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 0-11128
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BALCOR PENSION INVESTORS-III
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(Exact name of registrant as specified in its charter)
Illinois 36-3164211
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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-III
(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 $ 6,714,525 $ 11,344,948
Cash and cash equivalents - Early
Investment Incentive Fund 696,051 302,437
Escrow deposits 57,693 127,004
Accounts and accrued interest receivable 131,011 222,417
Prepaid expenses 80,133 31,897
Deferred expenses, net of accumulated
amortization of $46,866 in 1996 and
$40,618 in 1995 15,622 21,870
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7,695,035 12,050,573
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Investment in loans receivable:
Loans receivable - wrap-around
and first mortgages 49,683,696 53,030,966
Less:
Loans payable - underlying mortgages 31,486,243 33,761,548
Allowance for potential loan losses 3,943,630 3,943,630
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Net investment in loans receivable 14,253,823 15,325,788
Real estate held for sale 14,214,705 14,214,705
Investment in joint ventures with affiliates 6,595,404 6,483,760
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35,063,932 36,024,253
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$ 42,758,967 $ 48,074,826
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LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 94,625 $ 101,455
Due to affiliates 45,975 36,011
Other liablilities, principally real
estate taxes and escrow deposits 414,345 534,113
Security deposits 89,854 89,848
Mortgage notes payable 1,644,945 1,666,291
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Total liabilities 2,289,744 2,427,718
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Limited Partners' capital (237,476
Interests issued) 47,915,094 52,908,205
Less Interests held by Early Investment
Incentive Fund (16,984 at June 30, 1996
and 16,090 at December 31, 1995) (6,218,194) (6,040,849)
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41,696,900 46,867,356
General Partner's deficit (1,227,677) (1,220,248)
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Total partners' capital 40,469,223 45,647,108
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$ 42,758,967 $ 48,074,826
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The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-III
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS 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 $ 2,783,314 $ 3,940,242
Less interest on loans
payable - underlying mortgages 1,604,819 2,023,459
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Net interest income on loans receivable 1,178,495 1,916,783
Income from operations of
real estate held for sale 787,327 1,050,667
Participation in income
of joint ventures with affiliates 264,908 347,217
Interest on short-term investments 181,179 516,000
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Total income 2,411,909 3,830,667
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Expenses:
Administrative 400,051 373,091
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Total expenses 400,051 373,091
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Income before gain on sale of real estate 2,011,858 3,457,576
Gain on sale of real estate 717,900
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Net income $ 2,011,858 $ 4,175,476
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Net income allocated to General Partner $ 150,889 $ 313,161
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Net income allocated to Limited Partners $ 1,860,969 $ 3,862,315
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Net income per average number of Limited
Partnership Interests outstanding
(221,381 in 1996 and 227,258 in 1995) $ 8.41 $ 17.00
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Distributions to General Partner $ 158,318 $ 158,318
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Distributions to Limited Partners $ 6,854,080 $ 7,499,820
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Distributions per Limited Partnership
Interest outstanding $ 30.96 $ 33.00
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The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-III
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS 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 $ 1,415,883 $ 1,968,217
Less interest on loans
payable - underlying mortgages 785,638 1,006,294
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Net interest income on loans receivable 630,245 961,923
Income from operations of
real estate held for sale 406,593 440,771
Participation in income
of joint ventures with affiliates 128,260 218,693
Interest on short-term investments 80,529 221,745
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Total income 1,245,627 1,843,132
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Expenses:
Administrative 310,493 180,030
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Total expenses 310,493 180,030
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Net income $ 935,134 $ 1,663,102
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Net income allocated to General Partner $ 70,135 $ 124,733
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Net income allocated to Limited Partners $ 864,999 $ 1,538,369
============= =============
Net income per average number of Limited
Partnership Interests outstanding
(221,377 in 1996 and 227,248 in 1995) $ 3.91 $ 6.77
============= =============
Distribution to General Partner $ 79,159 $ 79,159
============= =============
Distribution to Limited Partners $ 885,540 $ 6,590,751
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Distribution per Limited Partnership
Interest outstanding $ 4.00 $ 29.00
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The accompanying notes are an integral part of the financial statements.
