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
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EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 1996
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 0-10225
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BALCOR PENSION INVESTORS-II
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(Exact name of registrant as specified in its charter)
Illinois 36-3114027
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2355 Waukegan Road
Bannockburn, Illinois 60015
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 267-1600
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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
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<PAGE>
BALCOR PENSION INVESTORS-II
(An Illinois Limited Partnership)
BALANCE SHEETS
June 30, 1996 and December 31, 1995
(UNAUDITED)
ASSETS
1996 1995
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Cash and cash equivalents $ 11,052,027 $ 2,901,014
Cash and cash equivalents - Early Investment
Incentive Fund 239,328 308,993
Escrow deposits 130,252 113,962
Accounts and accrued interest receivable 1,077,160 250,265
Prepaid expenses 146,357 77,752
Deferred expenses, net of accumulated
amortization of $215,655 in 1996 and
$195,352 in 1995 131,527 151,830
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12,776,651 3,803,816
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Investment in loan receivable:
Wrap-around loan receivable 11,324,000 11,324,000
Less:
Loan payable - underlying mortgage 2,965,259 3,254,087
Allowance for potential loan losses 3,302,517 3,302,517
-------------- -------------
Net investment in loan receivable 5,056,224 4,767,396
Real estate held for sale (net of allowance
of $500,000 in 1996 and 1995) 22,475,638 27,518,370
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27,531,862 32,285,766
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$ 40,308,513 $ 36,089,582
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LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 106,451 $ 197,880
Due to affiliates 32,032 19,370
Other liabilities 234,061 154,471
Mortgage notes payable 12,053,506 12,138,360
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Total liabilities 12,426,050 12,510,081
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Limited Partners' capital (85,010
Interests issued) 33,862,309 29,692,815
Less Interests held by Early Investment
Incentive Fund (7,825 in 1996 and
7,310 in 1995) (4,920,893) (4,725,704)
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28,941,416 24,967,111
<PAGE>
General Partner's deficit (1,058,953) (1,387,610)
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Total partners' capital 27,882,463 23,579,501
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$ 40,308,513 $ 36,089,582
============== =============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-II
(An Illinois Limited Partnership)
STATEMENT OF INCOME AND EXPENSES
for the six months ended June 30, 1996 and 1995
(UNAUDITED)
1996 1995
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Income:
Interest on loans receivable $ 736,060 $ 1,034,742
Less interest on loans payable -
underlying mortgages 135,059 171,969
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Net interest income on loans 601,001 862,773
Income from operations of real estate
held for sale 1,198,681 1,229,500
Interest on short-term investments 67,088 252,691
Participation income 250,401 240,377
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Total income 2,117,171 2,585,341
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Expenses:
Administrative 332,755 187,284
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Total expenses 332,755 187,284
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Income before gain on sale of real estate 1,784,416 2,398,057
Gain on sale of real estate 3,731,149
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Net income $ 5,515,565 $ 2,398,057
============== =============
Net income allocated to
General Partner $ 413,667 $ 179,854
============== =============
Net income allocated to
Limited Partners $ 5,101,898 $ 2,218,203
============== =============
Net income per average number of
Limited Partnership Interests
outstanding (77,697 in 1996 and 79,130
in 1995) $ 65.66 $ 28.03
============== =============
Distributions to General Partner $ 85,010 $ 70,842
============== =============
Distributions to Limited Partners $ 932,404 $ 2,770,457
============== =============
Distributions per Limited Partnership $ 12.00 $ 35.00
Interest outstanding ============== =============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-II
(An Illinois Limited Partnership)
STATEMENT OF INCOME AND EXPENSES
for the quarters ended June 30, 1996 and 1995
(UNAUDITED)
1996 1995
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Income:
Interest on loans receivable $ 368,030 $ 368,202
Less interest on loans payable -
underlying mortgages 65,944 78,222
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Net interest income on loans 302,086 289,980
Income from operations of real estate
held for sale 683,706 713,181
Interest on short-term investments 33,217 124,821
Participation income 250,401
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Total income 1,269,410 1,127,982
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Expenses:
Administrative 248,772 105,277
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Total expenses 248,772 105,277
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Income before gain on sale of real estate 1,020,638 1,022,705
Gain on sale of real estate 3,731,149
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Net income $ 4,751,787 $ 1,022,705
============== =============
Net income allocated to
General Partner $ 356,384 $ 76,703
============== =============
Net income allocated to
Limited Partners $ 4,395,403 $ 946,002
============== =============
Net income per average number of
Limited Partnership Interests
outstanding (77,694 in 1996 and 79,126
in 1995) $ 56.57 $ 11.95
============== =============
Distribution to General Partner $ 42,505 $ 35,421
============== =============
Distribution to Limited Partners $ 466,202 $ 2,374,011
============== =============
Distribution per Limited Partnership $ 6.00 $ 30.00
Interest outstanding ============== =============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-II
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the six months ended June 30, 1996 and 1995
(UNAUDITED)
1996 1995
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Operating activities:
Net income $ 5,515,565 $ 2,398,057
Adjustments to reconcile net income to net
cash provided by operating activities:
Gain on sale of real estate (3,731,149)
Amortization of deferred expenses 20,303 26,119
Net change in:
Escrow deposits (16,290) (156,958)
Escrow deposits - restricted 81,159
Accounts and accrued interest
receivable (826,895) (175,627)
Prepaid expenses (68,605) (48,981)
Accounts payable (91,429) 61,337
Due to affiliates 12,662 (75,733)
Accrued liabilities 187,104
Other liabilities 79,590 (84,346)
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Net cash provided by operating activities 893,752 2,212,131
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Investing activities:
Collection of principal on
loans receivable 2,400,000
Improvements to real estate (129,800) (62,172)
Proceeds from sale of real estate 9,200,000
Costs incurred in connection with
sale of real estate (296,319)
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Net cash provided by investing
activities 8,773,881 2,337,828
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Financing activities:
Distributions to Limited Partners (932,404) (2,770,457)
Distributions to General Partner (85,010) (70,842)
Increase in cash and cash equivalents -
Early Investment Incentive Fund 69,665 (704)
Repurchase of Limited Partnership Interests (195,189) (232,684)
Principal payments on underlying
loans payable (288,828) (273,242)
Repayment of underlying loan payable (943,416)
Principal payments on mortgage
notes payable (84,854) (83,358)
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Net cash used in financing activities (1,516,620) (4,374,703)
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Net change in cash and cash equivalents 8,151,013 175,256
<PAGE>
Cash and cash equivalents
at beginning of year 2,901,014 7,699,482
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Cash and cash equivalents at end of period $ 11,052,027 $ 7,874,738
============== =============
The accompanying notes are an integral part of the financial statements
<PAGE>
BALCOR PENSION INVESTORS-II
(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. Interest Expense:
During the six months ended June 30, 1996 and 1995, the Partnership incurred
interest expense on mortgage notes payable on properties owned by the
Partnership of $565,269 and $572,813 and paid interest expense of $565,269 and
$572,533, respectively.
3. Transactions with Affiliates:
Fees and expenses, paid and payable by the Partnership to affiliates during the
six months and quarter ended June 30, 1996 were:
Paid
-----------------------
Six Months Quarter Payable
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Mortgage servicing fees $ 2,759 $ 2,759 $ 920
Reimbursement of expenses to
the General Partner, at cost 60,228 41,663 31,112
4. Sale of Real Estate:
In June 1996, the Partnership sold the Cumberland Pines Apartments in an all
cash sale for $9,200,000. From the proceeds of the sale, the Partnership paid
$296,319 in selling costs. The basis of the property was $5,172,532. For
financial statement purposes, the Partnership recognized a gain of $3,731,149
from the sale of this property.
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 Event:
In July 1996, the Partnership paid $9,691,147 to the holders of Limited
Partnership Interests, representing the quarterly distribution of Cash Flow of
$6.00 per Interest for the second quarter of 1996 and special distributions
from proceeds received from the sale of Cumberland Pines Apartments of $48.00
per Interest from Cash Flow and $60.00 per Interest from Mortgage Reductions.
<PAGE>
BALCOR PENSION INVESTORS-II
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Pension Investors-II (the "Partnership") is a limited partnership formed
in 1981 to invest in wrap-around mortgage loans and, to a lesser extent, other
junior mortgage loans and first mortgage loans. The Partnership raised
$85,010,000 through the sale of Limited Partnership Interests and used these
proceeds to originally fund thirty-three loans. Proceeds from prior loan
repayments were used to fund three additional mortgage loans. The Partnership
sold the Cumberland Pines Apartments in June 1996. As of June 30, 1996, the
Partnership is operating four properties acquired through foreclosure and has
one loan outstanding 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
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Summary of Operations
- ---------------------
The Partnership recognized a gain on the June 1996 sale of Cumberland Pines
Apartments which was the primary reason for the increase in net income during
the six months and quarter ended June 30, 1996 as compared to the same periods
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 repayment of the Stonegate Austin Mobile Home Park wrap-around loan in
March 1995 resulted in a decrease in net interest income on loans receivable
during the six months ended June 30, 1996 as 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. The Partnership did not recognize any provisions for potential
losses related to its loans or real estate held for sale during the six months
ended June 30, 1996 and 1995.
<PAGE>
Primarily due to lower average cash balances, interest income on short-term
investments decreased during 1996 as compared to 1995.
The Partnership's loan bears interest at a contractually-fixed interest rate.
The loan also provides for participation by the Partnership in increases in
value of the collateral property when the loan is repaid or refinanced. In
addition, the loan agreement allows the Partnership to receive a percentage of
rental income exceeding a base amount. This participation income is reflected
in the accompanying Statements of Income and Expenses when received. The
Partnership received participation income on the Alzina Office Building loan
during the six months ended June 30, 1996 and 1995.
The Partnership incurred higher legal, consulting, printing and postage costs
in connection with its response to a tender offer and certain related
litigation during the second quarter of 1996. As a result, administrative
expenses increased during 1996 as compared to 1995.
During the second quarter of 1996, the Partnership recognized a gain of
$3,731,149 in connection with the sale of Cumberland Pines Apartments.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership increased by approximately $8,151,000 as
of June 30, 1996 when compared to December 31, 1995 primarily due to the sale
of the Cumberland Pines Apartments. The Partnership generated cash flow
totaling approximately $894,000 from its operating activities primarily as a
result of the net interest income earned on its investment in loan receivable,
the operations of its properties, and the interest received on its short-term
investments, net of the payment of administrative expenses. The Partnership
also generated cash flow from its investing activities of approximately
$8,904,000 primarily due to the receipt of proceeds from the sale of the
Cumberland Pines Apartments. The Partnership's financing activities consisted
of the payment of distributions totaling approximately $1,017,000 to the
Partners, repurchases of Limited Partnership Interests totaling approximately
$195,000 and principal payments on the underlying loan and mortgage notes
payable totaling approximately $374,000. The Partnership also made a special
distribution to Limited Partners from Cash Flow and Mortgage Reductions in July
1996 as described below.
