SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported) August 15, 1997
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
(Exact Name of Registrant as Specified in its Charter)
State of Minnesota
(State or other Jurisdiction of Incorporation or
Organization)
0-16555 41-1571166
(Commission File Number) (I.R.S. Employer
Identification No.)
1300 Minnesota World Trade Center, St. Paul, Minnesota 55101
(Address of Principal Executive Offices)
(612) 227-7333
(Registrant's telephone number, including area code)
(Former name or former address, if changed since last report)
Item 2. Acquisition or Disposition of Assets.
On August 15, 1997, the Partnership purchased a newly
constructed Caribou Coffee restaurant in Marietta, Georgia
from Caribou Coffee Company, Inc. The total cash purchase
price of the land and building was approximately $1,235,000.
Caribou Coffee Company, Inc. is not affiliated with the
Partnership.
The cash, used in purchasing the property, was from
the proceeds of sale of properties.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired. -
Not Applicable. Property was newly constructed.
(b) A limited number of proforma adjustments are
required to illustrate the effects of the
transaction on the balance sheet and income
statement. The following narrative
description is furnished in lieu of the
proforma statements:
Assuming the Partnership had acquired the
property on January 1, 1996, the Partnership's
Investments in Real Estate would have
increased by $1,235,000 and its Current Assets
(cash) would have decreased by approximately
$1,235,000 at December 31, 1996 and June 30,
1997.
The Total Income for the Partnership would
have increased from $1,050,609 to $1,192,634
for the year ended December 31, 1996 and from
$495,921 to $566,934 for six months ended
June 30, 1997 if the Partnership had owned the
property during the periods.
Depreciation Expense would have increased by
$20,449 and $10,225 for the year ended
December 31, 1996 and the six months ended
June 30, 1997, respectively.
The net effect of these proforma adjustments
would have caused Net Income to increase from
$496,478 to $618,054 and from $211,451 to
$272,239, which would have resulted in Net
Income of $43.46 and $19.26 per Limited
Partnership Unit outstanding for the year
ended December 31, 1996 and the six months
ended June 30, 1997, respectively.
(c)Exhibits
Exhibit 10.1 - Net Lease Agreement
dated August 15, 1997 between the
Partnership and Caribou Coffee
Company, Inc. relating to the
property at 1275 Johnson Ferry
Road, Marietta, Georgia.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly
authorized.
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
By: AEI Fund Management XVI, Inc.
Its: Managing General Partner
Date: August 21, 1997 By: /s/ Mark E Larson
Mark E. Larson
Its Chief Financial Officer
(Principal Accounting and
Financial Officer)
NET LEASE AGREEMENT
THIS LEASE, made and entered into effective as of the
day of August, 1997, by and between AEI REAL ESTATE FUND
XVI LIMITED PARTNERSHIP ("Lessor"), a Minnesota limited
partnership whose corporate general partner is AEI Fund
Management XVI, Inc., a Minnesota corporation, whose
principal business address is 1300 Minnesota World Trade
Center, 30 East Seventh Street, St. Paul, Minnesota 55101,
and Caribou Coffee Company, Inc., a Minnesota corporation
("Lessee"), whose principal business address is Attention:
Real Estate Department, 615 North Third Street, Minneapolis,
Minnesota, 55401;
WITNESSETH:
WHEREAS, Lessor is the fee owner of a certain parcel of
real property and improvements located at Johnson Ferry,
Marietta, Georgia, 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 Eighteen
(18) consecutive "Lease Years", as hereinafter defined,
commencing on August , 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
recordingpurposes. That short form or memorandum of this
Lease will set forth the actual occupancy and termination
dates of the Term and optional Renewal Terms, as defined in
Article 28 hereof, and the existence of any Option to
Purchase, and that said Option shall terminate when the
Lessee shall lose right to possession or this Lease is
terminated, whichever occurs first, and that recordation of
a Court Order confirming Lessee's loss of the right of
possession shall be conclusive evidence of the removal of
this Lease from the chain of title.
ARTICLE 3. CONSTRUCTION OF IMPROVEMENTS
(A) Lessee warrants and agrees that to its actual
knowledge after commercially reasonable due inquiry (in any
context in this Lease, the term "actual knowledge" shall
mean that Lessee either actually knows or should have known
after conducting commercially reasonable due inquiry), 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 to its actual knowledge after
commercially reasonable due inquiry, 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) Subject to Lessee's right to contest the same
under Article 21 hereof, 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 Base Rent Payable for the first and second
Lease Years: Lessee shall pay to Lessor an annual Base Rent
of $142,025 , which amount shall be payable in advance on
the first day of each month in equal monthly installments of
$11,835.42. 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 Base Rent Payable beginning in the third
Lease Year and every Lease Year thereafter:
1. In the third and each Lease Year thereafter,
the annual Base Rent due and payable shall increase by an
amount equal to the lesser of: a) Two and One-Half Percent
(2.5%) 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
198- 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 One and One-Half of 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 prior year. 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.
Such increased Base Rent shall be payable in each
subsequent Lease Year until the next such increase, if any,
in advance of the first day of each month in equal monthly
installments.
(C) Interest on 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, regardless of the cure period afforded Lessee
herein. Provided, however, such interest shall not be
assessed on the first such overdue payment of Rent or other
monetary amounts due hereunder in any Lease Year until after
the expiration of any applicable cure period.
ARTICLE 5. INSURANCE AND INDEMNITY
(A) Lessee shall, throughout the Term or Renewal
Terms, if any, of this Lease, at its own cost and expense,
procure and maintain insurance which covers the Leased
Premises and improvements against fire, wind, and storm
damage (including flood insurance if the Leased Premises is
in a federally designated flood prone area or an area
exposed to flood or storm surge) 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 special form, 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 insurable value, or if greater, the
replacement cost, 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 12 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, including broad
form contractual liability and, if liquor is sold on the
Leased Premises, "Dram Shop" or liquor liability insurance,
if the same shall be or become available in the State of
Georgia, with initial limits of at least $2,000,000 per
occurrence/$5,000,000 general aggregate (inclusive of
umbrella coverage), or such additional amounts as Lessor
shall reasonably require from time to time.
