<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
COMMISSION FILE NO. 0-11884
________________________
NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2774875
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
399 Boylston Street, 13th Floor
Boston, Massachusetts 02116
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(617) 578-1200
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
(Title of Class)
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 ___
---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. [X]
No voting stock is held by non-affiliates of the Registrant.
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE>
PART I
------
Item 1. Business.
--------
New England Life Pension Properties; A Real Estate Limited Partnership
(the "Partnership") was organized under the Uniform Limited Partnership Act of
the Commonwealth of Massachusetts on December 17, 1982, to invest primarily in
newly-constructed and existing income-producing real properties.
The Partnership was initially capitalized with contributions of $2,000
from Copley Properties Company, Inc. (the "General Partner") and $10,000 from
NELRECO Troy, Inc. (the "Initial Limited Partner"). On December 23, 1982 the
Partnership filed a Registration Statement on Form S-11 (the "Registration
Statement") with the Securities and Exchange Commission with respect to the
public offering of 20,000 units of limited partnership interest at a purchase
price of $1,000 per unit (the "Units") with an option to sell up to an
additional 10,000 Units (an aggregate of $30,000,000). The Registration
Statement was declared effective on March 22, 1983. On June 29, 1983 the
Partnership sold all 30,000 Units, and the Partnership admitted 3,193 investors
as limited partners (the "Limited Partners"), with $29,652,760 being contributed
to the capital of the Partnership. At the same time, the Initial Limited Partner
withdrew its contribution from the Partnership.
The Partnership does not have any employees. Services are performed
for the Partnership by the General Partner and by affiliates of the General
Partner.
At December 31, 1995 the Partnership had the three real estate
investments described below. In 1985 a joint venture in which the Partnership
was a partner sold its interest in a fourth real estate investment. In May,
1991, the Partnership sold a fifth real estate investment that resulted in a
capital distribution of $50.00 per Unit. In June 1994, a sixth investment, an
industrial building in Ontario, California, was sold, resulting in a capital
distribution of $193.34 per unit.
The Partnership and its affiliate, New England Life Pension Properties
II have provided the ground lessee of one of the Partnership's properties, the
Willows Shopping Center in Concord, California, with a $2.5 million leasehold
mortgage loan for the purpose of completing the renovation of the Center. New
England Life Pension Properties I will fund $625,000, with the balance funded by
New England Life Pension Properties II. The Partnership has no other current
plan to renovate, improve or further develop any of its real property.
In the opinion of the General Partner of the Partnership, the
properties are adequately covered by insurance.
A. Research and Development Facility in Columbia, Maryland.
---------------------------------------------------------
In 1984 the Partnership consummated a land purchase-leaseback and
leasehold mortgage loan investment totaling $5,100,000 in a 75,500 square
foot research and development facility located in Rivers Corporate Park,
Columbia, Maryland. The ground lease provides that the Partnership will
receive an annual rental of $126,500 plus 50% of the ground lessee's gross
revenues from the building in excess of a base amount. The mortgage loan
bears interest at the rate of 11.5% per annum and is paid currently. The
Partnership is negotiating an extension to the loan which matured on March
31, 1994. The tenant occupying the building has a right of first offer during
the period which began in September, 1992 and continues through November,
2004.
<PAGE>
B. Office Building in Decatur, Georgia.
-------------------------------------
In 1985 the Partnership acquired a 3.28 acre parcel of land in
Decatur, Georgia, for $1,675,000 and leased it back to the seller. Situated on
the land is a four-story, 79,855 square foot office building. The ground lease
provides that the Partnership will receive an annual rental of $201,000 plus 60%
of the ground lessee's gross revenues from the building in excess of a base
amount.
The Partnership has fully funded its $5,825,000 non-recourse
mortgage loan commitment to the ground lessee. The loan is secured by a first
mortgage of the building and the leasehold interest in the land. Through
February 1993, interest only was payable monthly at the rate of 12% per annum.
Interest was paid at a 7% rate from October, 1991 through April, 1992, with the
remainder being deferred. The Partnership agreed effective March 1993, that (1)
the interest rate be reduced to 8.5%, (2) monthly payments be made in a sum
necessary to amortize, using a 25-year amortization schedule, the outstanding
principal balance of the loan through maturity in February 1995; and (3) an
additional monthly payment of $7,005.38 be made for twenty-four months to retire
the outstanding accrued interest.
The Partnership has also made an additional loan of $633,076 to fund
tenant improvements. Interest accrues monthly at the rate of 12% per annum. This
loan is secured by a second mortgage of the building and the leasehold interest
in the land.
Effective February 19, 1995, the ground lease and the first mortgage
loan were amended to provide that ground rent and interest will be payable only
to the extent that net cash flow from the property is available therefor. To the
extent net cash flow is not sufficient to pay the ground rent and interest
payments, such amounts will accrue. The Partnership also obtained the sole right
to cause a sale of the property beginning on or after January 1, 1996, and the
maturity date was extended to December 31, 1996.
C. Shopping Center in Concord, California.
----------------------------------------
On July 30, 1984, the Partnership and an affiliate of the
Partnership (the "Affiliate") jointly made land purchase-leaseback and leasehold
mortgage loan investments aggregating $15,719,317 in a 24.8 acre shopping center
located in Concord, California, known as the Willows Shopping Center. The
Partnership's share of the investments aggregated $3,929,829, giving the
Partnership a 25% interest in each component of the investment held in common
with the Affiliate. The investments entitled the Partnership and the Affiliate
jointly to receive an annual interest return of 13% on the $10,719,317 ten-year
mortgage, together with an annual fixed rental under the ground lease equal to a
12.2% return on the $5,000,000 land purchase price plus an annual percentage
rental equal to 50% of the ground tenant's annual gross revenues in excess of
specified base amounts.
On August 15, 1985, the Partnership and the Affiliate consented
to a sale by the ground tenant, Willows Concord Venture ("Willows Concord"), of
the ground tenant's ownership interest in the buildings and leasehold interest
in the land to an affiliate of VMS Realty, Inc., an Illinois corporation. In
conjunction with the sale, the ground lease was amended to provide that the
Partnership and the Affiliate would no longer participate in excess rental
revenues from the Shopping Center or in net appreciation from the sale of the
property. The mortgage loan was also amended to increase the principal amount by
$3,880,683 to $14,600,000, to extend the maturity date one year to August, 1995,
and to lower the interest rate from 13% per annum to a stepped rate beginning at
9% per annum and increasing to 12% over six years. Under the terms of the
original ground lease, the joint ground lessors were entitled to 50% of the net
proceeds from a sale. The Partnership received cash of $1,071,875 and an
interest in the incremental mortgage loan amount equal to $970,171, 50% of which
was payable to the former ground lessee upon full
<PAGE>
payment of the loan principal by the new mortgagor. The joint mortgagees also
entered into a Collection and Disbursement Agreement pursuant to which Concord
Willows was entitled to share in 50% of interest paid under the new note in
excess of the interest that would have been payable under the original note.
The Partnership and the Affiliate had not received interest
payments currently on the mortgage loan since the payment due in March, 1990,
and as a result, the Partnership and the Affiliate began foreclosure proceedings
to take possession of the property. On October 4, 1990, Pacific First Bank, the
second leasehold mortgagee, filed an involuntary bankruptcy petition in the
United States Bankruptcy Court for the Northern District of California against
the ground lessee/debtor, to which filing the ground lessee/debtor subsequently
consented. The ground lessee/debtor later consented to relief from stay of
foreclosure proceedings. The Partnership and its Affiliate sold their interest
in the leasehold mortgage loan to Willows Concord on June 14, 1991. In return,
the Partnership and the Affiliate took back a note in the amount of $14,863,206.
On June 18, 1991, Willows Concord foreclosed on the leasehold
mortgage. The Partnership, the Affiliate and Willows Concord entered into a
replacement promissory note in the principal amount of $14,863,206, effective
June 18, 1991. The new loan is secured by the leasehold interest, bears interest
at the rate of 9.323% per annum and provides for a reduction in principal if the
note is paid prior to maturity. The Partnership, the Affiliate and Willows
Concord also entered into a new ground lease which provides for annual rent in
the amount of $550,000 plus an annual percentage rent equal to 70% of the ground
lessee's annual gross revenues in excess of a specified amount. The Partnership
has a 25% share of such rent. To the extent that operating cash flow from the
shopping center is not sufficient to pay the ground rent, such rent may accrue
until June 1996, at which time Willows Concord is obligated to pay all unpaid
accrued rent and to pay all future ground rent on a current basis.
On January 1, 1995 the Partnership and the Affiliate provided a
$2.5 million construction loan to the ground lessee in order to fund the
completion of the renovation of the Center, the Partnership has committed to
fund $625,000 of this amount. The loan bears interest at 11% per annum, provides
for amortization on a 15-year schedule, and matures on December 31, 1997. In
addition, the ground lease was amended to provide the Partnership and the
Affiliate with the sole right to cause a sale on or after January 1, 1996.
<PAGE>
Item 2. Properties.
-----------
The following table sets forth the annual realty taxes for the
Partnership's properties and information regarding tenants who occupy 10% or
more of gross leasable area (GLA) in the Partnership's properties:
<TABLE>
<CAPTION>
ESTIMATED
1996
ANNUAL NUMBER OF
REALTY TENANTS WITH 10% NAME(S) OF SQUARE FEET OF
PROPERTY TAXES OR MORE OF GLA TENANT(S) EACH TENANT
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shopping Center in $327,958 2 Whole Earth 40,374
Concord, CA Access
REI 29,486
Office Building in $148,200 1 Sullivan Health 9,939
Decatur, GA
R&D Building in $86,362 1 Biosys 75,500
Columbia, MD
----------------------------------------------------------------------------------------------------
<CAPTION>
ANNUAL
CONTRACT
RENT
PER LEASE RENEWAL LINE OF BUSINESS
SQ. FT. EXPIRATION OPTIONS OF PRINCIPAL
TENANTS
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shopping Center in $7.80 4/1996 None Specialty Retail
Concord, CA
$5.50 5/2003 Two 5 year Specialty Retail
options
Office Building in $14.04 2/1998 None Medical
Decatur, GA
R&D Building in $8.64 11/2004 Two 5 year Biotechnology
Columbia, MD options
- -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
The following table sets forth for each of the last five years
the gross leasable area, occupancy rates, rental revenue and net effective rent
for the Partnership's properties:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Gross Leasable Year-End Rental Net Effective
Property Area Occupancy Revenue Rent ($/sf/yr)*
Recognized
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shopping Center in Concord, CA
- ----------------------------------
1991 274,488 68% $3,131,840 $16.07
1992 274,488 70% $2,346,938 $12.39
1993 274,488 78% $2,612,770 $12.52
1994 251,531 91% $2,595,391 $12.39
1995 251,531 91% $3,099,701 $13.54
Office Building in Decatur, GA
- ----------------------------------
1991 79,855 97% $1,424,331 $18.25
1992 79,855 82% $1,263,302 $18.50
1993 79,855 88% $1,080,745 $16.11
1994 79,855 90% $1,200,783 $16.90
1995 79,855 90% $1,143,642 $15.52
R&D Building in Columbia, MD
- ----------------------------------
1991 75,500 100% $1,050,205 $13.91
1992 75,500 100% $1,050,205 $13.91
1993 75,500 100% $ 623,614 $ 8.26
1994 75,500 100% $ 529,627 $ 7.01
1995 75,500 100% $ 593,913 $ 7.87
- -------------------------------------------------------------------------------------------------------------
</TABLE>
* Net effective rent calculation is based on average occupancy during the
respective years.
<PAGE>
Following is a schedule of lease expirations for each of the next ten
years for the Partnership's properties based on the annual contract rent in
effect at December 31, 1995:
<TABLE>
<CAPTION>
TENANT AGING REPORT
PROPERTY # OF LEASE TOTAL TOTAL PERCENTAGE OF
EXPIRATIONS SQUARE FEET ANNUAL GROSS ANNUAL
RENTAL RENTAL*
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shopping Center in Concord, CA (1)
- ------------------------------
1996 2 41,790 $314,917 12%
1997 3 11,130 $ 63,362 2%
1998 1 600 $ 18,948 1%
1999 3 23,650 $260,984 10%
2000 2 10,520 $128,746 5%
2001 1 7,088 $ 77,117 3%
2002 2 22,411 $222,615 9%
2003 4 44,779 $401,192 15%
2004 0 0 $ 0 0%
2005 6 49,457 $586,913 23%
Office Building in Decatur, GA
- ------------------------------
1996 4 4,680 $ 72,383 6%
1997 5 9,800 $158,300 14%
1998 7 22,919 $355,748 31%
1999 7 16,846 $275,122 24%
2000 2 11,611 $177,554 16%
2001 0 0 $ 0 0%
2002 0 0 $ 0 0%
2003 0 0 $ 0 0%
2004 1 7,580 $ 95,963 9%
2005 0 0 $ 0 0%
R&D Building in Columbia, MD
- ----------------------------
1996 0 0 $ 0 0%
1997 0 0 $ 0 0%
1998 0 0 $ 0 0%
1999 0 0 $ 0 0%
2000 0 0 $ 0 0%
2001 0 0 $ 0 0%
2002 0 0 $ 0 0%
2003 0 0 $ 0 0%
2004 1 75,500 $653,075 100%
2005 0 0 $ 0 0%
- -------------------------------------------------------------------------------------------------------
</TABLE>
(1) Remaining leases do not expire within 10 years.
* Does not include expenses paid by tenants.
<PAGE>
Following is information regarding the competitive market conditions for each of
the Partnership's properties. This information has been gathered from sources
deemed reliable. However, the Partnership has not independently verified the
information and, as such, cannot guarantee its accuracy or completeness.
A. R&D in Columbia, MD.
-------------------
The Howard County R&D market contains approximately 3.2 million square feet and
exhibited a vacancy rate of 10% as of December 31, 1995. The 10% vacancy rate
is a strong improvement from the 1990 to 1993 period when the vacancy rate
hovered in the 22%-to-24% range.
B. Office building in Decatur, GA.
------------------------------
The metropolitan Atlanta class "A" office market comprises eight sub-markets
that total 47 million square feet, of which approximately 16 million square feet
is located in the Central Business District area. The overall office vacancy
rate stands at 9.5%, which is a significant decline from 14.7% in 1993.
The Decatur office building is located in the Northlake sub-market, one of the
smallest markets with just 1.3 million square feet of space. This sub-market
has a reported vacancy of 5% which is down significantly from 10.9% in 1993.
C. Shopping Center in Concord, CA.
------------------------------
This neighborhood shopping center lies within the Central Contra Costa
County market in which there is approximately 8.1 million square feet of retail
inventory. This market incorporates the cities along the I-680 corridor and
includes Walnut Creek, Concord, Pleasant Hill and Martinez. An average vacancy
rate of 5% was reported within the neighborhood centers, with retail strip
properties posting a slightly higher average vacancy of 7%. Since 1992, no new
retail projects have come on-line within the property's immediate neighborhood.
New construction is expected to be limited due to the lack of available land and
the still cautious attitude among the lending community.
Item 3. Legal Proceedings.
-----------------
The Partnership is not a party to, nor are any of its properties
subject to, any material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this Annual Report on Form 10-K.
<PAGE>
PART II
-------
Item 5. Market for Registrant's Common Equity and Related Stockholder
-------------------------------------------------------------
Matters.
---------
There is no active market for the Units. Trading in the Units is
sporadic and occurs solely through private transactions.
As of December 31, 1995, there were 3,387 holders of Units.
The Partnership's Amended and Restated Agreement of Limited
Partnership dated June 29, 1983, as amended (the "Partnership Agreement"),
requires that any Distributable Cash (as defined therein) be distributed
quarterly to the Partners in specified proportions and priorities. There are no
restrictions on the Partnership's present or future ability to make
distributions of Distributable Cash. For the year ended December 31, 1995 cash
distributions paid in 1995 or distributed after year end with respect to 1995 to
the Limited Partners as a group totaled $984,000. For the year ended December
31, 1994, cash distributions paid in 1994 or distributed after year end with
respect to 1994 to the Limited Partners as a group totaled $7,096,200 which
included $5,800,200 of capital distributions.
Cash distributions were less than net income and less than cash
provided by operating activities in 1995; therefore, partners' capital
increased. Reference is made to the Partnership's Statement of Changes in
Partners' Capital and Statement of Cash Flows in Item 8 hereof.
<PAGE>
Item 6. Selected Financial Data.
-----------------------
<TABLE>
<CAPTION>
For Year For Year For Year For Year For Year
Ended or Ended or Ended or Ended or Ended or
As of As of: As of As of: As of:
12/31/95(4) 12/31/94(3) 12/31/93(2) 12/31/92 12/31/91/(1)
----------- ----------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C>
Revenues $ 2,104,802 $ 3,691,109 $ 2,675,255 $ 3,246,472 $ 2,714,467
Net Income [Loss] $ 1,569,268 $ 3,129,077 $ (899,024) $ 2,191,885 $ 1,900,018
Net Income [Loss] per
Unit of Limited
Partnership
Interest
Outstanding $ 51.79 $ 103.26 $ (29.67) $ 72.33 $ 62.70
Total Assets $ 19,239,985 $ 18,681,253 $ 22,682,389 $24,935,668 $ 24,733,681
----------- ----------- ----------- ----------- --------------
Total Cash
Distributions
per Limited
Partnership Unit,
including amounts
distributed after
year end with
respect to the
previous year $ 32.80 $ 236.54 $ 51.80 $ 59.20 $ 119.24
</TABLE>
(1) The Partnership consummated a sale in 1991 which increased Net Income by
$32,402 ($1.07 per Unit) and cash distributions by $1,500,000 ($50 per
Unit).
(2) The Partnership recorded a provision of $2,800,000 ($92.40 per Unit) for
impaired mortgage loans during 1993.
(3) The Partnership consummated a sale in 1994 which increased Net Income by
$1,385,562 ($45.72 per Unit) and capital distributions by $5,800,200
($193.34 per Unit).
The Partnership also recorded a credit of $200,000 ($6.60 per Unit) related
to impaired mortgage loans during 1994.
(4) The Partnership recorded a credit of $260,000 ($8.58 per Unit) related to
impaired mortgage loans during 1995.
<PAGE>
ITEM NO. 7
- ----------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
- --------------------------------------------------------------------------
OPERATIONS
- ----------
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Partnership completed its offering of units of limited partnership interest
in June 1983. A total of 30,000 units were sold. The Partnership received
proceeds of $27,253,251, net of selling commissions and other offering costs,
which were invested in real estate, used to pay related acquisition costs, or
retained as working capital reserves. The Partnership made the real estate
investments described in Item 1 hereof. One investment was sold in each of 1985
and 1991; a third investment was sold in 1994. As a result of these sales and
similar transactions, capital of $13,600,200 has been returned to the limited
partners through December 31, 1995. One of the Partnership's mortgage loan
investments had a maturity date in 1994. Renewal discussions are ongoing;
however, the Partnership intends to extend the maturity until the underlying
property can be sold, at terms which are in the best interest of the limited
partners. Two other mortgage loans matured in February 1995 but were
subsequently extended to December 31, 1996.
On June 17, 1994, the Partnership sold its Ontario Distribution Center
investment and received net proceeds of $6,414,737. The resulting capital
distribution to limited partners of $5,800,200 on July 28, 1994 ($193.34 per
limited partnership) reduced the adjusted capital contribution to $546.66 per
unit.
At December 31, 1995, the Partnership had $1,204,043 in cash and cash
equivalents which was partially used for cash distributions of $248,485 to
partners on January 25, 1996; the remainder is expected to be used to fund the
renovation of the Willows Shopping Center or retained as working capital
reserves. The source of future liquidity and cash distributions to partners is
expected to be cash generated by the Partnership's real estate investments and
proceeds from the sale of such investments. Distributions of cash from
operations for the four quarters of 1995 were made at the annualized rate of 6%
on the adjusted capital contribution. Distributions of cash from operations for
1994 were made at the annualized rate of 7% for the first and second quarters
and 6% for the third and fourth quarters. The reduction in the cash
distribution rate is due to the absence of cash flow from the Ontario
Distribution Center.
The carrying value of the real estate investments in the financial statements at
December 31, 1995, other than impaired mortgage loans (Decatur TownCenter), is
at depreciated cost or if the investment's carrying value is determined not to
be recoverable through expected undiscounted future cash flows, the carrying
value is reduced to estimated fair market value. The fair market value of such
investments is further reduced by the estimated cost of sale for properties held
for sale. Carrying value may be greater or less than current appraised value.
At December 31, 1995, the carrying value of Willows Shopping Center exceeded its
appraised value by approximately $390,000. The appraised value of the remaining
investments at December 31, 1995 exceeded their related carrying values by an
aggregate of $46,000. The current appraised value of real estate investments
has been estimated by the general partner and is generally based on a
combination of traditional appraisal approaches performed by the Partnership's
advisor and independent appraisers. Because of the subjectivity inherent in the
valuation process, the estimated current appraised value may differ
significantly from that which could be realized if the real estate were actually
offered for sale in the marketplace.
<PAGE>
RESULTS OF OPERATIONS
- ---------------------
FORM OF REAL ESTATE INVESTMENTS
The Willows Shopping Center is structured as a ground lease/mortgage loan
investment. However, for financial reporting purposes it is accounted for as a
jointly-owned property. The remainder of the Partnership's investments are
structured and accounted for as ground lease/ mortgage loan investments.
OPERATING FACTORS
At December 31, 1995, the Willows Shopping Center was 91% leased, compared to
approximately 91% and 78% at the end of 1994 and 1993, respectively. The ground
lessee/borrower has commenced the full rehabilitation of this property including
the complete renovation and reconfiguration of the center to a mini power
center. The general partner determined that it is in the best interest of the
Partnership to provide funding for the rehabilitation costs in the form of a
construction loan, together with its affiliate which owns a share of the center.
The Partnership's share of the remaining estimated cost is approximately
$525,000 at December 31, 1995.
Decatur TownCenter's occupancy rate remained stable at 90% throughout 1995.
Occupancy was 90% and 82% at the end of 1994 and 1993, respectively.
INVESTMENT RESULTS
The Partnership determined that the mortgage loans to the Decatur TownCenter
were impaired and had recognized a provision for impaired mortgage loans of
$2,800,000 which was charged to operations in 1993. During 1994 and 1995, the
estimated market value of the loan collateral increased and, accordingly, the
valuation allowance was reduced by $200,000 and $260,000, respectively, through
a credit to operating results.
The sale of the Ontario Distribution Center in June 1994 resulted in the
recognition of a gain of $1,385,562.
1995 COMPARED TO 1994
Exclusive of the credit related to the allowance for impaired mortgage loans and
revenue from the Ontario Distribution Center, real estate operating results for
1995 were $1,391,034, a slight increase compared to $1,359,953 in 1994. The
increase primarily stemmed from results at Willows Shopping Center which
increased by $40,000, partially offset by a decrease in operating income
generated by Decatur TownCenter.
Interest income on short-term investments and cash equivalents increased during
1995 due to an increase in interest rates.
Operating cash flow, exclusive of Ontario Distribution Center, decreased
approximately $57,000 between 1994 and 1995. This change differs from the
change in operating results primarily due to an increase in non-cash working
capital items.
<PAGE>
1994 COMPARED TO 1993
Exclusive of the credit related to the allowance for impaired mortgage loans and
revenue from the Ontario Distribution Center, real estate operating results for
1994 were $1,359,953, a slight decrease compared to $1,365,612 in 1993. Real
estate operating results in 1993 included two significant transactions; a lease
termination fee of $80,000 from Rivers Corporate Parks and $90,000 from the
settlement of past due rents at Willows Shopping Center in connection with an
anchor tenant's lease revision. Excluding that settlement, operating income at
Willows Shopping Center increased by $60,000. In addition, operating income
generated by Decatur TownCenter increased by approximately $100,000 due to a
higher average occupancy rate in 1994.
Interest income on short-term investments and cash equivalents increased during
1994 due to an increase in interest rates and to an increase in the average
investment balance resulting from the temporary investment of sales proceeds
from the Ontario Distribution Center.
Operating cash flow, exclusive of Ontario Distribution Center, decreased
approximately $277,000 between 1993 and 1994. This decline is primarily due to
the realization in 1993 of previously accrued revenue from Decatur TownCenter
and Willows Shopping Center.
PORTFOLIO EXPENSES
The Partnership management fee is 9% of distributable cash flow from operations
after any increase or decrease in working capital reserves as determined by the
general partner. General and administrative expenses primarily consist of real
estate appraisal, printing, legal, accounting and investor servicing fees.
1995 COMPARED TO 1994
The Partnership management fee decreased approximately $31,000 due to the
decrease in distributable cash flow. General and administrative expenses
increased 2% due to an increase in legal fees, partially offset by a decrease in
printing and accounting fees.
1994 COMPARED TO 1993
The Partnership management fee decreased due to a decrease in distributable cash
flow. General and administrative expenses decreased 3% primarily due to a
decrease in printing and appraisal costs.
INFLATION
- ---------
By their nature, real estate investments tend not to be adversely affected by
inflation. Inflation may result in appreciation in the value of the
Partnership's real estate investments over time, if rental rates and replacement
costs increase. Declines in real property values, during the period of
Partnership operations, due to market and economic conditions, have overshadowed
the positive effect inflation may have on the value of the Partnership's
investments.
<PAGE>
Item 8. Financial Statements and Supplementary Data.
-------------------------------------------
See the Financial Statements of the Partnership included as a part of
this Annual Report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and
---------------------------------------------------------------
Financial Disclosure.
--------------------
The Partnership has had no disagreements with its accountants on any
matters of accounting principles or practices or financial statement
disclosure.
PART III
--------
Item 10. Directors and Executive Officers of the Registrant.
--------------------------------------------------
(a) and (b) Identification of Directors and Executive Officers.
--------------------------------------------------
The following table sets forth the names of the directors and
executive officers of the General Partner and the age and position held by each
of them as of December 31, 1995.
<TABLE>
<CAPTION>
Name Position(s) with the General Partner Age
- ---- ------------------------------------ ---
<S> <C> <C>
Joseph W. O'Connor President, Chief Executive Officer and Director 49
Daniel J. Coughlin Managing Director and Director 43
Peter P. Twining Managing Director, General Counsel and Director 49
Wesley M. Gardiner, Jr. Vice President 37
Daniel C. Mackowiak Principal Financial and Accounting Officer 44
</TABLE>
Mr. O'Connor and Mr. Coughlin have served in an executive capacity
since the organization of the General Partner on December 16, 1982. Mr. Gardiner
and Mr. Twining have served in their capacities since June 1994, and Mr.
Mackowiak has served in his capacity as of January 1, 1996. All of these
individuals will continue to serve in such capacities until their successors are
elected and qualify.
(c) Identification of Certain Significant Employees.
-----------------------------------------------
None.
(d) Family Relationships.
--------------------
None.
(e) Business Experience.
-------------------
The General Partner was incorporated in Massachusetts on
December 16, 1982. The background and experience of the executive officers and
directors of the General Partner are as follows:
<PAGE>
Joseph W. O'Connor has been President, Chief Executive Officer and a
Director of Copley Real Estate Advisors, Inc. ("Copley") since January, 1982. He
was a Principal of Copley from 1985 to 1987 and has been a Managing Director of
Copley since January 1, 1988. He has been active in real estate for 27 years.
From June, 1967, until December, 1981, he was employed by New England Mutual
Life Insurance Company ("The New England"), most recently as a Vice President in
which position he was responsible for The New England's real estate portfolio.
He received a B.A. from Holy Cross College and an M.B.A. from Harvard Business
School.
Daniel J. Coughlin was a Principal of Copley from 1985 to 1987 and has
been a Managing Director of Copley since January 1, 1988 and a Director of
Copley since July 1994. Mr. Coughlin has been active in financial management
and control for 21 years. From June, 1974 to December, 1981, he was Real Estate
Administration Officer in the Investment Real Estate Department at The New
England. Since January, 1982, he has been in charge of the asset management
division of Copley. Mr. Coughlin is a Certified Property Manager and a licensed
real estate broker. He received a B.A. from Stonehill College and an M.B.A.
from Boston University.
Peter P. Twining is a Managing Director and General Counsel of Copley.
As such, he is responsible for general legal oversight and policy with respect
to Copley and its investment portfolios. Before being promoted to this position
in January 1994, he was a Vice President/Principal and senior lawyer responsible
for assisting in the oversight and management of Copley's legal operations.
Before joining Copley in 1987, he was a senior member of the Law Department at
The New England and was associated with the Boston law firm, Ropes and Gray.
Mr. Twining is a graduate of Harvard College and received his J.D. in 1979 from
Northeastern University.
Wesley M. Gardiner, Jr. joined Copley in 1990 and has been a Vice
President at Copley since January, 1994. From 1982 to 1990, he was employed by
Metric Realty, a nationally-known real estate investment advisor and syndication
firm, as a portfolio manager responsible for several public and private limited
partnerships. His career at Copley has included asset management responsibility
for the company's Georgia and Texas holdings. Presently, as a Vice President
and Team Leader, Mr. Gardiner has overall responsibility for all the
partnerships advised by Copley whose securities are registered under the
Securities and Exchange Act of 1934. He received a B.A. in Economics from the
University of California at San Diego.
Daniel C. Mackowiak has been a Vice President of Copley since January
1989 and has been a Vice President and the Principal Financial and Accounting
Officer of the Managing General Partner since January 1996. Mr. Mackowiak
previously held the offices of Chief Accounting Officer of Copley from January
1989 through April 1994 and Vice President and Principal Financial and
Accounting Officer of the Managing General Partner between January 1989 and May
1994. From 1975 until joining Copley, he was employed by the public accounting
firm of Price Waterhouse, most recently as a Senior Audit Manager. He is a
certified public accountant and has been active in the field of accounting his
entire business career. He received a B.S. from Nichols College and an M.B.A.
from Cornell University.
<PAGE>
Mr. O'Connor is a director of Copley Properties, Inc., a Delaware
corporation organized as a real estate investment trust which is listed for
trading on the American Stock Exchange. None of the other directors of the
General Partner is a director of a company with a class of securities registered
pursuant to Section 12 of the Securities Exchange Act of 1934. All of the
directors and officers of the General Partner also serve as directors and
officers of one or more corporations which serve as general partners of
publicly-traded real estate limited partnerships which are affiliated with the
General Partner.
(f) Involvement in Certain Legal Proceedings.
----------------------------------------
None.
Item 11. Executive Compensation.
----------------------
Under the Partnership Agreement, the General Partner and its
affiliates are entitled to receive various fees, commissions, cash
distributions, allocations of taxable income or loss and expense reimbursements
from the Partnership. See Notes 1, 2 and 6 of Notes to Financial Statements.
The following table sets forth the amounts of the fees and cash
distributions and reimbursements for out-of-pocket expenses which the
Partnership paid to or accrued for the account of the General Partner and its
affiliates for the year ended December 31, 1995. Cash distributions to the
General Partner include amounts distributed after year end with respect to
1995.
<TABLE>
<CAPTION>
Amount of Compensation
Receiving Entity Type of Compensation and Reimbursement
- ---------------- -------------------- ----------------------
<S> <C> <C>
Copley Properties Company, Share of Distributable Cash $ 9,940
Inc.
Copley Real Estate Advisors, Management Fees 98,302
Inc.
New England Securities Servicing Fees and Out of
Corporation Pocket Reimbursements 4,719
----------------
TOTAL $ 112,961
----------------
</TABLE>
For the year ended December 31, 1995, the Partnership allocated
$19,973 of taxable income to the General Partner.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
--------------------------------------------------------------
(a) Security Ownership of Certain Beneficial Owners.
-----------------------------------------------
No person or group is known by the Partnership to be the
beneficial owner of more than 5% of the outstanding Units at December 31, 1995.
Under the Partnership Agreement, the voting rights of the Limited Partners are
limited and, in some circumstances, are subject to the prior receipt of certain
opinions of counsel or judicial decisions.
<PAGE>
Except as expressly provided in the Partnership Agreement, the
right to manage the business of the Partnership is vested exclusively in the
General Partner.
(b) Security Ownership of Management.
--------------------------------
An affiliate of the General Partner of the Partnership owned
1,094 Units at December 31, 1995.
(c) Changes in Control.
------------------
There exists no arrangement known to the Partnership the
operation of which may at a subsequent date result in a change in control of the
Partnership.
Item 13. Certain Relationships and Related Transactions.
----------------------------------------------
The Partnership has no relationships or transactions to report other
than as reported in Item 11, above.
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
---------------------------------------------------------------
(a) The following documents are filed as part of this report:
(1) Financial Statements--The Financial Statements listed on the
accompanying Index to Financial Statements and Schedules, Financial Statements
Index No. 2 and Financial Statements Index No. 3 are filed as part of this
Annual Report. The opinion of independent accountants on the 1995 financial
statements of the Decatur ground lessee/ mortgagor refers to the uncertainty as
to the ability of that entity to continue to operate as a going concern. This
condition has no effect on the Partnership's carrying value of, or revenue
recognition from, the Decatur investment, since both are based on the economic
attributes of the underlying property to which the Partnership has priority
entitlements.
