SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- -----
EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 1996
-------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- -----
EXCHANGE ACT OF 1934.
For the transition period from to
------------ ------------
Commission file number 0-9198
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BALCOR PENSION INVESTORS
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois 36-2943462
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2355 Waukegan Road
Bannockburn, Illinois 60015
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 267-1600
--------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
<PAGE>
BALCOR PENSION INVESTORS
(AN ILLINOIS LIMITED PARTNERSHIP)
BALANCE SHEETS
June 30, 1996 and December 31, 1995
(UNAUDITED)
ASSETS
1996 1995
-------------- -------------
Cash and cash equivalents $ 5,613,350 $ 5,159,556
Accounts and accrued interest receivable 224,752 245,402
-------------- -------------
5,838,102 5,404,958
-------------- -------------
Investment in loan receivable:
Loan receivable - wrap-around mortgage 30,443,927 30,443,927
Less:
Loan payable - underlying mortgage 21,547,919 21,547,919
Allowance for potential loan loss 4,853,336 4,853,336
-------------- -------------
Net investment in loan receivable 4,042,672 4,042,672
Real estate held for sale (net of allowance
of $300,000 in 1995) 3,161,581 5,763,025
-------------- -------------
7,204,253 9,805,697
-------------- -------------
$ 13,042,355 $ 15,210,655
============== =============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 57,816 $ 69,002
Due to affiliates 69,723 42,885
Other liabilities, principally real estate
taxes and security deposits 80,783 147,277
Mortgage note payable 575,301
-------------- -------------
Total liabilities 208,322 834,465
-------------- -------------
Limited Partners' capital (71,675
Partnership Interests issued
and outstanding) 13,026,568 14,561,840
General Partner's deficit (192,535) (185,650)
-------------- -------------
Total partners' capital 12,834,033 14,376,190
-------------- -------------
$ 13,042,355 $ 15,210,655
============== =============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF INCOME AND EXPENSES
for the six months ended June 30, 1996 and 1995
(UNAUDITED)
1996 1995
-------------- -------------
Income:
Interest on loans receivable $ 163,055 $ 1,323,249
Less interest on loans payable -
underlying mortgages 123,667 835,602
-------------- -------------
Net interest income on loans
receivable 39,388 487,647
Income from operations of real estate
held for sale 359,295 327,901
Interest on short-term investments 110,093 169,850
Recovery of loss on real estate 300,000
-------------- -------------
Total income 808,776 985,398
-------------- -------------
Expenses:
Provision for loss on real estate 575,301
Participation expense related to sale
of real estate 473,394
General Partner management fees 45,269 49,795
Administrative 294,992 349,087
-------------- -------------
Total expenses 1,388,956 398,882
-------------- -------------
(Loss) income before gain on sale of
real estate and extraordinary item (580,180) 586,516
Gain on sale of real estate 70,769
--------------
(Loss) income before extraordinary item (509,411)
Extraordinary item:
Gain on forgiveness of debt 575,301
-------------- -------------
Net income $ 65,890 $ 586,516
============== =============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF INCOME AND EXPENSES
for the six months ended June 30, 1996 and 1995
(UNAUDITED)
(CONTINUED)
1996 1995
-------------- -------------
(Loss) income before extraordinary item
allocated to General Partner $ (5,094) $ 5,865
============== =============
(Loss) income before extraordinary item
allocated to Limited Partners $ (504,317) $ 580,651
============== =============
(Loss) income before extraordinary item
per Limited Partnership Interest
(71,675 issued and outstanding) $ (7.03) $ 8.10
============== =============
Extraordinary item allocated to General
Partner $ 5,753 None
============== =============
Extraordinary item allocated to Limited
Partners $ 569,548 None
============== =============
Extraordinary item per Limited
Partnership Interest (71,675 issued
and outstanding) $ 7.94 None
============== =============
Net income allocated to General Partner $ 659 $ 5,865
============== =============
Net income allocated to Limited Partners $ 65,231 $ 580,651
============== =============
Net income per Limited Partnership Interest
(71,675 issued and outstanding) $ 0.91 $ 8.10
============== =============
Distributions to General Partner $ 7,544 $ 6,224
============== =============
Distributions to Limited Partners $ 1,600,503 $ 591,319
============== =============
Distributions per Limited Partnership
Interest $ 22.33 $ 8.25
============== =============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended June 30, 1996 and 1995
(UNAUDITED)
1996 1995
-------------- -------------
Income:
Interest on loans receivable $ 661,624
Less interest on loans payable -
underlying mortgages 416,722
-------------
Net interest income on loans
receivable 244,902
Income from operations of real estate
held for sale $ 148,313 107,594
Interest on short-term investments 54,399 84,791
Recovery of loss on real estate 300,000
-------------- -------------
Total income 502,712 437,287
-------------- -------------
Expenses:
Participation expense related to sale
of real estate 473,394
General Partner management fees 30,179 39,987
Administrative 211,997 215,212
-------------- -------------
Total expenses 715,570 255,199
-------------- -------------
(Loss) income before gain on sale of
real estate (212,858) 182,088
Gain on sale of real estate 70,769
-------------- -------------
Net (loss) income $ (142,089) $ 182,088
============== =============
Net (loss) income allocated to General
Partner $ (1,421) $ 1,821
============== =============
Net (loss) income allocated to Limited
Partners $ (140,668) $ 180,267
============== =============
Net (loss) income per Limited Partnership
Interest (71,675 issued and outstanding) $ (1.96) $ 2.51
============== =============
Distribution to General Partner $ 3,772 $ 3,772
============== =============
Distribution to Limited Partners $ 358,375 $ 358,375
============== =============
Distribution per Limited Partnership
Interest $ 5.00 $ 5.00
============== =============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
for the six months ended June 30, 1996 and 1995
(UNAUDITED)
1996 1995
-------------- -------------
Operating activities:
Net income $ 65,890 $ 586,516
Adjustments to reconcile net income
to net cash provided by operating
activities:
Gain on forgiveness of debt (575,301)
Gain on sale of real estate (70,769)
Participation expense related to
sale of real estate 473,394
Provision for potential losses on
real estate 575,301
Recovery of loss on real estate (300,000)
Net change in:
Accounts and accrued interest
receivable 20,650 (34,955)
Accounts and accrued interest
payable (11,186) (134,532)
Due to affiliates 26,838 (43,217)
Other liabilities (66,494) 36,568
-------------- -------------
Net cash provided by operating activities 138,323 410,380
-------------- -------------
Investing activities:
Proceeds from sale of real estate 2,093,800
Distribution of proceeds to Second
Mortgagee (167,194)
Costs incurred in connection with sale
of real estate (3,088)
--------------
Net cash provided by investing activities 1,923,518
--------------
Financing activities:
Distributions to Limited Partners (1,600,503) (591,319)
Distributions to General Partner (7,544) (6,224)
Principal payments on underlying loan (251,317)
-------------- -------------
Net cash used in financing activities (1,608,047) (848,860)
-------------- -------------
Net change in cash and cash equivalents 453,794 (438,480)
Cash and cash equivalents at beginning
of period 5,159,556 6,226,192
-------------- -------------
Cash and cash equivalents at end of period $ 5,613,350 $ 5,787,712
============== =============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policy:
In the opinion of management, all adjustments necessary for a fair presentation
have been made to the accompanying statements for the six months and quarter
ended June 30, 1996, and all such adjustments are of a normal and recurring
nature.
2. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
six months and quarter ended June 30, 1996 are:
Paid
-----------------------
Six Months Quarter Payable
------------ --------- ----------
Mortgage servicing fees $ 5,080 $ 2,540 $ 847
General Partner management fees 30,180 15,090 30,179
Reimbursement of expenses to
the General Partner, at cost 62,632 44,321 38,697
3. Sale of Real Estate:
During May 1996, the Partnership sold the Huntington Plaza Shopping Center for
$2,400,000, consisting of cash of $2,093,800 and $306,200 in the form of a
purchase money note collateralized by a junior mortgage on the property. The
Partnership assigned the $306,200 note and paid $167,194 to the holder of a
second mortgage on the property as part of an agreement which allowed the
Partnership to take title to the property in 1993. These expenses, which total
$473,394, have been classified as participation expense on the income
statement. The Partnership also paid $3,088 of other selling costs related to
the sale. The basis of the property was $1,923,518. For financial statement
purposes, the Partnership recognized a recovery of $300,000 and a gain of
$70,769 from the sale of the property.
4. Extraordinary Item:
A foreclosure sale of the remaining building in Normandy Mall took place in
March 1996 and the underlying lender made a successful bid and obtained title
to the building in April 1996. In connection with the foreclosure, the
Partnership recognized an extraordinary gain on forgiveness of debt of
$575,301. In addition, the Partnership recognized a provision for losses equal
to the carrying value of the building of $575,301 during the quarter ended
March 31, 1996. The Partnership has no further interest in the building or the
remainder of Normandy Mall.
<PAGE>
5. Contingency:
A proposed settlement has been reached with respect to the class action
complaint, Paul Williams and Beverly Kennedy, et al, v. Balcor Pension
Investors, et al. between counsel for the Class and counsel for the defendants.
A final hearing on the proposed settlement is expected to be held in November
1996. The General Partner does not believe that the proposed settlement will
have a material adverse impact on the Partnership.
6. Subsequent Events:
(a) In July 1996, the Partnership paid a distribution of $2,145,950 to the
holders of Limited Partnership Interests representing the quarterly
distribution of available Cash Flow of $5.00 per Interest for the second
quarter of 1996 and special distributions of $5.00 per Interest from Cash Flow
and $19.94 per Interest from Mortgage Reductions in connection with the sale of
Huntington Plaza Shopping Center.
(b) During July 1996, the Partnership sold the Nob Hill Apartments - Phase I
for $4,775,000 consisting of cash of $4,510,820 and $264,180 in the form of a
promissory note. From the proceeds of the sale, the Partnership paid $212,988
in selling costs. The Partnership will recognize a gain of approximately
$1,400,000 for financial statement purposes during the third quarter of 1996.
<PAGE>
BALCOR PENSION INVESTORS
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Pension Investors (the "Partnership") was formed in 1977 to invest in
wrap-around mortgage loans and, to a lesser extent, in other junior mortgage
loans and first mortgage loans. The Partnership raised $71,675,000 through the
sale of Limited Partnership Interests and utilized these proceeds to fund
thirty-six loans. The Partnership sold the Huntington Plaza and Nob Hill
Apartments in May and July 1996, respectively. Currently, the Partnership has
one loan in its portfolio.
Inasmuch as the management's discussion and analysis below relates primarily to
the time period since the end of the last fiscal year, investors are encouraged
to review the financial statements and the management's discussion and analysis
contained in the annual report for 1995 for a more complete understanding of
the Partnership's financial position.
Operations
- ----------
Summary of Operations
- ---------------------
The Partnership sold the Huntington Plaza Shopping Center in May 1996 and
recognized participation expense in connection with the sale. In addition, the
Partnership received less interest income on the North Capitol Office Building
loan during 1996 than in 1995. As a result, the Partnership generated decreased
net income during the six months ended June 30, 1996, as compared to the same
period in 1995 and generated a net loss during the quarter ended June 30, 1996
as compared to net income during the same period in 1995. Further discussion of
the Partnership's operations is summarized below.
1996 Compared to 1995
- ---------------------
Unless otherwise noted, discussions of fluctuations between 1996 and 1995 refer
to both the six months and quarters ended June 30, 1996 and 1995.
The North Capitol Office Building wrap-around loan was placed on non-accrual
status in December 1995 when the borrower did not make the payment due upon the
maturity of the loan. For non-accrual loans, income is recorded only as cash
payments are received from the borrower. In March 1996, the borrower
discontinued the monthly payments required on the wrap-around loan pursuant to
a forbearance agreement and subsequently filed for bankruptcy protection. This
resulted in a decrease in net interest income on the loan receivable during
1996 when compared to 1995. The funds advanced by the Partnership for this loan
total approximately $4,100,000, representing 6.4% of original funds advanced.
