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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14D-9
Solicitation/Recommendation Statement Pursuant to
Section 14(d)(4) of the Securities Exchange Act of 1934
(Amendment No. __)
De Anza Properties - XII, Ltd., De Anza Properties - XII, Ltd.
a California limited partnership De Anza Corporation
(Name of Subject Company) (Name of Persons Filing Statement)
Units of Limited Partnership Interest
(Title of Class of Securities)
NONE
((CUSIP) Number of Class of Securities)
Herbert M. Gelfand with copies to:
De Anza Corporation Michael J. Connell
9171 Wilshire Blvd. Rena L. O'Malley
Suite 627 Morrison & Foerster LLP
Beverly Hills, California 90210 555 West Fifth Street
(310) 550-1111 Los Angeles, CA 90013-1024
(Name, address, and telephone number of (213) 892-5200
person authorized to receive
notice and communications on behalf of the
person(s) filing statement)
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The subject company is DeAnza Properties-XII, Ltd., a California limited
partnership (the "Partnership"). The title of the class of equity securities to
which this Statement relates is units of limited partnership interest ("Units")
of the Partnership. The address of the principal executive offices of the
Partnership is 9171 Wilshire Boulevard, Suite 627, Beverly Hills, California
90210.
ITEM 2. TENDER OFFER OF THE BIDDERS.
This Statement relates to the offer (the "Offer") by Accelerated High
Yield Institutional Investors, L.P., the general partner of which is MacKenzie
Patterson, Inc., Citadel Secondary Market Fund 1, Ltd., the general partner of
which is Citadel Financial Group, Inc., and Cal Kan, Inc., a Kansas corporation
owned by C.E. Patterson, President of MacKenzie Patterson, Inc. (together the
"Bidders"), to purchase for cash up to 5,680 Units at $550 per Unit as disclosed
in the Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1") dated
December 2, 1997 filed by the Bidders with the Securities and Exchange
Commission. According to the Schedule 14D-1, the principal place of business of
the Bidders is located at 1640 School Street, Suite 100, Moraga, California
94556.
ITEM 3. IDENTITY AND BACKGROUND.
(a) This Statement is being filed by the Partnership and De Anza
Corporation, a California corporation (the "Operating General Partner"). The
address of the principal executive offices of the Operating General Partner is
9171 Wilshire Boulevard, Suite 627, Beverly Hills, California 90210. The name
and business address of the Partnership are set forth in Item 1 above.
(b)(1) The Partnership is a limited partnership and has no executive
officers or directors. Except as described below, to the best knowledge of the
Partnership, there are no material contracts, agreements, arrangements or
understandings or any actual or potential conflicts of interest between the
Partnership on the one hand and its general partners including the Operating
General Partner or the directors and executive officers of the Operating General
Partner or affiliates thereof on the other hand, with respect to the Offer.
Terra Vista Management, Inc., a California corporation (the "Manager"),
manages and operates Warner Oaks Apartments, the Partnership's sole substantial
remaining property ("Warner Oaks"), pursuant to a Management Agreement dated as
of August 18, 1994 entered into by the Partnership with the Manager (the
"Management Agreement") and also manages one space in a mobile home park at San
Luis Bay (together with Warner Oaks the "Properties"). The President and sole
stockholder of the Manager is Michael D. Gelfand, who is also President and a
member of the Board of Directors of the Operating General Partner, and the son
of Herbert M. Gelfand (who is Chairman of the Board and sole shareholder,
through his family trust, of the Operating General Partner
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and a general partner of the Partnership). The Management Agreement continues
from year-to-year. However, either party may, without penalty or obligation to
the other party, by providing sixty (60) days' written notice to the other,
terminate the Management Agreement with or without cause at any time. The
Management Agreement may be immediately canceled in the event of violation of
any of the provisions of the Management Agreement, or by the Partnership in the
event a petition in bankruptcy is filed by or against the Manager which is not
dismissed within ninety (90) days following the date of such filing.
