose upon its consent), Lessor may
then lease the Leased Premises or any portion thereof to
Lessee's proposed assignee or sublessee, as the case may be,
without liability whatsoever to Lessee.
(E) Notwithstanding anything above to the contrary,
Lessor agrees that its consent to any proposed assignment or
sublet shall not be unreasonably withheld or delayed,
provided Lessor is given prior written notice of such
sublease or assignment, accompanied by a copy of such
sublease or assignment, and the consents of Lessee (such
consent to be in form and substance satisfactory to Lessor)
to such assignment or sublet, affirming its continued
liability hereunder.
ARTICLE 8. REPAIRS AND MAINTENANCE
(A) Lessee covenants and agrees to keep and maintain
in good order, condition and repair the interior and
exterior of the Leased Premises during the term of the
Lease, or any renewal terms, and further agrees that Lessor
shall be under no obligation to make any repairs or
perform any maintenance to the Leased Premises. Lessee
covenants and agrees that it shall be responsible for all
repairs, alterations, replacements, or maintenance of,
including but without limitation to or of: The interior and
exterior portions of all doors; door checks and operators;
windows; plate glass; plumbing; water and sewage facilities;
fixtures; electrical equipment; interior walls; ceilings;
signs; roof; structure; interior building appliances and
similar equipment; heating and air conditioning equipment;
and any equipment owned by Lessor and leased to Lessee
hereunder, as itemized, if any, on Exhibit B attached hereto
and incorporated herein by reference; and further agrees to
replace any of said equipment when necessary. Lessee
further agrees to be responsible for, at its own expense,
snow removal, lawn maintenance, landscaping, maintenance of
the parking lot (including parking lines, seal coating, and
blacktop surfacing), and other similar items.
(B) If Lessee refuses or neglects to commence or
complete repairs promptly and adequately, after prior
written notice as required under Article 16(B) (except in
cases of emergency to prevent waste or preserve the safety
and integrity of the Leased Premises, in which case no
notice need be given), Lessor may cause such repairs to be
made, but shall not be required to do so, and Lessee shall
pay the cost thereof to Lessor within five (5) business days
following demand. It is understood that Lessee shall pay
all expenses and maintenance and repair during the term of
this Lease. If Lessee is not then in default hereunder,
Lessee shall have the right to make repairs and improvements
to the Leased Premises without the consent of Lessor if such
repairs and improvements do not exceed 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. In the
event of making such alterations as herein provided, Lessee
further agrees to indemnify and save harmless Lessor from
all expense, liens, claims or damages to either persons or
property or the Leased Premises which may arise out of or
result from the undertaking or making of said repairs,
improvements, alterations or additions, or Lessee's failure
to make said repairs, improvements, alterations or
additions.
ARTICLE 9. COMPLIANCE WITH LAWS AND REGULATIONS
Lessee will comply with all statutes, ordinances,
rules, orders, regulations and requirements of all federal,
state, city and local governments, and with all rules,
orders and regulations of the applicable Board of Fire
Underwriters which affect the use of the improvements.
Lessee will comply with all easements, restrictions, and
covenants of record against or affecting the Leased Premises
and any franchise or license agreements required for
operation of the Leased Premises in accordance with
Article 14 hereof.
ARTICLE 10. SIGNS
Lessee shall have the right to install and maintain a
sign or signs advertising Lessee's business, provided that
the signs conform to law, and further provided that the sign
or signs conform specifically to the written requirements of
the appropriate governmental authorities.
ARTICLE 11. SUBORDINATION
(A) Lessor reserves the right and privilege to subject
and subordinate this Lease at all times to the lien of any
mortgage or mortgages now or hereafter placed upon Lessor's
interest in the Leased Premises and on the land and
buildings of which said premises are a part, or upon any
buildings hereafter placed upon the land of which the Leased
Premises are a part, provided such mortgagee shall execute
its standard form, commercially reasonable subordination,
attornment and non-disturbance agreement. Lessor also
reserves the right and privilege to subject and subordinate
this Lease at all times to any and all advances to be made
under such mortgages, and all renewals, modifications,
extensions, consolidations, and replacements thereof,
provided such mortgagee shall execute its standard form,
commercially reasonable subordination, attornment and non-
disturbance agreement.
(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 12. CONDEMNATION OR EMINENT DOMAIN
(A) If the whole of the Leased Premises are taken by
any public authority under the power of eminent domain, or
by private purchase in lieu thereof, then this Lease shall
automatically terminate upon the date possession is
surrendered, and Rent shall be paid up to that day. If any
part of the Leased Premises shall be so taken as to render
the remainder thereof materially unusable in the opinion of
a licensed third party arbitrator reasonably approved by
Lessor and Lessee, for the purposes for which the Leased
Premises were leased, then Lessor and Lessee shall each have
the right to terminate this Lease on thirty (30) days notice
to the other given within ninety (90) days after the date of
such taking. In the event that this Lease shall terminate
or be terminated, the Rent shall, if and as necessary, be
paid up to the day that possession was surrendered.
(B) If any part of the Leased Premises shall be so
taken such that it does not materially interfere with the
business of Lessee, then Lessee shall, with the use of the
condemnation proceeds to be made available by Lessor, but
otherwise at Lessee's own cost and expense, restore the
remaining portion of the Leased Premises to the extent
necessary to render it reasonably suitable for the purposes
for which it was leased. Lessee shall make all repairs to
the building in which the Leased Premises is located to the
extent necessary to constitute the building a complete
architectural unit. Provided, however, that such work shall
not exceed the scope of the work required to be done by
Lessee in originally constructing such building unless
Lessee shall demonstrate to Lessor's reasonable satisfaction
the availability of funds to complete such work. Provided,
further, the cost thereof to Lessor shall not exceed the
proceeds of its condemnation award, all to be done without
any adjustments in Rent to be paid by Lessee. This lease
shall be deemed amended to reflect the taking in the legal
description of the Leased Premises.
(C) All compensation awarded or paid upon such total
or partial taking of the Leased Premises shall belong to and
be the property of Lessor without any participation by
Lessee, whether such damages shall be awarded as
compensation for diminution in value to the leasehold or to
the fee of the premises herein leased. Nothing contained
herein shall be construed to preclude Lessee from
prosecuting any claim directly against the condemning
authority in such proceedings for: Loss of business; damage
to or loss of value or cost of removal of inventory, trade
fixtures, furniture, and other personal property belonging
to Lessee; provided, however, that no such claim shall
diminish or otherwise adversely affect Lessor's award or the
award of any fee mortgagee.
ARTICLE 13. RIGHT TO INSPECT
Lessor reserves the right to enter upon, inspect and
examine the Leased Premises at any time during business
hours, after reasonable notice to Lessee, and Lessee agrees
to allow Lessor free access to the Leased Premises to show
the premises. Upon default by Lessee or at any time within
ninety (90) days of the expiration or termination of the
Lease, Lessee agrees to allow Lessor to then place "For
Sale" or "For Rent" signs on the Leased Premises. Lessor
and Lessor's representatives shall at all times while upon
or about the Leased Premises observe and comply with
Lessee's reasonable health and safety rules, regulations,
policies and procedures. Lessor agrees to indemnify and
hold Lessee, its successors, assigns, agents and employees
from and against any liability, claims, demands, cause of
action, suits and other litigation or judgements of every
kind and character, including injury to or death of any
person or persons, or trespass to, or damage to, or loss or
destruction of, any property, whether real or personal, to
the extent resulting from the negligence or willful
misconduct or Lessor or Lessor's representatives while upon
or about the Leased Premises.
ARTICLE 14. EXCLUSIVE USE
(A) After the Occupancy Date, Lessee expressly agrees
and warrants that the Leased Premises will be used
exclusively as a restaurant, in compliance with any
applicable restrictive covenants or conditions of record
against the Leased Premises as of the date hereof or
consented to by Lessee. In any other such case, after
obtaining Lessor's prior written consent, such consent not
to be unreasonably withheld or delayed, Lessee may conduct
any lawful business from the Leased Premises. Lessee
acknowledges and agrees that any other use without the prior
written consent of Lessor will constitute a default under
and a violation and breach of this Lease. Lessee agrees:
To open for business on the first day in respect of which
Rent is payable; to operate all of the Leased Premises
during the Term or Renewal Terms during regular and
customary hours for businesses similar to the permitted
exclusive use stated herein, unless prevented from doing so
by causes beyond Lessee's control or due to remodeling; and
to conduct its business in a professional and reputable
manner.
(B) If the Leased Premises are not operated as a
restaurant or other permitted use hereunder, or remain
closed for thirty (30) consecutive days (unless such closure
results from reasons beyond Lessee's reasonable control) and
in the event Lessee fails to pay Rent when due or fulfill
any other obligation hereunder, then Lessee shall be in
default hereunder and Lessor may, at its option, cancel this
Lease by giving written notice to Lessee or exercise any
other right or remedy that Lessor may have; provided,
however, that closings shall be reasonably permitted for
replacement of trade fixtures or during periods of repair
after destruction or due to remodeling.
ARTICLE 15. DESTRUCTION OF PREMISES
If, during the term of this Lease, the Leased Premises
are totally or partially destroyed by fire or other
elements, within a reasonable time (but in no event longer
than one hundred eighty (180) days and subject to the
provisions herein below), Lessee shall repair and restore
the improvements so damaged or destroyed as nearly as may be
practical to their condition immediately prior to such
casualty. All rents payable by Lessee shall be abated
during the period of repair and restoration to the extent
that Lessor shall be compensated by the proceeds of the rent
loss insurance required to be maintained by Lessee
hereunder.
Provided Lessee is not in default hereunder (and
retains according to the terms hereof the right to rebuild)
with the Lessor's prior written consent, which consent shall
not be unreasonably withheld or delayed, Lessee shall have
the right to promptly and in good faith settle and adjust
any claim under such insurance policies with the insurance
company or companies on the amounts to be paid upon the
loss. The insurance proceeds shall be used to reimburse
Lessee for the cost of
rebuilding or restoration of the Leased Premises. Risk that
the insurance company shall be insolvent or shall refuse to
make insurance proceeds available shall be with Lessee. The
Leased Premises shall be so restored or rebuilt so as to be
of at least equal value and substantially the same character
as prior to such damage or destruction. If the insurance
proceeds are less than 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.
Any insurance proceeds remaining with Escrowee after
the completion of the repair or restoration shall be paid to
Lessor.
If the proceeds from the insurance are insufficient,
after review of the bids for completion of such
improvements, or should become insufficient during the
course of construction, to pay for the total cost of repair
or restoration, Lessee shall, prior to commencement of work,
demonstrate to Escrowee and Lessor's reasonable
satisfaction, the availability of such funds necessary to
completion construction and Lessee shall deposit the same
with Escrowee for disbursement under
the construction escrow agreement.
Provided, further, that should the Leased Premises be
damaged or destroyed to the extent of fifty (50%) percent of
its value or such that Lessee cannot carry on business as a
restaurant or its permitted use immediately prior to such
damage or destruction, without (in the opinion of a licensed
third party arbitrator reasonably approved by Lessor and
Lessee) being closed for more than sixty (60) days (which
duration of closure may be established by Lessee by the
affidavit of the approved independent third party arbitrator
as to the estimated time of repair) during the last two (2)
years of the remaining term of this Lease or any of the
option terms of this Lease, if any further options to renew
remain, Lessee may elect within 30 days of such damage, to
then exercise at least one (1) option to renew this Lease so
that the remaining term of the Lease is not less than five
(5) years in order to be entitled to such insurance proceeds
for restoration or rebuilding. Absent such election, this
Lease shall terminate upon Lessor's receipt of the insurance
or other proceeds at least equal to the estimated cost of
such repair or restoration.
ARTICLE 16. ACTS OF DEFAULT
Each of the following shall be deemed a default by
Lessee and a breach of this Lease:
(A) Failure to pay the Rent or any monetary
obligation herein reserved, or any part thereof when the
same shall be due and payable. Interest and late charges
for failure to pay Rent when due shall accrue from the first
date such Rent was due and payable; provided, however,
Lessee shall have five (5) business days after written
notice from Lessor within which to cure the failure to pay
the Rent or any monetary obligation herein reserved.
(B) Failure to do, observe, keep and perform any
of the other terms, covenants, conditions, agreements and
provisions in this Lease to be done, observed, kept and
performed by Lessee; provided, however, that Lessee shall
have Thirty (30) days after written notice from Lessor
within which to cure such default, or such longer time as
may be reasonably necessary if such default cannot
reasonably be cured within Thirty (30) days, if Lessee is
diligently pursuing a course of conduct that in Lessor's
reasonable opinion is capable of curing such default, but in
any event such longer time shall not exceed 120 days after
written notice from Lessor of the default hereunder.
(C) The abandonment of the premises by Lessee,
the adjudication of Lessee as a bankrupt, the making by
Lessee of a general assignment for the benefit of creditors,
the taking by Lessee of the benefit of any insolvency act
or law, the appointment of a permanent receiver or trustee
in bankruptcy for Lessee property, or the appointment of a
temporary receiver which is not vacated or set aside within
sixty (60) days from the date of such appointment; provided,
however, that the foregoing shall not constitute events of
default so long as Lessee continues to otherwise satisfy its
obligations (including but not limited to the payment of
Rent) hereunder.
ARTICLE 17. TERMINATION FOR DEFAULT
In the event of any uncured default by Lessee and at
any time thereafter, Lessor may serve a written notice upon
Lessee that Lessor elects to terminate this Lease. This
Lease shall then terminate on the date so specified as if
that date had been originally fixed as the expiration date
of the term herein granted, provided, however, subject to
Article 19D, that Lessee shall have continuing liability for
future rents for the remainder of the original term and any
exercised
renewal term as set forth in Article 19, notwithstanding any
earlier termination of the Lease hereunder (except where
Lessee has exercised a right to terminate where granted
herein), preserving unto Lessor the benefit of its bargained-
for rental payments.
ARTICLE 18. LESSOR'S RIGHT OF RE-ENTRY
In the event that this Lease shall be terminated as
hereinbefore provided, or by summary proceedings or
otherwise, or in the event of an uncured default hereunder
by Lessee, or in the event that the premises or any part
thereof, shall be abandoned by Lessee and Rent shall not be
paid or other obligations (including but not limited to
repair and maintenance obligations) of Lessee hereunder
shall not be met, then Lessor or its agents, servants or
representatives, may immediately or at any time thereafter,
re-enter and resume possession of the premises or any part
thereof, and remove all persons and property therefrom,
either by summary dispossess proceedings or by a suitable
action or proceeding at law, or by force or otherwise
without being liable for any damages therefor, except for
damages resulting from Lessor's negligence or willful
misconduct. Notwithstanding anything above to the contrary,
if Lessee is still in possession of the Leased Premises,
Lessor agrees to use such legal proceedings (summary or
otherwise) prescribed by law to regain possession of the
Leased Premises.
ARTICLE 19. LESSEE'S CONTINUING LIABILITY
(A) Should Lessor elect to re-enter as provided in
this Lease or should it take possession pursuant to legal
proceedings or pursuant to any notice provided for by law,
Lessor shall undertake commercially reasonable efforts to
mitigate Lessee's continuing liability hereunder as such
efforts may be prescribed by law or statute (which shall
include listing the Leased Premises with a licensed
commercial real estate broker and securing the property
against waste, but shall not otherwise include the
expenditure of Lessor's funds, unless the same be required
by law or statute), and in addition, Lessor may either (i)
terminate this Lease or (ii) it may from time to time,
without terminating the contractual obligation of Lessee to
pay Rent under this Lease, make such alterations and repairs
as may be necessary to relet the Leased Premises or any part
thereof for the remainder of the original Term or any
exercised Renewal Terms, at such Rent or Rents, and upon
such other terms and conditions as Lessor in its sole
discretion may deem advisable. Termination of Lessee's
right to possession by Court Order shall be sufficient
evidence of the termination of Lessee's possessory rights
under this Lease, and the filing of such an Order shall be
notice of the termination of Lessee's Right of First Refusal
as set forth in any Memorandum of Lease of record.
(B) Upon each such reletting, without termination of
the contractual obligation of Lessee to pay Rent under this
Lease, all Rents received by Lessor shall be applied as
follows:
1. First, to the payment of any indebtedness
other than Rent due hereunder from Lessee to Lessor;
2. Second, to the payment of any costs and
expenses of such reletting, including brokerage fees and
attorney's fees and of costs of such alterations and
repairs;
3. Third, to the payment of Rent and other
monetary obligations due and unpaid hereunder;
4. Finally, the residue, if any, shall be held
by Lessor and applied in payment of future Rent as the same
may become due and payable hereunder.
If such Rents received from such reletting during any month
are less than that to be paid during that month by Lessee
hereunder, Lessee shall pay any such deficiency to Lessor.
Such deficiency shall be calculated and paid monthly. No
such re-entry or taking possession of such Leased Premises
by Lessor shall be construed as an election on its part to
terminate Lessee's contractual obligations under this Lease
respecting the payment of rent and obligations for the costs
of repair and maintenance unless a written notice of such
intention be given to Lessee.
(C) Notwithstanding any such reletting without
termination, Lessor may at any time thereafter elect to
terminate this Lease for any uncured breach.
(D) In addition to any other remedies Lessor may have
with this Article 19, Lessor may recover from Lessee all
damages it may incur by reason of any uncured breach,
including: The cost of recovering and reletting the Leased
Premises; reasonable attorney's fees; and, the present value
(discounted at a rate of 7% per annum) of the excess of the
amount of Rent and charges equivalent to Rent reserved in
this Lease for the remainder of the Term over the then
reasonable Rent value of the Leased Premises (or the actual
Rents receivable by Lessor, if relet), (the Lessee bearing
the burden of proof to demonstrate the amount of rental loss
for the same period, that through reasonable efforts to
mitigate damages, could have been avoided) for the remainder
of the Term, all of which amounts shall be immediately due
and payable from Lessee to Lessor in full. In the event
that the Rent obtained from such alternative or substitute
tenant is more than the Rent which Lessee is obligated to
pay under this Lease, then such excess shall be paid to
Lessor provided that Lessor shall credit such excess against
the outstanding obligations of Lessee due pursuant hereto,
if any.
(E) It is the object and purpose of this Article 19
that Lessor shall be kept whole and shall suffer no damage
by way of non-payment of Rent or by way of diminution in
Rent. Lessee waives and will waive all rights to trial by
jury in any summary proceedings or in any action brought to
recover Rent herein which may hereafter be instituted by
Lessor against Lessee in respect to the Leased Premises.
Lessee hereby waives any rights of re-entry it may have or
any rights of redemption or rights to redeem this Lease upon
a termination of this Lease, including but not limited to
rights of redemption afforded by Minnesota Statute 504.02,
et. seq., as amended.
ARTICLE 20. PERSONALTY, FIXTURES AND EQUIPMENT
(A) All building fixtures, building machinery, and
building equipment used in connection with the operation of
the Leased Premises including, but not limited to, heating,
electrical wiring, lighting, ventilating, plumbing, air
conditioning systems, and the equipment owned by Lessor and
leased to Lessee hereunder, if any, as specifically set
forth on Exhibit B attached hereto and incorporated herein
by reference shall be the property of Lessor. All other
trade fixtures and all other articles of personal property
owned by Lessee shall remain the property of Lessee.
(B) Lessee shall furnish and pay for any and all
equipment, furniture, trade fixtures, and signs, except for
such items, if any, described in Article 20(A) above, as
owned by Lessor. Lessee agrees that Lessor shall have a
lien on all Lessee's equipment, furniture, trade fixtures,
furnishings, and signs as security for the performance of
and compliance with this Lease, subject to the rights of any
bona fide third party's security interest in such property.
Provided Lessee is not in default hereunder, Lessor will
agree that its interest in the personal property of Lessee
will be subordinated to financing which may exist or which
Lessee may cause to exist in the future on that same
personal property.