<PAGE>
Balcor Pension Investors-III
(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 $ 2,011,858 $ 4,175,476
Adjustments to reconcile net income to net
cash provided by operating activities:
Gain on sale of real estate (717,900)
Participation in income of
joint ventures with affiliates (264,908) (347,217)
Amortization of deferred expenses 6,248 6,249
Net change in:
Escrow deposits 69,311 205,829
Escrow deposits - restricted 899,929
Accounts and accrued
interest receivable 91,406 69,158
Prepaid expenses (48,236) (157,264)
Accounts payable (6,830) (36,084)
Due to affiliates 9,964 (100,271)
Other liabilities (119,768) (998,047)
Security deposits 6 (2,563)
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Net cash provided by operating activities 1,749,051 2,997,295
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Investing activities:
Distributions from joint
venture partners - affiliates 153,264 90,730
Collection of principal payments
on loans receivable 1,507,535 22,316
Additions to real estate (56,633)
Proceeds from sale of real estate 856,240
Costs incurred in connection
with sale of real estate (79,750)
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Net cash provided by investing activities 1,660,799 832,903
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Financing activities:
Distributions to Limited Partners (6,854,080) (7,499,820)
Distributions to General Partner (158,318) (158,318)
Increase in cash and cash equivalents -
Early Investment Incentive Fund (393,614) (119,879)
Repurchase of Limited Partnership
Interests (177,345) (273,257)
Principal payments on underlying
loans payable (435,570) (568,584)
Principal payments on mortgage
notes payable (21,346) (111,192)
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Net cash used in financing activities (8,040,273) (8,731,050)
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Net change in cash and cash equivalents (4,630,423) (4,900,852)
Cash and cash equivalents at beginning
of period 11,344,948 18,445,509
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Cash and cash equivalents at end of period $ 6,714,525 $ 13,544,657
============= =============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-III
(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
and paid interest expense on mortgage notes payable on properties owned by the
Partnership of $76,658 and $262,913, 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 are:
Paid
-----------------------
Six Months Quarter Payable
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Mortgage servicing fees $ 14,169 $ 7,066 $ 2,355
Reimbursement of expenses to
the General Partner, at cost 58,256 46,138 43,620
4. Investments in Joint Ventures with Affiliates:
The Partnership owns a 27.5% joint venture interest in the Brookhollow/Stemmons
Office Center and a 12.68% joint venture interest in the Perimeter 400 Center
Office Building.
The following information has been summarized from the financial statements of
the joint ventures:
1996
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Net investment in real estate as of June 30 $36,015,862
Total liabilities as of June 30 590,390
Total income 3,919,144
Net income 1,667,854
<PAGE>
5. Contingency:
A proposed settlement has been reached with respect to the class action
complaint, Paul Williams and Beverly Kennedy, et al, v. Balcor Pension
Investors, et al. between counsel for the Class and counsel for the defendants.
A final hearing on the proposed settlement is expected to be held in November
1996. The General Partner does not believe that the proposed settlement will
have a material adverse impact on the Partnership.
6. Subsequent Event:
In July 1996, the Partnership paid $2,465,001 to the holders of Limited
Partnership Interests representing the regular quarterly distribution of
available Cash Flow of $4.00 per Interest for the second quarter of 1996 and
special distributions from proceeds received from the Pepper Square loan
repayment of $2.50 per Interest from Cash Flow and $3.88 per Interest from
Mortgage Reductions.
<PAGE>
BALCOR PENSION INVESTORS-III
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Pension Investors-III (the "Partnership") is a limited partnership
formed in 1982 to invest in wrap-around mortgage loans and, to a lesser extent,
other junior mortgage loans and first mortgage loans. The Partnership raised
$118,738,000 through the sale of Limited Partnership Interests and utilized
these proceeds to fund thirty-two loans. In addition, proceeds from prior loan
repayments were used to fund five additional loans. As of June 30, 1996, four
loans remain outstanding in the Partnership's portfolio. In addition, the
Partnership owns two properties held for sale and holds minority joint venture
interests in an additional two properties.
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
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During 1995, the Partnership sold two properties and received repayments on two
loans. The combined effect of these events resulted in a decrease in net income
during the six months and quarter ended June 30, 1996 as compared to the same
periods in 1995. The recognition of the gain on the sale of the Crossings
Shopping Center during the first quarter of 1995 also contributed to the
decrease in net income for the six months ended June 30, 1996. Further
discussion of the Partnership's operations is summarized below.
1996 Compared to 1995
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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 repayments of the Colony Apartments loan in August 1995 and the Rivergate
Apartments loan in December 1995 resulted in a decrease in net interest income
on loans receivable during 1996 as compared to 1995.
