<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
___________________
FORM T-3
FOR APPLICATIONS FOR QUALIFICATION OF INDENTURES
UNDER THE TRUST INDENTURE ACT OF 1939
___________________
JAMBOREE LLC
(NAME OF APPLICANT)
3333 MICHELSON DRIVE
SUITE 210
IRVINE, CALIFORNIA 92612-1682
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
___________________
SECURITIES TO BE ISSUED UNDER THE
INDENTURE TO BE QUALIFIED
TITLE OF CLASS AMOUNT
-------------- ------
CLASS A SENIOR SECURED NOTES DUE 2002 $80,000,000
___________________
NAME AND ADDRESS OF AGENT FOR SERVICE:
JAMBOREE LLC
3333 MICHELSON DRIVE
SUITE 210
IRVINE, CALIFORNIA 92612-1682
C/O KENNETH LIANG, ESQ.
COPIES TO:
PAUL S. ARONZON, ESQ.
MILBANK, TWEED, HADLEY & MCCLOY
601 SOUTH FIGUEROA STREET, 30TH FLOOR
LOS ANGELES, CALIFORNIA 90017
___________________
The applicant hereby amends this application for qualification on such date
or dates as may be necessary to delay its effectiveness until (i) the 20th
day after the filing of a further amendment which specifically states that it
shall supersede this amendment, or (ii) such date as the Commission, acting
pursuant to Section 307(c) of the Trust Indenture Act of 1939, as amended,
may determine upon the written request of the applicant.
<PAGE>
GENERAL
1. GENERAL INFORMATION. Furnish the following information as to the applicant:
(a) Form of organization:
A limited liability company.
(b) State or other sovereign power under the laws of which organized:
Delaware.
2. SECURITIES ACT EXEMPTION APPLICABLE. State briefly the facts relied upon
by the applicant as a basis for the claim that registration of the indenture
securities under the Securities Act of 1933 ("SECURITIES ACT") is not required.
BACKGROUND.
On July 30, 1985, Crow Winthrop Operating Partnership ("CWOP" or the
"DEBTOR") acquired the improved real property located at 3333-3355 Michelson
Drive in Irvine, California (the "PROPERTY"). In connection with its
acquisition of the Property, CWOP executed the Secured Promissory Note in the
principal amount of $204 million in favor of Pacific Mutual Life Realty
Finance, Inc. ("PACIFIC MUTUAL"). Pacific Mutual obtained funding for the loan
by selling Participation Certificates (the "CERTIFICATES") pursuant to the
Purchase, Participation and Servicing Agreement dated June 17, 1985 (the
"PURCHASE AGREEMENT"), which provides for the participation and servicing of
the Certificates.
On March 28, 1997, CWOP filed for protection under Chapter 11 of
Title 11 of the United States Code (the "BANKRUPTCY CODE") with the filing of
its Plan of Reorganization with the United States Bankruptcy Court for the
Central District of California (the "BANKRUPTCY COURT"). On July 23, 1997,
CWOP filed its proposed Third Amended Plan of Reorganization Dated July 23,
1997 (as amended, the "PLAN"). The Plan is expected to be confirmed by the
Bankruptcy Court in early September 1997 and will become effective September
30, 1997.
The Plan provides for the formation of a new entity, Jamboree LLC,
which will be the owner of CWOP's sole asset, the Property. Pursuant to the
Plan, the holders of Certificates (the "CERTIFICATEHOLDERS"), in exchange for
their approximately $198 million of Certificates, will receive new securities
in the aggregate principal amount of $100 million issued by Jamboree LLC and
secured by the Property, consisting of: 1) $80 million in aggregate principal
amount of the Class A Senior Secured Notes Due 2002 (the "SECURITIES"), the
securities to be issued under the indenture to be qualified (the "INDENTURE"),
and (2) $20 million in aggregate principal amount of the Class B Senior
Subordinated Secured Notes Due 2002. In addition, the Certificateholders will
receive an initial 90% membership interest in Jamboree LLC, which membership
interest will be held through a newly formed corporation to be operated as a
real estate investment trust ("JAMBOREE OFFICE REIT").
The Securities will be issued in reliance on the exemption from the
registration requirements of the Securities Act afforded by Section 1145 of the
Bankruptcy Code. Section 1145 of the Bankruptcy Code exempts the offer or sale
of securities under a plan of reorganization from registration under the
Securities Act and state law. Under Section 1145, the issuance of securities
is exempt from registration if three principal requirements are satisfied: (1)
the securities must be issued "under a plan" of reorganization by a debtor, its
successor under a plan of reorganization, or an affiliate participating in a
joint plan of reorganization with the debtor; (2) the recipients of the
securities must hold a claim against the debtor or such affiliate, an interest
in the debtor or such affiliate, or a claim for an administrative expense
against the debtor or such affiliate; and (3) the securities must be issued
entirely in exchange for the recipient's claim against or interest in the
debtor or such affiliate, or "principally" in such exchange and "partly" for
cash or other property. The Debtor believes that the
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issuance of the Securities will be eligible for the exemption provided by
Section 1145(a) of the Bankruptcy Code because the issuance satisfies the
exemption's requirements: (a) the Securities will be securities of Jamboree
LLC, which is a successor to the Debtor, and issuance of the Securities is
specifically mandated under the Plan; (b) the recipients of the Securities hold
claims against the Debtor; and (c) the recipients will receive the Securities
in exchange for their claims against the Debtor.
AFFILIATIONS
3. AFFILIATES. Furnish a list or diagram of all affiliates of the applicant
and indicate the respective percentages of voting securities or other bases of
control.
AS OF AUGUST 11, 1997
None.
AFTER EFFECTIVE DATE
<TABLE>
<CAPTION>
AFFILIATE STATE OF INCORPORATION PERCENTAGE OF VOTING SECURITIES
- --------- ---------------------- -------------------------------
<S> <C> <C>
CWOP Maryland partnership 10% membership interest in
Jamboree LLC
Jamboree Offices REIT* Maryland real estate 90% membership interest in
investment trust Jamboree LLC
</TABLE>
* Jamboree Offices REIT will be wholly-owned by the Certificateholders.
There are no individual persons directly controlling, controlled by
or under common control with the applicant other than the Member
Representatives listed in Item 4 below. Information with respect to the
ownership structure of the named affiliates generally has been omitted.
MANAGEMENT AND CONTROL
4. DIRECTORS AND EXECUTIVE OFFICERS. List the names and complete mailing
addresses of all directors and executive officers of the applicant and all
persons chosen to become directors or executive officers. Indicate all offices
with the applicant held or to be held by each person named.
The following individuals have been chosen to be the initial Member
Representatives upon the Effective Date.
<TABLE>
<CAPTION>
NAME ADDRESS OFFICE
- ---- ------- ------
<S> <C> <C>
Greg Geiger c/o Oaktree Capital Management, LLC Class 1 Member Representative
Russel Bernard 550 South Hope Street, 22nd Floor
Keith Greengrove Los Angeles, California 90071
Kenneth Liang
Jeffrey Furber c/o Winthrop Financial Associates Class 2 Member Representative
One International Place, 12th Floor
Boston, Massachusetts 02110
</TABLE>
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5. PRINCIPAL OWNERS OF VOTING SECURITIES. Furnish the following information
as to each person owning 10% or more of the voting securities of the applicant.
AS OF AUGUST 11, 1997
<TABLE>
<CAPTION>
Name and Complete Amount Percentage of Voting
Mailing Address Title of Class Owned Owned Securities Owned
--------------- -------------------- ----- ----------------
<S> <C> <C> <C>
None N/A N/A N/A
AFTER THE EFFECTIVE DATE
Jamboree Offices REIT, Inc. Class 1 Membership 810,000 90%
Units Units
Crow Winthrop Operating Class 2 Membership 90,000 10%
Partnership Units Units
</TABLE>
UNDERWRITERS
6. UNDERWRITERS. Give the name and complete mailing address of (a) each
person who, within three years prior to the date of filing the application,
acted as an underwriter of any securities of the obligor which were outstanding
on the date of filing the application, and (b) each proposed principal
underwriter of the securities proposed to be offered. As to each person
specified in (a), give the title of each class of securities underwritten.
(a) No person, within the three years prior to the date of this
Application, has acted as an underwriter of any securities of the Issuer
which are outstanding on the date of this Application.
(b) No person will act as principal underwriter of the Securities
governed by the Indenture.
CAPITAL SECURITIES
7. CAPITALIZATION. (a) Furnish the following information as to each
authorized class of securities of the applicant.
AS OF AUGUST 11, 1997:
None.
AFTER THE EFFECTIVE DATE:
Title of Class Authorized Outstanding
-------------- ---------- -----------
Class 1 Membership Units 810,000 810,000
Class 2 Membership Units 90,000 90,000
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(b) Give a brief outline of the voting rights of each class of voting
securities referred to in paragraph (a) above.
AS OF AUGUST 11, 1997:
None.
AFTER THE EFFECTIVE DATE:
The holders of the Class 1 Membership Units and the Class 2
Membership Units have one vote per Membership Unit held for purposes of
electing representatives with respect to the class of Membership Unit so held.
Holders of Class 1 Membership Units elect four such representatives and holders
of Class 2 Membership Units elect one such representative. Except in certain
circumstances, each representative has one vote. A unanimous vote of such
representatives is required with respect to certain matters as set forth in
section 6.7 of the Limited Liability Company Agreement of Jamboree LLC (See
Exhibit T3A).
INDENTURE SECURITIES
8. ANALYSIS OF INDENTURE PROVISIONS. Insert at this point the analysis of
indenture provisions required under Section 305(a)(2) of the Trust Indenture
Act of 1939 ("TIA").
The Securities will be issued under an indenture (the "INDENTURE")
expected to be dated as of the Effective Date (as defined in the Indenture)
between the Issuer and IBJ Schroder Bank & Trust Company, as trustee (the
"TRUSTEE"), a copy of which is being filed as an exhibit hereto. The following
summary of certain provisions of the Securities and the Indenture does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, the detailed provisions contained in the Indenture and the Plan
(See Exhibits T3C and T3E). Wherever particular provisions or defined terms of
the Indenture are referred to, such provisions or defined terms are
incorporated by reference as a part of the statements made herein and such
statements are qualified in their entirety by such reference. Certain defined
terms in the Indenture are capitalized and used with their defined meaning
herein.
(A) EVENTS OF DEFAULT.
The Indenture provides that an "EVENT OF DEFAULT" will occur if any
one of the following events occurs:
(a) The Issuer fails to make any payment in respect of
principal of or premium on the Notes when the same becomes due and
payable and such failure continues for a period of five (5) Business
Days after the due date of such payment, or the Issuer fails to make
any payment when due of interest on the Notes and such failure continues
for a period of ten (10) days after the due date of such payment; or
(b) Either (i) the information provided by CWOP or any of its
Affiliates and contained in the Disclosure Statement with respect to
CWOP's business, financial condition and results of operations (other
than the financial projections contained therein), taken on the basis
of the Disclosure Statement as a whole, or (ii) the Collateral
Documents prove to contain, as of their respective dates, any untrue
statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light
of the circumstances in which they were made, not misleading; or
(c) The Issuer fails to perform or observe (i) any term,
covenant or agreement contained in Article IV or Article V of the
Indenture or (ii) any other term, covenant or agreement contained in
the Indenture, the Plan or the Collateral Documents, if such failure
under this clause (ii) remains unremedied for 30 days after the earlier
of the date on which written notice thereof has been given to the
Issuer by the Trustee or the Holders; or
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(d) The Issuer fails, after any applicable grace period, to
pay any principal of or premium, if any, or interest on the Class
B Notes or any of its other Indebtedness, in an amount exceeding
$200,000 (excluding the Notes), when the same becomes due and payable;
or any other event occurs or condition exists under any agreement or
instrument relating to any such Indebtedness, if the effect of such
event or condition is to accelerate the maturity of such Indebtedness;
or any such Indebtedness is declared to be due and payable, or
required to be prepaid (other than by a regularly scheduled required
prepayment), prior to the stated maturity thereof, or
(e) The Issuer generally does not pay its debts as such debts
become due except such debts that are the subject of a good faith
dispute, or admits in writing its inability to pay its debts
generally, or makes a general assignment for the benefit of creditors,
or any proceeding is instituted by or against the Issuer seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding
up, reorganization, arrangement, adjustment, protection, relief or
composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee
or other similar official for it or for any substantial part of its
property and, in the case of any such proceedings instituted against
the Issuer (but not instituted by it), either such proceedings remain
undismissed or unstayed for a period of 30 days or any of the actions
sought in such proceedings occurs, or the Issuer takes any action to
authorize any of the actions set forth above in this clause (e); or
(f) Any judgment or order for the payment of money in excess of
$100,000 is rendered against the Issuer and either (i) enforcement
proceedings have been commenced by any creditor upon such judgment or
order, or (ii) there is any period of 30 consecutive days during which a
stay of enforcement of such judgment or order, by reason of a pending
appeal or otherwise, is not in effect; or
(g) The Indenture or the Collateral Documents, for any reason, cease
to create a valid Lien on Collateral having a value of $100,000 or more
purported to be covered thereby, or such Lien ceases to have the priority
Lien status initially granted and be a perfected Lien as to Collateral
having a value of $100,000 or more; or
(h) The Issuer fails to pay any Imposition prior to delinquency or,
if the Issuer is prohibited by law from paying such Imposition, the Issuer
fails to pay such Imposition within one hundred eighty (180) days of the
Issuer's receipt of notice of such prohibition; or
(i) The Issuer fails to perform its obligations under the Plan.
If an Event of Default (other than an Event of Default specified in
clause (e) above) occurs and is continuing, the Trustee by notice to the Issuer
may, or upon written notice from the Holders of not less than 25% in principal
amount of the Notes outstanding on the date of determination must, or such
Holders by written notice to the Issuer and the Trustee may, declare all the
Notes to be due and payable immediately and upon such declaration, the
principal of, premium, if any, and interest on the Notes will be due and
payable immediately. If an Event of Default specified in clause (e) above
occurs, such an amount will IPSO FACTO become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder. Holders of not less than 25% in principal amount of the Notes
outstanding on the date of determination, by written notice to the Trustee, may
on behalf of all of the Holders rescind an acceleration and its consequences if
the rescission would not conflict with any judgment or decree and if all
existing Events of Default (except nonpayment of principal, interest or premium
that has become due solely because of the acceleration) have been cured or
waived.
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A Holder of a Note may pursue a remedy with respect to the Indenture
or the Notes only if: (a) the Holder of a Note gives to the Trustee and the
Collateral Agent written notice of a continuing Event of Default; (b) the
Holders of 25% in principal amount of the Notes outstanding on the date of
determination make a written request to the Trustee and the Collateral Agent to
pursue the remedy; (c) such Holder of a Note or Holders offer and, if
requested, provide to the Trustee and the Collateral Agent indemnity
satisfactory to the Trustee and the Collateral Agent against any loss,
liability or expense; (d) the Trustee and the Collateral Agent do not comply
with the request within 60 days after receipt of the request and the offer and,
if requested, the provision of indemnity; and (e) during such 60-day period the
Holders of 25% in principal amount of the Notes outstanding on the date of
determination do not give the Trustee and the Collateral Agent a direction
inconsistent with the request. A Holder of a Note may not use the Indenture to
prejudice the rights of another Holder of a Note or to obtain a preference or
priority over another Holder of a Note.
The Holders of not less than 25% in principal amount of the Notes
outstanding on the date of determination by written notice to the Trustee may
on behalf of the Holders of all of the Notes waive an existing Default or Event
of Default and its consequences under the Indenture, except a continuing
Default or Event of Default in the payment of the principal of or interest on
the Notes. Upon any such waiver, such Default will cease to exist, and any
Event of Default arising therefrom will be deemed to have been cured for every
purpose of the Indenture and the Collateral Documents; but no such waiver will
extend to any subsequent or other Default or Event of Default.
If a Default or Event of Default occurs and is continuing and if it
is known to a Responsible Officer of the Trustee and/or the Collateral Agent,
the Trustee and/or the Collateral Agent must promptly notify the other, and the
Trustee must mail to Holders of the Notes a notice of the Default or Event of
Default within 30 days after it occurs. Notwithstanding anything contained in
TIA Section 315(b) to the contrary, the Trustee may not withhold any such
notice.
(B) AUTHENTICATION AND DELIVERY OF SECURITIES.
A Note will not be valid until authenticated by the manual signature
of the Trustee. The signature of an authorized signatory of the Trustee will
be conclusive evidence that the Note has been authenticated under the
Indenture. The Trustee will, upon a written order of the Issuer set forth in an
Officers' Certificate of the Issuer, authenticate Notes for original issue of
up to the aggregate principal amount stated in paragraph 4 of the Notes. The
aggregate principal amount of Notes outstanding at any time may not exceed the
amount set forth in the Indenture.
The Trustee may appoint an authenticating agent acceptable to the
Issuer to authenticate Notes. Unless limited by the terms of such appointment,
an authenticating agent may authenticate Notes whenever the Trustee may do so.
Each reference in the Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as
an Agent to deal with the Issuer or an Affiliate of the Issuer.
There will be no proceeds from the issuance of the Securities because
the Securities will be issued under the Plan in exchange for the discharge of
certain claims.
(C) RELEASE OR SUBSTITUTION OF PROPERTY SUBJECT TO THE LIEN OF THE
INDENTURE.
No Collateral will be released from the Lien and security interest
created by the Collateral Documents pursuant to the provisions of the
Collateral Documents or the Indenture without the prior written consent of the
Trustee and the Required Holders.
The Issuer must furnish to the Trustee and the Collateral Agent,
prior to each proposed release of Collateral pursuant to the Collateral
Documents or the Indenture, (1) all documents required by TIA Section 314(d)
and (2) an Opinion of Counsel to the effect that such accompanying documents
constitute all documents required
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by TIA Section 314(d). The Trustee may, to the extent permitted by the
Indenture, accept as conclusive evidence of compliance with the foregoing
provisions the appropriate statements contained in such documents and such
Opinion of Counsel.
(D) SATISFACTION AND DISCHARGE OF INDENTURE.
Upon the Issuer's exercise of its option to discharge its obligations
under the Notes, the Issuer will be deemed to have been discharged from its
obligations with respect to all outstanding Notes on the date the conditions
set forth in the Indenture are satisfied (hereinafter, "DEFEASANCE"). For this
purpose, such Defeasance means that the Issuer will be deemed to have paid and
discharged the entire Indebtedness represented by the outstanding Notes, which
will thereafter be deemed to be "outstanding" only for certain purposes set
forth in the Indenture, and to have satisfied all its other obligations under
such Notes and the Indenture.
The following are the conditions to the discharge of obligations with
respect to the outstanding Notes:
(a) the Issuer irrevocably has deposited or caused to be
deposited with the Trustee as trust funds in trust for the purpose of
making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Notes, (2) Cash in
an amount or (3) non-callable Governmental Securities which through the
scheduled payment of principal and interest in respect thereof in
accordance with their terms will provide, not later than one day before
the due date of any payment under the Notes, Cash in an amount, or
(4) a combination thereof, in such amounts, as will be sufficient to pay
and discharge and which is to be applied by the Trustee (or other
qualifying trustee) (A) the principal of and interest on the outstanding
Notes on the stated maturity or on the applicable redemption date, as the
case may be, and (B) any mandatory sinking fund payments or analogous
payments applicable to the outstanding Notes on the day on which such
payments are due and payable in accordance with the terms of the Indenture
and of such Notes; PROVIDED that the Trustee has been irrevocably
instructed to apply such money or the proceeds of such noncallable
Governmental Securities to said payments with respect to the Notes;
(b) no Default or Event of Default with respect to the Notes has
occurred and be continuing on the date of such deposit;
(c) such Defeasance will not result in a breach or violation of, or
constitute a default under, the Indenture or any other agreement or
instrument to which the Issuer is a party or by which the Issuer is bound;
(d) the Issuer has delivered to the Trustee an Officers' Certificate
stating that the deposit made by the Issuer pursuant to its election under
the Indenture was not made by the Issuer with the intent of preferring the
Holders over other creditors of the Issuer or with the intent of defeating,
hindering, delaying or defrauding creditors of the Issuer or others;
(e) the Issuer has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
provided for relating to the Defeasance have been complied with; and
(f) the Issuer has delivered to the Trustee an Opinion of Counsel
confirming that, subject to customary assumptions and exclusions, (A) the
Company has received from, or there has been published by, the United
States Internal Revenue Service a ruling or (B) since the Effective Date,
there has been a change in the applicable federal income tax law, in either
case to the effect that the Holders of the outstanding Notes will not
recognize income, gain or loss for federal income tax purposes as a result
of such Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Defeasance had not occurred; and
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(g) the Issuer has delivered to the Trustee an Opinion of Counsel to
the effect that, as of the date of such opinion and subject to the
customary assumptions and exclusions, the trust funds will not be subject
to the effect of any applicable bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally under any applicable
United States, state law and that the Trustee has a perfected security
interest in such trust for the ratable benefit of the Holders.
(E) EVIDENCE OF COMPLIANCE WITH CONDITIONS.
Upon any request or application by the Issuer to the Trustee to take
any action under the Indenture, the Issuer must furnish to the Trustee: (a) an
Officers' Certificate in form and substance reasonably satisfactory to the
Trustee stating that, in the opinion of the signers, all conditions precedent
and covenants, if any, provided for in the Indenture relating to the proposed
action have been satisfied; and (b) an Opinion of Counsel in form and substance
reasonably satisfactory to the Trustee stating that, in the opinion of such
counsel, all such conditions precedent and covenants provided for in the
Indenture relating to the proposed action have been satisfied.
Except as otherwise provided in the Indenture, the Issuer must
deliver to the Trustee, within 90 days after the end of each Fiscal Year
commencing with the 1997 Fiscal Year, an Officers' Certificate stating that in
the course of the performance by each signer of such signer's duties as an
Officer of the Issuer such signer would normally have knowledge of the Issuer's
compliance with the covenants contained in each of the covenants and conditions
applicable to the Issuer set forth in the Indenture, stating whether or not
such signer has knowledge of any Default in such compliance (such compliance
having been determined without regard to any period of grace or requirement of
notice provided under the Indenture) and, if so, specifying each such Default
of which such signer has knowledge and the nature thereof and what action the
Issuer proposes to take in connection with such Default. For purposes of the
Indenture, one of the signatories of such Officers' Certificate must be an
Authorized Member or one of the principal executive officer, the principal
financial officer or the principal accounting officer of the Issuer.
9. OTHER OBLIGORS. Give the name and complete mailing address of any person,
other than the applicant, who is an obligor upon the indenture securities.
None.
CONTENTS OF APPLICATION FOR QUALIFICATION
This application for qualification comprises:
(a) Pages numbered ____ to ____, consecutively.*
(b) The statement of eligibility and qualification of IBJ Schroder
Bank & Trust Company, as trustee under the indenture to be qualified with
respect to the Securities.
(c) The following exhibits in addition to those filed as part of
the statement of eligibility and qualification of the Trustee:
Exhibit T3A. A copy of the Limited Liability Company Agreement of
the Issuer, as amended to date.
Exhibit T3B. Not Applicable.
Exhibit T3C. Form of Indenture, to be dated as of the Effective
Date, between the Issuer and IBJ Schroder Bank & Trust
Company, as trustee.
- ------------
* Pursuant to Rule 309(a) of Regulation ST, requirements as to sequential
numbering shall not apply to this electronic format document.
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Exhibit T3D. Not Applicable.
Exhibit T3E. A copy of the Disclosure Statement dated July 23, 1997,
and ballots, letters and other written communications
sent to Holders of the Notes.
Exhibit T3F. See the Cross-Reference Sheet contained in the
Indenture filed herewith as Exhibit T3C.
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SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
applicant, JAMBOREE LLC, a limited liability company organized and existing
under the laws of the State of Delaware, has duly caused this application to be
signed on its behalf by the undersigned, thereunto duly authorized, and its
seal to be hereunto affixed and attested, all in the City of Los Angeles and
State of California, on the 11th day of August 1997.
JAMBOREE LLC
By: /s/ Kenneth Liang
------------------------------------
Kenneth Liang
Sole Member
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FORM T-1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________
STATEMENT OF ELIGIBILITY UNDER
THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(b)(2)____
IBJ SCHRODER BANK & TRUST COMPANY
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
New York 13-5375195
(JURISDICTION OF INCORPORATION OR (I.R.S. EMPLOYER
ORGANIZATION IF NOT A U.S. NATIONAL BANK) IDENTIFICATION NUMBER)
One State Street, New York, New York 10004
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
______________________
MAX VOLMAR, IBJ SCHRODER BANK & TRUST COMPANY
ONE STATE STREET, NEW YORK, NEW YORK 10004
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
____________
JAMBOREE LLC
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
Delaware 33-0767222
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
3333 Michelson Drive
Suite 210
Irvine, California 92612-1682
Attention: Kenneth Liang, Esq.
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
________
Class A Senior Secured Notes Due 2002
(TITLE OF THE INDENTURE SECURITIES)
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ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
New York State Banking Department, Two Rector Street,
New York, New York
Federal Deposit Insurance Corporation, Washington, D.C.
Federal Reserve Bank of New York Second District, 33 Liberty
Street, New York, New York
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee.
ITEM 3. VOTING SECURITIES OF THE TRUSTEE.
FURNISH THE FOLLOWING INFORMATION AS TO EACH CLASS OF VOTING SECURITIES OF
THE TRUSTEE:
As of:
- --------------------------------------------------------------------------------
Col. A Col. B
- --------------------------------------------------------------------------------
Title of Class Amount outstanding
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Not applicable.
ITEM 4. TRUSTEESHIPS UNDER OTHER INDENTURES.
IF THE TRUSTEE IS A TRUSTEE UNDER ANOTHER INDENTURE UNDER WHICH ANY
OTHER SECURITIES, OR CERTIFICATES OF INTEREST OR PARTICIPATION IN ANY OTHER
SECURITIES, OF THE OBLIGOR ARE OUTSTANDING, FURNISH THE FOLLOWING INFORMATION:
(a) TITLE OF THE SECURITIES OUTSTANDING UNDER EACH SUCH OTHER
INDENTURE.
Not applicable.
(b) A BRIEF STATEMENT OF THE FACTS RELIED UPON AS A BASIS FOR THE
CLAIM THAT NO CONFLICTING INTEREST WITHIN THE MEANING OF SECTION 310(B)(1) OF
THE ACT ARISES AS A RESULT OF THE TRUSTEESHIP UNDER ANY SUCH OTHER INDENTURE,
INCLUDING A STATEMENT AS TO HOW THE INDENTURE SECURITIES WILL RANK AS COMPARED
WITH THE SECURITIES ISSUED UNDER SUCH OTHER INDENTURE.
Not applicable.
ITEM 5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH THE OBLIGOR
OR UNDERWRITERS.
-2-
<PAGE>
IF THE TRUSTEE OR ANY OF THE DIRECTORS OR EXECUTIVE OFFICERS OF THE
TRUSTEE IS A DIRECTOR, OFFICER, PARTNER, EMPLOYEE, APPOINTEE, OR REPRESENTATIVE
OF THE OBLIGOR OR OF ANY UNDERWRITER FOR THE OBLIGOR, IDENTIFY EACH SUCH PERSON
HAVING ANY SUCH CONNECTION AND STATE THE NATURE OF EACH SUCH CONNECTION.
Not applicable.
ITEM 6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS OFFICIALS.
FURNISH THE FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF THE
TRUSTEE OWNED BENEFICIALLY BY THE OBLIGOR AND EACH DIRECTOR, PARTNER, AND
EXECUTIVE OFFICER OF THE OBLIGOR:
As of:
- --------------------------------------------------------------------------------
Col. A Col. B Col. C Col. D
Name of owner Title of class Amount owned Percentage of
beneficially voting securities
represented by
amount given in
Col. C
- --------------------------------------------------------------------------------
Not applicable.
ITEM 7. VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR THEIR
OFFICIALS.
FURNISH THE FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF THE
TRUSTEE OWNED BENEFICIALLY BY EACH UNDERWRITER FOR THE OBLIGOR AND EACH
DIRECTOR, PARTNER, AND EXECUTIVE OFFICER OF EACH SUCH UNDERWRITER:
As of:
- --------------------------------------------------------------------------------
Col. A Col. B Col. C Col. D
Name of owner Title of class Amount owned Percentage of
beneficially voting securities
represented by
amount given in
Col. C
- --------------------------------------------------------------------------------
Not applicable.
ITEM 8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE.
FURNISH THE FOLLOWING INFORMATION AS TO SECURITIES OF THE OBLIGOR
OWNED BENEFICIALLY OR HELD AS COLLATERAL SECURITY FOR OBLIGATIONS IN DEFAULT BY
THE TRUSTEE:
As of:
- --------------------------------------------------------------------------------
Col. A Col. B Col. C Col. D
Title of class Whether the Amount owned Percent of class
securities are beneficially represented by
voting or non- or held as amount given in
voting securities collateral Col. C
security
for obligations
in default
- --------------------------------------------------------------------------------
Not applicable.
-3-
<PAGE>
ITEM 9. SECURITIES OF UNDERWRITERS OWNED OR HELD BY THE TRUSTEE.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR
OBLIGATIONS IN DEFAULT ANY SECURITIES OF AN UNDERWRITER FOR THE OBLIGOR,
FURNISH THE FOLLOWING INFORMATION AS TO EACH CLASS OF SECURITIES OF SUCH
UNDERWRITER ANY OF WHICH ARE SO OWNED OR HELD BY THE TRUSTEE:
As of:
- --------------------------------------------------------------------------------
Col. A Col. B Col. C Col.D
Title of issuer Amount outstanding Amount owned Percent of class
and title of class beneficially represented by
or held as amount given in
collateral Col. C
security
for obligations
in default by
trustee
- --------------------------------------------------------------------------------
Not applicable.
ITEM 10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF CERTAIN
AFFILIATES OR SECURITY HOLDERS OF THE OBLIGOR.
As of:
- --------------------------------------------------------------------------------
Col. A Col. B Col. C Col.D
Title of issuer Amount outstanding Amount owned Percent of class
and title of class beneficially represented by
or held as amount given in
collateral Col. C
security
for obligations
in default by
trustee
- --------------------------------------------------------------------------------
Not applicable.
ITEM 11. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF ANY SECURITIES OF A PERSON
OWNING 50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR.
As of:
- --------------------------------------------------------------------------------
Col. A Col. B Col. C Col.D
Title of issuer Amount outstanding Amount owned Percent of class
and title of class beneficially represented by
or held as amount given in
collateral Col. C
security
for obligations
in default by
trustee
- --------------------------------------------------------------------------------
Not applicable.
ITEM 12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE.
-4-
<PAGE>
EXCEPT AS NOTED IN THE INSTRUCTIONS, IF THE OBLIGOR IS INDEBTED TO THE
TRUSTEE, FURNISH THE FOLLOWING INFORMATION:
As of:
-----------------------------------------------------------------
Col. A Col. B Col. C
Nature of indebtedness Amount outstanding Date due
-----------------------------------------------------------------
Not applicable.
ITEM 13. DEFAULTS BY THE OBLIGOR.
(a) STATE WHETHER THERE IS OR HAS BEEN A DEFAULT WITH RESPECT TO THE
SECURITIES UNDER THIS INDENTURE. EXPLAIN THE NATURE OF ANY SUCH DEFAULT.
None.
(b) IF THE TRUSTEE IS A TRUSTEE UNDER ANOTHER INDENTURE UNDER WHICH
ANY OTHER SECURITIES, OR CERTIFICATES OF INTEREST OR PARTICIPATION IN ANY OTHER
SECURITIES, OF THE OBLIGOR ARE OUTSTANDING, OR IS TRUSTEE FOR MORE THAN ONE
OUTSTANDING SERIES OF SECURITIES UNDER THE INDENTURE, STATE WHETHER THERE HAS
BEEN A DEFAULT UNDER ANY SUCH INDENTURE OR SERIES, IDENTIFY THE INDENTURE OR
SERIES AFFECTED, AND EXPLAIN THE NATURE OF ANY SUCH DEFAULT.
None.
ITEM 14. AFFILIATIONS WITH THE UNDERWRITERS.
IF ANY UNDERWRITER IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
Not applicable.
ITEM 15. FOREIGN TRUSTEE.
IDENTIFY THE ORDER OR RULE PURSUANT TO WHICH THE FOREIGN TRUSTEE IS
AUTHORIZED TO ACT AS SOLE TRUSTEE UNDER INDENTURES QUALIFIED OR TO BE QUALIFIED
UNDER THE ACT.
Not applicable.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS A PART OF THIS STATEMENT OF
ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN
EFFECT.
* A copy of the Charter of IBJ Schroder Bank & Trust Company as
amended to date. (See Exhibit 1A to Form T-1, Securities and
Exchange Commission File No. 22-18460).
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
-5-
<PAGE>
* A copy of the Certificate of Authority of the trustee to Commence
Business (Included in Exhibit 1 above.).
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE
TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS SPECIFIED
IN PARAGRAPH (1) OR (2) ABOVE.
* A copy of the Authorization of the trustee to exercise corporate
trust powers, as amended to date (See Exhibit 4 to Form T-1,
Securities and Exchange Commission File No. 22-19146).
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
* A copy of the existing By-Laws of the trustee, as amended to date
(See Exhibit 4 to Form T-1, Securities and Exchange commission
File No. 22-19146).
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4, IF THE OBLIGOR IS
IN DEFAULT.
Not Applicable.
6. THE CONSENTS OF THE UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED
BY SECTION 321(b) OF THE ACT.
The consent of United States institutional trustee required by
Section 321(b) of the Act.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING AUTHORITY.
A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or
examining authority.
* The Exhibits thus designated are incorporated herein by reference as
exhibits hereto. Following the description of such Exhibits is a
reference to the copy of the Exhibit heretofore filed with the
Securities and Exchange Commission, to which there have been no
amendments or charges.
NOTE
In answering any item in this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor and its directors or
officers, the trustee has relied upon information furnished to it by the
obligor.
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
trustee of all facts on which to base responsive answers to Item 2, the answer
to said Item is based on incomplete information.
Item 2, may, however, be considered as correct unless amended by an
amendment to this Form T-1.
Pursuant to General Instruction B, the trustee has responded to Items of
this form since to the best knowledge of the trustee as indicated in Item 13,
the obligor is not in default under any indenture under which the applicant is
trustee.
-6-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
trustee, IBJ Schroder Bank & Trust Company, a corporation organized and
existing under the laws of the state of New York, has duly caused this
statement of eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the city of New York, and State of New York,
on the 7th day of August, 1997.
IBJ SCHRODER BANK & TRUST COMPANY
By /s/ Max Volmar
------------------------------
Max Volmar
Vice President
-7-
<PAGE>
Exhibit 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act
of 1939, as amended, in connection with the issuance by JAMBOREE LLC of its
Class A Senior Secured Notes due 2002, we hereby consent that reports of
examinations by Federal, State, Territorial, or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
IBJ SCHRODER BANK & TRUST COMPANY
By /s/ Max Volmar
------------------------------
Max Volmar
Vice President
Dated: August 7, 1997
-8-
<PAGE>
Exhibit 7
CONSOLIDATED REPORT OF CONDITION OF
IBJ SCHRODER BANK & TRUST COMPANY
of New York, New York
And Foreign and Domestic Subsidiaries
Report as of March 31, 1997
ASSETS Dollar Amounts
------ in Thousands
------------
Cash and balance due from depository institutions:
Noninterest-bearing balances and currency and coin .......... $ 37,521
Interest-bearing balances ................................... $ 325,073
Securities: Held-to-maturity securities ..................... $ 177,447
Available-for-sale securities ................... $ 47,358
Federal funds sold and securities purchased under
agreements to resell in domestic offices of the bank
and of its Edge and Agreement subsidiaries and in IBFs:
Federal Funds sold and Securities purchased under agreements
to resell ................................................. $ 75,273
Loans and lease financing receivables:
Loans and leases, net of unearned income ..$ 1,820,213
LESS: Allowance for loan and lease losses .$ 58,785
LESS: Allocated transfer risk reserve .....$ -0-
Loans and leases, net of unearned income, allowance, and
reserve ................................................... $ 1,761,428
Trading assets held in trading accounts ......................... $ 602
Premises and fixed assets (including capitalized leases) ........ $ 3,817
Other real estate owned ......................................... $ 202
Investments in unconsolidated subsidiaries and associated
companies ..................................................... $ -0-
Customers' liability to this bank on acceptances outstanding ... $ 310
Intangible assets .............................................. $ -0-
Other assets ................................................... $ 74,528
TOTAL ASSETS ................................................... $ 2,503,559
-9-
<PAGE>
LIABILITIES
-----------
Deposits:
In domestic offices ......................................... $ 792,944
Noninterest-bearing ..................$ 260,196
Interest-bearing .....................$ 394,562
In foreign offices, Edge and Agreement subsidiaries, and IBFs $ 1,149,176
Noninterest-bearing ..................$ 13,875
Interest-bearing .....................$1,135,301
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of the bank and
of its Edge and Agreement subsidiaries, and in IBFs:
Federal Funds purchased and Securities sold under agreements
to repurchase ............................................. $ 344,500
Demand notes issued to the U.S. Treasury ...................... $ 30,000
Trading Liabilities ........................................... $ 178
Other borrowed money:
a) With a remaining maturity of one year or less ......... $ 23,037
b) With a remaining maturity of more than one year ....... $ 4,958
Mortgage indebtedness and obligations under capitalized leases. $ -0-
Bank's liability on acceptances executed and outstanding ...... $ 310
Subordinated notes and debentures ............................. $ -0-
Other liabilities ............................................. $ 71,245
TOTAL LIABILITIES ............................................. $ 2,278,162
Limited-life preferred stock and related surplus .............. $ -0-
EQUITY CAPITAL
Perpetual preferred stock and related surplus ................. $ -0-
Common stock .................................................. $ 29,649
Surplus (exclude all surplus related to preferred stock) ...... $ 217,008
Undivided profits and capital reserves ........................ $ (21,223)
Net unrealized gains (losses) on available-for-sale securities. $ 37
Cumulative foreign currency translation adjustments ........... $ -0-
TOTAL EQUITY CAPITAL .......................................... $ 225,397
TOTAL LIABILITIES AND EQUITY CAPITAL ......................... $ 2,503,559
-10-
<PAGE>
Exhibit 99.1
T3A
LIMITED LIABILITY COMPANY AGREEMENT
OF
JAMBOREE LLC,
A DELAWARE LIMITED LIABILITY COMPANY
BY AND BETWEEN
JAMBOREE OFFICES REIT, INC.
A MARYLAND CORPORATION
AND
CROW WINTHROP OPERATING PARTNERSHIP,
A MARYLAND GENERAL PARTNERSHIP
____________ __, 1997
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Use of Defined Terms . . . . . . . . . . . . . . . . . . . . . 13
1.3 Cross-References . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 2 Formation and General Provisions . . . . . . . . . . . . . . . 13
2.1 Formation. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.2 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.3 Registered Office and Place of Business. . . . . . . . . . . . 14
2.4 Registered Agent for Service of Process. . . . . . . . . . . . 14
2.5 Business Purposes. . . . . . . . . . . . . . . . . . . . . . . 14
2.6 Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.7 Filings and Other Acts . . . . . . . . . . . . . . . . . . . . 14
2.8 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 3 Capitalization, Financing and Issuance of Notes. . . . . . . . 14
3.1 Initial Capital Contributions. . . . . . . . . . . . . . . . . 14
3.2 Additional Capital Contributions and Member Loans. . . . . . . 14
(a) Necessary Funds. . . . . . . . . . . . . . . . . . . . . 15
(b) Third Party Loan . . . . . . . . . . . . . . . . . . . . 15
(c) Capital Contribution or Member Loan. . . . . . . . . . . 15
(d) Amount of Contribution . . . . . . . . . . . . . . . . . 15
(e) Failure to Make Contribution . . . . . . . . . . . . . . 16
(f) Adjustments to Capital Accounts and Issuance of
Additional Units . . . . . . . . . . . . . . . . . . . . 16
(g) Member Loans . . . . . . . . . . . . . . . . . . . . . . 16
(h) Terms of Member Loans. . . . . . . . . . . . . . . . . . 17
(i) Repayment. . . . . . . . . . . . . . . . . . . . . . . . 17
3.3 Units. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.4 Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . 18
3.5 Withdrawal of and Interest on Capital. . . . . . . . . . . . . 18
3.6 Issuance of Notes. . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE 4 Allocations and Certain Tax Matters. . . . . . . . . . . . . . 18
4.1 Allocations. . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.2 Tax Elections and Returns. . . . . . . . . . . . . . . . . . . 22
4.3 Tax Matters Member . . . . . . . . . . . . . . . . . . . . . . 22
4.4 Withholding Payments Required by Law . . . . . . . . . . . . . 23
i
<PAGE>
Page
----
4.5 Intent Concerning Tax Treatment. . . . . . . . . . . . . . . . 24
ARTICLE 5 Payments and Distributions . . . . . . . . . . . . . . . . . . 24
5.1 Distributions. . . . . . . . . . . . . . . . . . . . . . . . . 24
5.2 Repayment of Member and Tax Payment Loans. . . . . . . . . . . 25
5.3 Return of Distributions. . . . . . . . . . . . . . . . . . . . 25
5.4 Distribution Upon Withdrawal . . . . . . . . . . . . . . . . . 25
ARTICLE 6 Management . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.1 Board of Representatives . . . . . . . . . . . . . . . . . . . 25
(a) Class One Representatives. . . . . . . . . . . . . . . . 25
(b) Class Two Representatives. . . . . . . . . . . . . . . . 26
6.2 Selection of Board Representatives; Voting . . . . . . . . . . 26
6.3 Duties of Board Representatives. . . . . . . . . . . . . . . . 27
6.4 Meetings of Members and Board. . . . . . . . . . . . . . . . . 28
6.5 Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.6 Authority to Act for Company . . . . . . . . . . . . . . . . . 29
6.7 Actions Requiring Unanimous Consent. . . . . . . . . . . . . . 29
6.8 Powers of the Board. . . . . . . . . . . . . . . . . . . . . . 31
6.9 Operation of Company in Accordance with REIT Requirements. . . 32
6.10 Operation and Activities of REIT; Other Business . . . . . . . 33
6.11 Compensation and Remuneration. . . . . . . . . . . . . . . . . 33
6.12 Reimbursement of REIT. . . . . . . . . . . . . . . . . . . . . 33
6.13 Competing Activities . . . . . . . . . . . . . . . . . . . . . 34
6.14 No Employees . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 7 The Members. . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.1 Admission of Members . . . . . . . . . . . . . . . . . . . . . 34
7.2 Withdrawal and Resignation . . . . . . . . . . . . . . . . . . 35
7.3 Transferability. . . . . . . . . . . . . . . . . . . . . . . . 35
7.4 Certain Restricted Transfers . . . . . . . . . . . . . . . . . 36
7.5 Effective Dates of Transfers . . . . . . . . . . . . . . . . . 36
ARTICLE 8 Record Keeping and Accounting. . . . . . . . . . . . . . . . . 37
8.1 Books and Records. . . . . . . . . . . . . . . . . . . . . . . 37
8.2 Inspection of Books and Records; Confidentiality . . . . . . . 37
8.3 Method of Accounting . . . . . . . . . . . . . . . . . . . . . 38
ii
<PAGE>
Page
----
8.4 Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.5 Financial Reporting. . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE 9 Dissolution and Liquidation. . . . . . . . . . . . . . . . . . 39
9.1 Events of Dissolution. . . . . . . . . . . . . . . . . . . . . 39
9.2 Liquidation. . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.3 Final Accounting . . . . . . . . . . . . . . . . . . . . . . . 40
9.4 Certificate of Cancellation. . . . . . . . . . . . . . . . . . 40
9.5 Liability for Capital Contributions. . . . . . . . . . . . . . 40
ARTICLE 10 Liability; Indemnification . . . . . . . . . . . . . . . . . . 41
10.1 Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.2 Indemnity for Actions by or in the Right of the Company. . . . 41
10.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.4 Advance Payment of Expenses. . . . . . . . . . . . . . . . . . 42
10.5 Other Arrangements Not Excluded. . . . . . . . . . . . . . . . 42
10.6 Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE 11 Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . 43
11.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.2 Governing Law; Arbitration . . . . . . . . . . . . . . . . . . 44
11.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . 45
11.4 Entire Agreement; Amendment. . . . . . . . . . . . . . . . . . 45
11.5 Severability . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.6 Construction and Interpretation. . . . . . . . . . . . . . . . 45
11.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 45
Exhibit A Capital Contributions and Contributed Property
Exhibit B Distribution of Units and Percentage Interests
Exhibit C Legal Description of Facility
Exhibit D Board Representatives
Exhibit E Dilution Formula
iii
<PAGE>
THE UNITS REFERRED TO IN THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. REFER TO
ARTICLE 7 OF THIS AGREEMENT FOR PROVISIONS RELATING TO VARIOUS RESTRICTIONS ON
THE SALE OR OTHER TRANSFER OF THESE INTERESTS.
- ------------------------------------------------------------------------------
LIMITED LIABILITY COMPANY AGREEMENT
OF
JAMBOREE LLC
- ------------------------------------------------------------------------------
THIS LIMITED LIABILITY COMPANY AGREEMENT (this "AGREEMENT"), dated as
of ________ ___, 1997 (the "EFFECTIVE DATE"), is entered into by and between
CROW WINTHROP OPERATING PARTNERSHIP, a Maryland general partnership ("CWOP"),
and JAMBOREE OFFICES REIT, INC., a Maryland corporation ("REIT"). CWOP and REIT
are each a "MEMBER" and collectively they are the sole initial "MEMBERS" of
JAMBOREE LLC, the Delaware limited liability company (the "COMPANY") to be
formed and operated in accordance with this Agreement.
ARTICLE 1
DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the following terms
shall have the following respective meanings. Various other terms are defined
elsewhere in the Agreement.
"ACCOUNTANTS" means the national firm or firms of independent
certified public accountants selected by the Member Board to audit the
books and records of the Company and to prepare related statements and
reports.
"ACT" means the Delaware Limited Liability Company Act, Delaware Code
title 6, sections 18-101 to 18-1109, as amended from time to time or
superseded.
"ADJUSTED CAPITAL ACCOUNT DEFICIT" shall mean, with respect to any
Member, the deficit balance, if any, in such Member's Capital Account as of
the end of any relevant Fiscal Year and after giving effect to the
following adjustments:
1
<PAGE>
(a) credit to such Capital Account any amounts which such holder
is obligated or treated as obligated to restore with respect to any
deficit balance in such Capital Account pursuant to section 1.704-
1(b)(2)(ii)(c) of the Regulations, or is deemed to be obligated to
restore with respect to any deficit balance pursuant to the
penultimate sentences of sections 1.704-2(g)(1) and 1.704-2(i)(5) of
the Regulations; and
(b) debit to such Capital Account the items described in
sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the requirements of the alternate test for economic effect
contained in section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be
interpreted consistently therewith.
"ADMINISTRATIVE EXPENSES" means: (a) all administrative and operating
costs and expenses of the Company; (b) those administrative costs and
expenses of REIT, including, but not limited to, salaries and other
remunerations paid to directors, officers and employees of REIT and
accounting and legal expenses undertaken by REIT on behalf or for the
benefit of the Company; and (c) to the extent not included in the foregoing
CLAUSE (b), REIT Expenses.
"AFFILIATE" means any individual, partnership, corporation, trust,
limited liability company, or other entity or association, directly or
indirectly, through one or more intermediaries, controlling, controlled by,
or under common control with a Member. "CONTROL" as used in the preceding
sentence, means, with respect to a corporation, the right to exercise,
directly or indirectly, more than fifty percent (50%) of the voting rights
of the controlled corporation, and, with respect to any individual,
partnership, limited liability company, trust, or other entity or
association, the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of the controlled
entity, whether through membership, ownership of voting securities, by
contract or otherwise.
"AGREEMENT" means this Agreement, as originally executed and as
amended from time to time.
"APPRAISAL PROCESS" means the following process, which shall be
employed by the Board when necessary to determine the value of an asset
then owned by the Company (the "RES") that, pursuant to this Agreement, is
stated to be subject to the Appraisal Process:
2
<PAGE>
(a) The Board, by majority vote, shall promptly after such vote
cause a written appraisal to be prepared by a nationally recognized
appraiser or valuation firm (the "APPRAISER") chosen in good faith by
the majority of the Board. The Appraiser shall be instructed to
calculate the value of the applicable Res pursuant to the applicable
provisions of this Agreement and shall deliver its written appraisal
to the Board and each of the Members within thirty (30) calendar days
after having been selected by the majority of the Board. The Non-
contributing Member (as defined in Section 3.2) shall pay all fees and
expenses of such Appraiser.
(b) If the Contributing Member (as defined in SECTION 3.2)
agrees with the Appraised Value as determined pursuant to the
preceding PARAGRAPH (a), it shall so notify the Board and each of the
other Members within ten (10) Business Days after receiving the
appraisal described in PARAGRAPH (a), in which event (or in the event
that the Contributing Member fails to otherwise notify the Board and
each of the other Members within such period) such determination of
value as reflected in such appraisal shall be conclusive for the
relevant purpose under this Agreement. If the Contributing Member
disagrees with the value reflected in such appraisal as determined
pursuant to the preceding PARAGRAPH (a), the Contributing Member shall
so notify the Board and each other Member and such Contributing Member
shall then cause a second written appraisal to be prepared by a
separate Appraiser chosen in good faith by the Contributing Member.
The second Appraiser shall also be instructed to calculate the value
of the Res pursuant to the applicable provisions of this Agreement and
to deliver its appraisal to the Board and to the other Members within
thirty (30) calendar days after having been selected by the
Contributing Member. The Contributing Member shall pay all fees and
expenses of the second Appraiser pursuant to this PARAGRAPH (b).
(c) In the event that the Contributing Member obtains a second
appraisal pursuant to the preceding PARAGRAPH (b), and the
determinations of two Appraisers differ by less than ten percent
(10%), then the value of the Res for the relevant purpose under this
Agreement shall be deemed to be the average of the two (2)
determinations. If the two (2) determinations differ by ten percent
(10%) or more, the two (2) Appraisers shall then promptly select a
third Appraiser (subject to approval by the Contributing Member and
the Non-contributing Member, which approval may not be unreasonably
withheld). The third Appraiser shall be instructed to calculate the
value of the Res pursuant to the applicable provisions of this
Agreement and to deliver its appraisal to the Board and each other
Member within thirty (30) calendar days after having been selected.
The Company shall pay all fees and expenses of the third Appraiser.
Following receipt of a third appraisal pursuant to this PARAGRAPH (c),
the value
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of the Res for the relevant purpose under this Agreement
shall conclusively be deemed to be the value that constitutes the
average of the two (2) appraisals that are closest in amount.
(d) Following any application of the Appraisal Process,
SCHEDULE 1 shall be revised to reflect the valuation of the applicable
asset as determined through such Appraisal Process.
"APPROVED BUDGET" means an operating or capital expense budget for the
Facility deemed an Approved Budget pursuant to the Management Agreement.
"AUDITED FINANCIAL STATEMENTS" means financial statements (balance
sheet, statement of income, statement of Members' equity and statement of
cash flows) prepared in accordance with GAAP and accompanied by an
independent auditor's report containing an opinion thereon.
"BANKRUPTCY" means (a) the filing of an application by a Person or
with such Person's consent for the appointment of a trustee, receiver or
custodian of that Person's assets; (b) the entry of a decree or order for
relief against a Person by a court of competent jurisdiction in any
involuntary case brought against the Person under any bankruptcy,
insolvency or other similar law that generally affects the rights of
creditors and relief of debtors (collectively, "DEBTOR RELIEF LAWS"), as
any of the same may now or hereafter be in effect; (c) the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator or other
similar agent under applicable debtor relief laws for a Person or for any
substantial part of that Person's assets or property; (d) the ordering by a
court of competent jurisdiction of the winding up or liquidation of a
Person's affairs; (e) the filing of a petition in any such involuntary
Bankruptcy case that is not dismissed within thirty (30) days of filing or
that is not dismissed or suspended pursuant to Section 305 of the United
States Bankruptcy Code, 11 U.S.C. Section 305 (or any analogous provision
of federal debtor relief law now or hereafter in effect); (f) the consent
by a Person to the entry of an order for relief in any case described in
the foregoing CLAUSE (e) or to the appointment of or the taking of
possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator, or other similar agent under any applicable debtor relief
laws for the Person or for any substantial part of that Person's assets or
property; or (g) the making by a Person of any general assignment for the
benefit of creditors.
"BOARD" means the Board of Representatives of the Company as
constituted at any time pursuant to SECTION 6.1.
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"BOARD REPRESENTATIVE" means a representative appointed pursuant to
SECTION 6.1 to serve on the Board. No Board Representative shall be deemed
to be a "manager" within the meaning of the Act.
"BUSINESS DAY" means any day that is not a Saturday, Sunday or a day
on which banking institutions in the State of California or New York are
authorized or obligated by law or executive order to close.
"CAPITAL ACCOUNT" means, as to any Member, a book account maintained
in accordance with the following provisions:
(a) to each Member's Capital Account there shall be credited the
amount of cash contributed by the Member, the initial Gross Asset
Value of any other asset contributed by such Member to the capital of
the Company (net of liabilities secured by contributed property that
the Company assumes or takes subject to), as specified on SCHEDULE 1
with respect to the Members' initial Capital Contributions, such
Member's or holder's distributive share of Net Income and any other
items of income or gain allocated to such Member, the amount of any
Company liabilities assumed by the Member or secured by distributed
assets that such Member takes subject to and any other items in the
nature of income or gain that are allocated to such Member pursuant to
SECTION 4.1; and
(b) to each Member's Capital Account there shall be debited the
amount of cash distributed to the Member, the Gross Asset Value of any
Company asset distributed to such Member pursuant to any provision of
this Agreement, such Member's distributive share of Net Losses and any
other items in the nature of expenses or losses that are allocated to
such Member pursuant to SECTION 4.1.
In the event that a Unit or portion thereof is transferred within the
meaning of section 1.704-1(b)(2)(iv)(f) of the Regulations, the transferee
shall succeed to the Capital Account of the transferor to the extent that
it relates to the Unit or portion thereof so transferred. In the event
that the Gross Asset Values of Company assets are adjusted, as contemplated
in PARAGRAPH (b) OR (c) of the definition of "Gross Asset Value," the
Capital Accounts of the Members shall be adjusted to reflect the aggregate
net adjustments as if the Company sold all of its Properties for their fair
market values and recognized gain or loss for federal income tax purposes
equal to the amount of such aggregate net adjustment. This definition of
Capital Accounts is intended to comply with the maintenance of capital
account provisions of section 704(b) of the IRC and the Regulations
thereunder and shall be interpreted and applied in a manner consistent
therewith.
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"CAPITAL CONTRIBUTION" means, with respect to any Member, the amount
of cash and the initial Gross Asset Value of any Contributed Property (net
of liabilities to which such property is subject), as specified on SCHEDULE
1 with respect to the Members' initial Capital Contributions.
"CERTIFICATE" means the Certificate of Formation of the Company, as
originally filed with the Delaware Secretary of State and as amended from
time to time.
"CLASS A INDENTURE" means the Indenture concerning the Class A Notes,
dated as of the Effective Date, by and between the Company as issuer and
IBJ Schroder Bank & Trust Company as trustee, as amended from time to time.
"CLASS B INDENTURE" means the Indenture concerning the Class B Notes,
dated as of the Effective Date, by and between the Company as issuer and
Fleet Financial Group, Inc. as trustee, as amended from time to time.
"CLASS A NOTES" means the Class A Senior Secured Notes issued by the
Company pursuant to the Class A Indenture, in an aggregate principal amount
of Eighty Million Dollars ($80,000,000).
"CLASS B NOTES" means the Class B Senior Secured Subordinated Notes
issued by the Company pursuant to the Class B Indenture, in an aggregate
principal amount of Twenty Million Dollars ($20,000,000).
"CLASS ONE MEMBER" means a Member who holds a Class One Unit.
"CLASS ONE REPRESENTATIVE" means a Board Representative selected by
the holders of the Class One Units.
"CLASS ONE UNITS" means the Units having the rights, obligations and
preferences provided in this Agreement.
"CLASS TWO MEMBER" means a Member who holds a Class Two Unit.
"CLASS TWO REPRESENTATIVE" means a Board Representative selected by
the holders of the Class Two Units.
"CLASS TWO UNITS" means the Units having the rights, obligations and
preferences provided in this Agreement. The Class Two Units, which
initially shall be equal in number to one-ninth (1/9th) of the number of
Class One Units, shall initially be held by CWOP.
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"COMPANY MINIMUM GAIN" shall have the meaning set forth in section
1.704-2(b)(2) of the Regulations and the amount of Company Minimum Gain
(and any net increase or decrease thereof) for a fiscal year or other
period shall be determined in accordance with the rules of section 1.704-
2(d) of the Regulations.
"COMPANY RECORD DATE" means the record date established by the Board
for distributions pursuant to SECTION 5.1, which record date shall be the
same as the record date established by REIT for distribution to its
stockholders of some or all of its portion of such distribution.
"CONTRIBUTED PROPERTY" means any property or other asset listed on
EXHIBIT A (as such Exhibit may be amended from time to time), in such form
as may be permitted by the Act, but excluding cash, contributed or deemed
contributed to the Company with respect to the Units held by each Member.
"CWDLP" means Crow Winthrop Development Limited Partnership, a
Maryland limited partnership.
"CWOP" means Crow Winthrop Operating Partnership, a Maryland general
partnership.
"DEPRECIATION" shall mean, with respect to any asset of the Company
for any Fiscal Year or other period, the depreciation or amortization, as
the case may be, allowed or allowable for federal income tax purposes in
respect of such asset for such Fiscal Year or other period, except that if
the Gross Asset Value of an asset differs from its adjusted tax basis for
federal income tax purposes at the beginning of such Fiscal Year or other
period, Depreciation shall be an amount that bears the same ratio to such
beginning book value as the federal income tax depreciation, amortization
or other cost recovery deduction for such Fiscal Year or other period bears
to such beginning adjusted tax basis and if such adjusted tax basis is
zero, the Depreciation shall be based on the method of depreciation,
amortization or the cost recovery deduction utilized in preparing the
financial statements of the Company; provided, however, that if the Company
adopts the remedial method described in section 1.704-3(d) of the
Regulations with respect to any items of Company Property, then
Depreciation for such Property shall be computed in the manner set forth in
such section.
"EFFECTIVE DATE" means ____________ ___, 1997, the date on which this
Agreement shall be effective and binding on the Members; provided, however,
that in no event shall the Effective Date be prior to the "Effective Date"
as defined in the Plan.
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"EQUITY REGISTRATION RIGHTS AGREEMENT" means the Equity Registration
Rights Agreement, dated as of the Effective Date, by and between REIT and
the Restricted Holders.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"FACILITY" means the real property comprising part of the project
commonly known as Park Place, Irvine, California, together with all
buildings and improvements thereon, and easements appurtenant thereto, as
more particularly described in EXHIBIT C.
"FISCAL YEAR" means the one-year period (or shorter period with
respect to the Fiscal Year in which the Company is formed) ending on each
December 31st.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time set forth in the opinions
and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and
pronouncements of the Financial Accounting Standards Board, or in such
other statements by such other Person as may be in general use by
significant segments of the accounting profession, which are applicable to
the circumstances as of the date of determination.
"GROSS ASSET VALUE" means, with respect to any asset of the Company,
such asset's adjusted basis for federal income tax purposes, except as
follows:
(a) the initial Gross Asset Value of any asset contributed by a
Member to the Company shall be the gross fair market value of such
asset at the time of its contribution as specified, with respect to
the initial Capital Contributions (as described in SECTION 3.1), on
SCHEDULE 1 to EXHIBIT A;
(b) except with respect to any asset subject to the Appraisal
Process, in which case the value determined pursuant to the Appraisal
Process shall be deemed to be the value of the asset, the Gross Asset
Values of all Company assets shall be adjusted to equal their
respective gross fair market values, as reasonably determined by the
Board, immediately prior to the following events:
(i) a Capital Contribution (other than a de minimis
Capital Contribution) to the Company by a new or existing Member as
consideration for Units;
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(ii) the distribution by the Company to a Member of more
than a de minimis amount of Company property as consideration for the
redemption of Units;
(iii) the liquidation of the Company within the meaning
of section 1.704-1(b)(2)(ii)(g) of the Regulations; and
(iv) any other event as to which the Board reasonably
determines that an adjustment is necessary or appropriate in
accordance with the Regulations to reflect the relative economic
interests of the Members;
(c) the Gross Asset Values of Company assets distributed to any
Member shall be the gross fair market values of such assets as
reasonably determined by the Board as of the date of distribution; and
(d) the Gross Asset Values of Company assets shall be increased
(or decreased) to reflect any adjustments to the adjusted basis of
such assets pursuant to sections 734(b) or 743(b) of the IRC, but only
to the extent that such adjustments are taken into account in
determining Capital Accounts pursuant to section 1.704-1(b)(2)(iv)(m)
of the Regulations.
At all times, Gross Asset Values shall be adjusted by any Depreciation
taken into account with respect to the Company's assets for purposes of
computing Net Income and Net Loss. Any adjustment to the Gross Asset
Values of Company property shall require an adjustment to the Capital
Accounts.
"INDENTURES" means, collectively, the Class A Indenture and the Class
B Indenture.
"IRC" means the United States Internal Revenue Code of 1986, as
amended from time to time.
"IRS" means the United States Internal Revenue Service.
"MANAGEMENT AGREEMENT" means the Management and Leasing Agreement,
dated as of the Effective Date, by and between the Company, as "Owner," and
WCM, as "Manager," as amended from time to time.
"MEMBER" means CWOP and REIT, for as long as they remain members of
the Company, and any other Person who becomes a member of the Company in
accordance with this Agreement.
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"MEMBER NONRECOURSE DEBT" shall have the meaning set forth in section
1.704-2(b)(4) of the Regulations.
"MEMBER NONRECOURSE DEDUCTIONS" shall have the meaning set forth in
section 1.704-2(i)(2) of the Regulations and the amount of Member
Nonrecourse Deductions with respect to a Member Nonrecourse Debt shall be
determined in accordance with the rules of section 1.704-2(i) of the
Regulations.
"MINIMUM GAIN ATTRIBUTABLE TO MEMBER NONRECOURSE DEBT" shall have the
same meaning as "partner nonrecourse debt minimum gain" as determined in
accordance with section 1.704-2(i)(2) of the Regulations.
"NET INCOME" or "NET LOSS" shall mean, for each Fiscal Year or other
applicable period, an amount equal to the Company's net income or loss for
such year or period as determined for federal income tax purposes by the
Accountants, determined in accordance with section 703(a) of the IRC (for
this purpose, all items of income, gain, loss or deduction required to be
stated separately pursuant to section 703(a) of the IRC shall be included
in taxable income or loss), with the following adjustments: (A) by
including as an item of gross income any tax-exempt income received by the
Company; (B) by treating as a deductible expense any expenditure of the
Company described in section 705(a)(2)(B) of the IRC (including amounts
paid or incurred to organize the Company (unless an election is made
pursuant to section 709(b) of the IRC) or to promote the sale of interests
in the Company and by treating deductions for any losses incurred in
connection with the sale or exchange of Company property disallowed
pursuant to section 267(a)(1) or section 707(b) of the IRC as expenditures
described in section 705(a)(2)(B) of the IRC); (C) in lieu of depreciation,
depletion, amortization and other cost recovery deductions taken into
account in computing total income or loss, there shall be taken into
account Depreciation; (D) gain or loss resulting from any disposition of
Company Property with respect to which gain or loss is recognized for
federal income tax purposes shall be computed by reference to the Gross
Asset Value of such Property rather than its adjusted tax basis; (E) in the
event of an adjustment of the Gross Asset Value of any Company asset that
requires that the Capital Accounts of the Company be adjusted pursuant to
sections 1.704-1(b)(2)(iv)(e), (f) and (m) of the Regulations, the amount
of such adjustment is to be taken into account as additional Net Income or
Net Loss pursuant to SECTION 4.1; and (f) excluding any items specially
allocated pursuant to SECTION 4.1(b).
"NET PROCEEDS FROM THE SALE OF THE FACILITY" means the gross proceeds
received by the Company from the sale or other transfer or disposition of
the Facility MINUS the costs of such sale or other transfer or disposition
(including reasonable attorneys' fees and expenses) and such reserves in
amounts reasonably determined by the Board upon majority vote.
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"NONRECOURSE DEDUCTIONS" shall have the meaning set forth in sections
1.704-2(b)(1) and (c) of the Regulations and shall be determined in
accordance with section 1.704-2(c) of the Regulations.
"NONRECOURSE LIABILITIES" shall have the meaning set forth in section
1.704-2(b)(3) of the Regulations.
"NOTES" means, collectively, the Class A Notes and the Class B Notes.
"NOTES REGISTRATION RIGHTS AGREEMENT" means the Notes Registration
Rights Agreement, dated as of the Effective Date, by and between the
Company and the Restricted Holders.
"PERCENTAGE INTEREST" means, with respect to a Member and as of the
date of determination, the percentage derived by dividing (A) the number of
Units held by the Member (including Units held by the Member's assignees
that have not been admitted as Members) by (B) the total number of issued
and outstanding Units, as the same may from time to time be adjusted
pursuant to SECTION 3.2. The initial Percentage Interests of the Members
are set forth on EXHIBIT B.
"PERSON" means an individual, partnership, limited partnership, trust,
estate, association, corporation, limited liability company or other
entity, whether foreign or domestic.
"PETITION DATE" means March 28, 1997, the date on which CWOP filed its
pre-arranged bankruptcy case pursuant to Chapter 11 of the United States
Bankruptcy Code.
"PLAN" means the Debtor's Plan of Reorganization, dated March 28,
1997, as amended through the Effective Date, as filed by CWOP in the United
States Bankruptcy Court for the Central District of California.
"PROPERTY" means any property acquired by or contributed to the
Company or any property owned by a Person in which the Company has an
ownership interest.
"PROPERTY APPRECIATION AGREEMENT" means the Property Appreciation and
Exchange Rights Agreement, which is held as of the Effective Date by CWOP.
"REGISTRATION RIGHTS AGREEMENTS" means, collectively, the Equity
Registration Rights Agreement and the Notes Registration Rights Agreement.
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"REGULATIONS" means the Income Tax Regulations promulgated from time
to time by the United States Department of Treasury for purposes of
interpreting and applying the provisions of the IRC.
"REIT" means Jamboree Offices REIT, Inc., a Maryland corporation.
"REIT DIVIDENDS" means those payments and distributions reasonably
determined by REIT's independent certified public accountants to be
necessary or desirable to comply with the REIT Requirements.
"REIT EXPENSES" means all expenses, which the Company hereby assumes
and agrees to pay, as incurred by REIT for the benefit of the Company,
including: (a) costs and expenses relating to the formation and
continuation of the Company and continuity of existence of REIT, including
taxes (other than REIT's federal and state income and franchise taxes, if
any), fees and assessments associated therewith, any and all costs,
expenses or fees payable to or on behalf of any director of REIT; (b) to
the extent funded by REIT for payment by the Company, costs and expenses
relating to any offer or registration of securities by REIT, the net
proceeds of which are to be contributed or loaned to the Company, and all
statements, reports, fees and expenses incidental thereto, including
underwriting discounts and selling commissions applicable to any such offer
of securities; (c) costs and expenses associated with the preparation and
filing of any periodic reports by REIT under federal, state or local laws
or regulations, including filings with the SEC; (d) costs and expenses
associated with compliance by REIT with laws, rules and regulations
promulgated by any regulatory body, including the SEC; and (e) all other
costs of REIT incurred in the course of its business on behalf of the
Company, including, without limitation, any financial obligations of REIT
under the Registration Rights Agreements or the Property Appreciation
Agreement.
"REIT REQUIREMENTS" means the requirements that REIT must satisfy in
order to: (a) qualify as a real estate investment trust under the IRC and
Regulations; and (b) avoid any federal income or excise tax liability that,
if incurred, would prevent REIT from qualifying as a real estate investment
trust under the IRC and Regulations.
"REIT SHARES" means the shares of common stock, par value $0.01 per
share, of REIT.
"RESTRICTED HOLDERS" means, with respect to the Equity Registration
Rights Agreement, [FROM EQUITY AGREEMENT, WHEN FINALIZED] and, with respect
to the Notes Registration Rights Agreement, [FROM NOTES AGREEMENT, WHEN
FINALIZED].
"RIGHTS" shall mean the rights of Members set forth in the Property
Appreciation Agreement or the Registration Rights Agreements. No provision
of this
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Agreement shall be interpreted as granting any Member any Rights or any
rights or interest in or to the Property Appreciation Agreement or the
Registration Rights Agreements.
"SEC" means the United States Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"TOTAL REVENUES" means consolidated revenues of the Company for a
period calculated in the same manner in which they are calculated in
determining Net Income for that period.
"UNITS" means, collectively, the Class One Units and the Class Two
Units, and all other units of any other class that the Company may at any
time be authorized by this Agreement to issue, each of which represents a
limited liability company interest in the Company.
"WCM" means Winthrop California Management Limited Partnership, a
Massachusetts limited partnership.
1.2 USE OF DEFINED TERMS. Unless the context otherwise requires, any
defined term used in the plural shall refer to all members of the relevant
class, and any defined term used in the singular shall refer to any number of
the members of the relevant class. Accounting terms that are defined under GAAP
will, unless they are specifically defined in another manner in this Agreement,
have the meanings given to them under GAAP from time to time.