During 1996, the Partnership received cash payments of net interest income
totaling approximately $79,000. See Liquidity and Capital Resources, below, for
additional information.
<PAGE>
Income from operations of real estate held for sale represents the net
operations of those properties acquired by the Partnership through foreclosure.
At June 30, 1996, the Partnership was operating the Nob Hill Apartments - Phase
I. The Partnership sold the Huntington Plaza Shopping Center in May 1996. Prior
to the sale, real estate tax and common area maintenance reimbursement income
increased at the property which resulted in an increase in income from real
estate held for sale during 1996 as compared to 1995.
Primarily as a result of lower interest rates and less cash available for
investment due to special distributions to the Limited Partners in July 1995
and January 1996, interest income on short-term investments decreased during
1996 when compared to 1995.
Provisions are charged to income when the General Partner believes an
impairment has occurred to the value of its properties or in a borrower's
ability to repay a loan or in the value of the collateral property.
Determinations of fair value are made periodically on the basis of performance
under the terms of the loan agreement and assessments of property operations.
Determinations of fair value represent estimations based on many variables
which affect the value of real estate, including economic and demographic
conditions. During the six months ended June 30, 1996, the Partnership
recognized a provision of $575,301 in connection with the foreclosure of the
remaining building to which the Partnership held title in Normandy Mall and a
recovery of $300,000 related to the Huntington Plaza Shopping Center. The
Partnership did not recognize any provisions for potential losses related to
its loan or real estate held for sale during the six months ended June 30,
1995.
During the second quarter of 1996, the Partnership recognized participation
expense of $473,394 in connection with the sale of Huntington Plaza Shopping
Center.
As a result of a special distribution of Cash Flow made in July 1995, General
Partner management fees decreased during 1996 when compared to 1995.
Legal fees incurred in 1995 relating to litigation for the Normandy Mall
resulted in a decrease in administrative expense during 1996 when compared to
1995.
During the second quarter of 1996, the Partnership recognized a gain of $70,769
in connection with the sale of the Huntington Plaza Shopping Center.
During the first quarter of 1996, the Partnership recognized an extraordinary
gain on forgiveness of debt of $575,301 in connection with the foreclosure of
the one building that it retained title to in Normandy Mall. See Liquidity and
Capital Resources for additional information.
<PAGE>
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership increased by approximately $454,000 as of
June 30, 1996 when compared to December 31, 1995. The Partnership generated
cash flow totaling approximately $138,000 from its operating activities
primarily from the operation of its properties, net of the payment of
administrative expenses. The Partnership also generated cash flow of
approximately $1,924,000 from its investing activities resulting from the sale
of the Huntington Plaza Shopping Center. The Partnership's financing activities
consisted of the payment of distributions totaling approximately $1,608,000 to
Partners.
The Partnership defines cash flow generated from its properties as an amount
equal to the property's revenue receipts less property related expenditures.
During the six months ended June 30, 1996 and 1995, the Nob Hill Apartments -
Phase I generated positive cash flow. As of June 30, 1996, the occupancy rate
was 98% at this property. The Huntington Plaza Shopping Center, which was sold
in May 1996, generated positive cash flow during the six months ended June 30,
1995, and prior to its sale in 1996.
In December 1995, the North Capitol Building wrap-around loan matured and the
borrower failed to make the principal payment due. Pursuant to a forbearance
agreement dated January 24, 1996, the Partnership agreed not to exercise its
rights against the borrower through March 1, 1996. The borrower continued to
make monthly interest only payments on the loan while negotiations with the
Partnership for repayment continued. The borrower did not make the March 1996
payment and the loan was placed in default on March 7, 1996. On March 22, 1996,
the borrower commenced proceedings under Chapter 11 of the U.S. Bankruptcy
Code. The General Partner is reviewing the borrower's bankruptcy filing and
will take such actions as are necessary to protect the Partnership's interests.
As previously reported, the Partnership is now in its liquidation stage.
During May 1996 and July 1996, the Partnership sold the Huntington Plaza
Shopping Center and Nob Hill Apartments - Phase I for $2,400,000 and
$4,775,000, respectively. While it is the Partnership's intent to complete the
disposition of its remaining asset and be terminated by the end of 1996, the
bankruptcy of the borrower on the North Capitol Building loan may prevent the
loan from being repaid and may make it impossible for the Partnership to sell
its interest in the loan until the bankruptcy action is resolved. As a result,
the timing of the liquidation of the Partnership could be lengthened from the
time period described in the Partnership's prospectus.
In 1991, the Partnership obtained title to the Normandy Mall and Norwood Plaza
shopping centers and in 1993, title to the properties, with the exception of
one building in Normandy Mall (the "Building"), was relinquished to the first
mortgage holder pursuant to a settlement agreement. The first mortgage loan
collateralized by the Building was held by a different third party lender, Gulf
Life Insurance Company ("Gulf Life"), who commenced foreclosure proceedings in
January 1995. Gulf Life subsequently sold the loan to American Mortgage
Acquisition Corporation ("American"). A foreclosure sale of the Building took
place in March 1996 and American made a successful bid and obtained title to
the Building in April 1996. The Partnership has no further interest in the
Building or the remainder of Normandy Mall.
<PAGE>
In 1993, the Partnership acquired title to the Huntington Plaza Shopping Center
through foreclosure. Prior to the foreclosure, this property had been
encumbered by a second mortgage loan which was subordinate to the Partnership's
loan. In order for the holder of the second mortgage not to contest the
Partnership's foreclosure actions, the Partnership and the holder of the second
mortgage executed an agreement which stated that the net proceeds from the sale
of the property would be distributed to both the Partnership and the second
mortgage holder pursuant to an agreed upon formula. In May 1996, the
Partnership sold the Huntington Plaza Shopping Center for $2,400,000,
consisting of $306,200 in the form of a purchase money note collateralized by a
junior mortgage on the property and cash totaling $2,093,800. From the
proceeds, $167,194 was paid to the second mortgage holder. In addition, the
second mortgage holder agreed to accept the $306,200 purchase money note as
full settlement of the agreement. Net proceeds received by the Partnership from
this transaction were $1,923,518. See Note 3 of Notes to Financial Statements
for additional information.
