SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 10, 1997
JMB INCOME PROPERTIES, LTD. - VII
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(Exact name of registrant as specified in its charter)
Illinois 0-9555 36-2999384
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(State or other) (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Organization
900 N. Michigan Avenue, Chicago, Illinois 60611-1575
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(Address of principal executive office)
Registrant's telephone number, including area code: (312) 915-1987
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ONE WOODFIELD LAKE
Schaumburg, Illinois
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. JMB Income Properties, Ltd.
- - VII (the "Partnership"), an Illinois limited partnership, was a 80%
partner in One Woodfield Lake Limited Partnership ("One Woodfield"), an
Illinois limited partnership, which is a beneficiary of a land trust that
owns fee title to an office building located in Schaumburg, Illinois
commonly known as One Woodfield Lake (the "Property"). The Partnership had
approached the unaffiliated venture partners in One Woodfield with the
intent to market and sell the Property. Per the One Woodfield venture
agreement, the unaffiliated venture partners in One Woodfield held the
right of first opportunity to purchase the Partnership's interest in the
Property had the Partnership pursued a sale of the Property. Accordingly,
on October 10, 1997, the unaffiliated venture partners through One
Woodfield redeemed and retired the Partnership's interest in One Woodfield
for a redemption price of $3,920,451. The redemption price was based upon
a deemed sale price of the Property of $17,500,000, which approximates the
price at which the Partnership was going to market the property to
unaffiliated third parties, less approximately $12,331,000 of existing debt
(from which the Partnership was released of all liability by the lender at
closing), closing costs and prorations.
The Property was 100% occupied at the date of sale. The redemption of
the Partnership's interest is expected to result in a gain to the
Partnership for both financial reporting purposes and Federal income tax
reporting purposes in 1997. In addition, in connection with the redemption
of the Partnership's interest and as is customary in such transactions, the
Partnership agreed to certain representations and warranties, with a
stipulated survival period which expires June 15, 1998. The Property was
classified as held for sale as of December 31, 1996 and therefore has not
been subject to continued depreciation as of that date for financial
reporting purposes.
The Partnership Agreement provides that the General Partners shall
receive as a distribution from the sale of a real property by the
Partnership an amount equal to 3% of the selling price, and that the
remaining proceeds (net after expenses and retained working capital) be
distributed 85% to the Limited Partners and 15% to the General Partners.
However, the Limited Partners shall receive 100% of such net sale proceeds
until the Limited Partners (i) have received cash distributions of sale or
refinancing proceeds in an amount equal to the Limited Partners' aggregate
initial capital investment in the Partnership and (ii) have received
cumulative cash distributions from the Partnership's operations which, when
combined with sale or refinancing proceeds previously distributed, equal a
6% annual return on the Limited Partners' average capital investment for
each year (their initial capital investment as reduced by sale or
refinancing proceeds previously distributed) commencing with the fourth
fiscal quarter of 1980. Two-thirds of the 3% General Partner discussed
above is further subordinated to the Limited Partners receiving out of
sales proceeds an amount equal to 110% of their initial capital investment
in the Partnership. The Limited Partners have received cash distributions
that satisfied the requirements in (i) and (ii) above. Also, the Limited
Partners have received an amount equal to 110% of their initial capital
investment which was satisfied by the August 1993 cash distribution.
Therefore, the proceeds from the redemption of the Partnership's interest
will be distributed first to the General Partners in an amount equal to 3%
of the deemed selling price, and then the remaining proceeds (net after
expenses and retained working capital) will be distributed 85% to the
Limited Partners and 15% to the General Partners.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements - Not Applicable.
(b) Pro Forma Financial Information - Narrative.
As a result of the redemption of the Partnership's interest in One
Woodfield, beyond the date of sale there will be no further rental and
other income, property operating expenses, mortgage interest and venture
partners' share of venture operations recorded for the Property in the
consolidated financial statements of the Partnership, which for the
Partnership's most recent fiscal year (the year ended December 31, 1996)
were $3,052,030, $1,926,240, $1,017,287 and $100,566, respectively. Rental
and other income, property operating expenses, mortgage interest and
venture partners' share of venture operations recorded for the Property
were $1,689,492, $1,209,316, $504,287 and $14,880, respectively, for the
six months ended June 30, 1997. Also, as a result of the redemption of the
Partnership's interest in One Woodfield, there are no further assets and
liabilities related to the Property, which at June 30, 1997 consisted of
property held for sale or disposition of $6,106,860; venture partners'
deficit in venture of $2,572,296; cash and other current assets of
$1,254,749; other assets of $557,169; long-term debt of $12,330,749;
accrued real estate taxes and other current liabilities of $2,121,294 and
security deposits of $30,207.
(c) Exhibits.
10.1 Partnership Interest Redemption Agreement between JMB
Income Properties, Ltd. - VII and One Woodfield Lake Partnership, dated
August 30, 1997, and exhibits thereto.
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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.
JMB INCOME PROPERTIES, LTD. - VII
BY: JMB Realty Corporation
(Managing General Partner)
By: GAILEN J. HULL
Gailen J. Hull
Senior Vice President
Principal Accounting Officer
Dated: October 27, 1997
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EXHIBIT 10.1
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PARTNERSHIP INTEREST
REDEMPTION AGREEMENT
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(One Woodfield Lake, Schaumburg, Illinois)
THIS AGREEMENT is made and entered into as of the 30th day of August,
1997, by and among JMB INCOME PROPERTIES, LTD.-VII, an Illinois limited
partnership ("Seller") and ONE WOODFIELD LAKE LIMITED PARTNERSHIP, an
Illinois limited partnership (the "Partnership").