1.3 CROSS-REFERENCES. All references in this Agreement to specific
Articles, Sections, Paragraphs, Clauses, Exhibits and Schedules are, unless
otherwise indicated, references to the Articles, Sections, Paragraphs, Clauses,
Exhibits and Schedules of this Agreement.
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ARTICLE 2
FORMATION AND GENERAL PROVISIONS
2.1 FORMATION. The Certificate, which shall be filed with the
Delaware Secretary of State prior to the Effective Date, shall provide that the
Company shall be formed by the Members on the Effective Date. Upon execution
and delivery of this Agreement, CWOP and REIT shall be deemed admitted as
Members of the Company as of the Effective Date.
2.2 NAME. The name of the Company shall be, and the business of the
Company shall be conducted in the name of, "Jamboree LLC" or such other name as
the Board may from time to time select.
2.3 REGISTERED OFFICE AND PLACE OF BUSINESS. The Company shall
continuously maintain its registered office at
[____________________________________], or at such other place in the state of
Delaware as the Board may from time to time select. The Company shall maintain
its principal place of business at [____________________________________], or at
such other place in the state of California as the Board may from time to time
select.
2.4 REGISTERED AGENT FOR SERVICE OF PROCESS. The registered agent
for service of process for the Company is [_____________________], whose address
is [______________________] [MUST BE SAME AS REGISTERED OFFICE], or such other
qualified registered agent as the Board from time to time may lawfully appoint.
2.5 BUSINESS PURPOSES. The business purposes of the Company shall be
to acquire and own, operate and manage, encumber, improve, finance, lease, and
sell or otherwise transfer the Facility, and all personal property used or
useful in connection therewith, to engage in Approved Activities (as defined in
SECTION 6.10) and to engage in all necessary and related activities in
connection with any of the foregoing.
2.6 POWERS. In furtherance of the business purposes described in
SECTION 2.5, the Company, the Members and the Board may exercise all powers
conferred upon them by the Act as modified or varied, to extent allowed by the
Act and other applicable law, by this Agreement and the Certificate.
2.7 FILINGS AND OTHER ACTS. The Members shall from time to time
perform all acts and cause to be executed and filed all documents reasonably
necessary for the formation, operation and continued existence of the Company as
required by the Act, other applicable law, this Agreement and the Certificate.
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2.8 TERM. The term of this Agreement shall be coterminous with the
duration of the Company, which (a) shall commence on the Effective Date and
(b) shall terminate on the occurrence of any Dissolution Event (as defined in
SECTION 9.1).
ARTICLE 3
CAPITALIZATION, FINANCING AND ISSUANCE OF NOTES
3.1 INITIAL CAPITAL CONTRIBUTIONS. The Members shall make or cause
to be made on the Effective Date the Capital Contributions described in
EXHIBIT A.
3.2 ADDITIONAL CAPITAL CONTRIBUTIONS AND MEMBER LOANS. Except as
provided in this SECTION 3.2, the Members shall have no right and no obligation
to make additional Capital Contributions to the Company. It is the intention of
the Members that the Company obtain the funds necessary to carry out its
business from the initial Capital Contributions of the Members pursuant to
SECTION 3.1, from income attained through pursuit of the Company's business and
from third-party lenders (to the extent permitted by the documents and
agreements governing the indebtedness that may be incurred by the Company) in
the form of operating and other loans. However, in the event that the Board
from time to time determines pursuant to this SECTION 3.2 that the Company needs
additional funds and that such funds are not available from the above-described
sources, the following provisions shall apply:
(a) NECESSARY FUNDS. The Board, by majority vote, may from time
to time determine in good faith that capital in excess of the capital
previously contributed to the Company and the capital obtained through the
business operations of the Company is required: (i) to carry out the
business of the Company; (ii) to pay REIT Required Dividends (as defined in
the Indentures); or (iii) to fund Approved Activities. In each such event,
the Board, by majority vote and in good faith, shall make a determination
as to the amount of additional capital ("NECESSARY FUNDS") required by the
Company; provided, however, that such determination shall be based upon: an
Approved Budget with respect to matters described in the foregoing CLAUSE
(i); or the reasonable determination of the Board and the Accountants with
respect to matters described in the foregoing CLAUSES (ii) AND (iii).
(b) THIRD PARTY LOAN. Upon each decision by the Board pursuant
to SECTION 3.2(a) that Necessary Funds are required by the Company, the
Board shall use all reasonable efforts to obtain from a third-party lender
(to the extent permitted by the documents and agreements governing the
amount of indebtedness that may be incurred by the Company) a loan on
commercially reasonable terms in the principal amount of the Necessary
Funds or such lesser principal amount as may be available from a third-
party lender on commercially reasonable terms.
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(c) CAPITAL CONTRIBUTION OR MEMBER LOAN. In the event that the
Board is unable to obtain a loan from a third-party lender pursuant to
SECTION 3.2(b) in the full amount of the Necessary Funds, the Board shall
determine, by majority vote based on the best interests of the Company,
whether the amount of Necessary Funds not satisfied through such a third-
party loan shall be (i) contributed in cash to the Company by the Members
as an additional Capital Contribution pursuant to SECTION 3.2(d) or (ii)
loaned in cash to the Company by the Members as a Member Loan pursuant to
SECTION 3.2(g).
(d) AMOUNT OF CONTRIBUTION. In the event that the Board
determines pursuant to SECTION 3.2(c)(i) that any amount of Necessary Funds
shall be contributed to the Company by the Members as an additional Capital
Contribution, each Member may, within ten (10) days of written notice from
the Board, contribute as an additional Capital Contribution an amount equal
to the aggregate amount of Necessary Funds to be contributed multiplied by
that Member's Percentage Interest.
(e) FAILURE TO MAKE CONTRIBUTION. In the event that either
Member (the "NON-CONTRIBUTING MEMBER") fails to timely make any additional
Capital Contribution authorized pursuant to SECTION 3.2(d), the other
Member (the "CONTRIBUTING MEMBER") shall within ten (10) days of the
expiration of the period described in SECTION 3.2(d), either (i) withdraw
its contribution, (ii) elect not to withdraw its contribution, or (iii)
elect not to withdraw its contribution and contribute to the Company, in
addition to the additional Capital Contribution made by the Contributing
Member, an amount equal to the additional Capital Contribution that the
Non-contributing Member failed to make. Upon each instance of a
Contributing Member making a Capital Contribution pursuant to the foregoing
CLAUSE (ii) or CLAUSE (iii), the Percentage Interests of the Members shall
be adjusted in accordance with the dilution formula set forth in EXHIBIT E.
Such adjustment of Percentage Interests shall be the Company's and
Contributing Member's sole and exclusive remedy for the failure of the Non-
contributing Member to contribute its pro rata share of Necessary Funds.
There shall be no third-party beneficiary of any obligation of a Member to
make further contributions to the capital of the Company.
(f) ADJUSTMENTS TO CAPITAL ACCOUNTS AND ISSUANCE OF ADDITIONAL
UNITS. Upon making any additional Capital Contribution in accordance with
this SECTION 3.2 that is not withdrawn pursuant to SECTION 3.2(e)(i), each
Member's Capital Account shall be adjusted as provided in the definition of
Capital Account set forth in SECTION 1.1, and additional Units shall be
issued in an amount that is proportionate to the additional Capital
Contribution.
(g) MEMBER LOANS. In the event that the Board determines that
it is in the best interest of the Company to meet a call for Necessary
Funds through
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Member Loans, each Member may make a Member Loan in the
principal amount of the amount of Necessary Funds MULTIPLIED BY the
Member's respective Percentage Interest. In the event that either Member
declines to make a Member Loan with respect to any request by the Board for
Necessary Funds (such Member to be referred to as the "DECLINING MEMBER"),
the other Member may, but shall not be obligated to, make a Member Loan in
the principal amount of the amount of Necessary Funds. The right of the
other Member to make a Member Loan in the amount of the Declining Member's
pro rata share of Necessary Funds shall be the sole and exclusive remedy of
the Company and the other Members for the failure of the Declining Member
to make a Member Loan. There shall be no third-party beneficiary of a
Member's obligation, if any, to make a Member Loan.
(h) TERMS OF MEMBER LOANS. All Member Loans (i) shall bear
interest at the lesser of (A) the rate most recently announced at the time
of making the applicable Member Loan by Bank of America, N.T. & S.A. as its
"prime" (or "reference") interest rate PLUS three percent (3%), or (B) the
maximum rate allowed by law; (ii) shall be prepayable in whole or in part
without penalty; (iii) unless prohibited under the terms of any
indebtedness of the Company, shall be fully recourse to the Company and its
assets but nonrecourse to each Member and its assets; (IV) shall be an
unsecured payment right in favor of the payee, which may be transferred
only together with a transfer by such payee of all of its Units in
accordance with this Agreement; and (V) shall be for a term to be
determined by the Board.
(i) REPAYMENT. Except for distributions described in SECTION
5.1(a), all Member Loans must be repaid in full out of available funds of
the Company before any distribution may be made to any Member under
ARTICLE 5. All Member Loans shall be repaid pari passu based on
outstanding principal and unpaid interest. All payments received with
respect to a Member Loan shall be applied first against accrued and unpaid
interest thereunder, and then against the outstanding principal balance
thereof.
3.3 UNITS.
(a) The limited liability company interest of a Member (or an
assignee of a Member) in capital, allocations of Net Income, Net Losses and
distributions shall be evidenced by the issuance to such Member (or
assignee) of one or more Units. The Company is authorized initially to
issue (i) Class One Units equal in number to the initial number of REIT
Shares issued by REIT, and (ii) Class Two Units equal in number to one-
ninth (1/9th) of the number of Class One Units. Each Member, upon making
the initial Capital Contribution described in SECTION 3.1, shall receive
the number of Units and shall have the initial Percentage Interest as set
forth on EXHIBIT B. The aggregate total of all Units outstanding and the
ownership of Units by each
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Member, as of the Effective Date, are as set forth on EXHIBIT B.
Additional Units may be issued pursuant to SECTION 3.2(f).
(b) Upon the unanimous decision of the Board, the Company is
authorized to issue to REIT additional Units in one or more classes or one
or more series of any of such classes, with such designations, preferences
and relative, participating, optional or other special rights, powers and
duties, including rights, powers and duties senior to the then-existing
Units, as shall be determined by the Company, including (i) the allocation
of items of Company income, gain, loss, deduction and credit to each such
class or series of Units and (ii) the rights of each such class or series
of Units to share in Company distributions (including liquidating
distributions); provided, however, that no such additional Units shall be
issued to REIT unless (x) such additional Units are issued in connection
with an issuance of REIT Shares or other shares of REIT, which shares have
designations, preferences and other rights, all such that the economic
interests of such shares are substantially similar to the designations,
preferences and other rights of the additional Units issued to REIT in
accordance with this SECTION 3.3(b) and (y) REIT contributes to the Company
an amount equal to the net proceeds received by REIT in connection with the
issuance of such shares. The net proceeds of all offerings of securities
by REIT, to the extent permitted hereunder, shall be contributed to the
Company (in the case of equity offerings) or loaned to the Company upon the
same terms and conditions, including principal amount, interest rate,
repayment schedule and costs and expenses, as applicable to or incurred in
connection with the borrowing (in the case of debt offerings).
(c) No fractional Units shall remain outstanding. Any
fractional Units that, but for this SECTION 3.3(c), would otherwise be
outstanding shall be redeemed by the Company for cash equal to the fair
market value of such fractional Unit as determined by the unanimous vote of
the Board.
3.4 CAPITAL ACCOUNTS. A Capital Account shall be established and
maintained for each Member.
3.5 WITHDRAWAL OF AND INTEREST ON CAPITAL. Except as specifically
provided in this Agreement: (a) no Member shall be entitled to withdraw any
portion of its Capital Account; (b) no time or schedule has been agreed upon for
the return of Capital Contributions to any Member; and (c) no Member shall be
entitled to interest on its Capital Contribution or Capital Account.
3.6 ISSUANCE OF NOTES. On the Effective Date the Company shall issue
the Class A Notes pursuant to the Class A Indenture and the Class B Notes
pursuant to the Class B
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Indenture, all in accordance with the Plan and the Confirmation Order (as
defined in the Plan) issued thereon.
ARTICLE 4
ALLOCATIONS AND CERTAIN TAX MATTERS
4.1 ALLOCATIONS. Subject to SECTION 3.3, the Net Income, Net Loss
and other Company items shall be allocated pursuant to the provisions of this
SECTION 4.1.
(a) ALLOCATION OF NET INCOME AND NET LOSS.
(i) NET INCOME. Except as otherwise provided herein, Net
Income for each Fiscal Year or other applicable period shall be allocated
to the Members in accordance with their respective Percentage Interests.
(ii) NET LOSS. Except as otherwise provided herein, Net
Loss of the Company for each Fiscal Year or other applicable period shall
be allocated to the holders of Units in accordance with their respective
Percentage Interests.
(b) SPECIAL ALLOCATIONS. Notwithstanding any provisions of
SECTION 4.1(a), the following special allocations shall be made in the
following order:
(i) MINIMUM GAIN CHARGEBACK. Notwithstanding any other
provision of this ARTICLE 4, if there is a net decrease in Company Minimum
Gain for any Fiscal Year (except as a result of conversion or refinancing
of Company indebtedness, certain Capital Contributions or revaluation of
the Company Property as further outlined in section 1.704-2(f) of the
Regulations), each holder of Units shall be specially allocated items of
Company income and gain for such year (and, if necessary, subsequent years)
in an amount equal to that holder's share of the net decrease in Company
Minimum Gain as determined under section 1.704-2(g) of the Regulations.
The items to be so allocated shall be determined in accordance with section
1.704-2(f) of the Regulations. This SECTION 4.1(b)(i) is intended to
comply with the minimum gain chargeback requirement in said section of the
Regulations and shall be interpreted consistently therewith.
(ii) MINIMUM GAIN CHARGEBACK ATTRIBUTABLE TO MEMBER
NONRECOURSE DEBT. Notwithstanding any other provision of this ARTICLE 4,
if there is a net decrease in Minimum Gain Attributable to Member
Nonrecourse Debt during any Fiscal Year (other than due to the conversion,
refinancing or other change in the debt instrument causing it to become
partially or wholly nonrecourse, certain Capital Contributions, or certain
revaluations of Company Property (as further outlined in
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section 1.704-2(i)(4) of the Regulations)), each holder of Units shall
be specially allocated items of Company income and gain for such year
(and, if necessary, subsequent years) in an amount equal to the holder's
share of the net decrease in the Minimum Gain Attributable to Member
Nonrecourse Debt as determined under section 1.704-2(i) of the
Regulations. The items to be so allocated shall be determined in
accordance with sections 1.704-2(i)(4) and (j)(2) of the Regulations.
This SECTION 4.1(b)(ii) is intended to comply with the minimum gain
chargeback requirement with respect to Member Nonrecourse Debt contained
in section 1.704-2(i) of the Regulations and shall be interpreted
consistently therewith.
(iii) QUALIFIED INCOME OFFSET. In the event a holder of
Units unexpectedly receives any adjustments, allocations or distributions
described in section 1.704-1(b)(2)(ii)(d)(4), (5), or (6) of the
Regulations, and such holder has an Adjusted Capital Account Deficit, items
of Company income and gain shall be specially allocated to such holder in
an amount and manner sufficient to eliminate the Adjusted Capital Account
Deficit as quickly as possible, provided that an allocation pursuant to
this SECTION 4.1(b)(iii) shall be made only if and to the extent that such
holder would have Adjusted Capital Account Deficit after all other
allocations provided for in this ARTICLE 4 have been tentatively made as if
this SECTION 4.1(b)(iii) were not in the Agreement. This SECTION
4.1(b)(iii) is intended to constitute a "qualified income offset" under
section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted
consistently therewith.
(iv) GROSS INCOME ALLOCATION. In the event any holder of
Units has an Adjusted Capital Account Deficit at the end of a Fiscal Year
which is in excess of the sum of (A) the amount such holder is obligated to
restore pursuant to any provision of this Agreement, and (B) the amount
such holder is deemed to be obligated to restore pursuant to the
penultimate sentences of sections 1.704-2(g)(1) and 1.704-2(i)(5) of the
Regulations, each such holder shall be specially allocated items of Company
income and gain in the amount of such excess as quickly as possible,
provided that an allocation pursuant to this SECTION 4.1(b)(iv) shall be
made only if and to the extent that such holder would have an Adjusted
Capital Account Deficit in excess of such sum after all other allocations
provided for in this ARTICLE 4 have been made as if SECTION 4.1(v)(iii) and
this SECTION 4.1(b)(iv) were not in the Agreement.
(v) NONRECOURSE DEDUCTIONS. Nonrecourse Deductions for any
Fiscal Year or other applicable period shall be allocated to the holders of
Units in accordance with their respective Percentage Interests. For
purposes of section 1.752-3(a)(3) of the Regulations, "excess nonrecourse
liabilities" shall be allocated among the holders of Units in proportion to
their respective Percentage Interests.
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(vi) MEMBER NONRECOURSE DEDUCTIONS. Member Nonrecourse
Deductions for any Fiscal Year or other applicable period shall be
specially allocated to the holder of Units that bears the economic risk of
loss with respect to the Member Nonrecourse Debt of which such Member
Nonrecourse Deductions are attributable (as determined pursuant to sections
1.704-2(b)(4) and (i)(1) of the Regulations).
(vii) SECTION 754 ADJUSTMENTS. To the extent an
adjustment to the adjusted tax basis of any Company asset pursuant to
section 734(b) or Section 743(b) of the IRC is required, pursuant to
section 1.704-1(b)(2)(iv)(m)(2) or section 1.704-1 (b)(2)(iv)(m)(4) of the
Regulations, to be taken into account in determining Capital Accounts, the
amount of such adjustment to Capital Accounts shall be treated as an item
of gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment decreases such basis) and such gain or loss shall be
specially allocated to holders of Units in accordance with their interests
in a manner consistent with the manner in which their Capital Accounts are
required to be adjusted pursuant to such sections of the Regulations.
(viii) CURATIVE ALLOCATIONS. The Regulatory Allocations
(as defined below) shall be taken into account in allocating other items of
income, gain, loss and deduction among the holders of Units so that, to the
extent possible, the cumulative net amount of allocations of Company items
under SECTIONS 4.1(a) AND (b) shall be equal to the net amount that would
have been allocated to each holder of Units if the Regulatory Allocations
had not occurred. This SECTION 4.1(b)(viii) is intended to minimize, to
the extent possible and to the extent necessary, any economic distortions
that may result from application of the Regulatory Allocations and shall be
interpreted in a manner consistent therewith. As used in this Agreement,
"REGULATORY ALLOCATIONS" shall mean the allocations provided under this
SECTION 4.1(b), excluding however the provisions of this SECTION
4.1(b)(viii).
(ix) VARYING INTERESTS. In the event a Member's Percentage
Interest during a Fiscal Year changes, the allocations pursuant to this
ARTICLE 4 shall be made by the Company to take such varying interests into
account under the "interim closing of the books method."
(c) TAX ALLOCATIONS.
(i) GENERALLY. Subject to SECTIONS 4.1(c)(ii) AND (iii),
items of income, gain, loss, deduction and credit to be allocated for
income tax purposes (collectively, "TAX ITEMS") shall be allocated among
the holders of Units on the same basis as their respective book items.
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(ii) ALLOCATIONS RESPECTING IRC SECTION 704(c) AND
REVALUATIONS. Property contributed to the Company shall be subject to
section 704(c) of the IRC and the Regulations thereunder so that,
notwithstanding SECTION 4.1(b), taxable gain from disposition, taxable
loss from disposition and tax Depreciation with respect to Company
Property that is subject to section 704(c) of the IRC and/or section
1.704-1(b)(2)(iv)(f) of the Regulations (collectively, "SECTION 704(c)
TAX ITEMS") shall be allocated on a Property by Property basis in
accordance with section 704(c) of the IRC and/or the Regulations
thereunder, as the case may be. The allocation of Section 704(c) Tax
Items shall be made pursuant to the remedial allocation method of
section 1.704-3(d) of the Regulations. Allocations pursuant to this
SECTION 4.1(c)(II) are solely for purposes of federal, state, and local
taxes and shall not affect, or in any way be taken into account in
computing, the Capital Account or share of Net Income, Net Loss, other
items or distributions of a holder of Units pursuant to any provision of
this Agreement. This SECTION 4.1(c)(II) shall be applied consistently
with the valuations specified on SCHEDULE 1.
(iii) TAX CREDITS AND OTHER ITEMS. Tax credits and other
items shall be allocated in accordance with the holdings of Units to the
extent permitted under section 1.704-1(b)(4)(ii) of the Regulations or
other applicable provision of the IRC and the Regulations and otherwise
in accordance with such provisions.
4.2 TAX ELECTIONS AND RETURNS. All elections required or
permitted to be made by the Company under any applicable tax law shall be
made by the Board in its sole and absolute discretion, except that the
Company shall, if requested by a Member, file an election on behalf of the
Company pursuant to section 754 of the IRC to adjust the basis of Company
Property in the case of a transfer of a Unit or distribution from the
Company, including transfers made in connection with the exercise of the
Rights, made in accordance with the provisions of this Agreement. The
Company shall, at the request of any Member required to reduce its basis in
depreciable property in connection with its exclusion from gross income of
income from discharge of indebtedness under section 108(a) of the IRC, reduce
the Company's tax basis in depreciable property solely with respect to such
Member, in a manner consistent with section 1017(b)(3)(C) of the IRC and the
Regulations promulgated thereunder.
4.3 TAX MATTERS MEMBER. REIT is hereby designated as the "Tax
Matters Member" within the meaning of section 6231(a)(7) of the IRC (and any
corresponding provisions of state and local law) for the Company; provided,
however, that (a) in exercising its authority as Tax Matters Member, the Tax
Matters Member shall be limited by the provisions of this Agreement affecting
tax aspects of the Company; (b) the Tax Matters Member shall consult in good
faith with the Board regarding the filing of an administrative adjustment
request with respect to the Company before filing such request, it being
understood, however, that the provisions hereof shall not be construed to
limit the ability of any Member, including the Tax Matters Member, to file an
administrative adjustment request
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on its own behalf pursuant to section 6227(a) of the IRC; (C) the Tax Matters
Member shall consult in good faith with the Board regarding the filing of a
petition for judicial review of an administrative adjustment request under
section 6228 of the IRC, or a petition for judicial review of a final
administrative judgment under section 6226 of the IRC relating to the Company
before filing such petition; (d) the Tax Matters Member shall give prompt
notice to the Board and to the Members and any notice partners under section
6231 of the IRC of the receipt of any written notice that the IRS intends to
examine or audit Company income tax returns for any year, the receipt of
written notice of the beginning of an administrative proceeding at the
Company level relating to the Company under section 6223 of the IRC, the
receipt of written notice of the final Company administrative adjustment
relating to the Company pursuant to section 6223 of the IRC, and the receipt
of any request from the IRS for waiver of any applicable statute of
limitations with respect to the filing of any tax return by the Company; and
(e) the Tax Matters Member shall promptly notify the Board if the Tax Matters
Member does not intend to file for judicial review with respect to the
Company. Similar provisions shall apply in the case of any audit or
examination by a state or local taxing authority.
4.4 WITHHOLDING PAYMENTS REQUIRED BY LAW.
(a) Unless treated as a Tax Payment Loan (as defined below), any
amount paid by the Company for or with respect to any holder of Units on
account of any withholding tax or other tax payable with respect to the
income, profits or distributions of the Company pursuant to the IRC, the
Regulations, or any state or local statute, regulation, notice, ruling or
ordinance requiring such payment (a "WITHHOLDING TAX ACT") shall be treated
as a distribution to such holder for all purposes of this Agreement,
consistent with the character or source of the income, profits or cash that
gave rise to the payment or withholding obligation. To the extent that the
amount required to be remitted by the Company under the Withholding Tax Act
exceeds the amount then otherwise distributable to such holder, unless and
to the extent that funds shall have been provided by such holder pursuant
to the last sentence of this SECTION 4.4(a), the excess shall constitute a
loan from the Company to such holder (a "TAX PAYMENT LOAN"), which shall be
fully recourse to such holder, shall be payable upon demand and shall bear
interest, from the date that the Company makes the payment to the relevant
taxing authority, at a rate equal to lesser of (i) the rate most recently
announced at the time of making the applicable Tax Payment Loan by Bank of
America, N.T. & S.A. as its "prime" (or "reference") interest rate PLUS
three percent (3%), or (ii) the maximum rate allowed by law. So long as
any Tax Payment Loan to any holder of Units or the interest thereon remains
unpaid, the Company shall make future distributions due to such holder
under this Agreement by applying the amount of any such distributions first
to the payment of any unpaid interest on such Tax Payment Loan and then to
the repayment of the principal thereof, and no such distributions shall be
paid to such holder until all of such principal and interest has been paid
in full. If
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the amount required to be remitted by the Company under the zapplicable
Withholding Tax Act exceeds the amount then otherwise distributable to a
holder of Units, the Company shall notify such holder at least five (5)
Business Days in advance of the date upon which the Company would be
required to make a Tax Payment Loan under this SECTION 4.4(a) (the "TAX
PAYMENT LOAN DATE") and provide such holder the opportunity to pay to
the Company, on or before the Tax Payment Loan Date, all or a portion of
such deficit.
(b) The Company will take all actions necessary to comply with
the provisions of any Withholding Tax Act applicable to the Company and to
carry out the provisions of this SECTION 4.4. Nothing in this SECTION 4.4
shall create any obligation on any holder of Units to advance funds to the
Company or to borrow funds from third parties in order to make any payments
on account of any liability of the Company under a Withholding Tax Act.
(c) In the event that a Tax Payment Loan is not paid by a holder
of Units within thirty (30) days after written demand therefor is made by
the Company, the Company may cause all distributions that would otherwise
be made to such holder to be retained by the Company, or sell such holder's
Units for sale proceeds, in each case up to the amount necessary to repay
such Tax Payment Loan, including all accrued and unpaid interest therein,
and such retained distributions or sale proceeds shall be applied against,
first, the accrued interest on and, second, the principal of, such Tax
Payment Loan.
4.5 INTENT CONCERNING TAX TREATMENT. The Members intend for the
Company to be treated as a partnership for state and federal income tax purposes
and, notwithstanding any other provision of this Agreement, shall take all
actions necessary to achieve such treatment.
ARTICLE 5
PAYMENTS AND DISTRIBUTIONS
5.1 DISTRIBUTIONS. The Company shall make such distributions as it
may in its reasonable discretion determine to the holders of Units who are
holders on the Company Record Date with respect to such distribution. All such
distributions shall be made pro rata in accordance with the holders' respective
Percentage Interests.
(a) Notwithstanding any provisions of this SECTION 5.1 to the
contrary, the Company shall distribute sufficient amounts, pro rata
according to Percentage Interests, to enable REIT to pay shareholder
dividends that will satisfy the REIT Requirements.
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aa
(b) Notwithstanding any provisions of this SECTION 5.1 to the
contrary, all distributions to be made after the dissolution of the Company
shall be made in accordance with ARTICLE 9. Notwithstanding any provision
to the contrary contained in this Agreement, the Company, and the Board
Representatives on behalf of the Company, shall not be required to make a
distribution to any Member on account of its Units or its interest in the
Company if such distribution would violate Section 18-607 of the Act or
other applicable law.
5.2 REPAYMENT OF MEMBER AND TAX PAYMENT LOANS. Except for
distributions made pursuant to SECTION 5.1(a), no distributions shall be made to
any Member while any Member Loan remains outstanding. Notwithstanding anything
contained in SECTION 5.1 to the contrary, distributions made to a Member while
any Tax Payment Loan remains outstanding to that Member shall be made in
accordance with SECTION 4.4.
5.3 RETURN OF DISTRIBUTIONS. In the event that a Member is ordered
by a court of competent jurisdiction pursuant to the Act or other applicable law
to return any distribution made to it by the Company, the Member shall do so
promptly and shall indemnify the Company and the Board Representatives against
any liability for the return of such distributions.
5.4 DISTRIBUTION UPON WITHDRAWAL. No withdrawing Member shall be
entitled to receive any distribution or the value of such Member's Units as a
result of withdrawal from the Company prior to the liquidation of the Company,
except as specifically provided in this Agreement; provided, however, that
nothing contained in this SECTION 5.4 is intended to contradict, nor shall it
limit, the provisions of SECTION 7.2.
ARTICLE 6
MANAGEMENT
6.1 BOARD OF REPRESENTATIVES. The management of the Company is fully
reserved to the Members, and the Company shall not have "managers," as that term
is used in the Act. The Company shall be managed by the Members through the
Board, which will be comprised of five (5) representatives (the "BOARD
REPRESENTATIVES") to be selected by the Members in accordance with SECTIONS 6.1
AND 6.2.
(a) CLASS ONE REPRESENTATIVES. At all times, at least four (4)
Board Representatives, the Class One Representatives, shall be selected by
the Class One Members. The initial Class One Representatives are set forth
on EXHIBIT D. The Class One Members may at any time and from time to time,
but always upon three (3) days' prior written notice to the Board, change
the identity of the Class One Representatives selected pursuant to SECTION
6.2.
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(b) CLASS TWO REPRESENTATIVES. One (1) Board Representative,
the Class Two Representative, shall be selected by the Class Two Members.
The initial Class Two Representative is set forth on EXHIBIT D. The Class
Two Members may at any time and from time to time, but always upon three
(3) days' prior written notice to the Board, change the identity of the
Class Two Representative selected pursuant to SECTION 6.2.
(i) If at any time prior to __________________, 2000 [3
YEARS FROM THE EFFECTIVE DATE], CWOP exercises the exchange rights of the
Property Appreciation Agreement and withdraws as a Member of the Company,
and provided that the Company has not dissolved pursuant to ARTICLE 9, the
Class Two Representative shall continue to serve as a third-party
representative on the Board, and shall enjoy all rights and
responsibilities of the Class Two Representative until the earlier of (a)
___________________, 2000 [SAME DATE] or (b) the date that CWOP exercises
Tranche C of the Property Appreciation Agreement. CWOP shall, in its sole
and absolute discretion, designate the identity of the Class Two
Representative serving as a Board Representative after CWOP's exercise of
the exchange rights of the Property Appreciation Agreement and may from
time to time, but always upon three (3) days' prior written notice to the
Board, change the identity of such Class Two Representative.
(ii) Notwithstanding anything in this SECTION 6.1(b) to the
contrary, no representative selected by the Class Two Members shall serve
as Board Representative during any period in which neither CWOP nor WCM is
serving as Manager (as defined in the Management Agreement) of the Facility
because of the final termination of the Management Agreement by the Company
for "Cause" (as defined in the Management Agreement) or by mutual agreement
between the Company and Manager.
6.2 SELECTION OF BOARD REPRESENTATIVES; VOTING.
(a) Except for the meetings of the holders of a class of Units
for purposes of selecting Board Representatives as described in this
SECTION 6.2, no meetings of the Members shall be required to be held and
all other business of the Company shall be delegated to and conducted by
the Board.
(b) The Class One Members and, except under the circumstances
described in SECTION 6.1(b)(i), the Class Two Members shall meet separately
on the first day of May of each calendar year, or the first Business Day
thereafter if such day is not a Business Day, for purposes of selecting,
respectively, the Class One Representatives and the Class Two
Representative for the following one-year period. Special meetings of the
holders of a class of Units may be called at any time for any
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purpose by a majority of the Members of that class or by the Members
holding a majority of the Units of that class. Notice of each meeting
of the Members of any class, stating the date, time and place of the
meeting and the matters to be voted upon, must be given not less than
ten (10) nor more than sixty (60) days before the date of the meeting to
each Member entitled to vote at the meeting. Any Member may participate
in any meeting required or allowed under this SECTION 6.2(b) by
conference telephone or similar communications equipment by which all
persons present at the meeting can hear each other, and any Member
participating in such manner will be deemed present at the meeting and
all acts taken by such Member during his or her participation will be
deemed taken at the meeting.
(c) Each Member entitled to vote on any matter shall be
entitled to one (1) vote for each Unit held by that Member, and shall
have the right to cast any votes to which it is entitled in person or by
proxy. The presence in person or by proxy of holders of a majority of
the Units of each class entitled to vote at the meeting shall constitute
a quorum for the transaction of business at the meeting with respect to
that class. No Person may cast the votes represented by any Units held
by that Person unless that Person has been admitted as a Member of the
Company.
(d) The selection of the Class One Representatives and the Class
Two Representative will be determined by the respective plurality votes of
the Class One Members and the Class Two Members.
(e) Except as otherwise provided in this Agreement, any other
matter subject to a vote of any Members will be determined by the vote of a
majority of the outstanding Units that are voted with regard to such
matter.
(f) Whenever the vote of Members at a meeting is required or
permitted in connection with any action by the Company, the meeting and
vote may be dispensed with if the action is consented to in writing by
Members having at least the minimum number of votes required to authorize
the action at a meeting at which the holders of all Units entitled to vote
are present and voted.
6.3 DUTIES OF BOARD REPRESENTATIVES. Each Board Representative shall
devote sufficient time, efforts and managerial resources to the business and
affairs of the Company as is reasonably necessary to fulfill the obligations of
the Board Representatives as set forth in this Agreement and to enable the
Company to conduct its business in the manner contemplated by this Agreement.
To the fullest extent permitted by law, each Board Representative shall be
deemed an agent of the Members that appointed such Person a Representative, and
such Representative shall not be deemed to be an agent or a sub-agent of the
Company or the other Members and shall have no duty (fiduciary or otherwise) to
the Company or such other Members. Each Member, by execution of this Agreement,
agrees and
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consents to and acknowledges the delegation of powers and authority to such
Board Representatives and to the actions and decisions of such Board
Representatives within the scope of such Board Representatives' authority as
conferred under this Agreement.
6.4 MEETINGS OF MEMBERS AND BOARD.
(a) Except as set forth in SECTION 6.2(a), no annual or regular
meetings of the Members are required to be held.
(b) The Board shall meet on a monthly basis, or more frequently
if necessary to enable the Company to conduct its business in the manner
contemplated by this Agreement. Any Board Representative, acting alone,
may also request a meeting of the Board. A Board Representative
participating in any monthly meeting by conference telephone or similar
communications equipment by which all persons present at the meeting can
hear each other will be deemed present at the meeting and all acts taken by
such Board Representative during his or her participation will be deemed
taken at the meeting. The presence of a majority of the Board
Representatives shall constitute a quorum for the transaction of business
by the Board. Whenever the vote of the Board is required or permitted in
connection with any action by the Company, the meeting and vote may be
dispensed with if the action is consented to in writing by Board
Representatives having at least the minimum number and class of votes
required to authorize such action. No meeting of the Board pursuant to
this SECTION 6.4(a) shall be held upon less than fifteen (15) days' prior
notice, except in the event of an emergency, in which case a meeting may be
held upon as much prior notice as is practicable under the circumstances.
(c) A secretary of the Company shall take minutes for all
meetings of the Board, and a Class One Representative and the Class Two
Representative shall take minutes for all meetings of the Members of their
respective classes.
(d) In the event that the Class Two Representative is unable to
attend any noticed meeting of the Board, CWOP may, without prior notice to
the Board or REIT, designate a substitute Board Representative to appear at
such meeting and act in the place and stead of the Class Two
Representative. Any such substitute Board Representative shall present to
the Board, at the time of the meeting, indicia of the substitute Board
Representative's authority.
6.5 VOTING. Each Board Representative shall be entitled to one (1)
vote on each matter requiring the approval of the Board.
6.6 AUTHORITY TO ACT FOR COMPANY. Upon the affirmative vote of Board
Representatives comprising a majority of the Board, the Board shall have the
rights, powers
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and authority granted under this Agreement and applicable law to obligate and
bind the Company, on behalf and in the name of the Company, and to take such
action as the majority of the Board deems necessary or advisable in
furtherance of the Company's business purposes; provided, however, that the
Board shall in no event cause the Company to take any action that (or fail to
take any action, the omission of which), in the opinion of counsel to REIT:
(a) could adversely affect the ability of REIT to qualify or continue to
qualify as a real estate investment trust; (b) could subject REIT to any
additional taxes under section 857 or section 4981 of the IRC or other
potentially adverse consequences under the IRC; (c) could otherwise violate
the REIT Requirements; or (d) could violate any law or regulation of any
governmental body or agency having jurisdiction over REIT or its securities,
unless such action (or inaction) shall have been specifically consented to by
REIT in writing. Notwithstanding any other provision of this Agreement, no
Member or Board Representative, without obtaining the prior requisite consent
of the Board, may (x) incur or contract for any debt, liability or obligation
on behalf or in the name of the Company; (y) cause the Company to engage or
be included directly or indirectly in any transaction or matter; or (z) cause
the Company to take any action or refrain from taking any action whatsoever.
The Board may designate Company officers or Board Representatives to carry
out and implement any action authorized by the Board pursuant to this
Agreement.
6.7 ACTIONS REQUIRING UNANIMOUS CONSENT. Notwithstanding any other
provision of this Agreement, only upon the affirmative vote of all Board
Representatives shall the Board or any Member or Board Representative be
authorized to take any of the following actions on behalf of or in the name of
the Company:
(a) take any action to cause a Bankruptcy of the Company;
(b) terminate the Management Agreement without "Cause" (as
defined in the Management Agreement);
(c) at any time prior to _____________________, 2000 [3 YEARS
FROM THE EFFECTIVE DATE], in one transaction, or a series of related
transactions: lease, sell, convey, grant, assign or otherwise transfer all
or substantially all of the Facility or grant, convey, assign or otherwise
create or suffer to exist any right or interest that may be converted into
any interest in all or substantially all of the Facility or any portion
thereof or into Units (except as expressly provided to the contrary in this
Agreement with respect to Units) or otherwise grant, convey, assign,
transfer or sell, directly or indirectly, any right, title or interest in
all or substantially all of the legal or beneficial ownership of the
Facility or enter into any agreement to do any of the foregoing; provided,
however, that the foregoing shall not prohibit a majority of the Board from
encumbering or hypothecating an interest in the Facility to secure
financing permitted pursuant to SECTION 6.8(c);
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(d) change the number of the classes of Units that the Company
is authorized to issue, or the rights, obligations and liabilities of such
classes;
(e) except with respect to Units issued pursuant to SECTION
3.2(f) OR 3.3, issue additional Units of any existing class of Units;
(f) issue any options, rights or convertible or exchangeable
securities that may entitle the holder thereof to acquire Units of any
class, or enter into any other type of agreement under which the Company
is, or upon the passage of time, the payment of money or the occurrence of
any other event may become, required to issue additional Units of any
class;
(g) authorize a Person to take any action affecting, to the
extent described in SECTION 6.9(b), the percentage of gross income of REIT
that fails to be treated as "rents from real property" within the meaning
of section 856(d)(2) of the IRC;
(h) authorize a Member to transfer all or a portion of its Units
pursuant to SECTION 7.3(c) OR 7.4;
(i) to borrow money and, as security therefor, to encumber all
or any portion of the Facility if (i)(A) such borrowing is not an arms-
length transaction or (B) is not from a third-party lender unaffiliated
with a Member and (ii) involves participation, conversion, shared
appreciation or other comparable feature if such participation, conversion,
shared appreciation or other comparable feature would cause the applicable
borrowing to effectively constitute a transaction described in SECTION
6.7(c);
(j) to obtain replacements of and to refinance, recast,
increase, modify, consolidate, or extend any loan or security instrument
described in SECTION 6.7(i);
(k) take any act in contravention of this Agreement, the
Certificate or applicable law;
(l) take any act or fail to take any act the effect of which
would make it impossible to carry on the ordinary business of the Company;
(m) confess a judgment against the Company;
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(n) possess the Property of the Company, or assign any rights
therein, for other than a Company purpose and in pursuit of the business of
the Company;
(o) at any time prior to _____________________, 2000 [3 YEARS
FROM THE EFFECTIVE DATE], sell, exchange or otherwise dispose of any assets
or Property necessary for the use and operation of the Facility;
(p) at any time prior to _____________________, 2000 [3 YEARS
FROM THE EFFECTIVE DATE], merge or otherwise combine the Company with
another entity;
(q) dissolve the Company in accordance with SECTION 9.1(b);
(r) at any time prior to _____________________, 2000 [3 YEARS
FROM THE EFFECTIVE DATE], authorize Approved Activities as described in
SECTION 6.10;
(s) following the sale or other transfer or disposition of the
Facility, continue the Company in accordance with Section 9.1(d); and
(t) take any other action that, pursuant to this Agreement,
requires the unanimous vote or approval of the Board.
6.8 POWERS OF THE BOARD. Subject to all limitations and conditions
set forth in this Agreement, and upon obtaining in each instance the consent of
the requisite number of Board Representatives as required under this Agreement,
the Board shall have the right, power and authority to cause the Company to take
all reasonable action, incur all reasonable expenditures and to enter into any
and all contracts or agreements in connection with the Company's business,
including the right, power and authority:
(a) to retain, appoint and dismiss from such retention any and
all authorized officers or representatives, agents, independent
contractors, attorneys, the Accountants, other consultants and the like;
(b) to manage, operate, lease, encumber, collateralize,
subordinate, sell, exchange, grant options for the sale or exchange of, or
otherwise convey title to the Facility;
(c) except as provided in SECTION 6.7(i) or to the contrary in
an document or agreement that may govern the indebtedness that may be
incurred by the Company, to borrow money and, as security therefor, to
encumber all or any portion of the Facility;
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(d) except as provided in SECTION 6.7(j) or to the contrary in
an document or agreement that may govern the indebtedness that may be
incurred by the Company, to obtain replacements of and to refinance,
recast, increase, modify, consolidate, or extend any loan or security
instrument described in SECTION 6.8(c);
(e) determine from time to time pursuant to SECTION 3.2(a) that
additional operating capital is required by the Company and the amount of
Necessary Funds, and, pursuant to SECTION 3.2(c), whether such Necessary
Funds are to be contributed as an additional Capital Contribution pursuant
to SECTION 3.2(d) or loaned as a Member Loan pursuant to SECTION 3.2(g);
(f) to obtain such insurance as deemed necessary or appropriate
to protect the Company;
(g) to sell or otherwise dispose of all of the personal Property
owned by the Company;
(h) to make operating decisions for the Facility with respect
to, without limitation, capital expenditures and renewals and modifications
of leases;
(i) to approve all agreements entered into by the Company;
(j) to approve any termination of the Management Agreement with
"Cause" (as defined in the Management Agreement);
(k) to appoint officers or authorized representatives of the
Company to carry out the policy of the Company as created by the Board;
(l) to do any of the foregoing at such price, rental, rate or
amount, for cash, securities or other property and on such other terms as
the Board deems proper;
(m) to approve the Company's annual operations budget; and
(n) to execute, acknowledge, verify and deliver any and all
instruments to effectuate any of the foregoing.
6.9 OPERATION OF COMPANY IN ACCORDANCE WITH REIT REQUIREMENTS.
(a) The Company has the authority to and shall operate at all
times in a manner that will enable REIT to satisfy the REIT Requirements.
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(b) Without the prior unanimous affirmative vote of the Board,
no Member, Board Representative or holder of Units or any Affiliate of any
of the foregoing shall take any action to acquire directly or indirectly,
an interest in any tenant of the Facility or any other Property, which
would have, through the actual or constructive ownership of any tenant of
the Facility or any Property, the effect of causing the percentage of gross
income of REIT that fails to be treated as "rents from real property"
within the meaning of section 856(d)(2) of the IRC to exceed such
percentage existing on the Effective Date.
6.10 OPERATION AND ACTIVITIES OF REIT; OTHER BUSINESS. All business
activities of REIT, including activities pertaining to the acquisition,
development, operation and ownership of the Facility, shall be conducted through
the Company. In the event that either Member desires the Company to engage in
business other than the acquisition, development, operation and ownership of the
Facility ("OTHER BUSINESS"), the Member shall present such Other Business to the
Board for its consideration and approval. By unanimous vote (at any time prior
to _____________________, 2000 [3 YEARS FROM THE EFFECTIVE DATE]), or by
majority vote (from and after _____________________, 2000 [3 YEARS FROM THE
EFFECTIVE DATE]), the Board may approve any Other Business and such business (an
"APPROVED ACTIVITY") shall thereafter become the business of, and shall be
pursued, conducted and consummated through, the Company. The Board may, in
accordance with the provisions of SECTION 3.2, determine that Necessary Funds
are required for the pursuit of any Approved Activity. REIT shall not directly
or indirectly enter into or conduct any business other than the ownership,
acquisition and disposition of Units and such activities as are incidental
thereto. All future acquisitions by REIT, to the extent permitted hereunder,
shall be made through and for the benefit of the Company.
6.11 COMPENSATION AND REMUNERATION. Neither the Board Representatives
nor the Members shall be entitled to or receive any compensation or remuneration
for services rendered to the Company or any reimbursement of overhead and
administrative costs incurred in rendering the services and performing the
duties described herein except for such out-of-pocket expenses incurred by a
Board Representative or Member that are approved for reimbursement by the Board,
which shall promptly be reimbursed to the Person incurring the same.
6.12 REIMBURSEMENT OF REIT. Notwithstanding anything contained in
SECTION 6.11 to the contrary, REIT shall be reimbursed on a monthly basis, or on
such other basis as the Board may determine, for all expenses it incurs relating
to the ownership and operation of, or for the benefit of, the Company,
including, without limitation, the Administrative Expenses. Such reimbursements
shall be in addition to any reimbursement to REIT as a result of indemnification
pursuant to ARTICLE 10. REIT shall also be reimbursed for all expenses it
incurs relating to the organization and formation of the Company, REIT's share
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of public offerings of REIT Shares to the extent included in REIT Expenses, and
any other issuance of additional Units.
6.13 COMPETING ACTIVITIES. CWOP, its Affiliates and the Board
Representatives may engage or invest in any activity, including those that might
be in direct or indirect competition with the Company. Neither the Company nor
any Member shall have any right in or to such other activities or to the income
or proceeds derived therefrom. CWOP, its Affiliates and the Board
Representatives shall not be obligated to present any investment opportunity to
the Company, even if the opportunity is of the character that could be taken by
the Company. CWOP, its Affiliates and the Board Representatives shall have the
right to hold any investment opportunity for their own accounts, or to recommend
the opportunity to Persons other than the Company. REIT, its Affiliates and the
Board Representatives acknowledge that CWOP, its Affiliates and the Board
Representatives own or manage other businesses, including businesses that may
compete with the Company and for the time and resources of the Person owning or
managing the business. REIT hereby waives any and all rights and claims that
REIT may otherwise have against CWOP, its Affiliates and the Board
Representatives as a result of any such activities, provided that engaging in
such activities does not constitute or cause a breach of an express provision of
this Agreement. Notwithstanding anything in this Agreement to the contrary,
REIT shall engage only in those activities and investment opportunities
authorized under SECTION 6.10. Nothing contained in this SECTION 6.13 shall
limit or abrogate the obligations of certain Affiliates of CWOP pursuant to
Sections 14.1 and 16.2 of the Management Agreement.
6.14 NO EMPLOYEES. The Company shall have no employees. Each Member
shall be solely responsible for all wages, benefits, insurance and payroll taxes
concerning any of its employees.
ARTICLE 7
THE MEMBERS; TRANSFERABILITY
7.1 ADMISSION OF MEMBERS. Other than CWOP and REIT, no Person
shall become a Member of the Company except in accordance with this ARTICLE
7. No Person may become a Member of the Company unless that Person owns at
least one (1) Unit, and no Person to whom Units are transferred will become a
Member: (a) unless the transfer of the Units was made in accordance with this
ARTICLE 7; (b) until the transfer is recorded on the books of the Company;
(c) until the Person to whom the Units are transferred agrees to be bound by
all the provisions of this Agreement that were applicable to such Person's
transferor by executing and delivering a document, in form satisfactory to
the Board, pursuant to which the Person agrees to be bound by all those
provisions of this Agreement; and (d) except upon the unanimous affirmative
vote of the Board, which vote may be cast or withheld in each Board
Representative's sole and absolute discretion.
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7.2 WITHDRAWAL AND RESIGNATION. No Member may withdraw or resign as
a Member of the Company while it holds any Units of the Company. A Person will
cease being a Member of the Company when that Person disposes of all the Units
owned by the Person in accordance with this Agreement and the disposition of
those Units is registered on the books of the Company.
7.3 TRANSFERABILITY.
(a) The term "TRANSFER," when used with respect to a Unit, means
a transaction by which a Person purports to assign or transfer its Units to
another Person, and includes a sale, assignment, gift, pledge, encumbrance,
hypothecation, mortgage, exchange, merger, disposition of marital property
pursuant to court order, any transfer by death or any other disposition by
law or otherwise.
(b) Except as provided in SECTIONS 7.3(d) AND (e), no Member may
transfer all or any portion of its Units. Any purported transfer of a Unit
in the Company other than as provided in this Agreement shall be null and
void and of no force or effect whatsoever.
(c) Upon any transfer of a Unit in accordance with the
provisions of this SECTION 7.3 and admission to the Company as a Member in
accordance with SECTION 7.1, the transferee of such Unit shall become
vested with the powers and rights of the transferor and shall be liable for
all obligations and responsible for all duties of the transferor. It shall
be a condition to any transfer otherwise permitted by this Agreement that
the transferee assumes by express agreement (or pursuant to a statutory
merger or consolidation wherein all obligations and liabilities of the
transferor are assumed by a successor trust or corporation by operation of
law) all of the obligations of the transferor under this Agreement with
respect to such transferred Unit and no such transfer (other than pursuant
to a statutory merger or consolidation wherein all obligations and
liabilities of transferor are assumed by a successor trust or corporation
by operation of law) shall relieve the transferor of its obligations under
this Agreement except upon the unanimous affirmative vote of the Board.
(d) Notwithstanding anything in this SECTION 7.3 to the
contrary, CWOP may exchange its Units for REIT Shares in accordance with
and in the manner provided in the Property Appreciation Agreement. Upon
the exercise of its rights under exchange rights of the Property
Appreciation Agreement and the close of the transaction contemplated
thereby: (i) CWOP will cease to be a Member of the Company; (ii) the
Percentage Interest of the remaining Members of the Company shall be
adjusted as appropriate; and (iii) this Agreement shall be amended mutatis
mutandis.
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(e) Notwithstanding anything in this SECTION 7.3 to the
contrary, REIT may transfer its Units in the manner provided in this
Agreement following the exercise by CWOP of its rights under the exchange
rights of the Property Appreciation Agreement and the close of the
transaction contemplated thereby.
(f) In addition to any other restrictions on transfer provided
in this Agreement, no Units shall be transferable unless the transferor
gives written notice to all other Members of the proposed transfer, which
notice shall state, to the best of the transferor's knowledge, that such
transfer will not violate any of the restrictions set forth in SECTION 7.4.
(g) The Members acknowledge that the Units have not been
registered under any federal or state securities laws. Notwithstanding
anything to the contrary contained in this Agreement, no Units may be sold
or otherwise transferred unless such transfer is exempt from registration
under any applicable securities and other laws or such transfer is
registered under applicable securities laws, it being acknowledged that the
Company has no obligation to take any action which would cause any Units to
be registered.
7.4 CERTAIN RESTRICTED TRANSFERS. In addition to all other
restrictions on the transfer of Units contained in this Agreement, except upon
the unanimous affirmative vote of the Board, in no event may any transfer of a
Unit by any Person be made: (a) to any Person that lacks the legal right, power
or capacity to own Units; (b) if such transfer would not comply with all
requirements applicable to CWOP's exercise of the exchange rights of the
Property Appreciation Agreement or, if such requirements are inapplicable to the
respective transfer of Units, would cause REIT to cease to comply with the REIT
Requirements; (c) if such transfer would, in the opinion of counsel to the
Company, cause the Company to cease to be classified as a partnership for
federal income tax purposes; (d) if such transfer would result in the Company
being treated as a "publicly traded partnership" or is effectuated through an
"established securities market" or a "secondary market (or the substantial
equivalent thereof)" within the meaning of section 7704 of the IRC; or (E) if
such transfer would be in violation of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976.
7.5 EFFECTIVE DATES OF TRANSFERS.
(a) Transfers pursuant to this ARTICLE 7 may be made on any day,
but for purposes of this Agreement, the effective date of any such transfer
shall be (i) the first day of the month in which such transfer occurred if
such transfer occurred on or prior to the fifteenth calendar day of a
month, or (ii) the first day of the month immediately following the month
in which such transfer occurred, if such transfer occurred after the
fifteenth calendar day of a month, or such other date determined by
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the Board pursuant to such convention as may be administratively feasible
and consistent with applicable law.
(b) If any Unit is transferred or assigned in compliance with
the provisions of this ARTICLE 7, all distributions pursuant to SECTION 5.1
attributable to such transferred Units (i) with respect to which the
Company Record Date is before the effective date of such transfer (other
than a pledge, encumbrance, hypothecation or mortgage) shall be made to the
transferor, and (ii) all distributions after those described in the
foregoing CLAUSE (i) shall be made to the transferee.
ARTICLE 8
RECORD KEEPING AND ACCOUNTING
8.1 BOOKS AND RECORDS. True and proper books and records of the
Company shall be maintained by the Board at all times at the principal offices
of the Company, in which shall be entered fully and accurately all Company
transactions. These books and records shall include:
(a) A current list of the name, business address and taxpayer
identification number of each Member, and the number and classification of
Units owned by each Member;
(b) A copy of this Agreement, the Certificate and all amendments
to both documents, if any;
(c) Copies of the Company's federal, state and local income tax
or information returns and reports for the five (5) most recent taxable
years of the Company's existence;
(d) Copies of the Company's financial statements for the five
(5) most recent taxable years of the Company's existence; and
(e) The Company's records regarding the internal affairs and
management of the Company for the five (5) most recent Fiscal Years of the
Company's existence.
8.2 INSPECTION OF BOOKS AND RECORDS; CONFIDENTIALITY. All books and
records of the Company shall be open to inspection by any Member or its
authorized agent at any time upon reasonable notice. Each Member shall have the
right to make or to cause to be made, at Company expense, a copy of all books
and records of the Company. Notwithstanding the foregoing, each Member will,
and will cause its Board Representatives
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and other agents to, hold all information received as a result of access to
the Property, books and records of the Company in confidence, except to the
extent that information (a) is or becomes available to the public (other than
through a breach of this Agreement), (b) becomes available to the recipient
from a third party that, insofar as the recipient is aware, is not under an
obligation to the Company to keep the information confidential, (c) was known
to the recipient before it was made available to the recipient by the
Company, (d) otherwise is independently developed by the recipient, or (e) is
required to be disclosed pursuant to applicable law.
8.3 METHOD OF ACCOUNTING. The Company's books of accounts shall be
kept on the accrual method of accounting in accordance with GAAP.
TAX RETURNS. The Company shall be responsible for preparing and,
subject to each Member's prior reasonable approval of the same, filing all
federal and state tax returns for the Company and furnishing copies thereof to
the Members, together with required Company schedules showing allocations of tax
items, all within the period of time prescribed by law. The Company shall use
reasonable efforts to make available to the holders of Units final K-1's not
later than March 1st of each year.
8.5 FINANCIAL REPORTING. The Company shall furnish to the Members:
(a) As soon as practicable and in any event within fifteen (15)
days after the end of each month, detailed balance sheets as of the end of
such month and an income statement and statement of cash flows for the
Company for such month and for the period from the beginning of the current
Fiscal Year to the end of such month, all in reasonable detail and
accompanied by a certificate of an officer of the Company to the effect
that such statements fairly present in all material respects the financial
condition of the Company as of the dates indicated and the results of its
operations and cash flows for the periods indicated, subject to change
resulting from audit and normal year-end adjustment;
(b) As soon as possible and in any event within thirty (30) days
after the end of each quarter of each Fiscal Year (with respect to
quarterly reports) and within sixty (60) days after each Fiscal Year (with
respect to annual reports), copies of the quarterly and annual reports and
of the information, documents and other reports (or copies of such portions
of any of the foregoing as the SEC may by rules and regulations prescribe)
that the Company files or proposes to file with the SEC pursuant to
Sections 13(a) and 13(c) or 15(d) of the Exchange Act; at any time that the
Company is not subject to Sections 13(a) and 13(c) or 15(d) of the Exchange
Act and the Company would be entitled not to file such reports, information
and other documents with the SEC, the Company shall nonetheless furnish to
the Members, on the same timely basis, such reports, information and other
documents as the Members would be
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required to file with the SEC as if the Company were so subject to the
requirements of such Sections 13(a) and 13(c) or 15(d) of the Exchange Act;
(c) At the same time as the Company delivers the information,
documents and other reports required to be filed under SECTION 8.5(a) OR
(b), a certificate of an officer of the Company setting forth Available
Cash (as defined in the Indentures) and, after the end of each Fiscal Year,
Excess Cash Flow Amount (as defined in the Indentures) and deferred and
capitalized interest for such Fiscal Year; and
(d) Upon the request of a Member, to any prospective purchaser
of any Units to be sold or otherwise transferred in accordance with this
Agreement, all information that may be required to be delivered to such
prospective purchaser to enable any Member to sell to such purchaser its
Units without registration under the Securities Act within the limitations
of the exemption proved by (i) Rule 144A under the Securities Act, as such
rule may be amended as of such time, or (ii) any similar rule or regulation
hereafter adopted by the SEC, subject, in each case to receipt of an
appropriate confidentiality agreement from such prospective purchasers in
form and substance reasonably satisfactory to the Board (with appropriate
exceptions to permit resale).
ARTICLE 9
DISSOLUTION AND LIQUIDATION
EVENTS OF DISSOLUTION. The Company shall be dissolved and its
affairs wound up upon the occurrence of any of the following events
("DISSOLUTION EVENTS"):
(a) six (6) months after the fifth anniversary of the Petition
Date;
(b) the unanimous affirmative vote of the Board;
(c) the withdrawal of REIT or, except as provided in
SECTION 7.3(d) (so long as the Company's counsel reasonably determines that
a single-member entity may be classified as a partnership for California
tax purposes), CWOP as a Member, or the Bankruptcy of any Member, unless
within ninety (90) days of such event, (i) if there is only one (1)
remaining Member, such Member admits an additional Member and elects to
continue the Company without dissolution, or (ii) if there is more than one
(1) remaining Member, not less than a majority in interest of the remaining
Members (as determined under Revenue Procedure 94-46, 1994-2 CB 688) elect
to continue the Company without dissolution;
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(d) one (1) year after the sale or other transfer or disposition
of the Facility by the Company unless the Board by unanimous affirmative
vote elects to continue the Company; provided that, in all events and
irrespective of whether the Board shall vote to continue the Company, the
Net Proceeds from the Sale of the Facility shall be distributed to the
Members in accordance with this Agreement promptly following the sale or
other transfer or disposition of the Facility; or
(e) the entry of a decree of judicial dissolution under section
18-802 of the Act.
9.2 LIQUIDATION. Upon the occurrence of a Dissolution Event, the
Company shall be liquidated and its affairs shall be wound up. All proceeds
from such liquidation shall be distributed as follows (except as otherwise
required by Section 18-804 of the Act):
(a) First, to the payment (or the making of reasonable provision
for payment thereof) of debts and liabilities of the Company and the
expenses of liquidation, including the establishment of any reserves that
the Board deems reasonably necessary with regard to contingent, conditional
or unmatured liabilities or obligations of the Company, which reserve may
be paid to a liquidating trustee to be applied to the payment of those
obligations and liabilities and, to the extent not required for that
purpose, to be distributed to the Members; and
(b) Second, in accordance with the positive Capital Account
balances of the Members, as determined after taking into account all
Capital Account adjustments for the Fiscal Year during which such
liquidation occurs, provided that all distributions required by this
SECTION 9.2(b) shall be made by the end of such Fiscal Year, or, if later,
within ninety (90) days after the date of such liquidation.
9.3 FINAL ACCOUNTING. Prior to any liquidation upon the dissolution
of the Company, a proper accounting shall be made to the Members from the date
of the last previous accounting to the date of dissolution.
9.4 CERTIFICATE OF CANCELLATION. Upon the completion of the
liquidation and distribution of the Company's assets, the Company will be
terminated, all Units will be cancelled, and the Members shall cause an
authorized person to execute and file a Certificate of Cancellation in
accordance with section 18-203 of the Act.
9.5 LIABILITY FOR CAPITAL CONTRIBUTIONS. No Member shall have any
deficit restoration obligation or otherwise be personally liable for the return
of the Capital Contribution of any other Member. The only right of a Member
upon dissolution of the Company will be to receive distributions under this
ARTICLE 9.
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ARTICLE 10
LIABILITY; INDEMNIFICATION
10.1 INDEMNITY. Subject to the provisions of SECTION 10.1, the
Company shall, to the fullest extent permitted by law, indemnify any Person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, except an action by or in the right of the
Company, by reason of the fact that the Person is or was a Member, a Board
Representative or an agent of the Company, or is or was serving at the
request of the Company as a director, executive, officer, employee or agent
of another enterprise, against expenses including reasonable attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonably
incurred by the Person in connection with the action, suit or proceeding if
the Person's conduct was not willful and such Person acted in good faith and
in a manner that the Person reasonably believed to be in or not opposed to
the best interests of the Company, and, with respect to a criminal action or
proceeding, had no reasonable cause to believe the Person's conduct was
unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the Person did
not act in good faith and in a manner that the Person reasonably believed to
be in or not opposed to the best interests of the Company, and, with respect
to any criminal action or proceeding, had reasonable cause to believe that
the Person's conduct was unlawful.
10.2 INDEMNITY FOR ACTIONS BY OR IN THE RIGHT OF THE COMPANY.
Subject to the provisions of SECTION 10.3, the Company shall, to the fullest
extent permitted by law, indemnify any Person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding by or in the right of the Company to procure a judgment in
its favor by reason of the fact that the Person is or was a Member, a Board
Representative or an agent of the Company, or is or was serving at the
request of the Company as a director, executive, officer, employee or agent
of another enterprise, against expenses, including amounts paid in settlement
and attorneys' fees actually and reasonably incurred by the Person in
connection with the defense or settlement of the action, suit or proceeding
if the Person acted in good faith and in a manner that the Person reasonably
believed to be in or not opposed to the best interests of the Company.
Indemnification may not be made for any claim, issue or matter as to which
such Person has been adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable to the Company or for
amounts paid in settlement to the Company, unless and only to the extent that
the court in which the action or suit was brought or other court of competent
jurisdiction determines upon application that in view of all the
circumstances of the case, the Person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.
10.3 EXPENSES. Any indemnification under SECTIONS 10.1 AND 10.2, as
well as the advance payment of expenses permitted under SECTION 10.4, unless
ordered by a court or
41
<PAGE>
other tribunal of competent jurisdiction, must be made by the Company only as
authorized in the specific case upon a determination that indemnification of
the indemnified Person is proper in the circumstances under this ARTICLE 10.
The determination must be made:
(a) by the plurality vote of the Board excluding Board
Representatives who are parties to the action, suit or proceeding and
constituting a quorum;
(b) by independent legal counsel in a written opinion if a
quorum of the Board is not obtainable; or
(c) by the Members who were not parties to the action, suit or
proceeding.
10.4 ADVANCE PAYMENT OF EXPENSES. The applicable expenses of a Person
indemnified pursuant to SECTION 10.1 OR 10.2 may be paid by the Company as they
are incurred and in advance of the final disposition of the action, suit or
proceeding, upon receipt of an undertaking by or on behalf of the indemnified
Person to repay the amount if it is ultimately determined by a court of
competent jurisdiction that such Person is not entitled to be indemnified by the
Company.
10.5 OTHER ARRANGEMENTS NOT EXCLUDED. The indemnification and
advancement of expenses authorized in or ordered by a court pursuant to this
ARTICLE 10:
(a) do not exclude any other rights to which a Person seeking
indemnification or advancement of expenses may be entitled under any
agreement, vote of Members, Board Representatives or otherwise, for either
an action in the Person's official capacity or an action in another
capacity while holding the Person's office, except that indemnification,
unless ordered by a court or other tribunal of competent jurisdiction, may
not be made to or on behalf of any Member, Representative or agent if a
final adjudication established that the Person's acts or omissions involved
intentional misconduct, fraud or a knowing violation of the law and was
material to the cause of action; and
(b) continues for a Person who has ceased to be a Member,
Representative or agent and inures to the benefit of the heirs, executors
and administrators of such a Person; and
(c) does not preclude the Board from advancing expenses to
agents of the Company in its sole discretion.
42
<PAGE>
10.6 LIABILITY. No Board Representative or agent of the Company, or
any Person who is serving or was serving at the request of the Company as a
director, executive, officer, employee, or agent of another enterprise, shall
have any personal liability to the Company or the Members for monetary damages
for gross negligence in such capacity, provided that this SECTION 10.6 will not
eliminate the liability of any such Person: (a) for any breach of such Person's
duty of loyalty to the Company or a class of its Members; (b) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; or (c) for any transaction from which such Person derived an
improper personal benefit.
ARTICLE 11
MISCELLANEOUS
11.1 NOTICES. All notices, approvals and the like required or
permitted to be given pursuant to this Agreement shall be given, and effective,
as follows: (a) by personal delivery, which shall be effective upon delivery;
(b) by Federal Express or other nationally recognized overnight courier service,
which shall be effective one (1) day after deposit with such service; (c) by
facsimile transmission, which shall be effective upon transmission provided that
a receipt indicating successful transmission is received by the sender; or (d)
by certified or registered mail, return receipt request, which shall be
effective five (5) days after deposit in the United States mail. In order to be
effective, all deliveries pursuant to this SECTION 10.1 must be addressed as
follows, or as subsequently requested by the appropriate party in accordance
with this provision:
To REIT: Jamboree Offices REIT, Inc.
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
Facsimile:
--------------------------------------------
Attention:
--------------------------------------------
With a Milbank, Tweed, Hadley & McCloy
copy to: 601 South Figueroa Street, 30th Floor
Los Angeles, California 90017
Facsimile: 213/629-5063
Attention: Paul Aronzon, Esq.
43
<PAGE>
To CWOP: Crow Winthrop Operating Partnership
c/o Winthrop Financial Associates
One International Place, Suite 1200
Boston, Massachusetts 02110
Attention: Jeffrey D. Furber
With a Crow Winthrop Operating Partnership
copy to: c/o Winthrop Management
3333 Michelson Drive, Suite 210
Irvine, California 92612-1682
Facsimile: 714/851-2321
Attention: Janine R. Padia
With a O'Melveny & Myers LLP
copy to: 610 Newport Center Drive, Suite 1700
Newport Beach, California 92660-6429
Facsimile: 714/669-6994
Attention: Patricia J. Frobes, Esq.
11.2 GOVERNING LAW; ARBITRATION. This Agreement and all amendments
hereto shall be governed by and construed and enforced in accordance with the
laws of the state of Delaware. In the event of a dispute between the Members,
the Members shall enter the dispute into binding arbitration at the local Orange
County, California offices of the Judicial Arbitration & Mediation Services,
Inc. Any dispute submitted to arbitration shall be finally and conclusively
determined by the decision of a panel (the "ARBITRATION PANEL") of three (3)
arbitrators (the "ARBITRATORS") selected as provided below. Each Member shall
select one (1) Arbitrator and the third Arbitrator shall be selected by mutual
agreement of the other two Arbitrators, or, if the other Arbitrators fail to
reach agreement on a third Arbitrator within ten (10) days after their
selection, the Board shall request that the American Arbitration Association
promptly appoint a third Arbitrator possessing expertise or experience
appropriate to the pending dispute. Any Member may replace the Arbitrator
selected by such Member with another Arbitrator at any time prior to the first
meeting of the Arbitration Panel. The Arbitration Panel shall meet in Orange
County, California or such other place as a majority of the Arbitrators
determines, and shall decide the matter in dispute pursuant to such rules and
procedures as deemed appropriate by a majority of the Arbitrators. A decision
concurred in by a majority of the Arbitrators shall constitute the decision of
the Arbitration Panel. All decisions of the Arbitration Panel shall be
delivered to the Members in writing and, to the extent practical, shall be
rendered no more than twenty (20) days following the commencement of the
arbitration proceedings. All decisions made by the Arbitration Panel shall be
final, binding and conclusive on the Members, may be entered in any court of
competent jurisdiction and may be enforced to the fullest extent permitted by
law. Each Member shall bear its own expenses incurred in any arbitration,
including but not limited to attorneys' fees and costs and
44
<PAGE>
the fees and expenses of the Arbitrator appointed by such Member. The fees
and expenses of the third Arbitrator and all other costs and expenses not
attributable to an individual Member shall be borne in equal parts by the
Members.
11.3 SUCCESSORS AND ASSIGNS. Subject to the restrictions set forth in
this Agreement, this Agreement shall be binding on and shall inure to the
benefit of the Members and their respective executors, administrators,
successors and assigns.
11.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement is fully integrated
and contains the entire understanding of the Members with respect to the subject
matter hereof. This Agreement supersedes and terminates any prior or
contemporaneous negotiations, agreements and understandings, whether oral or
written, between the Members with respect to such subject matter. This
Agreement may be amended only by a written instrument signed by all Members.
11.5 SEVERABILITY. If any provision of this Agreement, or the
application of that provision to any Person or circumstance, shall be held
invalid or unenforceable, the offending provision shall be deemed to be severed
from the Agreement and the remainder of the Agreement, or the application of the
provision to Persons or circumstances other than those to which it is invalid or
unenforceable, shall not be affected thereby.
