-----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, M29hFeFx+9vWOD2IszihBBl0RrkOV+rb5/UpVMzjcmF3d/5eWDjLUS7P/DkPAtAV jM1WR7AOpYZJ8NLphPfpqg== 0000840459-97-000007.txt : 19970520 0000840459-97-000007.hdr.sgml : 19970520 ACCESSION NUMBER: 0000840459-97-000007 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AEI INCOME & GROWTH FUND XXI LTD PARTNERSHIP CENTRAL INDEX KEY: 0000931755 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 411789725 STATE OF INCORPORATION: MN FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 033-85076 FILM NUMBER: 97606930 BUSINESS ADDRESS: STREET 1: 1300 MINNESOTA WORLD TRADE CENTER STREET 2: 30 EAST SEVENTH ST CITY: ST PAUL STATE: MN ZIP: 55101 BUSINESS PHONE: 6122277333 MAIL ADDRESS: STREET 1: 1300 MINNESOTA WORLD TRADE CENTER STREET 2: 30 EAST SEVENTH STREET CITY: ST PAUL STATE: MN ZIP: 55101 10QSB 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB Quarterly Report Under Section 13 or 15(d) of The Securities Exchange Act of 1934 For the Quarter Ended: March 31, 1997 Commission file number: 33-85076C AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP (Exact Name of Small Business Issuer as Specified in its Charter) State of Minnesota 41-1789725 (State or other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 1300 Minnesota World Trade Center, St. Paul, Minnesota 55101 (Address of Principal Executive Offices) (612) 227-7333 (Issuer's telephone number) Not Applicable (Former name, former address and former fiscal year, if changed since last report) 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 preceding 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 Transitional Small Business Disclosure Format: Yes No [X] AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP INDEX PART I. Financial Information Item 1. Balance Sheet as of March 31, 1997 and December 31, 1996 Statements for the Periods ended March 31, 1997 and 1996: Income Cash Flows Changes in Partners' Capital Notes to Financial Statements Item 2. Management's Discussion and Analysis PART II. Other Information Item 1. Legal Proceedings Item 2. Changes in Securities Item 3. Defaults Upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP BALANCE SHEET MARCH 31, 1997 AND DECEMBER 31, 1996 (Unaudited) ASSETS 1997 1996 CURRENT ASSETS: Cash and Cash Equivalents $ 9,413,611 $10,729,033 Receivables 40,272 41,672 ----------- ----------- Total Current Assets 9,453,883 10,770,705 ----------- ----------- INVESTMENTS IN REAL ESTATE: Land 4,095,968 2,541,511 Buildings and Equipment 5,836,545 5,079,924 Construction in Progress 159,853 0 Construction Advances 643,688 1,621,870 Property Acquisition Costs 286,775 245,726 Accumulated Depreciation (216,975) (162,645) ----------- ----------- Net Investments in Real Estate 10,805,854 9,326,386 ----------- ----------- Total Assets $20,259,737 $20,097,091 =========== =========== LIABILITIES AND PARTNERS' CAPITAL CURRENT LIABILITIES: Payable to AEI Fund Management, Inc. $ 82,526 $ 132,900 Distributions Payable 478,335 429,668 Unearned Rent 47,936 0 ----------- ----------- Total Current Liabilities 608,797 562,568 ----------- ----------- PARTNERS' CAPITAL (DEFICIT): General Partners (12,363) (9,754) Limited Partners, $1,000 Unit Value; 24,000 Units authorized; 24,000 and 23,563 Units issued and outstanding in 1997 and 1996, respectively 19,663,303 19,544,277 ----------- ----------- Total Partners' Capital 19,650,940 19,534,523 ----------- ----------- Total Liabilities and Partners' Capital $20,259,737 $20,097,091 =========== =========== The accompanying Notes to Financial Statements are an integral part of this statement. AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP STATEMENT OF INCOME FOR THE PERIODS ENDED MARCH 31 (Unaudited) 1997 1996 INCOME: Rent $ 184,159 $ 58,478 Investment Income 165,451 117,857 ----------- ----------- Total Income 349,610 176,335 ----------- ----------- EXPENSES: Partnership Administration - Affiliates 51,705 58,242 Partnership Administration and Property Management - Unrelated Parties 22,615 7,834 Depreciation 54,330 14,766 ----------- ----------- Total Expenses 128,650 80,842 ----------- ----------- NET INCOME $ 220,960 $ 95,493 =========== =========== NET INCOME ALLOCATED: General Partners $ 2,210 $ 955 Limited Partners 218,750 94,538 ----------- ----------- $ 220,960 $ 95,493 =========== =========== NET INCOME PER LIMITED PARTNERSHIP UNIT (23,854 and 13,228 weighted average Units outstanding in 1997 and 1996, respectively) $ 9.17 $ 7.15 =========== =========== The accompanying Notes to Financial Statements are an integral part of this statement. AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP STATEMENT OF CASH FLOWS FOR THE PERIODS ENDED MARCH 31 (Unaudited) 1997 1996 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 220,960 $ 95,493 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation 54,330 14,766 (Increase) Decrease in Receivables 1,400 (68,959) Increase (Decrease) in Payable to AEI Fund Management, Inc. (50,374) 9,790 Increase in Unearned Rent 47,936 0 ----------- ----------- Total Adjustments 53,292 (44,403) ----------- ----------- Net Cash Provided By Operating Activities 274,252 51,090 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Investments in Real Estate (1,533,798) (3,563,427) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Capital Contributions from Limited Partners 436,651 2,812,724 Organization and Syndication Costs (59,286) (352,120) Increase in Distributions Payable 48,667 63,875 Distributions to Partners (481,908) (266,144) ----------- ----------- Net Cash Provided By (Used For) Financing Activities (55,876) 2,258,335 ----------- ----------- NET DECREASE IN CASH AND CASH EQUIVALENTS (1,315,422) (1,254,002) CASH AND CASH EQUIVALENTS, beginning of period 10,729,033 8,367,460 ----------- ----------- CASH AND CASH EQUIVALENTS, end of period $ 9,413,611 $ 7,113,458 =========== =========== The accompanying Notes to Financial Statements are an integral part of this statement. AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP STATEMENT OF CHANGES IN PARTNERS' CAPITAL FOR THE PERIODS ENDED MARCH 31 (Unaudited) Limited Partnership General Limited Units Partners Partners Total Outstanding BALANCE, December 31, 1995 $ (4,832) $10,291,351 $10,286,519 12,289.81 Capital Contributions 0 2,812,724 2,812,724 2,812.72 Organization and Syndication Costs 0 (352,120) (352,120) Distributions (2,662) (263,482) (266,144) Net Income 955 94,538 95,493 --------- ----------- ----------- ----------- BALANCE, March 31, 1996 $ (6,539) $12,583,011 $12,576,472 15,102.53 ========= =========== =========== =========== BALANCE, December 31, 1996 $ (9,754) $19,544,277 $19,534,523 23,563.35 Capital Contributions 0 436,651 436,651 436.65 Organization and Syndication Costs 0 (59,286) (59,286) Distributions (4,819) (477,089) (481,908) Net Income 2,210 218,750 220,960 --------- ----------- ----------- ----------- BALANCE, March 31, 1997 $ (12,363) $19,663,303 $19,650,940 24,000.00 ========= =========== =========== =========== The accompanying Notes to Financial Statements are an integral part of this statement. AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS MARCH 31, 1997 (Unaudited) (1) The condensed statements included herein have been prepared by the Partnership, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission, and reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results of operations for the interim period, on a basis consistent with the annual audited statements. The adjustments made to these condensed statements consist only of normal recurring adjustments. Certain information, accounting policies, and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Partnership believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the summary of significant accounting policies and notes thereto included in the Partnership's latest annual report on Form 10-KSB. (2) Organization - AEI Income & Growth Fund XXI Limited Partnership (Partnership) was formed to acquire and lease commercial properties to operating tenants. The Partnership's operations are managed by AEI Fund Management XXI, Inc. (AFM), the Managing General Partner of the Partnership. Robert P. Johnson, the President and sole shareholder of AFM, serves as the Individual General Partner of the Partnership. An affiliate of AFM, AEI Fund Management, Inc., performs the administrative and operating functions for the Partnership. The terms of the Partnership offering call for a subscription price of $1,000 per Limited Partnership Unit, payable on acceptance of the offer. The Partnership commenced operations on April 14, 1995 when minimum subscriptions of 1,500 Limited Partnership Units ($1,500,000) were accepted. On January 31, 1997, the Partnership offering terminated when the maximum subscription limit of 24,000 Limited Partnership Units ($24,000,000) was reached. Under the terms of the Limited Partnership Agreement, the Limited Partners and General Partners contributed funds of $24,000,000 and $1,000, respectively. During the operation of the Partnership, any Net Cash Flow, as defined, which the General Partners determine to distribute will be distributed 90% to the Limited Partners and 10% to the General Partners; provided, however, that such distributions to the General Partners will be subordinated to the Limited Partners first receiving an annual, noncumulative distribution of Net Cash Flow equal to 10% of their Adjusted Capital Contribution, as defined, and, provided further, that in no event will the General Partners receive less than 1% of such Net Cash Flow per annum. Distributions to Limited Partners will be made pro rata by Units. AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (Continued) (2) Organization - (Continued) Any Net Proceeds of Sale, as defined, from the sale or financing of the Partnership's properties which the General Partners determine to distribute will, after provisions for debts and reserves, be paid in the following manner: (i) first, 99% to the Limited Partners and 1% to the General Partners until the Limited Partners receive an amount equal to: (a) their Adjusted Capital Contribution plus (b) an amount equal to 10% of their Adjusted Capital Contribution per annum, cumulative but not compounded, to the extent not previously distributed from Net Cash Flow; (ii) any remaining balance will be distributed 90% to the Limited Partners and 10% to the General Partners. Distributions to the Limited Partners will be made pro rata by Units. For tax purposes, profits from operations, other than profits attributable to the sale, exchange, financing, refinancing or other disposition of the Partnership's property, will be allocated first in the same ratio in which, and to the extent, Net Cash Flow is distributed to the Partners for such year. Any additional profits will be allocated 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. For tax purposes, profits arising from the sale, financing, or other disposition of the Partnership's property will be allocated in accordance with the Partnership Agreement as follows: (i) first, to those partners with deficit balances in their capital accounts in an amount equal to the sum of such deficit balances; (ii) second, 99% to the Limited Partners and 1% to the General Partners until the aggregate balance in the Limited Partners' capital accounts equals the sum of the Limited Partners' Adjusted Capital Contributions plus an amount equal to 10% of their Adjusted Capital Contributions per annum, cumulative but not compounded, to the extent not previously allocated; (iii) third, the balance of any remaining gain will then be allocated 90% to the Limited Partners and 10% to the General Partners. Losses will be allocated 98% to the Limited Partners and 2% to the General Partners. The General Partners are not required to currently fund a deficit capital balance. Upon liquidation of the Partnership or withdrawal by a General Partner, the General Partners will contribute to the Partnership an amount equal to the lesser of the deficit balances in their capital accounts or 1% of total Limited Partners' and General Partners' capital contributions. AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (Continued) (3) Investments in Real Estate - The Partnership leases its properties to various tenants through non-cancelable triple net leases, which are classified as operating leases. Under a triple net lease, the lessee is responsible for all real estate taxes, insurance, maintenance, repairs and operating expenses of the property. The initial Lease terms are 20 years. The Leases contain renewal options which may extend the Lease term an additional 10 years for the Arby's restaurant, an additional 15 years for the Champps Americana and Denny's restaurants, and an additional 25 years for the Garden Ridge store. The Leases contain rent clauses which entitle the Partnership to receive additional rent in future years based on stated rent increases. Certain lessees have been granted options to purchase the property. Depending on the lease, the purchase price is either determined by a formula, or is the greater of the fair market value of the property or the amount determined by a formula. In all cases, if the option were to be exercised by the lessee, the purchase price would be greater than the original cost of the property. The Partnership's properties are all commercial, single- tenant buildings. The cost of the property and related accumulated depreciation at March 31, 1997 are as follows: Buildings and Accumulated Property Land Equipment Total Depreciation Arby's Montgomery, AL $ 328,310 $ 425,794 $ 754,104 $ 31,225 Media Play Apple Valley, MN 422,776 991,284 1,414,060 54,295 Garden Ridge Pineville, NC 1,181,253 2,463,138 3,644,391 98,525 Champps Americana Columbus, OH 609,172 1,199,708 1,808,880 31,495 Denny's Covington, LA 522,158 756,621 1,278,779 1,435 Champps Americana San Antonio, TX 1,032,299 0 1,032,299 0 ----------- ----------- ----------- ----------- $ 4,095,968 $ 5,836,545 $ 9,932,513 $ 216,975 =========== =========== =========== =========== AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (Continued) (3) Investments in Real Estate - (Continued) On December 21, 1995, the Partnership purchased a 34.0% interest in a Media Play retail store in Apple Valley, Minnesota for $1,414,060. The property was leased to The Musicland Group, Inc. under a Lease Agreement with a primary term of 18 years and annual rental payments of $139,587. The remaining interest in the property was purchased by AEI Net Lease Income & Growth Fund XIX Limited Partnership and AEI Net Lease Income & Growth Fund XX Limited Partnership, affiliates of the Partnership. In December, 1996, the Partnership and MGI reached an agreement in which MGI would buy out and terminate the Lease Agreement by making a payment of $800,000, which is equal to approximately two years' rent. The Partnership's share of such payment was $272,000. Under the Agreement, MGI remained in possession of the property and performed all of its obligations under the net lease agreement through January 31, 1997 at which time it vacated the property and made it available for re-let to another tenant. MGI was responsible for all maintenance and management costs of the property through January31, 1997 after which date the Partnership became responsible for its share of expenses associated with the property until it is re-let or sold. A specialist in commercial property leasing has been retained to locate a new tenant for the property. On March 28, 1996, the Partnership purchased a 40.75% interest in a Garden Ridge store in Pineville, North Carolina for $3,644,391. The property is leased to Garden Ridge, L.P. under a Lease Agreement with a primary term of 20 years and annual rental payments of $383,973. The remaining interest in the property was purchased by AEI Net Lease Income & Growth Fund XIX Limited Partnership and AEI Net Lease Income & Growth Fund XX Limited Partnership, affiliates of the Partnership. On August 29, 1996, the Partnership purchased a 67.8% interest in a Champps Americana restaurant in Columbus, Ohio for $1,808,880. The property is leased to Americana Dining Corporation under a Lease Agreement with a primary term of 20 years and annual rental payments of $191,259. The remaining interest in the property was purchased by AEI Real Estate Fund XVIII Limited Partnership, an affiliate of the Partnership. On March 14, 1997, the Partnership purchased a parcel of land in San Antonio, Texas for $1,032,299. The land is leased to Champps Americana, Inc. (Champps) under a Lease Agreement with a primary term of 20 years and annual rental payments of $83,451. The Partnership also entered into a Development Financing Agreement under which the Partnership will advance funds to Champps for the construction of a Champps Americana restaurant on the site. The Partnership is charging interest on the advances at a rate of 7.0%. The total purchase price, including the cost of the land, will be approximately $2,804,000. After the contruction is complete, the Lease Agreement will be amended to require annual rental payments of approximately $300,000. On March 19, 1997, the Partnership purchased a Denny's restaurant in Covington, Louisiana for $1,278,779. The property is leased to Huntington Restaurants Group, Inc. under a Lease Agreement with a primary term of 20 years and annual rental payments of $141,243. AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (Continued) (3) Investments in Real Estate - (Continued) On April 21, 1997, the Partnership purchased a 49.6% interest in a parcel of land in Schaumburg, Illinois for approximately $876,000. The land is leased to Champps under a Lease Agreement with a primary term of 20 years and annual rental payments of approximately $67,000. The Partnership also entered into a Development Financing Agreement under which the Partnership will advance funds to Champps for the construction of a Champps Americana restaurant on the site. The Partnership is charging interest on the advances at a rate of 7.0%. The total purchase price, including the cost of the land, will be approximately $2,128,000. After the construction is complete, the Lease Agreement will be amended to require annual rental payments of approximately $229,000. The remaining interests in the property are owned by AEI Income & Growth Fund XXI Limited Partnership and Net Lease Income & Growth Fund 84-A Limited Partnership, affiliates of the Partnership. In August, 1996, the Partnership entered into an agreement to purchase a 93.1% interest in a Caribou Coffee store in Charlotte, North Carolina. The purchase price will be approximately $1,274,000. The property will be leased to Caribou Coffee Company, Inc. under a Lease Agreement with a primary term of 18 years and annual rental payments of approximately $146,000. Through March 31, 1997, the Partnership had advanced $643,688 for the construction of the property and was charging interest on the Note at the rate of 7.0%. Effective March 7, 1997, the Partnership began charging interest on the Note at the rate of 11.5%. The Partnership has incurred net costs of $446,670 relating to the review of potential property acquisitions. Of these costs, $159,895 have been capitalized and allocated to land, building and equipment. The remaining costs of $286,775 have been capitalized and will be allocated to property acquisitions in future periods. (4) Payable to AEI Fund Management, Inc. - AEI Fund Management, Inc. performs the administrative and operating functions for the Partnership. The payable to AEI Fund Management represents the balance due for those services. This balance is non-interest bearing and unsecured and is to be paid in the normal course of business. ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS Results of Operations For the three months ended March 31, 1997 and 1996, the Partnership recognized rental income of $184,159 and $58,478, respectively. During the same periods, the Partnership also earned $165,451 and $117,857, respectively, in investment income from subscriptions proceeds which were invested in short-term money market accounts, commercial paper and federal agency notes. This investment income constituted 47% and 67%, respectively, of total income for the periods. The percentage of total income represented by investment income declines as subscription proceeds are invested in properties. ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) Musicland Group, Inc. (MGI), the lessee of the Media Play retail store in Apple Valley, Minnesota has recently experienced financial difficulties and has aggressively been restructuring its organization. As part of the restructuring, the Partnership and MGI reached an agreement in December, 1996 in which MGI would buy out and terminate the Lease Agreement by making a payment of $800,000, which is equal to approximately two years' rent. The Partnership's share of such payment was $272,000. Under the Agreement, MGI remained in possession of the property and performed all of its obligations under the net lease agreement through January 31, 1997 at which time it vacated the property and made it available for re-let to another tenant. MGI was responsible for all maintenance and management costs of the property through January 31, 1997 after which date the Partnership became responsible for its share of expenses associated with the property until it is re-let or sold. A specialist in commercial property leasing has been retained to locate a new tenant for the property. During the three months ended March 31, 1997 and 1996, the Partnership paid Partnership administration expenses to affiliated parties of $51,705 and $58,242, respectively. These administration expenses include initial start-up costs and expenses associated with processing distributions, reporting requirements and correspondence to the Limited Partners. The administrative expenses decrease after completion of the offering and acquisition phases of the Partnership's operations. During the same periods, the Partnership incurred Partnership administration and property management expenses from unrelated parties of $22,615 and $7,834, respectively. These expenses represent direct payments to third parties for legal and filing fees, direct administrative costs, outside audit and accounting costs, insurance and other property costs. The Partnership distributes all of its net income during the offering and acquisition phases, and if net income after deductions for depreciation is not sufficient to fund the distributions, the Partnership may distribute other available cash that constitutes capital for accounting purposes. As of March 31, 1997, the Partnership's cash distribution rate was 8.0% on an annualized basis. Distributions of Net Cash Flow to the General Partners are subordinated to the Limited Partners as required in the Partnership Agreement. As a result, 99% of distributions were allocated to Limited Partners and 1% 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 to rent 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 The Partnership's primary sources of cash will be proceeds from the sale of Units, investment income, rental income and proceeds from the sale of property. Its primary uses of cash will be investment in real properties, payment of expenses involved in the sale of units, the organization of the Partnership, the management of properties, the administration of the Partnership, and the payment of distributions. ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) The Partnership Agreement requires that no more than 15% of the proceeds from the sale of Units be applied to expenses involved in the sale of Units (including Commissions) and that such expenses, together with acquisition expenses, not exceed 20% of the proceeds from the sale of Units. As set forth under the caption "Estimated Use of Proceeds" of the Prospectus, the General Partners anticipate that 14% of such proceeds will be applied to cover organization and offering expenses if the maximum proceeds are obtained. To the extent organization and offering expenses actually incurred exceed 15% of proceeds, they are borne by the General Partners. During the offering of Units, the Partnership's primary source of cash flow will be from the sale of Limited Partnership Units. The Partnership offered for sale up to $24,000,000 of limited partnership interests (the "Units") (24,000 Units at $1,000 per Unit) pursuant to a registration statement effective February 1, 1995. From February1, 1995 to April 14, 1995, the minimum number of Limited Partnership Units (1,500) needed to form the Partnership were sold and on April 14, 1995, a total of 2,937.444 Units ($2,937,444) were transferred into the Partnership. On January 31, 1997, the Partnership offering terminated when the maximum subscription limit of 24,000 Limited Partnership Units ($24,000,000) was reached. From subscription proceeds, the Partnership paid organization and syndication costs (which constitute a reduction of capital) of $3,308,276. Before the acquisition of properties, cash flow from operating activities is not significant. Net income, after adjustment for depreciation, is lower during the first few years of operations as administrative expenses remain high and a large amount of the Partnership's assets remain invested on a short- term basis in lower-yielding cash equivalents. Net income will become the largest component of cash flow from operating activities and the largest component of cash flow after the completion of the acquisition phase. The Partnership Agreement requires that all proceeds from the sale of Units be invested or committed to investment in properties by the later of two years after the date of the Prospectus or six months after termination of the offer and sale of Units. While the Partnership is purchasing properties, cash flow from investing activities (investment in real property) will remain negative and will constitute the principal use of the Partnership's available cash flow. On March 28, 1996, the Partnership purchased a 40.75% interest in a Garden Ridge store in Pineville, North Carolina for $3,644,391. The property is leased to Garden Ridge, L.P. under a Lease Agreement with a primary term of 20 years and annual rental payments of $383,973. The remaining interest in the property was purchased by AEI Net Lease Income & Growth Fund XIX Limited Partnership and AEI Net Lease Income & Growth Fund XX Limited Partnership, affiliates of the Partnership. On August 29, 1996, the Partnership purchased a 67.8% interest in a Champps Americana restaurant in Columbus, Ohio for $1,808,880. The property is leased to Americana Dining Corporation under a Lease Agreement with a primary term of 20 years and annual rental payments of $191,259. The remaining interest in the property was purchased by AEI Real Estate Fund XVIII Limited Partnership, an affiliate of the Partnership. ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) On March 14, 1997, the Partnership purchased a parcel of land in San Antonio, Texas for $1,032,299. The land is leased to Champps Americana, Inc. (Champps) under a Lease Agreement with a primary term of 20 years and annual rental payments of $83,451. The Partnership also entered into a Development Financing Agreement under which the Partnership will advance funds to Champps for the construction of a Champps Americana restaurant on the site. The Partnership is charging interest on the advances at a rate of 7.0%. The total purchase price, including the cost of the land, will be approximately $2,804,000. After the contruction is complete, the Lease Agreement will be amended to require annual rental payments of approximately $300,000. On March 19, 1997, the Partnership purchased a Denny's restaurant in Covington, Louisiana for $1,278,779. The property is leased to Huntington Restaurants Group, Inc. under a Lease Agreement with a primary term of 20 years and annual rental payments of $141,243. On April 21, 1997, the Partnership purchased a 49.6% interest in a parcel of land in Schaumburg, Illinois for approximately $876,000. The land is leased to Champps under a Lease Agreement with a primary term of 20 years and annual rental payments of approximately $67,000. The Partnership also entered into a Development Financing Agreement under which the Partnership will advance funds to Champps for the construction of a Champps Americana restaurant on the site. The Partnership is charging interest on the advances at a rate of 7.0%. The total purchase price, including the cost of the land, will be approximately $2,128,000. After the construction is complete, the Lease Agreement will be amended to require annual rental payments of approximately $229,000. The remaining interests in the property are owned by AEI Income & Growth Fund XXI Limited Partnership and Net Lease Income & Growth Fund 84-A Limited Partnership, affiliates of the Partnership. In August, 1996, the Partnership entered into an agreement to purchase a 93.1% interest in a Caribou Coffee store in Charlotte, North Carolina. The purchase price will be approximately $1,274,000. The property will be leased to Caribou Coffee Company, Inc. under a Lease Agreement with a primary term of 18 years and annual rental payments of approximately $146,000. Through March 31, 1997, the Partnership had advanced $643,688 for the construction of the property and was charging interest on the Note at the rate of 7.0%. Effective March 7, 1997, the Partnership began charging interest on the Note at the rate of 11.5%. After completion of the acquisition phase, 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. 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. As of March 31, 1997, the Partnership has not acquired any Units from Limited Partners. ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) Until capital is invested in properties, the Partnership will remain extremely liquid. At March 31, 1997, $9,453,883 or 47% of the Partnership's assets were in cash or cash equivalents (including accrued interest receivable). After completion of property acquisitions, the Partnership will attempt to maintain a cash reserve of only approximately 1% of subscription proceeds. Because properties are purchased for cash and leased under triple- net leases, this is considered adequate to satisfy most contingencies. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS There are no material pending legal proceedings to which the Partnership is a party or of which the Partnership's property is subject. ITEM 2. CHANGES IN SECURITIES None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5. OTHER INFORMATION None. PART II - OTHER INFORMATION (Continued) ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits - Description 10.1 Development Financing Agreement dated April 21, 1997 between the Partnership, AEI Net Lease Income & Growth Fund XX Limited Partnership, Net Lease Income & Growth Fund 84-A Limited Partnership and Champps Americana, Inc. relating to the property at 955 Golf Road, Schaumburg, Illinois. 10.2 Net Lease Agreement dated April 21, 1997 between the Partnership, AEI Net Lease Income & Growth Fund XX Limited Partnership, Net Lease Income & Growth Fund 84-A Limited Partnership and Champps Americana, Inc. relating to the property at 955 Golf Road, Schaumburg, Illinois. 27 Financial Data Schedule for period ended March 31, 1997. b. Reports filed on Form 8-K - During the quarter ended March 31, 1997, the Partnership filed a Form 8-K, dated March 25, 1997, reporting the acquisition of land in San Antonio, Texas and the acquisition of a Denny's restaurant in Covington, Louisiana. SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: May 13, 1997 AEI Income & Growth Fund XXI Limited Partnership By: AEI Fund Management XXI, Inc. Its: Managing General Partner By: /s/ Robert P Johnson Robert P. Johnson President (Principal Executive Officer) By: /s/ Mark E Larson Mark E. Larson Chief Financial Officer (Principal Accounting Officer) EX-10.1 2 DEVELOPMENT FINANCING AGREEMENT THIS AGREEMENT, made and entered into effective as of this 21 day of April, 1997, by and between Champps Americana, Inc. ("Lessee"), whose address is 55 Ferncroft Road, Danvers, Massachuttets 01923-4001, and AEI Income & Growth Fund XXI Limited Partnership, AEI Net Lease Income & Growth Fund XX Limited Partnership, and Net Lease Income & Growth Fund 84-A Limited Partnership ("Lessor"), whose address is Suite 1300, World Trade Center, Saint Paul, Minnesota 55102. W I T N E S S E T H, that: WHEREAS, Lessee is contemplating building on the premises described in Exhibit "A" attached hereto the following Improvements : Construction of an approximately 8,600 square foot building and improvements to be used as a Champps Restaurant. WHEREAS, Lessee has made application to Lessor for development financing to defray the costs of constructing such Improvements; WHEREAS, Lessor's Assignor has issued to Lessee its Development Financing and Leasing Commitment to advance funds in the amount hereinafter specified, subject to compliance with the terms and conditions of this Development Financing Agreement and the Net Lease Agreement (the "Lease") of even date herewith; NOW, THEREFORE, in consideration of entering into the Lease and other good and valuable consideration, the receipt of which is hereby acknowledged by the parties hereto, the parties hereto agree as follows: ARTICLE I DEFINITIONS For purposes of this Agreement, the following terms shall have the following meanings: 1. "Application" shall mean Lessee's application to the Lessor for the Development Financing the terms and conditions of which are incorporated herein by reference. 2. "Architect's Contract" shall mean Lessee's contract with the Project Architect. 3. "Commitment" shall mean Lessor's Commitment to Lessee agreeing to provide the Development Financing. (The "Development Financing and Leasing Commitment" dated April 21, 1997.) 4. "Completion Date" shall mean midnight, February 1, 1998, subject to Force Majeure, as defined herein. 5. "Construction Costs" shall mean land costs, all costs paid to construct and complete the Improvements, as specified on Exhibit "B" attached hereto and made a part hereof. 6. "Construction Contracts" shall mean the contracts between Lessee and Contractors for the furnishing of labor, services or materials to the Leased Premises in connection with the construction of the Improvements. 7. "Contractors" shall mean those firms directly engaged by Lessee to construct the Improvements, whether one or more. 8. "Contract Documents" shall mean the Project Architect's Contract, Plans and Specifications and the contract with the Contractor. 9. "Development Financing" shall mean the funds to be made available pursuant to the Commitment and not to exceed the lesser of the Construction Costs or the maximum loan amount of Four Million Two Hundred Ninety Thousand Dollars ($4,290,000) as specified in the Commitment. 10. "Development Financing and Carrying Charges" shall mean all fees, taxes and charges incurred under the Development Financing and in the construction of the Improvements including, but not limited to, non-refundable commitment fees; interest charges, service and inspection fees, attorney's fees, title insurance fees and charges, recording fees and insurance premiums. 11. "Development Financing Documents" shall mean this Agreement, the Lease, Assignment of Architects and Construction Contracts, Guarantees, and such other documents given to the Lessor as security for the Development Financing. 12. "LTIC-CDD" shall mean Lawyers Title Insurance Corporation, Construction Disbursement Department, the nationally recognized title insurer, or Lessor's in-house designee, to be LTIC-CDD under the Development Financing Disbursement Agreement executed by and between the parties of even date herewith. 13. "Final Disbursement Date" shall mean the date of the final disbursement of the Development Financing provided hereunder. 14. "Improvements" shall mean the structures and other improvements to be constructed on the Leased Premises in accordance with the Plans and Specifications. 15. "Initial Disbursed Funds" shall mean those funds disbursed on the Closing Date for land acquisition and related soft costs upon Lessor's acquisition of the Leased Premises. 16. "Inspecting Architect" shall mean the architect, if any, hired by Lessor to perform inspections of the premises. An Inspecting Architect may only be engaged by Lessor in the event of a default relating to construction of the Improvements under the Development Financing Documents. 17. "Leased Premises" shall mean the real property described in the Exhibit "A" attached to this Agreement, together with all Improvements, equipment and fixtures thereon. 18. "Lessee Equity" shall mean the final Construction Costs less the amount of the Development Financing. 19. "Plans and Specifications" shall mean the plans and specifications prepared by the Project Architect who shall be licensed in the jurisdiction of the Leased Premises and selected by Lessee. 20. "Project" shall mean the construction of the Improvements on the Leased Premises. 21. "Project Architect" shall mean the architect retained by Lessee to design and supervise construction of the Improvements. 22. "Rental Modification Date" shall mean a date one hundred and eighty days (180) from the date hereof. 23. "Sub-Contractors" shall mean those persons furnishing labor or materials for the Project pursuant to the Sub- Contracts. 24. "Sub-Contracts" shall mean the contracts between the Contractor and its materialmen and mechanics in the furnishing of labor or materials for the Project. 25. "Title" shall mean Lawyers Title Insurance Corporation issuing the Lessor's fee owner's title insurance policy. ARTICLE II THE DEVELOPMENT FINANCING Subject to compliance with the provisions of this Agreement, Lessor agrees to advance to Lessee, and Lessee agrees to request from Lessor, the Development Financing. The Development Financing shall be advanced in stages by Lessor to LTIC-CDD and disbursed by LTIC-CDD pursuant to the provisions of Article VIII hereof. The Development Financing, or so much thereof as has been advanced hereunder, shall bear interest at the rate and shall be repaid in accordance with the terms hereof and the Lease. The proceeds of the Development Financing shall be used exclusively for the purposes of defraying Construction Costs. ARTICLE III N/A ARTICLE IV CONSTRUCTION OF IMPROVEMENTS Lessee agrees to commence construction of the Improvements within thirty (30) days from the date of this Agreement. After commencement of construction of any Improvements, Lessee agrees to diligently pursue said construction to completion, and to supply such moneys and to perform such duties as may be necessary to complete the construction of said Improvements pursuant to the Plans and Specifications and in full compliance with all terms and conditions of this Agreement and the Development Financing Documents, all of which shall be accomplished on or before the Completion Date, subject to Force Majeure and without liens, claims or assessments (actual or contingent) asserted against the Leased Premises for any material, labor or other items furnished in connection therewith,subject to Lessee's right to contest such liens, claims, or assessments provided the same are removed as a lien upon the Leased Premises prior to foreclosure of such lien, and all in full compliance with all construction, use, building, zoning and other similar requirements of any pertinent governmental jurisdiction. Lessee will provide to Lessor, upon request, evidence of satisfactory compliance with all the above requirements. ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE LESSEE Lessee hereby represents and warrants to the Lessor, which representations and warranties shall be deemed to be restated by Lessee each time Lessor makes an advance of the Development Financing, that: 1. VALIDITY OF DEVELOPMENT FINANCING DOCUMENTS - The Development Financing Documents are in all respects legal, valid and binding according to their terms. 2. NO PRIOR LIEN ON FIXTURES - No mortgage, bill of sale, security agreement, financing statement, or other title retention agreement (except those executed in favor of Lessor) has been, or will be, executed with respect to any fixture (except Lessee's trade fixtures not financed with this Development Financing) used in conjunction with the construction, operation or maintenance of the improvements. 3. CONFLICTING TRANSACTION OF LESSEE - The consummation of the transactions hereby contemplated and the performance of the obligations of Lessee under and by virtue of the Development Financing Documents will not result in any breach of, or constitute a default under, any mortgage, lease, bank loan or credit agreement, corporate charter, by-laws, partnership agreement, or other instrument to which Lessee is a party or by which it may be bound or affected, the breach of which would materially affect Lessee's ability to perform its obligations hereunder. 4. PENDING LITIGATION - There are no actions, suits or proceedings pending, or to the knowledge of Lessee threatened, against or affecting it or the Leased Premises, or involving the validity or enforceability of any of the Development Financing Documents, at law or in equity, or before or by any governmental authority, except actions, suits and proceedings that are fully covered by insurance or which, if adversely determined would not substantially impair the ability of Lessee to perform each and every one of its obligations under and by virtue of the Development Financing Documents; and to the Lessee's knowledge it is not in default with respect to any order, writ, injunction, decree or demand of any court or any governmental authority. 5. VIOLATIONS OF GOVERNMENTAL LAW, ORDINANCES OR REGULATIONS - To the best knowledge of Lessee, there are no violations or notices of violations of any federal or state law or municipal ordinance or order or requirement of the State in which the Leased Premises are located or any municipal department or other governmental authority having jurisdiction affecting the Leased Premises, which violations in any way have a material adverse affect on the Leased Premises and which remain uncured after notice by such governmental authority or department (if notice is required) and the expiration of the time within which Lessee may cure such violation, or if no time limitation is specified, within a reasonable time after notice to cure such violation . 6. COMPLIANCE WITH ZONING ORDINANCES AND SIMILAR LAWS - To the best knowledge of Lessee, the Plans and Specifications and construction pursuant thereto and the use of the Leased Premises contemplated thereby comply and will comply with all present governmental laws and regulations and requirements, zoning ordinances, standards, and regulations of all governmental bodies exercising jurisdiction over the Leased Premises. Lessee agrees to provide the Project Architect's certification to such effect prior to the funding of the first disbursement under the Development Financing. 7. LESSEE'S STATUS AND AUTHORITY - If the Lessee be a corporation, limited liability company, trust or a partnership, Lessee warrants and represents that (i) it is duly organized, existing and in good standing under the laws of the state in which it is incorporated or created; (ii) it is duly qualified to do business and is in good standing in the state in which the Leased Premises are located; (iii) it has the corporate or other power, authority and legal right to carry on the business now being conducted by it and to engage in the transactions contemplated by this Agreement and the Development Financing Documents; and (iv) the execution and delivery of this Agreement and the Development Financing Documents and the performance and observance of the provisions hereof and thereof have been (or future acts will be) duly authorized by all necessary trust, partnership, or corporate actions of Lessee. Lessee will furnish such resolutions, affidavits and opinions of counsel to such effect as Lessor may reasonably require. 8. AVAILABILITY OF UTILITIES - All utility services necessary for the construction of the Improvements will be available prior to the commencement of construction, and all utility services necessary for the proper operation of the Improvements for their intended purposes are available at the Leased Premises or will be available at the Leased Premises prior to the Final Disbursement Date, at commercially comparable utility rates and hook-up charges for the vicinity, including water supply, storm and sanitary sewer facilities, gas, electricity and telephone facilities. Lessee shall furnish evidence of such availability of utilities from time to time at Lessor's request. 9. BUILDING PERMITS - All building permits required for the construction of the Improvements have been obtained prior to the commencement of the construction of the Improvements and copies of same will be delivered to Lessor. 10. CONDITION OF LEASED PREMISES - The Leased Premises are not now damaged or injured as a result of any fire, explosion, accident, flood or other casualty, nor to the best of Lessee's knowledge, subject to any action in eminent domain. 11. APPROVAL OF PLANS AND SPECIFICATIONS - To the best knowledge of Lessee in reliance upon the Project Architect's certification to such effect, the Plans and Specifications conform to the requirements and conditions set out by applicable law or any effective restrictive covenant, to all governmental authorities which exercise jurisdiction over the Leased Premises or the construction thereon, and no construction will be commenced upon the Leased Premises until said Plans and Specifications shall have been approved by Lessor, which consent shall not be unreasonably withheld or delayed and shall be given or withheld within ten business days after written request therefor. Subject to Article VI, paragraph 14, no material changes are to be made in the Plans and Specifications as approved without Lessor's prior consent, which consent shall not be unreasonably withheld or delayed and shall be given or withheld within ten business days after written request therefor; except, after prior written notice to Lessor, provided the Development Financing shall remain in balance as set forth in Article VII, paragraph 3 herein, Lessor shall consent to reallocation among line items or use of the Construction Contingency in the aggregate of not more than the amount budgeted as set forth on Exhibit B for Construction Contingency, unless Lessee shall deposit Owner Equity with LTIC-CDD in the amount of such excess over the budgeted amount. 12. CONSTRUCTION CONTRACTS - Lessee has entered into contracts with the Contractors or separate contracts with materialmen and laborers providing for the construction of the Improvements. Lessee will cause the Contractors to promptly furnish Lessor with the complete list of all Sub-contractors or entities as and when under contract, which Contractors propose to engage to furnish labor and/or materials in constructing the Improvements (such list containing the names, addresses, and amounts of such sub-contracts as written in excess individually of $5,000, and prior to disbursement of funds to or for the benefit of such Subcontractors, affidavits of authorized signatory and other documents commercially reasonably required by Title to insure that the Leased Premises remain lien free) and will from time to time furnish Lessor or Title with true copies of all Contracts entered into by Lessee and with the terms of all verbal agreements therefor, if any, and as to subcontractors, letters signed by sub-contractors whose contracts are in excess of $5,000 setting forth the present amount of their contract and the amounts remaining to be paid under that contract, if the same information is not stated on a lien waiver reflecting the most currently requested payment to such subcontractor. 13. BROKERAGE COMMISSIONS - No brokerage commissions are due in connection with the transaction contemplated hereby or if there are commissions due or payable the same will be paid by Lessee. Lessee agrees to and shall indemnify Lessor from any liability, claims or losses arising by reason of any such brokerage commissions. This provision shall survive the repayment of the Development Financing and shall continue in full force and effect so long as the possibility of such liability, claims or losses exists. 14. NO PRIOR WORK - Except as may have been permitted by Lessor, no work or construction has been commenced or will be commenced by or on behalf of Lessee on the Leased Premises, nor has Lessee entered into any contracts or agreements for such work or construction which could result in the imposition of a mechanic's or materialmen's lien on the Leased Premises or the Improvements prior to or on parity with the interest of Lessor. 15. ENVIRONMENTAL IMPACT STATEMENT - All required environmental impact statements as required by any governmental authority having jurisdiction over the Leased Premises or the construction of the Improvements have been duly filed and approved. 16. ACCESS - The Leased Premises front on a publicly maintained road or street or have access to such a road or street under an easement or private way, which is not subject to a reversion in favor of any party. 17. FINANCIAL INFORMATION - Any financial statements heretofore delivered to Lessor are true and correct in all respects, have been prepared in accordance with generally accepted accounting practice, and fairly present the respective financial conditions of the subject thereof as of the respective dates thereof and no materially adverse change has occurred in the financial conditions reflected therein since the respective dates thereof. ARTICLE VI COVENANTS OF LESSEE Lessee hereby covenants and agrees with Lessor as follows: 1. SURVEYS - Prior to execution of any Development Financing Documents and prior to the initial request for a Disbursement (as defined in Article VIII hereof), Lessee has furnished to Lessor three copies of a current perimeter land survey, in form and substance satisfactory to Lessor, certified to Lessor, giving a description of the Leased Premises and showing all encroachments onto or from the Leased Premises, currently certified by a registered surveyor and bearing his registry number and showing access rights, easements, or utilities, rights of way, all setback requirements upon the Leased Premises, improvements, matters affecting title and such other items as Lessor may reasonably request. 