-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CloObqUTcJOukMXUaQNlVbhO4Dm4jWaa/16mX1ag2zu+2hfCLrAxue6e8qieaHl9 cmv8vjOQV+ztNFmukOYlFA== 0001073363-01-500003.txt : 20010402 0001073363-01-500003.hdr.sgml : 20010402 ACCESSION NUMBER: 0001073363-01-500003 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AEI INCOME & GROWTH FUND XXII LTD PARTNERSHIP CENTRAL INDEX KEY: 0001023458 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 411848181 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB SEC ACT: SEC FILE NUMBER: 000-24003 FILM NUMBER: 1586339 BUSINESS ADDRESS: STREET 1: 1300 MINNESOTA WORLD TRADE CENTER STREET 2: 30 EAST SEVENTH ST CITY: ST PAUL STATE: MN ZIP: 55101 BUSINESS PHONE: 6512277333 MAIL ADDRESS: STREET 1: 1300 MINNESOTA WORLD TRADE CENTER STREET 2: 30 SEVENTH ST EAST CITY: ST PAUL STATE: MN ZIP: 55101 10KSB 1 k22400.txt 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, 2000 Commission file number: 24003 AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP (Name of Small Business Issuer in its Charter) State of Minnesota 41-1848181 (State or other Jurisdiction of (I.R.S. Employer) Incorporation or Organization) Identification No.) 1300 Minnesota World Trade Center, St. Paul, Minnesota 55101 (Address of Principal Executive Offices) (651) 227-7333 (Issuer's telephone number) Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered None None Securities registered pursuant to Section 12(g) of the Act: Limited Partnership Units (Title of class) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No Check if disclosure of delinquent filers in response to Rule 405 of Regulation S-B is not contained in this Form, and no disclosure will be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [X] The Issuer's revenues for year ended December 31, 2000 were $1,225,209. As of February 28, 2001, there were 16,635.326 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 $16,635,326. 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 XXII Limited Partnership (the "Partnership" or the "Registrant") is a limited partnership which was organized pursuant to the laws of the State of Minnesota on July 31, 1996. 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 January 10, 1997. The Partnership commenced operations on May 1, 1997 when minimum subscriptions of 1,500 Limited Partnership Units ($1,500,000) were accepted. The Partnership's offering terminated January 9, 1999 when the extended offering period expired. The Partnership received subscriptions for 16,917.222 Limited Partnership Units ($16,917,222). 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 purchased twelve properties, including partial interests in three properties, at a total cost of $13,363,547. The balance of the subscription proceeds was applied to organization and syndication costs, working capital reserves and distributions, which represented a return of capital. The properties are all commercial, single tenant buildings leased under triple net leases. The Partnership'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 15 to 20 years. The leases provide for base annual rental payments, payable in monthly installments, and contain rent clauses which entitle the Partnership to receive additional rent in future years based on stated rent increases. The leases provide the lessees with two to four 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 June 29, 1998, the Partnership purchased a parcel of land in Centerville, Ohio for $1,850,988. On August 28, 1998, the Partnership assigned, for diversification purposes, 77% of its interest in the property to three affiliated partnerships. 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 $29,801. Effective December 25, 1998, the annual rent was increased to $44,701. 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 7.0%. 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 $93,256. The Partnership's share of total acquisition costs, including the cost of the land, was $924,843. The remaining interests in the property are owned by AEI Real Estate Fund XVII Limited Partnership, AEI Real Estate Fund XVIII Limited Partnership and AEI Income & Growth Fund XXI Limited Partnership, affiliates of the Partnership. On November 20, 1998, the Partnership purchased a parcel of land in Homewood, Alabama for $696,000. The land is leased to RTM Alabama, Inc. (RTM) under a Lease Agreement with a primary term of 20 years and annual rental payments of $46,980. Simultaneously with the purchase of the land, the Partnership entered into a Development Financing Agreement under which the Partnership advanced funds to RTM for the construction of an Arby's restaurant on the site. The Partnership charged interest on the advances at a rate of 6.75%. On July 9, 1999, after the development was completed, the Lease Agreement was amended to require annual rental payments of $87,135. Total acquisition costs, including the cost of the land, were $1,392,592. On November 25, 1998, the Partnership purchased a parcel of land in Fort Wayne, Indiana for $470,000. The land is leased to Tumbleweed, Inc. (TWI) under a Lease Agreement with a primary term of 15 years and annual rental payments of $39,950. Effective March 24, 1999, the annual rent was increased to $48,175. Simultaneously with the purchase of the land, the Partnership entered into a Development Financing Agreement under which the Partnership advanced funds to TWI for the construction of a Tumbleweed restaurant on the site. Initially, the Partnership charged interest on the advances at a rate of 8.5%. Effective March 24, 1999, the interest rate was increased to 10.25%. On August 31, 1999, after the development was completed, the Lease Agreement was amended to require annual rental payments of $130,941. Total acquisition costs, including the cost of the land, were $1,316,695. ITEM 1. DESCRIPTION OF BUSINESS. (Continued) On January 26, 1999, the Partnership purchased a Hollywood Video store in Saraland, Alabama for $1,377,891. The property is leased to Hollywood Entertainment Corp. under a Lease Agreement with a primary term of 15 years and annual rental payments of $129,617. On July 14, 1999, the Partnership purchased four Children's World daycare centers located in Abingdon, Maryland, Houston, Texas, Pearland, Texas and DePere, Wisconsin. The properties were purchased for $1,051,772, $892,219, $943,415 and $1,187,452, respectively. The properties are leased to ARAMARK Educational Resources, Inc. under Lease Agreements with primary terms of 15 years and annual rental payments of $91,677, $79,093, $83,635 and $106,157, respectively. On July 16, 1999, the Partnership purchased a Hollywood Video store in Minot, North Dakota for $1,330,000. The property is leased to Hollywood Entertainment Corporation under a Lease Agreement with a primary term of 15 years and annual rental payments of $129,168. On August 26, 1999, the Partnership purchased a Hollywood Video store in Muscle Shoals, Alabama for $1,340,627. The property is leased to Hollywood Entertainment Corporation under a Lease Agreement with a primary term of 15 years and annual rental payments of $129,659. On September 28, 1999, the Partnership purchased a 53% interest in a Marie Callender's restaurant in Henderson, Nevada for $937,897. The property was leased to Marie Callender Pie Shops, Inc. under a Lease Agreement with a primary term of 15 years and annual rental payments of $85,595. The remaining interest in the property was purchased by AEI Net Lease Income & Growth Fund XIX Limited Partnership, an affiliate of the Partnership. On September 28, 2000, the Partnership purchased a 40% interest in a Children's World daycare center in Golden, Colorado for $671,846. The property is leased to ARAMARK Educational Resources, Inc. under a Lease Agreement with a primary term of 15 years and annual rental payments of $66,344. The remaining interests in the property were purchased by AEI Private Net Lease Millennium Fund Limited Partnership and AEI Private Net Lease Fund 1998 Limited Partnership, affiliates of the Partnership. On May 8, 2000, the Partnership purchased a 48% interest in a parcel of land in Austin, Texas for $652,800. The land is leased to Razzoo's, Inc. (RI) under a Lease Agreement with a primary term of 15 years and annual rental payments of $55,488. Effective October 4, 2000, the annual rent was increased to $63,648. Simultaneously with the purchase of the land, the Partnership entered into a Development Financing Agreement under which the Partnership will advance funds to RI for the construction of a Razzoo's restaurant on the site. Through December 31, 2000, the Partnership had advanced $616,286 for the construction of the property and was charging interest on the advances at a rate of 8.5%. Effective October 4, 2000, the interest rate was increased to 9.75%. The Partnership's share of the total purchase price, including the cost of the land, will be approximately $1,646,000. After the construction is complete, the Lease Agreement will be amended to require annual rental payments of approximately $160,500. The remaining interests in the property are owned by AEI Real Estate Fund XV Limited Partnership, AEI Real Estate Fund XVII Limited Partnership, and AEI Net Lease Income & Growth Fund XIX Limited Partnership, affiliates of the Partnership. During 2000, the Partnership sold 61.9344% of the Children's World in DePere, Wisconsin, in four separate transactions, to unrelated third parties. The Partnership received total net sale proceeds of $845,347, which resulted in a total net gain of $127,553. The total cost and related accumulated depreciation of the interests sold was $735,441 and $17,647, respectively. ITEM 1. DESCRIPTION OF BUSINESS. (Continued) During 2000, the Partnership sold its interest in the Marie Callender's restaurant, in five separate transactions, to unrelated third parties. The Partnership received total net sale proceeds of $1,035,799, which resulted in a total net gain of $108,736. The total cost and related accumulated depreciation of the interests sold was $937,897 and $10,834, respectively. During 2000, the Partnership sold 35.5084% of the Hollywood Video store in Saraland, Alabama, in three separate transactions, to unrelated third parties. The Partnership received total net sale proceeds of $595,850, which resulted in a total net gain of $121,431. The total cost and related accumulated depreciation of the interests sold was $489,267 and $14,848, respectively. Subsequent to December 31, 2000, the Partnership sold an additional 14.1301% of the Children's World in DePere, Wisconsin to an unrelated third party. The Partnership received net sale proceeds of approximately $179,000, which resulted in a net gain of approximately $19,000. Major Tenants During 2000, three of the Partnership's lessees each contributed more than ten percent of the Partnership's total rental revenue. The major tenants in aggregate contributed 72% of the Partnership's total rental revenue in 2000. 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 2001 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. 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 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. ITEM 2. DESCRIPTION OF PROPERTIES. (Continued) 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 property that the Partnership acquired and owned as of December 31, 2000. Total Property Annual Annual Purchase Acquisition Lease Rent Per Property Date Costs Lessee Payment Sq. Ft. TGI Friday's Restaurant Greensburg, PA Ohio Valley (40.0%) 12/10/97 $ 668,144 Bistros, Inc. $ 69,187 $38.35 Hollywood Video Store Hollywood Saraland, AL Entertainment (64.4916%) 1/26/99 $ 888,624 Corporation $ 83,592 $17.31 Champps Americana Restaurant Centerville, OH Americana (23.0%) 1/27/99 $ 924,843 Dining Corp. $ 93,256 $43.28 Arby's Restaurant RTM Homewood, AL 7/9/99 $1,392,592 Alabama, Inc. $120,648 $37.05 Children's World ARAMARK Daycare Center Educational Abingdon, MD 7/14/99 $1,051,772 Resources, Inc. $ 91,677 $12.36 Children's World ARAMARK Daycare Center Educational Houston, TX 7/14/99 $ 892,219 Resources, Inc. $ 79,093 $10.91 Children's World ARAMARK Daycare Center Educational Pearland, TX 7/14/99 $ 943,415 Resources, Inc. $ 83,635 $11.01 ITEM 2. DESCRIPTION OF PROPERTIES. (Continued) Total Property Annual PurchaseAcquisition Lease Annual Rent Property Date Costs Lessee Payment Per Sq. Ft. Children's World Daycare Center ARAMARK DePere, WI Educational (38.0656%) 7/14/99 $ 452,011 Resources, Inc. $ 40,409 $10.43 Hollywood Hollywood Video Store Entertainment Minot, ND 7/16/99 $1,330,000 Corporation $129,168 $17.21 Hollywood Hollywood Video Store Entertainment Muscle Shoals, AL 8/26/99 $1,340,626 Corporation $129,659 $19.29 Tumbleweed Restaurant Fort Wayne, IN 8/31/99 $1,316,695 Tumbleweed, Inc. $133,560 $23.97 Children's World Daycare Center ARAMARK Golden CO Educational (40.0%) 9/28/00 $ 671,846 Resources, Inc. $ 66,344 $19.35 Razzoo's Restaurant Austin, TX (48.0%) (land only)(1) 5/8/00 $ 629,302 Razzoo's, Inc. $ 63,648 $13.53 (1) Restaurant was under construction as of December 31, 2000. The properties listed above with a partial ownership percentage are owned with affiliates of the Partnership and/or related third parties. The remaining interest in the TGI Friday's restaurant is owned by AEI Real Estate Fund XVII Limited Partnership. The remaining interests in the Champps Americana restaurant are owned by AEI Real Estate Fund XVII Limited Partnership, AEI Real Estate Fund XVIII Limited Partnership and AEI Income & Growth Fund XXI Limited Partnership. The remaining interests in the Hollywood Video store in Saraland, Alabama and the Children's World daycare center in DePere, Wisconsin are owned by unrelated third parties. The remaining interests in the Children's World daycare center in Golden, Colorado are owned by AEI Private Net Lease Fund 1998 Limited Partnership and AEI Private Net Lease Millennium Fund Limited Partnership. The remaining interests in the Razzoo's restaurant are owned by AEI Real Estate Fund XV Limited Partnership, AEI Real Estate Fund XVII Limited Partnership and AEI Net Lease Income & Growth Fund XIX Limited Partnership. The Partnership accounts for properties owned as tenants- in-common with affiliated Partnerships and/or unrelated third parties using the proportionate consolidation method. Each tenant-in-common owns a separate, undivided interest in the properties. Any tenant-in-common that holds more than a 50% interest does not control decisions over the other tenant-in- common interests. The financial statements reflect only this Partnership's percentage share of the properties' land, building and equipment, liabilities, revenues and expenses. ITEM 2. DESCRIPTION OF PROPERTIES. (Continued) The initial Lease terms are 15 years, except for the Champps Americana and Arby's restaurants, which have Lease terms of 20 years. The Leases contain renewal options which may extend the Lease term an additional 15 years, except the TGI Friday's, Arby's, Razzoo's and Tumbleweed restaurants, which have renewal options that may extend the Lease term an additional 10 years and the Hollywood Video store in Saraland, Alabama which has renewal options that may extend the Lease term an additional 20 years. Pursuant to the Lease Agreement, 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 39 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. Through December 31, 2000, all properties listed above were 100% occupied. 