11.6 CONSTRUCTION AND INTERPRETATION. Article, section, paragraph,
exhibit and schedule headings and titles appearing in this Agreement are solely
for the convenience of the Members and shall not be used, nor shall they have
any force and effect, in the construction and interpretation of this Agreement.
Unless the context requires otherwise, pronouns stated in this Agreement in the
masculine, the feminine or the neuter gender shall also include the masculine,
feminine and neuter genders. This Agreement is the product of full negotiation,
has been reviewed by counsel to both Members and, therefore, shall not be
interpreted pursuant to any rule of construction that would require ambiguities
to be strictly construed for or against any Member.
11.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be considered an original, but all of which,
when taken together, shall constitute but one and the same instrument.
[SIGNATURES BEGIN ON NEXT PAGE.]
45
<PAGE>
IN WITNESS WHEREOF, the Members have executed this Agreement as of the
date first above written.
"REIT"
JAMBOREE OFFICES REIT, INC.,
a Maryland corporation
By:
---------------------------------------------------
Name:
--------------------------------------------
Title:
--------------------------------------------
"CWOP"
CROW WINTHROP OPERATING PARTNERSHIP,
a Maryland general partnership
By: WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP,
a Delaware limited partnership,
its general partner
By: THREE WINTHROP PROPERTIES, INC.,
a Massachusetts corporation,
its general partner
By:
-----------------------------------------
Name:
----------------------------------
Title:
---------------------------------
46
<PAGE>
EXHIBIT A
CAPITAL CONTRIBUTIONS AND CONTRIBUTED PROPERTY
Exhibit A - Page 1
<PAGE>
EXHIBIT A - SCHEDULE 1
INITIAL GROSS ASSET VALUES
Exhibit A - Page S-1
<PAGE>
EXHIBIT B
DISTRIBUTION OF UNITS AND PERCENTAGE INTERESTS
Exhibit B - Page 1
<PAGE>
EXHIBIT C
LEGAL DESCRIPTION OF FACILITY
[Attached.]
Exhibit C - Page 1
<PAGE>
EXHIBIT D
BOARD REPRESENTATIVES
INITIAL CLASS ONE REPRESENTATIVES
1.
2.
3.
4.
INITIAL CLASS TWO REPRESENTATIVE
5.
Exhibit D - Page 1
<PAGE>
EXHIBIT E
DILUTION FORMULA
1. Following the occurrence of an event described in SECTION 3.2(e)(ii)
or SECTION 3.2(e)(iii), the Members' Percentage Interests shall be adjusted as
follows:
a. The Contributing Member's Percentage Interest shall equal:
(The Net Equity Value of the Facility MULTIPLIED BY the
Contributing Member's then Percentage Interest) PLUS (the
aggregate amount of the additional Capital Contribution
contributed by the Contributing Member)
DIVIDED BY
(The Net Equity Value of the Facility) PLUS (the aggregate amount
of the additional Capital Contribution contributed by the
Contributing Member);
b. The Non-contributing Member's Percentage Interest shall equal:
(The Net Equity Value of the Facility) MULTIPLIED BY (the Non-
contributing Member's then Percentage Interest)
DIVIDED BY
(The Net Equity Value of the Facility) PLUS (the aggregate amount
of the additional Capital Contribution contributed by the
Contributing Member).
2. "NET EQUITY VALUE OF THE FACILITY" means, as of the date of
determination, the fair market value of the Facility as determined by the
Appraisal Process MINUS an amount equal to the sum of: the amount remaining
unpaid on the Class A Notes PLUS the amount remaining unpaid on the Class B
Notes; provided, however, that if the Class A Notes and the Class B Notes have
been refinanced, the Net Equity Value of the Facility shall mean the fair market
value of the Facility as determined by the Appraisal Process MINUS an amount
equal to the outstanding principal balance of the debt secured by the Facility.
3. The adjustment of a Non-contributing Member's Percentage Interest
pursuant to SECTION 3.2(e) and the dilution procedure described in this EXHIBIT
E shall be the sole and exclusive remedy of the Contributing Member for a Non-
contributing Member's failure to make each required additional Capital
Contribution.
Exhibit E - Page 1
<PAGE>
4. By way of illustration, but without limitation, suppose:
a. Net Equity Value of the Facility = $1,000,000;
b. Necessary Funds to be contributed as an additional Capital
Contribution = $500,000;
c. Then Percentage Interests of Members:
REIT: 90%
CWOP: 10%
d. Corresponding portion of Necessary Funds to be contributed by
Members:
REIT: $450,000
CWOP: $50,000
e. i. If CWOP does not contribute and REIT contributes $500,000
(i.e., the entire amount of Necessary Funds), the revised
Percentage Interests of the Members would then equal:
REIT: 1,400,000/1,500,000 = 93.33%
CWOP: 100,000/1,500,000 = 6.67%.
ii. Alternatively, if CWOP does not contribute and REIT
contributes $450,000 (i.e., only its portion of Necessary
Funds), the revised Percentage Interests of the Members
would then equal:
REIT: 1,350,000/1,450,000 = 93.10%
CWOP: 100,000/1,450,000 = 6.90%.
Exhibit E - Page 2
<PAGE>
Exhibit 99.2
T3C
JAMBOREE LLC
$80,000,000
_____% CLASS A SENIOR SECURED NOTES DUE 2002
-------------------------------
-----------
INDENTURE
Dated as of , 1997
------------ ----
-----------
-----------
IBJ SCHRODER BANK & TRUST COMPANY
as TRUSTEE
- --------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE*
TRUST INDENTURE
ACT SECTION INDENTURE SECTION
310 (a)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.10
(a)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.10
(a)(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .N.A.
(a)(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .N.A.
(a)(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.10
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.10
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .N.A.
311 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.11
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .N.A.
312 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.07
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.03
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.03
313 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.06
(b)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.06,10.03
(b)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.06
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.06,11.02
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.06
314 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.09
(a)(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.05
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.02
(c)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.04
(c)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.04
(c)(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .N.A.
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.04
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.05
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .N.A.
315 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.01
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.05
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.01
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.01
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.11
316 (a)(last sentence). . . . . . . . . . . . . . . . . . . . . . . . . . .2.09
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.05
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.04
(a)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.07
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.15
317 (a)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.08
(a)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.09
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.04
318 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
i
<PAGE>
TRUST INDENTURE
ACT SECTION INDENTURE SECTION
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .N.A.
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
N.A. means not applicable.
* This Cross-Reference Table is not part of the Indenture.
ii
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I.
DEFINITIONS AND INCORPORATION BY REFERENCE. . . . . . . . 1
1.01. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02. OTHER DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT . . . . . . . . . . 14
1.04. RULES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE II.
THE NOTES. . . . . . . . . . . . . . . . 15
2.01. FORM AND DATING . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.02. MATURITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.03. AMORTIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.04. EXECUTION AND AUTHENTICATION. . . . . . . . . . . . . . . . . . . . . 15
2.05. REGISTRAR AND PAYING AGENT. . . . . . . . . . . . . . . . . . . . . . 16
2.06. PAYING AGENT TO HOLD MONEY IN TRUST . . . . . . . . . . . . . . . . . 16
2.07. LISTS OF HOLDERS OF THE NOTES . . . . . . . . . . . . . . . . . . . . 17
2.08. TRANSFER AND EXCHANGE . . . . . . . . . . . . . . . . . . . . . . . . 17
2.09. REPLACEMENT NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.10. OUTSTANDING NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.11. TREASURY NOTES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.12 TEMPORARY NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.13 CANCELLATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.14. DEFAULTED INTEREST. . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.15. RECORD DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.16. CUSIP NUMBER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE III.
REDEMPTION AND PURCHASE OF NOTES . . . . . . . . . . 20
3.01. REDEMPTION GENERALLY. . . . . . . . . . . . . . . . . . . . . . . . . 20
3.02. SELECTION OF NOTES TO BE REDEEMED . . . . . . . . . . . . . . . . . . 20
3.03. NOTICE OF REDEMPTION OR PURCHASE. . . . . . . . . . . . . . . . . . . 20
3.04. EFFECT OF NOTICE OR EXERCISE OF RIGHTS. . . . . . . . . . . . . . . . 22
3.05. DEPOSIT OF REDEMPTION OR PURCHASE PRICE . . . . . . . . . . . . . . . 22
3.06. NOTES REDEEMED OR PURCHASED IN PART . . . . . . . . . . . . . . . . . 22
3.07. OPTIONAL REDEMPTION . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.08. PURCHASE AT HOLDERS OPTION. . . . . . . . . . . . . . . . . . . . . . 23
3.09. COVENANT TO COMPLY WITH SECURITIES LAWS UPON PURCHASE OF NOTES. . . . 25
3.10. REPAYMENT TO THE ISSUER . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE IV.
COVENANTS. . . . . . . . . . . . . . . . 25
4.01. PAYMENT OF PRINCIPAL AND INTEREST; PAYMENTS IN KIND . . . . . . . . . 25
i
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4.02. MAINTENANCE OF OFFICE OR AGENCY . . . . . . . . . . . . . . . . . . . 25
4.03. OFFICERS' AND ACCOUNTANTS' CERTIFICATES AS TO COMPLIANCE. . . . . . . 26
4.04. CONDUCT OF BUSINESS; MANAGEMENT; TITLE INSURANCE. . . . . . . . . . . 26
4.05. PAYMENT OF TAXES, ETC . . . . . . . . . . . . . . . . . . . . . . . . 27
4.06. PRESERVATION OF EXISTENCE, ETC. . . . . . . . . . . . . . . . . . . . 29
4.07. FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . 29
4.08. LIMITATION ON INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . 30
4.09. LIENS, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.10. INDEBTEDNESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.11. LEASE OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.12. RESTRICTED PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.13. TRANSACTIONS WITH AFFILIATES. . . . . . . . . . . . . . . . . . . . . 33
4.14. NEW SUBSIDIARIES. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.15. RESERVE ACCOUNTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.16. REQUIRED INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.17. GENERAL INSURANCE REQUIREMENTS. . . . . . . . . . . . . . . . . . . . 35
4.18. DELIVERY OF INSURANCE POLICIES, PAYMENT OF PREMIUMS . . . . . . . . . 35
4.19. INDEMNIFICATION; SUBROGATION; WAIVER OF OFFSET. . . . . . . . . . . . 36
4.20. EVENT OF LOSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.21. INVESTMENT COMPANY ACT. . . . . . . . . . . . . . . . . . . . . . . . 39
4.22. STAY, EXTENSION AND USURY LAWS. . . . . . . . . . . . . . . . . . . . 39
ARTICLE V.
SUCCESSORS. . . . . . . . . . . . . . . . 39
5.01. MERGER, CONSOLIDATION OR SALE OF ASSETS . . . . . . . . . . . . . . . 39
5.02. SUCCESSOR ENTITY SUBSTITUTED. . . . . . . . . . . . . . . . . . . . . 40
ARTICLE VI.
DEFAULTS AND REMEDIES. . . . . . . . . . . . . 40
6.01. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.02. ACCELERATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.03. OTHER REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.04. WAIVER OF PAST DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . 42
6.05. DIRECTION BY HOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . 43
6.06. LIMITATION ON SUITS . . . . . . . . . . . . . . . . . . . . . . . . . 43
6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT. . . . . . . . . . . . . . . . . 43
6.08. COLLECTION SUIT . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.09. PROOFS OF CLAIM . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.10. PRIORITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.11. UNDERTAKING FOR COSTS . . . . . . . . . . . . . . . . . . . . . . . . 45
6.12. RESTORATION OF RIGHTS AND REMEDIES. . . . . . . . . . . . . . . . . . 45
ARTICLE VII.
THE TRUSTEE . . . . . . . . . . . . . . . 46
7.01. DUTIES OF THE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . 46
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7.02. RIGHTS OF THE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . 47
7.03. INDIVIDUAL RIGHTS OF THE TRUSTEE, THE COLLATERAL AGENT AND AGENTS . . 48
7.04. DISCLAIMER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
7.05. NOTICE OF DEFAULTS. . . . . . . . . . . . . . . . . . . . . . . . . . 48
7.06. REPORTS BY THE TRUSTEE TO HOLDERS OF THE NOTES. . . . . . . . . . . . 49
7.07. COMPENSATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
7.08. REPLACEMENT OF THE TRUSTEE. . . . . . . . . . . . . . . . . . . . . . 50
7.09. SUCCESSOR TRUSTEE BY MERGER, ETC. . . . . . . . . . . . . . . . . . . 51
7.10. ELIGIBILITY; DISQUALIFICATION . . . . . . . . . . . . . . . . . . . . 51
7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE ISSUER. . . . . . . . . 51
ARTICLE VIII.
DEFEASANCE. . . . . . . . . . . . . . . . 51
8.01. OPTION TO EFFECT DEFEASANCE . . . . . . . . . . . . . . . . . . . . . 51
8.02. DEFEASANCE AND DISCHARGE. . . . . . . . . . . . . . . . . . . . . . . 51
8.03. CONDITIONS TO DEFEASANCE. . . . . . . . . . . . . . . . . . . . . . . 52
8.04. DEPOSITED MONEY AND GOVERNMENTAL SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . . 53
8.05. REPAYMENT TO THE ISSUER . . . . . . . . . . . . . . . . . . . . . . . 53
8.06. REINSTATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE IX.
AMENDMENT, SUPPLEMENT AND WAIVER . . . . . . . . . . 54
9.01. WITHOUT CONSENT OF HOLDERS. . . . . . . . . . . . . . . . . . . . . . 54
9.02. WITH CONSENT OF HOLDERS . . . . . . . . . . . . . . . . . . . . . . . 55
9.03. COMPLIANCE WITH TRUST INDENTURE ACT . . . . . . . . . . . . . . . . . 56
9.04. REVOCATION AND EFFECT OF CONSENTS . . . . . . . . . . . . . . . . . . 56
9.05. NOTATION ON OR EXCHANGE OF NOTES. . . . . . . . . . . . . . . . . . . 57
9.06. THE TRUSTEE TO SIGN AMENDMENTS, ETC . . . . . . . . . . . . . . . . . 57
ARTICLE X.
COLLATERAL AND SECURITY . . . . . . . . . . . . 57
10.01. COLLATERAL DOCUMENTS. . . . . . . . . . . . . . . . . . . . . . . . . 57
10.02. RECORDING AND OPINIONS. . . . . . . . . . . . . . . . . . . . . . . . 58
10.03. RELEASE OF COLLATERAL . . . . . . . . . . . . . . . . . . . . . . . . 58
10.04. CERTIFICATES OF THE ISSUER. . . . . . . . . . . . . . . . . . . . . . 58
10.05. AUTHORIZATION OF ACTIONS TO BE TAKEN BY THE COLLATERAL AGENT UNDER THE
COLLATERAL DOCUMENTS. . . . . . . . . . . . . . . . . . . . . . . . . 59
10.06. AUTHORIZATION OF RECEIPT OF FUNDS BY THE TRUSTEE UNDER THE COLLATERAL
DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
10.07. TERMINATION OF SECURITY INTEREST. . . . . . . . . . . . . . . . . . . 59
10.08. COLLATERAL AGENT'S DUTIES . . . . . . . . . . . . . . . . . . . . . . 59
10.09. HAZARDOUS MATERIALS . . . . . . . . . . . . . . . . . . . . . . . . . 60
10.10. INSPECTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
10.11. TITLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
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ARTICLE XI.
MISCELLANEOUS. . . . . . . . . . . . . . . 61
11.01. TRUST INDENTURE ACT CONTROLS. . . . . . . . . . . . . . . . . . . . . 61
11.02. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
11.03. COMMUNICATION BY THE HOLDERS WITH OTHER HOLDERS . . . . . . . . . . . 63
11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. . . . . . . . . . 63
11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION . . . . . . . . . . . . 64
11.06. RULES BY THE TRUSTEE AND AGENTS . . . . . . . . . . . . . . . . . . . 64
11.07. NO PERSONAL LIABILITY OF THE MEMBERS, OFFICERS,
EMPLOYEES AND EQUITYHOLDERS. . . . . . . . . . . . . . . . . . . . 64
11.08. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
11.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS . . . . . . . . . . . . 65
11.10. SUCCESSORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
11.11. SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
11.12. COUNTERPART ORIGINALS . . . . . . . . . . . . . . . . . . . . . . . . 65
11.13. TABLE OF CONTENTS, HEADINGS, ETC. . . . . . . . . . . . . . . . . . . 65
11.14. QUALIFICATION OF INDENTURE. . . . . . . . . . . . . . . . . . . . . . 65
11.15. SATISFACTION AND DISCHARGE. . . . . . . . . . . . . . . . . . . . . . 66
11.16. THIRD PARTY BENEFICIARY . . . . . . . . . . . . . . . . . . . . . . . 66
EXHIBITS
Exhibit A Form of Note
Exhibit B Form of Deed of Trust
Exhibit C Form of Assignment of Rents and Leases
Exhibit D Form of Assignment of Contracts
Exhibit E Form of Pledge Agreement
Exhibit F Form of Reserve Account Agreement
Exhibit G Security Agreement
Exhibit H Form of Management and Leasing Agreement
Exhibit I Form of Collateral Agency Agreement
Exhibit J Form of Registration Rights Agreement
Exhibit K Form of Assignment of Deed of Trust
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This INDENTURE is dated as of ___________________, 1997, between
Jamboree LLC, a Delaware limited liability company (the "ISSUER"), and IBJ
Schroder Bank & Trust Company, a New York banking corporation, as trustee (the
"TRUSTEE").
The Issuer and the Trustee agree as follows for the benefit of each
other and for the equal and ratable benefit of the Holders of the Issuer's
[______%] Class A Senior Secured Notes due 2002 (the "Notes"):
ARTICLE I.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
when used with respect to any specified Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"AGENT" means any Registrar, Paying Agent or co-registrar.
"APPROVED BUDGETS" shall have the meaning ascribed to that term in the
Management and Leasing Agreement.
"APPROVED RESERVES" means, collectively, the REIT Required Dividends
Reserve, the Debt Service Reserve, the Tenant Improvement Reserve and the
Incentive Management Fee Reserve.
"ASSIGNMENT OF CONTRACTS" means, at any time, the Assignment of
Contracts, in the form attached hereto as EXHIBIT D made by the Issuer in favor
of the Collateral Agent, as the same may be amended, modified, supplemented,
extended, renewed, restated or replaced from time to time in accordance with the
terms of such agreement at such time.
"ASSIGNMENT OF DEED OF TRUST" means, at any time, the Assignment of
Deed of Trust, Financing Statement and Security Agreement, in the form attached
hereto as EXHIBIT K made by Pacific Mutual Realty Finance, Inc. in favor of the
Collateral Agent, as the same may be amended, modified, supplemented, extended,
renewed, restated or replaced from time to time in accordance with the terms of
such agreement at such time.
"ASSIGNMENTS OF RENTS AND LEASES" means, at any time, the Amended and
Restated Assignment of Rents and Leases, in the form attached hereto as
EXHIBIT C made by the Issuer in favor of the Collateral Agent, as the same may
be amended, modified, supplemented, extended, renewed, restated or replaced in
accordance with the terms of such agreement at such time.
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"AUTHORIZED MEMBER" means any Member that is authorized in accordance
with the terms of the governing documents of the limited liability company of
which it is a part to act on behalf of and make binding legal commitments for
such limited liability company.
"AVAILABLE CASH" means, as at any date of determination, all Cash and
Permitted Investments held by the Issuer or the Trustee.
"BANKRUPTCY CODE" means the Bankruptcy Reform Act of 1978, as amended,
and as codified in title II of the United States Code.
"BANKRUPTCY LAW" means the Bankruptcy Code or any similar federal or
state law for the relief of debtors.
"BOARD OF MEMBERS" means the Board of Members of the Issuer as set
forth in the Issuer's charter documents.
"BUSINESS DAY" means any day other than a Legal Holiday.
"CAPITAL EXPENDITURES" means, for any Person for any period, the
aggregate of all expenditures by such Person, except interest capitalized during
construction, during such period for property, plant or equipment, including,
without limitation, renewals, improvements, replacements and capitalized repairs
(but excluding repairs in the ordinary course), that would be reflected as
additions to property, plant or equipment on a balance sheet of such Person
prepared in accordance with GAAP and includes without limitation payments, other
than those attributable to interest, on capitalized leases and other
Indebtedness incurred to finance such property, plant and equipment. For the
purpose of this definition, the purchase price of equipment which is acquired
simultaneously with the trade-in of existing equipment owned by such Person or
with insurance proceeds shall be included in Capital Expenditures only to the
extent of the gross amount of such purchase price less the credit granted by the
seller of such equipment being traded in at such time or the amount of such
proceeds, as the case may be.
"CAPITALIZED LEASE OBLIGATIONS" of a Person means any obligation that
is required to be classified and accounted for as a capital lease on the face of
a balance sheet of such Person prepared in accordance with GAAP; the amount of
such obligation shall be the capitalized amount thereof, determined in
accordance with GAAP; the stated maturity thereof shall be the date of the last
payment of rent or any other amount due under such lease prior to the first date
upon which such lease may be terminated by the lessee without payment of a
penalty; and such obligation shall be deemed secured by a Lien on any property
or assets to which such lease relates.
"CASH" means legal tender accepted in the United States of America for
the payment of public and private debts currently United States Dollars.
"CLASS B NOTES" means the ____% Senior Subordinated Secured Notes due
2002 of the Issuer.
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"COLLATERAL" means all the assets of the Issuer including, but not
limited to, assets defined as "Collateral" or, in the case of the Deed of Trust,
the "Trust Estate" in the Collateral Documents.
"COLLATERAL AGENCY AGREEMENT" means, at any time, the Collateral
Agency Agreement between the Trustee and the Collateral Agent in the form
attached hereto as EXHIBIT I, as the same may be amended, supplemented,
extended, renewed, restated or replaced in accordance with the terms of such
agreement at such time.
"COLLATERAL AGENT" means the collective reference to IBJ Schroder Bank
& Trust Company, as collateral agent or such other collateral agent as may be
appointed from time to time pursuant to the Collateral Agency Agreement.
"COLLATERAL DOCUMENTS" means the Deed of Trust, the Assignment of
Rents and Leases, the Assignment of Contracts, the Assignment of Deed of Trust,
the Pledge Agreement, the Reserve Account Agreement, the Security Agreement and
the Collateral Agency Agreement together with all related filings, assignments,
instruments and deeds of trust, as such agreements, filings, assignments,
instruments and deeds of trust may from time to time be amended, supplemented or
otherwise modified in accordance with the terms of this Indenture and such
agreements.
"CONSOLIDATED NET WORTH" means, with respect to any Person, the
consolidated equity of the common equityholders of such Person and its
consolidated Subsidiaries determined on a consolidated basis in accordance with
GAAP.
"CONTINGENT OBLIGATION" means with reference to any Person, any direct
or indirect liability, contingent or otherwise, of such Person with respect to
any Indebtedness or contractual obligation (including dividend payment
obligations) of another Person, if the purpose or intent of such Person in
incurring the Contingent Obligation is to provide assurance to the obligee of
such Indebtedness or contractual obligation that such Indebtedness or
contractual obligation will be paid or discharged, or that any agreement
relating thereto will be complied with, or that any holder of such Indebtedness
or contractual obligation will be protected (in whole or in part) against loss
in respect thereof.
"CORPORATE TRUST OFFICE OF THE TRUSTEE" shall be at the address of the
Trustee specified in SECTION 11.02 or such other address as to which the Trustee
may give notice to the Issuer.
"CWOP" means Crow Winthrop Operating Partnership, a Maryland general
partnership.
"CUSTODIAN" means any receiver, trustee or similar official under any
Bankruptcy Law.
"DEBT SERVICE" means, during any period of computation, the amount
obtained for such period by totalling the following amounts: (i) the principal
amount of all outstanding Notes and Class B Notes scheduled to become due and
payable by their terms in such period; and
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(ii) the amount of interest that would be due and payable during such period on
the aggregate principal amount of Notes and Class B Notes outstanding in such
period.
"DEBT SERVICE RESERVE" means a reserve created by the Issuer for the
retention of amounts reasonably determined by the Issuer's Board of Members to
be necessary for the payment of any Projected Debt Service Shortfall in any
future period.
"DEED OF TRUST" means, at any time, the Amended and Restated Deed of
Trust, Assignment of Rents, Security Agreement and Fixture Filing in the form
attached hereto as EXHIBIT B, made by the Issuer in favor of the Collateral
Agent, encumbering the Property, and any substitute, successor or additional
deed of trust securing the Obligations or any portion of such Obligations, at
such time.
"DEFAULT" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"DEFAULT RATE" means the rate provided in the Notes for payment of
interest on overdue principal of and interest on the Notes.
"DEFAULTED INTEREST" means, at any time, the amount of overdue
interest on the Notes at such time.
"DISCLOSURE STATEMENT" means the Disclosure Statement in Support of
Debtor's Plan of Reorganization dated April [____], 1997.
"EFFECTIVE DATE" means the "Effective Date" as defined in the Plan.
"ENVIRONMENTAL LAWS" means all applicable federal, state and local
laws, statutes, rules, ordinances, judicial decisions, permits, licenses,
regulations and other governmental restrictions relating to pollution or the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata), including, without limitation, laws,
statutes, rules, ordinances, judicial decisions, permits, licenses, regulations
and other governmental restrictions relating to emissions, discharges, releases
or threatened releases of Hazardous Substances, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances or the cleanup or other
remediation thereof.
"ENVIRONMENTAL LIABILITIES AND COSTS" means with reference to any
Person, all liabilities, obligations, responsibilities, liabilities resulting
from Remedial Actions, losses, damages, punitive damages, treble damages, costs
and expenses (including, without limitation, all reasonable fees, disbursements
and expenses of counsel, expert and consulting fees, and costs of investigation
and feasibility studies), fines, penalties and sanctions incurred as a result of
any claim or demand by any other Person, whether based in contract, tort,
implied or express warranty, strict liability, criminal or civil statute,
including, without limitation, any claim or demand arising under any
Environmental Law, or any order or agreement with any Governmental Authority or
other Person, and which relate to any environmental, health or safety condition,
or
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a Release or threatened Release, and result from the past, present or future
operations of such Person.
"ENVIRONMENTAL LIEN" means any Lien in favor of any Governmental
Authority for Environmental Liabilities and Costs.
"EVENT OF LOSS" means, with respect to any property or asset (tangible
or intangible, real or personal), any of the following: (A) any loss,
destruction or damage of such property or asset; (B) any actual condemnation,
seizure or taking by exercise of the power of eminent domain or otherwise of
such property or asset, or confiscation of such property or asset or the
requisition of the use of such property or asset; or (C) any settlement in lieu
of clause (B) above.
"EXCESS CASH FLOW AMOUNT" means for any period, an amount, determined
by the Board of Members, equal to all revenues and receipts in the form of Cash
or cash equivalents received by or on behalf of the Issuer generated by the
Property or from any source (other than interest paid on amounts on deposit in
any Approved Reserve, which interest shall be retained in such Approved
Reserve), during such period, minus the sum, without duplication, of (1) amounts
actually paid or retained in the REIT Required Dividends Reserve, up to the
aggregate amount of the REIT Required Dividends during such period, (2) interest
and regularly scheduled installments of principal actually paid during such
period under the terms of the Notes, (3) interest and regularly scheduled
installments of principal actually paid during such period under the terms of
the Class B Notes, (4) operating expenses of the Issuer with respect to the
Property actually paid in cash during such period in accordance with the
Approved Budgets, including, without limitation, amounts paid in cash by the
Issuer pursuant to the REA and/or Settlement Agreement, (5) Capital Expenditures
actually made in cash (net of any proceeds of any related financing with respect
to such Capital Expenditures) in accordance with the Approved Budgets during
such period, (6) amounts deposited during such period in the Operating
Disbursement Account to bring the aggregate amount held in that account up to an
amount deemed sufficient by the manager under the Management and Leasing
Agreement but not in excess of $500,000 plus expenses approved for the month
upcoming immediately after the end of such period plus other payments acquired
or approved in each case under and in accordance with the Management Agreement,
provided that the Issuer has granted a security interest in such account in
favor of the Collateral Agent in accordance with the Reserve Account Agreement,
(7) amounts actually paid or retained in the Tenant Improvement Reserve, up to
the aggregate amount of the cost of tenant improvements made or to be made
during such period and the immediately succeeding period to the extent
determined necessary by the Board of Members to make such tenant improvements
taking into account projected cash flows from and expenses of operations to the
extent the Issuer has granted a security interest in such reserve in favor of
the Trustee under the Reserve Account Agreement, (8) amounts actually paid or
retained in the Incentive Management Fee Reserve, up to the aggregate amount of
the Incentive Management Fees accruing during such period, to the extent the
Issuer has granted a security interest in such reserve in favor of the Trustee
under the Reserve Account Agreement, (9) amounts determined by the Board of
Members in its reasonable discretion to be necessary to fund any Projected Debt
Service Shortfall and retained in the Debt Service Reserve, up to the aggregate
amount of the Projected Debt Service Shortfall, to the extent the Issuer has
granted a security interest in such reserve in favor of the Trustee under the
Reserve Account Agreement and (10) reasonable
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amounts actually paid in cash during such period in connection with litigation
to which the Issuer is a party (including, without limitation, reasonable
amounts paid out under any indemnity provided by the Issuer in connection
therewith).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"EXISTING RESERVE ACCOUNT" means an account established on or prior to
the date of this Agreement from which the Issuer is permitted to pay REIT
Required Dividends, tenant improvements, Debt Service, Capital Expenditures
required to comply with law and Capital Expenditures necessary (as reasonably
determined by the Issuer) to maintain the Improvements in a condition adequate
to attract desirable tenants (as reasonably determined by the Issuer) and in
which the Issuer shall have granted a security interest in favor of the
Collateral Agent in accordance with the Reserve Account Agreement.
"FISCAL QUARTER" means each of the four consecutive three-month
periods during any Fiscal Year, which begin January 1, April 1, July 1 and
October 1, respectively.
"FISCAL YEAR" means the Issuer's fiscal year ending December 31.
"GAAP" means generally accepted accounting principles in the United
States of America, as in effect from time to time, set forth in the opinions and
pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and the statements and pronouncements of the
Financial Accounting Standards Board, or in such other statements by such other
Person as may be in general use by significant segments of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"GOVERNMENTAL SECURITIES" means direct obligations of, or obligations
guaranteed by, the United States of America, to the payment of which the full
faith and credit of the United States is pledged.
"HAZARDOUS SUBSTANCE" means any toxic or hazardous waste, pollutant,
or substance, including, without limitation, friable asbestos, PCBs, petroleum
products and* byproducts, substances defined or listed as: "hazardous
substances" in the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980 ("CERCLA") as amended, 42 U.S.C. Section 9601, ET SEQ.,
"hazardous materials" in the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1802, ET SEQ., "hazardous waste" in the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901, ET SEQ., any chemical substance or mixture
regulated under the Toxic Substances Control Act, as amended, 15 U.S.C. Section
2601, ET SEQ., and any hazardous or toxic substance or pollutant regulated under
any other applicable federal, state or local Environmental Laws.
"HOLDER" means a Person in whose name a Note is registered.
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"IMPOSITIONS" means, collectively, all real property taxes and
assessments, general and special, and all other taxes and assessments of any
kind or nature whatsoever, including, without limitation, nongovernmental levies
or assessments such as maintenance charges, levies or assessments or appurtenant
whole stock estate, which are assessed or imposed upon the Trust Estate, or
become due and payable, and which create, may create or appear to create a Lien
upon the Trust Estate, or any part thereof, or upon any person, property,
equipment or other facility used in the operation or maintenance of the Trust
Estate.
"IMPROVEMENTS" has the meaning assigned to such term in the Deed of
Trust.
"INCENTIVE MANAGEMENT FEE" shall have the meaning assigned to that
term in the Management and Leasing Agreement.
"INCENTIVE MANAGEMENT FEE RESERVE" means a reserve created by the
Issuer for retention of amounts needed to pay the Incentive Management Fees.
"INDEBTEDNESS" means with reference to any Person, without duplication
(a) all indebtedness of such Person for borrowed money (including, without
limitation, reimbursement and all other obligations with respect to surety
bonds, letters of credit, bankers' acceptances, whether or not matured) or for
the deferred purchase price of property, assets or services (other than normal
trade accounts payable incurred in the ordinary course of business), (b) all
obligations of such Person evidenced by notes, bonds, debentures or similar
instruments, (c) all indebtedness of such Person created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (d) all Capitalized Lease Obligations of such Person,
(e) all Contingent Obligations of such Person, (f) all obligations of such
Person under interest rate contracts, (g) all indebtedness of the type referred
to in clause (a), (b), (c), (d), (e) or (f) above secured by (or for which the
holder of such indebtedness has an existing right, contingent or otherwise, to
be secured by) any Lien against property or an interest in property owned by
such Person, even though such Person has not assumed or become liable for the
payment of such indebtedness, the amount of such obligation being deemed to be
the lesser of the value of such property or asset or the amount of the
obligation so secured and (h) in the case of the Issuer, the Notes.
"INDENTURE" means this Indenture, as amended or supplemented from time
to time.
"INDEPENDENT FINANCIAL ADVISOR" means an accounting, appraisal or
investment banking firm of nationally recognized standing that is, in the
judgment of the Issuer's Board of Members, (i) qualified to perform the task for
which it has been engaged and (ii) disinterested and independent with respect to
the Issuer and all of its Affiliates.
"INSURANCE SCHEDULE" has the meaning set forth in SECTION 4.16.
"INTERESTS" means shares of capital stock, beneficial, limited
liability company or partnership interests, participations or other equivalents
(regardless of how designated) of or in any Person, whether voting or non-
voting.
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"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor statute.
"INVESTMENT" means any advance, loan, extension of credit or capital
contribution to, or purchase of any stocks, bonds, notes, debentures or other
securities of, or interest in, any Person, any purchase of any interest in Real
Estate, any commitment or other obligation, whether contingent or absolute, to
do any of the foregoing, which commitment or other obligation does not
constitute a Contingent Obligation. Capital Expenditures shall not constitute
Investments.
"ISSUE DATE" means the date of first issuance of the Notes under this
Indenture.
"LEASE" means each underlying lease of Real Estate.
"LEGAL HOLIDAY" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York, New York, or at a place of payment are
authorized by law, regulation or executive order to remain closed. If a payment
date is a Legal Holiday at a place of payment, payment may be made at that place
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period.
"LIENS" means any mortgage, deed of trust, pledge, hypothecation,
assignment, deposit arrangement, encumbrances, lien (statutory or other),
security interest or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever, including, without
limitation, any conditional sale or other title retention agreement, the
interest of a lessor under a capitalized lease obligation, any financing lease
having substantially the same economic effect as any of the foregoing, the
filing, under the Uniform Commercial Code or comparable law of any jurisdiction,
of any financing statement naming the owner of the assets to which such Lien
relates as debtor, and any agreement to grant a Lien.
"MANAGEMENT AND LEASING AGREEMENT" means, at any time, the Management
and Leasing Agreement in the form attached hereto as EXHIBIT H, as the same may
be amended, supplemented, extended, renewed or replaced in accordance with the
terms of such agreement at such time.
"MATERIAL ADVERSE CHANGE" means a material adverse change in any of
(a) the financial condition, business, operations, results of operations or the
aggregate fair market value of the properties of the Issuer, (b) the legality,
validity or enforceability of this Indenture or the Collateral Documents,
(c) the perfection or priority of the Liens granted pursuant to this Indenture
or the Collateral Documents caused by the action or lack of action of the
Issuer, (d) the ability of the Issuer to pay any installment due under the Notes
or to perform its obligations under this Indenture or the Plan or the ability of
the Issuer to perform its obligations under the Collateral Documents, or (e) the
rights and remedies of the Holders, the Trustee or the Collateral Agent under
this Indenture or the Collateral Documents.
"MATERIAL ADVERSE EFFECT" means an effect that would result in a
Material Adverse Change.
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"MEMBER" generally means a member of a limited liability company, and,
unless the context otherwise requires, a member of the Issuer.
"NET LOSS PROCEEDS" means the aggregate cash proceeds received by the
Issuer in respect of any Event of Loss, including, without limitation, insurance
proceeds and proceeds from condemnation awards or damages awarded by any
judgment, net of the direct costs in recovery of such Net Loss Proceeds
(including, without limitation, legal, accounting, appraisal and insurance
adjuster fees) and any taxes paid or payable as a result thereof.
"NOTES" means the notes described above issued under this Indenture.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation (including security documents) governing any Indebtedness.
"OFFICER" means, with respect to any Person, any Authorized Member,
the Chairman of the Board, the Chief Executive Officer, the President, the Chief
Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant
Treasurer, Secretary or any Vice-President of such Person.
"OFFICERS' CERTIFICATE" means a certificate signed on behalf of the
Issuer by two Officers of the Issuer, each of whom must be Authorized Members or
one of whom must be the President or an Executive Vice President, and the other
must be the Treasurer, an Assistant Treasurer, the Controller, the Secretary, an
Assistant Secretary or a Vice President of the Issuer.
"OPERATING DISBURSEMENT ACCOUNT" shall have the meaning ascribed to
that term in the Management and Leasing Agreement.
"OPERATIVE DOCUMENTS" means this Indenture, the Notes, the Collateral
Documents and the Registration Rights Agreement.
"OPINION OF COUNSEL" means an opinion from legal counsel (including at
the option of the Trustee and/or the Collateral Agent, local legal counsel in
each state where the relevant Collateral is located) who is reasonably
acceptable to the Trustee and/or the Collateral Agent, as applicable.
"PAYING AGENT" shall mean a Person to whom the Notes may be presented
for payment of principal, premium, if any, and interest.
"PERMITTED INVESTMENTS" means, collectively, (a) any United States
Government or United States agency obligations, if such obligations are backed
by the full faith and credit of the United States Government or shares of a
money market mutual fund registered under the Investment Company Act of 1940, as
amended, the principal of which is invested solely in such United States
Government or agency obligations, (b) commercial paper having a rating of A1/P1
or better, and (c) certificates of deposit, overnight bank deposits and banker
acceptances of any commercial bank having combined capital and surplus of at
least $200,000,000; PROVIDED that the term or maturity for such Permitted
Investments shall not exceed ninety (90) days with respect
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to the REIT Required Dividends Reserve, one year with respect to the Incentive
Management Fee Reserve and one hundred eighty (180) days with respect to all
other reserves, in each case from the date of purchase, deposit or acquisition.
"PERSON" means any individual, corporation, partnership, limited
liability company, joint venture, entity, association, joint-stock company,
trust or unincorporated organization (including any subdivision or ongoing
business of any such entity or substantially all of the assets of any such
entity, subdivision or business).
"PLAN" means the Plan of Reorganization in the Chapter 11 case of CWOP
confirmed by the Honorable John E. Ryan, United States Bankruptcy Judge, in Case
No. SA-97-14512 JR, by order entered [__________ ____], 1997, as such plan is
amended prior to the Effective Date.
"PLEDGE AGREEMENT" means, at any time, the Pledge and Security
Agreement between CWOP and the Collateral Agent in the form attached hereto as
EXHIBIT E, with respect to the pledge of the membership interests of the Issuer
held by CWOP, as the same may be amended, supplemented, extended, renewed,
restated or replaced in accordance with the terms of such agreement at such
time.
"PREFERRED INTERESTS", as applied to the Interests of any Person,
means Interests of any class or classes (however designated) that are preferred
as to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over
Interests of any other class of such Person.
"PROJECTED DEBT SERVICE SHORTFALL" means, with respect to any period,
the amount (if any) by which the cash flows of the Issuer projected to be
available for the payment of Debt Service in such period are less than the
amount of Debt Service projected for such period. The Projected Debt Service
Shortfall for any period shall be reasonably determined by the Issuer's Board of
Members on the basis of and consistent with the Approved Budgets of the Issuer,
the definition of "Excess Cash Flow Amount" contained herein, and the income,
expense, cash flow and other financial projections for the Issuer contained in
the Plan.
"PROPERTY" means the Real Estate described on SCHEDULE 1 hereto.
"PURCHASE EVENT" means the occurrence of a Triggering Event or the
existence, at the end of a Fiscal Year, of an Excess Cash Flow Amount.
"PURCHASE EVENT NOTICE" means a notice given to a Holder in accordance
with SECTION 3.03 with respect to a Purchase Event.
"REA" means that certain Construction, Operation and Reciprocal
Easement Agreement, dated as of July 26, 1985, by and between CWOP and Crow
Winthrop Development Limited Partnership as duly recorded in the official
records of Orange County, California on July 30, 1985, as Instrument No. 85-
279768.
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"REAL ESTATE" means any interest in all plots, pieces or parcels of
land owned in any capacity, whether as a joint venturer, participant, partner or
otherwise, or in which the Issuer may have a security interest, or leased as at
the date hereof or acquired or leased after the Effective Date by the Issuer
together with all of the buildings and other improvements now or hereafter
erected on the Real Estate, and any fixtures appurtenant thereto.
"REDEMPTION NOTICE" means a notice given to a Holder in accordance
with SECTION 3.03 with respect to a redemption of Notes pursuant to
SECTION 3.07.
"REGISTRAR" shall mean a Person to whom the Notes may be presented for
registration of transfer or for exchange.
"REGISTRATION RIGHTS AGREEMENT" means, at any time, the Registration
Rights Agreement between the Issuer and certain Holders in the form of EXHIBIT
J, as the same may be amended, supplemented, extended, renewed, restated or
replaced in accordance with the terms of such agreement at such time.
"REGULATIONS" means the regulations promulgated by the SEC under the
Securities Exchange Act of 1934, as amended.
"REIT" means Jamboree Offices REIT, Inc., a Maryland corporation.
"REIT REQUIRED DIVIDENDS" means all amounts that the REIT is required
to distribute to its shareholders in order to retain its status as a real estate
investment trust under the Internal Revenue Code as determined by the REIT's
independent certified public accountants.
"REIT REQUIRED DIVIDENDS RESERVE" means a reserve created by the
Issuer for the retention of amounts needed to pay REIT Required Dividends.
"RELEASE" means with reference to any Person, any release, spill,
emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration into the indoor or outdoor environment or into or out of
any property owned by such Person, including, without limitation, the movement
of Hazardous Substances through or in the air, soil, surface water, ground water
or other property.
"REMEDIAL ACTION" means all actions required to (a) clean up, remove,
treat or in any other way address Hazardous Substances in the indoor or outdoor
environment, (b) prevent the Release or threat of Release or minimize the
further Release of Hazardous Substances so they do not migrate or endanger or
threaten to endanger public health or welfare or the indoor or outdoor
environment, or (c) perform pre-remedial studies and investigations and post-
remedial monitoring and care.
"REPRESENTATIVE" means the indenture trustee or other trustee, agent
or representative, if any, for an issue of Senior Indebtedness.
"REQUIRED HOLDERS" means the Holders of 51% in principal amount of the
Notes outstanding on the date of determination.
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"RESERVE ACCOUNT AGREEMENT" means, at any time, the Reserve Account
Agreement among the Issuer, the Collateral Agent and the depositary, in the form
attached hereto as EXHIBIT F, as the same may be amended, supplemented,
extended, renewed, restated or replaced in accordance with the terms of such
agreement at such time.
"RESPONSIBLE OFFICER" when used with respect to the Trustee or the
Collateral Agent, means any trust officer, financial services officer or vice
president within the Corporate Trust Office of the Trustee or of the Collateral
Agent (or any successor group of the Trustee or the Collateral Agent) or any
other officer of the Trustee or the Collateral Agent customarily performing
functions similar to those performed by any of the above designated officers and
also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of his or her knowledge of and
familiarity with the particular subject.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SECURITY AGREEMENT" means, at any time, the Security Agreement in the
form attached hereto as EXHIBIT G, made by the Issuer in favor of the Collateral
Agent, as the same may be amended, supplemented, extended, renewed or replaced
in accordance with the terms of such agreement at such time.
"SETTLEMENT AGREEMENT" means that certain Settlement Agreement, dated
as of April 1, 1995, by and among CWOP, Winthrop California Investors Limited
Partnership, Winthrop California Management Limited Partnership, Crow Irvine #1,
Crow Irvine #2, Crow Winthrop Development Limited Partnership and Crow Orange
County Management Company, Inc.
"SUBSIDIARY" means with respect to any Person, any corporation,
partnership or other business entity of which an aggregate of 50% or more of the
outstanding Interests having ordinary voting power to elect a majority of the
board of directors, managers, trustees or other controlling Persons is, at the
time, directly or indirectly, owned by such Person and/or one or more
Subsidiaries of such Person (irrespective of whether, at the time, Interests of
any other class or classes of such entity shall have or might have voting power
by reason of the happening of any contingency).
"TENANT IMPROVEMENT RESERVE" means a reserve for tenant improvements
and leasing commissions, that are anticipated to be paid during any particular
calendar year, in each case, as set forth in the Approved Budgets (as defined in
the Management and Leasing Agreement) and in which the Issuer shall have granted
a security interest in favor of the Collateral Agent in accordance with the
Reserve Account Agreement.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-
77bbbb), as amended, as in effect on the date on which this Indenture is
qualified under the TIA.
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"TRIGGERING EVENT" means and shall be deemed to have occurred upon
(i) the sale, transfer, conveyance or hypothecation of the Property or
Improvements, or any material portion of the Property or Improvements or
interest therein, whether voluntary, involuntary, by operation of law or
otherwise, the execution of any installment land sale contract or similar
instrument affecting all or a material portion of the Property or Improvements
or, except in the ordinary course of business, the lease of all or substantially
all of the Property or Improvements, in one or in a series of transactions, to
any "person" or "group" (as such terms are used in or defined in
Section 13(d)(3) of the Exchange Act), (ii) an event or series of events
(whether a stock purchase, merger, consolidation or other business combination
or otherwise) as a result of which (a) the REIT owns less than 51% of the
combined voting power of the then outstanding securities of the Issuer
ordinarily (and apart from rights accruing after the happening of a contingency)
having the right to vote in the election of Members or to control the Issuer's
actions with respect to the Trust Estate or (b) the Issuer's existence ceases or
(iii) the aggregation of Excess Loss Proceeds in excess of $8,000,000.
"TRUST ESTATE" has the meaning assigned to that term in the Deed of
Trust.
"TRUSTEE" means the party named as such in the introductory paragraph
of this Indenture until a successor replaces it in accordance with the
applicable provisions of this Indenture and thereafter means the successor
serving hereunder.
SECTION 1.02. OTHER DEFINITIONS.
Defined in
Term Section
---- ----------
"Acceptance" . . . . . . . . . . . . . . . . . . . . 3.04
"Class B Liens" . . . . . . . . . . . . . . . . . . . 4.09(v)
"Defeasance . . . . . . . . . . . . . . . . . . . . . 8.02
"Hazardous Materials Claims". . . . . . . . . . . . . 10.09(d)
"Impound" . . . . . . . . . . . . . . . . . . . . . . 4.05(g)
"Indemnified Parties" . . . . . . . . . . . . . . . . 4.19
"Event of Default" . . . . . . . . . . . . . . . . . 6.01
"Excess Amount Notes" . . . . . . . . . . . . . . . . 3.04
"Excess Notes Notice" . . . . . . . . . . . . . . . . 3.04
"Foreclosure Action" . . . . . . . . . . . . . . . . 7.02
"Original Purchase Notice" . . . . . . . . . . . . . 3.08(d)
"Rejection Notice" . . . . . . . . . . . . . . . . . 3.03(j)
"Registrar" . . . . . . . . . . . . . . . . . . . . . 2.05
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SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"INDENTURE SECURITIES" means the Notes;
"INDENTURE SECURITY HOLDER" means a Holder of a Note;
"INDENTURE TO BE QUALIFIED" means this Indenture;
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee; and
"OBLIGOR" on the Notes means the Issuer and any permitted successor
obligor upon the Notes.
All other terms used in this Indenture that are defined by the TIA,
deemed by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and in the plural
include the singular;
(e) provisions apply to successive events and transactions; and
(f) references to articles, sections (or subdivisions of
sections), exhibits, annexes or schedules are to this Indenture unless
explicitly stated otherwise.
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ARTICLE II.
THE NOTES
SECTION 2.01. FORM AND DATING.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of EXHIBIT A hereto, the terms of which are
incorporated in and made a part of this Indenture. The Notes may have
notations, legends or endorsements approved as to form by the Issuer and
required by law, stock exchange rule, agreements to which the Issuer is subject
or usage. Each Note shall be dated the date of its authentication. The Notes
shall be issuable only in denominations of $1,000 and integral multiples
thereof.
The terms and provisions contained in the Notes shall constitute, and
are hereby expressly made, a part of this Indenture, and to the extent
applicable, the Issuer and the Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions and to be bound by them.
SECTION 2.02. MATURITY.
The Issuer promises to pay on or before March 27, 2002, the unpaid
principal amount of the Notes together with interest on the terms and conditions
set forth in this Indenture and the Notes.
SECTION 2.03. AMORTIZATION.
The principal of the Notes shall be payable on the dates and in the
amounts set forth in the Notes.
SECTION 2.04. EXECUTION AND AUTHENTICATION.
An Officer of the Issuer shall sign the Notes for the Issuer by manual
or facsimile signature. The Issuer's seal shall be reproduced on the Notes and
may be in facsimile form.
If an Officer whose signature is on a Note no longer holds that office
at the time the Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature
of an authorized signatory of the Trustee. The signature of an authorized
signatory of the Trustee shall be conclusive evidence that the Note has been
authenticated under this Indenture.
The Trustee shall, upon a written order of the Issuer set forth in an
Officers' Certificate, authenticate Notes for original issue of up to the
aggregate principal amount stated in paragraph 4 of the Notes. The aggregate
principal amount of Notes outstanding at any time shall not exceed the amount
set forth herein.
The Trustee may appoint an authenticating agent acceptable to the
Issuer to authenticate Notes. Unless limited by the terms of such appointment,
an authenticating agent may
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authenticate Notes whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes authentication by such
agent. An authenticating agent shall have the same rights as an Agent has
pursuant to this Indenture to deal, and the same protections on its dealings,
with the Issuer or an Affiliate of the Issuer.
SECTION 2.05. REGISTRAR AND PAYING AGENT.
The Issuer shall maintain or cause to be maintained (i) an office or
agency where Notes may be presented for registration of transfer or for exchange
(including any co-registrar, the "REGISTRAR") and an office or agency where
Notes may be presented for payment ("PAYING AGENT"). The Registrar shall keep a
register of the Notes and of their transfer and exchange. The Issuer may
appoint one or more co-registrars and one or more additional paying agents. The
term "PAYING AGENT" includes any additional paying agent. The Issuer may change
any Paying Agent, Registrar or co-registrar upon thirty (30) days' prior notice
to the Trustee. The Issuer shall notify the Trustee and the Trustee shall
notify the Holders of the Notes of the name and address of any Agent not a party
to this Indenture. The Issuer may act as Paying Agent, Registrar or
co-registrar. The Issuer shall enter into an appropriate agency agreement with
any Agent not a party to this Indenture, which shall incorporate the provisions
of the TIA. The agreement shall implement the provisions of this Indenture that
relate to such Agent. The Issuer shall notify the Trustee of the name and
address of any such Agent. If the Issuer fails to maintain a Registrar or
Paying Agent, or fails to give the foregoing notice, the Trustee shall act as
such, and shall be entitled to appropriate compensation in accordance with
SECTION 7.07.
The Issuer initially appoints the Trustee as Registrar, Paying Agent
and agent for service of notices and demands in connection with the Notes.
SECTION 2.06. PAYING AGENT TO HOLD MONEY IN TRUST.
The Issuer shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent shall hold in trust for the benefit of
the Holders of the Notes or the Trustee all money held by the Paying Agent for
the payment of principal of and interest on the Notes regardless of its source,
and shall notify the Trustee of any Default by the Issuer (or any other obligor
on the Notes or any other Person) in making any such payment. While any such
Default continues, the Trustee may require a Paying Agent to pay all money held
by it to the Trustee and to account to the Trustee for any funds disbursed. The
Issuer at any time may require a Paying Agent to pay all money held by it to the
Trustee and to account to the Trustee for any funds disbursed. Upon payment
over to the Trustee, the Paying Agent (if other than the Issuer) shall have no
further liability for the funds disbursed to the Trustee. If the Issuer acts as
Paying Agent, it shall segregate and hold in a separate trust fund for the
benefit of the Holders of the Notes all money held by it as Paying Agent and
shall promptly notify the Trustee of any failure to do so.
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SECTION 2.07. LISTS OF HOLDERS OF THE NOTES.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders of the Notes and shall otherwise comply with TIA Section 312(a). If the
Trustee is not the Registrar, the Issuer shall furnish to the Trustee at least
seven Business Days before each interest payment date and at such other times as
the Trustee may request in writing a list in such form and as of such date as
the Trustee may reasonably require of the names and addresses of Holders of the
Notes, including the aggregate principal amount of the Notes held by each of
such Holders, and the Issuer shall otherwise comply with TIA Section 312(a).
SECTION 2.08. TRANSFER AND EXCHANGE.
When Notes are presented to the Registrar with a request to register
the transfer or to exchange them for an equal principal amount of Notes of other
denominations, the Registrar shall register the transfer or make the exchange if
its requirements for such transactions are met; PROVIDED, HOWEVER, that any Note
presented or surrendered for registration of transfer or exchange shall be duly
endorsed or accompanied by a written instruction of transfer in form
satisfactory to the Registrar and the Trustee duty executed by the Holder of
such Note or by his attorney duly authorized in writing. To permit
registrations of transfer and exchanges, the Issuer shall issue and the Trustee
shall authenticate Notes at the Registrar's request, subject to such rules as
the Trustee may reasonably require.
Neither the Issuer nor the Registrar shall be required to (i) issue,
register the transfer of or exchange Notes during a period beginning at the
opening of business on a Business Day 15 days before the day of any selection of
Notes for redemption under SECTION 3.02 and ending at the close of business on
the date of selection or register the transfer of or exchange any Note so
selected for redemption in whole or in part, except the unredeemed portion of
any Note being redeemed in part.
No service charge shall be made to any Holder of a Note for any
registration of transfer or exchange (except as otherwise expressly permitted
herein), but the Issuer may require payment of a sum sufficient to cover any
transfer tax or similar governmental charge payable in connection therewith
(other than such transfer tax or similar governmental charge payable upon
exchanges pursuant to SECTION 2.12, 3.06 OR 9.05, which shall be paid by the
Issuer).
Prior to due presentment to the Registrar for registration of the
transfer of any Note, the Trustee, any Agent and the Issuer may deem and treat
the Person in whose name any Note is registered as the absolute owner of such
Note for the purpose of receiving payment of principal of, premium, if any, and
interest on such Note and for all other purposes whatsoever, whether or not such
Note is overdue, and neither the Trustee, any Agent nor the Issuer shall be
affected by notice to the contrary.
SECTION 2.09. REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee, or the Issuer and
the Trustee receive evidence to their satisfaction of the destruction, loss or
theft of any Note, the Issuer shall
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issue and the Trustee, upon the written order of the Issuer set forth in an
Officers' Certificate, shall authenticate a replacement Note if the Trustee's
requirements for replacements of Notes are met. If required by the Trustee or
the Issuer in connection with any loss, theft or destruction of a Note, an
indemnity bond must be supplied by the Holder that is sufficient in the judgment
of the Trustee and the Issuer to protect the Issuer, the Trustee, any Agent or
any authenticating agent from any loss which any of them may suffer if a Note is
replaced; PROVIDED, HOWEVER, that any institutional Holder may satisfy such
requirement for an indemnity bond by delivering its unsecured indemnity
agreement. Each of the Issuer and the Trustee may charge for its expenses in
replacing a Note.
Every replacement Note is an additional obligation of the Issuer and
shall be entitled to the benefits of this Indenture.
SECTION 2.10. OUTSTANDING NOTES.
Subject to SECTION 8.02, the Notes outstanding at any time are all the
Notes authenticated by the Trustee except for those cancelled by it, those
delivered to it for cancellation and those described in this SECTION 2.10 as not
outstanding.
If a Note is replaced pursuant to SECTION 2.09, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of and interest on any Note is considered paid
under SECTION 4.01, it ceases to be outstanding and interest on it ceases to
accrue.
Subject to SECTION 2.11, a Note does not cease to be outstanding
because the Issuer or an Affiliate of the Issuer holds the Note.
SECTION 2.11. TREASURY NOTES.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Issuer shall be considered as though not outstanding, except that for purposes
of determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes which a Responsible Officer knows to be
so owned shall be so considered. The Issuer shall advise the Trustee in writing
of all Notes held by the Issuer upon the Trustee's written notification that
such advice is necessary for the Trustee to determine the requisite principal
amount of Notes outstanding in connection with any direction, waiver, consent,
amendment or other action under this Indenture. Notwithstanding the foregoing,
Notes that are to be acquired by the Issuer pursuant to an exchange offer,
tender offer or other agreement shall not be deemed to be owned by the Issuer,
until legal title to such Notes passes to the Issuer.
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SECTION 2.12. TEMPORARY NOTES.
Until definitive Notes are ready for delivery, the Issuer may prepare
and the Trustee shall authenticate temporary Notes. Temporary Notes shall be
substantially in the form of definitive Notes but may have variations that the
Issuer and the Trustee consider appropriate for temporary Notes. Without
unreasonable delay, the Issuer shall prepare and the Trustee, upon receipt of
the written order of the Issuer set forth in an Officers' Certificate, shall
authenticate definitive Notes in exchange for temporary Notes. Until such
exchange, temporary Notes shall be entitled to the same rights, benefits and
privileges as definitive Notes.
SECTION 2.13. CANCELLATION.
The Issuer at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment.
The Trustee shall cancel all Notes surrendered for registration of transfer,
exchange, payment, replacement or cancellation and shall destroy cancelled Notes
(subject to the record retention requirement of the Exchange Act), unless the
Issuer directs cancelled Notes to be returned to it. The Issuer may not issue
new Notes to replace Notes that it has redeemed or paid or that have been
delivered to the Trustee for cancellation. All cancelled Notes held by the
Trustee shall be destroyed and certification of their destruction delivered to
the Issuer, unless by a written order, signed by two Officers of the Issuer, the
Issuer shall direct that cancelled Notes be returned to it.
SECTION 2.14. DEFAULTED INTEREST.
If the Issuer defaults in a payment of interest on the Notes, it shall
pay the Defaulted Interest in any lawful manner plus, to the extent lawful,
interest payable on the Defaulted Interest, to the Persons who are Holders of
the Notes on a subsequent special record date, which date shall be at the
earliest practicable date but in all events at least five Business Days prior to
the next payment date, in each case at the Default Rate. The Issuer shall fix
or cause to be fixed each such special record date and payment date, and shall,
promptly thereafter, notify the Trustee of any such date. At least 15 days
before the special record date, the Issuer (or the Trustee, in the name of and
at the expense of the Issuer) shall mail to Holders of the Notes a notice that
states the special record date, the related payment date and the amount of such
interest to be paid.
SECTION 2.15. RECORD DATE.
The record date for purposes of determining the identity of Holders of
the Notes entitled to vote or consent to any action by vote or consent
authorized or permitted under this Indenture shall be determined as provided for
in TIA Section 316(c).
SECTION 2.16. CUSIP NUMBER.
The Issuer in issuing the Notes may use a "CUSIP" number and, if it
does so, it shall notify the Trustee and the Trustee, after receiving such
notice, shall use the CUSIP number in notices of redemption or exchange as a
convenience to Holders; PROVIDED, HOWEVER, that any
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such notice may state that no representation is made as to the correctness or
accuracy of the CUSIP number printed in the notice or on the Notes and that
reliance may be placed only on the other identification numbers printed on the
Notes. The Issuer will promptly notify the Trustee of any change in the CUSIP
number.
ARTICLE III.
REDEMPTION AND PURCHASE OF NOTES
SECTION 3.01. REDEMPTION GENERALLY.
If either (a) the Issuer elects to redeem Notes pursuant to the
redemption provisions of SECTION 3.07 or a Purchase Event occurs in accordance
with SECTION 3.08, the Issuer shall furnish to the Trustee and to each of the
Holders, within the time periods set forth in such Sections, written notice
setting forth the items required in SECTION 3.03 and, to the Trustee, an
Officers' Certificate as to compliance by the Issuer with the requirements of
this Article III with respect to the subject redemption or purchase delivered
not later than the redemption or purchase date.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed, the Trustee shall
select the Notes to be redeemed among the Holders of the Notes in compliance
with the requirements of the principal national securities exchange, if any, on
which the Notes are listed, or, if the Notes are not so listed, on a pro rata
basis, by lot or in accordance with any other method the Trustee considers fair
and appropriate (and in such manner as complies with applicable legal and stock
exchange requirements, if any), provided that no Notes of $1,000 or less shall
be redeemed in part. In the event of partial redemption by lot, the particular
Notes to be redeemed shall be selected, unless otherwise provided herein, not
less than thirty (30) nor more than sixty (60) days prior to the redemption date
by the Trustee from the outstanding Notes not previously called for purchase or
redemption.
The Trustee shall promptly notify the Issuer in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount of such Notes to be redeemed. Notes and
portions of them selected shall be in amounts of $1,000 or whole multiples of
$1,000; except that if all of the Notes of a Holder are to be redeemed, the
entire outstanding amount of Notes held by such Holder, even if not a multiple
of $1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION OR PURCHASE.
Within the time periods set forth in SECTION 3.07 OR 3.08, as
applicable, the Issuer shall mail or cause to be mailed, by first class mail,
postage prepaid, at its registered address, (a) a Redemption Notice to each
Holder whose Notes are to be redeemed pursuant to SECTION 3.07, and (b) a
Purchase Event Notice to each Holder pursuant to SECTION 3.08.
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The Redemption Notice or Purchase Event Notice shall identify the
Notes to be redeemed pursuant to SECTION 3.07 or state the principal amount as
to which a Purchase Event has occurred and shall state:
(a) the redemption or purchase date;
(b) the redemption or purchase price;
(c) the principal amount to be redeemed pursuant to SECTION 3.07
or as to which a Purchase Event has occurred of any Note and, in the case
of a redemption or purchase in part, that after the redemption date or
purchase date upon surrender of such Note, a new Note or Notes in principal
amount equal to the unredeemed or unpurchased portion shall be issued;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption or delivered for purchase
must be surrendered to the Paying Agent to collect the redemption or
purchase price;
(f) that, unless the Issuer defaults in depositing such
redemption or purchase payment, interest on Notes redeemed or purchased
ceases to accrue on and after the redemption or purchase date, and that if
a Note is redeemed or purchased on or after an interest record date but on
or prior to the related interest payment date, then accrued and unpaid
interest shall be paid to the Person in whose name such Note was registered
at the close of business on such record date;
(g) the section of this Indenture pursuant to which the Notes
are being redeemed or as to which a Purchase Event has occurred;
(h) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed on
the Notes;
(i) in the case of a Purchase Event, the procedures the Holder
must follow to exercise rights under SECTION 3.08 and, in the case of a
purchase pursuant to SECTION 3.08(b), that, to the extent the Holder would
like Notes in excess of its pro-rata portion of the Excess Cash Flow Amount
to be purchased, that such Holder should provide notice to the Issuer not
later than the close of business three (3) Business Days prior to the
purchase date specifying the maximum principal amount of Notes that such
Holder elects to make available for purchase in accordance with
SECTION 3.08(b); and
(j) in the case of a Purchase Event, that such Holder will be
deemed to have made an election to have the maximum principal amount of its
Notes (excluding Excess Amount Notes) purchased pursuant to SECTION 3.08
unless such Holder delivers, not later than the close of business three (3)
Business Days prior to the purchase date, notice to the Issuer that such
Holder elects not to exercise its rights under SECTION 3.08 in whole or in
part ("REJECTION NOTICE").
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At the Issuer's written request, the Trustee shall give the Redemption
Notice or Purchase Notice in the Issuer's name and at the Issuer's expense.
SECTION 3.04. EFFECT OF NOTICE OR EXERCISE OF RIGHTS.
Once a Redemption Notice is mailed in accordance with SECTION 3.03,
Notes called for redemption pursuant to SECTION 3.07 shall become due and
payable on the redemption date at the redemption price. Once a Purchase Event
Notice is mailed, the Notes with respect to which a Holder either (a) delivers a
notice pursuant to SECTION 3.08(d) that such Holder elects to exercise its
rights under SECTION 3.08, or (b) fails to deliver a Rejection Notice indicating
that such Holder elects not to exercise its rights under SECTION 3.08 (each an
"ACCEPTANCE"), in either case prior to the close of business on a date that is
three (3) Business Days prior to the purchase date, shall become due and payable
on the purchase date at the purchase price in a principal amount up to such
Holder's pro rata share of the Excess Cash Flow Amount. In the case of a
purchase pursuant to SECTION 3.08(b), to the extent a Holder delivers notice
("EXCESS NOTES NOTICE") not later than the close of business three (3) Business
Days prior to the purchase date that it would like Notes in a principal amount
in excess of its pro-rata portion of the Excess Cash Flow Amount ("EXCESS AMOUNT
NOTES") to be purchased pursuant to SECTION 3.03(i), a portion of the Excess
Amount Notes shall become due and payable on such purchase date equal to such
Holder's pro-rata share (based on the aggregate Excess Amount Notes identified
by all Holders who have delivered Excess Notes Notices) of the aggregate
principal amount of all Notes as to which other Holders have delivered Rejection
Notices.
Unless the Issuer defaults in making the redemption or purchase
payment, on and after the redemption date or purchase date, as appropriate,
interest shall cease to accrue on the Notes or the portions of Notes redeemed or
purchased. If a Note is redeemed or purchased on or after an interest record
date but on or prior to the related interest payment date, then any accrued and
unpaid interest shall be paid on such interest payment date to the Person in
whose name such Note was registered at the close of business on such record
date. If any Note called for redemption or for which an Acceptance has occurred
shall not be so paid upon surrender for redemption or purchase, interest shall
be paid on the unpaid principal, from the redemption date or purchase date, as
appropriate, until such principal is paid, and to the extent lawful on any
interest not paid on such unpaid principal, in each case at the rate provided in
the Notes. Notes called for redemption or delivered for purchase must be
surrendered to the Paying Agent to collect the redemption or purchase price.
SECTION 3.05. DEPOSIT OF REDEMPTION OR PURCHASE PRICE.
On or prior to one Business Day before any redemption or purchase
date, the Issuer shall deposit with the Trustee or with the Paying Agent United
States dollars in same day funds sufficient to pay the redemption or purchase
price of and accrued interest on all Notes to be redeemed or purchased on that
date. The Trustee or the Paying Agent shall promptly return to the Issuer any
money deposited with the Trustee or the Paying Agent by the Issuer in excess of
the amounts necessary to pay the redemption or purchase price of, and accrued
interest on, all Notes to be redeemed or purchased.
SECTION 1.036. NOTES REDEEMED OR PURCHASED IN PART.
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Upon surrender of a Note that is redeemed or purchased in part, the
Issuer shall issue and upon written order of the Issuer the Trustee shall
authenticate for the Holder of the Notes at the expense of the Issuer a new Note
equal in principal amount to the unredeemed or unpurchased portion of the Note
surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
The Issuer shall have the option to redeem the Notes, in whole or in
part, upon not less than thirty (30) nor more than sixty (60) days' notice,
during the periods set forth below at a redemption price (expressed as a
percentage of par) set forth opposite such periods, PLUS accrued and unpaid
interest, if any, on such Notes to the applicable redemption date:
PERIOD PERCENTAGE
------ ----------
Issue Date through March 27, 2000: 102.00%
March 28, 2000 through September 27, 2001: 101.00%
thereafter: 100.00%
SECTION 3.08. PURCHASE AT HOLDERS OPTION.
(a) Except as set forth in this SECTION 3.08, the Issuer shall
not be required to make mandatory redemption payments, sinking fund payments or
mandatory purchases with respect to the Notes prior to maturity.
(b) No later than one hundred twenty (120) days after the end of
each Fiscal Year commencing with the Fiscal Year ending December 31, 1997, the
Issuer shall, at the option of each Holder, purchase the maximum principal
amount of the Notes (in integral multiples of $1,000), that may be purchased
with 100% of the Excess Cash Flow Amount for such Fiscal Year, at a purchase
price in Cash equal to 100% of the principal amount of such Notes plus accrued
and unpaid interest thereon to the date of purchase. Any such purchase shall be
made on a pro-rata basis as described in SECTION 3.04. The Issuer shall provide
the written notice required by SECTION 3.03 to the Trustee and to each Holder
(and to beneficial owners as required by applicable law, including, without
limitation, Rule 13e-4 of the Regulations) no later than ninety (90) days after
the end of each Fiscal Year.
(c) Within ninety (90) days after the occurrence of a Triggering
Event, the Issuer shall, at the option of each Holder, purchase all of the
outstanding Notes, at a purchase price in Cash equal to 100% of the principal
amount of all outstanding Notes plus accrued and unpaid interest thereon to the
date of purchase. The Issuer shall provide the written notice required by
SECTION 3.03 to the Trustee and to each Holder (and to beneficial owners as
required by applicable law, including, without limitation, Rule 13e-4 of the
Regulations) no later than five (5) days after the occurrence of the Triggering
Event.
(d) A Holder may exercise its rights specified in
SECTION 3.08(b) OR (c) by delivery of a written notice ("ORIGINAL PURCHASE
NOTICE") to the Trustee or to the office or agency referred to in SECTION 4.02
at any time prior to the close of business on a date that is three (3) Business
Days prior to the purchase date, stating:
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(1) the certificate number or numbers of the Note or Notes
that the Holder elects to have purchased and will deliver to be purchased;
and
(2) the portion of the principal amount of the Notes that
the Holder elects to have purchased and will deliver to be purchased, which
portion must be $1,000 or an integral multiple thereof.