The Partnership has retained the Manager and an affiliate of the
Operating General Partner to provide accounting, data processing and investor
and other services to the Partnership. The Manager and the Operating General
Partner's affiliate are reimbursed on an allocated basis for their costs and
expenses for providing these services (directly or through unrelated third
parties) to the Partnership. The total of such reimbursements paid by the
Partnership for the nine months ended September 30, 1997 was $76,804. The
Manager is entitled to receive compensation under the Management Agreement for
its services of a sum equivalent to five percent (5%) of the aggregate gross
receipts from the operation of Warner Oaks, excluding all receipts from
utilities or from taxes of any kind or type. However, the Manager's compensation
is subordinated to the receipt (on a noncumulative basis) by the limited
partners of the Partnership of an annual cash distribution equal to seven
percent (7%) of the adjusted aggregate capital contributions of the limited
partners. Accordingly, management fees have been deferred for the nine months
ended September 30, 1997 and prior years. Based upon current estimates of value
of the Partnership's Properties, it is unlikely that any deferred management
fees will be paid. The Management Agreement is an exhibit hereto and is
incorporated herein by reference.
(b)(2) To the best knowledge of the Partnership, there are no material
contracts, agreements, arrangements or understandings or any actual or potential
conflicts of interest between the Partnership or its general partners or
executive officers or directors of the Operating General Partner or affiliates
thereof, on the one hand, and the Bidders or its executive officers, directors
or affiliates, on the other hand.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) The Operating General Partner has determined that the Offer is
inadequate and not in the best interests of the limited partners and recommends
that limited partners of the Partnership reject the Offer and not tender their
Units pursuant to the Offer.
(b) The reasons for the position taken by the Operating General Partner
are as follows:
1. The Offer price does not reflect the value of the Partnership's
underlying assets. The Partnership has entered into a contingent agreement with
Bay Apartment Communities, Inc., an unaffiliated entity (the "Purchaser") for
the sale of its principal asset, the Warner Oaks property, for an aggregate
purchase price of $20 million. Under
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the terms of the purchase agreement, the Purchaser had a right to conduct a
thorough investigation of the project and to determine whether or not to proceed
with the purchase of the property. The Partnership received notice on December
8, 1997 that the Purchaser has completed its investigation of the project,
approved all matters subject to its inspection, and has determined to proceed
with the purchase as contemplated. The scheduled closing date is in January,
1998, subject to satisfaction of certain customary closing conditions. Although
there can be no guarantee that the sale will be completed, based on the
Purchaser's December 8 letter, the Operating General Partner believes that it is
highly likely that the sale will be completed as contemplated in the purchase
agreement. The Operating General Partner believes that if Warner Oaks were sold
as contemplated (at the contract price of $20 million) each Unit would be worth
approximately $714 upon liquidation. The Operating General Partner believes an
offer significantly below the $714 estimate is too low to be recommended by the
Operating General Partner. In reaching this conclusion, the Operating General
Partner did not take into account individual tax consequences, which may vary
significantly among limited partners. The $714 estimate was not determined by
any independent third party valuation expert, but reflects the existing contract
purchase price.
As set forth in the Bidders' materials mailed to each of the limited
partners, the Bidders are making the Offer for investment purposes and with the
intention of making a profit from the ownership of the Units. In establishing
the purchase price of $550 per Unit, the Bidders were motivated to establish the
lowest price which might be acceptable to limited partners consistent with the
Bidders' objectives. Limited partners who sell any Unit to the Bidders will not
receive any distribution to be made by the Partnership with respect to that Unit
once the Unit is sold, including all quarterly distributions and any
distributions to be made when the Partnership's Properties are sold. The
Partnership anticipates making a regular quarterly distribution December 31,
1997. It is anticipated that the distribution will be $8.25 per Unit, as it has
been for each of the prior three quarters of 1997. In accordance with the
Bidders' Offer, the quarterly distribution will reduce the Bidders' $550 per
Unit offer by $8.25 per Unit, resulting in a net offer of $541.75 per Unit.