(C) Lessee agrees to notify Lessor in writing if
Lessee is unable to procure all or some part of the
aforesaid insurance. In the event Lessee fails to provide
all insurance required under this Lease, Lessor shall have
the right, but not the obligation, to procure such insurance
on Lessee's behalf, following five (5) business days written
notice to Lessee of Lessor's intent to do so (unless
insurance then in place would during such period, or already
has, lapsed, in which case no notice need be given) and
Lessee may obtain such insurance during said five day period
and not then be in default hereunder. If Lessor shall
obtain such insurance, Lessee will then, within five (5)
business days from receiving written notice, pay Lessor the
amount of the premiums due
or paid, together with interest thereon at the lesser of 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, AEI Fund
Management XVI, Inc., and Robert P. Johnson, as the general
partners of Lessor, as additional insured and loss payee, as
their respective interests may appear, and shall provide
that the policies cannot be canceled, terminated, changed,
or modified without thirty (30) days written notice to the
parties. In addition, all of such policies shall 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
provide Lessor and shall maintain legible copies of any and
all policies, endorsements, and exclusions required herein,
to be made available for Lessor's review and photocopy upon
Lessor's reasonable request from time to time, in any event
not more often than twice per Lease Year unless such request
is occasioned by claim of loss in excess of $100,000. 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 and exclusions). Lessee
agrees that it will not settle any property insurance claims
affecting the Leased Premises in excess of $50,000 without
Lessor's prior written consent, such consent not to be
unreasonably withheld or delayed. Lessor shall consent to
any settlement of an insurance claim wherein Lessee shall
confirm in writing with evidence reasonably satisfactory to
Lessor that Lessee has sufficient funds available to
complete the rebuilding of the 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
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 not insurable under the insurance
coverage required by this Lease, 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; provided, however, that the foregoing
shall not relieve any insurer of nor is the foregoing
intended to negate any waiver of subrogation by such
insurer.
(F) Lessor and Lessee and all parties claiming under
them mutually release and discharge each other from all
claims and liabilities arising from or caused by any
casualty or hazard, covered or required hereunder to be
covered in whole or in part by insurance on the Leased
Premises or in connection with property on or activities
conducted on the Leased Premises, and waive any right or
subrogation which might otherwise exist in or accrue to any
person on account thereof.
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 promptly 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 equitable
apportionment (after deduction of Lessee's reasonable out of
pocket expenses incurred in obtaining such refund) as
provided during the first and last years of the term of this
Lease.
(E) Lessor, within sixty (60) days after written
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 after
the aforesaid notice from Lessor shall promptly join and
share in the cost with Lessor of such contest or review,
Lessor shall be entitled to receive and retain any refund
payable by the governmental authority with respect thereto.
Provided, however, if Lessee shall join and share in the
cost of such contest or review, and there shall be any
refund payable by the governmental authority with respect
thereto, Lessee shall be entitled to an equitable
apportionment of such refund attributable (after
reimbursement to Lessee and Lessor for reasonable out of
pocket expenses incurred in obtaining such refund) to taxes
payable or paid by Lessee under the terms of this Lease.
(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 on Rent 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. Notwithstanding the foregoing,
nothing contained herein shall be construed to include as a
tax for which Lessee is liable which shall be the basis of
any inheritance, estate, succession, transfer, gift,
franchise, corporation, income or profit tax or capital levy
that is or may be imposed upon Lessor.
(H) Notwithstanding anything in this Lease to the
contrary, in the event that during the Term (or any
extension thereof) any governmental entity makes any
improvement and assesses any portion of the Leased Premises
therefor, Tenant shall be liable only for so much of the
assessment as shall be due and payable if paid in the
minimum allowed installments without incurring penalty or
late charge. Additionally, with respect to any special
assessments which may be levied or assessed during the Term
or any renewal thereof, Lessee shall have the right to pay
such assessments in equal installments over the longest
legally available period and shall not be liable for any
remainder existing after expiration of the Term (or any
renewal).
ARTICLE 7. PROHIBITION ON ASSIGNMENTS AND SUBLETTING;
(A) After prior written notice to Lessor, accompanied
by a copy of the form of sublease or assignment, Lessee may
sublet or assign all or a portion of the Leased Premises,
without Lessor's consent. Lessee and all guarantors, if
any, shall give notice to Lessor in the form attached hereto
as Exhibit B evidencing their consent and confirming their
continued liability under the Lease and guaranty,
respectively. Except as set forth in subparagraph (E)
below, in the event of a subletting or assignment of its
interest hereunder, Lessee shall not be released from it
obligations hereunder. Lessee shall reimburse Lessor for
its out-of-pocket reasonable expenses incurred in connection
with such subletting or assignment, including but not
limited to reasonable attorney's fees, if any, incurred by
Lessor.
(B) Any attempted subleasing or assignment of this
Lease by Lessee in violation of subparagraph (A) above shall
be unenforceable against Lessor until Lessee shall provide
Lessor with notice of such assignment or subletting. Except
as otherwise expressly provided in subparagraph (A) above,
Lessee shall not, without obtaining the prior written
consent of Lessor, in each instance:
1. otherwise transfer this Lease, or any part of
Lessee's right, title or interest therein;
2. allow all or any part of the Leased Premises
to be used or occupied by any other Persons (herein defined
as a Party other than Lessee, be it a corporation, a
partnership, an individual or other entity); or
3. mortgage, pledge or otherwise encumber this
Lease, or the Leased Premises.
(C) For the purposes of this Article:
1. an agreement by any other Person, directly or
indirectly, to assume Lessee's obligations under this Lease
shall be deemed an assignment;
2. any Person to whom Lessee's interest under
this Lease passes by operation of law, or otherwise, shall
be bound by the provisions of this Article;
3. each material modification, amendment or
extension or any assignment or sublease to which Lessor has
previously been given notice shall be deemed a new
assignment or sublease; and
(D) Notwithstanding anything above to the contrary,
Lessor agrees to enter into a nondisturbance agreement with
proposed sublessee, if a nondisturbance agreement is
required by such sublessee, but only upon the following
conditions. Lessor has the sole discretion to approve
the form and terms of the sublease and the form and terms of
the nondisturbance agreement. Such nondisturbance agreement
shall be acceptable (if not otherwise containing terms
reasonably objectionable to Lessor) if the sublessee shall
agree to cure all defaults of Lessee hereunder and assume
full obligations of the Lessee upon a default hereunder, if
sublessee desires not to be disturbed; otherwise, the
sublease shall expressly terminate upon an uncured default
hereunder.
Furthermore, the nondisturbance agreement shall be
accompanied by the consents of Lessee and all guarantors, if
any (such consent to be in form and substance satisfactory
to Lessor) to such nondisturbance agreement, affirming their
continued liability hereunder (or under their guaranty,
respectively). Lessor agrees to provide any sublessee whose
approved nondisturbance agreement so requires,
contemporaneous written notice of default by Lessee (if
written notice is required hereunder); provided, however,
that failure of sublessee to receive such notices shall not
hinder or delay Lessor's right to proceed with any or all
remedies granted to Lessor herein as against Lessee. No
such notice to Lessee shall be effective as against
sublessee unless a copy is so given
to sublessee at the sublessee's last address known to
Lessor.