(C) At the end of the term of this Lease, the property
described at Article 20(B) above, after written notice to
Lessor given at least ten (10) business days prior to any
proposed removal, may be removed from the Leased Premises by
Lessee regardless of whether or not such property is
attached to the Leased Premises so as to constitute a
"fixture" within the meaning of the law; however, all
damages and repairs to the Leased Premises which may be
caused by the removal of such property shall be paid for by
Lessee.
ARTICLE 21. LIENS
Lessee shall not do or cause anything to be done
whereby the Leased Premises may be encumbered by any
mechanic's or other liens. Whenever and as often as any
mechanic's or other lien is filed against said Leased
Premises purporting to be for labor or materials furnished
or to be furnished to Lessee, Lessee shall remove the lien
of record by payment or by bonding with a surety company
authorized to do business in the state in which the property
is located, within forty-five (45) days from the date of the
filing of said mechanic's or other lien and delivery of
notice thereof to Lessee. Should Lessee fail to take the
foregoing steps within said forty-five (45) day period (or
in any event, prior to the expiration of the time within
which Lessee may bond over such lien to remove it as a lien
upon the Leased Premises), Lessor shall have the right,
among other things, to pay said lien without inquiring into
the validity thereof, and Lessee shall forthwith reimburse
Lessor for the total expense incurred by it in discharging
said lien as additional Rent hereunder.
ARTICLE 22. NO WAIVER BY LESSOR EXCEPT IN WRITING
No agreement to accept a surrender of the Leased
Premises or termination of this Lease shall be valid unless
in writing signed by Lessor. The delivery of keys to any
employee of Lessor or Lessor's agents shall not operate as a
termination of the Lease or a surrender of the premises.
The failure of Lessor to seek redress for violation of any
rule or regulation, shall not prevent a subsequent act,
which would have originally constituted a violation, from
having all the force and effect of an original violation.
Neither payment by Lessee or receipt by Lessor of a lesser
amount than the Rent herein stipulated shall be deemed to be
other than on account of the earliest stipulated Rent. Nor
shall any endorsement or statement on any check nor any
letter accompanying any check or payment as Rent be deemed
an accord and satisfaction. Lessor may accept such check or
payment without prejudice to Lessor's right to recover the
balance of such Rent or pursue any other remedy provided in
this Lease. This Lease contains the entire agreement
between the parties, and any executory agreement hereafter
made shall be ineffective to change it, modify it or
discharge it, in whole or in part, unless such executory
agreement is in writing and signed by the party against whom
enforcement of the change, modification or discharge is
sought.
ARTICLE 23. QUIET ENJOYMENT
Lessor covenants that Lessee, upon paying the Rent set
forth in Article 4 and all other sums herein reserved as
Rent and upon the due performance of all the terms,
covenants, conditions and agreements herein contained on
Lessee's part to be kept and performed, shall have, hold and
enjoy the Leased Premises free from molestation, eviction,
or disturbance by Lessor, or by any other person or persons
lawfully claiming the same, and that Lessor has good right
to make this Lease for the full term granted, including
renewal periods.
ARTICLE 24. BREACH - PAYMENT OF COSTS AND ATTORNEYS' FEES
Each party agrees to pay and discharge all reasonable
costs, and actual attorneys' fees, including but not limited
to attorney's fees incurred at the trial level and in any
appellate or bankruptcy proceeding, and expenses that shall
be incurred by the prevailing party in enforcing the
covenants, conditions and terms of this Lease or defending
against an alleged breach, including the costs of reletting.
Such costs, attorneys fees, and expenses if incurred by
Lessor shall be considered as Rent as due and owing in
addition to any Rent defined in Article 4 hereof.
ARTICLE 25. ESTOPPEL CERTIFICATES
Either party to this Lease will, at any time, upon not
less than ten (10) business days prior request by the other
party, execute, acknowledge and deliver to the requesting
party a statement in writing, executed by an executive
officer of such party, certifying that: (a) this Lease is
unmodified (or if modified then disclosure of such
modification shall be made); (b) this Lease is in full force
and effect; (c) the date to which the Rent and other charges
have been paid; and (d) to the knowledge of the signer of
such certificate that the other party is not in default in
the performance of any covenant, agreement or condition
contained in this Lease, or if a default does exist,
specifying each such default of which the signer may have
knowledge. It is intended that any such statement delivered
pursuant to this Article may be relied upon by any
prospective purchaser or mortgagee of the Leased Premises or
any assignee of such mortgagee or a purchaser of the
leasehold estate.
ARTICLE 26. FINANCIAL STATEMENTS
During the term of this Lease, Lessee will, within
ninety (90) days after the end of Lessee's fiscal year,
furnish Lessor with Lessee's financial statements, in SEC
Form 10-K, if available. The financial statements shall be
audited, at the Lessee's expense, by a nationally recognized
independent certified public accounting firm reasonably
acceptable to Lessor and shall be prepared in conformity
with generally accepted accounting principles (GAAP).
Lessee shall also provide Lessor with financial statements
for the Leased Premises within 90 days after the end of each
Lease Year. The financial statements for the Leased
Premises do not need to be prepared by an independent
certified public accountant, but shall be certified as true
and correct by the chief financial officer or other
authorized officer of Lessee. Additionally, during the term
of the Lease, Lessee will within forty-five (45) days from
the end of each quarter of each fiscal year, furnish Lessor
with Lessee's financial statements in SEC Form 10-Q if
available and financial statements of the Leased Premises
for such quarter. Lessor shall have the right to require
such financial statements for the Lessee and the Leased
Premises on a monthly basis after the occurrence of a
default in any Lease Year. Provided, however, if Lessee
shall not commit a default for twelve consecutive months,
Lessor's right to require such monthly financial statements
shall terminate until Lessee shall again commit a default in
any given Lease Year. Said quarterly (or monthly, if
required by Lessor) financial statements do not need to be
prepared by an independent certified public accountant, but
shall be certified as true and correct by the chief
financial officer or other authorized officer of Lessee.
The financial statements shall conform to GAAP, and include
a balance sheet and related statements of operations,
statement of cash flows, statement of changes in
shareholder's equity, and related notes to financial
statements, if any.
ARTICLE 27. MORTGAGE
Lessee does hereby agree to make reasonable
modifications of this Lease requested by any Mortgagee of
record from time to time, provided such modifications are
not substantial and do not increase any of the Rents or
obligations of Lessee under this Lease or substantially
modify any of the business elements of this Lease.
ARTICLE 28. OPTION TO RENEW
If this Lease is not previously canceled or terminated
and if Lessee has materially complied with and performed all
of the covenants and conditions in this Lease after
applicable cure periods and is not currently in default,
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 each Lease year of
the Renewal Term shall increase by an amount equal to One
and Nine Hundred Twenty Five Thousandths Percent (1.925%) of
the Base Rent payable for the immediately prior Lease Year.
The first Renewal Term will commence on the day
following the date the original Term expires and the
successive Renewal Term would commence on the day of
following the last day of the then expiring Renewal Term.
Except as otherwise provided in Article 15 hereof, Lessee
must give ninety (90) days written notice to Lessor of its
intent to exercise this option prior to the expiration of
the original Term of this Lease or any Renewal Term, as the
case may be.
ARTICLE 29. MISCELLANEOUS PROVISIONS
(A) All written notices shall be given to Lessor or
Lessee by certified mail or nationally recognized overnight
mail. Notices to either party shall be addressed to the
person and address given on the first page hereof. Lessor
and Lessee may, from time to time, change these addresses by
notifying each other of this change in writing. Notices of
overdue Rent may be sent to Lessee by regular, special
delivery, or nationally recognized overnight mail.
(B) The terms, conditions and covenants contained in
this Lease and any riders and plans attached hereto shall
bind and inure to the benefit of Lessor and Lessee and their
respective successors, heirs, legal representatives, and
assigns.
(C) This Lease shall be governed by and construed
under the laws of the State where the Leased Premises are
situate.
(D) In the event that any provision of this Lease
shall be held invalid or unenforceable, no other provisions
of this Lease shall be affected by such holding, and all of
the remaining provisions of this Lease shall continue in
full force and effect pursuant to the terms hereof.
(E) The Article captions are inserted only for
convenience and reference, and are not intended, in any way,
to define, limit, describe the scope, intent, and language
of this Lease or its provisions.
(F) In the event Lessee remains in possession of the
Leased Premises herein leased after the expiration of this
Lease and without the execution of a new lease and without
Lessor's written permission, Lessee shall be deemed to be
occupying said premises as a tenant from
month-to-month, subject to all the conditions, provisions,
and obligations of this Lease insofar as the same can be
applicable to a month-to-month tenancy except that the
monthly installment of Rent shall be One Hundred Fifty
percent (150%) the amount due on the last month prior to
such expiration.
(G) If any installment of Rent (whether lump sum,
monthly installments, or any other monetary amounts required
by this Lease to be paid by Lessee and deemed to constitute
"Rent" hereunder) shall not be paid when due, or non-
monetary default shall remain uncured after the expiration
of any applicable cure period, Lessor shall have the right
to charge Lessee a late charge of $250.00 per month for each
month that any amount of Rent installment remains unpaid.
Said late charge shall commence after such installment is
due or non-monetary default goes uncured after the
expiration of any applicable cure period and continue until
said installment, interest and all accrued late charges are
paid in full or such non-monetary default is cured.
(H) Any part of the Leased Premises may be conveyed by
Lessor for private or public non-exclusive easement purposes
at any time, provided such easement does not interfere with
the access to the Leased Premises, visibility, or operations
of 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 an easement shall belong solely to Lessor.
(I) For the purpose of this Lease, the term "Rent"
shall be defined as Rent under Article 4, and any other
monetary amounts required by this Lease to be paid by
Lessee.
(J) Lessee agrees to cooperate with Lessor to allow
Lessor to obtain and use at Lessor's expense promotional
photographs of the Leased Premises, to the extent permitted
by Lessee's franchisor or licensor, if applicable.
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")(except
in the ordinary course of business in the operation of the
Leased Premises as a restaurant or other permitted use and
then only in accordance with applicable federal, state or
local environmental laws, statutes, regulations,
requirements and ordinances; (ii) that to the best of
Lessee's knowledge, there have been no investigations or
reports involving Lessee, or the Leased Premises by any
governmental authority which in any way pertain to Hazardous
Materials; (iii) that to the best of Lessee's knowledge, the
operation of the Leased Premises has not violated and is not
currently violating any federal, state or local law,
regulation, ordinance or requirement governing Hazardous
Materials; (iv) that the Leased Premises is not listed in
the United States Environmental Protection Agency's National
Priorities List of Hazardous Waste Sites nor any other list,
schedule, log, inventory or record of Hazardous Materials or
hazardous waste sites, whether maintained by the United
States Government or any state or local agency; and (v) that
the Leased Premises will not contain any formaldehyde, urea
or asbestos, except as may have been disclosed in writing to
Lessor by Lessee at the time of execution and delivery of
this Lease. Lessee agrees to indemnify and reimburse
Lessor, its successors and assigns, for:
(a) any breach of these representations and
warranties, and
(b) any loss, damage, expense or cost arising out of
or incurred by Lessor which is the result of a breach of,
misstatement of or misrepresentation of the above covenants,
representations and warranties, and
(c) any and all liability of any kind whatsoever which
Lessor may, for any cause and at any time, sustain or incur
by reason of Hazardous Materials discovered on the Leased
Premises during the term hereof or placed or released on the
Leased Premises by Lessee;
together with all attorneys' fees, costs and disbursements
incurred in connection with the defense of any action
against Lessor arising out of the above. These covenants,
representations and warranties shall be deemed continuing
covenants, representations and warranties for the benefit of
Lessor, and any successors and assigns of Lessor and shall
survive expiration or sooner termination of this Lease. The
amount of all such indemnified loss, damage, expense or
cost, shall bear interest thereon at the lesser of 15% or
the highest rate of interest allowed by law and shall become
immediately due and payable in full on demand of Lessor, its
successors and assigns.
ARTICLE 32. ESCROWS
Upon a default by Lessee which is uncured after the
expiration of any applicable notice and cure period, or upon
the request of Lessor's Mortgagee, if any, Lessee shall
deposit with Lessor on the first day of each and every
month, an amount equal to one-twelfth (1/12th) of the
estimated annual real estate taxes, assessments and
insurance (if the insurance is to be purchased by Lessor)
("Charges") due on the Leased Premises, or such higher
amounts reasonably determined by Lessor as necessary to
accumulate such amounts to enable Lessor to pay all charges
due and owing at least thirty (30) days prior to the date
such amounts are due and payable. From time to time out of
such deposits Lessor will, upon the presentation to Lessor
by Lessee of the bills therefor, pay the Charges or at
Lessee's option, will upon presentation of receipted bills
therefor, reimburse Lessee for such payments made by Lessee.
In the event the deposits on hand shall not be sufficient to
pay all of the estimated Charges when the same shall become
due from time to time or the prior payments shall be less
than the currently estimated monthly amounts, then Lessee
shall pay to Lessor on demand any amount necessary to make
up the deficiency. The excess of any such deposits shall be
credited to subsequent payments to be made for such items.
If a default or an event of default shall occur under the
terms of this Lease, Lessor may, at its option, without
being required so to do, apply any Deposit on hand to cure
the default, in such order and manner as Lessor may elect.
ARTICLE 33. OPTION TO PURCHASE
Lessor, for itself, its successors and assigns, hereby
gives and grants to Lessee the exclusive and irrevocable
option (the "Option") to purchase the Leased Premises,
subject to the following terms and conditions:
(A) Duration of Option. The Option and all rights and
privileges of Lessee hereunder shall be in force for the
duration of the Eighth Lease Year only, and must be
exercised (though closing may occur after the end of such
Lease Year) prior to the last day of the Eighth Lease Year.
(B) Manner of Exercising Option. A written notice in
substantially the following form, addressed to Lessor and
signed by Lessee and given, in accordance with the
provisions of Article 29(A) hereof, within the period for
exercising the Option, submitted with a bank cashier's check
or money order payable to the order of Lessor in the amount
of $5,000.00 (the "Deposit") shall be an effective exercise
of the Option, to wit:
(date)
"We hereby exercise the Option to purchase the property
commonly known as Timber Lodge Steakhouse, St. Cloud,
Minnesota, pursuant to the option to purchase contained in
that certain Net Lease Agreement between us pertaining to
said premises."
(C) Terms of Sale if Option Exercised. Upon Lessee's
exercise of the Option in accordance with the provisions of
subparagraph (B) hereof, Lessor shall be obligated to sell
and convey by recordable Limited Warranty Deed, good and
marketable title to the Leased Premises subject only to the
matters affecting title of record at the time Lessor
acquired title to the Leased Premises and those matters
which Lessee has suffered, created, or permitted to accrue
during the term hereof, and Lessee shall be obligated to
purchase the Premises upon the following terms and
conditions:
(i) Price. The price "Purchase Price" at which Lessor
shall sell and Lessee shall purchase the Leased Premises
shall be Lessor's acquisition cost as reported in its Form
10K Financial Statement as filed with the Securities and
Exchange Commission, compounded by Five Percent (5%) per
lease year, prorated to the date of closing, plus all
transaction costs including but not limited to attorneys
fees of either party.
(ii) Closing. Closing shall be sixty (60) days after
the Option is exercised, unless the parties mutually agree
otherwise. The Purchase Price less credit for the Deposit
shall be tendered in cash or other certified funds by Lessee
at Closing.
(iii) Evidence of Title. Not less than twenty (20)
days prior to closing, Lessee shall obtain a commitment for
an ALTA owner's policy of title insurance dated within sixty
(60) days of the closing date, issued by a nationally
recognized title insurance company approved by Lessor (the
"Title Company") in the amount of the Purchase Price
determined pursuant to subparagraph (C)(i) above, naming
Lessee as the proposed insured, and covering the fee simple
title to the Leased Premises, and showing Lessor vested with
good title to the Leased Premises subject only to the
matters affecting title which were of record at the time
Lessor acquired title to the Leased Premises and those
matters which Lessee has suffered, created, or permitted to
accrue during the term hereof. Such title commitment shall
be conclusive evidence of good title.
(iv) Prorations. Lessor shall pay the cost of the
aforesaid title policy and any and all state and municipal
taxes imposed by law on the transfer of the title to the
Leased Premises, or the transaction pursuant to which such
transfer occurs. Water, sewer and other utility charges, if
any, which are not metered, driveway permit charges, if any,
general real estate taxes, and other similar items, shall be
adjusted ratably as of the Closing, except to the extent
otherwise settled between the parties pursuant to other
provisions of this Lease. No portion of the Base Rent paid
by Lessee shall be credited toward the Purchase Price but
Lessee shall be given a credit for rent prepaid for any
period after the Closing.
(v) Escrow Closing. At the election of Lessor or
Lessee upon notice to the other party not less than five (5)
days prior to the Closing, this sale shall be closed through
an escrow with the Title Company, in accordance with the
general provisions of the usual form of 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 Act of Sale
shall be made through the escrow. The cost of the escrow
shall be divided equally between the Lessor and Lessee. If
for any reason other than Lessee's default, the transaction
fails to close, the Deposit shall be returned to Lessee
forthwith.
(vi) Remedies on Default. If Lessee defaults under the
provisions of this subparagraph 33(C) and Lessor not being
default hereunder, Lessor shall have the right to annul the
provisions of this paragraph 33 by giving Lessee notice of
such election, provided that Lessor has first notified
Lessee of such default and Lessee has failed to cure the
same within ten (10) days after such notice. Upon Lessor's
notice of annulment in accordance herewith, the Deposit
shall be forfeited and paid to Lessor as liquidated damages,
which shall be Lessor's sole and exclusive remedy. If
Lessor defaults under the provisions of this subparagraph
33(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 Deposit at Lessee's election and immediately
upon its demand shall be returned to Lessee, which return
shall not, however, in any way release or absolve Lessor
from its obligations hereunder and (ii) Lessee shall be
entitled to all remedies (both legal and equitable) the law
(both statutory and decisional) of the state in which the
Leased Premises are situated provides without first having
to tender the balance of the purchase price as a condition
precedent thereof and without having to make any election of
such remedies.
(D) Effect of Option on Lease. If the Option is
exercised, this Lease shall continue in full force and
effect until the Closing hereinabove specified. If for any
reason not caused by Lessor, such Closing fails to occur,
this Lease shall continue in full force and effect, except
that if the provisions of this paragraph 33 are annulled by
Lessor, in accordance with subparagraph 33(C)(vi), by reason
of a default by Lessee, this Lease shall continue but
without the provisions of this paragraph 33 being a part hereof.
ARTICLE 34. 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,
Leased Premises related maintenance, repair, insurance,
taxes, and assessments, shall be paid by Lessee.
IN WITNESS WHEREOF, Lessor and Lessee have respectively
signed and sealed this Lease as of the day and year first
above written.
LESSEE: TIMBER LODGE STEAKHOUSE,INC.
By: /s/ William J Birmingham
Its: Chief Financial Officer
STATE OF )
)SS.
COUNTY OF )
The foregoing instrument was acknowledged before me
this 18th day of November, 1997, by William J Birmingham, as
CFO of Timber Lodge Steakhouse, Inc. on behalf of said
corporation.
/s/ Barbara J Kochevar
Notary Public
[notary seal]
LESSOR: AEI REAL ESTATE FUND XV LIMITED
PARTNERSHIP, a Delaware limited partnership
By: AEI FUND MANAGEMENT 86-A, INC., a
Minnesota corporation
By: /s/ Robert P Johnson
Robert P. Johnson, President
STATE OF MINNESOTA )
)SS.