The Partnership defines cash flow generated from its properties as an amount
equal to the properties' revenue receipts less property related expenditures,
which include debt service payments. During the six months ended June 30, 1996
and 1995, all four of the Partnership's remaining properties generated positive
cash flow. The Cumberland Pines Apartments, which was sold in June 1996,
generated positive cash flow during the six months ended June 30, 1995 and
prior to its sale in 1996.
As of June 30, 1996, the occupancy rates of the Partnership's remaining
residential properties ranged from 96% to 97%. The occupancy rate of the
Parkway Distribution Center was 96%. Many rental markets continue to remain
extremely competitive; therefore, the General Partner's goals are to maintain
high occupancy levels, while increasing rents where possible, and to monitor
and control operating expenses and capital improvement requirements at the
properties.
<PAGE>
As previously reported, the Partnership is in its liquidation stage. The
General Partner believes that the market for multifamily housing properties is
favorable to sellers of these properties and the General Partner's strategy is
to sell or otherwise dispose of all assets by the end of 1996. During June
1996, the Partnership sold the Cumberland Pines Apartments. Currently, the
Partnership has entered into contracts to sell the Sherwood Acres Phases I and
II Apartments and the Parkway Distribution Center for sale prices of
$19,726,000 and $6,200,000, respectively. The Partnership is actively marketing
the Hollowbrook Apartments. In addition, the Partnership has contracted to sell
the wrap-around loan collateralized by the Alzina Office Building in August
1996. See Item 5. Other Information for additional information. Proceeds will
be distributed to Limited Partners upon the sale or disposition of the
remaining assets.
In June 1996, Heitman/JMB Advisory Corporation, an unaffiliated third party,
initiated discussions with the General Partner for a potential sale of all of
the remaining properties and the loan of the Partnership. These discussions did
not result in any agreement of terms between the parties, and it is unlikely at
this time that a sale of the Partnership's assets to them will be consummated.
This will not affect the Partnership's strategy as described in the preceding
paragraph.
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. Lower interest rates
may increase the probability that borrowers' may seek prepayment of the
Partnership's loan whereas rising interest rates decrease the yields on the
loans and make prepayment less likely.
As mentioned above, during June 1996, the Partnership sold the Cumberland Pines
Apartments in an all cash sale for $9,200,000. From the proceeds of the sale,
the Partnership paid $296,319 in selling costs. The remainder of the proceeds
were distributed to the Partners in July 1996. See Note 4 of Notes to Financial
Statements for additional information.
In July 1996, the Partnership paid $9,691,147 to the holders of Limited
Partnership Interests representing the quarterly distribution of Cash Flow of
$6.00 per Interest for the second quarter of 1996 and special distributions
from proceeds received from the sale of Cumberland Pines Apartments of $48.00
per Interest from Cash Flow and $60.00 per Interest from Mortgage Reductions.
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
distributions totaling $1,482.68 per $1,000 Interest. Of this amount $1,011.50
represents Cash Flow from operations and $471.18 represents a return of
Original Capital. In July 1996, the Partnership also paid $382,545 to the
General Partner as its distributive share of Cash Flow distributed for the
second quarter of 1996 and made a contribution to the Early Investment
Incentive Fund in the amount of $127,515.
The Partnership expects to continue making cash distributions; however, the
level of such future distributions will be dependent upon the Cash Flow
generated by the receipt of mortgage payments and property cash flow, less
payments on the underlying mortgage loan and administrative expenses. The
General Partner believes it has retained, on behalf of the Partnership, an
<PAGE>
appropriate amount of working capital to meet cash or liquidity requirements
which may occur.
During the six months ended June 30, 1996, the General Partner on behalf of the
Partnership used amounts placed in the Early Investment Incentive Fund to
repurchase 515 Interests from Limited Partners at a total cost of $195,189.
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-II
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
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Williams class action
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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.
Proposed Class and Derivative Action Lawsuits
- ---------------------------------------------
On May 22, 1996, a proposed class and derivative action complaint was filed,
Chipain vs. Walton Street Capital Acquisition II, LLC (Circuit Court of Cook
County, Illinois, County Department, Chancery Division ("Chancery Court"), Case
No. 96 CH 05299) (the "Chipain Case"), naming the General Partner and the
general partners (together, the "Balcor Defendants") of nine other limited
partnerships sponsored by The Balcor Company (together, with the Partnership,
the "Affiliated Partnerships") as defendants. Additional defendants were
Insignia Management Group ("Insignia") and Walton Street Capital Acquisition
II, LLC ("Walton") and certain of their affiliates and principals
(collectively, the "Walton and Insignia Defendants"). The complaint alleged,
among other things, that the tender offers for the purchase of limited
partnership interests in the Affiliated Partnerships made by a joint venture
consisting of affiliates of Insignia and Walton were coercive and unfair.
The Walton and Insignia Defendants filed motions to dismiss the complaint,
which were granted on June 5, 1996. The plaintiffs filed an amended complaint,
which all defendants then moved to dismiss. On June 18, 1996, the court
dismissed the complaint in its entirety as to the Walton and Insignia
Defendants and as to the Balcor Defendants on all counts on which dismissal was
sought.
On June 14, 1996, a second proposed class and derivative action complaint was
filed in Chancery Court, Dee vs. Walton Street Capital Acquisition II, LLC
(Case No. 96 CH 06283) (the "Dee Case"). On July 1, 1996, a proposed class
action complaint was filed in the same court, Anderson vs. Balcor Mortgage
Advisors (Case No. 96 CH 06884) (the "Anderson Case"). An amended complaint
consolidating the Dee and Anderson Cases (the "Dee/Anderson Case") was filed on
July 25, 1996. The same day, the plaintiffs in the Chipain Case withdrew their
complaint. The Dee/Anderson Case names the Balcor Defendants, the Affiliated
Partnerships, and the Walton and Insignia Defendants, as defendants. The
<PAGE>
complaint seeks to assert class and derivative claims against the Walton and
Insignia Defendants and alleges that, in connection with the tender offers, the
Walton and Insignia Defendants misused the General Partner's and Insignia's
fiduciary positions and knowledge in breach of the Walton and Insignia
Defendants' fiduciary duty and in violation of the Illinois Securities and
Consumer Fraud Acts. The plaintiffs request certification as a class and
derivative action, unspecified compensatory damages and rescission of the
tender offers.
The Balcor Defendants intend to vigorously contest this action. No class has
been certified as of this date. Management of each of the Balcor Defendants
believes they have meritorious defenses to contest the claims. It is not
determinable at this time whether or not an unfavorable decision in this action
would have a material adverse impact on the Partnership.
Item 5. Other Information
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Sherwood Acres Apartments, Phases I and II
- -----------------------------------------
As previously described, on June 28, 1996, the Partnership contracted to sell
the Sherwood Acres Apartments, Phases I and II, Baton Rouge, Louisiana, to an
unaffiliated party, BH TFL, Inc., for a sale price of $19,726,000. Pursuant to
the agreement of sale, the purchaser is required to deposit $197,260 into an
escrow account as earnest money upon the completion of the purchaser's due
diligence review, which date has been extended upon the agreement of the
Partnership and the purchaser from July 23, 1996 to August 14, 1996. The
closing date of the sale has been extended from August 15, 1996 to September
15, 1996.
Alzina Office Building Loan
- ---------------------------
In 1982, the Partnership funded a $4,415,034 loan collateralized by a
wrap-around mortgage on the Alzina Office Building, Springfield, Illinois, and
evidenced by a wrap-around mortgage note in the principal amount of $11,324,000
(the "Loan"). The principal amount of the Loan included the principal amount of
an underlying first mortgage loan (the "Underlying Loan"). Pursuant to the
terms of the Loan, the borrower is required to make interest only payments on
the Loan through maturity in June 1997, at which time the amount of the Loan,
less the outstanding amount of the Underlying Loan, would be due to the
Partnership. As of August 1, 1996, the outstanding principal balances of the
Loan and the Underlying Loan are approximately $11,324,000 and $2,866,600,
respectively.
On August 8, 1996, the Partnership contracted to sell its interest in the Loan
to CS First Boston Mortgage Capital Corp. for a sale price equal to 107.60% of
the outstanding principal balance of the Loan less the outstanding principal
balance of the Underlying Loan at closing, scheduled for August 22, 1996
("Closing Date"). It is estimated that the sale price of the Loan will be
$9,100,000. The purchaser has deposited $453,750 into an escrow account as
earnest money with the remainder of the sale price payable in cash at closing.
From the proceeds of the sale, the Partnership will pay approximately $289,000
to an unaffiliated party as a commission. Neither the General Partner nor any
affiliate will receive a brokerage commission in connection with the sale of
<PAGE>
the Loan. The General Partner will be reimbursed by the Partnership for actual
expenses incurred in connection with the sale.
Affiliates of the General Partner have simultaneously contracted to sell their
interests in 3 other loans ("Other Loans") to the purchaser. In the event that
the closing of the sale of any of the Other Loans does not occur on the Closing
Date or the purchaser terminates the contract for any Other Loan, the sale
price of the Loan will be reduced by $25,000.
The closing is subject to the satisfaction of numerous terms and conditions.
There can be no assurance that all of the terms and conditions will be complied
with and, therefore, it is possible the sale of the Loan may not occur.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits:
(4) Form of Subscription Agreement previously filed as Exhibit 4(a) to
Amendment No. 1 to the Registrant's Registration Statement on Form S-11 dated
May 7, 1981 (Registration No. 2-70841) 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 September 30, 1992 (Commission File No.
0-10225) are incorporated herein by reference.
(10) (i) Agreement of Sale and attachment thereto relating to the sale of
Cumberland Pines apartment complex, Atlanta, Georgia, previously filed as
Exhibit (10) to the Registrant's Report on Form 10-Q for the quarter ended
March 31, 1996, is incorporated herein by reference.
