SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14D-9
Solicitation/Recommendation Statement Pursuant to Section 14(d)(4) of the
Securities Exchange Act of
1934
BALCOR REALTY INVESTORS-84
(Name of Subject Company)
BALCOR REALTY INVESTORS-84
(Name of Person(s) Filing Statement)
Limited Partnership Interests
(Title of Class of Securities)
N/A
(CUSIP Number of Class of Securities)
Thomas E. Meador
Chairman
The Balcor Company
Bannockburn Lake Office Plaza
2355 Waukegan Road, Suite A200
Bannockburn, Illinois 60015
(708) 267-1600
(Name, Address and Telephone Number of Person
Authorized to Receive Notice and Communications on
Behalf of the Person(s) Filing Statement)
Copy To:
Michael P. Morrison, Esq.
Hopkins & Sutter
Three First National Plaza, Suite 4100
Chicago, Illinois 60602
(312) 558-6600
<PAGE>
Item 1. Security and Subject Company
The name of the subject partnership is Balcor Realty Investors-84, an Illinois
limited partnership (the "Partnership"). The address of the Partnership's
principal executive offices is 2355 Waukegan Road, Suite A200, Bannockburn,
Illinois 60015. The Partnership's sole general partner is Balcor Partners-XV,
an Illinois general partnership (the "General Partner"). The title of the
class of equity securities to which this statement relates is the Partnership's
limited partnership interests (the "Units"). (The holder of any Unit is
hereinafter referred to as a "Limited Partner".)
Item 2. Tender Offer of the Bidder
This statement relates to the unsolicited tender offer by Walton Street Capital
Acquisition Co., L.L.C., a Delaware limited liability company ("Walton
Street"), to purchase up to 45% (but not more than 45%) of the Units at a
purchase price of $84 per Unit, net to the seller in cash, without interest,
upon the terms and subject to the conditions set forth in the Offer to
Purchase, dated November 16, 1995 (the "Offer to Purchase"), and the related
letter of transmittal (which together constitute the "Offer"). The Offer is
disclosed in a Tender Offer Statement on Schedule 14D-1 dated November 16, 1995
as filed with the Securities and Exchange Commission (the "Commission"), as
amended by Amendment No. 1 to Schedule 14D-1 filed with the Commission on
November 21, 1995 ("Amendment No. 1"). The Offer to Purchase states that the
address of the principal executive office of Walton Street is 900 North
Michigan Avenue, Suite 1900, Chicago, Illinois 60611.
Item 3. Identity and Background
(a) The name and business address of the Partnership, which is the person
filing this statement, are set forth in Item 1 above.
(b)(1) The Partnership and its affiliates have the following material
contracts, agreements, arrangements and understandings and actual or potential
conflicts of interest with the Partnership and its affiliates:
The General Partner owns a nominal interest in the Partnership and, subject to
certain preferential rights of the Limited Partners, the General Partner is
entitled to a certain percentage of the cash flows of the Partnership resulting
from the operations of the Partnership's properties. In addition, also subject
to certain preferential rights of the Limited Partners, the General Partner is
entitled to a certain percentage of the net cash proceeds realized by the
Partnership from the sale or refinancing of the Partnership's properties.
These preferential rights of the Limited Partners subordinate the General
Partner's right to receive such distributions to the receipt by Limited
Partners of their original capital plus an agreed upon rate of return. Due to
such subordination, the General Partner does not expect to receive any
distributions from the Partnership in connection with the operations of the
Partnership or the sale or refinancing of any of the Partnership's properties.
The General Partner does expect to continue to be reimbursed by the Partnership
for certain administrative expenses incurred by the General Partner in
connection with its management of the Partnership's business. A partner of the
General Partner, The Balcor Company (the "Company"), funds certain other
administrative expenses of the General Partner that are not reimbursed by the
Partnership.
<PAGE>
The Partnership and each of its subsidiary limited partnerships (collectively,
with the Partnership, the "BRI-84 Partnerships") are jointly and severally
liable to the Company and/or certain affiliates of the Company (collectively,
the "Partnership Lender") for repayment of certain revolving credit loans made
by the Partnership Lender to the BRI-84 Partnerships (the "Partnership
Indebtedness"). The Partnership Indebtedness is recourse to all property and
assets (real, personal and intangible) of each BRI-84 Partnership. The
Partnership Indebtedness is payable by the BRI-84 Partnerships on demand of the
Partnership Lender. Such Partnership Indebtedness is evidenced by the two
Revolving Promissory Notes and the two Master Loan and Security Agreements
attached hereto as Exhibits (c), (d), (e) and (f), respectively.
(b)(2) The Partnership and its affiliates have the following material
contracts, agreements, arrangements and understandings and actual or potential
conflicts of interest with Walton Street, Insignia, or either of their
affiliates:
The ownership of a substantial number of Units by any person presents a
potential conflict of interest between such person on the one hand and the
General Partner and any non-tendering Limited Partners on the other hand. If
the transactions contemplated in the Offer were to be consummated, Walton
Street could own a substantial number of Units. The ownership of a large block
of Units by Walton Street would enable Walton Street to significantly influence
decisions of the Partnership with respect to certain Partnership matters.
Holders of a majority of the outstanding Units are entitled to vote to take any
of the following actions: (i) remove the General Partner; (ii) elect or approve
of a successor to any removed or withdrawn General Partner; (iii) dissolve the
Partnership; and (iv) amend the Partnership's partnership agreement. In order
to amend certain provisions of the Partnership's partnership agreement approval
by the General Partner as well as an affirmative vote by the holders of a
majority of the outstanding Units is required. Similarly, General Partner
consent and an affirmative vote by the holders of a majority of the outstanding
Units is required to sell all or substantially all of the assets of the
Partnership in a single transaction or a series of related transactions.
Limited Partners holding more than 10% of the Units are entitled to call a
meeting at which these matters may be submitted to a vote of the Limited
Partners. Therefore, such ownership by Walton Street may increase the
likelihood that any one or more of these actions may be taken by the
Partnership. Such actions may conflict with the General Partner's intentions
and/or any non-tendering Limited Partner's desires with respect to these
Partnership matters.
As of November 4, 1994, an affiliate of Insignia Financial Group, Inc.
("Insignia") entered into property management and leasing agreements with
respect to the properties owned by the Partnership (collectively, the "Property
Management Agreements", the form of which is attached hereto as Exhibit (g)).
The execution of the Property Management Agreements was part of a larger
transaction involving, in relevant part, the purchase of certain assets of an
affiliate of the Company, including interests under property management
agreements with respect to virtually all of the properties owned by the
Partnership and various other partnerships affiliated with the Company. The
Property Management Agreements, which are terminable at the option of either
party upon 60 days' prior written notice, provide for annual fees of 5% of
gross operating receipts to be paid to Insignia. As discussed in Item 7 below,
Walton Street and Insignia have entered into an agreement pursuant to which
Walton Street will assign its right to purchase all of the Units tendered in
response to the Offer to a joint-venture partnership in which Walton Street
<PAGE>
owns a 75% interest and Insignia owns a 25% interest. Pursuant to an Agreement
as to Subject Partnerships filed as an exhibit to Amendment No. 1, Walton
Street has agreed not to directly or indirectly terminate, seek to terminate,
cause the termination of, reduce the compensation then payable under, or
otherwise interfere in any way with the Property Management Agreements, unless
Insignia or its affiliates engage in gross negligence, intentional misconduct,
fraud or material breach in performance of their obligations thereunder. As a
result of these contractual arrangements, both Walton Street and Insignia may
have a conflict of interest with the General Partner and the non-tendering
Limited Partners. Additionally, in its role as manager of the Partnership's
properties, Insignia has access to information which is not generally provided
to the Limited Partners, and in some instances it may receive information prior
to the General Partner.
If the General Partner is removed as General Partner by the Limited Partners at
some future date, such removal may adversely impact the employment needs of the
Company.
Except as set forth in (b)(1) and (b)(2) above, there are no material
contracts, agreements, arrangements or understandings, or any actual or
potential conflicts of interest between the Partnership or any of its
affiliates and: (i) the General Partner, its executive officers, directors, or
affiliates; or (ii) Walton Street or Insignia, or either of their executive
officers, directors or affiliates.
Item 4. The Solicitation and Recommendation
(a) The General Partner recommends that holders of the Units reject the Offer
and not tender any of their Units to Walton Street. A copy of a letter to the
holders of Units communicating the General Partner's recommendation is filed
herewith as Exhibit (h) and is incorporated herein by reference.
(b) The General Partner believes that Walton Street's offering price of $84
per Unit is inadequate. The General Partner's financial advisor, Alex. Brown &
Sons Incorporated ("Alex. Brown"), has advised the General Partner that the
current liquidation value (as defined below) for each Unit is between $191 and
$215 (see Exhibit (i) hereto). Alex. Brown's definition of current liquidation
value ("A.B. Value") assumes an orderly liquidation of the remaining assets of
the Partnership over twelve months. The Offer is below the A.B. Value per
Unit. The General Partner believes that Walton Street's primary motivation in
making its offer is Walton Street's desire to capitalize on the significant
disparity between the fair market value of the assets held by the Partnership
and the price that Walton Street is offering to Limited Partners. By accepting
the offer, Limited Partners may not be able to fully realize the value of the
Units.
(c) The Partnership has thirteen remaining properties. The General Partner
intends to conduct an orderly liquidation of those assets over the next three
to four year period, although the timing of the liquidation may be lengthened
or shortened in response to changing market conditions, economic factors,
interest rates and unforseen events.
(d) In general, acceptance of Walton Street's offer may constitute a
significant taxable event to Limited Partners. To the extent applicable to a
Limited Partner's personal situation, a sale of Units in the Partnership may
cause a Limited Partner to recognize taxable income. Each Limited Partner
should consult his or her personal tax and legal advisors prior to accepting
<PAGE>
the Offer and tendering Units. For further information on this subject, see
Item 8 below.
Item 5. Persons Retained, Employed or to Be Compensated
The Partnership has retained Alex. Brown for the limited purpose of estimating
the current liquidation value of the Units. The General Partner wanted an
independent third party to perform this function so that Unit holders could
make an informed decision regarding the Offer. The Partnership has agreed to
pay Alex. Brown a fee of $75,000 plus (i) $5,000 for each Partnership asset and
(ii) out of pocket expenses incurred by Alex. Brown in connection with the
performance of these duties up to an aggregate amount of $20,000. In addition,
Alex. Brown has received a $20,185.00 retainer fee from the Partnership.
Neither the Company nor any person acting on its behalf has retained any other
person to make solicitations or recommendations to holders of Units in
connection with the Offer.
Item 6. Recent Transactions and Intent with Respect to Securities
(a) To the best of the General Partner's knowledge, no transactions in the
Units have been effected during the past 60 days by the Partnership, the
General Partner or any partner, executive officer, director, affiliate or
subsidiary of either such entity.
(b) To the best of the General Partner's knowledge, none of the Partnership,
the General Partner, the Company or any partner, executive officer, director,
affiliate or subsidiary of each such entity presently intends to tender any
Units that are held of record or beneficially owned by such persons pursuant to
the Offer.
Item 7. Certain Negotiations and Transactions by the Subject Company
(a) No negotiations are being undertaken or are underway by the Partnership in
response to the Offer which relate to or would result in: (1) an extraordinary
transaction such as a merger or reorganization involving the Partnership or any
affiliate controlled by the Partnership; (2) a purchase, sale or transfer of a
material amount of assets by the Partnership or any affiliate controlled by the
Partnership; or (3) any material change in the present capitalization or
distribution policy of the Partnership.
On November 18, 1995, counsel for the Partnership received a bidder's notice
from Insignia on behalf of one of its affiliates requesting the Partnership's
limited partner list and contemplating the commencement of a tender offer for
Units of the Partnership. The Partnership delivered the limited partner list
to Insignia on November 20, 1995. Insignia manages virtually all of the
Company's multi-family residential properties including the Partnership's
properties. In Amendment No. 1 to Schedule 14D-1, filed with the Commission by
Walton Street on November 21, 1995, Walton Street disclosed that it had entered
into an agreement with Insignia pursuant to which, among other things, Walton
Street would assign its right to purchase all of the Units tendered in response
to the Offer to a joint-venture partnership in which Walton Street owns a 75%
interest and Insignia owns a 25% interest.
(b) There are no transactions, General Partner resolutions, agreements in
principle or signed contracts in response to the Offer that relate to or would
result in one or more of the events referred to in Item 7(a).
<PAGE>
Item 8. Additional Information to be Furnished
Tendering Limited Partners will recognize gain on the sale of a Unit pursuant
to the Offer to the extent that the amount realized (the sum of the cash Offer
price plus the share of Partnership liabilities allocated to the Unit) exceeds
the Limited Partner's adjusted tax basis in such Unit. Notably, any gain
realized by a Limited Partner may possibly be offset by "suspended" passive
activity losses, if any, from the Partnership or from other passive activities.
In the event a Limited Partner realizes a loss on disposition such loss may be
deductible only to the extent permitted under the passive activity loss rules
and other applicable limitations. If a Limited Partner sells all Units (and
such Units have not been aggregated for purposes of the passive loss rules with
activities not currently being sold), any passive activity loss recognized on
the sale and any suspended passive activity losses from the Partnership (to the
extent not used to offset any gain recognized on the sale) will no longer be
subject to the passive activity loss limitation, and therefore should be
deductible by such Limited Partner from other income, subject to any other
applicable limitations (including at-risk limitations and tax basis
limitations).
Under the Internal Revenue Code of 1986, as it reads on the date hereof,
individuals and corporations are taxed on net capital gain (defined as the
excess of net long-term capital gain over net short-term capital loss) at
maximum rates of 28% and 35%, respectively. A bill passed by Congress in
November 1995 would allow individuals a deduction equal to 50% of net capital
gain (resulting in an effective rate of 19.8% in the case of an individual in
the highest 39.6% rate bracket) in lieu of the 28% maximum rate, and reduce the
maximum rate for corporations to 28%. It is uncertain whether any change in
the taxation of capital gains and losses will ultimately be enacted, and if so,
what the changes and their effective dates will be. Nonetheless, Limited
Partners should consider the possibility of changes in the taxation of capital
gains and losses in evaluating the Offer.
In addition, other considerations could affect your tax liability, including
but not limited to, alternative minimum taxes, state income taxes and other
considerations.
Item 9. Material to be Filed as Exhibits
(a) Letter to Investors, dated November 17, 1995.
(b) Press release, dated November 16, 1995.
(c) Revolving Promissory Note dated June 1, 1992.
(d) Revolving Promissory Note dated October 14, 1993.
(e) Master Loan and Security Agreement dated as of June 1, 1992.
(f) Master Loan and Security Agreement dated as of October 14, 1993.
(g) Form of Property Management and Leasing Agreement.
(h) Letter to Investors, dated November 30, 1995.
(i) Alex. Brown Valuation Letter.
<PAGE>
Signature. After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Dated: November 30, 1995 BALCOR REALTY INVESTORS-84
By: Balcor Partners-XV, its general partner
By: RGF-Balcor Associates-II,
a partner
By: The Balcor Company, a partner
/s/Thomas E. Meador
Thomas E. Meador, Chairman<PAGE>
BALCOR REALTY INVESTORS-84
P.O. Box 7190
Deerfield, Illinois 60015-7190
November 17, 1995
Dear Investor,
By this time you may have received an offer from Walton Street Capital
Acquisition Co., L.L.C. to acquire 45 percent of the limited partnership units
of Balcor Realty Investors-84.
Numerous items which appear in the offer call for a considered response from
Balcor Partners-XV, the general partner of Balcor Realty Investors-84. You
will be hearing from your general partner with respect to this offer no later
than November 30, 1995.
In the meantime, we advise you to defer making a determination as to whether to
accept or reject such offer. In addition, please understand that while your
telephone inquiries are welcome, the securities laws strictly limit what your
general partner can tell you about this offer prior to its written response to
you on or before November 30, 1995.
Very truly yours,
BALCOR REALTY INVESTORS-84
By: Balcor Partners-XV,
the General Partner
By: RGF-Balcor Associates-II,
a partner
By: The Balcor Company,
a partner
/s/Thomas E. Meador
Thomas E. Meador
President
<PAGE>
FOR IMMMEDIATE RELEASE Contact: Susan D. Miller
(212) 640-4953
BALCOR RECEIVES NOTICE OF OFFERS
FOR PARTNERSHIP UNITS
Bannockburn, Ill. - November 16, 1995 - The Balcor Company, in its capacity as
a partner of the general partners of Balcor Realty Investors Ltd.-82; Balcor
Realty Investors-83; Balcor Realty Investors-84; Balcor Realty Investors
85-Series I, A Real Estate Limited Partnership; Balcor Realty Investors
85-Series III, A Real Estate Limited Partnership; Balcor Realty Investors
86-Series I, A Real Estate Limited Partnership; Balcor Equity Properties
Ltd.-VIII; and Balcor Equity Properties-XII; and in its capacity as the
controlling shareholder of the general partner of IDS/Balcor Income Partners, A
Real Estate Limited Partnership; announced today that it has received notice of
offers from Walton Street Capital Acquisition Co., L.L.C. to acquire up to 45
percent of the outstanding units of each of these limited partnerships.
Each of the general partners of these partnerships is considering the offers
and expects to respond to its limited partners on or before November 30, 1995.
The Balcor Company is a wholly owned subsidiary of American Express Company.
<PAGE>
REVOLVING PROMISSORY NOTE
("Note")
US $14,000,000.00 June 1, 1992
FOR VALUE RECEIVED, ON DEMAND, the undersigned, BALCOR REALTY
INVESTORS-84, an Illinois limited partnership (hereinafter
referred to as "Borrower"), hereby promises to pay to the order
of THE BALCOR COMPANY, a Delaware corporation (hereinafter
referred to as "Lender"), with its principal office at 4849 Golf
Road, Skokie, Illinois 60077, or at such other place as the
holder hereof may from time to time designate in writing, in
lawful money of the United States of America, the principal sum
of Fourteen Million and no/100 Dollars (S14,000,000.00) or such
lesser amount as may have been disbursed hereunder, together with
interest on the unpaid principal amount hereof from time to time
outstanding, at the rates provided for in Section 1 below. The
entire principal sum hereof, together with all accrued and unpaid
interest thereon shall be due and payable on demand ("Maturity
Date").
1. Interest, Interest Rate and Time of Interest Payments.
(a) "Base Rate" shall mean Lender's average cost of funding as
determined by Lender on a daily basis in any manner deemed
reasonable by Lender and which, at a maximum, shall be a rate per
annum as determined on a daily basis and as designated by Lender
which does not exceed the maximum limit permitted to be charged
by "Affiliates", as such term is defined in, and as permitted
pursuant to, the Borrower's Partnership Agreement in effect prior
to the Maturity Date. The rate of interest which accrues hereon
shall change from time to time concurrently with Lender's average
cost of funding as determined daily by Lender.
(b) "Disbursement Date" shall mean the date on which the initial
disbursement of funds pursuant to this Note occurs.
(c) "Senior Note" shall mean a promissory note or notes secured
by a mortgage or mortgages which is or are senior to this Note
and any mortgage or mortgages securing this Note.
(d) "Senior Mortgage" shall mean a mortgage securing a Senior
Note.
(e) The stated interest rate ("Stated Rate") shall be equal to
the Base Rate.
(f) The amount of monthly interest to be paid each month prior to
the occurrence of any "Event of Default" (as defined in the
"Agreement", which is hereinafter defined) shall be an amount
equal to the lesser of: (1) the amount of interest computed at
the Base Rate on the amount outstanding under this Note or (2)
the amount of Cash Flow (as hereinafter defined) for the
<PAGE>
preceding calendar month. The amount of such monthly interest
shall be referred to as the "Monthly Interest."
(g) Monthly Interest shall be payable in arrears on the fifteenth
day of each month, commencing with the first month following the
Disbursement Date. Interest shall be calculated on the basis of a
360 day year, but shall be computed for the actual number of days
in the period for which interest is charged.
(h) Each month, the difference between the amount of interest at
the Stated Rate and the paid Monthly Interest shall accrue
("Accrued Interest") and become due and payable on the Maturity
Date. However, if the Cash Flow during any calendar month is in
excess of the amount necessary to pay Monthly Interest for that
month, then such excess shall be applied first towards Accrued
Interest and then to principal.
(i) Upon a sale of or refinancing of any real estate owned by the
Borrower (each a "Borrower Property" and collectively, the
"Borrower Properties") or by any partnership in which the
Borrower has an equity interest (each a "Subpartnership" and
collectively the "Subpartnerships") of any real estate which is
owned by such Subpartnership (each a "Subpartnership Property"
and collectively the "Subpartnership Properties"), whether or not
such real estate is subject to any mortgage, deed of trust or
deed to secure debt which secures this Note, the refinancing of
any Superior Note or the refinancing of the indebtedness
evidenced by this Note, the "Net Proceeds" from such sale or
refinancing shall be applied first to Accrued Interest, then to
current interest and then to principal. "Net Proceeds" shall mean
the gross proceeds from the sale or refinancing of a Borrower
Property or a Subpartnership Property minus payment of the
indebtedness of a Senior Note, reasonable brokerage commissions,
points and/or fees paid in the case of a refinancing, title
insurance premiums, attorneys' fees and costs and normal closing
costs and recording fees.
(j) Cash Flow for the Borrower shall mean the sum of:
i. the "Gross Income" for all Borrower Properties less the
"Operating Expenses" for all Borrower Properties in a calendar
month; plus
ii. with respect to each Subpartnership, provided the Gross
Income for the calendar month from the Subpartnership Property
owned by such Subpartnership is greater than Operating Expenses
for such calendar month for such Subpartnership Property, the
Gross Income for such Subpartnership Property for such calendar
month minus the Operating Expenses for such Subpartnership
Property for such calendar month.
Gross Income shall mean all of the income derived from each such
Borrower Property or Subpartnership Property and/or the operation
thereof, including but not limited to, non-refundable security
<PAGE>
deposits, income from concessionaires and laundry equipment
placed in and about each such Borrower Property or Subpartnership
Property. Operating Expenses for a Borrower Property or
Subpartnership Property shall mean the amount necessary to pay
all sums due on a Senior Note and a Senior Mortgage which is a
lien on such Borrower Property or Subpartnership Property, plus
all reasonable operating expenses of such Borrower Property or
Subpartnership Property. For purposes of determining Operating
Expenses for each Borrower Property or Subpartnership Property,
such expenses shall be those which are incurred at market rates,
allocable to the period in question (whether paid or payable),
including management fees (calculated at the lesser of the amount
actually paid or 5% of gross rentals), and equal monthly amounts
for insurance, real estate and personal property taxes or escrow
deposits. All of such Operating Expenses shall be determined
under generally accepted accounting principles, consistently
applied. Cash Flow for any calendar month shall be reduced by all
contributions and advances made by the Borrower to each
Subpartnership whose Subpartnership Property had Operating
Expenses in excess of Gross Income in such calendar month,
provided such contributions or advances shall have been made with
the consent of The Balcor Company (and consent for any month
shall not imply or require that The Balcor Company shall consent
for a subsequent month) and provided the funds for such
contribution or advance resulted from operations of Partnership
Properties or Subpartnership Properties and were not the result
of draws under this Note.
(k) In no event shall the amount paid or agreed to be paid
hereunder exceed the highest lawful rate permissible under
applicable law; and if under any circumstance whatsoever,
fulfillment of any provision of this Note, at the time
performance of such provision shall be due, shall involve
transcending the limit of validity prescribed by applicable law,
then ipso facto, the obligation to be fulfilled shall be reduced
to the limit of such validity, and if from any circumstance the
holder of this Note should receive as interest an amount which
would exceed the highest lawful rate allowable under law, such
amount which would be excessive interest shall be applied to the
reduction of the unpaid principal balance due under this Note and
not to the payment of interest, or if such excess interest
exceeds the unpaid balance of principal, the excess shall be
refunded to Borrower.
2. Issued Under Master Loan and Security Agreement.
Advances under this Note evidence indebtedness incurred upon oral
or written request of the Borrower pursuant to a certain Master
Loan and Security Agreement (the "Agreement") between the
Borrower and the Lender dated as of , 1992, and made a part of
this Note, as the same may be amended from time to time.
3. Demand Nature of Note.
<PAGE>
It is expressly understood and agreed by the Borrower that this
Note matures upon issuance, and the Borrower further acknowledges
and agrees that the Lender, at any time, without notice, and
without reason may demand that this Note be immediately paid in
full. The demand nature of this Note shall not be deemed modified
by reference herein to a default or Event of Default. The
Borrower further acknowledges and agrees that, for purposes of
this Note, to the extent there is reference to an Event of
Default, such reference is for the purpose of permitting the
Lender to receive "Default Interest" (as hereinafter defined) and
to terminate the right of Borrower to limit its interest payments
to Cash Flow. It is expressly agreed that Lender may exercise its
demand rights hereunder whether or not an Event of Default has
occurred. The Borrower further acknowledges and agrees that the
Lender, with or without reason and without notice, may from time
to time make demand for partial payments hereunder and that such
demands shall not preclude the Lender from demanding at any time
that this Note be immediately paid in full.
4. Acceleration and Attorneys' Fees.
If any installment under this Note is not paid when due, the
entire principal amount outstanding hereunder and accrued
interest thereon and the Accrued Interest shall at once become
due and payable, at the option of the Lender. The Lender may
exercise this option to accelerate during any default by the
Borrower regardless of any prior forbearance. In the event of any
default in the payment of this Note, and if the same is referred
to an attorney at law for collection or any action at law or in
equity is brought with respect hereto, the Borrower shall pay the
Lender all expenses and costs, including, but not limited to,
attorneys' fees.
5. Late Charges and Default Interest.
If any installment under this Note is not received by the Lender
within ten (10) calendar days after the installment is due, the
Borrower shall pay to the Lender a late charge of four percent
(4%) of such installment, such late charge to be immediately due
and payable without demand by the Lender. If any installment
under this Note remains past due for ten (10) calendar days or
more, the outstanding principal balance of this Note shall bear
interest "Default Interest") during the period in which the
Borrower is in default at a rate of four percent (4%) per annum
in excess of the Base Rate, or, if such Default Interest may not
be collected from the Borrower under applicable law, then at the
maximum increased rate of interest, if any, which may be
collected from the Borrower under applicable law.
6. Prepayments.
The unpaid principal and Accrued Interest of this Note may be
prepaid in whole or in part without premium or penalty.
Prepayments shall be applied against the outstanding principal
<PAGE>
balance of this Note and shall not extend or postpone the due
date of any subsequent monthly installments or change the amount
of such installments, unless the Lender shall agree otherwise in
writing.
7. Modifications.
From time to time, without affecting the obligation of the
Borrower or its successors or assigns to pay the outstanding
principal balance of this Note and observe the covenants of the
Borrower contained herein, without affecting the guaranty of any
person, corporation, partnership or other entity for payment of
the outstanding principal balance of this Note, without giving
notice to or obtaining the consent of the Borrower, the
successors or assigns of the Borrower or guarantors, and without
liability on the part of the Lender, the Lender may, at its
option, extend the time for payment of said outstanding principal
balance or any part thereof, reduce the payments thereon, release
anyone liable on any of said outstanding principal balance,
accept a renewal of this Note, modify the terms and time of
payment of said outstanding principal balance, join in any
extension or subordination agreement, release any security given
therefor, take or release other or additional security, and agree
in writing with the Borrower to modify the rate of interest of
this Note or change the amount of the monthly installments
payable hereunder.
8. Waivers.
Presentment, notice of dishonor, and protest are hereby waived by
all makers, sureties, guarantors and endorsers hereof. This Note
shall be the joint and several obligation of all makers,
sureties, guarantors and endorsers, and shall be binding upon
them and their successors and assigns.
9. Choice of Law.
This Note was made, executed and delivered in Skokie, Illinois
and shall be governed by the laws of the State of Illinois.
10. Limited Liability in Certain Cases.
So long as the general partner of Borrower is an affiliate of The
Balcor Company, in no event shall any general partner of the
Borrower have any liability for the payment hereof or for any
deficiency which may remain after the enforcement of Lender's
rights and remedies hereunder; provided, however, that if the
general partner of the Borrower is not an affiliate of The Balcor
Company, then such general partner shall be fully liable for
payment hereof, and for any deficiency, and by agreeing to act as
<PAGE>
such general partner, such person agrees to and accepts such
liability.
BALCOR REALTY INVESTORS-84, an
Illinois limited partnership
By: BALCOR PARTNERS-XV
By: RGF-BALCOR ASSOCIATES-II
By: THE BALCOR COMPANY
By: /s/Allan Wood
------------------------
Allan Wood
Executive Vice President
<PAGE>
REVOLVING PROMISSORY NOTE
("Note")
US $2,000,000 October 14, 1993
FOR VALUE RECEIVED, ON DEMAND, the undersigned, Balcor Realty Investors - 84,
an Illinois limited partnership (hereinafter referred to as "Borrower"), hereby
promises to pay to the order of THE BALCOR COMPANY, a Delaware corporation
(hereinafter referred to as "Lender"), with its principal office at 4849 Golf
Road, Skokie, Illinois 60077, or at such other place as the holder hereof may
from time to time designate in writing, in lawful money of the United States of
America, the principal sum of Two million and no/100ths Dollars ($2,000,000) or
such lesser amount as may have been disbursed hereunder, together with interest
on the unpaid principal amount hereof from time to time outstanding, at the
rates provided for in Section 1 below. The entire principal sum hereof,
together with all accrued and unpaid interest thereon shall be due and payable
on demand ("Maturity Date").
1. Interest, Interest Rate and Time of Interest Payments.
(a) "Base Rate" shall mean Lender's average cost of funding as determined by
Lender on a daily basis in any manner deemed reasonable by Lender and which, at
a maximum, shall be a rate per annum as determined on a daily basis and as
designated by Lender which does not exceed the maximum limit permitted to be
charged by "Affiliates", as such term is defined in, and as permitted pursuant
to, the Borrower's Partnership Agreement in effect prior to the Maturity Date.
The rate of interest which accrues hereon shall change from time to time
concurrently with Lender's average cost of funding as determined daily by
Lender.
(b) "Disbursement Date" shall mean the date on which the initial disbursement
of funds pursuant to this Note occurs.
(c) "Senior Note" shall mean a promissory note or notes secured by a mortgage
or mortgages which is or are senior to this Note and any mortgage or mortgages
securing this Note.
(d) "Senior Mortgage" shall mean a mortgage securing a Senior Note.
(e) The stated interest rate ("Stated Rate") she be equal to the Base Rate.
(f) The amount of monthly interest to be paid each month prior to the
occurrence of any "Event of Default" (as defined in the "Agreement", which is
hereinafter defined) shall be an amount equal to the lesser of (1) the amount
of interest computed at the Base Rate on the amount outstanding under this Note
or (2) the amount of Cash Flow (as hereinafter defined) for the preceding
calendar month. The amount of such monthly interest shall be referred to as the
"Monthly Interest."
(g) Monthly Interest shall be payable in arrears on the fifteenth day of each
month, commencing with the first month following the Disbursement Date.
Interest shall be calculated on the basis of a 360 day year, but shall be
computed for the actual number of days in the period for which interest is
charged.
<PAGE>
(h) Each month, the difference between the amount of interest at the Stated
Rate and the paid Monthly Interest shall accrue ("Accrued Interest") and become
due and payable on the Maturity Date. However, if the Cash Flow during any
calendar month is in excess of the amount necessary to pay Monthly Interest for
that month then such excess shall be applied first towards Accrued Interest and
then to principal.
(i) Upon a sale of or refinancing of any real estate owned by the Borrower
(each a "Borrower Property" and collectively, the "Borrower Properties") or by
any partnership in which the Borrower has an equity interest (each a
"Subpartnership" and collectively the "Subpartnerships") of any real estate
which is owned by such Subpartnership (each a "Subpartnership Property" and
collectively the "Subpartnership Properties"), whether or not such real estate
is subject to any mortgage, deed of trust or deed to secure debt which secures
this Note, the refinancing of any Superior Note or the refinancing of the
indebtedness evidenced by this Note, the "Net Proceeds" from such sale or
refinancing shall be applied first to Accrued Interest, then to current
interest and then to principal. "Net Proceeds" shall mean the gross proceeds
from the sale or refinancing of a Borrower Property or a Subpartnership
Property minus payment of the indebtedness of a Senior Note, reasonable
brokerage commissions, points and/or fees paid in the case of a refinancing,
title insurance premiums attorneys' fees and costs and normal closing costs and
recording fees.
j) Cash Flow for the Borrower shall mean the sum of:
i. the "Gross Income" for all Partnership Properties less the "Operating
Expenses" for all Partnership Properties in a calendar month; plus
ii. with respect to each Subpartnership, provided the Gross Income for the
calendar month from the Subpartnership Property owned by such Subpartnership is
greater than Operating Expenses for such calendar month for such Subpartnership
Property, the Gross Income for such Subpartnership Property for such calendar
month minus the Operating expenses for such Subpartnership Property for such
calendar month.