COUNTY OF RAMSEY )
The foregoing instrument was acknowledged before me the
18th day of November, 1997, by Robert P. Johnson, the
President of AEI Fund Management 86-A, Inc., a Minnesota
corporation, corporate general partner of AEI Real Estate
Fund XV Limited Partnership, on behalf of said limited
partnership.
/s/ Barbara J Kochevar
Notary Public
[notary seal]
LESSOR: AEI REAL ESTATE FUND XVII LIMITED
PARTNERSHIP, a Minnesota limited
partnership
By: AEI FUND MANAGEMENT XVII, INC., a
Minnesota corporation
By: /s/ Robert P Johnson
Robert P. Johnson, President
STATE OF MINNESOTA )
)SS.
COUNTY OF RAMSEY )
The foregoing instrument was acknowledged before me the
18th day of November, 1997, by Robert P. Johnson, the
President of AEI Fund Management XVII, Inc., a Minnesota
corporation, corporate general partner of AEI Real Estate
Fund XVII Limited Partnership, on behalf of said limited
partnership.
/s/ Barbara J Kochevar
Notary Public
[notary seal]
LESSOR: AEI INSTITUTIONAL NET LEASE FUND '93
LIMITED PARTNERSHIP, a Minnesota limited
partnership
By: AEI FUND MANAGEMENT XVIII, INC., a
Minnesota corporation
By: /s/ Robert P Johnson
Robert P. Johnson, President
STATE OF MINNESOTA )
)SS.
COUNTY OF RAMSEY )
The foregoing instrument was acknowledged before me the
18th day of November, 1997, by Robert P. Johnson, the
President of AEI Fund Management XVIII, Inc., a Minnesota
corporation, corporate general partner of AEI Institutional
Net Lease Fund '93 Limited Partnership, on behalf of said
limited partnership.
/s/ Barbara J Kochevar
Notary Public
[notary seal]
Exhibit "A"
This part of Lot Two (2), Block One (1) Fishcher Addition, a
duly recorded plat in the office of the County
Recorder/Registrar of Titles in Stearns County, Minnesota,
lying North of a line drawn parallel with and 327.20 feet
Southerly of, as measured at right angles to, the most
Northerly line of said Lot Two (2); together with the rights
of ingress, egress, utilities easements and such other
rights which constitute an interest in real property as
created in that certain Easement and Maintenance Agreement
dated Dec. 10. 1996 filed of record Dec. 13, 1996 as
Document No. 835857.
Exhibit "B"
None
DEVELOPMENT FINANCING AGREEMENT
THIS AGREEMENT, made and entered into effective as of
this 23rd day of December, 1997, by and between Champps
Entertainment, Inc. ("Lessee"), whose address is 55
Ferncroft Road, Danvers, Massachusetts 01923-4001, and AEI
Net Lease Income & Growth Fund XIX Limited Partnership, AEI
Real Estate Fund XV Limited Partnership, AEI Real Estate
Fund XVII Limited Partnership, and AEI Real Estate Fund
XVIII Limited Partnership ("Lessor"), whose address is Suite
1300, World Trade Center, Saint Paul, Minnesota 55102.
W I T N E S S E T H, that:
WHEREAS, Lessee is contemplating building on the
premises described in Exhibit "A" attached hereto the
following Improvements :
Construction of an approximately 11,100 square foot
building and improvements to be used as a Champps
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 t Lesee its
Development Financing and Leasing Commitment to advance
funds in the amount hereinafter specified, subject to
compliance with the terms and conditions of this Development
Financing Agreement and the Net Lease Agreement (the
"Lease") of even date herewith;
NOW THEREFORE, in consideration of entering into the
Lease and other good and valuable consideration, the receipt
of which is hereby acknowledged by the parties hereto, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the following terms shall
have the following meanings:
1. "Application" shall mean Lessee's application
to the Lessor for the Development Financing the terms and
conditions of which are incorporated herein by reference.
2. "Architect's Contract" shall mean Lessee's
contract with the Project Architect.
3. "Commitment" shall mean Lessor's Commitment
to Lessee agreeing to provide the Development Financing.
(The "Development Financing and Leasing Commitment" dated of
even date herewith.)
4. "Completion Date" shall mean midnight,
October 1, 1998, subject to Force Majeure, as defined
herein.
5. "Construction Costs" shall mean land costs,
all costs paid to construct and complete the Improvements,
as specified on Exhibit "B" attached hereto and made a part
hereof.
6. "Construction Contracts" shall mean the
contracts between Lessee and Contractors for the furnishing
of labor, services or materials to the Leased Premises in
connection with the construction of the Improvements.
7. "Contractors" shall mean those firms directly
engaged by Lessee to construct the Improvements, whether one
or more.
8. "Contract Documents" shall mean the Project
Architect's Contract, Plans and Specifications and the
contract with the Contractor.
9. "Development Financing" shall mean the funds
to be made available pursuant to the Commitment and not to
exceed the lesser of the Construction Costs or the maximum
loan amount of Four Million Five Hundred Ten Thousand
Dollars ($4,510,000) as specified in the Commitment.
10. "Development Financing and Carrying Charges"
shall mean all fees, taxes and charges incurred under the
Development Financing and in the construction of the
Improvements including, but not limited to, non-refundable
commitment fees; interest charges, service and inspection
fees, attorney's fees, title insurance fees and charges,
recording fees and insurance premiums.
11. "Development Financing Documents" shall mean
this Agreement, the Lease, Assignment of Architects and
Construction Contracts, Guarantees, and such other documents
given to the Lessor as security for the Development
Financing.
12. "LTIC-CDD" shall mean Lawyers Title
Insurance Corporation, Construction Disbursement Department,
the nationally recognized title insurer, or Lessor's in-
house designee, to be LTIC-CDD under the Development
Financing Disbursement Agreement executed by and between the
parties of even date herewith.
13. "Final Disbursement Date" shall mean the
date of the final disbursement of the Development Financing
provided hereunder.
14. "Improvements" shall mean the structures and
other improvements to be constructed on the Leased Premises
in accordance with the Plans and Specifications.
15. "Initial Disbursed Funds" shall mean those
funds disbursed on the Closing Date for land acquisition and
related soft costs upon Lessor's acquisition of the Leased
Premises.
16. "Inspecting Architect" shall mean the
architect, if any, hired by Lessor to perform inspections of
the premises. An Inspecting Architect may only be engaged
by Lessor in the event of a default relating to construction
of the Improvements under the Development Financing
Documents.
17. "Leased Premises" shall mean the real
property described in the Exhibit "A" attached to this
Agreement, together with all Improvements, equipment and
fixtures thereon.
18. "Lessee Equity" shall mean the final
Construction Costs less the amount of the
Development Financing.
19. "Plans and Specifications" shall mean the
plans and specifications prepared by the Project Architect
who shall be licensed in the jurisdiction of the Leased
Premises and selected by Lessee.
20. "Project" shall mean the construction of the
Improvements on the Leased Premises.
21. "Project Architect" shall mean the architect
retained by Lessee to design and supervise construction of
the Improvements.
22. "Rental Modification Date" shall mean a date
one hundred and eighty days (180) from the date hereof.
23. "Sub-Contractors" shall mean those persons
furnishing labor or materials for the Project pursuant to
the Sub-Contracts.
24. "Sub-Contracts" shall mean the contracts
between the Contractor and its materialmen and mechanics in
the furnishing of labor or materials for the Project.
25. "Title" shall mean Lawyers Title Insurance
Corporation issuing the Lessor's fee owner's title insurance
policy.
ARTICLE II
THE DEVELOPMENT FINANCING
Subject to compliance with the provisions of this
Agreement, Lessor agrees to advance to Lessee, and Lessee
agrees to request from Lessor, the Development Financing.
The Development Financing shall be advanced in stages by
Lessor to LTIC-CDD and disbursed by LTIC-CDD pursuant to the
provisions of Article VIII hereof. The Development
Financing, or so much thereof as has been advanced
hereunder, shall bear interest at the rate and shall be
repaid in accordance with the terms hereof and the Lease.
The proceeds of the Development Financing shall be used
exclusively for the purposes of defraying Construction
Costs.
ARTICLE III
N/A
ARTICLE IV
CONSTRUCTION OF IMPROVEMENTS
Lessee agrees to commence construction of the
Improvements within thirty (30) days from the date of this
Agreement. After commencement of construction of any
Improvements, Lessee agrees to diligently pursue said
construction to completion, and to supply such moneys and to
perform such duties as may be necessary to complete the
construction of said Improvements pursuant to the Plans and
Specifications and in full compliance with all terms and
conditions of this Agreement and the Development Financing
Documents, all of which shall be accomplished on or before
the Completion Date, subject to Force Majeure and without
liens, claims or assessments (actual or contingent) asserted
against the Leased Premises for any material, labor or other
items furnished in connection therewith, subject to Lessee's
right to contest such liens, claims, or assessments provided
the same are removed as a lien upon the Leased Premises
prior to foreclosure of such lien, and all in full
compliance with all construction, use, building, zoning and
other similar requirements of any pertinent governmental
jurisdiction. Lessee will provide to Lessor, upon request,
evidence of satisfactory compliance with all the above
requirements.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE LESSEE
Lessee hereby represents and warrants to the Lessor, which
representations and warranties shall be deemed to be
restated by Lessee each time Lessor makes an advance of the
Development Financing, that:
1. VALIDITY OF DEVELOPMENT FINANCING DOCUMENTS - The
Development Financing Documents are in all respects legal,
valid and binding according to their terms.
2. NO PRIOR LIEN ON FIXTURES - No mortgage, bill of sale,
security agreement, financing statement, or other title
retention agreement (except those executed in favor of
Lessor) has been, or will be, executed with respect to any
fixture (except Lessee's trade fixtures not financed with
this Development Financing) used in conjunction with the
construction, operation or maintenance of the improvements.
3. CONFLICTING TRANSACTION OF LESSEE - The consummation of
the transactions hereby contemplated and the performance of
the obligations of Lessee under and by virtue of the
Development Financing Documents will not result in any
breach of, or constitute a default under, any mortgage,
lease, bank loan or credit agreement, corporate charter, by-
laws, partnership agreement, or other instrument to which
Lessee is a party or by which it may be bound or affected,
the breach of which would materially affect Lessee's ability
to perform its obligations hereunder.
4. PENDING LITIGATION - There are no actions, suits or
proceedings pending, or to the knowledge of Lessee
threatened, against or affecting it or the Leased Premises,
or involving the validity or enforceability of any of the
Development Financing Documents, at law or in equity, or
before or by any governmental authority, except actions,
suits and proceedings that are fully covered by insurance or
which, if adversely determined would not substantially
impair the ability of Lessee to perform each and every one
of its obligations under and by virtue of the Development
Financing Documents; and to the Lessee's knowledge it is not
in default with respect to any order, writ, injunction,
decree or demand of any court or any governmental authority.
5. VIOLATIONS OF GOVERNMENTAL LAW, ORDINANCES OR REGULATIONS
- - To the best knowledge of Lessee, there are no violations
or notices of violations of any federal or state law or
municipal ordinance or order or requirement of the State in
which the Leased Premises are located or any municipal
department or other governmental authority having
jurisdiction affecting the Leased Premises, which violations
in any way have a material adverse affect on the Leased
Premises and which remain uncured after notice by such
governmental authority or department (if notice is required)
and the expiration of the time within which Lessee may cure
such violation, or if no time limitation is specified,
within a reasonable time after notice to cure such violation
.
6. COMPLIANCE WITH ZONING ORDINANCES AND SIMILAR LAWS - To
the best knowledge of Lessee, the Plans and Specifications
and construction pursuant thereto and the use of the Leased
Premises contemplated thereby comply and will comply with
all present governmental laws and regulations and
requirements, zoning ordinances, standards, and regulations
of all governmental bodies exercising jurisdiction over the
Leased Premises. Lessee agrees to provide the Project
Architect's certification to such effect prior to the
funding of the first disbursement under the Development
Financing.
7. LESSEE'S STATUS AND AUTHORITY - If the Lessee be a
corporation, limited liability company, trust or a
partnership, Lessee warrants and represents that (i) it is
duly organized, existing and in good standing under the laws
of the state in which it is incorporated or created; (ii) it
is duly qualified to do business and is in good standing in
the state in which the Leased Premises are located; (iii) it
has the corporate or other power, authority and legal right
to carry on the business now being conducted by it and to
engage in the transactions contemplated by this Agreement
and the Development Financing Documents; and (iv) the
execution and delivery of this Agreement and the Development
Financing Documents and the performance and observance of
the provisions hereof and thereof have been (or future acts
will be) duly authorized by all necessary trust,
partnership, or corporate actions of Lessee. Lessee will
furnish such resolutions, affidavits and opinions of counsel
to such effect as Lessor may reasonably require.
8. AVAILABILITY OF UTILITIES - All utility services
necessary for the construction of the Improvements will be
available prior to the commencement of construction, and all
utility services necessary for the proper operation of the
Improvements for their intended purposes are available at
the Leased Premises or will be available at the Leased
Premises prior to the Final Disbursement Date, at
commercially comparable utility rates and hook-up charges
for the vicinity, including water supply, storm and sanitary
sewer facilities, gas, electricity and telephone facilities.
Lessee shall furnish evidence of such availability of
utilities from time to time at Lessor's request.
9. BUILDING PERMITS - All building permits required for the
construction of the Improvements have been obtained prior to
the commencement of the construction of the Improvements and
copies of same will be delivered to Lessor.
10. CONDITION OF LEASED PREMISES - The Leased Premises
are not now damaged or injured as a result of any fire,
explosion, accident, flood or other casualty, nor to the
best of Lessee's knowledge, subject to any action in eminent
domain.
11. APPROVAL OF PLANS AND SPECIFICATIONS - To the best
knowledge of Lessee in reliance upon the Project Architect's
certification to such effect, the Plans and Specifications
conform to the requirements and conditions set out by
applicable law or any effective restrictive covenant, to all
governmental authorities which exercise jurisdiction over
the Leased Premises or the construction thereon, and no
construction will be commenced upon the Leased Premises
until said Plans and Specifications shall have been approved
by Lessor, which consent shall not be unreasonably withheld
or delayed and shall be given or withheld within ten
business days after written request therefor. Subject to
Article VI, paragraph 14, no material changes are to be made
in the Plans and Specifications as approved without Lessor's
prior consent, which consent shall not be unreasonably
withheld or delayed and shall be given or withheld within
ten business days after written request therefor; except,
after prior written notice to Lessor, provided the
Development Financing shall remain in balance as set forth
in Article VII, paragraph 3 herein, Lessor shall consent to
reallocation among line items or use of the Construction
Contingency in the aggregate of not more than the amount
budgeted as set forth on Exhibit B for Construction
Contingency, unless Lessee shall deposit Owner Equity with
LTIC-CDD in the amount of such excess over the budgeted
amount.
12. CONSTRUCTION CONTRACTS - Lessee has entered into
contracts with the Contractors or separate contracts with
materialmen and laborers providing for the construction of
the Improvements. Lessee will cause the Contractors to
promptly furnish Lessor with the complete list of all Sub-
contractors or entities as and when under contract, which
Contractors propose to engage to furnish labor and/or
materials in constructing the Improvements (such list
containing the names, addresses, and amounts of such sub-
contracts as written in excess individually of $5,000, and
prior to disbursement of funds to or for the benefit of such
Subcontractors, affidavits of authorized signatory and other
documents commercially reasonably required by Title to
insure that the Leased Premises remain lien free) and will
from time to time furnish Lessor or Title with true copies
of all Contracts entered into by Lessee and with the terms
of all verbal agreements therefor, if any, and as to
subcontractors, letters signed by sub-contractors whose
contracts are in excess of $5,000 setting forth the present
amount of their contract and the amounts remaining to be
paid under that contract, if the same information is not
stated on a lien waiver reflecting the most currently
requested payment to such subcontractor.
13. BROKERAGE COMMISSIONS - No brokerage commissions are
due in connection with the transaction contemplated hereby
or if there are commissions due or payable the same will be
paid by Lessee. Lessee agrees to and shall indemnify Lessor
from any liability, claims or losses arising by reason of
any such brokerage commissions. This provision shall
survive the repayment of the Development Financing and shall
continue in full force and effect so long as the possibility
of such liability, claims or losses exists.
14. NO PRIOR WORK - Except as may have been permitted by
Lessor, no work or construction has been commenced or will
be commenced by or on behalf of Lessee on the Leased
Premises, nor has Lessee entered into any contracts or
agreements for such work or construction which could result
in the imposition of a mechanic's or materialmen's lien on
the Leased Premises or the Improvements prior to or on
parity with the interest of Lessor.
15. ENVIRONMENTAL IMPACT STATEMENT - All required
environmental impact statements as required by any
governmental authority having jurisdiction over the Leased
Premises or the construction of the Improvements have been
duly filed and approved.
16. ACCESS - The Leased Premises front on a publicly
maintained road or street or have access to such a road or
street under an easement or private way, which is not
subject to a reversion in favor of any party.
17. FINANCIAL INFORMATION - Any financial statements
heretofore delivered to Lessor are true and correct in all
respects, have been prepared in accordance with generally
accepted accounting practice, and fairly present the
respective financial conditions of the subject thereof as of
the respective dates thereof and no materially adverse
change has occurred in the financial conditions reflected
therein since the respective dates thereof.
ARTICLE VI
COVENANTS OF LESSEE
Lessee hereby covenants and agrees with Lessor as follows:
1. SURVEYS - Prior to execution of any Development Financing
Documents and prior to the initial request for a
Disbursement (as defined in Article VIII hereof), Lessee has
furnished to Lessor three copies of a current perimeter land
survey, in form and substance satisfactory to Lessor,
certified to Lessor, giving a description of the Leased
Premises and showing all encroachments onto or from the
Leased Premises, currently certified by a registered
surveyor and bearing his registry number and showing access
rights, easements, or utilities, rights of way, all setback
requirements upon the Leased Premises, improvements, matters
affecting title and such other items as Lessor may
reasonably request.
2. TITLE INSURANCE - Prior to the initial request for
Disbursement the Lessee has furnished Lessor with an ALTA
policy of title insurance, and prior to any subsequent
request for Disbursement such ALTA policy of title insurance
shall be brought down to the date of Disbursement by
endorsement, all in form and substance satisfactory to
Lessor issued at the Lessee's expense and written by Title
insuring the Leased Premises to be marketable, free from
exceptions for mechanic's and materialmen's liens and free
from other exceptions not previously approved by the Lessor,
naming Lessor as fee owner insured to the extent of advances
made hereunder subject only to such exceptions as may be
reasonably approved by Lessor.
3. RESTRICTIONS ON CONVEYANCE OR SECONDARY FINANCING -
Lessee will not transfer, sell, convey or encumber the
Leased Premises or subject the Leased Premises to any
secondary financing in any way without the written consent
of the Lessor, except as permitted in Article V, paragraph 2
relating to trade fixture financing sources or suppliers.
4. INSURANCE - To obtain or cause Contractor to obtain and
maintain such insurance or evidence of insurance as Lessor
may reasonably require, including but not limited to the
following:
(a) BUILDER'S RISK INSURANCE - Builder's Risk
Insurance written on the so-called "Builder's Risk-Completed
Value Basis" in an amount equal to the full replacement cost
of the Improvements at the date of completion with coverage
available on the so-called multiple peril form of policy,
including coverage against collapse and water damage, naming
Lessor as additional named insured, such insurance to be in
such amounts and form and written by such companies as shall
be reasonably approved by Lessor, and the originals of such
policies (together with appropriate endorsement thereto,
evidence of payment of premiums thereon and written
agreements by the insurer or insurers therein to give Lessor
ten (10) days' prior written notice of any intention to
cancel) shall be promptly delivered to Lessor, said
insurance coverage to be kept in full force and effect at
all times until the completion of construction of the
Improvements.
