SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Under Section 13 or 15(d)
Of The Securities Exchange Act Of 1934
For the Fiscal Year Ended: December 31, 1999
Commission file number: 0-29274
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
(Name of Small Business Issuer in its Charter)
State of Minnesota 41-1789725
(State or other Jurisdiction of (I.R.S. Employer)
Incorporation or Organization) Identification No.)
1300 Minnesota World Trade Center, St. Paul, Minnesota 55101
(Address of Principal Executive Offices)
(651) 227-7333
(Issuer's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Units
(Title of class)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the past 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [X] No
Check if disclosure of delinquent filers in response to Rule 405
of Regulation S-B is not contained in this Form, and no
disclosure will be contained, to the best of the registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or and
amendment to this Form 10-KSB. [X]
The Issuer's revenues for year ended December 31, 1999 were
$1,891,099.
As of February 29, 2000, there were 23,548.50 Units of limited
partnership interest in the registrant outstanding and owned by
nonaffiliates of the registrant, which Units had an aggregate
market value (based solely on the price at which they were sold
since there is no ready market for such Units) of $23,548,500.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant has not incorporated any documents by reference
into this report.
Transitional Small Business Disclosure Format:
Yes No [X]
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
AEI Income & Growth Fund XXI Limited Partnership (the
"Partnership" or the "Registrant") is a limited partnership which
was organized pursuant to the laws of the State of Minnesota on
August 31, 1994. The registrant is comprised of AEI Fund
Management XXI, Inc. (AFM) as Managing General Partner, Robert P.
Johnson as the Individual General Partner, and purchasers of
partnership units as Limited Partners. The Partnership offered
for sale up to $24,000,000 of limited partnership interests (the
"Units") (24,000 Units at $1,000 per Unit) pursuant to a
registration statement effective February 1, 1995. The
Partnership commenced operations on April 14, 1995 when minimum
subscriptions of 1,500 Limited Partnership Units ($1,500,000)
were accepted. On January 31, 1997, the Partnership offering
terminated when the maximum subscription limit of 24,000 Limited
Partnership Units ($24,000,000) was reached.
The Partnership was organized to acquire existing and
newly constructed commercial properties located in the United
States, to lease such properties to tenants under triple net
leases, to hold such properties and to eventually sell such
properties. From subscription proceeds, the Partnership had
purchased ten properties including partial interests in seven
properties, at a total cost of $19,686,525. The balance of the
subscription proceeds was applied to organization and syndication
costs, working capital reserves and distributions, which
represented a return of capital. The properties are commercial,
single tenant buildings leased under triple net leases.
The Partnership's properties were purchased with
subscription proceeds without any indebtedness. The Partnership
will not finance properties in the future to obtain proceeds for
new property acquisitions. If it is required to do so, the
Partnership may incur short-term indebtedness, which may be
secured by a portion of the Partnership's properties, to finance
the day-to-day cash flow requirements of the Partnership
(including cash flow necessary to repurchase Units). The amount
of borrowings that may be secured by the Partnership's properties
is limited in the aggregate to 10% of the purchase price of all
Partnership properties. The Partnership will not incur
borrowings prior to application of the proceeds from sale of the
Units, will not incur borrowings to pay distributions, and will
not incur borrowings while there is cash available for
distributions.
The Partnership will hold its properties until the General
Partners determine that the sale or other disposition of the
properties is advantageous in view of the Partnership's
investment objectives. In deciding whether to sell properties,
the General Partners will consider factors such as potential
appreciation, net cash flow and income tax considerations. In
addition, certain lessees may be granted options to purchase
properties after a specified portion of the lease term has
elapsed. The Partnership expects to sell some or all of its
properties prior to its final liquidation and to reinvest the
proceeds from such sales in additional properties. The
Partnership reserves the right, at the discretion of the General
Partners, to either distribute proceeds from the sale of
properties to the Partners or to reinvest such proceeds in
additional properties, provided that sufficient proceeds are
distributed to the Limited Partners to pay federal and state
income taxes related to any taxable gain recognized as a result
of the sale. It is anticipated that the Partnership will
commence liquidation through the sale of its remaining properties
twelve to fifteen years after its formation, although final
liquidation may be delayed by a number of circumstances,
including market conditions and seller financing of properties.
ITEM 1. DESCRIPTION OF BUSINESS. (Continued)
Leases
Although there are variations in the specific terms of the
leases, the following is a summary of the general terms of the
Partnership's leases. The properties are leased to various
tenants under triple net leases, which are classified as
operating leases. Under a triple net lease, the lessee is
responsible for all real estate taxes, insurance, maintenance,
repairs and operating expenses for the property. The initial
lease terms are for 20 years. The leases provide for base annual
rental payments, payable in monthly installments, and contain
rent clauses which entitle the Partnership to receive additional
rent in future years based on stated rent increases.
The leases provide the lessees with two to five five-year
renewal options subject to the same terms and conditions as the
initial lease. Certain lessees have been granted options to
purchase the property. Depending on the lease, the purchase
price is either determined by a formula, or is the greater of the
fair market value of the property or the amount determined by a
formula. In all cases, if the option were to be exercised by the
lessee, the purchase price would be greater than the original
cost of the property.
On March 14, 1997, the Partnership purchased a parcel of
land in San Antonio, Texas for $1,032,299. The land is leased to
Champps Americana, Inc. (Champps) under a Lease Agreement with a
primary term of 20 years and annual rental payments of $83,451.
Effective September 9, 1997, the annual rent was increased to
$128,156. Simultaneously with the purchase of the land, the
Partnership entered into a Development Financing Agreement under
which the Partnership advanced funds to Champps for the
construction of a Champps Americana restaurant on the site.
Initially, the Partnership charged interest on the advances at a
rate of 7.0%. Effective September 9, 1997, the interest rate was
increased to 10.75%. On December 23, 1997, after the development
was completed, the Lease Agreement was amended to require annual
rental payments of $296,023. Total acquisition costs, including
the cost of the land, were $2,833,357.
On March 19, 1997, the Partnership purchased a Denny's
restaurant in Covington, Louisiana for $1,304,948. The property
is leased to Huntington Restaurants Group, Inc. under a Lease
Agreement with a primary term of 20 years and annual rental
payments of $141,243.
On April 21, 1997, the Partnership purchased a 49.6%
interest in a parcel of land in Schaumburg, Illinois for
$876,387. The land is leased to Champps under a Lease Agreement
with a primary term of 20 years and annual rental payments of
$66,906. Effective October 17, 1997, the annual rent was
increased to $102,749. Simultaneously with the purchase of the
land, the Partnership entered into a Development Financing
Agreement under which the Partnership advanced funds to Champps
for the construction of a Champps Americana restaurant on the
site. Initially, the Partnership charged interest on the
advances at a rate of 7.0%. Effective October 17, 1997, the
interest rate was increased to 10.75%. On December 31, 1997,
after the development was completed, the Lease Agreement was
amended to require annual rental payments of $236,479. The
Partnership's share of the total acquisition costs, including the
cost of the land, was $2,256,462. The remaining interests in the
property are owned by AEI Net Lease Income & Growth Fund XX
Limited Partnership and Net Lease Income & Growth Fund 84-A
Limited Partnership, affiliates of the Partnership.
ITEM 1. DESCRIPTION OF BUSINESS. (Continued)
On July 8, 1997, the Partnership purchased a parcel of
land in Livonia, Michigan for $1,074,384. The land is leased to
Champps under a Lease Agreement with a primary term of 20 years
and annual rental payments of $75,207. Effective January 3,
1998, the annual rent was increased to $115,496. Simultaneously
with the purchase of the land, the Partnership entered into a
Development Financing Agreement under which the Partnership
advanced funds to Champps for the construction of a Champps
Americana restaurant on the site. Initially, the Partnership
charged interest on the advances at a rate of 7.0%. Effective
January 3, 1998, the interest rate was increased to 10.75%. On
May 19, 1998, after the development was completed, the Lease
Agreement was amended to require annual rental payments of
$429,135. Total acquisition costs, including the cost of the
land, were $4,150,061.
On July 31, 1997, the Partnership purchased a 93.1%
interest in a Caribou Coffee store in Charlotte, North Carolina
for $1,310,598. The property was leased to Caribou Coffee
Company, Inc. under a Lease Agreement with a primary term of 18
years and annual rental payments of $146,438. The remaining
interest in the property is owned by AEI Institutional Net Lease
Fund '93 Limited Partnership, an affiliate of the Partnership.
On August 28, 1998, the Partnership purchased a 25%
interest in a parcel of land in Centerville, Ohio for $462,747.
The land is leased to Americana Dining Corporation (ADC) under a
Lease Agreement with a primary term of 20 years and annual rental
payments of $32,392. Effective December 25, 1998, the annual
rent was increased to $48,588. Simultaneously with the purchase
of the land, the Partnership entered into a Development Financing
Agreement under which the Partnership advanced funds to ADC for
the construction of a Champps Americana restaurant on the site.
Initially, the Partnership charged interest on the advances at a
rate of 7%. Effective December 25, 1998, the interest rate was
increased to 10.5%. On January 27, 1999, after the development
was completed, the Lease Agreement was amended to require annual
rental payments of $101,365. The Partnership's share of the
total acquisition costs, including the cost of the land, was
$984,426. The remaining interests in the Fund property are owned
by AEI Real Estate Fund XVII Limited Partnership, AEI Real Estate
Fund XVIII Limited Partnership and AEI Income & Growth Fund XXII
Limited Partnership, affiliates of the Partnership.
On March 8, 2000, the Partnership purchased a parcel of
land in Fort Wayne, Indiana for $549,000. The land is leased to
Tumbleweed, Inc. (TWI) under a Lease Agreement with a primary
term of 15 years and annual rental payments of $48,038.
Simultaneously with the purchase of the land, the Partnership
entered into a Development Financing Agreement under which the
Partnership will advance funds to TWI for the construction of a
Tumbleweed restaurant on the site. The Partnership is charging
interest on the advances at a rate of 8.75%. The total purchase
price, including the cost of the land, will be approximately
$1,460,000. After the construction is complete, the Lease
Agreement will be amended to require annual rental payments of
approximately $144,000.
Through December 31, 1998, the Partnership sold 40.7615%
of its interest in the Champps Americana restaurant in Columbus,
Ohio, in six separate transactions to unrelated third parties.
The Partnership received total net sale proceeds of $1,383,508
which resulted in a total net gain of $341,928. The total cost
and related accumulated depreciation of the interests sold was
$1,087,502 and $45,922, respectively. For the year ended
December 31, 1998, the net gain was $235,377.
ITEM 1. DESCRIPTION OF BUSINESS. (Continued)
During 1999, the Partnership sold 85.0382% of its interest
in the Arby's restaurant in four separate transactions to
unrelated third parties. The Partnership received total net sale
proceeds of $881,682 which resulted in a total net gain of
$220,469. The total cost and related accumulated depreciation of
the interest sold was $731,056 and $69,843, respectively.
On October 26, 1999, the Partnership sold the Caribou
Coffee store to an unrelated third party. The Partnership
received net sale proceeds of $1,553,867, which resulted in a net
gain of $301,764. At the time of sale, the cost and related
accumulated depreciation of the property was $1,310,597 and
$58,494, respectively.
As of December 31, 1997, based on an analysis of market
conditions, it was determined the fair value of the Partnership's
interest in the Media Play retail store was approximately
$748,000. In the fourth quarter of 1997, a charge to operations
for real estate impairment of $580,200 was recognized, which is
the difference between the book value at December 31, 1997 of
$1,328,200 and the estimated market value of $748,000. The
charge was recorded against the cost of the land, building and
equipment.
Major Tenants
During 1999, two of the Partnership's lessees each
contributed more than ten percent of the Partnership's total
rental revenue. The major tenants in aggregate contributed 82%
of the Partnership's total rental revenue in 1999. It is
anticipated that, based on minimum rental payments required under
the leases, each major tenant will continue to contribute more
than ten percent of the Partnership's rental income in 2000 and
future years. Any failure of these major tenants could
materially affect the Partnership's net income and cash
distributions.
Competition
The Partnership is a minor factor in the commercial real
estate business. There are numerous entities engaged in the
commercial real estate business which have greater financial
resources than the Partnership. At the time the Partnership
elects to dispose of its properties, the Partnership will be in
competition with other persons and entities to find buyers for
its properties.
Employees
The Partnership has no direct employees. Management
services are performed for the Partnership by AEI Fund
Management, Inc., an affiliate of AFM.
Year 2000 Compliance
The Year 2000 issue is the result of computer systems that
use two-digits rather than four to define the applicable year,
which may prevent such systems from accurately processing dates
ending in the Year 2000 and beyond. This could result in
computer system failures or disruption of operations, including,
but not limited to, an inability to process transactions, to send
or receive electronic data, or to engage in routine business
activities.
ITEM 1. DESCRIPTION OF BUSINESS. (Continued)
AEI Fund Management, Inc. (AEI) performs all management
services for the Partnership. In 1998, AEI completed an
assessment of its computer hardware and software systems and
replaced or upgraded certain computer hardware and software using
the assistance of outside vendors. AEI has received written
assurance from the equipment and software manufacturers as to
Year 2000 compliance. The costs associated with Year 2000
compliance have not been, and are not expected to be, material.
The Partnership is not aware of any issues related to Year 2000
non compliance with AEI systems or the systems of the various
tenants.
ITEM 2. DESCRIPTION OF PROPERTIES.
Investment Objectives
The Partnership's investment objectives are to acquire
existing or newly-developed commercial properties throughout the
United States that offer the potential for (i) regular cash
distributions of lease income; (ii) growth in lease income
through rent escalation provisions; (iii) preservation of capital
through all-cash sale-leaseback transactions; (iv) capital growth
through appreciation in the value of properties; and (v) stable
property performance through long-term lease contracts. The
Partnership does not have a policy, and there is no limitation,
as to the amount or percentage of assets that may be invested in
any one property. However, to the extent possible, the General
Partners attempt to diversify the type and location of the
Partnership's properties.
Description of Properties
The Partnership's properties are commercial, single tenant
buildings. The properties were acquired on a debt-free basis and
are leased to various tenants under triple net leases, which are
classified as operating leases. The Partnership holds an
undivided fee simple interest in the properties.
The Partnership's properties are subject to the general
competitive conditions incident to the ownership of single tenant
investment real estate. Since each property is leased under a
long-term lease, there is little competition until the
Partnership decides to sell the property. At this time, the
Partnership will be competing with other real estate owners, on
both a national and local level, in attempting to find buyers for
the properties. In the event of a tenant default, the
Partnership would be competing with other real estate owners, who
have property vacancies, to attract a new tenant to lease the
property. The Partnership's tenants operate in industries that
are very competitive and can be affected by factors such as
changes in regional or local economies, seasonality and changes
in consumer preference.
The following table is a summary of the properties that
the Partnership acquired and owned as of December 31, 1999.
Total Property Annual Annual
Purchase Acquisition Lease Rent Per
Property Date Costs Lessee Payment Sq. Ft.
Arby's Restaurant
Montgomery, AL RTM Gulf
(2.6811%) 5/31/95 $ 23,049 Coast, Inc. $ 2,524 $31.75
ITEM 2. DESCRIPTION OF PROPERTIES. (Continued)
Total Property Annual Annual
Purchase Acquisition Lease Rent Per
Property Date Costs Lessee Payment Sq. Ft.
Media Play Retail Store
Apple Valley, MN
(34.0%) 12/21/95 $1,414,060 (1)
Garden Ridge Retail Store
Pineville, NC Garden
(40.75%) 3/28/96 $3,644,391 Ridge, L.P. $ 383,973 $ 6.65
Champps
Americana Restaurant Americana
Columbus, OH Dining
(27.0385%) 8/29/96 $ 721,377 Corporation $ 80,987 $36.66
Huntington
Denny's Restaurant Restaurants
Covington, LA 3/19/97 $1,304,948 Group, Inc. $ 146,733 $34.13
Champps Champps
Americana Restaurant Entertainment
San Antonio, TX 12/23/97 $2,833,357 of Texas, Inc. $ 296,023 $34.10
Champps
Americana Restaurant
Schaumburg, IL Champps
(49.6%) 12/31/97 $2,256,462 Americana, Inc. $ 236,479 $42.73
Champps
Americana Restaurant Champps
Livonia, MI 5/19/98 $4,150,061 Americana, Inc. $ 429,135 $46.88
Champps
Americana Restaurant Americana
Centerville, OH Dining
(25.0%) 1/27/99 $ 984,426 Corporation $ 101,365 $43.28
(1) The property is vacant and listed for sale or lease.
The properties listed above with a partial ownership
percentage are owned with affiliates of the Partnership and/or
unrelated third parties. The remaining interest in the Arby's is
owned by unrelated third parties. The remaining interests in the
Media Play and Garden Ridge retail stores are owned by AEI Net
Lease Income & Growth Fund XIX Limited Partnership and AEI Net
Lease Income & Growth Fund XX Limited Partnership. The remaining
interest in the Champps Americana restaurant in Columbus, Ohio is
owned by AEI Real Estate Fund XVIII Limited Partnership and
unrelated third parties. The remaining interest in the Champps
Americana restaurant in Schaumburg, Illinois is owned by Net
Lease Income & Growth Fund 84-A Limited Partnership and AEI Net
Lease Income & Growth Fund XX Limited Partnership. The remaining
interests in the Champps Americana restaurant in Centerville,
Ohio are owned by AEI Real Estate Fund XVII Limited Partnership,
AEI Real Estate Fund XVIII Limited Partnership and AEI Income &
Growth Fund XXII Limited Partnership.
ITEM 2. DESCRIPTION OF PROPERTIES. (Continued)
The Partnership accounts for properties owned as tenants-
in-common with affiliated Partnerships and/or unrelated third
parties using the proportionate consolidation method. Each
tenant-in-common owns a separate, undivided interest in the
properties. Any tenant-in-common that holds more than a 50%
interest does not control decisions over the other tenant-in-
common interests. The financial statements reflect only this
Partnership's percentage share of the properties' land, building
and equipment, liabilities, revenues and expenses.
The initial Lease terms are 20 years and contain renewal
options which may extend the Lease term an additional 10 years
for the Arby's restaurant, an additional 15 years for the Champps
and Denny's restaurants, and an additional 25 years for the
Garden Ridge retail store.
Pursuant to the Lease Agreements, the tenants are required
to provide proof of adequate insurance coverage on the properties
they occupy. The General Partners believe the properties are
adequately covered by insurance and consider the properties to be
well-maintained and sufficient for the Partnership's operations.
For tax purposes, the Partnership's properties are
depreciated under the Modified Accelerated Cost Recovery System
(MACRS). The largest depreciable component of a property is the
building which is depreciated, using the straight-line method,
over 40 years. The remaining depreciable components of a
property are personal property and land improvements which are
depreciated, using an accelerated method, over 5 and 15 years,
respectively. Since the Partnership has tax-exempt Partners, the
Partnership is subject to the rules of Section 168(h)(6) of the
Internal Revenue Code which requires a percentage of the
properties' depreciable components to be depreciated over longer
lives using the straight-line method. In general, the federal
tax basis of the properties for tax depreciation purposes is the
same as the basis for book depreciation purposes except for
properties whose book value was reduced by a real estate
impairment loss pursuant to Financial Accounting Standards Board
Statement No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of." The real
estate impairment loss, which was recorded against the book cost
of the land and depreciable property, was not recognized for tax
purposes.
Through December 31, 1999, all properties were 100%
occupied by the lessees, except the Media Play retail store which
has been 100% vacant since January 31, 1997.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP UNITS AND
RELATED SECURITY HOLDER MATTERS.
As of December 31, 1999, there were 1,306 holders of
record of the registrant's Limited Partnership Units. There is
no other class of security outstanding or authorized. The
registrant's Units are not a traded security in any market.
However, the Partnership may acquire Units from Limited Partners
who have tendered their Units to the Partnership. Such Units may
be acquired at a discount. The Partnership is not obligated to
purchase in any year more than 5% of the total number of Units
outstanding at the beginning of the year. In no event shall the
Partnership be obligated to purchase Units if, in the sole
discretion of the Managing General Partner, such purchase would
impair the capital or operation of the Partnership.
During 1999, ten Limited Partners redeemed a total of
280.37 Partnership Units for $239,479 in accordance with the
Partnership Agreement. In prior years, three Limited Partners
redeemed a total of 171.1 Partnership Units for $154,021. The
redemptions increase the remaining Limited Partners' ownership
interest in the Partnership.
Cash distributions of $18,483 and $19,091 were made to the
General Partners and $1,590,377 and $1,890,001 were made to the
Limited Partners in 1999 and 1998, respectively. The
distributions were made on a quarterly basis and represent Net
Cash Flow, as defined, except as discussed below. These
distributions should not be compared with dividends paid on
capital stock by corporations.
As part of the Limited Partner distributions discussed
above, the Partnership distributed $264,328 and $407,119 of
proceeds from property sales in 1999 and 1998, respectively.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS.
Results of Operations
For the years ended December 31, 1999 and 1998, the
Partnership recognized rental income of $1,850,940 and
$1,704,282, respectively. During the same periods, the
Partnership earned investment income of $40,159 and $150,469,
respectively. In 1999, rental income increased primarily as a
result of rent received from the Champps Americana restaurants in
Livonia, Michigan and Centerville, Ohio. These increases in
rental income were partially offset by a decrease in rental
income due to property sales and a decrease in investment income
earned on subscription and sale proceeds prior to the purchase of
the properties.
Musicland Group, Inc. (MGI), the lessee of the Media Play
retail store in Apple Valley, Minnesota experienced financial
difficulties and was aggressively restructuring its organization.
As part of the restructuring, the Partnership and MGI reached an
agreement in December, 1996 in which MGI would buy out and
terminate the Lease Agreement by making a payment of $800,000,
which is equal to approximately two years' rent. The
Partnership's share of such payment was $272,000. A specialist
in commercial property leasing has been retained to locate a new
tenant for the property. While the property is vacant, the
Partnership is responsible for the real estate taxes and other
costs required to maintain the property.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
As of December 31, 1997, based on an analysis of market
conditions in the area, it was determined the fair value of the
Partnership's interest in the Media Play was approximately
$748,000. In the fourth quarter of 1997, a charge to operations
for real estate impairment of $580,200 was recognized, which is
the difference between the book value at December 31, 1997 of
$1,328,200 and the estimated market value of $748,000. The
charge was recorded against the cost of the land, building and
equipment.
During the years ended December 31, 1999 and 1998, the
Partnership paid Partnership administration expenses to
affiliated parties of $227,787 and $248,958, respectively. These
administration expenses include initial start-up costs and
expenses associated with processing distributions, reporting
requirements and correspondence to the Limited Partners. During
the same periods, the Partnership incurred Partnership
administration and property management expenses from unrelated
parties of $81,971 and $107,932, respectively. These expenses
represent direct payments to third parties for legal and filing
fees, direct administrative costs, outside audit and accounting
costs, taxes, insurance and other property costs. The decrease
in these expenses in 1999, when compared to 1998, is the result
of expenses incurred in 1998 related to the Media Play situation
discussed above.
As of December 31, 1999, the Partnership's cash
distribution rate was 6.5% on an annualized basis. Distributions
of Net Cash Flow to the General Partners were subordinated to the
Limited Partners as required in the Partnership Agreement. As a
result, 99% of distributions and income were allocated to Limited
Partners and 1% to the General Partners.
Inflation has had a minimal effect on income from
operations. The Leases contain cost of living increases which
will result in an increase in rental income over the term of the
Leases. Inflation also may cause the Partnership's real estate
to appreciate in value. However, inflation and changing prices
may also have an adverse impact on the operating margins of the
properties' tenants which could impair their ability to pay rent
and subsequently reduce the Partnership's Net Cash Flow available
for distributions.
The Year 2000 issue is the result of computer systems that
use two-digits rather than four to define the applicable year,
which may prevent such systems from accurately processing dates
ending in the Year 2000 and beyond. This could result in
computer system failures or disruption of operations, including,
but not limited to, an inability to process transactions, to send
or receive electronic data, or to engage in routine business
activities.
AEI Fund Management, Inc. (AEI) performs all management
services for the Partnership. In 1998, AEI completed an
assessment of its computer hardware and software systems and
replaced or upgraded certain computer hardware and software using
the assistance of outside vendors. AEI has received written
assurance from the equipment and software manufacturers as to
Year 2000 compliance. The costs associated with Year 2000
compliance have not been, and are not expected to be, material.
The Partnership is not aware of any issues related to Year 2000
non compliance with AEI systems or the systems of the various
tenants.
Liquidity and Capital Resources
During the year ended December 31, 1999, the Partnership's
cash balances increased $1,854,632 mainly as a result of proceeds
received from the sale of property. Net cash provided by
operating activities decreased from $1,642,315 in 1998 to
$1,564,043 in 1999 mainly as a result of net timing differences
in the collection of payments from the lessees and the payment of
expenses, which were partially offset by an increase in income
and a decrease in expenses in 1999.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
The major components of the Partnership's cash flow from
investing activities are investments in real estate and proceeds
from the sale of real estate. During the years ended December
31, 1999 and 1998, the Partnership expended $236,188 and
$2,671,415, respectively, to invest in real properties (inclusive
of acquisition expenses). During the same periods, the
Partnership generated cash flow from the sale of real estate of
$2,435,549 and $862,718, respectively.