R E C I T A L S
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A. Seller, Lawrence F. Levy, Mark A. Levy and Herbert L. Nudelman,
constitute the sole partners in the Partnership formed and existing
pursuant to the "Partnership Agreement" (as hereinafter defined). Except
as otherwise set forth herein, all terms used in a defined manner herein
shall have the meanings set forth for such terms in the Partnership
Agreement.
B. The Partnership is the beneficiary of a land trust that owns
fee title to an office building located in Schaumburg, Illinois and
commonly known as "One Woodfield Lake" (the "Business Property").
C. Seller desires to sell, and Partnership desires to redeem and
retire, all of the Seller's interest in the Partnership, and Seller desires
to withdraw from the Partnership, all in the manner hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual undertakings of the
parties hereto, it is hereby agreed as follows:
1. THE TRANSACTIONS.
A. REDEMPTION OF PARTNERSHIP INTEREST. For the consideration and
on the terms and conditions hereinafter set forth, Seller shall transfer
and assign to the Partnership, and the Partnership shall redeem from
Seller, the entire right, title and interest of Seller in the Partnership,
including, but not limited to, Seller's interest in the Business Property
and in the capital and profits and losses of the Partnership. The
Partnership interests to be redeemed by the Partnership as aforesaid are
herein called the "Redeemed Partnership Interest".
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B. REDEMPTION PRICE. In consideration for the redemption of the
Redeemed Partnership Interest, the Partnership agrees to distribute to
Seller consideration (the "Redemption Price") in an amount equal to
$4,730,744, as adjusted by (i) the "Proration Amount", as such term is
hereinafter defined, and (ii) a credit to the Partnership for the costs of
completing the tenant improvements for Xerox in an amount equal to the
difference between (1) $378,720 and (2) any funds then being held on the
Closing Date by the "Existing Lender" (as hereinafter defined) or its
agents in a tenant improvement escrow account, the amount to be paid as
aforesaid being herein called the "Closing Payment". The Redemption Price
shall be paid on the Closing Date by wire transfer to Seller of immediately
available federal funds in accordance with wiring instructions to be
provided by Seller in connection with the closing hereunder. The
Redemption Price is the total consideration payable by the Partnership to
the Seller for the Redeemed Partnership Interest and following the
"Closing" (as hereinafter defined) and payment to Seller of the Closing
Payment, Seller shall be deemed to have withdrawn from the Partnership and
shall not retain an interest in or be entitled to receive distributions of
any other Partnership assets.
C. CONSENT OF EXISTING LENDER. It shall be a condition precedent
to the Obligations of Seller to sell, and the Partnership to redeem the
Redeemed Partnership Interest that the Existing Lender consent in writing
to the redemption transactions hereunder. It shall be a further condition
precedent to Seller's obligations to sell the Redeemed Partnership Interest
that the Existing Lender release Seller from any obligations under the
Existing Loan, the form of such release being subject to Seller's
reasonable approval. If the written consent of the Existing Lender is not
received on or before the Closing Date, then either party shall be entitled
to terminate this Agreement. If a release of Seller from Existing Lender
in form reasonably satisfactory to Seller is not received on or before the
Closing Date, then Seller shall be entitled to terminate this Agreement.
Seller and the Partnership shall reasonably cooperate with each other to
obtain such consent and release. In connection therewith, the Partnership
shall promptly deliver such information (including financial information)
as Existing Lender shall reasonably request. Notwithstanding the
foregoing, in the event that the Partnership refinances the debt evidenced
by the Existing Loan with a new loan (the
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"New Loan") simultaneously with the Closing, The provisions regarding the
consent of and release by the Existing Lender set forth in this paragraph
1C shall not apply. In the event that the Partnership obtains the New Loan
at Closing as aforesaid, Seller shall not be deemed to be part of the
Partnership at the time of the funding of the New Loan and Seller shall
have no obligations in connection with the New Loan.
D. CERTAIN DEFINITIONS.
(1) "Partnership Agreement", as used herein, means that
certain agreement captioned "Amended and Restated Agreement of Limited
Partnership of One Woodfield Lake", dated as of May 27, 1980 by and among
Seller, Lawrence F. Levy, Mark A. Levy, James DeRose, Herbert L. Nudelman
and J&G Partnership, as amended by that certain agreement captioned "First
Amendment to Amended and Restated Agreement of Limited Partnership of One
Woodfield Lake", dated as of September 17, 1981, by and among Seller,
Lawrence F. Levy, Mark A. Levy, James DeRose and Herbert L. Nudelman, and
by that certain amendment captioned "Second Amendment to Amended and
Restated Agreement of Limited Partnership of One Woodfield Lake", dated as
of May 13, 1991, by and among Seller, Lawrence F. Levy, Mark A. Levy and
Herbert L. Nudelman, together with all other amendments or modifications
entered into prior hereto.
(2) "Existing Loan", as used herein, means that certain loan
in the original principal amount of $12,600,000 made to the Partnership and
currently held by John Hancock Mutual Life Insurance Company ("Existing
Lender"), which loan is more particularly described in that certain
agreement captioned "Third Note and Mortgage Modification Agreement" dated
as of May 1, 1995 between LaSalle National Trust, N.A., as successor
trustee, and Existing Lender (such document, together with all other
documents or instruments evidencing or securing the Existing Loan,
including any and all amendments thereto, are herein called the "Existing
Loan Documents").
(3) "Proration Amount", as used herein, means the net amount
of the credit (or debit) to Seller as a result of the allocation of income
and expenses to the "Old Partnership" (as such term is hereinafter defined)
by reason of the prorations hereinafter provided for.
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2. CLOSING PROCEDURE. The acquisition of the Redeemed Partnership
Interest (the "Closing") shall be consummated through a money lender's
escrow closing conference ("Closing Conference") which shall be held on the
Closing Date at the offices of Chicago Title Insurance Company at 171 North
Clark Street, Chicago, Illinois. As used herein, the "Closing Date" means
October 10, 1997, or such other date as shall be hereafter agreed upon by
the parties.