(E) Notwithstanding anything above to the contrary,
upon an assignment of the Lessee's interest herein, Lessee
and any personal guarantors shall be released from further
liability hereunder after the following conditions are met:
(a) the assignment of Lessee's interest is to an entity or
entity and persons offering their personal guaranties of
Lessee's obligations ("Assignee"), which Assignee has an
Equity Net Worth equal to the greater of Twenty Million
Dollars or the cumulative Equity Net Worth of the Lessee and
all Guarantors at the time of such assignment; (b) there has
been no decline in the Assignee's Net Sales, Cash Flow, or
Retained Earnings, during any of the three calendar years
immediately preceding the time of such assignment; and (c)
in Lessor's sole but reasonable opinion, taking into
consideration such factors as the extent of restaurant
managerial and operational experience, business reputation,
and other factors reasonably related to the ability of the
Assignee to operate the Leased Premises, such Assignee is
equivalent to Lessee as determined either at the time this
Lease was executed, or the date of the assignment of
Lessee's interest, such date of equivalency to be determined
by Lessor in its sole discretion. Any such release of
Lessee shall be ineffective until Lessor has approved, such
approval not to be unreasonably withheld or delayed, the
form and substance of the assignment, the documents
evidencing the net worth of the Assignee and any new
Guarantors, and the new guaranties in the form and substance
reasonably satisfactory to Lessor.
For purposes of the foregoing, the following
definitions shall apply: Equity Net Worth shall equal the
difference between the proposed Assignee's total assets and
total liabilities as they appear on the Assignee's
consolidated balance sheet; Net Sales shall equal the net
revenues as reported on Assignee's consolidated statement of
operations; Cash Flow shall equal the sum total of the net
income, depreciation, and amortization accounts as reported
on Assignee;s consolidated statement of cash flows; and,
Retained Earnings shall equal the retained earnings as
reported on Assignee's consolidated statement of
shareholder's equity. Additionally, evidence of the above
amounts, individually and collectively, shall be considered
satisfactory only if provided by a
complete set of audited financial statements, prepared in
accordance with generally accepted accounting principles
(GAAP) by a nationally recognized independent certified
public accounting firm reasonably acceptable to Lessor.
(F) The parties hereto acknowledge that a portion of
the Leased Premised have been sublet to Bagel Acquisition
Corporation, an Indiana corporation, pursuant to that
certain Sublease dated November 27, 1996 (the "Sublease").
Lessor acknowledges and consents to the Sublease,
provided, however, the Sublease shall be subordinate to and
subject to the terms of this Lease, except to the extent the
Lessor and subtenant may have agreed otherwise in writing.
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. Lessee further agrees that
Lessor shall be under no obligation to make any repairs or
perform any maintenance to the Leased Premises, but Lessor
shall reimburse Lessee for such reasonable costs and
expenses incurred by Lessee in complying with Lessee's
obligations under this Article relating to repairs,
replacements and maintenance if the need for the same is
caused by the negligent acts or omissions of Lessor, its
agents, contractors or employees, but only to the extent
such costs and expenses are not covered by the insurance
maintained by Lessee or would
not be covered by the insurance required to be maintained by
Lessee under this Lease (if Lessee shall have failed to
maintain the same). Lessee covenants and agrees that during
the term of the Lease 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 C attached hereto and incorporated herein by
reference; and further agrees to replace any of said
equipment when necessary. Lessee further agrees during the
term of the Lease 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 and opportunity to cure 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 beyond the expiration of applicable cure
periods, 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 Property (defined below). In
the event of making such alterations as herein provided,
subject to Article 21, 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, by or on behalf of Lessee or any sublessee of
Lessee, 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 Lessee's or its
subtenants's or assigns's use and occupancy of the
improvements, whether or not due to a failure of the
Improvements to so comply predates this Lease. 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 or any other permitted
sublessee's or occupant'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, which shall
provide, without limitation, that the mortgagee shall agree
that Lessee's peaceable possession of the Leased Premises
and its rights under this Lease will not be diminished on
account thereof. Lessor also reserves the right and
privilege to subject and subordinate this Lease at all times
to any and all advances to be made under such mortgages, and
all renewals, modifications, extensions, consolidations, and
replacements thereof, provided such mortgagee shall execute
its standard form, commercially reasonable subordination,
attornment and non-disturbance agreement, which shall
provide, without limitation, that the mortgagee shall agree
that Lessee's peaceable possession of the Leased Premises
and its rights under this Lease will not be diminished on
account thereof.
(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, which shall
provide, without limitation, that the mortgagee shall agree
that Lessee's peaceable possession of the Leased Premises
and its rights under this Lease will not be diminished on
account thereof. Lessor agrees to reimburse Lessee for its
out-of-pocket reasonable expenses incurred in connection
with such subordination request, including but not limited
to reasonable attorney's fees, if any, incurred by Lessee in
connection therewith.
(C) Lessor represents and warrants that as of the date
of this Lease, there are no mortgages, deeds of trust, or
similar instruments executed by Lessor or anyone claiming
by, through, or under Lessor, affecting fee title to the
Leased Premises.
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 to the public authority, 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
who has significant experience in the retail industry,
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 to the public authority.
(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 (which to the extent of the cost of
restoration to return the improvements to a complete
architectural unit shall 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 the cost of
such work to Lessor shall not exceed the replacement cost of
improvements similar in scope and quality of the work done
by Lessee in originally constructing such improvements.
Further, if the cost of such work proposed by Lessee shall
exceed the condemnation award, or be in excess of the
replacement cost of the improvements similar in scope and
quality of the work done by Lessee in originally
constructing such improvements, Lessee shall demonstrate to
Lessor's reasonable satisfaction the availability of funds
(if any in excess of the condemnation proceeds be required)
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, including
moving or relocation costs, of Lessee's Property; 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 reasonably 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 defend, 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. Lessor will use commercially reasonable efforts
to not interfere with the business operation of Lessee or
its subtenants or other occupants during any inspection of
the Leased Premises.
ARTICLE 14. USE; LESSEE'S CONDUCT OF BUSINESS
(A) After the Occupancy Date, Lessee expressly agrees
and warrants that the Leased Premises will be used initially
as a Caribou Coffee and Brueggers restaurant. In any other
such case, after prior written notice to Lessor, Lessee may
conduct any lawful business from the Leased
Premises. Provided, however, that Lessee shall not use or
occupy, or permit the Leased Premises to be used or
occupied, nor do or permit anything to be done in or on the
Leased Premises in a manner which would (i) in any way make
void or voidable any insurance then in force on the
Premises, (ii) make it impossible to obtain insurance
required to be furnished by Lessee hereunder, (iii)
constitute a public nuisance, (iv) constitute the sales,
distribution or proliferation of sexually oriented
materials, or a massage parlor (v) constitute the sales,
storage, or distribution of hazardous materials including
but not limited to petroleum products, except as may be
incidental and only incidental to normal business
operations, and then only in accordance with applicable law,
ordinance or regulation, or (vi) violate any deed
restrictions affecting the Leased Premises or any present or
future applicable law, regulation, ordinance, or requirement
of any governmental authority. 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.
(B) Notwithstanding anything herein to the contrary,
nothing herein shall be construed as an obligation for
Lessee to open or operate its business in the Leased
Premises. Lessee shall have the right to remove Lessee's
Property and cease operations in the Leased Premises at any
time and at Lessee's sole discretion. However, the right to
cease to operate its business shall not affect Lessee's
obligation to pay all amounts due hereunder and to perform
all covenants and obligations hereunder. Lessee agrees, at
such time it is operating its business in the Leased
Premises, to conduct its business in a first-class manner
consistent with reputable business standards and practices.