In determining the estimated liquidation value of $714 per Unit the
Operating General Partner first calculated the estimated current net sales value
of Warner Oaks, the Partnership's principal remaining property. This calculation
was made by reducing the $20 million current purchase price by (i) $543,560 in
estimated closing costs which would be incurred upon the sale of Warner Oaks,
including broker's commission, title costs, surveys, legal fees and transfer
taxes, and (ii) $4,183,333 of mortgage debt encumbering Warner Oaks as of
September 30, 1997. The resulting estimated net sales value of Warner Oaks is
approximately $15,273,107.
To determine the estimated liquidation value of the Partnership's
assets, the Operating General Partner added to the estimated net sales value of
Warner Oaks, (i) $400,000 in reserves from the prior sale of The Mark and San
Luis Bay, (ii) $60,000 as an estimated condominium value of the remaining space
at San Luis Bay,
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(iii) $246,098 of notes receivable related to previous sales of condominium
spaces at San Luis Bay, and (iv) $252,116 of other net current assets (before
accrued management and condominium conversion fees) as of September 30, 1997
less estimated 1998 operating costs. The resulting net estimated liquidation
value of the Partnership's assets as of September 30, 1997 is approximately
$16,231,321 or $714 per Unit. Based on these estimates, the general partners
would not receive any distributions from sale and liquidation proceeds nor would
any deferred management or condominium conversion fees be paid.
The Operating General Partner plans to distribute all of the net sales
proceeds after closing and to hold reserves from other cash on hand to cover
certain Partnership obligations. The reserves are not expected to be substantial
and are intended to be fully distributed in 1998. If this distribution occurs
there would be no additional tax returns for the limited partners with respect
to the Partnership beyond the 1998 tax year. The Operating General Partner's
current plan is to wind-up the affairs of the Partnership and to make a final
distribution of any remaining assets of the Partnership in the second or third
quarter of 1998.
The sale of the project at $20 million would result in a gain, which
would be taxable. Based upon the new federal laws regarding capital gains taxes,
it is estimated that the federal tax would be $110 per Unit. This does not take
into account any state or local taxes, and does not take into account any
individual circumstances which might affect taxation of a partner. The general
partners are not expected to receive any portion of the sales proceeds. However,
the general partners will realize a taxable gain.
2. The Operating General Partner believes the Bidders intend to
influence Partnership Decisions. If, as a result of consummation of the Offer,
the Bidders are in a position to significantly influence all Partnership
decisions, the Bidders intend to vote the Units acquired in the Offer in
accordance with their own investment objectives. That vote may be different from
or in conflict with the interests of other limited partners who do not tender
their Units.
3. Risks. The Operating General Partner believes each limited
partner should consider the risks of a continuing investment in the Partnership.
In particular, limited partners should consider:
- The Offer provides limited partners with the opportunity to tender
their Units and realize their investment now at a definite price without having
to wait for the Partnership to be terminated or liquidated in the future.
- There is no assurance that a sale of Warner Oaks will be consummated
at the current contract price or that a future sale will result in distributions
greater than the Bidder's Offer.
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- The Offer provides an opportunity to limited partners to liquidate
their investment without the usual transaction costs associated with market
sales and without the difficulty of selling Units in an illiquid and limited
trading market.
The Operating General Partner urges all limited partners to carefully
consider all the information contained herein and consult with their own
advisors, tax, financial or otherwise, in evaluating the terms of the Offer
before deciding whether to tender Units. In particular, the Operating General
Partner has not taken into account the tax consequences to individual limited
partners as a result of accepting or rejecting the Offer and those tax
consequences could vary significantly for each limited partner based on such
limited partner's unique tax situation or other circumstances. No independent
person has been retained to evaluate or render any opinion with respect to the
fairness of the Offer price.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Neither the Partnership nor any person acting on its behalf intends to
employ, retain or compensate any other person to make solicitations or
recommendations to the limited partners of the Partnership in connection with
the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) To the best knowledge of the Partnership, no transactions in the
Units have been effected during the past 60 days by the Partnership, by general
partners of the Partnership, including by the Operating General Partner or any
executive officer or director of the Operating General Partner, or any
affiliates or subsidiaries of such persons.