Through December 31, 1998, the Partnership sold 40.7615%
of its interest in the Champps Americana restaurant in Columbus,
Ohio, in six separate transactions to unrelated third parties.
The Partnership received total net sale proceeds of $1,383,508
which resulted in a total net gain of $341,928. The total cost
and related accumulated depreciation of the interests sold was
$1,087,502 and $45,922, respectively. For the year ended
December 31, 1998, the net gain was $235,377.
During 1999, the Partnership sold 85.0382% of its interest
in the Arby's restaurant in four separate transactions to
unrelated third parties. The Partnership received total net sale
proceeds of $881,682 which resulted in a total net gain of
$220,469. The total cost and related accumulated depreciation of
the interest sold was $731,056 and $69,843, respectively.
On October 26, 1999, the Partnership sold the Caribou
Coffee store to an unrelated third party. The Partnership
received net sale proceeds of $1,553,867, which resulted in a net
gain of $301,764. At the time of sale, the cost and related
accumulated depreciation of the property was $1,310,597 and
$58,494, respectively.
During 1999 and 1998, the Partnership distributed $266,998
and $411,231 of the net sale proceeds to the Limited and General
Partners as part of their regular quarterly distributions which
represented a return of capital of $11.22 and $17.09 per Limited
Partnership Unit, respectively. The remaining net sale proceeds
will either be reinvested in additional property or distributed
to the Partners in the future.
On July 8, 1997, the Partnership purchased a parcel of
land in Livonia, Michigan for $1,074,384. The land is leased to
Champps under a Lease Agreement with a primary term of 20 years
and annual rental payments of $75,207. Effective January 3,
1998, the annual rent was increased to $115,496. Simultaneously
with the purchase of the land, the Partnership entered into a
Development Financing Agreement under which the Partnership
advanced funds to Champps for the construction of a Champps
Americana restaurant on the site. Initially, the Partnership
charged interest on the advances at a rate of 7.0%. Effective
January 3, 1998, the interest rate was increased to 10.75%. On
May 19, 1998, after the development was completed, the Lease
Agreement was amended to require annual rental payments of
$429,135. Total acquisition costs, including the cost of the
land, were $4,150,061.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
On August 28, 1998, the Partnership purchased a 25%
interest in a parcel of land in Centerville, Ohio for $462,747.
The land is leased to Americana Dining Corporation (ADC) under a
Lease Agreement with a primary term of 20 years and annual rental
payments of $32,392. Effective December 25, 1998, the annual
rent was increased to $48,588. Simultaneously with the purchase
of the land, the Partnership entered into a Development Financing
Agreement under which the Partnership advanced funds to ADC for
the construction of a Champps Americana restaurant on the site.
Initially, the Partnership charged interest on the advances at a
rate of 7%. Effective December 25, 1998, the interest rate was
increased to 10.5%. On January 27, 1999, after the development
was completed, the Lease Agreement was amended to require annual
rental payments of $101,365. The Partnership's share of the
total acquisition costs, including the cost of the land, was
$984,426. The remaining interests in the Fund property are owned
by AEI Real Estate Fund XVII Limited Partnership, AEI Real Estate
Fund XVIII Limited Partnership and AEI Income & Growth Fund XXII
Limited Partnership, affiliates of the Partnership.
On March 8, 2000, the Partnership purchased a parcel of
land in Fort Wayne, Indiana for $549,000. The land is leased to
Tumbleweed, Inc. (TWI) under a Lease Agreement with a primary
term of 15 years and annual rental payments of $48,038.
Simultaneously with the purchase of the land, the Partnership
entered into a Development Financing Agreement under which the
Partnership will advance funds to TWI for the construction of a
Tumbleweed restaurant on the site. The Partnership is charging
interest on the advances at a rate of 8.75%. The total purchase
price, including the cost of the land, will be approximately
$1,460,000. After the construction is complete, the Lease
Agreement will be amended to require annual rental payments of
approximately $144,000.
The Partnership's primary use of cash flow is distribution
and redemption payments to Partners. The Partnership declares
its regular quarterly distributions before the end of each
quarter and pays the distribution in the first week after the end
of each quarter. The Partnership attempts to maintain a stable
distribution rate from quarter to quarter. Redemption payments
are paid to redeeming Partners in the fourth quarter of each
year. Effective January 1, 1999, the Partnership's distribution
rate was reduced from 7.5% to 7.0%. Effective April 1, 1999, the
rate was reduced to 6.5%. As a result, distributions were higher
during 1998 when compared to the same period in 1999.
The Partnership may acquire Units from Limited Partners
who have tendered their Units to the Partnership. Such Units may
be acquired at a discount. The Partnership is not obligated to
purchase in any year more than 5% of the number of Units
outstanding at the beginning of the year. In no event shall the
Partnership be obligated to purchase Units if, in the sole
discretion of the Managing General Partner, such purchase would
impair the capital or operation of the Partnership.
During 1999, ten Limited Partners redeemed a total of
280.37 Partnership Units for $239,479 in accordance with the
Partnership Agreement. The Partnership acquired these Units
using Net Cash Flow from operations. In prior years, three
Limited Partners redeemed a total of 171.1 Partnership Units for
$154,021. The redemptions increase the remaining Limited
Partners' ownership interest in the Partnership.
The continuing rent payments from the properties, together
with cash generated from property sales, should be adequate to
fund continuing distributions and meet other Partnership
obligations on both a short-term and long-term basis.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)
Cautionary Statement for Purposes of the "Safe Harbor" Provisions
of the Private Securities Litigation Reform Act of 1995
The foregoing Management's Discussion and Analysis
contains various "forward looking statements" within the meaning
of federal securities laws which represent management's
expectations or beliefs concerning future events, including
statements regarding anticipated application of cash, expected
returns from rental income, growth in revenue, taxation levels,
the sufficiency of cash to meet operating expenses, rates of
distribution, and other matters. These, and other forward
looking statements made by the Partnership, must be evaluated in
the context of a number of factors that may affect the
Partnership's financial condition and results of operations,
including the following:
<BULLET> Market and economic conditions which affect
the value of the properties the Partnership owns and
the cash from rental income such properties generate;
<BULLET> the federal income tax consequences of rental
income, deductions, gain on sales and other items and
the affects of these consequences for investors;
<BULLET> resolution by the General Partners of
conflicts with which they may be confronted;
<BULLET> the success of the General Partners of
locating properties with favorable risk return
characteristics;
<BULLET> the effect of tenant defaults; and
<BULLET> the condition of the industries in which the
tenants of properties owned by the Partnership operate.
ITEM 7. FINANCIAL STATEMENTS.
See accompanying index to financial statements.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS
Report of Independent Auditors
Balance Sheet as of December 31, 1999 and 1998
Statements for the Years Ended December 31, 1999 and 1998:
Income
Cash Flows
Changes in Partners' Capital
Notes to Financial Statements
REPORT OF INDEPENDENT AUDITORS
To the Partners:
AEI Income & Growth Fund XXI Limited Partnership
St. Paul, Minnesota
We have audited the accompanying balance sheet of AEI Income
& Growth Fund XXI Limited Partnership (a Minnesota limited
partnership) as of December 31, 1999 and 1998 and the related
statements of income, cash flows and changes in partners' capital
for the years then ended. These financial statements are the
responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of AEI Income & Growth Fund XXI Limited Partnership as of
December 31, 1999 and 1998, and the results of its operations and
its cash flows for the years then ended, in conformity with
generally accepted accounting principles.
Minneapolis, Minnesota
January 25, 2000 Boulay, Heutmaker, Zibell & Co. P.L.L.P.
Certified Public Accountants
<PAGE>
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
BALANCE SHEET
DECEMBER 31
ASSETS
1999 1998
CURRENT ASSETS:
Cash and Cash Equivalents $ 2,412,278 $ 557,646
Receivables 0 16,052
----------- -----------
Total Current Assets 2,412,278 573,698
----------- -----------
INVESTMENTS IN REAL ESTATE:
Land 5,933,670 6,921,884
Buildings and Equipment 10,818,262 11,350,021
Construction in Progress 0 289,014
Property Acquisition Costs 14,304 10,782
Accumulated Depreciation (1,194,034) (816,805)
----------- -----------
Net Investments in Real Estate 15,572,202 17,754,896
----------- -----------
Total Assets $17,984,480 $18,328,594
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 20,786 $ 54,136
Distributions Payable 390,738 451,171
----------- -----------
Total Current Liabilities 411,524 505,307
----------- -----------
PARTNERS' CAPITAL (DEFICIT):
General Partners (33,456) (30,953)
Limited Partners, $1,000 Unit Value;
24,000 Units authorized and issued;
23,548 and 23,829 Units outstanding
in 1999 and 1998, respectively 17,606,412 17,854,240
----------- -----------
Total Partners' Capital 17,572,956 17,823,287
----------- -----------
Total Liabilities and Partners' Capital $17,984,480 $18,328,594
=========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31
1999 1998
INCOME:
Rent $ 1,850,940 $ 1,704,282
Investment Income 40,159 150,469
----------- -----------
Total Income 1,891,099 1,854,751
----------- -----------
EXPENSES:
Partnership Administration - Affiliates 227,787 248,958
Partnership Administration and Property
Management - Unrelated Parties 81,971 107,932
Depreciation 505,566 448,810
----------- -----------
Total Expenses 815,324 805,700
----------- -----------
OPERATING INCOME 1,075,775 1,049,051
GAIN ON SALE OF REAL ESTATE 522,233 235,377
----------- -----------
NET INCOME $ 1,598,008 $ 1,284,428
=========== ===========
NET INCOME ALLOCATED:
General Partners $ 15,980 $ 12,844
Limited Partners 1,582,028 1,271,584
----------- -----------
$ 1,598,008 $ 1,284,428
=========== ===========
NET INCOME PER LIMITED PARTNERSHIP UNIT
(23,758 and 23,829 weighted average Units
outstanding in 1999 and 1998, respectively) $ 66.59 $ 53.36
=========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,598,008 $ 1,284,428
Adjustments To Reconcile Net Income
To Net Cash Provided By Operating Activities:
Depreciation 505,566 448,810
Gain on Sale of Real Estate (522,233) (235,377)
Decrease in Receivables 16,052 146,625
Decrease in Payable to
AEI Fund Management, Inc. (33,350) (2,171)
----------- -----------
Total Adjustments (33,965) 357,887
----------- -----------
Net Cash Provided By
Operating Activities 1,564,043 1,642,315
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in Real Estate (236,188) (2,671,415)
Proceeds from Sale of Real Estate 2,435,549 862,718
----------- -----------
Net Cash Provided By (Used For)
Investing Activities 2,199,361 (1,808,697)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (Decrease) in Distributions Payable (60,433) 126,330
Distributions to Partners (1,606,441) (1,909,092)
Redemption Payments (241,898) 0
----------- -----------
Net Cash Used For
Financing Activities (1,908,772) (1,782,762)
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 1,854,632 (1,949,144)
CASH AND CASH EQUIVALENTS, beginning of period 557,646 2,506,790
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 2,412,278 $ 557,646
=========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31
Limited
Partnership
General Limited Units
Partners Partners Total Outstanding
BALANCE, December 31, 1997 $(24,706) $18,472,657 $18,447,951 23,828.87
Distributions (19,091) (1,890,001) (1,909,092)
Net Income 12,844 1,271,584 1,284,428
-------- ----------- ----------- -----------
BALANCE, December 31, 1998 (30,953) 17,854,240 17,823,287 23,828.87
Distributions (16,064) (1,590,377) (1,606,441)
Redemption Payments (2,419) (239,479) (241,898) (280.37)
Net Income 15,980 1,582,028 1,598,008
-------- ----------- ----------- -----------
BALANCE, December 31, 1999 $(33,456) $17,606,412 $17,572,956 23,548.50
======== =========== =========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(1) Organization -
AEI Income & Growth Fund XXI Limited Partnership
(Partnership) was formed to acquire and lease commercial
properties to operating tenants. The Partnership's
operations are managed by AEI Fund Management XXI, Inc.
(AFM), the Managing General Partner. Robert P. Johnson, the
President and sole shareholder of AFM, serves as the
Individual General Partner and an affiliate of AFM, AEI Fund
Management, Inc. (AEI), performs the administrative and
operating functions for the Partnership.
The terms of the Partnership offering call for a
subscription price of $1,000 per Limited Partnership Unit,
payable on acceptance of the offer. The Partnership
commenced operations on April 14, 1995 when minimum
subscriptions of 1,500 Limited Partnership Units
($1,500,000) were accepted. On January 31, 1997, the
offering terminated when the maximum subscription limit of
24,000 Limited Partnership Units ($24,000,000) was reached.
Under the terms of the Limited Partnership Agreement, the
Limited Partners and General Partners contributed funds of
$24,000,000 and $1,000, respectively. During operations,
any Net Cash Flow, as defined, which the General Partners
determine to distribute will be distributed 90% to the
Limited Partners and 10% to the General Partners; provided,
however, that such distributions to the General Partners
will be subordinated to the Limited Partners first receiving
an annual, noncumulative distribution of Net Cash Flow equal
to 10% of their Adjusted Capital Contribution, as defined,
and, provided further, that in no event will the General
Partners receive less than 1% of such Net Cash Flow per
annum. Distributions to Limited Partners will be made pro
rata by Units.
Any Net Proceeds of Sale, as defined, from the sale or
financing of properties which the General Partners determine
to distribute will, after provisions for debts and reserves,
be paid in the following manner: (i) first, 99% to the
Limited Partners and 1% to the General Partners until the
Limited Partners receive an amount equal to: (a) their
Adjusted Capital Contribution plus (b) an amount equal to
10% of their Adjusted Capital Contribution per annum,
cumulative but not compounded, to the extent not previously
distributed from Net Cash Flow; (ii) any remaining balance
will be distributed 90% to the Limited Partners and 10% to
the General Partners. Distributions to the Limited Partners
will be made pro rata by Units.
For tax purposes, profits from operations, other than
profits attributable to the sale, exchange, financing,
refinancing or other disposition of property, will be
allocated first in the same ratio in which, and to the
extent, Net Cash Flow is distributed to the Partners for
such year. Any additional profits will be allocated in the
same ratio as the last dollar of Net Cash Flow is
distributed. Net losses from operations will be allocated
99% to the Limited Partners and 1% to the General Partners.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(1) Organization - (Continued)
For tax purposes, profits arising from the sale, financing,
or other disposition of property will be allocated in
accordance with the Partnership Agreement as follows: (i)
first, to those partners with deficit balances in their
capital accounts in an amount equal to the sum of such
deficit balances; (ii) second, 99% to the Limited Partners
and 1% to the General Partners until the aggregate balance
in the Limited Partners' capital accounts equals the sum of
the Limited Partners' Adjusted Capital Contributions plus an
amount equal to 10% of their Adjusted Capital Contributions
per annum, cumulative but not compounded, to the extent not
previously allocated; (iii) third, the balance of any
remaining gain will then be allocated 90% to the Limited
Partners and 10% to the General Partners. Losses will be
allocated 98% to the Limited Partners and 2% to the General
Partners.
The General Partners are not required to currently fund a
deficit capital balance. Upon liquidation of the
Partnership or withdrawal by a General Partner, the General
Partners will contribute to the Partnership an amount equal
to the lesser of the deficit balances in their capital
accounts or 1% of total Limited Partners' and General
Partners' capital contributions.
(2) Summary of Significant Accounting Policies -
Financial Statement Presentation
The accounts of the Partnership are maintained on the
accrual basis of accounting for both federal income tax
purposes and financial reporting purposes.
Accounting Estimates
Management uses estimates and assumptions in preparing
these financial statements in accordance with generally
accepted accounting principles. Those estimates and
assumptions may affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and
liabilities, and the reported revenues and expenses.
Actual results could differ from those estimates.
The Partnership regularly assesses whether market events
and conditions indicate that it is reasonably possible to
recover the carrying amounts of its investments in real
estate from future operations and sales. A change in
those market events and conditions could have a material
effect on the carrying amount of its real estate.
Cash Concentrations of Credit Risk
At times throughout the year, the Partnership's cash
deposited in financial institutions may exceed FDIC
insurance limits.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(2) Summary of Significant Accounting Policies - (Continued)
Statement of Cash Flows
For purposes of reporting cash flows, cash and cash
equivalents may include cash in checking, cash invested
in money market accounts, certificates of deposit,
federal agency notes and commercial paper with a term of
three months or less.
Income Taxes
The income or loss of the Partnership for federal income
tax reporting purposes is includable in the income tax
returns of the partners. Accordingly, no recognition has
been given to income taxes in the accompanying financial
statements.
The tax return, the qualification of the Partnership as
such for tax purposes, and the amount of distributable
Partnership income or loss are subject to examination by
federal and state taxing authorities. If such an
examination results in changes with respect to the
Partnership qualification or in changes to distributable
Partnership income or loss, the taxable income of the
partners would be adjusted accordingly.
Real Estate
The Partnership's real estate is leased under triple net
leases classified as operating leases. The Partnership
recognizes rental revenue on the accrual basis according
to the terms of the individual leases. For leases which
contain cost of living increases, the increases are
recognized in the year in which they are effective.
Real estate is recorded at the lower of cost or estimated
net realizable value. The Partnership compares the
carrying amount of its properties to the estimated future
cash flows expected to result from the property and its
eventual disposition. If the sum of the expected future
cash flows is less than the carrying amount of the
property, the Partnership recognizes an impairment loss
by the amount by which the carrying amount of the
property exceeds the fair value of the property.
The Partnership has capitalized as Investments in Real
Estate certain costs incurred in the review and
acquisition of the properties. The costs were allocated
to the land, buildings and equipment.
The buildings and equipment of the Partnership are
depreciated using the straight-line method for financial
reporting purposes based on estimated useful lives of 25
years and 5 years, respectively.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(2) Summary of Significant Accounting Policies - (Continued)
The Partnership accounts for properties owned as tenants-
in-common with affiliated Partnerships and/or unrelated
third parties using the proportionate consolidation
method. Each tenant-in-common owns a separate, undivided
interest in the properties. Any tenant-in-common that
holds more than a 50% interest does not control decisions
over the other tenant-in-common interests. The financial
statements reflect only this Partnership's percentage
share of the properties' land, building and equipment,
liabilities, revenues and expenses.
(3) Related Party Transactions -
As of December 31, 1999, the Partnership owns a 2.6811%
interest in an Arby's restaurant. The remaining interests
in this property are owned by unrelated third parties. AEI
Institutional Net Lease Fund '93 Limited Partnership, an
affiliate of the Partnership, owned a 12.2807% interest in
this property until July 23, 1999 when its interest was sold
to an unrelated third party. The Partnership owns a 34.0%
interest in a Media Play retail store and a 40.75% interest
in a Garden Ridge retail store. The remaining interests in
these properties are owned by AEI Net Lease Income & Growth
Fund XIX Limited Partnership and AEI Net Lease Income &
Growth Fund XX Limited Partnership, affiliates of the
Partnership. The Partnership owns a 27.0385% interest in a
Champps Americana restaurant in Columbus, Ohio. The
remaining interests in this property are owned by AEI Real
Estate Fund XVIII Limited Partnership, an affiliate of the
Partnership, and unrelated third parties. The Partnership
owns a 49.6% interest in a Champps Americana restaurant in
Schaumburg, Illinois. The remaining interests in this
property are owned by Net Lease Income & Growth Fund 84-A
Limited Partnership and AEI Net Lease Income & Growth Fund
XX Limited Partnership, affiliates of the Partnership. The
Partnership owns a 25.0% interest in a Champps Americana
restaurant in Centerville, Ohio. The remaining interests in
this property are owned by AEI Real Estate Fund XVII Limited
Partnership, AEI Real Estate Fund XVIII Limited Partnership
and AEI Income & Growth Fund XXII Limited Partnership,
affiliates of the Partnership. The Partnership owned a
93.1% interest in a Caribou Coffee store. The remaining
interest was owned by AEI Institutional Net Lease Fund '93
Limited Partnership.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(3) Related Party Transactions - (Continued)
AEI and AFM received the following compensation and
reimbursements for costs and expenses from the Partnership:
Total Incurred by the Partnership
for the Years Ended December 31
1999 1998
a.AEI and AFM are reimbursed for all costs
incurred in connection with managing the
Partnership's operations, maintaining the
Partnership's books and communicating
the results of operations to the Limited
Partners. $ 227,787 $ 248,958
======== ========
b.AEI and AFM are reimbursed for all direct
expenses they have paid on the Partnership's
behalf to third parties. These expenses included
printing costs, legal and filing fees, direct
administrative costs, outside audit and
accounting costs, taxes, insurance and
other property costs. $ 81,971 $ 107,932
======== ========
c.AEI is reimbursed for all property acquisition
costs incurred by it in acquiring properties on
behalf of the Partnership. The amounts are net
of financing and commitment fees and expense
reimbursements received by the Partnership from
the lessees in the amount of $19,063 and $58,649
for 1999 and 1998, respectively. $ 3,488 $ (14,854)
======= ========
The payable to AEI Fund Management, Inc. represents the
balance due for the services described in 3a, b and c. This
balance is non-interest bearing and unsecured and is to be
paid in the normal course of business.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(4) Investments in Real Estate -
The Partnership leases its properties to various tenants
through triple net leases, which are classified as operating
leases. Under a triple net lease, the lessee is responsible
for all real estate taxes, insurance, maintenance, repairs
and operating expenses of the property. The initial Lease
terms are 20 years. The Leases contain renewal options
which may extend the Lease term an additional 10 years for
the Arby's, and an additional 15 years for the Denny's and
Champps Americana restaurants and 25 years for the Garden
Ridge retail store. The Leases contain rent clauses which
entitle the Partnership to receive additional rent in future
years based on stated rent increases. Certain lessees have
been granted options to purchase the property. Depending on
the lease, the purchase price is either determined by a
formula, or is the greater of the fair market value of the
property or the amount determined by a formula. In all
cases, if the option were to be exercised by the lessee, the
purchase price would be greater than the original cost of
the property.
The Partnership's properties are commercial, single-tenant
buildings. The Arby's restaurant and Media Play were
constructed and acquired in 1995. The Champps Americana
restaurant in Livonia, Michigan was constructed and acquired
in 1998. The land for the Champps Americana restaurant in
Centerville, Ohio was acquired in 1998 and construction of
the restaurant was completed in 1999. The remaining
properties were constructed and acquired in 1996 or 1997.
There have been no costs capitalized as improvements
subsequent to the acquisitions.
The cost of the property and related accumulated
depreciation at December 31, 1999 are as follows:
Buildings and Accumulated
Property Land Equipment Total Depreciation
Arby's, Montgomery, AL $ 10,033 $ 13,016 $ 23,049 $ 2,386
Media Play, Apple Valley, MN 239,690 594,170 833,860 130,106
Garden Ridge, Pineville, NC 1,181,253 2,463,138 3,644,391 369,471
Champps Americana,
Columbus, OH 242,937 478,440 721,377 71,772
Denny's, Covington, LA 532,844 772,104 1,304,948 98,100
Champps Americana,
San Antonio, TX 1,127,016 1,706,342 2,833,358 163,826
Champps Americana,
Schaumburg, IL 959,278 1,297,184 2,256,462 115,406
Champps Americana,
Livonia, MI 1,142,415 3,007,646 4,150,061 222,426
Champps Americana,
Centerville, OH 498,204 486,222 984,426 20,541
---------- ----------- ----------- ----------
$5,933,670 $10,818,262 $16,751,932 $1,194,034
========== =========== =========== ==========
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(4) Investments in Real Estate - (Continued)
On December 21, 1995, the Partnership purchased a 34.0%
interest in a Media Play retail store in Apple Valley,
Minnesota for $1,414,060. The property was leased to The
Musicland Group, Inc. (MGI) under a Lease Agreement with a
primary term of 18 years and annual rental payments of
$139,587.
In December, 1996, the Partnership and MGI reached an
agreement in which MGI would buy out and terminate the Lease
Agreement by making a payment of $800,000, which was equal
to approximately two years' rent. The Partnership's share
of such payment was $272,000. A specialist in commercial
property leasing has been retained to locate a new tenant
for the property. While the property is vacant, the
Partnership is responsible for the real estate taxes and
other costs required to maintain the property.
As of December 31, 1997, based on an analysis of market
conditions in the area, it was determined the fair value of
the Partnership's interest in the Media Play was
approximately $748,000. In the fourth quarter of 1997, a
charge to operations for real estate impairment of $580,200
was recognized, which is the difference between the book
value at December 31, 1997 of $1,328,200 and the estimated
market value of $748,000. The charge was recorded against
the cost of the land, building and equipment.
Through December 31, 1998, the Partnership sold 40.7615% of
its interest in the Champps Americana restaurant in
Columbus, Ohio, in six separate transactions to unrelated
third parties. The Partnership received total net sale
proceeds of $1,383,508 which resulted in a total net gain of
$341,928. The total cost and related accumulated
depreciation of the interests sold was $1,087,502 and
$45,922, respectively. For the year ended December 31,
1998, the net gain was $235,377.
During 1999, the Partnership sold 85.0382% of its interest
in the Arby's restaurant in four separate transactions to
unrelated third parties. The Partnership received total net
sale proceeds of $881,682 which resulted in a total net gain
of $220,469. The total cost and related accumulated
depreciation of the interest sold was $731,056 and $69,843,
respectively.