Failure to deliver an Original Purchase Notice pursuant to this
SECTION 3.08(d) prior to the close of business on the date that is three (3)
Business Days prior to the purchase date shall be deemed to be an exercise by
the Holder of its rights under this SECTION 3.08 with respect to all Notes with
respect to which a Purchase Event has occurred (other than Excess Amount Notes)
held by such Holder on such date. Any Holder who does not desire to have all or
a portion of its Notes purchased as a result of the occurrence of a Purchase
Event shall be required to deliver a Rejection Notice.
Any purchase by the Issuer contemplated pursuant to the
provisions of this SECTION 3.08 shall be consummated upon delivery of the
consideration to be received by the Holder to such Holder, promptly following
the later of the purchase date and the time of delivery of the Note. The
Issuer's obligation to purchase Notes pursuant to SECTION 3.08(b) shall extend
only to an aggregate principal amount of Notes that, together with all accrued
and unpaid interest thereon as of the purchase date, is equal to the Excess Cash
Flow Amount, and any Notes tendered in excess of that amount will be returned to
the Holders who tendered such Notes.
Notwithstanding anything herein to the contrary, any Holder
delivering to the Trustee, or to the office or agency referred to in
SECTION 4.02, the Original Purchase Notice, shall have the right to withdraw
such Original Purchase Notice at any time prior to the close of business on the
third Business Day preceding the purchase date by delivery of a written notice
of withdrawal to the Trustee or to such office or agency specifying:
(1) the certificate number or numbers of the Note or Notes in
respect of which such notice of withdrawal is being submitted;
(2) the principal amount of the Note or Notes with respect to
which such notice of withdrawal is being submitted; and
(3) the principal amount, if any, of such Note or Notes which
remain subject to the Original Purchase Notice, and which has been or will
be delivered to be purchased by the Issuer.
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SECTION 3.09. COVENANT TO COMPLY WITH SECURITIES LAWS UPON PURCHASE OF
NOTES.
In connection with any purchase of Notes under SECTION 3.08, the
Issuer shall (i) comply with Rule 13e-4 of the Regulations, if applicable,
(ii) file the related Schedule 13E-4 (or any successor schedule, form or report)
under the Exchange Act, if applicable, and (iii) otherwise comply with all
Federal and state securities laws regulating the purchase of the Notes
(including positions of the SEC under applicable no-action letters) so as to
permit the rights and obligations under SECTION 3.08 to be exercised at the time
and in the manner specified in this Article III.
SECTION 3.10. REPAYMENT TO THE ISSUER.
The Trustee or the Paying Agent, as applicable, shall promptly return
to the Issuer any cash, together with interest thereon, if any, held by it for
the payment of the purchase price of the Notes that remains unclaimed as
provided in SECTION 8.05(b); PROVIDED, HOWEVER, that to the extent that the
aggregate amount of cash deposited by the Issuer pursuant to SECTION 3.05
exceeds the aggregate purchase price of the Notes or portions thereof to be
purchased, together with accrued interest thereon, then promptly after the
purchase date (but in no event later than five (5) Business Days after the
purchase date), the Trustee or the Paying Agent, as applicable, shall return any
such excess to the Issuer together with accrued interest thereon.
ARTICLE IV.
COVENANTS
SECTION 4.01. PAYMENT OF PRINCIPAL AND INTEREST; PAYMENTS IN KIND.
The Issuer shall pay the principal of and interest on the Notes in
accordance with the terms of, and on the dates set forth in, this Indenture and
the Notes. During the period from the Effective Day until March 27, 2001, the
Issuer, at its option, may pay interest on the Notes by delivery of additional
Notes in accordance with the terms and on the dates set forth in the Notes.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Issuer shall maintain or cause to be maintained in the Borough of
Manhattan, City of New York, an office or agency where Notes may be presented
for registration of transfer or exchange of Notes and where notices and demands
to or upon the Issuer in respect of the Notes and this Indenture may be served.
The Issuer will give prompt written notice to the Trustee of any change in the
location of such office or agency. If at any time the Issuer shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, notices and demands may be made or
served at the Corporate Trust Office of the Trustee, and, in such event, the
Trustee shall act as the Issuer's agent to receive all such presentations,
notices and demands.
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The Issuer may also from time to time designate one or more other
offices or agencies (in or outside the City of New York) where the Notes may be
presented for any or all such purposes and may from time to time rescind such
designations; PROVIDED, HOWEVER, that no such designation or rescission shall in
any manner relieve the Issuer of its obligation to maintain an office or agency
in the City of New York, for the purposes set forth in SECTION 2.05 and for such
other purposes. The Issuer will give prompt written notice to the Trustee of
any such designation or rescission and of any change in the location of any such
other office or agency.
SECTION 4.03. OFFICERS' AND ACCOUNTANTS' CERTIFICATES AS TO COMPLIANCE.
To the extent not otherwise required pursuant to SECTION 4.07, the
Issuer shall deliver to the Trustee, within ninety (90) days after the end of
each Fiscal Year commencing with the 1997 Fiscal Year, an Officers' Certificate
stating that in the course of the performance by each signer of such signer's
duties as an Officer of the Issuer such signer would normally have knowledge of
the Issuer's compliance with the covenants contained in each of the covenants
and conditions applicable to the Issuer set forth in this Indenture, stating
whether or not such signer has knowledge of any Default in such compliance (such
compliance having been determined without regard to any period of grace or
requirement of notice provided under this Indenture) and, if so, specifying each
such Default of which such signer has knowledge and the nature thereof and what
action the Issuer proposes to take in connection with such Default. For
purposes of this SECTION 4.03, one of the signatories of such Officers'
Certificate shall be an Authorized Member or one of the principal executive
officer, the principal financial officer or the principal accounting officer of
the Issuer.
The Issuer will also deliver to the Trustee the certificates of
accountants required pursuant to SECTION 4.07.
SECTION 4.04. CONDUCT OF BUSINESS; MANAGEMENT; TITLE INSURANCE.
(a) Subject to the terms and conditions of this Indenture the
Issuer shall (i) conduct its business in a manner consistent with the terms
and provisions of the Plan and this Indenture; (ii) use its reasonable
efforts, in the ordinary course, to preserve its business and the
associated goodwill; and (iii) preserve all registered patents, trademarks,
trade names, copyrights and service marks that are material to its business
as presently conducted and as proposed to be conducted.
(b) At the request of the Collateral Agent, the Issuer shall
execute a certificate in form satisfactory to the Collateral Agent listing
the trade-names or fictitious business names under which the Issuer intends
to operate the Trust Estate or any business located thereon and
representing and warranting that the Issuer does business under no other
trade names or fictitious business names. The Issuer shall promptly notify
the Collateral Agent in writing of any change in said trade names or
fictitious business names, and will, upon request of the Collateral Agent,
execute any additional financing statements and other certificates
necessary to reflect the change in trade names or fictitious business
names.
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(c) The Issuer shall execute and at all times maintain in full
force and effect management contracts to provide for property management
and leasing of the Trust Estate on terms and conditions, at any time that
such agreements are with CWOP or any of its Affiliates, no less favorable
to the Issuer than the terms and conditions set forth in the Management and
Leasing Agreement.
(d) The Issuer shall at all times maintain title insurance
coverage on the Trust Estate in an amount not less than the aggregate
principal amount of the Notes, insuring, as of the date and time the Deed
of Trust is recorded, that fee title to the Property is vested in the
Issuer, and that the lien of the Deed of Trust is a valid first priority
Lien on the Trust Estate, subject only to the Liens permitted pursuant to
SECTION 4.09 and containing CLTA endorsements nos. 100, 104.6, 116, 116.1,
119.2, a non-imputation endorsement and such other endorsements as the
Collateral Agent may request.
SECTION 4.05. PAYMENT OF TAXES, ETC.
(a) The Issuer shall pay and discharge before the same shall
become delinquent, all lawful claims, taxes, assessments and governmental
charges or levies, imposed upon the Issuer or the Issuer's property except
when contested in good faith, by proper proceedings promptly instituted and
diligently conducted, and when adequate reserves therefor have been
established on the books of the Issuer in conformity with GAAP.
(b) In connection with this Indenture, the Issuer shall comply
with all withholding and reporting requirements imposed by federal, state
and local tax authorities and all distributions under this Indenture shall
be subject to such withholding and reporting requirements.
(c) Without limiting clause (a) of this SECTION 4.05, the Issuer
shall pay, or cause to be paid at least ten (10) days prior to delinquency,
all Impositions; PROVIDED, HOWEVER, that if, by law any such Imposition is
payable, or may at the option of the taxpayer be paid, in installments, the
Issuer may pay the same or cause it to be paid, together with any accrued
interest on the unpaid balance of such Imposition, in installments as the
same become due and before any fine, penalty, interest or cost may be added
to such Impositions for the nonpayment of any such installment and
interest.
(d) If at any time after the date of this Indenture there shall
be assessed or imposed (i) a tax or assessment on the Trust Estate in lieu
of or in addition to the Impositions payable by the Issuer pursuant to
SECTION 4.05(c), or (ii) a license fee, tax or assessment imposed on the
Holders and measured by or based in whole or in part upon the amount of the
outstanding Obligations of the Issuer secured by any of the Collateral
Documents, then all such taxes, assessments or fees shall be deemed to be
included within the term "Impositions" and the Issuer shall pay and
discharge the same as herein provided with respect to the payment of
Impositions. Anything to the contrary in this Indenture notwithstanding,
the Issuer shall have no obligation to pay any franchise, estate,
inheritance, income, excess profits or similar tax levied on the Holders or
on interest or
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other income received by the Holders comprising a portion of or in
connection with the Obligations of the Issuer under any Operative
Documents.
(e) Subject to the provisions of SECTION 4.05(f) and upon
request by the Collateral Agent, the Issuer shall deliver to the Collateral
Agent, within ten (10) days prior to the date upon which any such
Imposition is due and payable by the Issuer, evidence of payment of such
Imposition and within sixty (60) days after the date upon which any such
Imposition is due and payable by the Issuer, official receipts of the
appropriate taxing authority, or other proof satisfactory to the Collateral
Agent, evidencing the payment thereof.
(f) The Issuer shall have the right before any delinquency
occurs to contest or object to the amount or validity of any such
Imposition by appropriate proceedings, but this shall not be deemed or
construed in any way as relieving, modifying or extending the Issuer's
covenant to pay any such Imposition at the time and in the manner provided
in this SECTION 4.05, unless the Issuer has given prior written notice to
the Collateral Agent of the Issuer's intent to so contest or object to an
Imposition, and unless (i) the proceedings to be initiated by the Issuer
shall conclusively operate to prevent the sale of the Trust Estate, or any
part thereof, to satisfy such Imposition prior to final determination of
such proceedings; or (ii) the Issuer shall furnish a good and sufficient
bond, surety or other undertaking as may be required or permitted by law to
accomplish a stay of any such sale.
(g) At any time after an Event of Default has occurred, then
upon request by the Collateral Agent, the Issuer shall pay to the
Collateral Agent an initial cash reserve in an amount adequate to pay all
Impositions for the ensuing tax fiscal year and shall thereafter continue
to deposit with the Collateral Agent, in monthly installments, an amount
equal to one-twelfth (1/12) of the sum of the annual Impositions reasonably
estimated by the Collateral Agent, for the purpose of paying the
installment of Impositions next due on the Trust Estate (funds deposited
for this purpose shall hereinafter be referred to as "IMPOUNDS"). In such
event the Issuer further agrees to cause all bills, statements or other
documents relating to Impositions to be sent or mailed directly to the
Collateral Agent. Upon receipt of such bills, statements or other
documents, and provided the Issuer has deposited sufficient Impounds with
the Collateral Agent pursuant to this SECTION 4.05(g), the Collateral Agent
shall promptly pay such amounts as may be due thereunder out of the
Impounds so deposited with the Collateral Agent. If at any time and for
any reason the Impounds deposited with the Collateral Agent are or will be
insufficient to pay such amounts as may then or subsequently be due, the
Collateral Agent may notify the Issuer and upon such notice the Issuer
shall deposit immediately an amount equal to such deficiency with the
Collateral Agent. Notwithstanding the foregoing, nothing contained herein
shall cause any of the Holders to be deemed a Collateral Agent of said
funds or to be obligated to pay any amounts in excess of the amount of
funds deposited with the Collateral Agent pursuant to this SECTION 4.05(g).
To the extent permitted by law, the Collateral Agent may commingle Impounds
with its own funds and shall not be obligated to pay or allow any interest
on any Impounds held by the Collateral Agent pending disbursement or
application hereunder. The Collateral Agent may reserve for future payment
of Impositions such portion of the Impounds as the
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Collateral Agent may in its absolute discretion deem proper. Upon any
Event of Default under any of the Collateral Documents, the Collateral
Agent may apply the balance of the Impounds upon any indebtedness or
obligation secured hereby in such order as the Collateral Agent may
determine, notwithstanding that said indebtedness or the performance of
said obligation may not yet be due according to the terms thereof. Should
the Issuer fail to deposit with the Collateral Agent (exclusive of that
portion of said payments which has been applied by the Collateral Agent
upon any indebtedness or obligation secured hereby) sums sufficient to
fully pay such Impositions at least ten (10) days before delinquency
thereof, the Collateral Agent may, at the Collateral Agent's election, but
without any obligation so to do, advance any amounts required to make up
the deficiency, which advances, if any, shall be secured by the Collateral
and shall be repayable to the Collateral Agent as provided in the Operative
Documents. Should any default or event of default occur or exist on the
part of the Issuer in the payment or performance of any of the Issuer's
Obligations under the terms of the Collateral Documents, the Collateral
Agent may, at any time at the Collateral Agent's option, apply any sums or
amounts in its hands received as rents or income of the Trust Estate or
otherwise, to any Indebtedness or Obligation of the Issuer secured by the
Collateral in such manner and order as the Collateral Agent may elect,
notwithstanding said Indebtedness or the performance of said Obligation may
not yet be due according to the terms thereof. The receipt, use or
application of any such Impounds paid by the Issuer to the Collateral Agent
in accordance with this SECTION 4.05 shall not be construed to affect the
maturity of any Indebtedness secured by the Collateral Documents or any of
the rights or powers of the Holders or the Collateral Agent under the terms
of the Operative Documents or any of the Obligations of the Issuer or any
guarantor under the Operative Documents.
(h) The Issuer shall not suffer, permit or initiate the joint
assessment of any real and personal property which may constitute all or a
portion of the Trust Estate or suffer, permit or initiate any other
procedure whereby the Lien of the real property taxes and the Lien of the
personal property taxes shall be assessed, levied or charged to the Trust
Estate as a single Lien.
(i) If requested by the Collateral Agent, the Issuer shall cause
to be furnished to the Collateral Agent a tax reporting service covering
the Trust Estate of a type, duration and with a company satisfactory to the
Collateral Agent.
SECTION 4.06. PRESERVATION OF EXISTENCE, ETC.
The Issuer shall preserve and maintain its existence, rights and
franchises, except as permitted under Article V, if the failure to so preserve
or maintain, either individually or in the aggregate, would cause a Material
Adverse Effect.
SECTION 4.07. FINANCIAL STATEMENTS.
The Issuer shall furnish to the Trustee and the Holders in the case of
clauses (a) through (c) below, and to any prospective purchaser of the Notes in
the case of clause (d) below:
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(a) as soon as practicable and in any event within fifteen (15)
days after the end of each month, detailed balance sheets as of the end of
such month and an income statement and statement of cash flows for the
Issuer for such month and for the period from the beginning of the current
Fiscal Year to the end of such month, all in reasonable detail and
accompanied by an Officers' Certificate to the effect that such statements
fairly present in all material respects the financial condition of the
Issuer as at the dates indicated and the results of its operations and cash
flows for the periods indicated, subject to changes resulting from audit
and normal year-end adjustment;
(b) (i) as soon as possible and in any case within thirty (30) days
after the end of each Fiscal Quarter with respect to quarterly reports and
within sixty (60) days after each Fiscal Year with respect to annual
reports, copies of the quarterly and annual reports and of the information,
documents and other reports (or copies of such portions of any of the
foregoing as the SEC may by rules and regulations prescribe) that the
Issuer files or proposes to file with the SEC pursuant to Sections 13(a)
and 13(c) or 15(d) of the Exchange Act and, (ii) at any time the Issuer is
not subject to Section 13(a) and 13(c) or 15(d) of the Exchange Act and the
Issuer would be entitled not to file such reports, information and other
documents with the SEC, the Issuer shall nonetheless furnish to the Trustee
and to the Holders, on the same timely basis, such reports, information and
other documents as the Issuer would be required to file with the SEC as if
the Issuer were so subject to the requirements of such Sections 13(a) and
13(c) or 15(d) of the Exchange Act; and
(c) at the same time as the Issuer delivers the information,
documents and other reports required to be filed under SECTION 4.07(a)
or (b) an Officers' Certificate setting forth the calculation for the
period then ended or at the period end, as applicable, of Available Cash
and, after the end of each Fiscal Year, Excess Cash Flow Amount, and
deferred and capitalized interest for such Fiscal Year; and
(d) upon the request of the Required Holders, to any prospective
purchaser of any Notes, all information that may be required to be
delivered to such purchaser to enable any Holder to sell to such purchaser
its Notes without registration under the Securities Act within the
limitations of the exemption provided by (a) Rule 144A under the Securities
Act, as such rule may be amended as of such time, or (b) any similar rule
or regulation hereafter adopted by the SEC, subject, in each case, to
receipt of an appropriate confidentiality agreement from such prospective
purchasers in form and substance reasonably satisfactory to the Issuer
(with appropriate exceptions to permit resale).
SECTION 4.08. LIMITATION ON INVESTMENTS.
The Issuer shall not directly or indirectly, make any Investment from
and after the Effective Date except Investments approved by the Board of Members
of Available Cash in Permitted Investments.
SECTION 4.09. LIENS, ETC.
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(a) The Issuer shall not create or suffer to exist any Lien upon
or with respect to any of its properties, whether owned by the Issuer as at
the Effective Date or thereafter acquired, or assign any right to receive
income, except:
(i) Liens directly or indirectly created in favor of
the Trustee or the Collateral Agent for the benefit of the Holders
pursuant to this Indenture, the Plan and the Collateral Documents;
(ii) Liens arising by operation of law in favor of
materialmen, mechanics, warehousemen, carriers, lessors or other
similar Persons incurred by the Issuer in the ordinary course of
business which secure its obligations to such Person; PROVIDED,
HOWEVER, that the Issuer (A) is not in default in respect of such
payment obligation to such Person or (B) is in default with respect to
such payment obligation but is, in good faith and by appropriate
proceedings, diligently contesting such obligation and adequate
provision is made for the payment thereof in accordance with GAAP and
such default, either individually or in the aggregate, would not cause
a Material Adverse Effect; PROVIDED FURTHER, that the Issuer has
obtained a title insurance endorsement insuring against losses arising
therewith or has bonded within a reasonable time after becoming aware
of the existence of such Lien;
(iii) Liens (excluding Environmental Liens) securing
taxes, assessments or governmental charges or levies; PROVIDED,
HOWEVER, that the Issuer is performing on its obligations under the
Plan with respect to any payment obligation with respect thereto and
(A) is not in default in respect of such payment obligation or
(B) is in default in respect of such payment obligation but is in good
faith and by appropriate proceedings diligently contesting such
obligation and adequate provision is made for the payment thereof and
such default, either individually or in the aggregate, would not cause
a Material Adverse Effect;
(iv) zoning restrictions, easements, encroachments,
licenses, reservations, restrictions on the use of real property or
minor irregularities incident thereto that do not cause, individually
or in the aggregate, a Material Adverse Effect;
(v) Existing Encumbrances (as defined in the Deed of
Trust), including, without limitation, Liens (the "CLASS B LIENS") in
favor of the holders of the Class B Notes and any renewal, extension
or refunding of the Indebtedness represented by the Class B Notes that
does not increase the assets subject to such Liens; provided that such
Class B Liens are and shall remain junior and subordinate to the Liens
described in clause (i) above to at least the same extent as the Class
B Notes are subordinate to the Notes as of the Effective Date and
pursuant to the same or more stringent terms;
(vi) Leases of space in the Improvements (and related
agreements and instruments) entered into in the ordinary course of
business;
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(vii) UCC-1 financing statements filed with respect to
tenant-owned fixtures and tenant-owned improvements; or
(viii) Liens on assets acquired with the Indebtedness
permitted under SECTION 4.10(f).
(b) the Issuer shall pay or cause to be paid:
(i) When due, all encumbrances (including any debt
secured by deed of trust), ground rents, Liens, and/or charges, with
interest, on the Trust Estate, or any part thereof, and all costs,
fees and expenses related thereto.
(ii) When due, all charges for utilities or services
servicing any portion of or all of the Trust Estate, including, but
not limited to, electricity, gas, water and sewer.
If the Issuer shall fail to remove and discharge any Lien that is not permitted
by the terms above, then, in addition to any other right or remedy of the
Collateral Agent, the Collateral Agent may, but shall not be obligated to,
discharge the same, either by paying the amount claimed to be due, or by
procuring the discharge of such Lien by depositing in a court a bond or the
amount claimed or otherwise giving security for such claim, or by procuring such
discharge in such manner as is or may be prescribed by law. The Issuer shall,
promptly following receipt of a written demand therefor by the Collateral Agent,
pay to the Collateral Agent an amount equal to all costs and expenses incurred
by the Collateral Agent in connection with the exercise by the Collateral Agent
of the foregoing right to discharge any such Lien together with interest thereon
from the date of such expenditure at the Default Rate.
SECTION 4.10. INDEBTEDNESS.
The Issuer shall not, directly or indirectly, incur, create, assume or
suffer to exist or otherwise in any manner become or remain liable with respect
to any Indebtedness, except:
(a) Indebtedness represented by the Notes and the Class B Notes;
(b) Contingent Obligations constituting endorsements for
collection or deposit in the ordinary course of business of the Issuer;
(c) current liabilities in respect of (i) covenants, conditions
and restrictions constituting a Lien permitted under SECTION 4.09,
(ii) taxes, assessments and governmental charges or levies incurred, or
(iii) claims for labor, materials, inventory, services, supplies and
rentals incurred, or for goods or services purchased, in the ordinary
course of business;
(d) Indebtedness arising under any performance bond
reimbursement obligation entered into in the ordinary course of business of
the Issuer;
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(e) unimpaired indemnification claims under the limited
liability company agreement of the Issuer,
(f) Indebtedness incurred to finance the purchase price of
property; PROVIDED, HOWEVER, that such Indebtedness shall be non-recourse
to the Issuer and shall be secured by no asset of the Issuer other than the
property acquired; and
(g) additional unsecured Indebtedness of the Issuer; PROVIDED,
HOWEVER, that (i) such Indebtedness shall be expressly junior and
subordinate to the Notes pursuant to terms that are more stringent and
(ii) the interest rate payable in respect of such Indebtedness shall be a
fair market rate for Indebtedness incurred on comparable terms and
conditions.
SECTION 4.11. LEASE OBLIGATIONS.
(a) The Issuer shall not create or suffer to exist any
obligations as lessee for the rental or hire of real or personal property
in connection with any sale and leaseback transaction, or for the rental or
hire of real or personal property of any kind under other leases or
agreements to lease having an original term of one year or more that would
cause the direct or contingent liabilities of the Issuer in respect of all
such obligations to be increased by more than $250,000 payable in any
period of 12 consecutive months over the amount existing on the Effective
Date.
(b) The Issuer shall not become or remain liable as lessee or
guarantor or other surety with respect to any lease, whether an operating
lease or a capitalized lease, of any property (whether real or personal or
mixed), whether owned as at the Effective Date or acquired thereafter, that
the Issuer has sold or transferred as of the Effective Date or thereafter.
SECTION 4.12. RESTRICTED PAYMENTS.
The Issuer shall not (i) declare or make any dividend payment or other
distribution of assets, properties, Cash, rights, obligations or securities on
account of or in respect of any of its Interests or any Preferred Interests
which may be issued by the Issuer except REIT Required Dividends; PROVIDED,
HOWEVER, that the Issuer shall in no event declare or make any such dividend
payment or other distribution (other than REIT Required Dividends) if a Default
or Event of Default has occurred and is continuing, or (ii) purchase, redeem or
otherwise acquire for value any Interests or any Preferred Interests of the
Issuer, whether outstanding on the Effective Date or thereafter issued and
outstanding.
SECTION 4.13. TRANSACTIONS WITH AFFILIATES.
The Issuer shall not: (a) make any Investment in an Affiliate of the
Issuer; (b) transfer, sell, lease, assign or otherwise dispose of any assets to
any Affiliate of the Issuer; (c) merge into or consolidate with or purchase or
acquire assets from any Affiliate of the Issuer; (d) repay any Indebtedness to
any Affiliate of the Issuer (except under existing retirement or deferred
compensation plans); or (e) enter into any other transaction directly or
indirectly with
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or for the benefit of any Affiliate of the Issuer (including, without
limitation, guaranties and assumptions of obligations of any such Affiliate)
except for (i) transactions in the ordinary course of business, set forth in
writing, on a basis no less favorable to the Issuer than would be obtained in a
comparable arm's length transaction with a Person that is not an Affiliate of
the Issuer, PROVIDED that any transaction or series of related transactions
pursuant to which the Issuer or an Affiliate of the Issuer shall receive or
render value exceeding one hundred thousand dollars ($100,000), shall not be
permitted unless, prior to consummation thereof, the Issuer shall have received
an opinion of an Independent Financial Advisor, that such transaction or series
of related transactions is on terms that are fair, from a financial point of
view, to the Issuer, (ii) payment of salaries and other employee compensation
and benefits to officers of the Issuer or its Members as may reasonably be
adjusted over time but in no event to be adjusted by more than 10% annually in
the aggregate, (iii) payment or reimbursement of out-of-pocket expenses of the
Issuer and its Members with respect to operations of the Issuer and (iv) any
transaction required or otherwise permitted by the Plan, this Indenture or the
Management and Leasing Agreement.
SECTION 4.14. NEW SUBSIDIARIES.
The Issuer shall not incorporate or otherwise organize any Subsidiary
after the Effective Date.
SECTION 4.15. RESERVE ACCOUNTS.
(a) The Issuer may, from time to time and at any time except
during the continuation of an Event of Default, withdraw amounts from the
Operating Disbursements Account, the Approved Reserves and all other
reserves or accounts created in accordance with the Management and Leasing
Agreement to pay the costs and expenses for which such reserves and
accounts were created. The Issuer shall not be permitted to make any such
withdrawals during the continuance of an Event of Default without the
written consent of the Trustee.
(b) To the extent that amounts then available from cash flow
from operations of the Issuer and amounts in the Operating Disbursements
Account, the Approved Reserves and all other reserves or accounts created
in accordance with the Management and Leasing Agreement are not sufficient
to pay such costs, the Issuer shall be permitted to withdraw funds from the
Existing Reserve Account from time to time and at any time except during
the continuance of an Event of Default to pay the costs of tenant
improvements, REIT Required Dividends, Debt Service, Capital Expenditures
required to comply with law and Capital Expenditures reasonably necessary
(as reasonably determined by the Board of Members) to maintain the
Improvements in a condition adequate to attract desirable tenants (as
reasonably determined by the Issuer).
SECTION 4.16. REQUIRED INSURANCE.
The Issuer (or its authorized agent) shall procure and maintain or
shall cause to be procured and maintained continuously in effect until repayment
and performance of all Obligations of the Issuer under the Operative Documents,
those policies of insurance in form and amounts as set forth on Schedule 5
attached to the Management and Leasing Agreement (the
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"INSURANCE SCHEDULE"). All original policies, or certificates thereof, and
endorsements and renewals thereof shall be delivered to and retained by the
Collateral Agent unless the Collateral Agent waives this requirement in writing.
All policies shall expressly protect or recognize Holders' interest as required
by the Collateral Agent. Notwithstanding the policies of insurance set forth in
the Insurance Schedule, the Collateral Agent shall have the right to require the
Issuer to provide or cause to be provided the insurance coverage described as
follows:
(i) Rental value (or comparable business interruption)
insurance insuring against the same perils as set forth in the
Insurance Schedule in an amount of not less than 100% of one year's
rental value of the Property. "Rental value" as used herein is
defined as the sum of (a) the total anticipated gross rental income
from tenant occupancy of the Improvements as furnished and equipped by
Issuer, (b) the amount of all charges which are the legal obligation
of tenants and which due to interruption of the tenancy are the
obligation of Issuer, and (c) the fair rental value of any portion of
the Improvements which is occupied by Issuer.
(ii) If customarily included in all risk of direct
physical loss insurance and if requested by the Collateral Agent,
flood insurance on the Improvements in the event that such insurance
is available pursuant to the Flood Disaster Protection Act of 1973 or
other applicable legislation. If such insurance is available pursuant
to such legislation, the Collateral Agent shall have the right to
require that the Issuer secure flood insurance up to the amounts set
forth in the Insurance Schedule, even if such exceeds the amount
available under the Flood Disaster Protection Act of 1973.
(iii) Earthquake insurance against damage or loss, in an
amount and with a deductible consistent with the commercial real
estate practice existing at the time the insurance is issued and in
the place where the Property is located if available on commercially
reasonable terms.
SECTION 4.17. GENERAL INSURANCE REQUIREMENTS.
All policies required by SECTION 4.16 shall (a) be issued by companies
with a Best's Insurance Guide rating of at least B+ and duly qualified and
authorized to do such business in the State of California, (b) provide that it
cannot be modified or cancelled without thirty (30) days', prior written notice
to the Collateral Agent, (c) shall name the Trustee as an additional insured and
(d) shall provide for severability of interests.
SECTION 4.18. DELIVERY OF INSURANCE POLICIES, PAYMENT OF PREMIUMS.
(a) At the Collateral Agent's option, all policies of insurance
shall either have attached thereto a lender's loss payable endorsement for
the benefit of the Holders in form reasonably satisfactory to the
Collateral Agent or shall name the Holders as additional insureds. At
least thirty (30) days prior to the expiration of each required policy, the
Issuer shall deliver to the Collateral Agent evidence reasonably
satisfactory to the Collateral Agent of the payment of premium and the
renewal or replacement of such
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policy continuing insurance in the form as required by SECTION 4.16 or any
of the Operative Documents. All such policies shall contain a provision
that, notwithstanding any contrary agreement between the Issuer and the
insurance company, such policies will not be cancelled, allowed to lapse
without renewal, surrendered or materially amended, which term shall
include any reduction in the scope or limits of coverage, without at least
thirty (30) days' prior written notice to, and the consent of, the
Collateral Agent.
(b) In the event the Issuer fails to provide, maintain, keep in
force or deliver to the Collateral Agent the policies of insurance required
by SECTION 4.16 or by any of the Operative Documents, the Collateral Agent
may (but shall have no obligation to) procure such insurance or single-
interest insurance for such risks covering Holders' interest, and the
Issuer will pay all premiums thereon promptly upon demand by the Collateral
Agent, and until such payment is made by the Issuer, the amount of all such
premiums shall bear interest at the Default Rate.
(c) At any time after an Event of Default has occurred and while
such Event of Default is continuing, then upon request by the Collateral
Agent, the Issuer shall deposit with the Collateral Agent in monthly
installments an amount equal to one-twelfth (1/12) of the estimated
aggregate annual insurance premiums on all policies of insurance required
by SECTION 4.16 or any of the Operative Documents. In such event the
Issuer further agrees to cause all bills, statements or other documents
relating to the foregoing insurance premiums to be sent or mailed directly
to the Collateral Agent. Upon receipt of such bills, statements or other
documents evidencing that a premium for a required policy is then payable,
and providing the Issuer has deposited sufficient funds with the Collateral
Agent pursuant to this SECTION 4.18, the Collateral Agent shall promptly
pay such amounts as may be due thereunder out of the funds so deposited
with the Collateral Agent. If at any time and for any reason the funds
deposited with the Collateral Agent are or will be insufficient to pay such
amounts as may be then or subsequently due, the Collateral Agent shall
notify the Issuer and the Issuer shall immediately deposit an amount equal
to such deficiency with the Collateral Agent. Notwithstanding the
foregoing, nothing contained herein shall cause Holders to be deemed a
trustee of said funds or to be obligated to pay any amounts in excess of
the amount of funds deposited with the Collateral Agent pursuant to this
SECTION 4.18, nor shall anything contained herein modify the obligation of
the Issuer set forth in this Indenture or any other Operative Document to
maintain and keep such insurance in force at all times. To the extent
permitted by law, the Collateral Agent may commingle said reserve with its
own funds and the Issuer shall be entitled to no interest thereon.
SECTION 4.19. INDEMNIFICATION; SUBROGATION; WAIVER OF OFFSET.
(a) The Issuer shall indemnify, protect, hold harmless and
defend the Trustee, the Holders, the Collateral Agent, the trustee under
the Deed of Trust and their respective directors, officers, employees,
shareholders, members, assigns, representatives or agents (the "INDEMNIFIED
PARTIES") from and against any and all Environmental Liabilities and Costs,
losses, liabilities, suits, obligations, fines, damages, judgments,
penalties, claims, charges, costs and expenses (including attorneys' fees
and disbursements) which may be imposed on, incurred or paid by or asserted
against any of
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the Indemnified Parties by reason or on account of, or in connection with,
(i) acceptance or administration of its duties under this Indenture and the
other Operative Documents without negligence or bad faith on its part,
including, but not limited to, the costs and expenses of enforcing this
Indenture (including this SECTION 4.19) or any other Operative Document
against the Issuer or any other Person and defending itself against any
claim (whether asserted by the Issuer or a Holder or any other Person) or
liability in connection with the exercise of any of its powers or the
discharge of any of its duties under this Indenture or the other Operative
Documents and all Environmental Liabilities and Costs, (ii) any willful
misconduct of the Issuer or any Default or Event of Default, (iii) the
construction, reconstruction or alteration of the Trust Estate, (iv) any
negligence of the Issuer or any negligence or willful misconduct of any
lessee or sublessee of the Trust Estate, or any of their respective agents,
contractors, subcontractors, servants, employees, licensees or invitees, or
(v) any accident, injury, death or damage to any person or property
occurring in, on or about the Trust Estate or any street, driveway,
sidewalk, curb or passageway adjacent thereto, except for the willful
misconduct or gross negligence of the indemnified Party. The indemnity in
subsection (i) includes, without limitation, all costs of removal, Remedial
Action of any kind, and disposal of Hazardous Substances (whether or not
such Hazardous Substances may be legally allowed to remain in the Real
Estate if removal or remediation is prudent), after a foreclosure, the cost
of determining whether the Real Estate that was the subject of the
foreclosure is in compliance with, and free of all Environmental
Liabilities and Cost under, and causing such Real Estate to be in
compliance with, and free of all Environmental Liabilities and Cost under,
all applicable Environmental Laws, and the reasonable attorneys' and
consultants' fees, expenses and court costs relating thereto of each of the
Indemnified Parties.
Any amount payable to any of the Indemnified Parties under this
SECTION 4.19 shall be due and payable within ten (10) days after demand
therefor and receipt by the Issuer of a statement from any of the
Indemnified Parties setting forth in reasonable detail the amount claimed
and the basis therefor. The Issuer's obligations under this SECTION 4.19
shall survive the repayment or any other satisfaction of the Notes and
shall not be affected by the absence or unavailability of insurance
covering the same or by the failure or refusal of any insurance carrier to
perform any obligation on its part under any such policy of insurance. If
any claim, action or proceeding is made or brought against any of the
Indemnified Parties that is subject to the indemnity set forth in this
SECTION 4.19, the Issuer shall resist or defend against the same, if
necessary in the name of such Indemnified Parties (as applicable), by
attorneys for the Issuer's insurance carrier (if the same is covered by
insurance) approved by such Indemnified Parties (as applicable) or
otherwise by attorneys retained by the Issuer and approved by the such
Indemnified Parties (as applicable). Notwithstanding the foregoing, any of
the Indemnified Parties, in their discretion, if any of them disapprove of
the attorneys provided by the Issuer or the Issuer's insurance carrier, may
engage their own attorneys to resist or defend, or assist therein, and the
Issuer shall pay the fees and disbursements of said attorneys. The Issuer
need not pay for any settlement made without its consent, which consent
shall not be unreasonably withheld.
(b) The Issuer waives any and all right to claim or recover
against the Indemnified Parties, their officers, employees, agents and
representatives, for loss of or
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damage to the Issuer, the Trust Estate, the Issuer's property or the
property of others under the Issuer's control from any cause insured
against or required to be insured against by the provisions of this
Indenture or the Deed of Trust.
(c) The Obligations of the Issuer under any Operative Document
shall in no way be released, discharged or otherwise affected (except as
expressly provided herein) by reason of: (a) any damage to or destruction
of or any condemnation or similar taking of the Trust Estate or any part
thereof; (b) any restriction or prevention of or interference by any third
party with any use of the Trust Estate or any part thereof; (c) any title
defect or encumbrance or any eviction from the Trust Estate or any part
thereof by title paramount or otherwise; (d) any bankruptcy, insolvency,
reorganization, composition, adjustment, dissolution, liquidation or other
like proceeding relating to the Holders or any guarantor of any secured
Obligation of the Issuer under any Operative Document, or any action taken
with respect to the Deed of Trust by any trustee or receiver of the
Holders, or by any court, in any such proceeding; (e) any claim which the
Issuer has or might have against the Holders; (f) any default or failure on
the part of the Holders to perform or comply with any of the terms of any
Operative Document or of any other agreement with the Issuer; or (g) any
other occurrence whatsoever, whether similar or dissimilar to the
foregoing; whether or not the Issuer shall have notice or knowledge of any
of the foregoing. Except as expressly provided herein, the Issuer waives
all rights now or hereafter conferred by statute or otherwise to any
abatement, suspension, deferment, diminution or reduction of any sum
secured by any Collateral Document and payable by the Issuer.
SECTION 4.20. EVENT OF LOSS.
(a) Promptly after any Event of Loss with respect to Collateral
with a fair market value (or replacement cost, if greater) equal to or less than
one million dollars ($1,000,000), the Issuer shall apply the Net Loss Proceeds
from such Event of Loss to the rebuilding, repair, replacement or construction
of improvements to the Property.
(b) Promptly after any Event of Loss with respect to Collateral
with a fair market value (or replacement cost, if greater) in excess of one
million dollars ($1,000,000), the Issuer shall apply the Net Loss Proceeds from
such Event of Loss to the rebuilding, repair, replacement or construction of
improvements to the Property; PROVIDED that:
(i) no Default or Event of Default exists or is
continuing;
(ii) the Issuer delivers to the Collateral Agent and the
Trustee within thirty (30) days of such Event of Loss a written
opinion from a reputable architect that the Property, in substantially
the same condition and with substantially the same facilities as
existed prior to such Event of Loss, can be rebuilt, repaired,
replaced or constructed within one hundred eighty (180) days of such
Event of Loss;
(iii) the Issuer delivers to the Collateral Agent and the
Trustee an Officers' Certificate certifying that the Issuer has
available Net Loss Proceeds
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or cash on hand to complete such rebuilding, repair, replacement or
construction; and
(iv) the aggregate Net Loss Proceeds is less than
$8,000,000. Any Net Loss Proceeds from an Event of Loss that are not
reinvested or are not permitted to be reinvested as provided in this
Section 4.20 will be deemed "EXCESS LOSS PROCEEDS."
SECTION 4.21. INVESTMENT COMPANY ACT.
The Issuer shall not become an investment company subject to
registration under the Investment Company Act of 1940, as amended.
SECTION 4.22. STAY, EXTENSION AND USURY LAWS.
The Issuer covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, plead or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that may affect the covenants or
the performance of this Indenture; and the Issuer (to the extent it may lawfully
do so) hereby expressly waives all benefit or advantage of any such law, and
covenants that it will not, by resort to any such law, hinder, delay or impede
the execution of any power in this Indenture granted to the Trustee, but will
suffer and permit the execution of every such power as though no such law had
been enacted.
ARTICLE V.
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION OR SALE OF ASSETS.
The Issuer shall not consolidate or merge with or into (whether or not
the Issuer is the surviving entity), or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its properties or assets in one
or more related transactions to, another Person (other than the REIT) unless
(a) the Issuer is the surviving entity, or the Person formed by or surviving any
such consolidation or merger (if other than the Issuer) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia, (b) the Person formed by or
surviving any such consolidation or merger (if other than the Issuer), or the
Person to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made, assumes, pursuant to a supplemental indenture
and appropriate collateral documents in forms reasonably satisfactory to the
Trustee, all of the Obligations of the Issuer under the Operative Documents,
(c) immediately before and immediately after giving effect to such transaction
no Default or Event of Default exists, (d) the Issuer or the Person formed by or
surviving any such consolidation or merger, or to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made after
giving pro forma effect thereto as of the end of the most recently completed
Fiscal Quarter shall have a Consolidated Net Worth equal to or greater than the
Consolidated Net Worth of the Issuer immediately preceding the transaction
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and (e) the Issuer shall have delivered to the Trustee an Officer's Certificate
and an Opinion of Counsel, each stating that such consolidation, merger or
transfer and such supplemental indenture comply with the Indenture.
If, upon any consolidation or merger, or upon any sale, assignment,
transfer or lease, as provided in the preceding paragraph, any material property
of the Trust Estate, owned immediately prior thereto, would thereupon become
subject to any Lien securing any indebtedness for borrowed money of, or
guaranteed by, such other Person, the Issuer, prior to such consolidation,
merger, sale, assignment, transfer or lease, will secure the due and punctual
payment of the principal of, and premium, if any, and interest on the Notes then
outstanding equally and ratably with (or, at the option of the Issuer, prior to)
the Indebtedness secured by such Lien.
SECTION 5.02. SUCCESSOR ENTITY SUBSTITUTED.
Upon any consolidation or merger, or any sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Issuer in
accordance with SECTION 5.01, the successor entity formed by such consolidation
or into or with which the Issuer is merged or to which such sale, lease,
conveyance or other disposition is made shall succeed to, and be substituted for
(so that from and after the date of such consolidation, merger, sale, lease,
conveyance or other disposition, the provisions of this Indenture and the
Collateral Documents referring to the Issuer shall refer instead to the
successor entity and not to the Issuer), and may exercise every right and power
of the Issuer under this Indenture and the Collateral Documents with the same
effect as if such successor Person has been named as the Issuer, herein and
therein, and the Issuer will be discharged from all obligations under this
Indenture, the Notes and the Collateral Documents.
ARTICLE VI.
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
Each of the following events (whatever the reason for such event)
constitutes an "EVENT OF DEFAULT":
(a) The Issuer shall fail to make any payment in respect of
principal of or premium on the Notes when the same becomes due and payable
and such failure continues for a period of five (5) Business Days after the
due date of such payment, or the Issuer shall fail to make any payment when
due of interest on the Notes and such failure continues for a period of ten
(10) days after the due date of such payment; or
(b) Either (i) the information provided by CWOP or any of its
Affiliates and contained in the Disclosure Statement with respect to CWOP's
business, financial condition and results of operations (other than the
financial projections contained therein), taken on the basis of the
Disclosure Statement as a whole, or (ii) the Collateral Documents shall
prove to contain, as of their respective dates, any untrue statement of a
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material fact or omit to state a material fact necessary in order to make
the statements therein, in light of the circumstances in which they were
made, not misleading; or
(c) The Issuer shall fail to perform or observe (i) any term,
covenant or agreement contained in Article IV or Article V or (ii) any
other term, covenant or agreement contained in this Indenture, the Plan or
the Collateral Documents, if such failure under this clause (ii) shall
remain unremedied for 30 days after the earlier of the date on which
written notice thereof shall have been given to the Issuer by the Trustee
or the Holders; or
(d) The Issuer shall fail, after any applicable grace period, to
pay any principal of or premium, if any, or interest on the Class B Notes
or any of its other Indebtedness, in an amount exceeding $200,000
(excluding the Notes), when the same becomes due and payable (whether by
scheduled maturity, required prepayment, acceleration, demand or
otherwise); or any other event shall occur or condition shall exist under
any agreement or instrument relating to any such Indebtedness, if the
effect of such event or condition is to accelerate the maturity of such
Indebtedness; or any such Indebtedness shall be declared to be due and
payable, or required to be prepaid (other than by a regularly scheduled
required prepayment), prior to the stated maturity thereof; or
(e) The Issuer shall generally not pay its debts as such debts
become due except such debts that are the subject of a good faith dispute,
or shall admit in writing its inability to pay its debts generally, or
shall make a general assignment for the benefit of creditors, or any
proceeding shall be instituted by or against the Issuer seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or composition
of it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for
relief or the appointment of a receiver, trustee or other similar official
for it or for any substantial part of its property and, in the case of any
such proceedings instituted against the Issuer (but not instituted by it),
either such proceedings shall remain undismissed or unstayed for a period
of thirty (30) days or any of the actions sought in such proceedings shall
occur, or the Issuer shall take any action to authorize any of the actions
set forth above in this clause (e); or
(f) Any judgment or order for the payment of money in excess of
$100,000 shall be rendered against the Issuer and either (i) enforcement
proceedings shall have been commenced by any creditor upon such judgment or
order, or (ii) there shall be any period of thirty (30) consecutive days
during which a stay of enforcement of such judgment or order, by reason of
a pending appeal or otherwise, shall not be in effect; or
(g) This Indenture or the Collateral Documents shall, for any
reason, cease to create a valid Lien on Collateral having a value of
$100,000 or more purported to be covered thereby, or such Lien shall cease
to have the priority Lien status initially granted and be a perfected Lien
as to Collateral having a value of $100,000 or more; or
(h) The Issuer shall fail to pay any Imposition prior to
delinquency or, if the Issuer is prohibited by law from paying such
Imposition, the Issuer shall fail to pay
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such Imposition within one hundred eighty (180) days of the Issuer's
receipt of notice of such prohibition; or
(i) The Issuer shall fail to perform its obligations under the
Plan.
SECTION 6.02. ACCELERATION.
If an Event of Default (other than an Event of Default specified in
SECTION 6.01(e)) occurs and is continuing, the Trustee by notice to the Issuer
may, or upon written notice from the Holders of not less than 25% in principal
amount of the Notes outstanding on the date of determination shall, or such
Holders by written notice to the Issuer and the Trustee may, declare all the
Notes to be due and payable immediately and upon such declaration, the principal
of, premium, if any, and interest on the Notes shall be due and payable
immediately. If an Event of Default specified in SECTION 6.01(e) occurs, such
an amount shall IPSO FACTO become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder. Holders of
not less than 25% in principal amount of the Notes outstanding on the date of
determination, by written notice to the Trustee, may on behalf of all of the
Holders rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default
(except nonpayment of principal, interest or premium that has become due solely
because of the acceleration) have been cured or waived.
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee and/or
the Collateral Agent, as applicable, may pursue any available remedy (under this
Indenture, the Collateral Documents or otherwise) to collect the payment of
principal and interest on the Notes or to enforce the performance of any
provision of the Notes, this indenture or the Collateral Documents.
The Trustee or the Collateral Agent may maintain a proceeding even if
it does not possess any of the Notes or does not produce any of them in the
proceeding. A delay or omission by the Trustee, the Collateral Agent or any
Holder of a Note in exercising any right or remedy accruing upon an Event of
Default shall not impair the right or remedy or constitute a waiver of or
acquiescence in the Event of Default. All remedies are cumulative to the extent
permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
The Holders of not less than 25% in principal amount of the Notes
outstanding on the date of determination by written notice to the Trustee may on
behalf of the Holders of all of the Notes waive an existing Default or Event of
Default and its consequences under this Indenture, except a continuing Default
or Event of Default in the payment of the principal of or interest on the Notes.
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured for every purpose
of this Indenture and the Collateral Documents; but no such waiver shall extend
to any subsequent or other Default or Event of Default.
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SECTION 6.05. DIRECTION BY HOLDERS.
The Holders of not less than 25% in principal amount of the Notes
outstanding on the date of determination may direct the time, method and place
of conducting any proceeding for exercising any remedy available to the Trustee
and/or the Collateral Agent or exercising any trust or power conferred on it or
them. The Trustee and/or the Collateral Agent, however, may refuse to follow
any direction that conflicts with the law, this Indenture or the Collateral
Documents, that the Trustee and/or the Collateral Agent determines may be unduly
prejudicial to the rights of other Holders or that may involve the Trustee
and/or the Collateral Agent in personal liability.
SECTION 6.06. LIMITATION ON SUITSA.
Holder of a Note may pursue a remedy with respect to this Indenture or
the Notes only if:
(a) the Holder of a Note gives to the Trustee and the Collateral
Agent written notice of a continuing Event of Default;
(b) the Holders of not less than 25% in principal amount of the
Notes outstanding on the date of determination make a written request to
the Trustee and the Collateral Agent to pursue the remedy;
(c) such Holder of a Note or Holders offer and, if requested,
provide to the Trustee and the Collateral Agent an indemnity satisfactory
to the Trustee and the Collateral Agent against any loss, liability or
expense;
(d) the Trustee and the Collateral Agent do not comply with the
request within 60 days after receipt of the request and the offer and, if
requested, the provision of indemnity; and
(e) during such 60-day period the Holders of not less than 25%
in principal amount of the Notes outstanding on the date of determination
do not give the Trustee and the Collateral Agent a direction inconsistent
with the request.
A Holder of a Note may not use this Indenture to prejudice the rights
of another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal and interest on the Note,
on or after the respective due dates expressed in the Note, or to bring suit for
the enforcement of any such payment on or after such respective dates, shall not
be impaired or affected without the consent of the Holder, except that no Holder
shall have the right to institute any such suit if and to the extent that the
institution or prosecution thereof or the entry of judgment therein would under
applicable law result in the
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surrender, impairment, waiver or loss of the Liens pursuant to the Collateral
Documents upon any property subject to such Liens.
SECTION 6.08. COLLECTION SUIT.
If an Event of Default specified in SECTION 6.01(a) occurs and is
continuing, the Trustee and/or the Collateral Agent are authorized to recover
judgment in its own name and as trustee of an express trust against the Issuer
for, and the Issuer agrees to pay, the whole amount of principal of and interest
remaining unpaid on the Notes and interest on overdue principal and, to the
extent lawful, interest and such further amount as shall be sufficient to cover
the costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, the Collateral Agent and
their respective agents and counsel.
SECTION 6.09. PROOFS OF CLAIM.
The Trustee and/or the Collateral Agent are authorized to file such
proofs of claim and other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee and the Collateral Agent (including
any claim for the reasonable compensation, expenses, disbursements and advances
of the Trustee, the Collateral Agent, and their respective agents and counsel)
and the Holders of the Notes allowed in any judicial proceedings relative to the
Issuer (or any other obligor upon the Notes), the Issuer's creditors or the
Issuer's property and shall be entitled and empowered to collect, receive and
distribute any money or other property payable or deliverable on any such
claims, and any custodian in any such judicial proceeding is hereby authorized
by each Holder of a Note to make such payments to the Trustee and the Collateral
Agent, and in the event that the Trustee and the Collateral Agent shall consent
to the making of such payments directly to the Holders of the Notes, to pay to
the Trustee and the Collateral Agent any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, the
Collateral Agent, and their respective agents and counsel, and any other amounts
due the Trustee and the Collateral Agent under SECTION 7.07. To the extent that
the payment of any such compensation, expenses, disbursements and advances of
the Trustee, the Collateral Agent, or their respective agents and counsel, and
any other amounts due the Trustee and the Collateral Agent under SECTION 7.07
out of the estate in any such proceeding, shall be denied for any reason,
payment of the same shall be secured by a Lien on, and shall be paid out of, any
and all distributions, dividends, money, securities and other properties which
the Holders of the Notes may be entitled to receive in such proceeding whether
in liquidation or under any plan of reorganization or arrangement or otherwise.
Nothing herein contained shall be deemed to authorize the Trustee or the
Collateral Agent to authorize or consent to or accept or adopt on behalf of any
Holder of a Note any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder of a Note thereof,
or to authorize the Trustee or the Collateral Agent to vote in respect of the
claim of any Holder of a Note in any such proceeding; PROVIDED that the Trustee
may be a member of a creditors' or similar committee.
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SECTION 6.10. PRIORITIES.
If the Trustee or the Collateral Agent collects any money pursuant to
this Article VI, it shall pay out the money in the following order:
FIRST: to the Trustee, the Collateral Agent and their respective
agents and attorneys for amounts due under SECTION 7.07, including payment
of all compensation, expense and liabilities incurred, and all advances
made, by the Trustee and/or the Collateral Agent and the costs and expenses
of collection;
SECOND: to Holders for amounts due and unpaid on the Notes for
principal, premium, if any, and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the Notes
for principal, premium, if any, and interest, respectively;
THIRD: without duplication, to Holders for any other Obligations of
the Issuer owing to the Holders under this Indenture, the Notes or the
Collateral Documents; and
FOURTH: to the Issuer or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders pursuant to this SECTION 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee and/or the Collateral Agent for any
action taken or omitted by it as a Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section does not apply to a suit by the
Trustee or a suit by a Holder pursuant to SECTION 6.06.
SECTION 6.12. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case the Issuer, the
Trustee and the Holders will, subject to any determination in such proceeding,
be restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Trustee and the Holder will continue
as though no such proceeding had been instituted.
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ARTICLE VII.
THE TRUSTEE
SECTION 7.01. DUTIES OF THE TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and the other Collateral Documents, and use the same degree of
care and skill in their exercise, as a prudent person would exercise or use
under the circumstances in the conduct of his or her own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined
solely by the express provisions of this Indenture and the Collateral
Documents and the Trustee undertakes to perform only those duties that
are specifically set forth to be performed by it in this Indenture and
the Collateral Documents and no others, and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon certificates
or opinions furnished to the Trustee, and conforming to the
requirements of this Indenture and the Collateral Documents. The
Trustee, however, shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture and the Collateral Documents, if any.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of
paragraph (b) of this SECTION 7.01;
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless it is
proved that the Trustee was negligent in ascertaining the pertinent
facts; and
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to SECTION 6.05.
(d) Whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee is
subject to paragraphs (a), (b) and (c) of this SECTION 7.01.
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(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any financial liability if the
Trustee reasonably believes that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
The Trustee shall be under no obligation to exercise any of its rights and
powers under this Indenture at the request of any Holders, unless such
Holder shall have offered to the Trustee reasonable security and indemnity
satisfactory to it against any loss, liability or expense.
(f) Neither the Trustee nor any Paying Agent shall be liable for
interest on any money received by it except as the Trustee or such Paying
Agent may agree in writing with the Issuer. Money held in trust by the
Trustee or a Paying Agent need not be segregated from other funds except to
the extent required by law.
(g) Each of the Trustee and the Collateral Agent, in their
respective capacities as such, shall not be liable for actions or failures
to act with respect to the obligations of the other under any of the
Operative Documents.
SECTION 7.02. RIGHTS OF THE TRUSTEE.
(a) Each of the Trustee and the Collateral Agent may
conclusively rely upon any document believed by it to be genuine and to
have been signed or presented by the proper Person. Except as otherwise
provided in any Operative Document, neither the Trustee nor the Collateral
Agent need investigate any fact or matter stated in the document; but the
Trustee, in its sole discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records, and premises of the
Issuer, personally or by agent or attorney.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate, an Opinion of Counsel, approval of
Required Holders or any combination thereof. Neither the Trustee nor the
Collateral Agent shall be liable for any action it takes or omits to take
in good faith in reliance on such Officers' Certificate, Opinion of Counsel
or approval of Required Holders.
(c) Each of the Trustee and the Collateral Agent may act through
its attorneys and agents and shall not be responsible for the misconduct or
negligence of any agent appointed with due care.
(d) Neither the Trustee nor the Collateral Agent shall be liable
for any action it takes or omits to take in good faith which it believes to
be authorized or within its rights or powers conferred upon it by this
Indenture or the Collateral Documents.
(e) Unless otherwise specifically provided in this Indenture,
any demand, request, direction or notice from the Issuer shall be
sufficient if signed by an Officer of the Issuer.
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(f) Without limitation and notwithstanding any other provision
in any Operative Document, neither the Trustee nor the Collateral Agent
shall be required to take any action regarding any Real Estate, including,
without limitation, foreclosure or other action (collectively, a
"FORECLOSURE ACTION"), which could result in the Trustee or the Collateral
Agent, as applicable, being deemed to be an "operator" under CERCLA (as
defined in the definition of "HAZARDOUS SUBSTANCE"), if in the reasonable
judgment of the Trustee or the Collateral Agent, as applicable, by taking
such action it would incur unacceptable Environmental Liability or Cost,
and (ii) each of the Trustee and the Collateral Agent shall have the right,
prior to taking any Foreclosure Action with respect to any Real Estate, to
obtain a "Phase One" or other environmental report concerning such Real
Estate prepared by a consultant of its choice and to be reimbursed for the
reasonable cost thereof pursuant to SECTION 7.07, if, in its reasonable
judgment, such report is necessary in order to assess the matters described
in clause (i) of this SECTION 7.02(f). In making an evaluation described
under clause (i) of the preceding sentence, the Trustee or the Collateral
Agent, as applicable, shall assess its potential liability as compared to
the indemnity available pursuant to SECTION 7.07, or from any Holder
pursuant to SECTION 7.01(e).
SECTION 7.03. INDIVIDUAL RIGHTS OF THE TRUSTEE, THE COLLATERAL AGENT AND
AGENTS.
Each of the Trustee and the Collateral Agent in its individual or any
other capacity may become the owner or pledgee of Notes and may otherwise deal
with the Issuer or any Affiliate of the Issuer with the same rights it would
have if it were not the Trustee or the Collateral Agent, as applicable. Any
Agent may do the same with like rights and duties. The Trustee is also subject
to SECTIONS 7.10 AND 7.11, as specified therein, of this Indenture.
SECTION 7.04. DISCLAIMER.
Neither the Trustee nor the Collateral Agent shall be responsible for
and neither makes any representation as to the validity or adequacy of this
Indenture, the Notes, or the Collateral Documents, neither shall be accountable
for the Issuer's use of the proceeds from the Notes or any money paid to the
Issuer or upon the Issuer's direction under any provision of this Indenture or
the other Operative Documents, neither shall be responsible for the use or
application of any money received by any Paying Agent other than itself, and
neither shall be responsible for any statement or recital herein or any
statement in the Notes or any other document in connection with the sale of the
Notes or pursuant to this Indenture other than its certificate of
authentication. Neither the Trustee nor the Collateral Agent makes any
representation as to the validity, value or condition of any property covered or
intended to be covered by the Lien of the Collateral Documents or any part
thereof or as to the title of the Issuer to such property or as to the security
afforded by the Collateral Documents or hereby.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is
known or deemed known to a Responsible Officer of the Trustee and/or the
Collateral Agent, the Trustee and/or the Collateral Agent shall promptly notify
the other, and the Trustee shall mail to Holders
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a notice of the Default or Event of Default within thirty (30) days after
obtaining knowledge thereof. Notwithstanding anything contained in TIA Section
315(b) to the contrary, the Trustee shall not withhold any such notice.
SECTION 7.06. REPORTS BY THE TRUSTEE TO HOLDERS OF THE NOTES.
Within sixty (60) days after each January 1 beginning with the
January 1 following the Issue Date, the Trustee shall mail to the Holders of the
Notes a brief report dated as of such reporting date that complies with TIA
Section 313(a) (but if no event described in TIA Section 313(a) has occurred
within the twelve months preceding the reporting date, no report need be
transmitted). The Trustee shall, within 90 days thereof, and in compliance with
TIA Section 313(b), notify the Holders of the Notes in the event of (1) the
release, or release and substitution, of any collateral pursuant to
SECTION 10.03 OR 10.04 (and the consideration therefor, if any) the fair value
of which equals or exceeds 10% of the principal amount of the Notes outstanding
at the time of such release or (2) the character and amount of any advances made
by it since the date of the last report transmitted pursuant to TIA Section
313(a) (or if no such report has yet been so transmitted, since the Effective
Date), for the reimbursement of which it may claim a Lien or charge higher than
that of the Notes, the aggregate amount of which at any time exceeds 10% of the
principal amount of the Notes outstanding at such time. The Trustee also shall
comply with TIA Section 313(b)(2). The Trustee shall also transmit by mail all
reports as required by TIA Section 313(c).
A copy of each report at the time of its mailing to the Holders shall
be mailed to the Issuer and filed with the SEC and each stock exchange, if any,
on which the Notes are listed, in accordance with TIA 313(d). The Issuer shall
promptly notify the Trustee when the Notes are listed on any stock exchange.
SECTION 7.07. COMPENSATION.
The Issuer shall pay to each of the Trustee and the Collateral Agent
from time to time reasonable compensation for its acceptance of this Indenture
and for services provided under the Operative Documents. The Trustee's
compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Issuer shall reimburse each of the Trustee and the
Collateral Agent promptly upon request for all reasonable disbursements,
advances and expenses incurred or made by it in addition to the compensation for
its services. Such expenses shall include the reasonable compensation,
disbursements and expenses of the agents and counsel of each of the Trustee and
the Collateral Agent.
The obligations of the Issuer under this SECTION 7.07 AND SECTION
4.19(a) shall survive the satisfaction and discharge of this Indenture.
To secure the Issuer's payment obligations in this SECTION 7.07 AND
SECTION 4.19(a), each of the Trustee, the Collateral Agent, any Paying Agent and
each Indemnified Person shall have a Lien prior to the Notes on all money or
property held or collected by the Trustee, the Collateral Agent or any Paying
Agent, as applicable, except money or property held in trust to pay principal
and interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
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When the Trustee or the Collateral Agent incurs expenses or renders
services after an Event of Default specified in SECTION 6.01(e) occurs, the
expenses and the compensation for the services (including the fees and expenses
of its agents and counsel) are to constitute expenses of administration under
any Bankruptcy Law.
SECTION 7.08. REPLACEMENT OF THE TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 7.08.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Issuer. The Required Holders may
remove the Trustee by so notifying the Trustee and the Issuer in writing. The
Issuer may remove the Trustee if:
(a) the Trustee fails to comply with SECTION 7.10;
(b) the Trustee is adjudged a bankrupt or an insolvent or an
order for relief is entered with respect to the Trustee under any
Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or
its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Issuer shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Required
Holders may appoint a successor Trustee to replace the successor Trustee
appointed by the Issuer.
If a successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Issuer, or the
Holders of at least 10% in principal amount of the then outstanding Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with SECTION 7.10, any Holder of a Note
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuer. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of such
succession to Holders of the Notes. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee provided
all sums owing to the retiring Trustee hereunder have been paid and subject to
the Lien provided for in SECTION 7.07. Notwithstanding replacement of the
Trustee pursuant to this Section, the Issuer's obligations under SECTION 7.07
shall continue for
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the benefit of the retiring Trustee with respect to expenses and liability
incurred by it prior to such replacement.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business (including the trust
created by this Indenture) to, another corporation, the successor corporation or
association without any further act shall be the successor Trustee; PROVIDED
that such corporation is otherwise eligible to be the successor under this
Indenture.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America or of any state thereof authorized under such laws to exercise corporate
trust powers, shall be subject to supervision or examination by federal or state
authority and shall have a combined capital and surplus of at least $100 million
as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to
TIA Section 310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE ISSUER.
The Trustee is subject to TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.
ARTICLE VII.
DEFEASANCE
SECTION 8.01. OPTION TO EFFECT DEFEASANCE.
The Issuer may elect to have SECTION 8.02 be applied to all
outstanding Notes upon compliance with the conditions set forth below in this
Article VIII and delivery of an Officers' Certificate setting forth a resolution
of the Board of Members making such election.
SECTION 8.02. DEFEASANCE AND DISCHARGE.
Upon the Issuer's exercise under SECTION 8.01 of the option applicable
to this SECTION 8.02, the Issuer shall be deemed to have been discharged from
its obligations with respect to all outstanding Notes on the date the conditions
set forth below (including SECTION 8.03) are satisfied (hereinafter,
"DEFEASANCE"). For this purpose, such Defeasance means that the Issuer shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes
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of SECTION 8.04 and the other Sections of this Indenture referred to in
(a) and (b) of this SECTION 8.02, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Issuer, shall execute proper instruments acknowledging
the same), except for the following which shall survive until otherwise
terminated or discharged hereunder: (a) the rights of Holders of outstanding
Notes to receive solely from the trust fund described in SECTION 8.03, and as
more fully set forth in such Section, payments in respect of the principal of
and interest on such Notes when such payments are due, (b) the Issuer's
obligations with respect to such Notes under SECTIONS 2.06, 2.08, 2.09, 2.12 AND
4.02, (c) the rights, powers, trusts, duties and immunities of the Trustee
hereunder and the Issuer's obligations in connection therewith, and (d) this
Article VIII.
SECTION 8.03. CONDITIONS TO DEFEASANCE.
The following shall be the conditions to the application of
SECTION 8.02 to the outstanding Notes:
(a) the Issuer shall irrevocably have deposited or caused to be
deposited with the Trustee as trust funds in trust for the purpose of
making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Notes, (i) Cash in
an amount or (ii) non-callable Governmental Securities which through the
scheduled payment of principal and interest in respect thereof in
accordance with their terms will provide, not later than one day before the
due date of any payment under the Notes, Cash in an amount, or (iii)
a combination thereof, in such amounts, as will be sufficient to pay and
discharge and which shall be applied by the Trustee (or other qualifying
trustee) (A) the principal of and interest on the outstanding Notes on the
stated maturity or on the applicable redemption date, as the case may be,
and (B) any mandatory sinking fund payments or analogous payments
applicable to the outstanding Notes on the day on which such payments are
due and payable in accordance with the terms of this indenture and of such
Notes; PROVIDED that the Trustee shall have been irrevocably instructed to
apply such money or the proceeds of such noncallable Governmental
Securities to said payments with respect to the Notes;
(b) no Default or Event of Default with respect to the Notes
shall have occurred and be continuing on the date of such deposit;
(c) such Defeasance shall not result in a breach or violation
of, or constitute a default under, this Indenture or any other material
agreement or material instrument to which the Issuer is a party or by which
the Issuer is bound;
(d) the Issuer shall have delivered to the Trustee an Officers'
Certificate stating that the deposit made by the Issuer pursuant to its
election under SECTION 8.02 was not made by the Issuer with the intent of
preferring the Holders over other creditors of the Issuer or with the
intent of defeating, hindering, delaying or defrauding creditors of the
Issuer or others;
(e) the Issuer shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to
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the Defeasance under SECTION 8.02 have been complied with as contemplated
by this SECTION 8.03;
(f) the Issuer shall have delivered to the Trustee an Opinion of
Counsel confirming that, subject to customary assumptions and exclusions,
(A) the Company has received from, or there has been published by, the
United States Internal Revenue Service a ruling or (B) since the Effective
Date, there has been a change in the applicable federal income tax law, in
either case to the effect that the Holders of the outstanding Notes will
not recognize income, gain or loss for federal income tax purposes as a
result of such Defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have been
the case if such Defeasance had not occurred; and
(g) the Issuer shall have delivered to the Trustee an Opinion of
Counsel to the effect that, as of the date of such opinion and subject to
the customary assumptions and exclusions, the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally under
any applicable United States or state law and that the Trustee has a
perfected security interest in such trust for the ratable benefit of the
Holders.
SECTION 8.04. DEPOSITED MONEY AND GOVERNMENTAL SECURITIES TO BE HELD IN
TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to SECTION 8.05, all money and Governmental Securities
(including the proceeds thereof) deposited with the Trustee pursuant to
SECTION 8.03 in respect of the outstanding Notes shall be held in trust and
applied by the Trustee, in accordance with the provisions of such Notes and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Issuer acting as Paying Agent) as the Trustee may determine, to
the Holders of such Notes of all sums due and to become due thereon in respect
of principal, premium, if any, and interest, but such money need not be
segregated from other funds except to the extent required by law.
The Issuer shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 8.03 or the principal, premium, if any,
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
SECTION 8.05. REPAYMENT TO THE ISSUER.
(a) Anything in this Article Eight to the contrary
notwithstanding, the Trustee shall deliver or pay to the Issuer from time to
time upon the request of the Issuer any money or Governmental Securities held by
it as provided in SECTION 8.03 which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee, are in excess of the amount thereof which
would then be required to be deposited to effect an equivalent Defeasance.
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(b) Any money deposited with the Trustee or any Paying Agent, or
then held by the Issuer, in trust for the payment of the principal of or
interest on any Note and remaining unclaimed for two years after such principal
or interest has become due and payable shall be paid to the Issuer on its
request or (if then held by the Issuer) shall be discharged from such trust; and
the Holder of such Note shall thereafter, as a general unsecured creditor, look
only to the Issuer for payment thereof, and all liability of the Trustee or such
Paying Agent with respect to such trust money, and all liability of the Issuer,
as trustee thereof, shall thereupon cease; PROVIDED, HOWEVER, that the Trustee
or such Paying Agent, before being required to make any such repayment, may at
the expense of the Issuer cause to be published once, in the "New York Times"
and "The Wall Street Journal" (national edition), notice that such money remains
unclaimed and that, after a date specified therein, which shall not be less than
30 days from the date of such notification or publication, any unclaimed balance
of money then remaining will be repaid to the Issuer.