(b) To the best knowledge of the Partnership, the Operating General
Partner, the officers and directors of the Operating General Partner and any
other affiliate of the Operating General Partner do not presently intend to
tender to the Bidders any Units currently held of record or beneficially owned
by such Persons.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as described below, the Partnership is not engaged in any
negotiation in response to the Offer which relates to or would result in: (1) An
extraordinary transaction such as a merger or reorganization, involving the
Partnership or any subsidiary of the Partnership; (2) A purchase, sale or
transfer of a material amount of assets by the Partnership or any subsidiary of
the Partnership; (3) A tender offer for or other acquisition of securities by or
of the Partnership; or (4) Any material change in the present capitalization or
dividend policy of the Partnership.
The General Partner has from time to time had discussions with Mr.
Patterson which have included, among other things, discussions regarding the
refinancing and/or sale of Warner Oaks. The contract for the sale of Warner
Oaks, described in Item 4
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above was entered into prior to the Bidders' Offer and was not entered into in
response to the Offer.
(b) There are no transactions, board or partnership resolutions,
agreements in principle, or signed contracts in response to the Offer, which
relate to or would result in one or more of the matters referred to in this Item
7.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
The general partners of the Partnership, including the Operating General
Partner and certain officers and directors of the Operating General Partner and
other affiliates of the Operating General Partner, beneficially own limited
partnership Units and general partner interests in the Partnership. The total
amount of Units owned by all general partners and the directors and key
executive officers of the Operating General Partner is less than 1% of the
outstanding Units.
Pursuant to the terms of the Partnership's Partnership Agreement, in the
event a general partner (including the Operating General Partner) is removed as
a general partner by a vote of a majority in interest of the limited partners,
such general partner shall automatically become a limited partner and if the
vote of a majority in interest of the limited partners so requires, sell his
interest to the limited partners who shall purchase such interest on behalf of
the Partnership. If a removed general partner is required by the limited
partners to sell his interest in the Partnership, the amount to be paid for such
interest shall be computed as of the date of the consummation of the purchase
and in accordance with Section 15 of the Partnership's Partnership Agreement.
The affirmative vote of a majority in interest of the limited partners
of the Partnership is required under the Partnership's Partnership Agreement to
remove or replace any general partner (including the Operating General Partner)
or to dissolve the Partnership.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
(a) Letter to Limited Partners dated December 12, 1997.
(b) None.
(c) Management Agreement dated as of August 18, 1994 by and between
Terra Vista Management, Inc., a California corporation, and De Anza
Properties-XII, Ltd., a California limited partnership.*
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* Not included in copies mailed to limited partners.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete, and
correct.
December 12, 1997
(Date)
DE ANZA PROPERTIES-XII, LTD.,
A CALIFORNIA LIMITED PARTNERSHIP
By: DE ANZA CORPORATION
Operating General Partner
By: /s/Herbert M. Gelfand
----------------------------
Herbert M. Gelfand
Chairman of the Board
DE ANZA CORPORATION
By: /s/Herbert M. Gelfand
-----------------------------------
Herbert M. Gelfand
Chairman of the Board
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EXHIBIT INDEX
99.1 Letter to Limited Partners dated December 12, 1997.
99.2 Management Agreement dated as of August 18, 1994 by and between
Terra Vista Management, Inc., a California corporation, and De Anza
Properties-XII, Ltd., a California limited partnership. Incorporated herein by
reference to Exhibit No. 99.2 to Schedule 14D-9 Solicitation/Recommendation
Statement Pursuant to Section 14(d)(4) of the Securities Exchange Act of 1934
previously filed by De Anza Properties XII, Ltd. with the Securities and
Exchange Commission on May 2, 1996.