In July 1996, the Partnership sold the Nob Hill Apartments - Phase I for
$4,775,000, consisting of $264,180 in the form of a promissory note which
matures in December 1996 and cash totaling $4,510,820. Net proceeds of
$4,297,832 have been received by the Partnership. See Note 5 of Notes to
Financial Statements for additional information.
In July 1996, the Partnership paid a distribution of $2,145,950 to the holders
of Limited Partnership Interests representing the regular quarterly
distributions of available Cash Flow of $5.00 per Interest for the second
quarter of 1996 and special distributions of $5.00 per Interest from Cash Flow
and $19.94 per Interest from Mortgage Reductions in connection with the sale of
Huntington Plaza Shopping Center. The level of the regular quarterly
distribution remained unchanged from the amount distributed to Limited Partners
during the first quarter of 1996. Including the July 1996 distribution, Limited
Partners have received cumulative distributions of $1,761.08 per $1,000
Interest, of which $1,181.41 represents Cash Flow from operations and $579.67
represents a return of Original Capital.
The Partnership will make a cash distribution in the fourth quarter of 1996
from proceeds generated from the sale of the Nob Hill Apartments - Phase I. The
General Partner believes it has retained, on behalf of the Partnership, an
appropriate amount of working capital to meet cash or liquidity requirements
which may occur.
Changing interest rates can impact real estate values in several ways.
Generally, declining interest rates may lower the cost of capital allowing
buyers to pay more for a property whereas rising interest rates may increase
the cost of capital and lower the price of real estate.
Inflation has several types of potentially conflicting impacts on real estate
investments. Short-term inflation can increase real estate operating costs
which may or may not be recovered through increased rents and/or sales prices,
depending on general or local economic conditions. In the long-term, inflation
can be expected to increase operating costs and replacement costs and may lead
to increased rental revenues and real estate values.
<PAGE>
BALCOR PENSION INVESTORS
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
- -------------------------
Williams class action
- ---------------------
With respect to the class action complaint, Paul Williams and Beverly Kennedy,
et al. vs. Balcor Pension Investors, et al. (U.S. District Court, Northern
District of Illinois, Case No.: 90 C 0726), the ongoing settlement discussions
among the parties have resulted in a proposed settlement between counsel for
the Class and counsel for defendants. A draft notice including a description of
the terms of the proposed settlement is attached as Exhibit 99. A final hearing
to determine the fairness, reasonableness and adequacy of the proposed
settlement will be held on November 20, 1996 at 11:00 a.m. Copies of the
proposed settlement agreement may be inspected at the office of the Clerk of
the Court of the United States District Court for the Northern District of
Illinois located at 219 South Dearborn, Chicago, Illinois 60604.
Item 5. Other Information
- --------------------------
Nob Hill Apartments
- -------------------
On June 4, 1996, the Partnership contracted to sell Nob Hill Apartments, Phase
I, Winter Park, Florida, to an unaffiliated party, Ceebraid-Signal Corporation,
a Florida corporation, for a sale price of $4,775,000. The sale closed on July
9, 1996. A portion of the purchase price was payable in the form of a
promissory note in the amount of $264,180. The note bears interest at the rate
of 8% per annum and is payable in monthly interest only installments with the
entire principal balance and any unpaid interest due upon maturity on December
8, 1996. The remainder of the purchase price was paid in cash at closing from
which the Partnership paid approximately $10,000 in closing costs, $143,250 to
an unaffiliated party as a brokerage commission and $59,688 to an affiliate of
the third party providing property management services for the property for
services rendered in connection with the sale. The Partnership received the
remaining proceeds of approximately $4,298,000.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits:
(4) Form of Subscription Agreement set forth as Exhibit 3(c) to Amendment No. 2
to the Registrant's Registration Statement on Form S-11 dated December 15, 1977
(Registration No. 2-60478) and Form of Confirmation regarding Interests in the
Registrant set forth as Exhibit 4.2 to the Registrant's Report on Form 10-Q for
the quarter ended June 30, 1992 (Commission File No. 0-9198) are incorporated
herein by reference.
(10)(a)(i) Agreement of Sale and attachment thereto; First Amendment to
Agreement of Sale; Form of Junior Mortgage and Security Agreement; Form of
Principal Note; and Satisfaction and Release, relating to the sale of
Huntington Plaza, Huntington, Indiana, previously filed as Exhibits (2)(a),
(b), (c), (d) and (e) to the Registrant's Current Report on Form 8-K dated
April 26, 1996 are incorporated herein by reference.
(ii) Second Amendment to Agreement of Sale and Escrow Agreement relating to the
sale of Huntington Plaza, Huntington, Indiana, previously filed as Exhibit
(10)(b) to the Registrant's Report on Form 10-Q for the quarter ended March 31,
1996, is incorporated herein by reference.
(b) Agreement of Sale and attachment thereto relating to the sale of Nob Hill
Apartments - Phase I, previously filed as Exhibit 2(a) to the Registrant's
Current Report on Form 8-K dated June 4, 1996, is incorporated herein by
reference.
(27) Financial Data Schedule of the Registrant for the six month period ended
June 30, 1996 is attached hereto.
(99) (i) Form of Notice of Proposed Class Action Settlement and Hearing
relating to Paul Williams and Beverly Kennedy, et. al. vs. Balcor Pension
Investors, et. al.
(ii) Promissory Note relating to the sale of Nob Hill Apartments, Phase I,
Winter Park, Florida is attached hereto.
(b) Reports on Form 8-K:
(i) A Current Report on Form 8-K dated April 26, 1996 was filed reporting a
contract to sell Huntington Plaza Shopping Center, Huntington, Indiana.