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, 2000 there were 739 holders 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 2000, seven Limited Partners redeemed a total of 150.86 Partnership Units for $113,871 in accordance with the Partnership Agreement. In 1999, four Limited Partners redeemed a total of 109.04 Partnership Units for $87,231. The redemptions increase the remaining Limited Partner's ownership interest in the Partnership. ITEM 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP UNITS AND RELATED SECURITY HOLDER MATTERS. (Continued) Cash distributions of $33,384 and $35,826 were made to the General Partners and $1,140,252 and $1,071,123 were made to the Limited Partners in 2000 and 1999, respectively. The distributions were made on a quarterly basis and represent Net Cash Flow, as defined, or a partial return of contributed capital, except as discussed below. These distributions should not be compared with dividends paid on capital stock by corporations. As part of the Limited Partnership distributions discussed above, the Partnership distributed $259,449 of proceeds from property sales in 2000. The distributions reduced the Limited Partner's Adjusted Capital Contribution. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. Results of Operations For the years ended December 31, 2000 and 1999, the Partnership recognized rental income of $1,144,982 and $713,963, respectively. During the same periods, the Partnership earned $80,227 and $270,895, respectively, in investment income from subscription proceeds and property sales proceeds which were invested in a short-term money market account. This investment income constituted 7% and 28% respectively, of total income. The percentage of total income represented by investment income declines as subscription proceeds are invested in properties. During the years ended December 31, 2000 and 1999, the Partnership paid Partnership administration expenses to affiliated parties of $164,339 and $165,419, respectively. These administration expenses include costs associated with the management of the properties, processing distributions, reporting requirements and correspondence to the Limited Partners. During the same periods, the Partnership incurred Partnership administration and property management expenses from unrelated parties of $29,932 and $27,348, respectively. These expenses represent direct payments to third parties for legal and filing fees, direct administrative costs, outside audit and accounting costs, taxes, insurance and other property costs. As of December 31, 2000, the Partnership's annualized cash distribution rate was 7.1%, based on the Adjusted Capital Contribution. Pursuant to the Partnership Agreement, distributions of Net Cash Flow were allocated 97% to the Limited Partners and 3% to the General Partners. Since the Partnership has only recently purchased its real estate, 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. Liquidity and Capital Resources During the year ended December 31, 2000, the Partnership's cash balances increased $324,878 as a result of cash generated from the sale of property, which was partially offset by cash used to purchase property and distributions of net sale proceeds to the Partners. Net cash provided by operating activities increased from $708,899 in 1999 to $1,009,525 in 2000 as a result of an increase in income in 2000 and net timing differences in the collection of payments from the lessees and the payment of expenses. 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, 2000 and 1999, the Partnership expended $1,917,434 and $10,303,009, respectively, to invest in real properties (inclusive of acquisition expenses). During the year ended December 31, 2000, the Partnership generated cash flow from the sale of real estate of $2,476,996. On June 29, 1998, the Partnership purchased a parcel of land in Centerville, Ohio for $1,850,988. On August 28, 1998, the Partnership assigned, for diversification purposes, 77% of its interest in the property to three affiliated partnerships. 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 $29,801. Effective December 25, 1998, the annual rent was increased to $44,701. 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 7.0%. 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 $93,256. The Partnership's share of total acquisition costs, including the cost of the land, was $924,843. The remaining interests in the property are owned by AEI Real Estate Fund XVII Limited Partnership, AEI Real Estate Fund XVIII Limited Partnership and AEI Income & Growth Fund XXI Limited Partnership, affiliates of the Partnership. On November 20, 1998, the Partnership purchased a parcel of land in Homewood, Alabama for $696,000. The land is leased to RTM Alabama, Inc. (RTM) under a Lease Agreement with a primary term of 20 years and annual rental payments of $46,980. Simultaneously with the purchase of the land, the Partnership entered into a Development Financing Agreement under which the Partnership advanced funds to RTM for the construction of an Arby's restaurant on the site. The Partnership charged interest on the advances at a rate of 6.75%. On July 9, 1999, after the development was completed, the Lease Agreement was amended to require annual rental payments of $87,135. Total acquisition costs, including the cost of the land, were $1,392,592. On November 25, 1998, the Partnership purchased a parcel of land in Fort Wayne, Indiana for $470,000. The land is leased to Tumbleweed, Inc. (TWI) under a Lease Agreement with a primary term of 15 years and annual rental payments of $39,950. Effective March 24, 1999, the annual rent was increased to $48,175. Simultaneously with the purchase of the land, the Partnership entered into a Development Financing Agreement under which the Partnership advanced funds to TWI for the construction of a Tumbleweed restaurant on the site. Initially, the Partnership charged interest on the advances at a rate of 8.5%. Effective March 24, 1999, the interest rate was increased to 10.25%. On August 31, 1999, after the development was completed, the Lease Agreement was amended to require annual rental payments of $130,941. Total acquisition costs, including the cost of the land, were $1,316,695. On January 26, 1999, the Partnership purchased a Hollywood Video store in Saraland, Alabama for $1,377,891. The property is leased to Hollywood Entertainment Corp. under a Lease Agreement with a primary term of 15 years and annual rental payments of $129,617. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued) On July 14, 1999, the Partnership purchased four Children's World daycare centers located in Abingdon, Maryland, Houston, Texas, Pearland, Texas and DePere, Wisconsin. The properties were purchased for $1,051,772, $892,219, $943,415 and $1,187,452, respectively. The properties are leased to ARAMARK Educational Resources, Inc. under Lease Agreements with primary terms of 15 years and annual rental payments of $91,677, $79,093, $83,635 and $106,157, respectively. On July 16, 1999, the Partnership purchased a Hollywood Video store in Minot, North Dakota for $1,330,000. The property is leased to Hollywood Entertainment Corporation under a Lease Agreement with a primary term of 15 years and annual rental payments of $129,168. On August 26, 1999, the Partnership purchased a Hollywood Video store in Muscle Shoals, Alabama for $1,340,627. The property is leased to Hollywood Entertainment Corporation under a Lease Agreement with a primary term of 15 years and annual rental payments of $129,659. On September 28, 1999, the Partnership purchased a 53% interest in a Marie Callender's restaurant in Henderson, Nevada for $937,897. The property was leased to Marie Callender Pie Shops, Inc. under a Lease Agreement with a primary term of 15 years and annual rental payments of $85,595. The remaining interest in the property was purchased by AEI Net Lease Income & Growth Fund XIX Limited Partnership, an affiliate of the Partnership. On September 28, 2000, the Partnership purchased a 40% interest in a Children's World daycare center in Golden, Colorado for $671,846. The property is leased to ARAMARK Educational Resources, Inc. under a Lease Agreement with a primary term of 15 years and annual rental payments of $66,344. The remaining interests in the property were purchased by AEI Private Net Lease Millennium Fund Limited Partnership and AEI Private Net Lease Fund 1998 Limited Partnership, affiliates of the Partnership. On May 8, 2000, the Partnership purchased a 48% interest in a parcel of land in Austin, Texas for $652,800. The land is leased to Razzoo's, Inc. (RI) under a Lease Agreement with a primary term of 15 years and annual rental payments of $55,488. Effective October 4, 2000, the annual rent was increased to $63,648. Simultaneously with the purchase of the land, the Partnership entered into a Development Financing Agreement under which the Partnership will advance funds to RI for the construction of a Razzoo's restaurant on the site. Through December 31, 2000, the Partnership had advanced $616,286 for the construction of the property and was charging interest on the advances at a rate of 8.5%. Effective October 4, 2000, the interest rate was increased to 9.75%. The Partnership's share of the total purchase price, including the cost of the land, will be approximately $1,646,000. After the construction is complete, the Lease Agreement will be amended to require annual rental payments of approximately $160,500. The remaining interests in the property are owned by AEI Real Estate Fund XV Limited Partnership, AEI Real Estate Fund XVII Limited Partnership, and AEI Net Lease Income & Growth Fund XIX Limited Partnership, affiliates of the Partnership. During 2000, the Partnership sold 61.9344% of the Children's World in DePere, Wisconsin, in four separate transactions, to unrelated third parties. The Partnership received total net sale proceeds of $845,347, which resulted in a total net gain of $127,553. The total cost and related accumulated depreciation of the interests sold was $735,441 and $17,647, respectively. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued) During 2000, the Partnership sold its interest in the Marie Callender's restaurant, in five separate transactions, to unrelated third parties. The Partnership received total net sale proceeds of $1,035,799, which resulted in a total net gain of $108,736. The total cost and related accumulated depreciation of the interests sold was $937,897 and $10,834, respectively. During 2000, the Partnership sold 35.5084% of the Hollywood Video store in Saraland, Alabama, in three separate transactions, to unrelated third parties. The Partnership received total net sale proceeds of $595,850, which resulted in a total net gain of $121,431. The total cost and related accumulated depreciation of the interests sold was $489,267 and $14,848, respectively. Subsequent to December 31, 2000, the Partnership sold an additional 14.1301% of the Children's World in DePere, Wisconsin to an unrelated third party. The Partnership received net sale proceeds of approximately $179,000, which resulted in a net gain of approximately $19,000. During 2000, the Partnership distributed $262,069 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 $15.54 per Limited Partnership Unit. The remaining net sale proceeds will either be reinvested in additional property or distributed to the Partners in the future. 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 on a semi-annual basis. 