The Partnership has two loans on non-accrual status at June 30, 1996 which are
collateralized by Carmel on Providence Apartments and Bannockburn Executive
Plaza. For non-accrual loans, income is recorded only as cash payments are
received from the borrower. The funds advanced by the Partnership for these two
loans total approximately $6,200,000, representing approximately 6% of original
funds advanced. During 1996, the Partnership received cash payments of net
interest income totaling approximately $212,000 on the Carmel on Providence
loan. The Partnership would have received approximately $148,000 of net
interest income under the terms of the original loan agreement. Of the net
interest income received, $26,000 relates to costs incurred by the Partnership
prior to the borrower's bankruptcy filing, which have been added to the
principal of the loan and which accrue interest, payable by the borrower on a
<PAGE>
quarterly basis. In addition, approximately $301,000 was received on the
Bannockburn Executive Plaza loan. This loan originally matured in January 1994
and was subsequently extended to December 1997.
Operations of real estate held for sale represent the net operations of those
properties acquired by the Partnership through foreclosure. At June 30, 1996,
the Partnership was operating The Woods Apartments and the Orchards Shopping
Center. Original funds advanced by the Partnership total approximately
$6,678,000 for these properties, representing approximately 6% of original
funds advanced. The Partnership sold the Crossings Shopping Center and the
Candlewyck Apartments in 1995, both of which had been generating income. In
addition, rental and service income decreased at the Orchards Shopping Center
during 1996 due to decreased occupancy levels. The combined effect of these
events resulted in a decrease in income from real estate held for sale during
1996 as compared to 1995. Improved operations at The Woods Apartments resulting
from increased rental rates and decreased repair and maintenance expense due to
the completion of structural repairs and clubhouse renovation during 1995
partially offset this decrease.
Participation in income of joint ventures with affiliates represents the
Partnership's 27.5% and 12.68% shares of income from the Brookhollow/Stemmons
and Perimeter 400 Center office buildings, respectively. Decreased rental and
service income at the Brookhollow/Stemmons Office Building due to lower
occupancy resulted in a decrease in income during 1996 as compared to 1995.
Proceeds received in connection with the 1994 loan repayments and property
sales were invested in short-term investments and subsequently distributed to
investors in 1995, which resulted in a decrease in interest income on
short-term investments during 1996 as compared to 1995.
Provisions are charged to income when the General Partner believes an
impairment has occurred, either in a borrower's ability to repay the 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.
The Partnership incurred higher consulting, printing and postage costs in
connection with its response to a tender offer during the second quarter of
1996. As a result, administrative expenses increased during 1996 as compared to
1995.
During 1995, the Partnership recognized a gain of $717,900 in connection with
the sale of the Crossings Shopping Center.
<PAGE>
Liquidity and Capital Resources
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The cash position of the Partnership decreased by approximately $4,630,000 as
of June 30, 1996 when compared to December 31, 1995 primarily due to a special
distribution made to Limited Partners in January 1996. The Partnership
generated cash flow totaling approximately $1,749,000 from its operating
activities primarily as a result of the net interest income earned on its loans
receivable, the operations of its properties, and the interest received on its
short-term investments, net of the payment of administrative expenses. The
Partnership received funds from investing activities primarily due to the
receipt of proceeds of approximately $1,508,000 related to the repayment of the
Pepper Square loan. The Partnership's financing activities consisted primarily
of the payment of distributions totaling approximately $7,012,000 to the
Partners and principal payments on underlying loans and mortgage notes payable
totaling approximately $457,000. 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 property's revenue receipts less property related expenditures,
which include debt service payments if applicable. The Orchards Shopping Center
is the only property that has underlying debt. During the six months ended June
30, 1996 and 1995, the Orchards Shopping Center and The Woods Apartments
generated positive cash flow. The Crossings Shopping Center, which was sold in
January 1995, generated positive cash flow prior to its sale in 1995 and the
Candlewyck Apartments, which was sold in August 1995, generated positive cash
flow during the six months ended June 30, 1995. The Brookhollow/Stemmons and
Perimeter 400 Center office complexes, properties in which the Partnership
holds minority joint venture interests, also generated positive cash flow
during the six months ended June 30, 1996 and 1995.
