DEVELOPMENT FINANCING AGREEMENT
THIS AGREEMENT, made and entered into effective as of
this 18th day of April, 2000, by and between Kona Restaurant
Group, Inc. (hereinafter referred to as "Lessee"), whose
address is 0000 Xxxxx Xxxx, 000 Xxxxx, Xxxxxx, Xxxxx 00000,
and AEI Private Net Lease Fund 1998 Limited Partnership,
whose principal business address is 1300 Minnesota World
Trade Center, 00 Xxxx Xxxxxxx Xxxxxx, Xx. Xxxx, Xxxxxxxxx
00000 (hereinafter referred to as "Lessor") .
W I T N E S S E T H, that:
WHEREAS, Lessee is contemplating building the following
Improvements on the premises described in Exhibit "A"
attached hereto :
Construction of a building and improvements to be used
as a Xxxxxx Xxxxxx'x Country Italian Restaurant.
WHEREAS, Lessee has made application to Lessor for
development financing to defray the costs of constructing
such Improvements;
WHEREAS, Lessor's Assignor has issued to Lessee its
Development Financing and Leasing Commitment to advance
funds in the amount hereinafter specified, subject to
compliance with the terms and conditions of this Development
Financing Agreement and the Net Lease Agreement (the
"Lease") of even date herewith;
NOW, THEREFORE, in consideration of entering into the
Lease and other good and valuable consideration, the receipt
of which is hereby acknowledged by the parties hereto, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the following terms
shall have the following meanings:
1. "Application" shall mean Lessee's application to
the Lessor for the Development Financing the terms and
conditions of which are incorporated herein by reference.
2. "Architect's Contract" shall mean Lessee's
contract with the Project Architect.
3. "Commitment" shall mean Lessor's Commitment to
Lessee agreeing to provide the Development Financing. (The
"Development Financing and Leasing Commitment" dated of even
date herewith.)
4. "Completion Date" shall mean midnight, September
30, 2000, subject to Force Majeure, as defined herein.
5. "Construction Costs" shall mean actual incurred
land costs, all costs paid to construct and complete the
Improvements, as categorized and estimated 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 Two Million One Hundred Thirty Five Thousand
Dollars ($2,135,000) 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, 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 fifty days (150) 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
and Development Financing and Carrying Charges.
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, xxxx 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 will 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 Lessee 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 materially 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
(most recent form owner's) 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 are called for
in the Lease in the amounts called for in the Lease naming
Lessor as an additional named insured.
(c) PUBLIC LIABILITY - Comprehensive public liability
insurance (including operations of subcontractors) 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
accordance with the terms of the Lease.
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 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, if any, 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 ( "Draw Request"),
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 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 xxxxx 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 of lien
pursuant to bonding or otherwise to prevent such liens from
attaching to the Leased Premises.
c. Waivers of Mechanics' Liens and Materialmen's
Liens executed by all Sub-Contractors and workmen and
materialmen for all work done and all materials furnished to
the Leased Premises and included in the immediately
preceding Application for Payment, or evidence reasonably
required by Title to insure over the same by special
specific endorsement, or such other releases or lien
pursuant to bonding or otherwise to prevent such liens from
attaching to the Leased Premises.
d. Such other supporting evidence, including invoices
and receipts as may be requested by Lessor or 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. Lessor shall
give Lessee prompt written notice of any such advance or
withdrawal.
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. Lessor shall give Lessee
prompt written notice of any such advance or withdrawal.
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, inclusive
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. Contractor's profit
and overhead (less ten percent of such amount retained as
retainage) shall be disbursed at the time each disbursement
is made 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. 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.