(ii) Agreement of Sale and attachment thereto and Amendment to Agreement of
Sale and Escrow Agreement relating to the sale of Sherwood Acres Apartments,
Phases I and II, Baton Rouge, Louisiana, previously filed as Exhibits 2(a) and
2(b) to the Registrant's Current Report on Form 8-K dated June 28, 1996, is
incorporated herein by reference.
(iii) Purchase and Sale Agreement regarding the sale of the Partnership's
interest in the Alzina Office Building loan is attached hereto.
(27) Financial Data Schedule of the Registrant for the six-month period ended
June 30, 1996 is attached hereto.
(99) 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.
(b) Reports on Form 8-K: A Current Report on Form 8-K dated June 28, 1996 was
filed reporting the contract to sell Sherwood Acres Apartments, Phases I and
II, Baton Rouge, Louisiana and the closing of the sale of Cumberland Pines
Apartments, Atlanta, Georgia.
<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-II
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 Parker
----------------------------------------
Brian 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>
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") dated as of August 8, 1996
by and between LABCOR II LIMITED PARTNERSHIP ("Seller") and CS FIRST BOSTON
MORTGAGE CAPITAL CORP. ("Purchaser").
RECITALS
A. In accordance with the terms of a certain Loan Agreement (the "Loan
Agreement") between Balcor Pension Investors II ("BPI II") and Illinois
National Bank of Springfield, as Trustee under Trust Agreement dated December
29, 1972 and known as Trust No. 13-03770-00 ("Borrower"), BPI II made a certain
loan to the Borrower in the original principal amount of $11,324,000 (the
"Loan"). BPI II has assigned its interest in the Loan to Seller pursuant to a
certain Assignment of Loan Documents dated August 7, 1995 and recorded with the
Sangamon County, Illinois Recorder as Document No. 95-31385. The Loan is more
fully described on Exhibit A hereto. The Loan is evidenced and secured by a
mortgage (the "Mortgage") on the real property more fully described on Exhibit
B hereto (the "Property") and by any other documents or instruments which may
evidence or secure the Loan (collectively, the "Related Documents"). The Loan
Agreement, Mortgage and Related Documents are hereinafter collectively called
the "Loan Documents."
B. Borrower is also obligated to pay, or has acquired the Property subject
to, a loan in the original principal amount of $7,400,000 (the "Prior Mortgage
Loan"). The Prior Mortgage Loan is more fully described on Exhibit A hereto.
The Prior Mortgage Loan is evidenced and secured by a mortgage (the "Prior
Mortgage") on the Property and by any other documents or instruments which may
evidence or secure the Prior Mortgage Loan (collectively, the "Prior Mortgage
Related Documents"). The Prior Mortgage and the Prior Mortgage Related
Documents are hereinafter collectively called the "Prior Mortgage Loan
Documents").
C. Seller wishes to sell, and Purchaser wishes to purchase, subject to the
terms and conditions hereof:
(i) all right, title and interest of Seller in and to the Loan, together
with all Accrued Interest, Contingent Interest, and Deferred Interest (as those
terms are defined herein), and any accrued and unpaid fees with respect to the
Loan as of the Closing Date; and
(ii) all right, title and interest of Seller in and to the Loan Documents;
NOW, THEREFORE in consideration of the mutual representations, warranties,
covenants and agreements herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto hereby agree as follows:
Section 1. Definitions.
(a) As used herein, the following terms shall have the meanings herein
specified (to be equally applicable to both the singular and plural forms of
the terms defined), except to the extent otherwise specified to the contrary:
<PAGE>
"Accrued Interest" shall mean interest which shall have accrued on the Loan
since the most recent payment of interest with respect to the Loan and remains
unpaid.
"Adjustment" shall have the meaning specified in Section 11.
"Agreement" shall mean this Loan Sale Agreement, as it may be amended,
supplemented and modified from time to time.
"Bannockburn Loan" shall mean that certain loan made by Balcor Pension
Investors III to LaSalle National Bank, as Trustee under Trust Agreement dated
October 4, 1973 and known as Trust No. 46514 in the original principal amount
of $10,100,000, which is the subject of a Related Agreement.
"Borrower" shall have the meaning provided in Recital A.
"Business Day" shall mean any day other than (a) a Saturday or a Sunday or (b)
any other day in which commercial banks in Chicago, Illinois are required or
authorized by law to be closed for business.
"Closing" shall have the meaning provided in Section 6.
"Closing Date" shall have the meaning provided in Section 6.
"Contingent Interest" shall mean all interest in connection with the Loan which
shall become due and payable upon the occurrence of an event or circumstance
set forth in the Loan Documents which has not occurred on or prior to the
Closing Date.
"Deferred Interest" shall mean all interest which has accrued on the principal
amount of the Loan but which is not yet due and payable, excluding Contingent
Interest and Accrued Interest.
"Deposit" shall have the meaning provided in Section 3(a)(i).
"Escrow Agent" shall mean Chicago Title and Trust Company.
"Escrow Agreement" shall have the meaning specified in Section 3(b).
"Guarantor" shall have the meaning provided in Section 2(d)(vii).
"Immaterial part" shall have the meaning provided in Section 12(b).
"Indemnified Persons" means the Purchaser Indemnified Persons or the Seller
Indemnified Persons, as the case may be.
"Indemnifying Person" means the party who shall be obligated to indemnify the
Indemnified Persons under this Agreement.
"Insignificant portion" shall have the meaning provided in Section 12(a).
"Laws" shall mean any present or future federal, state, municipal or local
laws, ordinances, rules, regulations, requirements, judgments, writs, decrees,
determinations, awards or court orders, building codes and zoning ordinances
and similarly, applicable orders, rules and regulations of any regulatory,
licensing, accrediting, rating, insurance underwriting or rating organization
or other body exercising similar functions.
<PAGE>
"Loan Documents" shall have the meaning provided in Recital A.
"Losses" shall mean all damages, losses, liabilities, obligations, penalties,
claims, litigations, demands, defenses, judgments, suits, proceedings, costs,
disbursements or expenses of any kind or nature (including, without limitation,
reasonable attorneys' fees and disbursements) as sustained, suffered or
incurred by any Indemnified Person arising from any matter which is the subject
of indemnification under this Agreement; provided, however, that Losses of any
Indemnified Person under this Agreement shall be computed net of (A) the
amount, if any, of insurance proceeds that such Indemnified Person shall have
received (net of Taxes payable with respect thereto) in respect of the matter,
the existence or occurrence of which gave rise to such indemnification, and (B)
the amount, if any, of the Tax benefits actually realized by such Indemnified
Person as a result of such Losses in the year in which such Losses occur, as
reasonably determined by such Indemnified Person.
"Material part" shall have the meaning provided in Section 12(b).
"Mortgage" shall have the meaning provided in Recital A.
"Noland Loan" shall mean that certain loan made by Balcor Mortgage Advisors,
Inc. to Noland Fashion Square Partners in the original principal amount of
$23,300,000, which is the subject of a Related Agreement.
"Note" means the note or notes executed by the Borrower and evidencing the
Loan.
"Notice of Claim" shall have the meaning provided in Section 17(d).
"Other Loans" shall mean the Bannockburn Loan, the Seafirst Loan, and the
Noland Loan.
"Permitted Encumbrances" shall have the meaning provided in Section 5(a).
"Premium" shall mean a portion of the Purchase Price in the amount of $25,000.
"Pricing Date" shall have the meaning provided in Section 7(e).
"Principal Amount" shall mean the outstanding principal amount of the Loan as
of the Closing Date, but excluding the outstanding principal amount of any
Prior Mortgage Loan which would otherwise be included in calculating the
outstanding principal amount of the Loan pursuant to the Loan Documents.
"Prior Mortgage" shall have the meaning provided in Recital B.
"Prior Mortgage Loan" shall have the meaning provided in Recital B.
"Prior Mortgage Related Documents" shall have the meaning provided in Recital
B.
"Prior Mortgage Loan Documents" shall have the meaning provided in Recital B.
"Property" shall have the meaning provided in Recital A.
"Purchaser" shall have the meaning provided in the Preamble to this Agreement.
"Purchase Price" shall have the meaning provided in Section 3(a).
<PAGE>
"Purchaser Indemnified Persons" means and includes the Purchaser and its
permitted assigns and their respective directors, officers, agents, employees,
advisors and successors.
"Purchaser's Closing Documents" shall have the meaning provided in Section
6(b).
"Related Agreement" shall mean that certain Purchase and Sale Agreement of
even date herewith between Purchaser and Balcor Mortgage Advisors, Inc. as
seller, with respect to the Noland Loan and/or that certain Purchase and Sale
Agreement of even date herewith between Purchaser and Labcor III Limited
Partnership as seller with respect to the Bannockburn Loan, and/or that certain
Purchase and Sale Agreement of even date herewith between Purchaser and Labcor
III Limited Partnership as seller with respect to the Seafirst Loan.
"Reports" shall have the meaning provided in Section 7(l).
"Seafirst Loan" shall mean that certain loan made by Balcor Pension Investors
III to Hines, Spokane, Ltd. in the original principal amount of $32,425,000,
which is the subject of a Related Agreement.
"Seller" shall have the meaning provided in the Preamble of this Agreement.
"Seller Indemnified Persons" means and includes Seller and its affiliates and
their respective directors, officers, agents, employees, advisors and
successors.
"Seller's Closing Documents" shall have the meaning provided in Section 6(a).
"Significant portion" shall have the meaning provided in Section 12(a).
"Tax" or "Taxes" means all income taxes (including any tax on or based upon net
income, gross income, income as specially defined, earnings, or profits or
selected items of income, earnings or profits) and all gross receipts, sales,
use, ad valorem, transfer, franchise, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property or windfall
profits, alternative or add on minimum, customs, duties or other taxes, fees,
assessments or charges of any kind whatsoever, together with any interest and
any penalties, additions to tax or additional amounts in respect thereof,
imposed by any taxing authority.
"Third Party Claim" shall have the meaning provided in Section 17(d).
"Title Policies" shall have the meaning specified in Section 5(b).
(b) The phrase "to the best of Seller's knowledge" and any similar phrase
referring to the knowledge of Seller, shall mean the actual knowledge of any
person currently employed by Seller who Seller has determined is likely to have
firsthand knowledge with respect to the Loan, the Borrower, any Guarantor or
the Property. The knowledge of any other person shall not be imputed to
Seller, regardless of whether any such person shall have once been or shall
currently be employed by or an agent of Seller.