Furthermore, in no event shall Lessee be liable to Lessor
for damages
as a result of operating other stores in the area
surrounding the Leased Premises or any other area, nor shall
Lessee be limited or restricted in any way from opening or
operating other stores in the area surrounding the Leased
Premises or any other area.
(C) Notwithstanding the foregoing, if at any time,
subject to reasonable periods of closure for repair or
remodeling or force majeure, Lessee ceases operating in the
Leased Premises for more than nine (9) consecutive months,
Lessor shall have the right, exercisable within sixty (60)
days after said nine (9) month period, to terminate this
Lease upon sixty (60) days prior written notice to Lessee;
provided, however, that if Lessee (or any assignee,
subtenant or other permitted occupant) reopens in the Leased
Premises within said sixty (60) day period following
Lessor's election to terminate this Lease, said termination
shall be null and void and have no further force and effect.
Termination pursuant to this Article 14(C) shall be separate
and apart
from any remedy afforded Lessor in the event of any default
by Lessee remaining uncured beyond the expiration of any
notice and applicable cure period; any termination of
Lessee's right to possession for any other uncured default
remaining uncured beyond the expiration of any notice and
applicable cure period shall not be construed to be a
termination of the Lease and Lessee's continuing obligations
hereunder.
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 commercially reasonable and in any event no longer than
one year from the date of such damage or destruction) and
subject to the provisions herein below), Lessee shall repair
and restore the improvements so damaged or destroyed as
nearly as may be practical to their condition immediately
prior to such
casualty. All rents payable by Lessee shall be abated
during the period of repair and restoration to the extent
that Lessor shall be compensated by the proceeds of the rent
loss insurance required to be maintained by Lessee
hereunder.
Provided Lessee is not in default hereunder (and
retains according to the terms hereof the right to rebuild)
with the Lessor's prior written consent, which consent shall
not be unreasonably withheld or delayed, Lessee shall have
the right to promptly and in good faith settle and adjust
any claim under such insurance policies with the insurance
company or companies on the amounts to be paid upon the
loss. The insurance proceeds shall be used to reimburse
Lessee for the cost of
rebuilding or restoration of the Leased Premises. Risk that
the insurance company shall be insolvent or shall refuse to
make insurance proceeds available shall be with Lessee. The
Leased Premises shall be so restored or rebuilt so as to be
of at least equal value and substantially the same character
as prior to such damage or destruction. If the insurance
proceeds are less than 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 (or title insurance or other security over any
of the foregoing reasonably acceptable to Lessor). 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 Leased Premises and rent
hereunder shall be reduced by 11.5% 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 in the third or second to last Lease
Year to the extent of fifty (50%) percent of its value, or
in the last Lease Year to the extent of twenty-five (25%)
percent of its value, then, 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 all of the
insurance proceeds to which Lessor is entitled under this
Lease, which shall be 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, 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. Interest and late
charges for failure to pay Rent when due shall accrue on the
first failure to pay Rent when due in any Lease Year from
the first date beyond the expiration of any applicable cure
period if not cured prior thereto, and for any failure
thereafter to pay Rent within three (3) business days after
it was due and payable.
(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 is commercially
reasonable and is capable of curing such default, but in any
event such longer time shall not exceed 210 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 beyond
the expiration of any applicable cure period and at any time
thereafter (but prior to cure), 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 beyond the expiration of the applicable cure
period, 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 be
satisfied by the 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 Option to Purchase as
set forth in any Memorandum of Lease of record.
(B) Upon each such reletting, without termination of
the contractual obligation of Lessee to pay Rent under this
Lease, all Rents received by Lessor 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 as
limited herein 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.
Upon payment in full in good funds of such accelerated Rents
and charges equivalent to Rent reserved in this Lease, this
Lease shall terminate. 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) The removable equipment owned by Lessor and leased
to Lessee hereunder as specifically set forth on Exhibit C
attached hereto and incorporated herein by reference, and
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,
shall be the property of Lessor (even if all or a portion of
the same shall be owned by Lessee and claimed for tax
purposes during its occupancy of the Leased Premises) . All
other trade fixtures and all other articles of personal
property owned by Lessee shall remain the property of
Lessee. Except to the extent otherwise listed on Exhibit C,
any trade fixtures, business equipment, inventory,
trademarked items, signs, decorative soffit, counters,
shelving, showcases, mirrors,
and other removable personal property installed in or on the
Leased Premises by Lessee at its expense ("Lessee's
Property") shall remain the property of Lessee. Lessor
agrees that Lessee shall have the right, at any time, or
from time to remove any and all of Lessee's Property.
Lessee shall pay before delinquency all taxes, assessments,
license fees, and public charges levied, assessed or imposed
upon its business operations in the Leased Premises, as well
as upon Lessee's Property
or upon the Leased Premises. If any items of Lessee's
Property are assessed with the property of the Lessor, then
such assessment shall be equitably divided between Lessor
and Lessee to the end that either party shall pay only its
equitable portion of such assessment. Lessor shall
determine the basis of so prorating any such assessments,
and such determination shall be binding upon both Lessee and
Lessor. No tax assessments, fees or charges referred to in
this paragraph shall be considered real estate taxes under
the provisions of Article 6 hereof.
(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. Lessor hereby waives any contractual,
statutory, or other Lessor's lien on Lessee's Property. or
inventory. Lessor agrees to execute such reasonable
confirmation, certificate, and other documents (except
amendments to this Lease) as Lessee's lenders may reasonably
request in connection with any Lessee financing.
(C) At the end of the term of this Lease, Lessee's
Property, 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 trade fixture property is attached to
the Leased Premises so as to constitute a "fixture" within
the meaning of the law; however, such removable property
shall not include any tenant improvements to the extent the
same shall constitute walls, wall coverings, flooring,
ceiling or ceiling tiles, plumbing, lighting fixtures, or
HVAC; all damages and repairs to the Leased Premises which
may be caused by the removal of Lessee's 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 or any sublessee of 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, or providing
other security reasonably acceptable to Lessor, 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, if
sooner than 45 days, 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 peacefully and
quietly 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
Lessor shall defend
Lessee's right to such quiet enjoyment), 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 of the Lessee. The
financial statements shall be audited, at the Lessee's
expense, by KPMG Peat Marwick or 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 an operating statement
for the Leased Premises within 90 days after the end of each
Lease Year. The operating 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, after receipt of written request from Lessor,
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 operating statements on a monthly basis after
the occurrence of a monetary default or a second non-
monetary 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 operating
statements shall
terminate until Lessee shall again commit a monetary default
or a second non-monetary default in a given Lease Year.
Said quarterly (or monthly, if requested by Lessor)
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 income, changes in cash funds, changes
in capital, 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 in
Lessee's sole but reasonable discretion are not material and
adverse and do not increase any of the Rents or obligations
of Lessee under this Lease or materially or adversely modify
any of the business elements of this Lease.