(2) Financial Statement Schedules--The Financial Statement
Schedules listed on the accompanying Index to Financial Statements and Schedules
are filed as part of this Annual Report.
(3) Exhibits--The Exhibits listed in the accompanying Exhibit
Index are filed as a part of this Annual Report and incorporated in this Annual
Report as set forth in said Index.
(b) Reports on Form 8-K. No Current Reports on Form 8-K were filed
during the fourth quarter of 1995.
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP
Financial Statements
* * * * * * *
December 31, 1995
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES;
------------------------------------
A REAL ESTATE LIMITED PARTNERSHIP
---------------------------------
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
-------------------------------------------
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Accountants....................................................................
Financial Statements:
Balance Sheet - December 31, 1995 and 1994..................................................
Statement of Operations - Years ended December 31, 1995, 1994
and 1993.................................................................................
Statement of Changes in Partners' Capital - Years ended
December 31, 1995, 1994 and 1993.........................................................
Statement of Cash Flows - Years ended December 31, 1995, 1994
and 1993.................................................................................
Notes to Financial Statements...............................................................
Financial Statement Schedules:
Schedule III - Real Estate and Accumulated Depreciation at
December 31, 1995........................................................................
Schedule IV - Mortgage Loans on Real Estate at
December 31, 1995........................................................................
</TABLE>
All other schedules have been omitted because they are either not applicable or
the required information is shown in the financial statements or notes thereto.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Partners
NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP
In our opinion, the financial statements listed in the accompanying index
present fairly, in all material respects, the financial position of New England
Life Pension Properties; A Real Estate Limited Partnership (the "Partnership")
at December 31, 1995 and 1994, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of Copley Properties Company, Inc., the
General Partner of the Partnership; our responsibility is to express an opinion
on these financial statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by the General Partner, and evaluating the
overall financial statement presentation. We believe our audits provide a
reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
- ------------------------
Price Waterhouse LLP
Boston, Massachusetts
March 15, 1996
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP
BALANCE SHEET
<TABLE>
<CAPTION>
December 31,
--------------------------------
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Real estate investments:
Ground leases and mortgage loans, net $11,508,875 $11,115,609
Property, net 5,117,318 4,886,581
Deferred leasing costs and other assets, net 176,007 197,320
----------- -----------
16,802,200 16,199,510
Cash and cash equivalents 1,204,043 2,431,089
Short-term investments 1,109,814 -
Interest, rent and other receivables 123,928 50,654
----------- -----------
$19,239,985 $18,681,253
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 239,062 $ 255,658
Accrued management fee 24,575 24,575
Deferred disposition fees 457,768 457,768
----------- -----------
Total liabilities 721,405 738,001
----------- -----------
Partners' capital:
Limited partners ($546.66 per unit;
30,000 units authorized,
issued and outstanding) 18,467,706 17,898,131
General partner 50,874 45,121
----------- -----------
Total partners' capital 18,518,580 17,943,252
----------- -----------
$19,239,985 $18,681,253
=========== ===========
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------
1995 1994 1993
---------- ---------- ------------
INVESTMENT ACTIVITY
<S> <C> <C> <C>
Property rentals $ 780,127 $ 658,875 $ 663,036
Property operating expenses (354,550) (300,700) (322,373)
Depreciation and amortization (223,618) (198,296) (150,173)
---------- ---------- -----------
201,959 159,879 190,490
Ground rentals and interest
on mortgage loans 1,196,169 1,534,014 1,956,752
Amortization (7,094) (24,222) (33,882)
Credit from (provision for) impaired
mortgage loans 260,000 200,000 (2,800,000)
---------- ---------- -----------
Total real estate operations 1,651,034 1,869,671 (686,640)
Gain on sale of investment - 1,385,562 -
---------- ---------- -----------
Total real estate activity 1,651,034 3,255,233 (686,640)
Interest on cash equivalents
and short-term investments 128,506 112,658 55,467
---------- ---------- -----------
Total investment activity 1,779,540 3,367,891 (631,173)
---------- ---------- -----------
PORTFOLIO EXPENSES
Management fee 98,302 129,471 155,245
General and administrative 111,970 109,343 112,606
---------- ---------- -----------
210,272 238,814 267,851
---------- ---------- -----------
NET INCOME (LOSS) $1,569,268 $3,129,077 $ (899,024)
========== ========== ===========
Net income (loss) per limited
partnership unit $51.79 $103.26 $(29.67)
========== ========== ===========
Cash distributions per limited
partnership unit $32.80 $241.29 $51.80
========== ========== ===========
Number of limited partnership units
outstanding during the year 30,000 30,000 30,000
========== ========== ===========
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------------------------------------
1995 1994 1993
------------------ -------------------- ------------------
General Limited General Limited General Limited
Partner Partners Partner Partners Partner Partners
------- -------- ------- --------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning
of year $45,121 $17,898,131 $ 28,359 $22,039,045 $ 53,046 $24,483,079
Cash distributions (9,940) (984,000) (14,529) (7,238,700) (15,697) (1,554,000)
Net income (loss) 15,693 1,553,575 31,291 3,097,786 (8,990) (890,034)
------- ----------- -------- ----------- -------- -----------
Balance at end
of year $50,874 $18,467,706 $ 45,121 $17,898,131 $ 28,359 $22,039,045
======= =========== ======== =========== ======== ===========
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------
1995 1994 1993
----------- ----------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 1,569,268 $ 3,129,077 $ (899,024)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 230,712 222,518 184,055
Credit from (provision for) impaired
mortgage loans (260,000) (200,000) 2,800,000
Gain on sale of investment - (1,385,562) -
Increase in deferred leasing costs
and other assets (22,623) (122,075) (72,175)
Decrease in accrued ground lease/
mortgage loan receivables - - 414,623
Decrease (increase) in operating
receivables (88,234) 71,383 52,276
Decrease in unearned revenue - (1,232) (5,100)
Increase (decrease) in operating liabilities (16,596) 65,679 20,542
----------- ----------- -----------
Net cash provided by operating activities 1,412,527 1,779,788 2,495,197
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from sale of investment - 3,052,295 -
Repayment of mortgage loan investment - 3,170,000 -
Capital expenditures on owned property and
property collateralizing ground lease/
mortgage loan investments (550,779) (594,054) (542,193)
Decrease (increase) in short-term investments,
net (1,094,854) 1,045,544 (646,287)
Increase in deferred disposition fees - 192,442 -
----------- ----------- -----------
Net cash provided by (used in) investing
activities (1,645,633) 6,866,227 (1,188,480)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITY:
Distributions to partners (993,940) (7,253,229) (1,569,697)
----------- ----------- -----------
Net cash used in financing activity (993,940) (7,253,229) (1,569,697)
----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents (1,227,046) 1,392,786 (262,980)
Cash and cash equivalents:
Beginning of year 2,431,089 1,038,303 1,301,283
----------- ----------- -----------
End of year $ 1,204,043 $ 2,431,089 $ 1,038,303
=========== =========== ===========
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND BUSINESS
- ----------------------------------
General
New England Life Pension Properties; A Real Estate Limited Partnership (the
"Partnership") is a Massachusetts limited partnership organized for the purpose
of investing primarily in newly constructed and existing income producing real
properties. It primarily serves as an investment for qualified pension and
profit sharing plans and other entities intended to be exempt from federal
income tax. The Partnership commenced operations in June 1983, and acquired
several real estate investments through 1985. It intends to dispose of its
investments within twelve years of their acquisition, and then liquidate;
however, the general partner could extend the investment period if it is in the
best interest of the limited partners.
The general partner of the Partnership is Copley Properties Company, Inc.,
a wholly-owned subsidiary of Copley Real Estate Advisors, Inc. ("Copley"). The
associate general partner is CCOP Associates Limited Partnership, a
Massachusetts limited partnership, the general partners of which, are managing
directors of Copley and/or officers of the managing general partner. Subject to
the general partner's overall authority, the business of the Partnership is
managed by Copley pursuant to an advisory contract. Copley is an indirect
wholly-owned subsidiary of New England Investment Companies, L.P. ("NEIC"), a
publicly traded limited partnership. New England Mutual Life Insurance Company
("The New England") the parent of NEIC's predecessor, is NEIC's principal
unitholder. In August 1995, The New England announced an agreement to merge (the
"Merger") with Metropolitan Life Insurance Company ("Metropolitan Life"), with
Metropolitan Life to be the surviving entity. This merger, which is subject to
various policyholder and regulatory approvals, is expected to take place in the
first half of 1996. Metropolitan Life is the second largest life insurance
company in the United States in terms of total assets, having assets of over
$130 billion (and adjusted capital of over $8 billion) as of June 30, 1995.
At December 31, 1995 an affiliate of the general partner owned 1,094 units
of limited partnership interest and at December 31, 1994 the general partner
owned 1,069 units of limited partnership interest, which were repurchased from
certain qualified plans, within specified annual limitations provided for in the
Partnership Agreement.
Management
Copley, as advisor, is entitled to receive stipulated fees from the
Partnership in consideration of services performed in connection with the
management of the Partnership and the acquisition and disposition of Partnership
investments in real property. Partnership management fees are 9% of
distributable cash flow from operations, as defined, before deducting such fees.
Acquisition fees were paid in an amount equal to 2% of the gross proceeds from
the offering available for investment. Disposition fees are generally 3% of the
selling price of the property, but are subject to the prior receipt by the
limited partners of their capital contributions plus a stipulated return
thereon.
<PAGE>
New England Securities Corporation, an indirect subsidiary of The New
England, is engaged by the Partnership to act as its unit holder servicing
agent. Fees and out-of-pocket expenses for such services totaled $4,719, $6,985
and $7,066 in 1995, 1994 and 1993, respectively.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the general partner to make estimates
affecting the reported amounts of assets and liabilities, and of revenues and
expenses. In the Partnership's business, certain estimates require an assessment
of factors not within management's control, such as the ability of tenants to
perform under long-term leases and the ability of the properties to sustain
their occupancies in changing markets. Actual results, therefore, could differ
from those estimates.
Ground Leases and Mortgage Loans
While the related land and loan investments are legally separable, the
terms thereof have been negotiated jointly and the general partner evaluates
investment performance on a combined basis. They are, therefore, presented
together in the accompanying balance sheet and statement of operations.
Investments in land subject to ground leases are stated at cost, plus
accrued revenue. Investments in mortgage loans to the related ground lessees are
originally stated at cost, plus accrued interest. If the investment is subject
to ownership accounting (see below), cost is adjusted for the accumulated cost
recovery allowance. If the mortgage loan is impaired (see "Impaired Mortgage
Loans" below), the carrying amount is adjusted to the estimated market value of
the underlying collateral less anticipated costs of sale.
Accrual of contractual ground rent and loan interest is discontinued if the
total of the Partnership's invested cash and such accrual approximates the
appraised value of the investment. Under this condition, the Partnership applies
ownership accounting whereby revenue is recognized only to the extent of net
operating income generated by the underlying property, before depreciation, to
which the Partnership is entitled. In addition, the cost of the investment
related to depreciable property is subject to a recovery allowance similar to
depreciation, which is computed using the straight-line method based on
estimated useful lives. The Partnership, however, retains a priority claim to
all unrecognized contractual revenue. If a mortgage loan is determined to be
impaired, the Partnership recognizes revenue only to the extent of operating
cash flow generated by the collateral underlying the loan and no longer
recognizes a cost recovery allowance.
<PAGE>
Impaired Mortgage Loans
The Partnership considers a loan to be impaired when it is probable that it
will be unable to collect all amounts due under the contractual terms of the
loan agreement. Factors that the Partnership considers in determining whether a
loan is impaired include its past due status, fair value of the underlying
collateral and economic prospects of the borrower. When a loan is impaired, its
carrying value is periodically adjusted, through a valuation allowance, to its
estimated market value which is based on the appraised value of the underlying
collateral less anticipated costs of sale. Changes in the valuation allowance
are reported in the Statement of Operations.
Property
The Partnership and an affiliate share common ownership of an investment.
The form of the investment is a combination ground lease and mortgage loan, as
described above; however, in this case (Willows Shopping Center), substantial
economic risks of property ownership rest with the Partnership and its
affiliate. Accordingly, the investment is accounted for as owned property,
although the Partnership and its affiliate have a priority claim to all
unrecognized contractual revenue. The Partnership's financial statements include
its proportionate ownership share (25%) of the individual assets, liabilities,
revenue and expenses related to the property. Land and buildings and
improvements (net of accumulated depreciation) are classified as property in the
balance sheet.
Leases provide for rental increases over the respective lease terms. Rental
revenue is being recognized on a straight-line basis over the lease terms.
Capitalized Costs
Maintenance and repair costs are expensed as incurred. Significant
improvements and renewals are capitalized. Depreciation is computed using the
straight-line method based on estimated useful lives of the buildings and
improvements. Leasing costs are also capitalized and amortized over the related
lease terms.
Acquisition fees have been capitalized as part of the cost of real estate
investments. Amounts not related to land are being amortized using the
straight-line method over the terms of the mortgage loans or the estimated
useful lives of the property.
Realizability of Real Estate Investments
The Partnership considers a real estate investment, other than a mortgage
loan, to be impaired when it determines the carrying value of the investment is
not recoverable through undiscounted cash flows generated from the operations
and disposition of the property. Effective January 1, 1995, with its adoption of
Statement of Financial Accounting Standards No.121 (SFAS 121) entitled, "
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," the Partnership measures the impairment loss based on the
excess of the investment's carrying value over its estimated fair market value.
For investments being held for sale, impairment loss is measured based on the
excess of the investment's carrying value over
<PAGE>
its estimated fair market less estimated costs of sale. Property held for sale
is not depreciated during the holding period.
The carrying value of an investment may be more or less than its current
appraised value. At December 31, 1995, the carrying value of Willows Shopping
Center exceeded its appraised value by approximately $390,000, while at December
31, 1994 the carrying value exceeded its appraised value by approximately
$270,000. The appraised value of the remaining investments at December 31, 1995
and 1994 exceeded their related carrying values by an aggregate of $46,000 for
both years.
The current appraised value of real estate investments has been estimated
by the general partner and is generally based on a correlation of traditional
appraisal approaches performed by Copley and independent appraisers. Because of
the subjectivity inherent in the valuation process, the estimated current
appraised value may differ significantly from that which could be realized if
the real estate were actually offered for sale in the marketplace.
Cash Equivalents and Short-Term Investments
Cash equivalents are stated at cost, plus accrued interest. The Partnership
considers all highly liquid debt instruments purchased with a maturity of ninety
days or less to be cash equivalents; otherwise, they are classified as
short-term investments.
The Partnership has the positive intent and ability to hold all short-term
investments to maturity; therefore, short-term investments are carried at cost
plus accrued interest, which approximates market value. At December 31, 1995 all
investments are in commercial paper with less than six months remaining to
maturity. At December 31, 1994, the Partnership did not hold any short-term
investments.
Deferred Disposition Fees
Disposition fees due to Copley related to sales or restructuring of
investments are included in the determination of gains or losses resulting from
such transactions. According to the terms of the advisory contract, payment of
such fees has been deferred until the limited partners first receive their
capital contributions, plus stipulated returns thereon.
Income Taxes
A partnership is not liable for income taxes and, therefore, no provision
for income taxes is made in the financial statements of the Partnership. A
proportionate share of the Partnership's income is reportable on each partner's
tax return.
Per Unit Computations
Per unit computations are based on the number of units of limited
partnership interest outstanding during the year. The actual per unit amount
will vary by partner depending on the date of admission to, or withdrawal from,
the Partnership.
<PAGE>
NOTE 3 - INVESTMENTS IN GROUND LEASES AND MORTGAGE LOANS
- --------------------------------------------------------
The following is a summary of the Partnership's investments in ground
leases and mortgage loans:
<TABLE>
<CAPTION>
Fixed
Rental/
Investment/ Acquisition Interest December 31,
Location Date Rate 1995 1994
- ------------ ------------ -------- ----------- -----------
<S> <C> <C> <C> <C>
Rivers Corporate
Park 1984 (L) $ 1,100,000 $ 1,100,000
Columbia, MD 11.50% (M) 4,000,000 4,000,000
Decatur TownCenter 1985 12.00% (L) 1,675,000 1,675,000
Decatur, GA 8.5% (M) 5,825,000 5,825,000
1986-1989 12.00% (M) 633,076 633,076
------------ ------------
$ 13,233,076 $ 13,233,076
============ ============
</TABLE>
(L) Ground lease (M) Mortgage loan
<TABLE>
<CAPTION>
December 31,
-----------------------
1995 1994
-------------- --------------
<S> <C> <C>
Cash invested $ 13,233,076 $ 13,233,076
Unamortized closing costs and
acquisition fees, net 57,447 59,181
Accrued ground lease and
mortgage loan receivables 717,767 717,767
Capital expenditures 235,000 100,000
Cost recovery allowance (394,415) (394,415)
Valuation allowance for
impaired mortgage loans (2,340,000) (2,600,000)
-------------- -------------
$ 11,508,875 $ 11,115,609
============== =============
</TABLE>
<PAGE>
Ground leases have terms of fifty to sixty years and provide for additional
rent equal to a percentage, ranging from 50% to 60%, of gross revenues in excess
of a base amount from the rental of the buildings situated on the land.
Percentage rent totaled $7,413, $22,643 and $187,269 in 1995, 1994 and 1993,
respectively. The Partnership is also entitled to that same percentage of the
net proceeds from the sale of the entire property after it has recovered its
cash investment in the land and mortgage loan and, for Decatur TownCenter, after
payment to the ground lessee of an amount equal to its cost of any capital
improvements made during the lease term. The lease agreements require the lessee
to pay all operating expenses related to the subject land. The tenant occupying
Rivers Corporate Park has the right of first refusal to purchase the building
and a right to request the purchase of the land through November 2004 at fair
market value.
Generally, interest on the mortgage loans is payable monthly, except for
interest on the second mortgage loan on Decatur TownCenter which is payable upon
maturity. The loans are secured by first mortgages on the buildings, as well as
a second mortgage on Decatur TownCenter, and by the ground leasehold interests.
The mortgage loan on Rivers Corporate Park matured on March 31, 1994. Renewal
discussions are ongoing. The first and second mortgage loans on Decatur
TownCenter matured on February 19, 1995. On August 15, 1995, the ground
lease/mortgage loan agreements were amended to extend the maturity dates until
December 31, 1996 and to provide the Partnership the sole right to cause a sale
of the property on or after January 1, 1996.
Sale of Ontario Distribution Center
The Ontario Distribution Center in Ontario, California was sold on June 17,
1994. The net sale proceeds received by the Partnership fully repaid its ground
lease and mortgage loan investment and resulted in a gain of $1,385,562 ($45.72
per limited partnership unit), net of the disposition fee of $192,442 payable to
the advisor. On July 28, 1994, the Partnership made a capital distribution to
the limited partners in the aggregate amount of $5,800,200 ($193.34 per limited
partnership unit) with the proceeds from this sale.
Decatur TownCenter
The payment terms for the ground lease and mortgage loans on Decatur
TownCenter have been modified. Effective March 1, 1993, the rate on the first
mortgage loan was reduced to 8.5%, principal amortization commenced on a 25-year
schedule; and previously accrued interest was to be paid over a twenty-four
month period. The 1995 amendment to the first mortgage loan and ground lease
provides for interest and ground rent payments only to the extent of cash flow
from operations of the property. The Partnership, however, retains its claim to
all unpaid amounts.
With the determination that the loan was impaired as of January 1, 1993,
the Partnership has recognized income to the extent of operating cash flow
generated by the collateral underlying the loans ($602,256, $638,472 and
$535,192 in 1995, 1994 and 1993, respectively). In addition, a valuation
allowance has been established to adjust the carrying value of the loans to
estimated fair market value less anticipated costs of sale. The activity in the
valuation allowance during
<PAGE>
1994 and 1995, together with the related recorded and carrying value of the
impaired mortgage loans at the beginning and end of each year, are summarized as
follows:
<TABLE>
<CAPTION>
Recorded Valuation Carrying
Value Allowance Value
---------- ------------ ----------
<S> <C> <C> <C>
Balance at January 1, 1994 $ 6,561,846 $ (2,800,000) $ 3,761,846
============= ============== =============
Increase in fair market value of collateral $ 200,000
--------------
Balance at December 31, 1994 $ 6,646,927 $ (2,600,000) $ 4,046,927
============= ============== =============
Increase in fair market value of collateral $ 260,000
--------------
Balance at December 31, 1995 $ 6,781,928 $ (2,340,000) $ 4,441,928
============= ============== =============
</TABLE>
The average recorded value of the impaired mortgage loans did not differ
materially from the balances at the end of the period.
NOTE 4 - INVESTMENTS IN PROPERTY
- --------------------------------
The Willows Shopping Center investment (the "Willows"), acquired in 1984,
is owned jointly with an affiliate of the Partnership (the "Affiliate"); the
Partnership has a 25% ownership share. The ground lessee/mortgagor stopped
paying interest on the mortgage loan as of March 1990. As a result, the
Partnership and its Affiliate began foreclosure proceedings to take possession
of the property. A protracted series of legal interactions ensued, including the
filing of an involuntary bankruptcy petition by the second leasehold mortgagee.
In June 1991, the Partnership and its Affiliate sold the mortgage note to the
original owner of the Willows, who in turn undertook and completed the
foreclosure action. The Partnership and its Affiliate received a new mortgage
note; the principal related to the Partnership's share is $3,715,802. The note
bears interest at 9.323% per annum, payable monthly; however, it may accrue with
interest compounded at 11%. The loan matures on June 18, 2001. The original
owner also assumed the ground lease. The ground lease provides for annual rental
payments to the Partnership of $137,500. Rental payments may accrue through June
1996, with interest compounding at 11%. The ground lease also provides for
participation rentals at 70% of gross revenues in excess of a base amount to the
Partnership and its Affiliate. Under this investment arrangement, however, the
Partnership and its Affiliate are bearing substantial economic risks of
ownership; accordingly, the investment is being accounted for as a jointly owned
property.
In connection with a major renovation of the property, on January 1, 1995,
the Partnership and its Affiliate committed to make a construction loan to the
ground lessee in the amount of $2,500,000. The Partnership's share is $625,000
of which $100,621 has been funded as of December 31, 1995. Interest accrues at
11% compounded monthly; debt service payments begin on January 1, 1996,
including principal payments based upon a 15-year amortization schedule. The
note matures on December 31, 1997. In addition, the ground lease was amended,
whereby after January 1, 1996, the Partnership and the Affiliate may, at their
sole discretion, offer the entire property for sale.
<PAGE>
At December 31, 1995 and 1994, the Partnership's proportionate share of the
carrying value of the property was comprised of land of $1,250,000 and building
and improvements of $3,867,318 and $3,636,582, respectively (net of accumulated
depreciation of $766,954 and $581,911, respectively). The buildings are being
depreciated on a straight-line basis with an estimated useful life ranging from
21 to 25 years.
The Partnership's proportionate share of future minimum rentals under
non-cancelable operating leases are: $583,750 in 1996; $591,250 in 1997;
$581,750 in 1998; $537,250 in 1999; $413,000 in 2000; and $1,446,500 thereafter.
NOTE 5 - INCOME TAXES
- ---------------------
The Partnership's income for federal income tax purposes differs from that
reported in the accompanying statement of operations as follows:
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net income (loss) per financial
statements $ 1,569,268 $ 3,129,077 $ (899,024)
Timing differences:
Ground rent and mortgage loan interest (1) 688,074 602,941 678,782
Gain on sale - 223,483 -
Expenses - - 9,280
Valuation allowance (260,000) (200,000) 2,800,000
----------- ----------- -----------
Taxable income $1,997,342 $3,755,501 $2,589,038
=========== =========== ===========
</TABLE>
(1) Represents additional contractual revenue recognized for tax purposes
related to the Willows Shopping Center in 1993.
NOTE 6 - PARTNERS' CAPITAL
- --------------------------
Allocations of net income (losses) from operations and distributions of
distributable cash from operations, as defined, are in the ratio of 99% to the
limited partners and 1% to the general partner. Cash distributions are made
quarterly.
Net sales proceeds and financing proceeds are allocated first to limited
partners to the extent of their contributed capital plus a stipulated return
thereon, as defined, second to pay disposition fees, and then 85% to the limited
partners and 15% to the general partner. The adjusted capital contribution per
limited partnership unit was reduced from $1,000 to $790 during 1985, from $790
to $740 during 1991, and from $740 to $546.66 during 1994 as a result of such
transactions. Income from a sale is allocated in proportion to the distribution
of related proceeds, provided that the general partner is allocated at least 1%.
Income or losses from a sale, if there
<PAGE>
are no residual proceeds after the repayment of the related debt, will be
allocated 99% to the limited partners and 1% to the general partner.
NOTE 7 - SUBSEQUENT EVENT
- -------------------------
Distributions of cash from operations relating to the quarter ended
December 31, 1995 were made on January 25, 1996 in the aggregate amount of
$248,485 ($8.20 per limited partnership unit).
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AT DECEMBER 31, 1995
<TABLE>
<CAPTION>
Costs Subsequent Gross Amount at Which
Initial Costs to Partnership to Acquisitions Carried at Close of Period
----------------------------------------------- -----------------------------------------------
Encum - Buildings & Improve - Buildings &
Description brances Land Improvements ments Land Improvements
- -------------------------- ----------- -------------- ---------------- ------------ -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Research and Development
Facility
Columbia, Maryland Note A 1,122,880 -- -- 1,122,880 --
25% interest in Shopping Center
Concord, California Note A 1,250,000 3,298,795 1,335,476 1,250,000 4,634,271
Office Building
Decatur, Georgia Note A 1,709,567 -- -- 1,709,567 --
-------------------------------------------------------------------------------------------------
Total $4,082,447 $3,298,795 $1,335,476 $4,082,447 $4,634,271
=================================================================================================
<CAPTION>
Accrued Accumulated Date of Date Depreciable
Description Ground Rent Total Depreciation Construction Acquired Life
- -------------------------- ----------- -------------- ---------------- ------------ -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Research and Development
Facility
Columbia, Maryland -- 1,122,880 -- -- 03/28/84 --
25% interest in Shopping Center
Concord, California -- 5,884,271 (766,954) -- (L) 07/30/84
(B) 06/18/91 25 years
Office Building
Decatur, Georgia 234,500 1,944,067 -- -- (L) 02/20/85 30 years
(B) 1992
-------------------------------------------------------------------------------------------------
Total $234,500 $8,951,218 ($766,954)
=================================================================================================
</TABLE>
Notes: (L) Land
(A) All senior mortgages on the properties are (B) Buildings & Improvements
held by New England Life Pension Properties.
<TABLE>
<S> <C>
(B) Reconciliation of real estate owned:
Balance at beginning of year $8,535,439
Acquisitions 415,779
--------------
Balance at end of year $8,951,218
==============
Accumulated depreciation
at beginning of year $581,911
Depreciation expense 1995 185,043
--------------
Accumulated depreciation at end of year $766,954
==============
</TABLE>
<PAGE>
NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP
SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE
AT DECEMBER 31, 1995
<TABLE>
<CAPTION>
Final Periodic Cost
Interest Maturity Payment Face Amount Recovery
Description Rate Date Terms of Mortgage Allowance
- ----------- ------------ ------------ ------------ --------------- -------------
<S> <C> <C> <C> <C> <C>
Research and Development
Facility Interest
Columbia, Maryland 11.50% 03/28/94 Monthly 4,000,000 --
(See Note 3) Principal
at Maturity
Office Building
Decatur, Georgia 8.50% 12/31/96 25-yr monthly
(See Note 3) amortization 5,825,000 (394,415)
Principal
at Maturity
2nd Mortgage 12.00% 12/31/96 Interest 633,076 --
Monthly
Principal
at Maturity
-------------------------------------------------------------------------------------------
Total $10,458,076 ($394,415)
===========================================================================================
<CAPTION>
Valuation
allowance Amount of Deferred Carrying
for impaired Interest Aquisition Amount of
Description Mortgage loans Receivable Fees Mortgage
- ----------- ------------------ -------------- -------------- -------------
<S> <C> <C> <C> <C>
Research and Development
Facility
Columbia, Maryland -- -- -- $4,000,000
Office Building
Decatur, Georgia
(2,340,000) 718,267 0 $3,808,852
2nd Mortgage -- -- -- $ 633,076
-------------------------------------------------------------------------------
Total ($2,340,000) $718,267 $0 $8,441,928
===============================================================================
</TABLE>
<TABLE>
<S> <C>
Balance at beginning of year $8,048,662
Valuation allowance for impaired loans 260,000
Increase in acccrued ground lease/mortgage
loan receivables 135,000
Amortization of deferred acquisition fees (1,734)
--------------
8,441,928
==============
</TABLE>
<PAGE>
DECATUR TOWNCENTER ASSOCIATES, LTD.
FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994, AND 1993
<PAGE>
FINANCIAL STATEMENTS
INDEX NO. 2
AUDITOR'S REPORT AND FINANCIAL STATEMENTS
OF DECATUR TOWNCENTER ASSOCIATES, LTD.
<TABLE>
<CAPTION>
PAGE #
<S> <C>
Independent Auditor's Report of Duggan & Massey, P.C...........................
Balance Sheet - December 31, 1995 and 1994.....................................
Statement of Income - For the Years Ended
December 31, 1995, 1994 and 1993.............................................
Statement of Changes in Partner's Capital - For the Years Ended
December 31, 1995, 1994 and 1993.............................................
Statement of Cash Flows - For the Years Ended
December 31, 1995, 1994 and 1993.............................................
Notes to Financial Statements..................................................
</TABLE>
<PAGE>
[LETTERHEAD OF DUGGAN & MASSEY, P.C.]
INDEPENDENT AUDITOR'S REPORT
----------------------------
To The Partners
Decatur TownCenter Associates, Ltd.
We have audited the accompanying balance sheets of Decatur TownCenter
Associates, Ltd. as of December 31, 1995 and 1994 and the related statements of
income, partners' capital and cash flows for each of the three years in the
period ended December 31, 1995. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Decatur TownCenter Associates,
Ltd. as of December 31, 1995 and 1994 and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. The Partnership's significant
cash deficits and operating losses raise substantial doubt about its ability to
continue as a going concern. The Partnership's ability to continue as a going
concern is dependent on attaining future positive cash flow and/or additional
financing. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ Duggan & Massey, PC
January 15, 1996
<PAGE>
DECATUR TOWNCENTER ASSOCIATES, LTD.
BALANCE SHEETS
ASSETS
------
<TABLE>
<CAPTION>
December 31
----------------------------
1995 1994
------------ ------------
<S> <C> <C>
Current Assets
Cash $ 101,091 $ 15,024
Accounts receivable - tenants (Net of
allowance for doubtful accounts of
$340 and $1,072) 8,422 20,376
Accounts receivable - others 9,810 3,955
Prepaid expenses 2,826 1,860
------------ ------------
Total Current Assets 122,149 41,215
------------ ------------
Building and Improvements (Net of
accumulated depreciation of
$3,059,894 and $2,818,534) 2,978,833 3,161,332
------------ ------------
Other Assets
Loan costs (Net of accumulated
amortization of $100,000 and
$98,349) -0- 1,650
Commissions and procurement fees
(Net of accumulated amortization of
$141,934 and $89,770) 123,638 156,906
Investment in Decatur TownCenter II
Associates 1 1
------------ -----------
Total Other Assets 123,639 158,557
------------ -----------
Total Assets $3,224,621 $3,361,104
============ ===========
</TABLE>
<PAGE>
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
<TABLE>
<CAPTION>
December 31
------------------------------
1995 1994
-------------- --------------
<S> <C> <C>
Current Liabilities
First mortgage payable $5,825,000 $5,825,000
Second mortgage payable 1,055,116 1,055,116
Accrued interest expense 1,190,277 994,535
Accrued ground rent expense 1,189,250 988,250
Accounts payable 42,200 40,356
Rents received in advance 1,088 1,536
Security deposit 1,964 1,964
-------------- --------------
Total Current Liabilities 9,304,895 8,906,757
-------------- --------------
Partners' Capital (6,080,274) (5,545,653)
-------------- --------------
Total Liabilities and
Partners' Capital $3,224,621 $3,361,104
============== ==============
</TABLE>
See accompanying notes and accountant's report.