<PAGE>
Section 2. Agreement to Sell and Purchase the Loan. (a) Subject to the
terms and conditions set forth herein, Seller hereby agrees to sell, transfer
and assign to Purchaser and Purchaser hereby agrees to purchase and accept from
Seller all of its right, title and interest in and to the Loan and the Loan
Documents. Except as expressly set forth herein, the sale, transfer and
assignment of the Loan and the Loan Documents is and shall be made "AS IS",
"WHERE IS", "WITH ALL FAULTS".
(b) Purchaser has made such examinations, reviews and investigations as
it deems necessary or appropriate in making its decision to purchase the Loan.
Purchaser has been and will continue to be solely responsible for making its
own independent investigation of the Loan and the Loan Documents. Purchaser
acknowledges that the sale of the Loan by Seller to Purchaser is irrevocable,
and that Purchaser shall have no recourse to Seller, except as otherwise
provided in this Agreement. Purchaser acknowledges that Seller has not made
any representations or warranties concerning the collectability of the Loan or
the value of the Property.
(c) Purchaser acknowledges that Seller will not be delivering an estoppel
or confirmation of the outstanding amount of the Loan or any other information
regarding the Loan, the Loan Documents or anything relating to the Property
from the Borrower, any principal of the Borrower, any Guarantor, any other
party affiliated with the Borrower or any Guarantor, or any other party having
an interest in or claim to the Property.
(d) Except as expressly set forth herein, Seller does not and will not
make any oral or written representations, warranties, promises or guarantees
whatsoever, whether express or implied, concerning or with regard to, and
expressly disclaims any liability or obligation with respect to, concerning or
relating to, any of the following:
(i) the collectibility of the Loan;
(ii) the value or condition of the Property;
(iii) title or ownership to or of the Property or any portion or
part thereof or any materials, fixtures or furnishings located therein or
thereon;
(iv) compliance with any environmental protection, pollution or land
use Laws, including, but not limited to, those pertaining to the use, handling,
generating, treating, storing or disposing of any hazardous waste, hazardous
substance, petroleum product, storage tank, or other container therefor,
asbestos or any other substance controlled or otherwise governed by applicable
Laws;
(v) the zoning and any other restrictions applicable to the
Property;
(vi) ownership of or obligations in respect of any air rights, zoning
bonuses, floor area ratio bonuses or entitlements or other similar rights or
benefits attributable to, burdening or otherwise pertaining to the Property;
<PAGE>
(vii) claims by Borrower or any guarantors of the Loan (the
"Guarantors") against Seller under the Loan Documents or otherwise or claims by
third parties against the Borrower or any of the Guarantors or Seller or the
creditworthiness or ability of Borrower or any of the Guarantors to fulfill
their respective obligations or pay their respective debts as they mature;
(viii) pending, existing or projected approvals, commitments or
guarantees concerning or relating to, or rights of or from or claims against or
relating to, any governmental or quasi-governmental entity regarding,
assurances of assistance, compliance with programs or benefits, real estate
taxes or increases therein or changes thereto, tax reductions or benefits,
ability to meet, comport with or comply with assistance programs or programs
creating tax benefits for owners or tax reductions or credits for, in favor of
or benefitting the owner of the Property; and
(ix) the compliance in the past by the Borrower or any other
applicable party with conditions to advances under the Loan Documents or the
implicit or explicit waiver of any such conditions, the establishment of any
course of dealing or course of conduct regarding advances, or any commitment on
the part of Seller to make any advances under the Loan Documents.
Purchaser acknowledges that it is a sophisticated investor and, except as
otherwise provided in this Agreement, Purchaser is relying solely on its own
investigation of the Loan, the Borrower, the Guarantors and the Property.
Purchaser further acknowledges that the failure of Seller to disclose any
material, non-public information with respect to the Loan, the Borrower, the
Guarantors or the Property which was not known to Seller shall not entitle
Purchaser to rescind or invalidate this Agreement or to seek any damages from
Seller, except as may otherwise be provided in this Agreement.
Section 3. Purchase Price of the Loan. (a) The purchase price of the Loan
shall equal the sum of (x) one hundred seven and 60/100ths percent (107.60%) of
the outstanding Principal Amount of the Loan, plus (y) one hundred seven and
60/100ths percent (107.60%) of the outstanding Deferred Interest, if any (which
Deferred Interest is scheduled on Exhibit A attached hereto) (collectively, the
"Purchase Price"). The Purchase Price shall be paid as follows:
(i) an initial deposit equal to five percent (5%) of the Purchase
Price (together with any interest earned thereon, if any, the "Deposit"),
previously paid by Purchaser to the Escrow Agent, to be held in escrow, by the
Escrow Agent for disbursement in accordance with the terms of the Escrow
Agreement; and
(ii) the balance of the Purchase Price on the Closing Date payable by
wire transfer of immediately available funds to the direct order of Seller.
Purchaser shall receive at Closing a credit against the balance of the Purchase
Price then due in an amount equal to the sum, without duplication, of (A) all
payments of principal and interest, including, without limitation, proceeds
from compromises and settlements made by the Borrower with respect to the Loan
and actually received by Seller during the period commencing on the Pricing
Date and ending on the Closing Date and (B) any amounts then received by Seller
pursuant to Section 12 hereof and not applied to the restoration or rebuilding
of a Property in accordance with the Loan Documents.
<PAGE>
(b) The Escrow Agent will hold the Deposit in accordance with the Escrow
Agreement attached hereto as Exhibit C (the "Escrow Agreement"). The party
entitled to the Deposit shall receive all interest earned thereon, if any,
which interest shall not be credited against the balance of the Purchase Price
due pursuant to Section 3(a)(ii) above.
(c) In addition to the Purchase Price, Purchaser shall on the Closing
Date pay to Seller by wire transfer of immediately available funds to the
direct order of Seller, the total amount of Adjustments due Seller in
accordance with Section 11 hereof.
Section 4. Assumption of Seller's Obligations. (a) On the Closing Date,
Purchaser shall assume and upon the Closing Date shall be deemed to have
assumed all of Seller's obligations of any kind whatsoever with respect to the
Loan, the Property or the Loan Documents, including, without limitation, any
obligation Seller may have under the Loan Documents to make any payment on any
Prior Mortgage Loan, and Purchaser shall indemnify Seller as specified in
Section 17 hereof. The provisions of this Section shall survive the Closing.
(b) No recital herein or in any Exhibit hereto of any obligations to be
assumed by Purchaser shall constitute an acknowledgment or admission by either
party that any additional sums or advances are due, or that any other
obligations exist, under the Loan Documents or otherwise, and each party shall
have the right to deny and contest any claim for any such sums or advances or
any such obligation in the same manner as if such recitals had not been
included in this Agreement.
Section 5. Priority of Mortgage. (a) As a condition to the obligation of
the Purchaser to pay the Purchase Price at the Closing, the Mortgage shall be
subject only to any Prior Mortgage and any Prior Mortgage Loan Documents and
the liens, encumbrances and other title matters described on Schedule 5(a)
annexed hereto and other non-monetary encumbrances or defects which do not
materially, adversely affect the use or value of the Property and which are of
a type generally acceptable to institutional lenders in the jurisdiction in
which the Property is located ("Permitted Encumbrances" -- all other title
matters shall be referred to herein as "Unpermitted Encumbrances").
(b) The policy of title insurance (the "Title Policies") with respect to
the Loan, a copy of which is attached to Schedule 5(a) hereto, is and will be
at Closing in full force and effect, is not subject to defenses of the insurer
by reason of acts or knowledge of the insured, and the rights of Seller
thereunder will be assigned to Purchaser at Closing. Except as may be
specified on Schedule 5(a) hereto, no claims have been made by Seller under any
such Title Policies.
Section 6. Closing of Sale. The closing of the sale of the Loan (the
"Closing") shall occur on August 22, 1996, or on such earlier date as mutually
agreed by the parties hereto (the "Closing Date").
(a) At the Closing, except as provided in Exhibit A hereto, the following
(the "Seller's Closing Documents") shall be delivered by Seller to Purchaser:
<PAGE>
(i) assignments, without recourse, representation or warranty,
express or implied (other than any covenant, representation or warranty
contained in this Agreement which expressly survives the Closing), in the form
annexed hereto as Exhibit D-1 of the Mortgages and any separate assignment of
leases and rents all in recordable form in the jurisdiction in which the
Property is located; and
(ii) an allonge to the Note, in the form attached hereto as Exhibit
D-2.
(iii) a general assignment of the Seller's rights in and to the
Loan and the Loan Documents, without recourse, representation or warranty,
express or implied (other than any covenant, representation or warranty
contained in this Agreement which expressly survives the Closing), in the form
annexed hereto as Exhibit E.
(iv) assignments of any and all uniform commercial code financing
statements heretofore filed with respect to the Property in which Seller is
named as secured party, all on Form UCC-3 or such other forms which may then be
accepted for filing in the offices where such financing statements have been
filed.
(v) the original Loan Documents described on Exhibit A or, to the
extent that Seller is unable to deliver an original of any of the Loan
Documents, copies thereof, together with a certificate of the Seller with
regard to the accuracy of such copies, in the form of Exhibit F attached
hereto.
(vi) all escrow, impound or cash collateral accounts and all letters
of credit, if any, held by Seller as security for the Loan or the performance
of the Borrower's obligations under the Loan Documents.
(vii) copies of notices given by Seller to the Borrower, the
applicable insurance companies or any other person regarding the transfer of
the Loan.
(viii) a certificate regarding any changes in the information
specified on Exhibit A, as updated to the Closing Date.
(ix) an affidavit stating that Seller is not a "foreign person" under
the Foreign Investment in Real Property Tax Act, Internal Revenue Code Section
1445, as amended, and the regulations promulgated thereunder.
(x) an executed notice letter to the holder of the Prior Mortgage
regarding the sale of the Loan to Purchaser.
(xi) evidence that Seller is in good standing in the jurisdiction of
its formation and is authorized to consummate the transactions contemplated by
this Agreement, including certified copies of the organizational documents of
Seller and its constituent entities to the extent necessary to establish due
authorization by Seller of this Agreement and the transactions contemplated
hereby.
<PAGE>
(xii) such other and further documents and instruments of
transfer and assignment, without recourse, representation or warranty, express
or implied (other than any covenant, representation or warranty contained in
this Agreement which expressly survives the Closing), as may be reasonably
required to effectuate or confirm the assignment and transfer of the Loan and
the Loan Documents to Purchaser.
(b) At the Closing, the following (the "Purchaser's Closing Documents")
shall be delivered by Purchaser to Seller:
(i) The balance of the Purchase Price.