SECTION 8.06. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any Cash or
Governmental Securities in accordance with SECTION 8.02, as the case may be, by
reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, then the
Issuer's obligations under this Indenture and the Notes shall be revived and
reinstated as though no deposit had occurred pursuant to SECTION 8.02 until such
time as the Trustee or Paying Agent is permitted to apply all such money in
accordance with SECTION 8.02, as the case may be; PROVIDED, HOWEVER, that, if
the Issuer makes any payment of principal or interest on any Note following the
reinstatement of its obligations, the Issuer shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money held by the
Trustee or Paying Agent.
ARTICLE IX.
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS.
Notwithstanding SECTION 9.02, the Issuer and the Trustee may amend or
supplement this Indenture, the Notes and any other Operative Document without
the consent of any Holder:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in
place of certificated Notes;
(c) to provide for (i) the assumption of the Issuer's
obligations to the Holders of the Notes in the case of a merger or
consolidation pursuant to Article V, and (ii) certain amendments to the
Collateral Documents expressly called for therein pursuant to
SECTION 10.01;
(d) to execute and deliver any documents necessary or
appropriate to release Liens on any Collateral as permitted by
SECTION 10.03 OR 10.04;
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(e) to make any change that would provide any additional rights
or benefits to the Holders of the Notes or that does not materially
adversely affect the legal rights hereunder of any Holder of the Notes;
(f) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA; or
(g) to evidence or effect the pledge of additional or substitute
assets or property as collateral.
Upon the request of the Issuer accompanied by a resolution of the
Board of Members of the Issuer authorizing the execution of any such amended or
supplemental Indenture, and upon receipt by the Trustee of the documents
described in SECTION 9.06, the Trustee shall join with the Issuer in the
execution of any amended or supplemental Indenture authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations which may be therein contained, but the Trustee shall not be
obligated to enter into any such amended or supplemental Indenture that affects
the Trustee's own rights, duties or immunities under this Indenture, the
Collateral Documents or otherwise. The Issuer shall give the Holders, with a
copy to the Trustee, notice of the effectiveness of any amendment under this
SECTION 9.01 briefly describing the amendment or supplement.
SECTION 9.02. WITH CONSENT OF HOLDERS.
Subject to SECTION 6.07, the Issuer and the Trustee may amend or
supplement this Indenture, the Notes, or any amended or supplemental Indenture
with the written consent of the Required Holders (including consents obtained in
connection with a tender offer or exchange offer for the Notes), and, subject to
SECTION 6.07, any existing Default or Event of Default and its consequences or
compliance with any provision of this Indenture or the Notes may be waived with
the consent of the Holders of not less than 25% in principal amount of the Notes
outstanding on the date of determination (including consents obtained in
connection with a tender offer or exchange offer for the Notes). The Issuer and
the Trustee may, with the consent of Holders of 66 2/3% in principal amount of
each of the Notes and the Class B Notes, respectively, outstanding on the date
of determination, directly or indirectly release Liens on all or substantially
all of the Collateral except in connection with a Triggering Event. The Issuer
and the Trustee may, with the consent of Holders of the principal amount of
Notes whose Holders must consent to an amendment, supplement or waiver, reduce
such principal amount with respect to such amendment, supplement or waiver.
Upon the request of the Issuer accompanied by a resolution the Board
of Members of the Issuer authorizing the execution of any such amended or
supplemental Indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Required Holders as aforesaid,
and upon receipt by the Trustee of the documents described in SECTION 9.06, the
Trustee shall join with the Issuer in the execution of such amended or
supplemental Indenture, but the Trustee shall not be obligated to enter into any
such amended or supplemental Indenture that affects the Trustee's own rights,
duties or immunities under this Indenture, the Collateral Documents or
otherwise. After an amendment, supplement or waiver under this Section becomes
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effective, the Issuer shall mail to the Holders affected thereby a notice of the
effectiveness of any amendment under this SECTION 9.02 briefly describing the
amendment, supplement or waiver.
Notwithstanding the provisions of this SECTION 9.02, without the
consent of each Holder affected, an amendment or waiver may not (with respect to
any Notes held by a nonconsenting Holder):
(a) reduce the principal of or change the fixed maturity of any
Note or reduce the redemption price of the Notes;
(b) reduce the rate of or change the time for payment of
interest on any Note;
(c) waive a Default or Event of Default in the payment of
principal of or interest on the Notes (except a rescission of acceleration
of the Notes by the Required Holders and a waiver of the payment default
that resulted from such acceleration);
(d) make any Note payable in money other than that stated in the
Notes;
(e) make any change in SECTIONS 6.04, 6.07 OR 9.02 (this
sentence only); or
(f) waive a redemption payment with respect to any Note.
It shall not be necessary for the consent of the Holders under this
SECTION 9.02 to approve the particular form of any proposed amendment,
supplement, or waiver, but it shall be sufficient if such consent approves the
substance thereof.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes shall be
set forth in an amended or supplemental Indenture that complies with the TIA as
then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. Any such Holder of a Note or subsequent Holder of a Note,
however, may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the Trustee receives written notice that
the waiver, supplement or amendment becomes effective (or such later date as may
be required by law or stock exchange rule). An amendment, supplement or waiver
becomes effective in accordance with its terms and thereafter binds every Holder
of a Note.
The Issuer may fix a record date for determining which Holders must
consent to such amendment, supplement or waiver. If the Issuer fixes a record
date, the record date shall be fixed at (i) the later of 30 days prior to the
first solicitation of such consent or the date of the most recent list of
Holders furnished to the Trustee prior to such solicitation pursuant to SEC-
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TION 2.07 or (ii) such other date as the Issuer shall designate. If a record
date is fixed, then, notwithstanding the immediately preceding paragraph, those
Persons who were Holders of a Note at such record date (or their duly designated
proxies), and only those Persons, shall be entitled to consent to such amendment
or waiver or to revolve any consent previously given, whether or not such
Persons continue to be Holders after such record date. No consent shall be
valid or binding for more than 90 days after such record date unless consents
from Holders in the principal amount required under this Indenture for such
amendment or waiver to be effective shall also have been given and not revoked
their consent within such 90-day period.
After an amendment or waiver becomes effective it shall bind every
Holder of a Note, unless it is of the type described in SECTION 9.02 in which
case, the amendment or waiver shall bind each Holder of a Note who has consented
to it and every Holder of a Note that evidences the same Indebtedness as the
consenting Holder's Note.
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Issuer in
exchange for all Notes may issue and the Trustee shall authenticate new Notes
that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06. THE TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article IX if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Issuer may not sign an amendment or supplemental Indenture until its Board
of Members approves it. In signing or refusing to sign such amendment or
supplemental Indenture, the Trustee shall be entitled to receive, if requested,
an indemnity reasonably satisfactory to it and to receive and, subject to
SECTION 7.01, shall be fully protected in relying upon, an Officers' Certificate
and an Opinion of Counsel as conclusive evidence that such amendment or
supplemental Indenture is authorized or permitted by this Indenture, that it is
not inconsistent herewith, and that it will be valid and binding upon the Issuer
in accordance with its terms.
ARTICLE X.
COLLATERAL AND SECURITY
SECTION 10.01. COLLATERAL DOCUMENTS.
The due and punctual payment of the principal of and interest on the
Notes when and as the same shall be due and payable, whether on an interest
payment date or a principal amortization date, at maturity, by acceleration,
repurchase, redemption or otherwise, and interest on the overdue principal of
and interest (to the extent permitted by law), if any, on the Notes and
performance of all other obligations of the Issuer to the Holders, the Trustee
or the Collateral
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Agent under this Indenture, the Collateral Documents and the Notes, according to
the terms hereunder or thereunder, shall be secured as provided in the
Collateral Documents. Each Holder, by its acceptance thereof, consents and
agrees to the terms of the Collateral Documents (including, without limitation,
the provisions providing for foreclosure and release of Collateral) as the same
may be in effect or may be amended from time to time in accordance with its
terms and authorizes and directs the Collateral Agent to enter into the
Collateral Documents and to perform its obligations and exercise its rights
thereunder in accordance therewith. The Issuer shall deliver to the Trustee
copies of all Collateral Documents, and, subject to the provisions of the
Collateral Documents, shall do or cause to be done all such acts and things as
may be necessary or proper, or as may be required by the provisions of the
Collateral Documents, to assure and confirm to the Trustee the security interest
in the Collateral contemplated hereby, by the Collateral Documents or any part
thereof, as from time to time constituted, so as to render the same available
for the security and benefit of this Indenture and the Notes secured hereby,
according to the intent and purposes herein expressed. The Issuer shall take
upon request of the Trustee, any and all actions reasonably required to cause
the Collateral Documents to create and maintain, as security for the Obligations
of the Issuer under the Operative Documents, a valid and enforceable perfected
first priority Lien in and on all of the Collateral, in favor of the Collateral
Agent for the benefit of the Trustee, the Collateral Agent and the Holders,
(a) superior to and prior to the rights of all third Persons, and (b) subject to
no Liens other than the Liens permitted under SECTION 4.09.
SECTION 10.02. RECORDING AND OPINIONS.
The Issuer shall furnish to the Trustee, promptly following the
execution and delivery of this Indenture, and annually thereafter to the extent
required by Section 314(b) of the TIA, an Opinion of Counsel either (i) stating
that in the opinion of such counsel all action has been taken with respect to
the recording, registering and filing of this Indenture, the Mortgages, the
Assignments of Leases, the Collateral Assignments of Mortgages, the Collateral
Assignments of Leases and Uniform Commercial Code financing statements necessary
to make effective and perfect the Lien intended to be created by the Collateral
Documents, and reciting with respect to the security interests in the
Collateral, the details of such action, or (ii) stating that, in the opinion of
such counsel, no such action is necessary to make such Lien effective.
SECTION 10.03. RELEASE OF COLLATERAL.
No Collateral shall be released from the Lien and security interest
created by the Collateral Documents pursuant to the provisions of the Collateral
Documents or this Indenture without the prior written consent of the Trustee and
the Required Holders.
SECTION 10.04. CERTIFICATES OF THE ISSUER.
The Issuer shall furnish to the Trustee and the Collateral Agent,
prior to each proposed release of Collateral pursuant to the Collateral
Documents or this Indenture, (i) all documents required by TIA Section 314(d)
and (ii) an Opinion of Counsel to the effect that such accompanying documents
constitute all documents required by TIA Section 314(d). The Trustee may, to
the extent permitted by SECTIONS 7.01 AND 7.02, accept as conclusive evidence of
compliance
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with the foregoing provisions the appropriate statements contained in such
documents and such Opinion of Counsel.
SECTION 10.05. AUTHORIZATION OF ACTIONS TO BE TAKEN BY THE COLLATERAL AGENT
UNDER THE COLLATERAL DOCUMENTS.
Subject to the provisions of SECTIONS 7.01 AND 7.02, the Trustee may,
in its sole discretion and without the consent of the Holders, on behalf of the
Holders, direct the Collateral Agent to take all actions it deems necessary or
appropriate in order to (a) enforce any of the terms of the Collateral Documents
and (b) collect and receive any and all amounts payable in respect of the
Obligations of the Issuer under any of the Operative Documents. The Trustee and
the Collateral Agent shall have power to institute and maintain such suits and
proceedings and enter into such agreements as either may deem expedient to
prevent any impairment of the Collateral by any acts that may be unlawful or in
violation of the Collateral Documents or this Indenture, and such suits,
proceedings and agreements as the Trustee or the Collateral Agent may deem
expedient to preserve or protect its interests and the interest of the Holders
in the Collateral (including power to institute and maintain suits or
proceedings to restrain the enforcement of or compliance with any legislative or
other governmental enactment, rule or order that may be unconstitutional or
otherwise invalid if the enforcement of, or compliance with, such enactment,
rule or order would impair the security interest hereunder or be prejudicial to
the interests of the Trustee, the Collateral Agent or the Holders).
SECTION 10.06. AUTHORIZATION OF RECEIPT OF FUNDS BY THE TRUSTEE UNDER THE
COLLATERAL DOCUMENTS.
The Trustee shall cause the Collateral Agent to deliver to the Trustee
and the Trustee is authorized to receive any funds for the benefit of the
Holders distributed under the Collateral Documents, and to make further
distributions of such funds to the Holders according to the provisions of this
Indenture and the Collateral Documents.
SECTION 10.07. TERMINATION OF SECURITY INTEREST.
Upon the full and final payment of all Obligations of the Issuer under
all of the Operative Documents (including an effective defeasance pursuant to
SECTION 8.02), the Trustee shall, at the request of the Issuer, release (or
permit the Collateral Agent to release) the Liens pursuant to this Indenture.
If the Trustee or Paying Agent is unable to apply any Cash or Governmental
Securities in accordance with SECTION 8.02 by reason of any order or judgment of
any court or Governmental Authority enjoining, restraining or otherwise
prohibiting such application, then the Trustee shall cause the Collateral Agent
to cause the Liens to be revived and reinstated as though no deposit had
occurred pursuant to SECTION 8.02 until such time as the Trustee or Paying Agent
is permitted to apply all such money in accordance with SECTION 8.02.
SECTION 10.08. COLLATERAL AGENT'S DUTIES.
The Collateral Agent, acting in its capacity as such, shall have only
such duties with respect to the Collateral as are set forth in the Collateral
Documents.
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SECTION 10.09. HAZARDOUS MATERIALS.
(a) ENVIRONMENTAL COMPLIANCE. The Issuer shall keep and
maintain (and cause all tenants to keep and maintain) the Trust Estate,
including, without limitation, the groundwater on, under or in the vicinity
of the Trust Estate, in compliance with, and free of material liabilities
under, and shall not cause or permit the Trust Estate to be in material
violation of, or subject to conditions forming the basis for material
liability under, any Environmental Laws.
(b) RESTRICTIONS ON USE. The Issuer shall not (and shall take
all reasonable efforts to assure that all of its tenants shall not) use,
generate, manufacture, treat, handle, refine, produce, process, store,
discharge, release, dispose of or allow to exist on, under or about the
Trust Estate any Hazardous Substance except (i) in the ordinary course of
business and in de minimis amounts, and (ii) otherwise in compliance with,
and not reasonably likely to lead to liability under, Environmental Laws.
Furthermore, the Issuer shall not allow to exist on, under or about the
Trust Estate, any underground storage tanks or underground deposits.
(c) ACCESS. The Trustee shall be entitled, at any reasonable
time, to enter upon and inspect the Trust Estate and take any other actions
it reasonably deems necessary to confirm the Issuer's compliance with the
obligations and agreements set forth in this SECTION 10.09.
(d) NOTICE TO THE HOLDERS. The Issuer promptly shall advise the
Trustee, the Collateral Agent and the Holders in writing of (a) any and all
enforcement, clean up, removal, mitigation or other governmental or
regulatory actions instituted or threatened in writing pursuant to any
Environmental Laws affecting the Trust Estate; (b) all claims made or
threatened in writing by any third party against the Holders, the Issuer or
the Trust Estate relating to damage, contribution, cost recovery,
compensation, loss or injury resulting from any Hazardous Substance (the
matters set forth in clauses (a) and (b) above are hereinafter referred to
as "Hazardous Materials Claims"); (c) the Issuer's discovery of any
occurrence or condition on any real property adjoining or in the vicinity
of the Trust Estate that could cause the Trust Estate or any part thereof
to be classified as "border-zone property" under the provisions of
California Health and Safety Code Section 25220, ET SEQ., or any regulation
adopted in accordance therewith or which may support a similar claim or
cause of action under the Environmental Laws; and (d) the Issuer's
discovery of any occurrence or condition on the Trust Estate or any real
property adjoining or in the vicinity of the Trust Estate which could
subject the Issuer or the Trust Estate to any restrictions on ownership,
occupancy, transferability or use of the Trust Estate under any
Environmental Laws. The Holders shall have the right to join and
participate in, as a party if it so elects, any settlements, remedial
actions, legal proceedings or actions initiated in connection with any
Hazardous Materials Claims and to have its reasonable attorneys' fees in
connection therewith paid by the Issuer.
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SECTION 10.10. INSPECTIONS.
The Issuer will permit representatives of the Trustee and/or the
Collateral Agent to visit and inspect the properties of the Issuer, including,
without limitation, the Trust Estate, and to examine and make extracts from its
books and records, and to discuss its affairs, finances and accounts with its
officers and employees and its independent accountants, all at reasonable times
and as often as may be reasonably requested; provided that the rights granted
under this SECTION 10.10 shall be (i) exercised only to the extent reasonably
related in good faith to the protection of any interests, rights or remedies of
the Trustee under or in respect of the Collateral Documents and (ii) subject to
any law, regulation or order to which the Issuer is subject, or any indenture,
agreement or other instrument to which the Issuer is party, which prohibits the
disclosure of non-public information.
SECTION 10.11. TITLE.
The Issuer has good and marketable title to the Trust Estate subject
to no Lien, charge or encumbrance except such as are listed as exceptions to
title in the title policy or policies insuring the Lien of the Deed of Trust
issued by a title company or companies acceptable to the Trustee. The Deed of
Trust is and will remain a valid and enforceable Lien on the Trust Estate
subject only to the exceptions referred to above. The Issuer has full power and
lawful authority to grant, assign, transfer and mortgage its interest in the
Trust Estate in the manner and form done or intended by the Deed of Trust. The
Issuer will preserve its interest in and title to the Trust Estate and will
forever warrant and defend the same to the trustee under the Deed of Trust and
the Trustee and will forever warrant and defend the validity and priority of the
Lien created by the Deed of Trust against the claims of all persons and parties
whomsoever. The Issuer shall pay all costs, fees and expenses, including costs
of evidence of title and the fees of the trustee under the Deed of Trust or the
Trustee and attorney's fees, paid or incurred by the trustee under the Deed of
Trust or the Trustee in connection with the enforcement of their rights under
the Deed of Trust or in any action or proceeding threatened or commenced in
which the trustee under the Deed of Trust or the Trustee may appear or be made a
party, whether or not pursued to final judgement, and in any exercise of the
power of sale contained herein, whether or not such sale is actually
consummated. The Issuer shall promptly and completely observe, perform, and
discharge each and every obligation, covenant and agreement affecting the Trust
Estate whether the same is prior and superior or subject and subordinate to the
Lien created by the Deed of Trust.
ARTICLE XI.
MISCELLANEOUS
SECTION 11.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA Section 318(c), the imposed duties shall control.
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SECTION 11.02. NOTICES.
Any notice or communication by the Issuer or the Trustee to any other
party hereto is duly given if in writing and delivered in person or mailed by
first class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, to the
party's address:
If to the Issuer:
Jamboree LLC
c/o Oaktree Capital Management, LLC
550 South Hope Street, 22nd Floor
Los Angeles, California 90071
Telecopier No.: (213) 694-
Attention:
with copies to:
Milbank, Tweed, Hadley & McCloy
601 South Figueroa Street
Thirtieth Floor
Los Angeles, California 90017-5735
Telecopier No.: (213) 629-5063
Attention: Paul S. Aronzon, Esq.
and to:
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, California 90071
Telecopier Nos.: (213) 669-6407, (714) 669-6994
Attention: Patricia Frobes, Esq.
If to the Trustee:
IBJ Schroder Bank & Trust Company
1 State Street
New York, New York 10004
Telecopier No.: (212) 858-2952
Attention: Corporate Trust Administration
with a copy to:
Christopher D. Johnson
Squire, Sanders & Dempsey L.L.P.
Two Renaissance Square
40 N. Central Avenue, Suite 2700
Phoenix, Arizona 85004
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The Issuer or the Trustee, by notice to the other may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to the Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
Acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA Section 313(c), to the extent required by the TIA.
Failure to mail a notice or communication to a Holder of a Note or any defect in
it shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Issuer mails a notice or communication to the Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
SECTION 11.03. COMMUNICATION BY THE HOLDERS WITH OTHER HOLDERS.
The Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture, the Notes and the
Collateral Documents. The Trustee shall act in accordance with TIA Section
312(b) with respect to such communications. The Issuer, the Trustee, the
Collateral Agent, the Registrar and anyone else shall have the protection of TIA
Section 312(c).
SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Issuer to the Trustee to take
any action under this Indenture, the Issuer shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in SECTION 11.05) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in SECTION 11.05) stating that, in the opinion of such counsel, all such
conditions precedent and covenants provided for in this Indenture relating
to the proposed action have been satisfied.
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SECTIOIN 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to respect to compliance with
a condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA Section 314(a)(4)) shall include:
(a) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she
has made such examination or investigation as is necessary to enable him or
her to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(d) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been complied with.
SECTION 11.06. RULES BY THE TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting of
the Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 11.07. NO PERSONAL LIABILITY OF THE MEMBERS, OFFICERS, EMPLOYEES
AND EQUITYHOLDERS.
No officer, employee or equityholder (or directors, officers or
employees of such equityholders or their equityholders) of the Issuer, as such,
shall have any liability for any obligations of the Issuer under the Notes, the
Indenture or the Collateral Documents, or for any claim based on, in respect of,
or by reason of, such obligations or their creation. Each Holder of the Notes
by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes.
SECTION 11.08. GOVERNING LAW.
The internal law of the State of New York shall govern and be used to
construe this Indenture and the Notes without regard to principles of conflicts
of law.
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SECTION 11.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture and the Notes may not be used to interpret another
indenture, loan or debt agreement of the Issuer. Any such indenture, loan or
debt agreement may not be used to interpret this Indenture. This writing
constitutes the entire agreement of the parties with respect to the subject
matter hereof. Unless expressly otherwise indicated herein, an action or
transaction permitted by one provision hereof must nonetheless comply with all
other applicable provisions hereof, and any action or transaction not permitted
by any provision of this Indenture will not be permitted regardless of whether
any other provisions hereof might permit such action or transaction.
SECTION 11.10. SUCCESSORS.
All agreements of the Issuer in this Indenture and the Notes shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successors.
SECTION 11.11. SEVERABILITY.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 11.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 11.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
SECTION 11.14. QUALIFICATION OF INDENTURE.
The Issuer shall qualify this Indenture under the TIA and shall pay
all costs and expenses (including attorneys' fees for the Issuer, the Trustee
and the Holders of the Securities) incurred in connection therewith, including,
but not limited to, costs and expenses of qualification of the Indenture and the
Notes and printing this Indenture and the Notes. In connection with any such
qualification of this Indenture under the TIA, the Trustee shall be entitled to
receive from the Issuer any such Officers' Certificates, Opinions of Counsel or
other documentation as it may reasonably request.
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SECTION 11.15. SATISFACTION AND DISCHARGE.
Upon the indefeasible payment in full of all Obligations of the Issuer
under all of the Operative Documents, the Issuer shall be released from all its
obligations under this Indenture and under the Notes and this Indenture shall
cease to be of further effect.
SECTION 11.16. THIRD PARTY BENEFICIARY.
The Issuer and the Trustee hereby expressly agree and acknowledge that
the Collateral Agent is intended to be an express third party beneficiary of
this Indenture and the Collateral Agent shall be entitled to exercise any and
all rights and remedies afforded third-party beneficiaries under the laws of the
relevant jurisdiction.
[Signatures on following page]
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SIGNATURES
Dated as of , 1997 JAMBOREE, LLC
------------
By:
-------------------------------------
Attest: Name:
Title:
- ----------------------------------
Name:
Title:
Dated as of ____________, 1997 IBJ SCHRODER BANK & TRUST
COMPANY, as Trustee
Attest:
By:
- ------------------------------ ------------------------------------
Name: Name:
Title: Title:
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<PAGE>
EXHIBIT A
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. THIS NOTE MAY NOT BE
SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS THE PROPOSED TRANSACTION DOES
NOT REQUIRE REGISTRATION OR QUALIFICATION UNDER FEDERAL OR STATE SECURITIES
LAWS, OR UNLESS THE PROPOSED TRANSACTION IS REGISTERED OR QUALIFIED AS REQUIRED.
[Face of Note]
________% Class A Senior Secured Note due 2002
No.____ $_____________
Jamboree LLC promises to pay to _____________________________ or its registered
assigns the outstanding principal balance on March 27, 2002. The Interest
Payment Dates shall be monthly on the first day of each month, commencing
_____________, 1997. Interest may be paid through the issuance of additional
Notes until March 27, 1998. The record dates for determining Holders entitled
to receive payments of interest on the Notes shall be the fifteenth day of each
prior month (whether or not a Business Day).
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated: Jamboree LLC
-----------------------------
(SEAL)
By:
--------------------------------
This is one of the Notes
referred to in the within
mentioned Indenture:
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
By:
--------------------------------
Authorized Signatory
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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[Back of Note]
______% Class A Senior Secured Note due 2002
Capitalized terms used herein have the meanings assigned to them in
the Indenture (as defined below) unless otherwise indicated.
1. PRINCIPAL AND INTEREST. Jamboree LLC, a Delaware limited
liability company (the "ISSUER"), promises to pay interest on the outstanding
principal amount of this Note at the rate and in the manner specified below.
Interest shall accrue at ______% per annum and shall be payable monthly in
arrears on the first day of each month, commencing _____________, 1997 or if any
such day is not a Business Day on the next succeeding Business Day (each an
"INTEREST PAYMENT DATE") to the Holders of record of the Notes at the close of
business on the fifteenth day of the immediately preceding month, whether or not
a Business Day; PROVIDED, HOWEVER, that during the period from the date hereof
until March 27, 1998, the Issuer, at its option, may deliver on any Interest
Payment Date additional Notes (valued at 100% of the principal amount thereof)
to the Holder of this Note, in lieu of cash, in satisfaction of all or part of
the interest payment then due on this Note in accordance with the terms of the
Indenture. Notwithstanding the foregoing, additional Notes delivered in
satisfaction of any interest payment then due on this Note shall be issuable
only in denominations of $1000 and any integral multiple thereof, with the
remainder of any such interest payable in cash. Interest shall be computed on
the basis of a 360-day year consisting of twelve 30-day months. Interest shall
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from _____________, 1997. The Issuer shall pay interest
on overdue principal at a rate equal to 3% per annum in excess of the interest
rate on the Notes to the extent lawful; and it shall pay interest on overdue
installments of interest (without regard to any applicable grace periods) at the
same rate to the extent lawful. The Issuer shall, on each Interest Payment Date
beginning March 28, 1999, pay an installment of the principal of this Note to
the Person who is the registered Holder of this Note at the close of business on
each such Interest Payment Date in the amount of $________ multiplied by the
principal amount of this Note divided by the aggregate principal amount of all
the Notes outstanding on each such date.
2. METHOD OF PAYMENT. The Issuer shall pay interest on (except
defaulted interest) the outstanding principal amount of the Notes and principal
of the Notes to the Persons who are registered Holders at the close of business
on the record date next preceding the Interest Payment Date, even if such Notes
are cancelled after such record date and on or before such Interest Payment
Date. All payments under this Note shall be applied first to interest due and
payable on this Note and then to the reduction of the unpaid principal amount of
this Note. The Paying Agent shall keep a record of all payments of principal of
this Note, which record, absent manifest error, shall be conclusive for all
purposes under the Notes and the Indenture. At any time a Note is reissued,
replaced or exchanged pursuant to the terms of the Notes or the Indenture, the
principal amount of the new Note shall be reduced to reflect any such payments
made to the date of such reissue, replacement or exchange. The Issuer shall pay
principal and interest in money of the United States that at the time of payment
is legal tender for payment of public and private debts. The Notes shall be
payable both as to principal and interest at the office or agency of the
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Issuer maintained for such purpose within the City of New York, or, at the
option of a Holder, payment of interest may be made by check mailed to such the
Holder at its address set forth in the register of the Holders or by wire to an
account designated by such the Holder. Unless otherwise designated by the
Issuer, the Issuer's office or agency in New York shall be the office or agency
of the Trustee maintained for such a purpose.
3. PAYING AGENT AND REGISTRAR. Initially, the Trustee shall act as
Paying Agent and Registrar. The Issuer may change any Paying Agent, Registrar
or co-registrar upon thirty (30) days prior written notice to the Trustee. The
Issuer may act in any such capacity.
4. INDENTURE. The Issuer issued the Notes under an Indenture, dated
as of _____________, 1997 (the "INDENTURE"), between the Issuer and the
Trustee. The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S.C. Sections 77aaa-77bbbb), as in effect on the Issue Date. The
Notes are subject to all such terms, and the Holders are referred to the
Indenture and such act for a statement of such terms. The terms of the
Indenture shall govern any inconsistencies between the Indenture and the Notes.
The Notes are secured obligations of the Issuer limited to $80,000,000 in
aggregate principal amount.
5. OPTIONAL REDEMPTION. The Issuer shall have the option to redeem
the Notes, in whole or in part, upon not less than 30 nor more than 60 days'
notice, during the periods set forth below at a redemption price equal to the
percentage of par set forth opposite such periods PLUS accrued and unpaid
interest thereon to the applicable redemption date:
PERIOD PERCENTAGE
------ ----------
Issue Date through
March 27, 2000: 102.00%
March 28, 2000
through September 27, 2001: 101.00%
thereafter: 100.00%
6. PURCHASE AT HOLDERS OPTION. Except as set forth under
SECTION 3.08 of the Indenture and this paragraph 6, the Issuer shall not be
required to make mandatory redemption payments, sinking fund payments or
mandatory purchases with respect to the Notes prior to maturity. No later than
120 days after the end of each Fiscal Year commencing with the Fiscal Year
ending December 31, 1997, the Issuer shall, at the option of each Holder,
purchase the maximum principal amount of the Notes that may be purchased with
100% of the Excess Cash Flow Amount for such Fiscal Year, at a purchase price in
Cash equal to 100% of the principal amount of such Notes to be purchased plus
accrued and unpaid interest thereon to the date of purchase on a pro-rata basis
as described in SECTION 3.04 of the Indenture. Within 90 days after the
occurrence of a Triggering Event, the Issuer shall, at the option of each
Holder, purchase all of the outstanding Notes, at a purchase price in Cash equal
to 100% of the principal amount of all outstanding Notes plus accrued and unpaid
interest thereon to the date of purchase. The Issuer shall provide the written
notice required under SECTION 3.08 no later than 120 days after the end of each
Fiscal Year or 5 days after the occurrence of each Triggering Event. A Holder
may exercise its rights specified in SECTION 3.08 of the Indenture and this
paragraph 6 by delivery of
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an Original Purchase Notice to the Trustee or to the office or agency of the
Issuer specified in the Indenture at any time prior to the close of business on
a date that is 3 Business Days prior to the purchase date as set forth in
SECTION 3.08(d) of the Indenture. Failure to deliver such Original Purchase
Notice prior to the close of business on the date that is 3 Business Days prior
to the purchase date shall be deemed to be an exercise by such Holder of its
rights under SECTION 3.08 of the Indenture and this paragraph 6 with respect to
all Notes with respect to which a Purchase Event has occurred (other than Excess
Amount Notes) held by such Holder on such date. Any Holder who does not desire
to have all or a portion of its Notes purchased as a result of the occurrence of
a Purchase Event shall be required to deliver a Rejection Notice. Any Holder
delivering such Original Purchase Notice shall have the right to withdraw such
Original Purchase Notice at any time prior to the close of business on the third
Business Day immediately preceding the purchase date by delivery of a written
notice of withdrawal to the Trustee or to the office or agency of the Issuer
specified in the Indenture in accordance with SECTION 3.08(d) of the Indenture.
7. NOTICE OF REDEMPTION OR PURCHASE. Notice of redemption or of the
occurrence of a Purchase Event shall be mailed within the time period noted in
paragraphs 5 and 6 to each Holder whose Notes are to be redeemed or as to which
a Purchase Event has occurred at its registered address. Notes may be redeemed
or purchased in part but only in whole multiples of $1,000, unless all of the
Notes held by a Holder are to be redeemed or purchased. On and after the
redemption or purchase date, interest ceases to accrue on Notes or portions of
them redeemed or purchased.
8. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder
of a Note, among other things, to furnish appropriate endorsements and transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not exchange or register the transfer of any Note
or portion of a Note selected for redemption except the unredeemed portion of
any such Note. Also, it need not exchange or register the transfer of any Notes
for a period of 15 days before a selection of Notes to be redeemed.
9. PERSONS DEEMED OWNERS. Prior to due presentment to the Registrar
for registration of the transfer of this Note, the Trustee, any Agent and the
Issuer may deem and treat the Person in whose name this Note is registered as
its absolute owner for the purpose of receiving payment of principal of and
interest on this Note and for all other purposes whatsoever, whether or not this
Note is overdue, and neither the Trustee, any Agent nor the Issuer shall be
affected by notice to the contrary.
10. AMENDMENTS, SUPPLEMENT AND WAIVERS. Subject to certain
exceptions, the Indenture, Notes or any amended or supplemental Indenture may be
amended or supplemented with the written consent of the Required Holders, and
any existing Default or Event of Default and its consequences or compliance with
any provision of the Indenture or the Notes may be waived with the consent of
the Holders of not less than 25% in principal amount of the Notes outstanding on
the date of determination. Without the consent of any Holder, the Operative
Documents may be amended or supplemented to cure any ambiguity, defect or
inconsistency, to
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<PAGE>
provide for uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption of the Issuer's obligations to the Holders
in the case of a merger or consolidation, to make certain amendments to the
Collateral Documents, to execute and deliver any documents necessary or
appropriate to release Liens on any Collateral as permitted by SECTION 10.03 OR
10.04 of the Indenture, to make any change that would provide any additional
rights or benefits to the Holders of the Notes or that does not materially
adversely affect the legal rights under the Indenture of any such Holder, or to
comply with the requirements of the SEC in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act. The Issuer and
the Trustee may, with the consent of Holders of 66 2/3% in principal amount of
each of the Notes and the Class B Notes, respectively, outstanding on the date
of determination directly or indirectly release Liens on all or substantially
all of the Collateral except in connection with a Triggering Event. The Issuer
and the Trustee may, with the consent of Holders of the principal amount of
Notes whose Holders must consent to an amendment, supplement or waiver, reduce
such principal amount with respect to such amendment, supplement or waiver.
11. DEFAULTS AND REMEDIES. Events of Default include, without
limitation, the following events: the Issuer shall fail to make any payment in
respect of principal of or premium on the Notes when the same becomes due and
payable and such failure continues for a period of 5 Business Days after the due
date of such payment or the Issuer shall fail to make any payment when due of
interest on the Notes and such failure continues for a period of 10 days after
the due date of such payment; or either the information provided by CWOP or any
of its Affiliates and contained in the Disclosure Statement with respect to
CWOP's business, financial condition and results of operations (other than the
financial projections contained therein), taken on the basis of the Disclosure
Statement as a whole, or the Collateral Documents shall prove to contain, as of
their respective dates, any untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements therein not
misleading, in light of the circumstances in which they were made; or the Issuer
fails to perform or observe (i) any term, covenant or agreement contained in
Article IV or Article V of the Indenture or (ii) any other term, covenant or
agreement contained in the Indenture, the Plan or the Collateral Documents, if
such failure under this clause (ii) shall remain unremedied for 30 days after
the earlier of the date on which written notice thereof shall have been given to
the Issuer by the Trustee or the Holders; or the Issuer shall fail, after any
applicable grace period, to pay any principal of or premium, if any, or interest
on the Class B Notes or any of its other Indebtedness in an amount exceeding
$200,000 (excluding the Notes), when the same becomes due and payable (whether
by scheduled maturity, required prepayment, acceleration, demand or otherwise),
or any other event shall occur or condition shall exist under any agreement or
instrument relating to any such Indebtedness, if the effect of such event or
condition is to accelerate the maturity of such Indebtedness, or any such
Indebtedness shall be declared to be due and payable, or required to be prepaid
(other than by a regularly scheduled required prepayment), prior to the stated
maturity thereof; or the Issuer shall generally not pay its debts as such debts
become due except such debts that are the subject of a good faith dispute, or
shall admit in writing its inability to pay its debts generally, or shall make a
general assignment for the benefit of creditors, or any proceeding shall be
instituted by or against the Issuer seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a receiver,
trustee or other similar official for it or for any substantial part of its
property and, in the case of any such proceedings
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instituted against the Issuer (but not instituted by it), either such
proceedings shall remain undismissed or unstayed for a period of 30 days or any
of the actions sought in such proceedings shall occur, or the Issuer shall take
any action to authorize any of the foregoing actions; or any judgment or order
for the payment of money in excess of $100,000 shall be rendered against the
Issuer either (i) enforcement proceedings shall have been commenced by any
creditor upon such judgment or order, or (ii) there shall be any period of 30
consecutive days during which a stay of enforcement of such judgment or order,
by reason of a pending appeal or otherwise, shall not be in effect; the
Indenture or the Collateral Documents shall, for any reason, cease to create a
valid Lien on Collateral having a value of $100,000 or more purported to be
covered thereby, or such Lien shall cease to have the priority Lien status
initially granted and be a perfected Lien as to Collateral having a value of
$100,000 or more; or the Issuer shall fail to pay any Imposition prior to
delinquency or, if the Issuer is prohibited by law from paying such Imposition,
the Issuer shall fail to pay such Imposition within 180 days of the Issuer's
receipt of notice of such prohibition; or the Issuer shall fail to perform its
obligations under the Plan. If any Event of Default (other than Event of
Default specified in SECTION 6.01(e) of the Indenture) occurs and is continuing,
the Trustee may or the Holders of not less than 25% in principal amount of the
Notes outstanding on the date of determination may or may cause the Trustee to
declare all the Notes to be due and payable immediately. Upon the occurrence of
an Event of Default described in SECTION 6.01(e) (with respect to certain events
such as bankruptcy and insolvency) of the Indenture, such an amount will IPSO
FACTO become immediately due and payable without any declaration or other act on
the part of the Trustee or any Holder. Such Holders may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, the Holders of not less than 25% in principal amount of the Notes
outstanding on the date of determination may direct the time, method, and place
of conducting any proceeding for exercising any remedy available to the Trustee
and/or the Collateral Agent or exercising any trust or power conferred on it or
them. Such Holders, by written notice to the Trustee, may on behalf of the
Holders of all of the Notes waive any existing Default or Event of Default and
its consequences under the Indenture except a continuing Default or Event of
Default in the payment of interest on, or the principal of, the Notes.
12. TRUSTEE DEALINGS WITH ISSUER. The Trustee under the Indenture,
in its individual or other capacity, may make loans to, accept deposits from,
and perform services for the Issuer or its Affiliates, and may otherwise deal
with the Issuer or its Affiliates, as if it were not the Trustee; however, if
the Trustee acquires any conflicting interest it must eliminate such conflict
within 90 days, apply to the SEC for permission to continue as the Trustee or
resign.
13. NO PERSONAL LIABILITIES OF TRUSTEES, OFFICERS, EMPLOYEES AND
EQUITYHOLDERS. No officer, employee or equityholder (or directors, officers or
employees of such equity holders or their equityholders) of the Issuer, as such,
shall have any liability for any obligations of the Issuer under the Notes, the
Indenture or the Collateral Documents or for any claim based on, in respect of,
or by reason of, such obligations or their creation. Each Holder of the Notes
by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes.
14. AUTHENTICATION. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
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15. ABBREVIATIONS. Customary abbreviations may be used in the name
of a Holder of a Note or an assignee, such as: TEN COM (= tenants in common),
TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A
(= Uniform Gifts to Minors Act).
16. CUSIP NUMBER. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures ("CUSIP"), the Issuer
has caused CUSIP numbers to be printed on the Notes and has requested the
Trustee to use CUSIP numbers in notices of redemption as a convenience to the
Holders. No representation is made as to the accuracy of such numbers either as
printed on the Notes or as contained in any notice of redemption and reliance
may be placed only on the other identification numbers placed thereon.
17. COLLATERAL DOCUMENTS. As provided in the Indenture and the
Collateral Documents, and subject to certain limitations set forth therein, the
Obligations of the Issuer under the Operative Documents are secured by the
Collateral as provided in the Collateral Documents. Each Holder, by accepting a
Note, agrees to be bound by all terms and provisions of the Collateral
Documents, as the same may be amended from time to time. The Liens created
under the Collateral Documents shall be released upon the terms and subject to
the conditions set forth in the Indenture and the Collateral Documents.
18. SUCCESSOR ENTITY. When a successor Person assumes all the
obligations of its predecessor under the Operative Documents, the predecessor
Person shall be released from such Obligations.
The Issuer will furnish to any Holder of a Note upon written request
and without charge a copy of the Indenture or the Collateral Documents. Request
may be made to:
Jamboree LLC
- ------------------------
- ------------------------
Attention:
------------
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ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
- --------------------------------------------------------------------------------
(insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
agent to transfer this Note on the books of the Issuer. The Agent may
substitute another to act for him.
Date:
----------------------
Your Signature:
-----------------------------------
(Sign exactly as your name appears on
the face of this Note)
Signature Guarantee:
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ORIGINAL PURCHASE NOTICE
The undersigned Holder elects to have this Note purchased by the
Issuer pursuant to Section 3.08 of the Indenture. The certificate number of
this Note is:
The portion of the principal amount of this Note (including the principal amount
of this Note in excess of the Holder's pro-rata portion of the Excess Cash Flow
Amount that the Holder would like to be purchased) that the Holder will deliver
to be purchased, which portion must be $1,000 or an integral multiple of $1,000,
is $_________.
Date: Your Signature:
------------ ---------------------------
(Sign exactly as your name appears on the face of this Note)
Signature Guarantee:
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Exhibit 99.3
T3E
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
UNITED STATES BANKRUPTCY COURT
for the Central District of California
In re ) Chapter 11
)
CROW WINTHROP OPERATING ) Case No. SA97-14512-JR
PARTNERSHIP, a Maryland general partnership )
)
Debtor )
)
_________________________________________
DISCLOSURE STATEMENT IN SUPPORT OF
DEBTOR'S THIRD AMENDED PLAN OF REORGANIZATION,
DATED JULY 23, 1997
O'MELVENY & MYERS LLP
400 S. Hope St.
Los Angeles, CA 90071
(213) 669-6000
Robert White (CA State Bar #54797)
Suzzanne Uhland (CA State Bar #136852)
Lisa Bossetti (CA State Bar #186243)
Deborah Saltzman (CA State Bar #186411)
610 Newport Center Drive, Suite 1700
Newport Beach, CA 92660
(714) 760-9600
Patricia Frobes (CA State Bar #85142)
Frank Crance (CA State Bar #177568)
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THIS DISCLOSURE STATEMENT DESCRIBES THE THIRD AMENDED PLAN OF
REORGANIZATION DATED JULY 23, 1997 (THE "PLAN") FOR CROW WINTHROP OPERATING
PARTNERSHIP ("CWOP"). THIS DISCLOSURE STATEMENT HAS BEEN APPROVED BY THE
BANKRUPTCY COURT AS CONTAINING ADEQUATE INFORMATION FOR CREDITORS AND PARTNERS
OF CWOP TO VOTE ON THE PLAN. ALL CREDITORS AND PARTNERS OF CWOP WHO ARE
ENTITLED TO VOTE ARE ENCOURAGED TO READ AND CAREFULLY CONSIDER THE ENTIRE
DISCLOSURE STATEMENT, INCLUDING THE PLAN ATTACHED AS EXHIBIT 1, PRIOR TO
SUBMITTING THEIR BALLOTS.
IF YOU HAVE ANY QUESTIONS CONCERNING THE PROCEDURES FOR VOTING, PLEASE
CALL OR WRITE TO O'MELVENY & MYERS LLP, 400 SOUTH HOPE STREET, LOS ANGELES,
CALIFORNIA 90071, ATTENTION: LYNN TALAB (213) 669-6054.
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TABLE OF CONTENTS
I. INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
A. SUMMARY OF THE PLAN. . . . . . . . . . . . . . . . . . . . . . . . 2
B. RECOMMENDATION . . . . . . . . . . . . . . . . . . . . . . . . . . 3
II. VOTING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
A. ELIGIBILITY TO VOTE. . . . . . . . . . . . . . . . . . . . . . . . 3
B. BALLOTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
C. VOTING PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . 4
D. DEADLINE FOR VOTING. . . . . . . . . . . . . . . . . . . . . . . . 4
E. IMPORTANCE OF YOUR VOTE. . . . . . . . . . . . . . . . . . . . . . 4
III. BACKGROUND OF CWOP AND THE CHAPTER 11 CASE. . . . . . . . . . . . . . . 4
A. HISTORICAL FRAMEWORK . . . . . . . . . . . . . . . . . . . . . . . 4
1. Description of the Property; Formation of CWOP. . . . . . . . 4
2. Acquisition of the Property by CWOP; Structure of Financing . 5
3. Major Tenants . . . . . . . . . . . . . . . . . . . . . . . . 6
4. Property Management . . . . . . . . . . . . . . . . . . . . . 7
5. The Development Parcel; Exterior Common Area. . . . . . . . . 8
B. EVENTS LEADING TO THE FILING OF THE CHAPTER 11 CASE. . . . . . . . 9
1. Orange County Real Estate Market. . . . . . . . . . . . . . . 9
2. Agreement of Understanding with Certificateholders. . . . . . 10
C. SIGNIFICANT EVENTS DURING THE CHAPTER 11 CASE. . . . . . . . . . . 11
1. Cash Collateral Agreed Order. . . . . . . . . . . . . . . . . 11
2. Motion to Dismiss . . . . . . . . . . . . . . . . . . . . . . 11
3. Claims Bar Date and Claims Procedures Order . . . . . . . . . 11
4. Leasing Transactions. . . . . . . . . . . . . . . . . . . . . 11
5. Crow Claims and Litigation. . . . . . . . . . . . . . . . . . 12
IV. THE PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
A. TREATMENT OF ADMINISTRATIVE CLAIMS AND PRIORITY TAX CLAIMS . . . . 14
1. Allowance of Administrative Claims. . . . . . . . . . . . . . 14
2. Treatment of Allowed Administrative Claims. . . . . . . . . . 15
3. Treatment of Priority Tax Claims. . . . . . . . . . . . . . . 15
B. CLASSIFICATION AND TREATMENT OF CLAIMS AND INTERESTS . . . . . . . 15
1. Priority Claims (Class 1) . . . . . . . . . . . . . . . . . . 15
2. Secured Tax Claims (Class 2). . . . . . . . . . . . . . . . . 15
3. Other Secured Claims (Classes 3a, 3b and 3c). . . . . . . . . 16
4. Certificateholder Secured Claims (Class 4). . . . . . . . . . 16
5. Certificateholder Deficiency Claims (Class 5) . . . . . . . . 17
6. General Unsecured Claims (Class 6). . . . . . . . . . . . . . 17
7. Interests (Class 7) . . . . . . . . . . . . . . . . . . . . . 18
C. IMPLEMENTATION OF THE PLAN . . . . . . . . . . . . . . . . . . . . 18
1. Formation of Jamboree LLC and Jamboree Office REIT. . . . . . 18
2. Avoidance and Recovery Actions. . . . . . . . . . . . . . . . 19
3. Section 1129(a)(4) Payment. . . . . . . . . . . . . . . . . . 20
D. CLAIMS AND DISTRIBUTIONS.. . . . . . . . . . . . . . . . . . . . . 20
E. DISBURSEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
F. CANCELLATION OF SECURITIES . . . . . . . . . . . . . . . . . . . . 21
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G. DISCHARGE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
H. TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES. . . . . . . 21
I. ASSUMED EFFECTIVE DATE; CONDITIONS TO EFFECTIVENESS. . . . . . . . 22
1. Entry of Confirmation Order . . . . . . . . . . . . . . . . . 22
2. WCI Consent . . . . . . . . . . . . . . . . . . . . . . . . . 22
3. Jamboree LLC and Jamboree Office REIT . . . . . . . . . . . . 22
4. Contribution of Assets. . . . . . . . . . . . . . . . . . . . 22
5. Documentation . . . . . . . . . . . . . . . . . . . . . . . . 22
6. Jamboree Office REIT Shares and Jamboree LLC Units. . . . . . 22
7. Qualification of Indentures . . . . . . . . . . . . . . . . . 22
8. Perfection of Security Interests. . . . . . . . . . . . . . . 23
9. Title Policies. . . . . . . . . . . . . . . . . . . . . . . . 23
10. Evidence of Insurance . . . . . . . . . . . . . . . . . . . . 23
J. RETENTION OF JURISDICTION. . . . . . . . . . . . . . . . . . . . . 23
V. FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 23
A. HISTORICAL FINANCIAL INFORMATION; RECENT FINANCIAL PERFORMANCE . . 24
B. PAYMENT OF ADMINISTRATIVE EXPENSES AND CLAIMS. . . . . . . . . . . 24
C. PROJECTED FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . 24
VI. OPERATION AND GOVERNANCE OF SUCCESSOR ENTITIES. . . . . . . . . . . . . 25
A. GENERAL DISCUSSION . . . . . . . . . . . . . . . . . . . . . . . . 25
B. JAMBOREE LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
C. JAMBOREE OFFICE REIT AND JAMBOREE
OFFICE REIT SHARES . . . . . . . . . . . . . . . . . . . . . . . . 27
D. DESCRIPTION OF NEW NOTES ISSUED BY JAMBOREE LLC. . . . . . . . . . 29
1. New Class A Senior Secured Notes. . . . . . . . . . . . . . . 29
2. New Class B Senior Subordinated Secured Notes.. . . . . . . . 36
3. Security for the New Notes. . . . . . . . . . . . . . . . . . 37
4. New Notes Registration Rights Agreements. . . . . . . . . . . 38
E. PROPERTY APPRECIATION RIGHTS AND EXCHANGE RIGHT. . . . . . . . . . 39
F. FUTURE OPERATIONS, NEW MANAGEMENT AGREEMENT. . . . . . . . . . . . 40
G. REORGANIZED CWOP . . . . . . . . . . . . . . . . . . . . . . . . . 42
VII. CERTAIN FEDERAL INCOME TAX CONSEQUENCES . . . . . . . . . . . . . . . . 43
A. INTRODUCTION.. . . . . . . . . . . . . . . . . . . . . . . . . . . 43
B. FEDERAL INCOME TAX CONSEQUENCES TO CWOP. . . . . . . . . . . . . . 43
1. General . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
2. Reduction Of CWOP's Indebtedness. . . . . . . . . . . . . . . 44
3. Constructive Distribution Of Money Under Internal Revenue
Code Section 752. . . . . . . . . . . . . . . . . . . . . . . 44
C. FEDERAL INCOME TAX CONSEQUENCES TO CREDITORS . . . . . . . . . . . 45
1. Constructive or Deemed Exchange of Old Debt Instrument For
New Debt Instrument . . . . . . . . . . . . . . . . . . . . . 45
2. Tax Basis And Holding Period Of Items Received. . . . . . . . 46
3. Withholding.. . . . . . . . . . . . . . . . . . . . . . . . . 46
D. FEDERAL INCOME TAXATION OF JAMBOREE OFFICE REIT. . . . . . . . . . 47
1. REIT Organizational Requirements. . . . . . . . . . . . . . . 48
2. Income Tests. . . . . . . . . . . . . . . . . . . . . . . . . 48
3. Relief Provisions . . . . . . . . . . . . . . . . . . . . . . 49
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4. Asset Tests . . . . . . . . . . . . . . . . . . . . . . . . . 50
5. Annual REIT Distribution Requirements.. . . . . . . . . . . . 50
6. Failure to Qualify As a REIT. . . . . . . . . . . . . . . . . 51
7. Taxation to United States Shareholders of Distributions . . . 51
8. Backup Withholding. . . . . . . . . . . . . . . . . . . . . . 52
9. Treatment of Tax-Exempt Shareholders. . . . . . . . . . . . . 52
10. Taxation of Foreign Shareholders. . . . . . . . . . . . . . . 52
E. FEDERAL INCOME TAXATION OF JAMBOREE LLC. . . . . . . . . . . . . . 53
F. OTHER TAX CONSEQUENCES.. . . . . . . . . . . . . . . . . . . . . . 54
VIII. CERTAIN FEDERAL SECURITIES LAWS CONSEQUENCES . . . . . . . . . . . 54
A. GENERAL DISCUSSION . . . . . . . . . . . . . . . . . . . . . . . . 54
B. RESALE CONSIDERATIONS. . . . . . . . . . . . . . . . . . . . . . . 55
C. TRUST INDENTURE ACT. . . . . . . . . . . . . . . . . . . . . . . . 57
D. DELIVERY OF DISCLOSURE STATEMENT . . . . . . . . . . . . . . . . . 57
IX. CERTAIN FACTORS TO BE CONSIDERED REGARDING THE PLAN . . . . . . . . . . 57
A. BANKRUPTCY CONSIDERATIONS. . . . . . . . . . . . . . . . . . . . . 57
B. GENERAL BUSINESS RISKS . . . . . . . . . . . . . . . . . . . . . . 57
C. RISK WITH RESPECT TO NEW SECURITIES. . . . . . . . . . . . . . . . 58
X. ALTERNATIVES TO CONFIRMATION OF THE PLAN. . . . . . . . . . . . . . . . 59
XI. ACCEPTANCE AND CONFIRMATION OF THE PLAN . . . . . . . . . . . . . . . . 59
A. GENERAL CONFIRMATION REQUIREMENTS. . . . . . . . . . . . . . . . . 59
B. BEST INTERESTS TEST. . . . . . . . . . . . . . . . . . . . . . . . 59
C. FINANCIAL FEASIBILITY TEST . . . . . . . . . . . . . . . . . . . . 60
D. ACCEPTANCE BY IMPAIRED CLASSES . . . . . . . . . . . . . . . . . . 60
XII. CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
EXHIBITS TO DISCLOSURE STATEMENT
EXHIBIT 1 - Debtor's Third Amended Plan of Reorganization Dated July 23, 1997
EXHIBIT 2 - 1995 and 1996 Financial Statement
EXHIBIT 3 - January through March 1997 Cash Flow from Operations
EXHIBIT 4 - April 1997, May 1997 and June 1997 Cash Flow from Operations
(Budgeted to Actual)
EXHIBIT 5 - June 1997 through September 1997 Projected Cash Flow
EXHIBIT 6 - September 1997 through August 2002 Projected Cash Flow
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I. INTRODUCTION.
On July 23, 1997, Crow Winthrop Operating Partnership ("CWOP" or
the "Debtor") filed with the United States Bankruptcy Court for the Central
District of California (the "Bankruptcy Court") its proposed Third Amended Plan
of Reorganization Dated July 23, 1997 (the "Plan," attached hereto as
Exhibit 1).
The Debtor prepared this Disclosure Statement for use in the
solicitation of acceptances of the Plan. By order of the Bankruptcy Court, this
Disclosure Statement was approved as containing information adequate to enable
creditors and partners of the Debtor to make an informed judgment to vote either
to accept or to reject the Plan. APPROVAL OF THIS DISCLOSURE STATEMENT BY THE
BANKRUPTCY COURT DOES NOT MEAN THAT THE BANKRUPTCY COURT RECOMMENDS ACCEPTANCE
OR REJECTION OF THE PLAN.
The financial information used in preparing this Disclosure
Statement was prepared by and is the sole responsibility of the Debtor. This
Disclosure Statement does not constitute financial or legal advice. Creditors
and partners of the Debtor should consult their own advisors if they have
questions about the Plan or this Disclosure Statement.
WHILE THIS DISCLOSURE STATEMENT DESCRIBES CERTAIN BACKGROUND
MATTERS AND THE MATERIAL TERMS OF THE PLAN, IT IS INTENDED AS A SUMMARY DOCUMENT
ONLY AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE PLAN AND THE EXHIBITS
ATTACHED TO THE PLAN AND THIS DISCLOSURE STATEMENT. YOU SHOULD READ THE PLAN
AND THE EXHIBITS TO OBTAIN A FULL UNDERSTANDING OF THEIR PROVISIONS. ADDITIONAL
COPIES OF THE DISCLOSURE STATEMENT AND THE EXHIBITS ATTACHED TO THIS DISCLOSURE
STATEMENT CAN BE OBTAINED FROM LYNN TALAB AT (213) 669-6054. THE COST OF COPIES
MUST BE PAID BY THE PERSON ORDERING THEM. COPIES OF PAPERS FILED IN THIS CASE
MAY BE INSPECTED DURING REGULAR COURT HOURS IN THE CLERK'S OFFICE, UNITED STATES
BANKRUPTCY COURT, 34 CIVIC CENTER PLAZA, SANTA ANA, CALIFORNIA.
THE STATEMENTS AND INFORMATION CONCERNING CWOP, REORGANIZED CWOP,
JAMBOREE LLC AND JAMBOREE OFFICE REIT SET FORTH IN THIS DISCLOSURE STATEMENT
CONSTITUTE THE ONLY STATEMENTS OR INFORMATION CONCERNING SUCH MATTERS THAT HAVE
BEEN APPROVED BY THE BANKRUPTCY COURT FOR THE PURPOSE OF SOLICITING ACCEPTANCES
OR REJECTIONS OF THE PLAN.
THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT ARE MADE AS
OF THE DATE HEREOF UNLESS ANOTHER TIME IS SPECIFIED HEREIN. NEITHER DELIVERY OF
THIS DISCLOSURE STATEMENT NOR ANY EXCHANGE OF RIGHTS MADE IN CONNECTION WITH THE
PLAN SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE INFORMATION SET FORTH HEREIN SINCE THE DATE THIS DISCLOSURE
STATEMENT AND THE MATERIALS RELIED UPON IN PREPARATION OF THIS DISCLOSURE
STATEMENT WERE COMPILED. CWOP, REORGANIZED CWOP, JAMBOREE LLC AND JAMBOREE
OFFICE REIT ASSUME NO DUTY TO UPDATE OR SUPPLEMENT THE DISCLOSURES CONTAINED
HEREIN AND DO NOT INTEND TO UPDATE OR SUPPLEMENT THE DISCLOSURES.
THIS DISCLOSURE STATEMENT MAY NOT BE RELIED ON FOR ANY PURPOSE
OTHER THAN TO DETERMINE WHETHER TO VOTE IN FAVOR OF OR AGAINST THE PLAN.
NOTHING CONTAINED HEREIN WILL CONSTITUTE AN ADMISSION OF ANY FACT OR
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LIABILITY BY ANY PARTY, BE ADMISSIBLE IN ANY PROCEEDING INVOLVING CWOP,
REORGANIZED CWOP, JAMBOREE LLC, JAMBOREE OFFICE REIT OR ANY OTHER PARTY OR BE
DEEMED CONCLUSIVE EVIDENCE OF THE TAX OR OTHER LEGAL EFFECTS OF THE
REORGANIZATION OF CWOP ON HOLDERS OF CLAIMS OR INTERESTS. CERTAIN OF THE
INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT IS BY ITS NATURE
FORWARD-LOOKING AND CONTAINS ESTIMATES, ASSUMPTIONS AND PROJECTIONS THAT MAY
BE MATERIALLY DIFFERENT FROM ACTUAL FUTURE RESULTS. THERE CAN BE NO
ASSURANCE THAT ANY FORECASTED OR PROJECTED RESULTS CONTAINED HEREIN WILL BE
REALIZED, AND ACTUAL RESULTS MAY BE DIFFERENT THAN THOSE SHOWN, POSSIBLY BY
MATERIAL AMOUNTS. NEITHER THE SECURITIES AND EXCHANGE COMMISSION, NOR ANY
STATE SECURITIES COMMISSION, HAS APPROVED OR DISAPPROVED THIS DISCLOSURE
STATEMENT.
Capitalized terms used in this Disclosure Statement and not
expressly defined herein are defined in the Plan. A reference in this
Disclosure Statement to a "Section" refers to a section of this Disclosure
Statement.
A. SUMMARY OF THE PLAN.
The following is a brief summary of the Plan, which is
qualified in its entirety by reference to the Plan, attached as Exhibit 1 to
this Disclosure Statement. The Plan provides for the formation of a new
entity, Jamboree LLC, which will be the owner of CWOP's sole asset, the
office building complex located at 3333-3355 Michelson Drive in Irvine,
California (the "Property"). The creditors of CWOP will be satisfied under
the Plan as follows: (a) holders of the approximately $198 million of
mortgage participation certificates (the "Certificateholders") will receive
collectively the New Notes in the aggregate principal amount of $100 million
issued by Jamboree LLC and secured by the Property and an initial 90%
membership interest in Jamboree LLC, which membership interest will be held
through a newly formed corporation to be operated as a real estate investment
trust (as described in Section VI.A) ("Jamboree Office REIT") and will
receive 0.1% of the amount of their deficiency claims in cash; (b) each
holder of an Allowed General Unsecured Claim will be paid in full and (c)
each holder of a Secured Tax Claim or Priority Claim will receive payment in
full over time, unless other treatment is agreed to by such holder. The
partners of CWOP will retain their proportional interests in Reorganized
CWOP, which on the Effective Date will own an initial 10% membership interest
in Jamboree LLC. Reorganized CWOP's interest in Jamboree LLC will be
exchangeable for an equivalent percentage equity interest in Jamboree Office
REIT (subject to dilution). In addition, Reorganized CWOP will receive the
New Property Appreciation Rights issued by Jamboree Office REIT representing
the right to receive cash payments based upon a percentage of the
appreciation of the value of the shares of Jamboree Office REIT above
specified values or, at Jamboree Office REIT's election, the right to receive
shares of Jamboree Office REIT (the "New Property Appreciation Rights"). As
part of the Plan, Jamboree LLC will enter into a new five-year property
management agreement with Winthrop California Management, the current
property manager.
The classification and treatment of creditors and partners under
the Plan are discussed in Section IV.B. Distributions under the Plan will be in
(a) cash, (b) notes issued by Jamboree LLC payable to certain taxing
authorities, (c) the New Notes issued by Jamboree LLC, (d) Jamboree Office REIT
Shares, (e) the New Property Appreciation Rights and (f) Jamboree LLC Units.
The cash required to fund the Plan will come from cash reserves and ongoing
operations.
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B. RECOMMENDATION.
THE DEBTOR RECOMMENDS THAT ALL CREDITORS AND PARTNERS ENTITLED TO
VOTE ON THE PLAN CAST THEIR BALLOTS TO ACCEPT THE PLAN. THE DEBTOR BELIEVES
THAT THE PLAN PROVIDES THE GREATEST AND EARLIEST POSSIBLE RECOVERIES TO CWOP'S
CREDITORS AND PARTNERS. THE DEBTOR FURTHER BELIEVES THAT ACCEPTANCE OF THE PLAN
IS IN THE BEST INTERESTS OF ALL PARTIES IN INTEREST AND THAT ANY ALTERNATIVE
WOULD RESULT IN FURTHER DELAY, UNCERTAINTY AND EXPENSE.
II. VOTING.
A. ELIGIBILITY TO VOTE.
The Plan divides creditors' Claims against and partners'
Interests in CWOP into various Classes and provides separate treatment for each
Class. Holders of Administrative Claims and Tax Priority Claims are not
classified and are not entitled to vote because the Bankruptcy Code requires the
Debtor to pay the holders of such Claims in full. Class 1 (Priority Claims),
Classes 3a, 3b and 3c (Other Secured Claims) and Class 6 (General Unsecured
Claims) are unimpaired and presumed to have accepted the Plan. All other
Classes of Claims and Interests under the Plan are impaired, and holders of
Claims and Interests in such Classes are entitled to vote on the Plan.
The record date for determining any creditor's or partner's
eligibility to vote on the Plan is July 9, 1997. Only those creditors and
partners entitled to vote on the Plan will receive a ballot with this Disclosure
Statement.
CREDITORS WHOSE CLAIMS ARE BEING OBJECTED TO ARE NOT ELIGIBLE TO
VOTE UNLESS THE OBJECTION IS RESOLVED IN THEIR FAVOR OR, AFTER NOTICE AND A
HEARING PURSUANT TO BANKRUPTCY RULE 3018(a), THE BANKRUPTCY COURT ALLOWS THE
CLAIM TEMPORARILY FOR THE PURPOSE OF VOTING TO ACCEPT OR REJECT THE PLAN. ANY
CREDITOR THAT WANTS ITS CLAIM TO BE ALLOWED TEMPORARILY FOR THE PURPOSE OF
VOTING MUST TAKE THE STEPS NECESSARY TO ARRANGE AN APPROPRIATE HEARING WITH THE
BANKRUPTCY COURT UNDER BANKRUPTCY RULE 3018(a).
B. BALLOTS.
In voting for or against the Plan, please use only the ballot or
ballots sent to you with this Disclosure Statement. Votes cast to accept or
reject the Plan will be counted by Class. Please read the voting instructions
on the reverse side of the ballot for a thorough explanation of voting
procedures. Please note that the execution of the Agreement of Understanding
did not constitute a vote for the Plan. (See Section III.B.2)
PLEASE PUT YOUR TAXPAYER IDENTIFICATION (OR SOCIAL SECURITY)
NUMBER ON YOUR BALLOT; THE DEBTOR MAY NOT BE ABLE TO MAKE DISTRIBUTIONS WITHOUT
IT.
IF YOU BELIEVE THAT YOU ARE A MEMBER OF A VOTING CLASS FOR WHICH
YOU DID NOT RECEIVE A BALLOT, IF YOUR BALLOT IS DAMAGED OR LOST, OR IF YOU HAVE
QUESTIONS CONCERNING VOTING PROCEDURES, CALL LYNN TALAB, BANKRUPTCY COORDINATOR
WITH O'MELVENY & MYERS LLP AT (213) 669-6054. LYNN TALAB CANNOT PROVIDE YOU
WITH LEGAL ADVICE.
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C. VOTING PROCEDURE.
Mail your completed ballots to: Lynn Talab, Bankruptcy
Coordinator, O'Melveny & Myers LLP, 400 S. Hope Street, Los Angeles, CA
90071-2899. A pre-addressed envelope is enclosed for your convenience. DO
NOT RETURN BALLOTS TO THE BANKRUPTCY COURT. You may not change your vote
after it is cast unless the Bankruptcy Court permits you to do so after
notice and a hearing to determine whether sufficient cause exists to permit
the change. DO NOT RETURN ANY DEBT INSTRUMENTS WITH YOUR BALLOT.
D. DEADLINE FOR VOTING.
IN ORDER TO BE COUNTED, BALLOTS MUST BE RECEIVED BY 4:00 P.M.,
LOS ANGELES TIME ON AUGUST 25, 1997.
E. IMPORTANCE OF YOUR VOTE.
Your vote is important. The Bankruptcy Code defines
acceptance by a class of claims as acceptance by holders of at least
two-thirds in amount and a majority in number of allowed claims in that class
that vote. ONLY THOSE CREDITORS AND PARTNERS WHO ACTUALLY VOTE ARE COUNTED
FOR PURPOSES OF DETERMINING WHETHER A CLASS HAS VOTED TO ACCEPT THE PLAN.
YOUR FAILURE TO VOTE WILL LEAVE TO OTHERS THE DECISION TO ACCEPT OR REJECT
THE PLAN.
III. BACKGROUND OF CWOP AND THE CHAPTER 11 CASE.
A. HISTORICAL FRAMEWORK.
1. DESCRIPTION OF THE PROPERTY; FORMATION OF CWOP.
The Property is a 14.748 acre parcel of improved real property
located at 3333-3355 Michelson Drive in Irvine, California, at the corner of
Jamboree Boulevard and Michelson Drive, immediately south of the Jamboree
exit of Interstate 405. The Property is part of a retail and office
development known as Park Place, which consists of the Property and
approximately 90 acres of land surrounding the Property. The Property
includes a ten-story tower building containing 236,000 square feet of office
space, six four-story 200,000 square feet buildings (1.2 million square feet
in the aggregate), and approximately 300,000 square feet of concourse space
- --approximately 1.5 million leasable square feet in total, making the
Property one of the largest office buildings in Orange County. Fluor
Corporation ("Fluor") constructed the improvements on the Property in 1975
through 1981, and since that time the Property has served as its world
headquarters. However, as discussed in Section III.A.3, Fluor has recently
announced that it will be constructing a new headquarters and intends to
vacate the Property when its lease expires in 1999.
In August of 1984, Trammell Crow Company ("Trammell Crow"), a
nationally known real estate developer, approached Winthrop Financial
Associates, A Limited Partnership ("WFA") with the proposition that WFA
finance the acquisition of the Property and surrounding land. In January of
1985, two partnerships were formed to acquire the properties: (1) CWOP, a
Maryland general partnership, which would acquire and operate the existing
office buildings, and (2) Crow Winthrop Development Limited Partnership
("CWDLP"), a Maryland limited partnership, which would acquire and develop
the land surrounding the existing facilities (the "Development Parcel").
Winthrop California Investors Limited Partnership ("WCI"), a limited
partnership of which WFA and Three Winthrop Properties Inc., a corporation
owned by WFA, are the
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general partners, is the 99% general partner of CWOP, and Crow Irvine #2
("Crow"), an entity controlled by affiliates of Trammell Crow, is the 1%
partner. Crow is a 75% general partner of CWDLP, and WCI is a 25% limited
partner. Thus, WFA and Trammell Crow agreed that an entity in which WFA
controlled a significant equity interest would own and control the Property
(i.e., the existing office building), while an entity in which Trammell Crow
affiliates controlled the predominant equity interest would own and control
the Development Parcel.
WCI's 3,500 limited partnership units are over 70% owned by
outside investors and the units are registered under the Securities Exchange
Act of 1934. WILCAP Limited Partnership, a Massachusetts limited partnership
wholly owned by WFA and its affiliates, owns 1,000 units. In addition to its
99% general partnership interest in CWOP and a 25% interest in CWDLP, WCI
owns a 99% limited partnership interest in Winthrop California Management
Limited Partnership ("WCM"), a Maryland limited partnership, which manages
and leases the Property.
2. ACQUISITION OF THE PROPERTY BY CWOP; STRUCTURE OF
FINANCING.
On July 30, 1985, CWOP acquired the Property, and CWDLP
acquired the Development Parcel from Fluor. The Property and the Development
Parcel were acquired for a total price of $302 million, of which $297,789,000
was allocated to the Property and $4,211,000 was allocated to the Development
Parcel, although an additional $35 million was paid to Fluor upon the
transfer of certain development rights for the Development Parcel.