(ii) A Current Report on Form 8-K dated June 4, 1996 was filed reporting a
contract to sell Nob Hill Apartments, Phase I, Winter Park, Florida, and the
closing of the sale of the Huntington Plaza Shopping Center, Huntington,
Indiana.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BALCOR PENSION INVESTORS
By: /s/Thomas E. Meador
-----------------------------
Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Mortgage Advisors, the General Partner
By: /s/Brian D. Parker
------------------------------
Brian D. Parker
Senior Vice President, and Chief Financial
Officer (Principal Accounting and Financial
Officer) of Balcor Mortgage Advisors, the
General Partner
Date: August 14, 1996
---------------------------
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 5613
<SECURITIES> 0
<RECEIVABLES> 4267
<ALLOWANCES> 5153
<INVENTORY> 0
<CURRENT-ASSETS> 5838
<PP&E> 3162
<DEPRECIATION> 0
<TOTAL-ASSETS> 13042
<CURRENT-LIABILITIES> 208
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 12834
<TOTAL-LIABILITY-AND-EQUITY> 13042
<SALES> 0
<TOTAL-REVENUES> 879
<CGS> 0
<TOTAL-COSTS> 45
<OTHER-EXPENSES> 768
<LOSS-PROVISION> 575
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (509)
<INCOME-TAX> 0
<INCOME-CONTINUING> (509)
<DISCONTINUED> 0
<EXTRAORDINARY> 575
<CHANGES> 0
<NET-INCOME> 66
<EPS-PRIMARY> .91
<EPS-DILUTED> .91
</TABLE>
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
PAUL WILLIAMS, et al., )
)
Plaintiffs, )
) No. 90 C 0726
v. )
) Honorable James B. Zagel
BALCOR PENSION INVESTORS, )
et al., )
)
Defendants. )
)
)
BALCOR MORTGAGE ADVISORS, et al., )
)
Counter-plaintiffs, )
)
v. )
)
PAUL WILLIAMS, et al., )
)
Counter-defendants. )
NOTICE OF PROPOSED
CLASS ACTION SETTLEMENT AND HEARING
THIS IS NOT NOTICE OF A LAWSUIT AGAINST YOU. This Notice is to
advise you of a proposed settlement of the class action lawsuit captioned above
and of a court hearing on the proposed settlement.
1. Summary of Proposed Settlement. The proposed settlement resolves
all issues raised by this lawsuit. The parties in these suits are the First
Union National Bank of North Carolina, Trustee of the Ploof Truck Lines, Inc.
Profit Sharing and 401(k) Plan, Bruce McGlasson and Tom Chipain (collectively
the "Class Representatives") on behalf of themselves and the plaintiff class as
defined below (the "Class"), Paul Williams, Beverly Kennedy, William B.
Copeland, Allan Hirschfield, Gregory Baird, individually and as trustee of the
Iva Medical Center, P.A. Pension and Profit Sharing Plan, and Samuel Wegbreit
(collectively "the Individual Plaintiffs"), who brought this suit as a class
action and Balcor Pension Investors, Balcor Pension Investors-II, Balcor
Pension Investors-III, Balcor Pension Investors-IV, Balcor Pension Investors-V,
Balcor Pension Investors-VI, Balcor Pension Investors-VII, Balcor Preferred
Pension-12, Balcor Mortgage Advisors, Balcor Mortgage Advisors-II, Balcor
Mortgage Advisors-III, Balcor Mortgage Advisors-V, Balcor Mortgage Advisors-VI,
Balcor Mortgage Advisors-VII, Balcor Mortgage Advisors-VIII, Balcor Mortgage
Advisors, Inc., Balcor Mortgage Advisors-V, Inc., The Balcor Company, Balcor
Securities Co., Shearson Lehman Hutton Inc., and American Express Company
(collectively "Defendants"). Plaintiffs assert that Defendants violated the
<PAGE>
law by misrepresenting or concealing material information concerning Balcor
Pension Investors, Balcor Pension Investors-II, Balcor Pension Investors-III,
Balcor Pension Investors-IV, Balcor Pension Investors-V, Balcor Pension
Investors-VI, Balcor Pension Investors-VII, and Balcor Preferred Pension-12
(the "BPI Partnerships") in connection with purchases of interests in them by
members of the Class. Defendants vigorously deny any wrongdoing and assert
that their conduct was proper and conformed to the law. To avoid the further
expense and risks of continued litigation, the parties have determined to
compromise their differences and have agreed to a proposed settlement that
resolves all issues raised by these lawsuits.
The class of persons who will be affected by the proposed settlement
consists of all individuals, partnerships, corporations and other entities who
invested in Balcor Pension Investors, Balcor Pension Investors-II, Balcor
Pension Investors-III, Balcor Pension Investors-IV, Balcor Pension
Investors-V, Balcor Pension Investors-VI, Balcor Pension Investors-VII, and
Balcor Preferred Pension-12 (the "BPI Partnerships"), during the original
public offerings of such interests. The Class excludes the Defendants and any
entities owned or controlled by the Defendants, those individuals and/or
entities who acquired their Partnership interests after the original offering
periods ended and those individuals who notified Class Counsel on or before
November 20, 1995 that they wished to be excluded from the Class.
This Notice contains important information regarding the settlement,
the final hearing on the settlement, and your right to participate in the
settlement hearing, which will be held on November 20, 1996 at 11:00 a.m. If
the Court approves the settlement, you will be bound by the Final Judgment.
YOU SHOULD READ THE ENTIRE NOTICE CAREFULLY, SINCE YOUR RIGHTS WILL BE AFFECTED
BY THIS SETTLEMENT.
2. History of the Lawsuits. There is now pending in the United
States District Court for the Northern District of Illinois an action captioned
Paul Williams, et al. v. The Balcor Company, et al., No. 90 C 0726, which was
filed on February 7, 1990. The lawsuit alleges violations by Defendants of
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C.
ee 78j(b) and 78t(a), Rule 10b-5 promulgated under e 10(b) of the Securities
Exchange Act of 1934, 17 C.F.R. d 240.10b-5, the rules and regulations of the
Securities and Exchange Commission promulgated under the Securities Exchange
Act of 1934, the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C.
ee 1961, et seq., and the common law in connection with the original offering
of interests in the BPI Partnerships. Defendants have denied these allegations
and have filed a class action counterclaim for declaratory judgment, which,
inter alia, concerns the propriety of defendants obtaining indemnification for
the attorneys' fees and expenses incurred defending this litigation from the
assets of the BPI Partnerships.