<PAGE>
DECATUR TOWNCENTER ASSOCIATES LTD.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended
December 31
-------------------------------------
1995 1994 1993
---------- ----------- ----------
<S> <C> <C> <C>
Rental Income $1,143,642 $1,200,783 $1,080,745
---------- ---------- ----------
Expenses
Advertising and promotion 3,433 4,480 857
Amortization 65,084 69,133 58,240
Bad debts 9,524 (530) 620
Depreciation 230,092 224,828 213,102
Donations 100 248 120
General building maintenance 112,535 104,466 100,522
Ground rent 201,000 201,000 201,000
Insurance 10,336 6,611 10,635
Interest 621,739 621,734 655,714
Legal and accounting 11,717 9,762 8,735
Management fees and commissions 75,201 65,888 62,854
Miscellaneous rental expense -0- 1,337 971
Office 5,355 5,324 3,864
Parking deck 11,465 12,783 10,417
Salary reimbursement 36,263 37,716 27,622
Security 21,208 18,599 17,501
Taxes and licenses 142,618 123,490 131,827
Utilities 119,980 122,336 122,318
---------- ----------- ----------
Total Expenses 1,677,650 1,629,205 1,626,919
---------- ----------- ----------
Operating Loss (534,008) (428,422) (546,174)
---------- ----------- ----------
Other Income and Expenses
Interest income 307 845 3,956
Penalty (920) -0- -0-
---------- ----------- ----------
Total Other Income and Expenses (613) 845 3,956
---------- ----------- ----------
Net Loss $ (534,621) $ (427,577) $ (542,218)
========== =========== ==========
</TABLE>
See accompanying notes and accountant's report.
<PAGE>
DECATUR TOWNCENTER ASSOCIATES LTD.
STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
Years Ended
December 31
------------------------------------------
1995 1994 1993
------------- ------------ -------------
<S> <C> <C> <C>
Balance, beginning of period $ (5,545,653) $ (5,118,076) $ (4,575,858)
Net loss for the period (534,621) (427,577) (542,218)
------------- ------------ ------------
Balance, end of period $ (6,080,274) $ (5,545,653) $ (5,118,076)
============= ============ ============
</TABLE>
See accompanying notes and accountant's report.
<PAGE>
DECATUR TOWNCENTER ASSOCIATES LTD.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended
December 31
-----------------------------------------------------
1995 1994 1993
-------------- ---------------- ---------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net loss $ (534,621) $ (427,577) $ (542,218)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Depreciation and amortization 295,176 293,961 271,342
(Increase) Decrease in assets:
Accounts receivable - tenants 11,954 10,072 (11,785)
Accounts receivable - others (5,855) (3,955) 6,965
Prepaid expenses (966) 722 11,578
Increase (Decrease) in Liabilities:
Accounts payable and accrued
liabilities 398,586 238,464 265,679
Rents received in advance (448) (4,964) 6,500
-------------- --------------- --------------
Net cash provided by
operating activities 163,826 106,723 8,061
Cash Flows From Investing Activities:
Capital expenditures (77,759) (155,176) (294,623)
-------------- --------------- --------------
Net increase (decrease) in cash and
cash equivalents 86,067 (48,453) (286,562)
Cash and cash equivalents at beginning
of year 15,024 63,477 350,039
-------------- --------------- --------------
Cash and cash equivalents at end of year $ 101,091 $ 15,024 $ 63,477
============== =============== ==============
Supplemental disclosure of cash flow
information:
Cash paid during the year for interest $ 425,996 $ 577,822 $ 599,154
============== =============== ==============
</TABLE>
See accompanying notes and accountant's report.
<PAGE>
DECATUR TOWNCENTER ASSOCIATES, LTD.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Operations
-------------------------
Decatur TownCenter Associates, Ltd. was formed on March 8, 1984 as a
partnership between A.J. Land, Jr., Daniel B. Pattillo and Lawrence P.
Kelly. A.J. Land, Jr. is the general partner of the project. The
partnership was established to construct, manage, and lease an office
building in Decatur, Georgia.
Building and Improvements
-------------------------
Building and improvements are carried at cost. Depreciation on the
building is computed using the straight-line method over a thirty year
period. Tenant improvements are being depreciated using the straight-line
method over the lives of the related tenant leases. Expenditures for
maintenance, repairs, renewals and improvements which do not materially
extend the useful lives of the assets are charged to current earnings.
Intangible Assets
-----------------
Loan costs are being amortized using the straight-line method over a ten
year period.
Commissions and procurement fees are being amortized using the straight-
line method over the lives of the related leases.
Income Taxes
------------
These financial statements do not reflect a provision or expense for income
taxes. Each partner's pro rata share of income or loss is reported on
their individual income tax return.
Reclassifications
-----------------
Certain amounts in the prior year financial statements have been
reclassified for comparative purposes to conform with the presentation in
the current year financial statements.
Cash and Cash Equivalents
-------------------------
For purposes of the statements of cash flows, the Partnership considers all
highly liquid debt instruments purchased with a maturity of twelve months
or less together with accrued interest to be cash equivalents.
<PAGE>
DECATUR TOWNCENTER ASSOCIATES, LTD.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
2. BUILDING AND IMPROVEMENTS
The investment in building and improvements consists of the following:
<TABLE>
<CAPTION>
December 31
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
Construction period interest
and taxes $ 338,060 $ 338,060
Building 3,863,063 3,863,063
Landscape and lobby 116,102 116,102
Furniture and equipment 9,067 9,067
Tenant and capital improvements 1,712,435 1,653,574
Less: accumulated depreciation (3,059,894) (2,818,534)
------------ ------------
Total Building and Improvements $ 2,978,833 $ 3,161,332
============ ============
</TABLE>
3. FIRST MORTGAGE PAYABLE
New England Life Pension Properties holds a first mortgage secured by all
of the real property and improvements of the partnership. The total
proceeds were $5,825,000. Monthly payments of interest only began April 1,
1985 and continue until maturity. On February 19, 1995, the maturity date
of the note was changed from February 19, 1995 to December 31, 1996. On
the maturity date, the loan shall be due and payable in full, including any
unpaid interest. Annual interest expense amounted to $495,125 for the year
ended December 31, 1995, $495,125 for the year ended December 31, 1994, and
$529,100 for the year ended December 31, 1993. Interest in the amount of
$84,498, $15,369 and $98,072 was accrued but unpaid at December 31, 1995,
1994 and 1993, respectively. There are no binding agreements to refinance
on or after the maturity date. The promissory note was amended March 1,
1993 to reduce the interest rate from 12% to 8.5% per annum.
4. SECOND MORTGAGE PAYABLE
New England Life Pension Properties ($633,076) and Decatur TownCenter
Associates, Ltd. partners ($422,040) hold a second leasehold mortgage
secured by all of the real property and improvements of the Partnership.
The total proceeds were $1,055,116. The loan bears interest at twelve
percent per year, beginning March 10, 1986 until maturity. On February 19,
1995, the maturity date of the note was changed from February 19, 1995 to
December 31, 1996. On the maturity date, the loan shall be due and payable
including accrued interest. There are no binding agreements to refinance
on or after the maturity date. Annual interest expense amounted to
$126,614 for each of the years ended December 31, 1995, 1994, and 1993.
Interest in the amount of $1,105,779, $979,165 and $852,551 was accrued but
unpaid at December 31, 1995, 1994 and 1993, respectively.
<PAGE>
DECATUR TOWNCENTER ASSOCIATES, LTD.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
5. RELATED PARTY TRANSACTIONS
The Partnership has contracted with related parties for the performance of
various management, leasing and construction services. The Decatur
TownCenter Associates, Ltd. partners have common ownership and management
control with Land Realty Services, Land & Property In-Town, Pope and Land
Enterprises, and Decatur TownCenter II Associates.
Amounts involving related parties are summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Accounts receivable $ 10,149 $ 3,955 $ -0-
Accounts payable 25,355 1,416 34,149
Capital improvements -0- 4,996 21,789
Construction-tenant finishes 46,076 89,273 119,978
Entertainment -0- -0- 14
General maintenance 34,923 10,556 4,919
Interest expense 50,646 50,646 50,646
Lease buy-outs -0- 26,637 122,024
Commissions 34,912 26,022 22,609
Management fees 33,361 35,743 38,453
Salaries 36,392 37,716 27,622
</TABLE>
Other related party items include a portion of the second mortgage funded
by partners in the amount of $422,040 (See Note 4) and the accrued interest
due to the partners on the second mortgage for the years ended December 31,
1995, 1994 and 1993 of $442,311, $391,665 and $341,020, respectively.
6. LEASE COMMITMENTS
Land - Building Site
--------------------
The Partnership sold to and leased back from New England Life Pension
Properties the land on which the building is located. The Partnership is
committed to a sixty-year lease beginning February 20, 1985. The lease
covers property of approximately one acre under the building. Annual
ground lease expense amounted to $201,000 for each of the years ended
December 31, 1995, 1994 and 1993. At December 31, 1995, 1994 and 1993, a
total of $1,189,250, $988,250 and $787,250 was accrued but unpaid.
<PAGE>
DECATUR TOWNCENTER ASSOCIATES, LTD.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
The lease amount is comprised of a fixed annual rental and a participation
rental. The fixed annual rental is $16,750 per month. The participation
rental is a sum equal to sixty percent (60%) of gross receipts (as defined
in the lease agreement) in excess of the base amount attributable to the
current lease year. Gross receipts did not exceed the stated base amounts
for the years ended December 31, 1995, 1994 and 1993; therefore, no
participation rental was owed.
Minimum future rental payments are as follows:
<TABLE>
<S> <C>
1996 $ 201,000
1997 201,000
1998 201,000
1999 201,000
2000 201,000
Thereafter 8,877,500
----------
Total Minimum Future
Rental Payments $9,882,500
==========
</TABLE>
The Partnership has an option to repurchase the land on the date the first
mortgage is repaid.
Land - Parking Lot
------------------
The Partnership owns approximately one and one-half acres on which the
parking lot is located; however, in conjunction with the sale-leaseback
described above, this land was leased to and subleased back from New
England Life Pension Properties. The primary lease is for a term of
ninety-nine years, beginning February 20, 1985. The annual rent income
amount is $1. The terms of the sublease are identical to those of the
primary lease, with the annual rent expense amount being $1.
7. INVESTMENT IN DECATUR TOWNCENTER II ASSOCIATES
Decatur Town Center Associates, Ltd. entered into a joint venture on
December 31, 1987 with New England Life Pension Properties IV to build an
office building on the Leasehold Tract - Clairmont Road Property. The
joint venture will lease and manage the property until December 31, 2047
unless sooner dissolved or terminated. No losses from the joint venture
have been allocated to Decatur TownCenter Associates, Ltd. since operating
deficiencies are funded by New England Life Pension Properties IV.
<PAGE>
DECATUR TOWNCENTER ASSOCIATES, LTD.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
8. RENTALS UNDER OPERATING LEASES
Minimum future rental income on noncancellable operating leases as of
December 31, 1995 is:
<TABLE>
<CAPTION>
Year Ending Minimum Future
December 31 Rentals
----------- --------------
<S> <C>
1996 $ 844,474
1997 720,270
1998 514,765
1999 357,896
2000 170,415
Thereafter 12,254
----------
Total $2,620,074
==========
</TABLE>
9. CONTINGENCY
The Partnership is negotiating with New England Life Pension Properties to
purchase the land and retire the debt in Decatur TownCenter Associates,
Ltd. If these negotiations are unsuccessful, New England Life Pension
Properties has the option to offer the property for sale at its sole
discretion as granted in the amended ground lease dated February 19, 1995.
<PAGE>
M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP
FINANCIAL REPORT
DECEMBER 31, 1995
<PAGE>
FINANCIAL STATEMENTS
INDEX NO. 3
AUDITOR'S REPORT AND FINANCIAL STATEMENTS
OF M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP
<TABLE>
<CAPTION>
PAGE #
<S> <C>
Independent Auditor's Report of Wolpoff & Company.............................
Balance Sheet - December 31, 1995 and 1994....................................
Statement of Income - For the Years Ended
December 31, 1995, 1994 and 1993............................................
Statement of Partners' Capital - For the Years Ended
December 31, 1995, 1994 and 1993............................................
Statement of Cash Flows - For the Years Ended
December 31, 1995, 1994 and 1993............................................
Notes to Financial Statements.................................................
</TABLE>
<PAGE>
[LETTERHEAD OF WOLPOFF & COMPANY, LLP]
To the Partners
M.O.R. XVIII Associates Limited Partnership
Columbia, Maryland
We have reviewed the balance sheet of M.O.R. XVIII Associates Limited
Partnership as of December 31, 1995 and 1994, and the related statements of
income, partners' capital and cash flows for the three years ended December 31,
1995, 1994 and 1993, in accordance with Statements on Standards for Accounting
and Review Services issued by the American Institute of Certified Public
Accountants. All information included in these financial statements is the
representation of the management of M.O.R. XVIII Associates Limited Partnership.
A review consists principally of inquiries of Partnership personnel and
analytical procedures applied to financial data. It is substantially less in
scope than an audit in accordance with generally accepted auditing standards,
the objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. The Partnership has a mortgage
which was due in March 1994. The Partnership's plans regarding this matter are
described in Note 7. The financial statements do not include any adjustments
that might result from this uncertainty.
/s/ Wolpoff & Company, LLP
WOLPOFF & COMPANY, LLP
Baltimore, Maryland
February 15, 1996
<PAGE>
M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP
-------------------------------------------
BALANCE SHEET
-------------
ASSETS
------
<TABLE>
<CAPTION>
December 31,
----------------------------
1995 1994
------------- -------------
<S> <C> <C>
PROPERTY, AT COST - Notes 1 and 2
Building $ 2,449,170 $ 2,449,170
Tenant Improvements 1,138,724 1,138,724
Land, 5.3 Acres, Unimproved
(11 Acres are Leased - See Note 5) 762,452 762,452
Preliminary Development Costs 227,713 227,713
Deferred Costs 403,059 403,059
------------- -------------
4,981,118 4,981,118
Less Accumulated Depreciation and Amortization 1,250,349 1,175,683
------------- -------------
PROPERTY, NET 3,730,769 3,805,435
------------- -------------
OTHER ASSETS
Cash and Cash Equivalents - Note 1 1,494 1,564
Restricted Funds - Note 2 152,556 145,573
Receivables from Tenant
Rent and Expense Reimbursements -0- 1,780
Deferred Rent Receivable - Notes 1 and 4 644,037 619,738
Receivable, Affiliates - Note 3 40,512 40,512
Receivable, Partner - Note 3 150,000 150,000
Prepaid Ground Rent -0- 20,625
------------- -------------
TOTAL OTHER ASSETS 988,599 979,792
------------- -------------
$ 4,719,368 $ 4,785,227
============= =============
</TABLE>
__________
See Accountant's Review Report.
The notes to financial statements are an integral part of this statement.
<PAGE>
M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP
-------------------------------------------
BALANCE SHEET
-------------
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
<TABLE>
<CAPTION>
December 31,
----------------------------
1995 1994
------------- -------------
<S> <C> <C>
LIABILITIES
Mortgage Payable - Note 2 $ 4,000,000 $ 4,000,000
Accrued Interest Payable 38,333 38,333
Tenant Security Deposits 43,161 43,161
Payable, Affiliates - Note 3 360,261 379,608
Accounts Payable and Accrued Expenses 1,271 -0-
------------- -------------
TOTAL LIABILITIES 4,443,026 4,461,102
COMMITMENTS AND CONTINGENCY - Notes 2, 5 and 7
PARTNERS' CAPITAL - Note 1 276,342 324,125
------------- -------------
$ 4,719,368 $ 4,785,227
============= =============
</TABLE>
__________
See Accountant's Review Report.
The notes to financial statements are an integral part of this statement.
<PAGE>
M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP
-------------------------------------------
STATEMENT OF INCOME
-------------------
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
REVENUE - Notes 1 and 4
Rental Income $ 677,374 $ 677,374 $ 677,374
Interest and Other Income 4,072 22,808 23,218
------------ ------------ ------------
TOTAL REVENUE 681,446 700,182 700,592
------------ ------------ ------------
EXPENSES - Note 4
General and Administrative 7,342 4,449 11,224
Property Taxes, Undeveloped Land 9,751 10,194 10,194
Legal and Accounting 3,700 3,818 8,768
Management Fees - Note 3 19,232 5,266 4,316
Maintenance Expenses -0- -0- 19,567
------------ ------------ ------------
TOTAL EXPENSES 40,025 23,727 54,069
------------ ------------ ------------
OPERATING INCOME 641,421 676,455 646,523
------------ ------------ ------------
DEBT SERVICE AND GROUND RENT
Interest on Permanent Mortgage - Note 2 460,000 460,000 460,000
Ground Rent - Note 5 154,538 126,500 126,500
Land Mortgage (Excluding
Special 1993 Principal Payment) - Note 2 -0- 87,024 103,099
------------ ------------ ------------
614,538 673,524 689,599
------------ ------------ ------------
FUNDS (DEFICIT) GENERATED BY OPERATIONS 26,883 2,931 (43,076)
------------ ------------ ------------
ADDITIONAL ITEMS TO ARRIVE AT NET LOSS
Depreciation and Amortization (74,666) (81,324) (94,785)
Principal Payments on Land Mortgage -0- 18,080 6,780
------------ ------------ ------------
(74,666) (63,244) (88,005)
------------ ------------ ------------
NET LOSS - Notes 1 and 6 $ (47,783) $ (60,313) $ (131,081)
============ ============ ============
</TABLE>
__________
See Accountant's Review Report.
The notes to financial statements are an integral part of this statement.
<PAGE>
M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP
-------------------------------------------
STATEMENT OF PARTNERS' CAPITAL
------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
CAPITAL CONTRIBUTIONS
Prior Years $ 1,489,546 $ 414,406 $ 50,674
Current Year -0- 1,075,140 363,732
------------- ------------- -------------
1,489,546 1,489,546 414,406
------------- ------------- -------------
DISTRIBUTIONS
Prior Years (788,241) (788,241) (788,241)
------------- ------------- -------------
ACCUMULATED LOSSES
Prior Years (377,180) (316,867) (185,786)
Current Year (47,783) (60,313) (131,081)
------------- ------------- -------------
(424,963) (377,180) (316,867)
------------- ------------- -------------
TOTAL PARTNERS' CAPITAL (DEFICIT) $ 276,342 $ 324,125 $ (690,702)
============= ============= =============
</TABLE>
__________
See Accountant's Review Report.
The notes to financial statements are an integral part of this statement.
<PAGE>
M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP
-------------------------------------------
STATEMENT OF CASH FLOWS
-----------------------
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------
1995 1994 1993
--------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (47,783) $ (60,313) $ (131,081)
--------------- --------------- ---------------
Adjustments to Reconcile Net Loss
to Net Cash Provided (Used) by Operating Activities
Depreciation and Amortization 74,666 81,324 94,785
Change in Accounts Payable and Accrued Expenses 1,271 (192,363) (96,948)
Change in Prepaid Expenses 20,625 -0- (20,625)
Increase in Receivables from Tenant (22,519) (149,901) (245,826)
Change in Loan Payable, Affiliates (19,347) 379,608 (63,731)
Increase in Receivables, Affiliates -0- (25,286) -0-
Increase in Restricted Funds (6,983) (842) (46,731)
--------------- --------------- ---------------
Total Adjustments 47,713 92,540 (379,076)
--------------- --------------- ---------------
Net Cash Provided (Used) by Operating Activites (70) 32,227 (510,157)
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Reimbursement for Tenant Improvements -0- -0- 10,879
Change in Receivable, Affiliates -0- (15,226) 602,815
Deferred Costs -0- -0- (9,604)
Change in Receivable, Partner -0- -0- (150,000)
--------------- --------------- ---------------
Net Cash Provided (Used) by Investing Activities -0- (15,226) 454,090
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital Contributions -0- -0- 363,732
Principal Payments, Land Loan -0- (18,080) (306,780)
--------------- --------------- ---------------
Net Cash Provided (Used) by Financing Activities -0- (18,080) 56,952
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (70) (1,079) 885
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,564 2,643 1,758
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 1,494 $ 1,564 $ 2,643
=============== =============== ===============
</TABLE>
(Continued)
__________
See Accountant's Review Report.
The notes to financial statements are an integral part of this statement.
<PAGE>
M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP
-------------------------------------------
STATEMENT OF CASH FLOWS
-----------------------
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash Paid During the Year for Interest $ 539,244 $ 539,244 $ 556,319
============= ============= =============
SUPPLEMENTAL SCHEDULE OF
NONCASH FINANCING ACTIVITIES:
Assumption of Land Mortgage by Partners $ -0- $ 1,075,140 $ -0-
============= ============= =============
</TABLE>
__________
See Accountant's Review Report.
The notes to financial statements are an integral part of this statement.
<PAGE>
M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP
-------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1995
-----------------
Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
------------
M.O.R. XVIII Associates Limited Partnership was formed in 1982 pursuant
to an agreement under the Maryland Uniform Limited Partnership Act.
Property
--------
The Partnership owns a leasehold interest in a 75,000-square-foot
office/warehouse building in Columbia (Howard County), Maryland. See
Note 5 regarding the related land lease. The development of the
property, which is 100% leased to Crop Genetics International
Corporation (see Note 4), was completed and operations commenced in
February 1984. The Partnership also owns 5.3 acres of unimproved land
adjacent to the property.
Expenses Pertaining to Unimproved Land
--------------------------------------
Carrying costs and expenses incurred when land is being prepared for
construction are capitalized and included in land costs. This was the
case in 1989 and 1990. In all other years, no substantial activity
occurred and carrying costs were expensed as incurred.
Depreciation
------------
Building and improvement costs are being depreciated using the
straight-line method over the estimated useful life of 50 years.
Amortization
------------
Various deferred costs are being amortized as follows:
<TABLE>
<CAPTION>
Amortization
Amount Period
------------ ------------
<S> <C> <C>
Leasing Costs $ 170,656 10 Years
Construction Mortgage Costs 80,850 * 1 - 3 Years
Permanent Mortgage Costs 134,814 * 10 Years
Organization Costs 16,739 * 5 Years
------------
$ 403,059
============
</TABLE>
*Fully amortized.
Rental Income
-------------
Rental income is recognized on a straight-line basis over the term of
the lease. The excess of resulting rental income over the rent
stipulated in the lease is reflected as deferred rent receivable.
Cash and Cash Equivalents
-------------------------
The Partnership considers all highly liquid debt instruments purchased
with a maturity of 3 months or less to be cash equivalents.
Income Taxes
------------
Partnerships, as such, are not subject to income taxes. The partners
are required to report their respective shares of partnership income or
loss on their respective income tax returns (see Note 6).
<PAGE>
M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP
-------------------------------------------
NOTES TO FINANCIAL STATEMENTS - CONTINUED
-----------------------------------------
DECEMBER 31, 1995
-----------------
Note 2 - DEBT SERVICE
Permanent Financing
-------------------
On March 28, 1984, the Partnership obtained permanent financing on the
leasehold interest from New England Life Pension Properties in the
amount of $4,000,000. Pertinent terms of the mortgage are as follows:
<TABLE>
<S> <C>
Mortgage Amount $4,000,000
Date Settled 3/28/84
Interest Rate 11.5%
Total Annual Payments (Interest Only) $460,000
Term 10 Years*
Collateral Building and
Improvements
</TABLE>
*The mortgage principal of $4,000,000 was due on March 28, 1994
(see Note 7).
Land Mortgage and Related Debt Reserve Fund
-------------------------------------------
The Partnership obtained a land loan of $1,400,000 from the First
National Bank of Maryland in December 1983. The Partnership established
a debt service reserve account as collateral. The balance of this
account at December 31, 1995, was $106,553. On August 1, 1994, the
loan, which had an outstanding balance of $1,075,140, was assumed by
MRU Limited Partnership, a limited partner, and MRU's capital account
was increased accordingly. The undeveloped land remains as collateral
for the loan.
Note 3 - RELATED PARTY TRANSACTIONS
Management Fees
---------------
The Partnership has entered into an agreement with Manekin Corporation,
an affiliated entity, to act as management agent for the property. The
management agreement provides for management fees equal to 1% of rent
and tenant expense billings collected. The management fee increased to
3% in 1995. Management fees totaled $19,232, $5,266 and $4,316 in 1995,
1994 and 1993, respectively.
Payable, Affiliates
-------------------
The Partnership participates in a central disbursing cash account with
various entities affiliated with the Partnership. As of December 31,
1995 and 1994, funds used by the Partnership in excess of the
Partnership's cash balance amounted to $360,261 and $379,608,
respectively, and is reflected as payable, affiliates. The funds bear
interest at the applicable federal rate.
Receivable, Partner
-------------------
As of December 31, 1995 and 1994, the Partnership had a $150,000 loan
receivable from MRU Limited Partnership, a limited partner. The loan is
noninterest bearing and is due upon demand.
<PAGE>
M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP
-------------------------------------------
NOTES TO FINANCIAL STATEMENTS - CONTINUED
-----------------------------------------
DECEMBER 31, 1995
-----------------
Note 3 - Receivable, Affiliates
----------------------
(Cont.) As of December 31, 1995 and 1994, the Partnership had amounts due from
various affiliated entities totaling $40,512.
Note 4 - LEASE
Crop Genetics International Corporation entered into a lease agreement
with the Partnership in September 1992 and moved into the space on
December 1, 1992. Real property taxes, insurance and most operating
expenses are paid directly by the tenant. The lease is for a twelve-
year, three-month term and provided for six months of free rent. The
average annual rent is $653,076.
The following is a schedule of future minimum lease payments to be
received:
<TABLE>
<S> <C>
1996 $ 653,076
1997 653,076
1998 653,076
1999 653,076
2000 671,006
Thereafter 3,400,646
</TABLE>
Note 5 - LAND SALE AND LEASEBACK
On March 28, 1984, the Partnership entered into a sale-leaseback
agreement with New England Life Pension Properties (a real estate
limited partnership). Pursuant to this agreement, the Partnership sold
11 acres of land for $1,100,000 in exchange for a 60-year net leasehold
interest in the land. The annual rent is $126,500 plus 50% of all
increases in gross revenues in excess of $597,000. For this purpose,
gross revenues do not include expense reimbursements paid by the
tenant. Additional ground rent of $28,038 was incurred for 1995. No
additional ground rent was incurred in 1994 and 1993.
Note 6 - TAX ACCOUNTING
The taxable loss of the Partnership differs from financial reporting as
follows:
<TABLE>
<CAPTION>
Current Prior
Year Years Total
------------- --------------- ---------------
<S> <C> <C> <C>
Net Loss as Reported $ (47,783) $ (377,180) $ (424,963)
Depreciation Adjustments (150,514) (1,629,081) (1,779,595)
Amortization of
Construction Period
Interest and Taxes -0- (269,005) (269,005)
Capitalized Interest and
Taxes on Undeveloped Land -0- 98,316 98,316
Deferred Rent (24,299) (619,738) (644,037)
------------- --------------- ---------------
Taxable Loss $ (222,596) $ (2,796,688) $ (3,019,284)
============= =============== ===============
</TABLE>
<PAGE>
M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP
-------------------------------------------
NOTES TO FINANCIAL STATEMENTS - CONTINUED
-----------------------------------------
DECEMBER 31, 1995
-----------------
Note 7 - CONTINGENCY
The Partnership has not secured new financing or an extension of the
mortgage that matured on March 28, 1994. They have continued making
monthly interest payments on the mortgage and are pursuing new
financing. The Partnership's continuation as a going concern is
dependent upon their ability to obtain debt or equity financing.
<PAGE>
To the Partners
M.O.R. XVIII Associates Limited Partnership
Columbia, Maryland
ACCOUNTANT'S REPORT ON SUPPLEMENTARY INFORMATION
------------------------------------------------
The accompanying supplementary information contained on page 13 is presented for
purposes of additional analysis. Such information has not been subjected to the
same inquiries and analytical procedures applied in the review of the basic
financial statements, but has been compiled from information that is the
representation of the management of M.O.R. XVIII Associates Limited Partnership,
without audit or review. Accordingly, we do not express an opinion or any other
form of assurance on such supplementary information.
/s/ Wolpoff & Company, LLP
WOLPOFF & COMPANY, LLP
Baltimore, Maryland
February 15, 1996
<PAGE>
M.O.R. XVIII ASSOCIATES LIMITED PARTNERSHIP
-------------------------------------------
SCHEDULE OF CHANGES IN PARTNERS' CAPITAL - INCOME TAX BASIS
-----------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995
----------------------------
<TABLE>
<CAPTION>
Partners' Partners'
Partners' Capital Current Capital
Ownership (Deficit) Capital Year (Deficit)
Percentage 12/31/94 Contribution Loss 12/31/95
------------- ------------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C>
GENERAL PARTNER
RA & DM, Inc. 1.00% $ (35,928) $ -0- $ (2,226) $ (38,154)
LIMITED PARTNER
MRU Limited Partnership 99.00% (2,049,207) -0- (220,370) (2,269,577)
------------- ------------- -------- ----------- -------------
100.00% $(2,085,135) $ -0- $(222,596) $(2,307,731)
============= ============= ======== =========== =============
</TABLE>
_________
See Accountant's Report on Supplementary Information.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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.
NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP
Date: March 15 , 1996 By: /s/ Joseph W. O'Connor
------ ----------------------
Joseph W. O'Connor
President of the
General Partner
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
President, Principal
Executive Officer and
Director of the
/s/ Joseph W. O'Connor General Partner March 15 , 1996
------------------------- ------
Joseph W. O'Connor
Principal Financial and
Accounting Officer of the
/s/ Daniel C. Mackowiak General Partner March 15 , 1996
------------------------- ------
Daniel C. Mackowiak
Director of the
/s/ Daniel J. Coughlin General Partner March 15 , 1996
------------------------- ------
Daniel J. Coughlin
Director of the
/s/ Peter P. Twining General Partner March 15 , 1996
------------------------- ------
Peter P. Twining
</TABLE>
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT PAGE NO.
- ----------- ------- --------
<S> <C> <C>
4. Amended and Restated Agreement of Limited *
Partnership of the Registrant, dated June 29,
1983 (filed as Exhibit 4 to the Registrant's
Annual Report on Form 10-K for the fiscal
year ended December 31, 1983 [the "1983 Annual
Report"]).
10A. Form of Escrow Deposit Agreement among the *
Registrant, NEL Equity Services Corporation
and The First National Bank of Boston (filed
as Exhibit 10A to the Registrant's Registration
Statement on Form S-11, dated December 22, 1982,
file no. 2-81059 [the "Registration Statement"]).
10B. Advisory Contract dated March 22, 1983, between *
the Registrant and Copley Real Estate Advisors,
Inc. (filed as Exhibit 10 to the 1983 Annual Report).
10C. Form of Agreement between the Registrant and *
Copley Properties Company, Inc. relating to
organizational expenses (filed as Exhibit 10C
to the Registration Statement).
10D. Purchase Agreement and Deposit Receipt dated *
April 14, 1983 between Doyle Development Company
and NBS Investment Corporation, which assigned
its rights and obligations thereunder to the
Registrant (filed as Exhibit 10 to Current Report
on Form 8-K dated June 29, 1983, as filed on
July 14, 1983).
10E. Purchase and Sale Agreement dated December 1984, *
as amended by First Addendum to Purchase and Sale
Agreement dated as of January 10, 1985 (filed as
Exhibit 28 to Current Report on Form 8-K dated
January 23, 1985).
10F. Amended and Restated Secured Promissory Note *
dated August 20, 1985, by VMS 1984-133, Ltd.,
for the benefit of the Registrant and New
England Life Pension Properties II; A Real
Estate Limited Partnership.
</TABLE>
_________________________________________________
* Previously filed and incorporated herein by reference.
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
EXHIBIT NUMBER PAGE NUMBER
- -------------- -----------
<S> <C> <C>
10G. Amended and Restated Ground Lease dated *
August 20, 1985 between the Registrant, New
England Life Pension Properties II; A Real
Estate Limited Partnership and VMS 1984-133,
Ltd.
10H. Amended and Restated Memorandum of Ground *
Lease dated August 20, 1985 by and among the
Registrant, New England Life Pension Properties
II; A Real Estate Limited Partnership and
VMS 1984-133, Ltd.
10I. Contract of Sale dated as of March 30, 1984 by *
and between Decatur TownCenter Associates, Ltd.,
and the Registrant.
10J. Three Party Agreement dated as of March 30, 1984 *
by and among Decatur Town Center Associates,
the Registrant and the Citizens and Southern
National Bank.
10K. Promissory Note dated February 20, 1985, in the *
principal amount of $5,825,000 from the Registrant
to Decatur Town Center Associates, Ltd.
10L. Ground Lease dated February 20, 1985 between *
the Registrant and Decatur Town Center Associates,
Ltd.
10M. First Consolidated Amendatory Agreement dated *
December 29, 1988 by and between Decatur
TownCenter Associates, Ltd. and the Registrant.
</TABLE>
____________________________________________________
* Previously filed and incorporated herein by reference.
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
EXHIBIT NUMBER PAGE NUMBER
- -------------- -----------
<S> <C> <C>
10N. Purchase and Sale Agreement dated September 27, *
1990 by and between New England Mutual Life
Insurance Company, a Massachusetts corporation,
and Tom Hennig Co., Inc., a California corporation,
as amended by Letter dated December 12, 1990.