As of June 30, 1996, The Woods Apartments and the Orchards Shopping Center have
occupancy rates of 93% and 83%, respectively. 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. The General Partner will also examine the terms of the mortgage
loan collateralized by the Orchards Shopping Center, which matures in 1997 and
may refinance or use Partnership reserves to repay the loan.
The General Partner believes that the market for multifamily housing properties
is favorable to sellers of these properties. Currently, the Partnership is
marketing the remaining residential property in its portfolio. Additionally,
the General Partner is exploring the sale of its commercial properties. The
General Partner examines each property individually by property type and market
in determining the optimal time to sell each property.
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 remaining loans 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.
<PAGE>
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 loans whereas rising interest rates decrease the yields on the
loans and make prepayment less likely.
Certain borrowers have failed to make payments when due to the Partnership for
more than ninety days and, accordingly, these loans have been placed on
non-accrual status (income is recorded only as cash payments are received). The
General Partner has negotiated with some of these borrowers regarding
modifications of the loan terms and has instituted foreclosure proceedings
under certain circumstances. Such foreclosure proceedings may be delayed by
factors beyond the General Partner's control such as bankruptcy filings by
borrowers and state law procedures regarding foreclosures. Further, certain
loans made by the Partnership have been restructured to defer and/or reduce
interest payments where the properties collateralizing the loans were
generating insufficient cash flow to support property operations and debt
service.
During February 1995, a plan of reorganization related to the Bannockburn
Executive Plaza loan was confirmed by the Bankruptcy Court effective March
1995. Pursuant to the plan, the borrower is required to remit all excess cash
flow from property operations on a monthly basis directly to the holder of the
underlying loan to further reduce the principal balance of the loan. Excess
cash flow of $47,270 was remitted to the holder of the underlying loan during
the six months ended June 30, 1996. The Partnership contracted to sell this
loan, along with the Seafirst Financial Center loan in August 1996. See Item 5.
Other Information for additional information.
In June 1996, the borrower of the $3,300,000 Pepper Square Apartments
wrap-around loan repaid the loan in full. The Partnership received proceeds of
$1,507,535, which consisted of the original funds advanced on the loan of
$913,765 and equity build-up related to principal payments of $593,770 made by
the Partnership on the underlying loan. The funds advanced by the Partnership
represents the difference between the original loan receivable balance of
$3,300,000 and the original balance of the underlying loan of $2,386,235.
Distributions to Limited Partners can be expected to fluctuate for various
reasons. Generally, distributions are made from Cash Flow generated by interest
and other payments made by borrowers under the Partnership's mortgage loans.
Loan prepayments and repayments can initially cause Cash Flow to increase as
prepayment premiums and participations are paid; however, thereafter
prepayments and repayments will have the effect of reducing Cash Flow. If such
proceeds are distributed, Limited Partners will have received a return of
capital and the dollar amount of Cash Flow available for distribution
thereafter can be expected to decrease. Distribution levels can also vary as
loans are placed on nonaccrual status, modified or restructured and, if the
Partnership has taken title to properties through foreclosure or otherwise, as
a result of property operations.
<PAGE>
In July 1996, the Partnership paid $2,465,001 to the holders of Limited
Partnership Interests representing the quarterly distribution for the second
quarter of 1996 of $4.00 of Cash Flow per Interest and special distributions
from proceeds received from the Pepper Square loan repayment of $2.50 per
Interest from Cash Flow and $3.88 per Interest from Mortgage Reductions. The
level of the regular quarterly distribution is consistent with the amount
distributed for the first quarter of 1996. The Partnership also paid $128,633
to the General Partner as its distributive share of the Cash Flow distributed
for the second quarter of 1996 and $42,878 as its contribution to the Early
Investment Incentive Fund. Including the July 1996 distribution, the
Partnership has distributed $682.26 per $500 Interest, of which $461.30
represents Cash Flow from operations and $220.96 represents a return of
Original Capital.
The Partnership expects to continue making cash distributions from the Cash
Flow generated by the receipt of mortgage payments and from property
operations, less payments on the underlying loans and administrative expenses.
The General Partner believes the Partnership has retained an 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 894 Interests from Limited Partners at a total cost of $177,345.