ARTICLE 28. OPTION TO RENEW
If this Lease is not previously canceled or terminated
and Lessee is not currently in monetary default, nor in non-
monetary default beyond the expiration of the applicable
cure period, 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 a renewal terms shall increase as
set forth in Article 4 hereof.
The first Renewal Term will commence on the day
following the date the original Term expires and the second
Renewal Term would commence on the day following the last
day of the expiring first 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) Notices and demands required, or permitted, to be
sent to those listed hereunder shall be sent by certified
mail, return receipt requested, postage prepaid, by
facsimile (with courtesy hard copy to follow by any other
means listed herein), or by Federal Express or other
reputable overnight courier service and shall be deemed to
have been given upon the date the same is postmarked (if
sent by certified mail), the day transmitted (if by fax), or
the day deposited with Federal Express or such other
reputable overnight courier service, but shall not be deemed
received until the earlier of actual receipt, the day of
transmittal by fax evidenced by confirmation of successful
transmittal by the transmitting fax machine), or three (3)
days following deposit in the United States Mail if sent by
certified mail to the address or fax number (as applicable)
and party shown on the first page hereof or at such other
address requested in writing by either party upon thirty
(30) days notice to the other party. Notice and cure
periods throughout this Lease commence the date notice is
deemed to have been received.
(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 Base Rent shall be One Hundred Fifty percent (150%) the
amount due on the last month prior to
such expiration.
(G) Lessor shall have the right to charge Lessee a
late charge for Rent unpaid (whether lump sum, monthly
installment, or any other monetary amounts required by this
Lease to be paid by Lessee and deemed to constitute Rent
hereunder) as follows. Late charges, in the amount of the
greater of $100.00 or Five Percent (5%) of such unpaid
amounts of Rent, for failure to pay Rent when due shall
accrue on the first failure to pay Rent when due in any
Lease Year from the first date beyond the expiration of any
applicable cure period if not cured prior thereto, and for
any failure thereafter to pay Rent within three (3) business
days after it was due and payable.
(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 in Lessee's
reasonable opinion materially and adversely 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 restore the
Leased Premises to substantially the same condition prior to
the conveyance, all to be done
without adjustments in Rent to be paid by Lessee. All
proceeds from any conveyance of such an easement after
payment of any costs incurred by Lessor in connection with
such easement shall be equitably divided between Lessor and
Lessee, but in no event shall Lessee's portion exceed
one-half of the net proceeds after reimbursement of Lessor's
costs associated therewith.
(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, and subject to Lessee's
reasonable internal policies regarding protection of trade
secrets and conceptual design.
(K) Wherever in this Lease Lessor or Lessee is
required to give its consent or approval, unless stated
otherwise specifically to the contrary, such consent or
approval shall not be unreasonably withheld, conditioned, or
delayed.
(L) Neither Lessor nor Lessee shall be responsible to
the other party for any delay, damage, or failure caused by
or occasioned by a Force Majeure Event; provided, however,
that a Force Majeure Event shall in no event excuse the
Lessee from the payment of Rent or any other payment of
money by Lessee required under this Lease. As used in this
Lease, "Force Majeure Event" includes: acts of God, action
of the elements, warlike action, insurrection, revolution,
or civil strife, piracy, civil war or hostile action,
strikes, acts of public enemies, federal or state laws,
rules, and regulations of any governmental authorities
having jurisdiction in the Leased Premises, beyond the
control of either party. Force Majeure Event shall not
include a delay,
damage, or failure the cure of which may be effected by the
expenditure of funds at then current market prices. Delays
(in no event to exceed 210 days) due to a Force Majeure
Event shall not be deemed to be a breach or failure to
perform under this Lease. Neither Lessor nor Lessee shall
be required against its will to adjust any labor or similar
disputes except in accordance with applicable law.
(M) The term "Lessor", as used in the Lease, so far as
covenants or obligations, if any, on the part of Lessor are
concerned, shall be limited to mean and include only the
owner or owners at the time in question of the fee of the
Premises, and in the event of any transfer or
transfers of the title to such fee, or any undivided portion
thereof, (a) Lessor herein named (and in the case of any
subsequent transfer or conveyance, the then grantor) shall
be automatically freed, released, and relieved, from and
after the date of such transfer or conveyance, of all
liability as respects the performance of any covenants or
obligations on the part of Lessor contained in this Lease
thereafter to be performed to the extent assumed by the new
owner; and (b) Lessee shall attorn to the new owner,
provided the new owner shall attorn to Lessee.
Notwithstanding any other provisions hereof, in the event of
any breach or default by Lessor in any term or provision of
this Lease, Lessee agrees to look solely to the equity or
interest then owned by the then Lessor in the Leased
Premises, but in no event shall any money judgement,
deficiency, or otherwise, be sought, obtained, or enforced
against Lessor personally.
(N) This Lease having been negotiated fairly and fully
by both parties, no presumption shall be created or intended
against the drafter hereof.
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, unless specifically limited herein.
ARTICLE 31. HAZARDOUS MATERIALS INDEMNITY
Lessee covenants, represents and warrants to Lessor,
its successors and assigns, (i) that it has not used or
knowingly permitted and will not use or permit the Leased
Premises to be used, whether directly or through
contractors, agents or tenants, and to Lessee's actual
knowledge after commercially reasonable due inquiry and
except as disclosed to Lessor in writing, the Leased
Premises has not at any time been used (except in connection
and only incidental to permitted uses hereunder and then
only in compliance with applicable law, regulation, or
ordinance) for the generating, transporting, treating,
storage, manufacture, emission of, or disposal of any
dangerous, toxic or hazardous pollutants, chemicals, wastes
or substances as defined in the Federal Comprehensive
Environmental Response Compensation and Liability Act of
1980 ("CERCLA"), the Federal Resource Conservation and
Recovery Act of 1976 ("RCRA"), or any other federal, state
or local environmental laws, statutes, regulations,
requirements and ordinances ("Hazardous
Materials"); (ii) that to Lessee's actual knowledge, after
commercially reasonable due inquiry, 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 to the best of Lessee's knowledge,
has not violated and is not currently violating any federal,
state or local law, regulation, ordinance or requirement
governing Hazardous Materials; (iv) that to Lessee's actual
knowledge after commercially reasonable due inquiry, 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. Except due to any matter arising out of the
acts or negligence of Lessor, its agents, employees,
lenders, contractors, or invitees, 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. 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.
Lessee's liability and obligations under this Section
shall survive the expiration or any termination of this
Lease for a period of two years from the expiration or
termination of the Lease. Provided, however, that the
foregoing shall not apply to any cause or action commenced
or claim made prior to the end of said two year period.
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 after the expiration of any applicable cure period,
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 relating to the Leased Premises
including but not limited to, maintenance, repair,
insurance, taxes, and assessments, shall be paid by Lessee,
except those expenses for repair and maintenance caused by
Lessor and not covered by applicable insurance.
ARTICLE 34. 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
period commencing after the end of the first full Lease Year
and continuing until the expiration of the Term or any on-
going Renewal Term.