On October 26, 1999, the Partnership sold the Caribou Coffee
store to an unrelated third party. The Partnership received
net sale proceeds of $1,553,867, which resulted in a net
gain of $301,764. At the time of sale, the cost and related
accumulated depreciation of the property was $1,310,597 and
$58,494, respectively.
During 1999 and 1998, the Partnership distributed $266,998
and $411,231 of the net sale proceeds to the Limited and
General Partners as part of their regular quarterly
distributions which represented a return of capital of
$11.22 and $17.09 per Limited Partnership Unit,
respectively. The remaining net sale proceeds will either
be reinvested in additional property or distributed to the
Partners in the future.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(4) Investments in Real Estate - (Continued)
On July 8, 1997, the Partnership purchased a parcel of land
in Livonia, Michigan for $1,074,384. The land is leased to
Champps under a Lease Agreement with a primary term of 20
years and annual rental payments of $75,207. Effective
January 3, 1998, the annual rent was increased to $115,496.
Simultaneously with the purchase of the land, the
Partnership entered into a Development Financing Agreement
under which the Partnership advanced funds to Champps for
the construction of a Champps Americana restaurant on the
site. Initially, the Partnership charged interest on the
advances at a rate of 7.0%. Effective January 3, 1998, the
interest rate was increased to 10.75%. On May 19, 1998,
after the development was completed, the Lease Agreement was
amended to require annual rental payments of $429,135.
Total acquisition costs, including the cost of the land,
were $4,150,061.
On August 28, 1998, the Partnership purchased a 25% interest
in a parcel of land in Centerville, Ohio for $462,747. The
land is leased to Americana Dining Corporation (ADC) under a
Lease Agreement with a primary term of 20 years and annual
rental payments of $32,392. Effective December 25, 1998,
the annual rent was increased to $48,588. Simultaneously
with the purchase of the land, the Partnership entered into
a Development Financing Agreement under which the
Partnership advanced funds to ADC for the construction of a
Champps Americana restaurant on the site. Initially, the
Partnership charged interest on the advances at a rate of
7%. Effective December 25, 1998, the interest rate was
increased to 10.5%. On January 27, 1999, after the
development was completed, the Lease Agreement was amended
to require annual rental payments of $101,365. The
Partnership's share of the total acquisition costs,
including the cost of the land, was $984,426.
On March 8, 2000, the Partnership purchased a parcel of land
in Fort Wayne, Indiana for $549,000. The land is leased to
Tumbleweed, Inc. (TWI) under a Lease Agreement with a
primary term of 15 years and annual rental payments of
$48,038. Simultaneously with the purchase of the land, the
Partnership entered into a Development Financing Agreement
under which the Partnership will advance funds to TWI for
the construction of a Tumbleweed restaurant on the site.
The Partnership is charging interest on the advances at a
rate of 8.75%. The total purchase price, including the cost
of the land, will be approximately $1,460,000. After the
construction is complete, the Lease Agreement will be
amended to require annual rental payments of approximately
$144,000.
The Partnership has incurred net costs of $14,304 relating
to the review of potential property acquisitions which have
been capitalized and will be allocated to properties
acquired subsequent to December 31, 1999.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(4) Investments in Real Estate - (Continued)
The minimum future rentals on the Leases for years
subsequent to December 31, 1999 are as follows:
2000 $ 1,679,356
2001 1,682,259
2002 1,685,219
2003 1,688,235
2004 1,691,309
Thereafter 21,416,465
-----------
$29,832,843
===========
There were no contingent rents recognized in 1999 or 1998.
(5) Major Tenants -
The following schedule presents rent revenue from individual
tenants, or affiliated groups of tenants, who each
contributed more than ten percent of the Partnership's total
rent revenue for the years ended December 31:
1999 1998
Tenants Industry
Champps Americana Group Restaurant $1,137,158 $ 949,723
Garden Ridge, L.P. Retail 383,973 383,973
---------- ----------
Aggregate rent revenue of major tenants $1,521,131 $1,333,696
========== ==========
Aggregate rent revenue of major tenants as
a percentage of total rent revenue 82% 78%
========== ==========
(6) Partners' Capital -
Cash distributions of $18,483 and $19,091 were made to the
General Partners and $1,590,377 and $1,890,001 were made to
the Limited Partners for the years ended December 31, 1999
and 1998, respectively. The Limited Partners' distributions
represent $66.94 and $79.32 per Limited Partnership Unit
outstanding using 23,758 and 23,829 weighted average Units
in 1999 and 1998, respectively. The distributions represent
$56.42 and $53.36 per Unit of Net Income and $10.52 and
$25.96 per Unit of return of contributed capital in 1999 and
1998, respectively.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(6) Partners' Capital - (Continued)
As part of the Limited Partner distributions discussed
above, the Partnership distributed $264,328 and $407,119 of
proceeds from property sales in 1999 and 1998, respectively.
Distributions of Net Cash Flow to the General Partners
during 1999 and 1998 were subordinated to the Limited
Partners as required in the Partnership Agreement. As a
result, 99% of distributions and income were allocated to
the Limited Partners and 1% to the General Partners.
The Partnership may acquire Units from Limited Partners who
have tendered their Units to the Partnership. Such Units
may be acquired at a discount. The Partnership is not
obligated to purchase in any year more than 5% of the number
of Units outstanding at the beginning of the year. In no
event shall the Partnership be obligated to purchase Units
if, in the sole discretion of the Managing General Partner,
such purchase would impair the capital or operation of the
Partnership.
During 1999, ten Limited Partners redeemed a total of 280.37
Partnership Units for $239,479 in accordance with the
Partnership Agreement. The Partnership acquired these Units
using Net Cash Flow from operations. In 1998, the
Partnership did not redeem any Units from the Limited
Partners. The redemptions increase the remaining Limited
Partners' ownership interest in the Partnership.
After the effect of redemptions, the Adjusted Capital
Contribution, as defined in the Partnership Agreement, is
$1,019.17 per original $1,000 invested.
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(7) Income Taxes -
The following is a reconciliation of net income for
financial reporting purposes to income reported for federal
income tax purposes for the years ended December 31:
1999 1998
Net Income for Financial
Reporting Purposes $1,598,008 $1,284,428
Depreciation for Tax Purposes
Under Depreciation for Financial
Reporting Purposes 149,590 122,145
Property Expenses for
Tax Purposes Over Expenses
For Financial Reporting
Purposes (14,134) 0
Amortization of Start-Up and
Organization Costs (67,172) (67,172)
Gain on Sale of Real Estate
for Tax Purposes Under Gain
for Financial Reporting Purposes (33,914) (5,937)
---------- ----------
Taxable Income to Partners $1,632,378 $1,333,464
========== ==========
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(7) Income Taxes - (Continued)
The following is a reconciliation of Partners' capital for
financial reporting purposes to Partners' capital reported
for federal income tax purposes for the years ended December
31:
1999 1998
Partners' Capital for
Financial Reporting Purposes $17,572,956 $17,823,287
Adjusted Tax Basis of Investments
in Real Estate Over Net Investments
in Real Estate for Financial
Reporting Purposes 930,408 814,732
Capitalized Start-Up Costs
Under Section 195 301,596 329,865
Amortization of Start-Up and
Organization Costs (183,840) (130,803)
Organization and Syndication Costs
Treated as Reduction of Capital
for Financial Reporting Purposes 3,214,043 3,214,043
----------- -----------
Partners' Capital for
Tax Reporting Purposes $21,835,163 $22,051,124
=========== ===========
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(8) Fair Value of Financial Instruments -
The estimated fair values of the financial instruments, none
of which are held for trading purposes, for the years ended
December 31:
1999 1998
Carrying Fair Carrying Fair
Amount Value Amount Value
Cash $ 329 $ 329 $ 195 $ 195
Money Market Funds 2,411,949 2,411,949 557,451 557,451
----------- ----------- --------- --------
Total Cash and
Cash Equivalents $ 2,412,278 $ 2,412,278 $ 557,646 $ 557,646
=========== =========== ========= ========
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
The registrant is a limited partnership and has no
officers, directors, or direct employees. The General Partners
of the registrant are Robert P. Johnson and AFM. The General
Partners manage and control the Partnership's affairs and have
general responsibility and the ultimate authority in all matters
affecting the Partnership's business. The director and officers
of AFM are as follows:
Robert P. Johnson, age 55, is Chief Executive Officer,
President and Director and has held these positions since the
formation of AFM in August, 1994, and has been elected to
continue in these positions until December, 2000. From 1970 to
the present, he had been employed exclusively in the investment
industry, specializing in tax-advantaged limited partnership
investments. In that capacity, he has been involved in the
development, analysis, marketing and management of public and
private investment programs investing in net lease properties as
well as public and private investment programs investing in
energy development. Since 1971, Mr. Johnson has been the
president, a director and a registered principal of AEI
Securities, Inc. (formerly AEI Incorporated), which is registered
with the Securities and Exchange Commission as a securities
broker-dealer, is a member of the National Association of
Securities Dealers, Inc. (NASD) and is a member of the Security
Investors Protection Corporation (SIPC). Mr. Johnson has been
president, a director and the principal shareholder of AEI Fund
Management, Inc., a real estate management company founded by
him, since 1978. Mr. Johnson is currently a general partner or
principal of the general partner in fifteen other limited
partnerships.
Mark E. Larson, age 47, is Executive Vice President,
Secretary, Treasurer and Chief Financial Officer and has held
these positions since the formation of AFM in August, 1994, and
has been elected to continue in these positions until December,
2000. Mr. Larson has been employed by AEI Fund Management, Inc.
and affiliated entities since 1985. From 1979 to 1985, Mr.
Larson was with Apache Corporation as manager of Program
Accounting responsible for the accounting and reports for
approximately 46 public partnerships. Mr. Larson is responsible
for supervising the accounting functions of AFM and the
registrant.
ITEM 10. EXECUTIVE COMPENSATION.
The General Partner and affiliates are reimbursed at cost
for all services performed on behalf of the registrant and for
all third party expenses paid on behalf of the registrant. The
cost for services performed on behalf of the registrant is actual
time spent performing such services plus an overhead burden.
These services include organizing the registrant and arranging
for the offer and sale of Units, reviewing properties for
acquisition and rendering administrative and management services.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth information pertaining to
the ownership of the Units by each person known by the
Partnership to beneficially own 5% or more of the Units, by each
General Partner, and by each officer or director of the Managing
General Partner as of February 29, 2000:
Name and Address Number of Percent
of Beneficial Owner Units Held of Class
AEI Fund Management XXI, Inc. 0 0%
1300 Minnesota World Trade Center
30 East 7th Street, St. Paul, Minnesota 55101
Robert P. Johnson 0 0%
1300 Minnesota World Trade Center
30 East 7th Street, St. Paul, Minnesota 55101
Mark E. Larson 0 0%
1300 Minnesota World Trade Center
30 East 7th Street, St. Paul, Minnesota 55101
The General Partners know of no holders of more than 5% of the
outstanding Units.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The registrant, AFM and its affiliates have common
management and utilize the same facilities. As a result, certain
administrative expenses are allocated among these related
entities. All of such activities and any other transactions
involving the affiliates of the General Partner of the registrant
are governed by, and are conducted in conformity with, the
limitations set forth in the Limited Partnership Agreement of the
registrant.
The following table sets forth the forms of compensation,
distributions and cost reimbursements paid by the registrant to
the General Partners or their Affiliates in connection with the
operation of the Fund and its properties for the period from
inception through December 31, 1999.
Person or Entity Amount Incurred From
Receiving Form and Method Inception (August 31, 1994)
Compensation of Compensation To December 31, 1999
AEI Securities, Inc. Selling Commissions equal to 8% $2,400,000
of proceeds plus a 2% nonaccountable
expense allowance, most of which was
reallowed to Participating Dealers.
General Partners and Reimbursement at Cost for other $ 877,000
Affiliates Organization and Offering Costs.
General Partners and Reimbursement at Cost for all $ 436,935
Affiliates Acquisition Expenses
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. (Continued)
Person or Entity Amount Incurred From
Receiving Form and Method Inception (August 31, 1994)
Compensation of Compensation To December 31, 1999
General Partners 1% of Net Cash Flow in any fiscal year $ 64,593
year until the Limited Partners have
received annual, non-cumulative
distributions of Net Cash Flow equal
to 10% of their Adjusted Capital
Contributions and 10% of any remaining
Net Cash Flow in such fiscal year.
General Partners and Reimbursement at Cost for all $1,101,903
Affiliates Administrative Expenses attributable
to the Fund, including all expenses
related to management and disposition
of the Fund's properties and all other
transfer agency, reporting, partner
relations and other administrative
functions.
General Partners 1% of distributions of Net Proceeds $ 10,302
of Sale until Limited Partners have
received an amount equal to (a) their
Adjusted Capital Contributions, plus
(b) an amount equal to 12% of their
Adjusted Capital Contributions per
annum, cumulative but not compounded,
to the extent not previously
distributed. 10% of distributions
of Net Proceeds of Sale thereafter.
The limitations included in the Partnership Agreement
require that the cumulative reimbursements to the General
Partners and their affiliates for administrative expenses not
allowed under the NASAA Guidelines ("Guidelines") will not exceed
the sum of (i) the front-end fees allowed by the Guidelines less
the front-end fees paid, (ii) the cumulative property management
fees allowed but not paid, (iii) any real estate commission
allowed under the Guidelines, and (iv) 10% of Net Cash Flow less
the Net Cash Flow actually distributed. The reimbursements not
allowed under the Guidelines include a controlling person's
salary and fringe benefits, rent and depreciation. As of
December 31, 1999, the cumulative reimbursements to the General
Partners and their affiliates did not exceed these amounts.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND 8-K/A.
A. Exhibits -
Description
3.1 Certificate of Limited
Partnership (incorporated by reference to
Exhibit 3.1 of the registrant's
Registration Statement on Form SB-2 filed
with the Commission on October 10, 1994
[File No. 33-85076C]).
3.2 Restated Limited Partnership
Agreement to the Prospectus (incorporated
by reference to Exhibit A of Amendment No.
2 of the registrant's Registration
Statement on Form SB-2 filed with the
Commission on January 20, 1995 [File No. 33-
85076C]).
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND 8-K/A. (Continued)
A. Exhibits -
Description
10.1 Net Lease Agreement dated
May 31, 1995, between the Partnership and
RTM Gulf Coast, Inc., relating to the
property at 2719 Zelda Road, Montgomery,
Alabama (incorporated by reference to
Exhibit A of Form 8-K filed with the
Commission on June 14, 1995).
10.2 Net Lease Agreement dated
August 2, 1995, between TKC X, LLC and
Garden Ridge, Inc. relating to the property
at 11415 Carolina Place Parkway, Pineville,
North Carolina (incorporated by reference
to Exhibit 10.1 of Form 8-K filed with the
Commission on April 10, 1996).
10.3 First Amendment to Lease
Agreement dated March 1, 1996 between TKC
X, LLC and Garden Ridge, L.P. relating to
the property at 11415 Carolina Place
Parkway, Pineville, North Carolina
(incorporated by reference to Exhibit 10.2
of Form 8-K filed with the Commission on
April 10, 1996).
10.4 Assignment and Assumption of
Lease dated March 28, 1996 between the
Partnership, AEI Net Lease Income & Growth
Fund XIX Limited Partnership, AEI Net Lease
Income & Growth Fund XX Limited
Partnership, and TKC X, LLC relating to the
property at 11415 Carolina Place Parkway,
Pineville, North Carolina (incorporated by
reference to Exhibit 10.3 of Form 8-K filed
with the Commission on April 10, 1996).
10.5 Net Lease Agreement dated
August 29, 1996 between the Partnership,
AEI Real Estate Fund XVIII Limited
Partnership and Americana Dining
Corporation relating to the property at 161
E. Campus View Boulevard, Columbus, Ohio
(incorporated by reference to Exhibit 10.3
of Form 8-K filed with the Commission on
September 12, 1996).
10.6 Net Lease Agreement dated
March 14, 1997 between the Partnership and
Champps Entertainment of Texas, Inc.
relating to the property at 11440
Interstate Highway 10, San Antonio, Texas
(incorporated by reference to Exhibit 10.2
of Form 8-K filed with the Commission March
25, 1997).
10.7 Net Lease Agreement dated
March 19, 1997 between the Partnership and
Huntington Restaurants Group, Inc. relating
to the property at 720 North Highway 190,
Covington, Louisiana (incorporated by
reference to Exhibit 10.6 of Form 8-K filed
with the Commission March 25, 1997).
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND 8-K/A. (Continued)
A. Exhibits -
Description
10.08 Net Lease Agreement dated April
21, 1997 between the Partnership, AEI Net
Lease Income & Growth Fund XX Limited
Partnership, Net Lease Income & Growth Fund
84-A Limited Partnership and Champps
Americana, Inc. relating to the property at
955 Golf Road, Schaumburg, Illinois
(incorporated by reference to Exhibit 10.2
of Form 10-QSB filed with the Commission on
May 13, 1997).
10.9 Net Lease Agreement dated
July 8, 1997 between the Partnership and
Champps Americana, Inc. relating to the
property at 19470 Haggerty Road, Livonia,
Michigan (incorporated by reference to
Exhibit 10.2 of Form 10-QSB filed with the
Commission on August 5, 1997).
10.10 First Amendment to Net
Lease Agreement dated December 23, 1997
between the Partnership and Champps
Entertainment of Texas, Inc. relating to
the property at 11440 Interstate Highway
10, San Antonio, Texas (incorporated by
reference to Exhibit 10.2 of Form 8-K filed
with the Commission on January 5, 1998).
10.11 First Amendment to Net
Lease Agreement dated December 31, 1997
between the Partnership, AEI Net Lease
Income & Growth Fund XX Limited
Partnership, Net Lease Income & Growth Fund
84-A, and Champps Americana, Inc. relating
to the property at 955 Golf Road,
Schaumburg, Illinois (incorporated by
reference to Exhibit 10.2 of Form 8-K filed
with the Commission on January 5, 1998).
10.12 Purchase Agreement dated March
24, 1998 between the Partnership and Carlos
W. Appleton and Mary V. Appleton relating
to the property at 161 E. Campus View
Boulevard, Columbus, Ohio (incorporated by
reference to Exhibit 10.1 of Form 10-QSB
filed with the Commission on May 12, 1998).
10.13 First Amendment to Net Lease
Agreement dated May 19, 1998 between the
Partnership and Champps Americana, Inc.
relating to the property at 19470 Haggerty
Road, Livonia, Michigan (incorporated by
reference to Exhibit 10.2 of Form 8-K filed
with the Commission on June 16, 1998).
10.14 Purchase Agreement dated July 28,
1998 between the Partnership and Tall Pines
Farm Limited Partnership relating to the
property at 161 E. Campus View Boulevard,
Columbus, Ohio (incorporated by reference
to Exhibit 10.1 of Form 10-QSB filed with
the Commission on November 9, 1998).
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND 8-K/A. (Continued)
A. Exhibits -
Description
10.15 Assignment of the Development
Financing Agreement and Net Lease Agreement
dated August 27, 1998 between the
Partnership, AEI Real Estate Fund XVII
Limited Partnership, AEI Real Estate Fund
XVIII Limited Partnership, AEI Income &
Growth Fund XXII Limited Partnership, and
Americana Dining Corporation relating to
the property at 7880 Washington Village
Drive, Centerville, Ohio (incorporated by
reference to Exhibit 10.2 of Form 10-QSB
filed with the Commission on November 9,
1998).
10.16 Development Financing Agreement
dated June 29, 1998 between AEI Income &
Growth Fund XXII Limited Partnership and
Americana Dining Corporation relating to
the property at 7880 Washington Village
Drive, Centerville, Ohio (incorporated by
reference to Exhibit 10.3 of Form 10-QSB
filed with the Commission on November 9,
1998).
10.17 Net Lease Agreement dated June
29, 1998 between AEI Income & Growth Fund
XXII Limited Partnership and Americana
Dining Corporation relating to the property
at 7880 Washington Village Drive,
Centerville, Ohio (incorporated by
reference to Exhibit 10.4 of Form 10-QSB
filed with the Commission on November 9,
1998).
10.18 First Amendment to Net Lease
Agreement dated January 27, 1999 between
the Partnership, AEI Real Estate Fund XVII
Limited Partnership, AEI Real Estate Fund
XVIII Limited Partnership, AEI Income &
Growth Fund XXII Limited Partnership and
Americana Dining Corp. relating to the
property at 7880 Washington Village Drive,
Centerville, Ohio (incorporated by
reference to Exhibit 10.26 of Form 10-KSB
filed with the Commission on March 12,
1999).
10.19 Purchase Agreement dated July 20,
1999 between the Partnership and Catharine
C. Whittenburg Testamentary Trust relating
to the property at 2719 Zelda Road,
Montgomery, Alabama (incorporated by
reference to Exhibit 10.1 of Form 10-QSB
filed with the Commission on July 30,
1999).
10.20 Co-Tenancy Agreement dated July
27, 1999 between the Partnership and
Catharine C. Whittenburg Testamentary Trust
relating to the property at 2719 Zelda
Road, Montgomery, Alabama (incorporated by
reference to Exhibit 10.2 of Form 10-QSB
filed with the Commission on July 30,
1999).
10.21 Purchase Agreement dated July 27,
1999 between the Partnership and Terry
Roland relating to the property at 2719
Zelda Road, Montgomery, Alabama
(incorporated by reference to Exhibit 10.3
of Form 10-QSB filed with the Commission on
July 30, 1999).
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND 8-K/A. (Continued)
A. Exhibits -
Description
10.22 Co-Tenancy Agreement dated July
28, 1999 between the Partnership and Terry
Roland relating to the property at 2719
Zelda Road, Montgomery, Alabama
(incorporated by reference to Exhibit 10.4
of Form 10-QSB filed with the Commission on
July 30, 1999).
10.23 Purchase Agreement dated August
4, 1999 between the Partnership and VTA
Building Company relating to the property
at 2719 Zelda Road, Montgomery, Alabama
(incorporated by reference to Exhibit 10.1
of Form 10-QSB filed with the Commission on
November 8, 1999).
10.24 Co-Tenancy Agreement dated August
6, 1999 between the Partnership and VTA
Building Company relating to the property
at 2719 Zelda Road, Montgomery, Alabama
(incorporated by reference to Exhibit 10.2
of Form 10-QSB filed with the Commission on
November 8, 1999).
10.25 Purchase Agreement dated
September 20, 1999 between the Partnership,
AEI Institutional Net Lease Fund '93
Limited Partnership and Boulevard East, LLC
relating to the property at 1531 East
Boulevard, Charlotte, North Carolina
(incorporated by reference to Exhibit 10.3
of Form 10-QSB filed with the Commission on
November 8, 1999).
10.26 Purchase Agreement dated
September 29, 1999 between the Partnership
and The Barrett Family Trust relating to
the property at 2719 Zelda Road,
Montgomery, Alabama (incorporated by
reference to Exhibit 10.4 of Form 10-QSB
filed with the Commission on November 8,
1999).
10.27 Co-Tenancy Agreement dated
October 22, 1999 between the Partnership
and The Barrett Family Trust relating to
the property at 2719 Zelda Road,
Montgomery, Alabama (incorporated by
reference to Exhibit 10.5 of Form 10-QSB
filed with the Commission on November 8,
1999).
10.28 Development Financing Agreement
dated March 8, 2000, between the
Partnership and Tumbleweed, Inc. relating
to the property at 8607 US Highway 24 West,
Fort Wayne, Indiana.
10.29 Net Lease Agreement dated March
8, 2000, between the Partnership and
Tumbleweed, Inc. relating to the property
at 8607 US Highway 24 West, Fort Wayne,
Indiana.
27 Financial Data Schedule for year ended December 31, 1999.
B. Reports on Form 8-K - None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
AEI INCOME & GROWTH FUND XXI
Limited Partnership
By: AEI Fund Management XXI, Inc.
Its Managing General Partner
March 10, 2000 By: /s/ Robert P. Johnson
Robert P. Johnson, President and Director
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on
the dates indicated.
Name Title Date
/s/ Robert P. Johnson President (Principal Executive Officer) March 10, 2000
Robert P. Johnson and Sole Director of Managing General
Partner
/s/ Mark E. Larson Executive Vice President, Treasurer March 10, 2000
Mark E. Larson and Chief Financial Officer
(Principal Accounting Officer)
DEVELOPMENT FINANCING AGREEMENT
THIS AGREEMENT, made and entered into effective as of this 8
day of March, 2000, by and between Tumbleweed, Inc. (hereinafter
referred to as "Lessee"), whose address is 1900 Mellwood Avenue,
Louisville, Kentucky, and AEI Income & Growth Fund XXI Limited
Partnership, whose principal business address is 1300 Minnesota
World Trade Center, 30 East Seventh Street, St. Paul, Minnesota
55101 (hereinafter referred to as "Lessor") .
W I T N E S S E T H, that:
WHEREAS, Lessee is contemplating building the following
Improvements on the premises described in Exhibit "A" attached
hereto :
Construction of a building and improvements to be used as a
Tumbleweed Restaurant.