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 sale 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 - III
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
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Williams class action
- ---------------------
With respect to the class action complaint, Paul Williams and Beverly Kennedy,
et al. vs. Balcor Pension Investors, et al. (U.S. District Court, Northern
District of Illinois, Case No.: 90 C 0726), the ongoing settlement discussions
among the parties have resulted in a proposed settlement between counsel for
the Class and counsel for defendants. A draft notice including a description of
the terms of the proposed settlement is attached as Exhibit 99. A final hearing
to determine the fairness, reasonableness and adequacy of the proposed
settlement will be held on November 20, 1996 at 11:00 a.m. Copies of the
proposed settlement agreement may be inspected at the office of the Clerk of
the Court of the United States District Court for the Northern District of
Illinois located at 219 South Dearborn, Chicago, Illinois 60604.
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
- --------------------------
Bannockburn Executive Plaza Loan
- --------------------------------
In 1982, the Partnership funded a $5,027,736 loan collateralized by a
wrap-around mortgage on the Bannockburn Executive Plaza Office Building,
Bannockburn, Illinois, and evidenced by a wrap-around mortgage note in the
principal amount of $10,100,000 (the "Loan"). The principal amount of the Loan
included the principal amount of an underlying first mortgage loan (the
"Underlying Loan") of $5,072,264. Pursuant to the terms of the Loan, the
borrower is required to make interest only payments on the Loan through
maturity in December 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 were approximately $9,583,415 and $3,293,044, 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 88.63% of
the difference between (i) outstanding principal balance of the Loan and (ii)
the outstanding principal balance of the Underlying Loan at closing, scheduled
for August 22, 1996 ("Closing Date"), which sale price is estimated to be
$5,575,000. The purchaser has deposited $266,250 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 closing costs and
approximately $111,500 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 the Loan. The General Partner will be reimbursed by
the Partnership for actual expenses incurred in connection with the sale.
The Partnership has simultaneously contracted to sell to the purchaser its
interest in the loan collateralized by Seafirst Financial Center, as described
below, and affiliates of the General Partner have simultaneously contracted to
sell their interests in two other loans (together with the Seafirst loan, the
"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 $250,000. Further, in the event the closing of the sale of the
Partnership's interest in the Seafirst loan does not occur for any reason, the
agreement for the sale of the Partnership's interest in the Loan will be
terminated.
<PAGE>
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.
Seafirst Financial Center Loan
- ------------------------------
In 1982, the Partnership funded a $5,017,310 loan collateralized by a
wrap-around mortgage on the Seafirst Financial Center, Spokane, Washington, and
evidenced by a wrap-around mortgage note in the principal amount of $32,425,000
(the "Loan"). The principal amount of the Loan included the principal amount of
an underlying first mortgage loan (the "Underlying Loan") of $27,407,690.
Pursuant to the terms of the Loan, the borrower is required to make interest
only payments on the Loan through maturity in November 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 were approximately $32,425,000 and
$24,376,891, respectively. The amount of deferred interest due under the Loan
is approximately $1,976,978.
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 87.21% of
the difference between (i) the sum of the outstanding principal balance of the
Loan and any deferred interest due under the Loan and (ii) the outstanding
principal balance of the Underlying Loan at closing, scheduled for August 22,
1996 ("Closing Date"), which sale price is estimated to be approximately
$8,700,000. The purchaser has deposited $420,000 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 closing costs and
approximately $246,500 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 the Loan. The General Partner will be reimbursed by
the Partnership for actual expenses incurred in connection with the sale.
The Partnership has simultaneously contracted to sell to the purchaser its
interest in the loan collateralized by the Bannockburn Executive Center, as
described above, and affiliates of the General Partner have simultaneously
contracted to sell their interests in two other loans (together with the
Bannockburn loan, the "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 $300,000. Further, in the event the
closing of the sale of the Partnership's interest in the Bannockburn loan does
not occur for any reason, the agreement for the sale of the Partnership's
interest in the Loan will be terminated.
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.
<PAGE>
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. 2 to the Registrant's Registration Statement on Form S-11 dated
May 20, 1982 (Registration Statement No. 2-75938) and as Exhibit 4(a) to the
Registrant's Registration Statement on Form S-11 dated November 2, 1982
(Registration No. 2-80123); and Form of Confirmation regarding Interests in the
Registrant set forth as Exhibit 4.2 to the Registrant's Report on Form 10-Q for
the quarter ended June 30, 1992 (Commission File No. 0-11128) are incorporated
herein by reference.
(10) (i) Purchase and Sale Agreement regarding the sale of the Partnership's
interest in the Bannockburn Executive Plaza loan is attached hereto.
(ii) Purchase and Sale Agreement regarding the sale of the Partnership's
interest in the Seafirst Financial Center 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: There were no reports filed on Form 8-K during the
quarter ended June 30, 1996.