2. TITLE INSURANCE - Prior to the initial request for Disbursement the Lessee has furnished Lessor with an ALTA policy of title insurance, and prior to any subsequent request for Disbursement such ALTA policy of title insurance shall be brought down to the date of Disbursement by endorsement, all in form and substance satisfactory to Lessor issued at the Lessee's expense and written by Title insuring the Leased Premises to be marketable, free from exceptions for mechanic's and materialmen's liens and free from other exceptions not previously approved by the Lessor, naming Lessor as fee owner insured to the extent of advances made hereunder subject only to such exceptions as may be reasonably approved by Lessor. 3. RESTRICTIONS ON CONVEYANCE OR SECONDARY FINANCING - Lessee will not transfer, sell, convey or encumber the Leased Premises or subject the Leased Premises to any secondary financing in any way without the written consent of the Lessor, except as permitted in Article V, paragraph 2 relating to trade fixture financing sources or suppliers. 4. INSURANCE - To obtain or cause Contractor to obtain and maintain such insurance or evidence of insurance as Lessor may reasonably require, including but not limited to the following: (a) BUILDER'S RISK INSURANCE - Builder's Risk Insurance written on the so-called "Builder's Risk-Completed Value Basis" in an amount equal to the full replacement cost of the Improvements at the date of completion with coverage available on the so-called multiple peril form of policy, including coverage against collapse and water damage, naming Lessor as additional named insured, such insurance to be in such amounts and form and written by such companies as shall be reasonably approved by Lessor, and the originals of such policies (together with appropriate endorsement thereto, evidence of payment of premiums thereon and written agreements by the insurer or insurers therein to give Lessor ten (10) days' prior written notice of any intention to cancel) shall be promptly delivered to Lessor, said insurance coverage to be kept in full force and effect at all times until the completion of construction of the Improvements. (b) HAZARD INSURANCE - Fire and Extended Coverage Insurance, and such other hazard insurance as Lessor may require and as called for in the Lease in an amount equal to the full replacement cost of the Improvements naming Lessor as an additional named insured, such insurance to be in such amounts and form and written by such companies as shall be reasonably approved by Lessor, and the originals of such policies (together with appropriate endorsements thereto, evidence of payment of premiums thereon and written agreement by the insurer or insurers therein to give Lessor ten (10) days' prior written notice of any intention to cancel) shall be promptly obtained and delivered to Lessor immediately upon completion of the construction of the Improvements and before any portion is occupied by Lessee or any tenant of Lessee with such insurance to be kept in full force and effect at all times thereafter. (c) PUBLIC LIABILITY - Comprehensive public liability insurance (including operations, contingent liability operations, operations of sub- contractors, completed operations and contractual liability insurance) in limits of coverage as set forth in the Lease. (d) WORKMEN'S COMPENSATION INSURANCE - Evidence of compliance with the required coverage under statutory workmen's compensation requirements. 5. COLLECTION OF INSURANCE PROCEEDS - To cooperate with Lessor in obtaining for Lessor the benefits of any insurance or other proceeds lawfully or equitably payable to it in connection with the transaction contemplated hereby and the collection of any indebtedness or obligation of the Lessee to Lessor incurred hereunder (including the payment by Lessee of the expense of an independent appraisal on behalf of Lessor in case of a fire or other casualty affecting the Leased Premises). 6. APPLICATION OF DEVELOPMENT FINANCING PROCEEDS - To use the proceeds of the Development Financing solely for the purpose of paying for Construction Costs and such incidental costs relative to the construction as may be reasonably approved from time to time in writing by Lessor, and in no event to use any of the Development Financing proceeds for personal, corporate or other purposes. 7. EXPENSES - To pay all costs of closing the Development Financing and all expenses of Lessor with respect thereto, including, but not limited to, legal fees by Lessor's counsel and all other reasonable attorney's fees (limited as set forth in the Commitment), costs of title insurance, transfer taxes, license and permit fees, recording expenses, surveys, intangible taxes, appraisal fees, Inspecting Architect fees, expenses of retaking possession upon default by Lessee hereunder or other costs of enforcement (including reasonable attorney's fees) and similar items. 8. LAWS, ORDINANCES AND ETC. - To comply promptly with any law, ordinance, order, rule or regulation of all authorities exercising jurisdiction over the Leased Premises or the construction thereon, including appropriate supervising boards of fire underwriters and similar agencies and the requirements of any insurer issuing coverage on the Project. 9. RIGHT OF LESSOR TO INSPECT LEASED PREMISES - Upon 48 hours notice, except in cases which Lessor reasonably deems to be an emergency, in which event upon reasonable notice under the circumstances, to permit Lessor and Title and their representatives and agents to enter upon the Leased Premises and to inspect the Improvements and all materials to be used in construction thereof and to cooperate and cause Contractor to cooperate with Lessor or Title and their representatives and agents during such inspections, provided that such is accomplished without interrupting the construction process. Provided, further, however, that this provision shall not be deemed to impose upon Lessor or Title any duty or obligation whatsoever to undertake such inspections, to correct any defects in the Improvements or to notify any person with respect thereto. 10. BOOKS AND RECORDS - To set up and maintain accurate and complete books, accounts and records pertaining to the Project including the working drawings in a manner reasonably acceptable to Lessor. The Lessor, Title and Inspecting Architect shall have the right at all reasonable times and upon reasonable prior notice to inspect, examine and copy all books and records of Lessee relating to the Project, and to enter and have free access to the Leased Premises and Improvements and to inspect all work done, labor performed and material furnished in or about the Project, provided that such is accomplished without interrupting the construction process. Notwithstanding the foregoing, Lessee shall be responsible for making inspections as to the Improvements during the course of construction and shall determine to its own satisfaction that the work done or materials supplied by the Contractors and all Subcontractors has been properly supplied or done in accordance with the applicable contracts. Lessee will hold Lessor and Title harmless from and Lessor and Title shall have and have no liability or obligation of any kind to Lessee or creditors of Lessee in connection with any defective, improper or inadequate workmanship or materials brought in or related to the Improvements or the Leased Premises, or any mechanic's liens arising as a result of such workmanship or materials. Upon Lessor's request, Lessee shall replace or cause to be replaced any such work or material found to be materially deficient by the Project Architect or Independent Architect. Lessor shall cooperate with Lessee in obtaining any rights under any applicable warranties to accomplish such work. Any inspections made by Inspecting Architect, Title or Lessor are for the sole benefit of Lessor and neither Lessee nor any creditor, tenant or vendee of Lessee shall be entitled to rely on such inspection. Lessee shall obtain for Lessor coincident rights to rely upon any warranties obtain by Lessee from its Contractors or subcontractors. 11. CORRECTION OF DEFECTS - To promptly correct any structural defects in the Improvements or any material departure from the Plans and Specifications not previously approved by Lessor. The advance of any Development Financing proceeds shall not constitute a waiver of Lessor's right to require compliance with this covenant. 12. SIGN REGARDING DEVELOPMENT FINANCING - To allow Lessor to erect and maintain at a suitable site on the Leased Premises, at a location to be chosen by Lessee in its reasonable discretion, a sign indicating that Development Financing is being provided by Lessor, to the extent permitted by law or private covenant, condition, or agreement affecting the Project. 13. ADDITIONAL DOCUMENTS - To furnish to Lessor all instruments, documents, initial surveys, footing or foundation surveys, if conducted, certificates, plans and specifications, appraisals, financial statements, title and other insurance reports and agreements and each and every other document and instrument required to be furnished by the terms hereof, all at Lessee's expense; to assign and deliver to Lessor such documents, instruments, assignments and other writings, and to do such other acts necessary or desirable to preserve and protect the Leased Premises, as Lessor may require; and to do and execute all and such further lawful and reasonable acts, conveyances and assurances for the carrying out of the intents and purposes of this Agreement, the Lease, or the Commitment, as Lessor shall reasonably require from time to time. 14. ARCHITECTS AND CONSTRUCTION CONTRACTS - To commit no default nor knowingly permit a default under the terms of the Architects or Construction Contracts; To waive none nor knowingly permit a waiver of the obligations of the parties thereunder; To do no act which would relieve such parties from their obligations thereunder; To make no amendments to such contracts, without the prior written consent of Lessor; To enter into no change orders or extras that cause a reallocation among budgeted line items, or that in the aggregate or singularly result in a net increase in excess of 10% of the original contract amount without Lessor's prior written consent, which consent shall not be unreasonably withheld or delayed; provided, however, Lessor shall be given written notice and copies of all change orders; provided, further, however, with written notice to Lessor prior to any request for funds subsequent to any such change order or reallocation, the Lessee shall be allowed to enter into any change order or extra which is accounted for by use of any reallocation among line items or any remaining budgeted Contingency line item, or if the same has been exhausted, Lessee shall be allowed increases in the original contract amount without Lessor's consent if Lessee has, upon the execution of said change order, deposited with Lessor the amount by which such change order increases the total Construction Cost; To allow all such contracts to be subject to the approval of Lessor for its loan purposes; To allow Lessor to take advantage of all the rights and benefits of the contracts upon any default by Lessee; and to submit evidence to Lessor that both the Architect and the Contractors will permit Lessor to acquire Lessee's interest under their respective contracts and the Contract Documents without additional charge or fee should an event of default occur hereunder, which default is not cured within applicable notice and cure periods. 15. ENFORCE PERFORMANCE OF SUB-CONTRACTS - To enforce, or cause to be enforced, the prompt performance of the Sub-Contracts in accordance with their terms and not to approve any changes in the same that in the aggregate or singularly result in a net increase in excess of 10% of the original General Contractor's contract amount without Lessor's prior written consent, which consent shall not be unreasonably withheld or delayed, provided Lessee's right to enter into any such change order shall be on the same terms set forth in Section 14 above. 16. COMPLIANCE WITH RULES - To comply with, and to require the Contractors to comply with, all rules, regulations, ordinances and laws bearing on the conduct of the work on the Improvements, including the requirements of any insurer issuing coverage on the Project and the requirements of any applicable supervising boards of fire underwriters. 17. OPINIONS OF COUNSEL - To furnish such opinions of counsel as may be reasonably requested of the Lessee in connection with the matters contemplated by this Agreement. 18. SOIL TESTS - To provide the Lessor with a soil report prepared by an acceptable engineer certifying as to the status of the soil conditions on the Leased Premises, the need or lack of need for special pilings and foundations and that either any pilings and foundation necessary to support the Improvements have been placed in a manner and quantity sufficient to provide the required support or that no such pilings and foundations are necessary for the support and construction of the Improvements. 19. MARKETABLE TITLE - To execute and deliver or cause to be executed and delivered such instruments as may be required by the Lessor and Title to provide Lessor with a marketable, valid title to the Leased Premises subject only to such exceptions to title as may be reasonably approved by Lessor. 20. VIOLATIONS OF GOVERNMENTAL LAW, ORDINANCES OR REGULATIONS - - Lessee will permit no violations nor commit the same, of any federal or state law or municipal ordinance or order or requirement of the State in which the Leased Premises are located or any municipal department or other governmental authority having jurisdiction affecting the Leased Premises, which violations in any way have a material adverse affect on the Leased Premises and which remain uncured after notice by such governmental authority or department (if notice is required) and the expiration of the time within which Lessee may cure such violation, or if no time limitation is specified, within a reasonable time after notice to cure such violation . 21. COMPLIANCE WITH ZONING ORDINANCES AND SIMILAR LAWS - The Plans and Specifications and construction pursuant thereto and the use of the Leased Premises contemplated thereby will comply with all governmental laws and regulations and requirements, zoning ordinances, standards, and regulations of all governmental bodies exercising jurisdiction over the Leased Premises, including environmental protection and equal employment regulations, and appropriate supervising boards of fire underwriters and similar agencies. 22. APPROVAL OF PLANS AND SPECIFICATIONS - The Plans and Specifications will conform to the requirements and conditions set out by applicable law or any effective restrictive covenant, and to all governmental authorities which exercise jurisdiction over the Leased Premises or the construction thereon. ARTICLE VII CONDITIONS PRECEDENT TO A DISBURSEMENT It shall be a condition precedent to each Disbursement under this Development Financing Agreement that: 1. DEVELOPMENT FINANCING DOCUMENTS - The Development Financing Documents shall have been duly executed and delivered to Lessor and shall be in full force and effect. 2. LESSEE EQUITY - Lessee shall have paid all of the Lessee Equity funds into the Project before the first Disbursement (or any subsequent Disbursement if additional Lessee Equity should be required) and Lessee shall deliver evidence of such payment reasonably satisfactory to Lessor. 3. DEVELOPMENT FINANCING BALANCE - As of the date immediately prior to any Disbursement, the total amount of unadvanced proceeds of the Development Financing shall be sufficient, in the commercially reasonable opinion of Lessor (the opinion of Lessor being based upon affidavit of the General Contractor, the Project Architect, the Inspecting Architect, or other reliable licensed third party contractor) to complete the Improvements free of liens. To the extent the total of the unadvanced proceeds of the Development Financing shall be insufficient, at any time, in Lessor's reasonable opinion, (based upon the affidavit as set forth above) to complete the Improvements, or be less than the total Construction Costs not yet paid for or not yet incurred (including interest accruing for the remainder of the term or extensions thereof, if any), the Lessee shall immediately deposit with the Lessor or with Title, as additional Lessee Equity funds, an amount equal to such deficiency and such additional Lessee Equity funds shall be disbursed by LTIC-CDD prior to the Disbursement of any further advance or advances under this Agreement. 4. NO DEFAULT - No event of default, which remains uncured after the expiration of applicable cure periods, shall exist under this Agreement or the Development Financing Documents. 5. REPRESENTATIONS AND WARRANTIES - The representations and warranties in Article V hereof shall be true and correct on and as of the date of each Disbursement. 6. COVENANTS - Lessee shall have complied with all of the covenants made by it in Article VI hereof. 7. SWORN CONSTRUCTION STATEMENT - Prior to the initial disbursement hereunder, the Lessee shall have submitted to Lessor and Title a Construction Cost Statement or the Construction Contract (if such information is contained therein) sworn to by Lessee and Contractors reflecting all major Sub-Contractors or materialmen who shall then be engaged in furnishing labor, materials or supplies for the Improvements. The list should show the name of each and every Contractor, Sub-Contractor and materialman (or at least such entities or individuals whose contract is in excess of $5,000), its address and an estimate of the dollar value of the work, labor and materials to be done or supplied and a general statement of the nature of the work to be done or materials to be supplied by each Contractor. Thereafter, if such list should change or new subcontractors shall execute contracts not reflected on the above list, the Lessee shall furnish to the Lessor any amendments or additions to the original statement as so submitted. 8. APPLICATION FOR PAYMENT - Lessor shall have received an Application for Payment pursuant to Article VIII hereof. 9. TITLE - Title shall issue its endorsement to the title policy insuring the Lessor as fee owner under the policy in the aggregate amounts of all prior Disbursements and the requested Disbursement. 10. WORK IN PLACE - All work or materials for which a Disbursement is requested shall be in place and incorporated into the Improvements. ARTICLE VIII METHODS OF DISBURSEMENTS OF DEVELOPMENT FINANCING PROCEEDS The Development Financing shall be disbursed (a "Disbursement") as follows: 1. PROCEDURE - Not more often than monthly, Lessee may submit an Application for Payment in the form attached hereto as Exhibit "C" requesting the Disbursement of proceeds under the Development Financing, which request shall be submitted to Lessor and to LTIC- CDD at least five (5) business days prior to the date on which a Disbursement is requested. Provided the conditions of this Development Financing Agreement are met on the date requested for such advance, Lessor shall advance to LTIC-CDD amounts certified to be currently payable by Lessee (excluding the retainage hereinafter specified) for the then incurred portion of Total Construction Costs pursuant to the Application for Payment. All costs shall have been approved in writing by the Project Architect, Lessee, Contractor, and if required by Lessor, by the Inspecting Architect. All interest accruing need not be disbursed to LTIC-CDD, but may be immediately and automatically credited by Lessor to the Development Financing account. LTIC- CDD shall disburse all funds advanced to it by Lessor in accordance with the terms and provisions of this Agreement and any special escrow requirements imposed by LTIC-CDD as a condition to its acting as the disbursing agent hereunder. The disbursed proceeds of the Development Financing shall bear interest from and including the date of disbursement to LTIC-CDD or the date of credit by Lessor provided that in the event LTIC- CDD shall fail to disburse any advances within five (5) business days after the date set for an advance, LTIC-CDD shall return said advance to Lessor and interest on such advance shall abate from and after the date of such return. Any amounts disbursed to LTIC-CDD and returned by LTIC-CDD to the Lessor shall not be deemed to be advanced under the Development Financing Documents. Each Application for Payment shall clearly set forth the amounts due to Lessee and to each Contractor out of the requested Development Financing and shall be accompanied by the following: a. A Draw Request Certificate in the form attached hereto as Exhibit "D" certifying that each contractor or materialman for which payment is requested in the relevant Application for Payment has satisfactorily completed the work or furnished the materials for which payment is requested in accordance with the applicable contract; that all work for which an Application for Payment is made substantially conforms to the Contract Documents and any approved changes, and is in place; and that sufficient funds remain of the undisbursed Development Financing proceeds to complete the Project and that all funds previously disbursed have been applied as per the previous Application for Payment. b. Waivers of Mechanics' Liens and Materialmen's Liens executed by all Contractors for all work done and all materials furnished to the Leased Premises and included in such current Application for Payment, or evidence reasonably required by Title to insure over the same by special specific endorsement, or such other releases or lien pursuant to bonding or otherwise to prevent such liens from attaching to the Leased Premises. c. Waivers of Mechanics' Liens and Materialmen's Liens executed by all Sub-Contractors and workmen and materialmen for all work done and all materials furnished to the Leased Premises and included in the immediately preceding Application for Payment, or evidence reasonably required by Title to insure over the same by special specific endorsement, or such other releases or lien pursuant to bonding or otherwise to prevent such liens from attaching to the Leased Premises. d. Such other supporting evidence, including invoices and receipts as may be requested by Lessor or LTIC-CDD to substantiate all payments which are to be made out of the Disbursement or to substantiate all payments then made in respect to the Project. 2. INTEREST ADVANCE - If interest has accrued on the Development Financing and is unpaid or fees are payable to the Lessor hereunder, Lessor shall be, and hereby is, authorized at any time to advance to itself from the proceeds of the Development Financing the total amount of such accrued interest and fees, whether or not an Application for Payment has been submitted by the Lessee and the same shall be deemed to be an advance of the proceeds of the Development Financing under this Agreement in the same manner and with the same effect as if advanced under the provisions above. It is understood Lessor may establish an automatic interest reserve whereby Lessor may withdraw from the Development Financing account on a regular basis the accrued interest on the Development Financing and credit the Development Financing balance with the same. 3. ASSESSMENT AND TAX ADVANCE - As taxes and assessments become due on the Leased Premises, Lessor shall be, and hereby is, authorized to advance to itself automatically from the proceeds of the Development Financing, the total amount of such taxes and assessments and the same shall be deemed to be an advance of the proceeds of the Development Financing under this Agreement in the same manner and with the same effect as if advances under the provisions above, if not previously paid before due pursuant to Lessee's obligations under the Lease. 4. DISBURSE UNDER DEVELOPMENT FINANCING DOCUMENT - All sums advanced and disbursed hereunder shall be disbursed under and shall be secured by the Development Financing Documents. 5. PAYMENTS TO SUBCONTRACTORS - In its reasonable discretion LTIC- CDD may make payments directly to any subcontractor or materialman. 