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Exhibit 99.1
DE ANZA PROPERTIES-XII, LTD.
9171 Wilshire Boulevard
Beverly Hills, California 90210
National: (800) 321-9638, ext. 153
California: (800) 421-2991, ext. 153
[DE ANZA LOGO]
PROPERTIES - XII, LTD.
December 12, 1997
Dear Limited Partner:
De Anza Properties-XII, Ltd., a California limited partnership (the
"Partnership") has reviewed the unsolicited tender offer made by affiliates of
MacKenzie Patterson, Inc. and affiliates of Citadel Financial Group, Inc.
(collectively, the "Bidders") to purchase units of limited partnership interests
of the Partnership ("Units") for $550 per Unit. The Operating General Partner
has determined that the offer is inadequate, and not in the best interests of
the Partnership or its limited partners. Accordingly, the Operating General
Partner recommends that the limited partners reject the offer and urges you not
to tender any of your limited partnership Units. None of the Operating General
Partner or any of its officers, directors or affiliates intend to tender any
Units. Limited partners who sell any Unit to the Bidders will not receive any
distributions to be made by the Partnership with respect to that Unit once the
Unit is sold, including all quarterly distributions and any distributions to be
made when the Partnership's properties are sold as is anticipated to occur in
January 1998, after which the Partnership will be liquidated. As described
below, the Operating General Partner estimates total liquidating distributions
to be approximately $714 per Unit. In addition, the Partnership anticipates
making a regular quarterly distribution December 31, 1997. It is anticipated
that the distribution will be $8.25 per Unit, as it has been for each of the
prior three quarters of 1997. In accordance with the Bidders' Offer, the
quarterly distribution will reduce the Bidders' $550 per Unit offer by $8.25 per
Unit, resulting in a net offer of $541.75 per Unit.
In arriving at its determination, the Operating General Partner reviewed
the offer with its advisors and management, and considered many factors
including the business, financial condition and prospects of the Partnership.
The Operating General Partner's conclusions and recommendations concerning
the offer are based, in large part, on the Operating General Partner's belief
that the amount being offered by the Bidders does not reflect the value of the
Partnership's underlying assets -- the most important of which is the
Partnership's sole remaining real property, Warner Oaks Apartments. As described
in the Partnership's October 31, 1997 letter to limited partners, the
Partnership has entered into a contingent agreement with Bay Apartment
Communities, Inc., an unaffiliated entity (the "Purchaser") for the sale of the
project for $20 million. Under the terms of the purchase agreement, the
Purchaser had a right to conduct a thorough investigation of the project and to
determine whether or not to proceed with the purchase of the property. The
Partnership received notice on December 8, 1997 that the Purchaser has completed
its investigation of the project, approved all matters subject to its
inspection, and has determined to proceed with the purchase as contemplated. The
scheduled closing date is in January, 1998, subject to satisfaction of certain
customary closing conditions.
If the project is sold as currently contemplated, the Partnership will be
liquidated, and the net proceeds will be distributed, along with any other
Partnership proceeds, subject to retaining reasonable reserves until final
liquidation. The reserves are not expected to be substantial and are intended to
be fully distributed in 1998. If the closing were to occur at the sales price of
$20 million, total liquidating distributions, including the net sales proceeds,
are estimated to be $714 per Unit of limited partnership interest. The sale of
the project at $20 million would result in a gain, which would be taxable. Based
upon the new federal laws regarding capital gains taxes, it is estimated that
the federal tax would be $110 per Unit. This does not take into account any
state or local taxes, and does not take into account any individual
circumstances which might affect taxation of
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a partner. The general partners are not expected to receive any portion of the
sales proceeds. However, the general partners will realize a taxable gain.