A. DELIVERY OF DOCUMENTS.
(1) ESCROW. On or before the Closing Date, the parties shall
deliver the following: (1) by Seller, duly executed and acknowledged
originals of (a) an assignment of the Redeemed Partnership Interest
("Assignment of Partnership Interest") in the form of Exhibit "A" attached
hereto and made a part hereof, and (2) by the Partnership, a release and
indemnification agreement ("Release and Indemnification Agreement") in the
form of Exhibit "B" attached hereto and made a part hereof, together with
the Closing Payment in immediately available federal funds. Such
deliveries may be made pursuant to escrow instructions ("Escrow
Instructions") to be executed among the Partnership, Seller and escrow
holder reasonably acceptable to both parties, which Escrow Instructions
shall be in form reasonably acceptable to such parties in order to
effectuate the intent hereof.
B. DELIVERY TO PARTIES. Upon the satisfaction of the conditions
set forth in the Escrow Instructions, then (x) the Assignment of
Partnership Interest shall be delivered to the Partnership, (y) the Release
and Indemnification Agreement and the Closing Payment shall be delivered to
Seller and (z) at the Closing Conference, the following additional items
shall be delivered:
(1) SELLER DELIVERIES. Seller shall deliver to the
Partnership the following:
(a) Duly executed and acknowledged certificates
regarding the "non-foreign" status of Seller;
(b) A certificate of Seller ("Seller Closing Certifi-
cate") updating the representations and warranties contained in paragraph
4A hereof to the Closing Date and noting any changes thereto; and
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(c) Evidence reasonably satisfactory to the Partnership
respecting the due organization of Seller and the due authorization and
execution of this Agreement and the documents required to be delivered
hereunder.
(2) PARTNERSHIP DELIVERIES. The Partnership shall deliver to
Seller the following:
(a) A certificate of the Partnership ("Partnership
Closing Certificate") updating the representations and warranties contained
in paragraph 4B hereof to the Closing Date and noting any changes thereto;
(b) Evidence reasonably satisfactory to Seller
respecting the due authorization and execution of this Agreement and the
documents required to be delivered hereunder; and
(c) Any other documents or instruments required to be
delivered by the Partnership hereunder.
C. PARTNERSHIP AMENDMENTS. Seller shall execute and deliver such
amendments to the Partnership Agreement and any Certificate of Limited
Partnership of the Partnership and such other Partnership documents as may
be reasonably required to effectuate the redemption of Seller's interest in
the Partnership and Seller's withdrawal from the Partnership, each as
contemplated herein. The Partnership shall cause all other partners of the
Partnership which may be necessary to sign such documents to execute and
deliver the same.
D. PRORATION OF TAXABLE INCOME. The Partnership's taxable income
or loss for 1997 will be prorated as of the Closing Date to allocate to the
Seller its distributive share of the Partnership's income and expenses for
the portion of the Partnership's taxable year ending on the Closing Date in
accordance with the applicable provisions of the Partnership Agreement.
E. CALCULATION OF PRORATION AMOUNT. The Proration Amount will be
determined on the basis of a written statement or statements prepared and
approved by the Partnership and Seller prior to the Closing Conference.
The parties will cooperate with each other in good faith in connection with
the computation of the Proration Amount. The "Proration Amount" will be
equal to the difference between (i) the "Other Assets" (as hereinafter
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defined) and (ii) the "Other Liabilities" (as hereinafter defined). The
Redemption Price will be increased by the amount by which Other Assets
exceed Other Liabilities and the Redemption Price will be reduced by the
amount by which Other Liabilities exceed Other Assets. The Other Assets
and Other Liabilities will be determined by reference to the Partnership's
accrual basis financial statements prepared in accordance with generally
accepted accounting principles, with the modifications described in this
paragraph. The term "Other Assets" shall mean the following assets of the
Partnership as of the Closing Date: (a) cash and cash equivalents,
including, but not limited to, the funds held in the real estate tax
account, and the funds held in the security deposit account, if any, each
administered by the Existing Lender or its agents (provided, however, the
cash in the tenant improvement escrow referred to in paragraph 1B above
shall not be considered an Other Asset); (b) accounts receivable, net of
any reserve for receivables deemed reasonably uncollectible by the parties
(including, but not limited to, unpaid rent from tenants, but excluding
unpaid rent from those tenants which have historically paid their rent in a
timely fashion so long as such unpaid rent due from such tenants has been
delinquent for less than forty-five (45) days); and (c) prepaid expenses.
The term "Other Liabilities" shall mean, as of the Closing Date, all of the
Partnership's: (w) accounts payable and prepaid rent; (x) accrued but
unpaid expenses (other than accrued real estate taxes); (y) security
deposits; and (z) accrued but unpaid real estate taxes (determined on the
basis of 107% of the second installment of the tax bill for 1996). The
Proration Amount shall be estimated by the parties no less than three (3)
days prior to the Closing Conference and the final Proration Amount will be
determined at the Closing Conference.
F. CLOSING COSTS. Seller shall pay (i) its own legal fees in
connection with the transactions under this Agreement, (ii) all state,
county and Village of Schaumburg transfer taxes (if any), and (iii) eighty
percent (80%) of any release, escrow, recording fees, title or survey fees
(if any); provided, however, that in no event shall Seller be obligated to
expend more than $5,000 in the aggregate for such title or survey fees.
The Partnership shall pay (i) its own legal fees in connection with the
transactions under this Agreement, and (ii) the balance of any documentary,
filing, recording, conveyance, release, escrow, recording fees,
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title or survey fees or filing charges for any instruments or documents
which may be recorded or filed, if any (but only to the extent that Seller
is not responsible for such expenses in accordance with the immediately
preceding sentence).