6. RETAINAGE - Each Disbursement shall be limited to an amount equal to ninety percent (90%) of the value, exclusive of Contractor's profit and overhead, of the materials and labor furnished to the Leased Premises and the balance (herein called the Retainage) shall be retained by Lessor, provided that thirty (30) days after completion by each subcontractor or materialman of his subcontract Lessor will disburse to such party, or to the Contractor on behalf of such party the Retainage withheld from said party, provided that as a condition to such disbursement the Lessee and Project Architect and the Inspecting Architect shall certify to Lessor the date that such Party's subcontract has been fully and satisfactorily completed and the subcontractor or materialmen shall have supplied Title with satisfactory final lien waivers, including final lien waivers for any of its submaterialmen or sub- contractors and the requirements of any bonding company issuing the Bonds shall have been fulfilled. Any Retainage due the Contractor for work performed or materials furnished by the Contractor and the final balance of Contractor's profit and overhead shall be disbursed on the Final Disbursement Date pursuant to Article IX hereof. Contractor's profit and overhead shall be disbursed based upon and in proportion to the percentage of completion of the Project, or amounts payable under the Construction Contract for work actually performed, whichever is less, as certified by the Project Architect. ARTICLE IX FINAL DEVELOPMENT FINANCING BALANCE Unless and until Lessor and Lessee have entered into a mutually satisfactory escrow holdback and undertaking agreement to, inter alia, complete the Improvements and otherwise satisfy the requirements of this Article IX, at no time and in no event shall Lessor be obligated to disburse the balance of the proceeds of the Development Financing, including any Retainage until the date the following have been satisfied (the "Final Disbursement Date"): 1. Lessor shall have received reasonably satisfactory evidence of the final completion of the Improvements in substantial accordance with the Contract Documents and the Certificate of Final Completion from the Project Architect accepted by the Contractor and Lessee. 2. Lessor shall have received satisfactory as-built surveys reflecting the final location of the Improvements as fully completed on the Leased Premises in accordance with the Contract Documents, said survey to be prepared by a registered or licensed surveyor bearing his registry number, certifying to Lessor as to the legal description of the Leased Premises and showing all Improvements located on the Leased Premises and indicating the street address of the Improvements, absence of any encroachments on the Leased Premises or from the Leased Premises onto adjacent land, showing all access points, and showing conformance to all set back requirements and delineating all utility easements that are specifically legally described, rights of way and other matters affecting the Leased Premises, and certifying as to the total acreage of the land, the exterior dimensions of the Improvements, and the number of parking spaces, if any, and such other matters as Lessor may reasonably request. 3. Lessor shall have received a requisite affidavit of the Lessee, Contractor and Project Architect, and approved by the Inspecting Architect certifying as to the final cost of the Improvements. 4. Title shall have been furnished with such final lien waivers sufficient in the opinion of Title to dissolve any possible Mechanic's and Materialman's Liens affecting title to the Leased Premises or Lessee shall have provided a bond or other security sufficient to remove the lien as an encumbrance upon title to the Leased Premises and Title shall have issued its endorsements to the title policy increasing the insured coverage to the full amount of all sums disbursed under this Development Financing Agreement. 5. Lessor shall have received evidence that all of the terms, provisions and conditions on the part of the Lessee to be performed or caused to be performed hereunder and under the Lease, including but not limited to obtaining casualty insurance for the full insurable value of the Improvements, have been fulfilled to the satisfaction of Lessor. 6. Lessor shall have received a Final Certificate of Occupancy issued by the appropriate governmental authority covering the Improvements and a Certificate of Substantial Completion from the Project Architect indicating that the Improvements as built comply with all building codes and zoning ordinances, including any plat requirements or requirements of recorded operating covenants or agreements affecting the Leased Premises. 7. All remaining uncompleted "punch list" items shall have been satisfactorily completed. 8. The requirements of all bonding companies, if any, with respect to release of retainage shall have been met. 9. An amendment to the Lease shall be executed by Lessee and Lessor setting forth the date the first Lease Year shall end and the Rent for the balance of the first Lease Year, and evidencing the satisfaction and termination of this Agreement. ARTICLE X EVENTS OF DEFAULT An "event of default" shall be deemed to have occurred hereunder and under the Lease, if: 1. DEFAULT UNDER DEVELOPMENT FINANCING DOCUMENTS - Any default or event of default occurs (which remains uncured after the expiration of any applicable cure period as may be set forth in any Development Financing Document) under any of the Development Financing Documents as defined therein; or 2. FAILURE TO COMPLETE CONSTRUCTION - Lessee shall fail for any reason, except Lessor's wrongful refusal to fund the Development Financing pursuant to the terms hereof, to substantially complete the construction of the Improvements by the Completion Date; or 3. BREACH OF AGREEMENT - Lessee breaches or fails to perform, observe or meet any covenant or condition of this Agreement, provided, however, with respect to non-monetary defaults hereunder, Lessee shall have twenty days after notice from Lessor to cure such non-monetary default, or if such default (but for the payment of monies) cannot be cured within twenty days, such longer time as may be reasonably necessary to effect a cure if Lessee is diligently pursuing a course of conduct reasonably designed to cure the default.; or 4. BREACH OF WARRANTY - Any warranties made or agreed to be made in any of the Development Financing Documents or this Agreement shall be breached by Lessee or shall prove to be false or misleading, and the same shall not be cured or made to be true and correct within the applicable cure periods; or 5. FILING OF LIENS AGAINST THE LEASED PREMISES - Any lien for labor, material, taxes or otherwise shall be filed against the Leased Premises and such lien shall not be promptly paid, released, contested in an appropriate forum, or bonded over to Lessor's reasonable satisfaction before the lien shall materially adversely affect Lessor's interest in the Premises; or 6. LITIGATION AGAINST LESSEE - Any suit shall be filed against Lessee, and is not resolved within 120 days and, which if adversely determined, could substantially impair the ability of Lessee to perform each and every one of its obligations under and by virtue of the Development Financing Documents; or 7. LEVY UPON THE LEASED PREMISES - A levy be made under any process on the Leased Premises and such levy shall not be promptly Bonded over prior to the execution of such levy; or 8. TRANSFER OF LEASED PREMISES - Lessee shall without the prior written consent of Lessor, voluntarily or by operation of law, sell, transfer, convey or encumber all or any part of its interest in the Leased Premises or in any of the personalty located thereon, or used or intended to be used in connection therewith; or 9. ABANDONMENT - Lessee abandons the project or delays or ceases work thereon for a period of fifteen consecutive (l5) days, or delays construction or suffers construction to be delayed for any period of time for any reason whatsoever so that completion of Improvements cannot be accomplished in the judgment of Lessor on or before the Completion Date, subject to force majeure; or 10. BANKRUPTCY - Lessee shall make an assignment for the benefit of its creditors or shall admit in writing its inability to pay its debts as they become due or shall file a petition in bankruptcy or shall be adjudicated a bankrupt or insolvent or shall file a petition seeking any reorganization, dissolution, liquidation, arrangement, composition, readjustment, or similar relief under any present or future bankruptcy or insolvency statute, law or regulation, or shall file an answer admitting to or not contesting the material allegations of a petition filed against it in any such proceedings, or shall not have the same dismissed or vacated, or shall seek or consent or acquiesce in the appointment of any trustee, receiver or liquidator of a material part of its properties, or shall not after the appointment without the consent or acquiescence of it of a trustee, receiver, or liquidator of any material part of its properties have such receiver, liquidator or appointment vacated; or 11. EXECUTION LEVY - Execution shall have been levied against the Leased Premises or any lien creditors commence suit to enforce a judgment lien against the Leased Premises or such action or suit shall have been brought and shall not be immediately bonded over and shall continue unstayed and in effect for a period of more than 120 consecutive days; or 12. ATTACHMENT - Any part of the Lessor's commitment to make the advances hereunder shall at any time be subject or liable to attachment or levy at the suit of any creditor of the Lessee or at the suit of any subcontractor or creditor of the Contractor and shall remain unstayed prior to the time Lessor shall be obligated to comply with the same; or ARTICLE XI REMEDIES OF LESSOR Lessee hereby agrees that the occurrence of any one or more of the events of default set out in Article X hereof, shall also constitute an event of default under each of the Development Financing documents, thereby entitling Lessor, after the expiration of any applicable cure period, at its option, to proceed to exercise any or all of the following remedies: 1. EXERCISE OF REMEDIES - To exercise any of the various remedies provided in any of the Development Financing Documents, including the acceleration of the Put described in Articles XIV hereof; 2. CUMULATIVE RIGHTS - Cumulatively to exercise all other rights, options and privileges provided by law; 3. CEASE MAKING ADVANCES - To refrain from making any advances under this Agreement but Lessor may make advances after the happening of any such event without thereby waiving the right to refrain from making other further advances or to exercise any of the other rights Lessor may have. 4. RIGHTS TO ENTER - To require Lessee to vacate the Leased Premises and permit Lessor (whether prior to the exercise of the Put or during any period prior to the closing of the sale pursuant to the Put; (a) To enter into possession; (b) To perform or cause to be performed any and all work and labor necessary to complete the Improvements in accordance with the Plans and Specifications; (c) To employ security watchmen to protect the Leased Premises; and (d) To disburse that portion of the Development Financing Proceeds not previously disbursed (including any Retainage) to the extent necessary to complete the construction of the Improvements in accordance with the Contract Documents and if the completion requires a larger sum than the remaining undisbursed portion of the Development Financing, to disburse such additional funds, all of which funds so disbursed by Lessor shall be deemed to have been disbursed to Lessee. For this purpose, Lessee hereby consents upon an uncured default by Lessee after the expiration of any applicable notice and cure period, to the Lessor taking the following actions, or not, in Lessor's reasonable discretion: to complete the construction of the Improvements in the name of the Lessee, and hereby empowers Lessor to take all actions necessary in connection therewith including but not limited to using any funds of Lessee including any balance which may be held in escrow and any funds which may remain unadvanced hereunder for the purpose of completing the said portion of the Improvements in the manner called for by the Contract Documents; to make such additions and changes and corrections in the Contract Documents which shall be necessary or desirable to complete the said portion of the Improvements in substantially the manner contemplated by the Contract Documents; to employ such contractors, subcontractors, agents, architects, and inspectors as shall be required for said purposes; to pay, settle or compromise all existing or future bills and claims which are or may be liens against said Leased Premises, or may be necessary or desirable for the completion of the said portion of the Improvements or the clearance of title to the Leased Premises; to execute all applications and certificates in the name of Lessee which may be required by any construction contract and to do any and every act with respect to the construction of the said portion of the Improvements which Lessee may do in its own behalf. Lessor shall also have power to prosecute and defend all actions and proceedings in connection with the construction of the said portion of the Improvements and to take such action and require such performance as it deems necessary. In accordance therewith, Lessee hereby assigns and quitclaims unto Lessor all sums to be advanced hereunder including Retainage. Any funds so disbursed or fees or charges so incurred shall be included in any amount necessary for the Lessee to pay pursuant to the Put. (e) To discontinue making advances hereunder to the Lessee and to terminate Lessor's obligations under this Agreement. 5. RIGHTS NON CUMULATIVE - No right or remedy by this Agreement or by any Development Financing Document or instrument delivered by the Lessee pursuant hereto, conferred upon or reserved to the Lessor shall be or is intended to be exclusive of any other right or remedy and each and every right and remedy shall be cumulative and in addition to any other right or remedy or now or hereafter arising at a law or in equity or by statute. Except as Lessor may hereafter otherwise agree in writing, no waiver by Lessor or any breach by or default of Lessee of any of its obligations, agreements, or covenants under this Agreement shall be deemed to be a waiver of any subsequent breach of the same or any other obligation, agreement or covenant, nor shall any forbearance by Lessor to seek a remedy for such breach be deemed a waiver of its rights and remedies with respect to such a breach, nor shall Lessor be deemed to have waived any of its rights and remedies unless it be in writing and executed with the same formality as this Agreement. 6. EXPENSES - The Development Financing and this Agreement and the performance by the Lessor or Lessee of their obligations hereunder shall be without cost and expense to the Lessor, all of which costs and expenses the Lessee agrees to pay and hold Lessor harmless of and payment of which shall be secured by the Development Financing Documents. Specifically, Lessee agrees to pay all title charges, surveyor's fees, appraisals, loan fees and attorney's fees and costs and the like incurred in connection with this Agreement. ARTICLE XII GENERAL CONDITIONS AND MISCELLANEOUS The following conditions shall be applicable throughout the term of this Agreement: 1. RIGHTS OF THIRD PARTIES - All conditions of the obligations of Lessor hereunder, including the obligation to make disbursements are imposed solely and exclusively for the benefit of Lessee, and no other person shall have standing to require satisfaction of such conditions in accordance with their terms or be entitled to assume that Lessor will refuse to make advances in the absence of strict compliance with any or all thereof, and no other person shall, under any circumstances, be deemed to be a beneficiary of such conditions, any and all of which may be freely waived in whole or in part by Lessor at any time if in its sole discretion it deems it desirable to do so. In particular, Lessor makes no representations and assumes no duties or obligations as to third parties concerning the quality of the construction of the Improvements or the absence therefrom of defects. In this connection, Lessee agrees to and shall indemnify Lessor from any liability, claims or losses resulting from the disbursement of the Development Financing proceeds or from the condition of the Leased Premises whether related to the quality of construction or otherwise and whether arising during or after the term of the Development Financing made by Lessor to Lessee in connection therewith, except for Lessor's gross negligence or willful misconduct. This provision shall survive the termination of this Agreement and shall continue in full force and effect so long as the possibility of any such liability, claims or losses exists. 2. EVIDENCE OF SATISFACTION OF CONDITIONS - Any condition of this Agreement which requires the submission of evidence of the existence or non- existence of a specified fact or facts implies as a condition the existence or non- existence, as the case may be, of such fact or facts, and Lessor shall, at all times, be free independently to establish to its reasonable satisfaction such existence or non-existence. 3. ASSIGNMENT - Lessee may not assign this Development Financing Agreement or any of its rights or obligations hereunder without the prior written consent of Lessor. 4. SUCCESSORS AND ASSIGNS - Whenever in this Agreement one of the parties hereto is named or referred to, the heirs, legal representatives, successors and assigns of such parties shall be included and all covenants and agreements contained in this Agreement by or on behalf of the Lessee or by or on behalf of the Lessor shall bind and inure to the benefit of their respective heirs, legal representatives, successors and assigns, whether so expressed or not. 5. HEADINGS - The headings of the sections, paragraphs and subdivisions of this Agreement are for the convenience of reference only, and are not to be considered a part hereof and shall not limit or otherwise affect any of the terms hereof. 6. INVALID PROVISIONS TO AFFECT NO OTHERS - If fulfillment of any provision hereof, or any transaction related thereto at the time performance of any such provision shall be due, shall involve transcending the limit of validity prescribed by law, then, ipso facto, the obligation to be fulfilled shall be reduced to the limit of such validity; and such clause or provision shall be deemed invalid as though not herein contained, and the remainder of this Agreement shall remain operative in full force and effect. 7. NUMBER AND GENDER - Whenever the singular or plural number, masculine or feminine or neuter gender is used herein, it shall equally include the other. 8. AMENDMENTS - Neither this Agreement nor any provision hereof may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against whom enforcement of the change, waiver, discharge or termination is sought. 9. NOTICES - Any notice which any party hereto may desire or may be required to give to any of the parties shall be in writing and the mailing thereof by certified mail, or equivalent, to the respective parties' addresses set forth hereinabove or to such other place such party may by notice in writing designate as its address shall constitute service of notice hereunder. 10. GOVERNING LAW - This Development Financing Agreement is made and executed pursuant to and is intended to be governed by the laws of the State where the Leased Premises are located. 11. FORCE MAJEURE - Anything in this Agreement to the contrary notwithstanding, Lessee shall not be deemed in default with respect to the performance of any of the terms, provisions, covenants, and conditions of this Agreement (except for the payment of all other monetary sums payable hereunder, to which the provisions of this Section shall not apply), if the same shall be due to any strike, lockout, civil commotion, warlike operations, invasion, rebellion, hostilities, sabotage, governmental regulations or controls, impracticability of obtaining any materials or labor (except due to the payment of monies), shortage or unavailability of a source of energy or utility service, Act of God, casualty, adverse weather conditions, or any cause beyond the reasonable control of Lessee (except due to the payment of monies). Provided, however, in order to invoke the extension of the Completion Date afforded by this section, Lessee shall notify Lessor in writing within five days of the occurrence of such force majeure, and in any event the Completion Date shall be extended as a result of such occurrence no more than reasonably necessary and in no event no more than 90 days. ARTICLE XIII DAMAGE, DESTRUCTION, CONDEMNATION, USE OF INSURANCE PROCEEDS 1. DAMAGE OR DESTRUCTION OF THE LEASED PREMISES. Lessee will give the Lessor prompt notice of any damage to or destruction of the Leased Premises and in case of loss covered by policies of insurance the Lessor (whether before or after the exercise of the Put if Lessee be in default hereof) is hereby authorized at its option to settle and adjust any claim arising out of such policies and collect and receipt for the proceeds payable therefrom, provided, that the Lessee may itself adjust and collect for any losses arising out of a single occurrence aggregating not in excess of $50,000.00. Any expense incurred by the Lessor in the adjustment and collection of insurance proceeds (including the cost of any independent appraisal of the loss or damage on behalf of Lessor) shall be reimbursed to the Lessor first out of any proceeds. The proceeds or any part thereof shall be applied to reduction of the Put Price, which Put may then be exercised by Lessor, without the application of any prepayment premium, or to the restoration or repair of the Leased Premises, the choice of application to be solely at the discretion of Lessor. 2. CONDEMNATION. Lessee will give the Lessor prompt notice of any action, actual or threatened, in condemnation or eminent domain affecting the Leased Premises and hereby assigns, transfers, and sets over to the Lessor the entire proceeds of any award or claim for damages for all or any part of the Leased Premises taken or damaged under the power of eminent domain or condemnation, the Lessor being hereby authorized to intervene in any such action and to collect and receive from the condemning authorities and give proper receipts and acquittances for such proceeds. Lessee will not enter into any agreements with the condemning authority permitting or consenting to the taking of the Leased Premises unless prior written consent of Lessor is obtained. Any expenses incurred by the Lessor in intervening in such action or collecting such proceeds shall be reimbursed to the Lessor first out of the proceeds. The proceeds or any part thereof shall be applied to reduction of the Put Price, which Put may then be exercised by Lessor, without the application of any prepayment premium, or to the restoration or repair of the Leased Premises, the choice of application to be solely at the discretion of Lessor. 3. DISBURSEMENT OF INSURANCE AND CONDEMNATION PROCEEDS. Any restoration or repair shall be done under the supervision of an architect acceptable to Lessor and pursuant to plans and specifications approved by the Lessor. Subject to paragraph 4 below, in any case where Lessor may elect to apply the proceeds to repair or restoration or permit the Lessee to so apply the proceeds they shall be held by Lessor for such purposes and will from time to time be disbursed by Lessor to defray the costs of such restoration or repair under such safeguards and controls as Lessor may reasonably require to assure completion in accordance with the approved plans and specifications and free of liens or claims. Lessee shall on demand deposit with Lessor any sums necessary to make up any deficits between the actual cost of the work and the proceeds and provide such lien waivers and completion bonds as Lessor may reasonably require. Any surplus which may remain after payment of all costs of restoration or repair shall be applied against the rent then most remotely to be paid, whether due or not, without application of any prepayment premium or credit. 