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
insurance in accordance with the Lease, 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;
and with respect to monetary defaults, Lessee shall have
five days after notice from Lessor to cure any such monetary
defaults; 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 in any material respect, and the same
shall not be cured or made to be true and correct within the
applicable cure periods, which for those relating to this
Agreement, the cure periods shall be the same as set forth
in paragraph 3 above; or
5. FILING OF LIENS AGAINST THE LEASED PREMISES - Any lien
for labor, material, taxes or otherwise shall be filed
against the Leased Premises and such lien shall not be
promptly paid, released, contested in an appropriate forum,
or bonded over to Lessor's reasonable satisfaction before
the lien shall materially adversely affect Lessor's interest
in the Premises; or
6. LITIGATION AGAINST LESSEE - Any suit shall be filed
against Lessee, and is not resolved within 120 days and,
which if adversely determined, could substantially impair
the ability of Lessee to perform each and every one of its
obligations under and by virtue of the Development Financing
Documents; or
7. LEVY UPON THE LEASED PREMISES - A levy be made under
any process on the Leased Premises and such levy shall not
be promptly bonded over prior to the execution of such levy;
or
8. TRANSFER OF LEASED PREMISES - Lessee shall without the
prior written consent of Lessor, voluntarily or by operation
of law, sell, transfer, convey or encumber all or any part
of its interest in the Leased Premises or in any of the
personalty located thereon, or used or intended to be used
in connection therewith; or
9. ABANDONMENT - Lessee abandons the project or delays or
ceases work thereon for a period of fifteen consecutive (l5)
days, or delays construction or suffers construction to be
delayed for any period of time for any reason whatsoever so
that completion of Improvements cannot be accomplished in
the judgment of Lessor on or before the Completion Date,
subject to force majeure; or
10. BANKRUPTCY - Lessee shall make an assignment for the
benefit of its creditors or shall admit in writing its
inability to pay its debts as they become due or shall file
a petition in bankruptcy or shall be adjudicated a bankrupt
or insolvent or shall file a petition seeking any
reorganization, dissolution, liquidation, arrangement,
composition, readjustment, or similar relief under any
present or future bankruptcy or insolvency statute, law or
regulation, or shall file an answer admitting to or not
contesting the material allegations of a petition filed
against it in any such proceedings, or shall not have the
same dismissed or vacated, or shall seek or consent or
acquiesce in the appointment of any trustee, receiver or
liquidator of a material part of its properties, or shall
not after the appointment without the consent or
acquiescence of it of a trustee, receiver, or liquidator of
any material part of its properties have such receiver,
liquidator or appointment vacated; or
11. EXECUTION LEVY - Execution shall have been levied
against the Leased Premises or any lien creditors commence
suit to enforce a judgment lien against the Leased Premises
or such action or suit shall have been brought and shall not
be immediately bonded over and shall continue unstayed and
in effect for a period of more than 120 consecutive days; or
12. ATTACHMENT - Any part of the Lessor's commitment to
make the advances hereunder shall at any time be subject or
liable to attachment or levy at the suit of any creditor of
the Lessee or at the suit of any subcontractor or creditor
of the Contractor and shall remain unstayed prior to the
time Lessor shall be obligated to comply with the same.
ARTICLE XI
REMEDIES OF LESSOR
Lessee hereby agrees that the occurrence of any one or more
of the events of default set out in Article X hereof, shall
also constitute an event of default under each of the
Development Financing documents, thereby entitling Lessor,
after the expiration of any applicable cure period, at its
option, to proceed to exercise any or all of the following
remedies:
1. EXERCISE OF REMEDIES - To exercise any of the various
remedies provided in any of the Development Financing
Documents, including the acceleration of the Put described
in Article 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 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 ten 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 $100,000.00. 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. Subject to paragraph 4 hereof, 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. Subject to paragraph
4 hereof, 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, to be disbursed as if such
disbursements were disbursements of Development Financing.
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, provided, the
Completion Date need not be extended more than 90 days, 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 certifies 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 within 45 days after the expiration of any
applicable notice and cure period, 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 timely elect to sell
the Leased Premises, Lessor shall give Lessee timely 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 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 $6,623.75 per month absent an uncured Default by Lessee;
absent an uncured Default, accrued rent during the period of
construction of the Improvements prior to the Rental
Modification Date shall not be payable until the Final
Disbursement Date. Upon the occurrence of an uncured
Default, all accrued rent shall be immediately due and
payable.
On the Rental Modification Date, if not otherwise in
default hereunder, Lessee shall begin paying Rent out of
pocket 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). 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. Distinct from Rent, disbursed proceeds of the
Development Financing shall accrue interest at a rate of
10.5% 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 fifty days (150) from the date
hereof, (the "Rental Modification Date"), Lessee shall begin
making monthly payments of subsequently accruing interest at
the rate of 10.5% per annum out of pocket ("Out of Pocket
Invoiced Interest") within 5 days after invoice from Lessor.
3. Upon the occurrence of an event of default which
remains uncured after the expiration of applicable notice
and cure periods, disbursed proceeds of the Development
Financing shall accrue interest at a rate of Twelve Percent
(12.0%) per annum, or the highest rate allowed by law,
whichever is less, and the rental rate on the Initial
Disbursed funds shall increase to Twelve Percent (12.0%) 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.
Kona Restaurant Group, Inc., a Delaware corporation
By: /s/ Xxxxxx
Its: President
[Lessor's Signature appears on following page.]