10O. Letter Agreement between New England Life *
Pension Properties II; A Real Estate Limited
Partnership, the Registrant and Willows
Concord Venture dated June 14, 1991.
10P. Promissory Note dated June 14, 1991, in the *
principal amount of $14,863,206.38 from Willows
Concord Venture to New England Life Pension
Properties II; A Real Estate Limited Partnership
and the Registrant.
10Q. Assignment of Note and Liens Including Deed of *
Trust dated as of June 13, 1991 by New England
Life Pension Properties II; A Real Estate Limited
Partnership and the Registrant to Willows Concord
Venture.
10R. Assignment of VMS Loan Documents dated June 14, *
1991 by Willows Concord Venture to New England
Life Pension Properties II; A Real Estate Limited
Partnership and the Registrant.
10S. Deed of Trust and Security Agreement dated June 13, *
1991 between Willows Concord Venture, as Trustor,
Chicago Title Company, as Trustee, and New England
Life Pension Properties II; A Real Estate Limited
Partnership and the Registrant, as Beneficiary.
10T. Assignment of Leases and Rents dated June 13, 1991 *
by Willows Concord Venture to New England Life
Pension Properties II; A Real Estate Limited
Partnership and the Registrant.
10U. Amended and Completely Restated Ground Lease *
dated effective as of June 18, 1991 between
Registrant, New England Life Pension Properties
II; A Real Estate Limited Partnership and
Willows Concord Venture.
</TABLE>
________________________________________________
* Previously filed and incorporated herein by reference.
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
EXHIBIT NUMBER PAGE NUMBER
- -------------- -----------
<S> <C> <C>
10V. Amended and Restated Secured Promissory Note *
effective as of June 14, 1991, in the principal
amount of $14,863,206.38 from Willows
Concord Venture to the Registrant and
New England Life Pension Properties II;
A Real Estate Limited Partnership.
10W. Modification Agreement and First Amendment to *
Loan Documents dated August 13, 1991, by and
between Willows Concord Venture, the
Registrant and New England Life Pension
Properties II; A Real Estate Limited Partnership.
10X. Modification Agreement and Second Amendment to *
Loan Documents dated September 12, 1991, by
and between Willows Concord Venture, the
Registrant and New England Life Pension Properties
II; A Real Estate Limited Partnership.
10Y. Modification Agreement and Third Amendment to *
Loan Documents dated October 15, 1991, by and
between Willows Concord Venture, the Registrant
and New England Life Pension Properties II;
A Real Estate Limited Partnership.
10Z. Fourth Amendment to Loan Documents dated *
December 17, 1992 by and between Willows
Concord Venture, Registrant and New England
Life Pension Properties II; A Real Estate
Limited Partnership.
10AA. Amendment to Promissory Note executed as of *
March 1, 1993 made by Decatur TownCenter
Associates, Ltd. in favor of Registrant.
10BB. First Amendment to First Consolidated *
Amendatory Agreement executed as of March 1,
1993 made by and between the Registrant and
Decatur TownCenter Associates, Ltd.
10CC. Fee Transfer and Lien Release Agreement dated *
June 1, 1994 by and between New England Life
Pension Properties, A Real Estate Limited
Partnership. A Massachusetts limited partnership
and 5141 E. Santa Ana Property Company, a
California Limited Partnership.
</TABLE>
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
EXHIBIT NUMBER PAGE NUMBER
- -------------- -----------
<S> <C> <C>
10DD. Construction Loan Agreement dated January 1, 1995 by
and between Willows Concord Venture, A California
Limited Partnership as Borrower, and New England
Life Pension Properties; A Real Estate Limited
Partnership as Lender.
10EE. Second Amendment to Promissory Note dated as of
February 19, 1995 between the Registrant
and Decatur TownCenter Associates, Ltd. ("Decatur").
10FF. Second Amendment to Ground Lease dated as of February
19, 1995 between the Registrant and Decatur.
10GG. Second Amendment to First Consolidated Amendatory
Agreement dated as of February 19, 1995 between the
Registrant and Decatur.
10HH. Third Amendment to Participation Agreement dated as of
February 19, 1995 among the Registrant, A.J. Land,
Jr., David B. Pattillo and Lawrence P. Kelly.
</TABLE>
__________________________________________________
* Previously filed and incorporated herein by reference.
<PAGE>
Construction Loan Agreement dated January 1, 1995 by and between Willows
Concord Venture, A California Limited Partnership as Borrower, and New England
Life Pension Properties; A Real Estate Limited Partnership as Lender.
<PAGE>
CLOSING AGENDA
--------------
CONSTRUCTION LOAN FROM NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP,
AND
NEW ENGLAND LIFE PENSION PROPERTIES II;
A REAL ESTATE LIMITED PARTNERSHIP, AS LENDER,
TO
WILLOWS CONCORD VENTURE, AS BORROWER
<TABLE>
<CAPTION>
DOCUMENT TAB NO.
- -------- -------
<S> <C>
Construction Loan Agreement...............................................1
Promissory Note...........................................................2
Security Agreement........................................................3
Fifth Amendment to Loan Documents.........................................4
First Amendment to Amended and
Completely Restated Ground Lease........................................5
</TABLE>
<PAGE>
___________________________________
CONSTRUCTION LOAN AGREEMENT
between
WILLOWS CONCORD VENTURE,
A CALIFORNIA LIMITED PARTNERSHIP
as Borrower,
and
NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP, AND
NEW ENGLAND LIFE PENSION PROPERTIES II;
A REAL ESTATE LIMITED PARTNERSHIP
as Lender,
Dated: January 1, 1995
Property Located In: Concord, Contra Costa County, California
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I. DEFINITIONS........................................................... 1
1.01 Defined Terms................................................. 1
ARTICLE II. LOAN................................................................. 6
2.01 Loan.......................................................... 6
2.02 Loan Documents................................................ 6
2.03 Effective Date................................................ 6
ARTICLE III. DISBURSEMENT........................................................ 6
3.01 Conditions Precedent.......................................... 6
3.02 Account....................................................... 7
3.03 Disbursement Authorization.................................... 7
3.04 Borrower's Funds Account...................................... 7
3.05 Pledge and Assignment......................................... 7
3.06 Disbursement.................................................. 7
3.07 Disbursed Funds............................................... 9
ARTICLE IV. CONSTRUCTION......................................................... 10
4.01 Commencement and Completion................................... 10
4.02 Force Majeure................................................. 10
4.03 Construction.................................................. 10
4.04 Americans With Disabilities Act
Compliance................................................... 10
4.05 Plans and Specifications...................................... 11
4.06 Construction Information;
Inspections.................................................. 12
4.07 Prohibited Contracts.......................................... 12
4.08 Contractors................................................... 12
4.09 Liens and Stop Notices........................................ 12
4.10 Construction Responsibilities................................. 13
4.11 Improvement District.......................................... 13
4.12 Delay......................................................... 13
4.13 Bonds......................................................... 13
4.14 Capital Expenditures and Reserves............................. 13
ARTICLE V. INSURANCE............................................................. 14
5.01 Title Insurance............................................... 14
5.02 Hazard Insurance.............................................. 14
5.03 Flood Zone Notification....................................... 14
5.04 Liability Insurance........................................... 14
5.05 Blanket Coverage.............................................. 14
5.06 General....................................................... 14
ARTICLE VI. REPRESENTATIONS AND WARRANTIES....................................... 15
6.01 Authority..................................................... 15
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C> <C>
6.02 Formation and Organization
Documents.................................................... 15
6.03 Enforceability................................................ 15
6.04 No Violation.................................................. 15
6.05 Financial Information......................................... 16
6.06 Accuracy...................................................... 16
6.07 Adequacy of Loan.............................................. 16
6.08 Taxes......................................................... 16
6.09 Compliance.................................................... 16
ARTICLE VII. DEFAULT............................................................. 16
7.01 Default....................................................... 16
7.02 Acceleration.................................................. 18
7.03 Disbursement by Lender........................................ 18
7.04 Lender's Completion of Construction........................... 19
7.05 Cessation of Construction..................................... 19
7.06 Repayment of Funds Advanced................................... 19
7.07 Right of Contest.............................................. 19
ARTICLE VIII. HAZARDOUS MATERIALS................................................ 20
8.01 Covenants..................................................... 20
8.02 Right of Contest.............................................. 20
8.03 Indemnity..................................................... 21
8.04 Inspection by Lender.......................................... 21
ARTICLE IX. MISCELLANEOUS PROVISIONS............................................. 21
9.01 Expenses...................................................... 21
9.02 Indemnity..................................................... 22
9.03 Books and Records............................................. 22
9.04 ERISA Compliance.............................................. 22
9.05 Further Assurances............................................ 22
9.06 Form of Documents............................................. 23
9.07 No Third Parties Benefited.................................... 23
9.08 Notices....................................................... 23
9.09 Authority to File Notices..................................... 24
9.10 Actions....................................................... 24
9.11 Relationship of Parties....................................... 24
9.12 Lender's Delay................................................ 24
9.13 Attorneys' Fees; Enforcement.................................. 24
9.14 Assignment.................................................... 25
9.15 Lender's Agents............................................... 25
9.16 Severability.................................................. 25
9.17 Heirs, Successors and Assigns................................. 25
9.18 Rights Cumulative, No Waiver.................................. 25
9.19 Time.......................................................... 25
9.20 Headings...................................................... 26
9.21 Governing Law................................................. 26
9.22 Integration; Interpretation................................... 26
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
9.23 Joint and Several Liability................................... 26
9.24 Execution in Counterparts..................................... 26
9.25 Incorporation................................................. 26
9.26 Credit for Principal Payments................................. 26
9.27 WAIVER OF RIGHT TO TRIAL BY JURY.............................. 27
9.28 Obligations under Ground Lease................................ 27
9.29 Non-Recourse.................................................. 27
</TABLE>
EXHIBIT A - DESCRIPTION OF PROPERTY
EXHIBIT B - DISBURSEMENT BUDGET
-iii-
<PAGE>
CONSTRUCTION LOAN AGREEMENT
---------------------------
THIS CONSTRUCTION LOAN AGREEMENT ("Agreement") is made as of January 1,
1995, between WILLOWS CONCORD VENTURE, a California limited partnership,
("Borrower") and NEW ENGLAND LIFE PENSION PROPERTIES; A Real Estate Limited
Partnership, and NEW ENGLAND LIFE PENSION PROPERTIES II; A Real Estate Limited
Partnership, each a Massachusetts limited partnership (jointly referral to
herein as "Lender").
A. Borrower is the ground tenant and Lender is the ground landlord of
certain real property described in Exhibit A hereto ("Property") under the
---------
Ground Lease (as hereinafter defined).
B. Borrower proposes to repair, renovate and rehabilitate the
Improvements (as hereinafter defined) located on the Property in accordance with
the Plans and Specifications (as hereinafter defined) and has requested a loan
from Lender for said purpose.
THEREFORE, Borrower and Lender agree as follows:
ARTICLE I. DEFINITIONS
1.01 DEFINED TERMS. As used herein, the following terms shall have the
-------------
meanings set forth below:
"Account" means a demand deposit account in the name of Borrower and Lender
which shall be opened with a bank approved by Lender and which shall be
administered in accordance with the terms of this Agreement.
"ADA" means the Americans with Disabilities Act of July 26, 1990, Public
Law Number 101-336, 104 Stat. 327, 42 U.S.C. Section 12101, et seq., as amended
from time to time.
"Agreement" means this Construction Loan Agreement as originally executed
or as it may from time to time be amended pursuant to Section 9.22 hereof.
------------
"Application for Payment" means a written itemized statement, signed by
Borrower, setting forth the matters described in Section 3.06 hereof.
------------
"Assignment of Leases and Rents" means that certain Assignment of Leases
and Rents dated as of June 13, 1991, executed by Borrower in favor of Lender,
recorded on June 18, 1991 as Instrument No. 91-110715 in the Official Records of
Contra Costa County, California, as amended by that certain Modification
Agreement and First Amendment to Loan Documents dated as of
<PAGE>
August 15, 1991, as further amended by that certain Modification Agreement and
Second Amendment to Loan Documents dated as of September 12, 1991, as further
amended by that certain Modification Agreement and Third Amendment to Loan
Documents dated as of October 15, 1991, as further amended by that certain
Fourth Amendment to Loan Documents dated as of December 17, 1992, and as further
amended by that Fifth Amendment to Loan Documents (as defined herein).
"Authorized Borrower Representatives" means the persons designated by
Borrower to Lender in writing who are authorized to request disbursements of the
Loan until written notice of Borrower's revocation of such authority is received
by Lender at its office address shown herein.
"Bankruptcy Act" means the Bankruptcy Reform Act of 1978, as amended or
recodified.
"Borrower" means Willows Concord Venture, a California limited partnership.
"Borrower's Funds" means all funds which are now or hereafter deposited and
held in the Borrower's Funds Account pursuant to Section 3.01(b) of this
---------------
Agreement.
"Borrower's Funds Account" means a demand deposit account in the name of
Borrower and Lender which shall be opened with a bank approved by Lender and
which shall be administered in accordance with the terms of this Agreement.
"CCP" means the California Code of Civil Procedure, as the same may be
amended or recodified.
"Debtor Relief Law" means any present or future state or federal law
regulating bankruptcy, reorganization or other relief of debtors, other than the
Bankruptcy Act.
"Deed of Trust" means that certain Deed of Trust and Security Agreement
dated as of June 13, 1991, by Borrower, as Trustor, to Chicago Title Company, as
Trustee, for the benefit of Lender, recorded in June 18, 1991 as Instrument No.
91-116714 in the Official Records of Contra Costa County, California, as amended
by that certain Modification Agreement and First Amendment to Loan Documents
dated as of August 15, 1991, as further amended by that certain Modification
Agreement and Second Amendment to Loan Documents dated as of September 12, 1991,
as further amended by that certain Modification Agreement and Third Amendment to
Loan Documents dated as of October 15, 1991, as further amended by that
-2-
<PAGE>
certain Fourth Amendment to Loan Documents dated as of December 17, 1992, and as
further amended by the Fifth Amendment to Loan Documents (as defined herein).
"Default" means the occurrence of any of the events listed in Section 7.01
------------
of this Agreement.
"Disbursement Budget" means the budget and schedule for disbursement of the
loan proceeds attached as Exhibit B to this Agreement.
---------
"Effective Date" means the date on which the Fifth Amendment to Loan
Documents is recorded in the office of the County Recorder of the County where
the Property is located.
"ERISA" means the Employee Retirement Income Security Act of 1974, as the
same may be amended or recodified.
"Financing Statement" means that certain State of California Uniform
Commercial Code, Financing Statement, Form UCC-1, dated of even date herewith,
executed by Borrower, as Debtor, in favor of Lender, as Secured Party.
"Fifth Amendment to Loan Documents" means that certain Fifth Amendment to
Loan Documents of even date herewith by and between Borrower and Lender.
"Governmental Agency" means (a) any government or municipality or
political subdivision of any government or municipality, (b) any assessment,
improvement, community facilities or other special taxing district, (c) any
governmental or quasi-governmental agency, authority, board, bureau, commission,
corporation, department, instrumentality or public body, or (d) any court,
administrative tribunal, arbitrator, public utility or regulatory body.
"Ground Lease" means that certain Amended and Completely Restated
Ground Lease by and between Lender, as Landlord, and Borrower, as Tenant,
effective as of June 18, 1991.
"Hazardous Materials" means oil, flammable explosives, asbestos, urea
formaldehyde insulation, radioactive materials, hazardous wastes, toxic or
contaminated substances or similar materials, including, without limitation, any
substances which are "hazardous substances," "hazardous wastes," "hazardous
materials" or "toxic substances" under applicable environmental laws, ordinances
or regulations.
-3-
<PAGE>
"Hazardous Materials Claim," means any claim or action pending or
threatened against Borrower, the Property or Improvements by any Governmental
Agency or any other person or entity relating to Hazardous Materials or pursuant
to the Hazardous Materials Laws.
"Hazardous Materials Laws" means all laws, ordinances and regulations
relating to Hazardous Materials, including, without limitation, those relating
to soil and ground water conditions.
"Improvements" means the shopping center and any and all other improvements
located on the Property.
"Initial Cure Period" means the period of time beginning with the date
on which written notice from Lender of Borrower's failure to perform any of its
non-monetary obligations under any of the Loan Documents is deemed served
pursuant to Section 9.08 of this Agreement) upon Borrower and ending 30 days
------------
after such service.
"Lender" means New England Life Pension Properties; A Real Estate Limited
Partnership, and New England Life Pension Properties II; a Real Estate Limited
Partnership, each a Massachusetts limited partnership (jointly referred to
herein as "Lender").
"Leasehold Interest" means Borrower's leasehold interest under the
Ground lease (as defined herein) which demises the Property, together with all
estate, title, interests, title reversion rights, rents, increases, issues,
profits, rights of way or uses, additions, accretions, servitudes, gaps, gores,
liberties, privileges, water rights, water courses, alleys, streets, passages,
ways, vaults, adjoining strips of ground, licenses, tenements, franchises,
hereditaments, rights, appurtenances and easements, now or hereafter owned by
Borrower and existing, belonging or appertaining to the Leasehold Interest, all
claims or demands whatsoever of Borrower therein or thereto, either at law or in
equity, in possession or in expectancy and all estate, right, title and interest
of Borrower in and to all streets, roads and public places, opened or proposed,
now or hereafter used in connection with, existing, belonging or appertaining
to, the Property and/or the Leasehold Interest.
"Loan" means the loan described in this Agreement in the principal sum of
$2,500,000.00.
"Loan Documents" means this Agreement, the Note, the Deed of Trust, the
Assignment of Leases and Rents, the Security Agreement, and the Financing
Statement.
-4-
<PAGE>
"Maturity Date" shall have the meaning given to such term in the Note.
"Note" means that certain Promissory Note of even date herewith in the
original principal amount of the Loan made by Borrower to the order of Lender.
"Onsite Materials" means materials for the repair, renovation and
rehabilitation of the Improvements which are stored on the Property.
"Original Note" means that certain Amended and Restated Promissory Note
dated effective as of June 14, 1991 made by Borrower in favor of Lender in the
principal amount of Fourteen Million Eight Hundred Sixty Three Thousand Two
Hundred Six and 38/100 Dollars ($14,863,206.38), which Original Note replaced
and superseded in its entirety that certain Promissory Note dated June 14, 1991
made by Borrower in favor of Lender in the principal amount of Fourteen Million
Eight Hundred Sixty Three Thousand Two Hundred Six and 38/100 Dollars
($14,863,206.38).
"Plans and Specifications" shall mean the plans and specifications for the
Work (as defined herein) submitted or to be submitted and approved by Lender, as
such plans and specifications may be amended or modified with the approval of
Lender in accordance with the provisions of Section 4.05 of this Agreement.
------------
"Property" means the real property located in the County of Contra
Costa, State of California and more particularly described in Exhibit A hereto.
---------
"Remedial Action" means all handling, treatment, removal, storage,
decontamination, cleanup, transport, disposal or other remedial action, if any,
required by any Hazardous Materials Laws, any order or request of any
governmental entity or agency or any judgment, consent decree, settlement or
compromise in respect to any Hazardous Materials Claims.
"Requirements" means all applicable laws, ordinances, rules, regulations,
building restrictions, recorded covenants and restrictions, and requirements of
all Governmental Agencies having jurisdiction over the Improvements or the
Property.
"Security Agreement" means that certain Security Agreement of even date
herewith executed by Borrower in favor of Lender.
"Title Company" means a title insurer satisfactory to Lender.
"Title Policy" means an LP-3 ALTA Lender's Policy of Title Insurance, with
any endorsements which Lender may reasonably
-5-
<PAGE>
require, insuring Lender, in the principal amount of the Loan, of the validity
and priority of the lien of the Deed of Trust upon the Leasehold Interest and
the Improvements, subject only to matters approved by Lender in writing.
"Work" means the repair, renovation and rehabilitation of the Improvements
in accordance with the Plans and Specifications.
ARTICLE II. LOAN
2.01 LOAN. By and subject to the terms of this Agreement, Lender
----
agrees to lend and Borrower agrees to borrow the principal sum of TWO MILLION
FIVE HUNDRED THOUSAND AND NO/100THS DOLLARS ($2,500,000.00), to finance the Work
and for the other purposes provided in the Loan Documents.
2.02 LOAN DOCUMENTS. Borrower shall deliver to Lender concurrently
--------------
with this Agreement the Loan Documents, properly executed and in recordable form
if necessary.
2.03 EFFECTIVE DATE. The date of the Loan Documents is for reference
--------------
purposes only. The date of delivery and transfer to Lender of the security
under the Loan Documents and of Borrower's and Lender's obligations under the
Loan Documents is the Effective Date.
ARTICLE III. DISBURSEMENT
3.01 CONDITIONS PRECEDENT. Lender shall not be obligated to make any
--------------------
disbursements or take any other action under the Loan Documents unless all of
the following conditions precedent are satisfied at the time of such action:
(a) There exists no Default, or event, omission or failure of
condition which would constitute a Default after notice or lapse of time, or
both;
(b) The undisbursed Loan proceeds together with all sums (if
any) to be provided by Borrower as shown in the Disbursement Budget shall at all
times be not less than the amount which Lender from time to time determines
necessary to: (i) pay, through completion, all costs of the Work and the
marketing and sale or leasing of the Property and Improvements in accordance
with the Loan Documents; (ii) pay all sums which may accrue under the Loan
Documents prior to repayment of the Loan; and (iii) enable Borrower to perform
and satisfy all of the covenants of Borrower contained in the Loan Documents. If
Lender determines
-6-
<PAGE>
at any time that said funds are not sufficient for said purposes, Borrower may
satisfy this condition by depositing the amount of such deficiency in the
Borrower's Funds Account within seven (7) days of Lender's written demand;
(c) Borrower has delivered to Lender all Loan Documents, other
documents, instruments, policies, and forms of evidence or other materials
requested by Lender under the terms of this Agreement or any of the other Loan
Documents; and
(d) The Title Company shall be unconditionally committed to
issuing, at Borrower's sole cost and expense, an endorsement to the Title Policy
increasing the liability amount thereof to cover the amount of the loan, with
coverage and in a form satisfactory to Lender, insuring Lender's interest under
the Deed of Trust as a good and sufficient first lien on the Leasehold Interest
and the Improvements, subject only to such exceptions from its coverage as
Lender shall approve in writing.
(e) Subject to the Ground Lease, Borrower shall have paid all
property taxes other than those which are a lien on the Property, but not yet
due and payable; and
(f) At Borrower's sole cost and expense, the Fifth Amendment to
Loan Documents shall have been duly recorded in the Official Records of Contra
Costa County, California, and the Financing Statement shall have been duly filed
with the California Secretary of State.
3.02 ACCOUNT. The proceeds of the Loan and Borrower's Funds, when
-------
qualified for disbursement, shall be deposited into the Account or otherwise
disbursed to or for the benefit or account of Borrower under the terms of this
Agreement.
3.03 DISBURSEMENT AUTHORIZATION. Disbursements hereunder may be made
--------------------------
by Lender to the Account upon the written request of the Authorized Borrower
Representatives.
3.04 BORROWER'S FUNDS ACCOUNT. Except as otherwise provided in this
------------------------
Agreement, Borrower's Funds shall be held in the Borrower's Funds Account and
disbursed in accordance with the terms hereof.
3.05 PLEDGE AND ASSIGNMENT. As security for Borrower's performance
---------------------
under the Loan Documents, Borrower irrevocably pledges and assigns to Lender all
monies at any time deposited in the Account and the Borrower's Funds Account.
3.06 DISBURSEMENT. Subject to the conditions set forth in Section 3.01,
------------
the proceeds of the Loan and Borrower's Funds shall
-7-
<PAGE>
be disbursed, not more frequently than once per month, in accordance with the
following terms and conditions:
(a) Unless another provision of this Agreement specifies
otherwise, from time to time throughout the term of the Loan, Borrower shall
submit to Lender an Application for Payment setting forth:
(i) a description of the work performed, material supplied
and/or costs incurred or due for which disbursement is
requested with respect to any line item ("Item") shown in
the Disbursement Budget; and
(ii) the total amount incurred, expended and/or due for each
requested Item less prior disbursements.
(b) Lender shall have the right to condition any disbursement upon
Lender's receipt and approval of the following:
(i) the Application for Payment;
(ii) bills, invoices, documents of title, vouchers, statements,
payroll records, receipts and any other documents evidencing
the total amount expended, incurred or due for any requested
Items;
(iii) evidence of Borrower's use of a lien release, joint check
and voucher system reasonably acceptable to Lender for
payments or disbursements to any contractor, subcontractor,
materialman, supplier or lien claimant;
(iv) physical inspections of the Work by Lender's inspectors
and/or engineers;
(v) waivers and releases of mechanics' lien, stop notice claim,
equitable lien claim or other lien claim rights;
(vi) evidence of Borrower's compliance with the provisions of
Sections 4.03 and 6.01 of this Agreement;
------------- ----
(vii) valid, recorded Notice(s) of Completion for the Work or any
portions of the Work for which
-8-
<PAGE>
Notice(s) of Completion may be recorded under applicable
law;
(viii) the Architect's and Engineer's, if any, Certificate of
Substantial Completion, prior to the final retention
disbursement or the final stage disbursement;
(ix) any other document, requirement, evidence or information
that Lender may reasonably request under any provision of
the Loan Documents; and
(x) in the event that any Application for Payment includes the
cost of Onsite Materials, such Application for Payment shall
include each of the following: (a) evidence that the Onsite
Materials have been paid for by Borrower; (b) evidence that
the Onsite Materials are insured as required hereunder; and
(c) evidence that the Onsite Materials are stored in an area
on the Property for which adequate security is provided
against theft and vandalism.
Borrower acknowledges that this approval process may result in
disbursement delays and Borrower consents to all such delays.
(c) Disbursements made after the deposit of Borrower's Funds shall be
made from Borrower's Funds until depleted.
(d) Lender shall have the option to make disbursement hereunder
directly to any contractor or supplier delivering goods or services in
connection with the Work.
(e) Each Application for Payment by Borrower shall constitute a
representation and warranty by Borrower that Borrower is in compliance with all
the conditions precedent specified in Section 3.01 of this Agreement.
------------
3.07 DISBURSED FUNDS. All disbursements shall be held by Borrower in
---------------
trust and applied by Borrower solely for the purposes for which the funds have
been disbursed. Lender is not obligated to monitor or determine Borrower's use
or application of the disbursements.
-9-
<PAGE>
ARTICLE IV. CONSTRUCTION
4.01 COMMENCEMENT AND COMPLETION. Unless otherwise provided by this
---------------------------
Agreement, Borrower shall promptly commence the Work and shall diligently
continue and complete the Work in accordance with the Plans and Specifications
on or before December 31, 1995.
4.02 FORCE MAJEURE. The time within which the Work must be completed
-------------
shall be extended for a period of time equal to the period of any delay directly
affecting the work which is caused by fire, earthquake or other Acts of God,
strike, lockout, acts of public enemy, riot, insurrection, or governmental
regulation of the sale or transportation of materials, supplies or labor
provided Borrower furnishes Lender with written notice (as specified in Section
-------
4.12), of any such delay within ten (10) days from the occurrence of any such
- ----
delay. In no event, however, shall the time for completion of the Work be
extended beyond the Maturity Date.
4.03 CONSTRUCTION. Borrower shall perform and complete the Work in a good
------------
and workmanlike manner in accordance with the Plans and Specifications and the
recommendations of any soils or engineering report approved by Lender. In
performing and completing the Work, Borrower shall comply with the Requirements.
If necessary, the Plans and Specifications shall be modified to comply with the
Requirements, subject to the provisions of Section 4.05 below.
------------
4.04 AMERICANS WITH DISABILITIES ACT COMPLIANCE. Borrower represents and
------------------------------------------
warrants to Lender that the Work has been designed and shall be performed and
completed, and that the Improvements shall be operated and hereafter maintained,
in strict accordance and full compliance with all of the requirements of the
ADA. Borrower is responsible for all ADA compliance costs, including, without
limitation, attorney's fees and litigation costs.
4.05 PLANS AND SPECIFICATIONS. Except as otherwise provided below, there
------------------------
shall be no change in the Plans and Specifications without Lender's prior
written approval, which approval shall not be unreasonably withheld or delayed.
Requests for approval shall be submitted on a change order form acceptable to
Lender signed by Borrower and, if required by Lender, the project architect and
the general contractor (if any), accompanied by working drawings and a written
narrative of the proposed change. As conditions to its approval, (a) Lender may
require reasonably satisfactory evidence of the cost of the proposed change and
the time necessary to complete the proposed change, and (b) to the extent Lender
reasonably determines that the proposed change shall result in
-10-
<PAGE>
increased cost, Lender may require Borrower to deposit the reasonable amount of
the increased cost into the Borrower's Funds Account in accordance with Section
-------
3.01(b). Borrower acknowledges that this approval process may result in delays
- -------
and consents to all such delays. Provided that Borrower submits any proposed
change order to Lender together with a cover letter specifying that Lender is to
reply within fifteen (15) days of its receipt thereof pursuant to this Section
-------
4.05, Lender shall be deemed to have approved such change order if it fails to
- ----
object in writing within fifteen (15) days of Lender's receipt of any such
change order and notice. Upon Lender's request, Borrower, the project architect,
and the general contractor (if any), shall initial the copy of the Plans and
Specifications delivered to, and approved by, Lender as a true copy of the Plans
and Specifications for the Work. Borrower shall maintain at all times a full set
of working drawings for the Work available for inspection by Lender.
Notwithstanding the above, Borrower may make minor changes in the Plans and
Specifications without Lender's prior written consent unless such change: (i)
constitutes a material change in the building material or equipment
specifications, the architectural or structural design, value, architecture, or
quality of any of the Improvements; or (ii) would result in an increase in any
item of construction cost in excess of TEN THOUSAND AND NO/100THS DOLLARS
($10,000.00) for any single change or in excess of FIFTY THOUSAND AND NO/100THS
DOLLARS ($50,000.00) for all such changes in such items of construction cost; or
(iii) would affect the structural integrity, quality of building material or
equipment or overall efficiency of operating systems or utility systems of the
Improvements; or (iv) requires the approval (which has not been given as of the
date of any such change) of any Governmental Agency or any other person or
entity. Notwithstanding the foregoing, Borrower shall submit all proposed
changes to the Plans and Specifications to Lender at least fifteen (15) days
prior to the commencement of construction relating to such proposed change
whether or not any such change is subject to Lender's approval.
4.06 CONSTRUCTION INFORMATION; INSPECTIONS. From time to time, and within
-------------------------------------
ten (10) business days of receipt from Lender of a request therefor, Borrower
shall deliver to Lender:
(a) a complete list stating (i) the name, address and phone number of
each contractor, subcontractor and material supplier to be employed or used for
the Work, and (ii) the dollar amount, including changes if any, of each contract
and subcontract, and the portion thereof, if any, paid through the date of such
list;
(b) copies of each contract and subcontract identified in such list,
including any changes thereto;
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(c) a cost breakdown, in a form reasonably acceptable to Lender,
stating the projected total cost of the Work, and the portion, if any, of each
cost item (i) which has been incurred, and (ii) which has been paid, all as of
the date of such cost breakdown;
(d) a construction progress schedule, in a form reasonably acceptable
to Lender, showing the progress of the Work and the projected sequencing and
completion time for uncompleted work, all as of the date of such schedule; and
(e) with respect to any item designated above which has been
previously delivered, such update thereof as Lender may request.
Lender is expressly authorized to contact any contractor, subcontractor or
material supplier and, at all reasonable times, to enter the Property and
inspect the Improvements and the Work in order to verify information disclosed
pursuant to this Section, or for any other reasonable purpose.
4.07 PROHIBITED CONTRACTS. Without Lender's prior written consent, which
--------------------
consent shall not be unreasonably withheld or delayed, Borrower shall not
contract for any materials, furnishings, equipment, fixtures or other parts or
components of the Work, or other property for the use or occupancy of the
Property or Improvements, if any third party retains or purports to retain any
interest (other than lien rights, if any, created by operation of law) in such
items after their delivery to the Property. Borrower shall have five (5) days
to effect the removal of any such retained interest
4.08 CONTRACTORS. Lender may, but shall not be obligated to, disapprove
-----------
any contractor, subcontractor or material supplier whom Lender deems financially
or otherwise unqualified; provided, however, that the absence of any such
-------- -------
disapproval shall not constitute a representation of qualifications.