4. LESSOR TO MAKE PROCEEDS AVAILABLE. In the event of insured damage to the improvements or in the event of a taking by condemnation of only a portion of the improvements or land area of the Leased Premises, and provided, the portion remaining can with restoration or repair continue to be operated for the purposes utilized immediately prior to such damage or taking, and if the appraised value of the Leased Premises after such restoration or repair shall not have been reduced, and provided further, no event of default exists under this Agreement after the expiration of any applicable cure periods and Lessee is diligently pursuing a course of conduct reasonably designed to cure such default, and the Lessee certified to Lessor their intention to remain in possession of the Leased Premises without any abatement or adjustment of rental payments, the Lessor agrees to make the proceeds available to the restoration or repair of the improvements on the Leased Premises in accordance with the provisions of paragraph 3 hereof. ARTICLE XIV MANDATORY PUT UPON DEFAULT Should Lessee commit an event of Default under this Agreement or any Development Financing Document (after the expiration of any applicable notice and cure period) ("Uncured Default"), Lessor shall have the following rights: Upon an Uncured Default, or damage or destruction or condemnation of the Leased Premises not addressed by paragraph XIII (4), if Lessor elects to exercise the following option, Lessee shall purchase the Leased Premises from Lessor subject to the following terms and conditions: A. The purchase price at which Lessor shall sell the Leased Premises to Lessee, shall be the total amount of Initial Disbursed Funds disbursed by Lessor to acquire the Leased Premises at the Closing Date (as defined in the Commitment), plus the total amount of funds disbursed pursuant to this Agreement, plus all accrued interest and incurred expenses of Lessor fundable pursuant to this Agreement, plus all reasonable costs of collection and enforcement of the terms hereof. B. At such time as Lessor shall elect to sell the Leased Premises, Lessor shall give Lessee written notice of its intent to exercise its option to sell the Leased Premises to Lessee, including in such notice Lessor's calculation of the Purchase Price through the actual closing of the sale of the Leased Premises to Lessee pursuant to the terms hereof (the "Sale Date"), which shall be sixty days from such notice by Lessor. Lessee shall on or before the Sale Date deliver the purchase price as set forth in subparagraph (A) of this Article to Lessor. Upon such delivery, which shall be preceded by ten (10) days notice to Lessor, Lessor shall deliver to Lessee a warranty deed and appropriate affidavits evidencing that Lessor transfers the Leased Premises to Lessee subject to restrictions, easements or other encumbrances upon title existing as of the date of delivery, if any, except to the extent, if any, placed of record or caused by Lessor. The purchase price to be paid to Lessor shall be a net amount. All expenses in connection with the transfer of the Leased Premises, including, but not limited to appraisal fees, title insurance, recording fees, documentary stamps, conveyance tax, title evidence, and all other closing costs, shall be paid by the Lessee. The purchase price shall be paid by Lessee in cash to Lessor concurrently with the conveyance of the Leased Premises by the Lessor to the Lessee. If Lessor elects to sell the Leased Premises to Lessee pursuant to the terms hereof, the Leased Premises shall be conveyed by the Lessor to the Lessee "As Is". If Lessee shall fail to pay the Purchase Price on or before the Sale Date, Lessor may terminate the Lease, and sell the Leased Premises to any third party purchaser. Lessor may then send Lessee notice of the shortfall (the "Deficiency"), if any, between the amount of the net proceeds received by Lessor in such sale, and the total amount of Initial Disbursed Funds disbursed by Lessor to acquire the Parcel at the Closing Date (as defined in the Commitment), plus the total amount of funds disbursed pursuant to this Agreement, plus all accrued interest and incurred expenses of Lessor fundable pursuant to this Agreement, plus all reasonable costs of collection and enforcement of the terms hereof. Lessee shall immediately upon receipt of such notice of Deficiency remit the amount of the Deficiency in good funds to Lessor. Lessor's rights under this Mandatory Put shall expire on the Final Disbursement Date when the amendment to the Lease has been executed by all parties as set forth in Article IX hereof. ARTICLE XV RENT, INTEREST, AND RENTAL MODIFICATION DATE 1. Rent shall be payable by Lessee and calculated as follows, on the funds advanced by Lessor on the Closing Date for the purchase of the land and related closing costs (the "Initial Disbursed Funds"): Rent shall accrue in the amount of $11,240.96 per month absent an uncured Default by Lessee; absent an uncured Default, accrued rent during the period of construction of the Improvements shall not be payable until the Final Disbursement Date. Upon the occurrence of an uncured Default, all accrued rent shall be immediately due and payable. On the Rental Modification Date, if not otherwise in default hereunder, Lessee shall begin paying Rent by the first of each month (prorata for the balance of any partial month in which the Rental Modification Date occurs, payable with the first such adjusted Rent payable on the first day of the first full month following the Rental Modification Date) in the amount of $17,262.90 per month out of pocket. On the Final Disbursement Date, absent an Uncured Default, Rent shall be adjusted and documented by the lease amendment contemplated in Article IX hereof and paid to Lessor as described in Article F. of the Commitment. 2. Disbursed proceeds of the Development Financing shall accrue interest at a rate of seven percent (7.0%) per annum, which interest shall accrue unpaid unless advanced by Lessor to itself, or Lessee shall default hereunder, which default shall remain uncured after the expiration of any applicable notice and cure period. However, one hundred and eighty days (180) from the date hereof, (the "Rental Modification Date"), Lessee shall begin making monthly payments of subsequently accruing interest at the rate of 10.75% per annum out of pocket ("Out of Pocket Invoiced Interest") within 5 days after invoice from Lessor. 3. Upon the occurrence of an event of default which remains uncured after the expiration of applicable notice and cure periods, disbursed proceeds of the Development Financing shall accrue interest at a rate of Fifteen Percent (15.0%) per annum, or the highest rate allowed by law, whichever is less, and the rental rate on the Initial Disbursed funds shall increase to Fifteen Percent (15.0%) per annum, or the highest rental rate allowed by law, whichever is less. ARTICLE XVI COUNTERPART EXECUTION Counterpart Execution. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument. IN WITNESS WHEREOF, Lessee and Lessor have hereunto caused these presents to be executed on the date first above written. Champps Americana, Inc., a Minnesota corporation By: /s/ Charles W. Redepenning Jr Its: Sr VP [Lessor's Signature appears on following page.] AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP By: AEI FUND MANAGEMENT XXI, INC., a Minnesota corporation, Its corporate general partner By: /s/ Robert P Johnson Robert P. Johnson, President AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP By: AEI Fund Management XX, Inc. By: /s/ Robert P Johnson Robert P. Johnson,President NET LEASE INCOME & GROWTH FUND 84-A LIMITED PARTNERSHIP By: Net Lease Management 84-A, Inc. By: /s/ Robert P Johnson Robert P. Johnson,President Exhibit A Legal Description Parcle 1 Lot 2 in American-Commons Subdivision, a Resubdivision of Lots 1 and 2 in Anderson's Woodfield Common West, a subdivision of part of the Northeast quarter of Section 14, Township 41 North, Range 10 East of the Third Principal Meridian, in Cook County, Illinois. Parcel 2 Non-exclusive easement for ingress, egress, and parking as established by reciprocal easement agreement made by Chi-Chi's, Inc., a Minnesota corporation, and Bob Evan Farm, Inc., an Ohio corporation, dated May 10, 1983, and recorded May 13, 1983, as Document 26604303. EXHIBIT B CONSTRUCTION COSTS PROJECT COST BUDGET CHAMPPS AMERICANA, INC.. SCHAUMBURG, IL PROJECT COST BUDGET APRIL 15, 1997 Land Acquisition Cost $ 1,750,000 Site Improvements 125,220 Building/General Construction 1,667,424 Construction Material (owner) 227,517 Construction Contingency - 10.0% 189,764 Permits & Fees 11,000 Architect/Engineering 78,200 Site Investigation and Surveys 11,300 Appraisal 4,000 Develoopment Interest 37,625 Title Insurance & Closing Costs (Construction and S/L) 10,000 Attorney's Fees-Borrower (Construction Sale/Leaseback) 10,000 Attorney's Fees- AEI (construction/Sale/Leaseback) 7,500 AEI Development Funding Fee 10,000 AEI Credit Report Fees (Promesa) 500 AEI Site Inspection Fee 1,000 Additional Legal 4,500 Champps Americana, Inc. Parcel Development Fee 64,750 Builders Risk Insurance 3,200 Construction Supervision and Overhead 34,000 AEI Sale/Leaseback Commitment/Funding Fee* 42,500 TOTAL PROJECT COST $ 4,290,000 *Total project costs prior to AEI S/L fee is $4,247,500. The S/L fee (rounded) is calculated on the total project cost prior to the S/L Fee and adjusted, if necessary, at the time the final disbursment of the Development Financing. Exhibit C APPLICATION FOR PAYMENT Champps Americana, Inc. ("Lessee") hereby requests a disbursement in the amount of______________________ ($____________________) pursuant to that certain Development Financing Agreement dated effective as of April _____, 1997 by and between Lessee, and AEI Income & Growth Fund XXI Limited Partnership, AEI Net Lease Income & Growth Fund XX Limited Partnership, and Net Lease Income & Growth Fund 84-A Limited Partnership ("Lessor"). The amounts requested have been or will be used to pay the items identified on Exhibit "A" attached hereto and made a part hereof. After payment of the amounts requested herein, the balance of undisbursed Development Financing proceeds of $_____________________ will be sufficient to complete construction and pay all related project costs currently known and approved by Lessor. In the event of cost overruns which cannot be accounted for by re-allocation among line items, Lessee agrees to contribute the necessary equity to complete construction pursuant to Development Financing Agreement and Development Financing Disbursement Agreement. All representations and warranties made by the Lessee in the Development Financing Documents (as defined in the Development Financing Agreement) are true and correct as of the date hereof and Lessee is not in default of any of the provisions thereof. The total cost of the items for which Lessor is funding is estimated to be $ . To date, $______________(exclusive of this request) has been disbursed pursuant to the Development Financing Disbursing Agreement. Dated:______________________________ Lessee: Champps Americana, Inc. a Minnesota corporation By: Its: STATE OF ) )SS. COUNTY OF ) The foregoing instrument was acknowledged before me this day of , 199 , by , the of Champps Americana, Inc., a Minnesota corporation, on behalf of the corporation. ______________________________________ Notary Public Lessee Exhibit D-1 DRAW REQUEST CERTIFICATE This Certificate made by Champps Americana, Inc.("Lessee"). RECITALS WHEREAS, Lessee and AEI Income & Growth Fund XXI Limited Partnership, AEI Net Lease Income & Growth Fund XX Limited Partnership, and Net Lease Income & Growth Fund 84-A Limited Partnership ("Lessor") have entered into a Development Financing Agreement dated effective as of , 1997 (the "Development Financing Agreement") pursuant to which Lessor agreed to loan $4,290,000 to Lessee for the purpose of constructing a Champps Restaurant on certain real property described on Exhibit "A" attached to the Development Financing Agreement ("Project"); and WHEREAS, Lessee and Contractor have entered into a contract dated , 1997, ("Construction Contract"); and WHEREAS, the Development Financing Agreement requires the submission to Escrowee and Lessor of this Certificate prior to the advancement of any loan proceeds under the Development Financing Agreement. NOW, THEREFORE, Lessee does hereby certify to Escrowee and Lessor as follows: 1. This Draw Request for the period from ____________________________, 1997 to _____________________, 1997, showing work completed to date of $ and requesting a current payment of $________________________ relates to costs incurred pursuant to the Construction Contract, and other line items, all as shown on the Development Financing Budget attached to the Development Financing Agreement, and are costs only pertaining to the Project and are included in the Development Financing Agreement. 2. As of the date of this Draw Request, the balance remaining due for all costs under the Construction Contract, including retainage and approved change orders, to complete the Project after receipt of payments requested herein will be $________________. 3. As of the date of this Draw Request, the remaining balance due on the Development Financing Agreement as set forth above is sufficient to complete the Project in accordance with the Plans and Specifications (as defined in the Development Financing Agreement) to the degree set forth by the Development Financing Agreement. 4. That all work covered by this Draw Request has been completed in accordance with the Construction Contract, Plans and Specifications, and any amendments thereto approved by Lessor. 5. That all work completed to date conforms to the Construction Contract, Plans and Specifications, and any amendments thereto approved by Lessor. 6. That all funds previously disbursed for costs incurred pursuant to the Construction Contract under the Development Financing Agreement have been applied as provided in all previous Draw Request Certificates. 7. That as of the date hereof, to the best of Lessee's knowledge after due inquiry, the Project complies with the requirements of all zoning and building laws, ordinances, regulations and permits; the requirements of all governmental agencies having jurisdiction over the Project; and there is no action or proceeding pending before any court or administrative agency with respect to such laws, ordinances, regulations and/or any certifications or permits issued thereunder. Dated this ______ day of ____________________, 1997. Lessee: Champps Americana, Inc., a Minnesota corporation By:______________________________ Its________________________ STATE OF ) )ss. COUNTY OF ) I, _______________________________________________, a Notary public of the said State and County do hereby certify that _________________________________________ personally appeared before me this day and he is the ____________________________ of Champps Americana, Inc., a Minnesota corporation, and that by authority duly given and as the act of the corporation, the foregoing instrument was signed in its name by its _______________________________, sealed with its corporate seal and attested by ____________________________ as its ___________________ Secretary. Witness my hand and official stamp or seal, this ______ day of _________________, 1997. _____________________________ ____________ My commission expires:________ Notary Public CONTRACTOR AND ARCHITECT Exhibit D-2 DRAW REQUEST CERTIFICATE This Certificate made by ,("Contractor"), AND ("Architect"). RECITALS WHEREAS, Champps Americana, Inc. ("Lessee") and AEI Income & Growth Fund XXI Limited Partnership, AEI Net Lease Income & Growth Fund XX Limited Partnership, and Net Lease Income & Growth Fund 84-A Limited Partnership ("Lessor") have entered into a Development Financing Agreement dated effective as of April , 1997 (the "Development Financing Agreement") pursuant to which Lessor agreed to loan $4,290,000 to Lessee for the purpose of constructing a Champps Restaurant on certain real property described on Exhibit "A" attached to the Development Financing Agreement ("Project"); and WHEREAS, Lessee and Contractor have entered into a contract dated , 1997, ("Construction Contract"); and WHEREAS, Lessee and Architect have entered into a contract dated , 1997, ("Architect Contract"); and WHEREAS, the Development Financing Agreement requires the submission to Escrowee and Lessor of this Certificate prior to the advancement of any loan proceeds under the Development Financing Agreement. NOW, THEREFORE, Contractor and Architect do hereby certify to Escrowee and Lessor as follows: 1. This Draw Request for the period from ____________________________, 1997 to _____________________, 1997, showing work completed to date of $ and requesting a current payment of $________________________ relates to costs incurred pursuant to the Construction Contract, and are costs only pertaining to the Project. 2. As of the date of this Draw Request, the balance remaining due for all costs under the Construction Contract, including retainage and approved change orders, to complete the Project after receipt of payments requested herein will be $________________. 3. As of the date of this Draw Request, the remaining balance due on the Construction Contract as set forth above is sufficient to complete the Project in accordance with the Plans and Specifications (as defined in the Construction Contract) to the degree set forth by the Construction Contract. 4. That all work covered by this Draw Request has been completed in accordance with the Construction Contract, Plans and Specifications, and any amendments thereto approved by Lessor. 5. That each subcontractor or materialmen for which payment is requested in this Draw Request has satisfactorily completed the work or furnished materials for which payment is requested in accordance with the Construction Contract. 6. That all work completed to date conforms to the Construction Contract, Plans and Specifications, and any amendments thereto approved by Lessor. 7. That all funds previously disbursed for costs incurred pursuant to the Construction Contract have been applied as provided in all previous Draw Request Certificates. 8. That as of the date hereof, to the best of Contractor's and Architect's knowledge after due inquiry, the Project complies with the requirements of all zoning and building laws, ordinances, regulations and permits; the requirements of all governmental agencies having jurisdiction over the Project; and there is no action or proceeding pending before any court or administrative agency with respect to such laws, ordinances, regulations and/or any certifications or permits issued thereunder. Dated this ______ day of ____________________, 1997. CONTRACTOR: By: Its: ARCHITECT: By: Its: STATE OF ) )ss. COUNTY OF ) I, _______________________________________________, a Notary public of the said State and County do hereby certify that _________________________________________ personally appeared before me this day and he is the ____________________________ of , a corporation, and that by authority duly given and as the act of the corporation, the foregoing instrument was signed in its name by its _______________________________, sealed with its corporate seal and attested by ____________________________ as its ___________________ Secretary. Witness my hand and official stamp or seal, this ______ day of _________________, 1997. _____________________________ ____________ My commission expires:________ Notary Public STATE OF ) )ss. COUNTY OF ) I, _______________________________________________, a Notary public of the said State and County do hereby certify that _________________________________________ personally appeared before me this day and he is the ____________________________ of , a corporation, and that by authority duly given and as the act of the corporation, the foregoing instrument was signed in its name by its _______________________________, sealed with its corporate seal and attested by ____________________________ as its ___________________ Secretary. Witness my hand and official stamp or seal, this ______ day of _________________, 1997. _____________________________ ____________ My commission expires:________ Notary Public EX-10.2 3 NET LEASE AGREEMENT THIS LEASE, made and entered into effective as of the 21 day of April, 1997, by and between AEI Income & Growth Fund XXI Limited Partnership ("Fund XXI"), a Minnesota limited partnership whose corporate general partner is AEI Fund Management XXI, Inc., a Minnesota corporation, AEI Net Lease Income & Growth Fund XX Limited Partnership ("Fund XX"), a Minnesota limited partnership whose corporate general partner is AEI Fund Management XX, Inc., a Minnesota corporation, and Net Lease Income & Growth Fund 84-A Limited Partnership ("Fund 84-A"), a Minnesota limited partnership whose corporate general partner is Net Lease Management 84-A, Inc., a Minnesota corporation , whose principal business address is 1300 Minnesota World Trade Center, 30 East Seventh Street, St. Paul, Minnesota 55101 (together, "Lessor"), and Champps Americana, Inc., a Minnesota corporation ("Lessee"), whose principal business address is One Corporate Place, 55 Ferncroft Road, Danvers, Ma. 01923; WITNESSETH: WHEREAS, Lessor is the fee owner of a certain parcel of real property and improvements located at 955 Golf Road, Schaumburg, Illinois, and legally described in Exhibit "A", which is attached hereto and incorporated herein by reference; and WHEREAS, Lessee will be constructing the building and improvements (together the "Building") on the real property described in Exhibit "A", which Building is described in the plans and specifications heretofore submitted to Lessor; and WHEREAS, Lessee desires to lease said real property and Building (said real property and Building hereinafter referred to as the "Leased Premises"), from Lessor upon the terms and conditions hereinafter provided; NOW, THEREFORE, in consideration of the Rents, terms, covenants, conditions, and agreements hereinafter described to be paid, kept, and performed by Lessee, Lessor does hereby grant, demise, lease, and let unto Lessee, and Lessee does hereby take and hire from Lessor and does hereby covenant, promise, and agree as follows: ARTICLE 1. LEASED PREMISES Lessor hereby leases to Lessee, and Lessee leases and takes from Lessor, the Leased Premises subject to the conditions of this Lease. ARTICLE 2. TERM (A) The term of this Lease ("Term") shall be Twenty (20) consecutive "Lease Years", as hereinafter defined, commencing on April 21, 1997 ("Occupancy Date"). (B) The first "Lease Year" of the Term shall be for a period of twelve (l2) consecutive calendar months from the Occupancy Date. If the Occupancy Date shall be other than the first day of a calendar month, the first "Lease Year" shall be the period from the Occupancy Date to the end of the calendar month of the Occupancy Date, plus the following twelve (l2) calendar months. Each Lease Year after the first Lease Year shall be a successive period of twelve (l2) calendar months. (C) The parties agree that once the Occupancy Date has been established, upon the request of either party, a short form or memorandum of this Lease will be executed for recording purposes. That short form or memorandum of this Lease will set forth the actual occupancy and termination dates of the Term and optional Renewal Terms, as defined in Article 28 hereof, and the existence of any right of first refusal, and that said right shall terminate when the Lessee shall lose right to possession or this Lease is terminated, whichever occurs first. ARTICLE 3. CONSTRUCTION OF IMPROVEMENTS (A) Lessee warrants and agrees that the Building will be constructed on the Leased Premises, and all other improvements to the land, including the parking lot, approaches, and service areas, will be constructed in all material respects by Lessee substantially in accordance with the plot, plans, and specifications heretofore submitted to Lessor. (B) Lessee warrants that the Building and all other improvements to the land contemplated do comply with the laws, ordinances, rules, and regulations of all state and local governments. (C) Lessee agrees to pay, if not already paid in full, for all architectural fees and actual construction costs relating to the Building and other related improvements on the Leased Premises, in the past, present or future, which shall include, but not be limited to, plans and specifications, general construction, carpentry, electrical, plumbing, heating, ventilating, air conditioning, decorating, equipment installation, outside lighting, curbing, landscaping, blacktopping, electrical sign hookup, conduit and wiring from building, fencing, and parking curbs, builder's risk insurance (naming Lessor, Lessee, and contractor as co-insured), and all construction bonds for improvements made by or at the direction of Lessee. (D) Opening for business in the Leased Premises by Lessee shall constitute an acceptance of the Leased Premises and an acknowledgment by Lessee that the premises are in the condition described under this Lease. ARTICLE 4. RENT PAYMENTS (A) Annual Rent Payable for the first, second, and third Lease Years: Lessee shall pay to Lessor Fund XXI an annual Base Rent of $66,906.17, which amount shall be payable in advance on the first day of each month in equal monthly installments of $5,575.52 to Lessor Fund XXI, to Lessor Fund XX an annual Base Rent of $49,909.85, which amount shall be payable in advance on the first day of each month in equal monthly installments of $4,159.15 to Lessor Fund XX, and to Lessor Fund 84-A an annual Base Rent of $18,075.46, which amount shall be payable in advance on the first day of each month in equal monthly installments of $502.10 to Lessor Fund 84-A. If the first day of the Lease Term is not the first day of a calendar month, then the monthly Rent payable for that partial month shall be a prorated portion of the equal monthly installment of Base Rent. (B) Annual Rent Payable beginning in the fourth, seventh, tenth, thirteenth, sixteenth, nineteenth, and if renewed according to the terms hereof, the