(b) HAZARD INSURANCE - Fire and Extended
Coverage Insurance, and such other hazard insurance as
Lessor may require and as called for in the Lease in an
amount equal to the full replacement cost of the
Improvements naming Lessor as an additional named insured,
such insurance to be in such amounts and form and written by
such companies as shall be reasonably approved by Lessor,
and the originals of such policies (together with
appropriate endorsements thereto, evidence of payment of
premiums thereon and written agreement by the insurer or
insurers therein to give Lessor ten (10) days' prior written
notice of any intention to cancel) shall be promptly
obtained and delivered to Lessor immediately upon completion
of the construction of the Improvements and before any
portion is occupied by Lessee or any tenant of Lessee with
such insurance to be kept in full force and effect at all
times thereafter.
(c) PUBLIC LIABILITY - Comprehensive public
liability insurance (including operations, contingent
liability operations, operations of sub- contractors,
completed operations and contractual liability insurance) in
limits of coverage as set forth in the Lease.
(d) WORKMEN'S COMPENSATION INSURANCE - Evidence
of compliance with the required coverage under statutory
workmen's compensation requirements.
5. COLLECTION OF INSURANCE PROCEEDS - To cooperate with
Lessor in obtaining for Lessor the benefits of any insurance
or other proceeds lawfully or equitably payable to it in
connection with the transaction contemplated hereby and the
collection of any indebtedness or obligation of the Lessee
to Lessor incurred hereunder (including the payment by
Lessee of the expense of an independent appraisal on behalf
of Lessor in case of a fire or other casualty affecting the
Leased Premises).
6. APPLICATION OF DEVELOPMENT FINANCING PROCEEDS - To use
the proceeds of the Development Financing solely for the
purpose of paying for Construction Costs and such incidental
costs relative to the construction as may be reasonably
approved from time to time in writing by Lessor, and in no
event to use any of the Development Financing proceeds for
personal, corporate or other purposes.
7. EXPENSES - To pay all costs of closing the Development
Financing and all expenses of Lessor with respect thereto,
including, but not limited to, legal fees by Lessor's
counsel and all other reasonable attorney's fees (limited as
set forth in the Commitment), costs of title insurance,
transfer taxes, license and permit fees, recording expenses,
surveys, intangible taxes, appraisal fees, Inspecting
Architect fees, expenses of retaking possession upon default
by Lessee hereunder or other costs of enforcement (including
reasonable attorney's fees) and similar items.
8. LAWS, ORDINANCES AND ETC. - To comply promptly with any
law, ordinance, order, rule or regulation of all authorities
exercising jurisdiction over the Leased Premises or the
construction thereon, including appropriate supervising
boards of fire underwriters and similar agencies and the
requirements of any insurer issuing coverage on the Project.
9. RIGHT OF LESSOR TO INSPECT LEASED PREMISES - Upon 48
hours notice, except in cases which Lessor reasonably deems
to be an emergency, in which event upon reasonable notice
under the circumstances, to permit Lessor and Title and
their representatives and agents to enter upon the Leased
Premises and to inspect the Improvements and all materials
to be used in construction thereof and to cooperate and
cause Contractor to cooperate with Lessor or Title and their
representatives and agents during such inspections, provided
that such is accomplished without interrupting the
construction process. Provided, further, however, that this
provision shall not be deemed to impose upon Lessor or Title
any duty or obligation whatsoever to undertake such
inspections, to correct any defects in the Improvements or
to notify any person with respect thereto.
10. BOOKS AND RECORDS - To set up and maintain accurate and
complete books, accounts and records pertaining to the
Project including the working drawings in a manner
reasonably acceptable to Lessor. The Lessor, Title and
Inspecting Architect shall have the right at all reasonable
times and upon reasonable prior notice to inspect, examine
and copy all books and records of Lessee relating to the
Project, and to enter and have free access to the Leased
Premises and Improvements and to inspect all work done,
labor performed and material furnished in or about the
Project, provided that such is accomplished without
interrupting the construction process. Notwithstanding the
foregoing, Lessee shall be responsible for making
inspections as to the Improvements during the course of
construction and shall determine to its own satisfaction
that the work done or materials supplied by the Contractors
and all Subcontractors has been properly supplied or done in
accordance with the applicable contracts. Lessee will hold
Lessor and Title harmless from and Lessor and Title shall
have and have no liability or obligation of any kind to
Lessee or creditors of Lessee in connection with any
defective, improper or inadequate workmanship or materials
brought in or related to the Improvements or the Leased
Premises, or any mechanic's liens arising as a result of
such workmanship or materials. Upon Lessor's request,
Lessee shall replace or cause to be replaced any such work
or material found to be materially deficient by the Project
Architect or Independent Architect. Lessor shall cooperate
with Lessee in obtaining any rights under any applicable
warranties to accomplish such work. Any inspections made by
Inspecting Architect, Title or Lessor are for the sole
benefit of Lessor and neither Lessee nor any creditor,
tenant or vendee of Lessee shall be entitled to rely on such
inspection. Lessee shall obtain for Lessor coincident
rights to rely upon any warranties obtain by Lessee from its
Contractors or subcontractors.
11. CORRECTION OF DEFECTS - To promptly correct any
structural defects in the Improvements or any material
departure from the Plans and Specifications not previously
approved by Lessor. The advance of any Development
Financing proceeds shall not constitute a waiver of Lessor's
right to require compliance with this covenant.
12. SIGN REGARDING DEVELOPMENT FINANCING - To allow
Lessor to erect and maintain at a suitable site on the
Leased Premises, at a location to be chosen by Lessee in its
reasonable discretion, a sign indicating that Development
Financing is being provided by Lessor, to the extent
permitted by law or private covenant, condition, or
agreement affecting the Project.
13. ADDITIONAL DOCUMENTS - To furnish to Lessor all
instruments, documents, initial surveys, footing or
foundation surveys, if conducted, certificates, plans and
specifications, appraisals, financial statements, title and
other insurance reports and agreements and each and every
other document and instrument required to be furnished by
the terms hereof, all at Lessee's expense; to assign and
deliver to Lessor such documents, instruments, assignments
and other writings, and to do such other acts necessary or
desirable to preserve and protect the Leased Premises, as
Lessor may require; and to do and execute all and such
further lawful and reasonable acts, conveyances and
assurances for the carrying out of the intents and purposes
of this Agreement, the Lease, or the Commitment, as Lessor
shall reasonably require from time to time.
14. ARCHITECTS AND CONSTRUCTION CONTRACTS - To commit no
default nor knowingly permit a default under the terms of
the Architects or Construction Contracts; To waive none nor
knowingly permit a waiver of the obligations of the parties
thereunder; To do no act which would relieve such parties
from their obligations thereunder; To make no amendments to
such contracts, without the prior written consent of Lessor;
To enter into no change orders or extras that cause a
reallocation among budgeted line items, or that in the
aggregate or singularly result in a net increase in excess
of 10% of the original contract amount without Lessor's
prior written consent, which consent shall not be
unreasonably withheld or delayed; provided, however, Lessor
shall be given written notice and copies of all change
orders; provided, further, however, with written notice to
Lessor prior to any request for funds subsequent to any such
change order or reallocation, the Lessee shall be allowed to
enter into any change order or extra which is accounted for
by use of any reallocation among line items or any remaining
budgeted Contingency line item, or if the same has been
exhausted, Lessee shall be allowed increases in the original
contract amount without Lessor's consent if Lessee has, upon
the execution of said change order, deposited with Lessor
the amount by which such change order increases the total
Construction Cost; To allow all such contracts to be subject
to the approval of Lessor for its loan purposes; To allow
Lessor to take advantage of all the rights and benefits of
the contracts upon any default by Lessee; and to submit
evidence to Lessor that both the Architect and the
Contractors will permit Lessor to acquire Lessee's interest
under their respective contracts and the Contract Documents
without additional charge or fee should an event of default
occur hereunder, which default is not cured within
applicable notice and cure periods.
15. ENFORCE PERFORMANCE OF SUB-CONTRACTS - To enforce,
or cause to be enforced, the prompt performance of the Sub-
Contracts in accordance with their terms and not to approve
any changes in the same that in the aggregate or singularly
result in a net increase in excess of 10% of the original
General Contractor's contract amount without Lessor's prior
written consent, which consent shall not be unreasonably
withheld or delayed, provided Lessee's right to enter into
any such change order shall be on the same terms set forth
in Section 14 above.
16. COMPLIANCE WITH RULES - To comply with, and to
require the Contractors to comply with, all rules,
regulations, ordinances and laws bearing on the conduct of
the work on the Improvements, including the requirements of
any insurer issuing coverage on the Project and the
requirements of any applicable supervising boards of fire
underwriters.
17. OPINIONS OF COUNSEL - To furnish such opinions of
counsel as may be reasonably requested of the Lessee in
connection with the matters contemplated by this Agreement.
18. SOIL TESTS - To provide the Lessor with a soil
report prepared by an acceptable engineer certifying as to
the status of the soil conditions on the Leased Premises,
the need or lack of need for special pilings and foundations
and that either any pilings and foundation necessary to
support the Improvements have been placed in a manner and
quantity sufficient to provide the required support or that
no such pilings and foundations are necessary for the
support and construction of the Improvements.
19. MARKETABLE TITLE - To execute and deliver or cause
to be executed and delivered such instruments as may be
required by the Lessor and Title to provide Lessor with a
marketable, valid title to the Leased Premises subject only
to such exceptions to title as may be reasonably approved by
Lessor.
20. VIOLATIONS OF GOVERNMENTAL LAW, ORDINANCES OR
REGULATIONS -
Lessee will permit no violations nor commit the same, of any
federal or state law or municipal ordinance or order or
requirement of the State in which the Leased Premises are
located or any municipal department or other governmental
authority having jurisdiction affecting the Leased Premises,
which violations in any way have a material adverse affect
on the Leased Premises and which remain uncured after notice
by such governmental authority or department (if notice is
required) and the expiration of the time within which Lessee
may cure such violation, or if no time limitation is
specified, within a reasonable time after notice to cure
such violation .
21. COMPLIANCE WITH ZONING ORDINANCES AND SIMILAR LAWS -
The Plans and Specifications and construction pursuant
thereto and the use of the Leased Premises contemplated
thereby will comply with all governmental laws and
regulations and requirements, zoning ordinances, standards,
and regulations of all governmental bodies exercising
jurisdiction over the Leased Premises, including
environmental protection and equal employment regulations,
and appropriate supervising boards of fire underwriters and
similar agencies.
22. APPROVAL OF PLANS AND SPECIFICATIONS - The Plans and
Specifications will conform to the requirements and
conditions set out by applicable law or any effective
restrictive covenant, and to all governmental authorities
which exercise jurisdiction over the Leased Premises or the
construction thereon.
23. NOTICE OF COMMENCMENT\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 into the Project before the first Disbursement
(or any subsequent Disbursement if additional Lessee Equity
should be required) and Lessee shall deliver evidence of
such payment reasonably satisfactory to Lessor.
3. DEVELOPMENT FINANCING BALANCE - As of the date
immediately prior to any Disbursement, the total amount of
unadvanced proceeds of the Development Financing shall be
sufficient, in the commercially reasonable opinion of Lessor
(the opinion of Lessor being based upon affidavit of the
General Contractor, the Project Architect, the Inspecting
Architect, or other reliable licensed third party
contractor) to complete the Improvements free of liens. To
the extent the total of the unadvanced proceeds of the
Development Financing shall be insufficient, at any time, in
Lessor's reasonable opinion, (based upon the affidavit as
set forth above) to complete the Improvements, or be less
than the total Construction Costs not yet paid for or not
yet incurred (including interest accruing for the remainder
of the term or extensions thereof, if any), the Lessee shall
immediately deposit with the Lessor or with Title, as
additional Lessee Equity funds, an amount equal to such
deficiency and such additional Lessee Equity funds shall be
disbursed by LTIC-CDD prior to the Disbursement of any
further advance or advances under this Agreement.
4. NO DEFAULT - No event of default, which remains uncured
after the expiration of applicable cure periods, shall exist
under this Agreement or the Development Financing
Documents.
5. REPRESENTATIONS AND WARRANTIES - The representations and
warranties in Article V hereof shall be true and correct on
and as of the date of each Disbursement.
6. COVENANTS - Lessee shall have complied with all of the
covenants made by it in Article VI hereof.
7. SWORN CONSTRUCTION STATEMENT - Prior to the initial
disbursement hereunder, the Lessee shall have submitted to
Lessor and Title a Construction Cost Statement or the
Construction Contract (if such information is contained
therein) sworn to by Lessee and Contractors reflecting all
major Sub-Contractors or materialmen who shall then be
engaged in furnishing labor, materials or supplies for the
Improvements. The list should show the name of each and
every Contractor, Sub-Contractor and materialman (or at
least such entities or individuals whose contract is in
excess of $5,000), its address and an estimate of the dollar
value of the work, labor and materials to be done or
supplied and a general statement of the nature of the work
to be done or materials to be supplied by each Contractor.
Thereafter, if such list should change or new subcontractors
shall execute contracts not reflected on the above list, the
Lessee shall furnish to the Lessor any amendments or
additions to the original statement as so submitted.
8. APPLICATION FOR PAYMENT - Lessor shall have received an
Application for Payment pursuant to Article VIII hereof.
9. TITLE - Title shall issue its endorsement to the title
policy insuring the Lessor as fee owner under the policy in
the aggregate amounts of all prior Disbursements and the
requested Disbursement.
10. WORK IN PLACE - All work or materials for which a
Disbursement is requested shall be in place and incorporated
into the Improvements.
11. AMENDED NOTICE OF COMMENCEMENT - Lessee shall provide
Lessor with any amended Notice of Commencement filed in
accordance with Michigan Statue, 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 Project
Architect, Lessee, Contractor, and if required by Lessor, by
the Inspecting Architect. All interest accruing need not be
disbursed to LTIC-CDD, but may be immediately and
automatically credited by Lessor to the Development
Financing account. LTIC-CDD shall disburse all funds
advanced to it by Lessor in accordance with the terms and
provisions of this Agreement and any special escrow
requirements imposed by LTIC-CDD as a condition to its
acting as the disbursing agent hereunder. The disbursed
proceeds of the Development Financing shall bear interest
from and including the date of disbursement to LTIC-CDD or
the date of credit by Lessor provided that in the event LTIC-
CDD shall fail to disburse any advances within five (5)
business days after the date set for an advance, LTIC-CDD
shall return said advance to Lessor and interest on such
advance shall abate from and after the date of such return.
Any amounts disbursed to LTIC-CDD and returned by LTIC-CDD
to the Lessor shall not be deemed to be advanced under the
Development Financing Documents. Each Application for
Payment shall clearly set forth the amounts due to Lessee
and to each Contractor out of the requested
Development Financing and shall be accompanied by the
following:
a. A Draw Request Certificate in the form
attached hereto as Exhibit "D" certifying that each
contractor or materialman for which payment is requested in
the relevant Application for Payment has satisfactorily
completed the work or furnished the materials for which
payment is requested in accordance with the applicable
contract; that all work for which an Application for Payment
is made substantially conforms to the Contract Documents and
any approved changes, and is in place; and that sufficient
funds remain of the undisbursed Development Financing
proceeds to complete the Project and that all funds
previously disbursed have been applied as per the previous
Application for Payment.
b. Waivers of Mechanics' Liens and Materialmen's
Liens executed by all Contractors for all work done and all
materials furnished to the Leased Premises and included in
such current Application for Payment, or evidence reasonably
required by Title to insure over the same by special
specific endorsement, or such other releases 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
Project Architect and the Inspecting Architect shall certify
to Lessor the date that such Party's subcontract has been
fully and satisfactorily completed and the subcontractor or
materialmen shall have supplied Title with satisfactory
final lien waivers, including final lien waivers for any of
its submaterialmen or sub- contractors and the requirements
of any bonding company issuing the Bonds shall have been
fulfilled. Any Retainage due the Contractor for work
performed or materials furnished by the Contractor and the
final balance of Contractor's profit and overhead shall be
disbursed on the Final Disbursement Date pursuant to Article
IX hereof. Contractor's profit and overhead shall be
disbursed based upon and in proportion to the percentage of
completion of the Project, or amounts payable under the
Construction Contract for work actually performed, whichever
is less, as certified by the Project Architect.
ARTICLE IX
FINAL DEVELOPMENT FINANCING BALANCE
Unless and until Lessor and Lessee have entered into a
mutually satisfactory escrow holdback and undertaking
agreement to, inter alia, complete the Improvements and
otherwise satisfy the requirements of this Article IX, at no
time and in no event shall Lessor be obligated to disburse
the balance of the proceeds of the Development Financing,
including any Retainage until the date the following have
been satisfied (the "Final Disbursement Date"):
1. Lessor shall have received reasonably satisfactory
evidence of the final completion of the Improvements in
substantial accordance with the Contract Documents and the
Certificate of Final Completion from the Project Architect
accepted by the Contractor and Lessee.
2. Lessor shall have received satisfactory as-built surveys
reflecting the final location of the Improvements as fully
completed on the Leased Premises in accordance with the
Contract Documents, said survey to be prepared by a
registered or licensed surveyor bearing his registry number,
certifying to Lessor as to the legal description of the
Leased Premises and showing all Improvements located on the
Leased Premises and indicating the street address of the
Improvements, absence of any encroachments on the Leased
Premises or from the Leased Premises onto adjacent land,
showing all access points, and showing conformance to all
set back requirements and delineating all utility easements
that are specifically legally described, rights of way and
other matters affecting the Leased Premises, and certifying
as to the total acreage of the land, the exterior dimensions
of the Improvements, and the number of parking spaces, if
any, and such other matters as Lessor may reasonably
request.
3. Lessor shall have received a requisite affidavit of the
Lessee, Contractor and Project Architect, and approved by
the Inspecting Architect certifying as to the final cost of
the Improvements.
4. Title shall have been furnished with such final lien
waivers sufficient in the opinion of Title to dissolve any
possible Mechanic's and Materialman's Liens affecting title
to the Leased Premises or Lessee shall have provided a bond
or other security sufficient to remove the lien as an
encumbrance upon title to the Leased Premises and Title
shall have issued its endorsements to the title policy
increasing the insured coverage to the full amount of all
sums disbursed under this Development Financing Agreement.
5. Lessor shall have received evidence that all of the
terms, provisions and conditions on the part of the Lessee
to be performed or caused to be performed hereunder and
under the Lease, including but not limited to obtaining
casualty insurance for the full insurable value of the
Improvements, have been fulfilled to the satisfaction of
Lessor.
6. Lessor shall have received a Final Certificate of
Occupancy issued by the appropriate governmental authority
covering the Improvements and a Certificate of Substantial
Completion from the Project Architect indicating that the
Improvements as built comply with all building codes and
zoning ordinances, including any plat requirements or
requirements of recorded operating covenants or agreements
affecting the Leased Premises.
7. All remaining uncompleted "punch list" items shall have
been satisfactorily completed.
8. The requirements of all bonding companies, if any, with
respect to release of retainage shall have been met.
9. An amendment to the Lease shall be executed by Lessee and
Lessor setting forth the date the first Lease Year shall end
and the Rent for the balance of the first Lease Year, and
evidencing the satisfaction and termination of this
Agreement.