WHEREAS, Lessee has made application to Lessor for
development financing to defray the costs of constructing such
Improvements;
WHEREAS, Lessor's Assignor has issued to Lessee its
Development Financing and Leasing Commitment to advance funds in
the amount hereinafter specified, subject to compliance with the
terms and conditions of this Development Financing Agreement and
the Net Lease Agreement (the "Lease") of even date herewith;
NOW, THEREFORE, in consideration of entering into the Lease
and other good and valuable consideration, the receipt of which
is hereby acknowledged by the parties hereto, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the following terms shall
have the following meanings:
1. "Application" shall mean Lessee's application to the
Lessor for the Development Financing the terms and conditions
of which are incorporated herein by reference.
2. "Architect's Contract" shall mean Lessee's contract with
the Project Architect.
3. "Commitment" shall mean Lessor's Commitment to Lessee
agreeing to provide the Development Financing. (The
"Development Financing and Leasing Commitment" dated of even
date herewith.)
4. "Completion Date" shall mean midnight, August 31, 2000,
subject to Force Majeure, as defined herein.
5. "Construction Costs" shall mean land costs, all costs
paid to construct and complete the Improvements, as specified
on Exhibit "B" attached hereto and made a part hereof.
6. "Construction Contracts" shall mean the contracts between
Lessee and Contractors for the furnishing of labor, services
or materials to the Leased Premises in connection with the
construction of the Improvements.
7. "Contractors" shall mean those firms directly engaged by
Lessee to construct the Improvements, whether one or more.
8. "Contract Documents" shall mean the Project Architect's
Contract, Plans and Specifications and the contract with the
Contractor.
9. "Development Financing" shall mean the funds to be made
available pursuant to the Commitment and not to exceed the
lesser of the Construction Costs or the maximum loan amount
of One Million Four Hundred Sixty Thousand Dollars
($1,460,000) as specified in the Commitment.
10. "Development Financing and Carrying Charges" shall mean
all fees, taxes and charges incurred under the Development
Financing and in the construction of the Improvements
including, but not limited to, non-refundable commitment
fees; interest charges, service and inspection fees,
attorney's fees, title insurance fees and charges, recording
fees and insurance premiums.
11. "Development Financing Documents" shall mean this
Agreement, the Lease, Assignment of Architects and
Construction Contracts, Guarantees, and such other documents
given to the Lessor as security for the Development
Financing.
12. "CLTIC-CDD" shall mean Commonwealth Land Title Insurance
Company, Construction Disbursement Department, the nationally
recognized title insurer, to be CLTIC-CDD under the
Development Financing Disbursement Agreement executed by and
between the parties of even date herewith.
13. "Final Disbursement Date" shall mean the date of the
final disbursement of the Development Financing provided
hereunder.
14. "Improvements" shall mean the structures and other
improvements to be constructed on the Leased Premises in
accordance with the Plans and Specifications.
15. "Initial Disbursed Funds" shall mean those funds
disbursed on the Closing Date for land acquisition and
related soft costs upon Lessor's acquisition of the Leased
Premises.
16. "Inspecting Architect" shall mean the architect, if any,
hired by Lessor to perform inspections of the premises. An
Inspecting Architect may only be engaged by Lessor in the
event of a default relating to construction of the
Improvements under the Development Financing Documents.
17. "Leased Premises" shall mean the real property described
in the Exhibit "A" attached to this Agreement, together with
all Improvements, equipment and fixtures thereon.
18. "Lessee Equity" shall mean the final Construction Costs
less the amount of the Development Financing.
19. "Plans and Specifications" shall mean the plans and
specifications prepared by the Project Architect who shall be
licensed in the jurisdiction of the Leased Premises and
selected by Lessee.
20. "Project" shall mean the construction of the Improvements
on the Leased Premises.
21. "Project Architect" shall mean the architect retained by
Lessee to design and supervise construction of the
Improvements.
22. "Rental Modification Date" shall mean a date one hundred
and twenty days (120) from the date hereof.
23. "Sub-Contractors" shall mean those persons furnishing
labor or materials for the Project pursuant to the Sub-
Contracts.
24. "Sub-Contracts" shall mean the contracts between the
Contractor and its materialmen and mechanics in the
furnishing of labor or materials for the Project.
25. "Title" shall mean Commonwealth Land Title Insurance
Corporation issuing the Lessor's fee owner's title insurance
policy.
ARTICLE II
THE DEVELOPMENT FINANCING
Subject to compliance with the provisions of this Agreement,
Lessor agrees to advance to Lessee, and Lessee agrees to request
from Lessor, the Development Financing. The Development
Financing shall be advanced in stages by Lessor to CLTIC-CDD and
disbursed by CLTIC-CDD pursuant to the provisions of Article VIII
hereof. The Development Financing, or so much thereof as has
been advanced hereunder, shall bear interest at the rate and
shall be repaid in accordance with the terms hereof and the
Lease. The proceeds of the Development Financing shall be used
exclusively for the purposes of defraying Construction Costs.
ARTICLE III
N/A
ARTICLE IV
CONSTRUCTION OF IMPROVEMENTS
Lessee agrees to commence construction of the Improvements
within thirty (30) days from the date of this Agreement. After
commencement of construction of any Improvements, Lessee agrees
to diligently pursue said construction to completion, and to
supply such moneys and to perform such duties as may be necessary
to complete the construction of said Improvements pursuant to the
Plans and Specifications and in full compliance with all terms
and conditions of this Agreement and the Development Financing
Documents, all of which shall be accomplished on or before the
Completion Date, subject to Force Majeure and without liens,
claims or assessments (actual or contingent) asserted against the
Leased Premises for any material, labor or other items furnished
in connection therewith, subject to Lessee's right to contest
such liens, claims, or assessments provided the same are removed
as a lien upon the Leased Premises prior to foreclosure of such
lien, and all in full compliance with all construction, use,
building, zoning and other similar requirements of any pertinent
governmental jurisdiction. Lessee will provide to Lessor, upon
request, evidence of satisfactory compliance with all the above
requirements.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE LESSEE
Lessee hereby represents and warrants to the Lessor, which
representations and warranties shall be deemed to be restated by
Lessee each time Lessor makes an advance of the Development
Financing, that:
1. VALIDITY OF DEVELOPMENT FINANCING DOCUMENTS - The Development
Financing Documents are in all respects legal, valid and binding
according to their terms.
2. NO PRIOR LIEN ON FIXTURES - No mortgage, bill of sale,
security agreement, financing statement, or other title retention
agreement (except those executed in favor of Lessor) has been, or
will be, executed with respect to any fixture (except Lessee's
trade fixtures not financed with this Development Financing) used
in conjunction with the construction, operation or maintenance of
the improvements.
3. CONFLICTING TRANSACTION OF LESSEE - The consummation of the
transactions hereby contemplated and the performance of the
obligations of Lessee under and by virtue of the Development
Financing Documents will not result in any breach of, or
constitute a default under, any mortgage, lease, bank loan or
credit agreement, corporate charter, by-laws, partnership
agreement, or other instrument to which Lessee is a party or by
which it may be bound or affected, the breach of which would
materially affect Lessee's ability to perform its obligations
hereunder.
4. PENDING LITIGATION - There are no actions, suits or
proceedings pending, or to the knowledge of Lessee threatened,
against or affecting it or the Leased Premises, or involving the
validity or enforceability of any of the Development Financing
Documents, at law or in equity, or before or by any governmental
authority, except actions, suits and proceedings that are fully
covered by insurance or which, if adversely determined would not
substantially impair the ability of Lessee to perform each and
every one of its obligations under and by virtue of the
Development Financing Documents; and to the Lessee's knowledge it
is not in default with respect to any order, writ, injunction,
decree or demand of any court or any governmental authority.
5. VIOLATIONS OF GOVERNMENTAL LAW, ORDINANCES OR REGULATIONS -
To the best knowledge of Lessee, there are no violations or
notices of violations of any federal or state law or municipal
ordinance or order or requirement of the State in which the
Leased Premises are located or any municipal department or other
governmental authority having jurisdiction affecting the Leased
Premises, which violations in any way have a material adverse
affect on the Leased Premises and which remain uncured after
notice by such governmental authority or department (if notice is
required) and the expiration of the time within which Lessee may
cure such violation, or if no time limitation is specified,
within a reasonable time after notice to cure such violation .
6. COMPLIANCE WITH ZONING ORDINANCES AND SIMILAR LAWS - To the
best knowledge of Lessee, the Plans and Specifications and
construction pursuant thereto and the use of the Leased Premises
contemplated thereby comply and will comply with all present
governmental laws and regulations and requirements, zoning
ordinances, standards, and regulations of all governmental bodies
exercising jurisdiction over the Leased Premises. Lessee agrees
to provide the Project Architect's certification to such effect
prior to the funding of the first disbursement under the
Development Financing.
7. LESSEE'S STATUS AND AUTHORITY - If the Lessee be a
corporation, limited liability company, trust or a partnership,
Lessee warrants and represents that (i) it is duly organized,
existing and in good standing under the laws of the state in
which it is incorporated or created; (ii) it is duly qualified to
do business and is in good standing in the state in which the
Leased Premises are located; (iii) it has the corporate or other
power, authority and legal right to carry on the business now
being conducted by it and to engage in the transactions
contemplated by this Agreement and the Development Financing
Documents; and (iv) the execution and delivery of this Agreement
and the Development Financing Documents and the performance and
observance of the provisions hereof and thereof have been (or
future acts will be) duly authorized by all necessary trust,
partnership, or corporate actions of Lessee. Lessee will furnish
such resolutions, affidavits and opinions of counsel to such
effect as Lessor may reasonably require.
8. AVAILABILITY OF UTILITIES - All utility services necessary for
the construction of the Improvements will be available prior to
the commencement of construction, and all utility services
necessary for the proper operation of the Improvements for their
intended purposes are available at the Leased Premises or will be
available at the Leased Premises prior to the Final Disbursement
Date, at commercially comparable utility rates and hook-up
charges for the vicinity, including water supply, storm and
sanitary sewer facilities, gas, electricity and telephone
facilities. Lessee shall furnish evidence of such availability
of utilities from time to time at Lessor's request.
9. BUILDING PERMITS - All building permits required for the
construction of the Improvements have been obtained prior to the
commencement of the construction of the Improvements and copies
of same will be delivered to Lessor.
10. CONDITION OF LEASED PREMISES - The Leased Premises are
not now damaged or injured as a result of any fire, explosion,
accident, flood or other casualty, nor to the best of Lessee's
knowledge, subject to any action in eminent domain.
11. APPROVAL OF PLANS AND SPECIFICATIONS - To the best
knowledge of Lessee in reliance upon the Project Architect's
certification to such effect, the Plans and Specifications
conform to the requirements and conditions set out by applicable
law or any effective restrictive covenant, to all governmental
authorities which exercise jurisdiction over the Leased Premises
or the construction thereon, and no construction will be
commenced upon the Leased Premises until said Plans and
Specifications shall have been approved by Lessor, which consent
shall not be unreasonably withheld or delayed and shall be given
or withheld within ten business days after written request
therefor. Subject to Article VI, paragraph 14, no material
changes are to be made in the Plans and Specifications as
approved without Lessor's prior consent, which consent shall not
be unreasonably withheld or delayed and shall be given or
withheld within ten business days after written request therefor;
except, after prior written notice to Lessor, provided the
Development Financing shall remain in balance as set forth in
Article VII, paragraph 3 herein, Lessor shall consent to
reallocation among line items or use of the Construction
Contingency in the aggregate of not more than the amount budgeted
as set forth on Exhibit B for Construction Contingency, unless
Lessee shall deposit Owner Equity with CLTIC-CDD in the amount of
such excess over the budgeted amount.
12. CONSTRUCTION CONTRACTS - Lessee has entered into
contracts with the Contractors or separate contracts with
materialmen and laborers providing for the construction of the
Improvements. Lessee will cause the Contractors to promptly
furnish Lessor with the complete list of all Sub-contractors or
entities as and when under contract, which Contractors propose to
engage to furnish labor and/or materials in constructing the
Improvements (such list containing the names, addresses, and
amounts of such sub-contracts as written in excess individually
of $5,000, and prior to disbursement of funds to or for the
benefit of such Subcontractors, affidavits of authorized
signatory and other documents commercially reasonably required by
Title to insure that the Leased Premises remain lien free) and
will from time to time furnish Lessor or Title with true copies
of all Contracts entered into by Lessee and with the terms of all
verbal agreements therefor, if any, and as to subcontractors,
letters signed by sub-contractors whose contracts are in excess
of $5,000 setting forth the present amount of their contract and
the amounts remaining to be paid under that contract, if the same
information is not stated on a lien waiver reflecting the most
currently requested payment to such subcontractor.
13. BROKERAGE COMMISSIONS - No brokerage commissions are due
in connection with the transaction contemplated hereby or if
there are commissions due or payable the same will be paid by
Lessee. Lessee agrees to and shall indemnify Lessor from any
liability, claims or losses arising by reason of any such
brokerage commissions. This provision shall survive the
repayment of the Development Financing and shall continue in full
force and effect so long as the possibility of such liability,
claims or losses exists.
14. NO PRIOR WORK - Except as may have been permitted by
Lessor, no work or construction has been commenced or will be
commenced by or on behalf of Lessee on the Leased Premises, nor
has Lessee entered into any contracts or agreements for such work
or construction which could result in the imposition of a
mechanic's or materialmen's lien on the Leased Premises or the
Improvements prior to or on parity with the interest of Lessor.
15. ENVIRONMENTAL IMPACT STATEMENT - All required
environmental impact statements as required by any governmental
authority having jurisdiction over the Leased Premises or the
construction of the Improvements have been duly filed and
approved.
16. ACCESS - The Leased Premises front on a publicly
maintained road or street or have access to such a road or street
under an easement or private way, which is not subject to a
reversion in favor of any party.
17. FINANCIAL INFORMATION - Any financial statements
heretofore delivered to Lessor are true and correct in all
respects, have been prepared in accordance with generally
accepted accounting practice, and fairly present the respective
financial conditions of the subject thereof as of the respective
dates thereof and no materially adverse change has occurred in
the financial conditions reflected therein since the respective
dates thereof.
ARTICLE VI
COVENANTS OF LESSEE
Lessee hereby covenants and agrees with Lessor as follows:
1. SURVEYS - Prior to execution of any Development Financing
Documents and prior to the initial request for a Disbursement (as
defined in Article VIII hereof), Lessee has furnished to Lessor
three copies of a current perimeter land survey, in form and
substance satisfactory to Lessor, certified to Lessor, giving a
description of the Leased Premises and showing all encroachments
onto or from the Leased Premises, currently certified by a
registered surveyor and bearing his registry number and showing
access rights, easements, or utilities, rights of way, all
setback requirements upon the Leased Premises, improvements,
matters affecting title and such other items as Lessor may
reasonably request.
2. TITLE INSURANCE - Prior to the initial request for
Disbursement the Lessee has furnished Lessor with an ALTA policy
of title insurance, and prior to any subsequent request for
Disbursement such ALTA policy of title insurance shall be brought
down to the date of Disbursement by endorsement, all in form and
substance satisfactory to Lessor issued at the Lessee's expense
and written by Title insuring the Leased Premises to be
marketable, free from exceptions for mechanic's and materialmen's
liens and free from other exceptions not previously approved by
the Lessor, naming Lessor as fee owner insured to the extent of
advances made hereunder subject only to such exceptions as may be
reasonably approved by Lessor.
3. RESTRICTIONS ON CONVEYANCE OR SECONDARY FINANCING - Lessee
will not transfer, sell, convey or encumber the Leased Premises
or subject the Leased Premises to any secondary financing in any
way without the written consent of the Lessor, except as
permitted in Article V, paragraph 2 relating to trade fixture
financing sources or suppliers.
4. INSURANCE - To obtain or cause Contractor to obtain and
maintain such insurance or evidence of insurance as Lessor may
reasonably require, including but not limited to the following:
(a) BUILDER'S RISK INSURANCE - Builder's Risk Insurance
written on the so-called "Builder's Risk-Completed Value
Basis" in an amount equal to the full replacement cost of the
Improvements at the date of completion with coverage
available on the so-called multiple peril form of policy,
including coverage against collapse and water damage, naming
Lessor as additional named insured, such insurance to be in
such amounts and form and written by such companies as shall
be reasonably approved by Lessor, and the originals of such
policies (together with appropriate endorsement thereto,
evidence of payment of premiums thereon and written
agreements by the insurer or insurers therein to give Lessor
ten (10) days' prior written notice of any intention to
cancel) shall be promptly delivered to Lessor, said insurance
coverage to be kept in full force and effect at all times
until the completion of construction of the Improvements.
(b) HAZARD INSURANCE - Fire and Extended Coverage Insurance,
and such other hazard insurance as Lessor may require and as
called for in the Lease in an amount equal to the full
replacement cost of the Improvements naming Lessor as an
additional named insured, such insurance to be in such
amounts and form and written by such companies as shall be
reasonably approved by Lessor, and the originals of such
policies (together with appropriate endorsements thereto,
evidence of payment of premiums thereon and written agreement
by the insurer or insurers therein to give Lessor ten (10)
days' prior written notice of any intention to cancel) shall
be promptly obtained and delivered to Lessor immediately upon
completion of the construction of the Improvements and before
any portion is occupied by Lessee or any tenant of Lessee
with such insurance to be kept in full force and effect at
all times thereafter.
(c) PUBLIC LIABILITY - Comprehensive public liability
insurance (including operations, contingent liability
operations, operations of sub- contractors, completed
operations and contractual liability insurance) in limits of
coverage as set forth in the Lease.
(d) WORKMEN'S COMPENSATION INSURANCE - Evidence of compliance
with the required coverage under statutory workmen's
compensation requirements.
5. COLLECTION OF INSURANCE PROCEEDS - To cooperate with Lessor in
obtaining for Lessor the benefits of any insurance or other
proceeds lawfully or equitably payable to it in connection with
the transaction contemplated hereby and the collection of any
indebtedness or obligation of the Lessee to Lessor incurred
hereunder (including the payment by Lessee of the expense of an
independent appraisal on behalf of Lessor in case of a fire or
other casualty affecting the Leased Premises).
6. APPLICATION OF DEVELOPMENT FINANCING PROCEEDS - To use the
proceeds of the Development Financing solely for the purpose of
paying for Construction Costs and such incidental costs relative
to the construction as may be reasonably approved from time to
time in writing by Lessor, and in no event to use any of the
Development Financing proceeds for personal, corporate or other
purposes.
7. EXPENSES - To pay all costs of closing the Development
Financing and all expenses of Lessor with respect thereto,
including, but not limited to, legal fees by Lessor's counsel and
all other reasonable attorney's fees (limited as set forth in the
Commitment), costs of title insurance, transfer taxes, license
and permit fees, recording expenses, surveys, intangible taxes,
appraisal fees, Inspecting Architect fees, expenses of retaking
possession upon default by Lessee hereunder or other costs of
enforcement (including reasonable attorney's fees) and similar
items.
8. LAWS, ORDINANCES AND ETC. - To comply promptly with any law,
ordinance, order, rule or regulation of all authorities
exercising jurisdiction over the Leased Premises or the
construction thereon, including appropriate supervising boards of
fire underwriters and similar agencies and the requirements of
any insurer issuing coverage on the Project.
9. RIGHT OF LESSOR TO INSPECT LEASED PREMISES - Upon 48 hours
notice, except in cases which Lessor reasonably deems to be an
emergency, in which event upon reasonable notice under the
circumstances, to permit Lessor and Title and their
representatives and agents to enter upon the Leased Premises and
to inspect the Improvements and all materials to be used in
construction thereof and to cooperate and cause Contractor to
cooperate with Lessor or Title and their representatives and
agents during such inspections, provided that such is
accomplished without interrupting the construction process.
Provided, further, however, that this provision shall not be
deemed to impose upon Lessor or Title any duty or obligation
whatsoever to undertake such inspections, to correct any defects
in the Improvements or to notify any person with respect thereto.
10. BOOKS AND RECORDS - To set up and maintain accurate and
complete books, accounts and records pertaining to the Project
including the working drawings in a manner reasonably acceptable
to Lessor. The Lessor, Title and Inspecting Architect shall have
the right at all reasonable times and upon reasonable prior
notice to inspect, examine and copy all books and records of
Lessee relating to the Project, and to enter and have free access
to the Leased Premises and Improvements and to inspect all work
done, labor performed and material furnished in or about the
Project, provided that such is accomplished without interrupting
the construction process. Notwithstanding the foregoing, Lessee
shall be responsible for making inspections as to the
Improvements during the course of construction and shall
determine to its own satisfaction that the work done or materials
supplied by the Contractors and all Subcontractors has been
properly supplied or done in accordance with the applicable
contracts. Lessee will hold Lessor and Title harmless from and
Lessor and Title shall have and have no liability or obligation
of any kind to Lessee or creditors of Lessee in connection with
any defective, improper or inadequate workmanship or materials
brought in or related to the Improvements or the Leased Premises,
or any mechanic's liens arising as a result of such workmanship
or materials. Upon Lessor's request, Lessee shall replace or
cause to be replaced any such work or material found to be
materially deficient by the Project Architect or Independent
Architect. Lessor shall cooperate with Lessee in obtaining any
rights under any applicable warranties to accomplish such work.
Any inspections made by Inspecting Architect, Title or Lessor are
for the sole benefit of Lessor and neither Lessee nor any
creditor, tenant or vendee of Lessee shall be entitled to rely on
such inspection. Lessee shall obtain for Lessor coincident
rights to rely upon any warranties obtain by Lessee from its
Contractors or subcontractors.
11. CORRECTION OF DEFECTS - To promptly correct any
structural defects in the Improvements or any material departure
from the Plans and Specifications not previously approved by
Lessor. The advance of any Development Financing proceeds shall
not constitute a waiver of Lessor's right to require compliance
with this covenant.
12. SIGN REGARDING DEVELOPMENT FINANCING - To allow Lessor to
erect and maintain at a suitable site on the Leased Premises, at
a location to be chosen by Lessee in its reasonable discretion, a
sign indicating that Development Financing is being provided by
Lessor, to the extent permitted by law or private covenant,
condition, or agreement affecting the Project.
13. ADDITIONAL DOCUMENTS - To furnish to Lessor all
instruments, documents, initial surveys, footing or foundation
surveys, if conducted, certificates, plans and specifications,
appraisals, financial statements, title and other insurance
reports and agreements and each and every other document and
instrument required to be furnished by the terms hereof, all at
Lessee's expense; to assign and deliver to Lessor such documents,
instruments, assignments and other writings, and to do such other
acts necessary or desirable to preserve and protect the Leased
Premises, as Lessor may require; and to do and execute all and
such further lawful and reasonable acts, conveyances and
assurances for the carrying out of the intents and purposes of
this Agreement, the Lease, or the Commitment, as Lessor shall
reasonably require from time to time.
14. ARCHITECTS AND CONSTRUCTION CONTRACTS - To commit no
default nor knowingly permit a default under the terms of the
Architects or Construction Contracts; To waive none nor knowingly
permit a waiver of the obligations of the parties thereunder; To
do no act which would relieve such parties from their obligations
thereunder; To make no amendments to such contracts, without the
prior written consent of Lessor; To enter into no change orders
or extras that cause a reallocation among budgeted line items, or
that in the aggregate or singularly result in a net increase in
excess of 10% of the original contract amount without Lessor's
prior written consent, which consent shall not be unreasonably
withheld or delayed; provided, however, Lessor shall be given
written notice and copies of all change orders; provided,
further, however, with written notice to Lessor prior to any
request for funds subsequent to any such change order or
reallocation, the Lessee shall be allowed to enter into any
change order or extra which is accounted for by use of any
reallocation among line items or any remaining budgeted
Contingency line item, or if the same has been exhausted, Lessee
shall be allowed increases in the original contract amount
without Lessor's consent if Lessee has, upon the execution of
said change order, deposited with Lessor the amount by which such
change order increases the total Construction Cost; To allow all
such contracts to be subject to the approval of Lessor for its
loan purposes; To allow Lessor to take advantage of all the
rights and benefits of the contracts upon any default by Lessee;
and to submit evidence to Lessor that both the Architect and the
Contractors will permit Lessor to acquire Lessee's interest under
their respective contracts and the Contract Documents without
additional charge or fee should an event of default occur
hereunder, which default is not cured within applicable notice
and cure periods.
15. ENFORCE PERFORMANCE OF SUB-CONTRACTS - To enforce, or
cause to be enforced, the prompt performance of the Sub-Contracts
in accordance with their terms and not to approve any changes in
the same that in the aggregate or singularly result in a net
increase in excess of 10% of the original General Contractor's
contract amount without Lessor's prior written consent, which
consent shall not be unreasonably withheld or delayed, provided
Lessee's right to enter into any such change order shall be on
the same terms set forth in Section 14 above.
16. COMPLIANCE WITH RULES - To comply with, and to require
the Contractors to comply with, all rules, regulations,
ordinances and laws bearing on the conduct of the work on the
Improvements, including the requirements of any insurer issuing
coverage on the Project and the requirements of any applicable
supervising boards of fire underwriters.
17. OPINIONS OF COUNSEL - To furnish such opinions of counsel
as may be reasonably requested of the Lessee in connection with
the matters contemplated by this Agreement.