After the lawsuit was filed, the Seventh Circuit Court of Appeals
held in Short v. Belleville Shoe Mfg. Co., 908 F.2d 1385 (7th Cir. 1990), that
actions brought to enforce those provisions of the Securities Exchange Act of
1934 alleged in the lawsuit to have been violated by Defendants must be brought
within one year after discovery of the alleged violation and within three years
after such violation. Shortly thereafter, the United States Supreme Court made
a similar ruling in Lampf, Pleva, Lipkind, Prupis & Petrigrow v. Gilbertson,
<PAGE>
111 S.Ct. 2773 (1991). On July 21, 1994, the court granted the motion for
class certification filed by the class representatives and certified a class
solely on plaintiffs' claims of violations of the Securities and Exchange Act
of 1934.
On July 12, 1996, the Honorable James B. Zagel of the United States
District Court for the Northern District of Illinois preliminarily determined
that the proposed settlement is fair and reasonable.
3. Purpose of this Notice. This Notice is given pursuant to Federal
Rule of Civil Procedure 23 and an Order of the United States District Court for
the Northern District of Illinois. This Notice is not an expression of any
opinion by that Court as to the merits of any of the claims or defenses
asserted by any party in this lawsuit. The purpose of this Notice is to inform
you of the pendency of this lawsuit, the terms of the proposed class
settlement, the date of the court hearing on the settlement, and your rights
with respect to the settlement and hearing.
4. Definition of the Class. The proposed Class on whose behalf this
settlement is made consists of all individuals, partnerships, corporations and
other entities who invested in Balcor Pension Investors, Balcor Pension
Investors-II, Balcor Pension Investors-III, Balcor Pension Investors-IV,
Balcor Pension Investors-V, Balcor Pension Investors-VI, Balcor Pension
Investors-VII, and Balcor Preferred Pension-12, during the original public
offerings of such interests. The Class excludes the Defendants and any
entities owned or controlled by the Defendants, those individuals and/or
entities who acquired their Partnership interests after the original offering
periods ended and those individuals who notified Class Counsel on or before
November 20, 1995 that they wished to be excluded from the Class.
5. The Proposed Settlement. The parties have agreed to the
following settlement terms:
Consideration to the Class. As a condition of settlement, Defendants
will make the following consideration to the Class:
a. Defendants will deposit $100,000 into one of the bank
accounts of Balcor Preferred Pension-12 which shall be distributed to
members of the Class who invested in Balcor Preferred Pension-12.
b. The general partner ("General Partner") of each of the BPI
Partnerships will forego and instead distribute among the members of the
Class its distributive partnership share of Cash Flow from operations for
one of the four quarters immediately following the effective date of the
Settlement Agreement, excluding that percentage of such distributive share
of Cash Flow that, pursuant to the Partnership Agreement for each of the
BPI Partnerships (except Balcor Pension Investors), is to be set aside for
and deposited into the Early Investment Incentive Fund for such BPI
Partnership. The quarter for which the General Partner of each of the BPI
Partnerships will forego such distributive share of Cash Flow will be
chosen by Defendants by determining which quarter, of the four quarters
immediately following the effective date of the Settlement Agreement,
represents an average distributive Partnership share of Cash Flow earned
by such General Partner.
<PAGE>
c. Defendant The Balcor Company will guarantee to members of
the Class who invested in the following partnerships and who continue to
hold their units until termination of the partnership that the total
distributions from all sources, including Cash Flow, Mortgage Reductions,
distributions from the Early Investment Incentive Fund, and pursuant to
Section 18.4 of the Partnership Agreement for each of the BPI
Partnerships, made throughout the existence of the partnership, and
including monies distributed pursuant to this Settlement Agreement
will equal the following percentages of their respective initial capital
contributions:
Balcor Pension Investors VI - 90%
Balcor Pension Investors VII - 80%
Balcor Preferred Pension-12 - 80%
This guarantee will be null and void:
(1) As to any of the above partnerships in which there is
an effective change in control, including but not limited to:
(a) the replacement of the General Partner by an entity or individual
not affiliated with the current General Partner; (b) the General
Partner having been joined by any entity or individual not affiliated
with it as co-general partner; or (c) material restrictions having
been placed on the powers of the General Partner;
(2) As to any Class member who sells any of his/her/its
units, including any transfer of interests into the Early Investment
Incentive Fund, in any of the BPI Partnerships, with respect to such
units sold;
(3) As to any Class member who receives a tender offer
after April 1, 1996 for any of his/her/its units and does not accept
such tender offer, but which, if the Class member had accepted the
offer, would have resulted in the Class member having received
(including total partnership distributions to the Class member plus
the offer price of the tender) an amount equal to or greater than the
amount he/she/it would receive pursuant to the guarantee, the
percentage of the Initial Guarantee (the "Tender Percentage") equal
to the number of units which were not tendered pursuant to the tender
offer divided by the total number of units of the partnership
remaining eligible for the guarantee at the date of the termination
of said tender offer. In the event that more than one tender offer
is initiated, a Tender Percentage shall be computed for each tender
offer and the Tender Percentage for which the Initial Guarantee shall
be null and void shall be the sum of the Tender Percentages of all
tender offers. The "Initial Guarantee" for each of Balcor Pension
Investors-VI, Balcor Pension Investors-VII and Balcor Preferred
Pension-12 shall be a dollar amount per partnership interest equal to
the percentage of initial capital contribution described above as the
guarantee level in this Section 5(c) minus the actual dollar amount
distributed per partnership interest as of the date of the Settlement
Agreement. As of March 31, 1996, total distributions per interest in
these partnerships and the amount of additional distributions
guaranteed were:
<PAGE>
Additional Distributions
Per Interest Pursuant to
Total Distributions Per Initial Guarantee as of
Partnership Interest Through 03/31/96 03/31/96
Balcor Pension
Investors-VI $206.18 per $250 Interest $18.82 per $250 Interest
Balcor Pension
Investors-VII $147.05 per $250 Interest $52.95 per $250 Interest
Balcor Preferred
Pension-12 $55.87 per $100 Interest $24.13 per $100 Interest
As a result of distributions to holders of interests in these partnerships
and/or tender offers to holders of interests in certain of these partnerships
after April 1, 1996, the additional distributions per interest pursuant to the
Initial Guarantee have decreased and may decrease further. As of ,
defendants' records reflected that the number of interests held by members of
the Class who were original investors in these partnerships was approximately:
Units Held by
Partnership Class Members
Balcor Pension Investors-VI 1,032,269
Balcor Pension Investors-VII 379,261
Balcor Preferred Pension-12 262,174
The distributions provided for in subparagraphs 5.a. and 5.b. above
shall be made only to investors who purchased units in the BPI Partnerships
during the original public offerings of such interests, excluding those
individuals who excluded themselves from the Class. Those investors who
purchased interests in the BPI Partnerships during the original public
offerings but have excluded themselves from the Class and those investors who
purchased interests following the termination of the original offering periods
for such interests will receive only quarterly distributions of Cash Flow from
operations as provided in the Partnership Agreements for the BPI Partnerships.