(ii) If Purchaser is a corporation, Purchaser shall supply at the
Closing a certified copy of a resolution of its Board of Directors authorizing
Purchaser's execution, delivery and performance of this Agreement, together
with such other documents as Seller may reasonably require to evidence
Purchaser's good standing and the authority of those acting on its behalf, or,
if Purchaser is other than a corporation, such other evidence of Purchaser's
existence, good standing (if applicable) and authority as Seller may reasonably
require.
(c) At the Closing, the Escrow Agent shall (and is hereby authorized and
directed by Seller and Purchaser to) transfer to Seller the Deposit.
(d) The obligation of Seller to transfer the Loan to Purchaser and to
otherwise consummate the transactions contemplated hereby shall be subject to
the satisfaction of the following conditions precedent on and as of the Closing
Date:
(i) all representations and warranties of Purchaser contained in
this Agreement shall have been true in all material respects when made and
shall be true in all material respects at and as of the Closing Date as if such
representations and warranties were made at and as of the Closing Date, and
Purchaser shall have performed and complied with, in all material respects, all
material covenants, agreements and conditions required by this Agreement to be
performed or complied with by Purchaser prior to or at the Closing;
(ii) Seller shall have received Purchaser's Closing Documents;
(iii) Seller shall have received payment of the balance of the
Purchase Price in accordance with Section 3(a)(ii) and such other amounts as
are due Seller hereunder; and
(iv) No claim, litigation or other proceeding, arising out of or
relating to the Loan, the Borrower, any Guarantor or the Property, shall have
been threatened or commenced after the Pricing Date against Seller or any
person for whom Seller shall be liable or whom Seller shall be obligated to
indemnify, which in the opinion of Seller is material, unless the Purchaser
shall have provided security satisfactory to Seller in its sole discretion for
Purchaser's obligation to indemnify Seller against such claim, litigation or
other proceeding under Section 17.
(e) Purchaser's obligation to pay the Purchase Price, to purchase the
Loan and otherwise to consummate the transactions contemplated hereby shall be
subject to Sections 5 and 12 hereof and to the satisfaction of the following
conditions precedent on and as of the Closing Date:
<PAGE>
(i) either (A) all representations and warranties of Seller
contained in this Agreement shall have been true in all material respects when
made and, to the extent then deemed remade, shall be true in all material
respects at and as of the Closing Date as if such representations and
warranties were made at and as of the Closing Date, or (B) if a representation
or warranty of Seller shall not be true and correct in all material respects
when made or deemed remade, and Seller shall be obligated to indemnify
Purchaser, or Seller shall have offered to indemnify Purchaser, against any
Losses resulting therefrom under Section 17 hereof;
(ii) Seller shall have performed and complied with, in all material
respects, all material covenants, agreements and conditions required by this
Agreement to be performed or complied with by Seller prior to or at the Closing
Date and
(iii) Purchaser shall have received Seller's Closing Documents.
In the event any of the conditions set forth in this Section 6(e) have not
been satisfied at or prior to Closing, Purchaser may terminate this Agreement
by giving written notice of such termination to Seller, in which event this
Agreement shall be deemed terminated upon Seller's receipt of such written
notice and the provisions of Section 16(b) hereof shall apply.
(f) Purchaser's obligation to pay the Premium is subject to the condition
that each of the Other Loans is transferred to Purchaser in accordance with the
terms of the Related Agreements. In the event that the closing of the transfer
of any Other Loan has not occurred on the Closing Date and the Related
Agreement for such Other Loan has not been terminated, the Premium otherwise
payable by Purchaser in connection with this Agreement shall be deposited into
an escrow with the Title Company on the Closing Date. Such escrow shall
provide that the Premium shall be disbursed to Seller simultaneously with the
closing of the transfer to Purchaser of the last to close of any Other Loan
that had not closed on the Closing Date. If any Related Agreement has been
terminated by Purchaser pursuant to a right of Purchaser provided therein prior
to the Closing Date, the Purchase Price payable by Purchaser at the Closing
shall be equal to the amount calculated in accordance with Section 3 hereof,
less the Premium. If any of the Other Agreements is terminated by Purchaser
subsequent to the Closing Date pursuant to a right of Purchaser provided
therein, the Premium deposited into escrow at Closing shall be returned to
Purchaser.
(g) The foregoing conditions are for the benefit only of the party for
whom they are specified to be conditions precedent and such party may, in its
sole discretion, waive any or all of such conditions and close under this
Agreement without any increase in, abatement of or credit against the Purchase
Price.
(h) From and after the Closing Date, Seller shall promptly, subsequent to
its receipt, forward to Purchaser (at the address specified herein for notices)
copies or originals of any and all bills, invoices, insurance binders and
policies, letters, documents and other correspondence it receives relating to
the Loan, the Loan Documents and the Property to the extent (i) that such
materials are not otherwise subject to a privilege, or subject to an obligation
of confidentiality or other contractual obligation restricting Seller's release
thereof or (ii) the delivery thereof would not subject Seller to criminal
liability or otherwise constitute the violation of any Law.
<PAGE>
Section 7. Representations and Warranties by Seller. Notwithstanding the
provisions of Section 2(d) hereof, Seller represents and warrants to Purchaser
as of the date of this Agreement as follows:
(a) Seller is an Illinois limited partnership, duly formed, validly
existing and in good standing under the Laws of the jurisdiction in which it
was formed, and has the full power, authority and legal right to engage in the
transactions contemplated by, and perform and observe the terms and conditions
of this Agreement.
(b) This Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary action on the part of Seller
and, upon the assumption that this Agreement constitutes a legal, valid and
binding obligation of Purchaser, this Agreement constitutes a legal, valid and
binding obligation of Seller, enforceable against Seller in accordance with its
terms, except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity.
(c) The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby by Seller do not and will not (i) violate
or conflict with the Seller's organizational documents or (ii) violate or
conflict with any Laws or any governmental regulation or permit applicable to
Seller or (iii) result in a breach of, or constitute a default under, any
provision of any contract or other instrument to which Seller is a party or by
which it is bound, which breach or default would prevent or materially
interfere with Seller's performance hereunder or (iv) result in the creation or
imposition of any lien, charge or encumbrance pursuant to the terms of any such
contract or other instrument which lien, charge or encumbrance would prevent or
materially interfere with Seller's performance hereunder.
(d) Except as specified on Schedule 7(h) or as previously disclosed to
Purchaser in writing, to the best of Seller's knowledge, without investigation
or inquiry with respect thereto, Seller has not received written notice of any
actions, suits or proceedings, either pending or threatened, in connection with
the Loan, including, without limitation, any actions, suits or proceedings
which might question the validity of this Agreement or the consummation of the
transactions contemplated hereby.
(e) As of the date specified on Exhibit A (the "Pricing Date"), (i) the
unpaid principal balance of the Loan, (ii) the amount of interest accrued on
the Loan which remains unpaid, (iii) the rate or rates at which interest on the
unpaid principal amount of the Loan accrues or is payable, (iv) the amount of
Deferred Interest, if any; (v) the amount of Contingent Interest paid by the
Borrower during the immediately preceding year, if any; (vi) the balances of
all escrow, impound and cash collateral accounts held by Seller with respect to
the Loan, if any; and (vii) the maturity date with respect to the Loan are as
specified on Exhibit A hereto; provided, however, that as of the Closing Date,
Seller shall furnish to Purchaser a certificate updating the information on
Exhibit A, which shall be true, correct and complete as of the Closing Date.
<PAGE>
(f) To the best of Seller's knowledge, without investigation or inquiry
with respect thereto, (i) the Loan Documents specified on Exhibit A hereto
constitute all material Loan Documents, (ii) there are no letters of credit
issued in favor of Seller which secure the Loan, (iii) such Loan Documents have
not been modified or amended, except as described on Exhibit A hereto, and (iv)
the copies of such Loan Documents which are attached to Exhibit A or which have
previously been delivered to Purchaser are true and correct in all material
respects.
(g) Except as specified on Schedule 7(g) or 7(h) or as previously
disclosed to Purchaser in writing, to the best of Seller's knowledge, without
investigation or inquiry with respect thereto, Seller has received no written
notice or claim that the Loan is subject to any right of rescission, set-off,
recoupment, abatement, diminution, counterclaim or valid defense by the
Borrower or any Guarantor which would affect the ability of the holder thereof
to realize the practical benefits of the security intended to be provided by
the Loan Documents for the Loan, as such realization may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity, regardless of whether such realization is considered in a
proceeding at law or in equity.
(h) Except as set forth on Schedule 7(h) or as previously disclosed to
Purchaser in writing, to the best of Seller's knowledge, without investigation
or inquiry with respect thereto, (i) Seller has not commenced or threatened to
commence any actions, suits or proceedings in connection with the Loan
Documents, and (ii) there are no valid, effective and enforceable orders,
injunctions or decrees of any federal, state, municipal or local court or
arbitral body with respect to the Loan or the Loan Documents.
(i) Seller (i) is the sole owner of the Loan, has not participated the
Loan, and has the absolute right to sell the Loan; (ii) has not granted any
other option to purchase or other rights in and to the Loan, (iii) has not
pledged, collaterally assigned or otherwise hypothecated any, interest therein
or agreed to do so and (iv) has obtained (to the extent required and not waived
or the requirement therefor otherwise avoided or averted) all consents of
Borrower, any Guarantor or other third party pursuant to the Loan Documents or
pursuant to any organizational documents of Seller or any entity owning,
directly or indirectly, any interest in Seller, which is necessary for the
execution and delivery of this Agreement and the sale of the Loan provided for
herein.
(j) Except as specified on Schedule 7(j) hereto or as previously
disclosed to Purchaser in writing, to the best of Seller's knowledge, without
investigation or inquiry with respect thereto, neither Borrower nor any
Guarantor has filed or is the subject of any proceeding under any state or
federal bankruptcy or insolvency Law.
(k) Except as specified on Schedule 7(k) hereto or as previously
disclosed to Purchaser, to the best of Seller's knowledge, without
investigation or inquiry with respect thereto, Seller has not received any
written notice of any pending or threatened condemnation or similar proceeding
affecting the Property.
<PAGE>
(l) Except as specified on Schedule 7(l) hereto or as previously
disclosed to Purchaser in writing, no environmental reports or studies with
respect to the Property (collectively, "Reports") have been performed by or on
behalf of Seller and, to the best of Seller's knowledge, without investigation
or inquiry, Seller has not received notice that any of such Reports are
inaccurate in any material respect.