18. SOIL TESTS - To provide the Lessor with a soil report
prepared by an acceptable engineer certifying as to the status of
the soil conditions on the Leased Premises, the need or lack of
need for special pilings and foundations and that either any
pilings and foundation necessary to support the Improvements have
been placed in a manner and quantity sufficient to provide the
required support or that no such pilings and foundations are
necessary for the support and construction of the Improvements.
19. MARKETABLE TITLE - To execute and deliver or cause to be
executed and delivered such instruments as may be required by the
Lessor and Title to provide Lessor with a marketable, valid title
to the Leased Premises subject only to such exceptions to title
as may be reasonably approved by Lessor.
20. VIOLATIONS OF GOVERNMENTAL LAW, ORDINANCES OR REGULATIONS
- - Lessee will permit no violations nor commit the same, of any
federal or state law or municipal ordinance or order or
requirement of the State in which the Leased Premises are located
or any municipal department or other governmental authority
having jurisdiction affecting the Leased Premises, which
violations in any way have a material adverse affect on the
Leased Premises and which remain uncured after notice by such
governmental authority or department (if notice is required) and
the expiration of the time within which Lessee may cure such
violation, or if no time limitation is specified, within a
reasonable time after notice to cure such violation .
21. COMPLIANCE WITH ZONING ORDINANCES AND SIMILAR LAWS - The
Plans and Specifications and construction pursuant thereto and
the use of the Leased Premises contemplated thereby will comply
with all governmental laws and regulations and requirements,
zoning ordinances, standards, and regulations of all governmental
bodies exercising jurisdiction over the Leased Premises,
including environmental protection and equal employment
regulations, and appropriate supervising boards of fire
underwriters and similar agencies.
22. APPROVAL OF PLANS AND SPECIFICATIONS - The Plans and
Specifications will conform to the requirements and conditions
set out by applicable law or any effective restrictive covenant,
and to all governmental authorities which exercise jurisdiction
over the Leased Premises or the construction thereon.
ARTICLE VII
CONDITIONS PRECEDENT TO A DISBURSEMENT
It shall be a condition precedent to each Disbursement under this
Development Financing Agreement that:
1. DEVELOPMENT FINANCING DOCUMENTS - The Development Financing
Documents shall have been duly executed and delivered to Lessor
and shall be in full force and effect.
2. LESSEE EQUITY - Lessee shall have paid all of the Lessee
Equity funds into the Project before the first Disbursement (or
any subsequent Disbursement if additional Lessee Equity should be
required) and Lessee shall deliver evidence of such payment
reasonably satisfactory to Lessor.
3. DEVELOPMENT FINANCING BALANCE - As of the date immediately
prior to any Disbursement, the total amount of unadvanced
proceeds of the Development Financing shall be sufficient, in the
commercially reasonable opinion of Lessor (the opinion of Lessor
being based upon affidavit of the General Contractor, the Project
Architect, the Inspecting Architect, or other reliable licensed
third party contractor) to complete the Improvements free of
liens. To the extent the total of the unadvanced proceeds of the
Development Financing shall be insufficient, at any time, in
Lessor's reasonable opinion, (based upon the affidavit as set
forth above) to complete the Improvements, or be less than the
total Construction Costs not yet paid for or not yet incurred
(including interest accruing for the remainder of the term or
extensions thereof, if any), the Lessee shall immediately deposit
with the Lessor or with Title, as additional Lessee Equity funds,
an amount equal to such deficiency and such additional Lessee
Equity funds shall be disbursed by CLTIC-CDD prior to the
Disbursement of any further advance or advances under this
Agreement.
4. NO DEFAULT - No event of default, which remains uncured after
the expiration of applicable cure periods, shall exist under this
Agreement or the Development Financing Documents.
5. REPRESENTATIONS AND WARRANTIES - The representations and
warranties in Article V hereof shall be true and correct on and
as of the date of each Disbursement.
6. COVENANTS - Lessee shall have complied with all of the
covenants made by it in Article VI hereof.
7. SWORN CONSTRUCTION STATEMENT - Prior to the initial
disbursement hereunder, the Lessee shall have submitted to Lessor
and Title a Construction Cost Statement or the Construction
Contract (if such information is contained therein) sworn to by
Lessee and Contractors reflecting all major Sub-Contractors or
materialmen who shall then be engaged in furnishing labor,
materials or supplies for the Improvements. The list should show
the name of each and every Contractor, Sub-Contractor and
materialman (or at least such entities or individuals whose
contract is in excess of $5,000), its address and an estimate of
the dollar value of the work, labor and materials to be done or
supplied and a general statement of the nature of the work to be
done or materials to be supplied by each Contractor. Thereafter,
if such list should change or new subcontractors shall execute
contracts not reflected on the above list, the Lessee shall
furnish to the Lessor any amendments or additions to the original
statement as so submitted.
8. APPLICATION FOR PAYMENT - Lessor shall have received an
Application for Payment pursuant to Article VIII hereof.
9. TITLE - Title shall issue its endorsement to the title policy
insuring the Lessor as fee owner under the policy in the
aggregate amounts of all prior Disbursements and the requested
Disbursement.
10. WORK IN PLACE - All work or materials for which a
Disbursement is requested shall be in place and incorporated into
the Improvements.
ARTICLE VIII
METHODS OF DISBURSEMENTS OF DEVELOPMENT FINANCING PROCEEDS
The Development Financing shall be disbursed (a "Disbursement")
as follows:
1. PROCEDURE - Not more often than monthly, Lessee may submit an
Application for Payment in the form attached hereto as Exhibit
"C" requesting the Disbursement of proceeds under the Development
Financing, which request shall be submitted to Lessor and to
CLTIC-CDD at least five (5) business days prior to the date on
which a Disbursement is requested. Provided the conditions of
this Development Financing Agreement are met on the date
requested for such advance, Lessor shall advance to CLTIC-CDD
amounts certified to be currently payable by Lessee (excluding
the retainage hereinafter specified) for the then incurred
portion of Total Construction Costs pursuant to the Application
for Payment. All costs shall have been approved in writing by
the Project Architect, Lessee, Contractor, and if required by
Lessor, by the Inspecting Architect. All interest accruing need
not be disbursed to CLTIC-CDD, but may be immediately and
automatically credited by Lessor to the Development Financing
account. CLTIC-CDD shall disburse all funds advanced to it by
Lessor in accordance with the terms and provisions of this
Agreement and any special escrow requirements imposed by CLTIC-
CDD as a condition to its acting as the disbursing agent
hereunder. The disbursed proceeds of the Development Financing
shall bear interest from and including the date of disbursement
to CLTIC-CDD or the date of credit by Lessor provided that in the
event CLTIC-CDD shall fail to disburse any advances within five
(5) business days after the date set for an advance, CLTIC-CDD
shall return said advance to Lessor and interest on such advance
shall abate from and after the date of such return. Any amounts
disbursed to CLTIC-CDD and returned by CLTIC-CDD to the Lessor
shall not be deemed to be advanced under the Development
Financing Documents. Each Application for Payment shall clearly
set forth the amounts due to Lessee and to each Contractor out of
the requested Development Financing and shall be accompanied by
the following:
a. A Draw Request Certificate in the form attached hereto as
Exhibit "D" certifying that each contractor or materialman
for which payment is requested in the relevant Application
for Payment has satisfactorily completed the work or
furnished the materials for which payment is requested in
accordance with the applicable contract; that all work for
which an Application for Payment is made substantially
conforms to the Contract Documents and any approved changes,
and is in place; and that sufficient funds remain of the
undisbursed Development Financing proceeds to complete the
Project and that all funds previously disbursed have been
applied as per the previous Application for Payment.
b. Waivers of Mechanics' Liens and Materialmen's Liens
executed by all Contractors for all work done and all
materials furnished to the Leased Premises and included in
such current Application for Payment, or evidence reasonably
required by Title to insure over the same by special specific
endorsement, or such other releases of lien pursuant to
bonding or otherwise to prevent such liens from attaching to
the Leased Premises.
c. Waivers of Mechanics' Liens and Materialmen's Liens
executed by all Sub-Contractors and workmen and materialmen
for all work done and all materials furnished to the Leased
Premises and included in the immediately preceding
Application for Payment, or evidence reasonably required by
Title to insure over the same by special specific
endorsement, or such other releases or lien pursuant to
bonding or otherwise to prevent such liens from attaching to
the Leased Premises.
d. Such other supporting evidence, including invoices and
receipts as may be requested by Lessor or CLTIC-CDD to
substantiate all payments which are to be made out of the
Disbursement or to substantiate all payments then made in
respect to the Project.
2. INTEREST ADVANCE - If interest has accrued on the Development
Financing and is unpaid or fees are payable to the Lessor
hereunder, Lessor shall be, and hereby is, authorized at any time
to advance to itself from the proceeds of the Development
Financing the total amount of such accrued interest and fees,
whether or not an Application for Payment has been submitted by
the Lessee and the same shall be deemed to be an advance of the
proceeds of the Development Financing under this Agreement in the
same manner and with the same effect as if advanced under the
provisions above. It is understood Lessor may establish an
automatic interest reserve whereby Lessor may withdraw from the
Development Financing account on a regular basis the accrued
interest on the Development Financing and credit the Development
Financing balance with the same.
3. ASSESSMENT AND TAX ADVANCE - As taxes and assessments become
due on the Leased Premises, Lessor shall be, and hereby is,
authorized to advance to itself automatically from the proceeds
of the Development Financing, the total amount of such taxes and
assessments and the same shall be deemed to be an advance of the
proceeds of the Development Financing under this Agreement in the
same manner and with the same effect as if advances under the
provisions above, if not previously paid before due pursuant to
Lessee's obligations under the Lease.
4. DISBURSE UNDER DEVELOPMENT FINANCING DOCUMENT - All sums
advanced and disbursed hereunder shall be disbursed under and
shall be secured by the Development Financing Documents.
5. PAYMENTS TO SUBCONTRACTORS - In its reasonable discretion
CLTIC-CDD may make payments directly to any subcontractor or
materialman.
6. RETAINAGE - Each Disbursement shall be limited to an amount
equal to ninety percent (90%) of the value, exclusive of
Contractor's profit and overhead, of the materials and labor
furnished to the Leased Premises and the balance (herein called
the Retainage) shall be retained by Lessor, provided that thirty
(30) days after completion by each subcontractor or materialman
of his subcontract Lessor will disburse to such party, or to the
Contractor on behalf of such party the Retainage withheld from
said party, provided that as a condition to such disbursement the
Lessee and Project Architect and the Inspecting Architect shall
certify to Lessor the date that such Party's subcontract has been
fully and satisfactorily completed and the subcontractor or
materialmen shall have supplied Title with satisfactory final
lien waivers, including final lien waivers for any of its
submaterialmen or sub- contractors and the requirements of any
bonding company issuing the Bonds shall have been fulfilled. Any
Retainage due the Contractor for work performed or materials
furnished by the Contractor and the final balance of Contractor's
profit and overhead shall be disbursed on the Final Disbursement
Date pursuant to Article IX hereof. Contractor's profit and
overhead shall be disbursed based upon and in proportion to the
percentage of completion of the Project, or amounts payable under
the Construction Contract for work actually performed, whichever
is less, as certified by the Project Architect.
ARTICLE IX
FINAL DEVELOPMENT FINANCING BALANCE
Unless and until Lessor and Lessee have entered into a mutually
satisfactory escrow holdback and undertaking agreement to, inter
alia, complete the Improvements and otherwise satisfy the
requirements of this Article IX, at no time and in no event shall
Lessor be obligated to disburse the balance of the proceeds of
the Development Financing, including any Retainage until the date
the following have been satisfied (the "Final Disbursement
Date"):
1. Lessor shall have received reasonably satisfactory evidence of
the final completion of the Improvements in substantial
accordance with the Contract Documents and the Certificate of
Final Completion from the Project Architect accepted by the
Contractor and Lessee.
2. Lessor shall have received satisfactory as-built surveys
reflecting the final location of the Improvements as fully
completed on the Leased Premises in accordance with the Contract
Documents, said survey to be prepared by a registered or licensed
surveyor bearing his registry number, certifying to Lessor as to
the legal description of the Leased Premises and showing all
Improvements located on the Leased Premises and indicating the
street address of the Improvements, absence of any encroachments
on the Leased Premises or from the Leased Premises onto adjacent
land, showing all access points, and showing conformance to all
set back requirements and delineating all utility easements that
are specifically legally described, rights of way and other
matters affecting the Leased Premises, and certifying as to the
total acreage of the land, the exterior dimensions of the
Improvements, and the number of parking spaces, if any, and such
other matters as Lessor may reasonably request.
3. Lessor shall have received a requisite affidavit of the
Lessee, Contractor and Project Architect, and approved by the
Inspecting Architect certifying as to the final cost of the
Improvements.
4. Title shall have been furnished with such final lien waivers
sufficient in the opinion of Title to dissolve any possible
Mechanic's and Materialman's Liens affecting title to the Leased
Premises or Lessee shall have provided a bond or other security
sufficient to remove the lien as an encumbrance upon title to the
Leased Premises and Title shall have issued its endorsements to
the title policy increasing the insured coverage to the full
amount of all sums disbursed under this Development Financing
Agreement.
5. Lessor shall have received evidence that all of the terms,
provisions and conditions on the part of the Lessee to be
performed or caused to be performed hereunder and under the
Lease, including but not limited to obtaining casualty insurance
for the full insurable value of the Improvements, have been
fulfilled to the satisfaction of Lessor.
6. Lessor shall have received a Final Certificate of Occupancy
issued by the appropriate governmental authority covering the
Improvements and a Certificate of Substantial Completion from the
Project Architect indicating that the Improvements as built
comply with all building codes and zoning ordinances, including
any plat requirements or requirements of recorded operating
covenants or agreements affecting the Leased Premises.
7. All remaining uncompleted "punch list" items shall have been
satisfactorily completed.
8. The requirements of all bonding companies, if any, with
respect to release of retainage shall have been met.
9. An amendment to the Lease shall be executed by Lessee and
Lessor setting forth the date the first Lease Year shall end and
the Rent for the balance of the first Lease Year, and evidencing
the satisfaction and termination of this Agreement.
ARTICLE X
EVENTS OF DEFAULT
An "event of default" shall be deemed to have occurred hereunder
and under the Lease, if:
1. DEFAULT UNDER DEVELOPMENT FINANCING DOCUMENTS - Any default or
event of default occurs (which remains uncured after the
expiration of any applicable cure period as may be set forth in
any Development Financing Document) under any of the Development
Financing Documents as defined therein; or
2. FAILURE TO COMPLETE CONSTRUCTION - Lessee shall fail for any
reason, except Lessor's wrongful refusal to fund the Development
Financing pursuant to the terms hereof, to substantially complete
the construction of the Improvements by the Completion Date; or
3. BREACH OF AGREEMENT - Lessee breaches or fails to perform,
observe or meet any covenant or condition of this Agreement,
provided, however, with respect to non-monetary defaults
hereunder, Lessee shall have twenty days after notice from Lessor
to cure such non-monetary default, or if such default (but for
the payment of monies) cannot be cured within twenty days, such
longer time as may be reasonably necessary to effect a cure if
Lessee is diligently pursuing a course of conduct reasonably
designed to cure the default.; or
4. BREACH OF WARRANTY - Any warranties made or agreed to be made
in any of the Development Financing Documents or this Agreement
shall be breached by Lessee or shall prove to be false or
misleading, and the same shall not be cured or made to be true
and correct within the applicable cure periods; or
5. FILING OF LIENS AGAINST THE LEASED PREMISES - Any lien for
labor, material, taxes or otherwise shall be filed against the
Leased Premises and such lien shall not be promptly paid,
released, contested in an appropriate forum, or bonded over to
Lessor's reasonable satisfaction before the lien shall materially
adversely affect Lessor's interest in the Premises; or
6. LITIGATION AGAINST LESSEE - Any suit shall be filed against
Lessee, and is not resolved within 120 days and, which if
adversely determined, could substantially impair the ability of
Lessee to perform each and every one of its obligations under and
by virtue of the Development Financing Documents; or
7. LEVY UPON THE LEASED PREMISES - A levy be made under any
process on the Leased Premises and such levy shall not be
promptly Bonded over prior to the execution of such levy; or
8. TRANSFER OF LEASED PREMISES - Lessee shall without the prior
written consent of Lessor, voluntarily or by operation of law,
sell, transfer, convey or encumber all or any part of its
interest in the Leased Premises or in any of the personalty
located thereon, or used or intended to be used in connection
therewith; or
9. ABANDONMENT - Lessee abandons the project or delays or ceases
work thereon for a period of fifteen consecutive (l5) days, or
delays construction or suffers construction to be delayed for any
period of time for any reason whatsoever so that completion of
Improvements cannot be accomplished in the judgment of Lessor on
or before the Completion Date, subject to force majeure; or
10. BANKRUPTCY - Lessee shall make an assignment for the
benefit of its creditors or shall admit in writing its inability
to pay its debts as they become due or shall file a petition in
bankruptcy or shall be adjudicated a bankrupt or insolvent or
shall file a petition seeking any reorganization, dissolution,
liquidation, arrangement, composition, readjustment, or similar
relief under any present or future bankruptcy or insolvency
statute, law or regulation, or shall file an answer admitting to
or not contesting the material allegations of a petition filed
against it in any such proceedings, or shall not have the same
dismissed or vacated, or shall seek or consent or acquiesce in
the appointment of any trustee, receiver or liquidator of a
material part of its properties, or shall not after the
appointment without the consent or acquiescence of it of a
trustee, receiver, or liquidator of any material part of its
properties have such receiver, liquidator or appointment vacated;
or
11. EXECUTION LEVY - Execution shall have been levied against
the Leased Premises or any lien creditors commence suit to
enforce a judgment lien against the Leased Premises or such
action or suit shall have been brought and shall not be
immediately bonded over and shall continue unstayed and in effect
for a period of more than 120 consecutive days; or
12. ATTACHMENT - Any part of the Lessor's commitment to make
the advances hereunder shall at any time be subject or liable to
attachment or levy at the suit of any creditor of the Lessee or
at the suit of any subcontractor or creditor of the Contractor
and shall remain unstayed prior to the time Lessor shall be
obligated to comply with the same.
ARTICLE XI
REMEDIES OF LESSOR
Lessee hereby agrees that the occurrence of any one or more of
the events of default set out in Article X hereof, shall also
constitute an event of default under each of the Development
Financing documents, thereby entitling Lessor, after the
expiration of any applicable cure period, at its option, to
proceed to exercise any or all of the following remedies:
1. EXERCISE OF REMEDIES - To exercise any of the various remedies
provided in any of the Development Financing Documents, including
the acceleration of the Put described in Articles XIV hereof;
2. CUMULATIVE RIGHTS - Cumulatively to exercise all other rights,
options and privileges provided by law;
3. CEASE MAKING ADVANCES - To refrain from making any advances
under this Agreement but Lessor may make advances after the
happening of any such event without thereby waiving the right to
refrain from making other further advances or to exercise any of
the other rights Lessor may have.
4. RIGHTS TO ENTER - To require Lessee to vacate the Leased
Premises and permit Lessor (whether prior to the exercise of the
Put or during any period prior to the closing of the sale
pursuant to the Put;
(a) To enter into possession;
(b) To perform or cause to be performed any and all work and
labor necessary to complete the Improvements in accordance
with the Plans and Specifications;
(c) To employ security watchmen to protect the Leased
Premises; and
(d) To disburse that portion of the Development Financing
Proceeds not previously disbursed (including any Retainage)
to the extent necessary to complete the construction of the
Improvements in accordance with the Contract Documents and if
the completion requires a larger sum than the remaining
undisbursed portion of the Development Financing, to disburse
such additional funds, all of which funds so disbursed by
Lessor shall be deemed to have been disbursed to Lessee. For
this purpose, Lessee hereby consents upon an uncured default
by Lessee after the expiration of any applicable notice and
cure period, to the Lessor taking the following actions, or
not, in Lessor's reasonable discretion: to complete the
construction of the Improvements in the name of the Lessee,
and hereby empowers Lessor to take all actions necessary in
connection therewith including but not limited to using any
funds of Lessee including any balance which may be held in
escrow and any funds which may remain unadvanced hereunder
for the purpose of completing the said portion of the
Improvements in the manner called for by the Contract
Documents; to make such additions and changes and corrections
in the Contract Documents which shall be necessary or
desirable to complete the said portion of the Improvements in
substantially the manner contemplated by the Contract
Documents; to employ such contractors, subcontractors,
agents, architects, and inspectors as shall be required for
said purposes; to pay, settle or compromise all existing or
future bills and claims which are or may be liens against
said Leased Premises, or may be necessary or desirable for
the completion of the said portion of the Improvements or the
clearance of title to the Leased Premises; to execute all
applications and certificates in the name of Lessee which may
be required by any construction contract and to do any and
every act with respect to the construction of the said
portion of the Improvements which Lessee may do in its own
behalf. Lessor shall also have power to prosecute and defend
all actions and proceedings in connection with the
construction of the said portion of the Improvements and to
take such action and require such performance as it deems
necessary. In accordance therewith, Lessee hereby assigns
and quitclaims unto Lessor all sums to be advanced hereunder
including Retainage. Any funds so disbursed or fees or
charges so incurred shall be included in any amount necessary
for the Lessee to pay pursuant to the Put.
(e) To discontinue making advances hereunder to the Lessee
and to terminate Lessor's obligations under this Agreement.
5. RIGHTS NON CUMULATIVE - No right or remedy by this Agreement
or by any Development Financing Document or instrument delivered
by the Lessee pursuant hereto, conferred upon or reserved to the
Lessor shall be or is intended to be exclusive of any other right
or remedy and each and every right and remedy shall be cumulative
and in addition to any other right or remedy or now or hereafter
arising at a law or in equity or by statute. Except as Lessor
may hereafter otherwise agree in writing, no waiver by Lessor or
any breach by or default of Lessee of any of its obligations,
agreements, or covenants under this Agreement shall be deemed to
be a waiver of any subsequent breach of the same or any other
obligation, agreement or covenant, nor shall any forbearance by
Lessor to seek a remedy for such breach be deemed a waiver of its
rights and remedies with respect to such a breach, nor shall
Lessor be deemed to have waived any of its rights and remedies
unless it be in writing and executed with the same formality as
this Agreement.
6. EXPENSES - The Development Financing and this Agreement and
the performance by the Lessor or Lessee of their obligations
hereunder shall be without cost and expense to the Lessor, all of
which costs and expenses the Lessee agrees to pay and hold Lessor
harmless of and payment of which shall be secured by the
Development Financing Documents. Specifically, Lessee agrees to
pay all title charges, surveyor's fees, appraisals, loan fees and
attorney's fees and costs and the like incurred in connection
with this Agreement.
ARTICLE XII
GENERAL CONDITIONS AND MISCELLANEOUS
The following conditions shall be applicable throughout the term
of this Agreement:
1. RIGHTS OF THIRD PARTIES - All conditions of the obligations of
Lessor hereunder, including the obligation to make disbursements
are imposed solely and exclusively for the benefit of Lessee, and
no other person shall have standing to require satisfaction of
such conditions in accordance with their terms or be entitled to
assume that Lessor will refuse to make advances in the absence of
strict compliance with any or all thereof, and no other person
shall, under any circumstances, be deemed to be a beneficiary of
such conditions, any and all of which may be freely waived in
whole or in part by Lessor at any time if in its sole discretion
it deems it desirable to do so. In particular, Lessor makes no
representations and assumes no duties or obligations as to third
parties concerning the quality of the construction of the
Improvements or the absence therefrom of defects. In this
connection, Lessee agrees to and shall indemnify Lessor from any
liability, claims or losses resulting from the disbursement of
the Development Financing proceeds or from the condition of the
Leased Premises whether related to the quality of construction or
otherwise and whether arising during or after the term of the
Development Financing made by Lessor to Lessee in connection
therewith, except for Lessor's gross negligence or willful
misconduct. This provision shall survive the termination of this
Agreement and shall continue in full force and effect so long as
the possibility of any such liability, claims or losses exists.
2. EVIDENCE OF SATISFACTION OF CONDITIONS - Any condition of this
Agreement which requires the submission of evidence of the
existence or non- existence of a specified fact or facts implies
as a condition the existence or non- existence, as the case may
be, of such fact or facts, and Lessor shall, at all times, be
free independently to establish to its reasonable satisfaction
such existence or non-existence.
3. ASSIGNMENT - Lessee may not assign this Development Financing
Agreement or any of its rights or obligations hereunder without
the prior written consent of Lessor.
4. SUCCESSORS AND ASSIGNS - Whenever in this Agreement one of the
parties hereto is named or referred to, the heirs, legal
representatives, successors and assigns of such parties shall be
included and all covenants and agreements contained in this
Agreement by or on behalf of the Lessee or by or on behalf of the
Lessor shall bind and inure to the benefit of their respective
heirs, legal representatives, successors and assigns, whether so
expressed or not.
5. HEADINGS - The headings of the sections, paragraphs and
subdivisions of this Agreement are for the convenience of
reference only, and are not to be considered a part hereof and
shall not limit or otherwise affect any of the terms hereof.