Gross Income shall mean all of the income derived from each such Borrower
Property or Subpartnership Property and/or the operation thereof, including but
not limited to, non-refundable security deposits, income from concessionaires
and laundry equipment placed in and about each such Borrower Property or
Subpartnership Property. Operating Expenses for a Borrower Property or
Subpartnership Property shall mean the amount necessary to pay all sums due on
a Senior Note and a Senior Mortgage which is a lien on such Borrower
Property or Subpartnership Property, plus all reasonable operating expenses of
such Borrower Property or Subpartnership Property. For purposes of determining
Operating Expenses for each Borrower Property or Subpartnership Property, such
expenses shall be those which are incurred at market rates, allocable to the
period in question (whether paid or payable), including management fees
(calculated at the lesser of the amount actually paid or 5% of gross rentals),
and equal monthly amounts for insurance, real estate and personal property
taxes or escrow deposits. All of such Operating Expenses shall be determined
under generally accepted accounting principles, consistently applied. Cash Flow
for any calendar month shall be reduced by all contributions and advances made
by the Borrower to each Subpartnership whose Subpartnership Property had
Operating Expenses in excess of Gross Income in such calendar month, provided
such contributions or advances shall have been made with the consent of The
<PAGE>
Balcor Company (and consent for any month shall not imply or require that The
Balcor Company shall consent for a subsequent month) and provided the funds for
such contribution or advance resulted from operations of Partnership Properties
or Subpartnership Properties and were not the result of draws under this Note.
(k) In no event shall the amount paid or agreed to be paid hereunder exceed the
highest lawful rate permissible under applicable law; and if under any
circumstance whatsoever, fulfillment of any provision of this Note, at the time
performance of such provision shall be due, shall involve transcending the
limit of validity prescribed by applicable law, then ipso facto, the obligation
to be fulfilled shall be reduced to the limit of such validity, and if from any
circumstance the holder of this Note should receive as interest an amount which
would exceed the highest lawful rate allowable under law, such amount which
would be excessive interest shall be applied to the reduction of the unpaid
principal balance due under this Note and not to the payment of interest, or if
such excess interest exceeds the unpaid balance of principal, the excess shall
be refunded to Borrower.
2. Issued Under Master Loan and Security Agreement.
Advances under this Note evidence indebtedness incurred upon oral or written
request of the Borrower pursuant to a certain Master Loan and Security
Agreement (the "Agreement") between the Borrower and the Lender dated as of
October 14, 1993, and made a part of this Note, as the same may be amended from
time to time.
3. Demand Nature of Note.
It is expressly understood and agreed by the Borrower that this Note matures
upon issuance, and the Borrower further acknowledges and agrees that the
Lender, at any time, without notice, and without reason may demand that this
Note be immediately paid in full. The demand nature of this Note shall not be
deemed modified by reference herein to a default or Event of Default. The
Borrower further acknowledges and agrees that, for purposes of this Note, to
the extent there is reference to an Event of Default, such reference is for the
purpose of permitting the Lender to receive "Default Interest" (as hereinafter
defined) and to terminate the right of Borrower to limit its interest payments
to Cash Flow. It is expressly agreed that Lender may exercise its demand rights
hereunder whether or not an Event of Default has occurred. The Borrower further
acknowledges and agrees that the Lender, with or without reason and without
notice, may from time to time make demand for partial payments hereunder and
that such demands shall not preclude the Lender from demanding at any time that
this Note be immediately paid in full.
4. Acceleration and Attorneys' Fees.
If any installment under this Note is not paid when due, the entire principal
amount outstanding hereunder and accrued interest thereon and the Accrued
Interest shall at once become due and payable, at the option of the Lender. The
Lender may exercise this option to accelerate during any default by the
Borrower regardless of any prior forbearance. In the event of any default in
the payment of this Note, and if the same is referred to an attorney at law for
collection or any action at law or in equity is brought with respect hereto,
the Borrower shall pay the Lender all expenses and costs, including, but not
limited to, attorneys' fees.
5. Late Charges and Default Interest.
<PAGE>
If any installment under this Note is not received by the Lender within ten
(10) calendar days after the installment is due, the Borrower shall pay to the
Lender a late charge of four percent (4%) of such installment, such late charge
to be immediately due and payable without demand by the Lender. If any
installment under this Note remains past due for ten (10) calendar days or
more, the outstanding principal balance of this Note shall bear interest
"Default Interest") during the period in which the Borrower is in default at a
rate of four percent (4%) per annum in excess of the Base Rate, or, if such
Default Interest may not be collected from the Borrower under applicable law,
then at the maximum increased rate of interest, if any, which may be collected
from the Borrower under applicable law.
6. Prepayments.
The unpaid principal and Accrued Interest of this Note may be prepaid in whole
or in part without premium or penalty. Prepayments shall be applied against the
outstanding principal balance of this Note and shall not extend or postpone the
due date of any subsequent monthly installments or change the amount of such
installments, unless the Lender shall agree otherwise in writing.
7. Modifications.
From time to time, without affecting the obligation of the Borrower or its
successors or assigns to pay the outstanding principal balance of this Note and
observe the covenants of the Borrower contained herein, without affecting the
guaranty of any person, corporation, partnership or other entity for payment of
the outstanding principal balance of this Note, without giving notice to or
obtaining the consent of the Borrower, the successors or assigns of the
Borrower or guarantors, and without liability on the part of the Lender, the
Lender may, at its option, extend the time for payment of said outstanding
principal balance or any part thereof, reduce the payments thereon, release
anyone liable on any of said outstanding principal balance, accept a renewal of
this Note, modify the terms and time of payment of said outstanding principal
balance, join in any extension or subordination agreement, release any security
given therefor, take or release other or additional security, and agree in
writing with the Borrower to modify the rate of interest of this Note or change
the amount of the monthly installments payable hereunder.
8. Waivers.
Presentment, notice of dishonor, and protest are hereby waived by all makers,
sureties, guarantors and endorsers hereof. This Note shall be the joint and
several obligation of all makers, sureties, guarantors and endorsers, and shall
be binding upon them and their successors and assigns.
9. Choice of Law.
This Note was made, executed and delivered in Skokie, Illinois and shall be
governed by the laws of the State of Illinois.
10. Limited Liability in Certain Cases.
So long as the general partner of Borrower is an affiliate of The Balcor
Company, in no event shall any general partner of the Borrower have any
<PAGE>
liability for the payment hereof or for any deficiency which may remain after
the enforcement of Lender's rights and remedies hereunder, provided, however,
that if the general partner of the Borrower is not an affiliate of The Balcor
Company, then such general partner shall be fully liable for payment hereof,
and for any deficiency, and by agreeing to act as such general partner, such
person agrees to and accepts such liability.
Balcor Realty Investors - 84
an Illinois limited partnership
By: Balcor Partners - XV, its general partner
By: RGF-Balcor Associates-II, a partner
By: The Balcor Company, a partner
By: /s/Allan Wood
------------------------
Allan Wood
Executive Vice President
<PAGE>
MASTER LOAN AND SECURITY AGREEMENT
THIS MASTER LOAN AND SECURITY AGREEMENT ("Agreement"), dated as of the 1st day
of June, 1992, by and between THE BALCOR COMPANY, a Delaware corporation, with
its principal place of business at 4849 Golf Road, Skokie, Illinois 60077, or
any Affiliate (as hereinafter defined) of The Balcor Company who shall join in
this Agreement and make any advance, on behalf of The Balcor Company, pursuant
to this Agreement (the "Lender"), and Balcor Realty Investors - 84, an Illinois
limited partnership (the "Principal Partnership"), with its principal place of
business at 4849 Golf Road, Skokie, Illinois 60077.
RECITALS
A. Lender has made or may in the future make advances to, or has guaranteed or
may in the future guarantee the obligations of the Principal Partnership from
time to time; and
B. The Principal Partnership has made or may make advances to one or more of
its subpartnerships, using funds provided by the Lender; and
C. The Principal Partnership and Lender wish to formalize their arrangement
regarding advances and enter into this Agreement to cover all advances,
including those previously made and those which may be made in the future; and
D. All current advances are payable on demand, and to induce Lender to forego,
on the date hereof, demand on such advances, and to provide security to Lender
for advances previously made and for additional advances which may be made in
the future, the Principal Partnership and/or one or more subpartnerships will
pledge certain assets as security for Borrower's Liabilities (as hereinafter
defined); and
E. The parties anticipate that upon request by the Principal Partnership from
time to time, Lender may at its sole option and in its sole and absolute
discretion make advances to the Principal Partnership directly, or to one or
more subpartnerships of the Principal Partnership, it being understood that
Lender may refuse to make any additional advances and may call as due and
payable any amounts owing hereunder for any or no reason;
NOW THEREFORE, in consideration of any loan, advance, extension of credit,
letter of credit, guarantee and/or other financial accommodation at any time
made by Lender to or for the benefit of the Principal Partnership, and of the
promises set forth herein, the parties hereto agree as follows:
1. DEFINITIONS AND TERMS.
1.1 The following words, terms and/or phrases shall have the meanings set forth
thereafter and such meanings shall be applicable to the singular and plural
form thereof, giving effect to the numerical difference; whenever the context
so requires, the use of "it" in reference to Borrower shall mean "Borrower" as
hereinafter defined:
(A) "Accounts": the definition ascribed to this term in Paragraph 4.1 below.
(B) "Affiliate": any "Person" (hereinafter defined) (i) in which Borrower, one
or more partners of Borrower, one or more equity interest holders of Borrower,
any "Subsidiary" (hereinafter defined), and/or any "Parent" (hereinafter
defined), individually, jointly and/or severally, now or at any time or times
<PAGE>
hereafter, has or have an equity or other ownership interest equal to or in
excess of five percent (5%) of the total equity of or other ownership interest
in such Person; and/or (ii) which directly or indirectly through one or more
intermediaries controls or is controlled by, or is under common control with
Borrower. For purposes of this definition, control shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of
Partnership Interests, "Stock" (hereinafter defined), by contract or otherwise.
Notwithstanding the foregoing, unless the context otherwise requires, neither
Lender, nor any affiliate of Lender (other than a Person who is an affiliate of
Lender solely because of his interest in Borrower, and who, if he had no
interest in Borrower, would not be an affiliate of Lender) shall be deemed to
be an Affiliate of Borrower hereunder.
(C) "Agreement": this Master Loan and Security Agreement.
(D) "And/or": one or the other or both, or any one or more or all, of the
things or Persons in connection with which the conjunction is used.
(E) "Base Rate": a rate of interest per annum which at a minimum shall be equal
to Lender's average cost of funding as determined by Lender on a daily basis in
any manner deemed reasonable by Lender and which, at a maximum shall be a rate
per annum as determined on a daily basis and as designated by Lender which does
not exceed the maximum limit permitted to be charged by "Affiliates", as such
term is defined in, and as permitted pursuant to, the Borrower's Partnership
Agreement, as amended from time to time.
(F) "Borrower": the Principal Partnership.
(G) "Borrower's Liabilities": all obligations and liabilities of Borrower to
Lender (including, without limitation, all debts, claims and indebtednesses)
whether primary, secondary, direct, contingent, fixed or otherwise, heretofore,
now and/or from time to time hereafter owing, due or payable, however
evidenced, created, incurred, acquired or owing and however arising, whether
under this Agreement or the "Other Agreements" (hereinafter defined), or by
oral agreement or operation of law or otherwise.
(H) "Borrower's Obligations": all terms, conditions, warranties,
representations, agreements, undertakings, covenants and provisions (other than
Borrower's Liabilities) to be performed, discharged, kept, observed or complied
with by Borrower pursuant to this Agreement and/or any of the Other Agreements.
(I) "Charges": all national, federal, state, county, city, municipal and/or
other governmental (or any instrumentality, division, agency, body or
department thereof, including, without limitation, the Pension Benefit Guaranty
Corporation) taxes, levies, assessments, charges, liens, claims or encumbrances
upon and/or relating to the Collateral (hereinafter defined), Borrower's
Liabilities, Indebtedness (hereinafter defined), Borrower's Obligations,
Borrower's business, Borrower's ownership and/or use of any of its assets,
and/or Borrower's income and/or gross receipts.
(J) "Collateral": the definition ascribed to this term in Paragraph 4.1 below.
(K) "Equipment": the definition ascribed to this term in Paragraph 4.1 below.
(L) "Event of Default": the definition ascribed to this term in Paragraph 12.1
below.
<PAGE>
(M) "Financials": those financial statements of Borrower heretofore or
concurrently herewith delivered by or on behalf of Borrower to Lender.
(N) "General Intangibles": the definition ascribed to this term in Paragraph
4.1 below.
(O) "Guarantor": any Person which has guaranteed or hereafter guarantees to
Lender the payment, collection or performance of all or any portion of
Borrower's Liabilities and/or Borrower's Obligations, and/or has granted or
hereafter grants to Lender a security interest in, or lien or encumbrance upon,
some or all of such Person's real and/or personal property to secure the
payment and/or performance of all or any portion of Borrower's Liabilities
and/or Borrower's Obligations.
(P) "Hazardous Material": any hazardous substance, or any pollutant or
contaminant defined as such in (or for purposes of) the Comprehensive
Environmental Response Compensation and Liability Act of 1980 or any other
applicable local, state or federal environmental protection, health or safety
statute, law, ordinance, code, rule or regulation relating to or imposing
liability or standards concerning hazardous, toxic or dangerous waste,
substance, material, smoke, gas or particulate matter, as now or at any time
hereafter in effect, or any other hazardous, toxic or dangerous waste,
substance or material, including, without limitation, asbestos, polychlorinated
biphenyls, petroleum, including crude oil or any fraction thereof which is
liquid at standard conditions of temperature or pressure, and any radioactive
material in any form or condition.
(Q) "Indebtedness": all obligations and liabilities of Borrower to any Person
other than Lender (including, without limitation, all debts, claims and
indebtedness) whether primary, secondary, direct, contingent, fixed or
otherwise, heretofore, now and/or from time to time hereafter owing, due or
payable, however evidenced, created, incurred, acquired or owing and however
arising, whether under written or oral agreement, by operation of law, or
otherwise. Indebtedness includes, without limiting the generality of the
foregoing: (i) obligations or liabilities of any Person that are secured by any
lien, claim, encumbrance or security interest upon property owned by Borrower
even though Borrower has not assumed or become liable for the payment therefor;
and (ii) obligations or liabilities created or arising under any lease of real
or personal property, or conditional sale or other title retention agreement
with respect to property used and/or acquired by Borrower, even though the
rights and remedies of the lessor, seller and/or lender thereunder are limited
to repossession of such property.
(R) "Loans": any and all loans, advances, extensions of credit, letters of
credit, guarantees and/or other financial accommodations of any kind or nature
made by Lender at any time to, for the benefit or at the request of Borrower
pursuant to this Agreement and/or any of the Other Agreements.
(S) "Mortgages": the Mortgage, Mortgages, Deed of Trust or Deeds of Trust, Deed
to Secure Debt and Deeds to Secure Debt in the forms acceptable to Lender, and
any other Mortgages, Deeds of Trust or Deeds to Secure Debt given by Borrower
to Lender at any time or from time to time hereafter.
(T) "Obligor": any Person who is and/or may become obligated to Borrower under
or on account of Accounts.
<PAGE>
(U) "Other Agreements": all agreements, instruments and documents, including,
without limitation, bond agreements, loan agreements, security agreements,
guaranties, mortgages, deeds of trust, deeds to secure debt, notes,
applications and agreements for letters of credit, letters of credit, advices
of credit, banker's acceptances, pledges, powers of attorney, consents,
assignments, contracts, notices, leases, financing statements and all other
written matter heretofore, now and/or from time to time hereafter executed by
and/or on behalf of Borrower and delivered to Lender, or issued by Lender upon
the application and/or other request of, and on behalf of, Borrower.
(V) "Parent": any Person, now or at any time or times hereafter, owning or
controlling (alone or with Borrower, any Subsidiary and/or any other Person) at
least a majority of the issued and outstanding Stock or other ownership
interest of Borrower or any Subsidiary (hereinafter defined). For purposes of
this definition, control shall have the same meaning ascribed to this term in
Subparagraph 1.1(B) above.
(W) "Partnership Interest": any right, title and interest, direct or indirect,
including general partnership interests, limited partnership interests, rights
to receive profits, proceeds or distributions.
(X) "Person": any individual, sole proprietorship, partnership, joint venture,
trust, unincorporated organization, association, corporation, institution,
entity, party or government (whether national, federal, state, county, city,
municipal or otherwise, including without limitation any instrumentality,
division, agency, body or department thereof).
(Y) "Real Property": the definition ascribed to this term in Paragraph 4.1
below.
(Z) "Records": the definition ascribed to this term in Paragraph 4.1 below.
(AA) "Revolving Loan": any one or more Loans made or to be made by Lender to
Borrower from time to time pursuant to Paragraph 3.1.
(AB) "Revolving Note": the Revolving Promissory Note attached hereto as Exhibit
A, in the form to be hereafter executed and delivered by Borrower in favor of
Lender.
(AC) "Stock": all shares, interests, participations or other equivalents
(however designated) of or in a corporation, whether or not voting, including,
but not limited to, common stock, warrants, preferred stock, convertible
debentures and all agreements, instruments and documents convertible, in whole
or in part, into any one or more or all of the foregoing.
(AD) "Subsidiary": (i) with respect to any Person who is a corporation, any
Person at least a majority of whose issued and outstanding Stock or other
ownership interests now or at any time hereafter is owned by Borrower and/or
one or more Subsidiaries, (ii) with respect to any Person who is a partnership,
any Person, a majority of whose interests are owned, directly or indirectly, by
the Principal Partnership.
(AE) "Supplemental Documentation": the definition ascribed to this term in
Paragraph 4.2 below.
<PAGE>
1.2 Except as otherwise defined in this Agreement or the Other Agreements, all
words, terms and/or phrases used herein and therein shall be defined by the
applicable definition therefor (if any) in the Uniform Commercial Code as
adopted by the State of Illinois.
1.3 Any accounting terms which are used in this Agreement which are not
specifically defined herein shall have the meanings customarily given them in
accordance with generally accepted accounting principles.
2. LOAN: GENERAL TERMS
2.1 Except as otherwise provided in notes or other instruments issued and/or
made by Borrower to Lender specifically containing provisions in conflict with
this Paragraph (in which event the conflicting provisions of said notes or
other instruments shall govern and control) that portion of Borrower's
Liabilities consisting of: (a) principal payable on account of any Loan shall
be payable by Borrower to Lender, on demand; (b) costs, fees and expenses
payable by Borrower to Lender shall be payable to Lender or to such other
Person or Persons designated by Lender, on demand; (c) interest payable by
Borrower to Lender shall be payable by Borrower monthly, and prior to demand,
only if and to the extent that Borrower's cash flow for any month shall exceed
Borrower's expenses and debt service for such month; and (d) the balance of
Borrower's Liabilities, if any, shall be payable by Borrower to Lender on
demand. All of such payments to Lender shall be payable at Lender's principal
place of business specified at the beginning of this Agreement or at such other
place or places as Lender may designate in writing to Borrower. All of such
payments to Persons other than Lender shall be payable at such place or places
as Lender may designate in writing to Borrower.
2.2 Any Loan may or may not (at Lender's sole and absolute discretion) be
evidenced by additional notes or other instruments issued or made by Borrower
to Lender. Where any Loan is not so evidenced, it shall be evidenced solely by
entries upon the ledgers, books, records and/or computer records of Lender
maintained for that purpose.
2.3 All of Borrower's Liabilities shall constitute one obligation secured by
Lender's security interest, lien or encumbrance in or upon the Collateral and
by all other security interests, liens, claims and encumbrances heretofore, now
and/or from time to time hereafter granted by Borrower and/or any Guarantor to
Lender.
2.4 Borrower warrants and represents to Lender that Borrower shall use the
proceeds of each Loan solely for business purposes and consistently with all
applicable laws and statutes. Borrower further warrants and represents to
Lender and covenants with Lender that Borrower is not in the business of
extending credit for the purpose of purchasing or carrying margin Stock (within
the meaning of Regulation U issued by the Board of Governors of the Federal
Reserve System), and no proceeds of the Loan will be used to purchase or carry
any margin Stock or to extend credit to others for the purpose of purchasing or
carrying any margin Stock.
2.5 Notwithstanding anything contained in this Agreement or the Other
Agreements to the contrary, the principal portion of Borrower's Liabilities
outstanding at any one time shall not exceed in the aggregate the principal
amount of the applicable Revolving Note. Lender, in its sole and absolute
<PAGE>
discretion, at any time and from time to time, may suspend the restrictions
imposed in this Paragraph.
2.6 Borrower hereby authorizes and directs Lender to disburse, for and on
behalf of Borrower and for Borrower's account, the proceeds of any Loans to
such Person or Persons as Borrower or any Person specified in Paragraph 14.12
of this Agreement shall direct, whether in writing or orally.
2.7 Borrower shall pay to Lender as part of Borrower's Liabilities, on demand,
any and all charges asserted by a bank or other institution against Lender for
or with respect to Lender's forwarding to Borrower or at the direction of
Borrower of proceeds of any Loans or for or with respect to Lender's depositing
for collection any check or item of payment received and/or delivered to Lender
on account of Borrower's Liabilities.
2.8 Lender, in its sole and absolute discretion, without notice thereof to
Borrower, may disburse any or all proceeds of any Loan to pay any costs,
expenses or other amounts required to be paid by Borrower hereunder and not so
paid, and/or to pay any Person as Lender deems necessary to insure that the
security interest, lien or other encumbrance granted to Lender in the
Collateral shall at all times have the priority represented and covenanted in
this Agreement and the Other Agreements. All monies so disbursed by Lender
shall be a part of Borrower's Liabilities, payable by Borrower to Lender on
demand.
2.9 Borrower's Liabilities shall bear interest at the rate specified in any
note or other instrument evidencing the same, or, in the absence thereof, at a
daily rate equal to the daily rate equivalent (computed on the basis of a 360
day year and charged for actual days elapsed) at the Base Rate. The foregoing
rate of interest shall fluctuate hereafter from time to time concurrently with
and in an amount equal to each increase or decrease in the Base Rate.
2.10 Lender shall have no obligation to make any advance to Borrower hereunder.
This Agreement shall be in effect until terminated by Lender at any time in its
sole and absolute discretion, or until terminated by Borrower at any time when
Borrower's Liabilities are equal to zero dollars ($0). On or before the
termination date, Borrower shall pay to Lender, in full, in cash or by
certified or cashier's check, Borrower's Liabilities.
3. LOAN: DISBURSEMENTS
3.1 Lender may, in its sole and absolute discretion, upon the request of
Borrower, loan to Borrower on a revolving credit basis (the "Revolving Loan")
up to the maximum principal amount of the Revolving Note. In no event shall
Lender be required to advance any amounts hereunder and Lender shall have the
right to evaluate each and every request for each extension of credit or
advance hereunder. Notwithstanding anything in this Paragraph 3.1 to the
contrary, Lender may at any time and from time to time, in Lender's sole and
absolute discretion, loan to Borrower more than the above stated amount,
without notice to any Guarantor or any other Person which might be liable to
Lender on account of Borrower's Liabilities and/or Borrower's Obligations,
provided, however, that any such over advance shall not establish a custom or
course of dealing or entitle Borrower to any subsequent over advance under the
same or different circumstances. The indebtedness of Borrower under a Revolving
Loan shall be evidenced by a Revolving Note.
<PAGE>
4. COLLATERAL: GENERAL TERMS
4.1 To secure the prompt payment to Lender of Borrower's Liabilities and the
prompt, full and faithful performance by Borrower of Borrower's Obligations,
Borrower hereby grants to Lender a security interest in and to, and assigns and
pledges to Lender, all of Borrower's now existing and/or owned and hereafter
arising and/or acquired: (a) Real Property of Borrower, now owned or hereafter
acquired and all rights and interests therein, including, without limitation,
all land and buildings, structures and other improvements and chattels now on
such real estate or hereafter erected or placed thereon, all mineral, oil and
gas rights, all shrubbery, trees and crops and/or produce growing, grown or
produced thereon, all air, water and riparian rights, whether or not
appurtenant, all water stock, all easements, tenements, hereditaments,
appurtenances, all rights in any abutting public or private streets and alleys
and submerged land (the "Real Property"); (b) notes, assignments of rents,
mortgages, deeds of trust, deeds to secure debt, security agreements, chattel
mortgages, financing statements, and similar items described in Paragraphs 7.1
and 7.2 hereof (collectively, "Loan Packages"); (c) all of Borrower's
Partnership Interests, (including, without limitation, all of Borrower's
Partnership Interests in all of those partnerships listed on Exhibit B); (d)
accounts, chattel paper, contract rights, leases and rental income thereunder,
leasehold interests, rents, letters of credit, instruments and documents
("Accounts"), and all goods whose sale, lease or other disposition by Borrower
have given rise to Accounts and have been returned to or repossessed or stopped
in transit by Borrower; (e) all patents, copyrights and trademarks, and all
applications for and registrations of the foregoing, all franchise rights,
tradenames, goodwill, beneficial interests, rights to tax refunds and all other
general intangibles of any kind or nature whatsoever ("General Intangibles");
(f) all inventory of Borrower, wherever located, whether intransit, held by
others for Borrower's account, covered by warehouse receipts, purchase orders
and contracts, or in the possession of any carriers, forwarding agents,
truckers, warehousemen, vendors or other Persons, including, without
limitation, all raw materials, work in process, finished merchandise, supplies,
goods, incidentals, office supplies and packaging materials ("Inventory"); (g)
goods (other than Inventory), machinery, equipment, vehicles, appliances,
furniture, furnishings and fixtures ("Equipment"); (h) monies, reserves,
deposits, certificates of deposit and deposit accounts and interest or
dividends thereon, securities, cash, cash equivalents and other property now or
at any time or times hereafter in the possession or under the control of Lender
or its bailee; (i) all books, records, computer records, ledger cards, programs
and other computer materials, customer and supplier lists, invoices, orders and
other property and general intangibles at any time evidencing or relating to
Collateral ("Records"); (j) all accessions to any of the Collateral and all
substitutions, renewals, improvements and replacements of and additions
thereto; (k) all insurance policies insuring, or proceeds of or relating to,
any of the foregoing; (l) all present and future judgments, awards of damage
and settlements made as a result of or in lieu of any taking of any of the
Collateral, or any part thereof, under the power of eminent domain, or for any
damage (whether caused by such taking or otherwise); and (m) all other property
of Borrower, real and/or personal, now owned or hereafter acquired; (n) all
products and proceeds of the foregoing (whether such proceeds are in the form
of cash, cash equivalents, proceeds of insurance policies, Real Estate,
Accounts, General Intangibles, Inventory, Equipment, Records or otherwise). All
of the foregoing is referred to herein individually and collectively as the
"Collateral." Borrower shall make appropriate entries upon its financial
statements and Records disclosing Lender's security interest in and assignment
and pledge of the Collateral.
<PAGE>
4.2 Borrower shall execute and/or deliver to Lender, at any time and from time
to time hereafter at the request of Lender, all agreements, instruments,
documents and other written matter (the "Supplemental Documentation") that
Lender reasonably may request, in form and substance acceptable to Lender, to
perfect and maintain perfected Lender's security interest, lien and/or
encumbrance in and/or assignment and pledge of the Collateral and to consummate
the transactions contemplated in or by this Agreement and the Other Agreements.
Borrower, irrevocably, hereby appoints Lender (and all Persons designated by
Lender for that purpose) as Borrower's true and lawful agent and
attorney-in-fact to sign the name of Borrower on the Supplemental Documentation
and to deliver the Supplemental Documentation to such Persons as Lender, in its
sole and absolute discretion, may elect. Borrower agrees that a carbon,
photographic or photostatic copy, or other reproduction, of this Agreement or
of any financing statement, shall be sufficient as a financing statement.
4.3 Lender (by any of its officers, employees and/or agents) shall have the
right, at any time or times during Borrower's usual business hours, to inspect
the Collateral (and the premises upon which it is located) and all related
Records and to verify the amount and condition of or any other matter relating
to the Collateral. All costs, fees and expenses incurred by Lender, or for
which Lender becomes obligated, in connection with such inspection and/or
verification shall constitute part of Borrower's Liabilities, payable by
Borrower to Lender on demand.
4.4 Borrower hereby warrants and represents to and covenants with Lender that:
(a) Lender's security interest in the Collateral is now and at all times
hereafter shall have a first priority, except for any permanent financing
secured by the Collateral, which may have priority over Lender's security
interest in the Collateral and except as permitted under Paragraph 10.2(a); (b)
the principal place of business of Borrower in Illinois is the location
specified at the beginning of this Agreement, and Borrower has no other offices
or locations and does not keep Collateral at any other office or location
except at the location of any of Borrower's Real Property and Borrower shall
not remove the Records and/or the Collateral from its principal place of
business and shall not keep any of such Records and/or the Collateral at any
other office or location unless Borrower gives Lender written notice thereof at
least thirty (30) days prior thereto and the same is within the continental
United States of America. Borrower, by written notice delivered to Lender at
least thirty (30) days prior thereto, shall advise Lender of Borrower's opening
of any new office or place of business or its closing of any then existing
office or place of business and any new office or place of business shall be
within the continental United States of America.
4.5 Lender, in its sole and absolute discretion, without waiving or releasing
any of Borrower's Obligations or any Event of Default, may at any time or times
hereafter, but shall be under no obligation to, pay, acquire and/or accept an
assignment of any security interest, lien, encumbrance or claim asserted by any
Person against the Collateral. All sums paid by Lender in respect thereof and
all costs, fees and expenses, including reasonable attorneys' fees, court
costs, expenses and other charges relating thereto incurred by Lender or for
which Lender becomes obligated on account thereof shall be part of Borrower's
Liabilities payable by Borrower to Lender on demand.
4.6 Immediately upon Borrower's receipt of that portion of the Collateral
consisting of Loan Packages, chattel paper and/or evidenced by an instrument
<PAGE>
and/or document, Borrower shall mark the same to show that such Collateral is
subject to a security interest in favor of Lender and shall deliver the
original thereof to Lender, together with appropriate endorsement and/or other
specific evidence of assignment thereof to Lender, in form and substance
acceptable to Lender.
4.7 Lender may, in its sole and absolute discretion, retain as additional
Collateral or release to Borrower, from time to time, such portion of the
monies, reserves and proceeds received by Lender with respect to the Collateral
as Lender may determine. All such monies, reserves and proceeds and other
property of Borrower in the possession of Lender or its bailee at any time or
times hereafter are hereby pledged by Borrower to Lender as additional
Collateral hereunder, and, in Lender's sole and absolute discretion, may be
held by Lender until Borrower's Liabilities are paid in full or, at any time,
may be applied by Lender on account of Borrower's Liabilities.
4.8 No authorization given by Lender pursuant to this Agreement or the Other
Agreements to sell any specified portion of Collateral or any items thereof,
and no waiver by Lender in connection therewith shall establish a custom or
constitute a waiver of the prohibition contained in this Agreement against such
sales, with respect to any portion of the Collateral or any item thereof not
covered by said authorization.
4.9 Regardless of the adequacy of any Collateral, any deposits or other sums at
any time credited by or payable or due from Lender or any bailee of Lender to
Borrower, or any monies, cash, cash equivalents, certificates of deposit,
securities, instruments, documents or other assets of Borrower in the
possession or control of Lender or its bailee for any purpose may at any time
be reduced to cash and applied by Lender to, or setoff by Lender against,
Borrower's Liabilities hereunder.
5. COLLATERAL: REAL PROPERTY
5.1 Borrower represents and warrants to Lender that Borrower has good, valid
and indefeasible title and ownership of all Real Property described in each
Mortgage given by Borrower as mortgagor.
5.2 If Borrower shall acquire any Real Property, which Real Property is
adjacent to or contiguous to any Real Property included within the Collateral
and owned by such Borrower, or any right, title or interest in or to any such
Real Property, Borrower shall promptly execute and deliver to Lender a Mortgage
in recordable form, mortgaging such Real Property to Lender, and such property,
and all of Borrower's right, title and interest therein shall be included
within the Collateral.
5.3 Lender's right and interest in the Real Property shall include all of
Borrower's right, title and interest in and to any contract for the sale of any
Real Property, including Borrower's future right or interest in any such
contract, whether now existing or hereinafter arising, and all proceeds from
any such sale.
6. COLLATERAL: EQUIPMENT
6.1 Borrower warrants and represents to Lender that Borrower has good,
indefeasible, and merchantable title, free and clear of all liens, claims and
encumbrances, except for any permanent financing secured by the Collateral and
as permitted under Paragraph 10.2(a), to and ownership of the Equipment
<PAGE>
described and/or listed on the Schedule of Equipment delivered to Lender and/or
located on each of Borrower's places of business specified in Paragraph 4.4
hereof, and on each parcel of Real Property mortgaged hereunder and that
Equipment shall be kept and/or maintained solely thereat.
6.2 Borrower shall keep and maintain the Equipment in good operating condition
and repair and shall make all necessary replacements thereof and renewals
thereto so that the value and operating efficiency thereof shall at all times
be maintained and preserved.