3. PROFITS AND LOSSES OF THE PARTNERSHIP PRIOR TO CLOSING; TAX
RETURNS. Subject to the provisions set forth in paragraph 2E above, the
parties confirm that profits and losses of the Partnership for the period
from January 1, 1997 through the Closing Date shall be allocated for tax
reporting purposes pursuant to the applicable provisions of the Partnership
Agreement. Seller will cooperate with the Partnership in providing and
preparing such information and items as may be required in order to timely
prepare and deliver tax returns and other similar items after the Closing
Date (and, in connection therewith, after the Closing Date the Partnership
shall continue to provide Seller full access to all books and records of
the Partnership and to all other financial information as may be reasonably
required in connection with such determinations).
4. REPRESENTATIONS AND WARRANTIES.
A. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby
represents and warrants to the Partnership as follows:
(1) Except as set forth in subparagraphs A(2) through A(11)
below, Seller makes no representation or warranty concerning title to the
Business Property, the physical condition of the Business Property
(including, but not limited to, the condition of the soil or the
improvements), the environmental condition of the Business Property
(including, but not limited to, the presence or absence of hazardous
substances on or respecting the Business Property), the compliance of the
Business Property with applicable laws and regulations (including, but not
limited to, zoning and building codes or the status of development or use
rights respecting the Business Property), the financial condition of the
Business Property or any other representation or warranty respecting any
income, expenses, charges, liens or encumbrances, rights or claims on,
affecting or pertaining to the Business Property or any part thereof. The
Partnership acknowledges that, except as to matters specifically set forth
in subparagraphs A(2) through A(11) below, the Partnership will acquire the
Redeemed Partnership Interest solely on the basis of (a) its own physical
and financial examination of
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the Business Property (the Partnership having completed all such due
diligence reviews, examinations and inspections deemed necessary by the
Partnership) and (b) information and knowledge in its possession and in the
possession of The Levy Organization Management, Inc. (the "Manager"). The
Partnership is not relying upon, and has no need to rely upon, any
knowledge or information in the possession of Seller with respect to any of
the foregoing matters except as set forth herein.
(2) Seller is a limited partnership, duly organized, validly
and in good standing existing under the laws of the State of Illinois.
(3) Seller is duly authorized, and qualified under any and
all applicable laws, regulations, ordinances and orders to do all things
required of it, under and in connection with this Agreement.
(4) Seller has the right, power and authority to enter into
and perform the terms of this Agreement and to consummate the transactions
contemplated hereby.
(5) This Agreement and all agreements, instruments and
documents herein provided to be executed or to be caused to be executed by
Seller are (or, in the case of agreements, instruments and documents
executed as of the Closing Date, will be as of the Closing Date) duly
authorized, executed and delivered by, and binding upon, Seller.
(6) Seller owns the Redeemed Partnership Interest, free and
clear of any and all liens, encumbrances, security interests, rights,
options, claims and demands (other than any security interests and rights
granted under the Partnership Agreement).
(7) Seller has no knowledge of and has received no written
notice from any municipal, county, state or other governmental authority or
any insurance company (i) regarding any violation of any building codes
and/or zoning ordinances or other applicable governmental requirements,
(ii) regarding any pending or threatened condemnation proceedings, (iii)
regarding any proceedings, litigation or administrative actions that could
or would cause the change, redefinition, or other modification of the
zoning classification, or other legal requirements applicable to the
Business Property or any part thereof, or (iv) regarding any pending or
threatened special taxes or assessments with respect to the Business
Property.
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(8) Seller has no knowledge and has received no written
notice of the existence of any recorded or unrecorded mechanic's or
materialman's liens or any claims for such liens affecting the Business
Property.
(9) To Seller's knowledge, (i) there are no service
agreements or contracts or other agreements (other than as expressly set
forth in this Agreement) relating to the Business Property which will be in
force on the Closing Date.
(10) This Agreement and all agreements, instruments and
documents herein provided to be executed or to be caused to be executed and
delivered by Seller and are binding upon Seller. Seller has the legal
capacity and authority to enter into this Agreement and consummate the
transactions herein provided without the consent or joinder of any other
party (except as set forth in this Agreement). Subject to this
subparagraph and paragraph 1C above, neither this Agreement nor anything
required to be done under this Agreement violates or shall violate any
note, mortgage, contract, agreement or instrument to which Seller is a
party.
(11) For purposes of this Agreement, Seller's knowledge means
the present actual knowledge of Julia Stibolt and Thomas Omundson of JMB
Realty Corporation and the portfolio manager and leasing manager,
respectively, overseeing the investment of Seller in the Partnership.
Notwithstanding anything to the contrary set forth in this Agreement,
Seller shall have no liability with respect to a breach of any of the
representations and warranties made by Seller in this Agreement if the
Partnership proceeds with the closing of the transaction contemplated
hereby with actual knowledge (or if Ruth A. Coniff or Lawrence F. Levy of
the Manager has actual knowledge) of such breach after the date hereof but
prior to the Closing Date.
B. REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP. Partnership
hereby represents and warrants to Seller as follows:
(1) The Partnership has the right, power and authority to
enter into and perform the terms of this Agreement and to consummate the
transactions contemplated hereby.
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(2) This Agreement and all agreements, instruments and
documents herein provided to be executed or to be caused to be executed by
the Partnership are (or, in the case of agreements, instruments and
documents executed as of the Closing Date, will be as of the Closing Date)
duly authorized, executed and delivered by, and binding upon, the
Partnership.