In the event of the sale of the project and the resulting liquidation of
the Partnership, only those partners who still own their partnership interests
will receive proceeds.
Before deciding to reject the Bidders' offer, limited partners should
consider the risks of a continued investment in the Partnership:
- The offer from the Bidders provides limited partners with the opportunity
to tender their Units and realize their investment now at a definite price
without having to wait for the Partnership to be terminated or liquidated in the
future.
- There is no assurance that a sale of Warner Oaks will be consummated at
the current contract price or that a future sale will result in distributions
greater than the price being offered now by the Bidders.
- The offer provides an opportunity to limited partners to liquidate their
investment without the usual transaction costs associated with market sales and
without the difficulty of selling Units in an illiquid and limited trading
market.
The attached Schedule 14D-9, which has been filed with the Securities and
Exchange Commission, expands upon the reasons for the Operating General
Partner's determination concerning the Bidders' offer, and contains additional
information relating to the Operating General Partner's recommendation and
certain other actions taken by the Operating General Partner on behalf of the
Partnership. We urge you to read the Schedule 14D-9 carefully.
If you have any questions concerning these matters please call Investor
Relations at (310) 777-2153.
You can be assured that the Operating General Partner will continue to act
in the manner in which the Operating General Partner believes to be in the best
interest of the Partnership and its limited partners.
Very truly yours,
DE ANZA PROPERTIES-XII, LTD.,
A CALIFORNIA LIMITED PARTNERSHIP
By: DE ANZA CORPORATION,
Operating General Partner
By: /s/ HERBERT M. GELFAND
----------------------
Herbert M. Gelfand
Chairman of the Board
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EXHIBIT 99.2
WARNER OAKS/TERRA VISTA
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (the "Agreement") is made as of the 18th day
of August, 1994, by and between Terra Vista Management, Inc., a California
corporation, (the "Manager"), and De Anza Properties - XII, Ltd., a California
limited partnership, (the "Owner"), in Los Angeles, California, with reference
to the following facts:
A. Owner has acquired certain improved real property located in
Woodland Hills, California, which is commonly known as Warner Oaks Apartments
(hereinafter referred to as the "Property").
B. De Anza Assets, Inc., a California corporation, is the
existing manager of the Property pursuant to a Management Agreement dated
October 1, 1985, which was amended as of June 14, 1990, to reflect an amendment
to Owner's partnership agreement. De Anza Assets, Inc. is wholly owned by De
Anza Group, Inc., which is being sold. Accordingly, De Anza Assets has
withdrawn as manager, which withdrawal has been accepted by Owner, and De Anza
Assets has been replaced by Terra Vista Management, Inc. The parties desire to
enter into this Management Agreement to reflect their obligations with respect
to the ownership and operation of the Property.
C. Owner desires that Manager maintain and operate the Property
on its behalf, and Manager desires to undertake said functions.
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NOW, THEREFORE, in consideration of the mutual covenants, conditions
and agreements set forth herein, the parties agree as follows:
1. Engagement. Owner hereby engages Manager as general manager
of the Property to the extent and subject to the conditions set forth herein,
and Manager hereby accepts such engagement.
2. Term and Termination. This Agreement shall continue from year
to year; provided, however, that Owner or Manager may, without penalty or
obligation to the other party to this Agreement, by providing sixty (60) days'
written notice to the other, terminate this Agreement with or without cause at
any time. This Agreement may be immediately canceled in the event of the
violation of any of the provisions hereof, or by Owner in the event a petition
in bankruptcy is filed by or against Manager which is not dismissed within
ninety (90) days following the date of such filing.
3. General Duties of Manager. Manager shall be directly
responsible for the day-to-day management of the Property, subject to such
general guidelines and instructions as the Owner may issue from time to time.
Notwithstanding anything to the contrary contained herein, all final decisions
respecting the management of the Property shall be made by Owner.