twenty- second, twenty-fifth, twenty-eighth, thirty-first, and thirty-fourth Lease Year: 1. In the fourth and every third Lease Year thereafter, the annual Base Rent due and payable shall increase by an amount equal to the lesser of: a) Seven and 35/100 Percent (7.35%) of the Base Rent payable for the immediately prior Lease Year, or b) The "CPI-U Percentage Increase" of the Base Rent payable for the prior Lease Year. "CPI-U" shall mean the Consumer Price Index for All Urban Consumers, (all items), published by the United States Department of Labor, Bureau of Labor Statistics (BLS) (1982-84 equal 100), U.S. Cities Average, or, in the event said index ceases to be published, by any successor index recommended as a substitute therefor by the United States Government or a comparable, nonpartisan substitute reasonably designated by Lessor. If the BLS changes the base reference period for the Price Index from 1982- 84=100, the CPI-U Percentage Increase shall be determined with the use of such conversion formula or table as may be published by the BLS. The term "CPI-U Percentage Increase" shall mean the percentage increase in the CPI-U determined by reference to the increase, if any, in the latest monthly CPI-U issued prior to the first day of the Lease Year for which Base Rent is being increased, over the CPI-U issued for the same month in the third year prior (e.g., the April CPI-U for the year 2000 over the April CPI-U for the year 1997.) Said month's CPI-U shall be used even though that CPI-U will not be for the month in which the renewal term commences. In no event shall the CPI-U Percentage Increase be less than zero. (C) Overdue Payments. Lessee shall pay interest on all overdue payments of Rent or other monetary amounts due hereunder at the rate of fifteen percent (15%) per annum or the highest rate allowed by law, whichever is less, accruing from the date such Rent or other monetary amounts were properly due and payable. ARTICLE 5. INSURANCE AND INDEMNITY (A) Lessee shall, throughout the Term or Renewal Terms, if any, of this Lease, at its own cost and expense, procure and maintain insurance which covers the Leased Premises and improvements against fire, wind, and storm damage (including flood insurance if the Leased Premises is in a federally designated flood prone area) and such other risks (including earthquake insurance, if the Leased Premises is located in a federally designated earthquake zone or in an ISO high risk earthquake zone) as may be included in the broadest form of all risk, extended coverage insurance as may, from time to time, be available in amounts sufficient to prevent Lessor or Lessee from becoming a co-insurer within the terms of the applicable policies. In any event, the insurance shall not be less than one hundred percent (100%) of the then insurable value, with such commercially reasonable deductibles as Lessor may reasonably require from time to time. Additionally, replacement cost endorsements, vandalism endorsement, malicious mischief endorsement, waiver of subrogation endorsement, waiver of co- insurance or agreed amount endorsement (if available), and Building Ordinance Compliance endorsement and Rent loss endorsements (for a period of 90 days) must be obtained. (B) Lessee agrees to place and maintain throughout the Term or Renewal Terms, if any, of this Lease, at Lessee's own expense, public liability insurance with respect to Lessee's use and occupancy of said premises, including "Dram Shop" or liquor liability insurance, if the same shall be or become available in the State of Illinois, with initial limits of at least $1,000,000 per occurrence/$3,000,000 general aggregate (inclusive of umbrella coverage), or such additional amounts as Lessor shall reasonably require from time to time. (C) Lessee agrees to notify Lessor in writing if Lessee is unable to procure all or some part of the aforesaid insurance. In the event Lessee fails to provide all insurance required under this Lease, Lessor shall have the right, but not the obligation, to procure such insurance on Lessee's behalf, following five (5) business days written notice to Lessee of Lessor's intent to do so (unless insurance then in place would during such period, or already has, lapsed, in which case no notice need be given) and Lessee may obtain such insurance during said five day period and not then be in default hereunder. If Lessor shall obtain such insurance, Lessee will then, within five (5) business days from receiving written notice, pay Lessor the amount of the premiums due or paid, together with interest thereon at the lesser of 15% per annum or the highest rate allowable by law, which amount shall be considered Rent payable by Lessee in addition to the Rent defined at Article 4 hereof. (D) All policies of insurance provided for or contemplated by this Article can be under Lessee's blanket insurance coverage and shall name Lessor, Lessor's corporate general partners, and Robert P. Johnson, as the general partners of Lessor, and Lessee as additional insured and loss payee, as their respective interests (as landlord and lessee, respectively) may appear, and shall provide that the policies cannot be canceled, terminated, changed, or modified without thirty (30) days written notice to the parties. In addition, all of such policies shall be in place on or before the Occupancy Date and contain endorsements by the respective insurance companies waiving all rights of subrogation, if any, against Lessor. All insurance companies providing coverages must be rated "A" or better by Best's Key Rating Guide (the most current edition), or similar quality under a successor guide if Best's Key Rating shall cease to be published. Lessee shall maintain legible copies of any and all policies and endorsements required herein, to be made available for Lessor's review and photocopy upon Lessor's reasonable request from time to time. On the Occupancy Date and no less than fifteen (15) business days prior to expiration of such policies, Lessee shall provide Lessor with legible copies of any and all renewal Certificates of Insurance reflecting the above terms of the Policies (including endorsements). Lessee agrees that it will not settle any property insurance claims affecting the Leased Premises in excess of $25,000 without Lessor's prior written consent, such consent not to be unreasonably withheld or delayed. Lessor shall consent to any settlement of an insurance claim wherein Lessee shall confirm in writing with evidence reasonably satisfactory to Lessor that Lessee has sufficient funds available to complete the rebuilding of the Premises. (E) Lessee shall defend, indemnify, and hold Lessor harmless against any and all claims, damages, and lawsuits arising after the Occupancy Date of this Lease and any orders, decrees or judgments which may be entered therein, brought for damages or alleged damages resulting from any injury to person or property or from loss of life sustained in or about the Leased Premises, unless such damage or injury results from the intentional misconduct or the gross negligence of Lessor and Lessee agrees to save Lessor harmless from, and indemnify Lessor against, any and all injury, loss, or damage, of whatever nature, to any person or property caused by, or resulting from any act, omission, or negligence of Lessee or any employee or agent of Lessee. In addition, Lessee hereby releases Lessor from any and all liability for any loss or damage caused by fire or any of the extended coverage casualties, unless such fire or other casualty shall be brought about by the intentional misconduct or negligence of Lessor. In the event of any loss, damage, or injury caused by the joint negligence or willful misconduct of Lessor and Lessee, they shall be liable therefor in accordance with their respective degrees of fault. (F) Lessor hereby waives any and all rights that it may have to recover from Lessee damages for any loss occurring to the Leased Premises by reason of any act or omission of Lessee; provided, however, that this waiver is limited to those losses for which Lessor is compensated by its insurers, if the insurance required by this Lease is maintained. Lessee hereby waives any and all right that it may have to recover from Lessor damages for any loss occurring to the Leased Premises by reason of any act or omission of Lessor; provided, however, that this waiver is limited to those losses for which Lessee is, or should be if the insurance required herein is maintained, compensated by its insurers. ARTICLE 6. TAXES, ASSESSMENTS AND UTILITIES (A) Lessee shall be liable and agrees to pay the charges for all public utility services rendered or furnished to the Leased Premises, including heat, water, gas, electricity, sewer, sewage treatment facilities and the like, all personal property taxes, real estate taxes, special assessments, and municipal or government charges, general, ordinary and extraordinary, of every kind and nature whatsoever, which may be levied, imposed, or assessed against the Leased Premises, or upon any improvements thereon, at any time after the Occupancy Date of this Lease for the period prior to the expiration of the term hereof, or any Renewal Term, if exercised. (B) Lessee shall pay all real estate taxes, assessments for public improvements or benefits, and other governmental impositions, duties, and charges of every kind and nature whatsoever which shall or may, during the term of this Lease, be charged, laid, levied, assessed, or imposed upon, or become a lien or liens upon the Leased Premises or any part thereof. Such payments shall be considered as Rent paid by Lessee in addition to the Rent defined at Article 4 hereof. If due to a change in the method of taxation, a franchise tax, Rent tax, or income or profit tax shall be levied against Lessor in substitution for or in lieu of any tax which would otherwise constitute a real estate tax, such tax shall be deemed a real estate tax for the purposes herein and shall be paid by Lessee; otherwise Lessee shall not be liable for any such tax levied against Lessor. (C) All real estate taxes, assessments for public improvements or benefits, water rates and charges, sewer rents, and other governmental impositions, duties, and charges which shall become payable for the first and last tax years of the term hereof shall be apportioned pro rata between Lessor and Lessee in accordance with the respective number of months during which each party shall be in possession of the Leased Premises (or through the expiration of the term hereof, if longer) in said respective tax years. Lessee shall pay within 60 days of the expiration of the term hereof Lessor's reasonable estimate of Lessee's pro-rata share of real estate taxes for the last tax year of the term hereof, based upon the last available tax bill. Lessor shall give Lessee notice of such estimated pro-rata real estate taxes no later than 75 days from the end of the term hereof. Upon receipt of the actual statement of real estate taxes for such prorated period, Lessor shall either refund to Lessee any over payment of the pro-rata Lessee obligation, or shall assess and Lessee shall pay promptly upon notice any remaining portion of the Lessee;s pro-rata obligation for such real estate taxes. (D) Lessee shall have the right to contest or review by legal proceedings or in such other manner as may be legal (which, if instituted, shall be conducted solely at Lessee's own expense) any tax, assessment for public improvements or benefits, or other governmental imposition aforementioned, upon condition that, before instituting such proceeding Lessee shall pay (under protest) such tax or assessments for public improvements or benefits, or other governmental imposition, duties and charges aforementioned, unless such payment would act as a bar to such contest or interfere materially with the prosecution thereof and in such event Lessee shall post with Lessor alternative security reasonably satisfactory to Lessor. All such proceedings shall be begun as soon as reasonably possible after the imposition or assessment of any contested items and shall be prosecuted to final adjudication with reasonable dispatch. In the event of any reduction, cancellation, or discharge, Lessee shall pay the amount that shall be finally levied or assessed against the Leased Premises or adjudicated to be due and payable, and, if there shall be any refund payable by the governmental authority with respect thereto, if Lessee has paid the expense of Lessor in such proceedings, Lessee shall be entitled to receive and retain the refund, subject, however, to apportionment as provided during the first and last years of the term of this Lease. (E) Lessor, within sixty (60) days after notice to Lessee if Lessee fails to commence such proceedings, may, but shall not be obligated to, contest or review by legal proceedings, or in such other manner as may be legal, and at Lessor's own expense, any tax, assessments for public improvements and benefits, or other governmental imposition aforementioned, which shall not be contested or reviewed, as aforesaid, by Lessee, and unless Lessee shall promptly join with Lessor in such contest or review, Lessor shall be entitled to receive and retain any refund payable by the governmental authority with respect thereto. (F) Lessor shall not be required to join in any proceeding referred to in this Article, unless in Lessee's reasonable opinion, the provisions of any law, rule, or regulation at the time in effect shall require that such a proceeding be brought by and/or in the name of Lessor, in which event Lessor shall upon written request, join in such proceedings or permit the same to be brought in its name, all at no cost or expense to Lessor. (G) Within thirty (30) days after Lessor notifies Lessee in writing that Lessor has paid such amount, Lessee shall also pay to Lessor, as additional Rent, the amount of any sales tax, franchise tax, excise tax, on Rents imposed by the State where the Leased Premises are located. At Lessor's option, Lessee shall deposit with Lessor on the first day of each and every month during the term hereof, an amount equal to one-twelfth (1/12) of any estimated sales tax payable to the State in which the property is situated for Rent received by Lessor hereunder ("Deposit"). From time to time out of such Deposit Lessor will pay the sales tax to the State in which the property is situated as required by law. In the event the Deposit on hand shall not be sufficient to pay said tax when the same shall become due from time to time, or the prior payments shall be less than the current estimated monthly amounts, then Lessee shall pay to Lessor on demand any amount necessary to make up the deficiency. The excess of any such Deposit shall be credited to subsequent payments to be made for such items. If a default or an event of default shall occur under the terms of this Lease, Lessor may, at its option, without being required so to do, apply any Deposit on hand to cure such default, in such order and manner as Lessor may elect. ARTICLE 7. PROHIBITION ON ASSIGNMENTS AND SUBLETTING; TAKE- BACK RIGHTS (A) Except as otherwise expressly provided in this Article, Lessee shall not, without obtaining the prior written consent of Lessor, in each instance: 1. assign or otherwise transfer this Lease, or any part of Lessee's right, title or interest therein; 2. sublet all or any part of the Leased Premises or allow all or any part of the Leased Premises to be used or occupied by any other Persons (herein defined as a Party other than Lessee, be it a corporation, a partnership, an individual or other entity); or 3. mortgage, pledge or otherwise encumber this Lease, or the Leased Premises. (B) For the purposes of this Article: 1. the transfer of voting control of any class of capital stock of any corporate Lessee or sublessee, or the transfer voting control of the total interest in any other person which is a Lessee or sublessee, however accomplished, whether in a single transaction or in a series of related or unrelated transactions, shall be deemed an assignment of this Lease, or of such sublease, as the case may be; 2. an agreement by any other Person, directly or indirectly, to assume Lessee's obligations under this Lease shall be deemed an assignment; 3. any Person to whom Lessee's interest under this Lease passes by operation of law, or otherwise, shall be bound by the provisions of this Article; 4. each material modification, amendment or extension or any sublease to which Lessor has previously consented shall be deemed a new sublease; and 5. Lessee shall present the signed consent to such assignment and/or subletting from any guarantors of this Lease, such consent to be in form and substance reasonably satisfactory to Lessor. Lessee agrees to furnish to Lessor within five (5) business days following demand at any time such information and assurances as Lessor may reasonably request that neither Lessee, nor any previously permitted sublessee or assignee, has violated the provisions of this Article. (C) If Lessee agrees to assign this Lease or to sublet all or any portion of the Leased Premises, Lessee shall, prior to the effective date thereof (the "Effective Date"), deliver to Lessor executed counterparts of any such agreement and of all ancillary agreements with the proposed assignee or sublessee, as applicable. If Lessee shall fail to do so, and shall have surrendered possession of the Leased Premises in violation of its duty of prior notice and failed to obtain Lessor's prior consent (if and where required herein), and, if in such event, Lessor in its sole discretion (except as otherwise specifically limited herein) shall not consent to a proposed sublease or assignment, Lessor shall then have all of the following rights, any of which Lessor may exercise by written notice to Lessee given within thirty (30) days after Lessor receives the aforementioned documents: 1. with respect to a proposed assignment of this Lease, the right to terminate this Lease on the Effective Date as if it were the Expiration Date of this Lease; 2. with respect to a proposed subletting of the entire Leased Premises, the right to terminate this Lease on the Effective Date as if it were the Expiration Date; or 3. with respect to a proposed subletting of less than the entire Leased Premises, the right to terminate this Lease as to the portion of the Leased Premises affected by such subletting on the Effective Date, as if it were the Expiration Date, in which case Lessee shall promptly execute and deliver to Lessor an appropriate modification of this Lease in form satisfactory to Lessor in all respects. 4. with respect to a proposed subletting or proposed assignment of this Lease, impose such conditions upon Lessor's consent as Lessor shall determine in its sole discretion. (D) If Lessor exercises any of its options under Article 7(C) above, (and if Lessor shall impose conditions upon its consent and Lessee shall fail to meet any conditions Lessor may impose upon its consent), Lessor may then lease the Leased Premises or any portion thereof to Lessee's proposed assignee or sublessee, as the case may be, without liability whatsoever to Lessee. (E) Notwithstanding anything above to the contrary, Lessor agrees to consent to any assignment or sublease all or any portion of the Lessee's interests herein to DAKA International, Inc. or a franchisee or licensee in good standing of Champps Entertainment Inc, for the Champps restaurant concept, provided Lessor is given prior written notice of such sublease or assignment, accompanied by a copy of such sublease or assignment, and the consents of Lessee and Guarantors (such consent to be in form and substance satisfactory to Lessor) to such assignment or sublet, affirming their continued liability hereunder (or under their guaranty, respectively). Lessor agrees that its consent to any other proposed assignment or sublet shall not be unreasonably withheld or delayed, provided Lessor is given prior written notice of such sublease or assignment, accompanied by a copy of such sublease or assignment, and the consents of Lessee and Guarantors (such consent to be in form and substance satisfactory to Lessor) to such assignment or sublet, affirming their continued liability hereunder (or under their guaranty, respectively). (F) Notwithstanding anything above to the contrary, the Lessee's interest herein shall not be assignable in any manner in accordance with the terms hereof unless and until the termination of the Development Finanacing Agreement as set forth in Article 35 hereof. ARTICLE 8. REPAIRS AND MAINTENANCE (A) Lessee covenants and agrees to keep and maintain in good order, condition and repair the interior and exterior of the Leased Premises during the term of the Lease, or any renewal terms, and further agrees that Lessor shall be under no obligation to make any repairs or perform any maintenance to the Leased Premises. Lessee covenants and agrees that it shall be responsible for all repairs, alterations, replacements, or maintenance of, including but without limitation to or of: The interior and exterior portions of all doors; door checks and operators; windows; plate glass; plumbing; water and sewage facilities; fixtures; electrical equipment; interior walls; ceilings; signs; roof; structure; interior building appliances and similar equipment; heating and air conditioning equipment; and any equipment owned by Lessor and leased to Lessee hereunder, as itemized on Exhibit B attached hereto and incorporated herein by reference; and further agrees to replace any of said equipment when necessary. Lessee further agrees to be responsible for, at its own expense, snow removal, lawn maintenance, landscaping, maintenance of the parking lot (including parking lines, seal coating, and blacktop surfacing), and other similar items. (B) If Lessee refuses or neglects to commence or complete repairs promptly and adequately, after prior written notice as required under Article 16(B) (except in cases of emergency to prevent waste or preserve the safety and integrity of the Leased Premises, in which case no notice need be given), Lessor may cause such repairs to be made, but shall not be required to do so, and Lessee shall pay the cost thereof to Lessor within five (5) business days following demand. It is understood that Lessee shall pay all expenses and maintenance and repair during the term of this Lease. If Lessee is not then in default hereunder, Lessee shall have the right to make repairs and improvements to the Leased Premises without the consent of Lessor if such repairs and improvements do not exceed Fifty Thousand Dollars ($50,000.00), provided such repairs or improvements do not affect the structural integrity of the Leased Premises. Any repairs or improvements in excess of Fifty Thousand Dollars ($50,000.00) or affecting the structural integrity of the Leased Premises may be done only with the prior written consent of Lessor, such consent not to be unreasonably withheld or delayed. All alterations and additions to the Leased Premises shall be made in accordance with all applicable laws and shall remain for the benefit of Lessor, except for Lessee's moveable trade fixtures. In the event of making such alterations as herein provided, Lessee further agrees to indemnify and save harmless Lessor from all expense, liens, claims or damages to either persons or property or the Leased Premises which may arise out of or result from the undertaking or making of said repairs, improvements, alterations or additions, or Lessee's failure to make said repairs, improvements, alterations or additions. ARTICLE 9. COMPLIANCE WITH LAWS AND REGULATIONS Lessee will comply with all statutes, ordinances, rules, orders, regulations and requirements of all federal, state, city and local governments, and with all rules, orders and regulations of the applicable Board of Fire Underwriters which affect the use of the improvements. Lessee will comply with all easements, restrictions, and covenants of record against or affecting the Leased Premises and any franchise or license agreements required for operation of the Leased Premises in accordance with Article 14 hereof. ARTICLE 10. SIGNS Lessee shall have the right to install and maintain a sign or signs advertising Lessee's business, provided that the signs conform to law, and further provided that the sign or signs conform specifically to the written requirements of the appropriate governmental authorities. ARTICLE 11. SUBORDINATION (A) Lessor reserves the right and privilege to subject and subordinate this Lease at all times to the lien of any mortgage or mortgages now or hereafter placed upon Lessor's interest in the Leased Premises and on the land and buildings of which said premises are a part, or upon any buildings hereafter placed upon the land of which the Leased Premises are a part, provided such mortgagee shall execute its standard form, commercially reasonable subordination, attornment and non-disturbance agreement. Lessor also reserves the right and privilege to subject and subordinate this Lease at all times to any and all advances to be made under such mortgages, and all