Construction Agency Agreement

EXHIBIT (10.13) ================================================================================


CONSTRUCTION AGENCY AGREEMENT


dated as of August 27, 1999


between


ATLANTIC FINANCIAL GROUP, LTD.


and


ROWE FURNITURE, INC.
as Construction Agent


================================================================================


TABLE OF CONTENTS
-----------------


Page ............................................................................


ARTICLE I DEFINITIONS.................................................... 1
1.1. Defined Terms....................................................... 1


ARTICLE II APPOINTMENT OF CONSTRUCTION AGENT.............................. 1
2.1. Appointment......................................................... 1
2.2. Acceptance; Construction............................................ 2
2.3. Commencement of Construction........................................ 2
2.4. Supplements to this Agreement....................................... 2
2.5. Term................................................................ 3
2.6. Identification of Properties; Construction Documents................ 3
2.7. Scope of Authority.................................................. 3
2.8. Covenants of the Construction Agent................................. 5


ARTICLE III THE BUILDING; INDEMNITY........................................ 6
3.1. Amendments; Modifications........................................... 6
3.2. Casualty, Condemnation and Construction Force
Majeure Events...................................................... 6
3.3. Indemnity........................................................... 6


ARTICLE IV PAYMENT OF FUNDS............................................... 7
4.1. Funding of Property Acquisition Costs and Property
Buildings Costs..................................................... 7


ARTICLE V CONSTRUCTION AGENCY EVENTS OF DEFAULT.......................... 7
5.1. Construction Agency Events of Default............................... 7
5.2. Damages............................................................. 8
5.3. Remedies; Remedies Cumulative....................................... 9


ARTICLE VI NO CONSTRUCTION AGENCY FEE..................................... 9
6.1. Lease as Fulfillment of Lessor's Obligations........................ 9


ARTICLE VII LESSOR'S RIGHTS; CONSTRUCTION AGENT'S RIGHTS................... 10
7.1. Exercise of the Lessor's Rights..................................... 10
7.2. Lessor's Right to Cure Construction Agent's
Defaults............................................................ 10 ARTICLE VIII MISCELLANEOUS.................................................. 10
8.1. Notices............................................................. 10
8.2. Successors and Assigns.............................................. 10
8.3. GOVERNING LAW....................................................... 11
8.4. Amendments and Waivers.............................................. 11
8.5. Counterparts........................................................ 11
8.6. Severability........................................................ 11
8.7. Headings and Table of Contents...................................... 11


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EXHIBITS


Exhibit A Form of Supplement to Construction Agency Agreement


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CONSTRUCTION AGENCY AGREEMENT
-----------------------------


CONSTRUCTION AGENCY AGREEMENT, dated as of August 27, 1999 (as amended, supplemented or otherwise modified from time to time, this "Agreement"), between
--------- ATLANTIC FINANCIAL GROUP, LTD., a Texas limited partnership, (the "Lessor"), and
------ ROWE FURNITURE, INC., a Virginia corporation ("Rowe Furniture", and in its
-------------- capacity as construction agent, the "Construction Agent").
------------------


PRELIMINARY STATEMENT


A. Lessor, the Guarantors, the Lessees signatory thereto, the Lenders signatory thereto and Crestar Bank, as agent for such Lenders (in such capacity, the "Agent") are parties to that certain Master Agreement, dated as of even date
----- herewith (as amended, supplemented or otherwise modified from time to time pursuant thereto, the "Master Agreement").
----------------


B. Subject to the terms and conditions hereof, (i) the Lessor desires to appoint Rowe Furniture as the Construction Agent to act as its sole and exclusive agent for the construction of the Buildings in accordance with the Plans and Specifications and pursuant to the Master Agreement, and (ii) the Construction Agent desires, for the benefit of the Lessor, to cause such Buildings to be constructed in accordance with the Plans and Specifications and pursuant to the Master Agreement and this Agreement, in each case in accordance with the terms herein set forth.


NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto covenant and agree as follows:


ARTICLE I


DEFINITIONS


1.1 Defined Terms. Capitalized terms used but not otherwise defined in
------------- this Agreement shall have the meanings set forth in the Master Agreement.


ARTICLE II


APPOINTMENT OF CONSTRUCTION AGENT


2.1 Appointment. Pursuant to and subject to the terms and conditions set
----------- forth herein and in the Master Agreement and the


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other Operative Documents, the Lessor hereby irrevocably designates and appoints Rowe Furniture as the Construction Agent to act as its exclusive agent for the construction of the Buildings in accordance with the Plans and Specifications on such Land.