6.3 Borrower, immediately on demand by Lender, shall deliver to Lender any and
all evidence of ownership of, including without limitation, certificates of
title to and applications for title to, any Equipment.
6.4 Borrower shall notify Lender within five (5) business days after it shall
acquire any Equipment covered by certificates of title. With respect to such
newly acquired Equipment, Borrower shall deliver to Lender, simultaneously with
such notice, the certificates of title relating to such Equipment and
appropriate financing statements, if required by applicable law, duly completed
by Borrower, to enable Lender to perfect its lien in such Equipment.
7. COLLATERAL: LOAN PACKAGES
7.1 Borrower shall obtain from any of its subpartnerships to which it shall
extend any loan or credit, or for whose benefit it shall provide any guarantee,
letter of credit or other security or security enhancement (collectively, an
"Accommodation"), a note or notes evidencing the loan, credit or Accommodation
substantially in the form of Exhibit C, a mortgage, deed of trust or deed to
secure debt acceptable to Lender which shall include the provisions set forth
in Exhibit D, and such assignments of rents, security agreements, financing
statements and similar items as Lender may request. All of such mortgages,
deeds of trust or deeds to secure debt shall secure in addition to any loans
and Accommodations made by Borrower to such subpartnership, the loans and
Accommodations made by Borrower to each and every other subpartnership, then
existing or thereafter arising, and all modifications, extensions, advances and
refinancings thereof, and each such note, mortgage, deed of trust, deed to
secure debt, assignment of rents, security agreement and other instrument or
document evidencing or securing such loan or Accommodation shall provide that
any default by any subpartnership on any Loan Package shall be a default under
each and every other Loan Package.
7.2 Borrower shall obtain from each of its subpartnerships, other than those
described in Paragraph 7.1, a mortgage, deed of trust or deed to secure debt
acceptable to Lender which shall include the provisions set forth on Exhibit D,
and an assignment of rents, security agreement and financing statement, which
shall secure the loans and Accommodations made by Borrower to each and every
other subpartnership, then existing or thereafter arising, and all
modifications, extensions, advances and refinancings thereof, and each such
mortgage, deed of trust or deed to secure debt shall provide that any default
by any subpartnership on any Loan Package shall be a default thereunder.
7.3 Borrower represents and warrants to Lender that it has good, valid and
marketable title to all of the Loan Packages, free and clear of any and all
claims, liens and encumbrances.
<PAGE>
7.4 At Lender's request, Borrower shall assign to Lender by recordable document
any and all documents evidencing and securing any loan in a Loan Package, and
cause such assignment to be duly recorded.
7.5 Until otherwise notified by Lender, and provided Borrower is not in default
hereunder, Borrower shall administer the Loan Packages as though they had not
been assigned to Lender hereunder, and Borrower shall be entitled to collect
any and all loans to its subpartnership borrowers, and to exercise any and all
rights under all documents evidencing and securing any and all such loans,
including the taking of any and all legal action to collect such loans.
8. COLLATERAL: PARTNERSHIP INTERESTS
8.1 Borrower represents and warrants to Lender that it has good, valid and
marketable title to all of the Partnership Interests owned by it, free and
clear of any and all claims, liens and encumbrances.
8.2 At Lender's request, Borrower shall notify each partnership in which it
holds a Partnership Interest of the assignment thereof to Lender, and shall use
its best efforts to cause the partnership to record or recognize such
assignment; provided, however, in no event shall Lender act as, or be deemed to
have acted as, a general partner of any such partnership, unless and until
Lender consents to act as a general partner, and signs a document specifically
naming Lender as a general partner and in which Lender specifically consents to
acting as a general partner.
8.3 At Lender's request, Borrower shall execute and deliver to Lender, or file
in the appropriate governmental offices, any and all UCC financing statements
and other comparable instruments to perfect Lender's security interest in the
Partnership Interests.
8.4 Until otherwise notified by Lender, and provided Borrower is not in default
hereunder, Borrower shall be entitled to deal with each of the partnerships in
which Borrower holds a Partnership Interest, as though the Partnership Interest
had not been assigned to Lender hereunder, and Borrower shall be entitled to
collect any and all distributions to Borrower, and to exercise any and all
rights under the applicable partnership agreement.
9. WARRANTIES, REPRESENTATIONS AND COVENANTS: INSURANCE AND
TAXES
9.1 Borrower, at its sole cost and expense, shall furnish or cause to be
furnished to Lender original policies or true and certified copies of insurance
on the Collateral (to the extent coverage is applicable) as follows:
(A) Insurance against loss or damage to Collateral by fire, lightning or
malicious mischief, and such hazards as are now or hereafter included in "All
Risk" coverage and against such other insurable practices which are insured for
property of like kind and character as the Collateral. The amounts of such
insurance shall be equal to one hundred percent (100%) of the full replacement
cost of the improvements located on the Collateral, without deduction for
depreciation, but in no event shall the amount of such insurance be less than
replacement cost, with one hundred percent (100%) coinsurance. Such policies of
insurance shall contain a Replacement Cost Endorsement, an Inflation Guard
Endorsement, an Agreed Amount Endorsement, and such other endorsements as are
required by Lender;
<PAGE>
(B) One hundred percent (100%) rent or business interruption insurance in an
amount equal to not less than one (1) year's rent from any of the Collateral
which is rental property without coinsurance;
(C) Flood insurance in the amount of one hundred percent (100%) replacement
cost of the Collateral if available, but not less than the maximum amounts
available to Borrower under the applicable National Flood Insurance guidelines
as to such portions of the Collateral which is Real Property situated in an
area now or subsequently designated as having special flood and/or mudslide
hazards;
(D) Earthquake insurance as available if the Collateral which is Real Property
is now situated in or subsequently designated as in a seismographic earthquake
zone;
(E) Boiler and machinery insurance to one hundred percent (100%) replacement
cost for boilers, turbines, electrical machinery, and miscellaneous equipment;
(F) At least two million dollars ($2,000,000) per occurrence of comprehensive
general liability insurance on an occurrence form. This requirement may be met
in combination with an umbrella policy with the permission of the Lender;
(G) Increased cost of Demolition and Increased Cost of Construction insurance;
(H) Other insurance as Lender may reasonably require.
All such policies of insurance shall be subject to the reasonable approval of
Lender as to the issuing company or companies, content, amount of coverage,
form and expiration dates. The insurance company or companies chosen must be
licensed in the state in which any of the Collateral insured is located and
must have a minimum rating of A: Class VIII in the most recent issue of Best's
Rating Guide. All insurance policies shall contain a Noncontributory Standard
Mortgagee clause, or its equivalent, and a Lender's Loss Payable Endorsement,
in form and content acceptable to Lender, in favor of Lender. All policies
shall name Lender as an additional insured and contain waiver of subrogation
and mortgagee clauses in favor of Lender. Policies shall also provide for
thirty (30) days written notice to Lender in advance of cancellation of said
policies for any reason for material modification of said policies and then ten
(10) days written notice to Lender in advance of payment of any insurance
claims under said policies to any Person. Renewal policies shall be submitted
to the Lender with paid receipts for the insurance premium fifteen (15) days
prior to expiration each year. The Lender shall have the option, but not the
obligation, to purchase insurance for the Collateral if existing insurance is
not adequate. Borrower, irrevocably, appoints Lender (and all officers,
employees or agents designated by Lender) as Borrower's true and lawful agent
and attorney-in-fact for the purpose of endorsing the name of Borrower on any
check, draft, instrument or other item of payment for the proceeds of such
policies of insurance. Furthermore, Borrower, irrevocably, appoints Lender (and
all officers, employees or agents designated by Lender) as Borrower's true and
lawful agent and attorney-in-fact, from and after an Event of Default, for
purposes of making, settling and adjusting claims under such policies of
insurance, and for making all determinations and decisions with respect to such
policies of insurance. In the event Borrower at any time or times hereafter
shall fail to obtain or maintain any of the policies of insurance required
above or to pay any premium in whole or in part relating thereto, then Lender,
without waiving or releasing any of Borrower's Obligations or any Event of
<PAGE>
Default hereunder, may at any time or times thereafter (but shall be under no
obligation to do so) obtain and maintain such policies of insurance and pay
such premium and take any other action with respect thereto which Lender deems
advisable. All sums so disbursed by Lender, including reasonable attorneys'
fees, court costs, expenses and other charges relating thereto, shall be part
of Borrower's Liabilities, payable by Borrower to Lender on demand.
9.2 Borrower shall pay promptly, when due, all of the Charges, provided,
however, that notwithstanding the foregoing, Borrower may permit or suffer the
Charges to attach to Borrower's assets and may dispute, without prior payment
thereof, the Charges, provided that Borrower, in good faith, shall be
contesting the attachment and enforcement thereof in an appropriate proceeding,
enforcement thereof against any assets of Borrower shall be stayed and
appropriate reserves therefor shall have been established on the Records of
Borrower in accordance with generally accepted accounting principles. In the
event Borrower, at any time or times hereafter, shall fail to pay the Charges
required herein, Borrower shall so advise Lender thereof in writing; Lender
may, without waiving or releasing any of Borrower's Obligations or any Event of
Default hereunder, in its sole and absolute discretion, at any time or times
thereafter, make such payment, or any part thereof, and take any other action
with respect thereto which Lender deems advisable. All sums so paid by Lender
and any expenses, including reasonable attorneys' fees, court costs, expenses
and other charges relating thereto, shall be part of Borrower's Liabilities,
payable by Borrower to Lender on demand.
9.3 Borrower shall require each of its subpartnership borrowers to provide to
Borrower for its benefit as a lender, the insurance described in, and to agree
to the provisions of, Paragraphs 9.1 and 9.2.
10. WARRANTIES REPRESENTATIONS AND COVENANTS: GENERAL
10.1 Except as disclosed in writing to Lender, Borrower warrants and represents
to and covenants with Lender that: (a) Borrower and each Subsidiary of Borrower
is and at all times hereafter shall be a limited partnership duly organized and
existing and in good standing under the laws of the state of its organization
and qualified or licensed to do business and in good standing in all states in
which the laws thereof require Borrower to be so qualified and/or licensed; (b)
Borrower has the right, power and capacity and is duly authorized and empowered
to enter into, execute, deliver and perform this Agreement and the Other
Agreements; (c) the execution, delivery and/or performance by Borrower of this
Agreement and the Other Agreements shall not, by the lapse of time, the giving
of notice or otherwise, constitute a violation of any applicable law or a
breach of any provision contained in Borrower's Agreement of Limited
Partnership or Certificate of Limited Partnership, or contained in any
agreement, instrument or document to which Borrower is now or hereafter a party
or by which it is or may become bound, or result in or require the creation of
any lien, security interest, charge or other encumbrance upon or with respect
to any now owned or hereafter arising or acquired properties of Borrower; (d)
this Agreement and the Other Agreements are and will be the legal, valid and
binding agreements of Borrower enforceable in accordance with their terms,
except as enforcement thereof may be subject to the effect of applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally, and to general principles of equity (regardless of
whether such enforcement is sought in a proceeding in equity or at law); (e)
Borrower has and at all times hereafter shall have good, indefeasible and
merchantable title to and ownership of the Collateral, free and clear of all
liens, claims, security interests and encumbrances except those of Lender, and
<PAGE>
those referred to in Paragraph 10.2(a) below; (f) except for (A) trade payables
arising in the ordinary course of its business since the dates reflected in the
Financials, (B) other accruals similar in nature or type to accruals shown on
the Financials and arising in the ordinary course of its business since the
dates reflected in the Financials (C) Indebtedness disclosed in the Financials,
(D) Borrower's obligations to issuers of letters of credit, and (E) the
Borrower's Liabilities, Borrower has no Indebtedness; (g) Borrower is not
subject to the renegotiation of any government contracts; (h) Borrower
possesses adequate assets, licenses, patents, copyrights, trademarks and
tradenames to continue to conduct its business as previously conducted by it;
(i) Borrower has and is in good standing with respect to all governmental
permits, certificates, consents and franchises necessary to continue to conduct
its business as previously conducted by it and to own or lease and operate its
properties as now owned or leased by it; (j) none of said permits,
certificates, consents or franchises contain any term, provision, condition or
limitation more burdensome than such as are generally applicable to Persons
engaged in the same or similar business as Borrower; (k) Borrower is not a
party to any contract or agreement or subject to any charge, restriction,
judgment, decree or order materially and adversely affecting its business,
property, assets, operations or condition, financial or otherwise; (l) Borrower
is not, and will not be during the term or any renewal term hereof, in
violation of any applicable statute, regulation or ordinance of the United
States of America, of any state, city, town, municipality, county or of any
other jurisdiction, or of any agency thereof, in any respect materially and
adversely affecting its business, property, assets, operations or condition,
financial or otherwise; (m) Borrower has filed or caused to be filed all tax
returns which are required to be filed, and has paid all Charges shown to be
due and payable on said returns or on any assessments made against it or any of
its property, and all other Charges imposed on it or any of its properties by
any governmental authority; (n) the Financials fairly and accurately present
the assets, liabilities and financial conditions and results of operations of
Borrower and such other Persons described therein as of and for the periods
ending on such dates and have been prepared in accordance with federal income
tax requirements or generally accepted accounting principles and such
principles have been applied on a basis consistently followed in all material
respects throughout the periods involved; (o) there has been no material and
adverse change in the assets, liabilities or financial condition of Borrower
since the date of the Financials; and (p) the execution, delivery and
performance by Borrower of this Agreement and/or the Other Agreements will not,
except to the extent caused by independent actions of Lender, impose on or
subject Lender to any liability, whether fixed or contingent, in respect of any
environmental protection or other law, rule or regulation (including, without
limitation, rules and regulations of the United States Environmental Protection
Agency) controlling, governing or relating to the pollution or contamination of
the air, water or land.
10.2 Borrower warrants and represents to and covenants with Lender that
Borrower shall not, without Lender's prior written consent thereto, which
Lender may or may not give in its sole discretion, concurrently or hereafter:
(a) grant a security interest in, assign, sell or transfer any of Borrower's
assets to any Person or permit, grant, or suffer a lien, claim or encumbrance
upon any of Borrower's assets except: (i) liens created by this Agreement and
the Other Agreements; (ii) liens for Charges which are not yet due and payable,
or which are permitted pursuant to Paragraph 9.2 of this Agreement; (iii)
mechanics', materialmen's, bankers', carriers', warehousemen's and similar
liens arising in the ordinary course of business and securing obligations of
Borrower that are not overdue for a period of more than sixty (60) days or are
<PAGE>
being contested in good faith by appropriate proceedings diligently pursued,
provided that in the case of any such contest any such proceedings commenced
for the enforcement of such lien shall have been duly suspended and such
provision for the payment of such liens has been made on the books of Borrower
as may be required by generally accepted accounting principles; (iv) liens
arising in connection with worker's compensation, unemployment insurance, old
age pensions and social security benefits which are not overdue or are being
contested in good faith by appropriate proceedings diligently pursued, provided
that in the case of any such contest any proceedings commenced for the
enforcement of such liens shall have been duly suspended and such provision for
the payment of such liens has been made on the books of Borrower as may be
required by generally accepted accounting principles; (v) liens incurred in the
ordinary course of business to secure the performance of statutory obligations
arising in connection with progress payments or advance payments due under
contracts with the United States Government or any agency thereof entered into
in the ordinary course of business, liens incurred or deposits made in the
ordinary course of business to secure the performance of tenders, statutory
obligations, bids, leases, performance bonds, fee and expense arrangements with
trustees and fiscal agents and other similar obligations (exclusive of
obligations incurred in connection with the borrowing of money or the payment
of the deferred purchase price of property) and liens directly securing appeal
and release bonds, provided that adequate provision for all such obligations
has been made on the books of Borrower in accordance with generally accepted
accounting principles; and (vi) zoning restrictions, easements, licenses,
restrictions on the use of Real Property or minor irregularities in title
thereto, which do not materially detract from the value or impair the use of
such Real Property; (b) permit or suffer any levy, attachment or restraint to
be made affecting any of its assets or the Collateral; (c) permit or suffer any
receiver, trustee or assignee for the benefit of creditors, or any other
custodian to be appointed to take possession of all or any of Borrower's assets
or any of the Collateral; (d) sell all or substantially all of its assets to
any Person; (e) modify, amend or supplement Borrower's Certificate of Limited
Partnership or Agreement of Limited Partnership or similar document; (f) enter
into any transaction not in the ordinary course of business which materially
and adversely affects Borrower's ability to repay Borrower's Liabilities or
Indebtedness, or materially and adversely affects the Collateral; (g) except as
otherwise permitted under the terms of Borrower's partnership agreement as it
may be in effect on the date hereof, other than in the ordinary course of
business, make any investment in the Stock or obligations of any Person,
provided, however, notwithstanding the foregoing, Borrower may make investments
in certificates of deposit of a banking institution having a net worth in
excess of $100,000,000 or in securities of the United States of America or
commercial paper with a P1 (or equivalent) rating (all of the foregoing
maturing within one year); (h) guaranty or otherwise, in any way, become liable
with respect to the obligations or liabilities of any Person, including,
without limitation, by agreement to maintain net worth or working capital, or
to purchase the obligations or property of any such Person, or to furnish funds
to any such Person, directly or indirectly, through the purchase of goods,
supplies or services, or obtain upon its credit the issuance of any letter or
letters of credit for the obligations of any such Person, provided, however,
that the foregoing shall not apply to endorsement of instruments or items of
payment for deposit or collection in the ordinary course of business; (i) make
any material change in Borrower's capital structure or in any of its business
objectives, purposes and operations which might in any way adversely affect the
repayment of Borrower's Liabilities; (j) other than as specifically permitted
in or contemplated by this Agreement, encumber, pledge, mortgage, sell, lease
or otherwise dispose of or transfer, whether by sale, merger, consolidation or
<PAGE>
otherwise, any of Borrower's assets; (k) redeem, retire, purchase or otherwise
acquire, directly or indirectly, any of Borrower's Partnership Interests; (1)
redeem or otherwise acquire any Indebtedness, except as required in accordance
with the express terms of the agreement or instrument creating or evidencing
such Indebtedness, or if such Indebtedness is superior, in right of payment, to
Borrower's Liabilities, and then so long as no Event of Default shall have
occurred or would occur after giving effect thereto; (m) enter into any
transactions, including, without limitation, the purchase, sale or exchange of
property or the rendering of any services, with any Affiliate, or enter into,
assume or suffer to exist any employment, management, administration, advisory
or consulting contract with any Affiliate or any officer, director or partner
of any Affiliate, except a transaction or contract which is in the ordinary
course of business, is otherwise permitted by this Agreement and is upon fair
and reasonable terms no less favorable than would be obtained in a comparable
arms-length transaction with a Person not an Affiliate; (n) distribute any cash
to partners or make any distributions or transfers of Borrower's property or
assets or make any loans, advances and/or extensions of credit to any Persons;
(o) terminate or withdraw from any pension (or similar) plan so as to result in
any material liability or penalty (in the sole opinion of Lender) of Borrower
to the pension plan, pension trustee, Pension Benefit Guaranty Corporation or
otherwise, or permit to occur any Reportable Event or Prohibited Transaction
(as defined in Title IV of the Employee's Retirement Income Security Act of
1974 as the same may be amended and in effect from time to time), or any other
event or condition, which presents a material risk (in the sole opinion of
Lender) of such termination or withdrawal; (p) incur Indebtedness (other than
Borrower's Liabilities) except renewals or extensions of existing Indebtedness
and interest thereon and/or refinancings of existing indebtedness (provided the
same is not increased in connection therewith), and trade payables arising in
the ordinary course of business; (q) except pursuant to this Agreement and the
Other Agreements, issue any power of attorney or other contract or agreement
giving any Person power or control over the day-to-day operations of Borrower's
business; (r) fail to comply in any material respect with any applicable
provision of the Comprehensive Environmental Response Compensation and
Liability Act of 1980 or any other applicable local, state or federal
environmental protection health or safety, statute, health or safety or
regulation relating to or imposing liability or standards concerning Hazardous
Material; (s) purchase, invest in or otherwise acquire, by purchase or capital
or financing lease real estate, machinery, equipment or other fixed assets
which in the aggregate require an expenditure by Borrower in any one fiscal
year of Borrower exceeding, in the aggregate, S100,000.
10.3 Borrower warrants and represents to and covenants with Lender that
Borrower shall do all of the following during the term of this Agreement unless
Lender waives any such requirement in writing: a) pay or discharge or otherwise
satisfy at or before maturity or before the same becomes delinquent, all
Indebtedness, provided, however, that Borrower shall not be required to pay any
Indebtedness which is unsecured while the same is being contested by it in good
faith and by appropriate proceedings so long as Borrower shall have set aside
on its books reserves in accordance with generally accepted accounting
principles with respect thereto and title to any property of Borrower is not
jeopardized; (b) preserve and maintain its existence, rights, privileges and
franchises in the jurisdiction of its organization, and qualify and remain
qualified to do business in each other jurisdiction in which such qualification
is necessary in view of its business or operations; (c) comply with all laws,
rules, regulations and governmental orders (federal, state and local) having
applicability to it or to the business or businesses at any time conducted by
it, where the failure to so comply would have a material adverse effect, either
<PAGE>
individually or in the aggregate, on the business, condition (financial or
otherwise) and assets, operations or prospects of Borrower; (d) duly and
punctually pay and perform each of its obligations under this Agreement and the
Other Agreements in accordance with the terms thereof; and (e) furnish to
Lender, as soon as possible and in any event within five (5) days after
Borrower shall have obtained knowledge of the occurrence of an Event of
Default, the written statement of the Chief Financial Officer of Borrower
setting forth the details of such Event of Default and the action which
Borrower proposes to take with respect thereto.
10.4 Borrower shall require that each subpartnership borrower give to it, as
lender, the representations and warranties, and agree to all of the covenants
contained in Paragraphs 10.1, 10.2, and 10.3.
11. WARRANTIES, REPRESENTATIONS AND COVENANTS: FINANCIAL
STATEMENTS
11.1 Borrower covenants with Lender that Borrower shall keep Records and
prepare financial statements and shall cause to be furnished to Lender, at
Lender's request, the following (all of the foregoing and following to be kept
and prepared at Lender's option, either in accordance with tax accounting or in
accordance with generally accepted accounting principles, applied on a basis
consistent with the Financials unless Borrower's certified public accountants
concur in any changes therein and such changes are consistent with then
generally accepted accounting principles):
(A) As soon as available but not later than ninety (90) days after the close of
each fiscal year of Borrower, a copy of the tax return and, if generally
accepted accounting is requested by Lender or elected by Borrower, a copy of
the annual audit report of Borrower and its Subsidiaries prepared on a
consolidated and consolidating basis in conformity with generally accepted
accounting principles and consisting of a balance sheet of Borrower and its
Subsidiaries as of the end of, and related statements of operations and cash
flow for, such year, together with a reconciliation of capital of Borrower and
its Subsidiaries for such year.
(B) Concurrently with the delivery of the audited financial statements
described in Subparagraph (A) above if required or given, (i) a certificate of
the aforesaid certified public accountants certifying to Lender that based upon
their examination of the affairs of Borrower, performed in connection with the
preparation of said financial statements, they are not aware of the occurrence
or existence of any condition or event which constitutes or upon notice or
lapse of time or both would constitute an Event of Default or, if they are
aware thereof, the nature thereof and (ii) the acknowledgment of such certified
public accountants, in form and substance reasonably acceptable to Lender, to
the effect that the Lender shall be permitted to rely thereupon for purposes of
Paragraph 5535.1 of Chapter 111 of the Illinois Annotated Statutes,
notwithstanding that the Lender is not in privity of contract with Such
certified public accountants in respect of such financial statements.
(C) Such other data and information (financial and otherwise) as Lender, from
time to time, may request bearing upon or related to the Collateral, Borrower's
financial condition and/or results of operations.
11.2 Borrower shall require that each subpartnership borrower give to it, as
lender, the representations and warranties, and agree to all of the covenants
contained in Paragraph 11.1.
<PAGE>
12. DEFAULT
12.1 The occurrence of any one of the following events shall constitute a
default ("Event of Default") under this Agreement: (a) Borrower shall default
in the performance or observance of any of Borrower's Obligations under this
Agreement; (b) if any representation or warranty on the part of Borrower
contained in this Agreement or the Other Agreements, or any document,
instrument or certificate delivered pursuant hereto or thereto shall have been
incorrect in any material respect when made or deemed made; (c) if Borrower
fails to pay Borrower's Liabilities, when due and payable or declared due and
payable; (d) if the Collateral, any Collateral securing the obligations to
Lender of any Guarantor or any other material portion of Borrower's or any such
Guarantor's assets are attached, seized, subjected to a writ of distress
warrant, or are levied upon, or come within the possession of any receiver,
trustee, custodian or assignee for the benefit of creditors and the same is not
terminated or dismissed within twenty (20) days thereafter; (e) if a petition
under any section or chapter of the Bankruptcy Reform Act of 1978, as amended,
or any similar law or regulation shall be filed by Borrower or any Guarantor or
if Borrower or any Guarantor shall make an assignment for the benefit of its
creditors or if any case or proceeding is filed by Borrower or any Guarantor
for its dissolution or liquidation; (f) if Borrower or any Guarantor is
enjoined, restrained or in any way prevented by court order from conducting all
or any material part of its business affairs or if a petition under any section
or chapter of the Bankruptcy Reform Act of 1978, as amended, or any similar law
or regulation is filed against Borrower or any Guarantor or if any case or
proceeding is filed against Borrower or any Guarantor for its dissolution or
liquidation and such injunction, restraint or petition is not dismissed or
stayed within thirty (30) days after the entry or filing thereof; (g) if an
application is made by Borrower or any Guarantor for the appointment of a
receiver, trustee or custodian for the Collateral, any Collateral securing such
Guarantor's obligations to Lender or any other material portion of Borrower's
or such Guarantor's assets; (h) if an application is made by any Person other
than Borrower or any Guarantor for the appointment of a receiver, trustee, or
custodian for the Collateral, any Collateral securing such Guarantor's
obligation's to Lender or any other material portion of Borrower's or such
Guarantor's assets and the same is not dismissed within thirty (30) days after
the application therefor; (i) except as permitted in Paragraph 9.2 above, if a
notice of any Charge is filed of record with respect to all or any of
Borrower's assets, or if any Charge becomes a lien or encumbrance upon the
Collateral or any other of Borrower's assets and the same is not released
within thirty (30) days after the same becomes a lien or encumbrance; (j) if
Borrower is in default in the payment of Indebtedness (other than Borrower's
Liabilities) and such default is declared and is not cured within the time, if
any, specified therefor in any agreement governing the same; (k) the death or
incompetency of any Guarantor (which is an individual), or the appointment of a
conservator for all or any material portion of Borrower's or any such
Guarantor's assets or the Collateral; (l) the occurrence of a default or Event
of Default under any agreement, instrument and/or document executed and
delivered by any Guarantor to Lender, which is not cured within the time, if
any, specified therefor in such agreement, instrument or document; (m) the
occurrence of a default or an Event of Default under any of the Other
Agreements, which is not cured within the time, if any, specified therefor in
such Other Agreement; (n) if one or more judgments or decrees shall be entered
against Borrower, involving, individually, or in the aggregate, a liability of
$25,000 or more and all such judgments or decrees shall not have been vacated,
discharged or stayed pending appeal within thirty (30) days from the entry
<PAGE>
thereof; (o) if this Agreement or any of the Other Agreements shall cease for
any reason to be in full force and effect (other than by reason of the
satisfaction of all of Borrower's Liabilities or voluntary release by Lender of
any Other Agreement) or Borrower or any other Person (other than Lender) shall
disavow its obligations thereunder, or shall contest the validity or
enforceability of any thereof; or (p) if any lien or security interest in any
Collateral or any Collateral securing the obligations of any Guarantor to
Lender shall for any reason cease to be a legal, valid, perfected or
enforceable lien on and security interest in such Collateral or Guarantor's
Collateral (other than by reason of the payment in full of all obligations
secured thereby or voluntary release by the secured party of such Collateral or
Guarantor's Collateral).
12.2 All of Lender's rights and remedies under this Agreement and the Other
Agreements are cumulative and non-exclusive.
12.3 Upon an Event of Default or the occurrence of any one of the events
described in Paragraph 12.1 (notwithstanding Borrower's right to cure the same
thereafter), without notice by Lender to or demand by Lender of Borrower,
Borrower's Liabilities shall be due and payable, forthwith.
12.4 Upon an Event of Default, Lender, in its sole and absolute discretion,
may: (a) exercise any one or more of the rights and remedies accruing to a
secured party under the Uniform Commercial Code of the relevant state or states
and any other applicable law upon default by a debtor; (b) enter, with or
without process of law and without breach of the peace, any premises where the
Collateral is or may be located, and without charge or liability to Lender
therefor seize and remove the Collateral from said premises and/or remain upon
said premises and use the same for the purpose of collecting, preparing and
disposing of the Collateral; and (c) sell or otherwise dispose of the
Collateral at public or private sale for cash or credit, provided, however,
that Borrower shall be credited with the net proceeds of such sale only when
such proceeds are actually received by Lender pursuant to Paragraph 14.1
hereof.
12.5 Upon an Event of Default, Borrower, immediately upon demand by Lender,
shall assemble the moveable Collateral and make it available to Lender at a
place or places to be designated by Lender which are reasonably convenient to
Lender and Borrower. Borrower recognizes that in the event Borrower fails to
perform, observe or discharge any of Borrower's Obligations, no remedy of law
will provide adequate relief to Lender, and agrees that Lender shall be
entitled to temporary and permanent injunctive relief in any such case without
the necessity of proving actual damages.
12.6 Any notice required to be given by Lender of a sale, lease, other
disposition of the Collateral or any other intended action by Lender, deposited
in the United States mail, postage prepaid and duly addressed to Borrower at
its principal place of business specified at the beginning of this Agreement
not less than ten (10) days prior to such proposed action, shall constitute
commercially reasonable and fair notice to Borrower thereof.
12.7 Upon an Event of Default, Borrower agrees that Lender may, if Lender deems
it reasonable, postpone or adjourn any such sale of the Collateral from time to
time by an announcement at the time and place of sale or by announcement at the
time and place of such postponed or adjourned sale, without being required to
give a new notice of sale. Borrower agrees that Lender has no obligation to
preserve rights against prior parties to the Collateral. Further, Borrower
<PAGE>
waives and releases any cause of action and claim against Lender as a result of
Lender's possession, collection or sale of the Collateral, any liability or
penalty for failure of Lender to comply with any requirement imposed on Lender
relating to notice of sale, holding of sale or reporting of sale of the
Collateral, and, to the extent permitted by law, any right of redemption from
such sale.
12.8 In the event Lender seeks possession of the Collateral through replevin or
other court process, Borrower hereby irrevocably waives (a) any bond, surety or
security required as an incident to such possession, and (b) any demand for
possession of the Collateral prior to commencement of any suit or action to
recover possession thereof.
12.9 Upon the occurrence of any one of the events described in Paragraph 12.1
above, notwithstanding Borrower's right to cure the same before it becomes an
Event of Default, Lender, if it determines that the Collateral or the payment
of Borrower's Liabilities is jeopardized, may enforce such of its rights and
remedies under this Article as Lender deems necessary or proper.
13. CONDITIONS PRECEDENT TO DISBURSEMENT
13.1 In no event shall Borrower request that Lender make any advance or
additional or future advances to Borrower unless, in addition to satisfaction
of the conditions set forth in Paragraphs 13.2 and 13.3 hereof, Lender shall
have received (if Lender shall have so requested), prior to any such advance,
the following, duly executed and in form and substance satisfactory to Lender:
(A) a duly executed copy of this Agreement;
(B) the applicable Revolving Note, duly executed by Borrower, payable to the
order of Lender;
(C) the applicable Mortgage;
(D) UCC-l Financing Statements, duly executed by Borrower, showing Borrower as
Debtor, in favor of Lender, as Secured Party, in the jurisdiction in which
Borrower maintains its chief executive office and in each other jurisdiction in
which Borrower conducts its business operations and/or maintains Collateral;
(E) UCC-2 Financing Statements, duly executed by Borrower, showing Borrower as
Debtor, in favor of Lender, as Secured Party, in each county in which Borrower
owns Real Property or maintains equipment or fixtures;
(F) UCC/Tax/Judgment Lien Search Report with respect to Borrower, together with
duly executed releases and/or termination statements as Lender may request;
(G) certified copies of the Certificate of Limited Partnership of Borrower;
(H) copy of Borrower's Agreement of Limited Partnership certified to by one of
Borrower's general partners;
(I) certificate(s) of Insurance in respect of all property, casualty, liability
and other insurance maintained by Borrower in respect of the Collateral or
otherwise in respect of its business, together with lender loss payable and
other endorsements acceptable as to form and substance to Lender; and
<PAGE>
(J) such other opinions, documents, assignments, certificates or approvals as
Lender reasonably may request.
All of the foregoing shall be in form and substance reasonably acceptable to
Lender and its counsel.
13.2 Lender shall not make any advance or additional or future advances to
Borrower unless and until all proceedings taken in connection with the
transaction contemplated by this Agreement, and all instruments, authorizations
and other documents applicable thereto, shall be satisfactory in form and
substance to Lender.