4.09 LIENS AND STOP NOTICES. If a claim of lien is recorded affecting the
----------------------
Leasehold Interest or Improvements or a bonded stop notice is served upon Lender
which affects the Loan or Borrower's Funds, Borrower shall, within twenty (20)
days of such recording or service or within five (5) days of Lender's demand
(whichever occurs first), (a) pay and discharge the same, or (b) effect the
release thereof by recording or delivering to Lender a surety bond in sufficient
form and amount, or (c) otherwise provide Lender with other assurance which
Lender deems, in its sole discretion,
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to be satisfactory for the payment of such lien or bonded stop notice and for
the full and continuous protection of Lender from the effect of such lien or
bonded stop notice.
4.10 CONSTRUCTION RESPONSIBILITIES. Borrower shall be solely responsible
-----------------------------
for all aspects of Borrower's business and conduct in connection with the
Leasehold Interest and Improvements, including, without limitation, the quality
and suitability of the Plans and Specifications and their compliance with the
Requirements, the supervision of the Work, the qualifications, financial
condition and performance of all architects, engineers, contractors, material
suppliers, consultants and property managers, and the accuracy of all
applications for payment and the proper application of all disbursements.
Lender is not obligated to supervise, inspect or inform Borrower or any third
party of any aspect of the Work or any other matter referred to above. Any
inspection or review by Lender is to determine whether Borrower is properly
discharging its obligations to Lender and may not be relied upon by Borrower or
any third party. Lender owes no duty of care to Borrower or any third party to
protect against, or to inform Borrower or any third party of, any negligent,
faulty, inadequate or defective design or construction of the Work.
4.11 IMPROVEMENT DISTRICT. Without Lender's prior written consent,
--------------------
Borrower shall not, directly or indirectly, advocate or assist in the
incorporation of any of the Property or Improvements into any improvement or
other assessment district.
4.12 DELAY. Borrower shall promptly notify Lender in writing of any event
-----
causing delay or interruption of the Work, or the timely completion of the Work.
The notice shall specify the particular work delayed, and the cause and period
of each delay.
4.13 BONDS. Within five (5) days of Lender's request, Borrower shall
-----
procure from a surety acceptable to Lender, and deliver to Lender, dual obligee
performance and labor and material payment bonds in a form, substance and amount
reasonably acceptable to Lender and, if requested by Lender, cause any such bond
to be recorded and the Plans and Specifications and construction agreement, if
any, to be filed in the office of the County Recorder of the County where the
Property is located.
4.14 CAPITAL EXPENDITURES AND RESERVES. Borrower shall not make any
---------------------------------
capital improvement to the property other than those described in the Plans and
Specifications (as the same may be changed pursuant to Section 4.05 hereof) or
expend or reserve any income or revenue derived from the Property for any such
capital improvement without Lender's prior approval for each such capital
improvement, expenditure or reserve.
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<PAGE>
ARTICLE V. INSURANCE
5.01 TITLE INSURANCE. Borrower shall procure the endorsement to the Title
---------------
Policy described in Section 3.01(d). During the term of the Loan, Borrower
shall procure and deliver to Lender, within five (5) business days of Lender's
written request to Borrower, such other endorsements to the Title Policy as
Lender may reasonably require.
5.02 HAZARD INSURANCE. Borrower shall procure and maintain from an
----------------
insurer reasonably satisfactory to Lender a policy of Builders Risk Completed
Value hazard insurance, with a vandalism and malicious mischief endorsement and
such other endorsements as Lender may reasonably require, insuring Lender
against damage to the Property in a amount reasonably acceptable to Lender.
Lender shall be named under a Lender's Loss Payable Endorsement (form #438BFU or
equivalent) attached to the policy. At Lender's request, the policy shall
contain an agreed value clause sufficient (as reasonably determined by Lender)
to eliminate any risk of co-insurance.
5.03 FLOOD ZONE NOTIFICATION. If required by applicable law, Borrower, as
-----------------------
ground tenant of the Property and the Improvements under any existing or future
lease or sale agreement, shall promptly give written notice to all lessees or
purchasers of the Leasehold Interest of the fact that the Property and the
Improvements are or will be located in a flood hazard area. Borrower
acknowledges that, to the extent required, such written notices have been given
by it or will be promptly given.
5.04 LIABILITY INSURANCE. Borrower shall procure and maintain from an
-------------------
insurer reasonably satisfactory to Lender a policy of comprehensive public
liability insurance and property damage insurance with limits as reasonably
required by Lender, insuring against liability for injury or death to any person
and property damage occurring on the Property or in the Improvements from any
cause whatsoever. Such policy shall name Lender as an additional insured.
5.05 BLANKET COVERAGE. Lender may accept blanket insurance policies in
----------------
satisfaction of Borrower's obligations to provide insurance.
5.06 GENERAL. Borrower shall procure and maintain all other insurance
-------
required by the Requirements, this Agreement, the Deed of Trust or applicable
law. Lender shall receive the originals of all required insurance policies, or
other evidence of insurance reasonably acceptable to Lender. Borrower shall
maintain all required insurance until the Loan is repaid. All insurance
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<PAGE>
policies shall provide that the insurance shall not be cancellable without
twenty (30) days prior written notice to Lender. All insurancce policies shall
be issued by licensed insurance companies acceptable to Lender.
ARTICLE VI. REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties as of the
Effective Date and continuing thereafter:
6.01 AUTHORITY. Borrower has complied with all laws and regulations
---------
concerning its organization, existence and transaction of business. Borrower
has the right and power to lease the Property and Improvements as ground tenant
as contemplated in the Loan Documents and the Ground Lease. Borrower has, or
at all appropriate times shall have, properly obtained all permits, licenses and
approvals necessary to perform the Work and to use, occupy and market the
Improvements, and has complied with the Requirements and all other applicable
statutes, laws, regulations and ordinances.
6.02 FORMATION AND ORGANIZATIONAL DOCUMENTS. Borrower has delivered to
--------------------------------------
Lender all of the relevant information and organizational documents of Borrower,
of the partners or joint venturers of Borrower (if any), and of all guarantors
of the Loan (if any), and all such formation and organizational documents remain
in full force and effect and have not been amended or modified since they were
delivered to Lender. If any such formation or organizational document is
hereafter amended or modified, Borrower shall immediately provide Lender with
notice in writing of such change.
6.03 ENFORCEABILITY. Borrower is authorized to execute deliver, to
--------------
perform its obligations under, the Loan Documents, which obligations are the
valid and binding obligations of Borrower.
6.04 NO VIOLATION. Borrower's undertakings in the Loan Documents do not
------------
violate any of the Requirements or any other applicable statute, law, regulation
or ordinance or any order or ruling of any court or governmental entity, or
conflict with, or constitute a breach or default under, any agreement by which
Borrower is, or the Leasehold Interest and Improvements are, bound or regulated.
Borrower is not in violation of any statute, law, regulation or ordinance, or of
any order of any court or governmental entity. There are no claims, actions or
proceedings pending or, to Borrower's knowledge, threatened against Borrower or
affecting the Leasehold Interest or Improvements other than those disclosed to
Lender in writing.
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<PAGE>
6.05 FINANCIAL INFORMATION. All financial information delivered to
---------------------
Lender, including, without limitation, information relating to the financial
condition of Borrower, the Leasehold Interest, the Improvements, partners or
joint venturers of Borrower, or guarantors, fairly and accurately represents
such financial condition and has been prepared in accordance with generally
accepted accounting principles consistently applied, unless otherwise noted in
such information. No material adverse change in such financial condition has
occurred.
6.06 ACCURACY. All reports, documents, instruments, information and forms
--------
of evidence delivered to Lender concerning the Loan or security for the Loan or
required by the Loan Documents are accurate, correct and sufficiently complete
to give Lender true and accurate knowledge of their subject matter, and do not
contain any misrepresentation or omission.
6.07 ADEQUACY OF LOAN. The undisbursed Loan proceeds, together with
----------------
Borrower's Funds and all other sums (if any) to be provided by Borrower as shown
in Exhibit B, are sufficient to do all of the things specified in Section
--------- -------
3.01(b).
- -------
6.08 TAXES. Borrower has filed all required federal, state, county and
-----
municipal tax returns and has paid all taxes owed and payable by Borrower, and
Borrower knows of no basis for any additional assessment with respect to any
such taxes.
6.09 COMPLIANCE. Borrower is familiar with all Requirements. The
----------
development of the Property and the construction of the Improvements will
conform to and comply with the Requirements and the Plans and Specifications.
ARTICLE VII. DEFAULT
7.01 DEFAULT. The following shall constitute an event of default under
-------
the Loan Documents:
(a) MONETARY. At Lender's option, (i) Borrower's failure to pay
--------
within fifteen (15) days of the date due any sums payable under the Note, the
Original Note or any of the other Loan Documents; or (ii) Borrower's failure to
deposit any Borrower's Funds as and when required under Section 3.01(b); or
---------------
(b) PERFORMANCE OF OBLIGATIONS. Borrower's failure to perform any of
--------------------------
its other obligations (in addition to those in Section 7.01(a) above) under any
---------------
of the Loan Documents within the Initial Cure Period, or, within ninety (90)
days after written notice so long as Borrower begins within the Initial Cure
Period and diligently continues to cure the failure, and Lender,
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<PAGE>
exercising reasonable judgment, determines that the cure cannot reasonably be
completed at or before expiration of the Initial Cure Period; or
(c) CONSTRUCTION; USE. (i) Any material deviation in the Work from
-----------------
the Plans and Specifications or Requirements or the appearance or use of
defective workmanship or materials in performing the Work, and Borrower's
failure to remedy the same to Lender's reasonable satisfaction within thirty
(30) days of Lender's written demand to do so; or (ii) the cessation of the Work
prior to completion for a continuous period of more than thirty (30) days,
unless such cessation is (A) a result of a casualty or taking and Borrower
diligently continues to restore the Property in accordance with the provisions
of Section 5 of the Deed of Trust, or (B) caused by events for which delay may
---------
be permitted under Section 4.02 hereof; or (iii) the curtailment in availability
------------
to the Property or Improvements of utilities or other public services necessary
for the full occupancy and utilization of the Improvements for a continuous
period of more than thirty (30) days; or
(d) LIENS; ATTACHMENT; CONDEMNATION. (i) The filing of any claim of
-------------------------------
lien against the Leasehold Interest or Improvements or the service on Lender of
any bonded stop notice relating to the Loan and the continuance of the claim of
lien or bonded stop notice for twenty (20) days without discharge, satisfaction
or provision for payment being made in accordance with Section 4.09; or (ii) the
------------
condemnation, seizure or appropriation of, or occurrence of an uninsured
casualty with respect to any material, as determined by Lender in its sole and
absolute discretion, portion of the Property or Improvements, unless (A) within
sixty (60) days after any such condemnation, seizure or appropriation, or
occurrence of an uninsured casualty, Borrower submits to Lender a written
proposal reasonably satisfactory to Lender for the repair or restoration of the
Property or Improvements, as the case may be, using funds provided by Borrower,
such that the value of the Leasehold Interest or Improvements, as the case may
be, is not materially impaired as a result thereof, and (B) Borrower diligently
pursues such repair or restoration to completion in a good and workmanlike
manner; or
(e) REPRESENTATIONS AND WARRANTIES. The failure of any of Borrower's
------------------------------
representations or warranties in any of the Loan Documents to be true within
thirty (30) days after notice by Lender; or
(f) CHANGE IN MANAGEMENT OR CONTROL. The occurrence of any
-------------------------------
management, organizational or other material change in the Borrower or the
partners or venturers thereof, including, without limitation, partnership or
joint venture disputes, which Lender
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<PAGE>
determines, in its reasonable discretion, will have a material adverse effect on
the Loan, the Leasehold Interest, the security for the Loan or upon Borrower's
or its partners' and venturers' ability to perform their obligations under the
Loan Documents, without Lender's prior written consent; provided, however, that
Lender shall not unreasonably withhold or delay its consent to any (i)
distribution to any general or limited partner of Borrower of such partner's
respective interest therein or (ii) assignment or transfer by any general or
limited partner of Borrower of its respective interest so distributed to any
person or entity controlling, controlled by, or under common control with such
general or limited partner (each an "Affiliate"), provided that (A) such
distribution, assignment or transfer is made for the purpose of accomplishing a
tax free exchange under Section 1031 of the Internal Revenue Code of 1986, as
amended, and (B) any and all such Affiliates agree to assume all of the
liabilities and obligations of Borrower and such general or limited partner to
Lender pursuant to a written instrument satisfactory to Lender.
(g) ACCELERATION UPON LOSS OF SECURITY. If at any time the Deed of
----------------------------------
Trust ceases to be a valid first lien upon the Leasehold Interest and
Improvements subject only to such other liens and encumbrances approved by
Lender and shown in the Title Policy.
(h) CROSS-DEFAULT. The occurrence of any Event of Default under the
-------------
Deed of Trust.
7.02 ACCELERATION. Upon the occurrence of a Default specified in Sections
------------ --------
7.01, Lender may, at its option, declare all sums owing to Lender under the
- ----
Note, the Original Note and the other Loan Documents immediately due and
payable. Upon the occurrence of any Default specified in any of the Loan
Documents which provides that acceleration shall be automatic, all sums owing to
Lender under the Note, the Original Note and the other Loan Documents shall
automatically become immediately due and payable. Upon acceleration, Lender
may, in addition to other uses permitted under the Loan Documents, apply
undisbursed Loan proceeds and any sums in the Account and the Borrower's Funds
Account to the sums owing to Lender under the Loan Documents in such order as
Lender may elect. Without limitation of the provisions of Section 7.04 hereof,
------------
Borrower hereby irrevocably appoints Lender as its true and lawful attorney-in-
fact, which agency is coupled with an interest, to accomplish the foregoing
actions and rights of Lender or transfer of such funds to Lender.
7.03 DISBURSEMENT BY LENDER. Upon the occurrence of a Default which is
----------------------
occasioned by Borrower's failure to pay money, Lender may but shall not be
obligated to make such payment from Loan proceeds, Borrower's Funds, or other
funds of Lender. If
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<PAGE>
such payment is made from proceeds of the Loan or from Borrower's Funds,
Borrower shall deposit in the Borrower's Funds Account, upon written demand
issued pursuant to Section 3.01(b), an amount equal to such payment. If such
---------------
payment is made from funds of Lender, Borrower shall repay such funds upon
demand issued pursuant to Section 7.06. In either case, the Default with respect
------------
to which any such payment has been made by Lender shall not be deemed cured
until such deposit or repayment (as the case may be) has been made by Borrower.
7.04 LENDER'S COMPLETION OF CONSTRUCTION. If a Default occurs, Lender
-----------------------------------
may, upon five (5) days written notice to Borrower, and with or without legal
process, take possession of the Property and Improvements, remove Borrower and
all agents, employees and contractors of Borrower from the Property and
Improvements, complete the Work and market and sell or lease the Leasehold
Interest and the Improvements. Borrower irrevocably appoints Lender as its
attorney-in-fact, which agency is coupled with an interest for the purposes of
effecting the provisions of this Section 7.04. As attorney-in-fact, Lender may,
------------
in Borrower's name, take or omit to take any action Lender may deem appropriate,
including, without limitation, exercising Borrower's rights under the Loan
Documents and all contracts concerning the Property and/or Improvements.
7.05 CESSATION OF CONSTRUCTION. If Lender reasonably determines that the
-------------------------
Work is not being performed in accordance with the Plans and Specifications, the
Requirements, or the Loan Documents, Lender may order all Work affected by the
condition of nonconformance immediately stopped. After that order, Borrower
shall not allow any Work, other than corrective work, to be performed on any of
the Property or Improvements affected by the condition of nonconformance until
Lender notifies Borrower in writing that the nonconforming condition has been
corrected, which notice shall be provided by Lender promptly after completion of
the corrective work and receipt of notice from Borrower that such work has been
completed.
7.06 REPAYMENT OF FUNDS ADVANCED. If Lender spends its funds in
---------------------------
exercising any of its rights or remedies under the Loan Documents, the amount of
funds spent shall be payable to Lender upon demand, together with interest at
the rate applicable to the principal balance of the Note as specified therein
plus 2% per annum, from the date the funds were spent. Until repaid, such
amounts shall have the security afforded disbursements under the Note.
7.07 RIGHT OF CONTEST. Borrower may contest in good faith any claim,
----------------
demand, levy or assessment (other than liens and stop notices, provision for
which is made in Section 4.09) by any
------------
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<PAGE>
person other than Lender which would constitute a Default if (a) Borrower
pursues the contest diligently and in a manner which Lender determines is not
prejudicial to Lender and does not impair the rights of Lender under any of the
Loan Documents; and (b) Borrower deposits with Lender any funds or other forms
of assurance which Lender in good faith from time to time reasonably determines
appropriate to protect Lender from the consequences of the contest being
unsuccessful. Borrower's compliance with this Section shall operate to prevent
such claim, demand, levy or assessment from becoming a Default.
ARTICLE VIII. HAZARDOUS MATERIALS
8.01 COVENANTS. Without limitation of the provisions of the Ground Lease
---------
or any other agreement, covenant or restriction by which Borrower may be bound,
Borrower hereby agrees as follows:
(a) NO HAZARDOUS ACTIVITIES. Borrower shall not cause or knowingly
-----------------------
permit any Hazardous Materials to be brought onto the Property in violation of
applicable law.
(b) HAZARDOUS MATERIALS LAWS. Borrower shall comply and cause the
------------------------
Property to comply with all Hazardous Materials Laws in connection with the
Work.
(c) NOTICES. Borrower shall immediately notify Lender in writing of:
-------
(i) the discovery by Borrower of any breach or violation of the foregoing
clauses (a) and (b) of this Section, or (ii) the receipt by Borrower of written
notice of any Hazardous Materials Claims.
(d) REMEDIAL ACTION. Subject to applicable law, in response to
---------------
Borrower's actual knowledge of the presence of any Hazardous Materials on or
under the Property resulting from any breach or violation of the foregoing
clauses (a) and (b) of this Section, Borrower shall promptly commence and
thereafter diligently pursue, at no cost or expense to Lender, all Remedial
Action in connection with such Hazardous Materials. The foregoing, however,
shall be subject to Borrower's right of contest under Section 8.02, below.
------------
8.02 RIGHT OF CONTEST. Borrower may contest in good faith any claim,
----------------
demand, levy or assessment under the Hazardous Materials Laws or any Hazardous
Materials Claims made by any person or entity if: (a) the contest is based on a
material question of law or fact raised by Borrower in good faith; (b) Borrower
promptly commences and thereafter diligently pursues the contest; (c) the
contest will not materially impair the taking of any Remedial Action with
respect to such claim, demand, levy or
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<PAGE>
assessment under Hazardous Materials Laws or Hazardous Materials Claims; and (d)
Borrower demonstrates to Lender's reasonable satisfaction that Borrower has the
financial capability to undertake and pay for such contest and any Remedial
Action when reasonably necessary. No Default shall be deemed to exist with
respect to any claim, demand, levy or attachment being contested by Borrower in
accordance with the foregoing terms of this Section 8.02.
------------
8.03 INDEMNITY. Notwithstanding anything to the contrary set forth in
---------
Section 9.29, the duty of Borrower to indemnify Lender and the liability of
- ------------
Borrower to Lender under Section 9.02 shall not be secured by the Deed of Trust
------------
or subject to any "non-recourse" or "limitation of liability" provisions of this
Agreement or any other Loan Document if such duty to indemnify arises out of a
breach of Section 8.01 hereof. Borrower acknowledges that Lender's appraisal of
------------
the Leasehold Interest and Improvements is such that Lender is not willing to
accept the consequences under California's "One Form of Action Rule" (i.e.
Section 726 of the CCP) and "Anti-Deficiency Rules" (i.e. Sections 580(a),
580(b) and 580(d) of the CCP) of the inclusion of Borrower's duty to indemnify
Lender with respect to the matters described above in this Section 8.03 among
------------
the obligations secured by the Deed of Trust and that Lender would not make the
Loan but for the unsecured personal liability undertaken by Borrower in
connection with such matters. Borrower further acknowledges that Lender's right
to indemnification with respect to such matters is in addition to, and not in
limitation of, all of the rights and remedies which Lender may possess at law or
in equity at any time under any Hazardous Materials Laws.
8.04 INSPECTION BY LENDER. Upon reasonable prior notice to Borrower,
--------------------
Lender, its employees and agents, may from time to time (whether before or after
the commencement of a nonjudicial or judicial foreclosure proceeding) enter and
inspect the Property for the purpose of determining the existence, location,
nature and magnitude of any past or present release or threatened release of any
Hazardous Materials into, onto, beneath or from the Property.
ARTICLE IX. MISCELLANEOUS PROVISIONS
9.01 EXPENSES. Borrower shall pay Lender immediately upon demand all
--------
costs and expenses incurred by Lender in connection with the enforcement or
satisfaction by Lender of any of Borrower's obligations under this Agreement or
under the Loan Documents. For all purposes of this Agreement, Lender's costs
and expenses shall include, without limitation, all appraisal fees, cost
engineering and inspection fees, legal fees, accounting fees,
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environmental consultant fees (if any), auditor fees, and the cost to Lender of
any title insurance premiums and title surveys. If any of the services described
in this Section are provided by an employee of Lender, Borrower shall reimburse
Lender its standard charge for such services.
9.02 INDEMNITY. Borrower indemnifies Lender against, and holds Lender
---------
harmless from, any losses, damages, liabilities, claims, actions, judgments,
court costs and legal or other expenses (including reasonable attorneys' fees)
which Lender may incur as a direct or indirect consequence of: (i) the making of
the Loan, except for violations of lending laws or regulations by Lender; or
(ii) Borrower's failure to perform any obligations as and when required by this
Agreement or any of the Loan Documents; or (iii) any failure at any time of any
of Borrower's representations or warranties to be true and correct, or (iv) any
act or omission by Borrower, any contractor, subcontractor or material supplier,
engineer, architect or other person or entity with respect to any of the Work.
Borrower shall pay immediately upon Lender's demand any amounts owing under this
indemnity together with interest from the date the indebtedness arises until
paid at the rate of interest applicable to the principal balance of the Note as
specified therein plus 2% per annum. Borrower's duty to indemnify Lender shall
survive the release and cancellation of the Note and the reconveyance or partial
reconveyance of the Deed of Trust.
9.03 RECORDS. Borrower shall maintain complete books of accounts and
-------
other records for the Work, the Leasehold Interest and Improvements and for
disbursement and use of the Loan proceeds and Borrower's Funds, and during
normal business hours upon not less than two (2) business days' notice the same
shall be available for inspection and copying by Lender.
9.04 ERISA COMPLIANCE. Borrower shall at all times comply with the
----------------
provisions of ERISA with respect to any retirement or other employee benefit
plan to which it is a party as employer, and as soon as possible after Borrower
knows, or has reason to know, that any Reportable Event (as defined in ERISA)
with respect to any such plan of Borrower has occurred, it shall furnish to
Lender a statement in writing setting forth details as to such Reportable Event
and the action, if any, which Borrower proposes to take with respect thereto,
together with a copy of the notice of such Reportable Event furnished to the
Pension Benefit Guaranty Corporation.
9.05 FURTHER ASSURANCES. At Lender's request and at Borrower's expense,
------------------
Borrower shall execute, acknowledge and deliver any other instruments and
perform any other acts
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<PAGE>
necessary, desirable or proper (as reasonably determined by Lender) to carry out
the purposes of the Loan Documents or to perfect and preserve any liens created
by the Loan Documents.
9.06 FORM OF DOCUMENTS. The form and substance of all documents,
-----------------
instruments, and forms of evidence to be delivered to Lender under the terms of
any of the Loan Documents shall be subject to Lender's approval (which approval
shall not be unreasonably withheld or delayed) and shall not be modified,
superseded or terminated in any respect without Lender's prior written approval.
9.07 NO THIRD PARTIES BENEFITTED. No person other than Lender and
---------------------------
Borrower and their permitted successors and assigns shall have any right of
action under any of the Loan Documents.
9.08 NOTICES. Any notice, request, demand or other communication required
-------
or permitted under the Loan Documents (unless otherwise expressly provided
therein) shall be given in writing by delivering the same in person to the
intended addressee by overnight courier service with guaranteed next day
delivery or by certified United States mail, postage prepaid or telegram sent to
the intended addressee at the applicable address set forth below or to such
different address as either Lender or Borrower shall have designated by written
notice to the other sent in accordance herewith. Such notices shall be deemed
given when received or, if earlier, in the case of delivery by courier service
with guaranteed next day delivery, the next day or the day designated for
delivery, or in the case of delivery by certified United States mail, two days
after deposit therein. No notice to or demand on Borrower in any case shall of
itself entitle Borrower to any other or further notice or demand in similar or
other circumstances.
Notice addresses:
If to Borrower: c/o Mr. William Thormahlen
Sares-Regis Group
18802 Bardeen Avenue
Irvine, California 92715-1521
If to Lender: c/o Copley Real Estate Advisors, Inc.
399 Boylston Street
Boston, Massachusetts 02116
Attention: General Counsel
-23-
<PAGE>
with a copy to: Hale and Dorr
60 State Street
Boston, MA 02109
Attention: Kenneth A. Hoxsie, Esq.
9.09 AUTHORITY TO FILE NOTICES. Borrower irrevocably appoints and
-------------------------
authorizes Lender, as Borrower's attorney-in-fact, which agency is coupled with
an interest, to execute and/or record in Lender's or Borrower's name any
notices, instruments or documents that Lender deems appropriate to protect
Lender's interest under any of the Loan Documents.
9.10 ACTIONS. Lender may commence, appear in or defend any action or
-------
proceeding purporting to affect the Leasehold Interest, Improvements, Loan
Documents or the rights, duties or liabilities of Borrower or Lender under the
Loan Documents. In exercising this right, Lender may incur and pay costs and
expenses including, without limitation, reasonable attorneys' fees and court
costs and Borrower agrees to pay all such expenses so incurred or paid.
9.11 RELATIONSHIP OF PARTIES. The relationship of Borrower and Lender
-----------------------
under the Loan Documents is, and shall at all times remain, solely that of
borrower and lender. Lender neither undertakes nor assumes any responsibility
or duty to Borrower or to any third party with respect to the Leasehold
Interest, Improvements or Loan, except as expressly provided in the Loan
Documents and the Ground Lease.
9.12 LENDER'S DELAY. Lender shall not be liable in any way for Lender's
--------------
failure to perform or delay in performing under the Loan Documents, and Lender
may suspend or terminate all or any portion of Lender's obligations under the
Loan Documents if Lender's delay or failure results directly or indirectly from,
or is based upon, the action, inaction, or purported action, of any Governmental
Agency, or any other cause or event identified in Section 4.02 hereof.
------------
9.13 ATTORNEY'S FEES; ENFORCEMENT. If any attorney is engaged by Lender
----------------------------
to enforce, or defend any provision of any of the Loan documents, or as a
consequence of any Default under the Loan Documents, with or without the filing
of any legal action or proceeding, Borrower shall pay to Lender, immediately
upon demand, the amount of all attorneys' fees and costs incurred by Lender in
connection therewith, together with interest thereon from the date of such
demand until paid at the rate of interest applicable to the principal balance of
the Note as specified therein plus 2% per annum.
-24-
<PAGE>
9.14 ASSIGNMENT. Borrower shall not assign Borrower's interest under any
----------
of the Loan Documents, or in any monies due or to become due thereunder, without
Lender's prior written consent. Any assignment made without Lender's consent
shall be void. Borrower recognizes that this is not an ordinary loan and that
Lender would not make this Loan except in reliance on Borrower's expertise and
reputation, Lender's knowledge of Borrower, and Lender's understanding that this
Agreement is more in the nature of an agreement involving personal services than
a standard loan where Lender would rely on security upon which no additional
work is planned. In this instance, Lender is relying on Borrower's expertise
and prior experience to perform and complete the Work in accordance with the
terms of the Loan Documents.
9.15 LENDER'S AGENTS. Lender may designate an agent or independent
---------------
contractor to exercise any of Lender's rights under the Loan Documents. Any
reference to Lender in any of the Loan Documents shall include Lender's agents,
employees or independent contractors.
9.16 SEVERABILITY. If any provision of the Loan Documents shall be
------------
determined by a court of competent jurisdiction to be invalid, illegal or
unenforceable, that portion shall be deemed severed from the Loan Documents and
the remaining parts shall remain in full force as though the invalid, illegal,
or unenforceable portion had never been part of the Loan Documents.
9.17 HEIRS, SUCCESSORS AND ASSIGNS. The terms of the Loan Documents shall
-----------------------------
be binding upon and inure to the benefit of the heirs, successors and assigns of
the parties; provided however, that this Section does not waive the provisions
of Section 9.14.
------------
9.18 RIGHTS CUMULATIVE, NO WAIVER. All Lender's rights and remedies
----------------------------
provided in the Loan Documents, granted by law or otherwise, are cumulative and
may be exercised by Lender at any time. Lender's exercise of any right or
remedy shall not constitute a cure of any Default unless all sums then due and
payable to Lender under the Loan Documents are repaid and Borrower has cured all
other Defaults. No waiver shall be implied from any failure of Lender to take,
or any delay by Lender in taking, action concerning any Default or failure of
condition under the Loan Documents, or from any previous waiver of any similar
or unrelated Default or failure of condition. Any waiver or approval under any
of the Loan Documents must be in writing and shall be limited to its specific
terms.
9.19 TIME. Time is of the essence of each term of the Loan Documents.
----
-25-
<PAGE>
9.20 HEADINGS. All headings appearing in any of the Loan Documents are
--------
for convenience only and shall be disregarded in construing the Loan Documents.
9.21 GOVERNING LAW. The Loan Documents shall be governed by, and
-------------
construed in accordance with, the laws of the State of California, except to the
extent preempted by Federal laws. Borrower and all persons and entities in any
manner obligated to Lender under the Loan Documents consent to the jurisdiction
of any Federal or State Court within the State of California having proper venue
and also consent to service of process by any means authorized by California or
Federal Law.
9.22 INTEGRATION; INTERPRETATION. The Loan Documents contain or expressly
---------------------------
incorporate by reference the entire agreement of the parties with respect to the
matters contemplated herein and supersede all prior negotiations. The Loan
Documents shall not be modified except by written instrument executed by all
parties. Any reference in any of the Loan Documents to the Property, the
Leasehold Interest or Improvements shall include all or any part of the
Property, the Leasehold Interest or Improvements. Any reference to the Loan
Documents in any of the Loan Documents includes any amendments, renewals or
extensions approved by Lender. Any reference in this Agreement to the Loan
Documents shall include all or any of the provisions of this Agreement and the
Loan Documents unless otherwise specified.
9.23 JOINT AND SEVERAL LIABILITY. The liability of all persons and
---------------------------
entities who are in any manner obligated under any of the Loan Documents shall
be joint and several.
9.24 EXECUTION IN COUNTERPARTS. This Agreement, and other Loan Documents
-------------------------
which expressly so provide, may be executed in any number of counterparts, each
of which when executed and delivered will be deemed to be an original and all of
which, taken together, will be deemed to be one and the same instrument.
9.25 INCORPORATION. Exhibits A and B attached hereto are incorporated
------------- - -
into this Agreement.
9.26 CREDIT FOR PRINCIPAL PAYMENTS. Any payment made upon the outstanding
-----------------------------
principal balance of the Loan shall be credited as of the business day upon
which the applicable following condition has occurred by no later than 11:00
a.m. (Pacific Standard Time or Pacific Daylight Time, as appropriate):
(a) In the case of a principal payment made by a federal funds wire
transfer, upon receipt by Lender of written advice from the Federal Reserve
System confirming that the transferred amount has been credited for the account
of Lender; or
-26-
<PAGE>
(b) In the case of a principal payment made by either a cashier's
check, or in the case of a check drawn upon a deposit account in which there are
then sufficient funds on deposit for the payment of said check, upon receipt by
Lender of such check or cashier's check at the address designated elsewhere
herein for the delivery to Lender of notices.
9.27 WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY TO THIS AGREEMENT
--------------------------------
HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION
OR CAUSE OF ACTION (a) ARISING UNDER THE LOAN DOCUMENTS OR THE ORIGINAL NOTE,
INCLUDING, WITHOUT LIMITATION, ANY PRESENT OR FUTURE MODIFICATION THEREOF OR (b)
IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE
PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THE LOAN DOCUMENTS OR THE ORIGINAL
NOTE (AS NOW OR HEREAFTER MODIFIED) OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS
RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY
HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO
THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH
ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER
OF THEIR RIGHT TO TRIAL BY JURY.
9.28 OBLIGATIONS UNDER GROUND LEASE. Nothing contained in this Agreement
------------------------------
shall be construed to relieve or excuse Borrower of any of its obligations in
its capacity as ground tenant under the Ground lease.