ARTICLE X
EVENTS OF DEFAULT
An "event of default" shall be deemed to have occurred
hereunder and under the Lease, if:
1. DEFAULT UNDER DEVELOPMENT FINANCING DOCUMENTS - Any
default or event of default occurs (which remains uncured
after the expiration of any applicable cure period as may
be set forth in any Development Financing Document) under
any of the Development Financing Documents as defined therein;
or
2. FAILURE TO COMPLETE CONSTRUCTION - Lessee shall fail for
any reason, except Lessor's wrongful refusal to fund the
Development Financing pursuant to the terms hereof, to
substantially complete the construction of the Improvements
by the Completion Date; or
3. BREACH OF AGREEMENT - Lessee breaches or fails to
perform, observe or meet any covenant or condition of this
Agreement, provided, however, with respect to non-monetary
defaults hereunder, Lessee shall have twenty days after
notice from Lessor to cure such non- monetary default, or if
such default (but for the payment of monies) cannot be cured
within twenty days, such longer time as may be reasonably
necessary to effect a cure if Lessee is diligently pursuing
a course of conduct reasonably designed to cure the
default.; or
4. BREACH OF WARRANTY - Any warranties made or agreed to be
made in any of the
Development Financing Documents or this Agreement shall be
breached by Lessee or shall prove to be false or misleading,
and the same shall not be cured or made to be true and
correct within the applicable cure periods; or
5. FILING OF LIENS AGAINST THE LEASED PREMISES - Any lien
for labor, material, taxes or otherwise shall be filed
against the Leased Premises and such lien shall not be
promptly paid, released, contested in an appropriate forum,
or bonded over to Lessor's reasonable satisfaction before
the lien shall materially adversely affect Lessor's interest
in the Premises; or
6. LITIGATION AGAINST LESSEE - Any suit shall be filed
against Lessee, and is not resolved within 120 days and,
which if adversely determined, could substantially impair
the ability of Lessee to perform each and every one of its
obligations under and by virtue of the Development Financing
Documents; or
7. LEVY UPON THE LEASED PREMISES - A levy be made under any
process on the Leased Premises and such levy shall not be
promptly Bonded over prior to the execution of such levy; or
8. TRANSFER OF LEASED PREMISES - Lessee shall without the
prior written consent of Lessor, voluntarily or by operation
of law, sell, transfer, convey or encumber all or any part
of its interest in the Leased Premises or in any of the
personalty located thereon, or used or intended to be used
in connection therewith; or
9. ABANDONMENT - Lessee abandons the project or delays or
ceases work thereon for a period of fifteen consecutive (l5)
days, or delays construction or suffers construction to be
delayed for any period of time for any reason whatsoever so
that completion of Improvements cannot be accomplished in
the judgment of Lessor on or before the Completion Date,
subject to force majeure; or
10. BANKRUPTCY - Lessee shall make an assignment for the
benefit of its creditors or shall admit in writing its
inability to pay its debts as they become due or shall file
a petition in bankruptcy or shall be adjudicated a bankrupt
or insolvent or shall file a petition seeking any
reorganization, dissolution, liquidation, arrangement,
composition, readjustment, or similar relief under any
present or future bankruptcy or insolvency statute, law or
regulation, or shall file an answer admitting to or not
contesting the material allegations of a petition filed
against it in any such proceedings, or shall not have the
same dismissed or vacated, or shall seek or consent or
acquiesce in the appointment of any trustee, receiver or
liquidator of a material part of its properties, or shall
not after the appointment without the consent or
acquiescence of it of a trustee, receiver, or liquidator of
any material part of its properties have such receiver,
liquidator or appointment vacated; or
11. EXECUTION LEVY - Execution shall have been levied
against the Leased Premises or any lien creditors commence
suit to enforce a judgment lien against the Leased Premises
or such action or suit shall have been brought and shall not
be immediately bonded over and shall continue unstayed and
in effect for a period of more than 120 consecutive days; or
12. ATTACHMENT - Any part of the Lessor's commitment to
make the advances hereunder shall at any time be subject or
liable to attachment or levy at the suit of any creditor of
the Lessee or at the suit of any subcontractor or creditor
of the Contractor and shall remain unstayed prior to the
time Lessor shall be obligated to comply with the same; 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, all of which costs and expenses the Lessee
agrees to pay and hold Lessor harmless of and payment of
which shall be secured by the Development Financing
Documents. Specifically, Lessee agrees to pay all title
charges, surveyor's fees, appraisals, loan fees and
attorney's fees and costs and the like incurred in
connection with this Agreement.
ARTICLE XII
GENERAL CONDITIONS AND MISCELLANEOUS
The following conditions shall be applicable throughout the
term of this Agreement:
1. RIGHTS OF THIRD PARTIES - All conditions of the
obligations of Lessor hereunder,
including the obligation to make disbursements are imposed
solely and exclusively for the benefit of Lessee, and no
other person shall have standing to require satisfaction of
such conditions in accordance with their terms or be
entitled to assume that Lessor will refuse to make advances
in the absence of strict compliance with any or all thereof,
and no other person shall, under any circumstances, be
deemed to be a beneficiary of such conditions, any and all
of which may be freely waived in whole or in part by Lessor
at any time if in its sole discretion it deems it desirable
to do so. In particular, Lessor makes no representations
and assumes no duties or obligations as to third parties
concerning the quality of the construction of the
Improvements or the absence therefrom of defects. In this
connection, Lessee agrees to and shall indemnify Lessor from
any liability, claims or losses resulting from the
disbursement of the Development Financing proceeds or from
the condition of the Leased Premises whether related to the
quality of construction or otherwise and whether arising
during or after the term of the Development Financing made
by Lessor to Lessee in connection therewith, except for
Lessor's gross negligence or willful misconduct. This
provision shall survive the termination of this Agreement
and shall continue in full force and effect so long as the
possibility of any such liability, claims or losses exists.
2. EVIDENCE OF SATISFACTION OF CONDITIONS - Any condition of
this Agreement which requires the submission of evidence of
the existence or non- existence of a specified fact or facts
implies as a condition the existence or non- existence, as
the case may be, of such fact or facts, and Lessor shall, at
all times, be free independently to establish to its
reasonable satisfaction such existence or non-existence.
3. ASSIGNMENT - Lessee may not assign this Development
Financing Agreement or any of its rights or obligations
hereunder without the prior written consent of Lessor.
4. SUCCESSORS AND ASSIGNS - Whenever in this Agreement one
of the parties hereto is named or referred to, the heirs,
legal representatives, successors and assigns of such
parties shall be included and all covenants and agreements
contained in this Agreement by or on behalf of the Lessee or
by or on behalf of the Lessor shall bind and inure to the
benefit of their respective heirs, legal representatives,
successors and assigns, whether so expressed or not.
5. HEADINGS - The headings of the sections, paragraphs and
subdivisions of this Agreement are for the convenience of
reference only, and are not to be considered a part hereof
and shall not limit or otherwise affect any of the terms
hereof.
6. INVALID PROVISIONS TO AFFECT NO OTHERS - If fulfillment
of any provision hereof, or any transaction related thereto
at the time performance of any such provision shall be due,
shall involve transcending the limit of validity prescribed
by law, then, ipso facto, the obligation to be fulfilled
shall be reduced to the limit of such validity; and such
clause or provision shall be deemed invalid as though not
herein contained, and the remainder of this Agreement shall
remain operative in full force and effect.
7. NUMBER AND GENDER - Whenever the singular or plural
number, masculine or feminine or neuter gender is used
herein, it shall equally include the other.
8. AMENDMENTS - Neither this Agreement nor any provision
hereof may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by
the party against whom enforcement of the change, waiver,
discharge or termination is sought.
9. NOTICES - Any notice which any party hereto may desire or
may be required to give to any of the parties shall be in
writing and the mailing thereof by certified mail, or
equivalent, to the respective parties' addresses set forth
hereinabove or to such other place such party may by notice
in writing designate as its address shall constitute service
of notice hereunder.
10. GOVERNING LAW - This Development Financing Agreement
is made and executed pursuant to and is intended to be
governed by the laws of the State where the Leased Premises
are located.
11. FORCE MAJEURE - Anything in this Agreement to the
contrary notwithstanding, Lessee shall not be deemed in
default with respect to the performance of any of the terms,
provisions, covenants, and conditions of this Agreement
(except for the payment of all other monetary sums payable
hereunder, to which the provisions of this Section shall not
apply), if the same shall be due to any strike, lockout,
civil commotion, warlike operations, invasion, rebellion,
hostilities, sabotage, governmental regulations or controls,
impracticability of obtaining any materials or labor (except
due to the payment of monies), shortage or unavailability of
a source of energy or utility service, Act of God, casualty,
adverse weather conditions, or any cause beyond the
reasonable control of Lessee (except due to the payment of
monies). Provided, however, in order to invoke the
extension of the Completion Date afforded by this section,
Lessee shall notify Lessor in writing within five days of
the occurrence of such force majeure, and in any event the
Completion Date shall be extended as a result of such
occurrence no more than reasonably necessary and in no event
no more than 90 days.
ARTICLE XIII
DAMAGE, DESTRUCTION, CONDEMNATION, USE OF INSURANCE
PROCEEDS
1. DAMAGE OR DESTRUCTION OF THE LEASED PREMISES. Lessee
will give the Lessor prompt notice of any damage to or
destruction of the Leased Premises and in case of loss
covered by policies of insurance the Lessor (whether before
or after the exercise of the Put if Lessee be in default
hereof) is hereby authorized at its option to settle and
adjust any claim arising out of such policies and collect
and receipt for the proceeds payable therefrom, provided,
that the Lessee may itself adjust and collect for any losses
arising out of a single occurrence aggregating not in excess
of $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 Mandatory Put shall expire on
the Final Disbursement Date when the amendment to the Lease
has been executed by all parties as set forth in Article IX
hereof.
ARTICLE XV
RENT, INTEREST, AND RENTAL MODIFICATION DATE
1. Rent shall be payable by Lessee and calculated as
follows, on the funds advanced by Lessor on the Closing Date
for the purchase of the land and related closing costs (the
"Initial Disbursed Funds"): Rent shall accrue in the amount
of $8,814.27 per month absent an uncured Default by Lessee;
absent an uncured Default, accrued rent during the period of
construction of the Improvements shall not be payable until
the Final Disbursement Date. Upon the occurrence of an
uncured Default, all accrued rent shall be immediately due
and payable.
On the Rental Modification Date, if not otherwise in
default hereunder, Lessee shall begin paying Rent by the
first of each month (prorata for the balance of any partial
month in which the Rental Modification Date occurs, payable
with the first such adjusted Rent payable on the first day
of the first full month following the Rental Modification
Date) in the amount of $13,221.41 per month out of pocket.
On the Final Disbursement Date, absent an Uncured Default,
Rent shall be adjusted and documented by the lease amendment
contemplated in Article IX hereof and paid to Lessor as
described in Article F. of the Commitment.
2. Disbursed proceeds of the Development
Financing shall accrue interest at a rate of seven percent
(7.0%) per annum, which interest shall accrue unpaid unless
advanced by Lessor to itself, or Lessee shall default
hereunder, which default shall remain uncured after the
expiration of any applicable notice and cure period.
However, one hundred and eighty days (180) from the date
hereof, (the "Rental Modification Date"), Lessee shall begin
making monthly payments of subsequently accruing interest at
the rate of 10.5% per annum out of pocket ("Out of Pocket
Invoiced Interest") within 5 days after invoice from Lessor.
3. Upon the occurrence of an event of default which
remains uncured after the expiration of applicable notice
and cure periods, disbursed proceeds of the Development
Financing shall accrue interest at a rate of Fifteen Percent
(15.0%) per annum, or the highest rate allowed by law,
whichever is less, and the rental rate on the Initial
Disbursed funds shall increase to Fifteen Percent (15.0%)
per annum, or the highest rental rate allowed by law,
whichever is less.
ARTICLE XVI
COUNTERPART EXECUTION
Counterpart Execution. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an
original and all of which shall constitute one and the same
instrument.
IN WITNESS WHEREOF, Lessee and Lessor have hereunto
caused these presents to be executed on the date first above
written.
Champps Entertainment, Inc.,
a Minnesota corporation
By:/s/ Charles W Redepenning Jr
Its:Sr. V.P.
[Lessor's Signature appears on following page.]
AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED PARTNERSHIP
By:AEI Fund Management XIX, Inc.
By: /s/ Robert P Johnson
Robert P. Johnson, President
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
By: AEI Fund Management 86-A, Inc.
By: /s/ Robert P Johnson
Robert P. Johnson, President
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
By: AEI Fund Management XVII, Inc.
By: /s/ Robert P Johnson
Robert P. Johnson, President
AEI REAL ESTATE FUND XVIII LIMITED PARTNERSHIP
By: AEI Fund Management XVIII, Inc.
By: /s/ Robert P Johnson
Robert P. Johnson, President
Exhibit A
Lot 1, Big Beaver Park Condominium, a condominium, created
by Master Deed dated August 12, 1997, and recorded in
Oakland County Recorder's Office in Liber 17559, Page 647,
Oakland County, Michigan.
EXHIBIT B
PROJECT COST BUDGET
CHAMPPS AMERICANA RESTAURANT
TROY, MI
12/5/97
A) CONSTRUCTION 2,533,055
A-1. GENERAL CONTRACTOR
A-1.1 SITEWORK 325,000
A-1.2 BUILDING 1,775,000
A-2. CONSTRUCTION MATERIAL (OWNER) 254,500
A-3. CONTINGENCY 7.5% 178,555
B) LAND 1,500,000 1,500,000
TOTAL CONSTRUCTION AND LAND 4,033,055
C) CEI COST 99,500
C-1 ATTORNEY FEES 12,000
C-2 R.E FEE PAID BY SELLER/LESSEE 37,500
C-3 CONSTRUCTION SUPERVISION AND 50,000
OVERHEAD
D) FEES / CONSTRUCTION 274,825
D-1 ARCHITECTURAL AND ENGINEERING 83,300
D-2 SITE INVESTIGATION AND SURVEYS 21,500
D-3 PERMITS AND FEES 32,000
D-4 BUILDERS RISH INSURANCE 2,000
D-5 LIQUOR LICENSE PURCHASE 55,000
D-6 TITLE INSURANCE (PREMIUM & POLICY) 18,000
D-7 PROTOTYPE FEE 10,000
D-8 PARCEL DEVELOPMENT FEE 53,014
based on first draw of $1,515,000
E) AEI COSTS 102,620
E-1 DEVELOPMENT INTREST 35,000
E-2 DEVELOPMENT FUNDING FEES 10,000
E-3 ATTORNEY FEES 7,500
E-4 APPRAISAL 4,000
E-5 AEI SITE INSPECTION 1,000
E-6 PROMESA FEES 420
E-7 ADDITIONAL LEGAL
E-8 SALE/LEASEBACK (1%) 44,700
TOTAL PROJECT BUDGET 4,510,000
Exhibit C
APPLICATION FOR PAYMENT
Champps Entertainment, Inc. ("Lessee") hereby requests
a disbursement in the amount
of______________________ ($____________________) pursuant to
that certain Development Financing Agreement dated effective
as of _____, 1997 by and between Lessee, AEI Net
Lease Income & Growth Fund XIX Limited Partnership, AEI Real
Estate Fund XV Limited Partnership, AEI Real Estate Fund
XVII Limited Partnership, and AEI Real Estate Fund XVIII
Limited Partnership ("Lessor"). The amounts requested have
been or will be used to pay the items identified on Exhibit
"A" attached hereto and made a part hereof.
After payment of the amounts requested herein, the
balance of undisbursed Development Financing proceeds of
$_____________________ will be sufficient to complete
construction and pay all related project costs currently
known and approved by Lessor. In the event of cost overruns
which cannot be accounted for by re-allocation among line
items, Lessee agrees to contribute the necessary equity to
complete construction pursuant to Development Financing
Agreement and Development Financing Disbursement Agreement.
All representations and warranties made by the Lessee
in the Development Financing Documents (as defined in the
Development Financing Agreement) are true and correct as of
the date hereof and Lessee is not in default of any of the
provisions thereof.
The total cost of the items for which Lessor is funding
is estimated to be $ . To date,
$______________(exclusive of this request) has been
disbursed pursuant to the Development Financing Disbursing
Agreement.
Dated:______________________________
Lessee:
Champps Entertainment, Inc. a Minnesota corporation
By:
Its:
Lessee
Exhibit D-1
DRAW REQUEST CERTIFICATE
This Certificate made by Champps Entertainment,
Inc.("Lessee").
RECITALS
WHEREAS, Lessee and AEI Net Lease Income & Growth Fund
XIX Limited
Partnership, AEI Real Estate Fund XV Limited Partnership,
AEI Real Estate Fund XVII Limited Partnership, and AEI Real
Estate Fund XVIII Limited Partnership ("Lessor") have
entered into a Development Financing Agreement dated
effective as of December , 1997 (the
"Development Financing Agreement") pursuant to which Lessor
agreed to loan $4,510,000 to Lessee for the purpose of
constructing a Champps Restaurant on certain real property
described on Exhibit "A" attached to the Development
Financing Agreement ("Project"); and
WHEREAS, Lessee and Contractor have entered into a
contract dated , 1997, ("Construction Contract");
and
WHEREAS, the Development Financing Agreement requires
the submission to Escrowee and Lessor of this Certificate
prior to the advancement of any loan proceeds under the
Development Financing Agreement.
NOW, THEREFORE, Lessee does hereby certify to Escrowee
and Lessor as follows:
1. This Draw Request for the period from
___________________________, 1997
to _____________________, 1997, showing work completed to
date of $ and requesting a current
payment of $________________________ relates to costs
incurred pursuant to the Construction Contract, and other
line items, all as shown on the Development Financing Budget
attached to the Development Financing Agreement, and are
costs only pertaining to the Project and are included in the
Development Financing Agreement.
2. As of the date of this Draw Request, the balance
remaining due for all costs under the Construction Contract,
including retainage and approved change orders, to complete
the Project after receipt of payments requested herein will
be $________________.
3. As of the date of this Draw Request, the remaining
balance due on the Development Financing Agreement as set
forth above is sufficient to complete the Project in
accordance with the Plans and Specifications (as defined in
the Development Financing Agreement) to the degree set forth
by the Development Financing Agreement.
4. That all work covered by this Draw Request has been
completed in accordance with the Construction Contract,
Plans and Specifications, and any amendments thereto
approved by Lessor.
5. That all work completed to date conforms to the
Construction Contract, Plans and Specifications, and any
amendments thereto approved by Lessor.
6. That all funds previously disbursed for costs
incurred pursuant to the Construction Contract under the
Development Financing Agreement have been applied as
provided in all previous Draw Request Certificates.
7. That as of the date hereof, to the best of Lessee's
knowledge after due inquiry, the Project complies with the
requirements of all zoning and building laws, ordinances,
regulations and permits; the requirements of all
governmental agencies having jurisdiction over the Project;
and there is no action or proceeding pending before any
court or administrative agency with respect to such laws,
ordinances, regulations and/or any certifications or permits
issued thereunder.
Dated this ______ day of ____________________, 1997.
Lessee: Champps Entertainment, Inc., a Minnesota
corporation
By:______________________________
Its________________________
STATE OF )
)ss.
COUNTY OF )
I, _______________________________________________, a
Notary public of the said State and County do hereby certify
that _________________________________________ personally
appeared before me this day and he is the
____________________________ of Champps Entertainment, Inc.,
a Minnesota corporation, and that by authority duly given
and as the act of the corporation, the foregoing instrument
was signed in its name by its
_______________________________, on behalf of said
corporation.
Witness my hand and official stamp or seal, this ______
day of _________________, 1997.
_________________________________________
My commission expires:________ Notary Public
CONTRACTOR AND ARCHITECT
Exhibit D-2
DRAW REQUEST CERTIFICATE
This Certificate made by
,("Contractor"), AND
("Architect").