In early 1985, the Debtor engaged Salomon Brothers Inc. and
Salomon Brothers Realty Corp. (collectively, "Salomon") to help obtain
financing to purchase the Property. Salomon in turn enlisted the assistance
of Pacific Mutual Life Insurance Co., which created Pacific Mutual Realty
Finance, Inc. (the "Servicing Agent"), a wholly-owned subsidiary, for
purposes of the transaction.
Salomon, the Servicing Agent and the Debtor devised a
structure whereby the Debtor would obtain a $204 million loan secured by its
real property and tangible personal property (the "Mortgage Loan"). The
Mortgage Loan was structured as a two-part transaction: (1) the financing to
purchase the Property was raised in the public market through the issuance of
certificated debt instruments (the "Certificates"), the issuance,
participation and servicing of which are provided for in the Purchase,
Participation and Servicing Agreement dated June 17, 1985 (the "Purchase
Agreement"); and (2) such financing was advanced to the Debtor pursuant to a
loan agreement (the "Existing Loan Agreement"), pursuant to which the Debtor
executed a Secured Promissory Note (the "Existing Secured Note") in the
principal amount of $204 million in favor of the Servicing Agent. The
Existing Secured Note is secured by a first priority deed of trust covering
the Property, the tangible personal property therein and the leases thereon
(the "Existing Deed of Trust"). In addition, the Servicing Agent and CWDLP
entered into an agreement granting the Servicing Agent, as custodial holder
of the Existing Secured Note and Existing Deed of Trust, certain approval
rights regarding the Development Parcel (the "Development Approval
Agreement"). The obligations under the Existing Secured Note are nonrecourse
to the partners of CWOP, except that $15 million of the principal was
guaranteed by WFA for tax purposes.
At the July 30, 1985 closing of the transaction, the Servicing
Agent simultaneously (1) issued the initial Certificates and (2) advanced the
$204 million in proceeds therefrom to the Debtor pursuant to the Existing
Loan Agreement. Pursuant to the Purchase Agreement, the Certificates
constitute absolute, undivided ownership interests in the Existing Secured
Note and all the collateral comprising the security therefor, and the
Servicing Agent acts solely as custodial agent for the exclusive benefit of
the holders of the Certificates (the "Certificateholders"). The Existing
Secured Note matured on April 1, 1996, at which time a final principal
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payment of approximately $198 million was due. CWOP was unable to pay the
principal amount when due, and this amount remained unpaid on the Petition
Date.
3. MAJOR TENANTS.
Five tenants each lease 10% or more of the rentable square
footage of the Property: (i) Fluor, (ii) Air Touch Cellular, (iii) Denny's
Inc., (iv) Waban, Inc. and (v) Preferred Mortgage.
FLUOR DANIEL, INC. Fluor is an international company whose
principal business is to provide engineering, construction and technical
services to a broad range of clients.
In late 1988, CWOP entered into its current lease (the
"Current Fluor Lease") with Fluor, which amended the lease entered into at
the time of the purchase of the Property. Under the terms of the Current
Fluor Lease, Fluor leases a minimum of approximately 790,000 useable square
feet (approximately 889,000 square feet on a rentable basis) for ten years.
The average rental rate is $16.84 per square foot net (which equates to an
approximately $27.26 gross per square foot). The Current Fluor Lease is
scheduled to expire July 31, 1999.
At the time the Current Fluor Lease was executed, Fluor was
leasing approximately 1,229,000 useable square feet. Since that time, they
have vacated space as permitted under the terms of the Current Fluor Lease.
As of December 31, 1996, Fluor leased approximately 790,000 useable square
feet. In June 1995, Fluor vacated approximately 174,000 useable square feet,
which had been occupied by AVCO Financial Services under a sublease. Later
that year, the space was leased directly to AirTouch Cellular.
CWOP and Fluor recently entered into subleases and leases with
two entities. California Lending Group, Inc., a subsidiary of ContiFinancial
Corporation, entered into a sublease for approximately 46,000 useable square
feet of space currently leased by Fluor. The sublease will become a direct
lease for a five year term when the current Fluor lease expires in 1998. The
average rental rate is $18.00 per square foot (gross) for the first thirty
months and $19.20 thereafter. The Prudential Real Estate Affiliates and
Prudential Insurance Company recently entered into a lease for approximately
56,000 square feet, which space consists of the ninth and tenth floors of the
tower. The lease, which has a 7 year term, will also become a direct lease
upon the expiration of the Current Fluor Lease. The average rental rate
during the term of the lease is $25.20 per square foot (gross).
Recently, CWOP has entered into another sublease/lease with
Fluor. In June, 1997, CWOP entered in an eight year lease (with two
five-year renewal options) with Prudential Residential Services, an affiliate
of Prudential Real Estate Affiliates and Prudential Insurance Company, for
approximately 9,330 square feet of the tower building. This lease will also
become a direct lease when the Fluor lease expires in 1998.
In 1995, CWOP engaged in discussions with Fluor regarding a
termination of the Current Fluor Lease and execution of a new, long-term
lease. In order to provide Fluor sufficient time to negotiate a long term
lease, CWOP agreed to provide Fluor with the rights to "holdover" designated
space for a period of 30 days to one year at an average net rental rate of
$13.44 per square foot (for atrium space) and $6.16 per square foot (for
concourse space).
CWOP made its most recent proposal for a new lease to Fluor in
December of 1996. Subsequently, Fluor announced that it will build a new
facility in Aliso Viejo and informed CWOP that it will vacate its space.
Because of the existing subleases, 698,000 feet will become vacant on
expiration of the Current Fluor Lease. On August 1, 1997, Fluor must
indicate which portions of its leased space it will vacate
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on July 31, 1998 (with the balance vacated by July 31, 1999) and in which
portions, if any, it will remain in as a holdover tenant.
AIRTOUCH CELLULAR. Commencing November 15, 1995, AirTouch
Cellular leased 189,265 square feet of space at an average rental rate of
approximately $14.00 per square foot. The lease is for 5.5 years and
contains two renewal options for terms of up to 5 years each.
DENNY'S INC. Denny's Inc. ("Denny's") is a national food
service company that operates the Denny's restaurant chain. The lease
agreement between CWOP and Denny's Inc. is for 158,362 square feet of space.
This initial lease term expires on July 14, 2004. Denny's does not occupy
any of the space under this lease and has subleased its entire space to two
tenants. The largest subtenant is Waban, Inc. ("Waban"), which subleases
106,576 square feet from Denny's and also leases 57,308 square feet directly
from CWOP, as described below. Denny's also subleases to another company,
Private Healthcare Systems. Flagstar, formerly known as T.W. Services, Inc.,
the parent company of Denny's, has guaranteed the Denny's lease, as well as
leases of two other subsidiaries that are tenants, El Pollo Loco and
Coco's/Carrows. Flagstar has recently announced that it intends to file a
prepackaged bankruptcy case, and the Debtor does not know what impact that
may have on the guaranty.
WABAN, INC. Waban, Inc. is a home improvement products
retailer. Waban has entered into two separate leases: a lease with CWOP for
57,308 square feet, and the sublease with Denny's discussed above. The lease
agreement between CWOP and Waban, which is scheduled to expire on July 24,
2004, contains extension options for three consecutive five year terms.
Waban's sublease agreement with Denny's expires on July 24, 2004.
PREFERRED MORTGAGE T.A.R. Preferred Mortgage Corporation
("Preferred Mortgage") entered into a lease for approximately 78,700 square
feet in January 1997. The lease expires March 31, 2002. The average rental
rate is approximately $16.56 per square foot. The lease contains a must-take
option whereby Preferred Mortgage will lease another 22,000 square feet after
May 1997.
4. PROPERTY MANAGEMENT.
From the date that CWOP acquired the Property until March
1992, Crow Orange County Management Company, Inc. ("COCMC"), an affiliate of
Crow, provided leasing, management and construction supervision services at
the Property pursuant to a management agreement executed by CWOP and COCMC
(the "COCMC Building Management Agreement"). In 1992, WCI desired to acquire
the right to manage the Property and, except for Crow's 1% interest in CWOP,
unify ownership and management of the Property. WCI formed Winthrop
California Management Limited Partnership ("WCM"), and in consideration of a
cash payment of $4 million and WCI's agreeing to afford greater flexibility
to Crow and its principals under the CWDLP partnership agreement, WCM
acquired COCMC's management rights and Crow agreed to essentially become a
limited partner in CWOP. (Crow did not agree to be actually converted to a
limited partner at the time because the conversion expands the rights of the
holder of the Existing Secured Note (and thus impairs Crow's rights) under
the Development Approval Agreement.) Thus, the CWOP partnership agreement
was amended to give WCI the sole right to manage the business of CWOP
(including the retention of professionals and the commencement of a
bankruptcy proceeding). The intent of the parties that Crow cede all
management rights to WCI is enforced by a provision in the amendment that
converts Crow to a limited partner in the event Crow breaches the provision
prohibiting Crow from controlling the partnership. Based on Crow's actions,
WCI has asserted that Crow has lost its status as a general partner of CWOP
and has been automatically converted to a limited partner under this
provision.
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WCM was formed to own the management rights to the Property
but otherwise is not a property management company. In order to perform the
management services under the property management agreement, WCM engaged
Winthrop Management, a property management affiliate of Winthrop Financial
Associates. Under CWOP's current agreement with WCM, the salaries of the
Winthrop Management employees who perform services for the Property (as well
as the office space for the property management office) are charged to CWOP
at cost and passed through to tenants as an operating expense. Winthrop
Management handles a significant portion of the accounting for the Property
as well as human resources, benefits and payroll for all on-site employees at
no expense to CWOP. Winthrop Management occupies approximately 2,000 square
feet of tower space for the property management office and 12,000 feet of
concourse space for building operations. Prior to the commencement of the
Reorganization Case, WCM received a fee of 5% of gross revenues for the space
leased by Fluor and 4% for other space plus leasing commissions and
construction management fees for managing the Property, the same fees COCMC
received under the COCMC Building Management Agreement.
5. THE DEVELOPMENT PARCEL; EXTERIOR COMMON AREA.
The respective rights of CWOP and CWDLP to use the Development
Parcel are governed by a reciprocal easement agreement entered into at the
time the Property was acquired from Fluor (the "REA"). Under the REA, the
owner of the Property (CWOP or its transferee) is granted easements for
access, utilities and parking. The owner also has a non-exclusive right to
use the common area portion of the Development Parcel, subject to certain
restrictions. Under the REA, CWDLP must provide at least 5,225 non-exclusive
surface parking spaces "appurtenant" to the Property. Except to the extent
the owner of the Property designates any of the spaces as reserved or the
spaces are relocated to a parking structure, the spaces are to be provided
without charge to CWOP. The owner of the Property has the right to designate
all or any portion of the surface parking spaces as reserved, and CWDLP is
entitled to a reserve premium on such spaces equal to the difference between
the "market rate" for the reserved space in question and the "market rate"
for the same space on an unreserved basis.
In order to provide for the effective management and
maintenance of Park Place, CWOP and CWDLP originally agreed to appoint COCMC
to act as managing agent for Park Place. In addition to the COCMC Building
Management Agreement, CWOP executed a management agreement under which COCMC
agreed to provide maintenance services with respect to the "common area" of
the Development Parcel, which is comprised of the parking lots and walkways
of Park Place (the "Common Area Management Agreement"). Under the REA and
the Common Area Management Agreement, COCMC is responsible for allocating the
expenses of the Development Parcel common area, which expenses include
insurance, security and property taxes for the portions of the Development
Parcel that constitute "common area." The REA provides for at least two
methods of allocating common area expenses: one based on the proportionate
square footage of the improvements located on each party's parcel and another
based on "standards, customs, and guidelines common in the industry in the
Newport Beach/Irvine/South Coast Plaza area," taking into account the
relative benefits derived from the common area, the amount of use and similar
factors. In addition, if a party's use of its parcel or the common area
results in an increased cost of maintenance or services, that party is to
bear the increased cost.
Prior to the sale of the management rights for the Property to
WCM, COCMC had not charged a fee under the Common Area Management Agreement.
However, after the sale, COCMC began charging CWOP a management fee of 15% of
all costs associated with the exterior common area -- including property
taxes and management "overhead". While CWOP did not dispute COCMC's right to
charge a reasonable management fee for the very limited services it provided
with respect to the external common area, COCMC demanded a management fee of
over $240,000 per annum (plus overhead) to manage what was, in essence,
grass, walkways and a parking lot.
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COCMC's imposition of this management fee was accompanied by
CWDLP's assessment of a reserved parking charge for any space designated as
reserved by CWOP's tenants. CWOP asserted that the fee was unreasonable, and
CWOP was effectively precluded from passing on any portion of the new charge
to its tenants because the lease with its tenants, which COCMC negotiated
while it was the property manager under the COCMC Building Management
Agreement, included free reserved parking.
In 1994, CWOP commenced litigation against CWDLP seeking
relief from the amounts charged by COCMC under the REA and the related
management agreement. The litigation was settled in April 1995 pursuant to
an agreement among the parties (the "Settlement Agreement"). The Settlement
Agreement provides that CWOP will pay for reserved spaced parking at $20,833
per month as adjusted by the Consumer Price Index, for 600 reserved spaces,
or a proportionally reduced amount if CWOP has fewer reserved spaces (but
CWOP may only reduce the number of spaces in 150 space increments). Under
the Settlement Agreement, WCM subcontracted certain management duties for the
common area. However, it receives no payment for managing the common area and
instead pays COCMC $20,833 per month in consideration for this "management
privilege."
During the past two years, retail development of the
Development Parcel has increased significantly. Retail tenants include
Houston's Restaurant, Ruth's Chris Steakhouse, Sports Chalet and California
Pizza Kitchen. In addition, CWDLP completed the construction of a 3-acre
18-hole putting golf course in 1996. CWDLP has recently announced plans to
commence additional development on the Development Parcel. The new project
is being advertised by Crow as a "city within a city" with two office
buildings, a hotel and a nightclub.
As part of the existing retail development, certain retail
parking was constructed separate from the parking available for tenants of
the Property and made into limited time lots. CWDLP recently informed CWOP
that it intends to gate sections of the parking for the Property that are
currently designated for visitor parking and to charge for such parking.
CWOP believes that this violates the terms of the REA and COCMC's duties as
managing agent for the common area. Numerous other disputes have arisen
between CWOP and CWDLP regarding the REA and the common area. As a result on
June 27, 1997, CWOP commenced the Crow Litigation. See Section III.C.5.
B. EVENTS LEADING TO THE FILING OF THE CHAPTER 11 CASE.
1. ORANGE COUNTY REAL ESTATE MARKET.
Since the acquisition of the Property, the Orange County
rental market and the rental market in the area proximate to John Wayne
Airport (the "Greater Airport market") have changed dramatically. The
market's general economic condition has weakened, and supply of office space
has outpaced demand. The Orange County office market consists of
approximately 52 million square feet of space contained in 585 buildings,
with approximately forty-five percent (45%) of these buildings developed
since 1985. As a result of this tremendous growth of supply, average vacancy
for the Greater Airport market increased from 9% in 1984 to approximately 25%
in 1989. While the vacancy rate gradually declined to approximately 17.2% at
the end of 1994 and 13.5% at the end of 1996, average rental rates have
remained depressed, with average rental rates in Orange County declining
approximately 20% from 1985 to 1996. While the Property maintained low
vacancy rates as the result of an aggressive leasing campaign (the Property
was 95% occupied at the end of 1996), the Property suffered a decline in
achievable rents consistent with the market.
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2. AGREEMENT OF UNDERSTANDING WITH CERTIFICATEHOLDERS.
In April 1996, the Existing Secured Note became due. Prior to
the maturity of the note, CWOP and the Certificateholders commenced
negotiations to restructure the Existing Secured Note. On April 10, 1996,
the Servicing Agent notified CWOP that it had received the requisite consents
from the Certificateholders to extend the maturity date through June 1996.
Although it was unable to repay the principal amount outstanding, CWOP
continued to pay interest at the nondefault rate after the maturity date.
There are over 20 Certificateholders, including foreign banks. The unanimous
consent of the Certificateholders is required to restructure the Existing
Secured Note, while the consent of 51% in aggregate amount of the
Certificates is required to commence foreclosure proceedings. By April of
1996, many of the original holders of the Certificates had sold to other
funds and institutions. In May 1996, four of the Certificateholders formed a
steering committee. The initial members were Topa Savings Bank, AEGON Realty
Advisors, Contrarian Capital LLC and TCW Asset Management Company (the
"Steering Committee"). The Steering Committee retained Milbank, Tweed,
Hadley & McCloy as its counsel. Despite the ongoing negotiations with CWOP,
holders representing at least 51% in aggregate amount of the Certificates
voted to record a notice of default against the Property in June 1996, and in
July 1996, the Servicing Agent took possession of approximately $1.3 million
in cash that was held in a pledged account. Nonetheless, negotiations among
the parties continued, and in August of 1996, the parties reached an
agreement providing for the payment of excess cash to the Certificateholders
pursuant to a monthly cash sweep of CWOP's rent account.
In November 1996, the Certificateholders and CWOP reached an
agreement in principle on the terms of a plan of reorganization, which terms
are incorporated in the Plan. The parties entered into an agreement of
understanding dated as of November 27, 1996 (the "Agreement of
Understanding"), which was executed by more than 66 2/3% in amount and more
than 50% in number of the Certificateholders (the "Requisite
Certificateholders"). Under the Agreement of Understanding, the Requisite
Certificateholders agreed to support a pre-arranged bankruptcy plan of
reorganization for CWOP with the terms contained in the Plan. The Requisite
Certificateholders also agreed to forbear from exercising any remedies so
long as the Agreement of Understanding was in effect.
The Agreement of Understanding does not obligate any
Certificateholder to vote for the Plan. All Certificateholders (including
the Certificateholders who signed the Agreement of Understanding and the
Certificateholders who agreed in writing to be bound by the terms of the
Agreement of Understanding when they purchased their Certificates) are
permitted to vote for the Plan or to vote against the Plan or not to vote at
all, without restraint and without breaching the Agreement of Understanding
regardless of which they choose to do.
The Debtor has indicated that it may seek to contend in the
Bankruptcy Court that the signatures to the Agreement of Understanding
constituted a valid prepetition vote in favor of the Plan that was made after
disclosure of adequate information to meet the requirements of section
1126(b) of the Bankruptcy Code. This reservation of rights does not in any
way affect the right of Certificateholders to vote against the Plan if they
choose to do so.
On or about March 25, 1997, CWOP Note Administrator L.L.C., an
affiliate of certain investment funds and accounts managed by TCW Asset
Management Company, became the successor servicing agent (the "Successor
Servicing Agent") under the Purchase Agreement, replacing the Servicing Agent
(but the Servicing Agent agreed to continue as subagent to perform certain
administrative tasks). The Servicing Agent intends to assign the Existing
Secured Note and liens securing the note to the Successor Servicing Agent.
On June 17, 1997, the Bankruptcy Court entered an order approving a
stipulation entered into by the Servicing Agent, the Successor Servicing
Agent and the Debtor modifying the automatic stay to the extent necessary to
execute and record documents in connection with that assignment.
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C. SIGNIFICANT EVENTS DURING THE CHAPTER 11 CASE.
CWOP commenced this case (the "Reorganization Case") by filing
a voluntary petition under chapter 11 of the Bankruptcy Code on March 28,
1997. Since the filing, the Debtor has operated its business as a debtor in
possession under the Bankruptcy Code. The following is a summary of certain
significant events that have occurred during the pendency of the
Reorganization Case.
1. CASH COLLATERAL AGREED ORDER.
The Debtor currently operates under a cash collateral order
entered by the Bankruptcy Court on April 3, 1997 (the "Cash Collateral
Order"). Under the terms of the Cash Collateral Order, CWOP may use the
Certificateholders' cash collateral to operate the Property and administer
the Reorganization Case in accordance with the budget attached to the order
(the "Initial Budget") or as otherwise approved by the Successor Servicing
Agent. The budget approved by the Cash Collateral Order extends through
September 30, 1997, but the Debtor may use cash collateral thereafter
provided CWOP and the Successor Servicing Agent agree to the terms of
additional 30 day budgets. The Cash Collateral Order also provides that all
"excess cash" (as determined under the Cash Collateral Order) generated
during the Reorganization Case will be placed in a reserve that CWOP will
contribute to Jamboree LLC on the Effective Date.
2. MOTION TO DISMISS.
On March 31, 1997, Crow filed a motion to dismiss the
Reorganization Case or alternatively to treat the filing as involuntary. In
its motion, Crow asserted that it did not consent to the filing. In
opposition, the Debtor asserted that Crow expressly consented to the filing
in the CWOP partnership agreement. The Court denied Crow's motion to dismiss
by an order entered May 2, 1997.
3. CLAIMS BAR DATE AND CLAIMS PROCEDURES ORDER.
On May 2, 1997, the Bankruptcy Court entered an order
requiring pre-petition creditors (with certain exceptions) to file proofs of
claim against the Debtor no later than June 16, 1997. A party to an
executory contract or lease that is rejected by the Debtor has until 30 days
from the date of mailing of the notice of entry of the order approving the
rejection to file a claim against the Debtor for rejection damages.
4. LEASING TRANSACTIONS.
On June 20, 1997, the Court entered an order authorizing CWOP
to enter into in the ordinary course of business leases that fall within
certain defined parameters (the "Ordinary Course Leasing Parameters"). The
Ordinary Course Leasing parameters are as follows: (a) lease renewals of new
leases of 15,000 rentable square feet or less; (b) lease terms of 6 years or
less; and (c) tenant improvements, if any, of $18.00 or less per square foot,
payable by CWOP as the work is completed. Since that order was entered, CWOP
entered into a variety of lease renewals with existing tenants in the
ordinary course. In addition, pursuant to a motions to authorize the Debtor
to enter into leases outside of the ordinary course of business, the Court
authorized the Debtor to enter into the lease with Prudential Residential
Services (see Section III.A.3) and a short-term lease with Consumer Portfolio
Services, Inc.
5. CROW CLAIMS AND LITIGATION.
CWDLP filed four separate proofs of claim asserting secured
and unsecured claims for CWOP's alleged delinquencies in the payment of its
share of property taxes and insurance premiums with respect to the common
area of the Development Parcel (the "Common Area"). CWDLP asserted the
following
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secured claims: $18,634.78 predicated upon liens filed with the Orange
County Recorder on March 14, 1996 and March 18, 1996; $79,714.07 predicated
upon a lien filed with the Orange County Recorder on November 12, 1996 and
amended December 6, 1996; and $59,872.54 predicated upon a lien filed with
the Orange County Recorder on January 31, 1997 and amended March 29, 1997
(the "CWDLP Secured Claims"). CWDLP asserted an unsecured claim in the
amount of $4,999.82 predicated upon another purported late payment but for
which CWDLP did not file a lien prior to the commencement of the bankruptcy
case.
On June 30, 1997, CWOP filed two complaints against CWDLP and
COCMC (the "Crow Litigation"). In the first, CWOP is objecting to CWDLP's
claims and seeking turnover, avoidance of fraudulent conveyances and
declaratory and other relief. In the second, CWOP is seeking declaratory and
other relief regarding the failure of COCMC to establish a parking control
program. The disputes that give rise to the Crow Litigation are set forth
below.
First, under the REA, the parties are entitled to the
non-exclusive right to use and enjoy the Common Area. However, since April
1995, CWDLP has used and developed portions of the Common Area in a manner
that is useful, beneficial and convenient only to CWDLP to the exclusion of
CWOP. These portions of Common Area include a modular office facility from
which CWDLP conducts its leasing and development activities, parcels used for
the development and operation of a miniature golf course, and parcels used
for the construction and development of a retail area, including the
establishment of restricted parking. Notwithstanding the fact that CWOP has
been denied its right to the use and enjoyment of these areas, CWDLP has
included them in Common Area and has apportioned Common Area expenses
associated therewith to CWOP. Under federal and state fraudulent conveyance
statutes, CWOP is entitled to the return of Common Area charges improperly
allocated to it, damages against CWDLP and COCMC for breach of contract and
constructive fraud, and a declaration that the affected areas be removed from
Common Area.
Second, CWDLP has impermissibly delayed charging tenants or
occupants of developed portions of the Development Parcel their share of the
Common Area expenses until the tenant or occupant is "open for business,"
although such land is removed from the Common Area upon the commencement of
construction, thereby overcharging CWOP for its allocable share of Common
Area expenses. Under state and federal fraudulent conveyance statutes, CWOP
is entitled to the return of Common Area charges improperly allocated to it,
damages against CWDLP and COCMC for breach of contract and constructive
fraud, and a declaration that the allocable share of Common Area Expenses be
allocated to tenants or occupants at the time the land is removed from the
Common Area.
Third, under the REA, CWOP is obligated to pay its allocable
share of property taxes associated with the Common Area. As managing agent,
COCMC is authorized to submit invoices from time to time requesting CWOP's
advance payment of its share of the property tax obligation. Although the
property tax payments are nominally due on November 1 and March 1 of each
fiscal year, installments may be paid, and are not delinquent, if paid by
December 10 and April 10, respectively. COCMC has engaged in the practice of
submitting invoices for property tax payments well in advance of the
delinquency date, and then declaring CWOP delinquent when payment is not made
within five days, and has imposed interest and late charges. In those
instances where CWOP has complied with COCMC's request, COCMC has
impermissibly had the use of CWOP's funds, in effect exacting a premium over
and above CWOP's actual property tax obligation. On this basis, CWDLP has
asserted the improper late charges that are the basis of its Claims filed
against the Debtor. CWOP objects to the claims on the basis that there is no
amount due to CWDLP. CWOP is also seeking to avoid CWDLP's asserted liens on
that basis. Further, by virtue of this conduct, CWOP is entitled to relief
under federal and state fraudulent conveyance statutes for the improper late
charges and premiums, for damages for breach of contract and constructive
fraud against CWDLP and COCMC, and for a declaration that the practices of
CWDLP and COCMC with respect to the collection of property tax are improper.
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Fourth, as noted above, COCMC, as managing agent collects
from the parties to the REA and remits to the County of Orange property taxes
for the Common Area. In turn, where a refund is due, the County of Orange
pays the refund to CWDLP for the benefit of the parties to the REA.
Notwithstanding that COCMC held refunds in excess of $550,000 as of March 28,
1996 and in excess of $610,000 as of January 1, 1996, COCMC has failed to
remit to CWOP its share of these refunds (of which the majority would be
refunded to CWOP's tenants). CWOP is entitled to relief against COCMC under
turnover, federal and state fraudulent conveyance statutes, and is entitled
to damages against CWDLP and COCMC for breach of contract and constructive
fraud.
Fifth, there is presently a dispute between CWOP and
CWDLP and COCMC with respect to charges for non-reserved parking. Under the
REA, CWDLP is required to supply at least 5,225 non-exclusive surface parking
spaces at no charge. COCMC contends that it is entitled to initiate a
parking system that would impose a charge on some or all of the non-reserved
spaces. CWOP is entitled to a declaration that it is entitled to at least
5,225 non-exclusive surface parking spaces without charge.
Sixth, there is presently a dispute between CWOP and
CWDLP and COCMC concerning CWDLP's reduction in the number of non-exclusive
parking spaces, as required under the REA, through the imposition of parking
time restrictions on parking spaces in the vicinity of the retail
development. CWOP is entitled to a declaration that spaces so restricted may
not be counted toward CWDLP's obligation under the REA to supply at least
5,225 surface parking spaces.
Seventh, under the REA, the managing agent, COCMC, is
required to provide prior written approval of exterior signage and monuments.
There is presently a dispute between CWOP and CWDLP and COCMC with respect to
the manner in which the managing agent has exercised approvals and
disapprovals of exterior signage and monuments. CWOP is entitled to a
declaration that the managing agent is required to administer the approval
process in a fair, consistent and commercially reasonable manner.
Eighth, the REA requires the managing agent to establish
a controlled parking program where necessary. At present, the absence of a
control program has resulted in an uneven and inefficient use of the parking
spaces and complaints and dissatisfaction on the part of the CWOP's tenants.
CWOP has requested the managing agent to implement a parking control program,
but Crow has refused.
CWOP is seeking the recovery or turnover of approximately
$900,000 and damages in an undetermined amount in addition to the declaratory
relief sought in the complaints. CWOP (on behalf of itself and its
successor, Jamboree LLC) expressly reserves all of its rights to amend the
complaints or bring additional and/or unrelated claims against CWDLP, COCMC
or Crow prior to or after the Effective Date.
IV. THE PLAN.
The following summary of certain principal provisions of
the Plan is qualified in its entirety by reference to the Plan, which is
attached as Exhibit 1 to this Disclosure Statement. In the event of any
discrepancy between this Disclosure Statement, including the following
summary description, and any provision of the Plan, the Plan or order
confirming the Plan will control. Capitalized terms used but not otherwise
defined herein will have the meanings ascribed to them in the Plan.
A. TREATMENT OF ADMINISTRATIVE CLAIMS AND PRIORITY TAX
CLAIMS.
Administrative Claims consist of all claims for payment of
costs or expenses of administration of the Debtor or the Debtor's bankruptcy
estate (the "Estate") specified in Bankruptcy Code SECTIONS 503(b) and
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507(a)(1), including, without limitation: (a) claims under Bankruptcy Code
SECTIONS 330(a), 331 or 503 for compensation for professional services
rendered and reimbursement of expenses in the Reorganization Case ("Fee
Claims"); (b) the actual, necessary costs and expenses of preserving the
estate and operating the business of the Debtor, incurred and paid in the
ordinary course of business by the Debtor after the bankruptcy filing and
invoiced prior to the Effective Date but excluding any claim of a
governmental unit for taxes ("Ordinary Course Administrative Claims"); (c)
any post-petition taxes subject to administrative treatment; and (d) fees and
charges assessed against the Debtor or the Estate pursuant to section 1930 of
title 28 of the United States Code. Priority Tax Claims consist of certain
unsecured claims of governmental units entitled to priority of distribution
from the estate under Bankruptcy Code SECTION 507(a)(8).
As provided in Bankruptcy Code SECTION 1123(a)(1),
Administrative Claims and Priority Tax Claims against the Debtor will not be
classified for the purposes of voting or receiving distributions under the
Plan. Rather, all such Claims will be treated separately as unclassified
Claims on the terms set forth in Article 2 of the Plan. The Debtor does not
believe any administrative claims will arise in the Reorganization Case other
than Ordinary Course Administrative Claims, which are operating expenses
budgeted for in the Initial Budget, and Fee Claims, for which the Debtor has
budgeted approximately $2 million. The Debtor estimates that the aggregate
amount of Allowed Priority Tax Claims will be approximately $96. Holders of
Administrative and Priority Tax Claims are not entitled to vote on the Plan;
their votes will not be solicited and they will not receive ballots. To the
extent a Priority Tax Claim is secured, it is separately classified and
treated under the Plan as a Secured Tax Claim.
1. ALLOWANCE OF ADMINISTRATIVE CLAIMS.
An Ordinary Course Administrative Claim will become
Allowed without any action by the holder of such Claim unless it is disputed
by the Debtor or Reorganized CWOP (if prior to or on the Effective Date) and
Jamboree LLC (if after the Effective Date) prior to the 60th day after the
Effective Date. Either the Debtor or Reorganized CWOP (if prior to or on the
Effective Date) or Jamboree LLC (if after the Effective Date) may dispute an
Ordinary Course Administrative Claim by providing written notice to the
claimant within 60 days after the Effective Date. If disputed by the Debtor
or Reorganized CWOP or Jamboree LLC, an Ordinary Course Administrative Claim
may become Allowed only as provided in Paragraph 2.B.3 of the Plan.
A Fee Claim will become Allowed only if the holder files
an application in accordance with the Bankruptcy Code and Bankruptcy Rules no
later than 60 days after the Effective Date and only if and to the extent
such Claim is Allowed by the Bankruptcy Court.
Under Paragraph 2.B.3 of the Plan, any other
Administrative Claim (including any Ordinary Course Administrative Claim that
is disputed by the Debtor or Reorganized CWOP or Jamboree LLC as set forth in
Paragraph 2.B.1 of the Plan) will become Allowed only if within 90 days after
the Effective Date the holder of such Claim files with the Bankruptcy Court
and serves on the Debtor or Reorganized CWOP (if prior to or on the Effective
Date) or Jamboree LLC (if after the Effective Date) a motion requesting
payment of such Administrative Claim, and only if and to the extent such
Claim is Allowed by the Bankruptcy Court pursuant to a Final Order. The
Debtor, Reorganized CWOP or Jamboree LLC may file an objection to any such
motion within the time provided by the Bankruptcy Rules or otherwise by the
Bankruptcy Court.
2. TREATMENT OF ALLOWED ADMINISTRATIVE CLAIMS.
Each holder of an Allowed Administrative Claim will receive
(i) the amount of such holder's Allowed Administrative Claim in one cash payment
or (ii) such other treatment as may be agreed by the Debtor or Reorganized CWOP
(if prior to or on the Effective Date) or Jamboree LLC (if after the Effective
Date) and such holder. Distributions on account of Administrative Claims that,
on the Effective Date, are Allowed
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Claims, will be made by Reorganized CWOP (if on the Effective Date) or
Jamboree LLC (if after the Effective Date) on or as promptly as practicable
after the Effective Date. Distributions on account of Administrative Claims
Allowed after the Effective Date will be made as soon as practicable after
such Claims become Allowed. The Debtor or Reorganized CWOP (if prior to or
on the Effective Date) or Jamboree LLC (if after the Effective Date) will pay
each Allowed Ordinary Course Administrative Claim on the date on which
payment is due or otherwise would be permitted to be made in accordance with
the terms and conditions of the particular transaction and any agreements
relating thereto.
3. TREATMENT OF PRIORITY TAX CLAIMS.
Each holder of an Allowed Priority Tax Claim will receive
(i) the amount of such holder's Allowed Priority Tax Claim on the sixth
anniversary of the assessment date of the taxes on which the holder's
Priority Tax Claim is based, with interest payable annually in arrears at the
judgment rate of interest determined in accordance with 28 U.S.C. SECTION
1961(a) on the Confirmation Date or such other rate as the Bankruptcy Court
may determine at the Confirmation Hearing or (ii) such other treatment as may
be agreed upon by the Debtor or Reorganized CWOP (if prior to or on the
Effective Date) or Jamboree LLC (if after the Effective Date).
B. CLASSIFICATION AND TREATMENT OF CLAIMS AND INTERESTS.
1. PRIORITY CLAIMS (CLASS 1).
Class 1 consists of Priority Claims. Priority Claims are
Claims entitled to priority pursuant to Bankruptcy Code SECTION 507(a), other
than an Administrative Claim or Priority Tax Claim. Each holder of an
Allowed Priority Claim will receive, on account of such Claim, (i) the amount
of such holder's Allowed Priority Claim in one cash payment or (ii) such
other treatment as may be agreed by the Debtor or Reorganized CWOP (if prior
to or on the Effective Date) or Jamboree LLC (if after the Effective Date)
and such holder. Class 1 is not impaired under the Plan and is deemed to have
accepted the Plan. The Debtor does not believe that there are any Priority
Claims.
2. SECURED TAX CLAIMS (CLASS 2).
Class 2 consists of the Secured Tax Claims. Secured Tax
Claims are Claims of governmental units for taxes to the extent that, by
operation of applicable non-bankruptcy law, such Claims are Secured Claims
under Bankruptcy Code SECTION 506(a) and not subject to avoidance under
chapter 5 of the Bankruptcy Code.
Under Paragraph 4.B of the Plan, each holder of an
Allowed Secured Tax Claim will receive, on account of such Claim, (i) a note
in the Allowed amount of such Claim secured by a lien on the Property PARI
PASSU with notes issued to any other holders of Allowed Secured Tax Claims
and senior to all other liens on the Property, with interest payable monthly
in arrears at a rate of 7.5% per annum and any unpaid interest and principal
payable on the third anniversary of the Effective Date, or (ii) such other
treatment as may be agreed to by the Debtor or Reorganized CWOP (if prior to
or on the Effective Date) or Jamboree LLC (if after the Effective Date) and
such holder. Class 2 is impaired under the Plan, and Debtor is soliciting
the votes of holders of Claims in that Class. The Debtor estimates that the
Allowed Secured Tax Claims will aggregate approximately $690,000.
3. OTHER SECURED CLAIMS (CLASSES 3A, 3B AND 3C).
Classes 3a, 3b and 3c consist of Other Secured Claims.
Class 3a consists of the Truck Secured Claim, the Claim of Ford Motor Credit
based on the purchase money loan for the 1997 Dodge Ram Truck to the extent such
Claim is a Secured Claim. Class 3b consists of the Van Secured Claim, the Claim
of Chrysler
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Financial Corporation based on the purchase money loan for the 1997 Dodge
Grand Caravan to the extent such Claim is Secured Claim. Class 3c consists
of the CWDLP Secured Claims to the extent such Claims are Secured Claims (see
SECTION III.C.5). The aggregate amount of the CWDLP Secured Claims is
$158,221.39. The Debtor has filed an objection to the CWDLP Secured Claims
as part of the Crow Litigation.
4. CERTIFICATEHOLDER SECURED CLAIMS (CLASS 4).
Class 4 consists of the Certificateholder Secured Claims.
The Certificateholder Claims consist of any and all Claims arising or
asserted under, on account of or related to the Certificates, the Purchase
Agreement, the Existing Deed of Trust, the Existing Secured Note and all
other documents executed by CWOP and delivered and/or received in connection
therewith. The Certificateholder Secured Claims are the Certificateholder
Claims that are Allowed as Secured Claims pursuant to as Paragraph 4.D.2 of
the Plan.
On account of its Claim, through the process described in
Paragraph 7.E of the Plan, each holder of an Allowed Certificateholder
Secured Claim will receive its Ratable Share of (a) 100% of the Jamboree
Office REIT Shares outstanding on the Effective Date, (b) the New Class A
Senior Secured Notes and (c) the New Class B Senior Subordinated Secured
Notes. On the Effective Date, Jamboree Office REIT will own 90% of the
initial Jamboree LLC Units. The Certificateholder Secured Claims will be
Allowed under the Plan in the aggregate amount of $105
million.(1)
In addition, the Plan provides that the treatment of the
Certificateholder Secured Claims will satisfy any and all claims of the
Certificateholders under the WFA Guaranty. For tax purposes, WFA guaranteed
that at least $15 million would be recovered from the Existing Secured Note.
The Plan clarifies that the $100 million in New Notes and the Jamboree Office
REIT Shares distributed to the holders of Allowed Certificateholder Secured
Claims satisfies this obligation. In addition, and notwithstanding this
provision in the Plan, it is likely that WFA (again for tax purposes) will
elect to amend and restate the WFA Guaranty and guaranty the New Notes in a
similar amount and on the same terms as WFA's guaranty of the Existing
Secured Note.
On the Effective Date, the Debtor and the
Certificateholders will enter into a mutual release of all Claims and Causes
of Action between the parties not provided for in the Plan. The parties will
submit the form of the mutual release to the Bankruptcy Court prior to the
Confirmation Hearing.
Class 4 is impaired under the Plan, and the Debtor is
soliciting the votes of the holders of Claims in that Class.
5. CERTIFICATEHOLDER DEFICIENCY CLAIMS (CLASS 5).
Class 5 consists of all Certificateholder Deficiency
Claims. Certificateholder Deficiency Claims are the Claims of the
Certificateholders other than the Certificateholder Secured Claims.
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1. The proposed Allowed amount of the Certificateholder Secured Claims under
the Plan is conditioned on the confirmation and effectiveness of the Plan and
represents a compromise and settlement between the Debtor and such Holders in
the Reorganization Case. The compromise is in all respects subject to Rule
408 of the Federal Rules of Evidence and shall not be used against either
party, as an admission or otherwise, in the adjudication of any such matters.
If the Plan does not become effective, the parties reserve all of their
rights, including the holders' right to elect treatment under Bankruptcy Code
SECTION 1111(b), subject to the terms of the Agreement of Understanding.
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On account of its Claim, through the process described in
Paragraph 7.E of the Plan, each holder of an Allowed Certificateholder
Deficiency Claim will receive 0.1% of its Allowed Claim. The
Certificateholder Deficiency Claims will be Allowed under the Plan in the
amount of $93 million.(2)
Class 5 is impaired under the Plan, and the Debtor is
soliciting the votes of the holders of Claims in that Class.
6. GENERAL UNSECURED CLAIMS (CLASS 6).
Class 6 consists of all General Unsecured Claims. A
General Unsecured Claim is any Claim other than an Administrative Claim, a
Priority Tax Claim, a Secured Tax Claim, a Priority Claim, a
Certificateholder Secured Claim, an Other Secured Claim or a
Certificateholder Deficiency Claim.
Each holder of an Allowed General Unsecured Claim will
receive on account of such Claim, cash in the amount equal to the Allowed
amount of such Claim with interest payable on such amount at the judgment
rate of interest determined in accordance with 28 U.S.C. SECTION 1961 on the
Confirmation Date, or such other rate as the Bankruptcy Court may determine
at the Confirmation Hearing. Distributions on account of General Unsecured
Claims that are Allowed on the Effective Date will be made on the Effective
Date. Distributions on account of Claims Allowed after the Effective Date
will be made when such Claims become Allowed.
The Debtor estimates that the Allowed General Unsecured
Claims will aggregate approximately $25,000. These are amounts owed to
vendors, suppliers and professionals who provided goods and services to the
Debtor prior to the Petition Date. A General Unsecured Claim in the amount
of $4,999.82 was filed by CWDLP, but the Debtor disputes that any amount is
owed to CWDLP on account of this claim. In addition, proofs of claim were
filed by seven of CWOP's tenants based on the tenant's security deposit or
the right to audit operating expenses. The Debtor is assuming all of the
leases of its tenants and believes that the cure payments made under
Bankruptcy Code SECTION 365(b) will satisfy all amounts owing under its
leases. Class 6 is unimpaired under the Plan, and the Debtor is not
soliciting the votes of the holders of Claims in that Class.
7. INTERESTS (CLASS 7).
Class 7 consists of the partnership interests in CWOP.
The holders of the Allowed Interests will retain their Interests in
Reorganized CWOP subject to the terms of the New CWOP Partnership Agreement
and the Plan. On the Effective Date, Reorganized CWOP will own (i) 10% of
the Jamboree LLC Units and (ii) will be a party to the New Property
Appreciation and Exchange Rights Agreement granting Reorganized CWOP (a) the
New Tranche A Property Appreciation Right, pursuant to which each of its
Jamboree LLC Units will be exchangeable for a Jamboree Office REIT Share, (b)
the New Tranche B Property Appreciation Right, representing the right to
purchase for $10,888,888.89 a number of Jamboree Office REIT Shares
representing 10% (subject to dilution) of the equity value of Jamboree LLC
or, at the option of Jamboree Office REIT, to receive a net cash payment
equal to the difference between the then current market price of the such
number of shares (assuming the exercise of all such rights and all other
rights under the New Property Appreciation and
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2. The proposed Allowed amount of the Certificateholder Deficiency Claims
under the Plan is conditioned on the confirmation and effectiveness of the
Plan and represents a compromise and settlement between the Debtor and such
Holders in the Reorganization Case. The compromise is in all respects
subject to Rule 408 of the Federal Rules of Evidence and shall not be used
against either party, as an admission or otherwise, in the adjudication of
any such matters. If the Plan does not become effective, the parties reserve
all of their rights, including the holders' right to elect treatment under
Bankruptcy Code SECTION 1111(b), subject to the terms of the Agreement of
Understanding.
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Exchange Rights Agreement concurrently exercised) and such exercise price and
(c) the New Tranche C Property Appreciation Right, representing the right to
purchase for $152,777,777.78 a number of Jamboree Office REIT Shares
representing 55% (subject to dilution) of the equity value of Jamboree LLC
or, at the option of Jamboree Office REIT, to receive a net cash payment
equal to the difference between the then current market price of such number
of shares (assuming the exercise of all such rights and all other rights
under the New Property Appreciation and Exchange Rights Agreement
concurrently exercised) and such exercise price.
WCI believes that Crow has been automatically converted
to a limited partner under the terms of the CWOP Partnership Agreement. This
conversion will not affect Crow's ownership percentage in Reorganized CWOP,
and therefore will not affect the value of the property received by Crow on
account of its Interest. The confirmation of the Plan will NOT convert Crow
to a limited partner.
Class 7 is impaired under the Plan, and the Debtor is
soliciting the votes of holders of Interests of that Class.
C. IMPLEMENTATION OF THE PLAN.
1. FORMATION OF JAMBOREE LLC AND JAMBOREE OFFICE REIT.
On or prior to the Effective Date, Jamboree LLC will be
formed and the initial Jamboree LLC Units will be issued 10% to Reorganized
CWOP and 90% to Jamboree Office REIT. Jamboree Office REIT will be formed
and its shares will be authorized on or before the Effective Date, and on the
Effective Date its shares will be distributed to the holders of Allowed
Certificateholder Secured Claims in accordance with Paragraph 4.D of the
Plan. If the Plan becomes effective, the confirmation of the Plan will be
deemed a revesting of all of the property of the Estate to Reorganized CWOP,
and title to all property so contributed will pass to and revest in
Reorganized CWOP free and clear of all Claims, all liens securing claims and
all interests, except any lien preserved under the Plan, including the lien
created by the Existing Deed of Trust and any valid lien or encumbrance of
record on the date of recordation of the Existing Deed of Trust. Such
property shall thereafter be contributed to Jamboree LLC in accordance with
Paragraph 7.E of the Plan.
The contribution of the Property to Jamboree LLC pursuant to
Paragraph 7.E of the Plan will take place in two steps. First, after entry of
the Confirmation Order and after WCI has obtained consent to the plan
transactions from its limited partners, but immediately prior to the occurrence
of the Effective Date, the Certificateholder Claims will be satisfied by the
payment to the Certificateholders (or their agent) of the cash payable to them
on account of their Allowed Certificateholder Deficiency Claims under Paragraph
4.E of the Plan and the issuance of Intermediate Notes in the amounts of $100
million and $4.5 million secured by the liens and security interests securing
the Allowed Certificateholder Secured Claims, which liens and security interests
will be amended and restated as contemplated by the indentures governing the New
Notes, except that the Certificateholders will be deemed to have released their
liens on cash or other assets of CWOP of a value of $500,000. These
transactions will be deemed to have satisfied the Certificateholder Claims and
discharged $93 million of CWOP's indebtedness. Immediately after the
consummation of those transactions: the $4.5 million Intermediate Note will be
deemed to be contributed by the Certificateholders to Jamboree Office REIT, and
thereafter be deemed contributed by Jamboree Office REIT to Jamboree LLC and
merged out of existence upon the assumption of the Debtor's obligations by
Jamboree LLC as described in the next paragraph; the Certificateholders will be
deemed to have contributed the Development Approval Agreement to Jamboree LLC;
and CWOP will transfer and contribute all of its property, including assets
securing the Intermediate Notes (including the Crow litigation) and the $500,000
of free assets, to Jamboree LLC. Immediately upon the transfer and contribution
of the assets to Jamboree LLC, Reorganized CWOP will be issued 10% of the
initial Jamboree LLC Units, Jamboree Office REIT will be issued 90% of the
initial Jamboree LLC Units and the $100 million Intermediate Note will be
cancelled and satisfied by the issuance of the New Notes to the holders
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of the Allowed Certificateholder Secured Claims. All of these transactions
will take place on the Effective Date. Neither the Intermediate Notes nor
any interest in them will be physically distributed to the
Certificateholders, but instead the Certificateholders will be distributed
directly the Jamboree Office REIT Shares and the New Notes, which will be
secured by the liens and security interests securing the Allowed
Certificateholder Secured Claims, which liens will be amended and restated as
contemplated by the indentures governing the New Notes, and the liens
securing the Intermediate Notes.
In consideration of the transfer and contribution of
CWOP's assets to Jamboree LLC, Jamboree LLC will execute an assignment and
assumption agreement providing for the express assumption by Jamboree LLC of
(i) the obligations of the Debtor and Reorganized CWOP under the Plan
designated for performance by Jamboree LLC after the Effective Date and (ii)
the obligation to indemnify and defend WCI, WCM, WFA, Three Winthrop
Properties, Inc. their affiliates and any current or former director, officer
or employee of the foregoing for claims against them and expenses incurred in
the Crow Litigation. These obligations are being expressly assumed by
Jamboree LLC in connection with and as consideration for the transfer of
CWOP's assets to Jamboree LLC.
Reorganized CWOP will make payments on account of Claims
Allowed (and in amount certain) on the Effective Date immediately prior to
the transfer of its assets to Jamboree LLC. After the Effective Date (and
the transfer of assets to Jamboree LLC), Jamboree LLC will be obligated to
make all payments required to be made under the Plan.
Jamboree LLC will not be liable or responsible for any
Claim against the Debtor or the Estate except as expressly set forth in the
Plan. Jamboree LLC, Reorganized CWOP and Jamboree Office REIT will be
successors to the Debtor for the purposes of Bankruptcy Code SECTIONS 1123,
1129 and 1145.
2. AVOIDANCE AND RECOVERY ACTIONS.
As of the Effective Date, the Debtor will waive the right
to prosecute and release, on behalf of itself and the Estate, any avoidance
or recovery actions under Bankruptcy Code SECTIONS 542 through 550 or any
other claims, rights or Causes of Action that belong to or could have been
raised by or on behalf of the Debtor or its Estate, other than or in
connection with any such actions that were commenced on or before the
Effective Date. In accordance with Bankruptcy Code SECTION 1123(b), as
successor to the Estate, Jamboree LLC will retain and may enforce any claims,
rights and Causes of Action that the Debtor or Estate may hold commenced on
or before the Effective Date. Jamboree LLC or any successor may pursue those
rights of action, as appropriate, in accordance with what is in the best
interests of Jamboree LLC or successors holding such rights of action.
Nothing in Paragraph 7.G of the Plan will be deemed to waive any right of the
Debtor, Reorganized CWOP or Ja mboree LLC or to assert avoidance or recovery
actions under Bankruptcy Code SECTIONS 542 through 550 or any other Causes of
Action defensively, including by way of setoff, recoupment or counterclaim.
The only avoidance action the Debtor intends to commence
before the Effective Date is the Crow Litigation. Because the Debtor's
creditors other than the Certificateholders are relatively nominal amounts
and are generally being paid in full under the Plan, the Certificateholders
would be the beneficiaries of any avoidance action commenced by the Debtor.
The Debtor and the Certificateholders concluded to waive any avoidance
actions other than the Crow Litigation as part of the Plan to avoid
complication and delay in the restructuring process and as part of the
Debtor's and Certificateholders' agreement to execute mutual releases in
connection with the Plan.
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3. SECTION 1129(a)(4) PAYMENT.
Pursuant to Bankruptcy Code SECTION 1129(a)(4), Jamboree
LLC will pay $500,000 to WCI on the Effective Date. The payment is on
account of the time and efforts of the officers and employees of WCI's
general partner in connection with the Plan and the restructuring process.
WCI will submit a memorandum prior to the confirmation hearing establishing
the reasonableness of such payment as required for Court approval under
Bankruptcy Code SECTION 1129(a)(4).
D. CLAIMS AND DISTRIBUTIONS.
Except for Administrative Claims or as otherwise ordered
by the Bankruptcy Court, all objections to Claims will be filed and served on
the applicable claimant by a date that is no later than 30 days after the
Effective Date or 30 days after the date on which the Claim is filed,
whichever is later. After the Effective Date, only Reorganized CWOP or
Jamboree LLC will have the authority to file, settle, compromise, withdraw or
litigate to judgment objections to Claims.
Notwithstanding any other provision of the Plan, no
payment or distribution will be made with respect to any Claim until such
Claim becomes an Allowed Claim. Unless a Claim is specifically Allowed under
the Plan, the Debtor, Reorganized CWOP and Jamboree LLC reserve any and all
objections to Claims, whether secured or unsecured, including any objection
to the validity or amount of alleged liens and security interests, whether
under the Bankruptcy Code, other applicable law or contract.
E. DISBURSEMENTS.
Reorganized CWOP (if on the Effective Date) or Jamboree
LLC (if after the Effective Date) will make all distributions of cash and
property pursuant to the Plan. Except as otherwise provided in the Plan,
distributions on account of Claims that are Allowed Claims on the Effective
Date will be made by Reorganized CWOP on the Effective Date. Distributions
on account of Claims Allowed after the Effective Date will be made by
Jamboree LLC when Claims become Allowed.
If a payment or distribution to the holder of an Allowed
Claim under the Plan is returned as undeliverable for lack of a current
address for the holder or otherwise, will file with the Bankruptcy Court the
name, if known, and last known address of the holder and the reason for its
inability to make payment. If, after the passage of one year and after any
additional effort to locate the holder that the Bankruptcy Court may direct,
the payment or distribution still cannot be made, the payment or distribution
and any further payment or distribution to the holder will be retained by
Jamboree LLC and the Allowed Claim will be deemed satisfied to the same
extent as if payment or distribution had been made to the holder of the
Allowed Claim.
No distributions of Jamboree Office REIT Shares will be
made to any entity, and the New Property Appreciation and Exchange Rights
Agreement will not be distributed to Reorganized CWOP, unless and until such
entities have delivered to Jamboree Office REIT an executed certificate
regarding the beneficial and constructive ownership of Jamboree Office REIT
Shares substantially in the form of Exhibit M to the Plan (the "REIT
Certificate"). By executing the REIT Certificate, the recipient represents
that based on its information and belief, neither it nor certain related
parties own shares in excess of the ownership limits specified therein. (For
a discussion of the REIT ownership limits and the New Articles, see SECTION
VI.C.) Jamboree Office REIT may elect in its sole discretion to waive this
requirement.
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F. CANCELLATION OF SECURITIES.
On and after the Effective Date, the Certificates will
represent only the right to receive property distributable under the Plan. Each
Certificateholder will surrender its Certificates to Reorganized CWOP (if on the
Effective Date) or Jamboree LLC (if after the Effective Date) and such
certificates will be cancelled. The Purchase Agreement will terminate in
accordance with its terms by the satisfaction of the Allowed Certificateholder
Claims under the Plan.
G. DISCHARGE.
Except for the obligations imposed by the Plan, the
distributions and rights that are provided in the Plan will be in complete
satisfaction, discharge and release of all Claims against, liabilities of, liens
on, obligations of and Interests in (i) the Debtor and the Estate, or (ii) the
assets and properties of the Debtor, Reorganized CWOP, Jamboree LLC, Jamboree
Office REIT or any successors thereto by merger, consolidation or otherwise,
whether known or unknown, arising or existing prior to the Effective Date.
H. TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES.
Under Bankruptcy Code Section 365, a debtor may assume or
reject executory contracts and unexpired leases. The Plan provides that on the
Effective Date, each executory contract and unexpired lease of the Debtor that
has not been assumed or rejected before the Confirmation Date with the approval
of the Bankruptcy Court or for which the Debtor has not filed a motion to assume
or reject before the Confirmation Date will be assumed. Entry of the
Confirmation Order by the Bankruptcy Court will constitute approval of each
assumption pursuant to Bankruptcy Code Section 365(c). The Debtor or
Reorganized CWOP (if prior to or on the Effective Date) or Jamboree LLC (if
after the Effective Date) will make any payments required under Bankruptcy Code
Section 365(b)(1).
The Debtor intends to file a motion to assume all of its
scheduled existing contracts and unexpired leases. The motion to assume will be
heard by the Bankruptcy Court at the Confirmation Hearing. In connection with
the assumption of the tenant leases, the Debtor will refund to each tenant its
share of the tax refunds recently received by CWOP for the 1991 through 1995 tax
years. The total refunds received total approximately $1.7 million, most of
which will be refunded to tenants.
In addition, the Debtor intends to assume the various
contracts with the Crow entities, including the REA, the Common Area Management
Agreement, air space lease dated July 26, 1985 and the Settlement Agreement on
the Effective Date. The Debtor asserts that there are no amounts in default on
those agreements and no payment is necessary under Bankruptcy Code Section
365(b). Such assumption is expressly subject to the Crow Litigation, and the
Debtor waives no rights in connection with that litigation by virtue of its
stated intent to assume such contracts, and in any event, the Debtor's stated
intent to assume such contracts is in all respects subject to Rule 408 of the
Federal Rules of Evidence and shall not be used as an admission or otherwise in
the adjudication of such matters.
MOREOVER, WHILE THE DEBTOR INTENDS TO ASSUME THESE
AGREEMENTS IN CONNECTION WITH THE PLAN, THE DEBTOR RESERVES ALL OF ITS RIGHTS,
AND IF THE PLAN IS NOT CONFIRMED, WILL LIKELY REJECT THOSE AGREEMENTS.
The Debtor will also assume the Agreement of Understanding
under the Plan.
On the Effective Date, all executory contracts and unexpired
leases assumed by the Debtor during the Reorganization Case will be assigned to
Jamboree LLC. Jamboree LLC will be bound by those
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contracts and any amendments thereto, and it is anticipated that it will
perform in accordance with the terms of those contracts and any and all
amendments thereto. However, nothing in the Plan will be deemed to waive any
rights, claims or defenses that the Debtor, Reorganized CWOP, Jamboree LLC or
any other entity might have with respect to any such contracts.
I. ASSUMED EFFECTIVE DATE; CONDITIONS TO EFFECTIVENESS.
The Debtor assumes, and its projections are based on, the
occurrence of the Effective Date on September 30, 1997, but the Plan is
contingent on the Effective Date occurring on or before that date. The Plan
will not become effective unless and until each of the following conditions has
been satisfied in full in accordance with the provisions specified below:
1. ENTRY OF CONFIRMATION ORDER. The Bankruptcy Court has
entered the Confirmation Order approving the Plan in all
respects.
2. WCI CONSENT. WCI has obtained the necessary consents
from its limited partners to effect the Plan and transactions
provided therein.
3. JAMBOREE LLC AND JAMBOREE OFFICE REIT. Jamboree LLC
and Jamboree Office REIT have been formed, and all formation
documents for such entities have been properly executed and filed
as required.
4. CONTRIBUTION OF ASSETS. The issuance of the
Intermediate Notes, the contribution of the $4.5 million
Intermediate Note, the contribution of property by Reorganized
CWOP, and the assumption of obligations by Jamboree LLC shall
have occurred in accordance with Paragraph 7.E of the Plan.
5. DOCUMENTATION. Each of the parties thereto has
executed and delivered the Collateral Documents, the New Notes
Registration Rights Agreement, the New Equity Registration Rights
Agreement, the New Property Appreciation and Exchange Rights
Agreement, copies of the New Articles and the New Bylaws, the New
LLC Agreement, resolutions of the directors or members of each of
Jamboree Office REIT and Jamboree LLC, good standing certificates
from California and the respective states of organization of each
of Jamboree Office REIT and Jamboree LLC and all other documents
necessary or appropriate to the transactions outlined in the
Plan.
6. JAMBOREE OFFICE REIT SHARES AND JAMBOREE LLC UNITS.
Jamboree Office REIT has issued the Jamboree Office REIT shares
in accordance with Paragraph 4.D of the Plan. Jamboree LLC has
issued 90% of the initial Jamboree LLC Units to Jamboree Office
REIT and 10% of the initial Jamboree LLC Units to Reorganized
CWOP.
7. QUALIFICATION OF INDENTURES. The applications for
qualification of each of the New Class A Senior Secured Note
Indenture and the New Class B Senior Subordinated Secured Note
Indenture have become and remain effective in accordance with the
Trust Indenture Act of 1939, as amended.
8. PERFECTION OF SECURITY INTERESTS. All actions have
been taken or caused to be taken in such a manner so that the
Collateral Agent with respect to the collateral granted as
security under the Collateral Documents holds a valid and
perfected first priority security interest in such collateral
(subject only to liens expressly permitted under the Collateral
Documents) including, without limitation, delivery of
certificates representing pledged equity interests, delivery and
filing of Uniform
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Commercial Code financing statements, assignments and/or
amendments in all jurisdictions as may be necessary or
desirable to perfect the Collateral Agent's security interest
in the Collateral, the recordation of the New Deed of Trust
encumbering the real property identified therein, the
execution and delivery of lockbox agreements regarding any
accounts in which the Collateral Agent holds a security
interest, and the making of all other filings, recordings or
other actions the Collateral Agent deems necessary or
desirable to establish, preserve and protect the first
priority liens granted to the Collateral Agent in real,
personal and mixed property.
9. TITLE POLICIES. The Collateral Agent has received an
ALTA lender's policy of title insurance on Form B-1970 (Rev. 10-
17-84) issued by Chicago Title Insurance Company or an insurer of
similar professional reputation and financial wherewithal (with
reinsurance satisfactory to the Collateral Agent) naming the
Collateral Agent as an insured in the amount of $100 million and
in form satisfactory to the Collateral Agent, insuring that the
lien of the New Deed of Trust is a valid first priority lien upon
the property and collateral described therein, subject only to
encumbrances permitted in the New Indentures, together with any
endorsements required by the Collateral Agent; and Jamboree LLC
has received an ALTA owner's policy of title insurance (Form
1970) issued by such insurer naming Jamboree LLC as insured, in
the amount of $105 million and in form satisfactory to the
Jamboree LLC, insuring that Jamboree LLC owns fee title to the
real property subject only to the New Deed of Trust and
encumbrances permitted in the New Indentures and under the Plan,
together with any endorsements required by Jamboree LLC.
10. EVIDENCE OF INSURANCE. The Collateral Agent has
received evidence satisfactory to Jamboree LLC and the Collateral
Agent that adequate insurance for the Property has been obtained
and that Jamboree LLC and the Collateral Agent are loss payees.
The conditions specified in Paragraphs 12.A.3. through
12.A.10 of the Plan may be waived in writing by the Debtor and Requisite
Certificateholders.
J. RETENTION OF JURISDICTION.
The Bankruptcy Court will retain jurisdiction over those
matters set forth in Paragraph 13.A of the Plan, including objections to Claims,
motions for the assumption or rejection of executory contracts and unexpired
leases, adversary proceedings and contested matters, implementation of the Plan,
all modifications and amendments to the Plan and applications for fees and
expenses of professionals.
V. FINANCIAL INFORMATION
A. HISTORICAL FINANCIAL INFORMATION; RECENT FINANCIAL
PERFORMANCE.
CWOP's audited financial statement for calendar year 1996 is
attached as Exhibit 2. CWOP prepares audited financial statements in accordance
with Generally Accepted Accounting Principles on an accrual basis and these
statements are audited by WCI's outside accountants, Arthur Anderson LLP.
CWOP's cash flow statement for the first quarter of 1997 is
attached as Exhibit 3. This statement shows CWOP's cash revenues and expenses
in the same format as CWOP's projected cash flows. Attached as Exhibit 4 are
CWOP's cash flow statements showing both budgeted and actual amounts for the
months of April, May and June of 1997. As those statements indicate, CWOP
generated excess cash flow of $1,580,138, in April, $2,014,159 in May and
$1,861,176 in June. In accordance with the terms of the Cash Collateral Order,
CWOP reserved $1,850,696.78 on May 10, 1997 and $1,036,347.91 on June 10, 1997
and
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$1,151,009.17 on July 10, 1997. See Section III.C.1. As those statements
indicate, operations and leasing activity during the Reorganization Case have
been generally consistent with CWOP's projections. The cash flow projections
for the remaining months prior to the assumed Effective Date of September 30,
1997 (June through September) are attached as Exhibit 5. The projections
contained in Exhibits 4 and 5 constitute the "Initial Budget" under the Cash
Collateral Order.
B. PAYMENT OF ADMINISTRATIVE EXPENSES AND CLAIMS.
The Debtor intends to make all cash payments required to be
made under the Plan out of its cash generated from operations. Ordinary Course
Administrative Expenses are budgeted for in the Initial Budget. Other cash
payments to be made under the Plan include Allowed Fee Claims (an aggregate of
approximately $2 million is budgeted for in the Initial Budget); Secured Tax
Claims (approximated to be $690,000 and budgeted for in Initial Budget); the
Section 1129(a)(4) payment to WCI ($500,000 budgeted for in September in the
Initial Budget); payments to unsecured creditors ($100,000 budgeted for in
September in the Initial Budget). As of September 30, 1997, the Debtor projects
excess cash and reserves to total $2,809,300 after making the payments described
above.
C. PROJECTED FINANCIAL INFORMATION.
CWOP's financial projections for the years 1998 through 2003
are attached as Exhibit 6. The projection period commences on September 1,
1997, and the September 1997 projections included in Exhibit 5 are included in
the 1997 (partial year) projections. These projections assume that the Plan
will be approved and implemented in accordance with its terms. The projections
are based on several lease and expense assumptions, some of which are set forth
in Exhibit 6. Additional assumptions were made regarding general business and
economic conditions. There can be no assurance that any of these assumptions
will be met. The projections are only estimates, and actual results may vary
materially from the projections. In addition, uncertainties that are inherent
in the projections increase for later years due to the increased difficulty
associated with forecasting rental rates, expenses and other economic factors at
more distant points in the future. The projections were not prepared with a
view toward compliance with the published guidelines of the American Institute
of Certified Public Accountants regarding financial projections, and have not
been reviewed, examined or compiled by CWOP's independent auditors or certified
public accountants.
Based on the projected cash flows, the Debtor believes the
value of the Property to be approximately $105 million.
The projected cash flows include the projected payments of
interest and principal on the New Notes. All other Claims are assumed to have
been paid in cash on the assumed Effective Date of September 30, 1997.
THE DEBTOR CAUTIONS THAT IT MAKES NO REPRESENTATION
CONCERNING THE ACCURACY OF THE PROJECTED FINANCIAL INFORMATION OR THE ABILITY TO
ACHIEVE THE PROJECTED RESULTS. MANY OF THE ASSUMPTIONS ON WHICH THESE
PROJECTIONS ARE BASED ARE SUBJECT TO SIGNIFICANT ECONOMIC UNCERTAINTIES. IT IS
LIKELY THAT SOME ASSUMPTIONS WILL NOT MATERIALIZE BECAUSE OF UNANTICIPATED
EVENTS AND CIRCUMSTANCES. ACCORDINGLY, THE ACTUAL RESULTS ACHIEVED THROUGHOUT
THE PROJECTION PERIOD ARE LIKELY TO VARY FROM THE PROJECTED RESULTS. THE
VARIATIONS MAY BE MATERIAL AND ADVERSE OR POSITIVE.
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THE DEBTOR DOES NOT ANTICIPATE AT THIS TIME THAT IT WILL
UPDATE THESE PROJECTIONS AT THE CONFIRMATION HEARING, FURNISH UPDATED
PROJECTIONS IN DOCUMENTS FILED WITH THE SEC OR OTHERWISE MAKE SUCH PROJECTIONS
PUBLIC.
VI. OPERATION AND GOVERNANCE OF SUCCESSOR ENTITIES
A. GENERAL DISCUSSION
Two new entities will be formed on or prior to the Effective
Date to implement the restructuring of CWOP pursuant to the Plan: (a) Jamboree
LLC, a Delaware limited liability company that will own the Property and in
which Reorganized CWOP will initially hold a 10% equity interest and Jamboree
Office REIT will initially hold a 90% equity interest, and (b) Jamboree Office
REIT, a Maryland corporation that initially will be owned 100% by the
Certificateholders. The Jamboree LLC Units owned by Reorganized CWOP will be
exchangeable for Jamboree Office REIT Shares, and Reorganized CWOP will be
issued the New Property Appreciation Rights, which may be exercised for cash or
(at the election of Jamboree Office REIT) Jamboree Office REIT Shares.
Jamboree Office REIT is intended to be operated to qualify
as a Real Estate Investment Trust (a "REIT") under the Internal Revenue Code of
1986, as amended (the "Internal Revenue Code"). The shareholders of a REIT have
the limited liability and investment liquidity of corporate shareholders without
double taxation. The ownership structure of Jamboree LLC and Jamboree Office
REIT is referred to as an "UPREIT" or "Umbrella Partnership" REIT. In an
UPREIT, an operating partnership or LLC owns the real property and a corporation
qualified as a REIT is a partner or member of the operating partnership or LLC.
In this case, Jamboree LLC will own the property and be the operating entity,
and Jamboree Office REIT will be a member of the LLC. (Despite the name
"Umbrella Partnership REIT" if an LLC is the operating entity, the LLC does not
obtain any partnership attributes by virtue of the structure.) This structure
has several advantages. As members of an LLC, Reorganized CWOP and the
Certificateholders will be able to allocate voting rights on particular issues
through the limited liability company agreement for Jamboree LLC (the "New LLC
Agreement," substantially in the form of Exhibit K to the Plan). In addition,
Jamboree LLC will be a "bankruptcy remote" entity, as a unanimous vote of its
board will be required for a voluntary bankruptcy filing. Because Jamboree LLC
is structured so that it is taxed as a partnership (i.e., not subject to tax at
the entity level), the parties will be able to achieve these governance goals
without incurring additional tax.
To qualify as a REIT under the Internal Revenue Code, 75% of
the assets of the corporation must be real property related and 95% of the
annual income must be attributable to interest, dividends, rents, gains or
losses on real estate. As discussed in Section VI.C, there are other
requirements, including those intended to ensure diversity of ownership (such as
a minimum number of holders and limitations on the amounts held by any single
individual) and those designed to insure that the assets of the REIT are not
being rapidly turned over (such as a limit on the amount of income that can be
derived from real estate assets held less than 4 years). To ensure that
Jamboree Office REIT qualifies as a REIT, the operating entity, in this case
Jamboree LLC, must also comply with the REIT asset and income requirements.