13.3 In addition to the foregoing, prior to Lender making of any advances
additional or future advances hereunder, all of the following shall have been
satisfied in a manner satisfactory to Lender:
(A) No change in the condition or operations, financial or otherwise, of
Borrower or any Affiliate, shall have occurred which change, in the sole credit
judgment of Lender, may have a material adverse effect on Borrower or such
Affiliate or on any of the Collateral;
(B) All of the representations and warranties of Borrower set forth in this
Agreement and each of the Other Agreements to which Borrower as a party shall
be true and correct on the date of the contemplated Loan to the same extent as
originally made on such date; and
(C) No Event of Default or event or condition which, with notice, lapse of time
and/or the making of the contemplated Loan, would constitute an Event of
Default shall exist or be continuing.
13.4 Any provision herein to the contrary notwithstanding, Lender shall have no
obligation to make any advance hereunder, even if all of the above conditions
shall have been satisfied, and each and every advance shall be at Lender's sole
option and discretion.
14. GENERAL
14.1 Any check, draft or similar item of payment by or for the account of
Borrower delivered to Lender on account of Borrower's Liabilities shall,
provided the same is honored and final settlement thereof is reflected by
irrevocable credit to Lender, be applied by Lender on account of Borrower's
Liabilities two (2) business days after the date Lender actually receives the
same. A "business day" shall mean any day upon which national banks with a
principal place of business in Chicago, Illinois are authorized or required by
law to be open for the transaction of commercial banking business.
14.2 That portion of Borrower's Liabilities consisting of monies, costs,
expenses or advances to be reimbursed by Borrower to Lender pursuant to this
Agreement shall be payable by Borrower to Lender on demand.
14.3 Borrower waives the right to direct the application of any and all
payments at any time or times hereafter received by Lender on account of
Borrower's Liabilities and Borrower agrees that Lender shall have the
continuing exclusive right to apply and reapply any and all such payments in
such manner as Lender may deem advisable, notwithstanding any entry by Lender
upon any of its books and records.
<PAGE>
14.4 Borrower covenants, warrants and represents to Lender that all
representations and warranties of Borrower contained in this Agreement and the
Other Agreements shall be true at the time of Borrower's execution of this
Agreement and the Other Agreements, shall survive the execution, delivery and
acceptance thereof by the parties thereto and the closing of the transactions
described therein or related thereto and shall be true from the time of
Borrower's execution of this Agreement to the end of the term hereof.
14.5 This Agreement and the Other Agreements may not be modified, altered or
amended except by an agreement in writing signed by Borrower and Lender.
Borrower may not sell, assign or transfer this Agreement or the Other
Agreements or any portion thereof, including, without limitation, Borrower's
rights, titles, interests, remedies, powers and/or duties thereunder. Borrower
hereby consents to Lender's sale, assignment, transfer or other disposition, at
any time and from time to time hereafter, of this Agreement or the Other
Agreements, or of any portion thereof, including, without limitation, Lender's
rights, titles, interests, remedies, powers and/or duties.
14.6 Lender's failure at any time or times hereafter to require strict
performance by Borrower of any provision of this Agreement shall not waive,
affect or diminish any right of Lender thereafter to demand strict compliance
and performance therewith. Any suspension or waiver by Lender of an Event of
Default by Borrower under this Agreement or the Other Agreements shall not
suspend, waive or affect any other Event of Default by Borrower under this
Agreement or the Other Agreements, whether the same is prior or subsequent
thereto and whether of the same or of a different type. None of the
undertakings, agreements, warranties, covenants and representations of Borrower
contained in this Agreement or the Other Agreements and no Event of Default by
Borrower under this Agreement or the Other Agreements shall be deemed to have
been suspended or waived by Lender unless such suspension or waiver is by an
instrument in writing signed by an officer of Lender and directed to Borrower
specifying such suspension or waiver.
14.7 If any provision of this Agreement or the Other Agreements or the
application thereof to any Person or circumstance is held invalid or
unenforceable, the remainder of this Agreement and the Other Agreements and the
application of such provision to other Persons or circumstances will not be
affected thereby and the provisions of this Agreement and the Other Agreements
shall be severable in any such instance.
14.8 This Agreement and the Other Agreements shall be binding upon and inure to
the benefit of the successors and assigns of Borrower and Lender. This
provision, however, shall not be deemed to modify Paragraph 14.5 hereof.
14.9 The provisions of the Other Agreements are incorporated in this Agreement
by this reference thereto. Except as otherwise provided in this Agreement and
except as otherwise provided in the Other Agreements by specific reference to
the applicable provision of this Agreement, if any provision contained in this
Agreement is in conflict with, or inconsistent with, any provision in the Other
Agreements, the provision contained in this Agreement shall govern and control.
14.10 Except to the extent provided to the contrary in this Agreement and in
the Other Agreements, no termination or cancellation (regardless of cause or
procedure) of this Agreement or the Other Agreements shall in any way affect or
impair the powers, obligations, duties, rights and liabilities of Borrower or
Lender in any way or respect relating to (i) any transaction or event occurring
prior to such termination or cancellation, (ii) the Collateral and/or (iii) any
<PAGE>
of the undertakings, agreements, covenants, warranties and representations of
Borrower contained in this Agreement or the Other Agreements. All such
undertakings, agreements, covenants, warranties and representations shall
survive such termination or cancellation.
14.11 Except as otherwise specifically provided in this Agreement, Borrower
waives any and all notice or demand which Borrower might be entitled to receive
with respect to this Agreement or the Other Agreements by virtue of any
applicable statute or law, and waives presentment, demand and protest and
notice of presentment, protest, default, dishonor, nonpayment, maturity,
release, compromise, settlement, extension or renewal of any or all commercial
paper, accounts, contract rights, documents, instruments, chattel paper and
guaranties at any time held by Lender on which Borrower may in any way be
liable and hereby ratifies and confirms whatever Lender may do in this regard.
14.12 Until Lender is notified by Borrower to the contrary in writing by
registered or certified mail directed to Lender's principal place of business,
the signature upon this Agreement or upon any of the Other Agreements of any
partner, manager, employee or agent of Borrower, or of any other Person
designated in writing to Lender by any of the foregoing, or of a "Designated
Person" (as that term is defined in Borrower's Certificate of even date
herewith, constituting one of the Other Agreements) shall bind Borrower and be
deemed to be the duly authorized act of Borrower.
14.13 Borrower hereby appoints Lender as Borrower's agent and attorney-in-fact
for the purpose of carrying out the provisions of this Agreement and the Other
Agreements, and taking any action and executing any agreement, instrument or
document which Lender may deem necessary or advisable to accomplish the
purposes hereof which appointment is irrevocable and coupled with an interest.
All monies paid for the purposes herein, and all costs, fees and expenses paid
or incurred in connection therewith, shall be part of Borrower's Liabilities,
payable by Borrower to Lender on demand.
14.14 Upon demand by Lender therefor, Borrower shall reimburse Lender for all
costs, fees and expenses incurred by Lender, or for which Lender becomes
obligated, in connection with the negotiation, preparation and conclusion of
this Agreement and the Other Agreements, including, without limitation,
attorneys' fees, costs and expenses, search fees, costs and expenses, title
insurance policy fees, costs and expenses, filing and recording fees and all
taxes payable in connection with this Agreement or the Other Agreements.
14.15 This Agreement and the Other Agreements are submitted by Borrower to
Lender (for Lender's acceptance or rejection thereof) at Lender's principal
place of business as an offer by Borrower to borrow monies from Lender now and
from time to time hereafter and shall not be binding upon Lender or become
effective until and unless accepted by Lender, in writing, at said place of
business. If so accepted by Lender, this Agreement and the Other Agreements
shall be deemed to have been made at said place of business. This Agreement and
the Other Agreements shall be governed and controlled by the laws of the State
of Illinois as to interpretation, enforcement, validity, construction, effect
and in all other respects without reference to principles of choice of law.
14.16 If at any time or times hereafter Lender: (a) employs counsel for advice
or other representation (i) with respect to the Collateral, this Agreement, the
Other Agreements or the administration thereof, (ii) to represent Lender in any
litigation, contest, dispute, suit or proceeding or to commence, defend or
intervene or to take any other action in or with respect to any litigation,
<PAGE>
contest, dispute, suit or proceeding (whether instituted by Lender, Borrower or
any other Person) in any way or respect relating to the Collateral, this
Agreement, the Other Agreements or Borrower's affairs, or (iii) to enforce any
rights of Lender against Borrower, any Guarantor or any other Person which may
be obligated to Lender by virtue of this Agreement or the Other Agreements,
including without limitation, any Obligor; (b) takes any action with respect to
administration of the Collateral, this Agreement or the Other Agreements, or to
protect, collect, sell, liquidate or otherwise dispose of the Collateral;
and/or (c) attempts to or enforces any of Lender's rights or remedies under
this Agreement or the Other Agreements, including without limitation Lender's
rights or remedies with respect to the Collateral, the reasonable costs, fees
and expenses incurred by Lender in any manner or way with respect to the
foregoing, shall be part of Borrower's Liabilities, payable by Borrower to
Lender on demand.
14.17 Borrower releases Lender from any and all causes of action or claims
which Borrower may now or hereafter have for any asserted loss or damage to
Borrower claimed to be caused by or arising from: (a) any failure of Lender to
protect, enforce or collect in whole or in part any of the Collateral; (b)
Lender's notification to any Obligor of Lender's security interests in the
Accounts; (c) Lender's directing any Obligor to pay any sums owing to Borrower
directly to Lender; and (d) any other act or omission to act on the part of
Lender, its officers, agents or employees, except for willful misconduct.
14.18 To the extent that Lender receives any payment on account of Borrower's
Liabilities, or any proceeds of Collateral are applied on account of Borrower's
Liabilities, and any such payment(s) and/or proceeds or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
subordinated and/or required to be repaid to a trustee, receiver or any other
Person under any bankruptcy act, state or federal law, common law or equitable
cause, then, to the extent of such payment(s) or proceeds received, Borrower's
Liabilities or part thereof intended to be satisfied shall be revived and
continue in full force and effect, as if such payment(s) and/or proceeds had
not been received by Lender and applied on account of Borrower's Liabilities.
14.19 Except as otherwise provided herein, this Agreement and the Other
Agreements supersede in their entirety any other agreement or understanding
between Lender and Borrower with respect to loans and advances made by Lender
and all commitments of Lender in connection therewith.
14.20 Each notice, demand or other communication in connection with this
Agreement shall be in writing and shall be deemed to be given to and served
upon the addressee thereof (i) upon actual delivery to such addressee at its
address set forth above, (ii) on the next business day after delivery thereof
to an overnight courier service, in accordance with such service's rules, or
(iii) on the third business day after the deposit thereof in the United States
mails, certified mail, first class postage prepaid, addressed to such addressee
at its address set forth above. By notice complying with this Paragraph, any
party may from time to time designate a different address as its address for
the purpose of the receipt of notices hereunder.
14.21 So long as the general partner of Borrower is an affiliate of The Balcor
Company, in no event shall any general partner of the Borrower have any
liability for breach of any covenants, representation or warranty, or for any
deficiency which may remain after the enforcement of Lender's rights and
remedies hereunder and under any of the Other Agreements; provided, however,
that if the general partner of the Borrower is not an affiliate of The Balcor
<PAGE>
Company, then such general partner shall be fully liable for any such breach
and any such deficiency, and by agreeing to act as such general partner, such
Person agrees to and accepts such liability.
14.22 No Person shall be liable for the obligations of any other Person
hereunder (except to the extent that a Person shall be liable for the
obligations of any partnership in which it is a general partner, except as
otherwise provided in Paragraph 14.21), and no property, rights or assets of
any Person shall be deemed to be Collateral for the obligations of any other
Person hereunder, unless such Person has specifically agreed, in writing, to
become liable for such obligations or to pledge its assets for such
obligations. It is not intended that the obligations of any Person be
cross-collateralized hereunder, but that any advance hereunder to any Person be
collateralized with only such Person's assets, notwithstanding that there may
be more than one Borrower hereunder.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and
year specified at the beginning hereof.
Balcor Realty Investors - 84, an Illinois Limited
Partnership
By: Balcor Partners - XV, its general partner
By: RGF-Balcor Associates - II, a partner
By: The Balcor Company, a partner
By: /s/Allan Wood
------------------------
Allan Wood
Executive Vice President
Accepted this 1st day of June, 1992, at Lender's principal place of business in
the Village of Skokie, State of Illinois.
THE BALCOR COMPANY
By: /s/Allan Wood
------------------------
Name: Allan Wood
------------------------
Title: Executive Vice President
------------------------
<PAGE>
EXHIBIT A
Attached to and Forming a
Part of Loan and Security
Agreement Dated as of
June 1, 1992, By and Between
The Balcor Company and
Balcor Realty Investors - 84
Form of Revolving Note
----------------------
EXHIBIT B
Attached to and Forming a
Part of Loan and Security
Agreement Dated as of
June 1, 1992, By and Between
The Balcor Company and
Balcor Realty Investors - 84
List of Partnerships Owned by Borrower
--------------------------------------
Antlers Investors
Chandler Investors
Desert Sands Investors
Chesapeake Associates
Chesapeake Investors
Chestnut Ridge Partners Phase II
Chimney Ridge Investors
Courtyards of Kendall Limited Partnership
Creekwood Investors
Drayton Investors
Highland Investors
Pinebrook Investors
Quails Lake Investors
Ridgepoint Hill Investors
Westwood Investors
Overland Investors
Woodland Hills Partners Limited Partnership
<PAGE>
MASTER LOAN AND SECURITY AGREEMENT
THIS MASTER LOAN AND SECURITY AGREEMENT ("Agreement"), dated as of the 14th day
of October, 1993, by and between THE BALCOR COMPANY, a Delaware corporation,
with its principal place of business at 4849 Golf Road, Skokie, Illinois 60077,
or any Affiliate (as hereinafter defined) of The Balcor Company who shall join
in this Agreement and make any advance, on behalf of The Balcor Company,
pursuant to this Agreement (the "Lender"), and Balcor Realty Investors-84, an
Illinois limited partnership (the "Principal Partnership"), with its principal
place of business at 4849 Golf Road, Skokie, Illinois 60077.
RECITALS
--------
A. Lender has made or may in the future make advances to, or has guaranteed or
may in the future guarantee the obligations of the Principal Partnership from
time to time; and
B. The Principal Partnership has made or may make advances to one or more of
its subpartnerships, using funds provided by the Lender; and
C. The Principal Partnership and Lender wish to formalize their arrangement
regarding advances and enter into this Agreement to cover all advances,
including those previously made and those which may be made in the future; and
D. All current advances are payable on demand, and to induce Lender to forego,
on the date hereof, demand on such advances, and to provide security to Lender
for advances previously made and for additional advances which may be made in
the future, the Principal Partnership and/or one or more subpartnerships will
pledge certain assets as security for Borrower's Liabilities (as hereinafter
defined); and
E. The parties anticipate that upon request by the Principal Partnership from
time to time, Lender may at its sole option and in its sole and absolute
discretion make advances to the Principal Partnership directly, or to one or
more subpartnerships of the Principal Partnership, it being understood that
Lender may refuse to make any additional advances and may call as due and
payable any amounts owing hereunder for any or no reason;
NOW THEREFORE, in consideration of any loan, advance, extension of credit,
letter of credit, guarantee and/or other financial accommodation at any time
made by Lender to or for the benefit of the Principal Partnership, and of the
promises set forth herein, the parties hereto agree as follows:
1. DEFINITIONS AND TERMS
----------------------
1.1 The following words, terms and/or phrases shall have the meanings set forth
thereafter and such meanings shall be applicable to the singular and plural
form thereof, giving effect to the numerical difference; whenever the context
so requires, the use of "it" in reference to Borrower shall mean "Borrower" as
hereinafter defined:
(A) "Accounts": the definition ascribed to this term in Paragraph 4.1 below.
(B) "Affiliate": any "Person" (hereinafter defined) (i) in which Borrower, one
or more partners of Borrower, one or more equity interest holders of Borrower,
<PAGE>
any "Subsidiary" (hereinafter defined), and/or any "Parent" (hereinafter
defined), individually, jointly and/or severally, now or at any time or times
hereafter, has or have an equity or other ownership interest equal to or in
excess of five percent (5%) of the total equity of or other ownership interest
in such Person; and/or (ii) which directly or indirectly through one or more
intermediaries controls or is controlled by, or is under common control with
Borrower. For purposes of this definition, control shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of
Partnership Interests, "Stock" (hereinafter defined), by contract or otherwise.
Notwithstanding the foregoing, unless the context otherwise requires, neither
Lender, nor any affiliate of Lender (other than a Person who is an affiliate of
Lender solely because of his interest in Borrower, and who, if he had no
interest in Borrower, would not be an affiliate of Lender) shall be deemed to
be an Affiliate of Borrower hereunder.
(C) "Agreement": this Master Loan and Security Agreement.
(D) "And/or": one or the other or both, or any one or more or all, of the
things or Persons in connection with which the conjunction is used.
(E) "Base Rate": a rate of interest per annum which at a minimum shall be equal
to Lender's average cost of funding as determined by Lender on a daily basis in
any manner deemed reasonable by Lender and which, at a maximum shall be a rate
per annum as determined on a daily basis and as designated by Lender which does
not exceed the maximum limit permitted to be charged by "Affiliates", as such
term is defined in, and as permitted pursuant to, the Borrower's Partnership
Agreement, as amended from time to time.
(F) "Borrower": the Principal Partnership.
(G) "Borrower's Liabilities": all obligations and liabilities of Borrower to
Lender (including, without limitation, all debts, claims and indebtednesses)
whether primary, secondary, direct, contingent, fixed or otherwise, heretofore,
now and/or from time to time hereafter owing, due or payable, however
evidenced, created, incurred, acquired or owing and however arising, whether
under this Agreement or the "Other Agreements" (hereinafter defined), or by
oral agreement or operation of law or otherwise.
(H) "Borrower's Obligations": all terms, conditions, warranties,
representations, agreements, undertakings, covenants and provisions (other than
Borrower's Liabilities) to be performed, discharged, kept, observed or complied
with by Borrower pursuant to this Agreement and/or any of the Other Agreements.
(I) "Charges": all national, federal, state, county, city, municipal and/or
other governmental (or any instrumentality, division, agency, body or
department thereof, including, without limitation, the Pension Benefit Guaranty
Corporation) taxes, levies, assessments, charges, liens, claims or encumbrances
upon and/or relating to the "Collateral" (hereinafter defined), Borrower's
Liabilities, Indebtedness (hereinafter defined), Borrower's Obligations,
Borrower's business, Borrower's ownership and/or use of any of its assets,
and/or Borrower's income and/or gross receipts.
(J) "Collateral": the definition ascribed to this term in Paragraph 4.1 below.
(K) "Equipment": the definition ascribed to this term in Paragraph 4.1 below.
<PAGE>
(L) "Event of Default": the definition ascribed to this term in Paragraph 12.1
below.
(M) "Financials": those financial statements of Borrower heretofore or
concurrently herewith delivered by or on behalf of Borrower to Lender.
(N) "General Intangibles": the definition ascribed to this term in Paragraph
4.1 below.
(O) "Guarantor": any Person which has guaranteed or hereafter guarantees to
Lender the payment, collection or performance of all or any portion of
Borrower's Liabilities and/or Borrower's Obligations, and/or has granted or
hereafter grants to Lender a security interest in, or lien or encumbrance upon,
some or all of such Person's real and/or personal property to secure the
payment and/or performance of all or any portion of Borrower's Liabilities
and/or Borrower's Obligations.
(P) "Hazardous Material": any hazardous substance, or any pollutant or
contaminant defined as such in (or for purposes of) the Comprehensive
Environmental Response Compensation and Liability Act of 1980 or any other
applicable local, state or federal environmental protection, health or safety
statute, law, ordinance, code, rule or regulation relating to or imposing
liability or standards concerning hazardous, toxic or dangerous waste,
substance, material, smoke, gas or particulate matter, as now or at any time
hereafter in effect, or any other hazardous, toxic or dangerous waste,
substance or material, including, without limitation, asbestos, polychlorinated
biphenyls, petroleum, including crude oil or any fraction thereof which is
liquid at standard conditions of temperature or pressure, and any radioactive
material in any form or condition.
(Q) "Indebtedness": all obligations and liabilities of Borrower to any Person
other than Lender (including, without limitation, all debts, claims and
indebtedness) whether primary, secondary, direct, contingent, fixed or
otherwise, heretofore, now and/or from time to time hereafter owing, due or
payable, however evidenced, created, incurred, acquired or owing and however
arising, whether under written or oral agreement, by operation of law, or
otherwise. Indebtedness includes, without limiting the generality of the
foregoing: (i) obligations or liabilities of any Person that are secured by any
lien, claim, encumbrance or security interest upon property owned by Borrower
even though Borrower has not assumed or become liable for the payment therefor;
and (ii) obligations or liabilities created or arising under any lease of real
or personal property, or conditional sale or other title retention agreement
with respect to property used and/or acquired by Borrower, even though the
rights and remedies of the lessor, seller and/or lender thereunder are limited
to repossession of such property.
(R) "Loans": any and all loans, advances, extensions of credit, letters of
credit, guarantees and/or other financial accommodations of any kind or nature
made by Lender at any time to, for the benefit or at the request of Borrower
pursuant to this Agreement and/or any of the Other Agreements.
(S) "Mortgages": the Mortgage, Mortgages, Deed of Trust or Deeds of Trust, Deed
to Secure Debt and Deeds to Secure Debt in the forms acceptable to Lender, and
any other Mortgages, Deeds of Trust or Deeds to Secure Debt given by Borrower
to Lender at any time or from time to time hereafter.
<PAGE>
(T) "Obligor": any Person who is and/or may become obligated to Borrower under
or on account of Accounts.
(U) "Other Agreements": all agreements, instruments and documents, including,
without limitation, bond agreements, loan agreements, security agreements,
guaranties, mortgages, deeds of trust, deeds to secure debt, notes,
applications and agreements for letters of credit, letters of credit, advices
of credit, banker's acceptances, pledges, powers of attorney, consents,
assignments, contracts, notices, leases, financing statements and all other
written matter heretofore, now and/or from time to time hereafter executed by
and/or on behalf of Borrower and delivered to Lender, or issued by Lender upon
the application and/or other request of, and on behalf of, Borrower.
(V) "Parent": any Person, now or at any time or times hereafter, owning or
controlling (alone or with Borrower, any Subsidiary and/or any other Person) at
least a majority of the issued and outstanding Stock or other ownership
interest of Borrower or any Subsidiary (hereinafter defined). For purposes of
this definition, control shall have the same meaning ascribed to this term in
Subparagraph l.l(B) above.
(W) "Partnership Interest": any right, title and interest, direct or indirect,
including general partnership interests, limited partnership interests, rights
to receive profits, proceeds or distributions.
(X) "Person": any individual, sole proprietorship, partnership, joint venture,
trust, unincorporated organization, association, corporation, institution,
entity, party or government (whether national, federal, state, county, city,
municipal or otherwise, including without limitation any instrumentality,
division, agency, body or department thereof).
(Y) "Real Property": the definition ascribed to this term in Paragraph 4.1
below.
(Z) "Records": the definition ascribed to this term in Paragraph 4.1 below.
(AA) "Revolving Loan": any one or more Loans made or to be made by Lender to
Borrower from time to time pursuant to Paragraph 3.1.
(AB) "Revolving Note": the Revolving Promissory Note attached hereto as Exhibit
A, in the form to be hereafter executed and delivered by Borrower in favor of
Lender.
(AC) "Stock": all shares, interests, participations or other equivalents
(however designated) of or in a corporation, whether or not voting, including,
but not limited to, common stock, warrants, preferred stock, convertible
debentures and all agreements, instruments and documents convertible, in whole
or in part, into any one or more or all of the foregoing.
(AD) "Subsidiary": (i) with respect to any Person who is a corporation, any
Person at least a majority of whose issued and outstanding Stock or other
ownership interests now or at any time hereafter is owned by Borrower and/or
one or more Subsidiaries, (it) with respect to any Person who is a partnership,
any Person, a majority of whose interests are owned, directly or indirectly, by
the Principal Partnership.
(AE) "Supplemental Documentation": the definition ascribed to this term in
Paragraph 4.2 below.
<PAGE>
1.2 Except as otherwise defined in this Agreement or the Other Agreements, all
words, terms and/or phrases used herein and therein shall be defined by the
applicable definition therefor (if any) in the Uniform Commercial Code as
adopted by the State of Illinois.
1.3 Any accounting terms which are used in this Agreement which are not
specifically defined herein shall have the meanings customarily given them in
accordance with generally accepted accounting principles.
2. LOAN: GENERAL TERMS
2.1 Except as otherwise provided in notes or other instruments issued and/or
made by Borrower to Lender specifically containing provisions in conflict with
this Paragraph (in which event the conflicting provisions of said notes or
other instruments shall govern and control) that portion of Borrower's
Liabilities consisting of: (a) principal payable on account of any Loan shall
be payable by Borrower to Lender on demand; (b) costs, fees and expenses
payable by Borrower to Lender shall be payable to Lender or to such other
Person or Persons designated by Lender, on demand; (c) interest payable by
Borrower to Lender shall be payable by Borrower monthly, and prior to demand,
only if and to the extent that Borrower's cash flow for any month shall exceed
Borrower's expenses and debt service for such month; and (d) the balance of
Borrower's Liabilities, if any, shall be payable by Borrower to Lender on
demand. All of such payments to Lender shall be payable at Lender's principal
place of business specified at the beginning of this Agreement or at such other
place or places as Lender may designate in writing to Borrower. All of such
payments to Persons other than Lender shall be payable at such place or places
as Lender may designate in writing to Borrower.
2.2 Any Loan may or may not (at Lender's sole and absolute discretion) be
evidenced by additional notes or other instruments issued or made by Borrower
to Lender. Where any Loan is not so evidenced, it shall be evidenced solely by
entries upon the ledgers, books, records and/or computer records of Lender
maintained for that purpose.
2.3 All of Borrower's Liabilities shall constitute one obligation secured by
Lender's security interest, lien or encumbrance in or upon the Collateral and
by all other security interests, liens, claims and encumbrances heretofore, now
and/ or from time to time hereafter granted by Borrower and/or any Guarantor to
Lender.
2.4 Borrower warrants and represents to Lender that Borrower shall use the
proceeds of each Loan solely for business purposes and consistently with all
applicable laws and statutes. Borrower further warrants and represents to
Lender and covenants with Lender that Borrower is not in the business of
extending credit for the purpose of purchasing or carrying margin Stock (within
the meaning of Regulation U issued by the Board of Governors of the Federal
Reserve System), and no proceeds of the Loan will be used to purchase or carry
any margin Stock or to extend credit to others for the purpose of purchasing or
carrying any margin Stock.
2.5 Notwithstanding anything contained in this Agreement or the Other
Agreements to the contrary, the principal portion of Borrower's Liabilities
outstanding at any one time shall not exceed in the aggregate the principal
amount of the applicable Revolving Note. Lender, in its sole and absolute
<PAGE>
discretion, at any time and from time to time, may suspend the restrictions
imposed in this Paragraph.
2.6 Borrower hereby authorizes and directs Lender to disburse, for and on
behalf of Borrower and for Borrower's account, the proceeds of any Loans to
such Person or Persons as Borrower or any Person specified in Paragraph 14.12
of this Agreement shall direct, whether in writing or orally.
2.7 Borrower shall pay to Lender as part of Borrower's Liabilities, on demand,
any and all charges asserted by a bank or other institution against Lender for
or with respect to Lender's forwarding to Borrower or at the direction of
Borrower of proceeds of any Loans or for or with respect to Lender's depositing
for collection any check or item of payment received and/or delivered to Lender
on account of Borrower's Liabilities.
2.8 Lender, in its sole and absolute discretion, without notice thereof to
Borrower, may disburse any or all proceeds of any Loan to pay any costs,
expenses or other amounts required to be paid by Borrower hereunder and not so
paid, and/or to pay any Person as Lender deems necessary to insure that the
security interest, lien or other encumbrance granted to Lender in the
Collateral shall at all times have the priority represented and covenanted in
this Agreement and the Other Agreements. All monies so disbursed by Lender
shall be a part of Borrower's Liabilities, payable by Borrower to Lender on
demand.
2.9 Borrower's Liabilities shall bear interest at the rate specified in any
note or other instrument evidencing the same, or, in the absence thereof, at a
daily rate equal to the daily rate equivalent (computed on the basis of a
360-day year and charged for actual days elapsed) at the Base Rate. The
foregoing rate of interest shall fluctuate hereafter from time to time
concurrently with and in an amount equal to each increase or decrease in the
Base Rate.
2.10 Lender shall have no obligation to make any advance to Borrower hereunder.
This Agreement shall be in effect until terminated by Lender at any time in its
sole and absolute discretion, or until terminated by Borrower at any time when
Borrower's Liabilities are equal to zero dollars ($0). On or before the
termination date, Borrower shall pay to Lender, in full, in cash or by
certified or cashier's check, Borrower's Liabilities.
3. LOAN: DISBURSEMENTS
--------------------
3.1 Lender may, in its sole and absolute discretion, upon the request of
Borrower, loan to Borrower on a revolving credit basis (the "Revolving Loan")
up to the maximum principal amount of the Revolving Note. In no event shall
Lender be required to advance any amounts hereunder and Lender shall have the
right to evaluate each and every request for each extension of credit or
advance hereunder. Notwithstanding anything in this Paragraph 3.1 to the
contrary, Lender may at any time and from time to time, in Lender's sole and
absolute discretion, loan to Borrower more than the above stated amount,
without notice to any Guarantor or any other Person which might be liable to
Lender on account of Borrower's Liabilities and/or Borrower's Obligations,
provided, however, that any such over-advance shall not establish a custom or
course of dealing or entitle Borrower to any subsequent over-advance under the
same or different circumstances. The indebtedness of Borrower under a Revolving
Loan shall be evidenced by a Revolving Note.
<PAGE>
4. COLLATERAL: GENERAL TERMS
--------------------------
4.1 To secure the prompt payment to Lender of Borrower's Liabilities and the
prompt, full and faithful performance by Borrower of Borrower's Obligations,
Borrower hereby grants to Lender a security interest in and to, and assigns and
pledges to Lender, all of Borrower's now existing and/or owned and hereafter
arising and/or acquired: (a) Real Property of Borrower, now owned or hereafter
acquired and all rights and interests therein, including, without limitation,
all land and buildings, structures and other improvements and chattels now on
such real estate or hereafter erected or placed thereon, all mineral, oil and
gas rights, all shrubbery, trees and crops and/or produce growing, grown or
produced thereon, all air, water and riparian rights, whether or not
appurtenant, all water stock, all easements, tenements, hereditaments,
appurtenances, all rights in any abutting public or private streets and alleys
and submerged land (the "Real Property"); (b) notes, assignments of rents,
mortgages, deeds of trust, deeds to secure debt, security agreements, chattel
mortgages, financing statements, and similar items described in Paragraphs 7.1
and 7.2 hereof (collectively, "Loan Packages"); (c) all of Borrower's
Partnership Interests, (including, without limitation, all of Borrower's
Partnership Interests in all of those partnerships listed on Exhibit B); (d)
accounts, chattel paper, contract rights, leases and rental income thereunder,
leasehold interests, rents, letters of credit, instruments and documents
("Accounts"), and all goods whose sale, lease or other disposition by Borrower
have given rise to Accounts and have been returned to or repossessed or stopped
in transit by Borrower; (e) all patents, copyrights and trademarks, and all
applications for and registrations of the foregoing, all franchise rights,
tradenames, goodwill, beneficial interests, rights to tax refunds and all other
general intangibles of any kind or nature whatsoever ("General Intangibles");
(f) all inventory of Borrower, wherever located, whether in transit, held by
others for Borrower's account, covered by warehouse receipts, purchase orders
and contracts, or in the possession of any carriers, forwarding agents,
truckers, warehousemen, vendors or other Persons, including, without
limitation, all raw materials, work in process, finished merchandise, supplies,
goods, incidentals, office supplies and packaging materials ("Inventory"); (g)
goods (other than Inventory), machinery, equipment, vehicles, appliances,
furniture, furnishings and fixtures ("Equipment"); (h) monies, reserves,
deposits, certificates of deposit and deposit accounts and interest or
dividends thereon, securities, cash, cash equivalents and other property now or
at any time or times hereafter in the possession or under the control of Lender
or its bailee; (i) all books, records, computer records, ledger cards, programs
and other computer materials, customer and supplier lists, invoices, orders and
other property and general intangibles at any time evidencing or relating to
Collateral ("Records"); (j) all accessions to any of the Collateral and all
substitutions, renewals, improvements and replacements of and additions
thereto; (k) all insurance policies insuring, or proceeds of or relating to,
any of the foregoing; (l) all present and future judgments, awards of damage
and settlements made as a result of or in lieu of any taking of any of the
Collateral, or any part thereof, under the power of eminent domain, or for any
damage (whether caused by such taking or otherwise); and (m) all other property
of Borrower, real and/or personal, now owned or hereafter acquired; (n) all
products and proceeds of the foregoing (whether such proceeds are in the form
of cash, cash equivalents, proceeds of insurance policies, Real Estate,
<PAGE>
Accounts, General Intangibles, Inventory, Equipment, Records or otherwise). All
of the foregoing is referred to herein individually and collectively as the
"Collateral." Borrower shall make appropriate entries upon its financial
statements and Records disclosing Lender's security interest in and assignment
and pledge of the Collateral.