2.2 Acceptance; Construction. Rowe Furniture hereby unconditionally
------------------------ accepts the designation and appointment as Construction Agent. The Construction Agent will cause the Buildings to be constructed on the Land substantially in accordance with the Plans and Specifications and, in accordance with the Operative Documents, to be equipped in substantial compliance in all material respects with all Requirements of Law and insurance requirements. If a Leased Property will be leased by a Lessee other than Rowe Furniture, Rowe Furniture may appoint such Lessee as its sub-construction agent with respect to such Leased Property, provided that such appointment shall not affect Rowe
-------- Furniture's obligations hereunder, which obligations shall be primary and shall remain in full force and effect.


2.3 Commencement of Construction. Subject to Construction Force Majeure
---------------------------- Events, the Construction Agent hereby agrees, unconditionally and for the benefit of the Lessor, to cause construction of a Building to commence on each parcel of Land as soon as is reasonably practicable, in its reasonable judgment, after the Closing Date in respect of such Land. For purposes hereof, construction of a Building shall be deemed to commence on the date (the "Construction Commencement Date") on which excavation for the foundation for - ------------------------------- such Building commences. Without limiting the foregoing, no phase of such construction shall be undertaken until all permits required for such phase have been issued therefor.


2.4 Supplements to this Agreement. On the Closing Date of each parcel of
----------------------------- Land, the Lessor and the Construction Agent shall each execute and deliver to the Agent a supplement to this Agreement in the form of Exhibit A to this
--------- Agreement, appropriately completed, pursuant to which the Lessor and the Construction Agent shall, among other things, each acknowledge and agree that the construction and development of such Land will be governed by the terms of this Agreement. Following the execution and delivery of a supplement to this Agreement as provided above, such supplement and all supplements previously delivered under this Agreement shall constitute a part of this Agreement. On or prior to the Closing Date of each parcel of Land, the Construction Agent shall prepare and deliver to the Lessor and the Agent a construction budget (the "Construction Budget") for the related Leased Property, which shall be attached - -------------------- as an exhibit to the related Supplement to this Agreement, setting forth in reasonable detail the budget for the Construction of the proposed Building on such Land in accordance
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with the Plans and Specifications therefor, and all related costs, including the capitalized interest and Yield expected to accrue during the related Construction Term, provided, however, the Construction Agent may prepare and deliver to the Lessor and the Agent a preliminary construction budget for the related Leased Property on the Closing Date, but, in any event, and as a condition to any Funding occurring after the Closing Date, the Construction Agent shall deliver a final Construction Budget (which shall not differ materially from the preliminary construction budget) to the Lessor and the Agent within 30 days of the Closing Date.


2.5 Term. This Agreement shall commence on the date hereof and shall
---- terminate with respect to any given Leased Property upon the first to occur of:


(a) payment by the related Lessee of the Leased Property Balance and
termination of the Lease with respect to such Leased Property in accordance
with the Lease;


(b) the expiration or earlier termination of the Lease;


(c) termination of this Agreement pursuant to Article V hereof;
---------


(d) the payment by the Construction Agent of the Leased Property
Balance or the Construction Failure Payment with respect to such Leased
Property pursuant to this Agreement; and


(e) the completion after the Completion Date of all punchlist items.


2.6 Identification of Properties; Construction Documents. The
---------------------------------------------------- Construction Agent may execute any of its duties and obligations under this Agreement by or through agents, contractors, employees or attorneys-in-fact, and the Construction Agent, as agent for the Lessor, shall enter into such agreements with architects and contractors as the Construction Agent deems necessary or desirable for the construction of the Buildings pursuant hereto (the "Construction Documents"); provided, however, that no such delegation shall
---------------------- -------- ------- limit or reduce in any way the Construction Agent's duties and obligations under this Agreement; provided, further, contemporaneously with the execution and
-------- ------- delivery of a Construction Document, the Construction Agent will execute and deliver to the Lessor the Security Agreement and Assignment, pursuant to which the Construction Agent assigns to the Lessor, among other things, all of the Construction Agent's rights under and interests in such Construction Documents. Each construction contract with a


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general contractor shall be with a reputable general contractor with experience in constructing projects that are similar in scope and type to the proposed Building, and shall provide for a commercially reasonable retainage amount.


2.7 Scope of Authority. (a) Subject to the terms, conditions,
------------------ restrictions and limitations set forth in the Operative Documents, the Lessor hereby expressly authorizes the Construction Agent, or any agent or contractor of the Construction Agent, and the Construction Agent unconditionally agrees, for the benefit of the ...