(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 $15,000.00 (the "Deposit") shall be an effective exercise
of the Option, to wit:
(date)
"We hereby exercise the Option to purchase the property on
Johnson Ferry, Marietta, Georgia, 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 (or anyone claiming by, through, or under
Lessee) has suffered, created, or negligently or knowingly
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, if
purchased during Lease Year Two or Three, shall be the then
current annual Base Rent capitalized at the rate of Eight
Percent (8%), e.g. (current annual Base Rent divided by
0.08), and if purchased during any Lease Year after Lease
Year Three, the Purchase Price shall be the greater of: (a)
the then current annual Base Rent capitalized at the rate of
Nine Percent (9%), e.g. (current annual Base Rent divided by
0.09), or (b) the price paid by Lessor for its respective
interest in the Leased Premises compounded at Five Percent
(5%) per Lease Year of ownership, prorated for partial Lease
Years through the date of Closing.
(ii) Closing. Closing shall be forty-five (45) 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 ten (10)
days prior to closing, Lessor shall obtain a commitment for
a ALTA Form B owner's policy of title insurance dated within
ten (10) days of the closing date, issued by a nationally
recognized title insurance company that issued Lessor's
original owner's title policy, or if said title company
shall be unavailable, such other nationally recognized title
company approved by Lessee (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 (or
anyone claiming by, through, or under Lessee) has suffered,
created, or negligently or knowingly permitted to accrue
during the term hereof, and shall contain such endorsements
as were issued to Lessor upon its acquisition of the Leased
Premises. Such title commitment shall be conclusive
evidence of good title. If Lessee shall make objection to
the marketability of title (as to other matters other than
set forth above), Lessor shall have a reasonable time (not
to exceed 120 days) within which to make title marketable,
or to obtain title insurance over Lessee's objections as to
marketability.
(iv) Ancillary documents. Not less than 30 days after
notice of Lessee's exercise of its Option to Purchase
hereunder, Lessor at its cost and expense shall obtain and
deliver to Lessee an updated (dated no more than 30 days
prior to the Closing Date) ALTA survey of the Leased
Premises attached hereto certified to Lessee and any one
other party designated by Lessee. Lessor shall deliver at
closing a FIRPTA Affidavit, standard form Seller's Affidavit
reflecting facts known to Lessor, and such other documents
reasonably required by the title company or Lessee to effect
the transaction contemplated herein.
(iv) Prorations. Lessor shall pay the cost of the
aforesaid title policy and any and all state, county, 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 Deed shall
be made through the escrow. The cost of the escrow shall be
divided equally between the Lessor and Lessee. If for any
reason other than Lessee's default, the transaction fails to
close, the Deposit shall be returned to Lessee forthwith.
(vi) Remedies on Default. If Lessee defaults under the
provisions of this subparagraph 34(C), provided Lessor is
not then in default under this Section, and 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, the first such time Lessee shall so default,
Lessor's sole and exclusive remedy shall be the retention of
Lessee's Earnest Money of $15,000. If Lessee shall
exercise this Option a second time, and again defaults under
the provisions of this subparagraph 34(C), provided Lessor
is not then in default under this Section, the second time
Lessee shall so default, Lessor shall have the right to
annul the provisions of this paragraph 34 by giving Lessee
notice of such election, provided that Lessor has first
notified Lessee of such default and Lessee has failed to
cure the same within ten (10) days after such notice. Upon
Lessor's notice of annulment in accordance herewith, the
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
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 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 such Closing fails
to occur, this Lease shall continue in full force and
effect, except that if the provisions of this paragraph 34
are annulled by Lessor, in accordance with subparagraph
34(C)(vi), by reason of a default by Lessee, this Lease
shall continue but without the provisions of this paragraph
34 being a part hereof.
ARTICLE 35. MANDATORY OBLIGATION TO PURCHASE
If Lessee shall discontinue business operations on the
Leased Premises anytime during the first five Lease Years,
subject to reasonable periods of closure for repair or
remodeling or force majeure, or shall fail to meet the Store
Level Net Income Test (defined below), Lessor has the option
of selling the Leased Premises to Lessee and, if Lessor
elects to exercise this 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 (or other third party if Lessee
shall cause a third party to effect the purchase) should it
elect to do so, shall be the price paid by Lessor.
(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. Provided Lessor complies with the terms
of this Article 35, Lessee shall on or before One Hundred
Eighty (180) days after the date of Lessor's notice of the
exercise of its option to sell (the "Closing Date") deliver
the purchase price in cash as set forth in subparagraph (A)
of this Article to Lessor. Upon the Closing Date, Lessor
shall deliver to Lessee a warranty deed and appropriate
FIRPTA and Seller's Affidavits evidencing that Lessor
transfers the Leased Premises to Lessee subject to
covenants, conditions, agreements, restrictions, easements
or other encumbrances upon title existing as of the date of
delivery, if any, as of the date Lessor took title to the
Leased Premises, and those matters suffered, created,
caused, or negligently or knowingly permitted to accrue by
Lessee (or anyone claiming by, through, or under Lessee).
Rent shall be prorated as of the Closing Date, and except
for pre-paid Rent, no portion of the Rent paid or payable by
Lessee shall be credited against the purchase price. 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 the option is exercised, the
Leased Premises shall be conveyed by the Lessor to the
Lessee "As Is", except for matters caused by Lessor's (or
anyone claiming by, through, or under Lessor) negligence or
intentional misconduct.
(C) Lessee shall be deemed to have failed the Store
Level Net Income Test and trigger the Lessor's right to
exercise this Mandatory Obligation to Purchase if Lessee's
Store Level Net Income, after depreciation, amortization,
and occupancy expenses allocable to Lessee's interest in the
Leased Premises and Lessee Property, shall fall below three
percent (3%) of the gross annual sales by Lessee from the
Leased Premises for any of the first five Lease Years.
Lessee shall provide evidence of Store Level Net Income by
furnishing Lessor with internally prepared store level
operating statements, pursuant to Article 26 hereof,
certified as true and correct by an authorized officer of
Lessee, to evidence the Leased Premises Store Level Net
Income. Lessor shall have ten (10) business days after the
provision of store level operating statements for the fifth
Lease Year within which to exercise this Mandatory
Obligation to Purchase, if Lessee shall have failed the
Store Level Net Income Test.
(D) Evidence of Title. Not less than ten (10) days
prior to closing, Lessor shall obtain a commitment for a
ALTA Form B owner's policy of title insurance dated within
ten (10) days of the closing date, issued by a nationally
recognized title insurance company that issued Lessor's
original owner's title policy, or if said title company
shall be unavailable, such other nationally recognized title
company approved by Lessee (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 (or
anyone claiming by, through, or under Lessee) has suffered,
created, or negligently or knowingly permitted to accrue
during the term hereof, and shall contain such endorsements
as were issued to Lessor upon its acquisition of the Leased
Premises. Such title commitment shall be conclusive
evidence of good title. If Lessee shall make objection to
the marketability of title (as to other matters other than
set forth above), Lessor shall have a reasonable time (not
to exceed 120 days) within which to make title marketable,
or to obtain title insurance over Lessee's objections as to
marketability.