4.2 Borrower shall execute and/or deliver to Lender, at any time and from time
to time hereafter at the request of Lender, all agreements, instruments,
documents and other written matter (the "Supplemental Documentation") that
Lender reasonably may request, in form and substance acceptable to Lender, to
perfect and maintain perfected Lender's security interest, lien and/or
encumbrance in and/or assignment and pledge of the Collateral and to consummate
the transactions contemplated in or by this Agreement and the Other Agreements.
Borrower, irrevocably, hereby appoints Lender (and all Persons designated by
Lender for that purpose) as Borrower's true and lawful agent and
attorney-in-fact to sign the name of Borrower on the Supplemental Documentation
and to deliver the Supplemental Documentation to such Persons as Lender, in its
sole and absolute discretion, may elect. Borrower agrees that a carbon,
photographic or photostatic copy, or other reproduction, of this Agreement or
of any financing statement, shall be sufficient as a financing statement.
4.3 Lender (by any of its officers, employees and/or agents) shall have the
right, at any time or times during Borrower's usual business hours, to inspect
the Collateral (and the premises upon which it is located) and all related
Records and to verify the amount and condition of or any other matter relating
to the Collateral. All costs, fees and expenses incurred by Lender, or for
which Lender becomes obligated, in connection with such inspection and/or
verification shall constitute part of Borrower's Liabilities, payable by
Borrower to Lender on demand.
4.4 Borrower hereby warrants and represents to and covenants with Lender that:
(a) Lender's security interest in the Collateral is now and at all times
hereafter shall have a first priority, except for any permanent financing
secured by the Collateral, which may have priority over Lender's security
interest in the Collateral and except as permitted under Paragraph 10.2(a); (b)
the principal place of business of Borrower in Illinois is the location
specified at the beginning of this Agreement, and Borrower has no other offices
or locations and does not keep Collateral at any other office or location
except at the location of any of Borrower's Real Property and Borrower shall
not remove the Records and/or the Collateral from its principal place of
business and shall not keep any of such Records and/or the Collateral at any
other office or location unless Borrower gives Lender written notice thereof at
least thirty (30) days prior thereto and the same is within the continental
United States of America. Borrower, by written notice delivered to Lender at
least thirty (30) days prior thereto, shall advise Lender of Borrower's opening
of any new office or place of business or its closing of any then existing
office or place of business and any new office or place of business shall be
within the continental United States of America.
4.5 Lender, in its sole and absolute discretion, without waiving or releasing
any of Borrower's Obligations or any Event of Default, may at any time or times
hereafter, but shall be under no obligation to, pay, acquire and/or accept an
assignment of any security interest, lien, encumbrance or claim asserted by any
Person against the Collateral. All sums paid by Lender in respect thereof and
all costs, fees and expenses, including reasonable attorneys' fees, court
costs, expenses and other charges relating thereto incurred by Lender or for
<PAGE>
which Lender becomes obligated on account thereof shall be part of Borrower's
Liabilities payable by Borrower to Lender on demand.
4.6 Immediately upon Borrower's receipt of that portion of the Collateral
consisting of Loan Packages, chattel paper and/or evidenced by an instrument
and/or document, Borrower shall mark the same to show that such Collateral is
subject to a security interest in favor of Lender and shall deliver the
original thereof to Lender, together with appropriate endorsement and/ or other
specific evidence of assignment thereof to Lender, in form and substance
acceptable to Lender.
4.7 Lender may, in its sole and absolute discretion, retain as additional
Collateral or release to Borrower, from time to time, such portion of the
monies, reserves and proceeds received by Lender with respect to the Collateral
as Lender may determine. All such monies, reserves and proceeds and other
property of Borrower in the possession of Lender or its bailee at any time or
times hereafter are hereby pledged by Borrower to Lender as additional
Collateral hereunder, and, in Lender's sole and absolute discretion, may be
held by Lender until Borrower's Liabilities are paid in full or, at any time,
may be applied by Lender on account of Borrower's Liabilities.
4.8 No authorization given by Lender pursuant to this Agreement or the Other
Agreements to sell any specified portion of Collateral or any items thereof,
and no waiver by Lender in connection therewith shall establish a custom or
constitute a waiver of the prohibition contained in this Agreement against such
sales, with respect to any portion of the Collateral or any item thereof not
covered by said authorization.
4.9 Regardless of the adequacy of any Collateral, any deposits or other sums at
any time credited by or payable or due from Lender or any bailee of Lender to
Borrower, or any monies, cash, cash equivalents, certificates of deposit,
securities, instruments, documents or other assets of Borrower in the
possession or control of Lender or its bailee for any purpose may at any time
be reduced to cash and applied by Lender to, or setoff by Lender against,
Borrower's Liabilities hereunder.
5. COLLATERAL: REAL PROPERTY
--------------------------
5.1 Borrower represents and warrants to Lender that Borrower has good, valid
and indefeasible title and ownership of all Real Property described in each
Mortgage given by Borrower as mortgagor.
5.2 If Borrower shall acquire any Real Property, which Real Property is
adjacent to or contiguous to any Real Property included within the Collateral
and owned by such Borrower, or any rights title or interest in or to any such
Real Property, Borrower shall promptly execute and deliver to Lender a Mortgage
in recordable form, mortgaging such Real Property to Lender, and such property,
and all of Borrower's right, title and interest therein shall be included
within the Collateral.
5.3 Lender's right and interest in the Real Property shall include all of
Borrower's right, title and interest in and to any contract for the sale of any
Real Property, including Borrower's future right or interest in any such
contract, whether now existing or hereinafter arising, and all proceeds from
any such sale.
<PAGE>
6. COLLATERAL: EQUIPMENT
---------------------
6.1 Borrower warrants and represents to Lender that Borrower has good,
indefeasible, and merchantable title, free and clear of all liens, claims and
encumbrances, except for any permanent financing secured by the Collateral and
as permitted under Paragraph 10.2(a), to and ownership of the Equipment
described and/or listed on the Schedule of Equipment delivered to Lender and/or
located on each of Borrower's places of business specified in Paragraph 4.4
hereof, and on each parcel of Real Property mortgaged hereunder and that
Equipment shall be kept and/or maintained solely thereat.
6.2 Borrower shall keep and maintain the Equipment in good operating condition
and repair and shall make all necessary replacements thereof and renewals
thereto so that the value and operating efficiency thereof shall at all times
be maintained and preserved.
6.3 Borrower, immediately on demand by Lender, shall deliver to Lender any and
all evidence of ownership of, including without limitation, certificates of
title to and applications for title to, any Equipment.
6.4 Borrower shall notify Lender within five (5) business days after it shall
acquire any Equipment covered by certificates of title. With respect to such
newly acquired Equipment, Borrower shall deliver to Lender, simultaneously with
such notice, the certificates of title relating to such Equipment and
appropriate financing statements, if required by applicable law, duly completed
by Borrower, to enable Lender to perfect its lien in such Equipment.
7. COLLATERAL: LOAN PACKAGES
--------------------------
7.1 Borrower shall obtain from any of its subpartnerships to which it shall
extend any loan or credit, or for whose benefit it shall provide any guarantee,
letter of credit or other security or security enhancement (collectively, an
"Accommodation"), a note or notes evidencing the loan, credit or Accommodation
substantially in the form of Exhibit C, a mortgage, deed of trust or deed to
secure debt acceptable to Lender which shall include the provisions set forth
in Exhibit D, and such assignments of rents, security agreements, financing
statements and similar items as Lender may request. A11 of such mortgages,
deeds of trust or deeds to secure debt shall secure in addition to any loans
and Accommodations made by Borrower to such subpartnership, the loans and
Accommodations made by Borrower to each and every other subpartnership, then
existing or thereafter arising, and all modifications, extensions, advances and
refinancing thereof, and each such note, mortgage, deed of trust, deed to
secure debt, assignment of rents, security agreement and other instrument or
document evidencing or securing such loan or Accommodation shall provide that
any default by any subpartnership on any Loan Package shall be a default under
each and every other Loan Package.
7.2 Borrower shall obtain from each of its subpartnerships, other than those
described in Paragraph 7.1, a mortgage, deed of trust or deed to secure debt
acceptable to Lender which shall include the provisions set forth on Exhibit D,
and an assignment of rents, security agreement and financing statement, which
shall secure the loans and Accommodations made by Borrower to each and every
other subpartnership, then existing or thereafter arising, and all
modifications, extensions, advances and refinancings thereof, and each such
<PAGE>
mortgage, deed of trust or deed to secure debt shall provide that any default
by any subpartnership on any Loan Package shall be a default thereunder.
7.3 Borrower represents and warrants to Lender that it has good, valid and
marketable title to all of the Loan Packages, free and clear of any and all
claims, liens and encumbrances.
7.4 At Lender's request, Borrower shall assign to Lender by recordable document
any and all documents evidencing and securing any loon in a Loan Package, and
cause such assignment to be duly recorded.
7.5 Until otherwise notified by Lender, and provided Borrower is not in default
hereunder, Borrower shall administer the Loan Packages as though they had not
been assigned to Lender hereunder, and Borrower shall be entitled to collect
any and all loans to its subpartnership borrowers, and to exercise any and all
rights under all documents evidencing and securing any and all such loans,
including the taking of any and all legal action to collect such loans.
8. COLLATERAL: PARTNERSHIP INTERESTS
----------------------------------
8.1 Borrower represents and warrants to Lender that it has good, valid and
marketable title to all of the Partnership Interests owned by it, free and
clear of any and all claims, liens and encumbrances.
8.2 At Lender's request, Borrower shall notify each partnership in which it
holds a Partnership Interest of the assignment thereof to Lender, and shall use
its best efforts to cause the partnership to record or recognize such
assignment; provided, however, in no event shall Lender act as, or be deemed to
have acted as, a general partner of any such partnership, unless and until
Lender consents to act as a general partner, and signs a document specifically
naming Lender as a general partner and in which Lender specifically consents to
acting as a general partner.
8.3 At Lender's request, Borrower shall execute and deliver to Lender, or file
in the appropriate governmental offices, any and all UCC financing statements
and other comparable instruments to perfect Lender's security interest in the
Partnership Interests.
8.4 Until otherwise notified by Lender, and provided Borrower is not in default
hereunder, Borrower shall be entitled to deal with each of the partnerships in
which Borrower holds a Partnership Interest, as though the Partnership Interest
had not been assigned to Lender hereunder, and Borrower shall be entitled to
collect any and all distributions to Borrower, and to exercise any and all
rights under the applicable partnership agreement.
9. WARRANTIES. REPRESENTATIONS AND COVENANTS: INSURANCE AND TAXES
--------------------------------------------------------------
9.1 Borrower, at its sole cost and expense, shall furnish or cause to be
furnished to Lender original policies or true and certified copies of insurance
on the Collateral (to the extent coverage is applicable) as follows:
(A) Insurance against loss or damage to Collateral by fire, lightning or
malicious mischief, and such hazards as are now or hereafter included in "All
Risk" coverage and against such other insurable practices which are insured for
property of like kind and character as the Collateral. The amounts of such
<PAGE>
insurance shall be equal to one hundred percent (100%) of the full replacement
cost of the improvements located on the Collateral, without deduction for
depreciation, but in no event shall the amount of such insurance be less than
replacement cost, with one hundred percent (100%) coinsurance. Such policies of
insurance shall contain a Replacement Cost Endorsement, an Inflation Guard
Endorsement, an Agreed Amount Endorsement, and such other endorsements as are
required by Lender;
(B) One hundred percent (100%) rent or business interruption insurance in an
amount equal to not less than one (1) year's rent from any of the Collateral
which is rental property without coinsurance;
(C) Flood insurance in the amount of one hundred percent (100%) replacement
cost of the Collateral if available, but not less than the maximum amounts
available to Borrower under the applicable National Flood Insurance guidelines
as to such portions of the Collateral which is Real Property situated in an
area now or subsequently designated as having special flood and/or mudslide
hazards;
(D) Earthquake insurance as available if the Collateral which Is Real Property
is now situated in or subsequently designated as in a seismographic earthquake
zone;
(E) Boiler and machinery insurance to one hundred percent (100%) replacement
cost for boilers, turbines, electrical machinery, and miscellaneous equipment;
(F) At least two million dollars ($2,000,000) per occurrence of comprehensive
general liability insurance on an occurrence form. This requirement may be met
in combination with an umbrella policy with the permission of the Lender;
(G) Increased cost of Demolition and Increased Cost of Construction insurance;
(H) Other insurance as Lender may reasonably require.
All such policies of insurance shall be subject to the reasonable approval of
Lender as to the issuing company or companies, content, amount of coverage,
form and expiration dates. The insurance company or companies chosen must be
licensed in the state in which any of the Collateral insured is located and
must have a minimum rating of A: Class VIII in the most recent issue of Best's
Rating Guide. All insurance policies shall contain a Noncontributory Standard
Mortgagee clause, or its equivalent, and a Lender's Loss Payable Endorsement,
in form and content acceptable to Lender, in favor of Lender. All policies
shall name Lender as an additional insured and contain waiver of subrogation
and mortgagee clauses in favor of Lender. Policies shall also provide for
thirty (30) days written notice to Lender in advance of cancellation of said
policies for any reason for material modification of said policies and then ten
(10) days written notice to Lender in advance of payment of any insurance
claims under said policies to any Person. Renewal policies shall be submitted
to the Lender with paid receipts for the insurance premium fifteen (15) days
prior to expiration each year. The Lender shall have the option, but not the
obligation, to purchase insurance for the Collateral if existing insurance is
not adequate. Borrower, irrevocably, appoints Lender (and all officers,
employees or agents designated by Lender) as Borrower's true and lawful agent
and attorney-in-fact for the purpose of endorsing the name of Borrower on any
check, draft, instrument or other item of payment for the proceeds of such
policies of insurance. Furthermore, Borrower, irrevocably, appoints Lender (and
all officers, employees or agents designated by Lender) as Borrower's true and
<PAGE>
lawful agent and attorney-in-fact, from and after an Event of Default, for
purposes of making, settling and adjusting claims under such policies of
insurance, and for making all determinations and decisions with respect to such
policies of insurance. In the event Borrower at any time or times hereafter
shall fail to obtain or maintain any of the policies of insurance required
above or to pay any premium in whole or in part relating thereto, then Lender,
without waiving or releasing any of Borrower's Obligations or any Event of
Default hereunder, may at any time or times thereafter (but shall be under no
obligation to do so) obtain and maintain such policies of insurance and pay
such premium and take any other action with respect thereto which Lender deems
advisable. All sums so disbursed by Lender, including reasonable attorneys'
fees, court costs, expenses and other charges relating thereto, shall be part
of Borrower's Liabilities, payable by Borrower to Lender on demand.
9.2 Borrower shall pay promptly, when due, all of the Charges, provided,
however, that notwithstanding the foregoing, Borrower may permit or suffer the
Charges to attach to Borrowers assets and may dispute, without prior payment
thereof, the Charges, provided that Borrower, in good faith, shall be
contesting the attachment and enforcement thereof in an appropriate proceeding,
enforcement thereof against any assets of Borrower shall be stayed and
appropriate reserves therefor shall have been established on the Records of
Borrower in accordance with generally accepted accounting principles. In the
event Borrower, at any time or times hereafter, shall fail to pay the Charges
required herein, Borrower shall so advise Lender thereof in writing; Lender
may, without waiving or releasing any of Borrower's Obligations or any Event of
Default hereunder, in its sole and absolute discretion, at any time or times
thereafter, make such payment, or any part thereof, and take any other action
with respect thereto which Lender deems advisable. All sums so paid by Lender
and any expenses, including reasonable attorneys' fees, court costs, expenses
and other charges relating thereto, shall be part of Borrower's Liabilities,
payable by Borrower to Lender on demand.
9.3 Borrower shall require each of its subpartnership borrowers to provide to
Borrower for its benefit as a lender, the insurance described in, and to agree
to the provisions of, Paragraphs 9.1 and 9.2.
10. WARRANTIES. REPRESENTATIONS AND COVENANTS: GENERAL
---------------------------------------------------
10.1 Except as disclosed in writing to Lender, Borrower warrants and represents
to and covenants with Lender that: (a) Borrower and each Subsidiary of Borrower
is and at all times hereafter shall be a limited partnership duly organized and
existing and in good standing under the laws of the state of its organization
and qualified or licensed to do business and in good standing in all states in
which the laws thereof require Borrower to be so qualified and/or licensed; (b)
Borrower has the right, power and capacity and is duly authorized and empowered
to enter into, execute, deliver and perform this Agreement and the Other
Agreements; (c) the execution, delivery and/or performance by Borrower of this
Agreement and the Other Agreements shall not, by the lapse of time, the giving
of notice or otherwise, constitute a violation of any applicable law or a
breach of any provision contained in Borrower's Agreement of Limited
Partnership or Certificate of Limited Partnership, or contained in any
agreement, instrument or document to which Borrower is now or hereafter a party
<PAGE>
or by which it Is or may become bound, or result in or require the creation of
any lien, security interest, charge or other encumbrance upon or with respect
to any now-owned or hereafter arising or acquired properties of Borrower; (d)
this Agreement and the Other Agreements are and will be the legal, valid and
binding agreements of Borrower enforceable in accordance with their terms,
except as enforcement thereof may be subject to the effect of applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally, and to general principles of equity (regardless of
whether such enforcement is sought in a proceeding in equity or at law); (e)
Borrower has and at all times hereafter shall have good, indefeasible and
merchantable title to and ownership of the Collateral, free and clear of all
liens, claims, security interests and encumbrances except those of Lender, and
those referred to in Paragraph 10.2(a) below; (f) except for (A) trade payables
arising in the ordinary course of its business since the dates reflected in the
Financials, (B) other accruals similar in nature or type to accruals shown on
the Financials and arising in the ordinary course of its business since the
dates reflected in the Financials (C) Indebtedness disclosed in the Financials,
(D) Borrower's obligations to issuers of letters of credit, and (E) the
Borrower's Liabilities, Borrower has no Indebtedness; (g) Borrower is not
subject to the renegotiation of any government contracts; (h) Borrower
possesses adequate assets, licenses, patents, copyrights, trademarks and
tradenames to continue to conduct its business as previously conducted by it;
(i) Borrower has and is in good standing with respect to all governmental
permits, certificates, consents and franchises necessary to continue to conduct
its business as previously conducted by it and to own or lease and operate its
properties as now owned or leased by it; (j) none of said permits,
certificates, consents or franchises contain any term, provision, condition or
limitation more burdensome than such as are generally applicable to Persons
engaged in the same or similar business as Borrower; (k) Borrower is not a
party to any contract or agreement or subject to any charge, restriction,
judgment, decree or order materially and adversely affecting its business,
property, assets, operations or condition, financial or otherwise; (l) Borrower
is not, and will not be during the term or any renewal term hereof, in
violation of any applicable statute, regulation or ordinance of the United
States of America, of any state, city, town, municipality, county or of any
other jurisdiction, or of any agency thereof, in any respect materially and
adversely affecting its business, property, assets, operations or condition,
financial or otherwise; (m) Borrower has filed or caused to be filed all tax
returns which are required to be filed, and has paid all Charges shown to be
due and payable on said returns or on any assessments made against it or any of
its property, and all other Charges imposed on it or any of its properties by
any governmental authority; (n) the Financials fairly and accurately present
the assets, liabilities and financial conditions and results of operations of
Borrower and such other Persons described therein as of and for the periods
ending on such dates and have been prepared in accordance with federal income
tax requirements or generally accepted accounting principles and such
principles have been applied on a basis consistently followed in all material
respects throughout the periods involved; (o) there has been no material and
adverse change in the assets, liabilities or financial condition of Borrower
since the date of the Financials; and (p) the execution, delivery and
performance by Borrower of this Agreement and/or the Other Agreements will not,
except to the extent caused by independent actions of Lender, impose on or
subject Lender to any liability, whether fixed or contingent, in respect of any
environmental protection or other law, rule or regulation (including, without
limitation, rules and regulations of the United States Environmental Protection
Agency) controlling, governing or relating to the pollution or contamination of
the air, water or land.
<PAGE>
10.2 Borrower warrants and represents to and covenants with Lender that
Borrower shall not, without Lender's prior written consent thereto, which
Lender may or may not give in its sole discretion, concurrently or hereafter:
(a) grant a security interest in, assign, sell or transfer any of Borrower's
assets to any Person or permit, grant, or suffer a lien, claim or encumbrance
upon any of Borrower's assets except: (i) liens created by this Agreement and
the Other Agreements; (ii) liens for Charges which are not yet due and payable,
or which are permitted pursuant to Paragraph 9.2 of this Agreement; (iii)
mechanics', materialmen's, bankers', carriers', warehousemen's and similar
liens arising in the ordinary course of business and securing obligations of
Borrower that are not overdue for a period of more than sixty (60) days or are
being contested in good faith by appropriate proceedings diligently pursued,
provided that in the case of any such contest any such proceedings commenced
for the enforcement of such lien shall have been duly suspended and such
provision for the payment of such liens has been made on the books of Borrower
as may be required by generally accepted accounting principles; (iv) liens
arising in connection with worker's compensation, unemployment insurance, old
age pensions and social security benefits which are not overdue or are being
contested in good faith by appropriate proceedings diligently pursued, provided
that in the case of any such contest any proceedings commenced for the
enforcement of such liens shall have been duly suspended and such provision for
the payment of such liens has been made on the books of Borrower as may be
required by generally accepted accounting principles; (v) liens incurred in the
ordinary course of business to secure the performance of statutory obligations
arising in connection with progress payments or advance payments due under
contracts with the United States Government or any agency thereof entered into
in the ordinary course of business, liens incurred or deposits made in the
ordinary course of business to secure the performance of tenders, statutory
obligations, bids, leases, performance bonds, fee and expense arrangements with
trustees and fiscal agents and other similar obligations (exclusive of
obligations incurred in connection with the borrowing of money or the payment
of the deferred purchase price of property) and liens directly securing appeal
and release bonds, provided that adequate provision for all such obligations
has been made on the books of Borrower in accordance with generally accepted
accounting principles; and (vi) zoning restrictions, easements, licenses,
restrictions on the use of Real Property or minor irregularities in title
thereto, which do not materially detract from the value or impair the use of
such Real Property; (b) permit or suffer any levy, attachment or restraint to
be made affecting any of its assets or the Collateral; (c) permit or suffer any
receiver, trustee or assignee for the benefit of creditors, or any other
custodian to be appointed to take possession of all or any of Borrower's assets
or any of the Collateral; (d) sell all or substantially all of its assets to
any Person; (e) modify, amend or supplement Borrower's Certificate of Limited
Partnership or Agreement of Limited Partnership or similar document; (f) enter
into any transaction not in the ordinary course of business which materially
and adversely affects Borrower's ability to repay Borrower's Liabilities or
Indebtedness, or materially and adversely affects the Collateral; (g) except as
otherwise permitted under the terms of Borrower's partnership agreement as it
may be in effect on the date hereof, other than In the ordinary course of
business, make any investment in the Stock or obligations of any Person,
provided, however, notwithstanding the foregoing, Borrower may make investments
in certificates of deposit of a banking institution having a net worth in
excess of S100,000,000 or in securities of the United States of America or
commercial paper with a P1 (or equivalent) rating (all of the foregoing
maturing within one year); (h) guaranty or otherwise, in any way, become liable
with respect to the obligations or liabilities of any Person, including,
<PAGE>
without limitation, by agreement to maintain net worth or working capital, or
to purchase the obligations or property of any such Person, or to furnish funds
to any such Person, directly or indirectly, through the purchase of goods,
supplies or services, or obtain upon its credit the issuance of any letter or
letters of credit for the obligations of any such Person, provided, however,
that the foregoing shall not apply to endorsement of instruments or items of
payment for deposit or collection in the ordinary course of business; (i) make
any material change in Borrower's capital structure or in any of its business
objectives, purposes and operations which might in any way adversely affect the
repayment of Borrower's Liabilities; (j) other than as specifically permitted
in or contemplated by this Agreement, encumber, pledge, mortgage, sell, lease
or otherwise dispose of or transfer, whether by sale, merger, consolidation or
otherwise, any of Borrower's assets; (k) redeem, retire, purchase or otherwise
acquire, directly or indirectly, any of Borrower's Partnership Interests; (l)
redeem or otherwise acquire any Indebtedness, except as required in accordance
with the express terms of the agreement or instrument creating or evidencing
such Indebtedness, or if such Indebtedness is superior, in right of payment, to
Borrower's Liabilities, and then so long as no Event of Default shall have
occurred or would occur after giving effect thereto; (m) enter into any
transactions, including, without limitation, the purchase, sale or exchange of
property or the rendering of any services, with any Affiliate, or enter into,
assume or suffer to exist any employment, management, administration, advisory
or consulting contract with any Affiliate or any officer, director or partner
of any Affiliate, except a transaction or contract which is in the ordinary
course of business, is otherwise permitted by this Agreement and is upon fair
and reasonable terms no less favorable than would be obtained in a comparable
arms-length transaction with a Person not an Affiliate; (n) distribute any cash
to partners or make any distributions or transfers of Borrower's property or
assets or make any loans, advances and/or extensions of credit to any Persons;
(o) terminate or withdraw from any pension (or similar) plan so as to result in
any material liability or penalty (in the sole opinion of Lender) of Borrower
to the pension plan, pension trustee, Pension Benefit Guaranty Corporation or
otherwise, or permit to occur any Reportable Event or Prohibited Transaction
(as defined in Title IV of the Employee's Retirement Income Security Act of
1974 as the same may be amended and in effect from time to time), or any other
event or condition, which presents a material risk (in the sole opinion of
Lender) of such termination or withdrawal; (p) incur Indebtedness (other than
Borrower's Liabilities) except renewals or extensions of existing Indebtedness
and interest thereon and/or refinancings of existing indebtedness (provided the
same is not increased in connection therewith), and trade payables arising in
the ordinary course of business; (q) except pursuant to this Agreement and the
Other Agreements, issue any power of attorney or other contract or agreement
giving any Person power or control over the day-to-day operations of Borrower's
business; (r) fail to comply in any material respect with any applicable
provision of the Comprehensive Environmental Response Compensation and
Liability Act of 1980 or any other applicable local, state or federal
environmental protection health or safety, statute, health or safety or
regulation relating to or imposing liability or standards concerning Hazardous
Material; (s) purchase, invest in or otherwise acquire, by purchase or capital
or financing lease real estate, machinery, equipment or other fixed assets
which in the aggregate require an expenditure by Borrower in any one fiscal
year of Borrower exceeding, in the aggregate, S100,000.
10.3 Borrower warrants and represents to and covenants with Lender that
Borrower shall do all of the following during the term of this Agreement unless
Lender waives any such requirement in writing: (a) pay or discharge or
otherwise satisfy at or before maturity or before the same becomes delinquent,
<PAGE>
all Indebtedness, provided, however, that Borrower shall not be required to pay
any Indebtedness which is unsecured while the same is being contested by it in
good faith and by appropriate proceedings so long as Borrower shall have set
aside on its books reserves in accordance with generally accepted accounting
principles with respect thereto and title to any property of Borrower is not
jeopardized; (b) preserve and maintain its existence, rights, privileges and
franchises in the jurisdiction of its organization, and qualify and remain
qualified to do business in each other jurisdiction in which such qualification
is necessary in view of its business or operations; (c) comply with all laws,
rules, regulations and governmental orders (federal, state and local) having
applicability to it or to the business or businesses at any time conducted by
it, where the failure to so comply would have a material adverse effect, either
individually or in the aggregate, on the business, condition (financial or
otherwise) and assets, operations or prospects of Borrower; (d) duly and
punctually pay and perform each of its obligations under this Agreement and the
Other Agreements in accordance with the terms thereof; and (e) furnish to
Lender, as soon as possible and in any event within five (5) days after
Borrower shall have obtained knowledge of the occurrence of an Event of
Default, the written statement of the Chief Financial Officer of Borrower
setting forth the details of such Event of Default and the action which
Borrower proposes to take with respect thereto.
10.4 Borrower shall require that each subpartnership borrower give to it, as
lender, the representations and warranties, and agree to all of the covenants
contained in Paragraphs 10.1, 10.2, and 10.3.
11. WARRANTIES. REPRESENTATIONS AND COVENANTS: FINANCIAL
-----------------------------------------------------
STATEMENTS
----------
11.1 Borrower covenants with Lender that Borrower shall keep Records and
prepare financial statements and shall cause to be furnished to Lender, at
Lender's request, the following (all of the foregoing and following to be kept
and prepared at Lender's option, either in accordance with tax accounting or in
accordance with generally accepted accounting principles, applied on a basis
consistent with the Financials unless Borrower's certified public accountants
concur In any changes therein and such changes are consistent with then
generally accepted accounting principles):
(A) As soon as available but not later than ninety (90) days after the close of
each fiscal year of Borrower, a copy of the tax return and, if generally
accepted accounting is requested by Lender or elected by Borrower, a copy of
the annual audit report of Borrower and its Subsidiaries prepared on a
consolidated and consolidating basis in conformity with generally accepted
accounting principles and consisting of a balance sheet of Borrower and its
Subsidiaries as of the end of, and related statements of operations and cash
flow for, such year, together with a reconciliation of capital of Borrower and
its Subsidiaries for such year.
(B) Concurrently with the delivery of the audited financial statements
described in Subparagraph (A) above if required or given, (1) a certificate of
the aforesaid certified public accountants certifying to Lender that based upon
their examination of the affairs of Borrower, performed in connection with the
preparation of said financial statements, they are not aware of the occurrence
or existence of any condition or event which constitutes or upon notice or
lapse of time or both would constitute an Event of Default or, if they are
<PAGE>
aware thereof, the nature thereof and (ii) the acknowledgment of such certified
public accountants, in form and substance reasonably acceptable to Lender, to
the effect that the Lender shall be permitted to rely thereupon for purposes of
Paragraph 5535.1 of Chapter 111 of the Illinois Annotated Statutes,
notwithstanding that the Lender is not in privity of contract with Such
certified public accountants in respect of such financial statements.
(C) Such other data and information (financial and otherwise) as Lender, from
time to time, may request bearing upon or related to the Collateral, Borrower's
financial condition and/or results of operations.
11.2 Borrower shall require that each subpartnership borrower give to it, as
lender, the representations and warranties, and agree to all of the covenants
contained in Paragraph 11.1.
12. DEFAULT
-------
12.1 The occurrence of any one of the following events shall constitute a
default ("Event of Default") under this Agreement: (a) Borrower shall default
in the performance or observance of any of Borrower's Obligations under this
Agreement; (b) if any representation or warranty on the part of Borrower
contained in this Agreement or the Other Agreements, or any document,
instrument or certificate delivered pursuant hereto or thereto shall have been
incorrect in any material respect when made or deemed made; (c) if Borrower
fails to pay Borrower's Liabilities, when due and payable or declared due and
payable; (d) if the Collateral, any Collateral securing the obligations to
Lender of any Guarantor or any other material portion of Borrower's or any such
Guarantor's assets are attached, seized, subjected to a writ of distress
warrant, or are levied upon, or come within the possession of any receiver,
trustee, custodian or assignee for the benefit of creditors and the same is not
terminated or dismissed within twenty (20) days thereafter; (e) if a petition
under any section or chapter of the Bankruptcy Reform Act of 1978, as amended,
or any similar law or regulation shall be filed by Borrower or any Guarantor or
if Borrower or any Guarantor shall make an assignment for the benefit of its
creditors or if any case or proceeding is filed by Borrower or any Guarantor
for its dissolution or liquidation; (f) if Borrower or any Guarantor is
enjoined, restrained or in any way prevented by court order from conducting all
or any material part of its business affairs or if a petition under any section
or chapter of the Bankruptcy Reform Act of 1978, as amended, or any similar law
or regulation is filed against Borrower or any Guarantor or if any case or
proceeding is filed against Borrower or any Guarantor for its dissolution or
liquidation and such injunction, restraint or petition is not dismissed or
stayed within thirty (30) days after the entry or filing thereof; (g) if an
application is made by Borrower or any Guarantor for the appointment of a
receiver, trustee or custodian for the Collateral, any Collateral securing such
Guarantor's obligations to Lender or any other material portion of Borrower's
or such Guarantor's assets; (h) if an application is made by any Person other
than Borrower or any Guarantor for the appointment of a receiver, trustee, or
custodian for the Collateral, any Collateral securing such Guarantor's
obligation's to Lender or any other material portion of Borrower's or such
Guarantor's assets and the same is not dismissed within thirty (30) days after
the application therefor; (i) except as permitted in Paragraph 9.2 above, if a
notice of any Charge is filed of record with respect to all or any of
Borrower's assets, or if any Charge becomes a lien or encumbrance upon the
Collateral or any other of Borrower's assets and the same is not released
within thirty (30) days after the same becomes a lien or encumbrance; (j) if
<PAGE>
Borrower is in default in the payment of Indebtedness (other than Borrower's
Liabilities) and such default is declared and is not cured within the time, if
any, specified therefor in any agreement governing the same; (k) the death or
incompetency of any Guarantor (which is an individual), or the appointment of a
conservator for all or any material portion of Borrower's or any such
Guarantor's assets or the Collateral; (l) the occurrence of a default or Event
of Default under any agreement, instrument and/or document executed and
delivered by any Guarantor to Lender, which is not cured within the time, if
any, specified therefor in such agreement, instrument or document; (m) the
occurrence of a default or an Event of Default under any of the Other
Agreements, which is not cured within the time, if any, specified therefor in
such Other Agreement; (n) if one or more judgments or decrees shall be entered
against Borrower, involving, individually, or in the aggregate, a liability of
$25,000 or more and all such judgments or decrees shall not have been vacated,
discharged or stayed pending appeal within thirty (30) days from the entry
thereof; (o) if this Agreement or any of the Other Agreements shall cease for
any reason to be in full force and effect (other than by reason of the
satisfaction of all of Borrower's Liabilities or voluntary release by Lender of
any Other Agreement) or Borrower or any other Person (other than Lender) shall
disavow its obligations thereunder, or shall contest the validity or
enforceability of any thereof; or (p) if any lien or security interest in any
Collateral or any Collateral securing the obligations of any Guarantor to
Lender shall for any reason cease to be a legal, valid, perfected or
enforceable lien on and security interest in such Collateral or Guarantor's
Collateral (other than by reason of the payment in full of all obligations
secured thereby or voluntary release by the secured party of such Collateral or
Guarantor's Collateral).