B. JAMBOREE LLC.
On the Effective Date, the Property will be owned in fee and
operated by Jamboree LLC, subject to the New Deed of Trust securing the New
Notes and subject to the liens on the Property, if any, securing the notes
issued to holders of Allowed Secured Tax Claims, which will be senior to the
deed of trust securing the New Notes. The units representing membership
interests in Jamboree LLC initially will be held 90% by Jamboree Office REIT and
10% by Reorganized CWOP.
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Jamboree LLC will be governed by a board of member
representatives (the "Jamboree LLC Board") in accordance with the terms of the
New LLC Agreement. Upon obtaining the requisite consent of the representatives,
the Jamboree LLC Board will be authorized to act for Jamboree LLC. The Jamboree
LLC Board will consist of five members. The initial five members will be
designated one by Reorganized CWOP and four by the holders of Allowed
Certificateholder Secured Claims. The initial board members will be determined
prior to the Confirmation Hearing, and a notice containing their identities and
respective backgrounds will be distributed to all parties in interest.
Jamboree LLC will have a term of five and one-half years
from the Petition Date provided that the Property is not sooner sold or
otherwise transferred. A majority of the members of the Jamboree LLC Board must
approve (i) all operating decisions not designated as requiring unanimous
approval in the New LLC Agreement and (ii) termination for cause of the New
Management Agreement. Unanimous approval of the Jamboree LLC Board will be
required for (i) the commencement of a voluntary case under the Bankruptcy Code,
(ii) termination of the New Management Agreement without cause, (iii) sale of
all or any material portion of the Property within three years of the Effective
Date, (iv) except as otherwise provided in the New LLC Agreement, issuance of
additional units representing membership interests, (v) the authorization of
business activities other than the ownership and operation of the Property
within three years of the Effective Date and (vi) certain other matters as
provided in the New LLC Agreement.
The New LLC Agreement contains the following exhibits:
Exhibit A - Capital Contributions and Contributed Property (which will be
completed prior to execution and will be consistent with Paragraph 7.E of the
Plan (see Section IV.C.1); Exhibit B - Distribution of Percentage Interests;
Exhibit C - Legal Description of the Property; Exhibit D - Board Representatives
(which, as indicated above, will be completed prior to the Confirmation Hearing)
and Exhibit E - the dilution formula in the event that a member does not heed a
capital call.
The membership interests in Jamboree LLC will be represented
by units, 90% of which, the Class One Units, will initially be issued to
Jamboree Office REIT and 10% of which, the Class Two Units, will initially be
issued to Reorganized CWOP. The percentage of membership interests held by each
member may be adjusted from time to time based on the amount (if any) of
additional capital contributions that a member may make or fail to make. Any
distributions made by Jamboree LLC will be made to the members pro rata based on
their percentage membership interest on the record date for distribution. In
the absence of the unanimous consent of the Jamboree LLC Board, no new classes
of units may be created. The units in Jamboree LLC may not be transferred,
except that Reorganized CWOP may exchange its units for Jamboree Office REIT
Shares through the exercise of its exchange right under the New Property
Appreciation and Exchange Rights Agreement. The exchange right is designated as
the "New Tranche A Right" in that agreement.
C. JAMBOREE OFFICE REIT AND JAMBOREE
OFFICE REIT SHARES.
Jamboree Office REIT will be established on or before the
Effective Date and will be governed in accordance with the New Articles, in
substantially the form of Exhibit A to the Plan, and the New Bylaws, in
substantially the form of Exhibit B to the Plan. The initial board of directors
will be determined prior to the Confirmation Hearing, and a notice containing
their identities and respective backgrounds will be distributed to all parties
in interest. Jamboree Office REIT will be authorized to issue 10 million
shares, of which 6 million shares will be classified initially as common stock,
par value $0.01 per share (the "Jamboree Office REIT Shares"), 1 million shares
will be classified as preferred stock and 3 million shares initially classified
as "Excess Shares". Of those authorized shares, 810,000 Jamboree Office REIT
Shares will be issued on the Effective Date to the holders of Allowed
Certificateholder Secured Claims. Subject to the Excess Shares provisions,
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holders of the Jamboree Office REIT Shares will be entitled to receive such
dividends, if any, as may declared from time to time by the board of
directors of Jamboree Office REIT in its discretion from funds legally
available therefor, and in the event of any liquidation, dissolution or
winding up of the affairs of Jamboree Office REIT, whether voluntary,
involuntary or otherwise, the holders of Jamboree Office REIT Shares will be
entitled, subject to the rights of any holders of preferred shares to share,
pro rata, in any property that may be available for distribution after the
satisfaction of all other claims. Subject to the Excess Shares provisions,
holders of Jamboree Office REIT Shares will be entitled to one vote per
share. Jamboree Office REIT Shares will have no preemptive or other
subscription rights (other than certain preemptive rights granted to
Reorganized CWOP in the New Property Appreciation and Exchange Rights
Agreement) and there will be no conversion rights or redemption or sinking
fund provisions with respect to such shares. All Jamboree Office REIT Shares
issued under the Plan will be fully paid and nonassessable upon issuance.
Pursuant to the New Articles, Jamboree Office REIT will be
authorized to reclassify unissued shares of capital stock and to issue one or
more series of preferred stock with the relative preferences and
voting powers, qualifications and/or special or relative rights or privileges,
as determined by the board of directors of Jamboree Office REIT. However, for
so long as Reorganized CWOP has not fully exercised the New Tranche C Property
Appreciation Right, the New Property Appreciation and Exchange Rights Agreement
will prohibit Jamboree Office REIT from issuing equity securities with
preferences, rights or privileges senior to the Jamboree Office REIT Shares
without the prior written consent of Reorganized CWOP. As required by the
Bankruptcy Code Section 1123, the New Articles will prohibit the issuance of any
non-voting equity security so long as such Bankruptcy Code prohibition is in
effect.
As more particularly described in Section VII.D hereof, for
Jamboree Office REIT to continue to qualify as a REIT under the Internal Revenue
Code, (i) not more than 50% in value of its outstanding common shares may be
owned, either directly or under the applicable attribution rules of the Internal
Revenue Code, by five or fewer individuals (as defined in the Internal Revenue
Code to include certain nonnatural persons) during the last half of a taxable
year, (ii) the common shares must be beneficially owned by 100 or more persons
during at least 335 days of a taxable year of 12 months or during a
proportionate part of a shorter taxable year and (iii) Jamboree Office REIT must
meet certain other tests regarding the nature of its income and assets.
In order to ensure continued REIT status, the New Articles
contain certain restrictions on transfer and ownership. The articles generally
prohibit any individual (as defined in the Internal Revenue Code to include
certain non-natural persons) from beneficially or constructively owning equity
stock in excess of 8.3% (the "Ownership Limit") (determined assuming the
issuance of the maximum number of shares pursuant to any option, warrant,
property appreciation, subscription, preemptive, conversion, exchange or similar
right that would increase such individual's ownership), which ownership limit
may be increased if the Internal Revenue Code is amended to increase certain
ownership limits of REITs or such increase would not otherwise affect REIT
status. Transfers that would (i) result in any individual owning shares in
excess of the Ownership Limit, (ii) result in the equity stock being owned by
less than 100 persons, (iii) result in Jamboree Office REIT being "closely held"
within the meeting of Section 856(h) of the Internal Revenue Code or (iv) that
would otherwise cause Jamboree Office REIT to fail to qualify as a REIT, will be
void in an amount equal to the number of shares that cause such a result. If
notwithstanding these restrictions, a transfer (or a non-transfer event) results
in an individual owning in excess of the Ownership Limit or results in Jamboree
Office REIT being "closely held," then the shares in excess of the Ownership
Limit or that result in Jamboree Office REIT being "closely held," will be
automatically converted into an equal number of "Excess Shares." The Excess
Shares will be transferred to a trust for a beneficiary named by Jamboree Office
REIT and thereafter Jamboree Office REIT as trustee may designate a permitted
transferee for the Excess Shares.
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Notwithstanding the foregoing, the Ownership Limit with
respect to any individual or individuals (as defined in the Internal Revenue
Code to include certain non-natural persons) pertaining to Reorganized CWOP will
be 16.6% with respect to any one individual, 24.9% with respect to any two
individuals, 33.2% with respect to any three individuals, 41.5% with respect to
any four individuals and 49.8% with respect to any five individuals. A failure
by any individuals pertaining to Reorganized CWOP to satisfy the Ownership Limit
could result in Reorganized CWOP being unable to exercise its rights under the
New Property Appreciation and Exchange Rights Agreement or in equity stock held
through Reorganized CWOP being converted into Excess Shares. Even if all
individuals pertaining to Reorganized CWOP satisfy this Ownership Limit with
respect to equity stock owned through Reorganized CWOP, if an individual or
individuals pertaining to Reorganized CWOP beneficially or constructively own
other equity stock that, in combination with the equity stock owned through
Reorganized CWOP, exceeds the Ownership Limit, then such individual's (or
individuals') equity stock held outside Reorganized CWOP that, so combined,
exceeds the Ownership Limit will be automatically converted into an equal number
of Excess Shares if acquired after equity stock beneficially or constructively
owned through Reorganized CWOP.
In order to ensure certain anticipated allocations with
respect to the liabilities of Jamboree LLC, the New Articles contain certain
supplementary restrictions on transfer and ownership relating to persons who are
holders of the New Notes. The New Articles prohibit any person who is a holder
of the New Notes from owning, either directly or under specified attribution
rules, 80 percent or more of the equity stock of Jamboree Office REIT (such
ownership, a "752 Violation"). Transfers that would result in any holder of the
New Notes owning shares that would cause a 752 Violation will be void in an
amount equal to the number of shares that cause that result. If notwithstanding
this restriction a transfer (or non-transfer event) results in a holder of the
New Notes owning shares that would cause a 752 Violation, then the shares being
transferred (or that are the subject of the non-transfer event) will be
automatically converted into an equal number of Excess Shares (and treated as
described above) to the extent necessary to prevent such a violation.
The Jamboree Office REIT shares will bear a legend setting
forth the above restrictions on transfer.
All persons who own, directly or by virtue of the
attribution provisions of the Internal Revenue Code, more than 5.0% (or such
lower percentage, as provided in the Treasury Regulations) of the equity stock
of Jamboree Office REIT will be required to give within 30 days after January 1
of each year a written statement to Jamboree Office REIT stating the name and
address of each beneficial owner, the number of shares beneficially owned and
how those shares are held. In addition, upon demand, each shareholder will be
required to disclose to Jamboree Office REIT such other information as Jamboree
Office REIT may reasonably request with respect to the ownership of the equity
stock to determine the effect of the ownership as REIT status.
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Because such entities may be considered "underwriters" and
therefore not entitled to an exemption for resale of the Jamboree Office REIT
Shares (see Section VIII.B), Reorganized CWOP, certain named persons and any
person or entity that receives or is the transferee from the named persons of
10% or more of the aggregate number of the Jamboree Office REIT Shares
distributed under the Plan and any such person's affiliates (the "Restricted
Equity Holders") will receive the benefit of a registration rights agreement
(the "New Equity Registration Rights Agreement," substantially in the form of
Exhibit H to the Plan). The New Equity Registration Rights Agreement will
provide, among other things, and subject to the conditions provided therein,
that (a) any Restricted Equity Holder, with the written consent of the
Restricted Equity Holders of at least 40% of the outstanding Jamboree Office
REIT Shares held by Restricted Equity Holders that have not then been registered
or become eligible for sale under SEC Rule 144, may serve a request on Jamboree
Office REIT requesting it to prepare a registration statement and to use its
best efforts to cause such registration statement to become effective within 90
days (or 180 days if it is the first registration) of the date of the demand
notice and (b) if, after the Effective Date, Jamboree Office REIT proposes to
register any of its debt or equity securities (with certain exceptions),
Restricted Equity Holders will be able to include their Jamboree Office REIT
Shares in such registration, subject to certain limitations in the event that
Jamboree Office REIT's underwriter advises it that the inclusion of such shares
in an underwritten public offering is impracticable. The rights of the
Restricted Equity Holders under the New Equity Registration Rights Agreement
will be subject to customary provisions regarding share limitations, suspension
of registration rights, payment of expenses and indemnification.
D. DESCRIPTION OF NEW NOTES ISSUED BY JAMBOREE LLC.
The following discussion summarizes certain provisions of
the New Class A Senior Secured Notes (referred to in this Section IV.D as the
"Class A Notes") and the New Class B Senior Subordinated Secured Notes (referred
to in this Section IV.D as the "Class B Notes") to be issued pursuant to the
Plan.
1. NEW CLASS A SENIOR SECURED NOTES.
The Class A Notes will be issued pursuant to an indenture by
and between Jamboree LLC and IBJ Schroder Bank and Trust Company as Indenture
Trustee (the "Class A Trustee"). The following summaries of certain provisions
of the New Class A Senior Secured Notes Indenture (referred to in this Section
IV.D. as the "Class A Indenture") are qualified in their entirety by reference
to all of the provisions of the Class A Indenture, substantially in the form of
Exhibit C to the Plan. Capitalized terms used in this Section without
definition have the meanings of those terms in the Class A Indenture.
GENERAL. The Class A Notes represent senior secured
obligations of Jamboree LLC. The Class A Notes will be in aggregate principal
amount of $80,000,000. The Class A Notes are issuable only in registered form
in denominations of $1,000 and any integral multiple thereof.
MATURITY, INTEREST AND PRINCIPAL. The Class A Notes will
mature on March 27, 2002. Interest will accrue on the Class A Notes at a fixed
rate equal to 2.25% above the interest rate on United States Treasury Bonds or
Notes with a maturity closest to the maturity of the Class A Notes on the
Effective Date. Interest on the Class A Notes is payable in cash monthly in
arrears on the first day of each month, commencing on the first such date after
the Effective Date. Interest is computed on the basis of a 360-day year of
twelve 30-day months. Interest only will be payable monthly in arrears until
March 27, 1999; thereafter interest and principal will be payable monthly in
arrears with principal amortized on a straight-line basis, based on a 25-year
amortization. Interest will be payable, at the option of Jamboree LLC, in Class
A Notes until March 27, 1998.
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OPTIONAL REDEMPTION. Jamboree LLC will have the option to
redeem the Class A Notes, in whole or in part, upon not less than 30 nor more
than 60 days' notice, during the periods set forth below at a redemption price
(expressed as a percentage of par) set forth opposite such periods, PLUS accrued
and unpaid interest, if any, on such Class A Notes to the applicable redemption
date:
Period Percentage
------ ----------
Issue Date through March 27, 2000: 102.00%
March 28, 2000 through September 27, 2001: 101.00%
thereafter: 100.00%
PURCHASE AT OPTION OF HOLDERS OF CLASS A NOTES. Except as
otherwise set forth in the Class A Indenture, Jamboree LLC will not be required
to make mandatory redemption payments, sinking fund payments or mandatory
purchases with respect to the Class A Notes prior to maturity.
Excess Cash Flow Amounts are defined under the Class A
Indenture as, for any period, an amount determined by the Board of Members of
Jamboree LLC equal to all forms of cash or cash equivalents received by or on
behalf of Jamboree LLC generated by the Property from any source (other than
interest on certain accounts), during such period, minus the sum, without
duplication, of (1) amounts actually paid or retained in a reserve up to the
amount of the REIT Required Dividends during the applicable period, (2) interest
and regularly scheduled installments of principal actually paid during such
period under the terms of the Class A Notes, (3) interest and regularly
scheduled installments of principal actually paid during such period under the
terms of the Class B Notes, (4) certain operating expenses of the Jamboree LLC
with respect to Property actually paid during such period, including, without
limitation, amounts paid by Jamboree LLC pursuant to the REA and Settlement
Agreement, (5) certain Capital Expenditures actually made in cash (net of any
proceeds of related financing with respect to such Capital Expenditures),
(6) certain amounts retained in the Operating Disbursement Account in accordance
with the New Management Agreement, (7) certain amounts actually paid or retained
in the Tenant Improvement Reserve with respect to tenant improvements, (8)
certain amounts actually paid or retained in the Incentive Management Reserve
under the New Management Agreement with respect to incentive management fees,
(9) certain amounts determined by the Board of Members of Jamboree LLC and
retained in a reserve to pay projected debt service shortfalls in the future and
(10) reasonable amounts actually paid in connection with litigation to which
Jamboree LLC is a party. Under the Class A Indenture, at the option of each
holder, Excess Cash will be applied to the purchase of such holder's Class A
Note as set forth more fully below.
No later than 120 days after the end of each Fiscal Year
commencing with the Fiscal Year ending December 31, 1997, Jamboree LLC shall, at
the option of each holder, purchase the maximum principal amount of the Class A
Notes (in integral multiples of $1,000), that may be purchased with 100% of the
Excess Cash Flow Amount for such Fiscal Year, at a purchase price in cash equal
to 100% of the principal amount of such Class A Notes plus accrued and unpaid
interest thereon to the date of purchase.
Within 90 days after the occurrence of a Triggering Event,
at the option of each holder of Class A Notes, Jamboree LLC shall purchase all
of the outstanding Class A Notes, at a purchase price in cash equal to 100% of
the principal amount of all outstanding Class A Notes plus accrued and unpaid
interest to the date of purchase. A Triggering Event, as defined in the Class A
Indenture, will be deemed to have occurred upon (1) the sale, transfer,
conveyance or hypothecation of the Property or Improvements, or any material
portion of the Property or Improvements or interest therein, whether voluntary,
involuntary, by operation of law or otherwise, the execution of any installment
land sale contract or similar instrument affecting all or a material portion of
the Property or Improvements or, except in the ordinary course of business, the
lease of all or substantially all of the Property or Improvements, in one or in
a series of transactions, to any "person" or
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"group" (as such terms are used in or defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended), (2) an event or series of
events (whether a stock purchase, merger, consolidation or other business
combination or otherwise) as a result of which (a) the REIT owns less than
51% of the combined voting power of the then outstanding securities of
Jamboree LLC ordinarily (and apart from rights accruing after the happening
of a contingency) having the right to vote in the election of members of
Jamboree LLC or to control Jamboree LLC's actions with respect to the
property subject to the lien of the deed of trust with respect to the Class A
Notes, or (b) Jamboree LLC's existence ceases or (iii) the aggregation of
Excess Loss Proceeds in excess of $8 million.
COVENANTS.
INVESTMENTS. Jamboree LLC will not be permitted
directly or indirectly, to make any Investment from and after the Effective Date
except Investments approved by the Board of Members of Jamboree LLC of cash in
certain permitted investments consisting of government and certain other liquid
securities. As defined in the Class A Indenture, Investments means any advance,
loan, extension of credit or capital contribution to, or purchase of any stocks,
bonds, notes, debentures or other securities of, or interest in, any person, any
purchase of any interest in real estate, any commitment or other obligation,
whether contingent or absolute, to do any of the foregoing, which commitment or
other obligation does not constitute a Contingent Obligation. Capital
Expenditures will not be deemed to constitute Investments.
LIENS. Jamboree LLC will not be permitted to create or
suffer to exist any Lien upon or with respect to any of its properties, whether
owned by Jamboree LLC as at the Effective Date or acquired later, or assign any
right to receive income, except as expressly provided in the Class A Indenture.
The Class A Indenture permits liens directly or indirectly created in favor of
the Class A Trustee or the Collateral Agent for the benefit of the holders of
the Class A Notes under the Class A Indenture, the Plan and the Collateral
Documents; certain liens arising by operation of law in favor of materialmen,
mechanics, warehousemen, carriers, lessors or other similar persons incurred by
Jamboree LLC in the ordinary course of business which secure its obligations to
such person; certain liens (excluding Environmental Liens) securing taxes,
assessments or governmental charges or levies; zoning restrictions, easements,
encroachments, licenses, reservations, restrictions on the use of real property
or minor irregularities incident thereto that do not cause, individually or in
the aggregate, a Material Adverse Effect; Existing Encumbrances (as defined in
the deed of trust securing the Class A Notes), including, without limitation,
liens in favor of the holders of the Class B Notes and any renewal, extension or
refunding of the Indebtedness represented by the Class B Notes; leases of space
in the Property (and related agreements and instruments) entered into in the
ordinary course of business; UCC-1 financing statements filed with respect to
tenant-owned fixtures and tenant-owned improvements; and certain liens on assets
acquired with certain Permitted Indebtedness.
INDEBTEDNESS. Jamboree LLC will not be permitted under
the Class A Indenture, directly or indirectly, to incur, create, assume or
suffer to exist or otherwise in any manner become or remain liable with respect
to any Indebtedness except Indebtedness represented by the Class A Notes and the
Class B Notes; Contingent Obligations constituting endorsements for collection
or deposit in the ordinary course of business of Jamboree LLC; current
liabilities in respect of (i) covenants, conditions and restrictions
constituting a lien permitted under the Class A Indenture; (ii) taxes,
assessments and governmental charges or levies incurred, or (iii) claims for
labor, materials, inventory, services, supplies and rentals incurred, or for
goods or services purchased, in the ordinary course of business; Indebtedness
arising under any performance bond reimbursement obligation entered into in the
ordinary course of business of Jamboree LLC; unimpaired indemnification claims
under the limited liability company agreement of Jamboree LLC; certain
Indebtedness incurred to finance the purchase price of property; and certain
other unsecured Indebtedness as specified in the Class A Indenture.
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LEASE OBLIGATIONS. Jamboree LLC will not be permitted
under the Class A Indenture to create or suffer to exist any obligations as
lessee for the rental or hire of real or personal property in connection with
any sale and leaseback transaction, or for the rental or hire of real or
personal property of any kind under other leases or agreements to lease having
an original term of one year or more that would cause the direct or contingent
liabilities of Jamboree LLC in respect of all such obligations to be increased
by more than $250,000 payable in any period of 12 consecutive months over the
amount existing on the Effective Date. Jamboree LLC is forbidden under the
Class A Indenture to become or remain liable as lessee or guarantor or other
surety with respect to any lease, whether an operating lease or a capitalized
lease, of any property, whether owned as at the Effective Date or acquired
thereafter, that Jamboree LLC has sold or transferred as of the Effective Date
or thereafter.
RESTRICTED PAYMENTS. Jamboree LLC will not be
permitted to (a) declare or make any dividend payment or other distribution of
assets, properties, cash, rights, obligations or securities on account of or in
respect of any of its limited liability company interests, beneficial interests,
whether voting or non-voting, or any preferred interests which may be issued by
Jamboree LLC except REIT Required Dividends; provided however that Jamboree LLC
in no event may declare or make any such dividend payment or other distribution
(other than a REIT Required Dividends) if a Default or Event of Default has
occurred and is continuing or (b) purchase, redeem or otherwise acquire for
value any such interests, whether outstanding on the Effective Date or later
issued and outstanding.
TRANSACTIONS WITH AFFILIATES. Under the Class A
Indenture, Jamboree LLC will not be permitted to: (a) make any Investment in an
Affiliate of Jamboree LLC; (b) transfer, sell, lease, assign or otherwise
dispose of any assets to any Affiliate of Jamboree LLC; (c) merge into or
consolidate with or purchase or acquire assets from any Affiliate of Jamboree
LLC; (d) repay any Indebtedness to any Affiliate of Jamboree LLC (except under
existing retirement or deferred compensation plans); or (e) enter into any other
transaction directly or indirectly with or for the benefit of any Affiliate of
Jamboree LLC (including, without limitation, guaranties and assumptions of
obligations of any such Affiliate) except for (1) transactions in the ordinary
course of business, set forth in writing, on a basis no less favorable to
Jamboree LLC than would be obtained in a comparable arm's length transaction
with a person that is not an Affiliate of Jamboree LLC; PROVIDED that any
transaction or series of related transactions pursuant to which Jamboree LLC or
an Affiliate of Jamboree LLC will receive or render value exceeding $100,000,
will not be permitted unless, prior to consummation thereof, Jamboree LLC has
received an opinion of an independent financial advisor, that such transaction
or series of related transactions is on terms that are fair, from a financial
point of view, to Jamboree LLC, (2) certain salaries and other employee
compensation and benefits to officers of Jamboree LLC or its members (3)
out-of-pocket expenses of Jamboree LLC and its members with respect to
operations of Jamboree LLC and (4) any transaction required or otherwise
permitted by the Plan or the Class A Indenture or the New Management Agreement.
NEW SUBSIDIARIES. Under the Class A Indenture,
Jamboree LLC will not be permitted to incorporate or otherwise organize any
Subsidiary after the Effective Date.
RESERVE ACCOUNTS. Jamboree LLC may, from time to time
and at any time except during the continuation of an Event of Default, withdraw
amounts from the Operating Disbursement Account (as defined in the New
Management Agreement), the Approved Reserves and all other reserves or accounts
created in accordance with the New Management Agreement to pay the costs and
expenses for which such reserves and accounts were created. Jamboree LLC will
not be permitted to make any such withdrawals during the continuance of an Event
of Default without the written consent of the Class A Trustee. To the extent
that amounts then available from cash flow from operations of Jamboree LLC,
amounts in the Operating Disbursements Account, the Approved Reserves and all
other reserves or accounts created in accordance with the New Management
Agreement are not sufficient to pay such costs, Jamboree LLC will be permitted
to
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withdraw funds from the Existing Reserve Account except during the
continuance of an Event of Default to pay the costs of tenant improvements,
REIT Required Dividends, Debt Service, Capital Expenditures required to
comply with law and Capital Expenditures reasonably necessary (as reasonably
determined by the Board of Members of Jamboree LLC) to maintain the Property.
EVENT OF LOSS. Promptly after any Event of Loss (as
defined herein) with respect to collateral for the Class A Notes with a fair
market value (or replacement cost, if greater) equal to or less than $1,000,000,
Jamboree LLC is required to apply the Net Loss Proceeds from such Event of Loss
to the rebuilding, repair, replacement or construction of improvements to the
Property. Promptly after any Event of Loss with respect to collateral for the
Class A Notes with a fair market value (or replacement cost if greater) in
excess of $1,000,000, Jamboree LLC is required to, subject to certain
conditions, apply the Net Loss Proceeds from such Event of Loss to the
rebuilding, repair, replacement or construction of improvements to the Property.
As defined in the Class A Indenture, Event of Loss means, with respect to any
property or asset (tangible or intangible, real or personal), any of the
following: (A) any loss, destruction or damage of such property or asset;
(B) any actual condemnation, seizure or taking by exercise of the power of
eminent domain or otherwise of such property or asset, or confiscation of such
property or asset or the requisition of the use of such property or asset; or
(C) any settlement in lieu of clause (B) above.
MERGER AND CONSOLIDATION. Under the Class A Indenture,
Jamboree LLC may not consolidate or merge with or into (whether or not Jamboree
LLC is the surviving entity), or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its properties or assets in one
or more related transactions to, another person (other than the REIT) unless,
among other conditions, (a) Jamboree LLC is the surviving entity, or the person
formed by or surviving any such consolidation or merger (if other than Jamboree
LLC) or to which such sale, assignment, transfer, lease, conveyance or other
disposition has been made is a corporation organized or existing under the laws
of the United States, any state thereof or the District of Columbia, (b) the
person formed by or surviving any such consolidation or merger (if other than
Jamboree LLC), or the person to which such sale, assignment, transfer, lease,
conveyance or other disposition has been made, assumes, pursuant to a
supplemental indenture and appropriate collateral documents in forms reasonably
satisfactory to the Class A Trustee, all of the obligations of Jamboree LLC
under the operative documents with respect to the Class A Notes, (c) immediately
before and immediately after giving effect to such transaction no Default or
Event of Default exists, (d) Jamboree LLC or the person formed by or surviving
any such consolidation or merger, or to which such sale, assignment, transfer,
lease, conveyance or other disposition has been made after giving pro forma
effect thereto as of the end of the most recently completed fiscal quarter has a
Consolidated Net Worth equal to or greater than the Consolidated Net Worth of
Jamboree LLC immediately preceding the transaction and (e) Jamboree LLC shall
have delivered to the Class A Trustee an officers' certificate and opinion of
counsel, each stating that such consolidation, merger or transfer and such
supplemental indenture comply with the Class A Indenture.
OTHER COVENANTS. The Class A Indenture will also
contain covenants requiring Jamboree LLC to maintain certain insurance on its
properties, pay taxes, provide certain financial information to the holders of
the Class A Notes, provide certain indemnities and subrogation take certain
actions to preserve its business and goodwill, not become an investment company
and forego the benefit of stay, extension and usury laws.
EVENTS OF DEFAULT AND REMEDIES. The Class A Indenture will
define an Event of Default to have occurred whenever, among other things,
Jamboree LLC fails to make any payment in respect of principal of or premium on
the Class A Notes when the same becomes due and payable and such failure
continues for a period of 5 Business Days after the due date of such payment, or
fail to make any payment when due of interest on the Class A Notes and such
failure continues for a period of 10 days after the due date of such payment; or
certain statements made in this Disclosure Statement or the Collateral Documents
prove to contain any untrue
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statement of a material fact or omit to state a material fact; or Jamboree
LLC fails to perform or observe certain terms, covenants or agreements
contained in the Class A Indenture, the Plan or the Collateral Documents,
subject, in certain instances to a 30 day cure period; or Jamboree LLC fails,
after any applicable grace period, to pay any principal of or premium, if
any, or interest on the Class B Senior Subordinated Secured Notes or any of
its other Indebtedness, in an amount exceeding $200,000 (excluding the Class
A Notes), when the same becomes due and payable; or any other event occurs or
condition exists under any agreement or instrument relating to any such
Indebtedness, if the effect of such event or condition is to accelerate the
maturity of such Indebtedness; or any such Indebtedness is declared to be due
and payable, or required to be prepaid (other than by a regularly scheduled
required prepayment), prior to the stated maturity thereof; or certain events
of bankruptcy, insolvency or reorganization occur with respect to Jamboree
LLC; or any final judgment or order for the payment of money in excess of
$100,000 amount is rendered against Jamboree LLC and either enforcement
proceedings have been commenced by any creditor upon such judgment or order
or 30 consecutive days shall have passed without a stay of such judgment or
order; or the Class A Indenture or the Collateral Documents, for any reason,
cease to create a valid first priority lien (except for liens expressly
permitted to be senior to the New Deed of Trust in the Class A Indenture and
the Collateral Documents) on collateral with respect to the Class A Notes
having a value in excess of $100,000; or Jamboree LLC fails to pay any
Imposition prior to delinquency or, if Jamboree LLC is prohibited by law from
paying such Imposition, Jamboree LLC fails to pay such Imposition within 180
days of Jamboree LLC's receipt of notice of such prohibition; or Jamboree LLC
shall fail to perform its obligations under the Plan.
ACCELERATION. If an Event of Default (other than a
bankruptcy Event of Default) occurs and is continuing, the Class A Trustee by
notice to Jamboree LLC may, or upon written notice from the holders of not less
than 25% in principal amount of the Class A Notes outstanding on the date of
determination must, or such holders by written notice to Jamboree LLC and the
Class A Trustee may, declare all the Class A Notes to be due and payable
immediately and upon such declaration, the principal of, premium, if any, and
interest on the Class A Notes will be due and payable immediately. If a
bankruptcy Event of Default occurs, such an amount will be immediately due and
payable without any declaration or other act on the part of the Class A Trustee
or any holder of Class A Notes. Holders of not less than 25% in principal
amount of the Class A Notes outstanding on the date of determination, by written
notice to the Class A Trustee, may on behalf of all of the holders of the Class
A Notes rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default
(except nonpayment of principal, interest or premium that has become due solely
because of the acceleration) have been cured or waived. The holders of not less
than 25% in principal amount of the Class A Notes outstanding on the date of
determination by written notice to the Class A Trustee may on behalf of the
holders of all of the Class A Notes waive an existing Default or Event of
Default and its consequences under the Class A Indenture, except a continuing
Default or Event of Default in the payment of the principal of or interest.
AMENDMENT, SUPPLEMENT AND WAIVER. Under the Class A
Indenture, Jamboree LLC and the Class A Trustee may amend or supplement the
Class A Indenture, the Class A Notes and any other operative document under the
Class A Indenture without the consent of any holder of Class A Notes to cure any
ambiguity, defect or inconsistency; provide for uncertificated Class A Notes in
addition to or in place of certificated Class A Notes; provide for (i) the
assumption of Jamboree LLC's obligations to the holders of the Class A Notes in
the case of a merger or consolidation, and (ii) certain amendments to the
Collateral Documents expressly called for therein; to execute and deliver any
documents necessary or appropriate to release liens on any collateral with
respect to the Class A Indenture as permitted by the Class A Indenture; to make
any change that would provide any additional rights or benefits to the holders
of the Class A Notes or that does not materially adversely affect the legal
rights under the Class A Indenture of any holder of the Class A Notes; to comply
with requirements of the Securities and Exchange Commission in order to effect
or maintain the qualification of the Class A Indenture under the Trust Indenture
Act of 1939, as amended; or to evidence or effect the pledge of additional or
substitute collateral with respect to the Class A Indenture.
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Under the Class A Indenture, Jamboree LLC and the Class A
Trustee may amend or supplement the Class A Indenture, the Class A Notes, or any
amended or supplemental Indenture with the written consent of holders of not
less than 51% in principal amount of the Class A Notes ("Required Holders") and,
subject to the rights of holders of the Class A Notes to receive payment of
principal of and interest on the Class A Notes, any existing Default or Event of
Default and its consequences or compliance with any provision of the Class A
Indenture or the Class A Notes may be waived with the consent of the holders of
not less than 25% in principal amount of the Class A Notes outstanding on the
date of determination. Jamboree LLC and the Class A Trustee may, with the
consent of holders of not less than 66 2/3% in principal amount of each of the
Class A Notes and the Class B Notes, respectively, outstanding on the date of
determination, directly or indirectly release liens on all or substantially all
of the collateral with respect to the Class A Indenture except in connection
with a Triggering Event. Jamboree LLC and the Class A Trustee may, with the
consent of holders of the principal amount of the Class A Notes whose holders
must consent to an amendment, supplement or waiver, reduce such principal amount
with respect to such amendment, supplement or waiver.
Without the consent of each holder of the Class Notes
affected, however, an amendment or waiver may not (with respect to any Class A
Notes held by a nonconsenting holder of the Class A Notes): reduce the principal
of or change the fixed maturity of any Class A Note or reduce the redemption
price of the Class A Notes; reduce the rate of or change the time for payment of
interest on any Class A Note; waive a Default or Event of Default in the payment
of principal of or interest on the Class A Notes (except a rescission of
acceleration of the Class A Notes by the Required Holders and a waiver of the
payment default that resulted from such acceleration); make any Class A Note
payable in money other than that stated in the Class A Notes; make any change in
certain sections of the Class A Indenture with respect to amendments and
payments of principal and interest; or waive a redemption payment with respect
to any Class A Note.
DEFEASANCE OF THE CLASS A INDENTURE. Jamboree LLC will be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes when Jamboree LLC irrevocably deposits with the Class A
Trustee cash or non-callable governmental securities sufficient to pay and
discharge the Class A Notes, Jamboree LLC has delivered to the Class A Trustee
an opinion of counsel confirming that the holders of the outstanding Class A
Notes will not recognize income, gain or loss for federal income tax purposes as
a result of such defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have been the
case if the defeasance of the Class A Notes had not occurred and Jamboree LLC
meets certain other conditions set forth in the Class A Indenture.
RELEASE OF COLLATERAL. No Collateral will be released from
the lien and security interest created by the Collateral Documents pursuant to
the provisions of the Collateral Documents or the Class A Indenture without the
prior written consent of the Class A Trustee and the Required Holders.
2. NEW CLASS B SENIOR SUBORDINATED SECURED NOTES.
The Class B Notes will be issued pursuant an indenture
between Jamboree LLC and Fleet National Bank, as trustee (the "Class B
Trustee"). The terms of the New Class B Senior Subordinated Secured Note
Indenture (the "Class B Indenture" substantially in the form of Exhibit D to the
Plan) are substantially identical to the terms of the Class A Indenture.
Differences between the Class B Indenture and the Class A Indenture include
differences in maturity, interest, amortization and principal amount. Also, the
Class B Notes will be subordinated to the Class A Notes.
GENERAL. The Class B Notes represent senior subordinated
secured obligations of Jamboree LLC. The Class B Notes will be in an aggregate
principal amount of $20,000,000.
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MATURITY, INTEREST AND PRINCIPAL. The Class B Notes will
mature on March 27, 2002. Interest will accrue on the Class B Notes at a fixed
rate equal to 3.00% above the interest rate on United States Treasury Bonds or
Notes with a maturity closest to the maturity of the Class B Notes on the
Effective Date. Interest on the Class B Notes is payable monthly in arrears on
the first day of each month, commencing on the first such date after the
Effective Date. Interest is computed on the basis of a 360-day year of twelve
30-day months. Interest only will be payable monthly in arrears until March 27,
2000; thereafter interest and principal will be payable monthly in arrears with
principal amortized on a straight-line basis, based on a 25-year amortization.
Interest will be payable, at the option of Jamboree LLC, in Class B Notes until
March 27, 2001.
SUBORDINATION. The Class B Notes are subordinated in right
of payment to the prior payment in full in cash of all existing and future
Senior Indebtedness (as defined in the Class B Indenture) when due. Senior
Indebtedness is defined in the Class B Indenture as (x) all Obligations (as
defined in the Class B Indenture) of Jamboree LLC existing to pay the principal
of, and interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization to the extent a claim for post-
filing interest is allowed in such proceedings and any excess interest due as a
result of an event of default under the Senior Indebtedness) and premiums on,
any Indebtedness of Jamboree LLC with respect to the New Class A Senior Secured
Notes and the other operative documents with respect to the New Class A Senior
Subordinated Notes, whether outstanding on the date of the Class B Indenture or
thereafter created, incurred, assumed, guaranteed or in effect guaranteed by
Jamboree LLC and (y) all amounts paid to the holders of Senior Indebtedness or
their representative under any payment that is rescinded or otherwise required
to be restored by such holders of Senior Indebtedness, whether as a result of
any proceedings in bankruptcy, reorganization or otherwise.
No direct or indirect payment generally will be permitted to
be made by or on behalf of Jamboree LLC under the Class B Notes or any other
operative document with respect to such notes, or to acquire any Class B Notes
for cash, securities or other property, by set-off or otherwise, or to redeem,
retire, purchase, deposit moneys for defeasance of or to acquire any Class B
Notes, and no action will be permitted to be taken to accelerate or to enforce
the Class B Notes, and Jamboree LLC will not be permitted to segregate and hold
separate for the benefit of the holders of the Class B Senior Subordinated
Secured Notes any money for such payment or distribution, if (i) any of the New
Senior Indebtedness is not paid in cash when due or defeased or (ii) any other
default on the Senior Indebtedness occurs, unless, in either case, (x) the
default has been cured or waived or (y) such Senior Indebtedness as is then due
has been paid in full in cash or defeased. Jamboree LLC may, however, make any
such direct or indirect payment or take such other action under the Class B
Notes or any other operative document with respect to such notes without regard
to the foregoing if Jamboree LLC and the Class B Trustee receive prior written
consent of all of the holders of the Senior Indebtedness. Also, the holders of
the Class B Notes may receive shares of stock and debt securities that are
subordinated to the Senior Indebtedness to at least the same extent as the Class
B Notes are subordinate to the Senior Indebtedness and pursuant to the same or
more stringent terms. In the event that Jamboree LLC makes any payment to the
Class B Trustee pursuant to the Class B Notes after defeasance of the Senior
Indebtedness but prior to a date that is 100 days after such defeasance
("Preference Expiration Date"), such payment shall be held by the Class B
Trustee, in trust for the benefit of the holders of the Senior Indebtedness and
such payment shall promptly be paid over to such holders or their
representatives upon the filing of a petition in bankruptcy or, if no such
petition is filed prior to the Preference Expiration Date, such payment shall be
released to the benefit of the holders of the New Class B Senior Subordinate
Secured Notes; Jamboree LLC, however, will not be permitted to make any payment
to the holders of the Class B Notes after the Senior Indebtedness is defeased
and prior to the Preference Expiration Date.
3. SECURITY FOR THE NEW NOTES.
The payment of the principal and interest on the New Notes
will be secured by substantially all the property of Jamboree LLC pursuant to
the Collateral Documents described below. IBJ Schroder Bank &
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Trust Company will act as Collateral Agent under those Collateral Documents.
The Collateral Documents include the following:
a. Amended and Restated Deed of Trust, Assignment of
Rents, Security Agreement and Fixture Filing (the "New Deed of
Trust") attached as Exhibit B to the Class A Indenture and as
Exhibit G to the Plan to be executed by Jamboree LLC to IBJ
Schroder Bank & Trust Company, as collateral agent (the
"Collateral Agent") for the benefit of the holders of the New
Notes, securing the payment in full of all amounts created and
evidenced by the New Notes and the performance of all obligations
under the Collateral Documents. The New Deed of Trust will
encumber the Property and all fixtures and personal property
located on it. The New Deed of Trust will have the same priority
as the Existing Deed of Trust and will be subject to "Existing
Encumbrances." Existing Encumbrances will include all valid
liens and encumbrances that were of record on the date the
Existing Deed of Trust was recorded.
b. Security Agreement attached as Exhibit G to the Class A
Indenture to be executed by Jamboree LLC and the Collateral
Agent, for the benefit of holders of the New Notes, securing the
payment in full of all amounts created and evidenced by the New
Notes and the performance of all obligations under the Collateral
Documents. The Security Agreement will grant a first priority
security interest in all personal property of Jamboree LLC and
the security interest granted thereunder will be perfected with
the filing of a UCC-1 Financing Statement with the California
Secretary of State's office.
c. Amended and Restated Assignment of Rents, Leases,
Income and Profits attached to as Exhibit C to the Class A
Indenture whereby Jamboree LLC will assign all leases affecting
the Property, and all rents and income derived from them, to the
Collateral Agent, for the benefit of the holders of the New
Notes. The holders of the New Notes will grant Jamboree LLC a
license to continue collecting rents so long as no Event of
Default has occurred. Upon an Event of Default, the holders of
the New Notes will have the right to revoke such license and
collect the rents.
d. Pledge and Security Agreement attached as Exhibit E to
the Class A Indenture to be executed by Reorganized CWOP to
Collateral Agent for the benefit of the holders of the New Notes.
Reorganized CWOP will pledge its Jamboree LLC Units as security
for the payment in full of all amounts created and evidenced by
the New Notes and the performance of all obligations under the
Collateral Documents.
e. Collateral Agency Agreement attached as Exhibit I to
the Class A Indenture to be executed by and between Jamboree LLC,
the Collateral Agent and Fleet Financial Group, Inc., appointing
the Collateral Agent as collateral agent for the holders of the
New Notes under the Class A Indenture and the Class B Indenture
and the Collateral Documents and setting forth the rights and
obligations of the Collateral Agent in such capacity.
f. Assignment of Deed of Trust, Financing Statement and
Security Agreement (with Assignment of Rents and Leases) to be
executed by the Servicing Agent or CWOP Note Administrator
L.L.C., assigning all of its right, title and interest under the
Existing Deed of Trust and the existing Assignment of Rents and
Leases to the Collateral Agent.
g. Assignment of Contracts attached as Exhibit D to the
Class A Indenture to be executed by CWOP, assigning all of its
right, title and interest under various agreements affecting the
Property to Jamboree LLC.
h. Reserve Account Agreement attached as Exhibit F to the
Class A Indenture to be executed by and between Jamboree LLC, the
Collateral Agent and a third party depositary, establishing
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a reserve account and setting forth the type of investments
permitted to be made by Jamboree LLC from such reserve account.
4. NEW NOTES REGISTRATION RIGHTS AGREEMENTS.
Because such entities may be considered "underwriters" and
therefore not entitled to an exemption for the resale of the New Notes (see
Section VIII.B), certain named persons, and any person or entity that receives
or is the transferee from the named persons of 10% or more of the aggregate face
amount of the New Notes (with respect to each type of Note) distributed under
the Plan and any such person's affiliates (the "Restricted Note Holders") will
receive the benefit of registration rights agreements (the "New Notes
Registration Rights Agreements"). The New Class A Registration Rights Agreement
is substantially in the form of Exhibit J to the Plan, and the New Class B
Registration Rights Agreement is substantially in the form of Exhibit K to the
Pleadings. The New Notes Registration Rights Agreements will provide, among
other things, and subject to the conditions provided therein, that (a) any
Restricted Note Holder, with the written consent of the Restricted Holders of at
least 40% of then unregistered Class A Notes or Class B Notes, as the case may
be, held by Restricted Note Holders of such notes, respectively, that have not
then been registered or become eligible for sale under SEC Rule 144, may serve a
request on Jamboree LLC requesting it to prepare a registration statement for
the Class A Notes or Class B Notes, as the case may be, and to use its best
efforts to cause such registration statement for such notes to become effective
within 90 days (or 180 days if it is the first registration) of the date of the
demand notice and (b) if, after the Effective Date, Jamboree LLC proposes to
register (with certain exceptions), Restricted Note Holders will be able to
include their Class A Notes or Class B Notes in such registration, subject to
certain limitations, in the event that Jamboree LLC's underwriter advises it
that the inclusion of such Notes in an underwritten public offering is
impracticable. The rights of the Restricted Note Holders under the New Notes
Registration Rights Agreements will be subject to customary provisions regarding
share limitations, suspension of registration rights, payment of expenses and
indemnification. In addition, the New Notes Registration Rights Agreements will
provide blackout periods with respect to certain registrations made under the
New Equity Registration Rights Agreement, and, with respect to the New Class B
Notes Registration Rights Agreement, under the New Class A Notes Registration
Rights Agreement.
E. PROPERTY APPRECIATION RIGHTS AND EXCHANGE RIGHT.
The New Property Appreciation and Exchange Rights Agreement,
substantially in the form of Exhibit F to the Plan, provides for the issuance of
the New Property Appreciation Rights to Reorganized CWOP and provides for the
exchange of Reorganized CWOP's Jamboree LLC Units for Jamboree Office REIT
Shares. The New Property Appreciation Rights will be exercisable at any time
until the earlier of (i) the close of business on March 27, 2002, and (ii) any
change in control of Jamboree Office REIT occurring after March 27, 2000;
provided that the Reorganized CWOP may not exchange its Jamboree LLC Units for
Jamboree Office REIT Shares for one year after the Effective Date except in
certain circumstances.
In general, the New Tranche A Property Appreciation Right
grants Reorganized CWOP the right to exchange each of its Jamboree LLC Units
for one Jamboree Office REIT Share.
The New Tranche B Property Appreciation Right grants to
Reorganized CWOP a right to purchase for $10,888,888.89 a number of Jamboree
Office REIT Shares (the "Tranche B Shares") representing 10% (subject to
dilution) of the equity value of Jamboree LLC or, at the option of Jamboree
Office REIT, to receive a net cash payment equal to the difference between the
then current market value of the Tranche B Shares (assuming the exercise of all
such rights and all other rights under the New Property Appreciation and
Exchange Rights Agreement concurrently exercised) and such exercise price. The
New Tranche B Property Appreciation Right is exercisable at any time during the
exercise period described above that the fair market
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value of the outstanding Jamboree Office REIT Shares equals or exceeds a
dollar amount that, when divided by Jamboree Office REIT's percentage equity
interest in Jamboree LLC, equals $98 million.
In addition, the New Tranche C Property Appreciation Right
grants to Reorganized CWOP a right to purchase for $152,777,777.78 a number of
Jamboree Office REIT Shares (the "Tranche C Shares") representing 55% (subject
to dilution) of the equity value of Jamboree LLC or, at the option of Jamboree
Office REIT, to receive a net cash payment equal to the difference between the
then current market value of the Tranche C Shares (assuming the exercise of all
such rights and all other rights under the New Property Appreciation and
Exchange Rights Agreement concurrently exercised) and such exercise price. The
New Tranche C Property Appreciation Right is exercisable at any time during the
exercise period described above that the fair market value of the outstanding
Jamboree Office REIT Shares equals or exceeds a dollar amount that, when divided
by Jamboree Office REIT's percentage equity interest in Jamboree LLC, equals
$125 million.
Reorganized CWOP may elect to exercise either of the New
Tranche B and Tranche C Property Appreciation Rights on a net issue or "cashless
basis" by surrendering a portion of the Tranche B Shares or Tranche C Shares, as
the case may be, in payment of the applicable exercise price. In any event, the
amount of the payment to be made or shares issued on account of the New Property
Appreciation Rights will be adjusted upon the occurrence of certain events at
set forth in the New Property Appreciation and Exchange Rights Agreement and
will be determined on a fully diluted basis giving effect to the exercise of
rights under the New Property Appreciation and Exchange Rights Agreement,
whichever one or more has been exercised at such time, and such other
outstanding options, warrants or other rights to purchase Jamboree Office REIT
shares as deemed appropriate by the appraiser.
To determine the fair market value of the Jamboree Office
REIT Shares for the purpose of the New Property Appreciation Rights, Jamboree
Office REIT will obtain an appraisal. If Reorganized CWOP disputes the
appraisal obtained by Jamboree Office REIT, it may obtain a second appraisal.
If the appraisals differ by less than 10%, then the value will be deemed to be
the average of the two determinations. If the appraisals differ by 10% or more,
then the two appraisers will select an appraiser to perform a third appraisal,
and the value will be deemed to be the value that constitutes the mid-point of
the range between the two determinations that are closest in amount.
If, after Reorganized CWOP exercises a Property Appreciation
Right, Jamboree Office REIT elects to declare a dividend of any cash paid upon
the exercise of the New Property Appreciation Rights, then the dividend will be
distributed to shareholders of Jamboree Office REIT based on their ownership
interests after giving effect to the exercise of the applicable right. In the
event that Reorganized CWOP has not exercised the New Tranche A Property
Appreciation Right at the time of exercise of the New Tranche B or the New
Tranche C Property Appreciation Right, the exercise price for the shares will be
reduced by 10%.
Each of the Property Appreciation Rights must be exercised
in whole by Reorganized CWOP. Reorganized CWOP's rights under the New Property
Appreciation and Exchange Rights Agreement are nontransferable except to an
affiliate of the Debtor. The Jamboree Office REIT Shares received by
Reorganized CWOP upon exchange or exercise of the New Property Appreciation
Rights will be "Registerable Securities" under the New Equity Registration
Rights Agreement.
F. FUTURE OPERATIONS, NEW MANAGEMENT AGREEMENT.
After the Effective Date, Jamboree LLC will retain WCM to
lease existing vacant space in the Property, as well as to re-lease space that
currently is leased but will become vacant prior to the maturity of the New
Notes. Jamboree LLC will continue to operate and manage the Property in a
manner similar to that in
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which it currently is operated and managed, and to maintain the Property in a
condition consistent with other Class A office buildings in the Irvine area.
The Property will be managed and leased by pursuant to
the New Management and Leasing Agreement (the "New Management Agreement") to
be entered into as of the Effective Date by and between Jamboree LLC and WCM
and substantially in the form of Exhibit I to the Plan. WCM is 99% owned by
WCI and had contracted with CWOP prior to the Reorganization Case to manage
the Property pursuant to an agreement similar to the New Management
Agreement. (WCM subsequently assigned its duties under the prior management
agreement to its affiliate, Winthrop Management. Section III.A.4) Unless
terminated earlier for cause by Jamboree LLC or WCM, the New Management
Agreement will expire by its terms on the earlier of the fifth anniversary of
the Petition Date or the sale of the Property.
The New Management Agreement will require WCM to manage
and lease the Property in accordance with annual operating and capital
expense budgets submitted to and approved by Jamboree LLC (collectively, the
"Approved Budgets"). The costs of managing and leasing the Property that are
identified in the Approved Budgets will be paid from an operating account
maintained by WCM for Jamboree LLC. The Approved Budgets will describe
expenses for, among other things, the on-site personnel required to manage
the Property, the necessary repairs and maintenance of the Property and its
appurtenances and the anticipated improvements to the Property. The New
Management Agreement will also require WCM to, among other things, supervise
construction activities undertaken at the Property, prepare and maintain
certain financial records and reports related to the Property and its
management, maintain specified levels of insurance coverage related to the
performance of WCM's duties and seek and obtain Jamboree LLC's prior consent
to any third-party leases not meeting certain predetermined criteria set
forth in the New Management Agreement.
As set forth in more detail below, in consideration of
the performance of its duties under the New Management Agreement, WCM will
receive (a) a management fee equal to the sum of two percent (2%) of the
Gross Revenues (as defined in the New Management Agreement) generated by the
operation of the Property; (b) certain incentive fees based on reductions it
is able to achieve, if any, in certain operating and other expenses; and (c)
leasing commission payments, consistent with prevailing market rates, for all
third-party leases it procures for the Property.
The following is a summary of the economic differences
between the New Management Agreement, and the agreement between WCM and CWOP
for the management and leasing of the Property prior to the commencement of
the case (the "Prior Agreement").
MANAGEMENT FEE: Under the Prior Agreement, WCM was
entitled to a management fee equal to the sum of a) 5% of gross revenues
attributable to the Fluor lease, plus b) out of pocket and on-site personnel
costs as are payable as management reimbursement under the Fluor lease, plus
c) 4% of gross revenue attributable to space released from the Fluor lease,
plus d) other out of pocket and on-site personnel costs more fully described
in the Prior Agreement. Under the New Management Agreement, WCM is entitled
to a) a base management fee equal to 2% of gross revenues generated by the
Property, plus b) an incentive fee equal to 50% of the positive difference
(if any) between actual Operating Expenses for calendar year 1996 and actual
Operating Expenses incurred in any subsequent calendar year; provided that in
no event may the incentive fee exceed 2% of gross revenues generated by the
Property during the year in question. "Operating Expenses include all of the
items on the 1996 audited financial statements (see Exhibit 2) other than
management fees, real estate taxes and nonrecurring expenses in the amount of
$649,402. A schedule setting forth the calculation of the 1996 Operating
Expenses will be attached as Schedule 6 to the New Management Agreement.
REIMBURSEMENTS: Under the Prior Agreement, WCM was not
entitled to reimbursement for the costs of general accounting and reporting
services. Under the New Management Agreement, WCM is entitled
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to reimbursement for the costs of such services, provided the services are
performed by on-site personnel and only to the extent such costs may be
passed through to tenants. For 1997, WCM believes approximately $70,000 will
be passed through to tenants for the onsite accountant. Under the New
Management Agreement, WCM is entitled to reimbursement for the costs and
expenses of any accountant retained in connection with Jamboree LLC's dispute
of WCM's calculation of its incentive fee. There was no provision for the
retention of such an accountant in the Prior Agreement.
LEASING COMMISSIONS: Under the Prior Agreement, WCM was
entitled to a leasing commission at market rates as agreed by WCM and CWOP
from time to time. For each lease for which no other broker was a procuring
cause, WCM was entitled to 100% of such commission. If another broker was a
procuring cause, WCM was entitled to 50% of such commission. Under the New
Management Agreement, WCM is entitled to a leasing commission calculated in
accordance with a leasing commission (Schedule 2) attached to the agreement.
The percentage of such commission to which WCM is entitled depending on the
involvement of other brokers is identical to the Prior Agreement.
CONSTRUCTION SERVICES FEE: Under the Prior Agreement,
WCM was entitled to a construction management fee equal to 10% of all soft
and hard costs of any work performed to prepare tenant space for occupancy.
Under the New Management Agreement, there is no construction management fee.
SUBORDINATION OF FEE: Under the Prior Agreement, WCM was
required to use revenue from the Property to pay, in full, amounts due all
third party creditors of Property prior to paying any amounts due WCM. Under
the New Management Agreement, WCM is entitled to use such revenue to pay such
amounts due creditors and amounts due WCM on a pro rata basis.
AUDIT: Under the Prior Agreement, if an audit by CWOP of
the books, records and files which WCM maintained for CWOP revealed an error
or discrepancy of more than $200,000, WCM was required to pay the first
$10,000 of the cost of the audit. Under the New Management Agreement, if any
such audit reveals error or discrepancies in excess of 4% of the amount
audited, WCM is required to pay the entire cost of the audit.
LEASING PARAMETERS: Under the Prior Agreement, all
leases were subject to CWOP's approval prior to submission to a proposed
tenant for execution. In addition, WCM was required to notify CWOP of all
leasing meetings, discussions and negotiations to allow for CWOP's
participation in such meetings. Under the New Management Agreement, WCM is
required to use a standard lease, the form of which will be attached to the
agreement and may, without the prior approval of Jamboree LLC, execute, on
behalf of Jamboree LLC, the following leases (or amendments and renewals
thereof):
1) leases covering 5,000 square feet or less that are
reasonably consistent with then current market terms. If any such lease
provides for tenant improvements in a certain dollar amount per foot (subject
to increase as set forth in the agreement), it must have a term in excess of
3 years; and
2) leases covering more than 5,000 square feet but less
than 25,000 on terms within the leasing parameters set forth on Schedule 1
attached to the agreement.
All other leases are subject to Jamboree LLC's approval
prior to execution by WCM on behalf of Jamboree LLC.
The New Management Agreement will contain the following
Exhibits and Schedules: Exhibit A - the legal description of the Property;
Exhibit B - the form of Approved Budget; Exhibit C - the form of monthly
reports; Exhibit D - a form of Statement of Income and Expenses and Balance
Sheet; Exhibit E - the
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Standard Lease; Schedule 1 - a schedule of pre-approved leasing parameters;
Schedule 2 - a schedule of leasing commissions; Schedule 3 -schedule of
existing contracts with affiliates; Schedule 4 - the owner's Designated
Representatives; and Schedule 5 - a summary of pre-reorganization insurance
coverage; Schedule 6 - operating expense calculation. The Exhibits and
Schedules that are not attached will be completed prior to execution of the
New Management Agreement. Schedule 1 (pre-approved leasing parameters) and
Exhibit E (form of standard lease) will be provided to the Successor
Servicing Agreement but not filed with the Court because of the confidential
and competitively sensitive nature of the information contained in those
documents.
G. REORGANIZED CWOP.
After the Effective Date, the sole assets of Reorganized
CWOP will be an initial 10% of the Jamboree LLC Units and its rights under
the New Property Appreciation and Exchange Rights Agreement. The CWOP
Partnership Agreement will be amended by a fourth amendment, which is
attached to the Plan as Exhibit E (as amended, the "New CWOP Partnership
Agreement"). The fourth amendment amends the CWOP partnership agreement to
take into account the fact that CWOP no longer owns the Property and to add
certain provisions designed to specially allocate the burden of any Excess
Shares designation resulting from a violation of the ownership limitations
for Jamboree Office REIT to the person whose holding causes such designation.
The fourth amendment assumes that Crow has been converted
to a limited partner in accordance with the terms of Section 4.1(f) of the
existing CWOP partnership agreement, and that a third amendment has been
executed to document that conversion. If for any reason the proposed third
amendment is not executed prior to the Effective Date, the fourth amendment
will be renumbered and modified accordingly. Neither the fourth amendment
nor the Plan have the effect of converting Crow to a limited partner or CWOP
to a limited partnership.
VII. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
A. INTRODUCTION.
The implementation of the Plan may have federal, state
and local tax consequences to CWOP and CWOP's creditors and partners. No tax
opinion has been sought or will be obtained with respect to any tax
consequences of the Plan. This Disclosure Statement does not constitute and
is not intended to constitute either a tax opinion or tax advice to any
person, and the summary contained herein is provided for informational
purposes only.
The discussion below summarizes only certain of the
federal income tax consequences associated with the Plan's implementation.
This discussion does not attempt to comment on all aspects of the federal
income tax consequences associated with the Plan, nor does it attempt to
consider various facts or limitations applicable to any particular creditor
or partner that may modify or alter the consequences described herein. This
discussion does not address state, local or foreign tax consequences or the
consequences of any federal tax other than the federal income tax.
The following discussion is based upon the provisions of
the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"),
the regulations promulgated thereunder, existing judicial decisions and
administrative rulings. In light of the numerous recent amendments to the
Internal Revenue Code, no assurance can be given that legislative, judicial
or administrative changes will not be forthcoming that would affect the
accuracy of the discussion below. Any such changes could be material and
could be retroactive with respect to transactions entered into or completed
prior to the enactment or promulgation thereof. The tax consequences of
certain aspects of the Plan are uncertain due to the lack of applicable legal
authority and may be subject to judicial or administrative interpretations
that differ from the discussion below.
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Tax legislation has been introduced in Congress which, if
enacted, would fundamentally alter the basic scheme of federal taxation by
replacing the federal income tax with a national retail sales tax or a form
of value added tax. Other proposed tax legislation would transform the
current graduated-rate federal income tax into an income-based flat tax.
Insofar as the discussion below addresses income tax consequences in 1997
and/or subsequent years, such discussion may be completely invalidated if tax
reform is enacted.
CREDITORS AND PARTNERS ARE ADVISED TO CONSULT WITH THEIR OWN TAX
ADVISORS REGARDING THE TAX CONSEQUENCES TO THEM AND TO CWOP OF THE
TRANSACTIONS CONTEMPLATED BY THE PLAN.
B. FEDERAL INCOME TAX CONSEQUENCES TO CWOP.
1. GENERAL.
Recently issued Treasury Regulations (the "Check-the-Box
Regulations") permit most unincorporated business entities to elect whether
to be taxed as partnerships or corporations for federal income tax purposes
without regard to the prior regulations' four-factor classification test.
Under the Check-the-Box Regulations most multi-member unincorporated domestic
entities will default to partnership classification without the need to make
an election. CWOP intends to take such steps as may be necessary to ensure
its classification as a partnership for federal income tax purposes. If CWOP
is classified as a partnership for federal income tax purposes, CWOP is not
itself a tax-paying entity but instead passes through to its partners all of
CWOP's items of income, gain, loss, deduction and credit for each taxable
year. CWOP's partners take into account on their own federal income tax
returns their distributive share of such items of income, gain, loss,
deduction and credit whether or not cash distributions with respect to such
items are made to the partners. If a CWOP partner is itself a partnership
for federal income tax purposes, such partnership passes through to its
partners their distributive share of items of income, gain, loss, deduction
and credit.
2. REDUCTION OF CWOP'S INDEBTEDNESS.
As a result of the Plan's implementation, the amount of
CWOP's aggregate outstanding indebtedness will be reduced substantially.
(The amount of discharged indebtedness for federal income tax purposes will
be referred to herein as a "Debt Discharge Amount.") In general, the Internal
Revenue Code provides that a taxpayer who realizes a discharge of
indebtedness must include the Debt Discharge Amount in its gross income in
the taxable year of discharge to the extent that the Debt Discharge Amount
exceeds any consideration given for such discharge. No income from the
discharge of indebtedness is realized to the extent that payment of the
liability being discharged would have given rise to a deduction.
The Internal Revenue Code establishes certain exceptions
to the general rule that a taxpayer who realizes a Debt Discharge Amount must
include such amount in his income. In the case of a partnership such as
CWOP, these exceptions apply at the partner level rather than the partnership
level. If a partner of a debtor partnership is itself a partnership, the
exceptions apply at the partner level of such higher-tier partnership,
assuming such partner is not another partnership (in which case the cycle is
repeated).
A CWOP partner (other than another partnership, as
discussed above) may be able to exclude from income such partner's
distributive share of CWOP's Debt Discharge Amount if the partner is in a
title 11 case or is insolvent. Further, a partner who is an individual or an
S corporation may be able to exclude from income all or a portion of its
distributive share of CWOP's Debt Discharge Amount by making an election
described in Internal Revenue Code section 108(c) relating to "qualified real
property business indebtedness." The ability of any CWOP partner (or
higher-tier partner, as applicable) to qualify for any exception to the
general rule of recognition of a Debt Discharge Amount will turn, in large
part, on such partner's particular tax
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circumstances, including in certain cases such partner's timely filing of an
election with the Internal Revenue Service. Consequently, CWOP is unable to
express any view with respect to whether any partner of CWOP will qualify
under any of the foregoing exceptions to the recognition of CWOP's Debt
Discharge Amount.
The exclusion of debt-discharge income with respect to a
bankrupt or insolvent taxpayer triggers the reduction of various tax
attributes of the taxpayer, including a reduction in the basis of the
taxpayer's property. The tax attributes that must be reduced and the order of
their reduction are specified in Code section 108(b)(2). Notably, the
insolvency exception for nonbankrupt taxpayers is limited to the extent of
the taxpayer's insolvency before the discharge. The gross income exclusion
for qualified real property business indebtedness, on the other hand,
requires an election by the taxpayer to reduce the basis of its depreciable
real property under the rules of Code section 1017 rather than include the
debt-discharge amount in income. In either case, all or a portion of any
reduction in the basis of property pursuant to an exclusion of debt-discharge
income may be recaptured as ordinary income upon disposition of the property.
As discussed in Section VII.E, below, the allocation of items of Jamboree
LLC income, gain, loss and deduction with respect to certain items of
property may be governed by Internal Revenue Code section 704(c).
3. CONSTRUCTIVE DISTRIBUTION OF MONEY UNDER INTERNAL
REVENUE CODE SECTION 752.
Under Internal Revenue Code section 752, a decrease in a
partner's share of a partnership's liabilities is treated as a distribution
of money by the partnership to the partner. Such a constructive distribution
generally triggers the recognition of gain by a partner to the extent the
amount so constructively distributed exceeds the partner's adjusted basis in
his partnership interest. For this purpose, the partner's adjusted basis
will ordinarily include the amount of the increase in basis due to the
allocation to the partner of its distributive share of any Debt Discharge
Amount.
Partners of CWOP are expected to experience a reduction
in their share of the liabilities of CWOP as a result of Plan transactions.
Whether any such reduction will trigger the recognition of income by any
particular partner is dependent upon such partner's adjusted basis in its
partnership interest, as such basis may be increased by such partner's
distributive share of CWOP's Debt Discharge Amount.
C. FEDERAL INCOME TAX CONSEQUENCES TO CREDITORS.
The federal income tax consequences of the Plan's
implementation to a creditor will depend on the type of consideration
received by the creditor in exchange for its Claim, whether the creditor
reports income on the cash or accrual method, whether the creditor receives
consideration in more than one tax year of the creditor, and whether all the
consideration received by the creditor is deemed to be received by that
creditor in an integrated transaction.
1. CONSTRUCTIVE OR DEEMED EXCHANGE OF OLD DEBT
INSTRUMENT FOR NEW DEBT INSTRUMENT.
A modification of the terms of indebtedness can result in
a constructive or deemed exchange of the new modified debt for the old
unmodified debt. If a constructive or deemed exchange occurs, a creditor may
realize and recognize a gain or loss. Under Internal Revenue Code section
1001, the gain or loss from an exchange of property is determined by
reference to the amount realized by the creditor from the exchange and the
creditor's adjusted tax basis in the property as determined under Internal
Revenue Code section 1001. For this purpose, the amount realized by the
creditor likely is the "issue price" of the new modified debt instrument as
determined under the Internal Revenue Code's original issue discount
provisions.
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Under newly-finalized Treasury Regulations, a
constructive or deemed exchange occurs with respect to a debt instrument if
the alteration of the terms of indebtedness constitutes a "significant
modification" as defined in the Regulations. The Regulations' approach is to
establish specific rules for determining the significance of certain types of
modifications and to provide a general rule for dealing with modifications
not otherwise addressed. The general rule broadly provides that a
modification is a significant modification only if, based on all facts and
circumstances, the legal rights or obligations that are altered and the
degree to which they are altered is economically significant. The specific
rules deal with (1) a change in yield, (2) a change in the timing of
payments, (3) a change in the identity of the obligor or the security for the
debt, (4) certain changes in the nature of the debt and (5) a change in
accounting or financial covenants.
A full and complete discussion of these specific rules is
beyond the scope of this Disclosure Statement. What follows is an overview
of certain specific rules. Creditors and other parties in interest should
consult their own tax advisors with respect to the application of the
Treasury Regulations' debt modification rules to the treatment of their
Claims under the Plan.
CHANGE IN YIELD. A change in yield is a significant
modification if the new yield (determined under rules promulgated in the
Treasury Regulations) varies from the annual yield on the unmodified debt
(determined as of the date of modification) by more than the greater of (i)
one-fourth of one percent (25 basis points) or (ii) 5 percent of the annual
yield of the unmodified debt.
CHANGES IN TIMING OF PAYMENTS. A modification that
changes the timing of one or more payments due under the terms of the debt is
a significant modification if it "results in the material deferral of
scheduled payments." The Regulations establish a safe harbor whereby the
deferral of one or more scheduled payments is not a material deferral if the
deferred payments are unconditionally payable no later than at the end of the
safe harbor period. The safe harbor period begins on the original due date of
the first scheduled payment that is deferred and extends for a period equal
to the lesser of five years or 50 percent of the original term of the debt.
CHANGE IN OBLIGOR OR SECURITY. The substitution of a new
obligor on a recourse debt generally is a significant modification. For this
purpose, the filing of a bankruptcy petition in and of itself does not result
in the substitution of a new obligor. A modification that releases,
substitutes, adds or otherwise alters the collateral for, a guarantee on, or
other form of credit enhancement for a recourse debt is a significant
modification if the modification results in a change in payment expectations.
A change in the priority of debt relative to other debt of the borrower is a
significant modification if it results in a change of payment expectations.
The substitution of a new obligor on a nonrecourse debt instrument generally
is not a significant modification.
CHANGES IN THE NATURE OF A DEBT INSTRUMENT. A
modification in the terms of a claim that results in an instrument or
property right that is not debt for federal income tax purposes is a
significant modification. For this purpose, any deterioration in the
financial condition of the obligor between the issue date of the debt and the
modification date generally is not taken into account.