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 2000, seven Limited Partners redeemed a total of 150.86 Partnership Units for $113,871 in accordance with the Partnership Agreement. The Partnership acquired these Units using Net Cash Flow from operations. In 1999, four Limited Partners redeemed a total of 109.04 Partnership Units for $87,231. The redemptions increase the remaining Limited Partner's 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: Market and economic conditions which affect the value of the properties the Partnership owns and the cash from rental income such properties generate; the federal income tax consequences of rental income, deductions, gain on sales and other items and the affects of these consequences for investors; resolution by the General Partners of conflicts with which they may be confronted; the success of the General Partners of locating properties with favorable risk return characteristics; the effect of tenant defaults; and 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 XXII LIMITED PARTNERSHIP INDEX TO FINANCIAL STATEMENTS Report of Independent Auditors Balance Sheet as of December 31, 2000 and 1999 Statements for the Years Ended December 31, 2000 and 1999: Income Cash Flows Changes in Partners' Capital Notes to Financial Statements REPORT OF INDEPENDENT AUDITORS To the Partners: AEI Income & Growth Fund XXII Limited Partnership St. Paul, Minnesota We have audited the accompanying balance sheet of AEI Income & Growth Fund XXII Limited Partnership (a Minnesota limited partnership) as of December 31, 2000 and 1999 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 XXII Limited Partnership as of December 31, 2000 and 1999, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. Minneapolis, Minnesota /s/BOULAY, HEUTMAKER, ZIBELL & CO. P.L.L.P. January 25, 2001 Boulay, Heutmaker, Zibell & Co. P.L.L.P. Certified Public Accountants AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP BALANCE SHEET DECEMBER 31 ASSETS 2000 1999 CURRENT ASSETS: Cash and Cash Equivalents $ 572,279 $ 247,401 Receivables 28,040 0 ----------- ----------- Total Current Assets 600,319 247,401 ----------- ----------- INVESTMENTS IN REAL ESTATE: Land 5,010,783 4,981,547 Buildings and Equipment 7,491,306 8,382,000 Construction in Progress 616,286 0 Accumulated Depreciation (477,061) (201,635) ----------- ----------- Net Investments in Real Estate 12,641,314 13,161,912 ----------- ----------- Total Assets $13,241,633 $13,409,313 =========== =========== LIABILITIES AND PARTNERS' CAPITAL CURRENT LIABILITIES: Payable to AEI Fund Management, Inc. $ 21,606 $ 14,979 Distributions Payable 300,145 256,847 ----------- ----------- Total Current Liabilities 321,751 271,826 ----------- ----------- PARTNERS' CAPITAL (DEFICIT): General Partners (40,033) (38,746) Limited Partners, $1,000 Unit Value; 24,000 Units authorized; 16,917 Units issued; 16,657 and 16,808 Units outstanding in 2000 and 1999, respectively 12,959,915 13,176,233 ----------- ----------- Total Partners' Capital 12,919,882 13,137,487 ----------- ----------- Total Liabilities and Partners' Capital $13,241,633 $13,409,313 =========== =========== The accompanying Notes to Financial Statements are an integral part of this statement. AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP STATEMENT OF INCOME FOR THE YEARS ENDED DECEMBER 31 2000 1999 INCOME: Rent $ 1,144,982 $ 713,963 Investment Income 80,227 270,895 ----------- ----------- Total Income 1,225,209 984,858 ----------- ----------- EXPENSES: Partnership Administration - Affiliates 164,339 165,419 Partnership Administration and Property Management - Unrelated Parties 29,932 27,348 Depreciation 318,756 184,942 ----------- ----------- Total Expenses 513,027 377,709 ----------- ----------- OPERATING INCOME 712,182 607,149 GAIN ON SALE OF REAL ESTATE 357,720 0 ----------- ----------- NET INCOME $ 1,069,902 $ 607,149 =========== =========== NET INCOME ALLOCATED: General Partners $ 32,097 $ 18,215 Limited Partners 1,037,805 588,934 ----------- ----------- $ 1,069,902 $ 607,149 =========== =========== NET INCOME PER LIMITED PARTNERSHIP UNIT (16,730 and 16,779 weighted average Units outstanding in 2000 and 1999, respectively) $ 62.03 $ 35.10 =========== =========== The accompanying Notes to Financial Statements are an integral part of this statement. AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP STATEMENT OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31 2000 1999 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 1,069,902 $ 607,149 Adjustments To Reconcile Net Income (Loss) To Net Cash Provided By Operating Activities: Depreciation 318,756 184,942 Gain on Sale of Real Estate (357,720) 0 (Increase) Decrease in Receivables (28,040) 46,634 Increase (Decrease) in Payable to AEI Fund Management, Inc. 6,627 (129,826) ----------- ----------- Total Adjustments (60,377) 101,750 ----------- ----------- Net Cash Provided By Operating Activities 1,009,525 708,899 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Investments in Real Estate (1,917,434) (10,303,009) Proceeds from Sale of Real Estate 2,476,996 0 ----------- ----------- Net Cash Provided By (Used For) Investing Activities 559,562 (10,303,009) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Capital Contributions from Limited Partners 0 972,059 Organization and Syndication Costs 0 (143,694) Increase in Distributions Payable 43,298 884 Distributions to Partners (1,170,114) (1,104,251) Redemption Payments (117,393) (89,929) ----------- ----------- Net Cash Used For Financing Activities (1,244,209) (364,931) ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 324,878 (9,959,041) CASH AND CASH EQUIVALENTS, beginning of period 247,401 10,206,442 ----------- ----------- CASH AND CASH EQUIVALENTS, end of period $ 572,279 $ 247,401 =========== =========== The accompanying Notes to Financial Statements are an integral part of this statement. AEI INCOME & GROWTH FUND XXII 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, 1998 $(21,135) $12,917,288 $12,896,153 15,945.16 Capital Contributions 0 972,059 972,059 972.06 Organization & Syndication Costs 0 (143,694) (143,694) Distributions (33,128) (1,071,123) (1,104,251) Redemption Payments (2,698) (87,231) (89,929) (109.04) Net Income 18,215 588,934 607,149 --------- ----------- ----------- ---------- BALANCE, December 31, 1999 (38,746) 13,176,233 13,137,487 16,808.18 Distributions (29,862) (1,140,252) (1,170,114) Redemption Payments (3,522) (113,871) (117,393) (150.86) Net Income 32,097 1,037,805 1,069,902 --------- ----------- ----------- ---------- BALANCE, December 31, 2000 $(40,033) $12,959,915 $12,919,882 16,657.32 ========= =========== =========== ========== The accompanying Notes to Financial Statements are an integral part of this statement. AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 (1) Organization - AEI Income & Growth Fund XXII 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 May 1, 1997 when minimum subscriptions of 1,500 Limited Partnership Units ($1,500,000) were accepted. The offering terminated January 9, 1999 when the extended offering period expired. The Partnership received subscriptions for 16,917.222 Limited Partnership Units ($16,917,222). Under the terms of the Limited Partnership Agreement, the Limited Partners and General Partners contributed funds of $16,917,222 and $1,000, respectively. During operations, any Net Cash Flow, as defined, which the General Partners determine to distribute will be distributed 97% to the Limited Partners and 3% to the General Partners. 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 9% 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 XXII LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 (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 9% 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 The Partnership's cash is deposited primarily in one financial institution and at times during the year it may exceed FDIC insurance limits. AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 (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 rental increases based on 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 will be 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 XXII LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 (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 - The Partnership owns a 40.0% interest in a TGI Friday's restaurant. The remaining interest in this property is owned by AEI Real Estate Fund XVII Limited Partnership, an affiliate of the Partnership. The Partnership owns a 23.0% interest in a Champps Americana restaurant. The remaining interests in this property are owned by AEI Real Estate Fund XVII Limited Partnership, AEI Real Estate Fund XVIII Limited Partnership and AEI Income & Growth Fund XXI Limited Partnership, affiliates of the Partnership. The Partnership owns a 40.0% interest in a Children's World daycare center in Golden, Colorado. The remaining interests in this property are owned by AEI Private Net Lease Fund 1998 Limited Partnership and AEI Private Net Lease Millennium Fund Limited Partnership, affiliates of the Partnership. The Partnership owns a 48.0% interest in a Razzoo's restaurant under construction in Austin, Texas. The remaining interest in this property is owned by AEI Real Estate Fund XV Limited Partnership, AEI Real Estate Fund XVII Limited Partnership and AEI Net Lease Income & Growth Fund XIX Limited Partnership, affiliates of the Partnership. The Partnership owned a 53.0% interest in a Marie Callender's restaurant. The remaining interests in this property are owned by AEI Net Lease Income & Growth Fund XIX Limited Partnership and unrelated third parties. AEI, AFM and AEI Securities, Inc. (ASI) received the following compensation and reimbursements for costs and expenses from the Partnership: Total Incurred by the Partnership for the Years Ended December 31 2000 1999 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. $ 164,339 $ 165,419 ======== ======== AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 (3) Related Party Transactions - (Continued) Total Incurred by the Partnership for the Years Ended December 31 2000 1999 b.AEI and AFM are reimbursed for all direct expenses they have paid on the Partnership's behalf to third parties relating to Partnership administration and property management. These expenses included printing costs, legal and filing fees, direct administrative costs, outside audit and accounting costs, taxes, insurance and other property costs. $ 29,932 $ 27,348 ======== ======== c.AEI is reimbursed for all costs and direct expenses 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 $45,923 and $313,652 for 2000 and 1999, respectively. $(23,489) $(125,292) ======== ======== d.AEI is reimbursed for all costs incurred in connection with the sale of property. $ 95,103 $ 0 ======== ======== e.ASI was the underwriter of the Partnership offering. Robert P. Johnson is the sole stockholder of ASI, which is a member of the National Association of Securities Dealers, Inc. ASI received, as underwriting commissions 8% for sale of certain subscription Units ($80 per unit sold, of which it re-allowed up to $80 per unit to other participating broker/dealers). ASI also received a 2% non-accountable expense allowance for all Units it sold through broker/dealers. These costs are treated as a reduction of partners' capital. $ 0 $ 97,205 ======== ======== f.AEI is reimbursed for all costs incurred in connection with managing the Partnership's offering and organization. $ 0 $ 43,726 ======== ======== AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 (3) Related Party Transactions - (Continued) Total Incurred by the Partnership for the Years Ended December 31 2000 1999 g.AEI is reimbursed for all direct expenses it has paid on the Partnership's behalf to third parties relating to the offering and organization of the Partnership. These expenses included printing costs, legal and filing fees, direct administrative costs, underwriting costs and due diligence fees. $ 0 $ 2,763 ======== ======== The payable to AEI Fund Management, Inc. represents the balance due for the services described in 3a, b, c, d, f and g. This balance is non-interest bearing and unsecured and is to be paid in the normal course of business. (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 15 years, except for the Champps Americana and Arby's restaurants which have Lease terms of 20 years. The Leases contain renewal options which may extend the Lease term an additional 15 years, except the TGI Friday's, Arby's, Razzoo's and Tumbleweed restaurants, which have renewal options that may extend the Lease term an additional 10 years, and the Hollywood Video store in Saraland, Alabama which has renewal options that may extend the Lease term an additional 20 years. The Leases contain rent clauses which entitle the Partnership to receive additional rent in future years based on stated rent increases. The Partnership's properties are all commercial, single- tenant buildings and were constructed and acquired in 1997, 1998, 1999 or 2000. There have been no costs capitalized as improvements subsequent to the acquisition. The cost of the property and related accumulated depreciation at December 31, 2000 are as follows: Buildings and Accumulated Property Land Equipment Total Depreciation TGI Friday's, Greensburg, PA $ 295,020 $ 373,124 $ 668,144 $ 48,743 Hollywood Video, Saraland, AL 369,668 518,956 888,624 40,652 Champps Americana, Centerville, OH 468,050 456,793 924,843 39,435 AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 (4) Investments in Real Estate - (Continued) Buildings and Accumulated Property Land Equipment Total Depreciation Arby's, Homewood, AL 748,169 644,423 1,392,592 51,256 Children's World, Abingdon, MD 208,416 843,356 1,051,772 49,196 Children's World, Houston, TX 124,577 767,642 892,219 44,779 Children's World, Pearland, TX 204,105 739,310 943,415 43,126 Children's World, DePere, WI 100,564 351,447 452,011 20,501 Hollywood Video, Minot, ND 619,597 710,403 1,330,000 41,440 Hollywood Video, Muscle Shoals, AL 600,315 740,311 1,340,626 40,717 Tumbleweed, Fort Wayne, IN 489,027 827,668 1,316,695 52,037 Children's World, Golden, CO 153,973 517,873 671,846 5,179 Razzoo's, Austin, TX 629,302 0 629,302 0 ---------- ---------- ----------- ---------- $5,010,783 $7,491,306 $12,502,089 $ 477,061 ========== ========== =========== ========== On June 29, 1998, the Partnership purchased a parcel of land in Centerville, Ohio for $1,850,988. On August 28, 1998, the Partnership assigned, for diversification purposes, 77% of its interest in the property to three affiliated partnerships. 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 $29,801. Effective December 25, 1998, the annual rent was increased to $44,701. 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 7.0%. 