renewals, modifications, extensions, consolidations, and replacements thereof, provided such mortgagee shall execute its standard form, commercially reasonable subordination, attornment and non- disturbance agreement. (B) Lessee covenants and agrees to execute and deliver, upon demand, such further instrument or instruments subordinating this Lease on the foregoing basis to the lien of any such mortgage or mortgages as shall be desired by Lessor and any proposed mortgagee or proposed mortgagees, provided such mortgagee shall execute its standard form, commercially reasonable subordination, attornment and non-disturbance agreement. ARTICLE l2. CONDEMNATION OR EMINENT DOMAIN (A) If the whole of the Leased Premises are taken by any public authority under the power of eminent domain, or by private purchase in lieu thereof, then this Lease shall automatically terminate upon the date possession is surrendered, and Rent shall be paid up to that day. If any part of the Leased Premises shall be so taken as to render the remainder thereof materially unusable in the opinion of a licensed third party arbitrator reasonably approved by Lessor and Lessee, for the purposes for which the Leased Premises were leased, then Lessor and Lessee shall each have the right to terminate this Lease on thirty (30) days notice to the other given within ninety (90) days after the date of such taking. In the event that this Lease shall terminate or be terminated, the Rent shall, if and as necessary, be paid up to the day that possession was surrendered. (B) If any part of the Leased Premises shall be so taken such that it does not materially interfere with the business of Lessee, then Lessee shall, with the use of the condemnation proceeds to be made available by Lessor, but otherwise at Lessee's own cost and expense, restore the remaining portion of the Leased Premises to the extent necessary to render it reasonably suitable for the purposes for which it was leased. Lessee shall make all repairs to the building in which the Leased Premises is located to the extent necessary to constitute the building a complete architectural unit. Provided, however, that such work shall not exceed the scope of the work required to be done by Lessee in originally constructing such building unless Lessee shall demonstrate to Lessor's reasonable satisfaction the availability of funds to complete such work. Provided, further, the cost thereof to Lessor shall not exceed the proceeds of its condemnation award, all to be done without any adjustments in Rent to be paid by Lessee. This lease shall be deemed amended to reflect the taking in the legal description of the Leased Premises. (C) All compensation awarded or paid upon such total or partial taking of the Leased Premises shall belong to and be the property of Lessor without any participation by Lessee, whether such damages shall be awarded as compensation for diminution in value to the leasehold or to the fee of the premises herein leased. Nothing contained herein shall be construed to preclude Lessee from prosecuting any claim directly against the condemning authority in such proceedings for: Loss of business; damage to or loss of value or cost of removal of inventory, trade fixtures, furniture, and other personal property belonging to Lessee; provided, however, that no such claim shall diminish or otherwise adversely affect Lessor's award or the award of any fee mortgagee. ARTICLE 13. RIGHT TO INSPECT Lessor reserves the right to enter upon, inspect and examine the Leased Premises at any time during business hours, after reasonable notice to Lessee, and Lessee agrees to allow Lessor free access to the Leased Premises to show the premises. Upon default by Lessee or at any time within ninety (90) days of the expiration or termination of the Lease, Lessee agrees to allow Lessor to then place "For Sale" or "For Rent" signs on the Leased Premises. Lessor and Lessor's representatives shall at all times while upon or about the Leased Premises observe and comply with Lessee's reasonable health and safety rules, regulations, policies and procedures. Lessor agrees to indemnify and hold Lessee, its successors, assigns, agents and employees from and against any liability, claims, demands, cause of action, suits and other litigation or judgements of every kind and character, including injury to or death of any person or persons, or trespass to, or damage to, or loss or destruction of, any property, whether real or personal, to the extent resulting from the negligence or willful misconduct or Lessor or Lessor's representatives while upon or about the Leased Premises. ARTICLE 14. EXCLUSIVE USE (A) After the Occupancy Date, Lessee expressly agrees and warrants that the Leased Premises will be used exclusively as a Champps Restaurant or other casual dining sit-down restaurant. In any other such case, after obtaining Lessor's prior written consent, such consent not to be unreasonably withheld or delayed, Lessee may conduct any lawful business from the Leased Premises. Lessee acknowledges and agrees that any other use without the prior written consent of Lessor will constitute a default under and a violation and breach of this Lease. Lessee agrees: To open for business within a reasonable period of time after completion of construction of the contemplated Improvements; to operate all of the Leased Premises during the Term or Renewal Terms during regular and customary hours for businesses similar to the permitted exclusive use stated herein, unless prevented from doing so by causes beyond Lessee's control or due to remodeling; and to conduct its business in a professional and reputable manner. (B) If the Leased Premises are not operated as a Champps Restaurant or other casual dining sit-down restaurant or other permitted use hereunder, or remain closed for thirty (30) consecutive days (unless such closure results from reasons beyond Lessee's reasonable control) and in the event Lessee fails to pay Rent when due or fulfill any other obligation hereunder, then Lessee shall be in default hereunder and Lessor may, at its option, cancel this Lease by giving written notice to Lessee or exercise any other right or remedy that Lessor may have; provided, however, that closings shall be reasonably permitted for replacement of trade fixtures or during periods of repair after destruction or due to remodeling. ARTICLE 15. DESTRUCTION OF PREMISES If, during the term of this Lease, the Leased Premises are totally or partially destroyed by fire or other elements, within a reasonable time (but in no event longer than one hundred eighty (180) days and subject to the provisions herein below), Lessee shall repair and restore the improvements so damaged or destroyed as nearly as may be practical to their condition immediately prior to such casualty. All rents payable by Lessee shall be abated during the period of repair and restoration to the extent that Lessor shall be compensated by the proceeds of the rent loss insurance required to be maintained by Lessee hereunder. Provided Lessee is not in default hereunder (and retains according to the terms hereof the right to rebuild) with the Lessor's prior written consent, which consent shall not be unreasonably withheld or delayed, Lessee shall have the right to promptly and in good faith settle and adjust any claim under such insurance policies with the insurance company or companies on the amounts to be paid upon the loss. The insurance proceeds shall be used to reimburse Lessee for the cost of rebuilding or restoration of the Leased Premises. Risk that the insurance company shall be insolvent or shall refuse to make insurance proceeds available shall be with Lessee. The Leased Premises shall be so restored or rebuilt so as to be of at least equal value and substantially the same character as prior to such damage or destruction. If the insurance proceeds are less than Fifty Thousand Dollars ($50,000), they shall be paid to Lessee for such repair and restoration. If the insurance proceeds are greater than or equal to Fifty Thousand Dollars ($50,000), they shall be deposited by Lessee and Lessor into a customary construction escrow at a nationally recognized title insurance company, or at Lessee's option, with Lessor ("Escrowee") and shall be made available from time to time to Lessee for such repair and restoration. Such proceeds shall be disbursed in conformity with the terms and conditions of a commercially reasonable construction loan agreement. Lessee shall, in either instance, deliver to Lessor or Escrowee (as the case may be) satisfactory evidence of the estimated cost of completion together with such architect's certificates, waivers of lien, contractor's sworn statements and other evidence of cost and of payments as the Lessor or Escrowee may reasonably require and approve. If the estimated cost of the work exceeds One Hundred Thousand Dollars ($100,000), all plans and specifications for such rebuilding or restoration shall be subject to the reasonable approval of Lessor. Any insurance proceeds remaining with Escrowee after the completion of the repair or restoration shall be paid to Lessor to reduce the sum of monies expended by Lessor to acquire its interest in the Lease Premises and rent hereunder shall be reduced by 11% of such amount. If the proceeds from the insurance are insufficient, after review of the bids for completion of such improvements, or should become insufficient during the course of construction, to pay for the total cost of repair or restoration, Lessee shall, prior to commencement of work, demonstrate to Escrowee and Lessor's reasonable satisfaction, the availability of such funds necessary to completion construction and Lessee shall deposit the same with Escrowee for disbursement under the construction escrow agreement. Provided, further, that should the Leased Premises be damaged or destroyed to the extent of fifty (50%) percent of its value or such that Lessee cannot carry on business as a casual dining restaurant without (in the opinion of a licensed third party architect reasonably approved by Lessor and Lessee) being closed for more than sixty (60) days (which duration of closure may be established by Lessee by the affidavit of the approved independent third party architect as to the estimated time of repair) during the last two (2) years of the remaining term of this Lease or any of the option terms of this Lease, if any further options to renew remain, Lessee may elect within 30 days of such damage, to then exercise at least one (1) option to renew this Lease so that the remaining term of the Lease is not less than five (5) years in order to be entitled to such insurance proceeds for restoration or rebuilding. Absent such election, this Lease shall terminate upon Lessor's receipt of the insurance proceeds at least equal to the estimated cost of such repair or restoration. ARTICLE 16. ACTS OF DEFAULT Each of the following shall be deemed a default by Lessee and a breach of this Lease: (A) Failure to pay the Rent or any monetary obligation herein reserved, or any part thereof when the same shall be due and payable. Interest and late charges for failure to pay Rent when due shall accrue from the first date such Rent was due and payable; provided, however, Lessee shall have five (5) business days after written notice from Lessor within which to cure the failure to pay the Rent or any monetary obligation herein reserved. (B) Failure to do, observe, keep and perform any of the other terms, covenants, conditions, agreements and provisions in this Lease to be done, observed, kept and performed by Lessee; provided, however, that Lessee shall have Thirty (30) days after written notice from Lessor within which to cure such default, or such longer time as may be reasonably necessary if such default cannot reasonably be cured within Thirty (30) days, if Lessee is diligently pursuing a course of conduct that in Lessor's reasonable opinion is capable of curing such default, but in any event such longer time shall not exceed 120 days after written notice from Lessor of the default hereunder. (C) The abandonment of the premises by Lessee, the adjudication of Lessee as a bankrupt, the making by Lessee of a general assignment for the benefit of creditors, the taking by Lessee of the benefit of any insolvency act or law, the appointment of a permanent receiver or trustee in bankruptcy for Lessee property, or the appointment of a temporary receiver which is not vacated or set aside within sixty (60) days from the date of such appointment; provided, however, that the foregoing shall not constitute events of default so long as Lessee continues to otherwise satisfy its obligations (including but not limited to the payment of Rent) hereunder. ARTICLE 17. TERMINATION FOR DEFAULT In the event of any uncured default by Lessee and at any time thereafter, Lessor may serve a written notice upon Lessee that Lessor elects to terminate this Lease. This Lease shall then terminate on the date so specified as if that date had been originally fixed as the expiration date of the term herein granted, provided, however, that Lessee shall have continuing liability for future rents for the remainder of the original term and any exercised renewal term as set forth in Article 19, notwithstanding any earlier termination of the Lease hereunder (except where Lessee has exercised a right to terminate where granted herein), preserving unto Lessor the benefit of its bargained-for rental payments. ARTICLE 18. LESSOR'S RIGHT OF RE-ENTRY In the event that this Lease shall be terminated as hereinbefore provided, or by summary proceedings or otherwise, or in the event of an uncured default hereunder by Lessee, or in the event that the premises or any part thereof, shall be abandoned by Lessee and Rent shall not be paid or other obligations (including but not limited to repair and maintenance obligations) of Lessee hereunder shall not be met, then Lessor or its agents, servants or representatives, may immediately or at any time thereafter, re-enter and resume possession of the premises or any part thereof, and remove all persons and property therefrom, either by summary dispossess proceedings or by a suitable action or proceeding at law, or by force or otherwise without being liable for any damages therefor, except for damages resulting from Lessor's negligence or willful misconduct. Notwithstanding anything above to the contrary, if Lessee is still in possession of the Leased Premises, Lessor agrees to use such legal proceedings (summary or otherwise) prescribed by law to regain possession of the Leased Premises. ARTICLE 19. LESSEE'S CONTINUING LIABILITY (A) Should Lessor elect to re-enter as provided in this Lease or should it take possession pursuant to legal proceedings or pursuant to any notice provided for by law, Lessor shall undertake commercially reasonable efforts to mitigate Lessee's continuing liability hereunder as such efforts may be prescribed by law or statute (which shall include listing the Leased Premises with a licensed commercial real estate broker and securing the property against waste, but shall not otherwise include the expenditure of Lessor's funds, unless the same be required by law or statute), and in addition, Lessor may either (i) terminate this Lease or (ii) it may from time to time, without terminating the contractual obligation of Lessee to pay Rent under this Lease, make such alterations and repairs as may be necessary to relet the Leased Premises or any part thereof for the remainder of the original Term or any exercised Renewal Terms, at such Rent or Rents, and upon such other terms and conditions as Lessor in its sole discretion may deem advisable. Termination of Lessee's right to possession by Court Order shall be sufficient evidence of the termination of Lessee's possessory rights under this Lease, and the filing of such an Order shall be notice of the termination of Lessee's Right of First Refusal as set forth in any Memorandum of Lease of record. (B) Upon each such reletting, without termination of the contractual obligation of Lessee to pay Rent under this Lease, all Rents received by Lessor shall be applied as follows: 1. First, to the payment of any indebtedness other than Rent due hereunder from Lessee to Lessor; 2. Second, to the payment of any costs and expenses of such reletting, including brokerage fees and attorney's fees and of costs of such alterations and repairs; 3. Third, to the payment of Rent and other monetary obligations due and unpaid hereunder; 4. Finally, the residue, if any, shall be held by Lessor and applied in payment of future Rent as the same may become due and payable hereunder. If such Rents received from such reletting during any month are less than that to be paid during that month by Lessee hereunder, Lessee shall pay any such deficiency to Lessor. Such deficiency shall be calculated and paid monthly. No such re-entry or taking possession of such Leased Premises by Lessor shall be construed as an election on its part to terminate Lessee's contractual obligations under this Lease respecting the payment of rent and obligations for the costs of repair and maintenance unless a written notice of such intention be given to Lessee. (C) Notwithstanding any such reletting without termination, Lessor may at any time thereafter elect to terminate this Lease for any uncured breach. (D) In addition to any other remedies Lessor may have with this Article 19, Lessor may recover from Lessee all damages it may incur by reason of any uncured breach, including: The cost of recovering and reletting the Leased Premises; reasonable attorney's fees; and, the present value (discounted at a rate of 8% per annum) of the excess of the amount of Rent and charges equivalent to Rent reserved in this Lease for the remainder of the Term over the then reasonable Rent value of the Leased Premises (or the actual Rents receivable by Lessor, if relet), (the Lessee bearing the burden of proof to demonstrate the amount of rental loss for the same period, that through reasonable efforts to mitigate damages, could have been avoided) for the remainder of the Term, all of which amounts shall be immediately due and payable from Lessee to Lessor in full. In the event that the Rent obtained from such alternative or substitute tenant is more than the Rent which Lessee is obligated to pay under this Lease, then such excess shall be paid to Lessor provided that Lessor shall credit such excess against the outstanding obligations of Lessee due pursuant hereto, if any. (E) It is the object and purpose of this Article 19 that Lessor shall be kept whole and shall suffer no damage by way of non-payment of Rent or by way of diminution in Rent. Lessee waives and will waive all rights to trial by jury in any summary proceedings or in any action brought to recover Rent herein which may hereafter be instituted by Lessor against Lessee in respect to the Leased Premises. Lessee hereby waives any rights of re- entry it may have or any rights of redemption or rights to redeem this Lease upon a termination of this Lease. ARTICLE 20. PERSONALTY, FIXTURES AND EQUIPMENT (A) All building fixtures, building machinery, and building equipment used in connection with the operation of the Leased Premises including, but not limited to, heating, electrical wiring, lighting, ventilating, plumbing, walk-in refrigerators/coolers, walk-in freezers, air conditioning systems, and the equipment owned by Lessor and leased to Lessee hereunder as specifically set forth on Exhibit B attached hereto and incorporated herein by reference shall be the property of Lessor. All other trade fixtures and all other articles of personal property owned by Lessee shall remain the property of Lessee. (B) Lessee shall furnish and pay for any and all equipment, furniture, trade fixtures, and signs, except for such items, if any, described in Article 20(A) above, as owned by Lessor. Lessee agrees that Lessor shall have a lien on all Lessee's equipment, furniture, trade fixtures, furnishings, and signs as security for the performance of and compliance with this Lease, subject to the rights of any bona fide third party's security interest in such property. Provided Lessee is not in default hereunder, Lessor will agree that its interest in the personal property of Lessee will be subordinated to financing which may exist or which Lessee may cause to exist in the future on that same personal property. (C) At the end of the term of this Lease, the property described at Article 20(B) above, after written notice to Lessor given at least ten (10) business days prior to any proposed removal, may be removed from the Leased Premises by Lessee regardless of whether or not such property is attached to the Leased Premises so as to constitute a "fixture" within the meaning of the law; however, all damages and repairs to the Leased Premises which may be caused by the removal of such property shall be paid for by Lessee. ARTICLE 21. LIENS Lessee shall not do or cause anything to be done whereby the Leased Premises may be encumbered by any mechanic's or other liens. Whenever and as often as any mechanic's or other lien is filed against said Leased Premises purporting to be for labor or materials furnished or to be furnished to Lessee, Lessee shall remove the lien of record by payment or by bonding with a surety company authorized to do business in the state in which the property is located, within forty-five (45) days from the date of the filing of said mechanic's or other lien and delivery of notice thereof to Lessee. Should Lessee fail to take the foregoing steps within said forty-five (45) day period (or in any event, prior to the expiration of the time within which Lessee may bond over such lien to remove it as a lien upon the Leased Premises), Lessor shall have the right, among other things, to pay said lien without inquiring into the validity thereof, and Lessee shall forthwith reimburse Lessor for the total expense incurred by it in discharging said lien as additional Rent hereunder. ARTICLE 22. NO WAIVER BY LESSOR EXCEPT IN WRITING No agreement to accept a surrender of the Leased Premises or termination of this Lease shall be valid unless in writing signed by Lessor. The delivery of keys to any employee of Lessor or Lessor's agents shall not operate as a termination of the Lease or a surrender of the premises. The failure of Lessor to seek redress for violation of any rule or regulation, shall not prevent a subsequent act, which would have originally constituted a violation, from having all the force and effect of an original violation. Neither payment by Lessee or receipt by Lessor of a lesser amount than the Rent herein stipulated shall be deemed to be other than on account of the earliest stipulated Rent. Nor shall any endorsement or statement on any check nor any letter accompanying any check or payment as Rent be deemed an accord and satisfaction. Lessor may accept such check or payment without prejudice to Lessor's right to recover the balance of such Rent or pursue any other remedy provided in this Lease. This Lease contains the entire agreement between the parties, and any executory agreement hereafter made shall be ineffective to change it, modify it or discharge it, in whole or in part, unless such executory agreement is in writing and signed by the party against whom enforcement of the change, modification or discharge is sought. ARTICLE 23. QUIET ENJOYMENT Lessor covenants that Lessee, upon paying the Rent set forth in Article 4 and all other sums herein reserved as Rent and upon the due performance of all the terms, covenants, conditions and agreements herein contained on Lessee's part to be kept and performed, shall have, hold and enjoy the Leased Premises free from molestation, eviction, or disturbance by Lessor, or by any other person or persons lawfully claiming the same, and that Lessor has good right to make this Lease for the full term granted, including renewal periods. ARTICLE 24. BREACH - PAYMENT OF COSTS AND ATTORNEYS' FEES Each party agrees to pay and discharge all reasonable costs, and actual attorneys' fees, including but not limited to attorney's fees incurred at the trial level and in any appellate or bankruptcy proceeding, and expenses that shall be incurred by the prevailing party in enforcing the covenants, conditions and terms of this Lease or defending against an alleged breach, including the costs of reletting. Such costs, attorneys fees, and expenses if incurred by Lessor shall be considered as Rent as due and owing in addition to any Rent defined in Article 4 hereof. ARTICLE 25. ESTOPPEL CERTIFICATES Either party to this Lease will, at any time, upon not less than ten (10) business days prior request by the other party, execute, acknowledge and deliver to the requesting party a statement in writing, executed by an executive officer of such party, certifying that: (a) this Lease is unmodified (or if modified then disclosure of such modification shall be made); (b) this Lease is in full force and effect; (c) the date to which the Rent and other charges have been paid; and (d) to the knowledge of the signer of such certificate