9.29 NONRECOURSE.
-----------
(a) Borrower shall be liable upon the indebtedness evidenced by the
Note, for all sums to accrue or to become payable thereunder, and for
performance of any covenants contained in any of the Loan Documents to the
extent, but only the extent, of Lender's security for the same, including,
without limitation, all properties, rights, estates, and interests covered by
this Agreement and the Loan Documents. No attachment, execution or other writ
of process shall be sought, issued or levied upon any assets, properties or
funds of Borrower other than the properties, rights, estates and interest
described in this Agreement and the other Loan Documents. In the event of
foreclosure of such title, liens, mortgages or security interests, by private
power of sale or otherwise, no judgment for any deficiency upon such
indebtedness, sums and amounts shall be sought or obtained by Lender against
Borrower.
-27-
<PAGE>
(b) Subject to the limitations set forth in Subparagraph (a) above,
nothing herein contained shall be construed to prevent Lender from exercising
and enforcing any other remedy allowed at law or in equity or by any statute or
by the terms of any of the Loan Documents.
(c) Notwithstanding the foregoing provisions of Subparagraphs (a) and
(b) above, or any provision of the Deed of Trust or any other Loan Document to
the contrary, no limitation of liability set forth herein, in the Deed of Trust
or in any other Loan Documents shall be deemed to limit any right Lender might
otherwise have to obtain injunctive relief against Borrower or any partner of
Borrower related to the Leasehold Interest or the Improvements or any personal
property security or to take any action to preserve, enforce or foreclose the
liens, mortgages, assignments and security interests now or at any time
hereafter securing the payment and performance of all sums and obligations
hereunder or any of the Loan Documents, or to collect rents or to collect
amounts which may become owing or payable under or on account of insurance,
condemnation awards or damages for other public actions or surety bonds
maintained or provided by Borrower.
(d) In addition to the foregoing provisions of this Section 9.29,
neither the limitation of liability set forth herein, or in the Deed of Trust or
any other Loan Document:
(i) shall apply to any damages sustained by Lender by reason of:
(A) any misrepresentation by Borrower or any partner of
Borrower proving to have been an intentional or fraudulent
misrepresentation when made,
(B) waste or intentional damage to the Property or
Improvements thereon by Borrower or any partner of Borrower,
(C) any breach of Borrower's obligations under Section 8.03
------------
hereof,
(D) the failure of Borrower or any partner of Borrower to
pay any income or other taxes, assessments or charges attributable to
the Borrower or such partner (as the case may be) which can create
liens on any portion of the Leasehold Interest or Improvements (to the
full extent of any such taxes, assessments or other charges) as to
Borrower or the partner who fails to pay such taxes, assessments or
charges, or
-28-
<PAGE>
(E) the making of any payment or any distribution (cash,
profits, fees or otherwise) of any assets of Borrower to any partner
of Borrower or to any affiliate of a partner of Borrower without the
prior written consent of Lender; and
(ii) shall apply should Borrower, or any partner of Borrower,
claim or contend at any time that the Deed of Trust securing the Loan is,
for any reason, invalid or unenforceable to an extent that would:
(A) preclude Lender from foreclosing the Deed of Trust or
causing a trustee's sale in connection with the Deed of Trust upon the
occurrence of a Default hereunder, or
(B) preclude Lender from foreclosing or otherwise enforcing
its security interest in the personal property covered by the Deed of
Trust or the Security Agreement upon the occurrence of a Default
hereunder.
(e) Nothing herein contained shall limit or be construed to limit the
personal liability and obligations of Borrower in the event that and to the
extent that after a Default or an event or circumstance that with the passage of
time, the giving of notice, or both, could constitute a Default, Borrower
collects any rents, issues or profits of the Leasehold Interest or the
Improvements or derived from the Leasehold Interest or the Improvements and does
not apply the same to the normal operating expenses of the Leasehold Interest or
the Improvements or any payments due under any of the Loan Documents, it being
intended hereby that Borrower shall be personally liable and obligated hereunder
to the full extent of such rentals and other items so collected and not so
applied, and that Lender or other holder hereof or of the Note, the Original
Note or any of the Loan Documents shall not be limited in any way in enforcing
such personal liability and obligations of Borrower.
-29-
<PAGE>
IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement as of
the date appearing on the first page of this Agreement.
"Lender" "Borrower"
NEW ENGLAND LIFE WILLOWS CONCORD VENTURE,
PENSION PROPERTIES' A Real a California limited partnership,
Estate Limited Partnership,
a Massachusetts limited
partnership By: /s/ William I. Thormahlen
----------------------------
Name: William I. Thormahlen
--------------------------
Title: General Partner
-------------------------
By: Copley Properties Company, Inc.
By: /s/ Wesley M. Gardiner
-------------------------
Name: Wesley M. Gardiner
--------------------
Title: Vice President
-------------------
NEW ENGLAND LIFE PENSION
PROPERTIES, II; A Real Estate Limited
Partnership, a Massachusetts limited
partnership
By: Copley Properties Company II, Inc.
By: /s/ Wesley M. Gardiner
-------------------------
Name: Wesley M. Gardiner
--------------------
Title: Vice President
-------------------
-30-
<PAGE>
EXHIBIT A
---------
LEGAL DESCRIPTION
-----------------
That certain real property located in the City of Concord, County of Contra
Costa, State of California, described as follows:
Parcel "B" as shown on the Parcel Map filed April 22, 1969, in Book 8
of Parcel Maps at Page 16, Contra Costa County Records (hereinafter, the
"Site").
Excepting therefrom the interest to Contra Costa County Flood Control
and Water Conservation District, in the Deed recorded May 16, 1969, in
Book 5876, Page 838, of Official Records.
ALSO EXCEPTING THEREFROM the buildings, structures and improvements now or
hereafter erected on the Site, and any replacements thereof, which are and
shall remain real property (collectively, the "Improvements"), and the
furnishings, equipment, machinery and other items of personal property now
or hereafter necessary for the property operation and maintenance of the
Improvements and situated on, over or beneath the Site.
<PAGE>
EXHIBIT B
The Willows
Section VII - 1994 & 1995 Summary 1995
Prepared By:
Ginger Bryant
<TABLE>
<CAPTION>
Actual Actual Actual Actual
Jan Feb Mar Apr May Jun Jul Aug
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Rental Income 215,188 198,598 176,675 224,225 190,544 170,610 189,076 212,876
CAM, Taxes and Insurance 47,369 44,817 54,995 27,523 42,032 46,920 43,715 47,050
Other Income 113 585 263 638 250 250 250 250
TOTAL REVENUES 262,670 244,000 231,933 252,386 232,827 217,780 233,041 260,176
Repairs and Maintenance 652 3,938 11,165 9,454 3,006 3,025 2,506 2,654
Parking Lot 1,911 0 1,040 520 740 740 3,740 740
Landscaping (100) 11,350 12,849 5,675 11,175 10,726 7,225 8,375
Utilities 60 4,358 5,931 4,521 12,000 4,000 12,000 4,000
HVAC 0 0 0 0 0 0 0 0
Janitorial & Trash 0 19,428 16,972 5,792 21,100 13,600 13,600 13,600
Security & Other 2,336 12,226 16,657 5,894 12,510 8,585 8,960 8,510
TOTAL CAM 4,859 51,300 64,614 31,856 60,531 40,676 48,031 37,879
Property Taxes 0 27,000 54,000 (27,289) 27,018 27,018 27,018 27,018
Insurance 1,647 1,647 1,647 1,647 1,647 1,647 1,647 1,647
Management Fees 8,878 7,546 6,930 8,160 6,994 6,543 7,000 7,814
Management Salaries 6,191 7,149 9,385 4,156 7,264 7,264 7,264 7,264
TOTAL OPERATING EXPENSES 21,575 94,642 136,576 18,530 103,454 83,148 90,961 81,622
Marketing 850 1,093 368 1,026 6,914 8,296 1,149 3,617
Professional Services 10,071 1,983 2,141 5,686 2,000 2,000 2,000 2,000
Administrative 5,358 1,349 9,460 3,930 3,525 4,639 3,525 3,501
Bad Debt 0 (609) (305) (305) (305) (305) (305) (305)
TOTAL EXPENSES 37,854 98,458 148,240 28,867 115,588 97,778 97,330 90,436
NET OPERATING INCOME 224,816 145,542 83,693 223,519 117,238 120,003 135,710 169,740
Interest Paid 0 0 0 0 0 0 0 0
Other Expenses Paid 0 0 0 800 0 0 0 0
Tenant Improvements/Vanilla (105,503) (22,618) (10,443) (2,775) (46,000) (124,000) (165,000) (300,000)
Leasing Commissions 7,172 (4,292) (2,880) (13,947) (34,435) (12,000) (13,150) (46,000)
Renovation and Replacements (80,902) (54,309) 2,139 (5,464) 0 (60,000) (20,000) 0
TOTAL CAPITAL (179,233) (81,219) (11,184) (22,186) (80,435) (196,000) (198,150) (346,000)
Loan/Other Funding 308,185 0 0 49,380 (250,000) (17,000) 57,000 53,000
Cash Accrual Adjustments (185,520) (338,603) 73,913 (153,808) 27,018 142,583 29,168 174,868
NET CASH FLOW 168,248 (274,280) 146,422 96,105 (186,179) 49,586 23,728 51,608
Beginning Cash 170,606 338,854 64,575 210,997 307,103 120,924 170,509 194,238
Ending Cash 338,854 64,575 210,997 307,103 120,924 170,509 194,238 245,846
Target Working Capital 50,000 50,000 50,000 50,000 50,000 50,000
Property Tax Reserve 135,000 0 27,000 54,000 81,000 108,000
Excess/Funding Need 25,997 257,103 43,924 66,509 63,238 87,846
Cumulative Funding 308,185 308,185 308,185 357,565 357,565 357,565 357,565 357,565
Balance in Coploy Cash
account 0 0 0 0 250,000 267,000 210,000 157,000
Potential Pad B REG pymt 250,000
Potential Pad B costs above
<CAPTION>
Current Yr
Sep Oct Nov Dec Total Forecast Change
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Rental Income 194,200 216,400 205,150 217,875 2,411,421 2,565,726 (154,304)
CAM, Taxes and Insurance 49,212 49,931 54,053 64,291 571,908 624,826 (52,917)
Other Income 250 250 250 250 3,599 3,000 599
TOTAL REVENUES 243,663 266,582 259,453 282,416 2,986,929 3,193,551 (206,623)
Repairs and Maintenance 2,878 6,665 4,518 5,037 55,497 45,180 10,318
Parking Lot 740 920 920 920 12,931 12,960 (29)
Landscaping 9,766 5,725 8,225 9,616 100,607 99,624 983
Utilities 12,000 4,300 10,500 5,500 79,170 90,400 (11,230)
HVAC 0 0 0 0 0 0 0
Janitorial & Trash 13,600 14,100 14,100 14,100 159,992 164,700 (1,232)
Security & Other 8,585 8,510 8,960 9,485 111,218 109,120 2,098
TOTAL CAM 47,569 40,220 47,223 44,658 519,415 521,984 908
Property Taxes 27,018 27,018 27,018 27,018 269,855 401,395 (131,540)
Insurance 1,729 1,729 1,729 1,729 20,093 20,094 (1)
Management Fees 7,319 8,007 7,793 8,482 91,465 95,657 (4,191)
Management Salaries 7,264 7,264 7,264 13,832 91,559 95,098 (3,539)
TOTAL OPERATING EXPENSES 90,898 84,238 91,026 95,718 992,388 1,134,227 (138,363)
Marketing 2,671 2,639 9,921 11,171 49,714 51,257 (1,543)
Professional Services 2,000 2,000 5,000 2,000 38,378 37,500 878
Administrative 4,463 3,501 3,975 4,439 51,668 50,829 839
Bad Debt (305) (305) (305) (305) (3,659) 5,000 (8,659)
TOTAL EXPENSES 99,727 92,073 109,617 113,023 1,128,489 1,278,813 (146,848)
NET OPERATING EXPENSES 143,935 174,509 149,836 169,393 1,858,440 1,914,738 (59,774)
Interest Paid 0 0 0 0 0 (0) 0
Other Expenses Paid 0 0 0 0 800 0 800
Tenant Improvements/Vanilla (559,150) (356,250) (198,400) (32,000) (1,922,139) (1,928,150) 6,011
Leasing Commissions (26,348) (55,250) (45,435) (54,500) (301,065) (394,900) 93,835
Renovation and Replacements 0 0 0 0 (218,536) (200,000) (18,536)
TOTAL CAPITAL (585,498) (411,500) (243,835) (86,500) (2,441,740) 2,523,050 81,310
Loan/Other Funding 157,000 426,000 222,000 94,000 1,099,565 0 1,099,565
Cash Accrual Adjustments 266,516 (146,980) (140,647) (292,425) (543,917) 0 (543,917)
NET CASH FLOW (18,047) 42,029 (12,646) (115,632) (28,452) (608,312) 576,384
Beginning Cash 245,846 227,800 269,829 257,183 170,606
Ending Cash 227,800 269,629 257,183 141,651 142,154
Target Working Capital 50,000 50,000 50,000 50,000
Property Tax Reserve 135,000 135,000 27,000 54,000
Excess/Funding Need 42,800 84,829 180,183 37,651
Cumulative Funding 357,565 783,565 1,005,565 1,099,565
Balance in Coploy Cash
account 0 0 0 0
before
Potential Pad B REG pymt contingency
Potential Pad B costs above ******* (in TI #) (1,350,000) 2,199,565
</TABLE>
<PAGE>
PROMISSORY NOTE
---------------
1. Defined Terms. As used in this Promissory Note (this "Note"), the
-------------
following terms shall have the following meanings:
Accrual Balance shall have the meaning assigned to it in Paragraph
---------------
3(a)(ii).
Accrued Amount shall have the meaning assigned to it in Paragraph
--------------
3(a)(ii).
Assignment of Leases shall mean that certain Assignment of Leases and
--------------------
Rents dated as of June 13, 1991, executed by Maker in favor of Lender, recorded
on June 18, 1991 as Instrument No. 91-110715 in the Official Records of Contra
Costa County, California, as amended by that certain Modification Agreement and
First Amendment to Loan Documents dated as of August 15, 1991, as further
amended by that certain Modification Agreement and Second Amendment to Loan
Documents dated as of September 12, 1991, as further amended by that certain
Modification Agreement and Third Amendment to Loan Documents dated as of October
15, 1991, as further amended by that certain Fourth Amendment to Loan Documents
dated as of December 17, 1992, and as further amended by that Fifth Amendment to
Loan Documents (as defined herein).
Date of Disbursement shall mean the date of this Note.
--------------------
Deed of Trust shall mean that certain Deed of Trust and Security
-------------
Agreement dated as of June 13, 1991, by Maker, as Trustor, to Chicago Title
Company, as Trustee, for the benefit of Lender, recorded in June 18, 1991 as
Instrument No. 91-116714 in the Official Records of Contra Costa County,
California, as amended by that certain Modification Agreement and First
Amendment to Loan Documents dated as of August 15, 1991, as further amended by
that certain Modification Agreement and Second Amendment to Loan Documents dated
as of September 12, 1991, as further amended by that certain Modification
Agreement and Third Amendment to Loan Documents dated as of October 15, 1991, as
further amended by that certain Fourth Amendment to Loan Documents dated as of
December 17, 1992, and as further amended by the Fifth Amendment to Loan
Documents (as defined herein).
Fifth Amendment to Loan Documents shall mean that certain Fifth
---------------------------------
Amendment to Loan Documents of even date herewith by and between Maker and
Lender.
<PAGE>
Fiscal Year shall mean the calendar year. As used in this Note, a
-----------
Fiscal Year shall include any partial Fiscal Year at the beginning and end of
the term of this Note.
Ground Lease shall mean that certain Amended and Completely Restated
------------
Ground Lease effective as of June 18, 1991 by and between Maker, as ground
tenant, and Lender, as ground landlord.
Improvements shall mean the shopping center and any and all other
------------
improvements located on the Property.
Interest Rate shall mean eleven percent (11%) per annum compounded
-------------
monthly.
Leasehold Interest shall mean Maker's leasehold interest under the
------------------
Ground Lease.
Lender shall mean New England Life Pension Properties; A Real Estate
------
Limited Partnership, and New England Life Pension Properties II; A Real Estate
Limited Partnership, each a Massachusetts limited partnership, together with
their respective successors and assigns (collectively referred to herein as
"Lender").
Loan shall mean the loan in the amount of the Principal Sum made by
----
Lender to Maker pursuant to the Loan Agreement.
Loan Agreement shall mean that certain Construction Loan Agreement by
--------------
and between Maker and Lender of even date herewith.
Maker shall mean Willows Concord Venture, a California limited
-----
partnership, having an address at 18802 Bardeen Avenue, Irvine, California
92715.
Maturity Date shall mean December 31, 1997.
-------------
Net Operating Cash Flow shall have the meaning assigned to it in
-----------------------
Paragraph 3(a)(iii).
Operating Expenses shall have the meaning assigned to it in Paragraph
------------------
3(a)(iv).
Original Note shall mean that certain Amended and Restated Promissory
-------------
Note effective as of June 14, 1991 made by Maker in favor of Lender in the
principal amount of Fourteen
-2-
<PAGE>
Million Eight Hundred Sixty Three Thousand Two Hundred Six and 38/100 Dollars
($14,863,206.38), which Original Note replaced and superseded in its entirety
that certain Promissory Note dated June 14, 1991 made by Maker in favor of
Lender in the principal amount of Fourteen Million Eight Hundred Sixty Three
Thousand Two Hundred Six and 38/100 Dollars ($14,863,206.38).
Principal Sum shall mean $2,500,000.00.
-------------
Property shall mean the real property located in the County of Contra
--------
Costa, State of California and more particularly described in Exhibit A to the
---------
Deed of Trust.
Security Agreement shall mean that certain Security Agreement of even
------------------
date herewith executed by Maker in favor of Lender.
Any initially-capitalized terms used and not otherwise defined herein
shall have the meanings given to such terms in the Deed of Trust.
2. Debt. FOR VALUE RECEIVED, Maker promises to pay upon the Maturity
----
Date to the order of Lender the unpaid portion of the Principal Sum, together
with interest on the unpaid principal from the Date of Disbursement to the
Maturity Date at the Interest Rate, in accordance with the terms hereof.
Interest payable hereunder shall be calculated on the basis of a 365-day year.
3. Payments of Interest and Principal.
----------------------------------
(a) Time and Method of Payment.
--------------------------
(i) If the Disbursement Date does not occur on the first day of
a month, there shall be paid on the first day of the first month following
the Disbursement Date, for the period commencing on the Disbursement Date
and ending on and including the last day of the month in which the
Disbursement Date occurs, interest only on the portion of the Principal Sum
disbursed on the Disbursement Date at the Interest Rate. Thereafter,
subject to Paragraph 3(a)(ii) below, Maker shall pay the Principal Sum to
Lender, together with interest thereon calculated in arrears, in monthly
installments commencing on the first day of the second month following the
Disbursement Date and continuing on the first day of each month thereafter
until the Maturity Date. Each installment shall be in an amount sufficient
to amortize the Principal Sum in equal payments based upon a fifteen (15)
year
-3-
<PAGE>
amortization schedule at the Interest Rate, which schedule shall be deemed
to have commenced on the first day of the first month following the
Disbursement Date regardless of the date of any subsequent disbursement of
the Principal Sum by Lender under the Loan Agreement. Lender shall
recalculate the amount of such monthly installments after each disbursement
of the Principal Sum under the Loan Agreement.
(ii) Notwithstanding the provisions of Paragraph 3(a)(i) above,
until January 1, 1996 Maker shall be required to make monthly installments
of interest and principal due to Lender only from and to the extent of Net
Operating Cash Flow realized by Maker for any month ending prior to January
1, 1996. Each such monthly installment (or portion thereof) of interest and
principal which is not paid by Maker when due in accordance with the
foregoing sentence shall accrue interest at the Interest Rate from the date
the same was due. The total of all such unpaid monthly installments (or
portions thereof), together with all interest accruals thereon, shall be
referred to herein as the "Accrued Amount." The Accrued Amount, or any
portion thereof remaining unpaid at any time and from time to time during
the term of this Note (the "Accrual Balance") shall bear interest at the
Interest Rate until fully repaid by Maker to Lender. At any time and from
time to time up to the Maturity Date, Maker may pay the then outstanding
Accrual Balance to Lender, in whole or in part. Notwithstanding the
foregoing, Maker hereby agrees to apply all Net Operating Cash Flow
realized by Maker for any month during the term of this Note (in excess of
the amount required to be paid pursuant to the first sentence of this
Paragraph 3(a)(ii)) (A) to reduce the outstanding Accrual Balance until
paid in full, and (B) after the outstanding Accrual Balance has been paid
in full, to reduce the outstanding Principal Sum. In all events, the
Principal Sum, including any Accrual Balance, remaining unpaid on the
Maturity Date shall be paid to Lender in full on the Maturity Date.
(iii) Net Operating Cash Flow. For purposes of this Note, the
-----------------------
term "Net Operating Cash Flow" shall mean, as to any particular Fiscal Year
or portion thereof, the difference between (i) the aggregate of all fixed,
minimum and guaranteed rents, fees, overage rents, percentage or
participation rents and all rents and receipts from licenses and
concessions received from the Property, including all amounts received for
parking and all fees, income and revenue of a non-rental nature received by
Maker during such Fiscal
-4-
<PAGE>
Year, less (ii) Operating Expenses, capital expenditures and reserves
therefor (to the extent permitted by Lender under the Loan Agreement), cost
of tenant improvements, payments of principal, interest, loan fees or other
charges or amounts on the Original Note which are paid by Maker during such
Fiscal Year, all payments by Maker to Lender under the Ground Lease, and a
reasonable reserve as determined by Maker to cover such expenses in the
following Fiscal Year, all as determined on a cash accounting basis. Net
Operating Cash Flow shall be computed by Maker on a monthly basis.
(iv) Definition of Operating Expenses. "Operating Expenses"
--------------------------------
shall mean all reasonable and necessary charges and expenses actually
incurred by Maker for the maintenance, protection, management and operation
of the Property in the manner required by the Ground Lease and consistent
with the management and operation of like properties in the Greater San
Francisco area, and shall include, but not be limited to:
(A) normal, prevailing wages, salaries, and fringe benefits
and payroll taxes for on-site personnel engaged in the operation of
the Property (excluding home office personnel);
(B) a management fee not in excess of the "Maximum
Management Fee", if, in fact, such fee is incurred, plus the actual
cost of on-site management. The "Maximum Management Fee" shall be
three percent (3%) of gross collected revenue;
(C) payment of utilities, maintenance supplies, real estate
taxes, betterments and assessments (but not income taxes or interest
paid on taxes), cleaning, repairs, insurance, ordinary accounting,
auditing and legal fees, interest paid to others on funds held in
escrow, ordinary advertising;
(D) normal, prevailing brokerage commissions payable to
third parties; and
(E) expenses incurred for replacement of capital
improvements and reserves therefor (to the extent permitted by Lender
under the Loan Agreement).
"Operating Expenses" shall not include depreciation or any other non-
cash costs.
-5-
<PAGE>
(b) Maturity Date. On the Maturity Date, Maker shall pay to Lender
-------------
the entire then unpaid and outstanding Principal Sum, together with any accrued,
unpaid interest hereunder (including, without limitation any outstanding Accrual
Balance).
4. Books and Records, Reports and Audits. During the term of this Note,
-------------------------------------
Maker shall maintain books and records and cause reports and audits to be
prepared in accordance with the provisions of the Deed of Trust.
5. Additional Interest. All expenditures by Lender pursuant to this Note
-------------------
or the other Loan Documents which are not reimbursed by Maker immediately upon
demand, all amounts remaining due and unpaid after the Maturity Date and any
amounts due and unpaid after an Event of Default shall bear interest at the rate
of five percent (5%) per annum more than the Interest Rate, until such amounts
are paid to Lender.
6. Manner and Place of Payment. All payments hereunder shall be made in
---------------------------
lawful money of the United States of America, in immediately available funds, at
399 Boylston Street, Boston, Massachusetts 02116, c/o Copley Real Estate
Advisors, Inc., or at such other place as Lender may from time to time designate
in writing.
7. Application of Payments. Unless an Event of Default has occurred and
-----------------------
is continuing, all payments hereunder shall be applied first to costs of
collection or enforcement and other similar amounts due, if any, under this Note
and the other Loan Documents, then to any accrued, unpaid interest due under the
Note (including, without limitation, any outstanding interest included in the
Accrual Balance), and then to the outstanding Principal Sum (including any
portion of the Principal Sum included in the Accrual Balance). If an Event of
Default has occurred and is continuing, such payments may be applied to sums due
hereunder or under the Loan Documents in any order and combination that Lender
may, in its sole discretion, determine.
8. Waivers. Other than as expressly provided herein with respect to
-------
notice and cure rights, Maker waives presentment for payment, demand, notice of
nonpayment, notice of intention to accelerate the maturity of this Note,
diligence in collection, commencement of suit against any obligor, notice of
protest, and protest of this Note and all other notices in connection with the
delivery, acceptance, performance, default or enforcement of the payment of this
Note, before or after maturity of this Note, with or without notice to Maker,
and agrees that its liability shall
-6-
<PAGE>
not be in any manner affected by any indulgence, extension of time, renewal,
waiver or modification granted or consented to by Lender. Maker consents to any
and all extensions of time, renewals, waivers or modifications that may be
granted by Lender with respect to the payment or other provisions of this Note,
and to any substitution, exchange or release of the collateral for this Note, or
any part thereof, with or without substitution of said collateral.
9. No Usury. Lender and Maker intend to comply at all times with
--------
applicable usury laws. If at any time such laws would ever render usurious any
amounts called for under this Note or the other Loan Documents, then it is
Maker's and Lender's express intention that Maker shall not be required to pay
interest on this Note at a rate in excess of the maximum lawful rate, that the
provisions of this Paragraph shall control over all other provisions or this
Note and the Loan Documents which may be in apparent conflict hereunder, that
such excess amount shall be immediately credited on the principal balance of
this Note (or, if this Note has been fully paid, refunded by Lender to Maker),
and the provisions hereof shall be immediately reformed and the amounts
thereafter collectible under this Note reduced, without the necessity of the
execution of any further documents, so as to comply with applicable usury laws,
but so as to permit the recovery of the fullest amount otherwise called for
under this Note. Any such crediting or refund shall not cure or waive any
default by Maker under this Note or the other Loan Documents. If at any time
following any reduction in the interest rate payable by Maker there remains
unpaid any principal amount under this Note and the maximum interest rate not
prohibited by applicable law is increased or eliminated, then the interest rate
payable under this Note shall be readjusted, to the extent not prohibited by
applicable law, so that the total dollar amount of interest payable hereunder
shall be equal to the dollar amount of interest which would have been paid by
Maker without giving effect to the reduction in interest resulting from
compliance with applicable usury laws. Maker agrees that in determining whether
or not any interest payable under this Note or the other Loan Documents exceeds
the highest rate not prohibited by law, any non-principal payment (except
payments specifically stated in this Note or in the other Loan Documents to be
"interest"), shall, to the maximum extent not prohibited by law, be an expense,
fee, or premium rather than interest. The term "applicable law" as used in this
Note shall mean the laws of the State of California, or the laws of the United
States, whichever laws allow the greater rate of interest, as such laws now
exist or may be changed or amended or come into effect in the future.
-7-
<PAGE>
10. Remedies. The rights and remedies of Lender are set forth in the Loan
--------
Documents and include, without limitation, in case of an Event of Default, the
right to declare the outstanding Principal Sum and any accrued and unpaid
interest due under this Note (including, without limitation, any outstanding
Accrual Balance) immediately due and payable.
11. Amendments. This Note may not be changed or amended orally but only
----------
by an agreement in writing, signed by the party against whom enforcement is
sought.
12. Governing Law. This Note shall be governed and construed by the laws
-------------
of the State of California.
13. Permitted Prepayment. Maker may prepay the entire unpaid Principal
--------------------
Sum, with accrued and unpaid interest (including, without limitation, any
outstanding Accrual Balance), in whole or in part, at any time, without
prepayment penalty. Unless Lender otherwise agrees, the amount of the monthly
installments of principal and interest payable hereunder shall not be reduced in
the event of any partial prepayment.
14. Non-Recourse Debt.
-----------------
(a) Maker shall be liable upon the indebtedness evidenced by this
Note, for all sums to accrue or to become payable thereunder, and for
performance of any covenants contained in any of the Loan Documents to the
extent, but only the extent, of Lender's security for the same, including,
without limitation, all properties, rights, estates, and interests covered by
the Loan Agreement and the Loan Documents. No attachment, execution or other
writ of process shall be sought, issued or levied upon any assets, properties or
funds of Maker other than the properties, rights, estates and interest described
in Loan Agreement and the other Loan Documents. In the event of foreclosure of
such title, liens, mortgages or security interests, by private power of sale or
otherwise, no judgment for any deficiency upon such indebtedness, sums and
amounts shall be sought or obtained by Lender against Maker.
(b) Subject to the limitations set forth in Subparagraph (a) above,
nothing herein contained shall be construed to prevent Lender from exercising
and enforcing any other remedy allowed at law or in equity or by any statute or
by the terms of any of the Loan Documents.
-8-
<PAGE>
(c) Notwithstanding the foregoing provisions of Subparagraphs (a) and
(b) above, or of any provision of the Deed of Trust or any other Loan Document
to the contrary, no limitation of liability set forth herein, in the Deed of
Trust or in any other Loan Document shall be deemed to limit any right Lender
might otherwise have to obtain injunctive relief against Maker or any partner of
Maker related to the Leasehold Interest or the Improvements or any personal
property security or to take any action to preserve, enforce or foreclose the
liens, mortgages, assignments and security interests now or at any time
hereafter securing the payment and performance of all sums and obligations
hereunder or any of the Loan Documents, or to collect rents or to collect
amounts which may become owing or payable under or on account of insurance,
condemnation awards or damages for other public actions or surety bonds
maintained or provided by Maker.
(d) In addition to the foregoing provisions of this Paragraph 14,
neither the limitation of liability set forth herein, or in the Deed of Trust or
any other Loan Document:
(i) shall apply to any damages sustained by Lender by reason of:
(A) any misrepresentation by Maker or any partner of Maker
proving to have been an intentional or fraudulent misrepresentation
when made,
(B) waste or intentional damage to the Property or
Improvements thereon by Maker or any partner of Maker,
(C) any breach of Maker's obligations under Section 8.03 of
------------
the Loan Agreement,
(D) the failure of Maker or any partner of Maker to pay any
income or other taxes, assessments or charges attributable to the
Maker or such partner (as the case may be) which can create liens on
any portion of the Leasehold Interest or Improvements (to the full
extent of any such taxes, assessments or other charges) as to Maker or
the partner who fails to pay such taxes, assessments or charges, or
(E) the making of any payment or any distribution (cash,
profits, fees or otherwise) of any assets of Maker to any partner of
Maker or to any
-9-
<PAGE>
affiliate of a partner of Maker without the prior written consent of
Lender; and
(ii) shall apply should Maker, or any partner of Maker, claim or
contend at any time that the Deed of Trust securing the Loan is, for any
reason, invalid or unenforceable to an extent that would:
(A) preclude Lender from foreclosing the Deed of Trust or
causing a trustee's sale in connection with the Deed of Trust upon the
occurrence of a Default under the Loan Agreement, or
(B) preclude Lender from foreclosing or otherwise enforcing its
security interest in the personal property covered by the Deed of Trust or
the Security Agreement upon the occurrence of a Default under the Loan
Agreement.
(e) Nothing herein contained shall limit or be construed to limit the
personal liability and obligations of Maker in the event that and to the extent
that after a Default or an event or circumstance that with the passage of time,
the giving of notice, or both, could constitute a Default, Maker collects any
rents, issues or profits of the Leasehold Interest or the Improvements or
derived from the Leasehold Interest or the Improvements and does not apply the
same to the normal operating expenses of the Leasehold Interest or the
Improvements or any payments due under any of the Loan Documents, it being
intended hereby that Maker shall be personally liable and obligated hereunder to
the full extent of such rentals and other items so collected and not so applied,
and that Lender or other holder hereof or of this Note, the Original Note or any
of the Loan Documents shall not be limited in any way in enforcing such personal
liability and obligations of Maker.
15. Security. This Note is secured, in part, by the Deed of Trust, the
--------
Assignment of Leases, the Security Agreement and all amendments, modifications,
supplements, substitutions, additions, renewals, replacements and extensions
thereof.
16. Collection. Any check, draft, money order or other instrument given
----------
in payment of all or any portion hereof may be accepted by Lender and handled by
collection in the customary manner, but the same shall not constitute payment
hereunder or diminish any rights of Lender except to the extent that actual
-10-
<PAGE>
cash proceeds of such instrument are unconditionally received by Lender and
applied to this indebtedness in the manner elsewhere herein provided.
17. Attorneys' Fees. Upon any Event of Default, Maker shall pay all costs
---------------
of collection, including without limitation, reasonable attorneys' fees and
expenses, whether or not suit is filed hereon.
IN WITNESS WHEREOF, this Note has been executed and delivered of the 1st
day of January, 1995.