RECITALS
WHEREAS, Champps Entertainment, Inc. ("Lessee") and AEI
Net Lease Income & Growth Fund XIX Limited Partnership, AEI
Real Estate Fund XV Limited Partnership, AEI Real Estate
Fund XVII Limited Partnership, and AEI Real Estate Fund
XVIII Limited Partnership ("Lessor") have entered into a
Development Financing Agreement dated effective as of
December , 1997 (the "Development Financing Agreement")
pursuant to which Lessor agreed to loan $4,510,000 to Lessee
for the purpose of constructing a Champps Restaurant on
certain real property described on Exhibit "A" attached to
the Development Financing Agreement ("Project"); and
WHEREAS, Lessee and Contractor have entered into a
contract dated , 1997, ("Construction Contract");
and
WHEREAS, Lessee and Architect have entered into a
contract dated , 1997, ("Architect Contract");
and
WHEREAS, the Development Financing Agreement requires
the submission to Escrowee and Lessor of this Certificate
prior to the advancement of any loan proceeds under the
Development Financing Agreement.
NOW, THEREFORE, Contractor and Architect do hereby
certify to Escrowee and Lessor as follows:
1. This Draw Request for the period from
____________________________, 1997 to _____________________,
1998, showing work completed to date of $
and requesting a current payment of
$________________________ relates to costs incurred pursuant
to the Construction Contract, and are costs only pertaining
to the Project.
2. As of the date of this Draw Request, the balance
remaining due for all costs under the Construction Contract,
including retainage and approved change orders, to complete
the Project after receipt of payments requested herein will
be $________________.
3. As of the date of this Draw Request, the remaining
balance due on the Construction Contract as set forth above
is sufficient to complete the Project in accordance with the
Plans and Specifications (as defined in the Construction
Contract) to the degree set forth by the Construction
Contract.
4. That all work covered by this Draw Request has been
completed in accordance with the Construction Contract,
Plans and Specifications, and any amendments thereto
approved by Lessor.
5. That each subcontractor or materialmen for which
payment is requested in this Draw Request has satisfactorily
completed the work or furnished materials for which payment
is requested in accordance with the Construction Contract.
6. That all work completed to date conforms to the
Construction Contract, Plans and Specifications, and any
amendments thereto approved by Lessor.
7. That all funds previously disbursed for costs
incurred pursuant to the Construction Contract have been
applied as provided in all previous Draw Request
Certificates.
8. That as of the date hereof, to the best of
Contractor's and Architect's knowledge after due inquiry,
the Project complies with the requirements of all zoning and
building laws, ordinances, regulations and permits; the
requirements of all governmental agencies having
jurisdiction over the Project; and there is no action or
proceeding pending before any court or administrative agency
with respect to such laws, ordinances, regulations and/or
any certifications or permits issued thereunder.
Dated this ______ day of ____________________, 1997.
CONTRACTOR:
By:
Its:
ARCHITECT:
By:
Its:
STATE OF )
)ss.
COUNTY OF )
I, _______________________________________________, a
Notary public of the said State and County do hereby certify
that _________________________________________ personally
appeared before me this day and he is the
____________________________ of
, a corporation, and that by authority duly
given and as the act of the corporation, the foregoing
instrument was signed in its name by its
_______________________________, on behalf of said
corporation.
Witness my hand and official stamp or seal, this ______
day of _________________, 1997.
________________________________________
My commission expires:________ Notary Public
STATE OF )
)ss.
COUNTY OF )
I, _______________________________________________, a
Notary public of the said State and County do hereby certify
that _________________________________________ personally
appeared before me this day and he is the
____________________________ of
, a corporation, and that by authority duly
given and as the act of the corporation, the foregoing
instrument was signed in its name by its
_______________________________, on behalf of said
corporation.
Witness my hand and official stamp or seal, this ______
day of _________________, 1997.
_________________________________________
My commission expires:________ Notary Public
NET LEASE AGREEMENT
THIS LEASE, made and entered into effective as of the
23rd day of December, 1997, by and between AEI Net Lease
Income & Growth Fund XIX Limited Partnership ("Fund XIX"), a
Minnesota limited partnership whose corporate general
partner is AEI Fund Management XIX, Inc., a Minnesota
corporation, AEI Real Estate Fund XV Limited Partnership
("Fund XV"), a Delaware limited partnership, whose corporate
general partner is AEI Fund Management 86-A, Inc., AEI Real
Estate Fund XVII Limited Partnership ("Fund XVII"), a
Minnesota limited partnership, whose corporate general
partner is AEI Fund Management XVII, Inc., and AEI Real
Estate Fund XVIII Limited Partnership ("Fund XVIII"), a
Minnesota limited partnership, whose corporate general
partner is AEI Fund Management XVIII, Inc., all of whose
principal business address is 1300 Minnesota World Trade
Center, 30 East Seventh Street, St. Paul, Minnesota 55101
("Lessor"), and Champps Entertainment, Inc., a Minnesota
corporation ("Lessee"), whose principal business address is
One Corporate Place, 55 Ferncroft Road, Danvers, Ma. 01923;
WITNESSETH:
WHEREAS, Lessor is the fee owner of a certain parcel of
real property and improvements located at Unit 1, Big Beaver
Park Condominium, Oakland County, Troy, Michigan, and
legally described in Exhibit "A", which is attached hereto
and incorporated herein by reference; and
WHEREAS, Lessee will be constructing the building and
improvements (together the "Building") on the real property
described in Exhibit "A", which Building is described in the
plans and specifications heretofore submitted to Lessor; and
WHEREAS, Lessee desires to lease said real property and
Building (said real property and Building hereinafter
referred to as the "Leased Premises"), from Lessor upon the
terms and conditions hereinafter provided;
NOW, THEREFORE, in consideration of the Rents, terms,
covenants, conditions, and agreements hereinafter described
to be paid, kept, and performed by Lessee, Lessor does
hereby grant, demise, lease, and let unto Lessee, and Lessee
does hereby take and hire from Lessor and does hereby
covenant, promise, and agree as follows:
ARTICLE 1. LEASED PREMISES
Lessor hereby leases to Lessee, and Lessee leases and
takes from Lessor, the Leased Premises subject to the
conditions of this Lease.
ARTICLE 2. TERM
(A) The term of this Lease ("Term") shall be Twenty
(20) consecutive "Lease Years", as hereinafter defined,
commencing on December 23rd , 1997 ("Occupancy Date").
(B) The first "Lease Year" of the Term shall be for a
period of twelve (l2) consecutive calendar months from the
Occupancy Date. If the Occupancy Date shall be other than
the first day of a calendar month, the first "Lease Year"
shall be the period from the Occupancy Date to the end of
the calendar month of the Occupancy Date, plus the following
twelve (l2) calendar months. Each Lease Year after the
first Lease Year shall be a successive period of twelve
(l2) calendar months.
(C) The parties agree that once the Occupancy Date has
been established, upon the request of either party, a short
form or memorandum of this Lease will be executed for
recording purposes. That short form or memorandum of this
Lease will set forth the actual occupancy and termination
dates of the Term and optional Renewal Terms, as defined in
Article 28 hereof, and the existence of any right of first
refusal, and that said right 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 do comply with the
laws, ordinances, rules, and regulations of all state and
local governments.
(C) Lessee agrees to pay, if not already paid in full,
for all architectural fees and actual construction costs
relating to the Building and other related improvements on
the Leased Premises, in the past, present or future, which
shall include, but not be limited to, plans and
specifications, general construction, carpentry, electrical,
plumbing, heating, ventilating, air conditioning,
decorating, equipment installation, outside lighting,
curbing, landscaping, blacktopping, electrical sign hookup,
conduit and wiring from building, fencing, and parking
curbs, builder's risk insurance (naming Lessor, Lessee, and
contractor as co-insured), and all construction bonds for
improvements made by or at the direction of Lessee.
(D) Opening for business in the Leased Premises by
Lessee shall constitute an acceptance of the Leased Premises
and an acknowledgment by Lessee that the premises are in the
condition described under this Lease.
ARTICLE 4. RENT PAYMENTS
(A) Annual Rent Payable for the first, second, and
third Lease Years: Lessee shall pay to Lessor an annual
Base Rent of $105,771.24, which amount shall be payable in
advance on the first day of each month in equal monthly
installments of $2,296.12 to Lessor Fund XV, $2,296.12 to
Lessor Fund XVII, $2,111.02 to Lessor Fund XVIII, and
$2,111.01 to Lessor Fund XIX. If the first day of the Lease
Term is not the first day of a calendar month, then the
monthly Rent payable for that partial month shall be a
prorated portion of the equal monthly installment of Base
Rent.
(B) Annual Rent Payable beginning in the fourth,
seventh, tenth, thirteenth, sixteenth,nineteenth, and if
renewed according to the terms hereof, the twenty-second,
twenty-fifth, twenty-eighth, thirty-first, and thirty-fourth
Lease Year:
1. In the fourth and every third Lease Year
thereafter, the annual Base Rent due and payable shall
increase by an amount equal to the lesser of: a) Seven and
35/100 Percent (7.35%) of the Base Rent payable for the
immediately prior Lease Year, or b) The "CPI-U Percentage
Increase" of the Base Rent payable for the prior Lease Year.
"CPI-U" shall mean the Consumer Price
Index for All Urban Consumers, (all items), published by the
United States Department of Labor, Bureau of Labor
Statistics (BLS) (1982-84 equal 100), U.S. Cities Average,
or, in the event said index ceases to be published, by any
successor index recommended as a substitute therefor by the
United States Government or a comparable, nonpartisan
substitute reasonably designated by Lessor. If the BLS
changes the base reference period for the Price Index from
1982-84=100, the CPI-U Percentage Increase shall be
determined with the use of such conversion formula or table
as may be published by the BLS.
The term "CPI-U Percentage Increase"
shall mean the percentage increase in the CPI-U determined
by reference to the increase, if any, in the latest monthly
CPI-U issued prior to the first day of the Lease Year for
which Base Rent is being increased, over the CPI-U issued
for the same month in the third year prior (e.g., the
December CPI-U for the year 2000 over the December CPI-U for
the year 1997.) Said month's CPI-U shall be used even
though that CPI-U will not be for the month in which the
renewal term commences. In no event shall the CPI-U
Percentage Increase be less than zero.
(C) Overdue Payments.
Lessee shall pay interest on all overdue payments of
Rent or other monetary amounts due hereunder at the rate of
fifteen percent (15%) per annum or the highest rate allowed
by law, whichever is less, accruing from the date such Rent
or other monetary amounts were properly due and payable.
ARTICLE 5. INSURANCE AND INDEMNITY
(A) Lessee shall, throughout the Term or Renewal
Terms, if any, of this Lease, at its own cost and expense,
procure and maintain insurance which covers the Leased
Premises and improvements against fire, wind, and storm
damage (including flood insurance if the Leased Premises is
in a federally designated flood prone area) and such other
risks (including earthquake insurance, if the Leased
Premises is located in a federally designated earthquake
zone or in an ISO high risk earthquake zone) as may be
included in the broadest form of all risk, extended coverage
insurance as may, from time to time, be available in amounts
sufficient to prevent Lessor or Lessee from becoming a co-
insurer within the terms of the applicable policies. In any
event, the insurance shall not be less than one hundred
percent (100%) of the then insurable value, with such
commercially reasonable deductibles as Lessor may reasonably
require from time to time. Additionally, replacement cost
endorsements, vandalism endorsement, malicious mischief
endorsement, waiver of subrogation endorsement, waiver of co-
insurance or agreed amount endorsement (if available), and
Building Ordinance Compliance endorsement and Rent loss
endorsements (for a period of 90 days) must be obtained.
(B) Lessee agrees to place and maintain throughout the
Term or Renewal Terms, if any, of this Lease, at Lessee's
own expense, public liability insurance with respect to
Lessee's use and occupancy of said premises, including "Dram
Shop" or liquor liability insurance, if the same shall be or
become available in the State of Michigan, with initial
limits of at least $1,000,000 per occurrence/$3,000,000
general aggregate (inclusive of umbrella coverage), or such
additional amounts as Lessor shall reasonably require from
time to time.
(C) Lessee agrees to notify Lessor in writing if
Lessee is unable to procure all or some part of the
aforesaid insurance. In the event Lessee fails to provide
all insurance required under this Lease, Lessor shall have
the right, but not the obligation, to procure such insurance
on Lessee's behalf, following five (5) business days written
notice to Lessee of Lessor's intent to do so (unless
insurance then in place would during such period, or already
has, lapsed, in which case no notice need be given) and
Lessee may obtain such insurance during said five day period
and not then be in default hereunder. If Lessor shall obtain
such insurance, Lessee will then, within five (5) business
days from receiving written notice, pay Lessor the amount of
the premiums due or paid, together with interest thereon at
the lesser of 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.
(D) All policies of insurance provided for or
contemplated by this Article can be under Lessee's blanket
insurance coverage and shall name Lessor, Lessor's corporate
general partner, and Robert P. Johnson, as the general
partner of Lessor, and Lessee as additional insured and loss
payee, as their respective interests (as landlord and
lessee, respectively) may appear, and shall provide that the
policies cannot be canceled, terminated, changed, or
modified without thirty (30) days written notice to the
parties. In addition, all of such policies shall be in
place on or before the Occupancy Date and contain
endorsements by the respective insurance companies waiving
all rights of subrogation, if any, against Lessor. All
insurance companies providing coverages must be rated "A" or
better by Best's Key Rating Guide (the most current
edition), or similar quality under a successor guide if
Best's Key Rating shall cease to be published. Lessee
shall maintain legible copies of any and all policies and
endorsements required herein, to be made available for
Lessor's review and photocopy upon Lessor's reasonable
request from time to time. On the Occupancy Date and no
less than fifteen (15) business days prior to expiration of
such policies, Lessee shall provide Lessor with legible
copies of any and all renewal Certificates of Insurance
reflecting the above terms of the Policies (including
endorsements). Lessee agrees that it will not settle any
property insurance claims affecting the Leased Premises in
excess of $25,000 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 Premises.
(E) Lessee shall defend, indemnify, and hold Lessor
harmless against any and all claims, damages, and lawsuits
arising after the Occupancy Date of this Lease and any
orders, decrees or judgments which may be entered therein,
brought for damages or alleged damages resulting from any
injury to person or property or from loss of life sustained
in or about the Leased Premises, unless such damage or
injury results from the intentional misconduct or the gross
negligence of Lessor and Lessee agrees to save Lessor
harmless from, and indemnify Lessor against, any and all
injury, loss, or damage, of whatever nature, to any person
or property caused by, or resulting from any act, omission,
or negligence of Lessee or any employee or agent of Lessee.
In addition, Lessee hereby releases Lessor from any and all
liability for any loss or damage caused by fire or any of
the extended coverage casualties, unless such fire or other
casualty shall be brought about by the intentional
misconduct or negligence of Lessor. In the event of any
loss, damage, or injury caused by the joint negligence or
willful misconduct of Lessor and Lessee, they shall be
liable therefor in accordance with their respective degrees
of fault.
(F) Lessor hereby waives any and all rights that it
may have to recover from Lessee damages for any loss
occurring to the Leased Premises by reason of any act or
omission of Lessee; provided, however, that this waiver is
limited to those losses for which Lessor is compensated by
its insurers, if the insurance required by this Lease is
maintained. Lessee hereby waives any and all right that it
may have to recover from Lessor damages for any loss
occurring to the Leased Premises by reason of any act or
omission of Lessor; provided, however, that this waiver is
limited to those losses for which Lessee is, or should be if
the insurance required herein is maintained, compensated by
its insurers.
ARTICLE 6. TAXES, ASSESSMENTS AND UTILITIES
(A) Lessee shall be liable and agrees to pay 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
for the period prior to the expiration of the term hereof,
or any Renewal Term, if exercised.
(B) Lessee shall pay all real estate taxes,
assessments for public improvements or benefits, and other
governmental impositions, duties, and charges of every kind
and nature whatsoever which shall or may, during the term of
this Lease, be charged, laid, levied, assessed, or imposed
upon, or become a lien or liens upon the Leased Premises or
any part thereof. 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.
(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.
Lessee shall pay within 60 days of the expiration of the
term hereof Lessor's reasonable estimate of Lessee's pro-
rata share of real estate taxes for the last tax year of the
term hereof, based upon the last available tax bill. Lessor
shall give Lessee notice of such estimated pro-rata real
estate taxes no later than 75 days from the end of the term
hereof. Upon receipt of the actual statement of real estate
taxes for such prorated period, Lessor shall either refund
to Lessee any over payment of the pro-rata Lessee
obligation, or shall assess and Lessee shall pay promptly
upon notice any remaining portion of the Lessee's pro-rata
obligation for such real estate taxes.
(D) Lessee shall have the right to contest or review
by legal proceedings or in such other manner as may be legal
(which, if instituted, shall be conducted solely at Lessee's
own expense) any tax, assessment for public improvements or
benefits, or other governmental imposition aforementioned,
upon condition that, before instituting such proceeding
Lessee shall pay (under protest) such tax or assessments for
public improvements or benefits, or other governmental
imposition, duties and charges aforementioned, unless such
payment would act as a bar to such contest or interfere
materially with the prosecution thereof and in such event
Lessee shall post with Lessor alternative security
reasonably satisfactory to Lessor. All such proceedings
shall be begun as soon as reasonably possible after the
imposition or assessment of any contested items and shall
be prosecuted to final adjudication with reasonable
dispatch. In the event of any reduction, cancellation, or
discharge, Lessee shall pay the amount that shall be finally
levied or assessed against the Leased Premises or
adjudicated to be due and payable, and, if there shall be
any refund payable by the governmental authority with
respect thereto, if Lessee has paid the expense of Lessor in
such proceedings, Lessee shall be entitled to receive and
retain the refund, subject, however, to apportionment as
provided during the first and last years of the term of this
Lease.
(E) Lessor, within sixty (60) days after notice to
Lessee if Lessee fails to commence such proceedings, may,
but shall not be obligated to, contest or review by legal
proceedings, or in such other manner as may be legal, and at
Lessor's own expense, any tax, assessments for public
improvements and benefits, or other governmental imposition
aforementioned, which shall not be contested or reviewed, as
aforesaid, by Lessee, and unless Lessee shall promptly join
with Lessor in such contest or review, Lessor shall be
entitled to receive and retain any refund payable by the
governmental authority with respect thereto.
(F) Lessor shall not be required to join in any
proceeding referred to in this Article,
unless in Lessee's reasonable opinion, the provisions of any
law, rule, or regulation at the time in effect shall require
that such a proceeding be brought by and/or in the name of
Lessor, in which event Lessor shall upon written request,
join in such proceedings or permit the same to be brought in
its name, all at no cost or expense to Lessor.
(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, franchise tax, excise tax, on Rents imposed
by the State where the Leased Premises are located. At
Lessor's option, Lessee shall deposit with Lessor on the
first day of each and every month during the term hereof, an
amount equal to one-twelfth (1/12) of any estimated sales
tax payable to the State in which the property is situated
for Rent received by Lessor hereunder ("Deposit"). From
time to time out of such Deposit Lessor will pay the sales
tax to the State in which the property is situated as
required by law. In the event the Deposit on hand shall not
be sufficient to pay said tax when the same shall become due
from time to time, or the prior payments shall be less than
the current estimated monthly amounts, then Lessee shall pay
to Lessor on demand any amount necessary to make up the
deficiency. The excess of any such Deposit shall be
credited to subsequent payments to be made for such items.
If a default or an event of default shall occur under the
terms of this Lease, Lessor may, at its option, without
being required so to do, apply any Deposit on hand to cure
such default, in such order and manner as Lessor may elect.
ARTICLE 7. PROHIBITION ON ASSIGNMENTS AND SUBLETTING;
TAKE-BACK RIGHTS
(A) Except as otherwise expressly provided in this
Article, Lessee shall not, without obtaining the prior
written consent of Lessor, in each instance:
1. assign or otherwise transfer this Lease,
or any part of Lessee's right, title or interest therein;
2. sublet all or any part of the Leased
Premises or allow all or any part of the Leased Premises to
be used or occupied by any other Persons (herein defined as
a Party other than Lessee, be it a corporation, a
partnership, an individual or other entity); or
3. mortgage, pledge or otherwise encumber
this Lease, or the Leased Premises.