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 $93,256. The Partnership's share of total acquisition costs, including the cost of the land, was $924,843. On November 20, 1998, the Partnership purchased a parcel of land in Homewood, Alabama for $696,000. The land is leased to RTM Alabama, Inc. (RTM) under a Lease Agreement with a primary term of 20 years and annual rental payments of $46,980. Simultaneously with the purchase of the land, the Partnership entered into a Development Financing Agreement under which the Partnership advanced funds to RTM for the construction of an Arby's restaurant on the site. The Partnership charged interest on the advances at a rate of 6.75%. On July 9, 1999, after the development was completed, the Lease Agreement was amended to require annual rental payments of $87,135. Total acquisition costs, including the cost of the land, were $1,392,592. AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 (4) Investments in Real Estate - (Continued) On November 25, 1998, the Partnership purchased a parcel of land in Fort Wayne, Indiana for $470,000. The land is leased to Tumbleweed, Inc. (TWI) under a Lease Agreement with a primary term of 15 years and annual rental payments of $39,950. Effective March 24, 1999, the annual rent was increased to $48,175. Simultaneously with the purchase of the land, the Partnership entered into a Development Financing Agreement under which the Partnership advanced funds to TWI for the construction of a Tumbleweed restaurant on the site. Initially, the Partnership charged interest on the advances at a rate of 8.5%. Effective March 24, 1999, the interest rate was increased to 10.25%. On August 31, 1999, after the development was completed, the Lease Agreement was amended to require annual rental payments of $130,941. Total acquisition costs, including the cost of the land, were $1,316,695. On January 26, 1999, the Partnership purchased a Hollywood Video store in Saraland, Alabama for $1,377,891. The property is leased to Hollywood Entertainment Corp. under a Lease Agreement with a primary term of 15 years and annual rental payments of $129,617. On July 14, 1999, the Partnership purchased four Children's World daycare centers located in Abingdon, Maryland, Houston, Texas, Pearland, Texas and DePere, Wisconsin. The properties were purchased for $1,051,772, $892,219, $943,415 and $1,187,452, respectively. The properties are leased to ARAMARK Educational Resources, Inc. under Lease Agreements with primary terms of 15 years and annual rental payments of $91,677, $79,093, $83,635 and $106,157, respectively. On July 16, 1999, the Partnership purchased a Hollywood Video store in Minot, North Dakota for $1,330,000. The property is leased to Hollywood Entertainment Corporation under a Lease Agreement with a primary term of 15 years and annual rental payments of $129,168. On August 26, 1999, the Partnership purchased a Hollywood Video store in Muscle Shoals, Alabama for $1,340,627. The property is leased to Hollywood Entertainment Corporation under a Lease Agreement with a primary term of 15 years and annual rental payments of $129,659. On September 28, 1999, the Partnership purchased a 53% interest in a Marie Callender's restaurant in Henderson, Nevada for $937,897. The property was leased to Marie Callender Pie Shops, Inc. under a Lease Agreement with a primary term of 15 years and annual rental payments of $85,595. On September 28, 2000, the Partnership purchased a 40% interest in a Children's World daycare center in Golden, Colorado for $671,846. The property is leased to ARAMARK Educational Resources, Inc. under a Lease Agreement with a primary term of 15 years and annual rental payments of $66,344. AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 (4) Investments in Real Estate - (Continued) On May 8, 2000, the Partnership purchased a 48% interest in a parcel of land in Austin, Texas for $652,800. The land is leased to Razzoo's, Inc. (RI) under a Lease Agreement with a primary term of 15 years and annual rental payments of $55,488. Effective October 4, 2000, the annual rent was increased to $63,648. Simultaneously with the purchase of the land, the Partnership entered into a Development Financing Agreement under which the Partnership will advance funds to RI for the construction of a Razzoo's restaurant on the site. Through December 31, 2000, the Partnership had advanced $616,286 for the construction of the property and was charging interest on the advances at a rate of 8.5%. Effective October 4, 2000, the interest rate was increased to 9.75%. The Partnership's share of the total purchase price, including the cost of the land, will be approximately $1,646,000. After the construction is complete, the Lease Agreement will be amended to require annual rental payments of approximately $160,500. During 2000, the Partnership sold 61.9344% of the Children's World in DePere, Wisconsin, in four separate transactions, to unrelated third parties. The Partnership received total net sale proceeds of $845,347, which resulted in a total net gain of $127,553. The total cost and related accumulated depreciation of the interests sold was $735,441 and $17,647, respectively. During 2000, the Partnership sold its interest in the Marie Callender's restaurant, in five separate transactions, to unrelated third parties. The Partnership received total net sale proceeds of $1,035,799, which resulted in a total net gain of $108,736. The total cost and related accumulated depreciation of the interests sold was $937,897 and $10,834, respectively. During 2000, the Partnership sold 35.5084% of the Hollywood Video store in Saraland, Alabama, in three separate transactions, to unrelated third parties. The Partnership received total net sale proceeds of $595,850, which resulted in a total net gain of $121,431. The total cost and related accumulated depreciation of the interests sold was $489,267 and $14,848, respectively. Subsequent to December 31, 2000, the Partnership sold an additional 14.1301% of the Children's World in DePere, Wisconsin to an unrelated third party. The Partnership received net sale proceeds of approximately $179,000, which resulted in a net gain of approximately $19,000. During 2000, the Partnership distributed $262,069 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 $15.54 per Limited Partnership Unit. The remaining net sale proceeds will either be reinvested in additional property or distributed to the Partners in the future. AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 (4) Investments in Real Estate - (Continued) The minimum future rentals on the Lease for years subsequent to December 31, 2000 are as follows: 2001 $ 1,185,225 2002 1,187,380 2003 1,189,559 2004 1,191,763 2005 1,193,991 Thereafter 11,235,463 ----------- $17,183,381 =========== There were no contingent rents recognized in 2000 or 1999. (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: 2000 1999 Tenants Industry Hollywood Entertainment Corporation Retail $ 358,208 $ 225,593 ARAMARK Educational Resources, Inc. Child Care 332,610 167,682 Tumbleweed, Inc. Restaurant 131,814 74,106 Americana Dining Corp. Restaurant N/A 89,862 --------- ---------- Aggregate rent revenue of major tenants $ 822,632 $ 557,243 ========= ========== Aggregate rent revenue of major tenants as a percentage of total rent revenue 72% 78% ========= ========== (6) Partners' Capital - Cash distributions of $33,384 and $35,826 were made to the General Partners and $1,140,252 and $1,071,123 were made to the Limited Partners for the years ended December 31, 2000 and 1999, respectively. The Limited Partners' distributions represent $68.16 and $63.84 per Limited Partnership Unit outstanding using 16,730 and 16,779 weighted average Units in 2000 and 1999, respectively. The distributions represent $55.20 and $29.91 per Unit of Net Income and $12.96 and $33.93 per Unit of return of contributed capital in 2000 and 1999, respectively. AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 (6) Partners' Capital - (Continued) As part of the Limited Partners' distributions discussed above, the Partnership distributed $259,449 of proceeds from property sales in 2000. The distributions reduced the Limited Partner's Adjusted Capital Contribution. 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 2000, seven Limited Partners redeemed a total of 150.86 Partnership Units for $113,871 in accordance with the Partnership Agreement. The Partnership acquired these Units using Net Cash Flow from operations. In 1999, four Limited Partners redeemed a total of 109.04 Partnership Units for $87,231. The redemptions increase the remaining Limited Partner's ownership interest in the Partnership. After the effect of redemptions and the return of capital from the sale of property, the Adjusted Capital Contribution, as defined in the Partnership Agreement, is $1,000.03 per original $1,000 invested. (7) Income Taxes - The following is a reconciliation of net income for financial reporting purposes to income reported for federal income tax purposes for the years ended December 31: 2000 1999 Net Income for Financial Reporting Purposes $1,069,902 $ 607,149 Depreciation for Tax Purposes Under Depreciation for Financial Reporting Purposes 69,271 36,822 Amortization of Start-Up and Organization Costs (89,854) (47,298) Gain on Sale of Real Estate for Tax Purposes Under Gain for Financial Reporting Purposes (10,034) 0 ----------- ----------- Taxable Income to Partners $1,039,285 $ 596,673 =========== =========== AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 (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: 2000 1999 Partners' Capital for Financial Reporting Purposes $12,919,882 $13,137,487 Depreciation for Tax Purposes Under Depreciation for Financial Reporting Purposes 97,907 38,670 Capitalized Start-Up Costs Under Section 195 319,994 346,411 Amortization of Start-Up and Organization Costs (117,221) (53,784) Organization and Syndication Costs Treated as Reduction of Capital for Financial Reporting Purposes 2,424,726 2,424,726 ----------- ----------- Partners' Capital for Tax Reporting Purposes $15,645,288 $15,893,510 =========== =========== (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: 2000 1999 Carrying Fair Carrying Fair Amount Value Amount Value Cash $ 1,764 $ 1,764 $ 1,835 $ 1,835 Money Market Funds 570,515 570,515 245,566 245,566 --------- --------- --------- --------- Total Cash and Cash Equivalents $ 572,279 $ 572,279 $ 247,401 $ 247,401 ========= ========= ========= ========= 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 56, 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, 2001. 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., 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 limited partnerships. Mark E. Larson, age 48, 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, 2001. 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 28, 2001: Name and Address Number of Percent of Beneficial Owner Units Held of Class AEI Fund Management XXI, Inc. 22 * 1300 Minnesota World Trade Center 30 East 7th Street, St. Paul, Minnesota 55101 Robert P. Johnson 0 0% 1300 Minnesota World Trade Center 30 East 7th Street, St. Paul, Minnesota 55101 Mark E. Larson 0 0% 1300 Minnesota World Trade Center 30 East 7th Street, St. Paul, Minnesota 55101 * Less than 1% The persons set forth in the preceding table hold sole voting power and power of disposition with respect to all of the Units set forth opposite their names. The General Partners know of no holders of more than 5% of the outstanding Units. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The registrant, AFM and its affiliates have common management and utilize the same facilities. As a result, certain administrative expenses are allocated among these related entities. All of such activities and any other transactions involving the affiliates of the General Partner of the registrant are governed by, and are conducted in conformity with, the limitations set forth in the Limited Partnership Agreement of the registrant. 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, 2000. Person or Entity Amount Incurred From Receiving Form and Method Inception (July 31, 1996) Compensation of Compensation To December 31, 2000 AEI Securities, Inc. Selling Commissions equal to 8% of proceeds $1,691,722 plus a 2% nonaccountable expense allowance, most of which was reallowed to Participating Dealers. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. (Continued) Person or Entity Amount Incurred From Receiving Form and Method Inception (July 31, 1996) Compensation of Compensation To December 31, 2000 General Partners and Reimbursement at Cost for other $ 762,880 Affiliates Organization and Offering Costs. General Partners and Reimbursement at Cost for all $ 319,410 Affiliates Acquisition Expenses General Partners and Reimbursement at Cost for all $ 687,327 Affiliates Administrative Expenses attributable to the Fund, including all expenses related to management of the Fund's properties and all other transfer agency, reporting, partner relations and other administrative functions. General Partners and Reimbursement at Cost for all expenses $ 95,103 Affiliates related to the disposition of the Fund's properties. General Partners 3% of Net Cash Flow in any fiscal year. $ 96,983 General Partners 1% of distributions of Net Proceeds of $ 2,621 Sale until Limited Partners have received an amount equal to (a) their Adjusted Capital Contributions, plus (b) an amount equal to 9% 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, 2000, 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 on September 13, 1996 [File No. 333-5604]). 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 on August 21, 1997 [File No. 333-5604]). ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND 8-K/A. (Continued) A. Exhibits - Description 10.1 Net Lease Agreement dated December 10, 1997 between the Partnership, and AEI Real Estate Fund XVII Limited Partnership and Ohio Valley Bistros, Inc. relating to the property at #1507, Rural Route #6, Greensburg, Pennsylvania (incorporated by reference to Exhibit 10.1 of Form 8-K filed on December 18, 1997). 10.2 Net Lease Agreement dated June 29, 1998 between the Partnership and Americana Dining Corp. relating to the property at 7880 Washington Village Drive, Centerville, Ohio (incorporated by reference to Exhibit 10.2 of Form 10- QSB filed on July 31, 1998). 10.3 Net Lease Agreement dated November 20, 1998 between the Partnership and RTM Alabama, Inc. relating to the property at 159 State Farm Parkway, Homewood, Alabama (incorporated by reference to Exhibit 10.11 of Form 10-KSB filed on March 12, 1999). 10.4 Net Lease Agreement dated November 25, 1998 between the Partnership and Tumbleweed, Inc. relating to the property at 6040 Lima Road, Fort Wayne, Indiana (incorporated by reference to Exhibit 10.13 of Form 10-KSB filed on March 12, 1999). 10.5 Assignment of Lease Agreement dated January 12, 1999 between the Partnership and Centurion Video, Ltd. relating to the property at 1097 Industrial Parkway, Saraland, Alabama (incorporated by reference to Exhibit 10.14 of Form 10-KSB filed on March 12, 1999). 