(E) Ancillary documents. Not less than 30 days prior
to closing date, Lessor at its cost and expense shall obtain
and deliver to Lessee an updated (dated within 45 days of
the closing date) ALTA survey of the Leased Premises
certified to Lessee and any one other party designated by
Lessee. Lessor shall deliver at closing a FIRPTA Affidavit,
standard form Seller's Affidavit reflecting facts known to
Lessor, and such other documents reasonably required by the
title company or Lessee to effect the transaction
contemplated herein.
(F) Prorations. Lessor shall pay the cost of the
aforesaid title policy and any and all state, county, 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, and any escrow fees. 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.
ARTICLE 36. LETTER OF CREDIT
(A) Lessee shall deliver to Lessor and maintain an
irrevocable Letter of Credit in the form attached hereto as
Exhibit D running in favor of Lessor issued by a bank
reasonably approved by Lessor, in an amount equal to One and
One-Half times the then current Annual Base Rent. The
Letter of Credit shall be irrevocable for the term thereof
and shall provide that it is automatically renewable for a
period ending not earlier than sixty (60) days after the
expiration of the term thereby demised without any action
whatsoever on the part of the Lessor; provided that the
issuing bank shall have the right not to renew said Letter
of Credit on written notice to Lessor not less than sixty
(60) days prior to the expiration of the then current term
thereof (it being understood, however, that the privilege of
the issuing bank not to renew said Letter of Credit shall
not, in any event, diminish the obligation of Lessee to
maintain such irrevocable Letter of Credit with Lessor
through the date which is sixty (60) days after the
expiration of the term hereby demised.) If the issuing bank
shall give notice of its intent not to renew the Letter of
Credit, Lessee shall replace said Letter of Credit at least
30 days prior to the stated expiration of the existing
Letter of Credit. Lessee's failure to so replace the Letter
of Credit shall be an immediate event of default without
notice and opportunity to cure, occasioning the right of
Lessor or any or its successor's and assigns to draw down on
the Letter of Credit in its entirety, notwithstanding
anything in this Lease to the contrary.
(B) The form and terms of the Letter of Credit (and the
bank issuing the same) shall be substantially in the form
attached as Exhibit D hereto and be acceptable to Lessor and
shall operate vis-a-vis Lessee and Lessor, among other
things, in effect that:
(1) Lessor, or its then managing agent, shall have the
right to draw down an amount (consistent with the terms set
forth below respecting Lessor's successor's and assigns) up
to the face amount of the Letter of Credit upon the
presentation to the issuing bank of Lessor's (or Lessor's
then managing agent's) statement that such amount is due to
Lessor under the terms and conditions of this lease, it
being understood that if Lessor or its managing agent be a
corporation, partnership or other entity, then such
statement shall be signed by an officer (if a corporation),
a general partner (if a partnership), or any authorized
party (if another entity);
(2) The Letter of Credit will be honored by the issuing
bank without inquiry as to the accuracy thereof and
regardless of whether the Lessee disputes the content of
such statement;
(3) In the event of a transfer of Lessor's interest in
the Leased Premises, Lessor shall have the right to transfer
the Letter of Credit to the transferee and thereupon to the
extent assumed by transferor, the Lessor shall, without any
further agreement between the parties, be released by Lessee
from all liability therefor, and it is agreed that the
provisions hereof shall apply to every transfer or
assignment of said Letter of Credit to a new Lessor. Upon a
transfer of all or part of the Lessor's interest in the
Leased Premises, within ten (10) days of Lessor's written
request accompanied by a copy of the written assumption,
Lessee shall cause the Letter of Credit to be appropriately
amended to reflect such transferee of Lessor's interest;
(C) Lessor may draw down upon the Letter of Credit in
whole or in part (as set forth below respecting partial
draws by Lessor's successors and assigns) upon the
occurrence of an event of default that Lessor believes in
good faith remains uncured after the expiration of any
applicable cure period. Should Lessor, due to a default
under this Lease, including but not limited to this Article,
draw down the entire Letter of Credit, Lessor shall hold the
funds without interest and apply the same to cure any
defaults of Lessee under this Lease. If after any
application of said funds Lessor shall hold any such funds
in an amount less than the face amount of the Letter of
Credit, Lessee shall be obligated to immediately either
increase the amount of funds so held by
Lessor, replace the Letter of Credit and obtain a release of
the funds held by Lessor, or be in default under this Lease.
Lessor may co-mingle any funds held by it with any other
funds of Lessor. Any cash funds held by Lessor in lieu of
the Letter of Credit shall be released to Lessee upon
presentation of a substitute Letter of Credit in the
appropriate amount, upon satisfaction of the terms of
release of the Letter of Credit otherwise set forth herein
below, or, if no uncured
default exists, at the termination of this Lease. If Lessor
shall fail or refuse after written notice and five (5)
business days opportunity to cure, to release the Letter of
Credit or any funds held by Lessor and not properly applied
by Lessor to cure any defaults of Lessee, such funds shall
bear interest at the rate of 15% per annum until released to
Lessee and Lessor shall incur a late charge of 5% of the
amount improperly held. In addition, if Lessor shall fail
or refuse to return such funds in violation hereof, Lessee
shall be entitled to a right of offset against future Rent
due and owing, as well as any other remedy available at law
or equity.
(D) Lessee further covenants that it will not assign or
encumber said Letter of Credit or any part thereof and that
neither Lessor or its successor or assigns will be bound by
any such assignment, encumbrance, attempted assignment, or
attempted encumbrance.
(E) Without limiting the generality of the foregoing,
if the Letter of Credit expires earlier than thirty (30)
days after the expiration of the term of this Lease, or the
issuing Bank notifies Lessor that it shall not renew the
Letter of Credit, Lessor will accept a renewal or substitute
Letter of Credit (such renewal or substitute Letter of
Credit to be in effect no later than thirty (30) days prior
to the expiration of the expiring Letter of Credit),
irrevocable and automatically renewable and on the same
terms as set forth above. However, if (i) the Letter of
Credit is not timely renewed or a substitute Letter of
Credit is not timely received, or (ii) Lessee fails to
maintain the Letter of Credit in the amount and on the terms
set forth herein, Lessee, at least thirty days prior to the
expiration of the current Letter of Credit, or immediately
(except where provided herein to the contrary) upon its
failure to comply with each and every term of this Article,
must deposit
with Lessor cash security in the amount of the required
Letter of Credit, to be held by Lessor in accordance
herewith.