<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-III
By: /s/Thomas E. Meador
-------------------------------
Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Mortgage Advisors-II, the General Partner
By: /s/Brian D. Parker
------------------------------
Brian D. Parker
Senior Vice President, and Chief Financial
Officer (Principal Accounting and Financial
Officer) of Balcor Mortgage Advisors-II, 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 III 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 III ("BPI III") and LaSalle
National Bank, as Trustee under Trust Agreement dated October 4, 1973 and known
as Trust No. 46514 ("Borrower"), BPI III made a certain loan to the Borrower in
the original principal amount of $10,100,000 (the "Loan"). BPI III 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 Lake County, Illinois
Recorder as Document No. 37241111. 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 $5,200,000 (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:
<PAGE>
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:
"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.
"Alzina Loan" shall mean that certain loan made by Balcor Pension Investors II
to Illinois National Bank of Springfield, as Trustee under Trust Agreement
dated December 29, 1972 and known as Trust No. 13-03770-00 in the original
principal amount of $11,324,000, 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).
<PAGE>
"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.
"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 Alzina 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 $250,000.
"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.
<PAGE>
"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).
"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 II Limited
Partnership as seller with respect to the Alzina 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).
<PAGE>
(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.
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;
<PAGE>
(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;
(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) eighty-eight and 63/100ths percent (88.63%) of the
outstanding Principal Amount of the Loan, plus (y) eighty-eight and 63/100ths
percent (88.63%) 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) 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.
(xi) an executed notice letter to the holder of the Prior Mortgage
regarding the sale of the Loan to Purchaser.
<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;
(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; and
(v) Seller and Purchaser shall have closed (or shall be closing
simultaneously with the closing of the transactions contemplated herein) the
transfer of the Seafirst Loan in accordance with the terms of the Related
Agreement applicable to the sale of the Seafirst Loan.
<PAGE>
(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:
(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 precedent 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 obligation of each of Seller and Purchaser to consummate the
transactions contemplated hereby shall be subject to the condition that the
holder of the Prior Mortgage has either (i) consented in writing to the
transactions contemplated hereby or (ii) acknowledged in writing that such
consent is not required under the Prior Mortgage Loan Documents or any
agreement between the holder of the Prior Mortgage and Seller. In the event
the condition set forth in this Section 6(g) has not been satisfied at or prior
to Closing, either party may terminate this Agreement by giving written notice
of such termination to the other party, in which event this Agreement shall be
deemed terminated upon such other party's receipt of such written notice and
the provisions of Section 16(b) hereof shall apply.
<PAGE>
(h) 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.
(i) 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.
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.
<PAGE>
(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.
(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.
<PAGE>
(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.
(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 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
(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.
<PAGE>
(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
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.
<PAGE>
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.
(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.
<PAGE>
(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 $250,000) 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 $250,000 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. 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
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.
<PAGE>
(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.
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:
<PAGE>
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 III 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.
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,
<PAGE>
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.
(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
<PAGE>
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.
(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.
<PAGE>
(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 III LIMITED PARTNERSHIP, an Illinois limited partnership
By: Balcor Mortgage Advisors II, an Illinois general partnership,
its general partner
By: RGF-Balcor Associates II, an Illinois general partnership,
a general partner
By: The Balcor Company, a Delaware corporation, a
general partner
By: /s/Daniel L. Charleston
---------------------------------
Name: Daniel L. Charleston
-------------------------------
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>
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") dated as of August 8,
1996 by and between LABCOR III 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 III ("BPI III") and Hines Spokane,
Ltd. ("Borrower"), BPI III made a certain loan to the Borrower in the original
principal amount of $32,425,000 (the "Loan"). BPI III 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 Auditor's Office of
Spokane County, Washington as Document No. 9509180150, in Volume 1772, Page
1698. 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 $27,500,000 (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;
<PAGE>
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:
"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.
"Alzina Loan" shall mean that certain loan made by Balcor Pension
Investors II to Illinois National Bank of Springfield, as Trustee under Trust
Agreement dated December 29, 1972 and known as Trust No. 13-03770-00 in the
original principal amount of $11,324,000, which is the subject of a Related
Agreement.
"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.
<PAGE>
"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.
"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.
<PAGE>
"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 Alzina Loan, the Bannockburn 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
$300,000.