10.6 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 XXI Limited Partnership and Americana Dining Corp. relating to the property at 7880 Washington Drive, Centerville, Ohio (incorporated by reference to Exhibit 10.15 of Form 10-KSB filed on March 12, 1999). 10.7 Purchase Agreement dated April 19, 1999 between AEI Fund Management, Inc. and NOM Muscle Shoals, Ltd. relating to the property at 1304 Woodward Avenue, Muscle Shoals, Alabama (incorporated by reference to Exhibit 10.2 of Form 10-QSB filed on May 7, 1999). 10.8 Assignment of Purchase Agreement dated April 27, 1999, between the Partnership and AEI Fund Management, Inc. relating to the property at 1700 South Broadway, Minot, North Dakota (incorporated by reference to Exhibit 10.3 of Form 10-QSB filed on May 7, 1999). 10.9 Assignment of Purchase Agreement dated April 27, 1999, between the Partnership and AEI Fund Management, Inc. relating to the property at 1304 Woodward Avenue, Muscle Shoals, Alabama (incorporated by reference to Exhibit 10.4 of Form 10-QSB filed on May 7, 1999). 10.10 First Amendment to Purchase Agreement dated April 27, 1999, between AEI Fund Management, Inc. and NOM Muscle Shoals, Ltd. relating to the property at 1304 Woodward Avenue, Muscle Shoals, Alabama (incorporated by reference to Exhibit 10.5 of Form 10-QSB filed on May 7, 1999). 10.11 Purchase and Sale Agreement and Escrow Instructions dated May 20, 1999 between AEI Fund Management, Inc. and ARAMARK Educational Resources, Inc. relating to the properties at 3325 Trellis Lane, Abingdon, Maryland, 2325 County Road 90, Pearland, Texas, 1553 Arcadian Drive, DePere, Wisconsin, and 18035 Forrest Height Drive, Houston, Texas (incorporated by reference to Exhibit 10.3 of Form 8-K filed on July 26, 1999). 10.12 Assignment of Purchase and Sale Agreement and Escrow Instructions dated June 16, 1999 between the Partnership, AEI Fund Management, Inc. and ARAMARK Educational Resources, Inc. relating to the properties at 3325 Trellis Lane, Abingdon, Maryland, 2325 County Road 90, Pearland, Texas, 1553 Arcadian Drive, DePere, Wisconsin, and 18035 Forrest Height Drive, Houston, Texas (incorporated by reference to Exhibit 10.4 of Form 8-K filed on July 26, 1999). 10.13 Assignment and Assumption of Lease dated June 29, 1999 between the Partnership and Magnum Video I, Inc. relating to the property at 1700 South Broadway, Minot, North Dakota (incorporated by reference to Exhibit 10.9 of Form 8-K filed on July 26, 1999). ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND 8-K/A. (Continued) A. Exhibits - Description 10.14 Net Lease Agreement dated July 14, 1999 between the Partnership and ARAMARK Educational Resources, Inc. relating to the property at 3325 Trellis Lane, Abingdon, Maryland (incorporated by reference to Exhibit 10.5 of Form 8-K filed on July 26, 1999). 10.15 Net Lease Agreement dated July 14, 1999 between the Partnership and ARAMARK Educational Resources, Inc. relating to the property at 2325 County Road 90 Pearland, Texas (incorporated by reference to Exhibit 10.6 of Form 8- K filed on July 26, 1999). 10.16 Net Lease Agreement dated July 14, 1999 between the Partnership and ARAMARK Educational Resources, Inc. relating to the property at 1553 Arcadian Drive, DePere, Wisconsin (incorporated by reference to Exhibit 10.7 of Form 8-K filed on July 26, 1999). 10.17 Net Lease Agreement dated July 14, 1999 between the Partnership and ARAMARK Educational Resources, Inc. relating to the property at 18035 Forrest Height Drive, Houston, Texas (incorporated by reference to Exhibit 10.8 of Form 8-K filed on July 26, 1999). 10.18 Sale and Purchase Agreement and Escrow Instructions dated June 2, 1999 between AEI Fund Management, Inc. and Marie Callender Pie Shops, Inc. relating to the property at Warm Springs Road, Henderson, Nevada (incorporated by reference to Exhibit 10.1 of Form 10-QSB filed on July 30, 1999). 10.19 First Amendment to Sale and Purchase Agreement and Escrow Instructions dated July 8, 1999 between AEI Fund Management, Inc. and Marie Callender Pie Shops, Inc. relating to the property at Warm Springs Road, Henderson, Nevada (incorporated by reference to Exhibit 10.2 of Form 10-QSB filed on July 30, 1999). 10.20 First Amendment to Net Lease Agreement dated July 9, 1999 between the Partnership and RTM Alabama, Inc. relating to the property at 159 State Farm Parkway, Homewood, Alabama (incorporated by reference to Exhibit 10.2 of Form 8-K filed on July 20, 1999). 10.21 Assignment of Purchase and Sale Agreement and Escrow Instructions dated July 23, 1999 between the Partnership, AEI Net Lease Income & Growth Fund XIX Limited Partnership and AEI Fund Management, Inc. and Marie Callender Pie Shops, Inc. relating to the property at Warm Springs Road, Henderson, Nevada (incorporated by reference to Exhibit 10.3 of Form 10-QSB filed on July 30, 1999). 10.22 Assignment of Lease dated August 26, 1999 between the Partnership and NOM Muscle Shoals, Ltd. relating to the property at 1304 Woodward Avenue, Muscle Shoals, Alabama (incorporated by reference to Exhibit 10.11 of Form 10-QSB filed on November 8, 1999). 10.23 First Amendment to Net Lease Agreement dated August 31, 1999, between the Partnership and Tumbleweed, Inc. relating to the property at 6040 Lima Road, Fort Wayne, Indiana (incorporated by reference to Exhibit 10.1 of Form 8-K filed on September 1, 1999). 10.24 Lease Agreement dated September 28, 1999 between the Partnership, AEI Net Lease Income & Growth Fund XIX Limited Partnership and Marie Callender Pie Shops, Inc. relating to the property at 530 North Stephanie Street, Henderson, Nevada (incorporated by reference to Exhibit 10.13 of Form 10-QSB filed on November 8, 1999). 10.25 Purchase Agreement dated February 14, 2000 between the Partnership and George M. Kunitake and Kay H. Kunitake, husband and wife, and Steven T. Kunitake relating to the property at 530 North Stephanie Street, Henderson, Nevada (incorporated by reference to Exhibit 10.32 of Form 10-KSB filed on March 10, 2000). 10.26 Purchase Agreement dated February 28, 2000 between the Partnership and the D & R Family Limited Partnership relating to the property at 1553 Arcadian Drive, DePere, Wisconsin (incorporated by reference to Exhibit 10.33 of Form 10-KSB filed on March 10, 2000). 10.27 Property Co-Tenancy Ownership Agreement dated February 29, 2000 between the Partnership and the D & R Family Limited Partnership relating to the property at 1553 Arcadian Drive, DePere, Wisconsin (incorporated by reference to Exhibit 10.34 of Form 10-KSB filed on March 10, 2000). ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND 8-K/A. (Continued) A. Exhibits - Description 10.28 Purchase Agreement dated February 29, 2000 between the Partnership and George Richard Swanson and Christine Marie Orth relating to the property at 530 North Stephanie Street, Henderson, Nevada (incorporated by reference to Exhibit 10.35 of Form 10-KSB filed on March 10, 2000). 10.29 Purchase Agreement dated March 16, 2000 between the Partnership and George M. Kunitake and Kay H. Kunitake, husband and wife, and Steven T. Kunitake relating to the property at 1553 Arcadian Drive, DePere, Wisconsin (incorporated by reference to Exhibit 10.1 of Form 10-QSB filed on May 5, 2000). 10.30 Property Co-Tenancy Ownership Agreement dated March 24, 2000 between the Partnership and George M. Kunitake and Kay H. Kunitake, husband and wife, and Steven T. Kunitake relating to the property at 1553 Arcadian Drive, DePere, Wisconsin (incorporated by reference to Exhibit 10.2 of Form 10-QSB filed on May 5, 2000). 10.31 Purchase Agreement dated March 27, 2000 between the Partnership and the Carl R. Whittington Trust relating to the property at 1553 Arcadian Drive, DePere, Wisconsin (incorporated by reference to Exhibit 10.3 of Form 10-QSB filed on May 5, 2000). 10.32 Purchase Agreement dated March 27, 2000 between the Partnership and the Carl R. Whittington Trust relating to the property at 530 North Stephanie Street, Henderson, Nevada (incorporated by reference to Exhibit 10.4 of Form 10-QSB filed on May 5, 2000). 10.33 Purchase Agreement dated March 27, 2000 between the Partnership and the Carl R. Whittington Trust relating to the property at 1097 Industrial Parkway, Saraland, Alabama (incorporated by reference to Exhibit 10.5 of Form 10-QSB filed on May 5, 2000). 10.34 Property Co-Tenancy Ownership Agreement dated March 30, 2000 between the Partnership and the Carl R. Whittington Trust relating to the property at 1097 Industrial Parkway, Saraland, Alabama (incorporated by reference to Exhibit 10.6 of Form 10-QSB filed on May 5, 2000). 10.35 Property Co-Tenancy Ownership Agreement dated March 30, 2000 between the Partnership and the Carl R. Whittington Trust relating to the property at 1553 Arcadian Drive, DePere, Wisconsin (incorporated by reference to Exhibit 10.7 of Form 10-QSB filed on May 5, 2000). 10.36 Purchase Agreement dated April 13, 2000 between the Partnership and Francis E. Quinn and Cecile Ann Quinn relating to the property at 530 North Stephanie Street, Henderson, Nevada (incorporated by reference to Exhibit 10.8 of Form 10-QSB filed on May 5, 2000). 10.37 Purchase Agreement dated April 18, 2000 between the Partnership and the Wuest Estate Company relating to the property at 1097 Industrial Parkway, Saraland, Alabama (incorporated by reference to Exhibit 10.9 of Form 10-QSB filed on May 5, 2000). 10.38 Property Co-Tenancy Ownership Agreement dated April 21, 2000 between the Partnership and the Wuest Estate Company relating to the property at 1097 Industrial Parkway, Saraland, Alabama (incorporated by reference to Exhibit 10.10 of Form 10-QSB filed on May 5, 2000). 10.39 Development Financing Agreement dated May 8, 2000 between the Partnership, AEI Real Estate Fund XV Limited Partnership, AEI Real Estate Fund XVII Limited Partnership, AEI Net Lease Income & Growth Fund XIX Limited Partnership and Razzoo's, Inc. relating to the property at 11617 Research Boulevard, Austin, Texas (incorporated by reference to Exhibit 10.1 of Form 10-QSB filed on August 2, 2000). 10.40 Net Lease Agreement dated May 8, 2000 between the Partnership, AEI Real Estate Fund XV Limited Partnership, AEI Real Estate Fund XVII Limited Partnership, AEI Net Lease Income & Growth Fund XIX Limited Partnership and Razzoo's, Inc. relating to the property at 11617 Research Boulevard, Austin, Texas (incorporated by reference to Exhibit 10.2 of Form 10-QSB filed on August 2, 2000). 10.41 Purchase Agreement dated June 1, 2000 between the Partnership, AEI Net Lease Income & Growth Fund XIX Limited Partnership and Grace Noltensmeier relating to the property at 530 North Stephanie Street, Henderson, Nevada (incorporated by reference to Exhibit 10.3 of Form 10-QSB filed on August 2, 2000). ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND 8-K/A. (Continued) A. Exhibits - Description 10.42 Purchase Agreement dated June 22, 2000 between the Partnership and Patricia T. Dixon relating to the property at 1097 Industrial Parkway, Saraland, Alabama (incorporated by reference to Exhibit 10.4 of Form 10-QSB filed on August 2, 2000). 10.43 Property Co-Tenancy Ownership Agreement dated June 30, 2000 between the Partnership and Patricia T. Dixon relating to the property at 1097 Industrial Parkway, Saraland, Alabama (incorporated by reference to Exhibit 10.5 of Form 10-QSB filed on August 2, 2000). 10.44 Purchase Agreement dated August 23, 2000 between the Partnership and Maricopa Land & Cattle Company, Inc. relating to the property at 1553 Arcadian Drive, DePere, Wisconsin (incorporated by reference to Exhibit 10.1 of Form 10-QSB filed on November 7, 2000). 10.45 Property Co-Tenancy Ownership Agreement dated September 12, 2000 between the Partnership and Maricopa Land & Cattle Company, Inc. relating to the property at 1553 Arcadian Drive, DePere, Wisconsin (incorporated by reference to Exhibit 10.2 of Form 10-QSB filed on November 7, 2000). 10.46 Net Lease Agreement dated September 28, 2000 between the Partnership, AEI Private Net Lease Millennium Fund Limited Partnership, AEI Private Net Lease Fund 1998 Limited Partnership and ARAMARK Educational Resources, Inc. relating to the property at 18601 Eagle Ridge, Golden, Colorado (incorporated by reference to Exhibit 10.3 of Form 10-QSB filed on November 7, 2000). 10.47 Purchase Agreement dated January 29, 2001 between the Partnership and Dwight W. and Linda R. Peterson relating to the property at 1553 Arcadian Drive, DePere, Wisconsin. 10.48 Property Co-Tenancy Ownership Agreement dated January 31, 2001 between the Partnership and Dwight W. and Linda R. Peterson relating to the property at 1553 Arcadian Drive, DePere, Wisconsin. 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 XXII Limited Partnership By: AEI Fund Management XXI, Inc. Its Managing General Partner March 9, 2001 By:/s/ Robert P. Johnson Robert P. Johnson, President and Director (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Name Title Date /s/ Robert P. Johnson President (Principal Executive Officer) March 9, 2001 Robert P. Johnson and Sole Director of Managing General Partner /s/ Mark E. Larson Executive Vice President, Treasurer March 9, 2001 Mark E. Larson and Chief Financial Officer (Principal Accounting Officer) EX-10.47 2 ptrsnpa.txt PURCHASE AGREEMENT Children's World - DePere, WI This AGREEMENT, entered into effective as of the 29 of January, 2001. l. PARTIES. Seller is AEI Income & Growth Fund XXII Limited Partnership which owns an undivided 38.0656% interest in the fee title to that certain real property legally described in the attached Exhibit "A" (the "Entire Property") Buyer is Dwight W. Peterson and Linda R. Peterson, married as joint tenants ("Buyer"). Seller wishes to sell and Buyer wishes to buy a portion as Tenant in Common of Seller's interest in the Entire Property. 2. PROPERTY. The Property to be sold to Buyer in this transaction consists of an undivided 14.1301 percentage interest (hereinafter, simply the "Property") as Tenant in Common in the Entire Property. 