(F) The Letter of Credit shall be released by Lessor
and Lessee's requirement to maintain such Letter of Credit
shall cease upon the following conditions:
After the end of the eighteenth (18th) full month from
the beginning of the first full Lease Year, the Letter of
Credit hereunder shall be released by Lessor based upon the
following conditions being satisfied concurrently:
Lessee evidencing an annual net income and equity
position corresponding to its most recent fiscal year period
then ended, greater than $1,500,000 and $25,000,000,
respectively. For purposes of the foregoing, net income
would be defined as the net income figure reported on
Lessee's annual audited financial statements, after all
applicable taxes and before all positive extraordinary
accounting items ("Net Income"). For purposes of the
foregoing, equity would be defined as the difference between
the Lessee's total assets and total liabilities as reported
on Lessee's annual audited financial statements ("Equity").
Evidence of Lessee's Net Income and Equity shall be
deemed satisfactory only if and when provided via audited
financial statements for the most recent fiscal year period
prepared by KPMG Peat Marwick or a nationally recognized
accounting firm reasonably acceptable to Lessor. Under no
condition will Lessor release the Letter of Credit if the
Leased Premises did not generate a store level net income,
after depreciation, amortization and all occupancy expenses
for such Leased Premises, of at least five percent (5.0%) of
the gross annual sales by Lessee from the Leased Premises
for the same most recent fiscal year period and/or such
Leased Premises had not been in operation for the entire
twelve calendar month period reflected in the audited
financial statements. Lessee shall furnish Lessor with
internally prepared store level financial statements,
certified as true and correct by an authorized officer of
Lessee, to evidence the Leased Premises store level net
income and length of operating history. Additionally, if
Lessee shall request the release of the Letter of Credit
more than two (2) calendar months after the end of the
fiscal year results reviewed above, Lessee shall furnish
Lessor with internally prepared financial statements for
both the Lessee and the Leased Premises, certified as true
and correct by an authorized officer of Lessee, evidencing
no material adverse change in both the Lessee's financial
condition and the Leased Premises's annualized gross sales
by Lessee and store level net income from the end of such
fiscal year.
Lessor shall have ten (10) business days to either
object to the request for release of the Letter of Credit,
citing specific failure(s) to meet the above contingencies
to release, or if Lessor shall make no objection in writing
to Lessee within said ten day period, the Letter of Credit
shall be released. Upon such release, this Lease shall be
deemed amended so as to delete this Article in its entirety.
Provided Lessee is not in default hereunder, Lessor
shall release the Letter of Credit at the expiration of the
term hereof and return the original Letter of Credit within
ten (10) days from the end of the term hereof.
(G) Notwithstanding the foregoing, if the Lessor
herein named on the first page of the Lease transfers or
conveys its entire interest (or conveys any partial interest
where original Lessor is no longer the managing agent for
the New Lessor entity) in the Leased Premises to a new
Lessor (hereinafter "New Lessor"), such New Lessor (or any
successor Lessor as to all or any part of New Lessor's
interest in the Leased Premises) shall only be entitled to
draw an amount under the Letter of Credit that New Lessor
reasonably believes necessary for purposes of curing a
Lessee default that extends beyond all applicable notice and
cure periods.
IN WITNESS WHEREOF, Lessor and Lessee have respectively
signed and sealed this Lease as of the day and year first
above written.
LESSEE: Caribou Coffee Company, Inc.
Witness:
/s/ Tom Berzinski By: /s/ John Puckett
Tom Berzinski Its: CEO
Print Name
/s/ Sheree Andersen
Sheree Andersen
Print Name
STATE OF Minnesota)
)SS.
COUNTY OF Carver)
The foregoing instrument was acknowledged before me
this 15th day of August, 1997,by John Puckett, as CEO of
Caribou Coffee Company, Inc. on behalf of said corporation.
/s/ Sheree Andersen
Notary Public
[notary seal]
LESSOR: AEI REAL ESTATE FUND XVI LIMITED
PARTNERSHIP, a Minnesota limited partnership
By: AEI FUND MANAGEMENT XVI, INC., a
Minnesota corporation
Witness
/s/ Sheree Andersen By: /s/ Robert P Johnson
Sheree Andersen Robert P. Johnson, President
Print Name
/s/ Rick Vitale
Rick Vitale
Print Name
STATE OF MINNESOTA )
)SS.
COUNTY OF RAMSEY )
The foregoing instrument was acknowledged before me the
15th day of August, 1997, by Robert P. Johnson, the
President of AEI Fund Management XVI, Inc., a Minnesota
corporation, corporate general partner of AEI Income &
Growth Fund XVI Limited Partnership,on behalf of said
limited partnership.
/s/ Sheree L Andersen
[notary seal] Notary Public
EXHIBIT "A"
LEGAL DESCRIPTION
All that tract or parcel of land lying and being in Land Lot
901 of the 16th District, Second Section, Cobb County,
Georgia and being more particularly described as follows:
To find the True Point of Beginning, commence at a point at
the corner common to Land Lots 901, 902, 971 and 972 of said
District, Section and County, said point being located North
84 33' 24" West a distance of 50.00 feet from a number 4
rebar found on the Southerly line of Land Lot 901 of said
District, Section and County, thence, from said land lot
corner, North 01, 48' 20" East a distance of 325.07 feet to
a point; thence, North 02 12' 51" East a distance of 45.46
feet to a number 4 rebar set and the TRUE POINT OF
BEGINNING; thence, North 01 53' 24" East a distance of
234.23 feet to an iron pin with plastic cap found at the
Southwesterly right-of-way of Johnson Ferry Road, said iron
pin being located North 28 40' 42" West a distance of 0.83
feet from a right of way monument found; thence, along the
Southwesterly right of way of Johnson Ferry Road, South 63
59' 03" East a distance of 164.20 feet to a point, said
point being located North 63 59' 03" West a distance of 1.79
feet from a right-of-way monument found; thence, departing
said right of way, South 02 07'32" West a distance of 166.
85 feet to a number 4 rebar found; thence, North 88 12' 50"
West a distance of 149.18 feet to a number 4 rebar set at
the TRUE POINT OF BEGINNING, containing 0.70 acre as shown
on Boundary Survey for Caribou Coffee, prepared by Atlanta
Engineering Services, Inc., dated December 1, 1994, last
revised February 5, 1996, certified to Caribou Coffee and
Chicago Title Insurance Company by Elvin L. Aycock, GA.
R.L.S. No 2374.
TOGETHER WITH easement appurtenant to the above described
property as set forth in Easement Agreement and Release of
Existing Easement Between Lorient corporation, N.V. and
Merchant's Walk Associated, L.P., dated September 28, 1993,
recorded in Deed Book 7652, Page 420, Cobb County, Georgia
records.
Exhibit B
Caribou Coffee Company, Inc. (Lessee) hereby gives Lessor
AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP, pursuant to
that certain Net Lease Agreement dated August , 1997,
hereby give lLessor notice of the proposed [assignment or
sublease] of the Net Lease Agreement, accompained by true
and correct copies of the porposed documents evidencing the
same. The undersigned hereby confirms its continued
liability under the Net Lease Agreement for the obligations
of Lessee, notwithstanding the proposed [assingment or
sublease] of its interest in the Net Lease Agreement.
CARIBOU COFFEE, INC.
By: /s/ John Puckett
CEO