12.2 All of Lender's rights and remedies under this Agreement and the Other
Agreements are cumulative and nonexclusive.
12.3 Upon an Event of Default or the occurrence of any one of the events
described in Paragraph 12.1 (notwithstanding Borrower's right to cure the same
thereafter), without notice by Lender to or demand by Lender of Borrower,
Borrower's Liabilities shall be due and payable, forthwith.
12.4 Upon an Event of Default, Lender, in its sole and absolute discretion,
may: (a) exercise any one or more of the rights and remedies accruing to a
secured party under the Uniform Commercial Code of the relevant state or states
and any other applicable law upon default by a debtor; (b) enter, with or
without process of law and without breach of the peace, any premises where the
Collateral is or may be located, and without charge or liability to Lender
therefor seize and remove the Collateral from said premises and/or remain upon
said premises and use the same for the purpose of collecting, preparing and
disposing of the Collateral; and (c) sell or otherwise dispose of the
Collateral at public or private sale for cash or credit, provided, however,
that Borrower shall be credited with the net proceeds of such sale only when
such proceeds are actually received by Lender pursuant to Paragraph 14.1
hereof.
12.5 Upon an Event of Default, Borrower, immediately upon demand by Lender,
shall assemble the moveable Collateral and make it available to Lender at a
place or places to be designated by Lender which are reasonably convenient to
Lender and Borrower. Borrower recognizes that in the event Borrower fails to
perform, observe or discharge any of Borrower's Obligations, no remedy of law
will provide adequate relief to Lender, and agrees that Lender shall be
<PAGE>
entitled to temporary and permanent injunctive relief in any such case without
the necessity of proving actual damages.
12.6 Any notice required to be given by Lender of a sale, lease, other
disposition of the Collateral or any other intended action by Lender, deposited
in the United States mail, postage prepaid and duly addressed to Borrower at
its principal place of business specified at the beginning of this Agreement
not less than ten (10) days prior to such proposed action, shall constitute
commercially reasonable and fair notice to Borrower thereof.
12.7 Upon an Event of Default, Borrower agrees that Lender may, if Lender deems
it reasonable, postpone or adjourn any such sale of the Collateral from time to
time by an announcement at the time and place of sale or by announcement at the
time and place of such postponed or adjourned sale, without being required to
give a new notice of sale. Borrower agrees that Lender has no obligation to
preserve rights against prior parties to the Collateral. Further, Borrower
waives and releases any cause of action and claim against Lender as a result of
Lender's possession, collection or sale of the Collateral, any liability or
penalty for failure of Lender to comply with any requirement imposed on Lender
relating to notice of sale, holding of sale or reporting of sale of the
Collateral, and, to the extent permitted by law, any right of redemption from
such sale.
12.8 In the event Lender seeks possession of the Collateral through replevin or
other court process, Borrower hereby irrevocably waives (a) any bond, surety or
security required as an incident to such possession, and (b) any demand for
possession of the Collateral prior to commencement of any suit or action to
recover possession thereof.
12.9 Upon the occurrence of any one of the events described in Paragraph 12.1
above, notwithstanding Borrower's right to cure the same before it becomes an
Event of Default, Lender, if it determines that the Collateral or the payment
of Borrower's Liabilities is jeopardized, may enforce such of its rights and
remedies under this Article as Lender deems necessary or proper.
13. CONDITIONS PRECEDENT TO DISBURSEMENT
------------------------------------
13.1 In no event shall Borrower request that Lender make any advance or
additional or future advances to Borrower unless, in addition to satisfaction
of the conditions set forth in Paragraphs 13.2 and 13.3 hereof, Lender shall
have received (if Lender shall have so requested), prior to any such advance,
the following, duly executed and in form and substance satisfactory to Lender:
(A) a duly executed copy of this Agreement;
(B) the Applicable Revolving Note, duly executed by Borrower, payable to the
order of Lender;
(C) the applicable Mortgage;
(D) UCC-1 Financing Statements, duly executed by Borrower, showing Borrower as
Debtor, in favor of Lender, as Secured Party, in the jurisdiction in which
Borrower maintains its chief executive office and in each other jurisdiction in
which Borrower conducts its business operations and/or maintains Collateral;
<PAGE>
(E) UCC-2 Financing Statements, duly executed by Borrower, showing Borrower as
Debtor, in favor of Lender, as Secured Party, in each county in which Borrower
owns Real Property or maintains equipment or fixtures;
(F) UCC/Tax/Judgment Lien Search Report with respect to Borrower, together with
duly executed releases and/ or termination statements as Lender may request;
(G) certified copies of the Certificate of Limited Partnership of Borrower;
(H) copy of Borrower's Agreement of Limited Partnership certified to by one of
Borrower's general partners;
(I) certificate(s) of Insurance in respect of all property, casualty, liability
and other insurance maintained by Borrower in respect of the Collateral or
otherwise in respect of its business, together with lender loss payable and
other endorsements acceptable as to form and substance to Lender; and
(J) such other opinions, documents, assignments, certificates or approvals as
Lender reasonably may request.
All of the foregoing shall be in form and substance reasonably acceptable to
Lender and its counsel.
13.2 Lender shall not make any advance or additional or future advances to
Borrower unless and until all proceedings taken in connection with the
transaction contemplated by this Agreement, and all instruments, authorizations
and other documents applicable thereto, shall be satisfactory in form and
substance to Lender.
13.3 In addition to the foregoing, prior to Lender making of any advances
additional or future advances hereunder, all of the following shall have been
satisfied in a manner satisfactory to Lender:
(A) No change in the condition or operations, financial or otherwise, of
Borrower or any Affiliate, shall have occurred which change, in the sole credit
judgment of Lender, may have a material adverse effect on Borrower or such
Affiliate or on any of the Collateral;
(B) All of the representations and warranties of Borrower set forth in this
Agreement and each of the Other Agreements to which Borrower as a party shall
be true and correct on the date of the contemplated Loan to the same extent as
originally made on such date; and
(C) No Event of Default or event or condition which, with notice, lapse of time
and/or the making of the contemplated Loan, would constitute an Event of
Default shall exist or be continuing.
13.4 Any provision herein to the contrary notwithstanding, Lender shall have no
obligation to make any advance hereunder, even if all of the above conditions
shall have been satisfied, and each and every advance shall be at Lender's sole
option and discretion
14. GENERAL
-------
<PAGE>
14.1 Any check, draft or similar item of payment by or for the account of
Borrower delivered to Lender on account of Borrower's Liabilities shall,
provided the same is honored and final settlement thereof is reflected by
irrevocable credit to Lender, be applied by Lender on account of Borrower's
Liabilities two (2) business days after the date Lender actually receives the
same. A "business day" shall mean any day upon which national banks with a
principal place of business in Chicago, Illinois are authorized or required by
law to be open for the transaction of commercial banking business.
14.2 That portion of Borrower's Liabilities consisting of monies, costs,
expenses or advances to be reimbursed by Borrower to Lender pursuant to this
Agreement shall be payable by Borrower to Lender on demand.
14.3 Borrower waives the right to direct the application of any and all
payments at any time or times hereafter received by Lender on account of
Borrower's Liabilities and Borrower agrees that Lender shall have the
continuing exclusive right to apply and reapply any and all such payments in
such manner as Lender may deem advisable, notwithstanding any entry by Lender
upon any of its books and records.
14.4 Borrower covenants, warrants and represents to Lender that all
representations and warranties of Borrower contained in this Agreement and the
Other Agreements shall be true at the time of Borrower's execution of this
Agreement and the Other Agreements, shall survive the execution, delivery and
acceptance thereof by the parties thereto and the closing of the transactions
described therein or related thereto and shall be true from the time of
Borrower's execution of this Agreement to the end of the term hereof.
14.5 This Agreement and the Other Agreements may not be modified, altered or
amended except by an agreement in writing signed by Borrower and Lender.
Borrower may not sell, assign or transfer this Agreement or the Other
Agreements or any portion thereof, including, without limitation, Borrower's
rights, titles, interests, remedies, powers and/or duties thereunder. Borrower
hereby consents to Lender's sale, assignment, transfer or other disposition, at
any time and from time to time hereafter, of this Agreement or the Other
Agreements, or of any portion thereof, including, without limitation, Lender's
rights, titles, interests, remedies, powers and/or duties.
14.6 Lender's failure at any time or times hereafter to require strict
performance by Borrower of any provision of this Agreement shall not waive,
affect or diminish any right of Lender thereafter to demand strict compliance
and performance therewith. Any suspension or waiver by Lender of an Event of
Default by Borrower under this Agreement or the Other Agreements shall not
suspend, waive or affect any other Event of Default by Borrower under this
Agreement or the Other Agreements, whether the same is prior or subsequent
thereto and whether of the same or of a different type. None of the
undertakings, agreements, warranties, covenants and representations of Borrower
contained in this Agreement or the Other Agreements and no Event of Default by
Borrower under this Agreement or the Other Agreements shall be deemed to have
been suspended or waived by Lender unless such suspension or waiver is by an
instrument in writing signed by an officer of Lender and directed to Borrower
specifying such suspension or waiver.
14.7 If any provision of this Agreement or the Other Agreements or the
application thereof to any Person or circumstance is held invalid or
unenforceable, the remainder of this Agreement and the Other Agreements and the
application of such provision to other Persons or circumstances will not be
<PAGE>
affected thereby and the provisions of this Agreement and the Other Agreements
shall be severable in any such instance.
14.8 This Agreement and the Other Agreements shall be binding upon and inure to
the benefit of the successors and assigns of Borrower and Lender. This
provision, however, shall not be deemed to modify Paragraph 14.5 hereof.
14.9 The provisions of the Other Agreements are incorporated in this Agreement
by this reference thereto. Except as otherwise provided in this Agreement and
except as otherwise provided in the Other Agreements by specific reference to
the applicable provision of this Agreement, if any provision contained in this
Agreement is in conflict with, or inconsistent with, any provision in the Other
Agreements, the provision contained in this Agreement shall govern and control.
14.10 Except to the extent provided to the contrary in this Agreement and in
the Other Agreements, no termination or cancellation (regardless of cause or
procedure) of this Agreement or the Other Agreements shall in any way affect or
impair the powers, obligations, duties, rights and liabilities of Borrower or
Lender in any way or respect relating to (i) any transaction or event occurring
prior to such termination or cancellation, (ii) the Collateral And/or (iii) any
of the undertakings, agreements, covenants, warranties and representations of
Borrower contained in this Agreement or the Other Agreements. All such
undertakings, agreements, covenants, warranties and representations shall
survive such termination or cancellation.
14.11 Except as otherwise specifically provided in this Agreement, Borrower
waives any and all notice or demand which Borrower might be entitled to receive
with respect to this Agreement or the Other Agreements by virtue of any
applicable statute or law, and waives presentment, demand and protest and
notice of presentment, protest, default, dishonor, nonpayment, maturity,
release, compromise, settlement, extension or renewal of any or all commercial
paper, accounts, contract rights, documents, instruments, chattel paper and
guaranties at any time held by Lender on which Borrower may in any way be
liable and here by ratifies and confirms whatever Lender may do in this regard.
14.12 Until Lender is notified by Borrower to the contrary in writing by
registered or certified mail directed to Lender's principal place of business,
the signature upon this Agreement or upon any of the Other Agreements of any
partner, manager, employee or agent of Borrower, or of any other Person
designated in writing to Lender by any of the foregoing, or of a "Designated
Person" (as that term is defined in Borrower's Certificate of even date
herewith, constituting one of the Other Agreements) shall bind Borrower and be
deemed to be the duly authorized act of Borrower.
14.13 Borrower hereby appoints Lender as Borrower's agent and attorney-in-fact
for the purpose of carrying out the provisions of this Agreement and the Other
Agreements, and taking any action and executing any agreement, instrument or
document which Lender may deem necessary or advisable to accomplish the
purposes hereof which appointment is irrevocable and coupled with an interest.
All monies paid for the purposes herein, and all costs, fees and expenses paid
or incurred in connection therewith, shall be part of Borrower's Liabilities,
payable by Borrower to Lender on demand.
14.14 Upon demand by Lender therefor, Borrower shall reimburse Lender for all
costs, fees and expenses incurred by Lender, or for which Lender becomes
obligated, in connection with the negotiation, preparation and conclusion of
this Agreement and the Other Agreements, including, without limitation,
<PAGE>
attorneys' fees, costs and expenses, search fees, costs and expenses, title
insurance policy fees, costs and expenses, filing and recording fees and all
taxes payable in connection with this Agreement or the Other Agreements.
14.15 This Agreement and the Other Agreements are submitted by Borrower to
Lender (for Lender's acceptance or rejection thereof) at Lender's principal
place of business as an offer by Borrower to borrow monies from Lender now and
from time to time hereafter and shall not be binding upon Lender or become
effective until and unless accepted by Lender, in writing, at said place of
business. If so accepted by Lender, this Agreement and the Other Agreements
shall be deemed to have been made at said place of business. This Agreement and
the Other Agreements shall be governed and controlled by the laws of the State
of Illinois as to interpretation, enforcement, validity, construction, effect
and in all other respects without reference to principles of choice of law.
14.16 If at any time or times hereafter Lender: (a) employs counsel for advice
or other representation (i) with respect to the Collateral, this Agreement, the
Other Agreements or the administration thereof, (ii) to represent Lender in any
litigation, contest, dispute, suit or proceeding or to commence, defend or
intervene or to take any other action in or with respect to Any litigation,
contest, dispute, suit or proceeding (whether instituted by Lender, Borrower or
any other Person) in any way or respect relating to the Collateral, this
Agreement, the Other Agreements or Borrower's affairs, or (iii) to enforce any
rights of Lender against Borrower, any Guarantor or any other Person which may
be obligated to Lender by virtue of this Agreement or the Other Agreements,
including without limitation, any Obligor; (b) takes any action with respect to
administration of the Collateral, this Agreement or the Other Agreements, or to
protect, collect, sell, liquidate or otherwise dispose of the Collateral;
and/or (c) attempts to or enforces any of Lender's rights or remedies under
this Agreement or the Other Agreements, including without limitation Lender's
rights or remedies with respect to the Collateral, the reasonable costs, fees
and expenses incurred by Lender in any manner or way with respect to the
foregoing, shall be part of Borrower's Liabilities, payable by Borrower to
Lender on demand.
14.17 Borrower releases Lender from any and all causes of action or claims
which Borrower may now or hereafter have for any asserted loss or damage to
Borrower claimed to be caused by or arising from: (a) any failure of Lender to
protect, enforce or collect in whole or in part any of the Collateral; (b)
Lender's notification to any Obligor of Lender's security interests in the
Accounts; (c) Lender's directing any Obligor to pay any sums owing to Borrower
directly to Lender; and (d) any other act or omission to act on the part of
Lender, its officers, agents or employees, except for willful misconduct.
14.18 To the extent that Lender receives any payment on account of Borrower's
Liabilities, or any proceeds of Collateral are applied on account of Borrower's
Liabilities, and any such payment(s) and/or proceeds or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
subordinated and/or required to be repaid to a trustee, receiver or any other
Person under any bankruptcy act, state or federal law, common law or equitable
cause, then, to the extent of such payment(s) or proceeds received, Borrower's
Liabilities or part thereof intended to be satisfied shall be revived and
continue in full force and effect, as if such payment(s) and/or proceeds had
not been received by Lender and applied on account of Borrower's Liabilities.
14.19 Except as otherwise provided herein, this Agreement and the Other
Agreements supersede in their entirety any other agreement or understanding
<PAGE>
between Lender and Borrower with respect to loans and advances made by Lender
and all commitments of Lender in connection therewith.
14.20 Each notice, demand or other communication in connection with this
Agreement shall be in writing and shall be deemed to be given to and served
upon the addressee thereof (i) upon actual delivery to such addressee at its
address set forth above, (ii) on the next business day after delivery thereof
to an overnight courier service, in accordance with such service's rules, or
(iii) on the third business day after the deposit thereof in the United States
mails, certified mail, first class postage prepaid, addressed to such addressee
at its address set forth above. By notice complying with this Paragraph, any
party may from time to time designate a different address as its address for
the purpose of the receipt of notices hereunder.
14.21 So long as the general partner of Borrower is an affiliate of The Balcor
Company, in no event shall any general partner of the Borrower have any
liability for breach of any covenants, representation or warranty, or for any
deficiency which may remain after the enforcement of Lender's rights and
remedies hereunder and under any of the Other Agreements; provided, however,
that if the general partner of the Borrower is not an affiliate of The Balcor
Company, then such general partner shall be fully liable for any such breach
and any such deficiency, and by agreeing to act as such general partner, such
Person agrees to and accepts such liability.
14.22 No Person shall be liable for the obligations of any other Person
hereunder (except to the extent that a Person shall be liable for the
obligations of any partnership in which it is a general partner, except as
otherwise provided in Paragraph 14.21), and no property, rights or assets of
any Person shall be deemed to be Collateral for the obligations of any other
Person hereunder, unless such Person has specifically agreed, in writing, to
become liable for such obligations or to pledge its assets for such
obligations. It is not intended that the obligations of any Person be
cross-collateralized hereunder, but that any advance hereunder to any Person be
collateralized with only such Person's assets, notwithstanding that there may
be more than one Borrower hereunder.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and
year specified at the beginning hereof.
Balcor Investors - 84, an Illinois Limited
Partnership
By: Balcor Partners - XV, its general Partner
By: RGF-Balcor Associates-II, a partner
By: The Balcor Company, a partner
By: /s/Allan Wood
------------------------
Allan Wood
Executive Vice President
Accepted this day of , 1993, at Lender's
principal place of business in the Village of Skokie, State of
Illinois.
THE BALCOR COMPANY
By: /s/Allan Wood
------------------------
Name: Allan Wood
------------------------
Title: Executive Vice President
------------------------
<PAGE>
EXHIBIT A
Attached to and Forming a
Part of Loan and Security
Agreement Dated as of
October 14, 1993, By and Between
The Balcor Company and
Balcor Realty Investors - 84
Form of Revolving Note
----------------------
<PAGE>
EXHIBIT B
Attached to and Forming a
Part of Loan and Security
Agreement Dated as of
October 14, 1993, By and Between
The Balcor Company and
Balcor Realty Investors - 84
List of Partnerships Owned by Borrower
--------------------------------------
Antlers Investors
Chandler Investors
Desert Sands Investors
Chesapeake Associates
Chesapeake Investors
Chestnut Ridge Partners Phase II
Chimney Ridge Investors
Courtyards of Kendall Limited Partnership
Creekwood Investors
Drayton Investors
Highland Investors
Pinebrook Investors
Quails Lake Investors
Ridgepoint Hill Investors
Westwood Investors
Overland Investors
Woodland Hills Partners Limited Partnership
<PAGE>
PROPERTY MANAGEMENT AND LEASING AGREEMENT
THIS MANAGEMENT AGREEMENT, (which, as amended from time to time, shall be
deemed the "Agreement") is made and entered into this ____ day of _________,
19___ by and between ______________________________________________, an
Illinois limited partnership ("Owner"), and INSIGNIA MANAGEMENT GROUP, L.P., a
Delaware corporation ("Manager").
WITNESSETH
WHEREAS, Owner is the owner of certain property with improvements located
thereon and commonly known as _______________________________________________,
located in __________________________________________________; and
WHEREAS, Owner intends to retain the services of Manager, as an independent
contractor, to manage, lease and operate the property pursuant to the express
terms and conditions set forth below.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein, the receipt and sufficiency of which is hereby acknowledged,
the parties hereto agree as follows:
ARTICLE I
APPOINTMENT OF MANAGER, TERM AND TERMINATION
Section 1.1. Exclusive Agency. Owner hereby hires and appoints Manager on
the terms and conditions hereinafter provided, as the sole and exclusive
management agent of that property of Owner consisting of _______________ units
known as __________________________________________, together with the land on
which said building(s) is (are) situated on that certain tract of real
property in ____________________, as legally described on Exhibit A attached
hereto and by this reference incorporated herein (the "Property"). Manager
hereby accepts said appointment on the terms and conditions set forth below,
and recognizes that a relationship of trust and confidence is created by this
Agreement, and agrees to use its reasonable best efforts to diligently and in a
first class manner manage the Property so as to effectuate an efficient and
economic operation thereof. As a material inducement for Owner to enter into
this Agreement, Manager represents and warrants that it currently and
throughout the term hereof shall possess the skills and experience to manage
projects of comparable quality and nature and that it and all necessary
personnel shall, where applicable, be duly licensed to perform the services
required herein consistent with the real estate brokerage laws in the state in
which the Property is located.
Section 1.2. Management Term. This Agreement shall commence as of
_________, 1994 and, unless sooner terminated as provided herein, shall
thereafter continue for a consecutive twelve (12) month period. Thereafter,
unless Owner elects not to renew this Agreement by written notice to Manager no
later than thirty (30) days prior to the end of any current term, this
Agreement shall be automatically renewed for successive terms, each with a
duration of one year unless otherwise terminated, as set forth below.
Notwithstanding the foregoing, at any time during the management term, Owner
and Manager shall each have the absolute right and power to terminate this
Agreement, with or without cause, upon sixty (60) days' prior written notice to
the non-terminating party. Owner shall have the absolute right to immediately
remove Manager from the Property upon delivery of said sixty (60) day notice,
however, unless terminated for cause as set forth below Manager shall be
<PAGE>
entitled to receive a management fee for the subsequent sixty (60) day period
consistent with the terms and conditions set forth in Section 2.2 below.
Section 1.3. Termination for Cause. Notwithstanding the stated term
hereof, this Agreement may be terminated by either party hereto for cause. If
such termination right is exercised by Owner, the termination will be effective
immediately upon delivery of written notice to Manager. Manager's right to
terminate for cause shall be upon no less than thirty (30) days prior written
notice, and the only definition of "cause" below that will permit Manager to
terminate for cause is the definition in subsection (i).
"Cause", as used herein, shall mean and refer to:
(i)the failure by either party to perform or comply with any of its
material obligations hereunder at the time or times and in the manner
required under this Agreement within five (5) days of receipt by the
non-performing party of notice of such failure (unless such failure is of
a criminal or quasi-criminal nature, in which event no cure period shall
be provided); or
(ii) Manager is grossly negligent in the performance of its obligations
under this Agreement or intentionally or willfully defaults under this
Agreement; or
(iii)Manager or Manager's employees act negligently or fail to act, which
failure to act constitutes negligence, with actual knowledge that such act
or failure to act may result in a release of any toxic or hazardous
material in violation of any federal, state or other applicable law and
such negligence does in fact result in such a release; or
(iv) Any unauthorized assignment or transfer of any of the rights or
obligations of Manager under this Agreement by Manager; or any
unauthorized change in the on-site personnel at the Property subject to
consultation with Owner as set forth in Section 2.9 below; or
(v)(a) If Manager or its ultimate parent (such parent company being
hereinafter referred to as the "Bankrupt Party") shall file a voluntary
petition in bankruptcy, or shall be adjudicated a bankrupt or insolvent,
or shall file any petition or answer seeking any reorganization,
arrangement, composition, liquidation, dissolution or similar relief for
itself under the present or any future federal bankruptcy act or any other
present or future applicable federal, state or other statute or law
relative to bankruptcy, insolvency or other relief for debtors, or under
any regulation promulgated thereunder, or shall seek or consent to or
acquiesce in the appointment of any trustee, receiver, conservator or
liquidator of the Bankrupt Party or of all or any substantial part of said
party's properties (the term "acquiesce" as used in this Section includes,
but is not limited to, the failure to file a petition or motion to vacate
or discharge any order, judgment or decree within fifteen (15) days after
the date of such order, judgment or decree); or
(b) If a court of competent jurisdiction shall enter an order,
judgment or decree approving a petition filed against Manager or the
Bankrupt Party seeking any reorganization, arrangement, composition,
liquidation, dissolution or similar relief under the present or any future
federal bankruptcy act or any other present of future applicable federal,
state or other statute or law relating to bankruptcy, insolvency, or other
<PAGE>
relief for debtors, and such party shall acquiesce in the entry of such
order, judgment or decree or such order, judgment or decree shall remain
unvacated and unstayed for an aggregate of sixty (60) days (whether or not
consecutive) from the date of entry thereof, or any trustee, receiver,
conservator or liquidator of such party or of all or any substantial part
of such party's property shall be appointed without the consent or
acquiescence of such party and such appointment shall remain unvacated and
unstayed for an aggregate of sixty (60) days (whether or not consecutive);
or
(c) If Manager or the Bankrupt Party shall become insolvent or admit
in writing its inability to pay its debts as they mature or is generally
not paying its debts as they mature or makes an assignment for the benefit
of creditors; or
(vi) Owner sells, transfers or otherwise conveys its interest in the
Property; or
(vii)Manager incurs any capital expenditures or, on a quarterly basis,
incurs controllable expenses, either of which is in excess of any approved
budget amount (and in excess of the amounts by which Manager may exceed
budgeted expenses, as set forth herein) or other written authorization
provided Manager by Owner except with respect to any of the foregoing made
on account of emergencies in accordance with the provisions hereof; or
(viii) Manager uses information obtained directly from its operation
and management of the Property in violation of the confidentiality
provisions contained herein below, to the detriment of Owner and for the
direct benefit of other projects owned, operated or managed by Manager or
an affiliate thereof.
Notwithstanding any such notice of termination by Owner of Manager,
Manager shall be and remain liable for the performance and the fulfillment
of its fiduciary duties and other obligations hereunder and shall maintain
all records, documents, property and files unimpaired through and
including the effective date of termination and thereafter as required by
the terms set forth herein.
<PAGE>
Section 1.4. Obligations Upon Termination.
(a) Upon expiration or termination of this Agreement for any reason,
Manager shall use its best efforts to deliver to Owner within 15 days (and in
no event more than 30 days) a full and final accounting, which shall include a
bona fide certified statement, executed by an executive officer of Manager,
outlining in detail any Management Fee (as defined in Section 2.2) and any
reimbursements due to Manager hereunder, and shall immediately cause all funds
held by Manager relating to the Property to be delivered to Owner without
deduction of any sums, including the Management Fee or any other fees due or
payable or to become due or payable to Manager or any other person or entity.
Manager shall promptly deliver to Owner all original books, records,
correspondence, bills and invoices and all other documents, personal property
and funds in Manager's possession relating to the Property including, without
limitation, all accounting books and records, rent rolls, security deposit
schedules, payroll records, originals and copies of all leases, correspondence,
service contracts and agreements, and technical data with respect to operation
and maintenance of the various systems of the Property. In the event Owner
concurs with Manager's statement of the Management Fee and any reimbursements
due to Manager, Owner shall promptly pay Manager such amount, which payment
shall be made not later than 30 days after receipt of Manager's statement;
however if Owner does not concur with the statement of the Management Fee
and/or any reimbursements due to Manager, the controversy as to the actual
amount due to Manager shall be negotiated in good faith by Owner and Manager,
using the parties reasonable efforts to resolve any disputes promptly.
(b) Upon termination, Manager shall surrender the Property to Owner and
quit the premises on the date required by Owner. Upon written request of Owner
and at Owner's expense, Manager shall notify all tenants of the Property of the
expiration of this Agreement by written notice approved by Owner, and shall use
its reasonable best efforts to cooperate with Owner to accomplish an orderly
transfer and transition of the operation and management of the Property to a
party designated by Owner. At the request of Owner, Manager shall, at its cost
and expense (if termination was for cause, otherwise at the cost and expense of
Owner), remove all signs previously approved for installation by Owner wherever
located indicating that Manager is the managing or leasing agent and replace
and restore any damage resulting therefrom, reasonable wear and tear excepted.
(c) Simultaneous with the submission of its final accounting, Manager
shall also submit a full inventory of all personal property of Owner having a
value in excess of $50.00, as more fully described in Section 2.3 (i) below, as
of the final date of Manager's operation as the Property's managing agent.
Said final inventory shall be certified by an authorized officer of Manager as
being complete, true and correct and that all items listed were present at the
Property on said date.
<PAGE>
ARTICLE II
MANAGEMENT DUTIES, RESPONSIBILITIES AND COMPENSATION
Section 2.1 Performance of Duties. Manager, subject to Owner's approval
rights as set forth herein, shall use its reasonable best efforts in the
management and marketing of the Property using state of the art management
methods and techniques. Manager shall operate the Property and provide those
management services, including but not limited to those set forth below, which
are customarily provided by managers of comparable quality and type real estate
in the same geographic area where the Property is located.
Section 2.2 Fees. Owner shall pay to Manager, as compensation for the
services rendered by Manager under this Agreement for management services, the
following fee (the "Management Fee"):
(a)Five percent (5%) of the Property's monthly gross cash receipts from
the operations of the Property during the previous month. Gross Cash Receipts
shall be defined as revenues collected from Property operations, including all
rental income collected, lease termination fees, parking fees (if Manager
services the parking garage; if not, parking fees shall be excluded), if any,
and late charges. Gross Cash Receipts shall specifically not include the
amount of any security deposits until such time as a security deposit is
applied to unpaid rent but not if applied as reimbursement for property damage
or expenses incurred by Owner, prepaid rent until such time as it is applied to
the applicable month's rental payment, sales proceeds, insurance proceeds,
tenant services provided by Manager for an additional fee paid by a tenant,
reimbursement of actual utility expenses, tax refunds, administrative expenses
or management fees paid by tenants of the Property, condemnation awards,
interest on funds on deposit or any cash proceeds received outside the
day-to-day operation of the Property. Manager shall be permitted to issue a
check for the Management Fee from the Property's Disbursement Account (as
discussed in Section 2.8(b) below) on or after the tenth day of the next
succeeding month; however, any checks returned by the bank for insufficient
funds or otherwise shall be deducted from Gross Cash Receipts prior to
calculation of the Management Fee and shall not be included in Gross Cash
Receipts until fully and finally collected. If returned checks are received
after payment of the Management Fee, the amount thereof shall be deducted from
the next month's Gross Cash Receipts, unless such check(s) have then been paid.
Notwithstanding the foregoing, under no circumstances shall Manager be
permitted to issue a check for payment of the Management Fee until Manager has
actually delivered to Owner the monthly rental and operating reports set forth
in Section 2.3 below, as amended from time to time.
(b)It is understood and agreed that the Management Fee set forth in
Section 2.2 above shall constitute Manager's sole compensation under this
Agreement for all management and leasing support services. All income and
revenues of whatever nature collected by Manager or others in connection with
Property operations are and shall remain the property of the Owner. It is
further agreed that except as expressly set forth in any approved budget or as
otherwise approved in writing by Owner, Manager shall be required to pay from
its own funds all expenses of Manager, including, but not limited to the
following:
(i)Cost of gross salary and wages, payroll taxes, insurance, worker's
compensation, and other benefits of management, accounting, marketing and
office personnel who are not Manager's employees on site at the Property
pursuant to the approved Budget. In addition, all costs and expenses
<PAGE>
including salary and fringe benefits of any Manager with multiple property
responsibility, except as otherwise expressly approved in writing by
Owner. All costs and expenses including salary and fringe benefits of any
regional engineering support, except on an as needed basis and as
previously approved in writing by Owner as expressly set forth in Section
4.1 below.
(ii) General accounting, bookkeeping and reporting services which are
considered to be within the reasonable scope of Manager's responsibility
to Owner.