(B) For the purposes of this Article:
1. the transfer of voting control of any
class of capital stock of any corporate Lessee or sublessee,
or the transfer voting control of the total interest in any
other person which is a Lessee or sublessee, however
accomplished, whether in a single transaction or in a series
of related or unrelated transactions, shall be deemed an
assignment of this Lease, or of such sublease, as the case
may be;
2. an agreement by any other Person,
directly or indirectly, to assume Lessee's obligations under
this Lease shall be deemed an assignment;
3. any Person to whom Lessee's interest
under this Lease passes by operation of law, or otherwise,
shall be bound by the provisions of this Article;
4. each material modification, amendment
or extension or any sublease to which Lessor has previously
consented shall be deemed a new sublease; and
5. Lessee shall present the signed consent
to such assignment and/or subletting from any guarantors of
this Lease, such consent to be in form and substance
reasonably satisfactory to Lessor.
Lessee agrees to furnish to Lessor within five (5)
business days following demand at any time such information
and assurances as Lessor may reasonably request that neither
Lessee, nor any previously permitted sublessee or assignee,
has violated the provisions of this Article.
(C) If Lessee agrees to assign this Lease or to sublet
all or any portion of the Leased Premises, Lessee shall,
prior to the effective date thereof (the "Effective Date"),
deliver to Lessor executed counterparts of any such
agreement and of all ancillary agreements with the proposed
assignee or sublessee, as applicable. If Lessee shall fail
to do so, and shall have surrendered possession of the
Leased Premises in violation of its duty of prior notice and
failed to obtain Lessor's prior consent (if and where
required herein), and, if in such event, Lessor in its sole
discretion (except as otherwise specifically limited herein)
shall not consent to a proposed sublease or assignment,
Lessor shall then have all of the following rights, any of
which Lessor may exercise by written notice to Lessee given
within thirty (30) days after Lessor receives the
aforementioned documents:
1. with respect to a proposed assignment of
this Lease, the right to terminate this Lease on the
Effective Date as if it were the Expiration Date of this
Lease;
2. with respect to a proposed subletting of
the entire Leased Premises, the right to terminate this
Lease on the Effective Date as if it were the Expiration
Date; or
3. with respect to a proposed subletting
of less than the entire Leased Premises, the right to
terminate this Lease as to the portion of the Leased
Premises affected by such subletting on the Effective Date,
as if it were the Expiration Date, in which case Lessee
shall promptly execute and deliver to Lessor an appropriate
modification of this Lease in form satisfactory to Lessor in
all respects.
4. with respect to a proposed subletting
or proposed assignment of this Lease, impose such conditions
upon Lessor's consent as Lessor shall determine in its sole
discretion.
(D) If Lessor exercises any of its options under
Article 7(C) above, (and if Lessor shall impose conditions
upon its consent and Lessee shall fail to meet any
conditions Lessor may impose upon its consent), Lessor may
then lease the Leased Premises or any portion thereof to
Lessee's proposed assignee or sublessee, as the case may be,
without liability whatsoever to Lessee.
(E) Notwithstanding anything above to the contrary,
Lessor agrees to consent to any assignment or sublease all
or any portion of the Lessee's interests herein to Unique
Casual Restaurants, Inc., or a franchisee or licensee in
good standing of Champps Entertainment Inc, for the Champps
restaurant concept, provided Lessor is given prior written
notice of such sublease or assignment, accompanied by a copy
of such sublease or assignment, and the consents of Lessee
and Guarantors (such consent to be in form and substance
satisfactory to Lessor) to such assignment or sublet,
affirming their continued liability hereunder (or under
their guaranty, respectively).
Lessor agrees that its consent to any other proposed
assignment or sublet shall not be unreasonably withheld or
delayed, provided Lessor is given prior written notice of
such sublease or assignment, accompanied by a copy of such
sublease or assignment, and the consents of Lessee and
Guarantors (such consent to be in form and substance
satisfactory to Lessor) to such assignment or sublet,
affirming their continued liability hereunder (or under
their guaranty, respectively).
(F) 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: The interior and exterior
portions of all doors; door checks and operators; windows;
plate glass; plumbing; water and sewage facilities;
fixtures; electrical equipment; interior walls; ceilings;
signs; roof; structure; interior building appliances and
similar equipment; heating and air conditioning equipment;
and any equipment owned by Lessor and leased to Lessee
hereunder, as itemized on Exhibit B attached hereto and
incorporated herein by reference; and further agrees to
replace any of said equipment when necessary. Lessee
further agrees to be responsible for, at its own expense,
snow removal, lawn maintenance, landscaping, maintenance of
the parking lot (including parking lines, seal coating, and
blacktop surfacing), and other similar items.
(B) If Lessee refuses or neglects to commence or
complete repairs promptly and adequately, after prior
written notice as required under Article 16(B) (except in
cases of emergency to prevent waste or preserve the safety
and integrity of the Leased Premises, in which case no
notice need be given), Lessor may cause such repairs to be
made, but shall not be required to do so, and Lessee shall
pay the cost thereof to Lessor within five (5) business days
following demand. It is understood that Lessee shall pay
all expenses and maintenance and repair during the term of
this Lease. If Lessee is not then in default hereunder,
Lessee shall have the right to make repairs and improvements
to the Leased Premises without the consent of Lessor if such
repairs and improvements do not exceed 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. In the
event of making such alterations as herein provided, Lessee
further agrees to indemnify and save harmless Lessor from
all expense, liens, claims or damages to either persons or
property or the Leased Premises which may arise out of or
result from the undertaking or making of said repairs,
improvements, alterations or additions, or Lessee's failure
to make said repairs, improvements, alterations or
additions.
ARTICLE 9. COMPLIANCE WITH LAWS AND REGULATIONS
Lessee will comply with all statutes, ordinances,
rules, orders, regulations and requirements of all federal,
state, city and local governments, and with all rules,
orders and regulations of the applicable Board of Fire
Underwriters which affect the use of the improvements.
Lessee will comply with all easements, restrictions, and
covenants of record against or affecting the Leased Premises
and any franchise or license agreements required for
operation of the Leased Premises in accordance with Article
14 hereof.
ARTICLE 10. SIGNS
Lessee shall have the right to install and maintain a
sign or signs advertising Lessee's business, provided that
the signs conform to law, and further provided that the sign
or signs conform specifically to the written requirements of
the appropriate governmental authorities.
ARTICLE 11. SUBORDINATION
(A) Lessor reserves the right and privilege to subject
and subordinate this Lease at all times to the lien of any
mortgage or mortgages now or hereafter placed upon Lessor's
interest in the Leased Premises and on the land and
buildings of which said premises are a part, or upon any
buildings hereafter placed upon the land of which the Leased
Premises are a part, provided such mortgagee shall execute
its standard form, commercially reasonable subordination,
attornment and non-disturbance agreement. Lessor also
reserves the right and privilege to subject and subordinate
this Lease at all times to any and all advances to be made
under such mortgages, and all renewals, modifications,
extensions, consolidations, and replacements thereof,
provided such mortgagee shall execute its standard form,
commercially reasonable subordination, attornment and non-
disturbance agreement.
(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. If any
part of the Leased Premises shall be so taken as to render
the remainder thereof materially unusable in the opinion of
a licensed third party arbitrator reasonably approved by
Lessor and Lessee, for the purposes for which the Leased
Premises were leased, then Lessor and Lessee shall each have
the right to terminate this Lease on thirty (30) days notice
to the other given within ninety (90) days after the date of
such taking. In the event that this Lease shall terminate
or be terminated, the Rent shall, if and as necessary, be
paid up to the day that possession was surrendered.
(B) If any part of the Leased Premises shall be so
taken such that it does not materially interfere with the
business of Lessee, then Lessee shall, with the use of the
condemnation proceeds to be made available by Lessor, but
otherwise at Lessee's own cost and expense, restore the
remaining portion of the Leased Premises to the extent
necessary to render it reasonably suitable for the purposes
for which it was leased. Lessee shall make all repairs to
the building in which the Leased Premises is located to the
extent necessary to constitute the building a complete
architectural unit. Provided, however, that such work shall
not exceed the scope of the work required to be done by
Lessee in originally constructing such building unless
Lessee shall demonstrate to Lessor's reasonable satisfaction
the availability of funds to complete such work. Provided,
further, the cost thereof to Lessor shall not exceed the
proceeds of its condemnation award, all to be done without
any adjustments in Rent to be paid by Lessee. This lease
shall be deemed amended to reflect the taking in the legal
description of the Leased Premises.
(C) All compensation awarded or paid upon such total
or partial taking of the Leased Premises shall belong to and
be the property of Lessor without any participation by
Lessee, whether such damages shall be awarded as
compensation for diminution in value to the leasehold or to
the fee of the premises herein leased. Nothing contained
herein shall be construed to preclude Lessee from
prosecuting any claim directly against the condemning
authority in such proceedings for: Loss of business; damage
to or loss of value or cost of removal of inventory, trade
fixtures, furniture, and other personal property belonging
to Lessee; provided, however, that no such claim shall
diminish or otherwise adversely affect Lessor's award or the
award of any fee mortgagee.
ARTICLE 13. RIGHT TO INSPECT
Lessor reserves the right to enter upon, inspect and
examine the Leased Premises at any time during business
hours, after reasonable notice to Lessee, and Lessee agrees
to allow Lessor free access to the Leased Premises to show
the premises. Upon default by Lessee or at any time within
ninety (90) days of the expiration or termination of the
Lease, Lessee agrees to allow Lessor to then place "For
Sale" or "For Rent" signs on the Leased Premises. Lessor
and Lessor's representatives shall at all times while upon
or about the Leased Premises observe and comply with
Lessee's reasonable health and safety rules, regulations,
policies and procedures. Lessor agrees to indemnify and
hold Lessee, its successors, assigns, agents and employees
from and against any liability, claims, demands, cause of
action, suits and other litigation or judgements of every
kind and character, including injury to or death of any
person or persons, or trespass to, or damage to, or loss or
destruction of, any property, whether real or personal, to
the extent resulting from the negligence or willful
misconduct or Lessor or Lessor's representatives while upon
or about the Leased Premises.
ARTICLE 14. EXCLUSIVE USE
(A) After the Occupancy Date, Lessee expressly agrees
and warrants that the Leased Premises will be used
exclusively as a Champps Restaurant or other casual dining
sit-down restaurant. In any other such case, after
obtaining Lessor's prior written consent, such consent not
to be unreasonably withheld or delayed, Lessee may conduct
any lawful business from the Leased Premises. Lessee
acknowledges and agrees that any other use without the prior
written consent of Lessor will constitute a default under
and a violation and breach of this Lease. Lessee agrees:
To open for business within a reasonable period of time
after completion of construction of the contemplated
Improvements; to operate all of the Leased Premises during
the Term or Renewal Terms during regular and customary hours
for businesses similar to the permitted exclusive use stated
herein, unless prevented from doing so by causes beyond
Lessee's control or due to remodeling; and to conduct its
business in a professional and reputable manner.
(B) If the Leased Premises are not operated as a
Champps Restaurant or other casual dining sit-down
restaurant or other permitted use hereunder, or remain
closed for thirty (30) consecutive days (unless such closure
results from reasons beyond Lessee's reasonable control) and
in the event Lessee fails to pay Rent when due or fulfill
any other obligation hereunder, then Lessee shall be in
default hereunder and Lessor may, at its option, cancel this
Lease by giving written notice to Lessee or exercise any
other right or remedy that Lessor may have; provided,
however, that closings shall be reasonably permitted for
replacement of trade fixtures or during periods of repair
after destruction or due to remodeling.
ARTICLE 15. DESTRUCTION OF PREMISES
If, during the term of this Lease, the Leased Premises
are totally or partially destroyed by fire or other
elements, within a reasonable time (but in no event longer
than one hundred eighty (180) days and subject to the
provisions herein below), Lessee shall repair and restore
the improvements so damaged or destroyed as nearly as may be
practical to their condition immediately prior to such
casualty. All rents payable by Lessee shall be abated
during the period of repair and restoration to the extent
that Lessor shall be compensated by the proceeds of the rent
loss insurance required to be maintained by Lessee
hereunder.
Provided Lessee is not in default hereunder (and
retains according to the terms hereof the right to rebuild)
with the Lessor's prior written consent, which consent shall
not be unreasonably withheld or delayed, Lessee shall have
the right to promptly and in good faith settle and adjust
any claim under such insurance policies with the insurance
company or companies on the amounts to be paid upon the
loss. The insurance proceeds shall be used to reimburse
Lessee for the cost of rebuilding or restoration of the
Leased Premises. Risk that the insurance company shall be
insolvent or shall refuse to make insurance proceeds
available shall be with Lessee. The Leased Premises shall be
so restored or rebuilt so as to be of at least equal value
and substantially the same character as prior to such damage
or destruction. If the insurance proceeds are less than
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.
Any insurance proceeds remaining with Escrowee after
the completion of the repair or restoration shall be paid to
Lessor to reduce the sum of monies expended by Lessor to
acquire its interest in the Lease Premises and rent
hereunder shall be reduced by 10.5% of such amount.
If the proceeds from the insurance are insufficient,
after review of the bids for completion of such
improvements, or should become insufficient during the
course of construction, to pay for the total cost of repair
or restoration, Lessee shall, prior to commencement of work,
demonstrate to Escrowee and Lessor's reasonable
satisfaction, the availability of such funds necessary to
completion construction and Lessee shall deposit the same
with Escrowee for disbursement under the construction escrow
agreement.
Provided, further, that should the Leased Premises be
damaged or destroyed to the extent of fifty (50%) percent of
its value or such that Lessee cannot carry on business as a
casual dining restaurant without (in the opinion of a
licensed third party architect reasonably approved by Lessor
and Lessee) being closed for more than sixty (60) days
(which duration of closure may be established by Lessee by
the affidavit of the approved independent third party
architect as to the estimated time of repair) during the
last two (2) years of the remaining term of this Lease or
any of the option terms of this Lease, if any further
options to renew remain, Lessee may elect within 30 days of
such damage, to then exercise at least one (1) option to
renew this Lease so that the remaining term of the Lease is
not less than five (5) years in order to be entitled to such
insurance proceeds for restoration or rebuilding. Absent
such election, this Lease shall terminate upon Lessor's
receipt of funds at least equal to the estimated cost of
such repair or restoration.
ARTICLE 16. ACTS OF DEFAULT
Each of the following shall be deemed a default by
Lessee and a breach of this Lease:
(A) Failure to pay the Rent or any
monetary obligation herein reserved, or any part thereof
when the same shall be due and payable. Interest and late
charges for failure to pay Rent when due shall accrue from
the first date such Rent was due and payable; provided,
however, Lessee shall have five (5) business days after
written notice from Lessor within which to cure the failure
to pay the Rent or any monetary obligation herein reserved.
(B) Failure to do, observe, keep
and perform any of the other terms, covenants, conditions,
agreements and provisions in this Lease to be done,
observed, kept and performed by Lessee; provided, however,
that Lessee shall have Thirty (30) days after written notice
from Lessor within which to cure such default, or such
longer time as may be reasonably necessary if such default
cannot reasonably be cured within Thirty (30) days, if
Lessee is diligently pursuing a course of conduct that in
Lessor's reasonable opinion is capable of curing such
default, but in any event such longer time shall not exceed
120 days after written notice from Lessor of the default
hereunder.
(C) The abandonment of the
premises by Lessee, the adjudication of Lessee as a
bankrupt, the making by Lessee of a general assignment for
the benefit of creditors, the taking by Lessee of the
benefit of any insolvency act or law, the appointment of a
permanent receiver or trustee in bankruptcy for Lessee
property, or the appointment of a temporary receiver which
is not vacated or set aside within sixty (60) days from the
date of such appointment; provided, however, that the
foregoing shall not constitute events of default so long as
Lessee continues to otherwise satisfy its obligations
(including but not limited to the payment of Rent)
hereunder.
ARTICLE 17. TERMINATION FOR DEFAULT
In the event of any uncured default by Lessee and at
any time thereafter, Lessor may serve a written notice upon
Lessee that Lessor elects to terminate this Lease. This
Lease shall then terminate on the date so specified as if
that date had been originally fixed as the expiration date
of the term herein granted, provided, however, that Lessee
shall have continuing liability for future rents for the
remainder of the original term and any exercised renewal
term as set forth in Article 19, notwithstanding any earlier
termination of the Lease hereunder (except where Lessee has
exercised a right to terminate where granted herein),
preserving unto Lessor the benefit of its bargained-for
rental payments.
ARTICLE 18. LESSOR'S RIGHT OF RE-ENTRY
In the event that this Lease shall be terminated as
hereinbefore provided, or by summary proceedings or
otherwise, or in the event of an uncured default hereunder
by Lessee, or in the event that the premises or any part
thereof, shall be abandoned by Lessee and Rent shall not be
paid or other obligations (including but not limited to
repair and maintenance obligations) of Lessee hereunder
shall not be met, then Lessor or its agents, servants or
representatives, may immediately or at any time thereafter,
re-enter and resume possession of the premises or any part
thereof, and remove all persons and property therefrom,
either by summary dispossess proceedings or by a suitable
action or proceeding at law, or by force or otherwise
without being liable for any damages therefor, except for
damages resulting from Lessor's negligence or willful
misconduct. Notwithstanding anything above to the contrary,
if Lessee is still in possession of the Leased Premises,
Lessor agrees to use such legal proceedings (summary or
otherwise) prescribed by law to regain possession of the
Leased Premises.
ARTICLE 19. LESSEE'S CONTINUING LIABILITY
(A) Should Lessor elect to re-enter as provided in
this Lease or should it take possession pursuant to legal
proceedings or pursuant to any notice provided for by law,
Lessor shall undertake commercially reasonable efforts to
mitigate Lessee's continuing liability hereunder as such
efforts may be prescribed by law or statute (which shall
include listing the Leased Premises with a licensed
commercial real estate broker and securing the property
against waste, but shall not otherwise include the
expenditure of Lessor's funds, unless the same be required
by law or statute), and in addition, Lessor may either (i)
terminate this Lease or (ii) it may from time to time,
without terminating the contractual obligation of Lessee to
pay Rent under this Lease, make such alterations and repairs
as may be necessary to relet the Leased Premises or any part
thereof for the remainder of the original Term or any
exercised Renewal Terms, at such Rent or Rents, and upon
such other terms and conditions as Lessor in its sole
discretion may deem advisable. Termination of Lessee's
right to possession by Court Order shall be sufficient
evidence of the termination of Lessee's possessory rights
under this Lease, and the filing of such an Order shall be
notice of the termination of Lessee's Right of First Refusal
as set forth in any Memorandum of Lease of record.
(B) Upon each such reletting, without termination of
the contractual obligation of Lessee to pay Rent under this
Lease, all Rents received by Lessor shall be applied as
follows:
1. First, to the payment of any
indebtedness other than Rent due hereunder from Lessee to
Lessor;
2. Second, to the payment of any
costs and expenses of such reletting, including brokerage
fees and attorney's fees and of costs of such alterations
and repairs;
3. Third, to the payment of Rent and
other monetary obligations due and unpaid hereunder;
4. Finally, the residue, if any,
shall be held by Lessor and applied in payment of future
Rent as the same may become due and payable hereunder.
If such Rents received from such reletting during any month
are less than that to be paid during that month by Lessee
hereunder, Lessee shall pay any such deficiency to Lessor.
Such deficiency shall be calculated and paid monthly. No
such re-entry or taking possession of such Leased Premises
by Lessor shall be construed as an election on its part to
terminate Lessee's contractual obligations under this Lease
respecting the payment of rent and obligations for the costs
of repair and maintenance unless a written notice of such
intention be given to Lessee.