"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 II Limited
Partnership as seller with respect to the Alzina 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.
"Reports" shall have the meaning provided in Section 7(l).
"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).
<PAGE>
(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.
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;
<PAGE>
(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;
(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.
<PAGE>
Section 3. Purchase Price of the Loan. (a) The purchase price of the
Loan shall equal the sum of (x) eighty-seven and 21/100ths percent (87.21%) of
the outstanding Principal Amount of the Loan, plus (y) eighty-seven and
21/100ths percent (87.21%) 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.
(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.
<PAGE>
(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:
(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.
<PAGE>
(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) 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.
(xi) an executed notice letter to the holder of the Prior Mortgage
regarding the sale of the Loan to Purchaser.
<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;
<PAGE>
(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; and
(v) Seller and Purchaser shall have closed (or shall be closing
simultaneously with the closing of the transactions contemplated herein)
the transfer of the Bannockburn Loan in accordance with the terms of the
Related Agreement applicable to the sale of the Bannockburn Loan.
(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:
(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 precedent 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.
<PAGE>
(f) (i) 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 $100,000 of 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 and the
remaining $200,000 shall be disbursed in accordance with subclause (ii) of this
Section 6(f). 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. (Additional
text follows on Page 10A)
(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.
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.
<PAGE>
(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,
Section 6.(f) (ii) If (x) the condition set forth in Section 6(f)(i)
above has been satisfied, and (y) on the Closing Date, the Borrower is in
default in the payment of any amount then due under the Loan, Purchaser and
Seller shall continue to escrow from the remaining balance of the Premium an
amount equal to the difference (but not less than zero) between $200,000 and
any amounts collected by Purchaser or collected by Seller and paid over to
Purchaser of the past due payment due under the Loan that was due from Borrower
on August 1, 1996. Such escrowed funds shall be disbursed to Seller, on a
dollar-for-dollar basis, as and when any payments on the Loan are received by
Purchaser (whether such payments are made by the Borrower, by Seattle First
National Bank pursuant to its cure rights under the Mortgage, or otherwise).
From and after the Closing Date, Purchaser shall continue to use commercially
reasonable efforts to collect past due amounts owed by Borrower under the Loan.
If, on the date which is 90 days after the Closing Date, Purchaser has not
collected an amount equal to or greater than the amount of escrowed funds, any
amounts remaining in the escrow shall be disbursed to Purchaser, and such
escrow shall terminate.
(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.
<PAGE>
(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.
(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.
<PAGE>
(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.
(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.
<PAGE>
(p) Seller has not consented to any modification of the lease dated
January 25, 1979 between Borrower and Seattle First National Bank and to the
best of Seller's knowledge, without inquiry or investigation, there has been no
modification or amendment of such lease which has not been disclosed by Seller
to Purchaser in writing.
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.
(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,
<PAGE>
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
<PAGE>
(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.
(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 (including each
participant) of the Prior Mortgage certifying the unpaid principal balance of
the Prior Mortgage Loan as of December 31, 1995; (ii) an estoppel certificate
from the holder (including each participant) of the Prior Mortgage certifying
the amount of the unpaid principal balance of the Prior Mortgage Loan; and
(iii) an estoppel certificate from Seattle First National Bank, as tenant under
that certain lease agreement dated January 22, 1979 with respect to the rental
payable under the lease; provided, however, that Seller shall not, in each
case, be obligated to incur any material cost or expense in connection
therewith.
<PAGE>
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
(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.
<PAGE>
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
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.
<PAGE>
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.
<PAGE>
(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.
(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 $250,000) 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 $250,000 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. Such escrow shall provide that the escrowed funds shall be
<PAGE>
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
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.
<PAGE>
(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.
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:
<PAGE>
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 III 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.
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
<PAGE>
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.
<PAGE>
(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.
(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.
<PAGE>
(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.
(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.
<PAGE>
(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.
IN WITNESS WHEREOF, Purchaser and Seller have executed and delivered this
Agreement as of the day and year first above written.
SELLER:
LABCOR III LIMITED PARTNERSHIP,
an Illinois limited partnership
By: Balcor Mortgage Advisors II, an Illinois
general partnership, its general partner
By: RGF-Balcor Associates II, an Illinois
general partnership, a general partner
By: The Balcor Company, a Delaware
corporation, a general partner
By: /s/ Daniel L. Charleston
-------------------------------
Name: Daniel L. Charleston
-------------------------------
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>
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