6. Class Counsels' Attorneys' Fees and Costs. Defendants will pay
the fees and costs of class counsel that may be awarded or approved by the
Court.
7. Release. If the settlement is approved by the Court, all Class
members who did not timely exclude themselves from the Class will release
Defendants from all claims that were or could have been raised by the Class or
the Class Representatives against Defendants in these lawsuits.
8. Class Membership. If you invested in Balcor Pension Investors,
Balcor Pension Investors-II, Balcor Pension Investors-III, Balcor Pension
Investors-IV, Balcor Pension Investors-V, Balcor Pension Investors-VI, Balcor
Pension Investors-VII or Balcor Pension Preferred Pension-12 during the
<PAGE>
original public offerings of such interests, you are a member of the Class,
unless you expressly requested to be excluded ("opted out") on or before
November 20, 1995. As a member of the Class, any claims you may have against
defendants with respect to your interests in the BPI Partnerships will be
forever resolved and cannot be pursued in another lawsuit, except that you
shall not be precluded from participating in and sharing in any fund deposited
by any Defendant with the Securities and Exchange Commission, any state
securities commission or any governmental or regulatory entity in connection
with the resolution of proceedings relating to sales, marketing and related
activities as a soliciting dealer for the offering of interests in the BPI
Partnerships. YOU NEED DO NOTHING TO REMAIN A MEMBER OF THE CLASS, and your
rights in this lawsuit will be represented by class counsel, one of whom is
Norman Rifkind, Beigel, Schy, Lasky, Rifkind, Fertik & Gelber, 250 South Wacker
Drive, Suite 1500, Chicago, Illinois 60606.
9. Objecting to the Terms of the Settlement Agreement. If you have
any objections to the proposed settlement, you must file a written objection,
together with all briefs and other papers in support of the objection, with the
Court on or before November 4, 1996, and you must also serve copies of that
written objection on class counsel, Norman Rifkind, Esq., at the address set
forth in paragraph 8, above, and on counsel for Defendants, David L. Carden,
Esq., Jones, Day, Reavis & Pogue, 77 West Wacker, Chicago, Illinois 60601-1692,
postmarked no later than October 20, 1996.
10. Final Hearing on Fairness of Settlement. A final hearing to
determine the fairness, reasonableness and adequacy of the proposed settlement
will be held on November 20, 1996 in the United States District Court for the
Northern District of Illinois, located in the Federal Building, 219 South
Dearborn Street, Chicago, Illinois, in Room 1919 at 11:00 a.m.
11. Further Information. This Notice is not all-inclusive. For
further information concerning the litigation, you may refer to the pleadings
and other papers, including the proposed Settlement Agreement, that have been
filed with the Court, which may be inspected during regular business hours at
the Office of the Clerk of the Court identified in paragraph 10, above, 20th
floor, or you may obtain further information about this action, the terms of
the settlement, the settlement hearing and how the settlement may affect your
rights by calling the following toll-free number for a recorded message:
1-800-XXX-XXXX. PLEASE DO NOT CONTACT THE CLERK OF THE COURT.
Dated: ______________
Clerk of the Court, United States
District Court for the Northern
District of Illinois
<PAGE>
______Stamford, Connecticut$264,180
Stamford, Connecticut
July 8, 1998
PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned (collectively, the "Maker"),
jointly and severally, promises to pay to the order of BON HILL
LIMITED PARTNERSHIP, an Illinois limited partnership (the
"Payee"), at the office of Payee at c/o The Balcor Company, 2355
Waukegan Road, Suite A200, Bannockburn, IL 60015, or at such
other place or places as the holder of this Note from time to time
may designate in writing, the principal sum of Two Hundred Sixty
Four Thousand One Hundred Eighty DOLLARS ($264,180) in lawful
money of the United States (the "Loan") together with interest in
like lawful money from the effective date of this Note at the
applicable annual rate set forth below, to be computed on the
basis of the actual number of days elapsed and an assumed year of
three hundred sixty (360) days.
1. Interest Rate. The outstanding principal balance of this
Note from time to time shall bear interest at the rate of eight
percent (8%) per annum.
2. Payments. Maker shall pay to Payee the Interest accruing
under this Note, in arrears, commencing on August 8, 1996 and on
the eighth day of each and every succeeding month thereafter until
the maturity of the Loan.
3. Maturity Date. The entire outstanding principal balance of
the Loan, together with all accrued and unpaid interest shall be
due an payable in full on December 8, 1996.
4. Prepayment. This Note may be prepaid in whole or in party
without penalty. Any partial prepayment shall be applied first to
accrued and unpaid Interest, then to principal.
5. Acceleration of Maturity. The entire unpaid principal
balance of the Loan, together with all unpaid interest accrued
thereon and all other sums owing under this Note shall at the
option of Payee become immediately due and payable upon Maker's
failure to pay any sum within ten (10) days of the date when due
under this Note, whereupon Payee shall be entitled to pursue any
and all rights and remedies provided by applicable law and/or in
the Note.