3. PURCHASE PRICE. The purchase price for this percentage interest in the Entire Property is $200,000 all cash. 4. TERMS. The purchase price for the Property will be paid by Buyer as follows: (a) When this agreement is executed, Buyer will pay $5,000 to Seller (which shall be deposited into escrow according to the terms hereof) (the "First Payment"). The First Payment will be credited against the purchase price when and if escrow closes and the sale is completed. (b) Buyer will deposit the balance of the purchase price, $195,000 (the "Second Payment") into escrow in sufficient time to allow escrow to close on the closing date. 5. CLOSING DATE. Escrow is anticipated to close on or before January 31, 2001. 6. DUE DILIGENCE. Buyer will have until the expiration of the fifth business day (The "Review Period") after delivery of each of following items, to be supplied by Seller, to conduct all of its inspections and due diligence and satisfy itself regarding each item, the Property, and this transaction. Buyer agrees to indemnify and hold Seller harmless for any loss or damage to the Entire Property or persons caused by Buyer or its agents arising out of such physical inspections of the Entire Property. (a) The original and one copy of a title insurance commitment for an Owner's Title insurance policy (see paragraph 8 below). (b) Copies of a Certificate of Occupancy or other such document certifying completion and granting permission to permanently occupy the improvements on the Entire Property as are in Seller's possession. (c) Copies of an "as built" survey of the Entire Property done concurrent with Seller's acquisition of the Property. Buyer Initial:/s/ DWP /s/ LP Purchase Agreement for Children's World, DePere, WI (d) Lease (as further set forth in paragraph 11(a) below) of the Entire Property showing occupancy date, lease expiration date, rent, and Guarantys, if any, accompanied by such tenant financial statements as may have been provided most recently to Seller by the Tenant and/or Guarantors. It is a contingency upon Seller's obligations hereunder that two (2) copies of Co-Tenancy Agreement in the form attached hereto duly executed by Buyer and Seller and dated on escrow closing date be delivered to the Seller on the closing date. Buyer may cancel this agreement for ANY REASON in its sole discretion by delivering a cancellation notice, return receipt requested, to Seller and escrow holder before the expiration of the Review Period. Such notice shall be deemed effective only upon receipt by Seller. If this Agreement is not cancelled as set forth above, the First Payment shall be non-refundable unless Seller shall default hereunder. If Buyer cancels this Agreement as permitted under this Section, except for any escrow cancellation fees and any liabilities under the first paragraph of section 6 of this agreement (which will survive), Buyer (after execution of such documents reasonably requested by Seller to evidence the termination hereof) shall be returned its First Payment, and Buyer will have absolutely no rights, claims or interest of any type in connection with the Property or this transaction, regardless of any alleged conduct by Seller or anyone else. Unless this Agreement is canceled by Buyer pursuant to the terms hereof, if Buyer fails to make the Second Payment, Seller shall be entitled to retain the First Payment and Buyer irrevocably will be deemed to be in default under this Agreement. Seller may, at its option, retain the First Payment and declare this Agreement null and void, in which event Buyer will be deemed to have canceled this Agreement and relinquish all rights in and to the Property or Seller may exercise its rights under Section 14 hereof. If this Agreement is not canceled and the Second Payment is made when required, all of Buyer's conditions and contingencies will be deemed satisfied. 7. ESCROW. Escrow shall be opened by Seller and funds deposited in escrow upon acceptance of this agreement by both parties. The escrow holder will be a nationally recognized escrow company selected by Seller. A copy of this Agreement will be delivered to the escrow holder and will serve as escrow instructions together with the escrow holder's standard instructions and any additional instructions required by the escrow holder to clarify its rights and duties (and the parties agree to sign these additional instructions). If there is any conflict between these other instructions and this Agreement, this Agreement will control. 8. TITLE. Closing will be conditioned on the commitment of a title company selected by Seller to issue an Owner's policy of title insurance, dated as of the close of escrow, in an amount equal to the purchase price, insuring that Buyer will own insurable title to the Property subject only to: the title company's standard exceptions; current real property taxes and assessments; survey exceptions; the rights of parties in possession pursuant to the lease defined in paragraph 11 below; Buyer Initial:/s/ DWP /s/ LP Purchase Agreement for Children's World, DePere, WI all matters of public record as shown in the title commitment; and other items disclosed to Buyer during the Review Period. Buyer shall be allowed five (5) days after receipt of said commitment for examination and the making of any objections to marketability thereto, said objections to be made in writing or deemed waived. If any objections are so made, the Seller shall be allowed eighty (80) days to make such title marketable or in the alternative to obtain a commitment for insurable title insuring over Buyer's objections. If Seller shall decide to make no efforts to make title marketable, or is unable to make title marketable or obtain insurable title, (after execution by Buyer of such documents reasonably requested by Seller to evidence the termination hereof) Buyer's First Payment shall be returned and this Agreement shall be null and void and of no further force and effect. Pending correction of title, the payments hereunder required shall be postponed, but upon correction of title and within ten (10) days after written notice of correction to the Buyer, the parties shall perform this Agreement according to its terms. 9. CLOSING COSTS. Seller will pay one-half of escrow fees, the cost of the title commitment and any brokerage commissions payable. The Buyer will pay the cost of issuing a Standard Owners Title Insurance Policy in the full amount of the purchase price, if Buyer shall decide to purchase the same. Buyer will pay all recording fees, one-half of the escrow fees, and the cost of an update to the Survey in Sellers possession (if an update is required by Buyer.) Each party will pay its own attorney's fees and costs to document and close this transaction. 10. REAL ESTATE TAXES, SPECIAL ASSESSMENTS AND PRORATIONS. (a) Because the Entire Property (of which the Property is a part) is subject to a triple net lease (as further set forth in paragraph 11(a)(i), the parties acknowledge that there shall be no need for a real estate tax proration. However, Seller represents that to the best of its knowledge, all real estate taxes and installments of special assessments due and payable in all years prior to the year of Closing have been paid in full. Unpaid real estate taxes and unpaid levied and pending special assessments for the year of Closing shall be the responsibility of Buyer and Seller in proportion to their respective Tenant in Common interests, pro-rated, however, to the date of closing for the period prior to closing, which shall be the responsibility of Seller if Tenant shall not pay the same. Seller and Buyer shall likewise pay all taxes due and payable in the year after Closing and any unpaid installments of special assessments payable therewith and thereafter, if such unpaid levied and pending special assessments and real estate taxes are not paid by any tenant of the Entire Property. (b) All income and all operating expenses from the Entire Property shall be prorated between the parties and adjusted by them as of the date of Closing. Seller shall be entitled to all income earned and shall be responsible for all expenses incurred prior to the date of Closing, and Buyer shall be entitled to its proportionate share of all income earned and shall be responsible for its proportionate share of all operating expenses of the Entire Property incurred on and after the date of closing. Buyer Initial:/s/ DWP /s/ LP Purchase Agreement for Children's World, DePere, WI 11. SELLER'S REPRESENTATION AND AGREEMENTS. (a) Seller represents and warrants as of this date that: (i) Except for the Net Lease Agreement in existence between AEI Income & Growth Fund XXII Limited Partnership and ARAMARK Educational Resources, Inc., f/k/a Children's World Learning Centers, Inc., dated July 14, 1999, Seller is not aware of any leases of the Property. (ii) It is not aware of any pending litigation or condemnation proceedings against the Property or Seller's interest in the Property. (iii) Except as previously disclosed to Buyer and as set forth in paragraph (b) below, Seller is not aware of any contracts Seller has executed that would be binding on Buyer after the closing date. (b) Provided that Buyer performs its obligations when required, Seller agrees that it will not enter into any new contracts that would materially affect the Property and be binding on Buyer after the Closing Date without Buyer's prior consent, which will not be unreasonably withheld. However, Buyer acknowledges that Seller retains the right both prior to and after the Closing Date to freely transfer all or a portion of Seller's remaining undivided interest in the Entire Property, provided such sale shall not encumber the Property being purchased by Buyer in violation of the terms hereof or the contemplated Co-Tenancy Agreement. 12. DISCLOSURES. (a) To the best of Seller's knowledge: there are now, and at the Closing there will be, no material, physical or mechanical defects of the Property, including, without limitation, the plumbing, heating, air conditioning, ventilating, electrical systems, and all such items are in good operating condition and repair and in compliance with all applicable governmental, zoning and land use laws, ordinances, regulations and requirements. (b) To the best of Seller's knowledge: the use and operation of the Property now is, and at the time of Closing will be, in full compliance with applicable building codes, safety, fire, zoning, and land use laws, and other applicable local, state and federal laws, ordinances, regulations and requirements. (c) Seller knows of no facts nor has Seller failed to disclose to Buyer any fact known to Seller which would prevent Buyer from using and operating the Property after the Closing in the manner in which the Property has been used and operated prior to the date of this Agreement. (d) To the best of Seller's knowledge: the Property is not, and as of the Closing will not be, in violation of any federal, state or local law, ordinance or regulations relating to industrial hygiene or to the environmental conditions on, under, or about the Property including, but Buyer Initial:/s/ DWP /s/ LP Purchase Agreement for Children's World, DePere, WI not limited to, soil and groundwater conditions. To the best of Seller's knowledge: there is no proceeding or inquiry by any governmental authority with respect to the presence of Hazardous Materials on the Property or the migration of Hazardous Materials from or to other property. Buyer agrees that Seller will have no liability of any type to Buyer or Buyer's successors, assigns, or affiliates in connection with any Hazardous Materials on or in connection with the Property either before or after the Closing Date, except as provided under applicable state or federal laws or regulations. (e) BUYER AGREES THAT IT SHALL BE PURCHASING THE PROPERTY IN ITS THEN PRESENT CONDITION, AS IS, WHERE IS, AND SELLER HAS NO OBLIGATIONS TO CONSTRUCT OR REPAIR ANY IMPROVEMENTS THEREON OR TO PERFORM ANY OTHER ACT REGARDING THE PROPERTY, EXCEPT AS EXPRESSLY PROVIDED HEREIN. (F) BUYER ACKNOWLEDGES THAT, HAVING BEEN GIVEN THE OPPORTUNITY TO INSPECT THE PROPERTY AND SUCH FINANCIAL INFORMATION ON THE LESSEE AND GUARANTORS OF THE LEASE AS BUYER OR ITS ADVISORS SHALL REQUEST, BUYER IS RELYING SOLELY ON ITS OWN INVESTIGATION OF THE PROPERTY AND NOT ON ANY INFORMATION PROVIDED BY SELLER OR TO BE PROVIDED EXCEPT AS SET FORTH HEREIN. BUYER FURTHER ACKNOWLEDGES THAT THE INFORMATION PROVIDED AND TO BE PROVIDED BY SELLER WITH RESPECT TO THE PROPERTY AND TO THE LESSEE AND GUARANTORS OF LEASE WAS OBTAINED FROM A VARIETY OF SOURCES AND SELLER NEITHER (A) HAS MADE INDEPENDENT INVESTIGATION OR VERIFICATION OF SUCH INFORMATION, OR (B) MAKES ANY REPRESENTATIONS AS TO THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. THE SALE OF THE PROPERTY AS PROVIDED FOR HEREIN IS MADE ON AN "AS IS" BASIS, AND BUYER EXPRESSLY ACKNOWLEDGES THAT, IN CONSIDERATION OF THE AGREEMENTS OF SELLER HEREIN, EXCEPT AS OTHERWISE SPECIFIED HEREIN, SELLER MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, OR ARISING BY OPERATION OF LAW, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTY OR CONDITION, HABITABILITY, TENANTABILITY, SUITABILITY FOR COMMERCIAL PURPOSES, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE, IN RESPECT OF THE PROPERTY. The provisions (d) - (f) above shall survive closing. 13. CLOSING. (a) Before the closing date, Seller will deposit into escrow an executed limited warranty deed conveying insurable title of the Property to Buyer, subject to the encumbrances contained in paragraph 8 above. (b) On or before the closing date, Buyer will deposit into escrow: the balance of the purchase price when required under Section 4; any additional funds required of Buyer, (pursuant to this agreement or any other agreement executed by Buyer) to close escrow. Both parties will sign and deliver to the escrow holder any other documents reasonably required by the escrow holder to close escrow. Buyer Initial:/s/ DWP /s/ LP Purchase Agreement for Children's World, DePere, WI (c) On the closing date, if escrow is in a position to close, the escrow holder will: record the deed in the official records of the county where the Property is located; cause the title company to commit to issue the title policy; immediately deliver to Seller the portion of the purchase price deposited into escrow by cashier's check or wire transfer (less debits and prorations, if any); deliver to Seller and Buyer a signed counterpart of the escrow holder's certified closing statement and take all other actions necessary to close escrow. 