Manager shall at all times do and perform all things reasonably
necessary to effectuate the purposes and intentions embodied in this Agreement
so that the Property is operated at all times in a manner consistent with
prudent business practice and in
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accordance with any and all leases, subleases and contracts to which the
Property is subject, and any and all other laws, statutes, ordinances and
regulations of any governmental authority having jurisdiction over Owner, the
Property or Manager.
4. Collection of Rent and Payment of Expenses. Manager shall
collect on behalf of Owner all rents and all other charges of every kind or
type whatsoever from all tenants or other occupants of the Property for
services provided in connection with, or for the use of, the Property or any
portion thereof, and shall deposit the same in depositories specifically
approved by Owner. Out of the foregoing rents and other charges collected on
behalf of Owner, Manager shall pay all expenses related to the operation and
maintenance of the Property and each of its facilities as and when the same
become due, all in accordance with specific instructions provided by Owner.
There shall be included in the operating expenses of the Property borne by
Owner the direct out-of-pocket expenses incurred by Manager or any of its
affiliates (including payments to salaried employees and payments for services
and supplies) in performing the bookkeeping, management, computer and public
relations services for Owner necessary for operation of Owner and the Property
which services, but for their performance by Manager or its affiliates, would
be required to be performed for Owner by another person; provided, however,
that such expenses to be borne by Owner shall not exceed the amount Owner would
be required to pay nonaffiliated persons for comparable services which could
reasonably be made available to Owner.
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Manager may, with Owner's prior approval, and, when so requested by
Owner, shall, at Owner's expense, institute legal actions or proceedings
to collect charges, rent or other income or compensation due to Owner with
respect to the Property, or to oust persons unlawfully in possession of any
portion of the same. All such actions or proceedings and any related
counterclaim, crossclaims or other proceedings shall be at Owner's expense
and may be brought in the name of Owner or Manager.
5. Employees. Manager shall have the exclusive right to
discharge, supervise and fix the pay of such personnel as are necessary for the
efficient maintenance and operation of the Property. However, such personnel
shall be employed and paid by and shall be bonded to the satisfaction of Owner.
6. Repair and Maintenance of Property. Manager, at Owner's
expense, shall make or attend to the making of ordinary and emergency repairs,
maintenance, decorations and alterations at the Property.
7. Taxes and Insurance. Owner shall pay all taxes, personal and
real, and assessments that are attributable to the Property. Manager shall
obtain and keep in force, at Owner's expanse, such fire, comprehensive,
liability and other insurance policies as are generally carried with respect to
similar facilities in amounts sufficient to protect and maintain the Property
and Owner's interest therein in a form, manner and amount, and with companies
satisfactory to Owner. Owner and Manager shall be named as insured parties in
all liability insurance policies relating to the Property.
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8. Accounting. Manager shall keep a detailed and complete set of
books and records of all the income and disbursements of the Property in
accordance with good accounting practice; and Manager shall, on a monthly
basis, render to Owner each of the following:
(a) A report on all vacancies;
(b) A schedule showing all income received and
disbursements made during the preceding month, together with the balance on
hand, if any, at the end of said month; and
(c) A schedule describing the monthly and annual budget
for the Property, together with the amount expended in each category in the
preceding month and for the year to date.
9. Books and Records. Manager shall keep adequate books and
records in connection with all matters arising under the terms of this
Agreement. During regular business hours, Manager shall allow Owner or any of
its duly authorized representatives access to Manager's records and
correspondence pertaining to any transaction arising out of this Agreement. At
the close of each fiscal year of Owner, Manager shall allow the books and
records which are the subject of this paragraph to be examined and audited by a
certified public accountant selected by Owner. In the event of the termination
of this Agreement, Manager shall turn over to Owner all records and
correspondence as may be reasonably necessary to assist Owner to carry to
completion any lease or other transaction and all contracts, records and
documents directly pertaining to the Property.