6. Default Rate of Interest. Irrespective of any acceleration
of maturity, at Payee's option the entire unpaid principal balance
of the Loan shall bear interest until paid at an augmented annual
rate (the "Default Rate") from and after the stated or accelerated
maturity of this Note, or from and after failure to pay within ten
(10) days of the due date any sum payable under this Note. The
Default Rate shall equal twelve percent (12%) per annum.
<PAGE>
7. Rights and Remedies of Payee. Payee shall be entitled to
pursue any and all rights and remedies provided by applicable law
and /or under the terms of this Note all of which shall be
cumulative and may be exercised successively or concurrently.
Payee's delay in exercising or failure to exercise any rights or
remedies to which Payee may be entitled in the event of any
default shall not constitute a waiver of any of Payee's rights or
remedies with respect to that of any subsequent default, whether
of the same or a different nature, nor shall any single or partial
exercise of any right or remedy by Payee preclude any other or
further exercise of that or any other right or remedy. No waiver
of any right or remedy by Payee shall be effective unless made in
writing and signed by Payee, nor shall any waiver on one occasion
apply to any future occasion, but shall be effective only with
respect to the specific occasion addressed in that signed writing.
8. Attorneys' Fees. If this Note is placed in the hands of an
attorney for collection or is collected through any legal
proceedings, Maker promises to pay Payee's reasonable costs,
disbursements and attorneys' fees (including, without limitation,
paralegal fees) incurred in connection therewith, those incurred
for appellate, bankruptcy or administrative proceedings.
9. Maximum Interest Rate. In no event shall any agreed or
actual exaction charged, reserved or taken as an advance or
forbearance by Payee as consideration for the Loan exceed the
limits imposed or provided by the law applicable from time to time
to the Loan (if any) for the use or detention of money or for
forbearance in seeking its collection; Payee hereby waives any
right to demand such excess. In the event that the interest
provisions of this Note or any exactions provided for in this Note
shall result at any time or for any reason in an effective rate of
interest that transcends the limits of the law applicable to the
Loan, then without further agreement or notice the obligation to
be fulfilled shall be automatically reduced to such limit and all
sums received by Payee in excess of those lawfully collectible as
Interest shall be applied against principal immediately upon
Payee's receipt thereof, with the same force and effect as though
the payor had specifically designated such extra sums to be so
applied to principal and Payee had agreed to accept such extra
payment(s) as a premium-free prepayment or prepayments. During
any time that the Loan bears Interest at the maximum lawful rate
(whether by application of this paragraph, the Default Rate
provisions of this Note, or otherwise), Interest shall be computed
on the basis of the actual number of days elapsed and the actual
number of days in the respective calendar year.
<PAGE>
10. Waivers and Stipulations. Maker hereby waives demand,
presentment, protest and notice of dishonor, waives suit against
or joinder of any other person, waives any immunity or exemption
of any property from garnishment or levy or execution or seizure
or attachment prior to or in execution of judgment, and waives (to
the extent lawfully waivable) all provisions and requirements of
law for the benefit of Maker now or hereafter in force. Maker
hereby irrevocably submits to the jurisdiction of the state and
federal courts in the State of Illinois for purposes of any action
or proceeding arising in connection with the Loan and agrees that
the venue of any such action or proceeding may be in Cook County,
Illinois, and waives any claims that the same is an inconvenient
forum. No provision of this Note shall limit Payee's right to
serve legal process in any manner permitted by law or to bring any
such action or proceeding in any other competent jurisdiction.
Except as otherwise required by the provisions of this Note, any
notice required to be given to Maker shall be deemed sufficient if
made personally or if mailed, postage prepaid, to Maker's address
then registered in Payee's record. Maker agrees to pay all filing
fees and similar charges and all costs incurred by Payee in
collecting or securing or attempting to collect or secure the
Loan, including attorneys' fees, whether or not involving
litigation and/or appellate, administrative or bankruptcy
proceedings. Maker agrees to pay any documentary stamp taxes,
intangible taxes or other taxes (except for income taxes based on
Payee's net income) which may now or hereafter apply to this Note
and agrees to indemnify and hold Payee harmless from and against
all liability, costs, attorneys' fees, penalties, interest or
expenses relating to any such taxes, as and when the same may be
incurred.
11. Governing Law. This Note shall be governed by, and
construed and enforced in accordance with, the laws of the State
of Illinois, except that federal law shall govern to the extent
that it may permit Payee to charge, from time to time, Interest on
the Loan at a rate higher than may be permissible under applicable
Illinois law.
12. Severability. Any provision of this Note which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction only, be ineffective only to the extent of such
prohibition or unenforceablity without invalidating the remaining
provisions hereof or affecting the validity or enforceability of
such provision in any other jurisdiction.
13. Miscellaneous. The term "Payee" shall be deemed to include
any subsequent holder(s) of this Note. Whenever used in this Note
and unless the context otherwise requires, words in the singular
include the plural, words in the plural include the singular, and
pronouns of any gender include the other genders. Captions and
paragraph headings in this Note are for convenience only and shall
not affect its interpretation. Maker shall receive immediate
credit on payment s if made in immediately available funds;
otherwise, said payments shall be credited upon clearance. This
Note cannot be changed or modified orally.
<PAGE>
14. Binding Effect. All of the terms of this Note shall be
binding upon Maker and Maker's heirs, personal representatives,
successors and assigns, jointly and severally.
15. Assignability. Payee shall be entitled to assign this Note
either as collateral or absolutely, to any third party, without
the consent of Maker.
16. Waiver of Trial by Jury. PAYEE, BY ACCEPTANCE HEREOF, AND
MAKER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE
RIGHT ANY OF THEM MAY HAVE TO TRIAL BY JURY IN RESPECT TO ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS NOTE AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN
CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY.
MAKER
/s/ Jason Schlesinger
--------------------------------------
Jason Schlesinger
/s/ Richard Schlesinger
--------------------------------------
Richard Schlesinger
/s/ William Weinseth
----------------------------------------
William Weinseth