"Maker" WILLOWS CONCORD VENTURE, a
California limited partnership
By: /s/ John S. Hagestad
-----------------------------------
John S. Hagestad
Its: General Partner
By: /s/ Carl F. Willgeroth
-----------------------------------
Carl F. Willgeroth
Its: General Partner
By: /s/ William Thormahlen
-----------------------------------
William J. Thormahlen
Its: General Partner
-11-
<PAGE>
SECURITY AGREEMENT
------------------
THIS SECURITY AGREEMENT ("Agreement") is entered into as of January 1,
1995, by WILLOWS CONCORD VENTURE, a California limited partnership ("Borrower"),
whose principal place of business is located at 18802 Bardeen Avenue, Irvine,
California 92715, in favor of NEW ENGLAND LIFE PENSION PROPERTIES; A REAL ESTATE
LIMITED PARTNERSHIP, and NEW ENGLAND LIFE PENSION PROPERTIES II; A REAL ESTATE
LIMITED PARTNERSHIP, each a Massachusetts limited partnership (collectively
"Lender").
RECITALS
--------
A. Borrower proposes to borrow from Lender, pursuant to the terms of that
certain Construction Loan Agreement (the "Loan Agreement") between Borrower and
Lender, dated as of the date of this Agreement, the principal sum of TWO MILLION
FIVE HUNDRED THOUSAND and 00/100THS DOLLARS ($2,500,000.00) (the "Loan") for the
purposes specified in the Loan Agreement and relating to the real property and
improvements described in the Loan Agreement (which property and improvements
are collectively referred to herein as the "Subject Property"). The Loan is
evidenced by a Promissory Note (the "Note") of Borrower payable to Lender in the
principal amount of the Loan and is secured by the Deed of Trust (as defined on
the Loan Agreement) on the Subject Property, the security interests granted
under this Agreement and any other security instruments specified in the Loan
Agreement.
B. The Loan Documents (as defined and described in the Loan Agreement)
include this Agreement, the Loan Agreement, the Deed of Trust, the Note, and the
Lease Assignment (as defined in the Loan Agreement). Initially-capitalized terms
used and not otherwise defined herein shall have the meanings given to such
terms in the Loan Agreement.
NOW, THEREFORE, in consideration of Lender's agreement to make the Loan,
Borrower agrees as follows:
1. Security interest. Borrower grants and assigns to Lender as of the
-----------------
Effective Date (as defined in the Loan Agreement) a security interest in all of
the following described personal property in which Borrower now or at any time
hereafter has any interest (collectively, the "Collateral"):
All goods, building and other materials, supplies, work in progress,
equipment, machinery, fixtures, furniture, furnishings, signs and other
personal property, wherever
<PAGE>
situated, which are or are to be incorporated into, used in connection
with, or appropriated for use on (i) the real property described on Exhibit
A to the Deed of Trust or (ii) the improvements described in the Loan
Agreement (which real property and improvements are collectively referred
to herein as the Subject Property); together with all rents, issues,
deposits and profits of the Subject Property; all inventory, accounts, cash
receipts, deposit accounts (including, without limitation, demand deposit
account no. 180206050 in the name of Willows Concord General Checking of
the First Interstate Bank, 1018 North Main Street, Santa Ana, California
982701 established pursuant to the Loan Agreement and demand deposit
account no. 9364452404 of Fleet Bank, Boston, Massachusetts; accounts
receivable, contract rights, general intangibles, chattel paper,
instruments, documents, notes, drafts, letters of credit, insurance
policies, insurance and condemnation awards and proceeds, any other rights
to the payment of money, trade names, trademarks and service marks arising
from or related to the Subject Property or any business now or hereafter
conducted thereon by Borrower; all permits, consents, approvals, licenses,
authorizations and other rights granted by, given by or obtained from, any
governmental entity with respect to the Subject Property; all deposits or
other security now or hereafter made with or given to utility companies by
Borrower with respect to the Subject Property; all advance payments of
insurance premiums made by Borrower with respect to the Subject Property;
all plans, drawings and specifications relating to the Subject Property;
all loan funds held by Lender, whether or not disbursed; all funds
deposited with Lender pursuant to any loan agreement; all reserves,
deferred payments, deposits, accounts, refunds, cost savings and payments
of any kind related to the Subject Property or any portion thereof;
together with all replacements and proceeds of, and additions and
accessions to, any of the foregoing; together with all books, records and
files relating to any of the foregoing.
2. Obligations Secured. This Agreement secures the payment and
-------------------
performance of all present and future obligations of Borrower to Lender under
the Loan, that certain Amended and Restated Promissory Note dated effective as
of June 14, 1991 made by Borrower in favor of Lender in the principal amount of
$14,863,206.38, the other Loan Documents and under any other agreement which
recites that it is secured hereby.
3. Representations and Warranties. Borrower represents and warrants
------------------------------
that: (a) Borrower has, or will have, good title to the Collateral; (b)
Borrower has not previously assigned or encumbered
-2-
<PAGE>
the Collateral to any person or entity other than Lender, and no financing
statement covering any of the Collateral has been delivered to any other person
or entity other than Lender; and (c) Borrower's principal place of business is
located at the address specified above.
4. Rights of Lender. In addition to Lender's rights as a "Secured
----------------
Party" under the California Uniform Commercial Code, as amended or recodified
from time to time ("UCC"), Lender may, but shall not be obligated to, at any
time without notice and at the expense of Borrower: (a) give notice to any
person of Lender's rights hereunder and, upon the occurrence of a Default,
enforce such rights; (b) insure, protect, defend and preserve the Collateral or
any rights or interests of Lender therein; (c) inspect the Collateral; and (c)
endorse, collect and receive any right to payment of money owing to Borrower
under or from the Collateral. Lender shall have no duty or obligation to make or
give any presentments, demands for performance, notice of nonperformance, notice
of protest or notices of dishonor in connection with any of the Collateral.
5. Collateral Designation Statement. Borrower shall, from time to time
--------------------------------
within ten (10) days of Lender's request, deliver to Lender a written statement
showing the description and location of all Collateral then subject to this
Agreement.
6. Miscellaneous Undertakings. In addition to Borrower's undertakings
--------------------------
under the other Loan Documents, Borrower, at its sole cost and expense, agrees
to pay within fifteen (15) days of Lender's demand, all expenses, including
without limitation, reasonable attorneys' fees and court costs, incurred by
Lender in connection with the creation, perfection, preservation or enforcement
of any of the security interests granted under this Agreement.
7. Default. "Default" shall mean (i) the failure to perform any
-------
obligation hereunder or the failure to be true of any representation or warranty
of Borrower herein, and the continuance of such failure for fifteen (15) days
after notice or within any longer grace period, if any, allowed in the Loan
Agreement for such failure, or (ii) the existence of any Default as defined in
the Loan Agreement.
8. Lender's Rights on Default. Upon the occurrence of a Default under
--------------------------
this Agreement, then in addition to all of Lender's rights as a "Secured Party"
under the UCC or otherwise by law:
8.1. Lender may (i) upon written notice, require Borrower to assemble
any or all of the Collateral and make it
-3-
<PAGE>
available to Lender at a place designated by Lender; (ii) without prior notice,
enter upon the Subject Property or other place where any of the Collateral may
be located and take possession of, collect, sell, and dispose of any or all of
the Collateral, and store the same at locations acceptable to Lender at
Borrower's expense; (iii) sell, assign and deliver at any place or in any lawful
manner all or any part of the Collateral and bid and become purchaser at any
such sale; and
8.2. Lender may, for the account of Borrower and at Borrower's
expense: (i) operate, use, consume, sell or dispose of the Collateral as Lender
deems appropriate for the purpose of performing any or all of the obligations
secured by this Agreement; (ii) enter into any agreement, compromise, or
settlement, including insurance claims, which Lender may deem desirable or
proper with respect to any of the Collateral; (iii) endorse and deliver
evidences of title for, and receive, enforce and collect by legal action or
otherwise, all indebtedness and obligations now or hereafter owing to Borrower
in connection with or on account of any or all of the Collateral; and (iv)
perform any of the obligations secured by this Agreement.
Notwithstanding any other provisions of this Agreement, Lender shall
not be deemed to have accepted any property other than cash in satisfaction of
any obligation of Borrower to Lender unless Lender shall make an express written
election of said remedy under UCC Section 9505, or other applicable law.
9. Power of Attorney. Borrower hereby irrevocably appoints Lender
-----------------
as Borrower's attorney-in-fact (such agency being coupled with an interest), and
as such attorney-in-fact lender may, without the obligation to do so, in
Lender's name or in the name of Borrower, prepare, execute and file or record
financing statements, continuation statements, applications for registration and
like papers necessary to create, perfect or preserve any of Lender's security
interests and rights in or to any of the Collateral, and, upon a Default
hereunder take any other action specified in Section 8 hereof; provided that
Lender as such attorney-in-fact shall be accountable only for such funds as are
actually received by Lender.
10. Possession and Use of Collateral. Except as otherwise provided
--------------------------------
in this Agreement or the other Loan Documents, so long as no Default exists
under this Agreement or any of the Loan Documents, Borrower may possess, use,
move, transfer or dispose of any of the Collateral in the ordinary course of
Borrower's business and in accordance with the Loan Agreement.
-4-
<PAGE>
11. Integration. This Agreement and the other Loan documents contain
-----------
the entire agreement of the parties and supersede any and all prior
negotiations. This Agreement is supplemented by those provisions of the Loan
Agreement which apply to the Loan Documents and said provisions are incorporated
herein by this reference.
IN WITNESS WHEREOF, Borrower has executed this Security Agreement as
of the date appearing on the first page of this Agreement.
"Borrower"
WILLOWS CONCORD VENTURE
a California limited partnership
By: /s/ William J. Thormahlen
-----------------------------------
Name: WILLIAM J. THORMAHLEN
------------------------------
Title: GENERAL PARTNER
------------------------------
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<PAGE>
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP
NEW ENGLAND LIFE PENSION PROPERTIES II;
A REAL ESTATE LIMITED PARTNERSHIP
c/o Hale and Dorr
60 State Street
Boston, Massachusetts 02109
Attention: Kenneth A. Hoxsie, Esq.
_______________________________________________________________________________
(Space Above For Recorder's Use)
FIFTH AMENDMENT TO LOAN DOCUMENTS
---------------------------------
THIS FIFTH AMENDMENT TO LOAN DOCUMENTS (this "Amendment") is entered into
as of the 1st day of January, 1995, by and between WILLOWS CONCORD VENTURE, a
California limited partnership ("Trustor"), and NEW ENGLAND LIFE PENSION
PROPERTIES; A REAL ESTATE LIMITED PARTNERSHIP, a Massachusetts limited
partnership, and NEW ENGLAND LIFE PENSION PROPERTIES II; A REAL ESTATE LIMITED
PARTNERSHIP, a Massachusetts limited partnership (collectively, "Beneficiary").
R E C I T A L S:
- - - - - - - -
A. Beneficiary has made a loan to Trustor in the principal amount of
Fourteen Million Eight Hundred Sixty-Three Thousand Two Hundred Six and 38/100
Dollars ($14,863,206.38) (the "Original Loan"). The Original Loan is evidenced
by that certain Amended and Restated Secured Promissory Note ("Original Note")
dated effective as of June 14, 1991 in the original principal amount of Fourteen
Million Eight Hundred Sixty-Three Thousand Two Hundred Six and 38/100 Dollars
($14,863,206.38). The Original Note is secured by (i) that certain Deed of Trust
and Security Agreement dated as of June 13, 1991 by and among Trustor, as
trustor, Chicago Title Company, as trustee, and Beneficiary, as beneficiary, and
recorded on June 18, 1991 as Instrument No. 91-116714 in the Official Records of
Contra Costa County, California (the "Registry"), as amended by that certain
Modification Agreement and First Amendment to Loan Documents dated as of August
13, 1991 (the "First Amendment"), as further amended by that certain
Modification Agreement and Second Amendment to Loan Documents dated as of
September 12, 1991 (the "Second Amendment"), as further amended by that certain
Modification and Third
<PAGE>
Amendment to Loan Documents dated as of October 15, 1991 (the "Third
Amendment"), and as further amended that certain Fourth Amendment to Loan
Documents (the "Fourth Amendment") dated as of December 17, 1992 recorded in the
Official Records of Contra Costa County, California as Instrument Nos. 93-
121110, 93-121111, 93-121112, 93-121113, respectively (as so amended, the
"Indenture") and (ii) that certain Assignment of Leases and Rents dated as of
June 13, 1991 executed by Trustor in favor of Beneficiary and recorded on June
18, 1991 as Instrument No. 91-116715 in the Official Records of Contra Costa
County, California, as amended by the First Amendment, the Second Amendment, the
Third Amendment and the Fourth Amendment (as so amended, the "Lease
Assignment"). The Indenture and the Lease Assignment encumber, among other
things, Trustor's leasehold interest under that certain Amended and Completely
Restated Ground Lease dated effective as of June 18, 1991 ("Ground Lease")
pursuant to which Beneficiary has leased to Trustor certain real property in
Contra Costa County, California, more particularly described on Exhibit "A"
-----------
attached to the Indenture (the "Property"). Except as otherwise provided in this
Amendment, all capitalized terms used herein without definition shall have
meanings given in the Indenture.
B. Beneficiary has made an additional loan to Trustor in the principal
amount of Two Million Five Hundred Thousand and 00/100 Dollars ($2,500,000.00)
(the "Construction Loan") pursuant to that certain Construction Loan Agreement
by and between Trustor and Beneficiary of even date herewith (the "Construction
Loan Agreement"). The Construction Loan is evidenced by a Promissory Note of
even date herewith in the principal amount of Two Million Five Hundred Thousand
and 00/100 Dollars ($2,500,000.00) (the "Construction Note").
C. Trustor and Beneficiary desire to amend the Indenture and the Lease
Assignment to, among other things, secure all of Trustor's obligations under the
Construction Note and the Construction Loan Agreement.
NOW, THEREFORE, in consideration of the foregoing Recitals (which are
incorporated herein by this reference) and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Trustor and Beneficiary hereby agree as follows:
A G R E E M E N T:
-----------------
1. Amendments to Indenture. The Indenture is hereby amended as follows:
-----------------------
-2-
<PAGE>
(a) Cover Sheet.
-----------
(i) The definition of the term "Trustor's Notice Address" is
deleted in its entirety from the Cover Sheet to the
Indenture and the following definition is hereby inserted in
place thereof:
"c/o Mr. William J. Thormahlen
Sares-Regis Group
18802 Bardeen Avenue
Irvine, California 92715-1521"
(ii) The definition of the term "Note Amount" is deleted in its
entirety from the Cover Sheet to the Indenture and the
following definitions are hereby inserted in place thereof:
"Original Note Amount: $14,863,206.38
"Construction Note Amount: $2,500,000.00"
Any and all references in the Indenture to the term "Note
Amount" shall mean and refer jointly to the Original Note
Amount and the Construction Note Amount.
(iii) The definition of the term "Maturity Date" is hereby deleted
in its entirety from the Cover Sheet to the Indenture and
the following definitions are hereby inserted in place
thereof:
"Maturity Date of Original Note: June 18, 2001"
"Maturity Date of Construction Note:
December 31, 1997."
Any and all references in the Indenture to the "Maturity
Date" shall mean and refer jointly to the Maturity Date of
the Original Note and the Maturity Date of the Construction
Note.
(b) Section 1.15 of the Indenture is hereby amended by deleting the
definition of the term "Loan Documents" in its entirety and inserting
the following definition in place thereof:
-3-
<PAGE>
"Loan Documents: this Indenture, the Original Note, the
Construction Note, the Lease Assignment, the Construction
Loan Agreement, the Security Agreement and any and all other
documents or instruments related thereto or to the Secured
Debt now or hereafter given by or on behalf of Trustor to
Beneficiary."
(c) Section 1.16 of the Indenture is hereby amended by deleting the
definition of the term "Note" in its entirety and inserting the
following definitions in place thereof:
"Original Note: that certain Amended and Restated
-------------
Promissory Note dated effected as of June 14, 1991 made by
Trustor in favor of Beneficiary in the Original Note Amount
and all replacements, substitutions, modifications, renewals
and extensions thereof, which Original Note is payable on
the Maturity Date of the Original Note. The Original Note
replaces and supersedes in its entirety that certain
Promissory Note dated June 14, 1991 made by Trustor in favor
of Beneficiary in the principal amount of $14,863,206.83."
"Construction Note: that certain Promissory Note dated as
-----------------
of January 1, 1995 made by Trustor in favor of Beneficiary
in the Construction Note Amount, and all replacements,
substitutions, modifications, renewals and extensions
thereof, which Construction Note is payable on the Maturity
Date of the Construction Note."
"Notes: the Original Note and the Construction Note."
-----
Any and all references in the Indenture to the term "Note"
shall mean and refer jointly to the Notes.
(d) The following definition is hereby added as Section 1.32 of the
Indenture:
"Loan Agreement: that certain Construction Loan Agreement
--------------
by and between Trustor and Beneficiary dated as of January
1, 1995."
-4-
<PAGE>
(e) The following definition is hereby added as Section 1.33 of the
Indenture:
"Security Agreement: that certain Security Agreement by and
------------------
between Trustor and Beneficiary dated as of January 1,
1995."
(f) Section 4.5(b) of the Indenture is hereby amended by inserting the
following at the end thereof:
"Notwithstanding the foregoing, Beneficiary shall not
unreasonably withhold or delay its consent to any (i)
distribution to any general or limited partner of Trustor of
its respective interest therein or (ii) assignment or
transfer by any general or limited partner of Trustor of its
respective interest so distributed to any person or entity
controlling, controlled by, or under common control with
such general or limited partner (each an "Affiliate"),
provided that (A) such distribution, assignment or transfer
is made for the purpose of accomplishing a tax free exchange
under Section 1031 of the Internal Reveue Code of 1986, as
amended, and (B) any and all such Affiliates agree to assume
all of the liabilities and obligations of Trustor and such
general or limited partner to Beneficiary pursuant to a
written instrument satisfactory to Beneficiary."
(g) Section 4.16 of the Indenture is hereby deleted in its entirety.
(h) Section 8.2 of the Indenture is hereby amended by deleting the
grammatical paragraph next following subparagraph (l) in its
entirety and inserting the following in place thereof:
"Any sums advanced by Beneficiary under this Paragraph 8.2
shall bear interest at the higher of the interest rates
specified in the Notes plus 2% per annum, shall be payable
by Trustor on demand, and together with such interest, shall
constitute part of the Secured Debt."
-5-
<PAGE>
(i) Section 10.13 of the Indenture is hereby deleted in its entirety and
the following new Section 10.13 is hereby inserted in place thereof:
"Non-Recourse Debt.
-----------------
(a) Trustor shall be liable upon the indebtedness
evidenced by the Notes, for all sums to accrue or to become
payable thereunder, and for performance of any covenants
contained in any of the Loan Documents to the extent, but
only the extent, of Beneficiary's security for the same,
including, without limitation, all properties, rights,
estates, and interests covered by the this Indenture and the
Loan Documents. No attachment, execution or other writ of
process shall be sought, issued or levied upon any assets,
properties or funds of Trustor other than the properties,
rights, estates and interest described in this Indenture and
the other Loan Documents. In the event of foreclosure of
such title, liens, mortgages or security interests, by
private power of sale or otherwise, no judgment for any
deficiency upon such indebtedness, sums and amounts shall be
sought or obtained by Beneficiary or Trustee against
Trustor.
(b) Subject to the limitations set forth in
Subparagraph (a) above, nothing herein contained shall be
construed to prevent Beneficiary from exercising and
enforcing any other remedy allowed at law or in equity or by
any statute or by the terms of any of the Loan Documents.
(c) Notwithstanding the foregoing provisions of
Subparagraphs (a) and (b) above, or of any provision of any
other Loan Document to the contrary, no limitation of
liability set forth herein or in any other Loan Document
shall be deemed to limit any right Beneficiary might
otherwise have to obtain injunctive relief against Trustor
or any partner of Trustor related to the Leasehold Interest
or the Improvements or any personal property security or to
take any action to preserve, enforce or foreclose the liens,
mortgages, assignments and security interests now or at
-6-
<PAGE>
any time hereafter securing the payment and performance of
all sums and obligations hereunder or any of the Loan
Documents, or to collect rents or to collect amounts which
may become owing or payable under or on account of
insurance, condemnation awards or damages for other public
actions or surety bonds maintained or provided by Trustor.
(d) In addition to the foregoing provisions of this
Section 10.13, neither the limitation of liability set forth
herein or any other Loan Document:
(i) shall apply to any damages sustained by
Beneficiary by reason of:
(A) any misrepresentation by Trustor or any
partner of Trustor proving to have been an intentional or
fraudulent misrepresentation when made,
(B) waste or intentional damage to the Property
or Improvements thereon by Trustor or any partner of
Trustor,
(C) any breach of Trustor's obligations under
Section 8.03 of the Loan Agreement,
------------
(D) the failure of Trustor or any partner of
Trustor to pay any income or other taxes, assessments or
charges attributable to the Trustor or such partner (as the
case may be) which can create liens on any portion of the
Leasehold Interest or Improvements (to the full extent of
any such taxes, assessments or other charges) as to Trustor
or the partner who fails to pay such taxes, assessments or
charges, or
(E) the making of any payment or any distribution
(cash, profits, fees or otherwise) of any assets of Trustor
to any partner of Trustor or to any affiliate of a partner
of Trustor without the prior written consent of Beneficiary;
and
-7-
<PAGE>
(ii) shall apply should Trustor, or any partner of
Trustor, claim or contend at any time that this Indenture
is, for any reason, invalid or unenforceable to an extent
that would:
(A) preclude Beneficiary from foreclosing this
Indenture causing a trustee's sale in connection with this
Indenture upon the occurrence of an Event of Default, or
(B) preclude Beneficiary from foreclosing or
otherwise enforcing its security interest in the personal
property covered by this Indenture or the Security Agreement
upon the occurrence of an Event of Default.
(e) Nothing herein contained shall limit or be
construed to limit the personal liability and obligations of
Trustor in the event that and to the extent that after an
Event of Default or an event or circumstance that with the
passage of time, the giving of notice, or both, could
constitute an Event of Default, Trustor collects any rents,
issues or profits of the Leasehold Interest or the
Improvements or derived from the Leasehold Interest or the
Improvements and does not apply the same to the normal
operating expenses of the Leasehold Interest or the
Improvements or any payments due under any of the Loan
Documents, it being intended hereby that Trustor shall be
personally liable and obligated hereunder to the full extent
of such rentals and other items so collected and not so
applied, and that Beneficiary or other holder hereof or of
either of the Notes or any of the Loan Documents shall not
be limited in any way in enforcing such personal liability
and obligations of Trustor."
2. Amendments to Lease Assignment. The Lease Assignment is hereby
------------------------------
amended as follows:
(a) Cover Sheet.
-----------
(i) The definition of the term "Assignor's Notice of Address"
is deleted in its entirety from the Cover Sheet to the
Lease Assignment and the following definition is hereby
inserted in place thereof:
-8-
<PAGE>
"c/o Mr. William J. Thormahlen
Sares-Regis Group
18802 Bardeen Avenue
Irvine, California 92715-1521"
(ii) The definition of the term "Note Amount" is hereby deleted
in its entirety from the Cover Sheet to the Lease
Assignment and the following definitions are hereby
inserted in place thereof:
"Original Note Amount: $14,863,206.38"
"Construction Note Amount: $2,500,000.00"
Any and all references in the Lease Assignment to the term
"Note Amount" shall mean and refer jointly to the Original
Note Amount and the Construction Note Amount.
(iii) The definition of the term "Maturity Date" is hereby
deleted in its entirety from the Cover Sheet to the Lease
Assignment and the following definitions are hereby
inserted in place thereof:
"Maturity Date of Original Note: June 18, 2001"
"Maturity Date of Construction Note: December 31,
1997."
Any and all references in the Lease Assignment to the term
"Maturity Date" shall mean and refer jointly to the
Maturity Date of Original Note and the Maturity Date of
Construction Note.
(iii) The definition of the term "Note" is hereby deleted in its
entirety from the Cover Sheet to the Lease Assignment and
the following definitions are hereby inserted in place
thereof:
"Original Note: that certain Amendment and Restated
Promissory Note dated effective as of June 14, 1991
made by Assignor in favor of Assignee in the Original
Note Amount and all
-9-
<PAGE>
replacements, substitutions, modifications, renewals
and extensions thereof, which Original Note is payable
on the Maturity Date of the Original Note. The Original
Note replaces and supersedes in its entirety that
certain Promissory Note dated June 14, 1991 made by
Assignor in favor of Assignee in the principal amount
of $14,863,206.83."
"Construction Note: that certain Promissory Note dated
as of January 1, 1995 made by Assignor in favor of
Assignee in the Construction Note Amount and all
replacements, substitutions, modifications, renewals
and extensions thereof, which Construction Note is
payable on the Maturity Date of the Construction Note."
"Notes: the Original Note and the Construction Note."
Any and all references in the Lease Assignment to the
term "Note" shall mean and refer jointly to Notes."
(b) Paragraph 1.10 of the Lease Assignment is hereby amended by
deleting the definition of the term "Loan Documents" in its
entirety and inserting the following definition in place thereof:
"Loan Documents: the Indenture, the Original Note, the
--------------
Construction Note, this Lease Assignment, the Construction
Loan Agreement, the Security Agreement and any and all other
documents or instruments related thereto or to the Secured
Debt now or hereafter given by or on behalf of Assignor to
Assignee."
(c) The following definition is hereby added as Paragraph 1.17 of the
Lease Assignment:
"Loan Agreement: that certain Construction Loan Agreement
--------------
by and between Assignor and Assignee dated as of January 1,
1995."
(d) The following definition is hereby added as Paragraph 1.18 of the
Lease Assignment:
-10-
<PAGE>
"Security Agreement: that certain Security Agreement by and
------------------
between Assignor and Assignee dated as of January 1, 1995."
(e) Paragraph 6.2 of the Lease Assignment is hereby amended by
deleting the last grammatical paragraph thereof in its entirety
and inserting the following in place thereof:
"Any sums advanced by Assignee under this Paragraph 6.2
shall bear interest at the higher of the interest rates
specified in the Notes plus 2% per annum, shall be payable
by Assignor on demand, and shall constitute a part of the
Secured Debt."
(f) Paragraph 7.14 of the Lease Agreement is hereby deleted in its
entirety and the following new Paragraph 7.14 is hereby inserted
in place thereof:
"Non-Recourse Debt.
-----------------
(a) Assignor shall be liable upon the indebtedness
evidenced by the Notes, for all sums to accrue or to become
payable thereunder, and for performance of any covenants
contained in any of the Loan Documents to the extent, but
only the extent, of Assignee's security for the same,
including, without limitation, all properties, rights,
estates, and interests covered by this Lease Assignment and
the Loan Documents. No attachment, execution or other writ
of process shall be sought, issued or levied upon any
assets, properties or funds of other than the properties,
rights, estates and interest described in this Lease
Assignment and the other Loan Documents. In the event of
foreclosure of such title, liens, mortgages or security
interests, by private power of sale or otherwise, no
judgment for any deficiency upon such indebtedness, sums and
amounts shall be sought or obtained by Assignee against
Assignor.
(b) Subject to the limitations set forth in
Subparagraph (a) above, nothing herein contained shall be
construed to prevent Assignee from exercising and enforcing
any other remedy allowed at law or in equity or by
-11-
<PAGE>
any statute or by the terms of any of the Loan Documents.
(c) Notwithstanding the foregoing provisions of
Subparagraphs (a) and (b) above, or of any provision of this
Lease Assignment or any other Loan Document to the contrary,
no limitation of liability set forth herein, in the
Indenture or in any other Loan Document shall be deemed to
limit any right Assignee might otherwise have to obtain
injunctive relief against Assignor or any partner of
Assignor related to the Leasehold Interest or the
Improvements or any personal property security or to take
any action to preserve, enforce or foreclose the liens,
mortgages, assignments and security interests now or at any
time hereafter securing the payment and performance of all
sums and obligations hereunder or any of the Loan Documents,
or to collect rents or to collect amounts which may become
owing or payable under or on account of insurance,
condemnation awards or damages for other public actions or
surety bonds maintained or provided by Assignor.
(d) In addition to the foregoing provisions of this
Section 7.14, neither the limitation of liability set forth
herein, or in the Indenture or any other Loan Document:
(i) shall apply to any damages sustained by Assignee
by reason of:
(A) any misrepresentation by Assignor or any
partner of Assignor proving to have been an intentional or
fraudulent misrepresentation when made,
(B) waste or intentional damage to the Property
or Improvements thereon by Assignor or any partner of
Assignor,
(C) any breach of Assignor's obligations under
Section 8.03 of the Loan Agreement,
------------
(D) the failure of Assignor or any partner of
Assignor to pay any income or other taxes, assessments or
charges attributable to
-12-
<PAGE>
the Assignor or such partner (as the case may be) which can
create liens on any portion of the Leasehold Interest or
Improvements (to the full extent of any such taxes,
assessments or other charges) as to Assignor or the partner
who fails to pay such taxes, assessments or charges, or
(E) the making of any payment or any distribution
(cash, profits, fees or otherwise) of any assets of Assignor
to any partner of Assignor or to any affiliate of a partner
of Assignor without the prior written consent of Assignee;
and
(ii) shall apply should Assignor, or any partner of
Assignor, claim or contend at any time that the Indenture
securing the Loan is, for any reason, invalid or
unenforceable to an extent that would:
(A) preclude Assignee from foreclosing the
Indenture or causing a trustee's sale in connection with the
Indenture upon the occurrence of an Event of Default under
the Indenture, or
(B) preclude Assignee from foreclosing or
otherwise enforcing its security interest in the personal
property covered by the Indenture or the Security Agreement
upon the occurrence of an Event of Default under the
Indenture.
(e) Nothing herein contained shall limit or be
construed to limit the personal liability and obligations of
Assignor in the event that and to the extent that after an
Event of Default or an event or circumstance that with the
passage of time, the giving of notice, or both, could
constitute an Event of Default, Assignor collects any rents,
issues or profits of the Leasehold Interest or the
Improvements or derived from the Leasehold Interest or the
Improvements and does not apply the same to the normal
operating expenses of the Leasehold Interest or the
Improvements or any payments due under any of the Loan
Documents, it being intended hereby that Assignor shall be
personally liable and
-13-
<PAGE>
obligated hereunder to the full extent of such rentals and
other items so collected and not so applied, and that
Assignee or other holder hereof or of either of the Notes or
any of the Loan Documents shall not be limited in any way in
enforcing such personal liability and obligations of
Assignor."
3. Affirmation of Lien; Full Force and Effect. Except as amended by this
------------------------------------------
Amendment, the Indenture and the Lease Assignment shall remain unmodified and in
full force and effect. The parties hereto hereby ratify and confirm the
Indenture and the Lease Assignment, as amended herein. Without limitation of
the foregoing, Trustor hereby certifies that (i) the representations and
warranties of Trustor set forth in Section 3 of the Indenture and Paragraph 3 of
--------- -----------
the Lease Assignment are true, correct and complete in all material respects on
and as of the date hereof as though made on and as of the date hereof; and (ii)
Trustor has performed and complied with, in all material respects, all
agreements, covenants and obligations required to be performed by Trustor under
the Indenture and the Lease Assignment prior to the date hereof.
4. References to Indenture and Lease Assignment. All references to the
--------------------------------------------
Indenture and the Lease Assignment in the Loan Documents shall be deemed to
refer to the Indenture and the Lease Assignment, respectively, as amended by
this Amendment.
5. Counterparts. This Amendment may be executed in any number of
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
6. Governing Law. This Amendment shall be governed by and construed in
-------------
accordance with the laws of the State of California.
7. Conflict. In the event of any inconsistencies between the provisions
--------
of this Amendment and the provisions of the Indenture and/or the Lease
Assignment, as applicable, the provisions of this Amendment shall govern and
prevail.
-14-
<PAGE>
IN WITNESS WHEREOF, Trustor and Beneficiary have executed this Amendment as
of the date first above written.