ACCOUNTING AND FINANCIAL COVENANTS. A modification that
adds, deletes or alters customary accounting or financial covenants is not a
significant modification.
A modification described above that is effective only
upon the occurrence of a substantial contingency or that is effective on a
deferred basis is tested under the general rule rather than the specific
rules.
Modifications occurring pursuant to a plan of
reorganization generally are treated as occurring on the effective date of
the plan.
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The new final Treasury Regulations apply to any
alteration of the terms of debt occurring on or after September 24, 1996.
Taxpayers, however, may rely on these Regulations for alterations of debt
occurring after December 2, 1992 and before September 24, 1996.
2. TAX BASIS AND HOLDING PERIOD OF ITEMS RECEIVED.
Generally, the aggregate tax basis in the items of
property (other than cash) received by a creditor in an actual or deemed
exchange will equal the amount realized in respect of such property items
(other than amounts allocable to any accrued interest). The holding period
for property items received in the exchange will begin on the day following
the exchange.
3. WITHHOLDING.
Jamboree LLC or a disbursing agent will withhold any
amounts required by law from payments made to creditors. This may require
payments by certain creditors of the required withholding tax on any non-cash
consideration issuable under the Plan. In addition, creditors may be
required to provide general tax information to Jamboree LLC or a disbursing
agent.
D. FEDERAL INCOME TAXATION OF JAMBOREE OFFICE REIT.
Jamboree Office REIT will elect to be taxed as a
REIT under Internal Revenue Code sections 856 through 860 and the applicable
Treasury Regulations (the "REIT Requirements" or the "REIT Provisions"),
which are the requirements for qualifying as a REIT. As long as Jamboree
Office REIT qualifies for taxation as a REIT, it generally will not be
subject to federal corporate income taxes on that portion of its ordinary
income or capital gain that is distributed to shareholders. Such treatment
substantially eliminates the federal "double taxation" on earnings that
generally results from investment in a corporation. Jamboree Office REIT
intends to operate in such a manner as to qualify for taxation as a REIT
under the Internal Revenue Code, but no assurance can be given that it will
operate in a manner so as to qualify or remain qualified. Qualification as a
REIT involves the application of highly technical and complex Internal
Revenue Code provisions for which there are only limited judicial or
administrative interpretations. The determination of various factual matters
and circumstances not entirely within Jamboree Office REIT's control may
affect its ability to qualify as a REIT. In addition, no assurance can be
given that legislation, new regulations, administrative interpretations, or
court decisions will not significantly change the tax laws with respect to
the qualification as a REIT or the federal income tax consequences of such
qualification; however, Jamboree Office REIT is not aware of any proposal in
Congress to amend the tax laws that would materially and adversely affect
Jamboree Office REIT's ability to operate as a REIT. The REIT Requirements
are highly technical and complex. The following discussion sets forth only
certain material aspects of those requirements. This summary is qualified in
its entirety by the applicable Internal Revenue Code provisions, rules and
regulations promulgated thereunder, and administrative and judicial
interpretations thereof.
Even if Jamboree Office REIT qualifies for taxation
as a REIT under the REIT Provisions, Jamboree Office REIT may be subject to
federal income and excise tax as follows:
First, Jamboree Office REIT will be taxed at regular
corporate income tax rates on any undistributed REIT taxable
income, including undistributed net capital gains.
Second, under certain circumstances, Jamboree Office
REIT may be subject to the "alternative minimum tax" on certain
of its items of tax preferences, if any.
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Third, if Jamboree Office REIT has (i) net income from
the sale or other disposition of "foreclosure property" that is
held primarily for sale to customers in the ordinary course of
business or (ii) other nonqualifying net income from foreclosure
property, it will be subject to tax at the highest corporate rate
on such income.
Fourth, if Jamboree Office REIT has net income from
prohibited transactions (which are, in general, certain sales or
other dispositions of property held primarily for sale to
customers in the ordinary course of business, other than sales of
foreclosure property), such income will be subject to a 100% tax.
Fifth, if Jamboree Office REIT should fail to satisfy
the 75% gross income test or the 95% gross income test (as
discussed below), but has nonetheless maintained its
qualifications as a REIT because certain other requirements have
been met, it will be subject to a 100% tax on the net income
attributable to the greater of the amount by which Jamboree
Office REIT fails the 75% or 95% test, multiplied by a fraction
intended to reflect Jamboree Office REIT's profitability.
Sixth, if Jamboree Office REIT should fail to
distribute, or fail to be treated as having distributed, with
respect to each calendar year, at least the sum of (i) 85% of its
REIT ordinary income for such year, (ii) 95% of its REIT capital
gain net income for such year, and (iii) any undistributed
taxable income from prior periods, Jamboree Office REIT would be
subject to a 4% excise tax on the excess of such required
distribution over the amounts actually distributed.
Jamboree Office REIT does not now intend to acquire
any appreciated assets from a corporation generally subject to full
corporate-level tax in a transaction in which its basis in assets would carry
over from the transferor. However, in the event of such an acquisition,
Jamboree Office REIT could, under certain circumstances, be subject to tax
upon disposition of such assets. (Under certain proposals made by the
Clinton Administration, such tax could be imposed upon acquisition of such
assets.)
1. REIT ORGANIZATIONAL REQUIREMENTS.
The Internal Revenue Code defines a REIT as a
corporation, trust, or association (a) that is managed by one or more
trustees or directors; (b) the beneficial ownership of which is evidenced by
transferable shares, or by transferable certificates of beneficial interest;
(c) that would be taxable as a domestic corporation, but for the REIT
Requirements; (d) that is neither a financial institution nor an insurance
company subject to certain provisions of the Internal Revenue Code; (e) the
beneficial ownership of which is held by 100 or more persons; (f) not more
than 50% in value of the outstanding stock of which is owned, directly or
indirectly, by five or fewer individuals (as defined in the Internal Revenue
Code to include certain entities) at any time during the last half of each
taxable year; and (g) meets certain other tests, described below, regarding
the nature of its income and assets. The Internal Revenue Code provides that
conditions (a) through (d), inclusive, must be met during the entire taxable
year and that condition (e) must be met during at least 335 days of a taxable
year of 12 months, or during a proportionate part of a taxable year of less
than 12 months. For purposes of condition (f), pension funds and certain
other tax-exempt entities are generally treated as individuals. Effective for
taxable years beginning after December 31, 1993, a pension trust that
qualifies under section 401(a) of the Internal Revenue Code generally will
not be treated as an individual for these purposes; instead the beneficiaries
of the pension trust will be treated as holding shares of the REIT in
proportion to their actuarial interests in the pension trust. Conditions (e)
and (f) will not apply until after the first taxable year for which an
election is made to be taxed as a REIT. The holders of the Allowed
Certificateholder Claims believe that it will issue sufficient Jamboree
Office REIT Shares pursuant to the Plan to allow it to continue to satisfy
conditions (e) and (f) above. In addition, a corporation may not elect to
become a REIT unless its taxable year is the calendar year. Jamboree Office
REIT satisfies this requirement.
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Regulations promulgated under Internal Revenue Code
section 856 provide that if a REIT invests in a partnership, notwithstanding
the allocation provisions set forth in the partnership agreement, for
purposes of determining whether the REIT qualifies under the various REIT
Requirements, the REIT will be deemed to own its "proportionate share" of
each of the assets of the partnership, and will be deemed to be entitled to
the income of the partnership attributable to such proportionate share.
Consequently, in order for Jamboree Office REIT to remain qualified as a
REIT, Jamboree LLC must comply with the income and asset requirements of a
REIT. Accordingly, the New LLC Agreement will contain provisions to ensure
Jamboree LLC's continued compliance with the REIT Requirements.
2. INCOME TESTS.
In order to maintain qualification as a REIT, Jamboree
Office REIT must satisfy annually three gross income requirements. First, at
least 75% of Jamboree Office REIT's gross income (excluding gross income from
prohibited transactions) for each taxable year must be derived, directly or
indirectly, from investments relating to real property or mortgages on real
property (as interest on obligations secured by mortgages, "rents from real
property" or as gain on the sale or exchange of such property), from certain
types of temporary investments or from certain other types of gross income.
Second, at least 95% of Jamboree Office REIT's gross income (excluding gross
income from prohibited transactions) for each taxable year must be derived
from such real property investments as aforesaid and from dividends,
interest, and gain from the sale or other disposition of stock or securities
and certain other types of gross income (or from any combination of the
foregoing). Third, short-term gain from the sale or other disposition of
stock or securities, gain from prohibited transactions, and gain on the sale
or other disposition of real property held for less than four years (apart
from involuntary conversions and sales of foreclosure property) generally
must represent less than 30% of Jamboree Office REIT's gross income
(including gross income from prohibited transactions) for each taxable year.
For purposes of applying the 30% gross income test, the holding period of
properties acquired by Jamboree LLC in the formation transaction will be
deemed to have commenced on the date of acquisition.
Rents received or deemed to be received by Jamboree
Office REIT will qualify as "rents from real property" in satisfying the
gross income requirements for a REIT described above only if certain
conditions are met. First, the amount of rent must not be based in whole or
in part on the income or profits of any person. However, an amount received
or accrued generally will not be excluded from the term "rents from real
property" solely by reason of being based on a fixed percentage or
percentages of receipts or sales. Second, the Internal Revenue Code provides
that rents received from a tenant will not qualify as "rents from real
property" in satisfying the gross income tests if Jamboree Office REIT, or an
owner of 10% or more of Jamboree Office REIT, directly or constructively owns
10% or more of such tenant (a "Related Party Tenant"). Third, if rent
attributable to personal property, leased in connection with a lease of real
property, is greater than 15% of the total rent received under the lease,
then the portion of rent attributable to such personal property will not
qualify as "rents from real property." Jamboree Office REIT does not
anticipate deriving rent attributable to personal property leased in
connection with real property in excess of the 15% limitation described
above. Finally, for rents received to qualify as "rents from real property,"
Jamboree Office REIT generally must not operate or manage the property or
furnish or render services to tenants, other than through an "independent
contractor" from whom Jamboree Office REIT derives no revenue. The
"independent contractor" requirement, however, does not apply to the extent
the services provided by Jamboree Office REIT are "usually or customarily
rendered" in connection with the rental of space for occupancy only and are
not otherwise considered "rendered to the occupant primarily for his
convenience." Jamboree Office REIT does not and will not (i) charge rent for
any property that is based in whole or in part on the income or profits of
any person (except by reason of being based on a percentage of receipts or
sales, as described above), (ii) rent any additional property to a Related
Party Tenant (unless the Board of Directors determines in its discretion that
the rent received from such Related Party Tenant is not material and will not
jeopardize Jamboree Office REIT's status as a REIT), (iii) derive rental
income attributable to personal property (other than personal property
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leased in connection with the lease of real property, the amount of which is
less than 15% of the total rent received under the lease), or (iv) perform
services considered to be rendered to the occupant of the property, other
than through an independent contractor from whom Jamboree Office REIT derives
no revenue. (The operations and services provided tenants of the Property
are being reviewed to determine whether any changes are necessary to comply
with the REIT rules.) While Jamboree Office REIT believes that the services
rendered to its tenants are usually or customarily rendered in connection
with the rental of space, if challenged by the Service, it may not be able to
demonstrate that the extent to which such services are rendered by other
property owners is common enough to cause them to be "customarily rendered."
In the case of any services that are not "usual and customary" under the
foregoing rules, Jamboree Office REIT intends to employ independent
contractors to perform such services.
3. RELIEF PROVISIONS.
If Jamboree Office REIT fails to satisfy one or both of
the 75% or 95% gross income tests for any taxable year, it may nevertheless
qualify as a REIT for such year if it is entitled to relief under certain
provisions of the Internal Revenue Code. These relief provisions will be
generally available if Jamboree Office REIT's failure to meet such tests was
due to reasonable cause and not due to willful neglect, if Jamboree Office
REIT attaches a schedule of the sources of its income to its return and if
any incorrect information on the schedule was not due to fraud with intent to
evade tax. It is not possible, however, to state whether in all circumstances
Jamboree Office REIT would be entitled to the benefit of these relief
provisions. As discussed above, even if these relief provisions apply, a tax
would be imposed with respect to Jamboree Office REIT's excess net income.
4. ASSET TESTS.
At the close of each quarter of its taxable year,
Jamboree Office REIT must satisfy three tests relating to the nature of its
assets. First, at least 75% of the value of Jamboree Office REIT's total
assets must be represented by real estate assets, cash, cash items, and
government securities. Second, not more than 25% of Jamboree Office REIT's
total assets may be represented by securities other than those in the 75%
asset class. Third, of the investments included in the 25% asset class, the
value of any one issuer's securities owned by Jamboree Office REIT may not
exceed 5% of the value of Jamboree Office REIT's total assets, and Jamboree
Office REIT may not own more than 10% of any one issuer's outstanding voting
securities.
After initially meeting the asset tests at the close of
any quarter, Jamboree Office REIT will not lose its status as a REIT if it
fails to satisfy the asset tests at the end of a later quarter solely by
reason of changes in asset values. If the failure to satisfy the asset tests
results from an acquisition of securities or other property during a quarter,
the failure can be cured by disposition of sufficient nonqualifying assets
within 30 days after the close of that quarter. Jamboree Office REIT intends
to maintain adequate records of the value of its assets to ensure compliance
with the asset tests, and to take such action within 30 days after the close
of any quarter as may be required to cure any noncompliance.
5. ANNUAL REIT DISTRIBUTION REQUIREMENTS.
In order to be treated as a REIT, Jamboree Office REIT is
required to distribute dividends (other than capital gain dividends) to its
shareholders in an amount at least equal to (a) the sum of (i) 95% of
Jamboree Office REIT's "REIT taxable income" (computed without regard to the
dividends paid deduction and Jamboree Office REIT's net capital gain) PLUS
(ii) 95% of the net income (after tax), if any, from foreclosure property in
excess of the special tax on income from foreclosure property, MINUS (b) the
sum of certain items of noncash income. Such distributions must be paid in
the taxable year to which they relate, or in the following taxable year if
declared before Jamboree Office REIT timely files its tax return for such
year and if paid on or
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before the first regular dividend payment after such declaration. To the
extent that Jamboree Office REIT does not distribute all of its net capital
gain or distributes at least 95%, but less than 100% of its "REIT taxable
income," as adjusted, it will be subject to tax thereon at regular ordinary
and capital gains corporate tax rates. Furthermore, if Jamboree Office REIT
should fail to distribute during each calendar year at least the sum of (a)
85% of its REIT ordinary income for such year, (b) 95% of its REIT capital
gain net income for such year, and (c) any undistributed taxable income from
prior periods, Jamboree Office REIT would be subject to a 4% excise tax on
the excess of such required distribution over the amounts actually
distributed. Jamboree Office REIT intends to make timely distributions
sufficient to satisfy the annual distribution requirement. Jamboree Office
REIT anticipates that it will generally have sufficient cash or liquid assets
to enable it to satisfy the 95% distribution requirement. REIT taxable
income is taxable income computed under general principles, subject to the
following modifications: the corporate dividends received deductions are not
allowed; the deduction for dividends paid under Internal Revenue Code section
561 is computed without regard to that portion of the deduction that is
attributable to the amount excluded from REIT taxable income as net income
from foreclosure property; taxable income is computed without regard to the
rules under Internal Revenue Code section 443(b) relating to computation of
tax on change of annual accounting period; an amount equal to the net income
from foreclosure property is excluded; an amount equal to the tax imposed
under Internal Revenue Code section 857(b)(5) if certain REIT requirements
are not met is deducted; and an amount equal to any net income derived from
prohibited transactions is excluded ("REIT Taxable Income").
It is possible that, from time to time, Jamboree Office REIT may
not have sufficient cash or other liquid assets to meet the 95% distribution
requirement due to timing differences between (a) the actual receipt of
income and actual payment of deductible expenses, (b) the inclusion of such
income and deduction of such expenses in arriving at the taxable income of
Jamboree Office REIT and (c) the use of cash to make nondeductible principal
payments on REIT debt. In the event that such an insufficiency or such
timing differences occur, Jamboree Office REIT may find it necessary to
arrange for borrowings, or to pay dividends in the form of taxable stock
dividends, if it is practicable to do so, to meet the 95% distribution
requirement.
Under certain circumstances, Jamboree Office REIT may be able to
rectify a failure to meet the distribution requirement for a year by paying
"deficiency dividends" to shareholders in a later year, which may be included
in Jamboree Office REIT's deduction for dividends paid for the earlier year.
Thus, Jamboree Office REIT may be able to avoid being taxed on amounts
distributed as deficiency dividends; however, Jamboree Office REIT will be
required to pay interest based upon the amount of any deduction taken for
deficiency dividends.
6. FAILURE TO QUALIFY AS A REIT.
If Jamboree Office REIT fails to qualify for taxation as a REIT
in any taxable year, and the relief provisions described above do not apply,
Jamboree Office REIT will be subject to tax (including any applicable
alternative minimum tax) on its taxable income at regular corporate rates.
Distributions to shareholders in any year in which Jamboree Office REIT fails
to qualify will not be deductible by Jamboree Office REIT and they will not
be required to be made. In such event, to the extent of current and
accumulated earnings and profits, all distributions to shareholders will be
taxable as ordinary income, and subject to certain limitations of the
Internal Revenue Code, corporate distributees may be eligible for the
dividends-received deduction. Unless entitled to relief under specific
statutory provisions, Jamboree Office REIT will also be disqualified from
taxation as a REIT for the four taxable years following the year during which
qualification was lost, and will not be permitted to requalify unless it
distributes any earnings and profits attributable to the period when it
failed to qualify. In addition, it will be subject to tax on any built-in
gains on property held during the period during which it did not qualify if
it sold such property within 10 years of requalification. It is not possible
to state whether in all circumstances Jamboree Office REIT would be entitled
to such statutory relief.
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7. TAXATION TO UNITED STATES SHAREHOLDERS OF DISTRIBUTIONS.
As long as Jamboree Office REIT qualifies as a REIT,
distributions up to the amount of Jamboree Office REIT's current or
accumulated earnings and profits (and not designated as capital gain
dividends) to a United States shareholder (I.E., a holder of New Common
Shares that is for United States federal income tax purposes (a) a citizen or
resident of the United States, (b) a corporation, partnership, or other
entity created or organized in or under the laws of the United States or of
any political subdivision thereof, or (c) an estate or trust the income of
which is subject to United States federal income taxation regardless of its
source) will be taken into account by them as ordinary income and will not be
eligible for the dividends-received deduction for corporations.
Distributions that are designated by Jamboree Office REIT as capital gain
dividends will be treated as long-term capital gain (to the extent they do
not exceed Jamboree Office REIT's actual net capital gain) for the taxable
year without regard to the period for which the shareholder has held its
stock. However, corporate shareholders may be required to treat up to 20% of
certain capital gain dividends as ordinary income pursuant to Internal
Revenue Code section 291(d). A distribution in excess of current or
accumulated earnings and profits will first be treated as a tax-free return
of capital, reducing the tax basis in the United States shareholder's New
Common Shares, and a distribution in excess of the United States
shareholder's tax basis in such New Common Shares will be treated as taxable
gain realized from the sale of such shares. Dividends declared by Jamboree
Office REIT in October, November or December of any year payable to a
shareholder of record on a specified date in any such month will be treated
as both paid by Jamboree Office REIT and received by the shareholder on
December 31 of such year, provided that the dividend is actually paid by
Jamboree Office REIT during January of the following calendar year.
Shareholders may not claim the benefit of any tax losses of Jamboree Office
REIT on their own income tax returns.
Jamboree Office REIT will be treated as having sufficient
earnings and profits to treat as a dividend any distribution by Jamboree
Office REIT up to the amount required to be distributed in order to avoid
imposition of the 4% excise tax discussed above. As a result, shareholders
may be required to treat as taxable dividends certain distributions that
would otherwise result in a tax-free return of capital. Moreover, any
"deficiency dividend" will be treated as a "dividend" (an ordinary dividend
or a capital gain dividend as the case may be), regardless of Jamboree Office
REIT's earnings and profits.
A loss incurred on the sale or exchange of Jamboree Office REIT
Shares held for less than six months will be deemed a long-term capital loss
to the extent of any capital gain dividends received by the selling
shareholder with respect to such stock.
8. BACKUP WITHHOLDING.
Jamboree Office REIT will report to its United States
shareholders and the IRS the amount of dividends paid during each calendar
year, and the amount of tax withheld, if any. Under the backup withholding
rules, a shareholder may be subject to backup withholding at the rate of 31%
with respect to dividends paid unless such holder (a) is a corporation or
comes within certain other exempt categories and, when required, demonstrates
this fact, or (b) provides a taxpayer identification number, certifies as to
no loss of exemption from backup withholding, and otherwise complies with
applicable requirements of the backup withholding rules. A United States
shareholder that does not provide Jamboree Office REIT with its correct
taxpayer identification number may also be subject to penalties imposed by
the IRS. Any amount paid as backup withholding will be creditable against
the shareholder's income tax liability. In addition, Jamboree Office REIT
may be required to withhold a portion of capital gain distributions to any
shareholders who fail to certify their non-foreign status.
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9. TREATMENT OF TAX-EXEMPT SHAREHOLDERS.
Distributions from Jamboree Office REIT to a tax-exempt employee
pension trust or other domestic tax-exempt shareholder will not constitute
"unrelated business taxable income" unless the shareholder has borrowed to
acquire or carry its shares of Jamboree Office REIT. A tax-exempt employee's
pension trust that holds more than 10% of the Jamboree Office REIT Shares
may, under certain circumstances, be required to treat a certain percentage
of dividends as unrelated business taxable income if Jamboree Office REIT is
"predominantly held" by qualified trusts. For these purposes, a qualified
trust is any trust defined under Internal Revenue Code section 401(a) and
exempt from tax under Internal Revenue Code section 501(a).
10. TAXATION OF FOREIGN SHAREHOLDERS.
The rules governing United States income taxation of
non-resident alien individuals, foreign corporations, foreign partnerships,
and foreign trusts and estates holding Jamboree Office REIT Shares
(collectively, "Foreign Shareholders") are complex, and no attempt will be
made herein to discuss such rules. A Foreign Shareholder should consult with
his or her own tax advisor to determine the effect of federal, state, and
local and country of tax residence income tax laws on an investment in
Jamboree Office REIT, including any reporting requirements.
E. FEDERAL INCOME TAXATION OF JAMBOREE LLC.
As explained above, the recently-enacted Check-the-Box Regulations
permit most unincorporated business entities to elect to be taxed as
partnerships or corporations for federal income tax purposes without regard
to the prior regulations' four-factor classification test. The New LLC
Agreement will authorize the members thereof to take such steps as may be
necessary to ensure Jamboree LLC's classification as a partnership under such
rules. As long as Jamboree LLC is classified as a partnership for federal
income tax purposes, its taxable income will flow through to its members. If
Jamboree LLC fails to qualify as a partnership for tax purposes, its taxable
income will be subject to tax at the regular corporate rate and distributions
by Jamboree LLC will be taxable as ordinary dividends to the members to the
extent of Jamboree LLC's earnings and profits and will not be deductible by
Jamboree LLC. Such treatment could also cause Jamboree Office REIT to fail
to satisfy certain of the income and asset tests applicable to REITs,
resulting in the unfavorable tax consequences described in Section VII.D.
above.
If Jamboree LLC is classified as a partnership for federal income
tax purposes, each member in Jamboree LLC must take into account its
distributive share of the LLC items of income, gain, loss, deduction and
credit in the member's taxable year in which the taxable year of the LLC
ends, whether or not cash distributions with respect to such items are made
to the member. Such LLC items will be allocated among the members in
accordance with the provisions of the New LLC Agreement. Under Internal
Revenue Code section 704(b), an allocation of income, gain, loss, deduction
or credit of the LLC to a member will not be respected for federal tax
purposes unless the allocation has "substantial economic effect." If an
allocation does not have "substantial economic effect," then each member's
distributive share of such item will be recalculated on the basis of such
member's "interest" in the LLC, taking into account all facts and
circumstances relating to the economic arrangement of the members. Although
the allocations of Jamboree LLC have been drafted in an attempt to comply
with Regulations promulgated under Internal Revenue Code section 704(b),
there can be no assurances that the IRS will not be able to successfully
challenge the allocations contained in the New LLC Agreement. Should any of
these allocations be found to be invalid, they would be disregarded and each
member's distributive share of income, gain, loss, deduction and credit would
be determined in accordance with his or her "interest" in Jamboree LLC, as
discussed above. This could result in additional tax liability, interest and
potential penalties to the members.
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Internal Revenue Code section 704(c) requires that income, gain,
loss and deduction attributable to appreciated or depreciated property that
is contributed to a partnership in exchange for an interest in the
partnership, must be allocated in a manner such that the contributing partner
is charged with, or benefits from, respectively, the unrealized gain or
unrealized loss associated with the property at the time of the contribution.
The amount of such unrealized gain or unrealized loss is generally equal to
the difference between the fair market value of contributed property at the
time of contribution and the adjusted tax basis of such property at such time
(a "Book-Tax Difference"). Such allocations are solely for federal income
tax purposes and do not affect the book capital accounts or other economic or
legal arrangements among the partners. Jamboree LLC will be formed by way of
contributions of property. Consequently, the New LLC Agreement requires that
such allocations be made in a manner consistent with Section 704(c) of the
Internal Revenue Code. In general, a contributing partner may be allocated
depreciation deductions for tax purposes that are lower than such deductions
would be if determined on a pro rata basis. In addition, in the event of the
disposition of any of the contributed assets that have a Book-Tax Difference,
all income attributable to such Book-Tax Difference will generally be
allocated to such contributing partner, and the non-contributing partner will
generally be allocated only its share of capital gains attributable to
appreciation, if any, occurring after the contribution. This will tend to
eliminate the Book-Tax Difference over the life of the partnership. The New
LLC Agreement will require the use of the "remedial allocation method," as
described in Regulations recently promulgated under Section 704(c) of the
Internal Revenue Code, in allocating income, gain, loss and deduction
attributable to any Book-Tax Difference.
It is anticipated that no ruling will be obtained regarding the
classification of Jamboree LLC as a partnership for federal income tax
purposes, the validity of the allocations set forth in the New LLC operating
Agreement, or any other tax matter. The tax consequences of ownership of an
interest in Jamboree LLC is therefore uncertain, and there can be no
assurance that the IRS will agree with the tax consequences described herein.
F. OTHER TAX CONSEQUENCES.
The parties may be subject to state or local taxation in various
state or local jurisdictions, including those in which it or they transact
business or reside. The state and local tax treatments may not conform to
the federal income tax consequences discussed above and each person should
consult such person's own tax advisor regarding the effect of state and local
tax laws.
EACH PERSON WHO WILL OR MAY RECEIVE AN INTEREST IN JAMBOREE LLC OR
JAMBOREE OFFICE REIT IS ADVISED TO CONSULT WITH SUCH PERSON'S OWN TAX ADVISOR
ABOUT THE POSSIBLE IMPACT OF JAMBOREE LLC AND JAMBOREE OFFICE REIT ON SUCH
PERSON'S OWN TAX SITUATION.
VIII. CERTAIN FEDERAL SECURITIES LAWS CONSEQUENCES
A. GENERAL DISCUSSION.
The Confirmation Order will authorize the issuance of the
Jamboree LLC Units, the New Notes, the New Property Appreciation Rights, the
Jamboree Office REIT Shares and the Jamboree Office REIT Shares to be issued
upon exercise of the New Property Appreciation Rights and Reorganized CWOP's
exchange of its Jamboree LLC Units. These instruments will be issued without
registration under the Securities Act of 1933, as amended (the "Securities
Act"), or under any state or local law, generally in reliance on the exemptions
set forth in Bankruptcy Code Section 1145.
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In order for the issuance of securities to be exempt from
registration under Bankruptcy Code Section 1145(a), three principal
requirements must be satisfied: (a) the securities must be issued "under a
plan" of reorganization by a debtor, its successor under a plan of
reorganization, or an affiliate participating in a joint plan of
reorganization with the debtor; (b) each recipient of the securities must
hold a claim against the debtor, an interest in the debtor, or a claim for an
administrative expense against the debtor; and (c) the securities must be
issued entirely in exchange for the recipient's claim against or interest in
the debtor, or "principally" in such exchange and "partly" for cash or other
property.
The Debtor believes that the issuance of the Jamboree LLC Units,
the New Notes, the New Property Appreciation Rights, the Jamboree Office REIT
Shares and the Jamboree Office REIT Shares issuable upon exercise of the New
Property Appreciation Rights and Reorganized CWOP's exchange of its Jamboree
LLC Units will be eligible for the exemption provided by section 1145(a) of
the Bankruptcy Code because the issuance satisfies the exemption's
requirements: (a) the securities to be issued will be securities of Jamboree
LLC and Jamboree Office REIT, which are successors to the Debtor, and
issuance of the securities is specifically mandated under the Plan; (b) the
recipients of the securities hold claims against or interests in the Debtor;
and (c) the recipients will receive the securities in exchange for their
claims against and interests in the Debtor. The Debtor will include its
legal analysis of this issue in its memorandum of law in support of
confirmation of the Plan.
B. RESALE CONSIDERATIONS.
Pursuant to Section 1145 of the Bankruptcy Code, the resale
or disposition by the recipients of the Jamboree LLC Units, the New Notes, the
New Property Appreciation Rights, the Jamboree Office REIT Shares, and the
Jamboree Office REIT Shares to be issued upon exercise of the New Property
Appreciation Rights and Reorganized CWOP's exchange of its Jamboree LLC Units
will also be exempt from registration under the Securities Act and state and
local securities laws, unless the recipient is deemed to be an "underwriter"
under Bankruptcy Code Section 1145(b). Bankruptcy Code Section 1145(b) defines
four types of underwriters:
a. a person who purchases a claim against, interest
in, or claim for administrative expense in the case concerning a
debtor, with a view to distributing any security received in exchange
for that claim or interest;
b. a person who offers to sell securities offered or
sold under a plan for the holders of those securities;
c. a person who offers to buy those securities from
the holders of such securities, if the offer is (i) made with a view
to distribution of the securities, or (ii) made under an
agreement made in connection with the plan, its consummation or the
offer or sale of securities under the plan;
d. a person who is an "issuer" with respect to the
securities as the term "issuer" is defined in section 2(11) of the
Securities Act.
Under section 2(11) of the Securities Act, an "issuer" includes
any person directly or indirectly controlling or controlled by issuer of the
securities, or any person under direct or indirect common control with the
issuer of the securities (an "affiliate"). Any person or group of persons
who act in concert, who receive a substantial amount of securities pursuant
to the Plan, may be deemed to be an "issuer" under the foregoing definition
and, therefore, an "underwriter" under Section 1145(b). Whether a person
would be deemed to be an issuer and therefore an underwriter with respect to
the securities to be issued pursuant to the Plan for purposes of the
Bankruptcy Code will depend on a number of factors. These factors include:
(a) the person's equity
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<PAGE>
interest in Jamboree LLC or Jamboree Office REIT; (b) the distribution and
concentration of other equity interests in Jamboree LLC or Jamboree Office
REIT; (c) whether the person is an officer or director of Jamboree LLC or
Jamboree Office REIT; (d) whether the person, either alone or acting in
concert with others, has a contractual or other relationship giving that
person power over management policies and decisions of Jamboree LLC or
Jamboree Office REIT; and (e) whether the person actually has such power
notwithstanding the absence of formal indicia of control. Accordingly, the
Debtor expresses no view on whether any person would be an "underwriter" or
an "affiliate" with respect to the securities to be issued pursuant to the
Plan.
To the extent that a person receiving securities under the Plan
is deemed to be an "underwriter" of the securities of Jamboree LLC or
Jamboree Office REIT, resales by that person likely would not be exempted by
Bankruptcy Code Section 1145 from registration under the Securities Act, or
other applicable law, except in "ordinary trading transactions" (within the
meaning of Bankruptcy Code Section 1145(b)(1)).
The Bankruptcy Code does not define the term "ordinary trading
transactions," and the SEC has not given definitive guidance with respect to
the proper construction of the term. However, the Debtor believes that a
transaction will be an "ordinary trading transaction" if it is carried out on
an exchange or in the over-the-counter market at a time when Jamboree LLC or
Jamboree Office REIT is a reporting company under the Securities Exchange Act
of 1934 (the "Exchange Act") and does NOT involve any of the following
factors:
(i) either (x) concerted action by two or more
recipients of securities issued under a plan of
reorganization in connection with the sale of
those securities, or (y) concerted action by
distributors on behalf of one or more such
recipients in connection with sales, or (z) both;
(ii) the preparation or use of informational documents
concerning the offering of the securities to
assist in the resale of the securities, other than
the disclosure statement approved in connection
with the plan (and any supplement thereto) and
documents filed with the SEC by the debtors or the
reorganized company pursuant to the Exchange Act;
or
(iii) special compensation to brokers or dealers in
connection with the sale of the securities
designed as a special incentive to resell the
securities, other than compensation that
would be paid pursuant to arms-length
negotiations between a seller and a broker or
dealer, each acting unilaterally, not greater
than the compensation that would be paid for
a routine similar-sized sale of similar
securities of a similar issuer.
In addition, a person deemed to be an "underwriter" under
Bankruptcy Code Section 1145 solely because he is an affiliate (as defined in
the Securities Act) may be able to sell securities received under the Plan
without registration, in accordance with Rule 144 under the Securities Act,
which permits public sales of securities received pursuant to a plan by
statutory underwriters subject to the availability to the public of current
information regarding Jamboree LLC and/or Jamboree Office REIT, volume
limitations, and certain other conditions (without complying with the holding
period requirement of Rule 144(d)).
The Debtor does not expect, however, that the exemptions
discussed above for "ordinary trading transactions" by underwriters and for
sales under Rule 144 by affiliates will be available with respect to
securities issued under the Plan on the Effective Date because the
availability of current financial information under the Exchange Act about
Jamboree LLC and/or Jamboree Office REIT is a condition to both exemptions,
and the Debtor does not anticipate that either Jamboree LLC or Jamboree
Office REIT will have a class of securities registered under the Exchange Act
on the Effective Date.
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Jamboree LLC and Jamboree Office REIT will execute registration
rights agreements in favor of Restricted Holders granting such Holders demand
and piggy-bank registration rights with respect to the New Notes and Jamboree
Office REIT Shares. See Sections VI.C and VI.D.3.
GIVEN THE COMPLEX, SUBJECTIVE NATURE OF THE QUESTION OF WHETHER
A PARTICULAR HOLDER MAY BE AN UNDERWRITER OR AN AFFILIATE, THE DEBTOR MAKES
NO REPRESENTATION CONCERNING THE RIGHT OF ANY PERSON TO TRANSFER THE JAMBOREE
LLC UNITS, THE NEW NOTES, THE JAMBOREE OFFICE REIT SHARES OR THE JAMBOREE
OFFICE REIT SHARES ISSUABLE UPON EXERCISE OF THE NEW PROPERTY APPRECIATION
RIGHTS OR REORGANIZED CWOP'S EXCHANGE OF ITS JAMBOREE LLC UNITS. THE DEBTOR
RECOMMENDS THAT POTENTIAL RECIPIENTS OF SECURITIES UNDER THE PLAN CONSULT
WITH THEIR OWN COUNSEL CONCERNING LIMITATIONS ON THEIR RIGHT TO TRANSFER
THOSE SECURITIES.
C. TRUST INDENTURE ACT.
Issuance of the New Notes requires compliance with the Trust
Indenture Act of 1939. The indentures for the New Notes will be qualified under
the Trust Indenture Act of 1939.
D. DELIVERY OF DISCLOSURE STATEMENT.
Under Bankruptcy Code Section 1145(a)(4), "stockbrokers" (as
that term is defined in the Bankruptcy Code) wishing to sell securities
received under the Plan qualify for the exemption from registration under
Bankruptcy Code Section 1145 for sales during the first 40 days after the
Effective Date of the Plan, provided that they deliver a copy of this
Disclosure Statement (and any supplement to it ordered by the Bankruptcy
Court) at or before the time of sale of any security issued under the Plan.
This requirement specifically applies to trading and other after-market
transactions in the securities issued under the Plan.
IX. CERTAIN FACTORS TO BE CONSIDERED REGARDING THE PLAN.
Creditors and partners of CWOP should consider the following
factors when deciding how to vote on the Plan.
A. BANKRUPTCY CONSIDERATIONS.
An objection to confirmation of the Plan could prevent
confirmation or delay confirmation for a significant period of time. In such
case, the Effective Date may not occur and payments to creditors may not
commence for several months.
B. GENERAL BUSINESS RISKS.
The projections included in Exhibit 4 are based on a variety of
assumptions which, if incorrect, could affect the accuracy of the projections.
While the attached projections included in Exhibit 4 incorporate
a series of assumptions reflecting future events at the Property and in the
Orange County leasing market, they do not incorporate a wide range of
potential risks that could impact the eventual performance of the Property.
These risks may include (i) the rejection of the Denny's leases for 158,362
square feet as part of Flagstar's reported restructuring, the outcome of
which could lead to lower achieved rents on this space, (ii) the development
of competitive office buildings on the Development Parcel, which could
negatively impact leasing efforts, (iii) the possibility of aggressive
overbuilding of competitive office product in the Orange County market, which
could
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lead to depressed rental rates and increased vacancy rates, (iv) the
inability of management to find tenants willing to lease the sub-grade
concourse space at cost effective rents, (v) litigation related to the
surrounding Development Parcel, (vi) a general and pronounced downturn in the
local economy or continued mergers and consolidations in industries that are
major tenants in the Orange County marketplace and (vii) physical
catastrophes that might damage the Property and render it partially or fully
unfunctional.
In addition, the financial terms (including free rent periods
and tenant improvement allowances) may vary significantly from the
assumptions that underlie the projections attached as Exhibit 4. Tenants in
the Property may default under their leases or otherwise cease making rental
payments, thereby negatively affecting projected cash flow from the Property
and Jamboree LLC's ability to make payments on the notes issued under the
Plan. Moreover, projected expense figures for Property operations may be
lower than actual costs. Because the Property is now over 20 years old,
capital replacement and repair costs may significantly exceed those assumed
in the projections.
Finally, there is no assurance that Jamboree LLC will be able to
sell or refinance the Property for an amount sufficient to pay in full the
outstanding principal balance of the New Notes within five years.
Notwithstanding CWOP's conclusions that the restructuring as
effected through the Plan is feasible, there can be no assurance that
payments under the New Notes can be made if the real estate market declines
further or if recovery takes longer than expected. ALTHOUGH CWOP HAS
ATTEMPTED TO PROJECT ACCURATELY FUTURE CASH FLOWS (SUBJECT TO THE LIMITATIONS
SET FORTH UNDER "FINANCIAL PROJECTIONS"), THERE IS A RISK THAT JAMBOREE LLC
MAY NOT BE ABLE TO MEET THE REPAYMENT TERMS OF THE NEW NOTES. ADVERSE
CONDITIONS, SUCH AS THE CONTINUED DEPRESSION OF, OR A FURTHER DOWNTURN IN,
THE REAL ESTATE MARKET, ARE BEYOND THE ABILITY OF CWOP, REORGANIZED CWOP,
JAMBOREE LLC OR ANY OTHER ENTITY, TO PREDICT WITH CERTAINTY AND MAY AFFECT
JAMBOREE LLC'S ABILITY TO REPAY THE NEW NOTES.
C. RISK WITH RESPECT TO NEW SECURITIES.
No trading market currently exists for the New Notes or the
Jamboree Office REIT Shares. The Debtor does not anticipate that a trading
market will exist until after the Plan is confirmed and becomes effective. No
assurance can be given that a market for the New Notes and Jamboree Office REIT
Shares will develop after that date.
The Certificateholders have had limited ability to liquidate
their claims during the Reorganization Case. It is anticipated that, if a
trading market is established, there may initially be a large number of
holders that may wish to dispose of their new securities. As a result, the
trading market, if any, for these securities may be unstable for some period
of time following the Effective Date. The potential exercise of the New
Property Appreciation Rights for additional Jamboree Office REIT Shares may
result in a low market price for the Jamboree Office REIT Shares for some
period of time following the Effective Date and may adversely affect the
marketability of the Jamboree Office REIT Shares.
If the Plan is confirmed, ownership of a substantial number of
the New Notes and Jamboree Office REIT Shares will be concentrated in a
relatively small number of holders. Sales of or offers to sell a substantial
number of New Notes or Jamboree Office REIT Shares or the perception of
investors, investment professionals and securities analysts of the
possibility of such sales could adversely affect the market price of the New
Notes and the Jamboree Office REIT Shares.
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Any sale of the New Notes may be at a substantial discount from
the principal amount. In addition, any recipient of the new securities who
is a "underwriter" under Bankruptcy Code Section 1145(b) may not be able to
resell any securities received under the Plan in that capacity without
registration under the Securities Act. See Section VIII for a summary
description of certain applicable securities laws issues.
In addition, while Jamboree Office REIT intends to operate in
such a manner as to qualify for taxation as a REIT under the Internal Revenue
Code, but no assurance can be given that it will operate in a manner so as to
qualify or remain qualified. Qualification as a REIT involves the
application of highly technical and complex Internal Revenue Code provisions
for which there are only limited judicial or administrative interpretations.
The determination of various factual matters and circumstances not entirely
within Jamboree Office REIT's control may affect its ability to qualify as a
REIT. In addition, no assurance can be given that legislation, new
regulations, administrative interpretations, or court decisions will not
significantly change the tax laws with respect to the qualification as a REIT
or the federal income tax consequences of such qualification. One
requirement that must be satisfied is that beneficial ownership of Jamboree
Office REIT must be held by 100 or more persons. Although this condition
will not apply until after the first taxable year, Jamboree Office REIT will
not meet this requirement on the Effective Date and no guarantee can be given
that it will achieve this level of ownership within the time required.
X. ALTERNATIVES TO CONFIRMATION OF THE PLAN.
The Debtor believes that the Plan provides a recovery to
creditors that is greater than or equal to the probable recoveries by
creditors and partners if the Debtor were liquidated under chapter 7 of the
Bankruptcy Code.
XI. ACCEPTANCE AND CONFIRMATION OF THE PLAN.
The Debtor believes that the Plan satisfies all of the
requirements for confirmation.
A. GENERAL CONFIRMATION REQUIREMENTS.
Bankruptcy Code Section 1129(a) contains several requirements
for confirmation of a plan. Among those requirements are that a plan be
proposed in good faith, that there be disclosed certain information regarding
payments made or promised to be made to insiders and that the plan comply
with the applicable provisions of chapter 11. The Debtor believes it has
complied with these requirements, as well as those requirements discussed
below.
B. BEST INTERESTS TEST.
Bankruptcy Code Section 1129(a)(7) requires that each holder of
a claim or interest in an impaired class must either (i) accept the plan or
(ii) receive or retain under the plan cash or property of a value, as of the
effective date of the plan, that is not less than the value such holder would
receive or retain if the debtor were liquidated under chapter 7 of the
Bankruptcy Code. The Debtor believes that the distributions under the Plan
equal or exceed the value that would be allocated to the holders in a
liquidation under chapter 7 of the Bankruptcy Code.
The only creditors impaired under the Plan are the Secured Tax
Claims, which are being paid in full under the Plan, and the
Certificateholders, both of which are not recourse to the general partners of
the Debtor. Accordingly, in a chapter 7 case, these creditors would be
entitled to recover only from the assets of
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the Debtor. The Debtor believes that if CWOP were liquidated, the sale of
the Property under such circumstances could result in sale proceeds
significantly less than the value of the Property under the Plan. Moreover,
the delay and expense of liquidation would necessarily reduce the amount and
value of distributions.
The recovery to the Certificateholders under the Plan is
significantly more than such holders would receive in a chapter 7
liquidation. Assuming a value of the Property of $105 million, the estimated
gross proceeds through sale by a chapter 7 trustee would be approximately
$100 million (this estimate is based on the fact that the chapter 7 trustee
would not be capable of providing any continuing representations or
warranties in connection with the sale and would be selling the Property on a
truly as-is basis). Assuming legal, brokerage and other fees equaled to 3%
of the gross sale amount, or $3 million, the chapter 7 trustee's fees in
connection with the transaction would be $2,910,000 (3% of the proceeds
distributable to creditors in accordance with Bankruptcy Code Section
326(a)), or total proceeds available for distribution of $94,090,000. This
contrasts with a recovery of approximately $104.5 million to the
Certificateholders under the Plan ($100 million in the New Notes and $4.5
million in the equity value of Jamboree LLC). The Certificateholders receive
more under the Plan than they would in a chapter 7 liquidation even if the
Property is worth significantly more. If the Property were worth $150
million, the net proceeds available for distribution to the
Certificateholders would be $141,135,000 ($150 million less brokerage and
legal expenses of $4.5 million and chapter 7 trustee's fees of $4,365,000).
In contrast, the value of the Certificateholders' recovery under the Plan
would be $145 million ($100 million in New Notes and $45 million in equity
value of the Jamboree LLC).
C. FINANCIAL FEASIBILITY TEST.
In order to confirm a plan, the Bankruptcy Code requires
that the bankruptcy court find that confirmation of the plan is not likely to be
followed by liquidation or the need for further financial reorganization of the
debtor (the "Feasibility Test"). Thus, for a plan to meet the Feasibility Test,
the bankruptcy court must find that there is a reasonable likelihood that the
reorganized debtor will possess the working capital and other resources
necessary to operate profitably and will be able to meet its obligations under
the plan.
Based on the projections attached as Exhibit 6, the Debtor
believes that following confirmation of the Plan, there is a reasonable
likelihood that Jamboree LLC, successor to the Debtor, will be able to
perform its obligations under the Plan and operate the Property without the
need for further financial reorganization (see the projected financial
information described in Section VI.B and included in Exhibit 6).
D. ACCEPTANCE BY IMPAIRED CLASSES.
Bankruptcy Code Section 1129(a) requires that each class of
claims or interests that is impaired under a plan accept the plan (subject to
the "cramdown" exception contained in Bankruptcy Code Section 1129(b)). A
class of claims under a plan accepts the plan if the plan is accepted by
creditors that hold at least two-thirds in amount and more than one-half in
number of the allowed claims in the class that actually vote on the plan. A
class of interests accepts the plan if the plan is accepted by holders of
interests that hold at least two-thirds in amount of the allowed interests in
the class that actually vote on a plan.
A class that is not "impaired" under a plan is conclusively
presumed to have accepted the plan. Solicitation of acceptances from such a
class is not required. A class is "impaired" unless (i) the legal, equitable
and contractual rights to which a claim or interest in the class entitles the
holder are not modified or (ii) the effect of any default is cured and the
original terms of the obligation are reinstated. Under the Plan, Class 1
(Priority Claims), Class 3a (the Truck Secured Claim), Class 3b, (the Van
Secured Claim) and Class 3c (the Crow Secured Claims) and Class 6 (General
Unsecured Claims) are not impaired and are deemed to accept the Plan. All
other Classes of Claims and Interests under the Plan are impaired under the
Plan.
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The Debtor believes that all impaired Classes will vote to
accept the Plan, and, therefore, the Plan will comply with this requirement
for confirmation. Nonetheless, if an impaired Class votes to reject the
Plan, the Debtor reserves its right to seek confirmation of the Plan pursuant
to Bankruptcy Code Section 1129(b), and will provide an analysis of the
Plan's compliance with the cramdown provisions in a memorandum of law in
support of confirmation of the Plan.
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XII. CONCLUSION.
THE DEBTOR URGES YOU TO VOTE TO ACCEPT THE PLAN AND TO
RETURN YOUR BALLOTS SO THAT THEY WILL BE RECEIVED AT THE ADDRESS AND PURSUANT
TO THE PROCEDURES DESCRIBED IN SECTION II.C OF THIS DISCLOSURE STATEMENT, NO
LATER THAN 4:00 P.M. LOS ANGELES TIME ON AUGUST 25, 1997.
Dated: Los Angeles, California
July 23, 1997
Respectfully submitted,
CROW WINTHROP OPERATING PARTNERSHIP
as Debtor
By: WINTHROP CALIFORNIA INVESTORS LIMITED
PARTNERSHIP
Its: General Partner
By: THREE WINTHROP PROPERTIES, INC.
Its: General Partner
By:
----------------------------
Its: President
O'MELVENY & MYERS LLP
Robert J. White
Suzzanne Uhland
By:
-----------------------------------
Suzzanne Uhland
Attorneys for the Debtor
61
<PAGE>
UNITED STATES BANKRUPTCY COURT
CENTRAL DISTRICT OF CALIFORNIA
IN RE: ) Chapter 11
)
CROW WINTHROP OPERATING ) Case No. SA 97-14512-JR
PARTNERSHIP, a Maryland )
general partnership )
) BALLOT ACCEPTING OR REJECTING
Debtor. ) THE DEBTOR'S THIRD AMENDED PLAN
) OF REORGANIZATION DATED
) JULY 23, 1997 (THE "PLAN")
)
) CLASS 4 SECURED CLAIMS OF HOLDERS OF
) MORTGAGE PARTICIPATION CERTIFICATES (THE
- ----------------------------------- "CERTIFICATEHOLDERS")
PLEASE READ AND FOLLOW THE INSTRUCTIONS ON THE REVERSE SIDE
CAREFULLY. THIS BALLOT MUST BE RECEIVED BY THE VOTING AGENT NO LATER THAN
4:00 P.M. LOS ANGELES TIME ON AUGUST 25, 1997, OR THE VOTE TRANSMITTED HEREBY
WILL NOT BE COUNTED AS ACCEPTING OR REJECTING THE PLAN.
ITEM 1. The amount of your Class 4 Claim for voting purposes is:
$____________*
ITEM 2. The undersigned holder of a Class 4 Claim votes (check one):
/ / To ACCEPT the Plan, / / To REJECT the Plan
ITEM 3. By signing this ballot, the undersigned (a) acknowledges receipt
of the Debtor's Disclosure Statement in support of the Plan and
other applicable solicitation materials and (b) certifies that
the undersigned is the claimant or has the power and authority to
accept or reject the Plan.
Name of Creditor:________________________________
(print or type)
Signature:_______________________________________
Title:___________________________________________
Tax I.D. or
Social Security Number:_________________________
Dated: __________________________________________
* Based upon orders of the Bankruptcy Court or provisions of the Bankruptcy
Code or Bankruptcy Rules, the amount for which your vote is counted may
differ from the indicated amount or final allowed amount for purposes of
distribution under the Plan.
<PAGE>
VOTING INFORMATION AND INSTRUCTIONS
FOR COMPLETING THE BALLOT
1. IT IS IMPORTANT THAT YOU VOTE. THE PLAN CAN BE CONFIRMED
BY THE BANKRUPTCY COURT AND THEREBY MADE BINDING ON YOU IF IT IS ACCEPTED BY
THE HOLDERS OF TWO-THIRDS (2/3) IN AMOUNT AND MORE THAN ONE-HALF (1/2) IN
NUMBER OF CLAIMS IN EACH CLASS ACTUALLY VOTING ON THE PLAN. IN THE EVENT THE
REQUISITE ACCEPTANCES ARE NOT OBTAINED, THE BANKRUPTCY COURT MAY NEVERTHELESS
CONFIRM THE PLAN IF IT FINDS THAT THE PLAN ACCORDS FAIR AND EQUITABLE
TREATMENT TO THE CLASS OR CLASSES REJECTING IT AND OTHERWISE SATISFIES THE
REQUIREMENTS OF SECTION 1129(b) OF THE BANKRUPTCY CODE.
2. FOR YOUR VOTE TO BE COUNTED, YOU MUST: (A) INDICATE
ACCEPTANCE OR REJECTION OF THE PLAN BY MARKING THE APPROPRIATE BOX; (B) SIGN
THE BALLOT; AND (C) RETURN THE COMPLETED BALLOT BY EITHER MAIL, OVERNIGHT
MAIL OR HAND DELIVERY TO THE FOLLOWING ADDRESS:
Lynn Talab
O'Melveny & Myers LLP
400 S. Hope Street
Los Angeles, CA 90071
TO BE COUNTED, YOUR COMPLETED BALLOT MUST BE RECEIVED NO LATER THAN 4:00 P.M.
LOS ANGELES TIME ON AUGUST 25, 1997.
3. The ballot is not a letter of transmittal and may not be used for
any purpose other than to transmit votes to accept or reject the Plan.
HOLDERS SHOULD NOT SURRENDER CERTIFICATES REPRESENTING OWNERSHIP IN THE
CERTIFICATES AT THIS TIME, AND NEITHER THE DEBTOR NOR ITS VOTING AGENT WILL
ACCEPT DELIVERY OF ANY SUCH CERTIFICATES TRANSMITTED WITH A BALLOT.
4. As noted above, your signature is required for your vote to be
counted. Names of all joint holders should be written even if signed by only
one of the joint holders. If the claim is held by a corporation, the ballot
should be executed in the name of the corporation by an authorized officer.
If the claim is held by a partnership, the ballot should be executed in the
name of the partnership by a general partner. If you are signing in a
representative capacity, indicate your title after your signature.
5. If you hold claims or interests in more than one class under the
Plan, you may receive more than one ballot, coded for different classes of
claims or interests. Each ballot votes only your claims or interests marked
on the ballot. Please complete and return each ballot you receive. A ballot
that partially accepts and partially rejects the Plan will not be counted. A
ballot that is incomplete or unsigned will not be counted.
6. For administrative convenience, ballots may be sent to all holders
of impaired claims. However, only holders of claims allowed under SECTION
502 of the Bankruptcy Code and applicable orders of the Court, or temporarily
allowed in an amount that the Court deems proper for the purposes of
accepting or rejecting the Plan, may accept or reject the Plan. If an
objection is or has been filed to your claim or if your claim is
unliquidated, disputed or contingent, your ballot will not be counted unless
the objection is resolved or your claim is allowed temporarily for voting
purposes under Federal Rule of Bankruptcy Procedure 3018(a). The amount of
your claim for the purpose of voting to accept or reject the Plan may differ
from the allowed amount of your claim for the purpose of receiving
distributions under the Plan.
7. The Agreement of Understanding dated as of November 27, 1996 does
not obligate any Certificateholder to vote for the Plan. All
Certificateholders (including the Certificateholders who signed the Agreement
of Understanding and the Certificateholders who agreed in writing to be bound
by the terms of the Agreement of Understanding when they purchased their
Certificates) are permitted to vote for the Plan or to vote against the Plan
or not to vote at all, without restraint and without breaching the Agreement
of Understanding regardless of which they choose to do.
8. The Debtor has indicated that it may seek to contend in the
Bankruptcy Court that the signatures to the Agreement of Understanding
constituted a valid prepetition vote in favor of the Plan that was made after
disclosure of adequate information to meet the requirements of section
1126(b) of the Bankruptcy Code. This reservation of rights does not in any
way affect the right of Certificateholders to vote against the Plan if they
choose to do so.
9. The Debtor may not have your tax identification or social security
number. It cannot make distributions without your number. If the claim is
held by an individual, please insert only your social security number. If
the claim is held by a corporation or partnership, please insert only that
entity's tax identification number.
10. The ballot is for voting purposes only and does not constitute and
shall not be deemed to constitute a proof of claim or an amendment to a proof
of claim.
IF YOU HAVE ANY QUESTIONS REGARDING THIS BALLOT OR THE
VOTING PROCEDURES, PLEASE CONTACT CROW WINTHROP OPERATING PARTNERSHIP
CHAPTER 11 ADMINISTRATION DEPARTMENT AT LYNN TALAB (213) 669-6000.
<PAGE>
UNITED STATES BANKRUPTCY COURT
CENTRAL DISTRICT OF CALIFORNIA
In re ) Case No. SA 97-14512-JR
)
CROW WINTHROP OPERATING ) Chapter 11
PARTNERSHIP, a Maryland General )
Partnership, ) NOTICE OF (1) APPROVAL OF
) DISCLOSURE STATEMENT IN
Debtor and ) SUPPORT OF DEBTOR'S THIRD
Debtor in Possession ) AMENDED PLAN OF REORGANIZATION
) DATED JULY 23, 1997; (2)
) HEARING ON CONFIRMATION OF THE
) PLAN, (3) DEADLINE AND
) PROCEDURES FOR OBJECTING TO
- ------------------------------------------ CONFIRMATION OF THE PLAN AND
(4) VOTING DEADLINE AND RECORD
DATE FOR VOTING ON THE PLAN
PLEASE TAKE NOTICE that the Bankruptcy Court ordered the following:
I. APPROVAL OF DISCLOSURE STATEMENT IN SUPPORT OF DEBTOR'S THIRD
AMENDED PLAN OF REORGANIZATION DATED JULY 23, 1997
By its order entered July 24, 1997, the Bankruptcy Court approved
the Disclosure Statement in Support of the Third Amended Plan of
Reorganization Dated July 23, 1997 (the "Disclosure Statement"). The
Disclosure Statement describes the Third Amended Plan of Reorganization Dated
July 23, 1997 (the "Plan") for Crow Winthrop Operating Partnership ("CWOP").
The Disclosure Statement has been approved by the Bankruptcy Court as
containing adequate information for creditors and partners of CWOP to vote on
the Plan. Copies of the Disclosure Statement and Plan have been mailed to
all parties in interest.
<PAGE>
II. HEARING ON CONFIRMATION OF THE PLAN
The hearing to consider confirmation of the Plan (the "Confirmation
Hearing") will commence on September 9, 1997 at 10:00 a.m., or as soon
thereafter as the parties may be heard, before the Honorable John E. Ryan,
United States Bankruptcy Judge, in the United States Bankruptcy Court for the
Central District of California, at Courtroom 606, 34 Civic Center Plaza,
Santa Ana, California, 92701. The Confirmation Hearing may be continued from
time to time by announcing such continuance in open court, all without
further notice to parties in interest, and the Plan may be modified pursuant
to Bankruptcy Code section 1127(a) prior to, during or as a result of the
Confirmation Hearing.
III. DEADLINE AND PROCEDURES FOR OBJECTING TO CONFIRMATION OF
THE PLAN
The last day for filing and serving objections to the confirmation
of the Plan (the "Confirmation Objection Deadline") is no later than 4:00
p.m. Los Angeles Time on August 27, 1997. In order to be considered, any
objection, comments or response to confirmation of the Plan (including any
supporting memoranda) must be in writing and (A) filed with the United States
Bankruptcy Court, (B) served in accordance with Bankruptcy Rule 3020(b) and
this paragraph, and (C) accompanied by a memorandum of points and authorities
and specifying in detail: (i) the name and address of the party filing the
objection, (ii) the grounds of such objection, (iii) evidentiary support
therefor, in the nature of affidavits under oath or declarations submitted
under penalty of perjury, and (iv) the amount of the objector's claims or
such other grounds that give the objector standing to assert any objection to
the Plan. Specifically, to be considered, an objection must be (1) filed no
later than 4:00 p.m. Los Angeles Time on August 27, 1997 with the United
States Bankruptcy Court for the Central District of California, 34 Civic
Center Plaza, Santa Ana, California, 92701, and (2) served, so that it is
received no later than 4:00 p.m. Los Angeles Time on August 27, 1997, by
O'Melveny & Myers LLP, 400 South Hope Street, Los Angeles, California 90071
(Attn: Suzzanne Uhland, Esq.), Milbank, Tweed, Hadley & McCloy, 601 South
Figueroa Street, 30th Floor, Los Angeles, California 90017 (Attn: Paul S.
Aronzon, Esq.), and the United States Trustee, 600 W. Santa Ana Boulevard,
Suite 501, Santa Ana, California 92701 (Attn: Michael Hauser, Esq.). Replies
to such objection must be filed with the Bankruptcy Court and served on the
parties listed above and the objector so it is received no later than 4:00
p.m. Los Angeles Time on September 3, 1997. The Debtor's memorandum in
support of the Plan must be filed with the Bankruptcy Court and served on
parties in interest so it is received no later than 4:00 p.m. Los Angeles
Time on September 4, 1997.
Any objection to the ballots must be (1) filed no later than 4:00 p.m.
Los Angeles Time on September 5, 1997 with the United States Bankruptcy Court
for the Central District of California, 34 Civic Center Plaza, Santa Ana,
California, 92701, and (2) served, so that it is received no later than 4:00
p.m. Los Angeles Time on September 5, 1997, by O'Melveny & Myers LLP, 400 South
Hope Street, Los Angeles, California 90071 (Attn: Suzzanne Uhland, Esq.),
Milbank, Tweed, Hadley & McCloy, 601 South Figueroa Street, 30th Floor, Los
Angeles,
2
<PAGE>
California 90017 (Attn: Paul S. Aronzon, Esq.), and the United States
Trustee, 600 W. Santa Ana Boulevard, Suite 501, Santa Ana, California 92701
(Attn: Michael Hauser, Esq.).
Objections that do not contain the information described above,
that are incomplete or unsigned, or that are not filed and served by the time
and date and in the manner set forth above may not be considered by the
Bankruptcy Court. Evidence that is not timely filed and served will be
stricken from the record and will not be considered in determining contested
matters at the Confirmation Hearing. All declarants or affiants must appear,
and be available, without need for subpoena for cross-examination at the
Confirmation Hearing (except for declarants making "Declarations of
Service"). The testimony of any declarant or affiant who is not present
himself or herself for cross-examination at the Confirmation Hearing will be
stricken from the record and will not be considered in determining contested
matters at the Confirmation Hearing.
IV. VOTING DEADLINE AND RECORD DATE FOR VOTING ON THE PLAN.
July 9, 1997, is the record date for purposes of determining
holders of claims entitled to vote to accept or reject the Plan. To be
counted, ballots for accepting or rejecting the Plan must be received by the
Voting Agent, Lynn Talab, Bankruptcy Coordinator with O'Melveny & Myers LLP,
as set forth in the specific ballots, no later than 4:00 p.m. Los Angeles
Time on August 25, 1997 (the "Voting Deadline"). If you have any questions
concerning the procedures for voting, please call or write to O'Melveny &
Myers LLP, 400 South Hope Street, Los Angeles, California 90071, Attention:
Lynn Talab (213) 669-6054. BALLOTS THAT ARE NOT RECEIVED BY THE VOTING
DEADLINE WILL NOT BE COUNTED.
DATED: July ___, 1997 ROBERT J. WHITE
SUZZANNE UHLAND
LISA M. BOSSETTI
O'MELVENY & MYERS LLP
400 South Hope Street
Los Angeles, California 90071
(213) 669-6000
By:_____________________________
Lisa M. Bossetti
Attorneys for Debtor
and Debtor in Possession
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<PAGE>
UNITED STATES BANKRUPTCY COURT
CENTRAL DISTRICT OF CALIFORNIA
IN RE: ) Chapter 11
)
CROW WINTHROP OPERATING ) Case No. SA 97-14512-JR
PARTNERSHIP, a Maryland )
general partnership )
) BALLOT ACCEPTING OR REJECTING
Debtor.) THE DEBTOR'S THIRD AMENDED PLAN
) OF REORGANIZATION DATED
) JULY 23, 1997 (THE "PLAN")
)
) CLASS 5 DEFICIENCY CLAIMS OF HOLDERS OF MORTGAGE
) PARTICIPATION CERTICATES (THE
- ------------------------- "CERTIFICATEHOLDERS")
PLEASE READ AND FOLLOW THE INSTRUCTIONS ON THE REVERSE SIDE CAREFULLY.
THIS BALLOT MUST BE RECEIVED BY THE VOTING AGENT NO LATER THAN 4:00 P.M. LOS
ANGELES TIME ON AUGUST 25, 1997, OR THE VOTE TRANSMITTED HEREBY WILL NOT BE
COUNTED AS ACCEPTING OR REJECTING THE PLAN.
ITEM 1. The amount of your Class 5 Claim for voting purposes is:
$____________*
ITEM 2. The undersigned holder of a Class 5 Claim votes (check one):
/ / To ACCEPT the Plan, / / To REJECT the Plan
ITEM 3. By signing this ballot, the undersigned (a) acknowledges receipt of
the Debtor's Disclosure Statement in support of the Plan and other
applicable solicitation materials and (b) certifies that the
undersigned is the claimant or has the power and authority to accept
or reject the Plan.
Name of Creditor:________________________________
(print or type)
Signature:_______________________________________
Title:___________________________________________
Tax I.D. or
Social Security Number:_________________________
Dated: __________________________________________
* Based upon orders of the Bankruptcy Court or provisions of the Bankruptcy
Code or Bankruptcy Rules, the amount for which your vote is counted may
differ from the indicated amount or final allowed amount for purposes of
distribution under the Plan.
<PAGE>
VOTING INFORMATION AND INSTRUCTIONS
FOR COMPLETING THE BALLOT
1. IT IS IMPORTANT THAT YOU VOTE. THE PLAN CAN BE CONFIRMED BY THE
BANKRUPTCY COURT AND THEREBY MADE BINDING ON YOU IF IT IS ACCEPTED BY THE
HOLDERS OF TWO-THIRDS (2/3) IN AMOUNT AND MORE THAN ONE-HALF (1/2) IN NUMBER
OF CLAIMS IN EACH CLASS ACTUALLY VOTING ON THE PLAN. IN THE EVENT THE
REQUISITE ACCEPTANCES ARE NOT OBTAINED, THE BANKRUPTCY COURT MAY NEVERTHELESS
CONFIRM THE PLAN IF IT FINDS THAT THE PLAN ACCORDS FAIR AND EQUITABLE
TREATMENT TO THE CLASS OR CLASSES REJECTING IT AND OTHERWISE SATISFIES THE
REQUIREMENTS OF SECTION 1129(b) OF THE BANKRUPTCY CODE.
2. FOR YOUR VOTE TO BE COUNTED, YOU MUST: (A) INDICATE ACCEPTANCE OR
REJECTION OF THE PLAN BY MARKING THE APPROPRIATE BOX; (B) SIGN THE BALLOT;
AND (C) RETURN THE COMPLETED BALLOT BY EITHER MAIL, OVERNIGHT MAIL OR HAND
DELIVERY TO THE FOLLOWING ADDRESSES:
Lynn Talab
O'Melveny & Myers LLP
400 S. Hope Street
Los Angeles, CA 90071
TO BE COUNTED, YOUR COMPLETED BALLOT MUST BE RECEIVED NO LATER THAN 4:00 P.M.
LOS ANGELES TIME ON AUGUST 25, 1997.
3. The summary ballot is not a letter of transmittal and may not be
used for any purpose other than to transmit votes to accept or reject the
Plan. HOLDERS SHOULD NOT SURRENDER CERTIFICATES REPRESENTING OWNERSHIP IN THE
CERTIFICATES AT THIS TIME, AND NEITHER THE DEBTOR NOR ITS VOTING AGENT WILL
ACCEPT DELIVERY OF ANY SUCH CERTIFICATES TRANSMITTED WITH A SUMMARY BALLOT.
4. As noted above, your signature is required for your vote to be
counted. Names of all joint holders should be written even if signed by only
one of the joint holders. If the claim is held by a corporation, the ballot
should be executed in the name of the corporation by an authorized officer.
If the claim is held by a partnership, the ballot should be executed in the
name of the partnership by a general partner. If you are signing in a
representative capacity, indicate your title after your signature.
5. If you hold claims or interests in more than one class under the
Plan, you may receive more than one ballot, coded for different classes of
claims or interests. Each ballot votes only your claims or interests marked
on the ballot. Please complete and return each ballot you receive. A ballot
that partially accepts and partially rejects the Plan will not be counted. A
ballot that is incomplete or unsigned will not be counted.
6. For administrative convenience, ballots may be sent to all holders
of impaired claims. However, only holders of claims allowed under SECTION
502 of the Bankruptcy Code and applicable orders of the Court, or temporarily
allowed in an amount that the Court deems proper for the purposes of
accepting or rejecting the Plan, may accept or reject the Plan. If an
objection is or has been filed to your claim or if your claim is
unliquidated, disputed or contingent, your ballot will not be counted unless
the objection is resolved or your claim is allowed temporarily for voting
purposes under Federal Rule of Bankruptcy Procedure 3018(a). The amount of
your claim for the purpose of voting to accept or reject the Plan may differ
from the allowed amount of your claim for the purpose of receiving
distributions under the Plan.
7. The Agreement of Understanding dated as of November 27, 1996 does
not obligate any Certificateholder to vote for the Plan. All
Certificateholders (including the Certificateholders who signed the Agreement
of Understanding and the Certificateholders who agreed in writing to be bound
by the terms of the Agreement of Understanding when they purchased their
Certificates) are permitted to vote for the Plan or to vote against the Plan
or not to vote at all, without restraint and without breaching the Agreement
of Understanding regardless of which they choose to do.
8. The Debtor has indicated that it may seek to contend in the
Bankruptcy Court that the signatures to the Agreement of Understanding
constituted a valid prepetition vote in favor of the Plan that was made after
disclosure of adequate information to meet the requirements of section
1126(b) of the Bankruptcy Code. This reservation of rights does not in any
way affect the right of Certificateholders to vote against the Plan if they
choose to do so.
9. The Debtor may not have your tax identification or social security
number. It cannot make distributions without your number. If the claim is
held by an individual, please insert only your social security number. If
the claim is held by a corporation or partnership, please insert only that
entity's tax identification number.
10. The ballot is for voting purposes only and does not constitute and
shall not be deemed to constitute a proof of claim or an amendment to a proof
of claim.
IF YOU HAVE ANY QUESTIONS REGARDING THIS BALLOT OR THE
VOTING PROCEDURES, PLEASE CONTACT CROW WINTHROP OPERATING PARTNERSHIP
CHAPTER 11 ADMINISTRATION DEPARTMENT AT LYNN TALAB (213) 669-6000.