5. ADDITIONAL CONDITIONS.
A. ADDITIONAL CONDITIONS TO THE PARTNERSHIP'S OBLIGATIONS. In
addition to the conditions provided in other provisions of this Agreement,
the Partnership's obligations hereunder are subject to the following
conditions precedent. Notwithstanding anything to the contrary contained
in this Agreement, each of the conditions set forth in this paragraph 5A
may be waived in writing by Partnership, such conditions being intended for
the exclusive protection and benefit of Partnership. In the event that
such conditions are not satisfied or waived by Partnership prior to the
Closing Date, then, at the option of Partnership, this Agreement may be
terminated.
(1) PERFORMANCE BY SELLER. The due performance by Seller of
each and every undertaking and agreement to be performed by it hereunder
(including, but not limited to, the delivery of the items specified in
paragraph 2 hereof) and the truth of each representation and warranty made
in this Agreement by Seller at the time as of which the same is made and as
of the Closing Date as if made on and as of the Closing Date.
(2) ABSENCE OF SELLER BANKRUPTCY/DISSOLUTION EVENT. That at
no time on or before the Closing Date shall any of the following
("Bankruptcy/Dissolution Event") have been done by, against or with respect
to Seller or any partner in Seller: (a) the commencement of a case under
Title 11 of the U.S. Code, as now constituted or hereafter amended, or any
other appointment of a trustee or receiver of any property interest, (b) an
assignment for the benefit of creditors, (c) an attachment, execution or
other judicial seizure of a substantial property interest, (d) the taking
of, failure to take or submission to any action indicating (after
reasonable investigation) an inability to meet its financial obligations as
they accrue, or (e) a dissolution.
(3) CASUALTY LOSS OR EMINENT DOMAIN. If, on or prior to the
Closing Date, either any portion of the Business Property is taken pursuant
to eminent domain proceedings
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or any of the improvements at the Business Property are damaged or
destroyed by any casualty, Seller shall have no obligation to repair or
replace any such damage or destruction. If, on or prior to the Closing
Date, any portion of the Business Property is taken pursuant to eminent
domain proceedings which constitute a "Material Condemnation" (as
hereinafter defined), or any of the improvements located on the Business
Property are damaged or destroyed by a "Material Casualty" (as hereinafter
defined), the Partnership may, at its option, either (a) terminate this
Agreement by written notice to Seller on or before the Closing Date (in
which event neither party shall have any liability to the other, or (b)
close the transaction, in which event (i) the Partnership shall be entitled
to all insurance or condemnation proceeds relating to such casualty or
condemnation, and (ii) the Partnership will be entitled to a credit against
the Redemption Price equal to eighty percent (80%) of any deductible
applicable to such insured loss. As used herein, the terms "Material
Condemnation" and "Material Casualty" shall mean a condemnation or
casualty, as applicable, after which the cost of restoration of the
Business Property exceeds $100,000, as reasonably determined by the
parties. In the event that the cost of restoration of the Business
Property following a condemnation or casualty as aforesaid is less than
$100,000 (as reasonably determined by the parties), then the Partnership
shall be obligated to close the transaction, in which event (i) the
Partnership shall be entitled to all insurance or condemnation proceeds
relating to such casualty or condemnation, and (ii) the Partnership will be
entitled to a credit against the Redemption Price equal to eighty percent
(80%) of any deductible applicable to such insured loss.
4. TITLE ENDORSEMENT. The Partnership's receipt of a
datedown endorsement to the Partnership's existing owner's title insurance
policy for the Business Property which (i) extends the effect date of the
policy to the Closing Date, (ii) increases the amount of insurance to an
amount equal to the appraised value of the Business Property, and (iii)
shows no new Schedule B exceptions (which have not been previously approved
by Lawrence F. Levy) since the effective date of said policy. Conclusive
evidence of the availability of such title shall be the irrevocable
commitment of the title company to issue to the Partnership on the Closing
Date such datedown endorsement.
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B. ADDITIONAL CONDITIONS TO SELLER'S OBLIGATIONS. In addition to
the conditions provided in other provisions of this Agreement, Seller's
obligations hereunder are conditioned on the following:
(1) PERFORMANCE BY THE PARTNERSHIP. The due performance by
the Partnership of each and every undertaking and agreement to be performed
by it or any member thereof (including, but not limited to, the delivery of
the items specified in paragraph 2 hereof) and the truth of each
representation and warranty made in this Agreement by the Partnership at
the time as of which the same is made and as of the Closing Date as if made
on and as of the Closing Date.
(2) ABSENCE OF PARTNERSHIP BANKRUPTCY/DISSOLUTION EVENT.
That at no time on or before the Closing Date shall any
Bankruptcy/Dissolution event of the following have been done by, against or
with respect to the Partnership.
C. OUTSIDE DATE. In the event that for any reason the redemption
herein contemplated shall not be consummated on or before September 15,
1997, then any party may at any time thereafter, by written notice to the
other parties, terminate this Agreement and the obligations of the parties
hereunder; provided, however, that, subject to the limitations on liability
set forth herein, such termination shall not release any party from
liability for breach of this Agreement.
6. INDEMNIFICATION.
A. INDEMNIFICATION BY THE PARTNERSHIP. As of the Closing Date,
the Partnership as it is constituted after the closing hereunder, shall
hold harmless, indemnify and defend Seller from and against all claims,
rights, demands, obligations, liabilities, costs and expenses (including
reasonable attorneys' fees) of any kind or nature related to the
Partnership Agreement, the Partnership, the Business Property, Existing
Loan or any of the "Collateral Agreements" (the "Claims"), but only to the
extent the Claims arise and accrue after the Closing Date (and the
Partnership as it is constituted after the Closing hereunder, shall release
Seller from all such matters). Notwithstanding the foregoing, Seller shall
remain liable for, and shall hold harmless, indemnify and defend the
Partnership for Seller's pro rata (i.e., 80%) share of any Claims that
arise and accrue on or before the Closing Date.