that the other party is not in default in the performance of any covenant, agreement or condition contained in this Lease, or if a default does exist, specifying each such default of which the signer may have knowledge. It is intended that any such statement delivered pursuant to this Article may be relied upon by any prospective purchaser or mortgagee of the Leased Premises or any assignee of such mortgagee or a purchaser of the leasehold estate. ARTICLE 26. FINANCIAL STATEMENTS During the term of this Lease, Lessee will, within ninety (90) days after the end of Lessee's fiscal year, furnish its financial statements to Lessor. Lessee's financial statements shall include, at a minimum, a consolidated balance sheet and statement of operations, and do not need to be prepared by an independent certified public accountant, but shall be prepared in conformity with generally accepted accounting principles (hereafter "GAAP") and be represented and warranted in writing as true and correct by the chief financial officer or other authorized officer of Lessee. Additionally, during the term of the Lease, Lessee will within forty-five (45) days from the end of each quarter of each fiscal year, furnish Lessor with Lessee's financial statements and operating statements of the Leased Premises for such quarter. Lessor shall have the right to require such financial statements and operating statements on a monthly basis after the occurrence of a default. Said quarterly (or monthly, if requested by Lessor) statements do not need to be prepared by an independent certified public accountant, but shall be represented and warranted in writing as true and correct by the chief financial officer or other authorized officer of Lessee. The financial statements shall conform to GAAP, and include, at a minimum, a balance sheet and statement of operations. ARTICLE 27. MORTGAGE Lessee does hereby agree to make reasonable modifications of this Lease requested by any Mortgagee of record from time to time, provided such modifications are not substantial and do not increase any of the Rents or obligations of Lessee under this Lease or substantially modify any of the business elements of this Lease. ARTICLE 28. OPTION TO RENEW If this Lease is not previously canceled or terminated and if Lessee has materially complied with and performed all of the covenants and conditions in this Lease after applicable cure periods and is not currently in default, then Lessee shall have the option to renew this Lease upon the same conditions and covenants contained in this Lease for Three (3) consecutive periods of Five (5) years each (singularly "Renewal Term"). Rent during the Twenty-Second, Twenty-Fifth, Twenty-Eighth, Thirty- First, and Thirty-Fourth Lease Year of the Renewal Term shall increase by the lesser of Seven and Thirty-Five One Hundredths Percent (7.35%) of the Rent payable for the preceding Lease Year, or the CPI-U Percentage Increase, as defined in Article 4 hereof. The first Renewal Term will commence on the day following the date the original Term expires and successive Renewal Terms would commence on the day following the last day of the then expiring Renewal Term. Except as otherwise provided in Article 15 hereof, Lessee must give ninety (90) days written notice to Lessor of its intent to exercise this option prior to the expiration of the original Term of this Lease or any Renewal Term, as the case may be. ARTICLE 29. MISCELLANEOUS PROVISIONS (A) All written notices shall be given to Lessor or Lessee by certified mail or nationally recognized overnight mail. Notices to either party shall be addressed to the person and address given on the first page hereof. Lessor and Lessee may, from time to time, change these addresses by notifying each other of this change in writing. Notices of overdue Rent may be sent to Lessee by regular, special delivery, or nationally recognized overnight mail. (B) The terms, conditions and covenants contained in this Lease and any riders and plans attached hereto shall bind and inure to the benefit of Lessor and Lessee and their respective successors, heirs, legal representatives, and assigns. (C) This Lease shall be governed by and construed under the laws of the State where the Leased Premises are situate. (D) In the event that any provision of this Lease shall be held invalid or unenforceable, no other provisions of this Lease shall be affected by such holding, and all of the remaining provisions of this Lease shall continue in full force and effect pursuant to the terms hereof. (E) The Article captions are inserted only for convenience and reference, and are not intended, in any way, to define, limit, describe the scope, intent, and language of this Lease or its provisions. (F) In the event Lessee remains in possession of the premises herein leased after the expiration of this Lease and without the execution of a new lease and without Lessor's written permission, Lessee shall be deemed to be occupying said premises as a tenant from month-to-month, subject to all the conditions, provisions, and obligations of this Lease insofar as the same can be applicable to a month-to-month tenancy except that the monthly installment of Rent shall be One Hundred Fifty percent (150%) the amount due on the last month prior to such expiration. (G) If any installment of Rent (whether lump sum, monthly installments, or any other monetary amounts required by this Lease to be paid by Lessee and deemed to constitute Rent hereunder) shall not be paid when due, or non-monetary default shall remain uncured after the expiration of any applicable cure period, Lessor shall have the right to charge Lessee a late charge of $250.00 per month for each month that any amount of Rent installment remains unpaid or non-monetary default shall go uncured after the first such occurrence in any 12 month period. Said late charge shall commence after such installment is due or non-monetary default goes uncured after the expiration of any applicable cure period and continue until said installment, interest and all accrued late charges are paid in full or such non-monetary default is cured. (H) Any part of the Leased Premises may be conveyed by Lessor for private or public non-exclusive easement purposes at any time, provided such easement does not interfere with the access to the Leased Premises, visibility, or operations of the business of Lessee. In such event Lessor shall, at its own cost and expense, restore the remaining portion of the Leased Premises to the extent necessary to render it reasonably suitable for the purposes for which it was leased, all to be done without adjustments in Rent to be paid by Lessee. All proceeds from any conveyance of an easement shall belong solely to Lessor. (I) For the purpose of this Lease, the term "Rent" shall be defined as Rent under Article 4, and any other monetary amounts required by this Lease to be paid by Lessee. (J) Lessee agrees to cooperate with Lessor to allow Lessor to obtain and use at Lessor's expense promotional photographs of the Leased Premises, to the extent permitted by Lessee's franchisor or licensor. ARTICLE 30. REMEDIES NON-EXCLUSIVITY. Notwithstanding anything contained herein it is the intent of the parties that the rights and remedies contained herein shall not be exclusive but rather shall be cumulative along with all of the rights and remedies of the parties which they may have at law or equity. ARTICLE 31. HAZARDOUS MATERIALS INDEMNITY Lessee covenants, represents and warrants to Lessor, its successors and assigns, (i) that it has not used or permitted and will not use or permit the Leased Premises to be used, whether directly or through contractors, agents or tenants, and to the best of Lessee's knowledge and except as disclosed to Lessor in writing, the Leased Premises has not at any time been used for the generating, transporting, treating, storage, manufacture, emission of, or disposal of any dangerous, toxic or hazardous pollutants, chemicals, wastes or substances as defined in the Federal Comprehensive Environmental Response Compensation and Liability Act of 1980 ("CERCLA"), the Federal Resource Conservation and Recovery Act of 1976 ("RCRA"), or any other federal, state or local environmental laws, statutes, regulations, requirements and ordinances ("Hazardous Materials"); (ii) that there have been no investigations or reports involving Lessee, or the Leased Premises by any governmental authority which in any way pertain to Hazardous Materials (iii) that the operation of the Leased Premises has not violated and is not currently violating any federal, state or local law, regulation, ordinance or requirement governing Hazardous Materials; (iv) that the Leased Premises is not listed in the United States Environmental Protection Agency's National Priorities List of Hazardous Waste Sites nor any other list, schedule, log, inventory or record of Hazardous Materials or hazardous waste sites, whether maintained by the United States Government or any state or local agency; and (v) that the Leased Premises will not contain any formaldehyde, urea or asbestos, except as may have been disclosed in writing to Lessor by Lessee at the time of execution and delivery of this Lease. Lessee agrees to indemnify and reimburse Lessor, its successors and assigns, for: (a) any breach of these representations and warranties, and (b) any loss, damage, expense or cost arising out of or incurred by Lessor which is the result of a breach of, misstatement of or misrepresentation of the above covenants, representations and warranties, and (c) any and all liability of any kind whatsoever which Lessor may, for any cause and at any time, sustain or incur by reason of Hazardous Materials discovered on the Leased Premises during the term hereof or placed or released on the Leased Premises by Lessee; together with all attorneys' fees, costs and disbursements incurred in connection with the defense of any action against Lessor arising out of the above. These covenants, representations and warranties shall be deemed continuing covenants, representations and warranties for the benefit of Lessor, and any successors and assigns of Lessor and shall survive expiration or sooner termination of this Lease. The amount of all such indemnified loss, damage, expense or cost, shall bear interest thereon at the lesser of 15% or the highest rate of interest allowed by law and shall become immediately due and payable in full on demand of Lessor, its successors and assigns. ARTICLE 32. ESCROWS Upon a default by Lessee which is uncured after the expiration of any applicable notice and cure period, or upon the request of Lessor's Mortgagee, if any, Lessee shall deposit with Lessor on the first day of each and every month, an amount equal to one-twelfth (1/12th) of the estimated annual real estate taxes, assessments and insurance (if the insurance is to be purchased by Lessor) ("Charges") due on the Leased Premises, or such higher amounts reasonably determined by Lessor as necessary to accumulate such amounts to enable Lessor to pay all charges due and owing at least thirty (30) days prior to the date such amounts are due and payable. From time to time out of such deposits Lessor will, upon the presentation to Lessor by Lessee of the bills therefor, pay the Charges or at Lessee's option, will upon presentation of receipted bills therefor, reimburse Lessee for such payments made by Lessee. In the event the deposits on hand shall not be sufficient to pay all of the estimated Charges when the same shall become due from time to time or the prior payments shall be less than the currently estimated monthly amounts, then Lessee shall pay to Lessor on demand any amount necessary to make up the deficiency. The excess of any such deposits shall be credited to subsequent payments to be made for such items. If a default or an event of default shall occur under the terms of this Lease, Lessor may, at its option, without being required so to do, apply any Deposit on hand to cure the default, in such order and manner as Lessor may elect. ARTICLE 33. NET LEASE Notwithstanding anything contained herein to the contrary it is the intent of the parties hereto that this Lease shall be a net lease and that the Rent defined pursuant to Article 4 should be a net Rent paid to Lessor. Any and all other expenses including but not limited to, maintenance, repair, insurance, taxes, and assessments, shall be paid by Lessee. ARTICLE 34. RIGHT OF FIRST REFUSAL Lessor, for itself, its successors and assigns, hereby gives and grants to Lessee a right of first refusal (the "Right of First Refusal") to purchase the Leased Premises, subject to the following terms and conditions: (A) Duration of Right of First Refusal. The Right of First Refusal and all rights and privileges of Lessee hereunder shall be in force for the term of this Lease until the expiration of Lessee's right to possession. (B) Manner of Exercising Right of First Refusal. If Lessor ("Selling Lessor") shall desire to sell all or any portion of its interest in the Leased Premises (subject to the terms of this Lease), Selling Lessor shall give Lessee written notice of Selling Lessor's intention to sell Selling Lessor's interest (partial or whole) in the Leased Premises. Such notice ("Lessor's Notice") shall give Selling Lessor's name and address and state a price at which Selling Lessor intends to sell and will sell a specified portion or all of its interest in the fee simple to the Leased Premises. If Lessee shall fail to exercise its Right of First Refusal as set forth herein, the terms of Article 34(E) shall apply. For twenty (20) business days following the giving of such notice, Lessee shall have the option to purchase such portion of the fee interest of the Selling Lessor as set forth in Lessor's Notice at the price in cash stated in the Lessor's Notice. A written notice in substantially the following form, addressed to Selling Lessor and signed by Lessee and given, in accordance with the provisions of Article 29(A) hereof, within the period for exercising the Right of First Refusal, submitted with a bank cashier's check or money order payable to the order of Selling Lessor in the amount of $5,000.00 (the "Earnest Money") shall be an effective exercise of Lessee's Right of First Refusal, to wit: (date) "We hereby exercise the Right of First Refusal to purchase such portion of the fee interest of the Selling Lessor (as set forth in Lessor's Notice) in the property commonly known as Champps, Schaumburg, Illinois, pursuant to the Right of First Refusal contained in that certain Net Lease Agreement between us pertaining to said premises." (C) Terms of Sale if Right of First Refusal Exercised. Upon Lessee's exercise of the Right of First Refusal in accordance with the provisions of subparagraph (B) hereof, Selling Lessor shall be obligated to sell and convey by recordable general warranty deed, good and indefeasible title to its interest in the Leased Premises (or such portion thereof as set forth in Lessor's Notice) subject only to the matters affecting title which were of record at the time Selling Lessor came into title to the Leased Premises and those matters which Lessee created, suffered or permitted to accrue during the term hereof, and Lessee shall be obligated to purchase such Lessor's interest upon the following terms and conditions: (i) Price. The price "Purchase Price" at which Selling Lessor shall sell and Lessee shall purchase the Leased Premises shall be the price stated in Lessor's Notice. (ii) Closing. Closing shall be sixty (60) days after the expiration of the twenty days within which Lessee may exercise its Right of First Refusal, unless the parties mutually agree otherwise. The Purchase Price less credit for the Earnest Money and any other credits to which Lessee is entitled hereunder shall be tendered in cash or other certified funds by Lessee at Closing. (iii) Evidence of Title. Not less than ten (10) days prior to closing, Selling Lessor shall obtain a commitment for an ALTA owner's policy of title insurance dated within thirty (30) days of the closing date, issued by a nationally recognized title insurance company selected by Selling Lessor (the "Title Company") in the amount of the Purchase Price determined pursuant to subparagraph (C)(i) above, naming Lessee as the proposed insured, and covering the fee simple title to the Leased Premises, and showing Selling Lessor vested with good title to portion of the Leased Premises being sold, subject only to the matters affecting title which were of record at the time Selling Lessor came into title to the Leased Premises and those matters which Lessee created, suffered or permitted to accrue during the term hereof. Such title commitment shall be conclusive evidence of good title. If Lessee shall make objection to the marketability of title, Selling Lessor shall have no obligation to make title marketable, but may withdraw Lessor's notice of intent to market the Premises. (iv) Prorations. Selling Lessor shall pay the cost of the aforesaid title policy and any and all state and municipal taxes imposed by law on the transfer of the title to the Leased Premises, or the transaction pursuant to which such transfer occurs. Water, sewer and other utility charges, if any, which are not metered, driveway permit charges, if any, general real estate taxes, and other similar items, shall be adjusted ratably as of the Closing, except to the extent otherwise settled between the parties pursuant to other provisions of this Lease. A prorated portion of the Rent prepaid by Lessee for the month of closing shall be credited toward the Purchase Price and Lessee shall be given a credit for rent prepaid for any period after the month in which the Closing occurs. Otherwise, Lessee shall not receive a credit against the Purchase Price for Rent paid hereunder. (v) Escrow Closing. At the election of Selling Lessor or Lessee upon notice to the other party not less than five (5) days prior to the Closing, this sale shall be closed through an escrow with the Title Company, in accordance with the general provisions of the usual form of Deed and Money Escrow Agreement then is use by said company, with such special provisions inserted in the escrow agreement as may be required to conform with this agreement. Upon the creation of such an escrow, anything herein to the contrary notwithstanding, paying of the purchase price and delivery of the deed shall be made through the escrow. The cost of the escrow shall be divided equally between the Selling Lessor and Lessee. If for any reason other than Lessee's default, the transaction fails to close, the Earnest Money shall be returned to Lessee forthwith. (vi) Remedies on Default. If Lessee defaults under the provisions of this subparagraph 34(C), Selling Lessor shall have the right to annul the provisions of this paragraph 34 by giving Lessee notice of such election, provided that Selling Lessor has first notified Lessee of such default and Lessee has failed to cure the same within ten (10) days after such notice. Upon Selling Lessor's notice of annulment in accordance herewith, the Earnest Money shall be forfeited and paid to Selling Lessor as liquidated damages, which shall be Selling Lessor's sole and exclusive remedy. If Selling Lessor defaults under the provisions of this subparagraph 34(C) and fails to cure such default within ten (10) days after being notified of the same by Lessee, then in such event, (i) the Earnest Money at Lessee's election and immediately upon its demand shall be returned to Lessee, which return shall not, however, in any way release or absolve Selling Lessor from its obligations hereunder and (ii) Lessee shall be entitled to all remedies (both legal and equitable) the law (both statutory and decisional) of the state in which the Leased Premises are situated provides without first having to tender the balance of the purchase price as a condition precedent thereof and without having to make any election of such remedies. (D) Effect of Right of First Refusal on Lease. If the Right of First Refusal is exercised by Lessee and is exercisable in Lessor's Notice as to the entire fee simple, this Lease shall continue in full force and effect until the Closing hereinabove specified. If the Right of First Refusal is exercised only as to all of an undivided portion of the fee simple to the Leased Premises, the Lease shall remain in full force and effect without merger or termination of this Lease because of such purchase. If for any reason such Closing fails to occur, this Lease shall continue in full force and effect, except that if the provisions of this paragraph 34 are annulled by Selling Lessor, in accordance with subparagraph 34(C)(vi), by reason of a default by Lessee, this Lease shall continue but without the provisions of this paragraph 34 being a part hereof. (E) If Lessee fails to exercise its Right of First Refusal, Selling Lessor shall be free to sell all or any portion of its interest in the Leased Premises for six months following the expiration of the twenty days within which Lessee may exercise its Right of First Refusal, provided that the Selling Lessor giving such Lessor's Notice shall sell its interest (or a portion thereof) for a price equal to or greater than the price (or the pro-rata portion thereof if a portion of the Selling Lessor's interest in the Leased Premises is sold) set forth in Lessor's Notice. This Right of First Refusal shall survive any sale of the Leased Premises and shall apply to any subsequent sale or potential sale by Lessor or its successors and assigns. ARTICLE 35. DEVELOPMENT FINANCING AGREEMENT The parties hereto hereby acknowledge that the terms hereof are subject to and shall in the event of conflicts be controlled by that certain Development Financing Agreement of even date herewith, until such Agreement is terminated in accordance with its terms. ARTICLE 36. COUNTERPART EXECUTION This Agreement may be executed in multiple counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument. IN WITNESS WHEREOF, Lessor and Lessee have respectively signed and sealed this Lease as of the day and year first above written. LESSEE: CHAMPPS AMERICANA, INC. By:/s/ Charles W Redepenning Its: SR VP STATE OF Massachusets) )SS. COUNTY OF Essek) The foregoing instrument was acknowledged before me this 15th day of April, 1997, by Charles W Redepenning Jr, as SR V.P. of Champps Americana, Inc. on behalf of said corporation. /s/ Julie K Benchetts Notary Public commision expires 4-8-99 Lessor's signature appears on the following pages LESSOR: AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP, a Minnesota limited partnership By: AEI FUND MANAGEMENT XXI, INC., a Minnesota corporation By:/s/ Robert P Johnson Robert P. Johnson, President STATE OF MINNESOTA ) )SS. COUNTY OF RAMSEY ) The foregoing instrument was acknowledged before me the 21 day of April, 1997, by Robert P. Johnson, the President of AEI Fund Management XXI, Inc., a Minnesota corporation, corporate general partner of AEI Income & Growth Fund XXI Limited Partnership, on behalf of said limited partnership. [notary seal] /s/ Michael B Daugherty Notary Public LESSOR AEI NET LEASE INCOME & GROWTH FUND XX LIMITED PARTNERSHIP By: AEI Fund Management XX, Inc. By: /s/ Robert P Johnson Robert P. Johnson,President STATE OF MINNESOTA ) )SS. COUNTY OF RAMSEY ) The foregoing instrument was acknowledged before me the 21 day of April, 1997, by Robert P. Johnson, the President of AEI Fund Management XX, Inc., a Minnesota corporation, corporate general partner of AEI Net Lease Income & Growth Fund XX Limited Partnership, on behalf of said limited partnership. [notary seal] /s/ Michael B Daugherty Notary Public LESSOR NET LEASE INCOME & GROWTH FUND 84-A LIMITED PARTNERSHIP By: Net Lease Management 84-A, Inc. By: /s/ Robert P Johnson Robert P. Johnson,President STATE OF MINNESOTA ) )SS. COUNTY OF RAMSEY ) The foregoing instrument was acknowledged before me the 21 day of April, 1997, by Robert P. Johnson, the President of Net Lease Management 84-A, Inc., a Minnesota corporation, corporate general partner of Net Lease Income & Growth Fund 84-A Limited Partnership, on behalf of said limited partnership. /s/ Michael B Daugherty Notary Public [notary seal] Exhibit A Legal Description Parcel 1 Lot 2 in American-Commons Subdivision, a Resubdivision of Lts 1 and 2 in Anderson's Woodfield common West, a subdivision of part of the Northeast quarter of Section 14, Township 41 North, Range 10 East of the Third Principal Meridian, in Cook County, Illinois. Parcel 2 Non-exclusive easement for ingress, dgress and parking as established by reciprocal easement agrrement made by Chi-Chi's Inc., a Minnesota corporation, and Bob Evan Farm, Inc., an Ohio corporation, dated May 10, 1993, and recorded May 13, 1993, as Document 26604303. EX-27 4
5 0000931755 AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP 3-MOS DEC-31-1997 MAR-31-1997 9,413,611 0 40,272 0 0 9,453,883 11,022,829 (216,975) 20,259,737 608,797 0 0 0 0 19,650,940 20,259,737 0 349,610 0 128,650 0 0 0 220,960 0 220,960 0 0 0 220,960 9.17 9.17
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