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10. Compensation. Owner shall pay to Manager as compensation for
its services under this Agreement a sum equivalent to 5% of the aggregate gross
receipts from the operation of the Property excluding all receipts from
utilities or from taxes of any kind or type (provided that this compensation is
no less favorable to Owner than that which it would have to pay for comparable
services which could reasonably be made available to it by non-affiliated
parties) and, if thereafter that compensation is less than the compensation
which would then have to be paid by Owner to non-affiliated parties performing
comparable services, the Operating General Partner of Owner shall have the
option under this Agreement (exercisable by three days written notice thereof
to Manager) to raise the compensation to be paid to Manager hereunder to a
level not in excess of that which would be payable by Owner for such comparable
services. No increase in Manager's compensation under this provision shall
exceed one percent of the annual gross receipts of the Property in any year.
The foregoing compensation shall be payable at the beginning of each monthly
accounting period and shall be calculated on the basis of the budgeted gross
receipts (as determined by Owner) from the operation of the Property during
that period. The total amount of compensation earned by Manager hereunder
shall, as soon as possible after the end of each calendar year during the term
of this Agreement, be calculated on the basis of the actual gross receipts from
the operation of the Property during that year, and any additional compensation
that is due to Manager (because the actual gross receipts exceeded the
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budgeted gross receipts) shall be paid to it by Owner at that time.
Conversely, if Manager collected more compensation than it was entitled to
receive during any such year (because the actual gross receipts were less than
the budgeted gross receipts), Manager shall return the excess compensation to
Owner (without interest thereon). Compensation received by Manager hereunder
in any given calendar year shall be returned by Manager to Owner to the extent
the limited partners of Owner have not received the Priority Return described
in Section 10.1(a), as adjusted by the requirements of Section 12.3.1(a), of
the Second Amended and Restated Certificate and Agreement of Limited
Partnership of Owner (the "Certificate and Agreement") at the end of such year,
provided, however, that, except to the extent of any reduction of the fee
payable to Manager in accordance with the immediately preceding clause of this
sentence, Manager shall not be obligated to provide its own funds to pay any
return to Owner's limited partners described in Section 10.1(a) or 12.3.1(a) of
the Certificate and Agreement, and in no event will the amount payable to
Manager hereunder be reduced below zero.
11. Indemnification. Owner shall indemnify, defend and hold
Manager harmless from any damages, costs, expenses or obligations incurred by
Manager as a result of any actions or omissions of Manager within the scope of
its authority as provided in this Agreement, or as a result of any other
actions or obligations as Owner may specifically authorize Manager to perform,
provided performance of such acts by Manager does not constitute fraud, bad
faith or negligence.
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12. Miscellaneous. To the extent possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law. However, if any provision hereof shall be held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, and shall in
no way affect the validity of the remainder of such provision, or of any of the
remaining provisions of this Agreement.
This Agreement shall be governed by, and construed and enforced in
accordance with, the internal laws of the State of California.
This Agreement and the rights of Owner and Manager hereunder shall not
be assignable by either of them. Manager may, however, subcontract the
performance of its duties under this Agreement to one or more subsidiaries or
affiliates of Manager or to one or more affiliated companies or unaffiliated
companies suitable to Owner, but it shall remain responsible for such
performance. The right of Manager to receive compensation may be assigned,
pledged or hypothecated at any time without Owner's consent.
This Agreement, and a notice regarding payment of deferred management
fees, contain the entire agreement of Owner and Manager with respect to the
subject matter hereof and may not be changed except by an instrument executed
by both of them.
(signatures on following page)
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IN WITNESS WHEREOF, the parties hereto have executed this Management
Agreement as of the date first above written.
OWNER: DE ANZA PROPERTIES - X
a California limited partnership
By /s/ HERBERT M. GELFAND
-------------------------------
Herbert M. Gelfand
Chairman of the Board
MANAGER: TERRA VISTA MANAGEMENT, INC.
a California corporation
By: /s/ MICHAEL D. GELFAND
--------------------------------
Michael D. Gelfand
President
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