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B. INDEMNIFICATION BY SELLER. Seller shall hold harmless,
indemnify and defend the Partnership and all of its partners from and
against any loss or damage to the Partnership or any of its partners
resulting from any inaccuracy in or breach of any representation and
warranty of Seller under this Agreement (or any agreement executed in
connection herewith) or resulting from any breach or default by Seller
under this Agreement (or any agreement executed in connection herewith).
C. GENERAL INDEMNITY PROVISIONS. Each indemnity provided for
under this Agreement shall be subject to the following provisions:
(1) The indemnity shall cover the costs and expenses of the
indemnitees, including reasonable attorneys' fees, related to any actions,
suits or judgments incident to any of the matters covered by such
indemnity.
(2) The indemnitee shall notify the indemnitor of any claim
against the indemnitee covered by the indemnity within 30 days after it has
notice of such claim, but failure to notify the indemnitor shall in no case
prejudice the rights of the indemnitee under this Agreement unless the
indemnitor shall be prejudiced by such failure and then only to the extent
the indemnitor shall be prejudiced by such failure. Should the indemnitor
fail to discharge or undertake to defend the indemnitee against such
liability upon learning of the same, then the indemnitee may settle such
liability, and the liability of the indemnitor hereunder shall be
conclusively established by such settlement, the amount of such liability
to include both the settlement consideration and the reasonable costs and
expenses, including reasonable attorneys' fees, incurred by the indemnitee
in effecting such settlement.
D. DEFINITION. As used herein, "Collateral Agreements" means the
individual and collective agreements, instruments, documents and covenants
entered into under or pursuant to or in connection with or concurrently
with the Partnership Agreement and any amendment or amendments made at any
time or times heretofore to any such agreements, instruments, documents or
covenants.
7. SUCCESSORS AND ASSIGNS. The Partnership may not assign or
transfer its rights or obligations under this Agreement without the prior
written consent of Seller (in which event such transferee shall assume in
writing all of the transferor's obligations hereunder, but
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such transferor shall not be released from its obligations hereunder);
provided, however, the Partnership may assign its interest in this
Agreement to any one or more of its partners or to a limited partnership,
limited liability company or other entity in which the Partnership or any
one or more of its partners (i) is the managing general partner or managing
member or in which the Partnership or any one or more of its partners
otherwise has the power to control management, and (ii) has not less than a
51% interest in capital and profits. No consent given by Seller to any
transfer or assignment of the Partnership's rights or obligations hereunder
shall be construed as a consent to any other transfer or assignment of the
Partnership's rights or obligations hereunder. No transfer or assignment
in violation of the provisions hereof shall be valid or enforceable.
Subject to the foregoing, this Agreement and the terms and provisions
hereof shall inure to the benefit of and be binding upon the successors
and assigns of the parties.
8. WAIVER OF RIGHT TO PURCHASE. If the transactions hereunder
shall fail to close for any reason other than due to (i) a default by
Seller under this Agreement, (ii) an occurrence of a Seller
Bankruptcy/Dissolution Event, (iii) an occurrence at the Business Property
of a Material Casualty or a Material Condemnation, (iv) the existence of a
material title defect affecting the Business Property, which material title
defect does not affect the Business Property as of the date hereof, the
cure or remedying of which will reasonably exceed $25,000, and which
material title defect was not caused by a partner in the Partnership other
than Seller, or (v) a change in the zoning classification covering the
Business Property which materially impacts the ability of the Partnership
to operate the Business Property as an office building, Partnership hereby
agrees that Lawrence F. Levy's rights under Section 7.1B(2) of the
Partnership Agreement (or any other similar rights of first offer, first
refusal or option to purchase under the Partnership Agreement) shall
thereupon terminate (and, without limitation thereon, Seller shall have the
right to cause a sale of the Business Property without having any
obligation to give Lawrence F. Levy any rights to purchase the Business
Property in connection therewith). Seller agrees that neither the
Partnership nor any of its general or limited partners shall have any
personal liability in the event of a default by the Partnership under this
Agreement, Seller agreeing that it will
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not institute any lawsuit to seek, obtain or take any monetary judgment
against the Partnership or any of its partners or against any property of
any of its partners on account of any default by the Partnership under this
Agreement.
9. BROKERS. Except for any fees which may be due to JMB Realty
Corporation (whose fees shall be paid by Seller), Seller represents and
warrants to the Partnership, and the Partnership represents and warrants to
Seller, that no broker or finder has been engaged by it, respectively, in
connection with any of the transactions contemplated by this Agreement or
to its knowledge is in any way connected with any of such transactions. In
the event of a claim for broker's or finder's fee or commissions in
connection herewith, then Seller shall indemnify, hold harmless and defend
the Partnership from the same if it shall be based upon any statement or
agreement alleged to have been made by Seller, and the Partnership shall
indemnify and defend Seller from the same if it shall be based upon any
statement or agreement alleged to have been made by the Partnership. The
indemnification obligations under this paragraph 9 shall survive the
closing of the transactions hereunder or the earlier termination of this
Agreement. Seller shall hold harmless, indemnify and defend the
Partnership and all of its partners from and against any and all Claims
arising out of, relating to or resulting from Seller's payment of brokerage
fees or other fees to JMB Realty Corporation.
10. LIMITATION OF LIABILITY.
(a) Notwithstanding anything to the contrary contained
herein, if the closing of the transactions hereunder shall have occurred
(and the Partnership shall not have waived, relinquished or released any
applicable rights in further limitation), the aggregate liability of Seller
arising pursuant to or in connection with the representations, warranties,
indemnifications, covenants or other obligations (whether express or
implied) of Seller under this Agreement (or any document executed or
delivered in connection herewith) shall not exceed $500,000.