"Trustor" WILLOWS CONCORD VENTURE, a
California limited partnership
By:/s/ John S. Hagestad
---------------------------------
John S. Hagestad
Its: General Partner
By:/s/ Carl F. Willgeroth
---------------------------------
Carl F. Willgeroth
Its: General Partner
By:/s/ William J. Thormahlen
---------------------------------
William J. Thormahlen
Its: General Partner
-15-
<PAGE>
"Beneficiary" NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP, a
Massachusetts limited partnership
By: Copley Properties Company,
Inc., a Massachusetts
corporation, General Partner
By: /s/ Wesley M. Gardiner
-------------------------------------
Name: Wesley M. Gardiner
-----------------------------------
Title: Vice President
----------------------------------
By: /s/ Marie Welch Stewart
-------------------------------------
Name: Marie Welch Stewart
-----------------------------------
Title: Investment Officer
----------------------------------
NEW ENGLAND LIFE PENSION PROPERTIES
II; A REAL ESTATE LIMITED
PARTNERSHIP, a Massachusetts limited
partnership
By: Copley Properties Company II,
Inc., a Massachusetts
corporation, General Partner
By: /s/ Wesley M. Gardiner
-------------------------------------
Name: Wesley M. Gardiner
-----------------------------------
Title: Vice President
----------------------------------
By: /s/ Marie Welch Stewart
-------------------------------------
Name: Marie Welch Stewart
-----------------------------------
Title: Investment Officer
----------------------------------
-16-
<PAGE>
ACKNOWLEDGMENT FOR WILLOWS CONCORD VENTURE
- ------------------------------------------
STATE OF CALIFORNIA )
) ss.
COUNTY OF Orange )
------
On 10-18-95, before me, Cheryl A. Hyatt, a Notary Public in and for
-------- ---------------
said state, personally appeared John S. Hagestad, personally known to me (or
proved to me on the basis of satisfactory evidence) to be the person whose name
is subscribed to the within instrument and acknowledged to me that he executed
the same in his authorized capacity, and that by his signature on the instrument
the person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
[SEAL APPEARS HERE] Cheryl A. Hyatt
-----------------------------------
Notary Public in and for said State
ACKNOWLEDGMENT FOR WILLOWS CONCORD VENTURE
- ------------------------------------------
STATE OF CALIFORNIA )
) ss.
COUNTY OF Orange )
------
On 10-18-95, before me, Cheryl A. Hyatt, a Notary Public in and for
-------- ---------------
said state, personally appeared Carl F. Willgeroth, personally known to me (or
proved to me on the basis of satisfactory evidence) to be the person whose name
is subscribed to the within instrument and acknowledged to me that he executed
the same in his authorized capacity, and that by his signature on the instrument
the person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
[SEAL APPEARS HERE] Cheryl A. Hyatt
-----------------------------------
Notary Public in and for said State
-17-
<PAGE>
ACKNOWLEDGMENT FOR WILLOWS CONCORD VENTURE
- ------------------------------------------
STATE OF CALIFORNIA )
) ss.
COUNTY OF Orange )
------
On 10-18-95, before me, Cheryl A. Hyatt, a Notary Public in and for
-------- ---------------
said state, personally appeared William J. Thormahlen, personally known to me
(or proved to me on the basis of satisfactory evidence) to be the person whose
name is subscribed to the within instrument and acknowledged to me that he
executed the same in his authorized capacity, and that by his signature on the
instrument the person, or the entity upon behalf of which the person acted,
executed the instrument.
WITNESS my hand and official seal.
[SEAL APPEARS HERE] Cheryl A. Hyatt
-----------------------------------
Notary Public in and for said State
-18-
<PAGE>
COMMONWEALTH OF MASSACHUSETTS )
) ss.
COUNTY OF SUFFOLK )
On this 1 day of November, 1995, before me, the undersigned, a Notary
- --------
Public in and for said State, personally appeared Wes Gardiner and
------------
Marie Stewart, personally known to me (or proved to me on the basis of
- -------------
satisfactory evidence) to be the Vice President AND Inv. Officer OF COPLEY
-------------- ------------
PROPERTIES COMPANY, INC., a Massachusetts corporation, the corporation that
executed the within instrument on behalf of NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP, a Massachusetts limited partnership, the
partnership therein named, pursuant to its bylaws or resolution of its board of
directors, and acknowledged to me that Copley Properties Company, Inc., executed
the within instrument on behalf of New England Life Pension Properties; A Real
Estate Limited Partnership as its free act and deed.
[SEAL APPEARS HERE] /s/ KARYN E. BATES
---------------------------------
Notary Public in and for
the Commonwealth of Massachusetts
COMMONWEALTH OF MASSACHUSETTS )
) ss.
COUNTY OF SUFFOLK )
On this 1 day of November, 1995, before me, the undersigned, a Notary
- --------
Public in and for said State, personally appeared Wes Gardiner and
------------
Marie Stewart, personally known to me (or proved to me on the basis of
- -------------
satisfactory evidence) to be the Vice President AND Inv. Officer OF COPLEY
-------------- ------------
PROPERTIES COMPANY II, INC., a Massachusetts corporation, the corporation that
executed the within instrument on behalf of NEW ENGLAND LIFE PENSION PROPERTIES
II; A REAL ESTATE LIMITED PARTNERSHIP, a Massachusetts limited partnership, the
partnership therein named, pursuant to its bylaws or resolution of its board of
directors, and acknowledged to me that Copley Properties Company II, Inc.,
executed the within instrument on behalf of New England Life Pension Properties
II; A Real Estate Limited Partnership as its free act and deed.
[SEAL APPEARS HERE] /s/ KARYN E. BATES
---------------------------------
Notary Public in and for
the Commonwealth of Massachusetts
-19-
<PAGE>
EXHIBIT A
---------
LEGAL DESCRIPTION
-----------------
That certain real property located in the City of Concord, County of Contra
Costa, State of California, described as follows:
Parcel "B" as shown on the Parcel Map filed April 22, 1969, in Book 8
of Parcel Maps at Page 16, Contra Costa County Records (hereinafter, the
"Site").
Excepting therefrom the interest to Contra Costa County Flood Control
and Water Conservation District, in the Deed recorded May 16, 1969, in
Book 5876, Page 838, of Official Records.
ALSO EXCEPTING THEREFROM the buildings, structures and improvements now or
hereafter erected on the Site, and any replacements thereof, which are and
shall remain real property (collectively, the "Improvements"), and the
furnishings, equipment, machinery and other items of personal property now
or hereafter necessary for the property operation and maintenance of the
Improvements and situated on, over or beneath the Site.
<PAGE>
FIRST AMENDMENT TO AMENDED AND COMPLETELY
-----------------------------------------
RESTATED GROUND LEASE
---------------------
This First Amendment to Amended and Completely Restated Ground Lease (this
"Amendment") is made and entered into as of the 1st day of January, 1995, by and
between NEW ENGLAND LIFE PENSION PROPERTIES; A REAL ESTATE LIMITED PARTNERSHIP,
NEW ENGLAND LIFE PENSION PROPERTIES II; A REAL ESTATE LIMITED PARTNERSHIP
(jointly, the "Landlord"), whose address is c/o Copley Real Estate Advisors,
Inc., 399 Boylston Street, Boston, MA 02116, and WILLOWS CONCORD VENTURE, a
California limited partnership (the "Tenant"), whose address is 18802 Bardeen
Avenue, Irvine California 92715-1521, who, for and in consideration of the sum
of Ten Dollars ($10.00) each to the other paid, and the mutual covenants flowing
between the parties hereto, the receipt and sufficiency of which are hereby
acknowledged, do hereby covenant, warrant and agree as follows:
1. Recitals. This Amendment is made with reference to the following
--------
facts and objectives:
a. Landlord and Tenant entered into a certain written Amended and
Completely Restated Ground Lease dated as of June 18, 1991 (the "Lease"),
pursuant to which Landlord leased to Tenant and Tenant leased from Landlord,
certain premises more particularly described therein (the "Premises").
b. The parties hereto desire to amend the Lease on the effective date
hereof on the terms and conditions set forth herein.
2. Representations. As an inducement to Landlord to enter into this
---------------
Amendment, Tenant represents that (a) Tenant has not made any assignment,
sublease, transfer, conveyance or other disposition of said lease or any
interest thereof; and that there exists no claim, demand, obligation, liability,
action or cause of action arising from said Lease; and (b) there are no liens
for past due taxes of any nature (except any lien for unpaid city, state and
county 1995 ad valorem taxes on said Premises), paving, sidewalk, curbing,
sewer, or any other street improvements of any kind against or affecting said
Premises.
3. Amendment of Lease.
------------------
a. Sections 16.08(b), 16.08(c) and 16.09 are hereby deleted in their entirety
from the Amended Lease, and the following new section 16.08(b) is hereby
substituted in their place:
<PAGE>
"16.08(b) On or after January 1, 1996, Landlord may at its sole discretion
offer the entire Property (Landlord's Estate together with Tenant's Estate)
for sale for such price and on such other terms and conditions as the
Landlord may determine in its sole discretion. In connection with any such
sale or proposed sale, the Landlord shall have the right to cause the
Property to be marketed to such prospective purchasers and upon such terms
as the Landlord shall determine in its sole discretion and to take such
other actions as it deems necessary or appropriate in connection with such
sale or proposed sale. The Tenant agrees, at the direction of the Landlord,
to execute and deliver such documents, including without limitation
purchase and sale agreements, deeds or assignments of lease, as may be
reasonably required in connection with any such sale or proposed sale;
provided, however, that Landlord shall use commercially reasonable efforts
to cause such documents to provide that the partners of Tenant will have no
recourse liability pursuant to such documents."
b. Section 16.10 of the Amended Lease is hereby amended by adding the
following language at the end thereof:
"Notwithstanding the foregoing, Landlord shall not unreasonably withhold or
delay its consent to any (i) distribution to any general or limited partner
of Tenant of such partner's respective interest therein or (ii) assignment
or transfer by any general or limited partner of Tenant of its respective
interest so distributed to any person or entity controlling, controlled by,
or under common control with such general or limited partner (each an
"Affiliate"), provided that (A) such distribution, assignment or transfer
is made for the purpose of accomplishing a tax free exchange under Section
1031 of the Internal Revenue Code of 1986, as amended, and (B) any and all
such Affiliates agree to assume all of the liabilities and obligations of
Tenant and such general or limited partner to Landlord pursuant to a
written instrument satisfactory to Landlord."
4. Effective Date. The effective date of this Amendment shall be the
--------------
date first above written.
5. Successors. This Amendment shall be binding on and inure to the
----------
benefit of the parties hereto and their heirs, successors and assigns.
-2-
<PAGE>
6. No Other Modification. Except as specifically amended by this
---------------------
Amendment, no other provision of the Lease is hereby modified, and the Lease
shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amended as a
sealed instrument on the date first above written.
LANDLORD:
NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP
By: Copley Properties Company, Inc.,
General Partner
By: /s/ Wesley M. Gardiner
--------------------------------
Name: Wesley M. Gardiner
Title: Vice President
NEW ENGLAND LIFE PENSION PROPERTIES
II; A REAL ESTATE LIMITED
PARTNERSHIP
By: Copley Properties Company II,
Inc., General Partner
By: /s/ Wesley M. Gardiner
--------------------------------
Name: Wesley M. Gardiner
Title: Vice President
TENANT:
WILLOWS CONCORD VENTURE
By: /s/ William J. Thormahlen
-------------------------------------
Name: WILLIAM J. THORMAHLEN
Title: GENERAL PARTNER
-3-
<PAGE>
Second Amendment to Promissory Note dated as of February 19, 1995 between the
Registrant and Decatur TownCenterAssociates, Ltd. ("Decatur").
<PAGE>
SECOND AMENDMENT TO PROMISSORY NOTE
-----------------------------------
This Second Amendment to Promissory Note (the "Amendment") made and entered
into as of the 19th day of February 1995, by and between Decatur TownCenter
Associates, Ltd., a Georgia limited partnership ("Borrower") and New England
Life Pension Properties; A Real Estate Limited Partnership, a Massachusetts
limited partnership ("Lender").
WHEREAS, Lender is the holder of that certain Promissory Note dated
February 20, 1985, made by Borrower to the order of Lender in the original
principal amount of $5,825,000, as amended by that Amendment to Promissory Note
dated as of March 1, 1993 (as so amended, the "Note"), which Note is secured by
(i) that certain Deed to Secure Debt and Security Agreement dated February 20,
1985, made by Borrower in favor of Lender, recorded in Deed Book 5156, Page 67,
Records of DeKalb County, Georgia (the "Security Deed") and (ii) that certain
Collateral Assignment of Rents and Leases dated February 20, 1985, made by
Borrower in favor of Lender, recorded in Deed Book 5156, Page 108, Records of
DeKalb County, Georgia (the "Lease Assignment");
WHEREAS, the Note, the Security Deed and the Lease Assignment are
collectively referred to as the "Loan Documents"; and
WHEREAS, the Borrower and Lender desire to extend the maturity date of the
Note.
NOW, THEREFORE, for and in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby covenant and agree as follows:
1. The Maturity Date set forth in Section 1.6 of the Note shall be
changed from February 19, 1995 to December 31, 1996.
2. The paragraph numbered "2" of the Amendment to Promissory Note dated as
of March 1, 1993 between Borrower and Lender is hereby deleted in its entirety
and shall be of no further force and effect.
3. The last paragraph of Section 3 of the Note is deleted in its entirety
and the following is substituted in place thereof:
All payments shall be made in lawful money of the United States of America,
in immediately available funds, at 399 Boylston Street, Boston,
Massachusetts or at such other place as Lender may from time to time
designate in writing.
<PAGE>
Notwithstanding the provisions of this Section 3 above, Borrower shall be
required to pay Monthly Installments due to Lender only from and to the
extent of Net Operating Cash Flow realized by the Borrower for any month.
Each such Monthly Installment (or portion thereof) which is not paid by the
Borrower when due in accordance with the foregoing sentence shall accrue
interest at the Interest Rate from the date the same was due. The total of
all such unpaid Monthly Installments (or portions thereof), together with
all interest accruals thereon, shall be referred to herein as the "Accrued
Amount." The Accrued Amount or any portion thereof remaining unpaid at any
time and from time to time during the term of this Note (the "Accrual
Balance") shall bear interest at the Interest Rate until fully repaid by
Borrower to Lender. At any time and from time to time up to the Maturity
Date, the Borrower may pay the then outstanding Accrual Balance to Lender
in whole or in part. Notwithstanding the foregoing, Borrower hereby agrees
to apply all Net Operating Cash Flow realized by Borrower for any month
during the term of this Note (in excess of the amount required to be paid
pursuant to the first sentence of this paragraph) to reduce the outstanding
Accrual Balance until paid in full. In all events, the Principal Sum,
including any Accrual Balance, remaining unpaid on the Maturity Date shall
be paid to Lender in full on the Maturity Date.
For purposes of this Note, the term "Net Operating Cash Flow" shall mean,
as to any particular month or portion thereof, the difference between (i)
the aggregate of all fixed, minimum and guaranteed rents, fees, overage
rents, percentage or participation rents and all rents and receipts from
licenses and concessions received from the Property, including all amounts
received for parking and all fees, income and revenue of a non-rental
nature received by Borrower during such month, less (ii) Operating
Expenses, the cost of tenant improvements and all payments by Borrower to
Lender under that certain Ground Lease between Borrower and Lender dated
February 28, 1985, as amended from time to time (the "Ground Lease"). Net
Operating Cash Flow shall be computed by Borrower on a monthly basis.
"Operating Expenses" shall have the meaning ascribed to it in the Ground
Lease.
4. Borrower and Lender agree that, as of December 31, 1994, the Accrual
Balance equals $15,369.
-2-
<PAGE>
5. All provisions of the Loan Documents shall be deemed modified to the extent
they are inconsistent with the above amendments. Except as modified herein, the
Loan Documents shall remain unmodified and in full force and effect.
IN WITNESS WHEREOF, this Amendment has been executed and delivered under seal as
of this 19th day of February, 1995.
DECATUR TOWNCENTER ASSOCIATES, LTD.
____________________________________
By: A.J. Land, Jr., General Partner
NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP
By: COPLEY PROPERTIES COMPANY, INC.
By: ________________________________
-3-
<PAGE>
Second Amendment to Ground Lease dated as of February 19, 1995
between the Registrant and Decatur.
<PAGE>
SECOND AMENDMENT TO GROUND LEASE
--------------------------------
This Second Amendment to Ground Lease (this "Amendment") is made and
entered into as of the 19th day of February, 1995, by and between NEW ENGLAND
LIFE PENSION PROPERTIES; A REAL ESTATE LIMITED PARTNERSHIP (the "Landlord"),
whose address is c/o Copley Real Estate Advisors, Inc., 399 Boylston Street,
Boston, MA 02116, and DECATUR TOWNCENTER ASSOCIATES, LTD., a Georgia limited
partnership (the "Tenant"), whose address is c/o Pope & Land Enterprises, 3065
Hargrove Road, Suite 350, Atlanta, Georgia 30339, who, for and in consideration
of the sum of Ten Dollars ($10.00) each to the other paid, and the mutual
covenants flowing between the parties hereto, the receipt and sufficiency of
which are hereby acknowledged, do hereby covenant, warrant and agree as follows:
1. Recitals. This Amendment is made with reference to the following
--------
facts and objectives:
a. Landlord and Tenant entered into a certain written Ground Lease
dated February 20, 1985 (the "Lease") and a certain written Short-Form Ground
Lease dated February 20, 1985 recorded in Deed Book 5156, Page 52, Records of
DeKalb County, Georgia, pursuant to which Landlord leased to Tenant and Tenant
leased from Landlord, certain premises more particularly described therein (the
"Premises").
b. Landlord and Tenant entered into a certain written First Amendment
to Short-Form Ground Lease and Ground Lease dated February 1, 1988, recorded in
Deed Book 6092, Page 455, Records of DeKalb County, Georgia, amending the Lease
(as so amended, the Lease is hereinafter referred to as the "Amended Lease").
c. The parties hereto desire to amend the Amended Lease on the
effective date hereof on the terms and conditions set forth herein.
2. Representations. As an inducement to Landlord to enter into this
---------------
Amendment, Tenant represents that (a) Tenant has not made any assignment,
sublease, transfer, conveyance or other disposition of said lease or any
interest thereof; and that there exists no claim, demand, obligation, liability,
action or cause of action arising from said Amended Lease; and (b) there are no
liens for past due taxes of any nature (except any lien for unpaid city, state
and county 1995 ad valorem taxes on said Premises), paving, sidewalk, curbing,
sewer, or any other street improvements of any kind against or affecting said
Premises.
<PAGE>
3. Amendment of Section 3.1 of the Lease. The following is added as
-------------------------------------
a new Section 3.1.D. of the Amended Lease, immediately following Section 3.1.C.
of the Amended Lease:
"D. Notwithstanding anything else to the contrary contained
herein, Tenant shall be required to pay Fixed Monthly Rental due to
Landlord only from and to the extent of Net Operating Cash Flow for
the month in which such payment is due. Each such Fixed Monthly Rental
(or portion thereof) which is not paid by Tenant when due in
accordance with the foregoing sentence shall accrue interest from the
date the same was due. The total of all such unpaid Fixed Monthly
Rental (or portions thereof) together with all interest accruals
thereon, shall be referred to herein as the "Accrued Amount." The
Accrued Amount or any portion thereof remaining unpaid at any time and
from time to time during the Term of this Lease (the "Accrual
Balance") shall bear interest at the rate of 8.5% per annum,
compounded monthly, until fully paid by Tenant to Landlord.
Notwithstanding the foregoing, Tenant hereby agrees to apply all Net
Operating Cash Flow for any month during the Term of this Lease (in
excess of the amount required to be paid pursuant to the first
sentence of this paragraph) to reduce the outstanding Accrual Balance
until paid in full. In all events, the entire Accrual Balance
remaining unpaid on the date of termination of this Lease shall be
paid to Landlord in full on such date of termination. For purposes of
this Lease, the term "Net Operating Cash Flow" shall mean, as to any
particular month or portion thereof, the difference between (i) Gross
Receipts, less (ii) Operating Expenses."
4. Amendment of Section 12.5 of the Lease. Section 12.5 is hereby
--------------------------------------
deleted from the Amended Lease in its entirety, and the following is hereby
substituted in its place:
"12.5 Landlord's and Tenant's Share of Net Condemnation Proceeds.
----------------------------------------------------------
Net Condemnation Proceeds which are not applied to Restoration after Taking
and are to be distributed under the provisions of this Article shall be
distributed as follows:
A. First, to Landlord to the extent of the Accrual Balance;
B. Second, to Landlord to the extent of Landlord's Interest in
the Land;
-2-
<PAGE>
C. Third, to the First Mortgagee to the extent necessary to
satisfy all amounts secured by the First Mortgage;
D. Fourth, to the holders of any junior Mortgages, in the order
of priority of such Mortgages, to the extent necessary to satisfy all
amounts secured by such junior Mortgages;
E. Fifth, to Tenant an amount equal to the aggregate cost of (a)
capital improvements made after the Lease Commencement Date with
respect to the Property with the approval of Landlord, less the
----
aggregate amount of costs of capital improvements included in
Operating Expenses under paragraph B(2) of Section 3.1 and costs
incurred in connection with a Restoration or Restoration after Taking
and (b) actual increases in Operating Expenses for the Property
incurred after the Lease Commencement Date which are not included in
Escalation Receipts, with interest thereon at a rate of 8.5% per annum
if paid from Tenant's own funds or, if paid from borrowed funds, the
rate of interest paid by Tenant on such borrowings, in either case
calculated on each such expense from the date such item of expense is
paid, provided that amounts payable under this clause (b) with respect
to increases in Operating Expenses and interest thereon shall only be
paid if and to the extent that the Property has appreciated in value
after each such element of increased expense is paid and each
increment of interest thereon has accrued;
F. The balance, if any, 60% to Landlord and 40% to Tenant.
5. Amendment of Section 16.8 of the Lease. Sections 16.8.A., 16.8.B.
--------------------------------------
and 16.8.C. are hereby deleted from the Amended Lease in their entirety,
and the following is hereby substituted in their place:
"16.8. Sale of Property, Application of Net Sale Proceeds.
--------------------------------------------------
A. The proceeds of any sale of the entire Property
(Landlord's Estate together with Tenant's Estate) pursuant to and in
accordance with the provisions of this Section 16.8, less the
----
reasonable costs and expenses of such sale (including, without
limitation, transfer taxes, attorneys' fees, brokerage commissions,
title premiums, filing fees and any fees required to secure the
consent of any mortgagee)
-3-
<PAGE>
("Net Sale Proceeds") shall be paid, applied and distributed as follows:
(i) First, to Landlord to the extent of the Accrual Balance;
(ii) Second, to Landlord to the extent of Landlord's Interest in
the Land;
(iii) Third, to the First Mortgagee to the extent necessary to
satisfy all amounts secured by the First Mortgage;
(iv) Fourth, to the holders of any junior Mortgages, in the
order of priority of such Mortgages, to the extent necessary to satisfy all
amounts secured by such junior Mortgages;
(v) Fifth, to Tenant an amount equal to the aggregate cost of
(a) capital improvements made after the Lease Commencement Date with
respect to the Property with the approval of Landlord, less the aggregate
----
amount of costs of capital improvements included in Operating Expenses
under paragraph B2 of Section 3.1 and costs incurred in connection with a
Restoration or Restoration after Taking and (b) actual increases in
Operating Expenses for the Property incurred after the Lease Commencement
Date which are not included in Escalation Receipts, with interest thereon
at a rate of 8.5% per annum if paid from Tenant's own funds or, if paid
from borrowed funds, the rate of interest paid by Tenant on such
borrowings, in either case calculated on each such expense from the date
such item of expense is paid, provided that amounts payable under this
clause (b) with respect to increases in Operating Expenses and interest
thereon shall only be paid if and to the extent that the Property is
appreciated in value after each such element of increased expense is paid
and each increment of interest thereon has accrued;
(vi) The balance, if any, 60% to Landlord and 40% to Tenant.
"B. If Tenant has not delivered to Landlord on or before
October 2, 1995, a binding commitment to purchase Landlord's Estate
and that certain promissory note from Tenant to Landlord dated
February 20, 1985 in the original principal amount of $5,285,000 (the
"Note") in form and substance
-4-
<PAGE>
satisfactory to Landlord in its sole discretion, the Developer shall
cooperate with Landlord in (i) selecting a real estate broker to
market the entire Property (Landlord's Estate together with Tenant's
Estate) for sale, (ii) identifying prospective purchasers of the
entire Property and (iii) no later than November 4, 1995, mailing to
such prospective purchasers a sales brochure and related marketing
materials. If Tenant and Landlord have not executed a purchase and
sale agreement for the sale of Landlord's Estate and the Note on or
before January 1, 1996, the Landlord may at its sole discretion offer
the entire Property (Landlord's Estate together with Tenant's Estate)
for sale for such price and on such other terms and conditions as the
Landlord may determine in its sole discretion. In connection with any
such sale or proposed sale, the Landlord shall have the right to cause
the Property to be marketed to such prospective purchasers and upon
such terms as the Landlord shall determine in its sole discretion and
to take such other actions as it deems necessary or appropriate in
connection with such sale or proposed sale. The Tenant agrees, at the
direction of the Landlord, to execute and deliver such documents,
including without limitation purchase and sale agreements, deeds or
assignments of lease, as may be reasonably required in connection with
any such sale or proposed sale."
6. Accrual Balance. Tenant and Landlord agree that, as of December
---------------
31, 1994, the Accrual Balance equals $988,250.
7. Effective Date. The effective date of this Amendment shall be the
--------------
date first above written.
8. Successors. This Amendment shall be binding on and inure to the
----------
benefit of the parties hereto and their heirs, successors and assigns.
9. No Other Modification. Except as specifically amended by this
---------------------
Amendment, no other provision of the Amended Lease is hereby modified, and the
Amended Lease shall remain in full force and effect.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amended as a
sealed instrument on the date first above written.
LANDLORD:
NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP
By: Copley Properties Company,
Inc., General Partner
By:_______________________________
TENANT:
DECATUR TOWNCENTER ASSOCIATES, LTD.,
By:____________________________________
A.J. Land, Jr., General Partner
The undersigned leasehold mortgagee
hereby consents to this Amendment
and the terms set forth herein.
NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP
By: Copley Properties Company, Inc.
By:____________________________
-6-
<PAGE>
Second Amendment to First Consolidated Amendatory Agreement dated
as of February 19, 1995 between the Registrant and Decatur.
<PAGE>
SECOND AMENDMENT TO FIRST CONSOLIDATED AMENDATORY AGREEMENT
-----------------------------------------------------------
This Second Amendment to First Consolidated Amendatory Agreement (this
"Amendment") is made and entered into as of the 19th day of February 1995, by
and between Decatur TownCenter Associates, Ltd., a Georgia limited partnership
("Borrower") and New England Life Pension Properties; A Real Estate Limited
Partnership, a Massachusetts limited partnership ("Lender").
WHEREAS, Lender is the holder of that certain Promissory Note dated March
10, 1986, made by Borrower to the order of Lender (the "Note"), which Note is
secured by (i) that certain Deed to Secure Debt and Security Agreement dated
March 10, 1986, made by Borrower in favor of Lender, recorded in Deed Book 5534,
Page 9, Records of DeKalb County, Georgia (the "Security Deed") and (ii) that
certain Assignment of Leases and Rents dated March 10, 1986 made by Borrower in
favor of Lender, recorded in Deed Book 5534, Page 43, Records of DeKalb County,
Georgia (the "Lease Assignment");
WHEREAS, disbursement of the principal amount of the Note is governed by
that certain Loan Agreement, dated March 10, 1986, by and between Borrower and
Lender (the "Loan Agreement");
WHEREAS, the Note, the Security Deed, the Lease Assignment and the Loan
Agreement are hereinafter collectively referred to as the "Loan Documents";
WHEREAS, Borrower and Lender entered into that certain First Consolidated
Amendatory Agreement, dated as of December 29, 1988, amending the Loan Documents
and providing, inter alia, for an increase in the principal amount of the Note
----------
to $1,104,000 (the "Amendatory Agreement");
WHEREAS, the Amendatory Agreement was amended by the First Amendment to
First Consolidated Amendatory Agreement between Borrower and Lender, dated as of
March 1, 1993 (the "First Amendment"); and
WHEREAS, Borrower and Lender desire to extend the maturity of the Note and
to effect other changes to the Loan Documents.
NOW, THEREFORE, for and in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby covenant and agree as follows:
1. The Maturity Date set forth in Section 1.5 of the Note is hereby
changed from February 19, 1995 to December 31, 1996. Each of the remaining Loan
Documents is hereby modified, as appropriate, to conform to the foregoing
extension of the Maturity Date.
2. The First Amendment is hereby declared null and void and shall not be
binding upon or enforceable against Borrower or Lender.
<PAGE>
3. Notwithstanding anything in the Loan Documents to the contrary, all
interest due pursuant to the terms of the Note shall be permitted to accrue
until the earlier of (i) the Maturity Date or (ii) the acceleration of the Note
pursuant to the Loan Documents. Such unpaid accrued interest shall bear
interest at the Interest Rate set forth in the Note. The entire outstanding
balance of the Note, together with all unpaid accrued interest, shall be due and
payable in full on the Maturity Date. Borrower and Lender agree that, as of
December 31, 1994, the amount of unpaid accrued interest on the Note equals
$979,165.
4. Upon the sale of the entire Property (as defined in that certain
ground lease dated as of February 20, 1985 between Borrower and Lender (as
amended, the "Ground Lease")), all sums owed Lender under the Loan Documents
shall be payable to Lender as provided in Section 16.8.A of the Ground Lease.
If such payments are not sufficient to pay all such amounts in full, Lender
shall nevertheless cause the liens created by the Security Deed and the Lease
Assignment to be discharged in connection with such sale.
5. Except as expressly amended, supplemented or otherwise modified
herein, all of the terms, covenants and conditions of the Loan Documents, as
amended by the Amendatory Agreement, are hereby ratified, confirmed and approved
by the parties hereto and shall continue to be in full force and effect.
IN WITNESS WHEREOF, Borrower and Lender have executed this Amendment on
the date first above written.
LENDER:
NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP
By: COPLEY PROPERTIES COMPANY, INC.
By: ________________________________
BORROWER:
DECATUR TOWNCENTER ASSOCIATES, LTD.
By: ________________________________
A.J. Land, Jr., General Partner
-2-
<PAGE>
Third Amendment to Participation Agreement dated as of February 19, 1995
among the Registrant, A.J. Land, Jr., David B. Pattillo and Lawrence P. Kelly.
<PAGE>
THIRD AMENDMENT TO PARTICIPATION AGREEMENT
This Third Amendment to Participation Agreement (the "Third
Amendment") is made and entered into as of the 19th day of February, 1995, by
and among A.J. Land, Jr., Daniel B. Pattillo and Lawrence P. Kelly
(collectively, the "Participants") and New England Life Pension Properties; A
Real Estate Limited Partnership (the "Lender").
WHEREAS, Participants and Lender entered into that certain
Participation Agreement, dated as of March 10, 1986, with respect to a loan in
the original principal amount of $600,000, made by Lender to Decatur TownCenter
Associates, Ltd. (the "Borrower");
WHEREAS, Participants and Lender entered into that certain First
Restated Amendment to Participation Agreement which, inter alia, increased the
----------
principal amount of the loan made by Lender to Borrower from $600,000 to
$1,104,000;
WHEREAS, Participants and Lender entered into that Second Amendment to
Participation Agreement, dated as of March 1, 1993; and
WHEREAS, Participants wish to consent to the execution of certain
documents.
NOW, THEREFORE, for and in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Participants and Lender hereby covenant and agree as follows:
<PAGE>
1. The Participants hereby consent to the execution and delivery by
the Lender and the Borrower of that certain Second Amendment to First
Consolidated Amendatory Agreement, dated as of the date hereof, in the form
attached hereto as Exhibit A.
---------
2. The Participants hereby consent to the execution and delivery by
the Lender and the Borrower of that Second Amendment to Promissory Note, dated
as of the date hereof, in the form attached hereto as Exhibit B.
---------
3. The Participants hereby consent to the execution and delivery by
the Lender and the Borrower of that Second Amendment to Ground Lease, dated as
of the date hereof, in the form attached hereto as Exhibit C.
---------
Executed as of the 19th day of February, 1995.
LENDER:
------
NEW ENGLAND LIFE PENSION PROPERTIES;
A REAL ESTATE LIMITED PARTNERSHIP
By: Copley Properties Company, Inc.,
General Partner
By:
_________________________________
-2-
<PAGE>
PARTICIPANTS:
------------
By:
________________________________
A.J. Land, Jr.
________________________________
Daniel B. Pattillo
________________________________
Lawrence P. Kelly
-3-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,204,043
<SECURITIES> 1,109,814
<RECEIVABLES> 123,928
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,437,785
<PP&E> 16,626,193
<DEPRECIATION> 0
<TOTAL-ASSETS> 19,239,985
<CURRENT-LIABILITIES> 263,637
<BONDS> 457,768
0
0
<COMMON> 0
<OTHER-SE> 18,518,580
<TOTAL-LIABILITY-AND-EQUITY> 19,239,985
<SALES> 1,976,296
<TOTAL-REVENUES> 2,104,802
<CGS> 354,550
<TOTAL-COSTS> 354,550
<OTHER-EXPENSES> 440,984
<LOSS-PROVISION> (260,000)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,569,268
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,569,268
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,569,268
<EPS-PRIMARY> 51.79
<EPS-DILUTED> 51.79
</TABLE>