14. DEFAULTS. If Buyer defaults, Buyer will forfeit all rights and claims and Seller will be relieved of all obligations and will be entitled to retain all monies heretofore paid by the Buyer. In addition, Seller shall retain all remedies available to Seller at law or in equity. If Seller shall default, Buyer irrevocably waives any rights to file a lis pendens, a specific performance action or any other claim, action or proceeding of any type in connection with the Property or this or any other transaction involving the Property, and will not do anything to affect title to the Property or hinder, delay or prevent any other sale, lease or other transaction involving the Property (any and all of which will be null and void), unless: it has paid the First Payment, deposited the balance of the Second Payment for the purchase price into escrow, performed all of its other obligations and satisfied all conditions under this Agreement, and unconditionally notified Seller that it stands ready to tender full performance, purchase the Property and close escrow as per this Agreement, regardless of any alleged default or misconduct by Seller. Provided, however, that in no event shall Seller be liable for any punitive, consequential or speculative damages arising out of any default by Seller hereunder. 15. BUYER'S REPRESENTATIONS AND WARRANTIES. a. Buyer represents and warrants to Seller as follows: (i) In addition to the acts and deeds recited herein and contemplated to be performed, executed, and delivered by Buyer, Buyer shall perform, execute and deliver or cause to be performed, executed, and delivered at the Closing or after the Closing, any and all further acts, deeds and assurances as Seller or the Title Company may require and be reasonable in order to consummate the transactions contemplated herein. (ii) Buyer has all requisite power and authority to consummate the transaction contemplated by this Agreement and has by proper proceedings duly authorized the execution and delivery of this Agreement and the consummation of the transaction contemplated hereby. (iii) To Buyer's knowledge, neither the execution and delivery of this Agreement nor the consummation of the transaction contemplated hereby will violate or be in conflict with (a) any applicable provisions of law, (b) any order of any court or other agency of government having jurisdiction hereof, or (c) any agreement or instrument to which Buyer is a party or by which Buyer is bound. Buyer Initial:/s/ DWP /s/ LP Purchase Agreement for Children's World, DePere, WI 16. DAMAGES, DESTRUCTION AND EMINENT DOMAIN. (a) If, prior to closing, the Property or any part thereof is destroyed or further damaged by fire, the elements, or any cause, due to events occurring subsequent to the date of this Agreement to the extent that the cost of repair exceeds $10,000.00, this Agreement shall become null and void, at Buyer's option exercised, if at all, by written notice to Seller within ten (10) days after Buyer has received written notice from Seller of said destruction or damage. Seller, however, shall have the right to adjust or settle any insured loss until (i) all contingencies set forth in Paragraph 6 hereof have been satisfied, or waived; and (ii) any ten-day period provided for above in this Subparagraph 16a for Buyer to elect to terminate this Agreement has expired or Buyer has, by written notice to Seller, waived Buyer's right to terminate this Agreement. If Buyer elects to proceed and to consummate the purchase despite said damage or destruction, there shall be no reduction in or abatement of the purchase price, and Seller shall assign to Buyer the Seller's right, title, and interest in and to all insurance proceeds (pro-rata in relation to the Entire Property) resulting from said damage or destruction to the extent that the same are payable with respect to damage to the Property, subject to rights of any Tenant of the Entire Property. If the cost of repair is less than $10,000.00, Buyer shall be obligated to otherwise perform hereinunder with no adjustment to the Purchase Price, reduction or abatement, and Seller shall assign Seller's right, title and interest in and to all insurance proceeds pro-rata in relation to the Entire Property, subject to rights of any Tenant of the Entire Property. (b) If, prior to closing, the Property, or any part thereof, is taken by eminent domain, this Agreement shall become null and void, at Buyer's option. If Buyer elects to proceed and to consummate the purchase despite said taking, there shall be no reduction in, or abatement of, the purchase price, and Seller shall assign to Buyer the Seller's right, title, and interest in and to any award made, or to be made, in the condemnation proceeding pro-rata in relation to the Entire Property, subject to rights of any Tenant of the Entire Property. In the event that this Agreement is terminated by Buyer as provided above in Subparagraph 16a or 16b, the First Payment shall be immediately returned to Buyer (after execution by Buyer of such documents reasonably requested by Seller to evidence the termination hereof). 17. BUYER'S 1031 TAX FREE EXCHANGE. While Seller acknowledges that Buyer is purchasing the Property as "replacement property" to accomplish a tax free exchange, Buyer acknowledges that Seller has made no representations, warranties, or agreements to Buyer or Buyer's agents that the transaction contemplated by the Agreement will qualify for such tax treatment, nor has there been any reliance thereon by Buyer respecting the legal or tax implications of the Buyer Initial:/s/ DWP /s/ LP Purchase Agreement for Children's World, DePere, WI transactions contemplated hereby. Buyer further represents that it has sought and obtained such third party advice and counsel, as it deems necessary in regards to the tax implications of this transaction. Buyer wishes to novate/assign the ownership rights and interest of this Purchase Agreement to Equity Title Exchange which will act as Accommodator to perfect the 1031 exchange by preparing an agreement of exchange of Real Property whereby Equity Title Exchange will be an independent third party purchasing the ownership interest in subject property from Seller and selling the ownership interest in subject property to Buyer under the same terms and conditions as documented in this Purchase Agreement. Seller consents to such assignments. Buyer asks the Seller, and Seller agrees to cooperate in the perfection of such an exchange if at no additional cost or expense to Seller or delay in time. Buyer hereby indemnifies and holds Seller harmless from any claims and/or actions resulting from said exchange. Pursuant to the direction of Equity Title Exchange, Seller will deed the Property directly to Buyer. 18. CANCELLATION If any party elects to cancel this Contract because of any breach by another party or because escrow fails to close by the agreed date, the party electing to cancel shall deliver to escrow agent a notice containing the address of the party in breach and stating that this Contract shall be cancelled unless the breach is cured within 10 days following the delivery of the notice to the escrow agent. Within three days after receipt of such notice, the escrow agent shall send it by United States Mail to the party in breach at the address contained in the Notice and no further notice shall be required. If the breach is not cured within the 10 days following the delivery of the notice to the escrow agent, this Contract shall be cancelled. 19. MISCELLANEOUS. (a) This Agreement may be amended only by written agreement signed by both Seller and Buyer, and all waivers must be in writing and signed by the waiving party. Time is of the essence. This Agreement will not be construed for or against a party whether or not that party has drafted this Agreement. If there is any action or proceeding between the parties relating to this Agreement the prevailing party will be entitled to recover attorney's fees and costs. This is an integrated agreement containing all agreements of the parties about the Property and the other matters described, and it supersedes any other agreements or understandings. Exhibits attached to this Agreement are incorporated into this Agreement. (b) If this escrow has not closed by January 31, 2001, through no fault of Seller, Seller may either, at its election, extend the closing date or exercise any remedy available to it by law, including terminating this Agreement. (c) Funds to be deposited or paid by Buyer must be good and clear funds in the form of cash, cashier's checks or wire transfers. Buyer Initial:/s/ DWP /s/ LP Purchase Agreement for Children's World, DePere, WI (d) All notices from either of the parties hereto to the other shall be in writing and shall be considered to have been duly given or served if sent by first class certified mail, return receipt requested, postage prepaid, or by a nationally recognized courier service guaranteeing overnight delivery to the party at his or its address set forth below, or to such other address as such party may hereafter designate by written notice to the other party. If to Seller: AEI Income & Growth Fund XXII Limited Partnership 1300 Minnesota World Trade Center 30 E. 7th Street St. Paul, MN 55101 If to Buyer: Dwight W. Peterson Linda R. Peterson 1344 WildHorse Point address Saratoga Springs, Utah 84043 city, state When accepted, this offer will be a binding agreement for valid and sufficient consideration which will bind and benefit Buyer, Seller and their respective successors and assigns. Buyer is submitting this offer by signing a copy of this offer and delivering it to Seller. Seller has five (5) business days from receipt within which to accept this offer. REST OF PAGE INTENTIONALLY LEFT BLANK Buyer Initial:/s/ DWP /s/ LP Purchase Agreement for Children's World, DePere, WI IN WITNESS WHEREOF, the Seller and Buyer have executed this Agreement effective as of the day and year above first written. BUYER: Peterson By:/s/ Dwight W Peterson Dwight W. Peterson By:/s/ Linda R Peterson Linda R. Peterson WITNESS: /s/ Daniel L Whittenburg Daniel L Whittenburg (Print Name) SELLER: AEI Income & Growth Fund XXII Limited Partnership, a Minnesota limited partnership By: AEI Fund Management XXI, Inc., its corporate general partner By:/s/ Robert P Johnson Robert P. Johnson, President WITNESS: /s/ Heather A Garcia Heather A Garcia (Print Name) EXHIBIT "A" LEGAL DESCRIPTION All of Lot One (1) of Volume 34 Certified Survey Maps, Page 125, Brown County Records, and is located in part of Government Lots 1 and 2, Section Thirty-five (35) and part of Government Lot 1 and part of the Southeast One-quarter of the Northeast, One-quarter (SE 1/4 - NE 1/4), Section Thirty-four (34), all being in Township Twenty-three (23) North, Range Twenty (20) East, in the Town of Ledgeview, Brown County, Wisconsin. and Part of Lot One (1) of Volume 30 Certified Survey Maps, Page 71, Brown County Records, being part of Government Lots 1 and 2, Section Thirty-five (35), Township Twenty-three (23) North, Range Twenty (20) East, in the Town of Ledgeview, Brown County, Wisconsin, more fully described as follows: Commencing at the West 1/4 corner, Section 35, T23N, R20E; thence N01 36' 23" West, 1763.33 feet along the West line of said Section 35, to the South right-of- way of Heritage Road, also known as C.T.H. "X"'; thence N89 02'44" East, 82.54 feet along said right-of-way to the point of beginning; thence N89 02'44" East 53.61 feet along said right-of-way; thence 167.98 feet along said right-of-way, being the arc of a 1095.92 foot radius curve to the right, whose long chord bears S86 33'48" East, 167.82 feet; thence S1 36' 23" East, 539.93 feet along the East line of Lot 1, Volume 30 Certified Survey Maps, Page 71, Brown County Records, to the North right-of-way of Swan Road; thence S88 33' 16" West, 220.77 feet along said right-of-way; thence N 1 36' 23" West, 554.67 feet along the East line of Lot 1, Volume 34 Certified Survey Maps, Page 125, Brown County Records, to the point of beginning. Tax Parcel No. D-50-1 and D-84-1 Arcadian Lane/Heritage Road De Pere, WI 54115 EX-10.48 3 ptrsonco.txt PROPERTY CO-TENANCY OWNERSHIP AGREEMENT (Children's World - DePere, WI) THIS CO-TENANCY AGREEMENT, Made and entered into as of the 31 day of January, 2001, by and between Dwight W. Peterson and Linda R. Peterson, married as joint tenants (hereinafter called "Peterson") and AEI Income & Growth Fund XXII Limited Partnership (hereinafter called "Fund XXII") (Peterson, Fund XXII (and any other Owner in Fee where the context so indicates) being hereinafter sometimes collectively called "Co-Tenants" and referred to in the neuter gender). WITNESSETH: WHEREAS, Fund XXII presently owns an undivided 23.9355% interest in and to, and Peterson presently owns an undivided 14.1301% interest in and to, and J. W. Gieszl presently owns an undivided 13.1881% interest in and to, and Carl R.Whittington, presently owns an undivided 14.8036% interest in and to, George M. Kunitake and Kay H. Kunitake, and Steven T. Kunitake, presently own an undivided 16.7323% interest in and to, and D & R Family Limited Partnership presently owns an undivided 17.2104% in and to the land situated in the City of DePere, County of Brown and State of WI, (legally described upon Exhibit A attached hereto and hereby made a part hereof) and in and to the improvements located thereon (hereinafter called "Premises"); WHEREAS, The parties hereto wish to provide for the orderly operation and management of the Premises and Peterson's interest by Fund XXII; the continued leasing of space within the Premises; for the distribution of income from and the pro-rata sharing in expenses of the Premises. NOW THEREFORE, in consideration of the purchase by Peterson of an undivided interest in and to the Premises, for at least One Dollar ($1.00) and other good and valuable consideration by the parties hereto to one another in hand paid, the receipt and sufficiency of which are hereby acknowledged, and of the mutual covenants and agreements herein contained, it is hereby agreed by and between the parties hereto, as follows: 1. The operation and management of the Premises shall be delegated to Fund XXII, or its designated agent, successors or assigns. Provided, however, if Fund XXII shall sell all of its interest in the Premises, the duties and obligations of Fund XXII respecting management of the Premises as set forth herein, including but not limited to paragraphs 2, 3, and 4 hereof, shall be exercised by the holder or holders of a majority undivided co- tenancy interest in the Premises. Except as hereinafter expressly provided to the contrary, each of the parties hereto agrees to be bound by the decisions of Fund XXII with respect to all administrative, operational and management matters of the property comprising the Premises, including but not limited to the management of the net lease agreement for the Premises. The parties hereto hereby designate Fund XXII as their sole and exclusive agent to deal with, and Fund XXII retains the sole right to deal with, any property agent or tenant and to monitor, execute and enforce the terms of leases of space within the Premises, including but not limited to any amendments, consents Co-Tenant Initial: /s/ DWP /s/ LP Co-Tenancy Agreement for Children's World, DePere, WI to assignment, sublet, releases or modifications to leases or guarantees of lease or easements affecting the Premises, on behalf of Peterson. As long as Fund XXII owns an interest in the Premises, only Fund XXII may obligate Peterson with respect to any expense for the Premises. As further set forth in paragraph 2 hereof, Fund XXII agrees to require any lessee of the Premises to name Peterson as an insured or additional insured in all insurance policies provided for, or contemplated by, any lease on the Premises. Fund XXII shall use its best efforts to obtain endorsements adding Co-Tenants to said policies from lessee within 30 days of commencement of this agreement. In any event, Fund XXII shall distribute any insurance proceeds it may receive, to the extent consistent with any lease on the Premises, to the Co-Tenants in proportion to their respective ownership of the Premises. 