(b) No constituent partner in or agent of Seller, nor any
advisor, trustee, member, director, officer, employee, beneficiary,
shareholder, participant, representative or agent of any corporation or
trust that is or becomes a constitute partner in Seller (including,
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but not limited to, JMB Realty Corporation) shall have any personal
liability, directly or indirectly, under or in connection with this
Agreement or any agreement made or entered into under or pursuant to the
provisions of this Agreement, or any amendment or amendments to any of the
foregoing made at any time or times, heretofore or hereafter, and the
Partnership and its successor sand assigns and, without limitation, all
other persons and entities, shall look solely to the assets of Seller for
the payment of any claim or for any performance, and the Partnership, on
behalf of itself and its successors and assigns, hereby waives any and all
such personal liability. Notwithstanding anything to the contrary
contained in this Agreement, neither the negative capital account of any
constituent partner in Seller or in any other constituent partner of
Seller, nor any obligation of any constituent partner in Seller or in any
other constituent partner of Seller to restore a negative capital account
or to contribute capital to Seller or to any other constituent partner of
Seller, shall at any time be deemed to be the property or an asset of
Seller or any such other constituent partner, (and neither the Partnership
nor any of its successors or assigns shall have any right to collect,
enforce or proceed against or with respect to any such negative capital
account of partner's obligation to restore or contribute).
(c) Notwithstanding the foregoing, (i) if Seller or its
successor-in-interest shall fail to retain reserves of at least $600,000 at
the time of closing hereunder or (ii) if during the period commencing on
the Closing Date and ending on June 15, 1998 (the "Survival Period"),
Seller or its successor-in-interest shall utilize such reserves for any
purpose other than the payment of claims, expenses, liabilities or
attorneys' fees of Seller or such successor-in-interest (including any
amounts incurred in connection with resolving or defending any claim of
liability hereunder) with respect to a breach or alleged breach of the
representations, warranties, indemnifications, covenants or other
obligations (whether express or implied) of Seller under this Agreement (or
any document executed or delivered in connection herewith), or is otherwise
related to, connected with or concerns the Business Property or the
partnership in any manner (collectively, the "Specified Liabilities"), then
subject to the terms and conditions of this Agreement, the Partnership may,
during the Survival Period, look to the assets of JMB Realty Corporation,
as the general partner of
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Seller, for the payment of any Specified Liabilities; provided, however,
the aggregate liability of JMB Realty Corporation in connection therewith
shall not exceed $500,000 in the aggregate and shall be further limited as
follows:
(i) with respect to the initial reserve amount, such
liability shall be limited to the lesser of the amount by which $600,000
exceeds the amount actually reserved by Seller or its successor-in-interest
in closing hereunder, and $500,000; or
(ii) during the Survival Period, such liability shall be
limited to the lesser of the amount of such reserves which, during the
Survival Period, are utilized for purposes other than the payment of the
Specified Liabilities, and $500,000.
11. FURTHER INSTRUMENTS. Each party will, whenever and as often as
it shall be requested so to do by the other, cause to be executed,
acknowledged or delivered any and all such further instruments and
documents as may be necessary or proper, in the reasonable opinion of the
requesting party, in order to carry out the intent and purpose of this
Agreement or any agreement executed by all the parties hereto in connection
herewith.
12. SURVIVAL. All warranties, representations, covenants,
obligations and agreements contained in this Agreement shall survive the
closing hereunder and the transfer and conveyance of the Redeemed
Partnership Interest hereunder and any and all performances hereunder;
provided, however, any cause of action of a party for a breach of the
representations and warranties contained in paragraphs 4A and 4B hereof
shall survive until June 15, 1998, at which time such representations and
warranties (and any cause of action resulting from a breach thereof not
then in litigation) shall terminate.
13. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties respecting the matters herein set forth and supersedes
all prior agreements between the parties hereto respecting such matters.
This Agreement may not be modified or amended except by written agreement
signed by both parties.
14. TIME OF THE ESSENCE. Time is of the essence of this Agreement.
15. INTERPRETATION. Paragraph headings shall not be used in
construing this Agreement. Each party acknowledges that such party and its
counsel, after negotiation and consultation, have reviewed and revised this
Agreement. As such, the terms of this
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Agreement shall be fairly construed and the usual rule of construction, to
the effect that any ambiguities herein should be resolved against the
drafting party, shall not be employed in the interpretation of this
Agreement or any amendments, modifications or exhibits hereto or thereto.
16. GOVERNING LAW. This Agreement shall be construed and enforced
in accordance with the laws of the State of Illinois.
17. NOTICES. Any notice which a party is required or may desire to
give the other shall be in writing and shall be sent by personal delivery
or by mail (either [i] by United States registered or certified mail,
return receipt requested, postage prepaid, or [ii] by Federal Express or
similar generally recognized overnight carrier regularly providing proof of
delivery), addressed as follows (subject to the right of a party to
designate a different address for itself by notice similarly given):
TO THE PARTNERSHIP:
------------------
The Levy Organization, Inc.
980 N. Michigan Avenue, Ste. 400
Chicago, Illinois 60611
Attention: Joseph G. Lansing, Esq.
WITH COPY TO:
------------
Much Shelist Freed Denenberg Ament Bell & Rubenstein, P.C.
200 N. LaSalle Street, Ste. 2100
Chicago, Illinois 60601
Attention: Mark S. Litner, Esq.
TO SELLER:
---------
900 North Michigan Avenue
19th Floor
Chicago, Illinois 60611
Attention: Ms. Julia Stibolt
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WITH COPY TO:
------------
Pircher, Nichols & Meeks
1999 Avenue of the Stars
Suite 2600
Los Angeles, California 90067
Attention: Real Estate Notices (GML)
Any notice so given by mail shall be deemed to have been given as of the
date of delivery (whether accepted or refused) established by U.S. Post
Office return receipt or the overnight carrier's proof of delivery, as the
case may be. Any such notice not so given shall be deemed given upon
receipt of the same by the party to whom the same is to be given.