6. INVALID PROVISIONS TO AFFECT NO OTHERS - If fulfillment of any
provision hereof, or any transaction related thereto at the time
performance of any such provision shall be due, shall involve
transcending the limit of validity prescribed by law, then, ipso
facto, the obligation to be fulfilled shall be reduced to the
limit of such validity; and such clause or provision shall be
deemed invalid as though not herein contained, and the remainder
of this Agreement shall remain operative in full force and
effect.
7. NUMBER AND GENDER - Whenever the singular or plural number,
masculine or feminine or neuter gender is used herein, it shall
equally include the other.
8. AMENDMENTS - Neither this Agreement nor any provision hereof
may be changed, waived, discharged or terminated orally, but only
by an instrument in writing signed by the party against whom
enforcement of the change, waiver, discharge or termination is
sought.
9. NOTICES - Any notice which any party hereto may desire or may
be required to give to any of the parties shall be in writing and
the mailing thereof by certified mail, or equivalent, to the
respective parties' addresses set forth hereinabove or to such
other place such party may by notice in writing designate as its
address shall constitute service of notice hereunder.
10. GOVERNING LAW - This Development Financing Agreement is
made and executed pursuant to and is intended to be governed by
the laws of the State where the Leased Premises are located.
11. FORCE MAJEURE - Anything in this Agreement to the contrary
notwithstanding, Lessee shall not be deemed in default with
respect to the performance of any of the terms, provisions,
covenants, and conditions of this Agreement (except for the
payment of all other monetary sums payable hereunder, to which
the provisions of this Section shall not apply), if the same
shall be due to any strike, lockout, civil commotion, warlike
operations, invasion, rebellion, hostilities, sabotage,
governmental regulations or controls, impracticability of
obtaining any materials or labor (except due to the payment of
monies), shortage or unavailability of a source of energy or
utility service, Act of God, casualty, adverse weather
conditions, or any cause beyond the reasonable control of Lessee
(except due to the payment of monies). Provided, however, in
order to invoke the extension of the Completion Date afforded by
this section, Lessee shall notify Lessor in writing within five
days of the occurrence of such force majeure, and in any event
the Completion Date shall be extended as a result of such
occurrence no more than reasonably necessary and in no event no
more than 90 days.
ARTICLE XIII
DAMAGE, DESTRUCTION, CONDEMNATION, USE OF INSURANCE PROCEEDS
1. DAMAGE OR DESTRUCTION OF THE LEASED PREMISES. Lessee
will give the Lessor prompt notice of any damage to or
destruction of the Leased Premises and in case of loss covered by
policies of insurance the Lessor (whether before or after the
exercise of the Put if Lessee be in default hereof) is hereby
authorized at its option to settle and adjust any claim arising
out of such policies and collect and receipt for the proceeds
payable therefrom, provided, that the Lessee may itself adjust
and collect for any losses arising out of a single occurrence
aggregating not in excess of $50,000.00. Any expense incurred by
the Lessor in the adjustment and collection of insurance proceeds
(including the cost of any independent appraisal of the loss or
damage on behalf of Lessor) shall be reimbursed to the Lessor
first out of any proceeds. The proceeds or any part thereof
shall be applied to reduction of the Put Price, which Put may
then be exercised by Lessor, without the application of any
prepayment premium, or to the restoration or repair of the Leased
Premises, the choice of application to be solely at the
discretion of Lessor.
2. CONDEMNATION. Lessee will give the Lessor prompt notice
of any action, actual or threatened, in condemnation or eminent
domain affecting the Leased Premises and hereby assigns,
transfers, and sets over to the Lessor the entire proceeds of any
award or claim for damages for all or any part of the Leased
Premises taken or damaged under the power of eminent domain or
condemnation, the Lessor being hereby authorized to intervene in
any such action and to collect and receive from the condemning
authorities and give proper receipts and acquittances for such
proceeds. Lessee will not enter into any agreements with the
condemning authority permitting or consenting to the taking of
the Leased Premises unless prior written consent of Lessor is
obtained. Any expenses incurred by the Lessor in intervening in
such action or collecting such proceeds shall be reimbursed to
the Lessor first out of the proceeds. The proceeds or any part
thereof shall be applied to reduction of the Put Price, which Put
may then be exercised by Lessor, without the application of any
prepayment premium, or to the restoration or repair of the Leased
Premises, the choice of application to be solely at the
discretion of Lessor.
3. DISBURSEMENT OF INSURANCE AND CONDEMNATION PROCEEDS. Any
restoration or repair shall be done under the supervision of an
architect acceptable to Lessor and pursuant to plans and
specifications approved by the Lessor. Subject to paragraph 4
below, in any case where Lessor may elect to apply the proceeds
to repair or restoration or permit the Lessee to so apply the
proceeds they shall be held by Lessor for such purposes and will
from time to time be disbursed by Lessor to defray the costs of
such restoration or repair under such safeguards and controls as
Lessor may reasonably require to assure completion in accordance
with the approved plans and specifications and free of liens or
claims. Lessee shall on demand deposit with Lessor any sums
necessary to make up any deficits between the actual cost of the
work and the proceeds and provide such lien waivers and
completion bonds as Lessor may reasonably require. Any surplus
which may remain after payment of all costs of restoration or
repair shall be applied against the rent then most remotely to be
paid, whether due or not, without application of any prepayment
premium or credit.
4. LESSOR TO MAKE PROCEEDS AVAILABLE. In the event of
insured damage to the improvements or in the event of a taking by
condemnation of only a portion of the improvements or land area
of the Leased Premises, and provided, the portion remaining can
with restoration or repair continue to be operated for the
purposes utilized immediately prior to such damage or taking, and
if the appraised value of the Leased Premises after such
restoration or repair shall not have been reduced, and provided
further, no event of default exists under this Agreement after
the expiration of any applicable cure periods and Lessee is
diligently pursuing a course of conduct reasonably designed to
cure such default, and the Lessee certified to Lessor their
intention to remain in possession of the Leased Premises without
any abatement or adjustment of rental payments, the Lessor agrees
to make the proceeds available to the restoration or repair of
the improvements on the Leased Premises in accordance with the
provisions of paragraph 3 hereof.
ARTICLE XIV
MANDATORY PUT UPON DEFAULT
Should Lessee commit an event of Default under this Agreement
or any Development Financing Document (after the expiration of
any applicable notice and cure period) ("Uncured Default"),
Lessor shall have the following rights:
Upon an Uncured Default, or damage or destruction or
condemnation of the Leased Premises not addressed by paragraph
XIII (4), if Lessor elects to exercise the following option,
Lessee shall purchase the Leased Premises from Lessor subject to
the following terms and conditions:
A. The purchase price at which Lessor shall sell the Leased
Premises to Lessee, shall be the total amount of Initial
Disbursed Funds disbursed by Lessor to acquire the
Leased Premises at the Closing Date (as defined in the
Commitment), plus the total amount of funds disbursed
pursuant to this Agreement, plus all accrued interest
and incurred expenses of Lessor fundable pursuant to
this Agreement, plus all reasonable costs of collection
and enforcement of the terms hereof.
B. At such time as Lessor shall elect to sell the Leased
Premises, Lessor shall give Lessee written notice of its
intent to exercise its option to sell the Leased
Premises to Lessee, including in such notice Lessor's
calculation of the Purchase Price through the actual
closing of the sale of the Leased Premises to Lessee
pursuant to the terms hereof (the "Sale Date"), which
shall be sixty days from such notice by Lessor. Lessee
shall on or before the Sale Date deliver the purchase
price as set forth in subparagraph (A) of this Article
to Lessor. Upon such delivery, which shall be preceded
by ten (10) days notice to Lessor, Lessor shall deliver
to Lessee a warranty deed and appropriate affidavits
evidencing that Lessor transfers the Leased Premises to
Lessee subject to restrictions, easements or other
encumbrances upon title existing as of the date of
delivery, if any, except to the extent, if any, placed
of record or caused by Lessor. The purchase price to be
paid to Lessor shall be a net amount. All expenses in
connection with the transfer of the Leased Premises,
including, but not limited to appraisal fees, title
insurance, recording fees, documentary stamps,
conveyance tax, title evidence, and all other closing
costs, shall be paid by the Lessee. The purchase price
shall be paid by Lessee in cash to Lessor concurrently
with the conveyance of the Leased Premises by the Lessor
to the Lessee. If Lessor elects to sell the Leased
Premises to Lessee pursuant to the terms hereof, the
Leased Premises shall be conveyed by the Lessor to the
Lessee "As Is".
If Lessee shall fail to pay the Purchase Price on or before
the Sale Date, Lessor may terminate the Lease, and sell the
Leased Premises to any third party purchaser. Lessor may then
send Lessee notice of the shortfall (the "Deficiency"), if any,
between the amount of the net proceeds received by Lessor in such
sale, and the total amount of Initial Disbursed Funds disbursed
by Lessor to acquire the Parcel at the Closing Date (as defined
in the Commitment), plus the total amount of funds disbursed
pursuant to this Agreement, plus all accrued interest and
incurred expenses of Lessor fundable pursuant to this Agreement,
plus all reasonable costs of collection and enforcement of the
terms hereof. Lessee shall immediately upon receipt of such
notice of Deficiency remit the amount of the Deficiency in good
funds to Lessor.
Lessor's rights under this Mandatory Put shall expire on the
Final Disbursement Date when the amendment to the Lease has been
executed by all parties as set forth in Article IX hereof.
ARTICLE XV
RENT, INTEREST, AND RENTAL MODIFICATION DATE
1. Rent shall be payable by Lessee and calculated as follows, on
the funds advanced by Lessor on the Closing Date for the purchase
of the land and related closing costs (the "Initial Disbursed
Funds"): Rent shall accrue in the amount of $4,003.13 per month
absent an uncured Default by Lessee; absent an uncured Default,
accrued rent during the period of construction of the
Improvements prior to the Rental Modification Date shall not be
payable until the Final Disbursement Date. Upon the occurrence
of an uncured Default, all accrued rent shall be immediately due
and payable.
On the Rental Modification Date, if not otherwise in default
hereunder, Lessee shall begin paying Rent by the first of each
month (prorata for the balance of any partial month in which the
Rental Modification Date occurs, payable with the first such
adjusted Rent payable on the first day of the first full month
following the Rental Modification Date) in the amount of
$4,517.81 per month out of pocket. On the Final Disbursement
Date, absent an Uncured Default, Rent shall be adjusted and
documented by the lease amendment contemplated in Article IX
hereof and paid to Lessor as described in Article F. of the
Commitment.
2. Disbursed proceeds of the Development Financing shall
accrue interest at a rate of 8.75% per annum, which interest
shall accrue unpaid unless advanced by Lessor to itself, or
Lessee shall default hereunder, which default shall remain
uncured after the expiration of any applicable notice and cure
period. However, one hundred and twenty days (120) from the date
hereof, (the "Rental Modification Date"), Lessee shall begin
making monthly payments of subsequently accruing interest at the
rate of 9.875% per annum out of pocket ("Out of Pocket Invoiced
Interest") within 5 days after invoice from Lessor.
3. Upon the occurrence of an event of default which remains
uncured after the expiration of applicable notice and cure
periods, disbursed proceeds of the Development Financing shall
accrue interest at a rate of Fifteen Percent (15.0%) per annum,
or the highest rate allowed by law, whichever is less, and the
rental rate on the Initial Disbursed funds shall increase to
Fifteen Percent (15.0%) per annum, or the highest rental rate
allowed by law, whichever is less.
ARTICLE XVI
COUNTERPART EXECUTION
Counterpart Execution. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original
and all of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, Lessee and Lessor have hereunto caused
these presents to be executed on the date first above written.
Tumbleweed, Inc., a Delaware corporation
By:/s/ Gregory A Compton
Its: VP\Secretary
[Lessor's Signature appears on following page.]
AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
By: AEI Fund Management XXI, Inc.
By: /s/ Robert P Johnson
Robert P. Johnson, President
EXHIBIT A
LEGAL DESCRIPTION
I, GREGORY L ROBERTS, a registered land surveyor, in and for
the State of Indiana do hereby certify to AEI Income and
Growth Fund XXI Limited Partnership, a Minnesota
corporation, or its assigns; LANDAMERICA/LAWYER"S TITLE
INSURANCE CORPORATION, a Virginia corporation or its assigns
and Tumbleweed, Inc., a Delaware corporation that this is a
true and correct plat of a survey of
Part of the Southeast Quarter of Section 23, Township 30
North, Range 11 East, Allen County, Indiana, more
particularly described as follows:
Commencing at the Southwest corner of the Southeast Quarter
of Section 23, Township 30 North, Range 11 East, Allen
County, Indiana; thence North 00 degrees 17 minutes West
(bearings in this description are based on the Indiana State
Highway Commission bearing of North 00 degrees 08 minutes
East for the centerline of Interstate Highway # 69) a
distance of 300.03 feet; thence North 89 degrees 39 minutes
44 seconds East a distance of 321.24 feet to the point of
beginning; thence North 89 degrees 39 minutes 44 seconds
East a distance of 288.0 feet to a point on the West line of
a 2.626 acre tract of land conveyed to the State of Indiana;
thence North 14 degrees 29 minutes 12 seconds West along the
West line of 2.626 acre tract, a distance of 267.0 feet;
thence South 75 degrees 30 minutes 48 seconds West a
distance of 49.0 feet; thence South 14 degrees 29 minutes 12
seconds East a distance of 41.12 feet; thence South 89
degrees 39 minutes 44 seconds West a distance of 142.5 feet;
thence south 00 degrees 20 minutes 16 seconds East, a
distance of 140.0 feet; thence South 32 degrees 11 minutes
47 seconds West a distance of 79.53 feet to the point of
beginning containing 1.13 acres, together with an ingress
and egress easement more particularly described as follows:
Part of the Southeast Quarter of Section 23, Township 30
North, Range 11 East, Allen County, Indiana, more
particularly described as follows:
Commencing at the Southwest corner of the Southeast Quarter
of Section 23, Township 30 North, Range 11 East, Allen
County, Indiana; thence North 00 degrees 17 minutes, West
(bearings in this description are based on the Indiana State
Highway commission bearing of North 00 degrees 08 minutes
East, for the centerline of Interstate Highway #69) a
distance of 300.03 feet; thence North 89 degrees 39 minutes
44 seconds East, a distance of 55.0 feet; to the point of
beginning, said point being on the East right of way line of
Ellison Road; thence North 89 degrees 39 minutes 44 seconds
East a distance of 266.24 feet; thence North 32 degrees 11
minutes 47 seconds East a distance of 79.53 feet; thence
North 00 degrees 20 minutes 16 seconds West a distance of
140.0 feet; thence South 89 degrees 39 minutes 44 seconds
West a distance of 35.0 feet; thence South 00 degrees 20
minutes 16 seconds East a distance of 115.35 feet to a point
of curvature; thence Southerly on a curve to the right
having a radius of 56.7 feet a central angle of 90 degrees
00 minutes an arc distance of 89.06 feet to a point of
tangent; thence South 89 degrees 39 minutes 44 seconds West
a distance of 162.28 feet; thence North 80 degrees 01
minutes 52 seconds West, a distance of 55.89 feet to a point
on the East right of way line of Ellison Road; thence South
00 degrees 17 minutes East a distance of 45.0 feet to the
point of beginning containing 0.372 acres.
Which correctly shows the location of all buildings,
structures and improvements on said described Parcel; that
there are no visible encroachments onto adjoining properties
streets, alleys, easements or setback lines by any of said
buildings, structures or improvements; that there are no
recorded or visible right of ways or easements on said
described Parcel, except as shown on said survey; that there
are no party walls or visible encroachements on said
described Parcel by buildings, structures or other
improvements situated on adjoining property, except as shown
on said plat or survey; and that the described Parcel has
access to a publicly dedicated right of way by an ingress &
egress easement as shown on said plat of survey, by shown
By: Gregory L Roberts
Dated:
EXHIBIT B
TUMBLEWEED, INC
FT. WAYNE, IN
PROJECT COST BUDGET
REVISED FEBRUARY 7, 2000
LAND AND HARD COSTS:
Land Acquisition Cost $ 540,000.00
Building/General Construction 453,000.00
Sitework $ 175,000.00
Owner Vendors:
Landscaping 13,000.00
Dimmer Panels 4,560.00
Wains Coating/Trim 13,185.00
Electrical Panels 6,200.00
Air Balance 1,600.00
Lighting 19,500.00
HVAC 19,500.00
Joists 13,230.00
Construction Contingency-10% 70,450.00
SUBTOTAL HARD COSTS $1,315,000.00
SOFT COSTS
Survey 2,500.00
Appraisal 3,000.00
Phase I Environmental 2,500.00
Permits/TAP Fees 9,000.00
Architect/Engineering 20,700.00
Utilities 2,000.00
Title Insurance & Closing Costs
(Construction and S\L) 10,000.00
Development Interest 16,610.00
Attorney's Fees-Borrower
(ConstructionSale/Leaseback) 2,500.00
Attorney's Fees -AEI
(Construction/Sale/Leaseback) 10,000.00
AEI Sale/Leaseback Commitment Fee 2% 28,350.00
AEI Credit Report Fees (Promesa) 500.00
AEI State Qualification Fees 1,500.00
AEI Site Inspection Fee 1,500.00
Tumbleweed Parcel Development Fee 16,015.00
AEI 1% Reimbursement 14,175.00
Miscellaneous 4,150.00
SUBTOTAL SOFT COSTS $ 145,000.00
TOTAL PROJECT COST $1,460,000.00
NET LEASE AGREEMENT
THIS LEASE, made and entered into effective as of the 8 day
of March, 2000, by and among AEI Income & Growth Fund XXI Limited
Partnership, a Minnesota limited partnership whose corporate
general partner is AEI Fund Management XXI, Inc., a Minnesota
corporation ("Fund XXI"), whose principal business address is
1300 Minnesota World Trade Center, 30 East Seventh Street, St.
Paul, Minnesota 55101 (hereinafter referred to as "Lessor"), and
Tumbleweed, Inc., a Delaware corporation (hereinafter referred to
as "Lessee"), whose principal business address is 1900 Mellwood
Avenue, Louisville, Kentucky;
WITNESSETH:
WHEREAS, Lessor is the fee owner of a certain parcel of real
property and improvements located at Fort Wayne, Indiana, and
legally described in Exhibit "A", which is attached hereto and
incorporated herein by reference; and
WHEREAS, Lessee will be constructing the building and
improvements (together the "Building") on the real property
described in Exhibit "A", which Building is described in the
plans and specifications heretofore submitted to Lessor; and
WHEREAS, Lessee desires to lease said real property and
Building (said real property and Building hereinafter referred to
as the "Leased Premises"), from Lessor upon the terms and
conditions hereinafter provided;
NOW, THEREFORE, in consideration of the Rents, terms,
covenants, conditions, and agreements hereinafter described to be
paid, kept, and performed by Lessee, Lessor does hereby grant,
demise, lease, and let unto Lessee, and Lessee does hereby take
and hire from Lessor and does hereby covenant, promise, and agree
as follows:
ARTICLE 1. LEASED PREMISES
Lessor hereby leases to Lessee, and Lessee leases and takes
from Lessor, the Leased Premises subject to the conditions of
this Lease.
ARTICLE 2. TERM
(A) The term of this Lease ("Term") shall be Fifteen (15)
consecutive "Lease Years", as hereinafter defined, commencing on
March 8, 2000 ("Occupancy Date"), plus the period between the
date hereof and the end of the month in which the First Amendment
hereto is executed as contemplated under the Development
Financing Agreement described in Article 34 hereof .
(B) The first "Lease Year" of the Term shall be for a
period of twelve (l2) consecutive calendar months from the
Occupancy Date, plus the period between the date hereof and the
end of the month in which the First Amendment hereto is executed
as contemplated under the Development Financing Agreement
described in Article 34 hereof . Each Lease Year after the first
Lease Year shall be a successive period of twelve (l2) calendar
months.
(C) The parties agree that once the Occupancy Date has been
established, upon the request of either party, a short form or
memorandum of this Lease will be executed for recording purposes.
That short form or memorandum of this Lease will set forth the
actual occupancy and termination dates of the Term and optional
Renewal Terms, as defined in Article 28 hereof, and the existence
of any right of renewal, and that said right shall terminate when
the Lessee shall lose right to possession or this Lease is
terminated, whichever occurs first.
ARTICLE 3. CONSTRUCTION OF IMPROVEMENTS
(A) Lessee warrants and agrees that the Building will be
constructed on the Leased Premises, and all other improvements to
the land, including the parking lot, approaches, and service
areas, will be constructed in all material respects by Lessee
substantially in accordance with the plot, plans, and
specifications heretofore submitted to Lessor.
(B) Lessee warrants that the Building and all other
improvements to the land contemplated do comply with the laws,
ordinances, rules, and regulations of all state and local
governments.
(C) Lessee agrees to pay, if not already paid in full, for
all architectural fees and actual construction costs relating to
the Building and other related improvements on the Leased
Premises, in the past, present or future, which shall include,
but not be limited to, plans and specifications, general
construction, carpentry, electrical, plumbing, heating,
ventilating, air conditioning, decorating, equipment
installation, outside lighting, curbing, landscaping,
blacktopping, electrical sign hookup, conduit and wiring from
building, fencing, and parking curbs, builder's risk insurance
(naming Lessor, Lessee, and contractor as co-insured), and all
construction bonds for improvements made by or at the direction
of Lessee.
(D) Opening for business in the Leased Premises by Lessee
shall constitute an acceptance of the Leased Premises and an
acknowledgment by Lessee that the premises are in the condition
described under this Lease.
ARTICLE 4. RENT PAYMENTS
(A) Annual Rent Payable for the part of the first
Lease Year until execution of the First Amendment
hereto or adjusted as contemplated under the
Development Financing Agreement: Lessee shall pay to
Lessor an annual Base Rent of $48,037.50, which amount
shall be payable in advance on the first day of each
month in equal monthly installments of $4,003.13 to
Lessor Fund XXI. If the first day of the Lease Term is
not the first day of a calendar month, then the monthly
Rent payable for that partial month shall be a prorated
portion of the equal monthly installment of Base Rent.
(B) Annual Rent Payable beginning in the second and each
Lease Year thereafter:
1. In the second and each Lease Year thereafter, the
annual Base Rent due and payable shall increase by
an amount equal to the lesser of: a) Two Percent
(2%) of the Base Rent payable for the immediately
prior Lease Year, or b) A percentage equal to two
times the "CPI-U Percentage Increase" of the Base
Rent payable for the prior Lease Year.
"CPI-U" shall mean the Consumer Price Index for
All Urban Consumers, (all items), published by the
United States Department of Labor, Bureau of Labor
Statistics (BLS) (1982-84 equal 100), U.S. Cities
Average, or, in the event said index ceases to be
published, by any successor index recommended as a
substitute therefor by the United States
Government or a comparable, nonpartisan substitute
reasonably designated by Lessor. If the BLS
changes the base reference period for the Price
Index from 1982-84=100, the CPI-U Percentage
Increase shall be determined with the use of such
conversion formula or table as may be published by
the BLS.
The term "CPI-U Percentage Increase" shall mean
the percentage increase in the CPI-U determined by
reference to the increase, if any, in the latest
monthly CPI-U issued prior to the first day of the
Lease Year for which Base Rent is being increased,
over the CPI-U issued for the same month in the
year prior (e.g., the March CPI-U for the year
2001 over the March CPI-U for the year 2000.) Said
month's CPI-U shall be used even though that CPI-U
will not be for the month in which the renewal
term commences. In no event shall the CPI-U
Percentage Increase be less than zero.
(C) Overdue Payments.
Lessee shall pay interest on all overdue payments of Rent or
other monetary amounts due hereunder at the rate of fifteen
percent (15%) per annum or the highest rate allowed by law,
whichever is less, accruing from the expiration of the applicable
notice and cure period after the date such Rent or other monetary
amounts were properly due and payable.
ARTICLE 5. INSURANCE AND INDEMNITY
(A) Lessee shall, throughout the Term or Renewal Terms, if
any, of this Lease, at its own cost and expense, procure and
maintain insurance which covers the Leased Premises and
improvements against fire, wind, and storm damage (including
flood insurance if the Leased Premises is in a federally
designated flood prone area) and such other risks (including
earthquake insurance, if the Leased Premises is located in a
federally designated earthquake zone or in an ISO high risk
earthquake zone) as may be included in the broadest form of all
risk, extended coverage insurance as may, from time to time, be
available in amounts sufficient to prevent Lessor or Lessee from
becoming a co-insurer within the terms of the applicable
policies. In any event, the insurance shall not be less than one
hundred percent (100%) of the then insurable value, with such
commercially reasonable deductibles as Lessor may reasonably
require from time to time. Additionally, replacement cost
endorsements, vandalism endorsement, malicious mischief
endorsement, waiver of subrogation endorsement, waiver of co-
insurance or agreed amount endorsement (if available), and
Building Ordinance Compliance endorsement and Rent loss
endorsements (for a period of twelve months) must be obtained.