(m) The execution and delivery of this Agreement by Seller do not, and
the performance of this Agreement by Seller will not require, the consent or
approval of any public authority.
(n) To the best of Seller's knowledge, without investigation or inquiry
with respect thereto, the Loan is not expressly cross-collateralized or
cross-defaulted with any other loan other than the Prior Mortgage Loan.
(o) Seller has no obligations to make any additional advances under the
Loan.
All warranties and representations of Seller in this Section 7 are true and
correct in all material respects as of the date hereof, and, with respect to
clauses (a) through (c) above, shall continue to be true and correct in all
material respects as of the Closing Date. Subject to the provisions of Section
17 hereof, the representations and warranties of Seller contained in this
Section 7 shall survive the Closing for a period of ninety (90) days; provided,
however, that any claim hereunder based upon such representations and
warranties must be made within such ninety (90) day period.
Section 8. Representations and Warranties by Purchaser. Purchaser
represents and warrants as follows:
(a) Purchaser is a Delaware corporation, validly existing and in good
standing under the laws of the jurisdiction in which it was formed, and has the
full power, authority and legal right to engage in the transactions
contemplated by, and perform and observe the terms and conditions of this
Agreement.
(b) This Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary action on the part of
Purchaser and, upon the assumption that this Agreement constitutes a valid and
binding obligation of Seller, this Agreement constitutes a legal, valid and
binding obligation of Purchaser, enforceable against Purchaser in accordance
with its terms, except as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting the
enforcement of creditors' rights generally, and by general principles of
equity.
<PAGE>
(c) The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby by Purchaser do not and will not (i)
violate or conflict with the organizational documents of Purchaser, (ii)
violate or conflict with any Law or any governmental regulation or permit
applicable to Purchaser, (iii) result in a breach of, or constitute a default
under, any of the provisions of any contract or other instrument to which
Purchaser is a party or by which it is bound, which breach or default would
prevent or materially interfere with Purchaser's performance hereunder, (iv)
result in the creation or imposition of any lien, charge or encumbrance
pursuant to the terms of any such contract or other instrument which lien,
charge or encumbrance would prevent or materially interfere with Purchaser's
performance hereunder or (v) violate, conflict with or constitute a "prohibited
transaction" under Section 406 of the Employee Retirement Income Security Act
of 1974, Section 4975 of the Internal Revenue Code of 1986, as amended, or
under any comparable provision of the Internal Revenue Code of 1986, as
amended.
(d) The execution and delivery of this Agreement by Purchaser do not, and
the performance of this Agreement by Purchaser will not, require the consent or
approval of any public authority.
(e) There are no legal actions, suits, arbitrations, or other legal,
administrative or other governmental proceedings pending or, to the knowledge
of Purchaser, threatened against Purchaser that might question the validity of
this Agreement or the consummation of the transactions contemplated hereby.
(f) Purchaser is a principal with respect to the proposed transaction
relating to the Loan, and is not acting as an agent for an undisclosed
unaffiliated principal.
(g) The obligations of Purchaser hereunder are not contingent upon
Purchaser's procuring financing to provide funds to pay the Purchase Price to
Seller, and Purchaser has (or will, as of the Closing Date, have) available
funds to enable it to consummate the purchase and sale described herein.
(h) Purchaser is not acting on behalf of the Borrower or any of the
Guarantors.
(i) Purchaser is a sophisticated buyer with respect to the Loan, has
adequate information concerning the business and financial condition of
Borrower to make an informed decision regarding the purchase of the Loan and,
except for the covenants, representations and warranties expressly set forth
herein, has independently and without reliance upon Seller, and based on such
information as Purchaser has deemed appropriate, made its own analysis and
decision to enter into this Agreement.
(j) Without implying that the Loan constitutes a "security" within the
meaning of any applicable securities laws, Purchaser is not purchasing the Loan
with a view to resale or distribution in a manner that would violate applicable
securities laws.
<PAGE>
All warranties and representations of Purchaser in this Section 8 are true and
correct in all material respects as of the date hereof, and shall continue to
be true and correct in all material respects as of the Closing Date. Subject
to the provisions of Section 17 hereof, the representations and warranties of
Purchaser contained in Sections 8(f), 8(i) and 8(j) shall survive the Closing.
Subject to the provisions of Section 17 hereof, the remaining representations
and warranties of Purchaser contained in this Section 17 shall survive the
Closing for a period of ninety (90) days; provided, however, that any claim
hereunder based upon such representations and warranties must be made within
such ninety (90) day period.
Section 9. Covenants of Seller. (a) Seller shall not, between the date
hereof and the Closing Date, take any affirmative action, or expressly consent
to any action, which would adversely affect the priority of the lien of the
Mortgage.
(b) Seller shall not, between the date hereof and the Closing Date,
(i) materially modify, waive or amend the terms of any of the Loan
Documents;
(ii) foreclose or accept a deed-in-lieu of foreclosure with respect
to the Loan;
(iii) grant any consents contemplated in the Loan Documents
without Purchaser's consent, which shall not be unreasonably, withheld,
conditioned or delayed (if Purchaser shall fail to respond to Seller's request
for such a consent for a period of three (3) Business Days, such failure to
respond shall be deemed to constitute Purchaser's consent to such matter);
(iv) compromise or settle claims of any kind with respect to the
Loan;
(v) sell or enter into an agreement to sell all or any portion of
the Loan or interest therein;
(vi) release any Borrower or Guarantor or any portion of the
Property; or
(vii) increase the principal amount outstanding under any Note or
increase the amount of the debt secured by any of the Mortgages; provided,
however, that Seller may make any advances which it may be required to make
under the Loan Documents and, at Seller's option, Seller may make advances to
pay costs and expenses incurred to protect and preserve the Property and its
rights and security under the Loan Documents, including, without limitation,
(A) taxes, charges or assessments that may be imposed by law upon the Property,
(B) premiums on insurance policies covering the Property, (C) expenses incurred
in upholding the lien or enforceability of a Mortgage or any other Loan
Document, (D) utilities, security and maintenance costs with respect to the
Property and (E) any other amount, cost or expense which Seller is permitted or
required to expend pursuant to the Loan Documents or as otherwise may be
required under the Loan Documents or pursuant to requirements of Law.
(c) Between the date hereof and the Closing Date, Seller shall continue
to service the Loan, the Borrower and any Guarantor in accordance with its
prior practices and as it would in the ordinary course of its business.
<PAGE>
(d) From and after the Closing Date, if Seller shall receive any payment
from a Borrower, any Guarantor or other party on account of an obligation or
liability arising under the Loan Documents which prior to the Closing Date
would have inured to Seller's benefit, then Seller shall accept such payment on
behalf of Purchaser and, subject to the provisions of Section 17 hereof, shall
promptly remit same to Purchaser.
(e) From and after the Closing Date, Seller shall cooperate with
Purchaser in connection with the delivery of notices to Borrowers and
Guarantors and the substitution of Purchaser in any ongoing litigation to
collect the Loan or to enforce the Loan Documents, including, without
limitation, providing such documentation, witnesses and information which
Seller possesses and which may be reasonably requested by Purchaser; provided,
however, that Seller shall not be required to incur any cost or expense in
connection therewith for which Purchaser shall not agree to indemnify Seller.
(f) Seller shall use its best efforts to obtain and deliver to Purchaser
prior to the Closing (i) an audit confirmation from the holder of the Prior
Mortgage certifying the unpaid principal balance of the Prior Mortgage Loan as
of December 31, 1995; and (ii) an estoppel certificate from the holder of the
Prior Mortgage certifying the amount of the unpaid principal balance of the
Prior Mortgage Loan; provided, however, that Seller shall not be obligated to
incur any material cost or expense in connection therewith.
Section 10. Covenants of Purchaser. From and after the date hereof until
the Closing Date, (i) Purchaser shall not contact the Borrower or any Guarantor
regarding the Loan or the Property, (ii) Purchaser shall not take any action
with respect to the Borrower or any Guarantor, the Loan or the Loan Documents
which would have the effect of impairing or diminishing the value thereof or
the priority of the Mortgage, and (iii) Purchaser shall deliver to Seller
copies of all notices given or received by Purchaser in connection with the
Loan.
Section 11. Adjustments. Except as provided on Exhibit A hereto, the
following (each an "Adjustment") shall be apportioned at the Closing as of the
close of business on the day immediately preceding the Closing Date:
(a) Accrued Interest as of the close of business on the day
immediately preceding the Closing Date shall be calculated and shall constitute
an Adjustment due Seller; and
(b) The following advances shall be calculated and shall constitute
an Adjustment due Seller:
(i) Any advances which Seller may have made in accordance with
its obligations under the Loan Documents or pursuant to any requirement of any
applicable Laws; or
<PAGE>
(ii) Any advances which Seller may have elected to make to pay
costs and expenses incurred to protect and preserve the Property and its rights
and security under the Loan Documents from and after the Pricing Date through
the close of business on the day immediately preceding the Closing Date,
including, without limitation, (A) taxes, charges or assessments that may be
imposed by law upon the Property, (B) premiums on insurance policies covering
the Property, (C) expenses incurred in upholding the lien or enforceability of
a Mortgage or any other Loan Document, (D) utilities, security and maintenance
costs with respect to the Property, and (E) any other amount, cost or expense
which Seller is permitted or required to expend pursuant to the Loan Documents.
(c) Contingent Interest based on the income or cash flow of the
Borrower for the year in which the Closing shall occur shall be prorated on a
per diem basis based on the Contingent Interest paid by the Borrower during the
immediately preceding year, and Seller's pro rata share of such Contingent
Interest shall constitute an Adjustment due Seller. Such proration shall be
final and shall not be recalculated when the actual Contingent Interest for
such year shall be ascertained.
Section 12. Condemnation and Destruction. (a) If, prior to the Closing
Date, all or any significant portion (as defined in this Section) of the
Property is taken by eminent domain (or, if prior to the Closing Date, any
eminent domain proceeding with respect to any significant portion of the
Property has been commenced or Seller has received written notice threatening
to commence any such eminent domain proceeding), Seller shall notify Purchaser
thereof promptly after obtaining knowledge thereof and Purchaser shall have the
right to terminate this Agreement, which termination shall be effected by
giving notice to Seller not later than ten (10) days after the giving of
Seller's notice. For the purposes hereof, a "significant portion" of the
Property shall mean (i) such a portion of the Property as shall have a value,
as reasonably determined by Seller, in excess of ten (10%) percent of the
Purchase Price or (ii) any portion of the Property the taking of which
materially interferes with the current use of the Property. If Purchaser
elects to terminate this Agreement as aforesaid, the provisions of Section
16(b) shall apply. If Purchaser does not elect to terminate this Agreement as
aforesaid, or if an "insignificant portion" (i.e., anything other than a
significant portion) of the Property is taken by eminent domain (or becomes the
subject of a pending taking), there shall be no abatement of the Purchase Price
and Seller shall assign to Purchaser (without recourse) at the Closing the
rights of Seller to the awards theretofore received, if any, for the taking,
and Purchaser shall be entitled to all rights of Seller under the Loan
Documents, if any, to receive and keep all awards for the taking of the
Property or such portion thereof.