18. LEGAL COSTS. The parties hereto agree that they shall pay
directly any and all legal costs which they have incurred on their own
behalf in the preparation of this Agreement, all deeds and other agreements
pertaining to this transaction and that such legal costs shall not be part
of the closing costs. In addition, if either the Partnership or Seller
brings any suit or other proceeding with respect to the subject matter or
the enforcement of this Agreement, the prevailing party (as determined by
the court, agency or other authority before which such suit or proceeding
is commenced), in addition to such other relief as may be awarded, shall be
entitled to recover reasonable attorneys' fees, expenses and costs of
investigation actually incurred. The foregoing includes, but is not
limited to, attorneys' fees, expenses and costs of investigation
(including, without limitation, those incurred in appellate proceedings),
costs incurred in establishing the right to indemnification, or in any
action or participation in, or in connection with, any case or proceeding
under Chapter 7, 11 or 13 of the Bankruptcy Code (11 United States Code
Sections 101 et seq.), or any successor statutes.
19. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, provided each of the parties hereto executes at least one
counterpart; each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts, together, shall constitute but one
agreement.
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20. CONTINUATION OF THE PARTNERSHIP. The parties agree that the
Partnership shall continue and not be dissolved because of the redemption
of the Redeemed Partnership Interest or the withdrawal of the Seller from
the Partnership at Closing.
21. RETURN OF DOCUMENTS. The Seller shall, no later than seven (7)
days after the Closing Date, turn over to the Partnership all reports,
records, contracts and or other documents relating to the Partnership and
in Seller's possession or control
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first above written.
SELLER:
JMB INCOME PROPERTIES, LTD.-VII,
an Illinois limited partnership,
By: JMB REALTY CORPORATION,
a Delaware corporation,
General Partner
By: /s/ JULIA S. STIBOLT
Name: Julia A. Stibolt
Title: Vice President
PARTNERSHIP:
ONE WOODFIELD LAKE LIMITED PARTNERSHIP,
an Illinois limited partnership
By: /s/ LAWRENCE F. LEVY
Name: Lawrence F. Levy
Title: General Partner
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EXHIBIT LIST
------------
(One Woodfield Lake; Schaumburg, Illinois)
A - Assignment of Partnership Interest
B - Release and Indemnification Agreement
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EXHIBIT "A"
ASSIGNMENT OF PARTNERSHIP INTEREST
FOR VALUABLE CONSIDERATION, receipt whereof is hereby acknowledged,
the undersigned, JMB INCOME PROPERTIES, LTD.-VII, an Illinois limited
partnership ("Assignor"), hereby transfers, assigns and conveys to ONE
WOODFIELD LAKE LIMITED PARTNERSHIP, an Illinois limited partnership (the
"Partnership"), all of the Assignor's right, title and interest in the
Partnership, including, but not limited to, Seller's interest in the
Partnership's assets and in the capital and profits and losses of the
Partnership.
This Assignment of Partnership Interest is given pursuant to that
certain agreement captioned "PARTNERSHIP INTEREST REDEMPTION AGREEMENT"
("Agreement"), dated as of August _____, 1997, between Assignor and the
Partnership.
The covenants, agreements, representations, warranties and
limitations provided in the Agreement with respect to the partnership
interest conveyed hereunder are hereby incorporated herein by this
reference as if herein set out in full and shall inure to the benefit of
and shall be binding upon Assignor and the Partnership, and their
respective successors and assigns. Except as set forth in said Agreement,
said partnership interest is assigned without warranty or representation,
express or implied.
Dated as of __________, 1997 JMB INCOME PROPERTIES, LTD.-VII,
an Illinois limited partnership,
By: JMB REALTY CORPORATION,
a Delaware corporation,
General Partner
By:
------------------------
Name:
------------------
Title:
------------------
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<PAGE>
EXHIBIT "B"
RELEASE AND INDEMNIFICATION
----------------------------
(One Woodfield Lake, Schaumburg, Illinois)
THIS RELEASE AND INDEMNIFICATION is made as of the _____ day of
__________, 1997, by ONE WOODFIELD LAKE LIMITED PARTNERSHIP, an Illinois
limited partnership (the "Partnership"), to JMB INCOME PROPERTIES, LTD.-
VII, an Illinois limited partnership ("Seller").
R E C I T A L S:
A. Seller and the Partnership are parties to that certain
Partnership Interest Redemption Agreement (together with all amendments
thereto, the "Agreement"), dated effective as of August _____, 1997,
pursuant to which, subject to the terms and conditions therein set forth,
Seller agrees to assign to the Partnership all of Seller's interest in the
Partnership.
B. The Agreement requires the delivery of this Release and
Indemnification.
C. Capitalized terms not otherwise defined herein shall have
the meanings ascribed to such terms in the Agreement.
NOW, THEREFORE, pursuant to the Agreement, the Partnership (as
it is constituted after the Closing Date), hereby covenants and agrees:
1. That it shall hold harmless, indemnify and defend Seller
from and against all claims, rights, demands, obligations, liabilities,
costs and expenses (including reasonable attorneys' fees) of any kind or
nature with respect to (a) facts or events which arise after the Closing
Date, or (b) facts or events known to the Partnership which arose prior to
the Closing Date and related to the Partnership Agreement, the Partnership,
the Business Property, the Existing Loan or any of the Collateral
Agreements, and that the Partnership hereby releases Seller from all such
matters.
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2. All covenants, obligations and agreements contained in
this Release and Indemnification shall survive the closing under the
Agreement and the transfer and conveyance of the Redeemed Partnership
Interest thereunder and any and all performances thereunder.
Dated as of __________, 1997 ONE WOODFIELD LAKE LIMITED PARTNERSHIP,
an Illinois limited partnership
By:
------------------------------
Name:
------------------------
Title:
------------------------
2