(B) Lessee agrees to place and maintain throughout the Term or
Renewal Terms, if any, of this Lease, at Lessee's own expense,
public liability insurance with respect to Lessee's use and
occupancy of said premises, including "Dram Shop" or liquor
liability insurance, if the same shall be or become available in
the State of Indiana, 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, Lessor's corporate general partners, and
Robert P. Johnson, and Lessee as additional insured and loss
payee, as their respective interests (as landlord and lessee,
respectively) may appear, and shall provide that the policies
cannot be canceled, terminated, changed, or modified without
thirty (30) days written notice to the parties. In addition, all
of such policies shall be in place on or before the Occupancy
Date and contain endorsements by the respective insurance
companies waiving all rights of subrogation, if any, against
Lessor. All insurance companies providing coverages must be
rated "A" or better by Best's Key Rating Guide (the most current
edition), or similar quality under a successor guide if Best's
Key Rating shall cease to be published. Lessee shall maintain
legible copies of any and all policies and endorsements required
herein, to be made available for Lessor's review and photocopy
upon Lessor's reasonable request from time to time. On the
Occupancy Date and no less than fifteen (15) business days prior
to expiration of such policies, Lessee shall provide Lessor with
legible copies of any and all renewal Certificates of Insurance
reflecting the above terms of the Policies (including
endorsements). Lessee agrees that it will not settle any
property insurance claims affecting the Leased Premises in excess
of $25,000 without Lessor's prior written consent, such consent
not to be unreasonably withheld or delayed. Lessor shall consent
to any settlement of an insurance claim wherein Lessee shall
confirm in writing with evidence reasonably satisfactory to
Lessor that Lessee has sufficient funds available to complete the
rebuilding of the Premises.
(E) Lessee shall defend, indemnify, and hold Lessor
harmless against any and all claims, damages, and lawsuits
arising after the Occupancy Date of this Lease and any orders,
decrees or judgments which may be entered therein, brought for
damages or alleged damages resulting from any injury to person or
property or from loss of life sustained in or about the Leased
Premises, unless such damage or injury results from the
intentional misconduct or the gross negligence of Lessor and
Lessee agrees to save Lessor harmless from, and indemnify Lessor
against, any and all injury, loss, or damage, of whatever nature,
to any person or property caused by, or resulting from any act,
omission, or negligence of Lessee or any employee or agent of
Lessee acting in such capacity. In addition, Lessee hereby
releases Lessor from any and all liability for any loss or damage
caused by fire or any of the extended coverage casualties, unless
such fire or other casualty shall be brought about by the
intentional misconduct or gross negligence of Lessor. In the
event of any loss, damage, or injury caused by the joint
negligence or willful misconduct of Lessor and Lessee, they shall
be liable therefor in accordance with their respective degrees of
fault.
(F) Lessor hereby waives any and all rights that it may
have to recover from Lessee damages for any loss occurring to the
Leased Premises by reason of any act or omission of Lessee;
provided, however, that this waiver is limited to those losses
for which Lessor is compensated by its insurers, if the insurance
required by this Lease is maintained. Lessee hereby waives any
and all right that it may have to recover from Lessor damages for
any loss occurring to the Leased Premises by reason of any act or
omission of Lessor; provided, however, that this waiver is
limited to those losses for which Lessee is, or should be if the
insurance required herein is maintained, compensated by its
insurers.
ARTICLE 6. TAXES, ASSESSMENTS AND UTILITIES
(A) Lessee shall be liable and agrees to pay the charges
for all public utility services rendered or furnished to the
Leased Premises, including heat, water, gas, electricity, sewer,
sewage treatment facilities and the like, all personal property
taxes, real estate taxes, special assessments, and municipal or
government charges, general, ordinary and extraordinary, of every
kind and nature whatsoever, which may be levied, imposed, or
assessed against the Leased Premises, or upon any improvements
thereon, at any time after the Occupancy Date of this Lease for
the period prior to the expiration of the term hereof, or any
Renewal Term, if exercised.
(B) Lessee shall pay all real estate taxes, assessments for
public improvements or benefits, and other governmental
impositions, duties, and charges of every kind and nature
whatsoever which shall or may, during the term of this Lease, be
charged, laid, levied, assessed, or imposed upon, or become a
lien or liens upon the Leased Premises or any part thereof. Such
payments shall be considered as Rent paid by Lessee in addition
to the Rent defined at Article 4 hereof. If due to a change in
the method of taxation, a franchise tax, Rent tax, or income or
profit tax shall be levied against Lessor in substitution for or
in lieu of any tax which would otherwise constitute a real estate
tax, such tax shall be deemed a real estate tax for the purposes
herein and shall be paid by Lessee; otherwise Lessee shall not be
liable for any such tax levied against Lessor.
(C) All real estate taxes, assessments for public
improvements or benefits, water rates and charges, sewer rents,
and other governmental impositions, duties, and charges which
shall become payable for the first and last tax years of the term
hereof shall be apportioned pro rata between Lessor and Lessee in
accordance with the respective number of months during which each
party shall be in possession of the Leased Premises (or through
the expiration of the term hereof, if longer) in said respective
tax years. Lessee shall pay within 60 days of the expiration of
the term hereof Lessor's reasonable estimate of Lessee's pro-rata
share of real estate taxes for the last tax year of the term
hereof, based upon the last available tax bill. Lessor shall
give Lessee notice of such estimated pro-rata real estate taxes
no later than 75 days from the end of the term hereof. Upon
receipt of the actual statement of real estate taxes for such
prorated period, Lessor shall either refund to Lessee any over
payment of the pro-rata Lessee obligation, or shall assess and
Lessee shall pay promptly upon notice any remaining portion of
the Lessee?s pro-rata obligation for such real estate taxes.
(D) Lessee shall have the right to contest or review by
legal proceedings or in such other manner as may be legal (which,
if instituted, shall be conducted solely at Lessee's own expense)
any tax, assessment for public improvements or benefits, or other
governmental imposition aforementioned, upon condition that,
before instituting such proceeding Lessee shall pay (under
protest) such tax or assessments for public improvements or
benefits, or other governmental imposition, duties and charges
aforementioned, unless such payment would act as a bar to such
contest or interfere materially with the prosecution thereof and
in such event Lessee shall post with Lessor alternative security
reasonably satisfactory to Lessor. All such proceedings shall be
begun as soon as reasonably possible after the imposition or
assessment of any contested items and shall be prosecuted to
final adjudication with reasonable dispatch. In the event of any
reduction, cancellation, or discharge, Lessee shall pay the
amount that shall be finally levied or assessed against the
Leased Premises or adjudicated to be due and payable, and, if
there shall be any refund payable by the governmental authority
with respect thereto, if Lessee has paid the expense of Lessor in
such proceedings, Lessee shall be entitled to receive and retain
the refund, subject, however, to apportionment as provided during
the first and last years of the term of this Lease.
(E) Lessor, within sixty (60) days after notice to Lessee
if Lessee fails to commence such proceedings, may, but shall not
be obligated to, contest or review by legal proceedings, or in
such other manner as may be legal, and at Lessor's own expense,
any tax, assessments for public improvements and benefits, or
other governmental imposition aforementioned, which shall not be
contested or reviewed, as aforesaid, by Lessee, and unless Lessee
shall promptly join with Lessor in such contest or review, Lessor
shall be entitled to receive and retain any refund payable by the
governmental authority with respect thereto.
(F) Lessor shall not be required to join in any proceeding
referred to in this Article, unless in Lessee's reasonable
opinion, the provisions of any law, rule, or regulation at the
time in effect shall require that such a proceeding be brought by
and/or in the name of Lessor, in which event Lessor shall upon
written request, join in such proceedings or permit the same to
be brought in its name, all at no cost or expense to Lessor.
(G) Within thirty (30) days after Lessor notifies Lessee in
writing that Lessor has paid such amount, Lessee shall also pay
to Lessor, as additional Rent, the amount of any sales tax,
franchise tax, excise tax, on Rents imposed by the State where
the Leased Premises are located. At Lessor's option, Lessee
shall deposit with Lessor on the first day of each and every
month during the term hereof, an amount equal to one-twelfth
(1/12) of any estimated sales tax payable to the State in which
the property is situated for Rent received by Lessor hereunder
("Deposit"). From time to time out of such Deposit Lessor will
pay the sales tax to the State in which the property is situated
as required by law. In the event the Deposit on hand shall not
be sufficient to pay said tax when the same shall become due from
time to time, or the prior payments shall be less than the
current estimated monthly amounts, then Lessee shall pay to
Lessor on demand any amount necessary to make up the deficiency.
The excess of any such Deposit shall be credited to subsequent
payments to be made for such items. If a default or an event of
default shall occur under the terms of this Lease, Lessor may, at
its option, without being required so to do, apply any Deposit on
hand to cure such default, in such order and manner as Lessor may
elect.
ARTICLE 7. PROHIBITION ON ASSIGNMENTS AND SUBLETTING; TAKE-BACK
RIGHTS
(A) Except as otherwise expressly provided in this Article,
Lessee shall not, without obtaining the prior written consent of
Lessor, in each instance:
1. assign or otherwise transfer this Lease, or any
part of Lessee's right, title or interest therein,
except in the event the Lease is assigned by
Tumbleweed to its successor entity in the event of
either an Initial Public Offering or Direct Public
Offering of Lessee or to any other entity
controlled by or under common control with Lessee
or such successor of Lessee; or
2. sublet all or any part of the Leased Premises or
allow all or any part of the Leased Premises to be
used or occupied by any other Persons (herein
defined as a Party other than Lessee, be it a
corporation, a partnership, an individual or other
entity); or
3. mortgage, pledge or otherwise encumber this Lease,
or the Leased Premises.
(B) For the purposes of this Article:
1. the transfer of voting control of any class of
capital stock of any corporate Lessee or
sublessee, or the transfer of voting control of
the total interest in any other person which is a
Lessee or sublessee, however accomplished, whether
in a single transaction or in a series of related
or unrelated transactions, shall be deemed an
assignment of this Lease, or of such sublease, as
the case may be;
2. an agreement by any other Person, directly or
indirectly, to assume Lessee's obligations under
this Lease shall be deemed an assignment;
3. any Person to whom Lessee's interest under this
Lease passes by operation of law, or otherwise,
shall be bound by the provisions of this Article;
4. each material modification, amendment or extension
or any sublease to which Lessor has previously
consented shall be deemed a new sublease;
Lessee agrees to furnish to Lessor within five (5) business
days following demand at any time such information and assurances
as Lessor may reasonably request that neither Lessee, nor any
previously permitted sublessee or assignee, has violated the
provisions of this Article.
(C) Except as permitted under Section (A)(1) above, if
Lessee agrees to assign this Lease or to sublet all or any
portion of the Leased Premises, Lessee shall, prior to the
effective date thereof (the "Effective Date"), deliver to Lessor
executed counterparts of any such agreement and of all ancillary
agreements with the proposed assignee or sublessee, as
applicable. If Lessee shall fail to do so, and shall have
surrendered possession of the Leased Premises in violation of its
duty of prior notice and failed to obtain Lessor's prior consent
(if and where required herein), and, if in such event, Lessor in
its sole discretion (except as otherwise specifically limited
herein) shall not consent to a proposed sublease or assignment,
Lessor shall then have all of the following rights (in addition
to any rights Lessor may possess occasioned by Lessee's default
hereunder), any of which Lessor may exercise by written notice to
Lessee given within thirty (30) days after Lessor receives the
aforementioned documents:
1. with respect to a proposed assignment of this
Lease, the right to terminate this Lease on the
Effective Date as if it were the Expiration Date
of this Lease;
2. with respect to a proposed subletting of the
entire Leased Premises, the right to terminate
this Lease on the Effective Date as if it were the
Expiration Date; or
3. with respect to a proposed subletting of less than
the entire Leased Premises, the right to terminate
this Lease as to the portion of the Leased
Premises affected by such subletting on the
Effective Date, as if it were the Expiration Date,
in which case Lessee shall promptly execute and
deliver to Lessor an appropriate modification of
this Lease in form satisfactory to Lessor in all
respects.
4. with respect to a proposed subletting or proposed
assignment of this Lease, impose such conditions
upon Lessor's consent as Lessor shall determine in
its sole discretion.
(D) If Lessor exercises any of its options under Article
7(C) above, (and if Lessor shall impose conditions upon its
consent and Lessee shall fail to meet any conditions Lessor may
impose upon its consent), Lessor may then lease the Leased
Premises or any portion thereof to Lessee's proposed assignee or
sublessee, as the case may be, without liability whatsoever to
Lessee.
(E) Notwithstanding anything above to the contrary, Lessor
agrees to consent to any assignment or sublease all or any
portion of the Lessee's interests herein to a franchisee or
licensee in good standing of Tumbleweed, Inc., for the Tumbleweed
restaurant concept, provided Lessor is given prior written notice
of such sublease or assignment, accompanied by a copy of such
sublease or assignment, and the consents of Lessee (such consent
to be in form and substance satisfactory to Lessor) to such
assignment or sublet, affirming their continued liability
hereunder.
Lessor agrees that its consent to any other proposed
assignment or sublet shall not be unreasonably withheld or
delayed, provided Lessor is given prior written notice of such
sublease or assignment, accompanied by a copy of such sublease or
assignment, and the consents of Lessee (such consent to be in
form and substance satisfactory to Lessor) to such assignment or
sublet, affirming their continued liability hereunder.
(F) Notwithstanding anything above to the contrary, the
Lessee's interest herein shall not be assignable in any manner in
accordance with the terms hereof unless and until the termination
of the Development Financing Agreement as set forth in Article 35
hereof.
ARTICLE 8. REPAIRS AND MAINTENANCE
(A) Lessee covenants and agrees to keep and maintain in
good order, condition and repair the interior and exterior of the
Leased Premises during the term of the Lease, or any renewal
terms, and further agrees that Lessor shall be under no
obligation to make any repairs or perform any maintenance to the
Leased Premises. Lessee covenants and agrees that it shall be
responsible for all repairs, alterations, replacements, or
maintenance of, including but without limitation to or of: The
interior and exterior portions of all doors; door checks and
operators; windows; plate glass; plumbing; water and sewage
facilities; fixtures; electrical equipment; interior walls;
ceilings; signs; roof; structure; interior building appliances
and similar equipment; heating and air conditioning equipment;
and any equipment owned by Lessor and leased to Lessee hereunder,
as itemized on Exhibit B attached hereto (if any) and
incorporated herein by reference; and further agrees to replace
any of said equipment when necessary. Lessee further agrees to
be responsible for, at its own expense, snow removal, lawn
maintenance, landscaping, maintenance of the parking lot
(including parking lines, seal coating, and blacktop surfacing),
and other similar items.
(B) If Lessee refuses or neglects to commence or complete
repairs promptly and adequately, after prior written notice as
required under Article 16(B) (except in cases of emergency to
prevent waste or preserve the safety and integrity of the Leased
Premises, in which case no notice need be given), Lessor may
cause such repairs to be made, but shall not be required to do
so, and Lessee shall pay the cost thereof to Lessor within five
(5) business days following demand. It is understood that Lessee
shall pay all expenses and maintenance and repair during the term
of this Lease. If Lessee is not then in default hereunder,
Lessee shall have the right to make repairs and improvements to
the Leased Premises without the consent of Lessor if such repairs
and improvements do not exceed Fifty Thousand Dollars
($50,000.00), provided such repairs or improvements do not affect
the structural integrity of the Leased Premises. Any repairs or
improvements in excess of Fifty Thousand Dollars ($50,000.00) or
affecting the structural integrity of the Leased Premises may be
done only with the prior written consent of Lessor, such consent
not to be unreasonably withheld or delayed. All alterations and
additions to the Leased Premises shall be made in accordance with
all applicable laws and shall remain for the benefit of Lessor,
except for Lessee's moveable trade fixtures. In the event of
making such alterations as herein provided, Lessee further agrees
to indemnify and save harmless Lessor from all expense, liens,
claims or damages to either persons or property or the Leased
Premises which may arise out of or result from the undertaking or
making of said repairs, improvements, alterations or additions,
or Lessee's failure to make said repairs, improvements,
alterations or additions.
ARTICLE 9. COMPLIANCE WITH LAWS AND REGULATIONS
Lessee will comply with all statutes, ordinances, rules,
orders, regulations and requirements of all federal, state, city
and local governments, and with all rules, orders and
regulations of the applicable Board of Fire Underwriters which
affect the use of the improvements. Lessee will comply with all
easements, restrictions, and covenants of record against or
affecting the Leased Premises and any franchise or license
agreements required for operation of the Leased Premises in
accordance with Article 14 hereof.
ARTICLE 10. SIGNS
Lessee shall have the right to install and maintain a sign
or signs advertising Lessee's business, provided that the signs
conform to law, and further provided that the sign or signs
conform specifically to the written requirements of the
appropriate governmental authorities.
ARTICLE 11. SUBORDINATION
(A) Lessor reserves the right and privilege to subject and
subordinate this Lease at all times to the lien of any mortgage
or mortgages now or hereafter placed upon Lessor's interest in
the Leased Premises and on the land and buildings of which said
premises are a part, or upon any buildings hereafter placed upon
the land of which the Leased Premises are a part, provided such
mortgagee shall execute its standard form, commercially
reasonable subordination, attornment and non-disturbance
agreement. Lessor also reserves the right and privilege to
subject and subordinate this Lease at all times to any and all
advances to be made under such mortgages, and all renewals,
modifications, extensions, consolidations, and replacements
thereof, provided such mortgagee shall execute its standard form,
commercially reasonable subordination, attornment and non-
disturbance agreement.
(B) Lessee covenants and agrees to execute and deliver,
upon demand, such further instrument or instruments subordinating
this Lease on the foregoing basis to the lien of any such
mortgage or mortgages as shall be desired by Lessor and any
proposed mortgagee or proposed mortgagees, provided such
mortgagee shall execute its standard form, commercially
reasonable subordination, attornment and non-disturbance
agreement.
ARTICLE l2. CONDEMNATION OR EMINENT DOMAIN
(A) If the whole of the Leased Premises are taken by any
public authority under the power of eminent domain, or by private
purchase in lieu thereof, then this Lease shall automatically
terminate upon the date possession is surrendered, and Rent shall
be paid up to that day. If any part of the Leased Premises shall
be so taken as to render the remainder thereof materially
unusable in the opinion of a licensed third party arbitrator
reasonably approved by Lessor and Lessee, for the purposes for
which the Leased Premises were leased, then Lessor and Lessee
shall each have the right to terminate this Lease on thirty (30)
days notice to the other given within ninety (90) days after the
date of such taking. In the event that this Lease shall
terminate or be terminated, the Rent shall, if and as necessary,
be paid up to the day that possession was surrendered.
(B) If any part of the Leased Premises shall be so taken
such that it does not materially interfere with the business of
Lessee, then Lessee shall, with the use of the condemnation
proceeds to be made available by Lessor, but otherwise at
Lessee's own cost and expense, restore the remaining portion of
the Leased Premises to the extent necessary to render it
reasonably suitable for the purposes for which it was leased.
Lessee shall make all repairs to the building in which the Leased
Premises is located to the extent necessary to constitute the
building a complete architectural unit. Provided, however, that
such work shall not exceed the scope of the work required to be
done by Lessee in originally constructing such building unless
Lessee shall demonstrate to Lessor's reasonable satisfaction the
availability of funds to complete such work. Provided, further,
the cost thereof to Lessor shall not exceed the proceeds of its
condemnation award, all to be done without any adjustments in
Rent to be paid by Lessee. This lease shall be deemed amended to
reflect the taking in the legal description of the Leased
Premises.
(C) All compensation awarded or paid upon such total or partial
taking of the Leased Premises shall belong to and be the property
of Lessor without any participation by Lessee, whether such
damages shall be awarded as compensation for diminution in value
to the leasehold or to the fee of the premises herein leased.
Nothing contained herein shall be construed to preclude Lessee
from prosecuting any claim directly against the condemning
authority in such proceedings for: Loss of business; damage to
or loss of value or cost of removal of inventory, trade fixtures,
furniture, and other personal property belonging to Lessee;
provided, however, that no such claim shall diminish or otherwise
adversely affect Lessor's award or the award of any fee
mortgagee.
ARTICLE 13. RIGHT TO INSPECT
Lessor reserves the right to enter upon, inspect and examine
the Leased Premises at any time during business hours, after
reasonable notice to Lessee, and Lessee agrees to allow Lessor
free access to the Leased Premises to show the premises. Upon
default by Lessee or at any time within ninety (90) days of the
expiration or termination of the Lease, Lessee agrees to allow
Lessor to then place "For Sale" or "For Rent" signs on the Leased
Premises. Lessor and Lessor's representatives shall at all times
while upon or about the Leased Premises observe and comply with
Lessee's reasonable health and safety rules, regulations,
policies and procedures. Lessor agrees to indemnify and hold
Lessee, its successors, assigns, agents and employees from and
against any liability, claims, demands, cause of action, suits
and other litigation or judgements of every kind and character,
including injury to or death of any person or persons, or
trespass to, or damage to, or loss or destruction of, any
property, whether real or personal, to the extent resulting from
the negligence or willful misconduct or Lessor or Lessor's
representatives while upon or about the Leased Premises.
ARTICLE 14. EXCLUSIVE USE
(A) After the Occupancy Date, Lessee expressly agrees and
warrants that the Leased Premises will be used exclusively as a
Tumbleweed Restaurant or other casual dining sit-down restaurant.
In any other such case, after obtaining Lessor's prior written
consent, such consent not to be unreasonably withheld or delayed,
Lessee may conduct any lawful business from the Leased Premises.
Lessee acknowledges and agrees that any other use without the
prior written consent of Lessor will constitute a default under
and a violation and breach of this Lease. Lessee agrees: To
open for business within a reasonable period of time after
completion of construction of the contemplated Improvements; to
operate all of the Leased Premises during the Term or Renewal
Terms during regular and customary hours for businesses similar
to the permitted exclusive use stated herein, unless prevented
from doing so by causes beyond Lessee's control or due to
remodeling; and to conduct its business in a professional and
reputable manner.
(B) If the Leased Premises are not operated as a Tumbleweed
Restaurant or other casual dining sit-down restaurant or other
permitted use hereunder, or remain closed for thirty (30)
consecutive days (unless such closure results from reasons beyond
Lessee's reasonable control) and in the event Lessee fails to pay
Rent when due or fulfill any other obligation hereunder, then
Lessee shall be in default hereunder and Lessor may, at its
option, cancel this Lease by giving written notice to Lessee or
exercise any other right or remedy that Lessor may have;
provided, however, that closings shall be reasonably permitted
for replacement of trade fixtures or during periods of repair
after destruction or due to remodeling.
ARTICLE 15. DESTRUCTION OF PREMISES
If, during the term of this Lease, the Leased Premises are
totally or partially destroyed by fire or other elements, within
a reasonable time (but in no event longer than one hundred eighty
(180) days and subject to the provisions herein below), Lessee
shall repair and restore the improvements so damaged or destroyed
as nearly as may be practical to their condition immediately
prior to such casualty. All rents payable by Lessee shall be
abated during the period of repair and restoration to the extent
that Lessor shall be compensated by the proceeds of the rent loss
insurance required to be maintained by Lessee hereunder.
Provided Lessee is not in default hereunder (and retains
according to the terms hereof the right to rebuild) with the
Lessor's prior written consent, which consent shall not be
unreasonably withheld or delayed, Lessee shall have the right to
promptly and in good faith settle and adjust any claim under such
insurance policies with the insurance company or companies on the
amounts to be paid upon the loss. The insurance proceeds shall
be used to reimburse Lessee for the cost of rebuilding or
restoration of the Leased Premises. Risk that the insurance
company shall be insolvent or shall refuse to make insurance
proceeds available shall be with Lessee. The Leased Premises
shall be so restored or rebuilt so as to be of at least equal
value and substantially the same character as prior to such
damage or destruction. If the insurance proceeds are less than
Fifty Thousand Dollars ($50,000), they shall be paid to Lessee
for such repair and restoration. If the insurance proceeds are
greater than or equal to Fifty Thousand Dollars ($50,000), they
shall be deposited by Lessee and Lessor into a customary
construction escrow at a nationally recognized title insurance
company, or at Lessee's option, with Lessor ("Escrowee") and
shall be made available from time to time to Lessee for such
repair and restoration. Such proceeds shall be disbursed in
conformity with the terms and conditions of a commercially
reasonable construction loan agreement. Lessee shall, in either
instance, deliver to Lessor or Escrowee (as the case may be)
satisfactory evidence of the estimated cost of completion
together with such architect's certificates, waivers of lien,
contractor's sworn statements and other evidence of cost and of
payments as the Lessor or Escrowee may reasonably require and
approve. If the estimated cost of the work exceeds One Hundred
Thousand Dollars ($100,000), all plans and specifications for
such rebuilding or restoration shall be subject to the reasonable
approval of Lessor.
Any insurance proceeds remaining with Escrowee after the
completion of the repair or restoration shall be paid to Lessor
to reduce the sum of monies expended by Lessor to acquire its
interest in the Leased Premises and rent hereunder shall be
reduced by 10.25% of such amount.
If the proceeds from the insurance are insufficient, after
review of the bids for completion of such improvements, or should
become insufficient during the course of construction, to pay for
the total cost of repair or restoration, Lessee shall, prior to
commencement of work, demonstrate to Escrowee and Lessor's
reasonable satisfaction, the availability of such funds necessary
to completion construction and Lessee shall deposit the same with
Escrowee for disbursement under the construction escrow
agreement.