(iii)Cost of forms, papers, ledgers, Federal Express or other overnight
courier charges, fax or other telephone services and other supplies, and
equipment used in Manager's office at any location off the Property.
(iv) Cost of electronic data processing, or any prorata charge thereof,
for data processing provided by computer service companies.
(vi) Political or charitable contributions.
(vii)Cost of advances made to employees and cost of travel for matters
not directly related to property operations including regional or national
management meetings by Manager's employees or agents to and from the
Property.
(viii) Cost attributable to losses from Manager's breach of its
obligations hereunder or from negligence, misconduct or fraud on the part
of Manager, Manager's associates or Manager's employees to the extent not
recovered by Owner from applicable insurance proceeds.
(ix) Cost of comprehensive crime insurance or fidelity bonds purchased by
Manager for its own account, as required herein.
(x)Training expenses, licenses, trade associations or organizational
affiliations and associated meetings or membership fees.
(xi) Employment or recruitment fees, severance fees or relocation
expenses.
(xii)Advertising and marketing expenses of Manager.
(xiii) Office furnishings and all costs incidental to the operation of
the office space provided to Manager by Owner.
Section 2.3 Management Reports. Manager shall timely prepare and deliver
to Owner the reports, schedules and statements required by Owner from time to
time, which shall initially include the forms described below. The format of
all such reports shall at all times be subject to the approval of Owner:
(a)Not later than the fifth (5th) day of each calendar month, property
operating results for the preceding month in electronic transmission;
(b)Not later than the tenth (10th) day of each calendar month, a monthly
unaudited operating statement in Owner's form, certified by the District
Manager of Manager to be true and correct to the best of Manager's knowledge
and belief. Such monthly statement shall show all receipts, expenses and other
financial results from the operation of the Property for the preceding month
<PAGE>
(including, without limitation, all deposits into the Operating Account and
expenditures from the Disbursement Account) and shall include copies of bank
account statements, reconciliations and backup expenditures, and all other
information reasonably requested by Owner. Such monthly statement shall
reflect the operations of the Property on a cash basis (however, accrual basis
reporting shall be available upon Owner's request), in accordance with
generally accepted accounting principles;
(c)Not later than the tenth (10th) day of each calendar month, a cash
flow statement for the Property for the preceding calendar month and for the
year to date. Each such statement shall also include a budget comparison and
an explanation of all major variances. The cash flow statement shall be
supported by schedules and statements required by the Owner from time to time,
which shall initially include the monthly reports set forth in Exhibit B,
attached hereto and incorporated herein by this reference;
(d)Not later than the twentieth (20th) day after the close of each
quarter, a quarterly report certified by an executive officer of Manager to be
true and correct to the best of Manager's knowledge and belief. Such quarterly
report shall report on the state of the business and affairs of the Property,
and include all payments to any person for services in connection with the
Property, regardless of the amount of such payments, and such other information
concerning the Property as may be reasonably requested by Owner, and which
quarterly reports, as set forth on Exhibit B, shall include (i) a narrative
report on leasing (if any), construction, employment and any other factors of
significance which relate to the Property, (ii) an operating statement
comparing current profit, loss and items of income and expenses to the Budget
and a forecast of said items for the balance of such fiscal year with variance
analysis explanation, and (iii) any revisions to the Budget that Manager may
recommend in light of the aforesaid forecast, provided that Manager at any time
may submit to Owner for review and approval by Owner one or more supplements to
or revisions of the Budget last approved by Owner. Such Budget re-forecasts
shall be provided to Owner by electronic transmission with hard copy to
follow,both in formats to be determined by Owner. Such quarterly report shall
reflect income and expenses from the operations of the Property on a cash basis
in accordance with generally accepted accounting principles;
(e)At Owner's written election, within seventy-five (75) days following
the end of each calendar year, at the expense of Owner, Manager shall have an
annual certified audit of the Property records (including a certified statement
for escalation billings, fixed asset schedule and such other schedules as Owner
deems necessary) prepared by a firm of independent certified public accountants
of nationally recognized standing approved by Owner, and shall furnish to Owner
a draft for Owner's approval prior to completion, and three (3) original copies
of such annual audit for Owner;
(f)Within sixty (60) days following the end of each calendar year, an
annual report of the Property certified by an executive officer of Manager to
be true and correct to the best of Manager's knowledge and belief. Such annual
report shall include such information as is necessary for Owner to have
prepared the audit of the Property records referenced in Section 2.17, and such
other information as Owner may request. Such annual report shall reflect
income and expenses from the operation of the Property on a cash basis in
accordance with generally accepted accounting principles;
(g)Promptly upon receipt thereof, a copy of all notices or statements
received by Manager which: (i) concern bank accounts or insurance policies or
<PAGE>
claims related to the Property; (ii) are received from any governmental agency;
(iii) are received from any tenant of the Property and relate to rent or the
asserted failure of Owner to perform its obligations under the applicable lease
or similar matters; or (iv) threaten or are expected to have a material effect
upon the Property or Owner. Such submittals shall not include copies of
information bulletins, questionnaires and similar materials of general
distribution which are not expected to have a material effect upon the Property
or Owner;
(h)Promptly upon obtaining knowledge thereof, a statement describing all
significant occurrences and circumstances affecting the Property or its
operation, and all occurrences and circumstances affecting in any manner
Owner's interest in and to the Property. Without limiting the above, Manager
shall promptly notify Owner in writing of the commencement of any legal actions
or proceedings affecting, or relating to, the Property; and
(i)Within sixty (60) days of the commencement hereof and then sixty (60)
days following the end of each calendar year, an annual inventory of the
personal property having a value of $50.00 or more (including, without
limitation, office equipment, tools, motor vehicles and office supplies,
excluding, however, expendable items, if any) owned or leased by Owner in
connection with the Property. Promptly following the date upon which any item
of such personal property is acquired, replaced or disposed of, Manager shall
notify Owner in writing of such change in said inventory. Manager shall be
responsible for any cost or expense associated with the repair or replacement
of any item of personal property which is incurred due to the negligent acts or
omissions of Manager.
Section 2.4 Maintenance and Repair of Property. Manager shall, as an
expense of the Property and consistent with approved budgetary guidelines,
maintain the buildings, appurtenances and common areas of the Property in good
condition according to local standards for comparable properties in the
immediate market area surrounding the Property, and, in any event, in
accordance with the standards and conditions specified by Owner from time to
time. Maintenance and repair items shall include but shall not be limited to,
interior and exterior janitorial services, exterior grounds and landscaping
services, repairs and alterations to existing improvements, plumbing, parking
areas, electrical systems painting, carpentry, maintenance and repair of
mechanical systems and such other maintenance and repair work as is reasonably
necessary. Manager agrees to periodically review with Owner all expenses and
any reserves therefor, and other services rendered in connection with the
Property, excepting, however, that emergency repairs reasonably deemed
immediately necessary by Manager for the preservation and safety of the
Property or tenants or other persons, or to avoid the suspension of any service
to the Property may be made by Manager without the approval of Owner if, under
the circumstances, Owner cannot be notified in any reasonable manner before the
required emergency repairs must be made and such costs do not exceed $5,000.00.
Owner's representative, which for purposes herein, shall be deemed Owner's
asset manager, as identified from time to time, in all instances shall be
notified of any such emergency expenditures within 24 hours of the occurrence
thereof. Notwithstanding this authority as to emergency repairs, it is
understood and agreed that Manager will confer with Owner regarding every such
expenditure. All necessary maintenance shall be performed by Manager in a
timely manner, and, unless otherwise directed by Owner, no necessary
maintenance shall be deferred except for such period during which Manager has
requested and has not received Owner's approval thereof.
<PAGE>
Section 2.5 Service and Supply Contracts.
(a)Manager shall directly select, supervise and engage all independent
contractors, suppliers and vendors, in the operation, repair, maintenance and
servicing of the Property, including but not limited to those necessary for the
supplying of electricity, gas, steam, water, telephone, cleaning, fuel, oil,
elevator maintenance, vermin extermination, trash removal, security and other
services deemed necessary or advisable by Manager for the operation of the
Property. Notwithstanding the foregoing, but subject to the provisions of
Section 2.4 above regarding emergency expenditures, any such contract that (i)
requires annual payment(s) which total in excess of $5,000, or (ii) has a term
of more than one (1) year (as expressly approved by Owner in writing), or (iii)
is with an affiliate of Manager or any individual directly related to any
employee of Manager, or (iv) would cause any line item of the approved budget,
other than for utilities or an expense deferred for one month, to be exceeded
shall require the prior written consent of Owner. Together with Manager's
request for consent to any such service contract, Manager shall deliver to
Owner a copy of the proposed contract, a statement of the relationship, if any,
between Manager (or the person or persons in control of Manager) and the party
which will supply such goods or services under the proposed contract,
supporting analysis, if any, and competitive bid documentation.
(b)In connection with its selection and supervision of contractors,
suppliers and other entities pursuant to this Section, Manager, among its other
duties, will (i) use its reasonable best efforts in selecting parties to
perform work or to provide labor, goods, utilities or services to or at the
Property so as to employ only such parties having the expertise and reputation
of being fully capable and reliable in efficiently and fully performing their
respective obligations under any contract with Manager, and fully performing
consistent with the obligations set forth in this Section; (ii) subject to the
emergency provisions of Section 2.4 hereof, negotiate and, when approved by
Owner or consistent with the approved Budget, enter into agreements relating to
the operation, repair, maintenance, service and/or promotion of the Property;
(iii) directly supervise and inspect the performance under all contracts and
agreements, including without limitation, the supervision, inspection and
observation of all servicing, cleaning, security, maintenance, repair,
decorating or alteration work at the Property during the progress thereof, and
the final inspection of the completed work and the approval or disapproval (as
appropriate) of all bills submitted for payment. In connection with the
foregoing, Manager shall obtain all necessary receipts, releases, waivers,
discharges and assurances necessary to keep, and will use its best efforts to
keep, the Property free from mechanics' and materialmen's liens and other
claims, all of which documentation shall be in such form as required by Owner.
Manager shall timely pay all bills of such contractors, suppliers and entities
properly approved by Owner, but such bills shall be at the expense of the
Property and shall be paid by Manager from the Disbursement Account described
in Section 2.8(b) below.
(c)All service contracts shall, unless expressly approved in writing by
Owner: (i) include a provision for cancellation thereof (without penalty) by
Owner on not more than thirty (30) days' written notice, (ii) require that all
contractors provide evidence of insurance specified in Section 5.8 of this
Agreement, (iii) include a provision requiring the contractor to indemnify
Owner and Manager for willful misconduct, negligence and all actions in excess
of the authority granted to the contractor under the terms of its contract with
Manager and (iv) include, unless waived by Owner, a provision requiring the
contractor to either obtain all appropriate waivers in the approved format as
<PAGE>
provided under applicable State law, or file a bond for the discharge of any
mechanics' lien filed against the Property by contractors or subcontractors, in
connection with work to be performed under the terms of the contract. Unless
Owner specifically waives such requirement in writing, all service contracts
(other than those entered into for emergency purposes) providing for annual
payments in excess of $5,000 shall be subject to bid under the procedure as
specified below.
(d)Except for contracts for emergency services or for rate-regulated
utility service, all contracts for repairs, capital improvements, goods and
services exceeding $5,000 shall, unless such requirement is waived in writing
by Owner, be awarded on the basis of competitive bidding, solicited in the
following manner:
(i)A minimum of two (2) written bids shall be obtained for each purchase
up to $10,000. Purchases over $10,000 will require a minimum of three (3)
bids.
(ii) Each bid will be solicited in a form prescribed by Owner so that
bids will be comparable.
(iii)Manager may accept the low bid without prior approval from Owner if
the expenditure is for an item included within the approved budget and if
the amount of such bid will not cause a material variance in any
accounting category of the approved budget.
(iv) Subject to Manager's rights under (iii) above, Owner shall be free
to accept or reject any and all bids in its sole and absolute discretion.
(v)Unless such requirement is waived in writing by Owner, each contract
for purchases exceeding $10,000 shall be rebid annually in conjunction
with the preparation of the proposed annual budget.
(e)When taking bids or issuing purchasing orders, Manager shall use its
reasonable best efforts to secure for, and credit to Owner any discounts,
commissions or rebates obtainable as a result of such purchases.
(f)Unless otherwise directed by Owner, Manager shall include in all
contracts and agreements which Manager is empowered to execute on behalf of
Owner, pursuant to powers granted in this Agreement or pursuant to other
authorization by Owner, substantially the following provision:
"The liability of Owner shall be limited solely to the lesser of (a) $1,000,000
or (b) Owner's then equity interest , if any, in the Property, and only such
equity interest of Owner, if any, in the Property, shall be liable for the
payment and discharge of any obligations imposed upon Owner hereunder, and
Owner is hereby released and relieved of any other obligations hereunder."
Section 2.6 Disbursements for Expenses of Property. Manager shall,
consistent with the approved Budget, as described below, (i) make a careful
audit of all bids received for services, work and supplies ordered in
connection with maintaining and operating the Property, (ii) pay all such
bills, which Manager determines are properly payable, (iii) pay water charges,
sewer rent, and utility assessments and all other charges and impositions
(other than real estate taxes), as and when the same shall become due and
payable, and (iv) pay the Management Fee (as defined in Section 2.2). All
bills shall be paid by Manager on a timely basis and/or as directed by Owner
<PAGE>
solely out of the revenues generated by the Property or otherwise through
funding reasonably determined necessary by Owner. Except to the extent any
late charge or penalty is due to Owner's failure to provide adequate funds
after receiving timely notice of such expected expenditures from Manager,
Manager shall bear the cost of all late charges or penalties incurred due to
the failure to timely pay any bill or expense due and owing.
Section 2.7 Collection of Monies. Manager shall use its reasonable best
efforts to collect rent, income and all other charges due from tenants with
respect to the Property and request, demand, collect, receive and receipt for
all such rents and other charges. Owner also authorizes Manager, if previously
approved in writing by Owner, to institute and execute legal proceedings for
the collection of rental and the dispossession of tenants and other persons
from the Property, in the name of and at the expense of Owner. Any request by
Manager for a write off or discharge of any monies due and owing Owner shall be
submitted in writing with supporting documents, to Owner for Owner's approval.
Selection of legal counsel shall be subject to Owner's approval. Manager
shall, promptly upon receipt of any of the above-referenced funds, deposit same
into the Operating Account referred to in Section 2.8(a) below.
Section 2.8 Banking Accounts.
(a)Operating Account. All rents and other revenue received from the
operation of the Property by Manager from any source shall be deposited on a
daily basis as received by Manager at such local bank as designated by Owner
and in a separate, segregated operating account (the "Operating Account") that
has been established by Owner. The Operating Account shall be swept by Owner
via electronic transfer on a daily basis to an investment account maintained by
Owner. Manager shall maintain a daily record of all deposits made, including
copies of all checks received for deposit.
(b)Disbursement Account. All Property expenses paid by Manager, as
provided herein, are to be drawn on a separate disbursement account (the
"Disbursement Account") that has been established by Owner which shall have two
authorized signatories designated by Manager and approved by Owner. Any check
in excess of $5,000 will require Owner approval prior to clearing the
Disbursement Account. Owner will fund the Disbursement Account on a weekly
basis, after receiving and approving the estimated total dollar amount
requested from Manager.
(c)Security Deposit Account. All security deposits received by Manager
shall be deposited on the date received into the Operating Account. No
interest shall be paid to any tenant with respect to any security deposit
unless required by the lease terms or by state or local law, and then only to
the extent required by law. Any required payments of security deposits shall
be made from the Disbursement Account referenced in Section 2.8(b) above. If a
separate, segregated security deposit account (the "Security Deposit Account")
is required, deposits will be made initially into the Operating Account,
refunds will be made from the Disbursement Account, and the Security Deposit
Account will be adjusted up or down once each month to the proper book balance.
This adjustment will be via check drawn on the Security Deposit Account and
deposited into the Operating Account or via check drawn on the Disbursement
Account and deposited into the Security Deposit Account. All funds in the
Security Deposit Account shall be deposited, maintained, paid out as provided
herein and in compliance with all applicable law and in accordance with the
terms of any lease agreement. Attached hereto and incorporated herein as
Exhibit C is a complete schedule of all security deposits for tenants in place
<PAGE>
at the commencement of this Agreement.
Section 2.9 Personnel. Manager undertakes to use due care in the
selection and supervision of personnel to operate and maintain the Property and
of each person in the general employ of Manager to whom said duties are
delegated. Manager shall investigate, hire, supervise and, as applicable,
discharge the personnel reasonably necessary to be employed, consistent with
approved budgetary guidelines, to maintain and operate the Property, in
accordance with the standards set forth in this Agreement, including, but not
limited to, on-site managers, leasing agents, marketing personnel, if any,
maintenance personnel and maintenance supervisory personnel. Manager shall
provide personnel capable of satisfactorily performing their duties and shall
provide personnel for that purpose without regard to the race, color, creed,
sex, age, disability or national origin of such personnel. Such pre-hiring
investigation shall include reference checks, verification of education, a
credit check, verification of employment history, determination whether a
potential employee has any criminal convictions, and post-offer pre-employment
drug tests. Such personnel shall, in every instance, be deemed employees of
Manager and not of Owner. Owner shall have no right to supervise or direct
such employees, and Manager agrees to be responsible for their activities and
performances hereunder. In the event Owner believes Manager's employees'
conduct is detrimental to the operation of the Property or Manager intends to
make changes in supervisory personnel, Manager shall consult with and consider
the recommendations of Owner. Manager shall in each instance advise Owner, in
writing, of any proposed change in the on-site Manager or other supervisory
personnel no less than thirty (30) days before such change is made unless
Manager elects to terminate its on-site Manager or other supervisory personnel
for cause, in which case Owner shall receive reasonable advance notice of such
intended change in personnel. The work performed by Manager's on-site
employees shall be exclusively for the benefit of the Property unless otherwise
agreed to in writing by Owner. Nothing contained in this Section 2.9 is
intended to give Owner the right to hire or fire any employee of Manager or
characterize Owner as the employer of any such employee.
Except as provided in Section 2.2(b) hereof, all reasonable expenses, including
payroll, customary payroll taxes and fringe benefits (including bonuses, 401K
plans and other insurance or retirement benefits consistent with the approved
Budget), medical and health insurance, workers' compensation, State and Federal
employment taxes and Social Security contributions, shall be deemed to be
expenses reimbursable to Manager by Owner, as evidenced by payrolls provided by
Manager in such form and manner as may be reasonably required by the Owner and
delivered with the monthly reports referred to in Section 2.3 hereof. Manager
understands and agrees that Manager's relationship to Owner is that of an
independent contractor. Manager will not represent in any manner that its
relationship to Owner with respect to the management of the Property is other
than that of an independent contractor having the authority to act as Owner's
representative expressly pursuant to the terms and conditions of this
Agreement. Manager will negotiate any applicable labor agreements relating to
employees of Manager (subject, however, to the reasonable approval of Owner as
to the final terms and conditions thereof), and cause to be prepared and filed
the necessary forms of disability insurance, hospitalization, group life
insurance, unemployment insurance, withholding taxes, and Social Security taxes
and all other forms required by any Federal, state, county or municipal
authority or labor union agreement.
Section 2.10 Tenant Lease Compliance, Service Requests and Complaints.
Manager shall maintain businesslike relations with tenants. Tenants' service
<PAGE>
requests shall be received, logged and considered in systematic fashion in
order to show the action taken with respect to each. A record of service
requests shall be maintained by Manager for inspection by Owner. Manager will
not knowingly permit the use of the Property for any purpose which voids or
increases the cost of any policy of insurance held by Owner or which might
render any loss thereunder uncollectible or which would be in material
violation of any legal obligation or insurance contract. Manager shall use its
reasonable best efforts and due diligence to secure full compliance by tenants
with the terms and conditions of their respective leases, and to this end,
Manager shall use its reasonable best efforts and due diligence to see that all
tenants are informed with respect to such rules, regulations and notices as may
be promulgated by Owner. Manager shall not knowingly take any action which
would violate any tenant's lease, and shall promptly deliver to Owner any
notice of default received from a tenant and use its reasonable best efforts
and due diligence to cure such default. Manager shall perform all duties of
the Owner under each lease so that such lease shall remain in full force and
effect and so that no claim of default shall be made against Owner as landlord
by reason of Manager's acts or omissions.
In the event Manager incorrectly bills any tenant for less than the full amount
of rent payable under any lease, Manager shall promptly take all reasonable
steps to collect all unpaid rent. Manager shall promptly reimburse Owner for
all amounts lost by Owner as a result of such incorrect billing including (i)
all amounts which Manager is unable to collect after a reasonable period of
time as a result of such error, and (ii) interest on all amounts due to Owner
as a result of such error (whether or not such amounts are ultimately collected
from appropriate tenants(s)) from the date Owner should have received such
amounts if not incorrectly billed, at the lesser of (x) the maximum rate of
interest permitted to be charged by Owner under applicable law or (y) three
percentage points in excess of the "Prime Rate" (or if no longer publicly
announced, the most nearly comparable rate as shall be available) of First
National Bank of Chicago as publicly announced from time to time, with changes
in such rate of interest to take effect on the date any such change is
announced. At Owner's option, Owner may deduct such amount due to Owner (plus
interest) from that portion of the Management Fee thereafter becoming due.
Notwithstanding the foregoing, Manager shall not commence any legal proceeding
in performing its obligations under this Section 2.10, unless such proceeding,
and the counsel retained in connection with such proceedings, are approved by
Owner. Manager, at Owner's request, shall institute and coordinate such
proceedings with counsel selected and approved in writing by Owner, provided,
however, that Owner shall retain final authority over the conduct of any such
proceedings. Manager shall have no obligation to institute in its name, or in
Owner's name, any landlord/tenant proceedings, but Manager, at Owner's written
request, and at Owner's expense to the extent any travel or out of pocket
expenses are incurred, will assist Owner in any proceedings relating to the
Property and instituted in Owner's name, which assistance will include, without
limitation, coordinating and participating in such proceedings with Owner's
counsel, all without additional cost to Owner.
Section 2.11 Books and Records. Manager shall maintain at the Property,
originals of each of the following: proper accounting books and journals and
orderly files containing originals of all rent records, insurance policies,
leases, correspondence, receipted bills and vouchers, and all other documents
and papers pertaining to the Property or the operation thereof. It is
specifically agreed that the originals of the foregoing documents shall be the
sole property of Owner, and that Manager shall, upon the written request of
<PAGE>
Owner, deliver any or all such original documents (or if such originals are not
in Manager's possession, then exact copies of such originals) to Owner or to
Owner's attorneys, accountants or other representatives of Owner, provided,
however, that Manager shall be entitled to retain copies of the foregoing
documents for internal audit and accounting purposes by its attorneys,
accountants, or employees and for no other purpose. After a three (3) year
period, Manager may transfer certain records to microfilm (in which case such
microfilm shall be treated as the original under this Section) and thereafter
deliver to Owner the actual originals. Manager agrees to keep all financial
and leasing information concerning the Property confidential at all times
during and after the term of this Agreement; and no such information shall be
given to any third party without the prior written consent of Owner except as
required by law or by legal proceedings.
Section 2.12 Preparation of Annual Budget.
(a)No more than thirty (30) days after the commencement hereof and
thereafter at least one hundred twenty (120) days prior to the commencement of
each calendar year (unless otherwise directed by Owner), so long as this
Agreement is in effect, Manager shall prepare and deliver to Owner a proposed
budget, which after approval by Owner shall be deemed the approved budget (the
"Budget"). The format, to be designated by Owner, shall set forth, in
reasonable detail and on a monthly basis, an itemized statement of the
estimated disbursements for such period, including but not limited to all
normal operating costs, expenses relating to tenant improvements, management
fees, real estate taxes, mortgage payments, insurance premiums, employee
salaries and similar items, a schedule of necessary capital expenditures
reasonably detailing each item and the estimated cost thereof (the "Capital
Expense Schedule"), and the estimated income for such period based on a
schedule of minimum rents (the "Rent Schedule"). If Manager believes it is
desirable to change the Rent Schedule or the Capital Expense Schedule, Manager
shall provide written notice to Owner of the changes sought. All such changes
shall require the specific written approval of Owner prior to implementation.
No annual Budget shall become effective until Owner has approved such Budget in
writing. In the event that Owner disapproves any proposed Budget submitted by
Manager during the term of this Agreement, then such Budget shall be
resubmitted by Manager within fourteen (14) days of receipt of Owner's written
notice which shall contain specific objections thereto.
(b)Manager agrees to use due diligence and to employ its reasonable best
efforts to ensure that the actual costs of maintaining and operating the
Property shall not exceed the amount provided therefor in the applicable Budget
(either total or in any line-item) except as expressly set forth below. Except
with respect to expenditures for emergency services or utilities, Manager shall
not incur any expense which would (i) cause any single line item indicated in
the Budget to be exceeded by $1,000.00 or (ii) together with other previous
expenses, in any major category of the Budget, exceed the budgeted amount in
such category by more than five percent (5%) on a quarterly basis, without the
prior written consent of Owner, and Manager shall promptly notify Owner of any
projected material variance. Until such time as a new budget has been
approved, the parties shall continue to operate under the last Budget. Manager
shall not transfer any amounts from one expense item to another (other than
from any contingency item to a specific line item) without Owner's prior
written consent. Any budgeted amounts which have not been spent by the end of
the Calendar Year shall be reduced to zero for the beginning of the next
Calendar Year.
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(c)The Budget shall be reforecast quarterly. Each quarterly budget
reforecast will show actual quarterly figures with a revised year-end budget to
reflect actual quarterly results. Owner shall advise Manager in writing of the
format and dates of the budget desired by Owner for the next succeeding
Calendar Year.
Section 2.13 Compliance with Laws and Contracts. Manager shall use its
best reasonable efforts to comply with, and cause the Property to be kept,
maintained, used and occupied in compliance with, the following (as now in
effect or as may hereafter be in effect) which relate to or affect the
Property, the operation or management of the Property or Owner's interest in
the Property (collectively the "Requirements"): (a) any and all orders,
regulations or requirements affecting the Property of any federal, state,
county or municipal authority having jurisdiction thereover, and orders of the
Board of Fire Underwriters or other similar bodies, (b) all present and future
covenants and restrictions whether or not of record, use permits and
development agreements, which may be applicable to the Property and/or its
operating and management (including, without limitation, laws, ordinances,
rules, regulations, requirements, leases, covenants, and restrictions
prohibiting restraint of trade, or discrimination whether on the basis of race,
creed, color, national origin, age, sex, marital status, or otherwise); (c) any
direction or occupancy certificate issued pursuant to any law, regulation or
rule by any public officer; (d) the terms and conditions of any mortgage or
deed of trust so long as copies of all or relevant portions of such documents
have been provided to Manager; and (e) the provisions of any insurance policy
or policies insuring Owner's interest in the Property (so as to not affect the
insurance coverage or increase the premium rate therefor). If Owner contests
any of the above Requirements, Manager shall participate in such contest to the
extent requested by Owner; however, the actual cost of any reasonable travel or
out of pocket expenses incurred by Manager shall be borne by Owner. Such
participation shall include, without limitation, coordinating such contests
with Owner's counsel, without additional cost to Owner. Manager shall not
comply with any such Requirement if Owner directs Manager in writing not to
comply. So long as Manager has provided full disclosure to Owner of the facts
relevant to the noncompliance with any Requirement, Owner agrees to indemnify,
defend and hold Manager harmless from any and all direct liability, loss, cost,
expense or claim to any third party as a result of Manager's failure to comply
with any Requirement at the express written direction of Owner. Manager shall
obtain, as an expense of the Property, any business license and/or operating
permit which may be required for the operation of the Property. This does not
include any license required by Manager to perform the services set forth
herein.
Section 2.14 Designated Representative. Manager shall identify a
designated District Manager who shall oversee the on-site personnel (subject to
the approval of Owner), who will be an employee of Manager. Manager agrees
that the designated District Manager will devote sufficient time and efforts to
the management of the Property as are necessary or expedient to fulfill the
Manager's obligations hereunder, in accordance with good management practice.
It is understood and agreed, however, that all salary and commissions to or
with respect to the activities of the District Manager shall be paid by Manager
out of the Management Fee and not by Owner, and that Manager will replace the
District Manager if deemed necessary by Owner.
Section 2.15 Limitation of Authority. Notwithstanding any provision of
this Agreement to the contrary, Manager shall not, without the prior written
consent of Owner, exercise any right not expressly set forth hereinabove,
<PAGE>
including but not limited to:
(a)Make any expenditure, whether from the Operating Account or otherwise,
or incur any obligation on behalf of Owner, except for (i) expenditures or
obligations approved by Owner in writing, (ii) expenditures made and
obligations incurred directly pursuant to the Budget, and (iii) expenditures
made in emergencies pursuant to Section 2.4 (all other obligations incurred or
expenditures made by Manager shall be deemed unauthorized and Manager shall
hold Owner harmless from and indemnify Owner against any and all such
obligations or expenditures);
(b)Sell, convey or otherwise transfer, pledge or encumber any property or
other asset of Owner;
(c)Retain architects, engineers, attorneys, accountants or other
professionals on behalf of Owner;
(d)Institute or defend lawsuits or other legal or administrative
proceedings on behalf of Owner;
(e)Pledge the credit of Owner except for purchases made in the ordinary
course of operating the Property or as otherwise contemplated pursuant to this
Agreement;
(f)Obligate Owner for the payment of any fee or commissions to any real
estate agent or broker other than fees or commissions incurred pursuant to
leasing agreements approved in writing by Owner;
(g)Borrow money or execute any promissory note or other obligation or
mortgage, deed of trust, security agreement or other encumbrance in the name of
or on behalf of Owner; or
(h)Permit any officer or employee of Manager or any third party to
handle, have access to, or be responsible for, monies or personal property of
Owner or bank accounts related to the Property (including the Operating Account
and the Security Deposit Account), unless the same are bonded or insured
pursuant to Section 5.4 below.
Section 2.16 Owner's Approval. With respect to those activities of
Manager hereunder which require Owner's approval of such activity or the cost
thereof, if Owner fails to approve either the activity or the costs, which
Owner may do in its sole and absolute discretion, then Manager shall not be
responsible to provide the activity until Owner's approval is obtained.
Manager shall be obligated to timely seek approval of such matters from Owner.
So long as Manager has acted timely and diligently and has provided Owner with
all relevant information, Manager shall not be responsible for any direct loss,
cost or expense arising from its failure to act.
Section 2.17 Audit. Owner shall have the right, at any time and from time
to time, to cause a physical inspection and/or financial audit of Manager's
operation of the Property for any fiscal year or portion thereof. The
financial audit may be made by Owner's in-house audit staff, accounting
personnel, a certified public accountant or firm of certified public
accountants of recognized national standing selected by Owner. If any physical
inspection by Owner's representative reveals that Manager has been negligent or
failed to timely oversee, observe or monitor the activities of its employees or
of any third party engaged to perform services at the Property and such failure
<PAGE>
results in additional costs or expenses to be incurred by Owner, including but
not limited to the repair or replacement of any equipment or improvements
located on the Property, Manager shall bear the entire cost thereof, which
amount shall be deducted from the Management Fee due Manager.
The results of any such financial audit shall be binding upon Owner and
Manager. If such financial audit shall reveal an overstatement or
understatement of Gross Cash Receipts for the period in question and a
consequent overpayment or underpayment of amounts paid to or payable by Manager
with respect to such period, an adjustment shall be made whereby the amount of
any such overpayment shall be paid over or credited to Owner by Manager, as
Owner may elect, or Owner shall pay over to Manager the amount of any such
underpayment, as the case may be. Any payment to Owner required by this
Section 2.17 shall be payable with interest thereon from Manager's own funds
from the date of the applicable overstatement, at the "prime rate" from time to
time announced by First National Bank of Chicago. In the event the audit
reveals that there has been an overpayment to Manager, the cost of the audit
shall be borne by Manager. In all other instances, the cost of any audit shall
be an expense of the Property. The provisions of this Section 2.17 shall
survive the termination of this Agreement.
Section 2.18 Determination of Market Management Fee Levels. Owner and
Manager agree that Owner may conduct periodic determinations of property
management fees customarily charged for the market in which the Property is
located and shall perform such determinations in a manner consistent with past
practices.
<PAGE>
ARTICLE III
LEASING DUTIES AND RESPONSIBILITIES
Section 3.1 Performance of Duties. Owner and Manager agree that during
the term of this Agreement, Manager is hereby appointed the exclusive leasing
agent for the Property, and neither Owner nor Manager will authorize or permit
any other person, firm or corporation to negotiate on behalf of Owner or act as
leasing agent on behalf of Owner for any leases for space in the Property
unless agreed to in writing by both parties. Owner and Manager further agree
that Manager shall not represent any tenant or proposed tenant of the Property
or any portion thereof. Manager, in fulfilling its leasing obligations for the
Property, shall, subject to the Owner's approval where required herein, perform
the duties expressly set forth below.
Section 3.2 Leasing Coordination.