(b) If, prior to the Closing Date, a material part (as defined in this
Section) of the Property is destroyed or damaged by fire or other casualty,
Seller shall promptly notify Purchaser thereof and Purchaser shall have the
right to terminate this Agreement, which termination shall be effected by
giving notice to Seller not later than ten (10) days after the giving of
Seller's notice. For the purposes hereof, a "material part" of the Property
shall mean a part of the Property as shall have a value, as reasonably
determined by Seller, in excess of ten (10%) percent of the Purchase Price. If
Purchaser elects to terminate this Agreement as aforesaid, the provisions of
Section 16(b) shall apply. If Purchaser does not elect to terminate this
Agreement as aforesaid, or if there is damage to or destruction of an
"immaterial part" (i.e., anything other than a material part) of the Property
by fire or other casualty, there shall be no abatement of the Purchase Price
<PAGE>
and Seller shall assign to Purchaser (without recourse) at the Closing the
rights of Seller to any insurance proceeds theretofore received, if any, with
respect to such damage or destruction, and Purchaser shall be entitled to all
rights of Seller under the Loan Documents, if any, to receive and keep any
insurance proceeds payable upon the occurrence of any such casualty.
Section 13. Time of the Essence. Purchaser and Seller acknowledge and agree
that each and every one of the dates, time periods and time limitations set
forth in this Agreement shall be of the essence of this Agreement as against
Purchaser and Seller.
Section 14. Title Examination, Diligence Fees. All premiums and fees for
title examination and title insurance or any other report, study, survey or
diligence research obtained by Purchaser, if any, and all related charges in
connection therewith shall be paid by Purchaser.
Section 15. Broker. (a) Seller represents and warrants to Purchaser that it
has not hired, retained or dealt with any broker or finder in connection with
the negotiation, execution or delivery of this Agreement or the transactions
contemplated hereby, except Meenan, McDevitt & Company and Creamer Realty
Consultants (the "Brokers"). Seller will indemnify Purchaser against all
charges payable to the Brokers in connection with this Agreement and all Losses
arising out of any claim that the aforesaid representation and warranty is
untrue.
(b) Purchaser represents and warrants to Seller that it has not hired,
retained or dealt with any broker or finder in connection with the negotiation,
execution or delivery of this Agreement or the transactions contemplated
hereby. Purchaser will indemnity Seller against all Losses arising out of any
claim that the aforesaid representation and warranty is untrue.
(c) The provisions of this Section shall survive the Closing and any
termination of this Agreement.
Section 16. Remedies. (a) If Purchaser shall default under this Agreement,
the parties hereto agree that the damages that Seller shall sustain as a result
thereof shall be substantial but shall be difficult to ascertain.
Notwithstanding anything contained herein to the contrary, the parties hereto
therefore agree that if, subject to the conditions contained herein, Purchaser
fails to perform all of the terms, covenants, conditions and agreements to be
performed by it hereunder whether at or prior to the Closing, Seller may retain
the Deposit as and for liquidated damages, and thereafter neither Seller nor
Purchaser shall have any further liability or obligation hereunder, except for
such liabilities or obligations which are specifically stated herein to survive
the termination of this Agreement. A default by Purchaser under any Related
Agreement shall constitute a default by Purchaser under this Agreement.
(b) If on the Closing Date Seller shall be unable to perform its
obligations or to satisfy any condition applicable to Seller hereunder in
accordance with the provisions of this Agreement or title to the Property shall
not be in accordance with this Agreement and this Agreement shall be terminated
in accordance with its terms as a result thereof, the sole liability of Seller
shall be to direct Escrow Agent to return the Deposit to Purchaser, and, upon
such return, this Agreement shall be deemed terminated and neither Seller nor
Purchaser shall have any further liability or obligation hereunder, except for
such liabilities or obligations as are specifically stated to survive the
termination of this Agreement.
<PAGE>
(c) Notwithstanding anything contained herein to the contrary, if Seller
shall intentionally default in the performance of its obligation to transfer
the Loan hereunder, Purchaser shall be entitled to sue for specific performance
of this Agreement. Purchaser shall not have any right to sue for or to collect
damages, including, without limitation, punitive damages, from Seller based
upon any such intentional default by Seller.
(d) If, pursuant to the terms, conditions and provisions hereof,
Purchaser or Seller is not obligated to purchase and close with respect to the
Loan, then upon Purchaser's or Seller's notice to the other with respect
thereto terminating this Agreement, Seller and Purchaser shall direct Escrow
Agent to disburse the Deposit to Purchaser and, upon such return, this
Agreement shall be deemed terminated and neither Seller nor Purchaser shall
have any further liability or obligation hereunder, except for such liabilities
or obligations as are specifically stated to survive the termination of this
Agreement.
Section 17. Indemnification.
(a) Subject to the limitations set forth in this Section 17, from and
after the Closing, Seller shall save, defend and indemnify the Purchaser
Indemnified Persons against and hold them harmless from any and all Losses (but
not exceeding aggregate Losses in excess of the amount deposited into escrow
pursuant to the following sentence) imposed upon or incurred by Purchaser
Indemnified Persons, directly or indirectly, arising out of the untruthfulness,
inaccuracy or breach of any representation or warranty of Seller contained in
this Agreement or the breach of any agreement or covenant of Seller contained
in this Agreement, excluding any such Losses which shall have been caused by
the intentional misconduct of the Purchaser Indemnified Persons. On the
Closing Date, Seller shall deposit into escrow with the Title Company in
accordance with an escrow agreement mutually acceptable to the parties hereto,
in order to secure Seller's indemnity obligations hereunder, an amount equal to
either (i) $250,000, if Seller has delivered either the audit confirmation or
estoppel letter described in Section 9(f) hereof, or (ii) $300,000, if Seller
has not delivered either the audit confirmation or estoppel letter described in
Section 9(f) hereof. Such escrow shall provide that the escrowed funds shall
be disbursed to Seller automatically without notice or consent from either
party hereto unless Purchaser makes a claim against Seller in accordance with
Section 7 hereof within 90 days after the Closing Date, and Purchaser so
notifies the escrowee within such time period.
(b) Subject to the limitations set forth in this Section 17, from and
after the Closing, Purchaser shall save, defend and indemnify the Seller
Indemnified Persons against and hold them harmless from any and all Losses
imposed upon or incurred by any Seller Indemnified Persons, directly or
indirectly, arising out of (i) the untruthfulness, inaccuracy or breach of any
representation or warranty of Purchaser contained in this Agreement; (ii) the
breach of any agreement or covenant of Purchaser contained in this Agreement;
(iii) Purchaser's failure to perform any of Sellers' obligations under the Loan
Documents accruing after the Closing Date, including, without limitation, any
covenants or agreements relating to insurance proceeds or condemnation awards;
or (iv) the ownership of the Loan or the Loan Documents by Purchaser after the
Closing Date, excluding any such Losses caused by the intentional misconduct of
the Seller Indemnified Persons. With the exception of (i) Losses which shall
have been caused by the intentional misconduct of the Seller Indemnified
Persons, or (ii) Losses for which Seller is required to indemnify any Purchaser
Indemnified Person pursuant to this Section 17, Purchaser hereby releases and
<PAGE>
forever discharges the Seller Indemnified Persons from all damages, losses,
liabilities, obligations, penalties, claims, litigations, demands, defenses,
judgments, suits, proceedings, costs, disbursements or expenses of any kind or
nature sustained, suffered or incurred by any Purchaser Indemnified Person in
connection with or related to the Loan or the Loan Documents.
(c) Each party's right of indemnification hereunder shall be that party's
sole contractual remedy with respect to any claims arising out of or in any way
related to the matters covered by this Agreement from and after the Closing and
shall be in lieu of any other remedy it may otherwise have at law, in equity or
otherwise.
(d) The obligations and liabilities of an Indemnifying Person with
respect to Losses resulting from the assertion of liability by third parties
(each, a "Third Party Claim") shall be subject to the following terms and
conditions:
(i) The Indemnified Persons shall give prompt written notice (each,
a "Notice of Claim") to the Indemnifying Person of any Third Party Claim which
might give rise to any Loss by the Indemnified Persons, stating the nature and
basis of said Third Party Claim, and the amount thereof to the extent known.
Each Notice of Claim shall be accompanied by copies of all relevant
documentation with respect to such Third Party Claim, including, without
limitation, any summons, complaint or other pleading which may have been served
or written demand or other document or instrument.
(ii) If the Indemnifying Person shall acknowledge in writing its
obligation to indemnify the Indemnified Persons, subject to the terms and
conditions of this Agreement, against such Third Party Claim, then the
Indemnifying Person shall have the right to assume the defense of such Third
Party Claim at its own expense and by its own counsel (reasonably satisfactory
to the Indemnified Persons).
(iii) If the Indemnifying Person shall assume the defense of a
Third Party Claim in accordance with this Agreement, the Indemnifying Person
shall not be responsible for any legal or other defense costs subsequently
incurred by the Indemnified Persons in connection with the defense thereof. If
the Indemnifying Person does not exercise its right to assume the defense of
such a Third Party Claim, then the Indemnified Persons may assume such defense
and the costs, expenses and reasonable attorneys' fees incurred by them shall
continue to constitute Losses hereunder.
(iv) Anything contained herein to the contrary notwithstanding,
neither the Indemnifying Person nor the Indemnified Persons shall admit any
liability with respect to, or settle, compromise or discharge, any Third Party
Claim without the written consent of the other, which consent shall not be
unreasonably withheld. In addition, each of the Indemnifying Person and the
Indemnified Persons shall cooperate and act in a reasonable and good faith
manner to minimize Losses relating to any Third Party Claim.
(e) The provisions of this Section 17 shall survive the Closing.