Provided, further, that should the Leased Premises be
damaged or destroyed to the extent of fifty (50%) percent of its
value or such that Lessee cannot carry on business as a casual
dining restaurant without (in the opinion of a licensed third
party architect reasonably approved by Lessor and Lessee) being
closed for more than sixty (60) days (which duration of closure
may be established by Lessee by the affidavit of the approved
independent third party architect as to the estimated time of
repair) during the last two (2) years of the remaining term of
this Lease or any of the option terms of this Lease, if any
further options to renew remain, Lessee may elect within 30 days
of such damage, to then exercise at least one (1) option to renew
this Lease so that the remaining term of the Lease is not less
than five (5) years in order to be entitled to such insurance
proceeds for restoration or rebuilding. Absent such election,
this Lease shall terminate upon Lessor's receipt of insurance
proceeds (and the deductible thereunder) payable under policies
maintained pursuant to this Lease.
ARTICLE 16. ACTS OF DEFAULT
Each of the following shall be deemed a default by Lessee
and a breach of this Lease:
(A) Failure to pay the Rent or any monetary obligation
herein reserved, or any part thereof when the same
shall be due and payable, provided, however,
Lessee shall have five (5) business days after
written notice from Lessor within which to cure
the failure to pay the Rent or any monetary
obligation herein reserved.
(B) Failure to do, observe, keep and perform any of
the other terms, covenants, conditions, agreements
and provisions in this Lease to be done, observed,
kept and performed by Lessee; provided, however,
that Lessee shall have Thirty (30) days after
written notice from Lessor within which to cure
such default, or such longer time as may be
reasonably necessary if such default cannot
reasonably be cured within Thirty (30) days, if
Lessee is diligently pursuing a course of conduct
that in Lessor's reasonable opinion is capable of
curing such default, but in any event such longer
time shall not exceed 120 days after written
notice from Lessor of the default hereunder.
(C) The abandonment of the premises by Lessee, the
adjudication of Lessee as a bankrupt, the making
by Lessee of a general assignment for the benefit
of creditors, the taking by Lessee of the benefit
of any insolvency act or law, the appointment of a
permanent receiver or trustee in bankruptcy for
Lessee property, or the appointment of a temporary
receiver which is not vacated or set aside within
sixty (60) days from the date of such appointment;
provided, however, that the foregoing shall not
constitute events of default so long as Lessee
continues to otherwise satisfy its obligations
(including but not limited to the payment of Rent)
hereunder.
ARTICLE 17. TERMINATION FOR DEFAULT
In the event of any uncured default by Lessee and at any
time thereafter, Lessor may serve a written notice upon Lessee
that Lessor elects to terminate this Lease. This Lease shall
then terminate on the date so specified as if that date had been
originally fixed as the expiration date of the term herein
granted, provided, however, that Lessee shall have continuing
liability for future rents for the remainder of the original term
and any exercised renewal term as set forth in Article 19,
notwithstanding any earlier termination of the Lease hereunder
(except where Lessee has exercised a right to terminate where
granted herein), preserving unto Lessor the benefit of its
bargained-for rental payments.
ARTICLE 18. LESSOR'S RIGHT OF RE-ENTRY
In the event that this Lease shall be terminated as
hereinbefore provided, or by summary proceedings or otherwise, or
in the event of an uncured default hereunder by Lessee, or in the
event that the premises or any part thereof, shall be abandoned
by Lessee and Rent shall not be paid or other obligations
(including but not limited to repair and maintenance obligations)
of Lessee hereunder shall not be met, then Lessor or its agents,
servants or representatives, may immediately or at any time
thereafter, re-enter and resume possession of the premises or any
part thereof, and remove all persons and property therefrom,
either by summary dispossess proceedings or by a suitable action
or proceeding at law, or by force or otherwise without being
liable for any damages therefor, except for damages resulting
from Lessor's negligence or willful misconduct. Notwithstanding
anything above to the contrary, if Lessee is still in possession
of the Leased Premises, Lessor agrees to use such legal
proceedings (summary or otherwise) prescribed by law to regain
possession of the Leased Premises.
ARTICLE 19. LESSEE'S CONTINUING LIABILITY
(A) Should Lessor elect to re-enter as provided in this
Lease or should it take possession pursuant to legal proceedings
or pursuant to any notice provided for by law, Lessor shall
undertake commercially reasonable efforts to mitigate Lessee's
continuing liability hereunder as such efforts may be prescribed
by law or statute (which shall include listing the Leased
Premises with a licensed commercial real estate broker and
securing the property against waste, but shall not otherwise
include the expenditure of Lessor's funds, unless the same be
required by law or statute and cannot be waived as provided for
herein), and in addition, Lessor may either (i) terminate this
Lease or (ii) it may from time to time, without terminating the
contractual obligation of Lessee to pay Rent under this Lease,
make such alterations and repairs as may be necessary to relet
the Leased Premises or any part thereof for the remainder of the
original Term or any exercised Renewal Terms, at such Rent or
Rents, and upon such other terms and conditions as Lessor in its
sole discretion may deem advisable. Termination of Lessee's
right to possession by Court Order shall be sufficient evidence
of the termination of Lessee's possessory rights under this
Lease, and the filing of such an Order shall be notice of the
termination of Lessee's renewal rights as set forth in any
Memorandum of Lease of record.
(B) Upon each such reletting, without termination of the
contractual obligation of Lessee to pay Rent under this Lease,
all Rents received by Lessor shall be applied as follows:
1. First, to the payment of any indebtedness other
than Rent due hereunder from Lessee to Lessor;
2. Second, to the payment of any costs and expenses
of such reletting, including brokerage fees and
attorney's fees and of costs of such alterations
and repairs;
3. Third, to the payment of Rent and other monetary
obligations due and unpaid hereunder;
4. Finally, the residue, if any, shall be held by
Lessor and applied in payment of future Rent as
the same may become due and payable hereunder.
If such Rents received from such reletting during any month are
less than that to be paid during that month by Lessee hereunder,
Lessee shall pay any such deficiency to Lessor. Such deficiency
shall be calculated and paid monthly. No such re-entry or taking
possession of such Leased Premises by Lessor shall be construed
as an election on its part to terminate Lessee's contractual
obligations under this Lease respecting the payment of rent and
obligations for the costs of repair and maintenance unless a
written notice of such intention be given to Lessee.
(C) Notwithstanding any such reletting without termination,
Lessor may at any time thereafter elect to terminate this Lease
for any uncured breach.
(D) In addition to any other remedies Lessor may have with
this Article 19, Lessor may recover from Lessee all damages it
may incur by reason of any uncured breach, including: The cost
of recovering and reletting the Leased Premises; reasonable
attorney's fees; and, the present value (discounted at a rate of
8% per annum) of the excess of the amount of Rent and charges
equivalent to Rent reserved in this Lease for the remainder of
the Term over the then reasonable Rent value of the Leased
Premises (or the actual Rents receivable by Lessor, if relet),
(the Lessee bearing the burden of proof to demonstrate the amount
of rental loss for the same period, that through reasonable
efforts to mitigate damages, could have been avoided) for the
remainder of the Term, all of which amounts shall be immediately
due and payable from Lessee to Lessor in full. In the event that
the Rent obtained from such alternative or substitute tenant is
more than the Rent which Lessee is obligated to pay under this
Lease, then such excess shall be paid to Lessor provided that
Lessor shall credit such excess against the outstanding
obligations of Lessee due pursuant hereto, if any.
(E) It is the object and purpose of this Article 19 that
Lessor shall be kept whole and shall suffer no damage by way of
non-payment of Rent or by way of diminution in Rent. Lessee
waives and will waive all rights to trial by jury in any summary
proceedings or in any action brought to recover Rent herein which
may hereafter be instituted by Lessor against Lessee in respect
to the Leased Premises. Lessee hereby waives any rights of re-
entry it may have or any rights of redemption or rights to redeem
this Lease upon a termination of this Lease.
ARTICLE 20. PERSONALTY, FIXTURES AND EQUIPMENT
(A) All building fixtures, building machinery, and building
equipment used in connection with the operation of the Leased
Premises including, but not limited to, heating, electrical
wiring, lighting, ventilating, plumbing, walk-in
refrigerators/coolers, walk-in freezers, air conditioning
systems, and the equipment owned by Lessor and leased to Lessee
hereunder as specifically set forth on Exhibit B attached hereto,
if any, and incorporated herein by reference shall be the
property of Lessor. All other trade fixtures and all other
articles of personal property owned by Lessee shall remain the
property of Lessee.
(B) Lessee shall furnish and pay for any and all equipment,
furniture, trade fixtures, and signs, except for such items, if
any, described in Article 20(A) above, as owned by Lessor.
Lessee agrees that Lessor shall have a lien on all Lessee's
equipment, furniture, trade fixtures, furnishings, and signs as
security for the performance of and compliance with this Lease,
subject to the rights of any bona fide third party's security
interest in such property. Provided Lessee is not in default
hereunder, Lessor will agree that its interest in the personal
property of Lessee will be subordinated to financing which may
exist or which Lessee may cause to exist in the future on that
same personal property.
(C) At the end of the term of this Lease, the property
described at Article 20(B) above, after written notice to Lessor
given at least ten (10) business days prior to any proposed
removal, may be removed from the Leased Premises by Lessee
regardless of whether or not such property is attached to the
Leased Premises so as to constitute a "fixture" within the
meaning of the law; however, all damages and repairs to the
Leased Premises which may be caused by the removal of such
property shall be paid for by Lessee.
ARTICLE 21. LIENS
Lessee shall not do or cause anything to be done whereby the
Leased Premises may be encumbered by any mechanic's or other
liens. Whenever and as often as any mechanic's or other lien is
filed against said Leased Premises purporting to be for labor or
materials furnished or to be furnished to Lessee, Lessee shall
remove the lien of record by payment or by bonding with a surety
company authorized to do business in the state in which the
property is located, within forty-five (45) days from the date of
the filing of said mechanic's or other lien and delivery of
notice thereof to Lessee. Should Lessee fail to take the
foregoing steps within said forty-five (45) day period (or in any
event, prior to the expiration of the time within which Lessee
may bond over such lien to remove it as a lien upon the Leased
Premises), Lessor shall have the right, among other things, to
pay said lien without inquiring into the validity thereof, and
Lessee shall forthwith reimburse Lessor for the total expense
incurred by it in discharging said lien as additional Rent
hereunder.
ARTICLE 22. NO WAIVER BY LESSOR EXCEPT IN WRITING
No agreement to accept a surrender of the Leased Premises or
termination of this Lease shall be valid unless in writing signed
by Lessor. The delivery of keys to any employee of Lessor or
Lessor's agents shall not operate as a termination of the Lease
or a surrender of the premises. The failure of Lessor to seek
redress for violation of any rule or regulation, shall not
prevent a subsequent act, which would have originally constituted
a violation, from having all the force and effect of an original
violation. Neither payment by Lessee or receipt by Lessor of a
lesser amount than the Rent herein stipulated shall be deemed to
be other than on account of the earliest stipulated Rent. Nor
shall any endorsement or statement on any check nor any letter
accompanying any check or payment as Rent be deemed an accord and
satisfaction. Lessor may accept such check or payment without
prejudice to Lessor's right to recover the balance of such Rent
or pursue any other remedy provided in this Lease. This Lease
contains the entire agreement between the parties, and any
executory agreement hereafter made shall be ineffective to change
it, modify it or discharge it, in whole or in part, unless such
executory agreement is in writing and signed by the party against
whom enforcement of the change, modification or discharge is
sought.
ARTICLE 23. QUIET ENJOYMENT
Lessor covenants that Lessee, upon paying the Rent set forth
in Article 4 and all other sums herein reserved as Rent and upon
the due performance of all the terms, covenants, conditions and
agreements herein contained on Lessee's part to be kept and
performed, shall have, hold and enjoy the Leased Premises free
from molestation, eviction, or disturbance by Lessor, or by any
other person or persons lawfully claiming the same, and that
Lessor has good right to make this Lease for the full term
granted, including renewal periods.
ARTICLE 24. BREACH - PAYMENT OF COSTS AND ATTORNEYS' FEES
Each party agrees to pay and discharge all reasonable costs,
and actual attorneys' fees, including but not limited to
attorney's fees incurred at the trial level and in any appellate
or bankruptcy proceeding, and expenses that shall be incurred by
the prevailing party in enforcing the covenants, conditions and
terms of this Lease or defending against an alleged breach,
including the costs of reletting. Such costs, attorneys fees,
and expenses if incurred by Lessor shall be considered as Rent as
due and owing in addition to any Rent defined in Article 4
hereof.
ARTICLE 25. ESTOPPEL CERTIFICATES
Either party to this Lease will, at any time, upon not less
than ten (10) business days prior request by the other party,
execute, acknowledge and deliver to the requesting party a
statement in writing, executed by an executive officer of such
party, certifying that: (a) this Lease is unmodified (or if
modified then disclosure of such modification shall be made); (b)
this Lease is in full force and effect; (c) the date to which the
Rent and other charges have been paid; and (d) to the knowledge
of the signer of such certificate that the other party is not in
default in the performance of any covenant, agreement or
condition contained in this Lease, or if a default does exist,
specifying each such default of which the signer may have
knowledge. It is intended that any such statement delivered
pursuant to this Article may be relied upon by any prospective
purchaser or mortgagee of the Leased Premises or any assignee of
such mortgagee or a purchaser of the leasehold estate.
ARTICLE 26. FINANCIAL STATEMENTS
During the term of this Lease, Lessee will, within ninety
(90) days after the end of Lessee's fiscal year, furnish Lessor
with Lessee's financial statements (in SEC Form 10-K, if
available). The financial statements shall be audited, at the
Lessee's expense, by a nationally recognized independent
certified public accounting firm reasonably acceptable to Lessor
and shall be prepared in conformity with generally accepted
accounting principles (GAAP). Lessee shall also provide Lessor
with financial statements for the Leased Premises within 90 days
after the end of each Lease Year. The financial statements for
the Leased Premises do not need to be prepared by an independent
certified public accountant, but shall be certified as true and
correct by the chief financial officer or other authorized
officer of Lessee. Additionally, during the term of the Lease,
Lessee will within forty-five (45) days from the end of each
quarter of each fiscal year, furnish Lessor with Lessee's
financial statements (in SEC Form 10-Q if available)and financial
statements of the Leased Premises for such quarter. Lessor shall
have the right to require such financial statements for the
Lessee and the Leased Premises on a monthly basis after the
occurrence of a default in any Lease Year. Provided, however, if
Lessee shall not commit a default for twelve consecutive months,
Lessor's right to require such monthly financial statements shall
terminate until Lessee shall again commit a default in any given
Lease Year. Said quarterly (or monthly, if required by Lessor)
financial statements do not need to be prepared by an independent
certified public accountant, but shall be certified as true and
correct by the chief financial officer or other authorized
officer of Lessee. The financial statements shall conform to
GAAP, and include a balance sheet and related statements of
operations, statement of cash flows, statement of changes in
shareholder's equity, and related notes to financial statements,
if any.
ARTICLE 27. MORTGAGE
Lessee does hereby agree to make reasonable modifications of
this Lease requested by any Mortgagee of record from time to
time, provided such modifications are not substantial and do not
increase any of the Rents or obligations of Lessee under this
Lease or substantially modify any of the business elements of
this Lease.
ARTICLE 28. OPTION TO RENEW
If this Lease is not previously canceled or terminated and
if Lessee has materially complied with and performed all of the
covenants and conditions in this Lease after applicable cure
periods and is not currently in default, then Lessee shall have
the option to renew this Lease upon the same conditions and
covenants contained in this Lease for Two (2) consecutive
periods of Five (5) years each (singularly "Renewal Term"). Rent
during the Renewal Term shall increase each Lease Year by the
lesser of Two Percent (2%) of the Rent payable for the preceding
Lease Year, or the CPI-U Percentage Increase, as defined in
Article 4 hereof.
The first Renewal Term will commence on the day following
the date the original Term expires and successive Renewal Terms
would commence on the day following the last day of the then
expiring Renewal Term. Except as otherwise provided in Article
15 hereof, Lessee must give ninety (90) days written notice to
Lessor of its intent to exercise this option prior to the
expiration of the original Term of this Lease or any Renewal
Term, as the case may be.
ARTICLE 29. MISCELLANEOUS PROVISIONS
(A) All written notices shall be given to Lessor or Lessee
by certified mail or nationally recognized overnight mail.
Notices to either party shall be addressed to the person and
address given on the first page hereof. Lessor and Lessee may,
from time to time, change these addresses by notifying each other
of this change in writing. Notices of overdue Rent may be sent
to Lessee by regular, special delivery, or nationally recognized
overnight mail.
(B) The terms, conditions and covenants contained in this
Lease and any riders and plans attached hereto shall bind and
inure to the benefit of Lessor and Lessee and their respective
successors, heirs, legal representatives, and assigns.
(C) This Lease shall be governed by and construed under the
laws of the State where the Leased Premises are situate.
(D) In the event that any provision of this Lease shall be
held invalid or unenforceable, no other provisions of this Lease
shall be affected by such holding, and all of the remaining
provisions of this Lease shall continue in full force and effect
pursuant to the terms hereof.
(E) The Article captions are inserted only for convenience
and reference, and are not intended, in any way, to define,
limit, describe the scope, intent, and language of this Lease or
its provisions.
(F) In the event Lessee remains in possession of the
premises herein leased after the expiration of this Lease and
without the execution of a new lease and without Lessor's written
permission, Lessee shall be deemed to be occupying said premises
as a tenant from month-to-month, subject to all the conditions,
provisions, and obligations of this Lease insofar as the same can
be applicable to a month-to-month tenancy except that the monthly
installment of Rent shall be One Hundred Fifty percent (150%) the
amount due on the last month prior to such expiration.
(G) If any installment of Rent (whether lump sum, monthly
installments, or any other monetary amounts required by this
Lease to be paid by Lessee and deemed to constitute Rent
hereunder) shall not be paid when due, or non-monetary default
shall remain uncured after the expiration of any applicable cure
period, Lessor shall have the right to charge Lessee a late
charge of $250.00 per month for each month that any amount of
Rent installment remains unpaid or non-monetary default shall go
uncured after the first such occurrence in any 12 month period.
Said late charge shall commence after such installment is due or
non-monetary default goes uncured after the expiration of any
applicable cure period and continue until said installment,
interest and all accrued late charges are paid in full or such
non-monetary default is cured.
(H) Any part of the Leased Premises may be conveyed by
Lessor for private or public non-exclusive easement purposes at
any time, provided such easement does not interfere with the
access to the Leased Premises, visibility, or operations of the
business of Lessee. In such event Lessor shall, at its own cost
and expense, restore the remaining portion of the Leased Premises
to the extent necessary to render it reasonably suitable for the
purposes for which it was leased, all to be done without
adjustments in Rent to be paid by Lessee. All proceeds from any
conveyance of an easement shall belong solely to Lessor.
(I) For the purpose of this Lease, the term "Rent" shall be
defined as Rent under Article 4, and any other monetary amounts
required by this Lease to be paid by Lessee.
(J) Lessee agrees to cooperate with Lessor to allow Lessor
to obtain and use at Lessor's expense promotional photographs of
the Leased Premises, to the extent permitted by Lessee's
franchisor or licensor.
ARTICLE 30. REMEDIES
NON-EXCLUSIVITY. Notwithstanding anything contained herein
it is the intent of the parties that the rights and remedies
contained herein shall not be exclusive but rather shall be
cumulative along with all of the rights and remedies of the
parties which they may have at law or equity. In the event of a
breach by Lessor, Lessee shall be entitled to all remedies at law
or equity, to be cumulatively enforced.
ARTICLE 31. HAZARDOUS MATERIALS INDEMNITY
Lessee covenants, represents and warrants to Lessor, its
successors and assigns, (i) that it has not used or permitted and
will not use or permit the Leased Premises to be used, whether
directly or through contractors, agents or tenants, and to the
best of Lessee's knowledge and except as disclosed to Lessor in
writing, the Leased Premises has not at any time been used for
the generating, transporting, treating, storage, manufacture,
emission of, or disposal of any dangerous, toxic or hazardous
pollutants, chemicals, wastes or substances as defined in the
Federal Comprehensive Environmental Response Compensation and
Liability Act of 1980 ("CERCLA"), the Federal Resource
Conservation and Recovery Act of 1976 ("RCRA"), or any other
federal, state or local environmental laws, statutes,
regulations, requirements and ordinances ("Hazardous Materials");
(ii) that there have been no investigations or reports involving
Lessee, or the Leased Premises by any governmental authority
which in any way pertain to Hazardous Materials (iii) that the
operation of the Leased Premises has not violated and is not
currently violating any federal, state or local law, regulation,
ordinance or requirement governing Hazardous Materials; (iv) that
the Leased Premises is not listed in the United States
Environmental Protection Agency's National Priorities List of
Hazardous Waste Sites nor any other list, schedule, log,
inventory or record of Hazardous Materials or hazardous waste
sites, whether maintained by the United States Government or any
state or local agency; and (v) that the Leased Premises will not
contain any formaldehyde, urea or asbestos, except as may have
been disclosed in writing to Lessor by Lessee at the time of
execution and delivery of this Lease. Lessee agrees to indemnify
and reimburse Lessor, its successors and assigns, for:
(a) any breach of these representations and warranties, and
(b) any loss, damage, expense or cost arising out of or
incurred by Lessor which is the result of a breach of,
misstatement of or misrepresentation of the above
covenants, representations and warranties, and
(c) any and all liability of any kind whatsoever which
Lessor may, for any cause and at any time, sustain or
incur by reason of Hazardous Materials discovered on
the Leased Premises during the term hereof or placed or
released on the Leased Premises by Lessee;
together with all attorneys' fees, costs and disbursements
incurred in connection with the defense of any action against
Lessor arising out of the above. These covenants,
representations and warranties shall be deemed continuing
covenants, representations and warranties for the benefit of
Lessor, and any successors and assigns of Lessor and shall
survive expiration or sooner termination of this Lease. The
amount of all such indemnified loss, damage, expense or cost,
shall bear interest thereon at the lesser of 15% or the highest
rate of interest allowed by law and shall become immediately due
and payable in full on demand of Lessor, its successors and
assigns.
ARTICLE 32. ESCROWS
Upon a default by Lessee which is uncured after the
expiration of any applicable notice and cure period, or upon the
request of Lessor's Mortgagee, if any, Lessee shall deposit with
Lessor on the first day of each and every month, an amount equal
to one-twelfth (1/12th) of the estimated annual real estate
taxes, assessments and insurance (if the insurance is to be
purchased by Lessor) ("Charges") due on the Leased Premises, or
such higher amounts reasonably determined by Lessor as necessary
to accumulate such amounts to enable Lessor to pay all charges
due and owing at least thirty (30) days prior to the date such
amounts are due and payable. From time to time out of such
deposits Lessor will, upon the presentation to Lessor by Lessee
of the bills therefor, pay the Charges or at Lessee's option,
will upon presentation of receipted bills therefor, reimburse
Lessee for such payments made by Lessee. In the event the
deposits on hand shall not be sufficient to pay all of the
estimated Charges when the same shall become due from time to
time or the prior payments shall be less than the currently
estimated monthly amounts, then Lessee shall pay to Lessor on
demand any amount necessary to make up the deficiency. The
excess of any such deposits shall be credited to subsequent
payments to be made for such items. If a default or an event of
default shall occur under the terms of this Lease, Lessor may, at
its option, without being required so to do, apply any Deposit on
hand to cure the default, in such order and manner as Lessor may
elect.
ARTICLE 33. NET LEASE
Notwithstanding anything contained herein to the contrary it
is the intent of the parties hereto that this Lease shall be a
net lease and that the Rent defined pursuant to Article 4 should
be a net Rent paid to Lessor. Any and all other expenses
including but not limited to, maintenance, repair, insurance,
taxes, and assessments, shall be paid by Lessee.
ARTICLE 34. DEVELOPMENT FINANCING AGREEMENT
The parties hereto hereby acknowledge that the terms hereof
are subject to and shall in the event of conflicts be controlled
by that certain Development Financing Agreement of even date
herewith, until such Agreement is terminated in accordance with
its terms.
ARTICLE 35. COUNTERPART EXECUTION
This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original and all of which shall
constitute one and the same instrument.
IN WITNESS WHEREOF, Lessor and Lessee have respectively
signed and sealed this Lease as of the day and year first above
written.
LESSEE: Tumbleweed, Inc.
By:/s/ Gregory A Compton
Its: VP\Secretary
STATE OF KENTUCKY)
)SS.
COUNTY OF JEFFERSON)
The foregoing instrument was acknowledged before me this 2nd
day of March, 2000, by Gregory A Compton, the Vice President &
Secretary of Tumbleweed, Inc. on behalf of said corporation.
/s/ Lisa Wright Hall
Notary Public
Commission expires 4/27/2003
LESSOR:
AEI INCOME & GROWTH FUND XXI
LIMITED PARTNERSHIP
By: AEI Fund Management XXI, Inc.
By: /s/ Robert P Johnson
Robert P. Johnson, President
STATE OF MINNESOTA )
)SS.
COUNTY OF RAMSEY )
The foregoing instrument was acknowledged before me the 7th
day of March, 2000, by Robert P. Johnson, the President of AEI
Fund Management XXI, Inc., a Minnesota corporation, corporate
general partner of AEI Income & Growth Fund XXI Limited
Partnership, on behalf of said limited partnership.
/s/ Barbara J Kochevar
Notary Public
[notary seal]
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<NAME> AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
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