AEI PRIVATE NET LEASE FUND 1998 LIMITED PARTNERSHIP
By: AEI Fund Management XVIII, Inc.
By: /s/ Xxxxxx X Xxxxxxx
Xxxxxx X. Xxxxxxx, President
EXHIBIT A
1.6310 ACRE
(71,046 Square Feet)
XXX XXXXX XX XXXXX
XXX XXXXXX XX XXXXXXXX
BEING a 1.6310 acre tract of land situated in Farm Xxx 0,
Xxxxx 0, Xxxxx 0, Xxxx Xxxxx Xxxx in the Original Four
League Grant to the Town of Victoria, Victoria County, Texas
and being a portion of that certain tract of land described
as 8.759 acres as conveyed from Xxxxxx Xxxx York to Xxxxxxxx
Xxxx and Trust Company, as Trustee, by instrument dated
November 10, 1992, and recorded in Volume 0035, Page 477 of
the Official Records of Victoria County, Texas, said 1.6310
acre tract of land being more fully described by metes and
bounds as follows:
COMMENCING at a 5/8 inch diameter iron rebar found for
corner in the east right-of-way line of U.S. Xxxxxxx Xx. 00
(also known as X. Xxxxxxx Street), said iron rebar marks the
southwest corner of Xxx 0, Xxxxx 0. xx Xxxxxx Xxxxxx
Subdivision No. 1, and addition to the City of Victoria,
Victoria County, Texas, according to the established map and
plat of said addition recorded in Volume 7, Page 85D of the
Map and Plat Records of said County;
THENCE, South 18 deg. 13' 29" West, along said right-of-way
line, a distance of 221.86 feet to a 5/8 inch diameter iron
rebar found marking the beginning of a curve to the left;
THENCE, in a southwesterly direction along said curve to the
left and continuing along said right-of-way line (internal
angle = 2 deg. 18' 40", radius = 3169.85 feet, chord bears S
16 deg. 30' 57" W, a distance of 152.03 feet) for an arc
distance of 152.04 feet to a 5/8 inch diameter iron rebar
found for the POINT OF BEGINNING of the herein described
tract;
Thence, South 71 deg. 47' 38" East, a distance of 223.07
feet to a 5/8 inch diameter iron rebar found marking the
northeast corner of the herein described tract;
THENCE, South 15 deg. 01' 17" West, along the north line of
said 2.10 acre tract, a distance of 216.11 feet to a
concrete monument found marking the southwest corner of the
herein described tract, in the aforesaid curving east right-
of-way line of U.S. Highway No. 77, same being the northwest
corner of said 2.10 acre tract;
THENCE, in a northeasterly direction along said curving
right-of-way line (internal angle 5 deg. 38' 32", radius =
3769.47 feet, chord bears N 12 deg. 32' 21" E, a distance of
371.05feet) for an arc distance of 371.20 feet to the POINT
OF BEGINNING, CONTAINING, within these metes and bounds
1.6310 acre (71,046 square feet) of land, more or less.
TOGETHER WITH certain rights, benefits, and easements
created by that certain Declaration of Easements,
Restrictions, and Related Agreements of even recording date
with the Special Warranty Deed from Triton Commercial
Properties, Ltd to AEI Net Lease Income & Growth Fund XIX
Limited Partnership, AEI Real Estate Fund XV Limited
Partnership, and AEI Real Estate Fund XVII Limited
Partnership.
Land and Hard Costs:
Land Acquisition Cost $ 402,500.00
Building/General Construction 1,100,000.00
Sitework (included in Building/General Construction)
Construction Contingency-10.0% 110,000.00
SUBTOTAL HARD COSTS $ 1,612,500.00
Soft Costs:
Landscaping (included in Building/General Construction)
Survey 2,000.00
Architect 40,000.00
Engineer 10,000.00
Site Engineering 16,500.00
Phase I Environmental 2,300.00
Permits & Fees 4,000.00
Impact/Tap Fees 13,000.00
Builders Xxxx Insurance 1,600.00
Soils Report/Materials Tests 3,000.00
Title Insurance & Closing Costs (Construction and S/L) 8,000.00
Development Interest 30,400.00
Attorney's Fees-Borrower 5,000.00
Attorney's Fees- AEI 10,000.00
AEI 1% Reimbursement 17,825.00
AEI State Qualification Fees 1,200.00
Appraisal 3,500.00
AEI Credit Report Fees (Promesa) 600.00
Miscellaneous 18,575.00
SUBTOTAL SOFT COSTS $ 187,500.00
TOTAL PROJECT COST $ 1,800,000.00