(C) Notwithstanding any such reletting without
termination, Lessor may at any time thereafter elect to
terminate this Lease for any uncured breach.
(D) In addition to any other remedies Lessor may have
with this Article 19, Lessor may recover from Lessee all
damages it may incur by reason of any uncured breach,
including: The cost of recovering and reletting the Leased
Premises; reasonable attorney's fees; and, the present value
(discounted at a rate of 8% per annum) of the excess of the
amount of Rent and charges equivalent to Rent reserved in
this Lease for the remainder of the Term over the then
reasonable Rent value of the Leased Premises (or the actual
Rents receivable by Lessor, if relet), (the Lessee bearing
the burden of proof to demonstrate the amount of rental loss
for the same period, that through reasonable efforts to
mitigate damages, could have been avoided) for the remainder
of the Term, all of which amounts shall be immediately due
and payable from Lessee to Lessor in full. In the event
that the Rent obtained from such alternative or substitute
tenant is more than the Rent which Lessee is obligated to
pay under this Lease, then such excess shall be paid to
Lessor provided that Lessor shall credit such excess against
the outstanding obligations of Lessee due pursuant hereto, if any.
(E) It is the object and purpose of this Article 19
that Lessor shall be kept whole and shall suffer no damage
by way of non-payment of Rent or by way of diminution in
Rent. Lessee waives and will waive all rights to trial by
jury in any summary proceedings or in any action brought to
recover Rent herein which may hereafter be instituted by
Lessor against Lessee in respect to the Leased Premises.
Lessee hereby waives any rights of re-entry it may have or
any rights of redemption or rights to redeem this Lease upon
a termination of this Lease.
ARTICLE 20. PERSONALTY, FIXTURES AND EQUIPMENT
(A) All building fixtures, building machinery, and
building equipment used in connection with the operation of
the Leased Premises including, but not limited to, heating,
electrical wiring, lighting, ventilating, plumbing, walk-in
refrigerators/coolers, walk-in freezers, air conditioning
systems, and the equipment owned by Lessor and leased to
Lessee hereunder as specifically set forth on Exhibit B
attached hereto and incorporated herein by reference shall
be the property of Lessor. All other trade fixtures and all
other articles of personal property owned by Lessee shall
remain the property of Lessee.
(B) Lessee shall furnish and pay for any and all
equipment, furniture, trade fixtures, and signs, except for
such items, if any, described in Article 20(A) above, as
owned by Lessor. Lessee agrees that Lessor shall have a
lien on all Lessee's equipment, furniture, trade fixtures,
furnishings, and signs as security for the performance of
and compliance with this Lease, subject to the rights of any
bona fide third party's security interest in such property.
Provided Lessee is not in default hereunder, Lessor will
agree that its interest in the personal property of Lessee
will be subordinated to financing which may exist or which
Lessee may cause to exist in the future on that same
personal property.
(C) At the end of the term of this Lease, the property
described at Article 20(B) above, after written notice to
Lessor given at least ten (10) business days prior to any
proposed removal, may be removed from the Leased Premises by
Lessee regardless of whether or not such property is
attached to the Leased Premises so as to constitute a
"fixture" within the meaning of the law; however, all
damages and repairs to the Leased Premises which may be
caused by the removal of such property shall be paid for by
Lessee.
ARTICLE 21. LIENS
Lessee shall not do or cause anything to be done
whereby the Leased Premises may be encumbered by any
mechanic's or other liens. Whenever and as often as any
mechanic's or other lien is filed against said Leased
Premises purporting to be for labor or materials furnished
or to be furnished to Lessee, Lessee shall remove the lien
of record by payment or by bonding with a surety company
authorized to do business in the state in which the property
is located, within forty-five (45) days from the date of the
filing of said mechanic's or other lien and delivery of
notice thereof to Lessee. Should Lessee fail to take the
foregoing steps within said forty-five (45) day period (or
in any event, prior to the expiration of the time within
which Lessee may bond over such lien to remove it as a lien
upon the Leased Premises), Lessor shall have the right,
among other things, to pay said lien without inquiring into
the validity thereof, and Lessee shall forthwith reimburse
Lessor for the total expense incurred by it in discharging
said lien as additional Rent hereunder.
ARTICLE 22. NO WAIVER BY LESSOR EXCEPT IN WRITING
No agreement to accept a surrender of the Leased
Premises or termination of this Lease shall be valid unless
in writing signed by Lessor. The delivery of keys to any
employee of Lessor or Lessor's agents shall not operate as a
termination of the Lease or a surrender of the premises.
The failure of Lessor to seek redress for violation of any
rule or regulation, shall not prevent a subsequent act,
which would have originally constituted a violation, from
having all the force and effect of an original violation.
Neither payment by Lessee or receipt by Lessor of a lesser
amount than the Rent herein stipulated shall be deemed to be
other than on account of the earliest stipulated Rent. Nor
shall any endorsement or statement on any check nor any
letter accompanying any check or payment as Rent be deemed
an accord and satisfaction. Lessor may accept such check or
payment without prejudice to Lessor's right to recover the
balance of such Rent or pursue any other remedy provided in
this Lease. This Lease contains the entire agreement
between the parties, and any executory agreement hereafter
made shall be ineffective to change it, modify it or
discharge it, in whole or in part, unless such executory
agreement is in writing and signed by the party against whom
enforcement of the change, modification or discharge is
sought.
ARTICLE 23. QUIET ENJOYMENT
Lessor covenants that Lessee, upon paying the Rent set
forth in Article 4 and all other sums herein reserved as
Rent and upon the due performance of all the terms,
covenants, conditions and agreements herein contained on
Lessee's part to be kept and performed, shall have, hold and
enjoy the Leased Premises free from molestation, eviction,
or disturbance by Lessor, or by any other person or persons
lawfully claiming the same, and that Lessor has good right
to make this Lease for the full term granted, including
renewal periods.
ARTICLE 24. BREACH - PAYMENT OF COSTS AND ATTORNEYS' FEES
Each party agrees to pay and discharge all reasonable
costs, and actual attorneys' fees, including but not limited
to attorney's fees incurred at the trial level and in any
appellate or bankruptcy proceeding, and expenses that shall
be incurred by the prevailing party in enforcing the
covenants, conditions and terms of this Lease or defending
against an alleged breach, including the costs of reletting.
Such costs, attorneys fees, and expenses if incurred by
Lessor shall be considered as Rent as due and owing in
addition to any Rent defined in Article 4 hereof.
ARTICLE 25. ESTOPPEL CERTIFICATES
Either party to this Lease will, at any time, upon not
less than ten (10) business days prior request by the other
party, execute, acknowledge and deliver to the requesting
party a statement in writing, executed by an executive
officer of such party, certifying that: (a) this Lease is
unmodified (or if modified then disclosure of such
modification shall be made); (b) this Lease is in full force
and effect; (c) the date to which the Rent and other charges
have been paid; and (d) to the knowledge of the signer of
such certificate that the other party is not in default in
the performance of any covenant, agreement or condition
contained in this Lease, or if a default does exist,
specifying each such default of which the signer may have
knowledge. It is intended that any such statement delivered
pursuant to this Article may be relied upon by any
prospective purchaser or mortgagee of the Leased Premises or
any assignee of such mortgagee or a purchaser of the
leasehold estate.
ARTICLE 26. FINANCIAL STATEMENTS
During the term of this Lease, Lessee will, within
ninety (90) days after the end of Lessee's fiscal year,
furnish its financial statements to Lessor. Lessee's
financial statements shall include, at a minimum, a
consolidated balance sheet and statement of operations, and
do not need to be prepared by an independent certified
public accountant, but shall be prepared in conformity with
generally accepted accounting principles (hereafter "GAAP")
and be represented and warranted in writing as true and
correct by the chief financial officer or other authorized
officer of Lessee. Additionally, during the term of the
Lease, Lessee will within forty-five (45) days from the end
of each quarter of each fiscal year, furnish Lessor with
Lessee's financial statements and operating statements of
the Leased Premises for such quarter. Lessor shall have the
right to require such financial statements and operating
statements on a monthly basis after the occurrence of a
default. Said quarterly (or monthly, if requested by
Lessor) statements do not need to be prepared by an
independent certified public accountant, but shall be
represented and warranted in writing as true and correct by
the chief financial officer or other authorized officer of
Lessee. The financial statements shall conform to GAAP, and
include, at a minimum, a balance sheet and statement of
operations.
ARTICLE 27. MORTGAGE
Lessee does hereby agree to make reasonable
modifications of this Lease requested by any Mortgagee of
record from time to time, provided such modifications are
not substantial and do not increase any of the Rents or
obligations of Lessee under this Lease or substantially
modify any of the business elements of this Lease.
ARTICLE 28. OPTION TO RENEW
If this Lease is not previously canceled or terminated
and if Lessee has materially complied with and performed all
of the covenants and conditions in this Lease after
applicable cure periods and is not currently in default,
then Lessee shall have the option to renew this Lease upon
the same conditions and covenants contained in this Lease
for Three (3) consecutive periods of Five (5) years each
(singularly "Renewal Term"). Rent during the Twenty-Second,
Twenty-Fifth, Twenty-Eighth, Thirty-First, and Thirty-Fourth
Lease Year of the Renewal Term shall increase by the lesser
of Seven and Thirty-Five One Hundredths Percent (7.35%) of
the Rent payable for the preceding Lease Year, or the CPI-U
Percentage Increase, as defined in Article 4 hereof.
The first Renewal Term will commence on the day
following the date the original Term expires and successive
Renewal Terms would commence on the day following the last
day of the then expiring Renewal Term. Except as otherwise
provided in Article 15 hereof, Lessee must give ninety (90)
days written notice to Lessor of its intent to exercise this
option prior to the expiration of the original Term of this
Lease or any Renewal Term, as the case may be.
ARTICLE 29. MISCELLANEOUS PROVISIONS
(A) All written notices shall be given to Lessor or
Lessee by certified mail or nationally recognized overnight
mail. Notices to either party shall be addressed to the
person and address given on the first page hereof. Lessor
and Lessee may, from time to time, change these addresses by
notifying each other of this change in writing. Notices of
overdue Rent may be sent to Lessee by regular, special
delivery, or nationally recognized overnight mail.
(B) The terms, conditions and covenants contained in
this Lease and any riders and plans attached hereto shall
bind and inure to the benefit of Lessor and Lessee and their
respective successors, heirs, legal representatives, and
assigns.
(C) This Lease shall be governed by and construed
under the laws of the State where the Leased Premises are situate.
(D) In the event that any provision of this Lease
shall be held invalid or unenforceable, no other provisions
of this Lease shall be affected by such holding, and all of
the remaining provisions of this Lease shall continue in
full force and effect pursuant to the terms hereof.
(E) The Article captions are inserted only for
convenience and reference, and are not intended, in any way,
to define, limit, describe the scope, intent, and language
of this Lease or its provisions.
(F) In the event Lessee remains in possession of the
premises herein leased after the expiration of this Lease
and without the execution of a new lease and without
Lessor's written permission, Lessee shall be deemed to be
occupying said premises as a tenant from month-to-month,
subject to all the conditions, provisions, and obligations
of this Lease insofar as the same can be applicable to a
month-to-month tenancy except that the monthly installment
of Rent shall be One Hundred Fifty percent (150%) the amount
due on the last month prior to such expiration.
(G) If any installment of Rent (whether lump sum,
monthly installments, or any other
monetary amounts required by this Lease to be paid by Lessee
and deemed to constitute Rent hereunder) shall not be paid
when due, or non-monetary default shall remain uncured after
the expiration of any applicable cure period, Lessor shall
have the right to charge Lessee a late charge of $250.00 per
month for each month that any amount of Rent installment
remains unpaid or non-monetary default shall go uncured
after the first such occurrence in any 12 month period.
Said late charge shall commence after such installment is
due or non-monetary default goes uncured after the
expiration of any applicable cure period and continue until
said installment, interest and all accrued late charges are
paid in full or such non-monetary default is cured.
(H) Any part of the Leased Premises may be conveyed by
Lessor for private or public non-exclusive easement purposes
at any time, provided such easement does not interfere with
the access to the Leased Premises, visibility, or operations
of 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 an
easement shall belong solely to Lessor.
(I) For the purpose of this Lease, the term "Rent"
shall be defined as Rent under Article 4, and any other
monetary amounts required by this Lease to be paid by
Lessee.
(J) Lessee agrees to cooperate with Lessor to allow
Lessor to obtain and use at Lessor's expense promotional
photographs of the Leased Premises, to the extent permitted
by Lessee's franchisor or licensor.
ARTICLE 30. REMEDIES
NON-EXCLUSIVITY. Notwithstanding anything contained
herein it is the intent of the parties that the rights and
remedies contained herein shall not be exclusive but rather
shall be cumulative along with all of the rights and
remedies of the parties which they may have at law or
equity.
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 the Leased Premises by any governmental authority
which in any way pertain to Hazardous Materials (iii) that
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 discovered on the Leased
Premises during the term hereof or placed or released on the
Leased Premises by Lessee;
together with all attorneys' fees, costs and disbursements
incurred in connection with the defense of any action
against Lessor arising out of the above. These covenants,
representations and warranties shall be deemed continuing
covenants, representations and warranties for the benefit of
Lessor, and any successors and assigns of Lessor and shall
survive expiration or sooner termination of this Lease. The
amount of all such indemnified loss, damage, expense or
cost, shall bear interest thereon at the lesser of 15% or
the highest rate of interest allowed by law and shall become
immediately due and payable in full on demand of Lessor, its
successors and assigns.
ARTICLE 32. ESCROWS
Upon a default by Lessee which is uncured after the
expiration of any applicable notice and cure period, or upon
the request of Lessor's Mortgagee, if any, Lessee shall
deposit with Lessor on the first day of each and every
month, an amount equal to one-twelfth (1/12th) of the
estimated annual real estate taxes, assessments and
insurance (if the insurance is to be purchased by Lessor)
("Charges") due on the Leased Premises, or such higher
amounts reasonably determined by Lessor as necessary to
accumulate such amounts to enable Lessor to pay all charges
due and owing at least thirty (30) days prior to the date
such amounts are due and payable. From time to time out of
such deposits Lessor will, upon the presentation to Lessor
by Lessee of the bills therefor, pay the Charges or at
Lessee's option, will upon presentation of receipted bills
therefor, reimburse Lessee for such payments made by Lessee.
In the event the deposits on hand shall not be sufficient to
pay all of the estimated Charges when the same shall become
due from time to time or the prior payments shall be less
than the currently estimated monthly amounts, then Lessee
shall pay to Lessor on demand any amount necessary to make
up the deficiency. The excess of any such deposits shall be
credited to subsequent payments to be made for such items.
If a default or an event of default shall occur under the
terms of this Lease, Lessor may, at its option, without
being required so to do, apply any Deposit on hand to cure
the default, in such order and manner as Lessor may elect.
ARTICLE 33. NET LEASE
Notwithstanding anything contained herein to the
contrary it is the intent of the parties
hereto that this Lease shall be a net lease and that the
Rent defined pursuant to Article 4 should be a net Rent paid
to Lessor. Any and all other expenses including but not
limited to, maintenance, repair, insurance, taxes, and
assessments, shall be paid by Lessee.
ARTICLE 34. 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. Such notice
("Lessor's Notice") shall give Selling Lessor's name and
address and state a price at which Selling Lessor intends to
sell and will sell a specified portion or all of its
interest in the fee simple to the Leased Premises. If
Lessee shall fail to exercise its Right of First Refusal as
set forth herein, the terms of Article 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 Champps, Troy, Michigan, pursuant to the Right of First
Refusal contained in that certain Net Lease Agreement
between us pertaining to said premises."
(C) Terms of Sale if 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 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 hereinabove specified. If the Right of First
Refusal is exercised only as to all of an undivided portion
of the fee simple to the Leased Premises, the Lease shall
remain in full force and effect without merger or
termination of this Lease because of such purchase. If for
any reason such Closing fails to occur, this Lease shall
continue in full force and effect, except that if the
provisions of this paragraph 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 for six
months following the expiration of the twenty days within
which Lessee may exercise its Right of First Refusal,
provided that the Selling Lessor giving such Lessor's Notice
shall sell its interest (or a portion thereof) for a price
equal to or greater than the price (or the pro-rata portion
thereof if a portion of the Selling Lessor's interest in the
Leased Premises is sold) set forth in Lessor's Notice. This
Right of First Refusal shall survive any sale of the Leased
Premises and shall apply to any subsequent sale or potential
sale by Lessor or its successors and assigns.
ARTICLE 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: CHAMPPS ENTERTAINMENT, INC.
By: /s/ Charles W Redepenning Jr
Its: Sr. VP
STATE OF MASSACHUSETTS )
)SS.
COUNTY OF ESSEX )
The foregoing instrument was acknowledged before me
this 16th day of December, 1997, by Charles W Redepenning,
Jr, as Sr. VP of Champps Entertainment, Inc. on behalf of
said corporation.
/s/ Jane Beanchette
Notary Public
Lessor's signature appears on the following pages
AEI NET LEASE INCOME & GROWTH FUND XIX LIMITED
PARTNERSHIP
By: AEI Fund Management XIX, Inc.
By: /s/ Robert P Johnson
Robert P. Johnson, President
STATE OF MINNESOTA )
)SS.
COUNTY OF RAMSEY )
The foregoing instrument was acknowledged before me the
23rd day of December, 1997, by Robert P Johnson , the President
of AEI Fund Management XIX, Inc., a Minnesota corporation,
corporate general partner of AEI Net Lease Income & Growth
Fund XIX Limited Partnership, on behalf of said limited partnership.
/s/ Michael B Daugherty
Notary Public
[notary seal]
AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP
By: AEI Fund Management 86-A, Inc.
By: /s/ Robert P Johnson
Robert P. Johnson, President
STATE OF MINNESOTA )
)SS.
COUNTY OF RAMSEY )
The foregoing instrument was acknowledged before me
the 23rd day of December, 1997, by Robert P Johnson, the President
of AEI Fund Management 86-A, Inc., a Minnesota corporation, corporate
general partner of AEI Real Estate Fund XV Limited Partnership, on behalf
of said limited partnership.
/s/ Michael B Daugherty
Notary Public
[notary seal]
AEI REAL ESTATE FUND XVII LIMITED PARTNERSHIP
By: AEI Fund Management XVII, Inc.
By: /s/ Robert P Johnson
Robert P. Johnson, President
STATE OF MINNESOTA )
)SS.
COUNTY OF RAMSEY )
The foregoing instrument was acknowledged before me
the 23rd day of December, 1997, by Robert P Johnson, the
President of AEI Fund Management XVII, Inc., a
Minnesota corporation, corporate general partner of AEI Real
Estate Fund XVII Limited Partnership, on behalf of said
limited partnership.
/s/ Michael B Daugherty
Notary Public
[notary seal]
AEI REAL ESTATE FUND XVIII LIMITED PARTNERSHIP
By: AEI Fund Management XVIII, Inc.
By: /s/ Robert P Johnson
Robert P. Johnson, President
STATE OF MINNESOTA )
)SS.
COUNTY OF RAMSEY )
The foregoing instrument was acknowledged before me
the 23rd day of December, 1997, by Robert P Johnson, the
President of AEI Fund Management XVIII, Inc., a
Minnesota corporation, corporate general partner of AEI Real
Estate Fund XVIII Limited Partnership, on behalf of said
limited partnership.
/s/ Michael B Daugherty
Notary Public
[notary seal]
Exhibit A
Lot 1, Big Beaver Park Condominium, a condominium, created
by Master Deed dated August 12, 1997, and recorded in
Oakland County Recorder's Office in Liver 17559, Page 647,
Oakland County, Michigan.
Exhibit B
None
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<NAME> AEI REAL ESTATE FUND XV LTD PARTNERSHIP
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
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0
0
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