(a)During the term of this Agreement, Manager shall use its reasonable
best efforts and due diligence to solicit and procure new tenants for the
apartments within the Property and shall further solicit renewals, expansions
and extensions of all existing tenants at the Property. Manager's operation in
connection with such leasing activities will be staffed as reasonably necessary
during customary business hours by Manager's leasing representatives. The
office space in the property designated by Owner, from time to time, as the
management office shall be utilized for leasing activities during customary
business hours by Manager.
(b)Subject to the prior approval of Owner and, to the extent provided for
in the Budget, at Owner's cost and expense, Manager shall advertise such space
or apartments as are or will become available for rent in the Property and
arrange for or engage outside advertising firms to prepare such signs,
brochures and other forms of advertising as Manager may deem advisable.
Manager shall not use Owner's name in any advertising or promotional material
without Owner's express prior written approval. Advertising and promotional
materials shall be prepared in full compliance with Federal, state and
municipal laws, ordinances, regulations and orders. Any reasonable costs of
printing leasing brochures and other promotional material shall be paid by
Owner to the extent provided for in the Budget and otherwise to the extent
approved in writing by Owner.
(c)Manager shall acquire and maintain a thorough knowledge of the leasing
market for space similar to that contained in the Property, prepare a Leasing
and Marketing Plan (which will include, without limitation, analysis of the
Property's leasing activity, market absorption and projected leasing
activities); recommend pricing and marketing strategies for Owner's
consideration; and establish general leasing procedures.
(d)Manager shall solicit and negotiate leases with desirable tenants
financially satisfactory to Owner in its sole and absolute discretion and for
uses consistent with the character of the Property as a first-class property
and shall prepare (or cause to be prepared at Owner's expense) all prospective
leases. All leases will be prepared in accordance with Owner's leasing
guidelines, as more particularly set forth in Section 3.4, and shall be on a
standard form of lease approved by Owner.
Leasing criteria shall be applied by Manager so that there shall be no
discrimination against, or segregation of, any person or group of persons on
account of race, color, creed, religion, age, sex, familial status, national
<PAGE>
origin, or ancestry, in the leasing, subleasing, transferring, use or occupancy
of the Property. Manager shall take all proper and necessary action to cause
the Property to be kept, maintained, used and occupied in compliance with all
applicable federal, state and local fair housing laws, regulations and
ordinances, including, but not limited to, the Fair Housing Act of 1968 (as
amended), and, where applicable, the Americans with Disabilities Act of 1990.
Manager shall submit to Owner financial statements, guarantees and other data
pertaining to prospective tenants as requested and shall take all necessary and
proper action to collect and deliver to Owner advance rent and security
deposits required by any lease.
(e)Owner agrees that during the term of this Agreement, in which Manager
is the exclusive leasing agent, it will not authorize or permit any other
person, firm or corporation other than Manager to have or maintain any rental
or "For Rent" sign in or about the Property, or any part thereof without the
prior written consent of Manager (which consent shall not be unreasonably
withheld), and will keep Manager informed concerning inquiries for space or
negotiations for space by any person, firm or corporation other than Manager.
Manager shall have the right to display on the Property suitable signs to the
effect that Manager is the manager of the Property and that space or apartments
within the Property are for rent, said signs being subject to Owner's prior
written approval as to form and content.
(f)Manager shall fully cooperate with other reputable and active licensed
real estate brokers to lease such space or apartments. All terms and
conditions of any brokerage agreement with such cooperating brokers shall be on
a standard form approved by Owner and any variance from such form, which is
adverse to Owner, shall be subject to Owner's prior written approval. Owner
may deal directly with such brokers.
Section 3.3 Meetings with Owner. Manager shall meet with Owner from time
to time as may be reasonably requested by Owner to advise Owner as to the
status of the leasing activities for the Property and to apprise Owner of its
marketing program and any alternative approaches which may be undertaken to
maximize leasing. Manager shall assist Owner in connection with all matters
and questions pertaining to activities hereunder and shall use its best efforts
to coordinate marketing requirements with all other planning considerations of
Owner with regard to the development of the Property. Manager shall not be
entitled to any additional compensation from Owner in connection with such
activities.
Section 3.4 Leasing Guidelines. Owner shall, from time to time, provide
Manager with leasing guidelines outlining the leasing requirements. Such
guidelines shall include, without limitation, permitted parameters regarding
term, rental rates and lease concessions, if any. Manager shall have no
authority to vary lease terms from the parameters set forth in the leasing
guidelines, or otherwise bind Owner with respect to any tenant unless otherwise
agreed to by Owner.
Section 3.5 Owner's Negotiation of Leases. Owner may negotiate leases
directly with prospective tenants and may discuss directly with tenants, and/or
brokers, terms of leases being negotiated by Manager; provided, however, that
Manager shall not cease to be Owner's leasing broker under this Agreement with
respect to such leases as a result of such negotiations by Owner.
Section 3.6 Leasing Reports. Manager shall prepare and submit the
following reports and statements, the forms of which shall be subject to the
<PAGE>
approval of Owner:
(a)On or before the tenth (10th) day of each calendar month, Manager
shall, at its sole cost and expense, submit to Owner, for Owner's approval, a
detailed report and with such supporting evidence as may be requested by Owner,
summarizing the following activities for the preceding calendar month:
1.Leases executed;
2.Written lease proposals;
3.Rents received;
4.Security deposits received;
5.Current and projected vacancies;
6.Leasing commissions or locator fees earned on each lease; and
7.Actual year-to-date leasing results vs. budgeted leasing results.
If requested by Owner, said report shall be rendered weekly instead of monthly.
(b)On or before the thirtieth (30th) day after the end of each calendar
year, Manager shall, at its sole cost and expense, submit to Owner an annual
report summarizing all leasing activities and all receipts and remittances for
the preceding calendar year.
<PAGE>
ARTICLE IV
CONSTRUCTION MANAGEMENT SERVICES
Section 4.1 Construction Management Services. Manager shall order labor
and materials and provide the associated supervision and direction
("Construction Management Services") for the installation of such renovations,
improvements and/or alterations to the building site, common areas or tenant's
premises as may be required by the terms of any lease with such tenant.
Further, Manager shall, at the cost and expense of Owner as approved by Owner
in advance, provide labor and materials, through contractors approved in
writing by Owner, to perform such work. Notwithstanding the foregoing, Manager
shall provide the services of its regional engineers to assist Manager in the
preparation of annual budgets and five (5) year projections at no additional
expense to Owner. Further, to the extent approved in writing by Owner, on a
project by project basis, Owner agrees to reimburse Manager for the cost of
Owner's use of Manager's regional engineers calculated utilizing an hourly rate
of the engineer's base salary multiplied by a factor of 1.30 plus all direct
reasonable travel and out of pocket expenses.
Section 4.2 Performance of Duties. Manager (at no expense to Owner)
shall review proposed plans for repairs, alterations and installations in order
to assure that they: (i) comply with all legal requirements and insurance
requirements (based upon certifications by engineers and architects retained,
as applicable, at Owner's or tenant's expense); (ii) do not negatively affect
the structural, electrical, mechanical and life safety systems of the Property
(provided that if Manager should be aware that there is any material
possibility of any such negative effect Manager shall so advise Owner; and, if
Owner chooses to have its own engineers review such plans, Manager shall supply
such information as Owner's engineers may require, and, notwithstanding
anything in this Agreement to the contrary, Manager shall not approve such
plans until the review by Owner's engineers has been completed and no objection
has been rendered by the engineers); and (iii) do not interfere with essential
building services to other tenants.
Section 4.3 Insurance. Manager will require, and use its reasonable best
efforts to assure that all parties performing work or providing labor, goods,
utilities or services to or at the Property maintain all insurance requirements
satisfactory to Owner and any mortgagee of the Property or any portion thereof
(so long as such mortgagee's requirements have been communicated to Manager),
including, but not limited to, Workers' Compensation Insurance, Employer's
Liability Insurance and insurance against liability for injury to persons and
property arising out of all such contractors', suppliers', or other entities'
operations, and the use of owned, non-owned or hired automotive equipment in
the pursuit of all such operations.
<PAGE>
ARTICLE V
INSURANCE
Section 5.1 Owner's Insurance. Owner shall carry, at its own expense,
commercial general liability insurance in such amounts that Owner, in its sole
and absolute discretion, deems necessary for the protection of Owner's
interests in the Property and such insurance shall be deemed the primary
insurance on the Property. Policies of commercial general liability insurance
carried by Owner shall include Manager (including the employees of Manager) as
an additional insured party only in Manager's capacity as Manager of the
Property. Commercial general liability insurance policies shall contain (i) a
severability of interest insurance clause, (ii) coverage for contractual
liability and personal injury liability and (iii) a waiver by the insurance
company of all right of recovery by way of subrogation against Manager, its
shareholders, officers, directors, agents and employees in connection with any
damage covered by such insurance company's policy (if such coverage is
available only at additional cost to Owner, Manager shall pay such additional
cost). The insurer or insureds, the coverages and the amounts of coverage
shall be determined by Owner in its sole discretion, but shall be commercially
reasonable under the circumstances. Owner shall furnish or cause to be
furnished to Manager certificates of insurance evidencing the foregoing
insurance. Such coverage may be provided by an umbrella policy covering other
properties owned by Owner or the parent or an affiliate thereof.
Section 5.2 Manager's Liability Insurance. Manager shall cause to be
placed and kept in force during the term of this Agreement, at its sole cost
and expense, commercial general liability insurance per location with no less
than $2,000,000 bodily injury per person, $3,000,000 per occurrence and
$500,000 property damage or $3,000,000 combined single limit. The policies
shall be issued by companies of recognized financial standing authorized to
issue such insurance in the state where the Property is located, and shall name
the Owner as an additional insured.
Section 5.3 Workers' Compensation Insurance. Manager, at the cost and
expense of Owner, shall obtain and maintain Workers' Compensation Insurance
(including Employer's Liability Insurance in amounts of no less than $1,000,000
per occurrence, $1,000,000 aggregate minimum) covering all employees of Manager
employed in, on or about the Property, so as to provide statutory benefits as
required by the laws of the state in which the Property is located.
Section 5.4 Bonding of Manager's Employees. Manager's on-site employees
handling funds of Owner shall be bonded by a fidelity bond at Manager's
expense, and evidence satisfactory to Owner shall be furnished to Owner that
such bond is in effect at least yearly or as often as Owner shall require.
Such bond shall provide coverage for employee dishonesty and criminal acts of
at least three times the average monthly rental income at the Property or such
greater amount as may be reasonably required by Owner, with no deductible
thereunder exceeding $10,000.00. Such bond must be tendered to Owner prior to
Manager's assuming management of the Property, must be reasonably acceptable to
Owner in all respects, must provide for the bonding company to provide to Owner
thirty (30) days prior notice of any termination, non-renewal or modification
of the bond, and prompt notice of any non-payment under the bond.
Section 5.5 Errors and Omissions Insurance. Manager shall furnish and
maintain throughout the term of this Agreement, a policy for professional
liability insurance with a per claim limit of liability of not less than Five
Million Dollars ($5,000,000.00) with a deductible not to exceed $50,000.00 or
<PAGE>
as otherwise approved in writing by Owner.
Section 5.6 Manager's Insurance Policies. Manager shall furnish, or
cause to be furnished to Owner, certificates of insurance evidencing all bonds
and other insurance which Manager is required to maintain pursuant to this
Agreement. All insurance policies maintained by Manager (other than Worker's
Compensation coverages) shall name Owner and Manager as named insureds, as
their respective interests may appear, shall be issued by companies of
recognized financial standing having a Best Guide rating of no less that A-X,
authorized to issue such insurance in the state where the Property is located
and shall provide that in the event of cancellation of the policy in whole or
in part, or a reduction as to coverage or amount thereunder, whether initiated
by the insurer or any insured, the insurer shall give not less than thirty (30)
days' advance written notice by registered or certified mail to Owner.
Section 5.7 Insurance Claim Administration. Manager shall provide timely
written reports to Owner, and as further directed, in writing by Owner to the
insurance carrier concerning all accidents and claims for damage relating to
the ownership, operation and maintenance of the Property promptly after it is
made aware thereof, and shall promptly prepare any reports required by Owner or
an insurance carrier in connection therewith. A copy of any such reports above
referenced shall be delivered to Owner's representative. Manager is not
authorized to settle any claims with or against insurance companies arising out
of any policies, including the execution of proofs of loss, the adjustment of
losses, signing of receipts, and the collection of money, without the express
written consent and approval of Owner.
Section 5.8 Waiver of Subrogation. Owner hereby waives all rights of
recovery against Manager and/or any insurance carrier of Manager for any loss
to the extent such loss is insured under any insurance policy covering the
Property, except to the extent any such claim or liability is based upon or the
result of the negligence, intentional or willful misconduct of Manager or of
Manager's employees. Manager hereby waives all rights of recovery against
Owner and/or any insurance carrier of Owner for any claim or liability to the
extent such claim or liability is based upon or the result of the negligence or
willful misconduct of Manager or Manager's employees. Each party agrees to
obtain endorsements to its policies, to the extent such endorsements are
obtainable from the insurance company, acknowledging such waivers. Nothing
herein nor any insurance obtained or applied for by Owner or Manager shall be
construed as implying that Owner or Manager is subject to any liability to
which it would not otherwise be subject.
<PAGE>
Section 5.9 Contractor's Insurance Requirements. Manager shall require
that each contractor engaged to perform any work at the Property maintain
insurance coverage, at the contractor's expense, in not less than the following
amounts:
(i)Worker's Compensation - Statutory amount;
(ii) Employer's Liability - $100,000 minimum
(iii)Comprehensive General Liability - $2,000,000 combined single limit
for personal injury and property damage; and
(iv) Automobile Liability - $1,000,000 combined single limit.
Manager shall not waive any of the above requirements without Owner's prior
written consent. Owner may, by written notice to Manager, require the
maintenance of insurance in higher amounts than those specified above if, in
Owner's reasonable judgment, the work to be performed on the Property by such
contractor is particularly hazardous. Manager shall obtain and keep on file a
Certificate of Insurance evidencing the insurance required herein naming Owner
and Manager as additional insureds, and shall provide Owner with copies
thereof.
<PAGE>
ARTICLE VI
INDEMNIFICATION
Section 6.1 Indemnification by Owner. Owner shall indemnify and save
Manager harmless, except in cases of fraud, willful misconduct or negligence of
the Manager, its employees and agents, from (i) all claims arising out of the
course of Manager's duties in connection with the management and, where
applicable, the leasing of the Property and from liability for injuries
suffered by third parties while on the Property, and (ii) all claims arising
from Manager's failure to make any payments to the extent Owner fails to make
funds available as required herein; Owner further agrees to reimburse Manager
for court costs and other reasonable expenses, including reasonable attorneys'
fees, incurred by Manager in defending any action brought against Manager for
injury or damage claimed to have been suffered upon the Property, except such
claims arising from the fraud, willful misconduct or negligence of Manager, its
employees and agents. Manager shall not be liable for any good faith error of
judgment or for any mistake of fact or law, or for anything which it may do or
refrain from doing in good faith and in pursuance of its duties and activities
hereunder, except in cases of fraud, willful misconduct or negligence of
Manager and/or its employees and agents.
Section 6.2 Indemnification by Manager. Manager agrees to indemnify,
defend and hold Owner harmless from any and all liability, claim, loss, cost,
damage or expense (including without limitation, attorneys' fees and expenses)
to any third person incurred by reason of any acts of commission or omission or
any negligent or tortious acts by Manager or its respective agents or
employees. Without limiting the foregoing, Manager shall:
(a)Be fully responsible for the performance of all of its employees and
agents;
(b)Pay any sums as are due to contractors or other parties as a result of
Manager's failure to abide by the terms of any contract, agreement or other
arrangement;
(c)Hold Owner harmless from and indemnify Owner against any and all
obligations and expenditures incurred or made by Manager and not made pursuant
to an approved Budget or otherwise approved by Owner or as authorized herein;
and
(d)Be fully responsible for all costs and expenses reasonably incurred by
Owner arising out of the failure of Manager or its employees to fully control
and secure the Property as expressly required herein and as approved by Owner
including but not limited to any claims, costs or expenses directly or
indirectly associated with the misuse of keys accessing any portion of the
Property, including, but not limited to, keys to tenant spaces.
In such event, Manager shall pay over, reimburse and make good to Owner all
sums of money that Owner shall pay, or cause to be paid, or become liable to
pay, under or by reason of this Agreement, including any and all charges and
expenses of whatsoever kind and nature in connection therewith or in connection
with any litigation, investigation or other matters in connection with such
payment or payments. Notwithstanding the foregoing, Owner agrees not to hold
Manager liable under this Section except to the extent Owner is unable to
recover any loss from:
(i)any third party insurance carriers pursuant to any insurance policies
<PAGE>
maintained by Owner or Manager or contractors or other parties on the
Property (provided that Manager shall take all proper and necessary action
to file the appropriate claims under such insurance policies);
(ii) any indemnities, warranties or guarantees granted to Owner or
Manager by any vendors or contractors (provided that Manager shall take
all proper and necessary action to enforce any such indemnities,
warranties or guaranties); or
(iii)where applicable on commercial properties, any operating expense
pass-through provisions contained in any leases of space in the Property.
Section 6.3 Environmental Liabilities.
(a)Except as expressly set forth in subsection (b) below, Owner shall
indemnify, defend and save Manager and its employees harmless from and against
any and all liabilities, claims, losses, costs, damages and expenses which at
any time or from time to time may be paid, incurred or suffered by, or asserted
against, Manager or its employees (including without limitation, court costs
and attorneys' fees) for, with respect to, or as a direct or indirect result
of, a release at any time during the term of this Agreement, and from time to
time (including, without limitation, any liabilities asserted or arising under
the applicable environmental statutes). Manager agrees to use its reasonable
best efforts and due diligence to prevent a release and to cooperate in Owner's
efforts to remove and/or mediate any such release and, at Owner's request and
discretion, to coordinate and supervise any contractor's responsible for the
removal of any Hazardous Materials discovered at the Property.
(b)Except as expressly set forth in subsection (a) above, Manager shall
indemnify, defend and hold Owner harmless from and against, and shall
immediately notify Owner of, any and all losses, liabilities, damages,
injuries, costs, expenses and claims of any and every kind whatsoever
(including, without limitation, court costs and attorneys' fees) which at any
time or from time to time may be paid, incurred or suffered by, or asserted
against, Owner or Manager for, with respect to, or as a direct or indirect
result of, the presence on or under, or the escape, seepage, leakage, spillage,
discharge, emission or release from, the Property into or upon any land, the
atmosphere, or any watercourse, body of water or wetland, of any Hazardous
Material which exists on, under or at the Property at any time during the term
of this Agreement, and from time to time, (including, without limitation, any
losses, liabilities, damages, injuries, costs, expenses or claims asserted or
arising under the Statutes) caused solely by the act of Manager, its agents or
employees or the failure by Manager, its agents or employees to act in
accordance with the requirements of this Agreement, and the foregoing
provisions set out in Section 6.3 (a) and (b) shall survive the termination of
this Agreement forever.
(c)Manager shall ensure that all subcontracts that it enters into on
behalf of Owner during the term of this Agreement, except as otherwise approved
by Owner, contain provisions (i) prohibiting the subcontractor thereunder, and
their respective sub-subcontractors, from introducing any Hazardous Materials
into the Property without the prior written consent of the Owner (except in
accordance with normal operating practice and environmental statutes); (ii)
requiring such subcontractor to promptly notify Owner and Manager of any
accidental release of Hazardous Materials on or adjacent to the Property; and
(iii) indemnify Owner and Manager against any release of Hazardous Materials
caused by the negligence or willful misconduct of such subcontractor or its
<PAGE>
agents or employees. Manager shall further provide notice to all necessary
parties, including all subcontractors, contractors and tenants of the existence
of any Operations and Maintenance Program ("O&M Plan") which has been put into
place by Owner and assure ongoing compliance therewith.
(d)For purposes of this Agreement, "Hazardous Material" means and
includes any hazardous substance or any pollutant or contaminant defined as
such in (or for purposes of) the Comprehensive Environmental Response,
Compensation and Liability Act, any so-called "Superfund" or "Superlien" law,
the Toxic Substances Control Act, or any other federal, state or local statute,
law, ordinance, code, rule, regulation, order or decree regulating, relating
to, or imposing liability or standards of conduct concerning any hazardous,
toxic or dangerous waste, substance or material, as now or at any time
hereafter in effect (collectively, the "Statutes"), or any other hazardous,
toxic or dangerous waste, substance or material.
<PAGE>
ARTICLE VII
GENERAL TERMS AND CONDITIONS
Section 7.1 Limitation of Agency. Nothing contained in this Agreement or in
the relationship of Owner and Manager shall be deemed to constitute a
partnership, joint venture or any other relationship, and Manager shall at all
times be deemed an independent contractor for purposes of this Agreement.
Nothing herein contained shall be deemed to constitute Manager as the agent of
Owner except as such rights are expressly granted or authorized herein, which
shall specifically exclude any rights with respect to the sale, transfer,
mortgaging or other financing of the Property.
Section 7.2 Notices. All notices, requests, demands, consents, approvals,
waivers or other communications given to any party under this Agreement or in
connection with this Agreement shall be in writing and shall be personally
delivered, sent by nationally recognized overnight air courier or by certified
or registered mail, return receipt requested, postage prepaid, addressed to
such party at its address set forth below. Copies of such notices shall be
sent by facsimile to the facsimile number set forth below. Notice shall be
given to Owner at:
c/o The Balcor Company
Bannockburn Lake Office Plaza
2355 Waukegan Rd., Suite A200
Bannockburn, Illinois 60015
Attn: Asset Management Department
FAX No. (708) 317-4464
with a copy to:
The Balcor Company
Bannockburn Lake Office Plaza
2355 Waukegan Rd., Suite A200
Bannockburn, Illinois 60015
Attn: Legal Department
FAX No. (708) 317-4458
and notice shall be given to Manager at:
Insignia Management Group, L.P.
One Insignia Financial Plaza
P.O. Box 1089
Greenville, South Carolina 29602
Attn: District Manager
FAX No. (803) 239-1096
Notices given in compliance with the foregoing provisions shall be deemed given
when received, as evidenced by acknowledgement of delivery upon personal
delivery or by execution of return receipt when mailed as aforesaid or by the
air courier's receipt, as the case may be. Either party shall give the other
written notice of any change of address for delivery of all subsequent notices.
Section 7.3 Choice of Laws. This Agreement is made pursuant to, and shall
be governed by and construed in accordance with, the laws of the state of
Illinois, however, all issues relating to the compliance with state specific
regulatory and licensing requirements shall be governed by the laws of the
state in which the Property is located.
<PAGE>
Section 7.4 Jurisdiction. The parties agree that any legal action, suit or
proceeding arising out of or in connection with this Agreement may be brought
in the appropriate court in Cook County, in the State of Illinois.
Section 7.5 Non-Assignability. Except as provided herein, Manager shall not
assign or in any way voluntarily or involuntarily transfer or convey this
Agreement or any interest herein or any right, title, interest or obligation
hereunder without the prior written approval of Owner, which may be given or
withheld in Owner's sole and absolute discretion. In the event Owner consents
to an assignment, Manager shall remain absolutely and primarily obligated to
Owner for the full and complete performance of Manager's duties and discharge
of Manager's obligations under this Agreement and Owner shall have no liability
to such assignee by reason of any such agreement between Manager and assignee
or any performance rendered by assignee in pursuance of this Agreement. This
Agreement shall be binding upon, and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns. Notwithstanding
the foregoing, this Agreement may be assigned to any entity controlled by
Manager or Manager's ultimate parent, without Owner's prior written consent
(but with no less than thirty (30) day's prior written notice to Owner) so long
as Manager named herein remains fully and absolutely liable for all of its
obligations hereunder. If Manager shall in any way assign, transfer or convey
its right, title or interest hereunder without Owner's prior written approval,
except as expressly permitted herein, Owner shall have the right to immediately
terminate this Agreement for cause.
Section 7.6 Waiver. No waiver of any breach or default hereunder shall be
implied from any omission of the non-defaulting party to take any action on
account of such breach or default if such breach or default persists or is
repeated, and no express waiver shall effect any right of action on account of
any default or breach other than the default or breach specified in the express
waiver, and then only for the time and to the extent therein stated.
Section 7.7 Remedies. Except as otherwise expressly provided herein, all
rights and remedies herein enumerated shall be distinct, separate and
cumulative and none shall exclude any other right or remedy allowed by law or
in equity, and said rights and remedies may be exercised and enforced
concurrently and whenever and as often as occasion therefor arises. If a legal
or equitable action is brought to enforce the terms of this Agreement, the
prevailing party shall be entitled to collect its costs, including reasonable
attorneys' fees and expenses of appeal, if any.
Section 7.8 Severability. If any provision or term of this Agreement shall
be determined by any court of competent jurisdiction to be invalid or
unenforceable for any reason whatsoever, the remainder of this Agreement or the
application of such provision to such person or circumstances, other than those
as to which it is so determined invalid or unenforceable, shall not be affected
thereby, and each provision hereof shall be valid and shall be enforced to the
fullest extent of the law.
Section 7.9 Counterparts. This Agreement may be executed in a number of
identical counterparts, each of which for all purposes is deemed an original,
and all of which constitute collectively one agreement; but in making proof of
this Agreement, it shall not be necessary to produce or account for more than
one such counterpart.
Section 7.10 Headings. All headings herein are inserted only for convenience
<PAGE>
and ease of reference and are not to be considered in the construction or
interpretation of any provision of this Agreement.
Section 7.11 Exculpation. No officer, director, shareholder, agent, employee
or partner of Owner shall have any personal liability of Owner's obligations
under this Agreement. Owner's liability under this Agreement shall be limited
as set forth in this Agreement to its interest in the Property.
Section 7.12 Representations. Manager and Owner each represent and warrant
that each has full power and authority to enter into this Agreement and
discharge their duties hereunder.
Section 7.13 Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the leasing and management of the
Property. Any modification, change or amendment of this Agreement shall be in
writing and executed by Owner or Manager.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
OWNER: MANAGER:
Insignia Management Group, L.P.
By: By:
-------------------------- -----------------------
Its authorized agent Its authorized agent
Witness: Witness:
---------------------- -------------------
Dated: Dated:
-------------- ----------------
<PAGE>
EXHIBIT A
INTENTIONALLY OMITTED
<PAGE>
EXHIBIT B
SUMMARY OF REPORTING REQUIREMENTS
Monthly:
Bank Reconciliations (by the 20th calendar day)
Market Information
Monthly Transaction Statement
Rent Roll
13 Month Rental Income Trend Report
13 Month Total Income Trend Report
26 Week Occupancy Trend Report (to be provided weekly)
13 Month Delinquency Trend Report
Monthly and Year-to-Date Delinquency and Write-off Report
Net Operating Cash Flow and Net Rental Income Comparison Report
Street Rent/Concession/Effective Rent Trend Report
Move-In Rent/Renewal Rent Report
Traffic Summary Report (Closing Ratios)
Occupancy/Availability by Unit Type Report
Property Trend Analysis
Property Activity Report (To be provided weekly)
Apartment Status Report
Monthly Concession Report
Monthly Prepaid Report
Monthly Vacant Days Report
Monthly Economic Occupancy Trend Analysis
Monthly Turnover Report
Monthly MTM and Leases Expiring Report
Quarterly:
Quarterly Budget Update/Reprojections
Quarterly and Year-to-Date High, Low, Closing and Average Occupancy Report
Schedule of non-recurring repairs and maintenance and capital improvements in
excess of $5,000 per repair/project.
Quarterly budget update/reprojections (See Sections 2.3 & 2.12)
<PAGE>
EXHIBIT C
SCHEDULE OF SECURITY DEPOSITS
<PAGE>
BALCOR REALTY INVESTORS-84
P.O. Box 7190
Deerfield, Illinois 60015-7190
November 30, 1995
Dear Investor:
On November 16, 1995, Walton Street Capital Acquisition Co., L.L.C. ("Walton
Street") announced an unsolicited offer to purchase up to 45% of the
outstanding limited partnership interests ("Units") of Balcor Realty
Investors-84 (the "Partnership"). Balcor Partners-XV ("Balcor"), your general
partner, recommends that you not accept this offer and not tender your Units to
Walton Street. You should keep the following in mind:
1. Balcor believes that Walton Street's offering price of $84.00 per Unit is
inadequate. Balcor's financial advisor, Alex. Brown & Sons Incorporated
("Alex. Brown"), has advised Balcor that the current liquidation value (defined
below) for each Partnership Unit is between $191.00 and $215.00 (see attachment
to this letter). The Walton Street offer is 44.0% to 39.1%, respectively, of
Alex. Brown's value range. Alex. Brown's definition of current liquidation
value ("A.B. Value") assumes an orderly liquidation of the remaining assets of
the Partnership over twelve months. No opinion of value is expressed by either
Alex. Brown or Balcor to those investors wanting to hold their Units through
the targeted liquidation of the Partnership as more fully described in
paragraph 3 below.
2. By accepting the offer, you may not be able to fully realize the value of
your Units. Balcor believes that Walton Street's primary motivation in making
its offer is Walton Street's desire to capitalize on the significant disparity
between the fair market value of the assets held by the Partnership and the
price that Walton Street is offering to you.
3. The Partnership has thirteen remaining properties. Balcor's strategy is
to sell these assets on an orderly basis over the next three to four year
period, although the timing of the liquidation may be lengthened or shortened
in response to changing market conditions, economic factors, interest rates and
unforseen events.
4. In general, acceptance of Walton Street's offer will constitute a
significant taxable event to you. To the extent applicable to your personal
situation, a sale of your Units may cause you to recognize taxable income. You
should consult your personal tax and legal advisors prior to accepting the
offer and tendering your Units.
Under the terms of Walton Street's offer, they cannot, until December 15, 1995,
purchase and pay for any Units tendered prior to that time, and you may
withdraw Units tendered to Walton Street at any time prior to 12:00 midnight on
December 15, 1995. If you wish to retain your Units, you need not take any
action regarding their offer.
Balcor will continue to act in the manner that Balcor believes is in the best
interests of the limited partners.
Balcor strongly urges you to read carefully the attached Schedule 14D-9 for a
more thorough discussion of the above and other factors. We have omitted the
Exhibits to the Schedule 14D-9 but will deliver them to you at our expense if
you call 1-800-422-5267.
Very truly yours,
/s/Thomas E. Meador
Thomas E. Meador
Chairman, Balcor Partners-XV
<PAGE>
November 27, 1995
Balcor Partners - XV
Balcor Realty Investors-84
c/o The Balcor Company
2355 Waukegan Road, Suite A200
Bannockburn, Illinois 60015
Dear Sirs:
In connection with an offer (the "Offer") by Walton Street Capital Acquisition
Co., L.L.C. for the purchase of up to 45% of the outstanding limited partner
interests ("Units") of Balcor Realty Investors-84 (the "Partnership"), you have
asked us to provide a range of values for the Units assuming orderly
liquidation over twelve months by application of a current income analysis
based on (a) historical and anticipated net operating income for 1995 data
provided to us by you; (b) capitalization assumptions prepared by us based in
part upon relevant real-estate profiles provided to us by you; and, (c) on site
visits of properties and interviews with property managers at a sample of
properties we deemed appropriate. Solely by such methodology, we believe that
such liquidation value of the Units is approximately $191 to $215 per Unit,
depending on assumptions made about prepayment penalties.
The above valuation estimate is subject to the following limitations and
conditions:
i. The valuation estimate is based in part on actual operating results for
the first nine months and anticipated operating results for the remaining three
months for 1995 as provided by you. There can be no assurance that such
anticipated results will actually be achieved.
ii. We did not perform any procedures concerning the possible effect of
present or future federal, state or local legislation that could affect the
sale of properties including, without limitation, legislation and regulations
relating to income taxes, civil rights, zoning, building codes, disabilities,
and environmental matters.
iii. We assume no responsibility for changes in market conditions or for the
inability of the Partnership to achieve its anticipated results based upon our
review of the assets.
iv. We have not considered any federal, state or local tax consequences that
would occur as a result of the sale of Units in response to the Offer.
v. The amounts of prepayment penalties used in determining our range of
values have been based upon review of mortgages and loan documents provided to
us by you. We have not independently determined whether those documents have
been amended, superseded, or modified.
vi. We assume no responsibility for the accuracy or completeness of any
information (financial or other) provided to us by you.
The valuation estimate stated herein is provided solely for your benefit and is
not intended to confer rights or remedies upon any holders of the Units or any
other person. The valuation stated herein does not constitute a recommendation
<PAGE>
to the holders of the units, nor are we expressing any opinion on the fairness
or adequacy of the Offer. Neither you nor your general partner may disclose,
quote from or refer to the analysis described herein except (a) with our prior
written consent, which consent shall not be unreasonably withheld, or (b) in
the event The Balcor Company or you is legally compelled to do so; provided
however, that we consent to a reference to this analysis in any communication
with Unit holders or filing with the Securities and Exchange Commission in
response to the Offer or other tender offers you receive prior to June 30,
1996, provided that this letter is reproduced therein or attached thereto in
its entirety.
Sincerely,
ALEX. BROWN & SONS INCORPORATED
By: /s/John E. Glennon
----------------------------