2. Income and expenses shall be allocated among the Co-Tenants in proportion to their respective share(s) of ownership. Shares of net income shall be pro-rated for any partial calendar years included within the term of this Agreement. Fund XXII may offset against, pay to itself and deduct from any payment due to Peterson under this Agreement, and may pay to itself the amount of Peterson's share of any legitimate expenses of the Premises which are not paid by Peterson to Fund XXII or its assigns, within ten (10) days after demand by Fund XXII. In the event there is insufficient operating income from which to deduct Peterson's unpaid share of operating expenses, Fund XXII may pursue any and all legal remedies for collection. Operating Expenses shall include all normal operating expense, including but not limited to: maintenance, utilities, supplies, labor, management, advertising and promotional expenses, salaries and wages of rental and management personnel, leasing commissions to third parties, a monthly accrual to pay insurance premiums, real estate taxes, installments of special assessments and for structural repairs and replacements, management fees, legal fees and accounting fees, but excluding all operating expenses paid by Tenant under terms of any lease agreement of the Premises. Peterson has no requirement to, but has, nonetheless elected to retain, and agrees to annually reimburse, Fund XXII in the amount of $525.00 for the expenses, direct and indirect, incurred by Fund XXII in providing Peterson with quarterly accounting and distributions of Peterson's share of net income and for tracking, reporting and assessing the calculation of Peterson's share of operating expenses incurred from the Premises. This invoice amount shall be pro-rated for partial years and Peterson authorizes Fund XXII to deduct such amount from Peterson 's share of revenue from the Premises. Peterson may terminate this agreement in this paragraph respecting accounting and distributions at any time and attempt to collect its share of rental income directly from the tenant; however, enforcement of all other provisions of the lease remains the sole right of Fund XXII pursuant to Section 1 hereof. Fund XXII may terminate its obligation under this paragraph upon 30 days notice to Peterson prior to the end of each anniversary hereof, unless agreed in writing to the contrary. 3. Full, accurate and complete books of account shall be kept in accordance with generally accepted accounting principles at Fund XXII's principal office, and each Co-Tenant shall have access to such books and may inspect and copy any part thereof during normal business hours. Within ninety (90) days after the end of each calendar year during the term hereof, Fund XXII shall Co-Tenant Initial: /s/ DWP /s/ LP Co-Tenancy Agreement for Children's World, DePere, WI prepare an accurate income statement for the ownership of the Premises for said calendar year and shall furnish copies of the same to all Co-Tenants. Quarterly, as its share, Peterson shall be entitled to receive 14.1301% of all items of income and expense generated by the Premises. Upon receipt of said accounting, if the payments received by each Co-Tenant pursuant to this Paragraph 3 do not equal, in the aggregate, the amounts which each are entitled to receive proportional to its share of ownership with respect to said calendar year pursuant to Paragraph 2 hereof, an appropriate adjustment shall be made so that each Co-Tenant receives the amount to which it is entitled. 4. If Net Income from the Premises is less than $0.00 (i.e., the Premises operates at a loss), or if capital improvements, repairs, and/or replacements, for which adequate reserves do not exist, need to be made to the Premises, the Co-Tenants, upon receipt of a written request therefor from Fund XXII, shall, within fifteen (15) business days after receipt of notice, make payment to Fund XXII sufficient to pay said net operating losses and to provide necessary operating capital for the premises and to pay for said capital improvements, repairs and/or replacements, all in proportion to their undivided interests in and to the Premises. 5. Co-Tenants may, at any time, sell, finance, or otherwise create a lien upon their interest in the Premises but only upon their interest and not upon any part of the interest held, or owned, by any other Co-Tenant. All Co-Tenants reserve the right to escrow proceeds from a sale of their interests in the Premises to obtain tax deferral by the purchase of replacement property. 6. If any Co-Tenant shall be in default with respect to any of its obligations hereunder, and if said default is not corrected within thirty (30) days after receipt by said defaulting Co- Tenant of written notice of said default, or within a reasonable period if said default does not consist solely of a failure to pay money, the remaining Co-Tenant(s) may resort to any available remedy to cure said default at law, in equity, or by statute. 7. This Co-Tenancy Agreement shall continue in full force and effect and shall bind and inure to the benefit of the Co-Tenant and their respective heirs, executors, administrators, personal representatives, successors and permitted assigns until July 14, 2029 or upon the sale of the entire Premises in accordance with the terms hereof and proper disbursement of the proceeds thereof, whichever shall first occur. Unless specifically identified as a personal contract right or obligation herein, this agreement shall run with any interest in the Property and with the title thereto. Once any person, party or entity has ceased to have an interest in fee in any portion of the Entire Property, it shall not be bound by, subject to or benefit from the terms hereof; but its heirs, executors, administrators, personal representatives, successors or assigns, as the case may be, shall be substituted for it hereunder. 8. Any notice or election required or permitted to be given or served by any party hereto to, or upon any other, shall be deemed given or served in accordance with the provisions of this Agreement, if said notice or elections addressed as follows; Co-Tenant Initial: /s/ DWP /s/ LP Co-Tenancy Agreement for Children's World, DePere, WI If to Fund XXII: AEI Income & Growth Fund XXII Limited Partnership 1300 Minnesota World Trade Center 30 E. Seventh Street St. Paul, Minnesota 55101 If to Peterson: Dwight W. Peterson Linda R. Peterson 1344 Wildhorse address Saratoga Springs, UT 84043 city, state If to Maricopa: Mr. J.W. Gieszl, President Maricopa Land & Cattle Company, Inc. 5724 E. Exeter Boulevard Phoenix, AZ 85018 If to Whittington: Carl R. Whittington, Trustee 1440 Elm Grove Avenue Akron, OH 44312 If to Kunitake: George M. and Kay H. Kunitake Steven T. Kunitake 153 Exeter San Carlos, CA 94070 If to D & R: Robert DeKlotz, Partner D & R Family Limited Partnership 1760 E. North Hills Drive LaHabra, CA 90631 Co-Tenant Initial: /s/ DWP /s/ LP Co-Tenancy Agreement for Children's World, DePere, WI Each mailed notice or election shall be deemed to have been given to, or served upon, the party to which addressed on the date the same is deposited in the United States certified mail, return receipt requested, postage prepaid, or given to a nationally recognized courier service guaranteeing overnight delivery as properly addressed in the manner above provided. Any party hereto may change its address for the service of notice hereunder by delivering written notice of said change to the other parties hereunder, in the manner above specified, at least ten (10) days prior to the effective date of said change. 9. This Agreement shall not create any partnership or joint venture among or between the Co-Tenants or any of them, and the only relationship among and between the Co-Tenants hereunder shall be that of owners of the premises as tenants in common subject to the terms hereof. 10. The unenforceability or invalidity of any provision or provisions of this Agreement as to any person or circumstances shall not render that provision, nor any other provision hereof, unenforceable or invalid as to any other person or circumstances, and all provisions hereof, in all other respects, shall remain valid and enforceable. 11. In the event any litigation arises between the parties hereto relating to this Agreement, or any of the provisions hereof, the party prevailing in such action shall be entitled to receive from the losing party, in addition to all other relief, remedies and damages to which it is otherwise entitled, all reasonable costs and expenses, including reasonable attorneys' fees, incurred by the prevailing party in connection with said litigation. REST OF PAGE INTENTIONALLY LEFT BLANK Co-Tenant Initial: /s/ DWP /s/ LP Co-Tenancy Agreement for Children's World, DePere, WI IN WITNESS WHEREOF, The parties hereto have caused this Agreement to be executed and delivered, as of the day and year first above written. Peterson: By: /s/ Dwight W Peterson Dwight W. Peterson By: /s/ Linda R Peterson Linda R. Peterson WITNESS: /s/ Daniel L Whittenburg Daniel L Whittenburg (Print Name) State of UTAH) ) ss. County of SALT LAKE) I, a Notary Public in and for the state and county of aforesaid, hereby certify there appeared before me this 23 day of January, 2001, Dwight W. Peterson and Linda R. Peterson, married as joint tenants, who executed the foregoing instrument in said capacity. /s/ J Randall Richards Notary Public [notary seal] Co-Tenant Initial: /s/ DWP /s/ LP Co-Tenancy Agreement for Children's World, DePere, WI Fund XXII: AEI Income & Growth Fund XXII Limited Partnership By: AEI Fund Management XXI, Inc., its corporate general partner By: /s/ Robert P Johnson Robert P. Johnson, President WITNESS: /s/ Jill Rayburn Jill Rayburn (Print Name) State of Minnesota ) ) ss. County of Ramsey ) I, a Notary Public in and for the state and county of aforesaid, hereby certify there appeared before me this 29 day of January, 2001, Robert P. Johnson, President of AEI Fund Management XXI Inc., corporate general partner of AEI Income & Growth Fund XXII Limited Partnership, who executed the foregoing instrument in said capacity and on behalf of the corporation in its capacity as corporate general partner, on behalf of said limited partnership. /s/ Heather A Garcia Notary Public [notary seal] Co-Tenant Initial: /s/ DWP /s/ LP Co-Tenancy Agreement for Children's World, DePere, WI EXHIBIT "A" LEGAL DESCRIPTION All of Lot One (1) of Volume 34 Certified Survey Maps, Page 125, Brown County Records, and is located in part of Government Lots 1 and 2, Section Thirty-five (35) and part of Government Lot 1 and part of the Southeast One-quarter of the Northeast, One-quarter (SE 1/4 - NE 1/4), Section Thirty-four (34), all being in Township Twenty-three (23) North, Range Twenty (20) East, in the Town of Ledgeview, Brown County, Wisconsin. and Part of Lot One (1) of Volume 30 Certified Survey Maps, Page 71, Brown County Records, being part of Government Lots 1 and 2, Section Thirty-five (35), Township Twenty-three (23) North, Range Twenty (20) East, in the Town of Ledgeview, Brown County, Wisconsin, more fully described as follows: Commencing at the West 1/4 corner, Section 35, T23N, R20E; thence N01 36' 23" West, 1763.33 feet along the West line of said Section 35, to the South right-of- way of Heritage Road, also known as C.T.H. "X"'; thence N89 02'44" East, 82.54 feet along said right-of-way to the point of beginning; thence N89 02'44" East 53.61 feet along said right-of-way; thence 167.98 feet along said right-of-way, being the arc of a 1095.92 foot radius curve to the right, whose long chord bears S86 33'48" East, 167.82 feet; thence S1 36' 23" East, 539.93 feet along the East line of Lot 1, Volume 30 Certified Survey Maps, Page 71, Brown County Records, to the North right-of-way of Swan Road; thence S88 33' 16" West, 220.77 feet along said right-of-way; thence N 1 36' 23" West, 554.67 feet along the East line of Lot 1, Volume 34 Certified Survey Maps, Page 125, Brown County Records, to the point of beginning. Tax Parcel No. D-50-1 and D-84-1 Arcadian Lane/Heritage Road De Pere, WI 54115 -----END PRIVACY-ENHANCED MESSAGE-----