<PAGE>
Section 18. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given and received (a) if
personally delivered with proof of delivery thereof (any notice or
communication so delivered being deemed to have been received at the time
delivered on a Business Day, or if not a Business Day, the next succeeding
Business Day), or (b) sent by United States first class registered or certified
mail, return receipt requested, postage prepaid (any notice or communication so
sent being deemed to have been received three (3) Business Days after the date
of deposit in the United States mail), or (c) by nationally recognized
overnight courier (any notice or communication so sent being deemed to have
been received on the first succeeding Business Day subsequent to the day so
sent), or (d) by telecopier (any notice or communication so sent being deemed
to have been received on the date of transmission, if a Business Day, or the
first succeeding Business Day subsequent thereto), addressed to the respective
parties as follows: If to Purchaser:
If to Purchaser:
CS First Boston Mortgage Capital Corp.
55 East 52nd Street
New York, New York 10055-0186
Attn: Brad Settleman, Vice President
Fax: (212) 318-0518
With a copy to:
Brown Raysman & Millstein LLP
120 West 45th Street
New York, New York 10036
Attn: Rand G. Boyers, Esq.
Fax: (212) 840-2429
If to Seller:
Labcor II Limited Partnership
c/o Balcor Management Services, Inc.
Bannockburn Lake Office Plaza
2355 Waukegan Road, Suite A200
Bannockburn, Illinois 60015
Attn: Daniel L. Charleston
Fax: (847) 317-4462
With a copy to:
Hopkins & Sutter
Three First National Plaza
Suite 4100
Chicago, Illinois 60602
Attn: Wayne F. Osoba
Fax: (312) 558-3312
or to such other address or party as either party may have furnished to the
other in writing in accordance herewith, except that notices of change of
address or addresses shall only be effective upon receipt.
<PAGE>
Section 19. Miscellaneous Provision. (a) The acceptance of the Closing
Documents referenced in Section 6 by Purchaser and Seller shall be deemed an
acknowledgment by Purchaser and Seller that the other has fully complied with
all of its obligations hereunder and that such party is discharged there from
and that such party shall have no further obligation or liability with respect
to any of the agreements made by it in this Agreement, except for those
provisions of this Agreement which expressly provide that any such obligation
of such party shall survive the Closing.
(b) Each of Seller and Purchaser agrees that it will continue to be bound
by the terms, covenants and conditions of that certain Confidentiality
Agreement, dated as of June 3, 1996 the terms of which shall continue in full
force and effect during the effectiveness of this Agreement and subsequent to
any Closing hereunder or the termination hereof. Seller agrees to treat the
terms and provisions of this Agreement, as they relate to the Purchase Price
paid by Purchaser and to any other economic terms of this Agreement, as
confidential, and will not disclose any of such terms to any third party,
including but not limited to the Borrower, but excluding Seller's officers,
employees, advisors, attorneys and consultants who have a need to know the same
in connection with the performance of Seller's obligations under this
Agreement, except to the extent that such disclosure is compelled pursuant to
any judicial order or is required to be disclosed pursuant to any law or
regulation applicable to Seller. The terms of this Section 19(b) shall continue
in full force and effect during the effectiveness of this Agreement and
subsequent to any Closing hereunder or the termination hereof.
(c) On or prior to the Closing Date, Purchaser shall not have the right
to assign its rights hereunder, in whole or in part, without the prior written
consent of Seller. Any assignment on or prior to the Closing Date without such
prior written consent shall be deemed null and void. Notwithstanding the
foregoing, Purchaser may assign this Agreement on or prior to the Closing Date
to an affiliate (as defined in the Securities Act of 1933) and to any lender
providing financing to Purchaser or such affiliate to consummate the
transactions contemplated herein; provided, however, that if any such
assignment shall occur or if Purchaser shall assign its rights hereunder after
the Closing Date, Purchaser shall remain liable for all obligations of
Purchaser under this Agreement. Subject to and without limiting the preceding
two sentences, this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns.
(d) This Agreement does not constitute an offer to sell and shall not
bind the parties hereto unless and until each elects to be bound hereby by
executing and delivering to the other an executed original counterpart hereof.
(e) If any term or provision of this Agreement or the application thereof
to any persons or circumstances shall, to any extent, be invalid or
unenforceable, the remainder of this Agreement or the application of such term
or provision to persons or circumstances other than those as to which it is
held invalid or unenforceable shall not be affected thereby, and each term and
provision of this Agreement shall be valid and enforceable to the fullest
extent permitted by law.
(f) This Agreement, together with the Escrow Agreement and the Schedules
and Exhibits hereto and thereto, constitute the entire agreement of the parties
regarding the subject matter of this Agreement and the Escrow Agreement, and
all prior or contemporaneous agreements, understandings, representations and
statements, oral or written, are hereby merged herein.
<PAGE>
(g) The parties agree to mutually execute and deliver to each other, at,
and, from time to time after, the Closing, such other and further documents as
may be reasonably required by counsel for the parties to carry into effect the
purposes and intents of this Agreement, provided such documents do not impose
any material obligations upon any party hereunder except as set forth in this
Agreement.
(h) This Agreement may not be modified, amended, altered or supplemented
except by written agreement executed and delivered by Purchaser and Seller.
This Agreement may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed shall
be deemed to be an original, and all of which when so executed shall be deemed
to be an original, and all of which taken together shall constitute one and the
same agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement. Any delivery of a counterpart signature by
telecopier shall, however, be promptly followed by delivery of a manually
executed counterpart.
(i) This Agreement shall be governed by and construed in accordance with
the laws of the State of Illinois applicable to agreements made and to be
performed wholly within such State.
(j) All Schedules and Exhibits referred to in this Agreement are
incorporated herein and made a part hereof as fully as if set forth herein.
(k) The failure of any party hereto to enforce at any time any of the
provisions of this Agreement shall in no way be construed as a waiver of any of
such provisions, or the right of any party thereafter to enforce each and every
such provision. No waiver of any breach of this Agreement shall be held to be
a waiver of any other or subsequent breach.
(l) Each party to this Agreement shall bear the costs of its own
attorneys' fees and expenses in the preparation, negotiation and execution of
this Agreement. Purchaser shall pay any transfer, conveyance, real property
transfer or gains, mortgage or mortgage recording, sales, use, value added,
stock or note transfer and stamp taxes, any recording, registration or other
similar taxes, expenses or fees and any penalties, interest and fees thereon,
imposed by any taxing authority, recording officer or register, or other
governmental authority in connection with the transactions contemplated herein.
(m) The Article and Section headings used herein are for reference
purposes only and do not control or affect the meaning or interpretation of any
term or provision hereof. All references in this Agreement to Sections,
paragraphs, Exhibits and Schedules are to the Sections and paragraphs hereof
and the Exhibits and Schedules annexed hereto.
(n) The representations, warranties and agreements of the parties
contained herein are intended solely for the benefit of the parties to whom
such representation, warranties or agreements are made and their permitted
assigns, shall confer no rights hereunder, whether legal or equitable, in any
other party, and no other party shall be entitled to rely thereon.
<PAGE>
(o) Seller and Purchaser each hereby irrevocably submits to the
jurisdiction of any State or Federal court sitting in the County of Cook and
State of Illinois over any action or proceeding arising out of or relating to
this Agreement, and Seller and Purchaser each hereby irrevocably agrees that
all claims in respect of such action or proceeding may be heard or determined
in any such State or Federal court. Seller and Purchaser each hereby
irrevocably waives, to the fullest extent it may effectively do so, the defense
of an inconvenient forum to the maintenance of such action or proceeding.
Seller and Purchaser each irrevocably consents to the service of any and all
process in any such action or proceeding by the mailing of copies of such
process to Seller or Purchaser, as the case may be, at its respective address
specified in Section 18 hereof. Seller and Purchaser each hereby agrees that
the final judgment in any such action or proceeding shall be conclusive and may
be enforced in any other jurisdiction by suit on the judgment or in any other
matter provided by law. Nothing in this paragraph shall affect the right of
Seller or Purchaser, as the case may be, to serve legal process in any other
manner permitted by law or affect the right of Seller or Purchaser, the case
may be, to bring any action or proceeding against the other in the courts of
any other jurisdiction.
(p) NEITHER SELLER NOR PURCHASER MAY RECORD THIS AGREEMENT, AND ALL
RECORDING OFFICERS ARE HEREBY DIRECTED NOT TO RECORD THIS AGREEMENT. To the
extent that any such filing is made in violation of the Agreement, the party
effecting such filing shall indemnify the other against any damages incurred by
the other in connection therewith. The provisions of this paragraph shall
survive the termination of this Agreement.
<PAGE>
IN WITNESS WHEREOF, Purchaser and Seller have executed and delivered this
Agreement as of the day and year first above written.
SELLER:
LABCOR II LIMITED PARTNERSHIP, an Illinois
limited partnership
By: Balcor Mortgage Advisors, an Illinois
general partnership, its general partner
By: RGF-Balcor Associates, an Illinois general
partnership, a general partner
By: The Balcor Company, a Delaware corporation, a
general partner
By: /s/Daniel L. Charlston
---------------------------------------
Name: Daniel L. Charlston
-------------------------------------
Title: Authorized Agent
------------------------------------
PURCHASER:
CS FIRST BOSTON MORTGAGE CAPITAL CORP., a Delaware corporation
By: /s/Bradley A. Settleman
-------------------------------------
Name: Bradley A. Settleman
------------------------------------
Title: Vice President
-----------------------------------
<PAGE>
EXHIBIT INDEX
Exhibit A List of Loan Documents and Loan Information
Exhibit B Legal Description
Exhibit C Form of Certificate of Accuracy
Exhibit D-1 Form of Assignment of Recorded Documents
Exhibit D-2 Form of Allonge
Exhibit E Form of General Assignment and Assumption
Exhibit F Form of Escrow Agreement
<PAGE>
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>
<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> 11291
<SECURITIES> 0
<RECEIVABLES> 6133
<ALLOWANCES> 3803
<INVENTORY> 0
<CURRENT-ASSETS> 12645
<PP&E> 22476
<DEPRECIATION> 0
<TOTAL-ASSETS> 40309
<CURRENT-LIABILITIES> 373
<BONDS> 12054
0
0
<COMMON> 0
<OTHER-SE> 27882
<TOTAL-LIABILITY-AND-EQUITY> 40309
<SALES> 0
<TOTAL-REVENUES> 5848
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 333
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5516
<INCOME-TAX> 0
<INCOME-CONTINUING> 5516
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5516
<EPS-PRIMARY> 65.66
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</TABLE>
